As filed with the Securities and Exchange Commission on March 6, 2000
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
THE MED-DESIGN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 77-0404919
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2810 Bunsen Avenue
Ventura, California 93003
(805) 339-0375
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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------
JAMES M. DONEGAN
Chief Executive Officer
The Med-Design Corporation
2810 Bunsen Avenue
Ventura, CA 93003
(805) 339-0375
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copies to:
ROBERT M. BERGER, ESQ.
Bongiovanni & Berger
121 S. Broad Street
Philadelphia, PA 19107-4550
(215) 790-0060
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |__|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |__| ___________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |__| ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |__|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=======================================================================================================================
Title of Each Class of Proposed Proposed
Securities to be Amount to be Maximum Offering Maximum Aggregate Amount of
Registered Registered Price Per Share(1) Offering Price(1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share.............. 2,375,708 shares $17.00 $40,387,036 $11,915
=======================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act based upon the last
reported sale price for such security by the Nasdaq Small Cap Market on
February 28, 2000.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
2,375,708 SHARES
THE MED-DESIGN CORPORATION
COMMON STOCK
The selling stockholders are offering for sale 2,375,708 shares of our
common stock under this prospectus. We will receive no proceeds from the sale of
these shares.
The selling stockholders may sell the shares through public or private
transactions, on or off the Nasdaq Small-Cap Market, at prevailing market prices
or at privately negotiated prices. See "Plan of Distribution" on page 11.
The Common Stock is listed on the Nasdaq Small-Cap Market under the symbol
"MEDC." On February 28, 2000 the last reported sale price of the common stock
on the Nasdaq Small-Cap Market was $17.00 per share.
See "Risk Factors" beginning on page 4 for a discussion of some issues to
consider before purchasing our common stock.
--------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful of complete. Any representation to the contrary is a
criminal offense.
--------------------------
The date of this Prospectus is March 6, 2000.
<PAGE>
TABLE OF CONTENTS
Page
----
The Company..................................................................2
Disclosure Regarding Forward-Looking Statements..............................3
Incorporation of Certain Documents by Reference..............................3
Risk Factors.................................................................4
Use of Proceeds.............................................................10
Selling Stockholders........................................................10
Plan of Distribution........................................................11
Legal Opinion...............................................................11
Experts.....................................................................12
Where You Can Find More Information.........................................12
THE COMPANY
We are focused on designing and developing safety medical needle devices
intended to reduce the incidence of accidental needle sticks to patients and
health care workers. We believe that superior devices are necessary to help
eliminate these occurrences.
We have designed and developed 24 safety needle products all utilizing
similar patented proprietary technology to reduce or eliminate the possibility
of an accidental needle stick. Our products, which are similar in appearance and
size to the standard devices in use, incorporate our novel proprietary needle
retraction technology that enables a health care professional with no
substantial change in operating technique to permanently retract the needle into
the body of the device that can then be safely discarded.
While we may commercially manufacture our own products in the future, we
initially plan to license and sell our technology to strategic partners. On
December 11, 1998, we 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. We
granted Becton Dickinson the exclusive worldwide rights to manufacture and sell
certain of our products and a one year option, with terms and conditions to be
negotiated, to license several additional products. Under the terms of the
agreements, we 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. In
December 1999 and January 2000, we entered into addendums to the license
agreement with Becton Dickinson, pursuant to which we granted Becton Dickinson
an option, which expires on March 10, 2000, to an exclusive, world-wide license
of 15 additional products. As consideration for this option to license
additional products we received $1.5 million. All or a portion of this $1.5
million may be applied by Becton Dickinson against certain future licensing fees
or other payments owing to us. If the $1.5 million payment exceeds any future
payments becoming due, we will either refund one-sixth of such excess to Becton
Dickinson or issue Becton Dickinson shares of our common stock in an amount
equal to such excess (based on the market price of our common stock at such
time), at Becton Dickinson's option.
We believe there is a growing legislative initiative in many states and the
federal government to mandate a conversion to safety needle devices. To date,
four states (California, Texas, Maryland, New Jersey and Tennessee) have passed
legislation to mandate or explore the compulsory need for safety needle
products. A federal act to accomplish the same purpose has been introduced in
both the House and Senate. The Occupational Safety and Health Administration has
issued a new compliance directive to enforce the use of available and effective
safety engineered needles in virtually every healthcare workplace in the United
States. We believe that the attention of legislative bodies to the pressing need
for the adoption of safety medical devices will cause increased attention on our
products. We believe that we are in a unique position to capitalize upon this
increased attention because the portfolio of safety products that we have
developed or are developing covers a broad spectrum of medical use.
