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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __ to__
Commission file number 0-25852
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THE MED-DESIGN CORPORATION
-------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 23-2771475
-------- ----------
(State or other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
2810 Bunsen Avenue, Ventura, CA 93003
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (805) 339-0375
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes |X| No |_|
On May 13, 2003, 12,701,280 shares of the registrant's common stock, $.01 par
value, were outstanding.
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page Number
PART I - FINANCIAL INFORMATION
Item 1- Financial Statements
Consolidated Balance Sheets as of March 31, 2003 (unaudited) and
December 31, 2002 .......................................................... 3
Consolidated Statements of Operations (unaudited) for the
three months ended March 31, 2003 and 2002.................................. 4
Consolidated Statements of Comprehensive Loss (unaudited) for the three
months ended March 31, 2003 and 2002........................................ 5
Consolidated Statements of Cash Flows (unaudited) for the three months
ended March 31, 2003 and 2002..................................................... 6
Notes to Consolidated Financial Statements (unaudited)............................ 7-10
Item 2- Management's Discussion and Analysis of Financial Condition and Results
of Operation......................................................................... 11-12
Item 3- Quantitative and Qualitative Disclosure About Market Risk............................. 12
Item 4- Controls and Procedures............................................................... 12
PART II - OTHER INFORMATION
Item 1- Legal Proceedings..................................................................... 13
Item 6- Exhibits and Reports on Form 8-K ..................................................... 13
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.............. 15
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.............. 16
2
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2003 2002
(Unaudited)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,620,481 $ 1,917,130
Available-for-sale securities 10,691,556 12,248,170
Prepaid expenses and other current assets 564,177 445,280
------------ ------------
Total current assets 12,757,317 14,729,477
Notes receivable - related party 259,863 250,000
Property, plant, and equipment, net of accumulated depreciation
of $1,191,368 and $1,158,603, respectively 327,157 345,130
Patents, net of accumulated amortization of $703,872 and $659,144,
respectively 1,674,895 1,664,617
------------ ------------
Total assets $ 15,019,232 $ 16,989,224
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of capital lease obligations $ 2,650 $ 2,574
Accounts payable 192,937 290,775
Accrued compensation and benefits 80,056 467,086
Other accrued expenses 97,193 189,447
------------ ------------
Total current liabilities 372,836 949,882
Capital lease obligations, less current maturities 814 1,506
------------ ------------
Total liabilities 373,650 951,388
------------ ------------
Commitments and Contingencies
Stockholders' equity
Preferred stock, $.01 par value, 5,000,000 shares authorized;
No shares outstanding at March 31, 2003 and December 31, 2002 -- --
Common stock, $.01 par value, 30,000,000 shares authorized;
12,635,098 and 12,519,798 shares issued and outstanding,
respectively 126,351 125,198
Additional paid-in capital 53,869,177 53,083,149
Accumulated deficit (38,989,511) (37,233,242)
Accumulated other comprehensive (loss) income (360,435) 62,731
------------ ------------
Total stockholders' equity 14,645,582 16,037,836
------------ ------------
Total liabilities and stockholders' equity $ 15,019,232 $ 16,989,224
============ ============
The accompanying notes are an integral part of these financial statements.
3
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
----------------------------
2003 2002
------------ ------------
Revenue $ 39,091 $ 6,695
------------ ------------
Operating expense:
General and administrative $ 1,534,357 $ 1,362,263
Research and development 414,358 346,478
------------ ------------
Total operating expenses 1,948,715 1,708,741
Loss from operations (1,909,624) (1,702,046)
Interest expense (113) (370)
Investment income 153,468 25,656
------------ ------------
Net loss ($ 1,756,269) ($ 1,676,760)
============ ============
Basic and diluted loss per
common share ($0.14) ($0.15)
Weighted average common shares 12,615,998 11,116,954
outstanding
The accompanying notes are an integral part of these
consolidated financial statements.
4
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
Three Months Ended March 31,
---------------------------------------
2003 2002
--------------- -------------------
Net loss ($1,756,269) ($1,676,760)
Other comprehensive loss:
Unrealized holding loss on
securities (423,166) (261,468)
--------------- -------------------
Comprehensive loss ($2,179,435) ($1,938,228)
=============== ===================
The accompanying notes are an integral part of these
consolidatedfinancial statements.
