U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from __ to__
Commission file number 0-25852
-------
THE MED-DESIGN CORPORATION
Delaware 77-0404919
- ------------------------ ------------------------
(State of Incorporation) (IRS Employer ID Number)
2810 Bunsen Avenue, Ventura, CA 93003
-------------------------------------
(805)339-0375
-------------
Check whether issuer (1) filed all reports required to be filed by Section 13
or 15(d) for the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No__
---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock - 7,951,570 shares of Common Stock, $.01 par value,
outstanding as of May 13, 1999.
<PAGE>
THE MED-DESIGN CORPORATION
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Page Number
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1- Financial Statements
Consolidated Balance Sheets as of March 31, 1999 (unaudited) and as of
December 31, 1998...................................................................3
Consolidated Statements of Operations (unaudited)for the three months ended
March 31, 1999 and 1998.............................................................4
Consolidated Statements of Comprehensive Loss (unaudited)for the
three months ended March 31, 1999 and 1998..........................................5
Consolidated Statements of Cash Flows (unaudited)for the three
months ended March 31, 1999 and 1998................................................6
Notes to Consolidated Financial Statements (unaudited)............................7-8
Item 2- Management's Discussion and Analysis of Plan of Operation .......................9-12
PART II - OTHER INFORMATION
Item 1- Legal Proceedings..................................................................13
Item 2- Changes in Securities..............................................................13
Item 3- Defaults upon Senior Securities....................................................13
Item 4- Submission of Matters to a Vote of Security Holders................................13
Item 5- Other Information..................................................................13
Item 6- Exhibits and Reports on Form 8-K...................................................13
</TABLE>
2
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited)
----------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 417,731 $ 32,883
Available-for-sale securities 4,796,936 6,111,620
Prepaid expenses and other current assets 131,047 173,006
------------ ------------
Total current assets 5,345,714 6,317,509
Property, plant, and equipment, net of accumulated depreciation
of $675,043 and $619,113 at March 31, 1999 and
December 31, 1998, respectively 815,767 865,267
Patents, net of accumulated amortization of $90,945
and $80,766 at March 31, 1999 and
December 31, 1998, respectively 831,682 788,629
Debt issue costs, net of accumulated amortization of
$78,180 and $53,720 at March 31 1999 and
December 31, 1998, respectively 487,020 511,480
------------ ------------
Total Assets $ 7,480,183 $ 8,482,885
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 250,000 $ 250,000
Current maturities of long-term debt and capital lease obligations 10,492 10,492
Accounts payable 224,576 215,426
Accrued expenses 127,987 176,697
------------ ------------
Total current liabilities 613,055 652,615
------------ ------------
Long-term debt and capital lease obligations, less current maturities 1,576,481 1,579,824
------------ ------------
Total liabilities 2,189,536 2,232,439
------------ ------------
Commitments and Contingencies
Stockholders' equity
Preferred stock, $.01 par value, 5,000,000 shares authorized;
300,000 shares issued and outstanding 3,000 3,000
Common stock, $.01 par value, 20,000,000 shares authorized;
7,951,570 shares issued and outstanding 79,516 79,516
Additional paid-in capital 24,255,114 24,244,554
Accumulated deficit (19,046,983) (18,084,352)
Accumulated other comprehensive income -- 7,728
------------ ------------
Total stockholders' equity 5,290,647 6,250,446
------------ ------------
Total Liabilities and Stockholders Equity $ 7,480,183 $ 8,482,885
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
----------------------------
1999 1998
---------- ----------
Operating expense:
Marketing -- $ 32,777
General and administrative $ 652,556 522,042
Research and development 299,927 284,652
----------- -----------
Total operating expenses 952,483 839,471
----------- -----------
Loss from operations (952,483) (839,471)
Interest expense (65,458) (63,285)
Investment income 55,310 163,990
----------- -----------
Net loss $ (962,631) $ (738,766)
=========== ===========
Basic and diluted earnings per common share $ (0.12) $ (0.09)
Weighted average common shares outstanding 7,951,570 7,951,570
=========== ===========
The accompanying notes are an integral part of these financial statements
4
<PAGE>
MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
Three Months Ended March 31,
1999 1998
Net loss ($962,631) ($738,766)
Other comprehensive loss:
Unrealized holding gains (losses)
on securities -- (9,787)
Comprehensive loss ($962,631) ($748,553)
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1999 1998
----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (962,631) $ (738,766)
Adjustments to reconcile net loss to operating
cash flows:
Depreciation and amortization 66,108 68,234