Our principal executive offices are located at 2810 Bunsen Avenue, Ventura,
California 93003, and our telephone number is (805) 339-0375.
2
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains, or has incorporated by
reference, forward-looking statements within the meaning of the federal
securities laws. Forward-looking statements typically are identified by use of
terms such as "may," "will," "expect," "anticipate," "estimate" and similar
words, although some forward-looking statements are expressed differently. You
should be aware that our actual results could differ materially from those
contained in the forward-looking statements due to a number of factors,
including changes in technology and customer demand for our product and
increases in competition. You should also consider carefully the statements
under "Risk Factors" which address additional factors that could cause our
actual results to differ from those set forth in the forward-looking statements.
Given these uncertainties, current or prospective investors are cautioned not to
place undue reliance on any such forward-looking statements. We disclaim any
obligation or intent to update any such factors or forward-looking statement to
reflect future events or developments.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We refer you to the following documents which we filed with the SEC and
incorporate by reference into this prospectus:
(a) Our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999.
(b) The description of our common stock, set forth in our registration
statement on Form 8-A filed on June 1, 1995, including any amendment or
report filed for the purpose of updating this description.
We also incorporate by reference all reports and documents filed by us
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
while this registration statement is effective. Any statement contained or
incorporated is superseded by any subsequently filed document that constitutes a
part of this prospectus.
Upon request, we will provide to you a copy of any or all documents which
were incorporated into this prospectus by reference. You should direct written
or oral requests for copies to Lawrence D. Ellis, Chief Financial Officer, The
Med-Design Corporation, 2810 Bunsen Avenue, Ventura, CA 93003 (telephone number-
805 339-0375).
3
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to invest in the shares of our common stock.
We are an early stage company
Since inception, we have been principally engaged in developmental and
organizational activities. To date, we have not generated significant revenues
from operations. We do not anticipate any significant revenues from the
commercialization of our products during the next twelve months. Substantially
all of our revenues have resulted from payments received under our strategic
alliance with Becton Dickinson. We may not be able to receive royalty revenues
in the future from Becton Dickinson and may not be successful in entering into
other strategic alliances or arrangements that would result in significant
revenues. In addition, commercial marketing of our products may prove to be
contingent upon our ability, and the ability of our partners, to obtain various
government approvals, including clearances from the U.S. Food and Drug
Administration. The approval procedure will be extremely time consuming,
expensive and uncertain. If we do not generate sufficient revenues, our
business, financial condition and operating results will be materially adversely
affected.
We are an early stage company and our business is subject to all of the
risks inherent in the establishment of a new business enterprise. Our likelihood
of success must be considered in light of the problems, expenses, complications
and delays frequently encountered in connection with the formation of a new
business, the development of new products, the competitive and regulatory
environment in which we may be operating, and the possibility that our
activities will not result in the commercialization of our products. We may not
be able to develop saleable or useful products.
We are dependent upon our strategic alliances with Becton Dickinson
In connection with our strategic alliances, Becton Dickinson must provide
us with certain royalty payments based on its sales of our products.
Substantially all of our revenues have been derived from our strategic alliance
with Becton Dickinson and we anticipate that payments from Becton Dickinson will
constitute all or a substantial portion of our revenues for the next twelve
months. Becton Dickinson has the right to terminate the underlying license
agreement upon 60 days' notice and in such event would be subject to no further
funding obligations to us. The success of our strategic alliance will depend on
Becton Dickinson's own competitive, marketing and strategic considerations,
including the relative advantages of alternative products being developed or
marketed by competitors. The amount and timing of resources Becton Dickinson
commits to these activities are entirely within Becton Dickinson's control.
Becton Dickinson is not obligated to pursue the development and
commercialization of the products it licenses from us. This strategic alliance
may not result in the successful commercialization of the our products and may
not generate any future royalty payments. If our strategic alliance with Becton
Dickinson were terminated or is unsuccessful in developing or commercializing
the products licensed by Becton Dickinson, our business, financial condition and
operating results will be materially adversely affected.
We anticipate we will incur continued losses for the foreseeable future
We have incurred significant losses since inception. We establish that as
of December 31, 1999 our accumulated deficit was $22,331,825. Unless and until
we are successful in developing and marketing our products and begin to receive
significant revenue from the transfer of technology and the granting of
licenses, none of which is expected to occur, if at all, before the fourth
quarter of year 2000, we will continue to incur losses.
