UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549







FORM
10-Q







(Mark
One)


x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the quarterly period ended March 31, 2010




 ̈
            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 333-144596





MEDICAL DESIGN STUDIOS,
INC.


(Exact
Name of Registrant as Specified in Its Charter)





Nevada
            
            26-0482524(State
      or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
      Employer Identification No.)




7231 South Rome
      Street, Aurora, Colorado
            
            80016(Address of
      Principal Executive Offices)
            
            (Zip
      Code)





(303)
      956-7197(Registrant’s
      Telephone Number, Including Area Code)(Former
      Name, Former Address and Former Fiscal Year,
              if
      Changed Since Last Report)





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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes   ̈    No   ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):






Large Accelerated
      Filer o
            Accelerated
      Filer  oNon-accelerated
      Filer o
            Smaller
      Reporting Company  x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    Yes  x    No  o




As of May
11, 2010, 7,142,858 shares of the issuer’s common stock were
outstanding.







MEDICAL
DESIGN STUDIOS, INC.





FORM
10-Q




March
31, 2010




INDEX




PART
I-- FINANCIAL INFORMATION




PageItem
      1.
            Financial
      Statements
            1Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            11Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            16Item
      4.
            Controls
      and Procedures
            16




PART
II-- OTHER INFORMATION




Item
      1.
            Legal
      Proceedings
            17Item
      1A.
            Risk
      Factors
            17Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            17Item
      3.
            Defaults
      Upon Senior Securities
            17Item
      4.
            Reserved
            17Item
      5.
            Other
      Information
            17Item
      6.
            Exhibits
            17








PART
I - FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS





MEDICAL
DESIGN STUDIOS, INC.





Balance
Sheets





ASSETSMarch
      31, 2010
            
            
            December
      31, 2009Current
      Assets:
            
            (Unaudited)Cash
            
            $
            187
            
            
            $
            100Accounts
      receivable, net of allowance for doubtful accounts
      of  $30,521
            
            
            11425
            
            
            
            9,025Total
      current assets
            
            
            11,612
            
            
            
            9,125Equipment:Computer
      and video equipment
            
            
            29,793
            
            
            
            29,793Accumulated
      depreciation
            
            
            (22,177
            )
            
            
            (20,470
            )Equipment,
      net
            
            
            7,616
            
            
            
            9,323TOTAL
      ASSETS
            
            $
            19,228
            
            
            $
            18,448LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      LiabilitiesAccrued
      expenses
            
            $
            8,773
            
            
            $
            17,561Stockholders’
      Equity:Preferred
      stock: $0.001 par value; 1,000,000 shares authorized; no shares issued or
      outstanding
            
            
            -
            
            
            
            -Common
      stock: $0.001 par value; 74,000,000 shares authorized; 7,142,946 shares
      issued and outstanding
            
            
            7,143
            
            
            
            7,143Additional
      paid-in capital
            
            
            98,312
            
            
            
            87,312Accumulated
      deficit
            
            
            (95,000
            )
            
            
            (93,568
            )Total
      stockholders’ equity
            
            
            10,455
            
            
            
            887TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            19,228
            
            
            $
            18,448See
      accompanying notes to financial statements.





1


MEDICAL
DESIGN STUDIOS, INC.





Statements
of Operations





(Unaudited)





Three
      Months Ended
              March
      31,2010
            
            
            2009Revenue
            
            $
            18,750
            
            
            $
            13,750Operating
      Expenses:Selling,
      general and administrative
            
            
            8,865
            
            
            
            13,978Compensation
            
            
            11,317
            
            
            
            9,364Total
      operating expenses
            
            
            20,182
            
            
            
            23,342Loss
      from operations
            
            
            (1,432
            )
            
            
            (9,592
            )Other
      income (expense)Recovery
      of bad debt
            
            
            -
            
            
            
            10,000-
            
            
            
            10,000Income
      (loss) before income taxes
            
            
            (1,432
            )
            
            
            408Provision
      for income taxes
            
            
            -
            
            
            
            -Net
      income (loss)
            
            $
            (1,432
            )
            
            $
            408Net
      loss per share - basic and diluted
            
            $
            (0.00
            )
            
            $
            (0.00
            )Weighted
      average number of common shares outstanding – basic and
      diluted
            
            
            7,142,946
            
            
            
            7,142,946See
      accompanying notes to the financial statements.





2


MEDICAL
DESIGN STUDIOS, INC.