Issuance of warrants for services 48,500
Amortization of debt issue costs 24,460 --
Debt issue cost in connection with
private investor loan 10,560 --
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 41,959 66,223
Accounts payable 9,150 2,761
Accrued expenses (48,710) (108,744)
----------- -----------
Net cash used in operating activities (859,104) (661,792)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (6,429) --
Additions to patents (53,232) (90,739)
Sale of available-for-sale-securities 1,306,956 2,216,916
Sale purchase of short-term investment -- 546,591
----------- -----------
Net cash provided by investing activities 1,247,295 2,672,768
----------- -----------
Cash flows from financing activities:
Capital lease payments (3,343) (7,892)
Repayment of long-term borrowings -- (296,540)
Repayment of short-term borrowing -- (1,700,615)
----------- -----------
Net cash used in financing activities (3,343) (2,005,047)
----------- -----------
Increase in cash 384,848 5,929
Cash and cash equivalents, beginning of period 32,883 114,079
----------- -----------
Cash and cash equivalents, end of period $ 417,731 $ 120,008
----------- -----------
Noncash investing and financing activities:
Change in unrealized gain (loss) on
available-for-sale securities $ -- ($ 9,787)
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
MED-DESIGN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
Basis of Presentation
The financial information included herein is unaudited, except for the
balance sheet as of December 31, 1998; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair statement of results for the
interim period.
The accompanying financial statements include The Med-Design Corporation
(hereinafter, including its subsidiaries as the context requires, the "Company")
and its wholly-owned subsidiaries, MDC Investment Holdings, Inc. ("MDC
Holdings") and MDC Research Ltd. All significant intercompany transactions and
accounts are eliminated.
The financial statements included herein have been prepared in accordance
with generally accepted accounting principles and the instructions to Form
10-QSB and Rule 310 (b) of Regulation S-B. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. These consolidated financial statements should be read in conjunction
with the Company's audited financial statements for the year ended December 31,
1998, which were included as part of the Company's Annual Report on Form 10-KSB.
Operating results for the three month period ending March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999.
2. Basic and Diluted Loss Per Share
The following table sets forth the computation of basic and diluted net loss per
share:
Three months ended
March 31,
1999 1998
----------- ----------
Net Loss $ (962,631) $ (738,766)
=========== ===========
Weighted average common shares
outstanding used to compute basic
and diluted net loss per common share 7,951,570 7,951,570
=========== ===========
Basic and diluted net loss per share $ (0.12) $ (0.09)
=========== ===========
Options and warrants to purchase 1,718,000 shares of common stock as of March
31, 1999 and 1,204,000 as of March 31, 1998, were not included in computing
diluted earnings per share as the effect was antidilutive.
Convertible debentures with an option to purchase 1,240,000 shares of common
stock and a promissory note issued in connection with a loan payment with a
commitment to issue 33,000 shares of common stock as of March 31, 1999; were not
included in computing diluted earnings per share as the effect was antidilutive.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report contains
forward-looking statements relating to such matters as anticipated business
performance, business prospects, technological developments, product
development, new products, research and development activities and similar
matters. Words such as "may," "should," "anticipate," "believe," "plan,"
"estimate," "expect," and "intend" and other similar expressions are intended to
identify forward-looking statements. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. In order to
comply with the terms of the safe harbor, The Med-Design Corporation
("Med-Design") notes that these forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in these forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in the sections of this Annual Report entitled "Business - Products
Under Development," "Business - Research and Development," "Business -
Competition," "Business - Marketing and Sales," "Business - Manufacturing,"
"Business - Patents and Proprietary Rights," "Business - Government
Regulation," "Management's Discussion and Analysis or Plan of Operation -
Results of Operation," "Management's Discussion and Analysis or Plan of
Operation - Plan of Operation," "Management's Discussion and Analysis or Plan of
Operation - Year 2000 Issues," "Management's Discussion and Analysis or Plan of
Operation - Liquidity and Capital Resources." Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. Med-Design undertakes no obligation to
publicly revise these forward-looking statements, to reflect events or
circumstances that arise after the date hereof. Readers should carefully review
the risk factors described in other documents that Med-Design files from time to
time with the Securities and Exchange Commission and in public communications
made by Med-Design.