Our operations may require additional funds
We have incurred negative cash flows from operations since our inception
and will continue to spend
4
<PAGE>
substantial funds on research and development programs. We believe that our
existing capital resources will be adequate to fund our capital requirements
through September 30, 2000. We have a revolving line of credit totaling
$3,000,000 with our principal bank. Our advances for capital equipment financing
under this facility cannot exceed $600,000, and all of our borrowings must be
fully collateralized by available-for-sale securities, cash, cash equivalents,
equipment financed, and general intangibles. This facility expires on May 20,
2001 and there is no assurance that we will be successful in negotiating a
additional financing on terms favorable to us.
We may need to raise additional funds through public or private financing
in order to carry out our planned operations. We believe that we will require
additional capital before we can become profitable, if at all. If we are unable
to obtain additional financing on terms favorable to us, we may be required to
reduce substantially, or eliminate, our product development activities or
otherwise modify our business strategy. Our capital requirements will depend on
the progress of our research and development programs, our regulatory
submissions and approvals, our pilot manufacturing capability and the costs
associated with protecting our patents and other proprietary rights.
We may not be able to protect our proprietary rights and we may infringe the
proprietary rights of others
Proprietary rights are important to our success and our competitive
position. We attempt to protect our intellectual property and maintain the
proprietary nature of our technology by, among other things, filing patent
applications for technology that we consider important to the development of our
business and require certain employees and key consultants to sign
non-disclosure and non-compete agreements.
We currently own 11 issued U.S. patents and 15 pending U.S. patent
applications. We currently have 12 foreign national patents and 21 pending
foreign national patent applications. We also have one issued European patent
and seven pending European patents applications.
We also have a trademark registration for the mark "SAFE STEP" and have
filed a trademark for the mark "THE MED-DESIGN CORPORATION" in the U.S. patent
and trademark office.
5
<PAGE>
However, our actions may be inadequate to protect any trademarks and other
proprietary rights or to prevent others from claiming that our actions violate
their trademarks and other proprietary rights. Such claims, with or without
merit, could be costly and time-consuming.
We are dependent on a single technology
All of the products we have designed and developed to date, and several of
the products we intend to design and develop, are based upon our proprietary
retraction technology. While we intend to develop additional products that are
not based upon the proprietary retraction technology, our current narrow focus
on a particular technology makes us vulnerable to the development of superior
competing products and changes in technology which could eliminate the need for
our products. Our business, financial condition and operating results would
suffer if a superior competing product were developed, or if there were a
reduced need for our products. We may not be able to successfully develop
additional products or applications.
Our products may not achieve market acceptance
The use of safety needles is relatively new. Although the market for
syringes, phlebotomy sets and intravenous catheters is large, actual sales of
our products, if and when they are produced, may be much less than the market's
potential. Sales of our products will depend mostly upon our ability to
demonstrate the operational and safety advantages of our products compared to
standard syringes, phlebotomy sets and intravenous catheters and our
competitors' safety medical devices. We may be unable to sell our products due
to the higher cost of safety medical devices relative to standard medical
device. There may never be a significant demand for our products.
We have no manufacturing experience and limited manufacturing facilities
We have not manufactured any products on a commercial basis. Certain
members of our management have had experience in the design and manufacturing of
other products, including medical devices, but our managers may not be
successful in designing and manufacturing our products. To be successful, we
must manufacture or contract with third parties to manufacture our products in
sufficient quantities, with quality control standards and at a reasonable cost.
We have leased approximately 26,000 square feet of space in Ventura,
California which contains, among other things, a semi-automated assembly system
to pilot manufacture our products. To the extent we cannot or do not manufacture
sufficient quantities of our products to satisfy the demand, if any, we will be
required to contract with third parties to manufacture such products. We may not
be able to enter into any such agreements on acceptable terms. Delays in
engaging third parties to manufacture our products could have a material adverse
effect on our manufacturing plans and timetable. In addition, third party
manufacturers may not meet our requirements for quality, quantity and
timeliness, or comply with requirements imposed by the FDA or other governmental
agencies, and we not be able to find substitute manufacturers, if necessary.
We have a limited marketing staff
We have no staff dedicated solely to marketing. If our commercial products
are developed, we will need to employ a sales force or retain marketing and
distribution services from other parties. We may not be able to hire and retain
qualified individuals. If we seek marketing and distribution services from third
parties, we may not be able to enter into agreements on acceptable terms.