Statements
of Cash Flows





(Unaudited)





Three
      Months Ended
              March
      31,2010
            
            
            2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
            
            $
            (1,432
            )
            
            $
            408Depreciation
            
            
            1,707
            
            
            
            2,596Recovery
      of bad debt
            
            
            -
            
            
            
            10,000Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Increase
      in accounts receivable
            
            
            (2,400
            )
            
            
            (13,850
            )Increase
      (decrease) in accrued expenses
            
            
            (8,788
            )
            
            
            846Net
      Cash Used in Operating Activities
            
            
            (10,913
            )
            
            
            -CASH
      FLOWS FROM INVESTING ACTIVITIES-
            
            
            
            -Net
      Cash Used in Investing Activities
            
            
            -
            
            
            
            -CASH
      FLOWS FROM FINANCING ACTIVITIESContribution
      to capital
            
            
            11,000
            
            
            
            -Net
      Cash Provided by Financing Activities
            
            
            -
            
            
            
            -CHANGE
      IN CASH
            
            
            87
            
            
            
            -CASH
      AT BEGINNING OF PERIOD
            
            
            
            
            
            
            4,766CASH
      AT END OF PERIOD
            
            $
            100
            
            
            $
            4,766See
      accompanying notes to the financial statements.





3


MEDICAL
DESIGN STUDIOS, INC.





March
31, 2010 and 2009





Notes
to Financial Statements





(Unaudited)





NOTE
1                      ORGANIZATION





Medical
Design Studios, Inc. (“MDS” or the “Company”) was founded as an unincorporated
business in January 2004 and became a C corporation in the State of Nevada on
February 1, 2005. The Company is a digital medical illustrator and animator
providing digital displays and enhancements to companies that assist attorneys
to prepare or enhance exhibits for trials involving medical issues. The Company
applied 505-10-S99-3 of the FASB Accounting Standards Codification, by
reclassifying all of the Company’s undistributed earnings and losses to
additional paid-in capital as of December 31, 2004 and the Company was inactive
for the month ended January 2005.  The accompanying financial
statements have been prepared as if the Company had its corporate capital
structure as of the first date of the first period presented.





The
acquisition of Medical Design Studios (“Predecessor”) by Medical Design Studios,
Inc. (“MDS”) has been accounted for as a reverse acquisition for financial
accounting purposes. The reverse merger is deemed a capital transaction and the
net assets of Predecessor (the accounting acquirer) are carried forward to MDS
(the legal acquirer and the reporting entity) at their carrying value before the
combination. The acquisition process utilizes the capital structure of MDS and
the assets and liabilities of Predecessor which are recorded at historical cost.
Since MDS had no operations prior to the reverse merger, the financial
statements of Predecessor and MDS are being combined for the period from January
1, 2004 through February 1, 2005. The equity of MDS is the historical equity of
Predecessor retroactively restated to reflect the number of shares issued by MDS
in the transaction.





On March 14, 2008, Justin N. Craig, the
Company’s President and Chief Executive Officer, privately sold 6,528,572 shares
of the Company’s common stock, constituting 91.4% of the Company’s outstanding
shares and all of the shares owned beneficially by him, to Vision Opportunity
Master Fund, Ltd. Certain other of the Company’s stockholders also sold shares
of the Company’s common stock to Vision Opportunity Master Fund. As a result of
these privately-negotiated sales, a change in control occurred from Mr. Craig to
Vision Opportunity Master Fund.




On March 17, 2008, pursuant to prior
approvals by stockholders owning in excess of a majority of the voting power of
the Company’s outstanding shares, the Company effected a 2-for-1 reverse stock
split of the Company’s outstanding shares of common stock.




After giving effect to the
privately-negotiated transactions described above, Vision Opportunity Master
Fund owns 6,742,858 shares of the Company’s common stock, or 94.4% of the
Company’s outstanding shares. Vision Opportunity Master Fund purchased these
shares for approximately $670,000 in cash, inclusive of related acquisition
costs. The source of the funding for the cash payment was the general working
capital of Vision Opportunity Master Fund.




4


The terms of the purchase and sale
transactions were as a result of arm’s-length negotiations between the parties.
None of the parties had any relationship with one another prior to this
transaction.




The Company’s officers and directors,
and the business focus of our company, were not changed in connection with the
purchase and sale transactions.





On
November 21, 2008, the Company effectuated a 5 for 1 forward stock
split.





On March
21, 2009, the Company effectuated a 1 for 3.5 reverse stock split.





All share and per share amounts in
these financial statements have been adjusted to give retroactive effect to the
reverse stock split.