5
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2003 2002
------------ ------------
Cash flows from operating activities:
Net loss ($ 1,756,269) ($ 1,676,760)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 106,066 107,528
Gain on sale of available-for-sale securities (26,612) --
Stock-based compensation 466,822 420,161
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 118,897 39,420
Accounts payable (97,838) 32,113
Accrued expenses (489,147) (102,894)
------------ ------------
Net cash used in operating activities (1,678,081) (1,180,432)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (43,364) (162,622)
Additions to patents (55,007) (37,913)
Investment in available-for-sale securities (1,376,026) (14,000,000)
Sale of available-for-sale securities 2,536,086 1,241,171
------------ ------------
Net cash provided by (used in) investing activities 1,061,689 (12,959,364)
------------ ------------
Cash flows from financing activities:
Capital lease payments (616) (3,315)
Warrants and stock options exercised 320,359 187,500
Proceeds from private placement-net of issuance
costs paid -- 14,236,840
------------ ------------
Net cash provided by financing activities 319,743 14,421,025
------------ ------------
(Decrease) increase in cash (296,649) 281,229
Cash and cash equivalents, beginning of period 1,917,130 397,765
------------ ------------
Cash and cash equivalents, end of period $ 1,620,481 $ 678,994
------------ ------------
Noncash investing and financing activities:
Change in unrealized loss on available-for-sale
securities ($ 423,166) ($ 261,468)
Private placement issuance costs accrued -- $ 42,800
The accompanying notes are an integral part of these
financial statements.
6
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements include
The Med-Design Corporation (hereinafter, including its subsidiaries as the
context indicates, the "Company" or "Med-Design") and its wholly-owned
subsidiaries, MDC Investment Holdings, Inc. and MDC Research Ltd. All
significant intercompany transactions and accounts are eliminated. The
accompanying consolidated financial statements have been prepared on a basis
consistent with that used as of and for the year ended December 31, 2002 and, in
the opinion of management, reflect all adjustments (principally consisting of
normal recurring accruals) considered necessary to present fairly the financial
position of the Company as of March 31, 2003 and the results of the Company's
operations and cash flows for the three month period ended March 31, 2003. The
results of operations for the three-month period ended March 31, 2003 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2003. The financial statements included herein have been prepared
in accordance with generally accepted accounting principles accepted in the
United States for interim financial information and the applicable requirements
of Regulation S-X promulgated by the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles accepted in the United States for
complete financial statements. The consolidated balance sheet at December 31,
2002 was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles accepted in the
United States. These consolidated financial statements should be read in
conjunction with the Company's audited financial statements, which were included
as part of the Company's Annual Report on Form 10-K for the year ended December
31, 2002.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of The Med-Design Corporation and its wholly owned subsidiaries, MDC Investment
Holdings, Inc. and MDC Research Ltd. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain amounts from prior
years have been reclassified for comparability.
New Accounting Standards
"In April 2003, the FASB issued SFAS No. 149 Amendment of Statement 133
on Derivative Instruments and Hedging Activities. This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
This Statement is effective for contracts entered into or modified after June
30, 3002. The adoption of this pronouncement will not impact our financial
position or results of operations."
Stock Based Compensation
We apply the intrinsic value method of Accounting Principles Board
Opinion No. 25 Accounting for Stock Issued to Employees (APB 25) and the
Financial Accounting Standards Board Interpretation No. 44 Accounting for
Certain Transactions Involving Stock Compensation (FIN 44) in accounting for our
stock plans. We have adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 Accounting for Stock-Based Compensation
(SFAS 123).
7
Stock Based Compensation, continued
The following table illustrates the effect on net loss and loss per
share if we had applied the fair value recognition provisions of SFAS 123:
Three Months Ended
March 31,
2003 2002
--------------- --------------
Net loss - as reported ($1,756,269) ($1,676,760)
Add: stock-based employee compensation
expense included in reported net loss 466,822 420,161
Deduct: total stock-based employee compensation
expense determined under fair-value based
method for all awards (938,323) (996,843)
--------------- --------------
Net loss - pro forma ($2,227,770) ($2,253,442)
--------------- --------------
Net loss per share:
Basic & diluted loss per share - as reported ($0.14) ($0.15)
Basic & diluted loss per share - pro forma ($0.18) ($0.20)
Pro forma information regarding net loss and loss per share has been
determined as if we had accounted for our stock options under the fair value
method of SFAS No. 123. The fair value for these options was estimated at the
date of grant using a Black-Scholes option pricing model with weighted-average
assumptions as follows:
Three Months Ended
March 31,
2003 2002
----------------- ------------------
Dividend yield 0.00% 0.00%
Expected volatility 89.33% to 98.60% 98.15% to 109.22%
Risk-free interest rate 1.65% to 3.00% 2.00% to 3.00%
Expected lives Based on the actual terms of options and
warrants
In August 2000 and March and November 2002, the Company entered into
several equity arrangements with officers of the Company involving grants of
stock options and warrants to purchase common stock. The Company recorded
compensation expense in the amount of $466,822 and $420,161 in connection with
these transactions in the first quarter of 2003 and 2002, respectively, to
reflect partial vesting of the grants.