We have a limited number of employees
The number of employees that we may need to hire will vary according to the
progress made in the development of our pilot manufacturing plant and the extent
to which we undertake the development, manufacture, marketing and distribution
of our products. If the need arises, we may not have the resources or ability to
engage qualified employees or outside independent consultants.
6
<PAGE>
We are dependent on key personnel
Our success depends upon the skills, experience and efforts of our
executive officers and certain marketing and technical people. We are
particularly dependent upon the services of James M. Donegan, our Chief
Executive Officer, Michael J. Botich, our Senior Vice President, Research and
Development and Thor R. Halseth, our Senior Vice President, Design. If Mr.
Donegan, Mr. Botich or Mr. Halseth, or any of our other key personnel, do not
continue in their present capacities, our operations could me materially
adversely affected.
We are subject to product liability claims
The manufacture and sale of our medical devices entails an inherent risk of
liability in the event of product failure or claim of harm caused by product
operation. Although we currently maintain product liability insurance coverage
($5,000,000 per occurrence and in the aggregate), such coverage may not remain
available at a reasonable cost and in amounts sufficient to protect us against
claims or recalls that could have a material adverse effect on our financial
condition.
Our business is subject to FDA Regulation
Our products are medical devices subject to regulation by the Food and Drug
Administration, which regulates, among other things, product manufacture,
labeling, distribution, and promotion in the United States. Our medical devices
must be cleared or approved by the Food and Drug Administration before we can
begin selling them in the United States. To date, none of the products we plan
to sell have been cleared or approved.
Obtaining Food and Drug Administration approval or clearance to market a
product can be a lengthy and costly process that can involve extensive clinical
studies. We may not be able to obtain the necessary FDA authorizations to allow
marketing or our products in a timely fashion, or at all.
Even if we get approvals or clearances, later problems with the product
could cause Food and Drug Administration to suspend or revoke them. Also, if the
Food and Drug Administration authorizes marketing of our products, we will be
subject to continuing requirements governing, among other things, the claims we
can make and our manufacturing processes. Failing to comply with FDA's
requirements can result in limitations on continued marketing and civil and
criminal penalties.
7
<PAGE>
Our markets are highly competitive
The needle market is highly competitive. We will compete in the United
States and abroad with medical product companies, including Tyco Kendall, Terumo
Medical, Becton Dickinson, Johnson & Johnson Retractable Technologies, Inc. and
Bio-Plexus, Inc. Several of these companies also manufacture safety needles. Our
products will compete with the standard and safety products manufactured by
these and other companies in the United States and in certain foreign countries.
Many of our competitors are better known, have longer operating histories and
are substantially larger and better financed than us. Such competitors may use
their economic strength to influence the market to continue to buy their
existing products or new products developed by them. One or more of these
competitors also could use such resources to improve their current products or
develop additional products which may compete more effectively with our
products. New competitors may arise and may develop products which compete with
our products. In addition, new technologies may arise which could lower or
eliminate the demand for our products. We cannot predict the development of
future competitive products or companies. We will be materially adversely
affected if we are unable to compete successfully.
Our systems may not be Year 2000 compliant
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 our 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. Our business operations are dependent upon internal software,
independent suppliers and Becton Dickinson.
We have reviewed our internal programs and have determined that there are
no material Year 2000 issues within our systems. We have engaged our network
service provider to examine all software utilized in our operations to ensure
Year 2000 compliance. Due to the uncertainty inherent in the Year 2000 process,
we are unable to determine a reasonable worst case scenario at this time.
We are controlled by our directors and officers
As of December 31, 1999, our directors and officers beneficially owned or
controlled approximately 39.95% of the outstanding Common Stock. Accordingly,
such executive officers and directors may, as a group, have the ability to exert
significant control over the election of our Board of Directors and to determine
corporate actions requiring stockholder approval including mergers,
consolidations and the sale of all or substantially all of the our assets. The
interests of these shareholders could conflict with the interests of our other
shareholders.
Our stock price is volatile
Historically, the trading price of the our Common Stock has fluctuated
widely, and it may be subject to similar future fluctuations in response to
quarter-to-quarter variations in operating results, announcements regarding
technological innovations, the formation of joint ventures and strategic
alliances, governmental regulatory approvals of our products, the development of
8
<PAGE>
new products by us or our competitors, general conditions in the medical device
industry and other events or factors, including factors such as analysts'
expectations which are beyond our control. In addition, in recent years the
prices of securities of NASDAQ Small-Cap Market companies and development stage
companies, in particular, have been extremely volatile. Investors may not be
able to resell their shares of our common stock following periods of volatility
because of the market's reaction to such volatility.