Business Overview
The Company was incorporated in Delaware on November 14, 1994. On February
28, 1995, The Med-Design Corporation, a Pennsylvania corporation, incorporated
on December 13, 1993, was merged with and into the Company.
The Company designs and develops safety medical devices intended to reduce
the incidence of accidental needlesticks. The Company has three core products
under development: the Retractable Needle Hypodermic Syringe (the "Safety
Syringe"), the Retractable Needle Vacuum Tube Phlebotomy Set (the "Safety
Phlebotomy Set"), and the Retractable Needle Intravenous Catheter Insertion
Device (the "Safety Catheter"). These products are similar in appearance and
size to the standard devices in use. Such products incorporate the Company's
novel proprietary retraction technology that enables a health care professional,
with no substantial change in operating technique and using one hand, to
permanently retract the needle of the device into the body of the device that
can be safely discarded.
The Company also has several new safety products which are in various
stages of development. These additional product developments include the Safety
PICC Introducer Catheter Insertion Device, Safety Guidewire Introducer, Safety
Winged Set Blood Collection Needle, Safety Arterial Blood Gas Syringe, Safety
Pre-Filled Vial Injector, Safety Pre-Filled Glass Syringe, Safety Wing Needle
Set/Catheter, Safety Blood Donor Needle, Safety Y-Port Infusion Needle, and
Safety Winged Fistula Needle, and a number of additional products in early
stages of development. These products also incorporate the Company's proprietary
retraction technology and are designed to reduce the incidence of accidental
needlesticks. The Company has developed various sizes and designs of these
products to accommodate the specific requirements of potential strategic
alliances for medical and dental applications.
On March 14, 1995, the Company organized a wholly-owned subsidiary, MDC
Investment Holdings, Inc. ("MDC Holdings"), under the laws of the State of
Delaware. The Company entered into an Agreement of Merger on April 5, 1995 (the
"Merger Agreement") with MDC Holdings and Med-Design Inc., a California
corporation ("MDI"), pursuant to
8
<PAGE>
Business Overview (continued)
which MDI merged with and into MDC Holdings, the surviving corporation (the
"Merger"), and the Company issued and delivered 1,219,742 shares of Common Stock
to the MDI shareholders in exchange for their shares of MDI Common Stock. In
addition, the Company issued a non-interest bearing promissory note in the
principal amount of $1,000,000 (the "Note") payable to the former MDI
shareholders, which was collateralized by all of the issued and outstanding
shares of the Common Stock, $ 0.01 par value per share, of MDC Holdings. In
connection with the Merger, the Company issued and delivered 3,572 shares of
Common Stock to a former noteholder of MDI to satisfy an obligation of MDI. The
Note was fully paid from a portion of the net proceeds of the Company's initial
public offering of 3,450,000 shares of its Common Stock in June 1995 ("Initial
Public Offering"). The Company's acquisition of MDI was accounted for in
accordance with the purchase method, under which the purchase price was
allocated to the assets of MDI based on the fair market value of such assets.
The excess of the purchase price over the fair market value of the net assets
acquired was treated as purchased research.
Immediately following the consummation of the Merger, MDC Holdings
transferred all of the assets it acquired in the Merger, other than its patents
and other intellectual property, and all of its liabilities to MDC Research
Ltd., a California corporation and wholly-owned subsidiary of MDC Holdings.
As a result of the Merger, MDC Holdings became the sole owner of all the
intellectual property rights worldwide including patents, patent applications,
trademarks and trademark applications relating to the Safety Syringe, Safety
Phlebotomy Set and Safety Catheter.
In June 1995, the Company completed its Initial Public Offering of
3,450,000 shares of Common Stock, par value $0.01 per share. The net proceeds to
the Company were approximately $9,526,000.