2. Stockholders Equity
On March 25, 2002, Med-Design completed a private equity placement of
its common stock. Med-Design sold 1,326,260 shares of its common stock for
$15,000,000. The net proceeds to the Company after the payment of offering
expenses were approximately $14,200,000.
In connection with the private placement, Med-Design granted to the
placement agent, for nominal consideration, a five-year warrant to purchase
40,000 shares of Med-Design common stock at an exercise price of $14.1375 per
share. The warrant vested upon issuance.
8
2. Stockholders Equity, continued
On March 15, 2002, Med-Design issued two warrants to purchase 18,000
shares of its common stock each at an exercise price of $12.50 per share to two
consultants. The warrants vest on March 15, 2005 and expire on December 27,
2007. Compensation expense of $25,120 and $4,187 was recorded during the first
quarter of 2003 and 2002, respectively, based on the fair value of the warrant
calculated using a Black-Scholes valuation model in accordance with FAS 123.
On October 25, 2002 the Company issued a stock option for consulting
services to be rendered through October 10, 2003. Compensation expense of
$25,726 was recorded during the first quarter of 2003 based on the fair value of
the warrant calculated using a Black-Scholes valuation model in accordance with
FAS 123.
3. Unrealized Holding Losses on Securities
On September 7, 2001, the Company entered into an Addendum to the
development and licensing agreement with Medamicus. Under the terms of the
Addendum, Med-Design received an initial payment of $2,000,000, $1,000,000 of
which was paid in the form of 68,027 shares of Medamicus common stock and
$1,000,000 which was paid in cash on October 15, 2001. The Company continues to
hold the majority of the common stock received from Medamicus in addition to
shares subsequently purchased by Med-Design, which common stock has declined
significantly in market value. The Medamicus stock held by the Company accounts
for $467,571 in unrealized losses at March 31, 2003.
4. Basic and Diluted Loss per Share:
Basic and diluted loss per common share is calculated by dividing net
loss by the weighted average number of common shares outstanding during the
period. Options and warrants to purchase 2,652,819 shares of common stock as of
March 31, 2003 and 2,368,416 shares of common stock as of March 31, 2002 were
not included in computing diluted earnings per share as the effect was
antidilutive.
5. Commitments and Contingencies
In August, 2000, the Company's stockholders approved an employment
contract for the Company's Chairman and CEO, which provided for the issuance of
59,702 shares of common stock per year for an aggregate of 238,806, shares
beginning April 1, 2000, provided he remains an officer, director or consultant
of the Company. The fair value of Med-Design common stock at the date of
stockholder approval of this issuance of common shares was $12.63 per share.
In November 1999, the Company approved the issuance, subject to
stockholder approval, which was received in August 2000, of 200,000 shares of
common stock to the then Chief Operating Officer. The stock vests at the earlier
of the date when the Company's common stock trades at $22.00 or higher for
thirty 30 consecutive days or November 11, 2004 provided he has not resigned or
been discharged for cause. On July 6, 2001, Med-Design stock maintained a market
price of $22.00 or higher for thirty (30) consecutive days and this agreement
was revised to provide that a third of the stock would be issued on August 6,
2001 and the remaining shares will vest in two equal tranches on August 6, 2002
and August 6, 2003.
In August 2000, Med-Design's stockholders approved the issuance of a
warrant to purchase 50,000 shares of common stock at an exercise price of $6.26
per share and the issuance of 125,000 shares of common stock to John F. Kelley,
at the time a director of the Company in connection with the performance of
consulting services. The compensation arrangement was approved, subject to the
conclusion of negotiations of Mr. Kelley's contract. Negotiations have not yet
concluded, and the Company continues to discuss contract terms with Mr. Kelley.
9
6. Related Party Transactions
For the three months ended March 31, 2003 and 2002, the Company paid
$10,410 and $3,639, respectively, for legal services to a firm, of which a
partner is a director, officer and stockholder of Med-Design.
On April 15, 2002, pursuant to a Note and Pledge Agreement, the Company
loaned $250,000 to Michael W. Simpson, who at the time was the Company's Chief
Operating Officer, which will be collateralized by 66,666 shares of the
Company's common stock to be issued to Mr. Simpson on August 6, 2003. The loan
is evidenced by a promissory note (the "Note") and was made to enable Mr.