Our common stock is subject to dilution
As of December 31, 1999, there are 9,074,637 shares of our Common Stock
issued and outstanding. In addition, an aggregate of 2,375,708 additional shares
of our Common Stock is issuable pursuant to stock options granted under our
Non-Qualified Stock Option Plan, Warrants, Series A Convertible Preferred Stock,
Convertible Debentures and a stock grant agreement.
As of December 31, 1999, the exercise price of stock options and warrants
to purchase 1,639,000 shares was at or below the current fair market value of
our Common Stock. The issuance of Common Stock upon the exercise of such stock
options and warrants may have an adverse effect upon the market price of our
Common Stock.
We are unlikely to pay dividends on our common stock
No cash dividends have been paid on our Common Stock. We anticipate that
income received from operations, if any, will be devoted to our future
operations. Accordingly, no cash dividends are anticipated in the future.
There are several barriers to takeover
We have an authorized class of 5,000,000 shares of preferred stock, 300,000
of which are issued and outstanding. The Board of Directors has the authority,
without shareholder approval, to issue preferred stock in one or more series and
to fix the relative rights and preferences thereof including their redemption,
dividend and conversion rights. Our ability to issue the authorized but unissued
shares of such preferred stock, depending upon the rights, preferences and
designations thereof, may have the effect of delaying, deterring or preventing a
change in control.
We are governed by the provisions of Section 203 of the Delaware General
Corporation Law, an anti-takeover law enacted in 1988. In general, the law
prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
"Business combination" is defined to include mergers, asset sales and certain
other transactions resulting in a financial benefit to the stockholders. An
"interested stockholder" is defined as a person who, together with affiliates
and associates, owns, (or, within the prior three years, did own) 15% or more of
a corporation's voting stock. As a result of the application of Section 203,
potential acquirers may be discouraged from attempting to effect an acquisition
transaction with us, thereby possibly depriving holders of the above market
prices paid pursuant to such transactions.
Our stock is subject to the risks associated with low-priced stocks
The Securities and Exchange Commission has adopted regulations which define
a "penny stock" to be an equity security that has a market price (as therein
defined) of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to any transaction
in a penny stock, of a disclosure schedule prepared by the Securities and
Exchange Commission relating to the penny stock market. Disclosure is also
required to be made about commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stocks. These restrictions will not apply to our securities if they
continue to be listed on the NASDAQ Small Cap Market and have certain price and
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volume information provided on a current and continuing basis or meet certain
minimum net tangible assets or average revenue criteria. In any event, even if
our securities were exempt from such restrictions it would remain subject to
Section 15(b)(6) of the Exchange Act, which gives the Securities and Exchange
Commission the authority to prohibit any person engaged in unlawful conduct
while participating in a distribution of penny stock, if it finds that such a
restriction would be in the public interest. If our securities were to be
removed from listing on the NASDAQ Small-Cap Market or otherwise become subject
to the existing rules on penny stocks, you may have difficulty selling our
securities.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock by the
selling stockholders.
SELLING STOCKHOLDERS
The shares of our common stock being offered by the selling stockholders
may be acquired, from time to time, upon (i) the conversion of the $1,550,000
aggregate principal amount of convertible debentures that we issued to certain
of the selling shareholders in a private financing in June of 1998, (ii) the
exercise of warrants granted from time to time to certain of the selling
stockholders, and (iii) the conversion of 300,000 shares of Series A convertible
preferred stock that we issued to Becton Dickinson in connection with the
Licensing Agreement on December 11, 1998. The convertible debentures are
convertible into our common stock at a conversion price equal to $1.25, the
warrants are exercisable into our common stock at a weighted average exercise
price of $3.78 and each share of the Preferred Stock is convertible into one
share of common stock. The selling stockholders are selling all of the common
stock offered by this prospectus and will receive all of the proceeds from the
sale.
The following table sets forth certain information regarding the beneficial
ownership of the common stock as of December 31, 1999 by each of the selling
stockholders. Unless otherwise indicated below, to the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to the shares of common stock, except to the extent authority is shared
by spouses under applicable law.