On January 31, 1996, the Board of Directors authorized a one-for-one stock
dividend that was distributed on February 26, 1996 to shareholders of record as
of February 12, 1996. The information contained in the consolidated financial
statements and the notes thereto and in this report have been adjusted to
reflect this stock dividend.
On January 23, 1997, the Company completed a sale ("Placement") of
1,000,000 shares of Common Stock at a price of $5.00 per share pursuant to a
private placement of such securities to certain "accredited investors" (pursuant
to Regulation D of the Securities Act of 1933, as amended). The Company received
proceeds of approximately $4,617,000, net of expenses incurred in connection
with the Placement.
In connection with the Placement, for nominal consideration, the Company
agreed to sell warrants to Fine Equities, Inc., the Company's placement agent
with respect to the Placement (the "Placement Agent"), to purchase 100,000
shares of Common Stock ("Placement Agent Warrants"). The Placement Agent
Warrants are exercisable at a price of $5.50 a share of Common Stock for a
period of four years commencing January 22, 1999.
On August 6, 1997, the Company acquired two patents from John Kulli, M.D.
In connection with the acquisition of these patents, the Company paid $75,000
cash and issued warrants to purchase 75,000 shares of its Common Stock at $5.75.
These warrants are exercisable on or before August 6, 2002.
On February 23, 1998, the company signed an agreement with Graphic Controls
Corporation for the development and licensing of its proprietary Safety
Intravenous Catheter Insertion Device. The signing of this agreement and the
completion of a series of mutually agreed upon milestones would result in
payment to Med-Design totaling as much as $3.72 million with continuous
royalties for the life of the patents. Med-Design would receive $1.82 million of
the $3.72 million during the completion of milestones associated with the
development phase and $1.9 million in milestone payments associated with the
granting of an exclusive license for North America.
On May 29, 1998, the Company obtained a loan from a private investor in the
amount of $250,000. The loan is due in one year with interest at prime rate
payable quarterly. The loan is callable upon change of control of the Company,
the signing of any significant licensing or joint venture agreement, or any
refinancing of the Company in excess of $500,000. As a condition of the loan the
Company also agreed to issue the lender 33,000 shares of common stock which is
earned pro rata over the period of one year as long as the full amount of the
loan remains outstanding.
9
<PAGE>
Business Overview (continued)
From June 29, 1998 to July 22, 1998 the Company completed a $1,550,000
private placement of convertible debentures secured by the Company's
intellectual properties. The net proceeds to the Company was $1,474,000.
On December 11, 1998, The Med-Design Corporation signed a multi-product
licensing agreement, an option licensing agreement and an equity agreement with
Becton, Dickinson and Company, ("Becton Dickinson"), a New Jersey based global
medical technology company. Med-Design granted Becton Dickinson the exclusive
worldwide rights to manufacture and sell Med-Design's Safety Blood Collection
Needle, Safety Winged Set Blood Collection Needle, Safety I.V. Catheter, Safety
Wing Needle Set/Catheter and Safety PICC Introducer Catheter Insertion Device
and a one year option, with terms and conditions to be negotiated, to license
the Safety Hypodermic Syringe (fixed or stake needle type), the Safety
Hypodermic Syringe (luer type), the Safety Arterial Blood Gas Syringe (add-on
type), the Safety Pre-Filled Glass Syringe (luer type), and the Safety
Pre-Filled Glass Syringe (fixed or stake needle type). Under the terms of the
agreements, Med-Design received an initial, non-refundable payment of $4.5
million, an equity investment of $1.5 million and continuing royalty payments
for the life of the patents payable on Becton Dickinson's net sales of licensed
products. Becton Dickinson invested $1.5 million in Med-Design through the
purchase of 300,000 shares of Series A Convertible Preferred Stock, convertible
into Med-Design's common shares at $5.00 per share. Becton Dickinson is entitled
to designate one member on Med-Design's Board of Directors. Med-Design
previously signed a development and licensing agreement for its proprietary
Safety I.V. Catheter with Graphic Controls Corporation, which was canceled by
mutual agreement with no obligation to either party.