Simpson to pay his 2001 federal income taxes. The Note is repayable on the
earlier of (i) April 15, 2004, (ii) the date on which Mr. Simpson ceases to be
an employee, consultant or director of the Company, (iii) the date on which the
Company provides notice to Mr. Simpson that the closing price of the common
stock has been $30.00 or higher for 20 consecutive trading days as reported on
the Nasdaq National Market or (iv) the date on which Mr. Simpson sells or
transfers the pledged securities. The Note accrues interest at 16% per year
until the issuance of the pledged securities to Mr. Simpson, at which time the
Note will accrue interest at the prime lending rate plus 1%. Amounts due under
the Note as of March 31, 2003, an aggregate of $259,863, of which $250,000 is
principal and $9,863 is accumulated interest, are included in the line item
"Notes receivable - related party" on the consolidated balance sheet.
On April 25, 2003, the Company entered into an employment agreement with Mr.
Simpson who resigned as director and officer of the Company as of March 13,
2003. The term of the agreement is from March 20, 2003 through July 15, 2003.
Under the agreement, Mr. Simpson will receive total compensation of $45,538 for
the period of the agreement. In addition, the agreement provides for severance
of $46,250, if the agreement is not extended on July 15, 2003. The agreement
acknowledges Mr. Simpson's debt to the Company and provides that the debt will
be repaid when Mr. Simpson receives the final tranche of the stock grant
described above.
7. Warrants Outstanding
As of March 31, 2003 and 2002, warrants to purchase a total of 500,000
and 700,000 shares of Med-Design's common stock, respectively, were outstanding
with various vesting and expiration periods.
On January 14, 1998, Med-Design issued a warrant to purchase 100,000
shares of common stock at an exercise price of $2.88 per share to a director of
the Company who was engaged to perform consulting services. The warrant was
exercisable upon issuance and was exercised on January 14, 2003.
As of March 31, 2002, warrants to purchase a total of 55,000 shares of
Med-Design's common stock were exercised.
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
FORWARD-LOOKING STATEMENTS
The report contains forward-looking statements within the meaning of
the "safe harbor" provisions of The Private Securities Litigation Reform Act of
1995 that address, among other things, the generation of royalty revenues from
our licensees; sufficiency of available resources to fund operations; and the
anticipated launch dates of several of our licensed products. We generally
identify forward looking statements in this report using words like "believe,"
"anticipate," "will," "expect," "may," "could," "intend" or similar statements.
There are important factors that could cause actual results to differ materially
from those expressed or implied by such forward-looking statements including
lack of demand or low demand for our products or for safety products generally;
a determination of our licensees to focus their marketing efforts on products
other than those licensed from us; delays in introduction of products licensed
by us due to manufacturing difficulties or other factors; our inability to
license or enter into joint venture or similar arrangements regarding our other
products and other factors discussed in this report generally and in our Annual
Report on Form 10-K for the year ended December 31, 2002. Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date of this report. We undertake no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date of this report.
Recent Developments
In January 2003, Med-Design resolved its previously reported royalty
rate dispute with BD. Med-Design and BD agreed that a royalty rate of 2.5% on
all sales of the BD Integra Syringe in the U.S. and all international markets
where our retracting needle syringe patents are in force would be paid to
Med-Design. The royalty rate is retroactive to the initial introduction date of
May 2002.
In February 2003, we received 510(k) clearance from the FDA for the
Safety Dental Injector. Med-Design will sell the product directly to Sultan
Chemists, who will market the product to dentists, dental groups and government
institutions through direct channels and established dental retailers. The
Safety Dental Injector will be manufactured by Owens-Illinois using automated
equipment and molds purchased by us.
Results of Operations
Results of Operations for the Three-Month Period Ended March 31, 2003 and 2002
Revenue for the three months ended March 31, 2003 was $39,091, an
increase of $32,396 as compared to revenue of $6,695 for the corresponding
period in 2002. The majority of the revenue for the three months ended March 31,
2003 and 2002 reflected royalty payments from Medamicus under our September 25,
2001 agreement with Medamicus. Royalties increased substantially from this
agreement in 2003 due to increased volume as a result of Medamicus completing
supply agreements with major customers.
General and administrative expenses were $1,534,357, an increase of
$172,094 as compared to general and administrative expenses of $1,362,263 for
the corresponding period in 2002. The increase in general and administrative
expenses was primarily due to costs related to additional executive personnel,
stock based compensation related to the additional warrants issued for services
in 2002 and increased legal, professional and insurance costs.
Research and development expenses for the three months ended March 31,
2003 were $414,358, an increase of $67,880 as compared to research and
development expenses of $346,478 in 2002. The increase in research and
development expenses was due primarily to regulatory costs related to the
preparation of the Safety Dental Injector for manufacturing and the hiring of
additional engineering personnel.