The information included below is based upon information provided by the
selling stockholders. Because the selling stockholders may offer all, some or
none of their common stock, no definitive estimate as to the number of shares
thereof that will be held by the selling stockholders after such offering can be
provided and the following table has been prepared on the assumption that all
shares of common stock offered under this Prospectus will be sold. See "Plan of
Distribution."
<TABLE>
<CAPTION>
Common Stock To Be
Common Stock Beneficially Owned If All Shares
Beneficially Owned Offered Hereunder
Prior to the Offering(1) Are Sold(1)
----------------------- --------------------------------
Shares That May be
Name Shares Percent Offered Hereunder Shares Percent
---- ------ ------- ----------------- ------ -------
<S> <C> <C> <C> <C> <C>
Almaro Trading LLC(2) 80,000 * 80,000 0 0
Kien Haan Chen and Yung San 40,000 * 40,000 40,000 *
Chen (JTTEN)(2)
Joanne Combleet and Harry 40,000 * 40,000 0 0
Combleet (JTTEN)(2)
John W. Dean and Katherine 80,000 * 80,000 0 0
Dean (JTTEN)(2)
E. Stephen Ellis and Carol Ellis 60,000 * 60,000 2,000 *
(JTTEN)(2)
Joseph M. Evanich(2) 20,000 * 20,000 0 0
John F. Kelley and Susan 80,000 * 80,000 589,750 6.5%
Kelley (JTTEN)(2)
Cathy Wichert(2) 40,000 * 40,000 2,500 *
Edgell Street Partners(2) 80,000 * 80,000 44,000 *
Stephen Lampe(2) 280,000 3% 280,000 0 0
R. Scott Williams(2) 152,000 1.67% 152,000 0 0
DLJ Securities Corp.(2) 88,000 * 88,000 0 0
J. Sheehan & Co.(3) 80,000 * 80,000 0 0
Dominique Bodevin(3) 10,000 * 10,000 0 0
Roger Favale(3) 10,000 * 10,000 6,000 *
John C. Kulli(3) 75,000 * 75,000 0 0
Allan Coplin(3) 25,000 * 25,000 0 0
Gilbert White(3) 50,000 * 50,000 150,250 1.6%
James M. Donegan(3)(4) 125,000 1.3% 125,000 1,270,065 14%
Joseph N. Bongiovanni III (3) 100,000 1% 100,000 55,000 *
John F. Kelley(3)(5) 500,000 5.5% 500,000 89,750 *
Richard Katz(3) 5,000 * 5,000 0 0
Pasquale Vallone 39,482 * 39,482 90,726 *
Becton Dickinson(6) 300,000 3.3% 300,000 0 0
Edward Allard 8,208 * 8,208 0 0
Daniel Q. Longmire 7,208 * 7,208 0 0
</TABLE>
- --------------
* Less than 1%
(1) Based on an aggregate of 9,074,637 shares of common stock outstanding as
of December 31, 1999.
(2) Includes shares of our common stock previously issued and issuable pursuant
to convertible debentures.
(3) Includes shares of our common stock previously issued and issuable pursuant
to presently exercisable Warrants.
(4) James M. Donegan is the President and Chief Executive Officer of Med-Design.
(5) John F. Kelley is a Director of Med-Design.
(6) Includes shares of our common stock issuable pursuant to Series A
convertible preferred stock.
10
<PAGE>
PLAN OF DISTRIBUTION
On March 6, 2000, we registered the shares of common stock offered by this
prospectus, in addition to other shares of common stock, to fulfill our
obligations under agreements with the selling stockholders. The registration of
the shares of common stock does not necessarily mean that any of the shares will
be offered or sold by the selling stockholders under this prospectus.
The selling stockholders may offer their shares at various times in one or
more of the following transactions:
o a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o face-to-face transactions between the selling stockholders and
purchasers without a broker-dealer.
In effecting sales, brokers or dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate. Such brokers or dealers
may receive commissions or discounts from the selling stockholders in amounts to
be negotiated immediately prior to the sale. Such brokers or dealers and any
other participating brokers or dealers may be deemed to be "underwriters" within
the meaning of the Securities Act or 1933, as amended (the "Securities Act"), in
connection with such sales. In addition, any securities covered by this
prospectus that qualify for sale pursuant to Rule 144 might be sold under Rule
144 rather than pursuant to this prospectus.