Year 2000 Issues
The "Year 2000 Issue" describes the use of two digits rather than four
digits to define the applicable year in certain computer programs. In the Year
2000, any of Med-Design's computer programs that have two digit date-sensitive
software may interpret a date of "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
discrepancies of operations. Med-Design's business operations are dependent upon
internal software, suppliers and Becton Dickinson, Med-Design's licensee.
Med-Design has reviewed its internal program and has determined that there
are no material Year 2000 issues within Med-Design's systems. Med-Design has
engaged its network service provider to examine all software utilized in
Med-Design's operations to ensure Year 2000 compliance. Additionally, Med-Design
is working with its suppliers and its licensee to determine the extent to which
such third parties' systems (insofar as they relate to Med-Design's business)
are subject to the Year 2000 issue, and expects to complete such inquiries, and
remedy any material issues before the end of 1999. Med-Design estimates that the
total costs of the Year 2000 project will be approximately $10,000, $4,000 of
which represents capital costs and approximately $6,000 represents costs to
outside vendors. As of December 31, 1998, Med-Design had incurred approximately
$2,000 of Year 2000 costs. Due to the uncertainty inherent in the Year 2000
process, Med-Design is unable to determine a reasonable worst case scenario at
this time. The costs of the Year 2000 project and the date on which Med-Design
plans to complete the Year 2000 project tasks are based on management's best
estimates which were determined utilizing numerous assumptions of future events,
including the continued availability of certain resources, third party
modification factors and other factors. As a result, there can be no assurance
that these forward looking estimates will be achieved, and the actual costs and
compliance by vendors, licensees and other third parties could differ materially
from Med-Design's current expectations, resulting in material financial risk.
Results of Operations
The Company has devoted substantially all of its research and development
efforts since its formation to development related to safety needles and the
designs and development of the equipment necessary to assemble the safety needle
device.
Research and development expenses amounted to $299,927 and $284,652 for the
three month period ending March 31, 1999 and 1998, respectively.
10
<PAGE>
Plan of Operation
Med-Design plans to focus on the following four areas of activity in 1999:
technology transfer of the recently licensed products; the licensing and final
development of those products currently under option to Becton, Dickinson and
Company; the further development and licensing of additional products; the
development of incremental revenues related to design and development and
manufacturing agreements with licensing partners.
Technology Transfer
The transfer of technology for the Safety Blood Collection Needle, Safety
Winged Set Blood Collection Needle, Safety Catheter, Safety Wing Needle
Set/Catheter and Safety PICC Introducer Catheter Insertion Device to Becton
Dickinson under the terms of a license agreement is currently underway and is
expected to be completed during June, 1999.
Optional Products
Med-Design also plans to complete concept development of the Safety
Hypodermic Syringe (fixed or stake needle type), the Safety Hypodermic Syringe
(luer type), the Safety Arterial Blood Gas Syringe Needle (add-on type), the
Safety Pre-Filled Glass Syringe (luer type), and the Safety Pre-Filled Glass
Syringe (fixed or stake needle type), each of which is subject to Becton
Dickinson's option to license. Med-Design is obligated, at Becton Dickinson's
request, to negotiate for the licensing of such products during the one year
term of the option agreement.
Additional Products
Med-Design also plans to advance concept development and modeling of
certain other products that are not currently under licensing or option
agreements, such as the Safety Pre-Filled Vial Injector. Med-Design also plans
to continue discussions and negotiations with third parties regarding the
licensing or joint venture of these products. Med-Design plans to support such
product development programs, discussions, and negotiations, including the
building of necessary prototypes with currently available funds.
Med-Design is also investigating opportunities with third parties to
manufacture, market and distribute Med-Design's products. Med-Design anticipates
that entering into alliances and licensing arrangements with third parties would
enable Med-Design to increase market penetration of its products more quickly
than Med-Design could achieve on its own. Med-Design has entered into such
arrangements with Beckon Dickinson as mentioned.