NOTE
2                       SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Basis
of Presentation





The
accompanying unaudited interim consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) for interim financial information and
with the rules and regulations of the United States Securities and Exchange
Commission (“SEC”) to Form 10 and Article 8 of Regulation S-X.
 Accordingly, they do not include all of the information and footnotes
required by U.S. GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of operations
realized during an interim period are not necessarily indicative of results to
be expected for a full year. These financial statements should be read in
conjunction with the financial statements of the Company for the year
ended December 31, 2009 and notes thereto contained in the Company’s Annual
Report Form 10-K as filed with the SEC on March 31, 2010.





Use
of estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amount of revenues and expenses during the
reporting period. Actual results could differ from these estimates.





Reclassifications





Certain
amounts in the prior period financial statements have been reclassified to
conform to the current period presentation. These reclassifications had no
effect on reported losses.





5


Cash
Equivalents




The
Company considers all highly liquid investments with maturities of three months
or less at the time of purchase to be cash equivalents.





Accounts
Receivable and Allowance for Doubtful Accounts





Accounts
receivable are recorded at cost. The Company considers the need for an allowance
for doubtful accounts related to its accounts receivables that are deemed to
have a high risk of collectability. Management reviews its accounts receivables
on a monthly basis to determine if any receivables will potentially be
uncollectible. Management analyzes historical collection trends and changes in
its customer payment patterns, customer concentration, and credit worthiness
when evaluating the adequacy of its allowance for doubtful accounts. The Company
includes any receivables balances that are determined to be uncollectible, along
with a general reserve, in its overall allowance for doubtful
accounts.





Equipment





Equipment,
which consists of computers and video equipment, is stated at cost less
accumulated depreciation. Depreciation is calculated on the straight-line basis
over the estimated useful life of three (3) to five (5) years. Depreciation
expense for the periods ended March 31, 2010 and 2009 was $1,707 and $2,596,
respectively.





Fair
Value of Financial Instruments





The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards
Codification for disclosures about fair value of its financial instruments and
has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification
(“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments.  Paragraph 820-10-35-37 establishes a framework for
measuring fair value in accounting principles generally accepted in the United
States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value
measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair
value hierarchy which prioritizes the inputs to valuation techniques used to
measure fair value into three (3) broad levels.  The fair value
hierarchy gives the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities and the lowest priority to
unobservable inputs.  The three (3) levels of fair value hierarchy
defined by Paragraph 820-10-35-37 are described below:





Level
      1
            
            Quoted
      market prices available in active markets for identical assets or
      liabilities as of the reporting date.Level
      2
            
            Pricing
      inputs other than quoted prices in active markets included in Level 1,
      which are either directly or indirectly observable as of the reporting
      date.Level
      3
            
            Pricing
      inputs that are generally observable inputs and not corroborated by market
      data.





The
carrying amounts of the Company’s financial assets and liabilities, such as cash
and accrued expenses, approximate their fair values because of the short
maturity of these instruments.





6


The
Company does not have any assets or liabilities measured at fair value on a
recurring or a non-recurring basis, consequently, the Company did not have any
fair value adjustments for assets and liabilities measured at fair value at
March 31, 2010 or December 31, 2009, nor gains or losses are reported in the
statement of operations that are attributable to the change in unrealized gains
or losses relating to those assets and liabilities still held at the reporting
date for the interim period ended March 31, 2010 or 2009.





Revenue
Recognition





The
Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition.  The Company recognizes revenue
when it is realized or realizable and earned.  The Company considers
revenue realized or realizable and earned when all of the following criteria are
met: (i) persuasive evidence of an arrangement exists, (ii) the product has been
shipped or the services have been rendered to the customer, (iii) the sales
price is fixed or determinable, and (iv) collectability is reasonably
assured.





Income
Taxes





The
Company accounts for income taxes under Section 740-10-30 of the FASB Accounting
Standards Codification.  Deferred income tax assets and liabilities
are determined based upon differences between the financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to
reverse.  Deferred tax assets are reduced by a valuation allowance to
the extent management concludes it is more likely than not that the assets will
not be realized.  Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the statements of operations in the period that includes the
enactment date.





The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification
(“Section 740-10-25”).  Section 740-10-25 addresses the determination
of whether tax benefits claimed or expected to be claimed on a tax return should
be recorded in the financial statements.  Under Section 740-10-25, the
Company may recognize the tax benefit from an uncertain tax position only if it
is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the
position.  The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a
greater than fifty percent (50%) likelihood of being realized upon ultimate
settlement.  Section 740-10-25 also provides guidance on
de-recognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased disclosures.  The
Company had no material adjustments to its liabilities for unrecognized income
tax benefits according to the provisions of Section 740-10-25.