Upon being notified by the selling stockholders that any material
arrangement has been entered into with a broker or dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplemented
prospectus, if required, pursuant to Rule 424(c) under the Securities Act,
disclosing:
o the name of each such broker or dealer;
o the number of shares involved;
o the price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker(s) or dealer(s), where applicable;
o that such broker(s) or dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this
prospectus, as supplemented; and
o other facts material to the transaction.
We are bearing all costs relating to the registration of the shares (other
than fees and expenses, if any, of counsel or other advisers to the selling
stockholders). The selling stockholders will pay any commissions, discounts or
other fees payable to broker-dealers in connection with any sale of the shares.
LEGAL OPINION
Bongiovanni & Berger opined as to the legality of the common stock offered
under this prospectus.
11
<PAGE>
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-KSB for the year ended December 31, 1999 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the Securities and Exchange
Commission (the "SEC"). You can read and copy these reports, proxy statements
and other information at the public reference facilities maintained by the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549; Midwest
Regional office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and Northeast Regional Office, 7 World Trade Center, Suite
1300, New York, New York 10048. You can obtain copies of such material at the
prescribed rates from the Public Reference Section of the SEC at its principal
office in Washington, D.C. You can obtain information about the SEC's Public
Reference Room at 1-800-SEC-0330. In addition, we file this material
electronically with the SEC, and the SEC maintains a website
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding companies (including us) that file electronically with the
SEC. Our common stock is listed on the Nasdaq Small-Cap Market and our reports,
proxy statements and other information can also be inspected at the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
We filed on March 6, 2000 a registration statement on Form S-3, with
respect to our common stock. For further information with respect to us and the
shares, we refer you to that registration statement and its exhibits. Statements
made in this prospectus regarding the contents of any contract or other
documents are not necessarily complete. You should read the actual documents
which are exhibits to the registration statement in their entirety.
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the expenses (other than underwriting
compensation expected to be incurred) in connection with the offering described
in this Registration Statement. All of such amounts (except the SEC Registration
Fee) are estimated.
SEC Registration Fee................................................ $11,915.00
Legal Fees and Expenses............................................. 50,000.00
Accounting Fees and Expenses........................................ 15,000.00
Total............................................................... $76,915.00
----------
Item 15. Indemnification of Directors and Officers
The Delaware General Corporation Law authorizes the Registrant to grant
indemnities to directors and officers in terms sufficiently broad to permit
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act.
Article VII of the Registrant's By-laws provides as follows:
Section A. The Corporation shall, to the fullest extent now or hereafter
permitted by law, indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as director or officer of another corporation,
partnership, joint venture, trust or other enterprise against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in, or
not opposed to, the best interests of the Corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section B. The Corporation shall, to the fullest extent now or hereafter
permitted by law, indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he ir or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint, venture, trust or other enterprise against
expenses, including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation. No such indemnification against expenses
shall be made, however, respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that despite the adjudication
of liability,
i
<PAGE>
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section C. Indemnification under Sections A and B of this Article shall be
made by the Corporation when ordered by a court or upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in those
Sections. Such determination shall be made (a) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit, or proceeding, or (b) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
Section D. Expenses incurred in defending a civil or criminal action, suit
or proceeding of the kind described in Sections A and B of this Article shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking, by or on behalf of the person who
may be entitled to indemnification under those Sections, to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation.
Section E. The indemnification provided in this Article shall continue as
to a person who has ceased to be a director or officer of the Corporation and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section F. Nothing herein contained shall be construed as limiting the
power or obligation of the Corporation to indemnify any person in accordance
with the Delaware General Corporation Law, as amended from time to time, or in
accordance with any similar law adopted in lieu thereof. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
Section G. The Corporation shall also indemnify any person against
expenses, including attorneys' fees, actually and reasonably incurred by him in
enforcing any right to indemnification under this Article, under the Delaware
General Corporation Law, as amended from time to time, or under any similar law
adopted in lieu thereof.
Section H. Any person who shall serve as a director, officer, employee or
agent of the Corporation or who shall serve, at the request of the Corporation,
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall be deemed to do so with
knowledge of an in reliance upon the rights of indemnification provided in this
Article, in the Delaware General Corporation Law, as amended from time to time,
and in any similar law adopted in lieu thereof.
The Company also maintains directors' and officers' liability insurance coverage
which insures directors and officers of the Company against certain losses
arising from claims made, and for which the Company has not yet provided
reimbursement, by reason of their being directors and officers of the Company or
its subsidiaries.