11
Liquidity and Capital Resources
At March 31, 2003, cash, cash equivalents and available-for-sale
securities totaled $12,312,037 as compared to $14,165,300 at December 31, 2002,
a decrease of $1,853,263 or approximately 13%. This decrease is primarily due to
our losses from operations.
For the three months ended March 31, 2003, our net cash used in
operating activities was $1,678,081, principally reflecting our net loss of
$1,756,269. Our cash position was also adversely affected by a $489,000 decrease
in accrued expenses relating to the operations of the business as described in
the results of operations. Net cash provided by financing activities consisted
primarily of the proceeds from the exercise of stock options and warrants.
We have a revolving line of credit totaling $3,000,000. This facility
can be used to fund working capital needs and finance capital equipment
purchases. However, advances for capital equipment financing may not exceed
$600,000. Borrowings are collateralized by substantially all of our assets. Any
borrowings to meet working capital needs bear interest at LIBOR plus 2.25%,
while borrowings to finance capital equipment purchases bear interest at the
prime rate plus 2.5%. The facility expires on May 31, 2003 and we intend to seek
renewal of the facility. There is no assurance that we will be successful in
negotiating an extension of the line of credit on reasonable terms. There were
no amounts outstanding under the line of credit at March 31, 2003.
We believe that we have sufficient funds to support our planned
operations for at least the next twelve months. The availability of resources
over a longer period of time will be dependent on our ability to enter into
licensing agreements and to receive royalty payments from our current and future
licensees and our ability to enter into, and profitably operate under, joint
venture or similar arrangements. If licensing revenues are insufficient to
support operations or we are unsuccessful in negotiating additional agreements,
we may be required to reduce the scope of, or cease, our operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
There were no amounts outstanding under our revolving line of credit at
March 31, 2003. If we were to borrow under our credit facility, borrowings to
meet working capital needs would bear interest at LIBOR plus 2.25% and
borrowings to finance capital equipment purchases would bear interest at the
prime rate plus 2.5%. As a result, any such borrowings would be subject to the
fluctuations in the market which affect LIBOR or the prime rate, respectively.
We invest a portion of excess cash in marketable securities in
accordance with our investment guidelines as approved by our Board of Directors.
These investments are in highly liquid, low risk securities where our risk of
loss is at a minimum. Additionally, we have acquired shares of a publicly traded
company for which we are at risk of loss based on downward fluctuations in the
quoted market fair value of those shares. If the quoted fair value of this
company's shares were to fall by 10% and 20%, we would incur an unrealized loss
of $164,809 and $329,618, respectively. Such losses are ultimately recognized as
expense in the period in which the stock is sold or in the current period if the
decline in market value is deemed to be other-than-temporary. At March 31, 2003,
the Company has an unrealized loss of approximately $467,000 with respect to
these shares.
Item 4. Controls and Procedures
An evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of March 31, 2003 was carried out by us
under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are functioning effectively to
provide reasonable assurance that the information required to be disclosed by us
in reports filed under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms. A controls system, no matter how well designed and
operated, cannot provide absolute assurance that the objectives of the controls
system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected. Subsequent to the date of the most recent evaluation of our
internal controls, there were no significant changes in our internal controls or
in other factors that could significantly affect the internal controls,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
12
Part II - OTHER FINANCIAL INFORMATION
Item 1. Legal Proceedings
On December 21, 2001, suit was filed in California Superior Court by
Michael J. Botich, a former executive officer of Med-Design. Mr. Botich alleged
that Med-Design breached an oral agreement to employ him as a part-time
consultant. The Company settled the suit in February 2003 and the settlement
payment of $350,000 is reflected in the Company's 2002 financial results.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
We filed a Form 8-K dated March 14, 2003 that included information
reported under Item 9 incorporating the presentation serving as the basis for a
conference call held by The Med-Design Corporation on March 14, 2003.
13
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Med-Design Corporation
Date: May 14, 2003 James M. Donegan
------------------------------------
James M. Donegan
Chief Executive Officer
Lawrence D. Ellis
------------------------------------
Lawrence D. Ellis
Chief Financial Officer
14
THE MED-DESIGN CORPORATION
CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, James M. Donegan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Med-Design
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
- -------------------- -----------------------------------------
Date: James M. Donegan, Chief Executive Officer
15
THE MED-DESIGN CORPORATION
CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Lawrence D. Ellis, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Med-Design
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
- -------------------- -----------------------------------------
Date: Lawrence D. Ellis, Chief Financial Officer
16
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002