Other Business
Med-Design is currently in negotiations with third parties to provide
additional design, development and manufacturing in furtherance of the
commercialization of the products. Med-Design has sufficient facilities to
perform these tasks. Med-Design's facility in Ventura, California contains a
research and development laboratory equipped with assembly and test equipment
for concept modeling and product development and a machine shop equipped with
machine tools for fabrication of new product parts for concept modeling and
assembly, and fabrication of prototype molds and test fixtures. Med-Design also
installed a 3,120 square foot Class 100,000 clean room at the facility, which is
capable of being used for the semi-automated assembly of both prototypes and
products intended for sale.
As a result of discussions with third parties, Med-Design has installed a
semi-automated assembly system at the facility to pilot manufacture its
products. The objective of Med-Design in installing the assembly system is to
demonstrate to potential third party manufacturers the economic feasibility of
the commercial production of its products. The semi-automated assembly system,
which consists of a series of manual and semi-automatic stations, with additions
and modifications, is capable of producing up to 6,000,000 units of commercial
products per year. The assembly system will produce one or more of Med-Design's
products at a time, and has the capability of being converted at a reasonable
cost with minimal delay to manufacture a different product at such time as
Med-Design may decide. Med-Design completed the system during the third quarter
of 1997.
11
<PAGE>
Med-Design anticipates earning revenues in 1999/2000 from one or more of
the following: licensing or optioning of additional products; third party
manufacturing agreement, third party development agreements and royalty payments
in association with licensed products.
As of March 15, 1999, Med-Design employed 17 people on a full-time basis
and one person on a part-time basis. Med-Design anticipates increasing employees
in certain strategic areas pending the outcome of continued discussions and
negotiations with third parties regarding the licensing or joint venture of its
early stage development products. Med-Design will however reassess its personnel
requirements as business activity dictates.
Liquidity and Capital Resources
At March 31, 1999, Med-Design was party to a revolving line of credit
totaling $3,000,000 with its principal lending institution. This facility can be
used to fund working capital needs and finance capital equipment purchases;
provided, however, that advances for capital equipment financing cannot exceed
$600,000. Borrowings to meet working capital needs bear interest at LIBOR plus
2.25 basis points, while borrowings to finance capital equipment purchases bear
interest at prime plus 2.5%. Pursuant to the terms of the facility, all
borrowings must be fully collateralized by available-for-sale securities, cash,
cash equivalents, equipment financed, and general intangibles of Med-Design.
There was no obligation outstanding under the agreement at March 31, 1999. The
facility expires on June 30,1999 and there is no assurance that Med-Design will
be successful in negotiating a continuation of the availability of the Loan
Agreement and what terms will be made available to Med-Design.
Management believes that Med-Design has sufficient funds to support its
planned operations and capital expenditures for the next eighteen months.
Thereafter Med-Design will rely on negotiating licensing and royalty agreements
with its current and future strategic partners. Becton Dickinson, as part of the
option licensing agreement, was granted an option to license several products.
No assurance, however, can be given that Med-Design will be able to conclude
final negotiations on these option products. If Med-Design is unsuccessful in
negotiating future agreements, Med-Design may be required to reduce
substantially, or eliminate certain areas of its product development activities,
limit its operations significantly, or otherwise modify its business strategy.
Med-Design's capital requirements will depend on many factors, including
but not limited to, the progress of its research and development programs, the
development of regulatory submissions and approvals, pilot manufacturing
capability, and the costs associated with protecting its patents and other
proprietary rights.
There are no other material commitments at this time.
12
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities
None.
Item 3 - Defaults upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) List of Exhibits filed pursuant to Item 601 of Regulation S-B. The
following exhibits are filed with this Report on Form 10-QSB.
Exhibit
Number Description
- ------- -----------
27* Financial Data Schedule.
(b) No reports on Form 8-K have been filed during the quarter ended
March 31, 1999.
* Electronic filing only.
13
<PAGE>
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned, thereunto duly authorized.
The Med-Design Corporation
Date: May 13, 1999
/s/ James M. Donegan
-----------------------------------
James M. Donegan
Chief Executive Officer
/s/ Lawrence D. Ellis
-----------------------------------
Lawrence D. Ellis
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 417,731
<SECURITIES> 4,796,936
<RECEIVABLES> 0
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0
0
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</TABLE>