Item 16. Exhibits
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description
- ------- -----------
5 -- Opinion of Bongiovanni & Berger regarding legality of securities
being registered
23.1 -- Consent of Bongiovanni & Berger (included in its opinion filed as
Exhibit 5 hereto)
23.2 -- Consent of PricewaterhouseCoopers LLP
24 -- Powers of Attorney (included as part of the signature page hereof)
ii
<PAGE>
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
provided, however, that paragraphs (1) (i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
iii
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Ventura, State of California, on March 6, 2000.
THE MED-DESIGN CORPORATION
By: /s/ JAMES M. DONEGAN
----------------------------------
James M. Donegan
President, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below in so signing also makes, constitutes and appoints James M.
Donegan and Lawrence D. Ellis, or either of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to execute and cause to be filed with the Securities and Exchange
Commission any and all amendments and post-effective amendments to this
Registration Statement and a related registration statement that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
and in each case to file the same, with all exhibits thereto and other documents
in connection therewith, and hereby ratifies and confirms all that said
attorneys-in-fact and agents or their substitute or substitutes may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ JAMES M. DONEGAN Chairman of the Board, President and March 6, 2000
- ------------------------------ Chief Executive Officer
James M. Donegan (Principal Executive Officer)
/s/ LAWRENCE D. ELLIS Vice President of Finance and March 6, 2000
- ------------------------------ Acting Chief Financial Officer
Lawrence D. Ellis (Principal Financial and Accounting Officer)
/s/ JOSEPH N. BONGIOVANNI, III Director March 6, 2000
- ------------------------------
Joseph N. Bongiovanni, III
/s/ JOHN F. KELLEY Director March 6, 2000
- ------------------------------
John F. Kelley
/s/ MICHAEL SIMPSON Director March 6, 2000
- ------------------------------
Michael Simpson
/s/ GILBERT M. WHITE Director March 6, 2000
- -------------------------------
Gilbert M. White
/s/ WILLIAM A. JOLLY Director March 6, 2000
- -------------------------------
William A. Jolly
/s/ VINCENT PAPA Director March 6, 2000
- -------------------------------
Vincent Papa
/s/ PASQUALE VALLONE Director March 6, 2000
- -------------------------------
Pasquale Vallone
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
5 -- Opinion of Bongiovanni & Berger regarding legality of securities
being registered
23.1 -- Consent of Bongiovanni & Berger (included in its opinion filed as
Exhibit 5 hereto)
23.2 -- Consent of PricewaterhouseCoopers LLP
24 -- Powers of Attorney (included as part of the signature page hereof)
EXHIBIT 5
[BONGIOVANNI & BERGER LETTERHEAD]
March 6, 2000
The Med-Design Corporation
2810 Bunsen Avenue
Ventura, California 93003
Re: The Med-Design Corporation
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
As counsel to The Med-Design Corporation, a Delaware corporation (the
"Company"), we have assisted in the preparation of the subject Registration
Statement on Form S-3 (the "Registration Statement"), to be filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), relating to the public offering of up to 2,375,708 shares (the
"Shares") of the Company's Common Stock, par value $.01 per share, to be sold by
the individuals listed as the selling shareholders in the Registration Statement
(the "Selling Shareholders").
In rendering the opinion set forth below, we have reviewed (a) the Registration
Statement; (b) the Company's Certificate of Incorporation and Bylaws;
(c) certain records of the Company's corporate proceedings as reflected in its
minute books; and (d) such records, documents, statutes and decisions as we have
deemed relevant. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity with the original of all documents submitted to us as copies
thereof.
Our opinion set forth below is limited to the Delaware General Corporation Law.
Our opinion is also made in reliance upon the representations of Pennsylvania
Merchant Group and the Debenture Purchasers concerning the qualifications and
shareholdings of those Debenture purchasers, and we have made no independent
investigation of such representations.
Based upon the foregoing, we are of the opinion that the Shares are validly
issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as Exhibit 5 to the Registration
Statement and to the reference to our firm under the heading "Legal Matters" in
the Registration Statement. In giving such opinion, we do not thereby admit that
we are acting within the category of persons whose consent is required under
Section 7 of the Act or the rules or regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Bongiovanni & Berger
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 25, 2000 relating to the
financial statements and financial statement schedules, which appears in The
Med-Design Corporation's Annual Report on Form 10-KSB for the year ended
December 31, 1999. We also consent to the references to us under the headings
"Experts."
PricewaterhouseCoopers LLP
Philadelphia, PA
March 6, 2000