Net
income (loss) per common share





Net
income per common share is computed pursuant to section 260-10-45 of the FASB
Accounting Standards Codification.  Basic net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number
of shares of common stock outstanding during the period. Diluted net income
(loss) per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and potentially outstanding
shares of common stock during each period. There were no potentially dilutive
shares outstanding as of March 31, 2010 or 2009.





7


Recently
issued accounting standards





In June
2003, the Securities and Exchange Commission (“SEC”) adopted final rules under
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC
Release No. 33-9072 on October 13, 2009. Commencing with its annual
report for the year ending December 31, 2010, the Company will be required to
include a report of management on its internal control over financial reporting.
The internal control report must include a statement





·
            of
      management’s responsibility for establishing and maintaining adequate
      internal control over its financial
reporting;





·
            of
      management’s assessment of the effectiveness of its internal control over
      financial reporting as of year end;
and





·
            of
      the framework used by management to evaluate the effectiveness of the
      Company’s internal control over financial
  reporting.





Furthermore,
in the following fiscal year, it is required to file the auditor’s attestation
report separately on the Company’s internal control over financial reporting on
whether it believes that the Company has maintained, in all material respects,
effective internal control over financial reporting.





In
August 2009, the FASB issued the FASB Accounting Standards Update No.
2009-04 “Accounting for
Redeemable Equity Instruments - Amendment to Section 480-10-S99” which
represents an update to section 480-10-S99, distinguishing liabilities from
equity, per EITF Topic D-98, Classification and Measurement of
Redeemable Securities.  The Company does not expect the
adoption of this update to have a material impact on its consolidated financial
position, results of operations or cash flows.





In
August 2009, the FASB issued the FASB Accounting Standards Update No.
2009-05 “Fair Value
Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair
Value”, which provides amendments to subtopic 820-10, Fair Value
Measurements and Disclosures – Overall, for the fair value measurement of
liabilities.  This Update provides clarification that in circumstances
in which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using one or
more of the following techniques: 1. A valuation technique that uses: a. The
quoted price of the identical liability when traded as an asset b. Quoted prices
for similar liabilities or similar liabilities when traded as assets. 2. Another
valuation technique that is consistent with the principles of topic 820; two
examples would be an income approach, such as a present value technique, or a
market approach, such as a technique that is based on the amount at the
measurement date that the reporting entity would pay to transfer the identical
liability or would receive to enter into the identical liability. The amendments
in this Update also clarify that when estimating the fair value of a liability,
a reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of the liability. The amendments in this Update also clarify that both
a quoted price in an active market for the identical liability when traded as an
asset in an active market when no adjustments to the quoted price of the asset
are required are Level 1 fair value measurements.  The Company does
not expect the adoption of this update to have a material impact on its
consolidated financial position, results of operations or cash
flows.





8


In
September 2009, the FASB issued the FASB Accounting Standards Update No.
2009-09 “Accounting for
Investments-Equity Method and Joint Ventures and Accounting for Equity-Based
Payments to Non-Employees”.  This Update represents a
correction to Section 323-10-S99-4, Accounting by an Investor for
Stock-Based Compensation Granted to Employees of an Equity Method
Investee. Additionally, it adds observer commentAccounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees
to the Codification. The Company does not expect the adoption to have a material
impact on its consolidated financial position, results of operations or cash
flows.





In
January 2010, the FASB issued the FASB Accounting Standards Update No.
2010-01 “Equity Topic 505 –
Accounting for Distributions to Shareholders with Components of Stock and
Cash”, which clarifies that the stock portion of a distribution to
shareholders that allows them to elect to receive cash or stock with a potential
limitation on the total amount of cash that all shareholders can elect to
receive in the aggregate is considered a share issuance that is reflected in EPS
prospectively and is not a stock dividend for purposes of applying Topics 505
and 260 (Equity and Earnings Per Share (“EPS”)).  Those distributions
should be accounted for and included in EPS calculations in accordance with
paragraphs 480-10-25- 14 and 260-10-45-45 through 45-47 of the FASB Accounting
Standards codification.  The amendments in this Update also provide a
technical correction to the Accounting Standards Codification.  The
correction moves guidance that was previously included in the Overview and
Background Section to the definition of a stock dividend in the Master
Glossary.  That guidance indicates that a stock dividend takes nothing
from the property of the corporation and adds nothing to the interests of the
stockholders.  It also indicates that the proportional interest of
each shareholder remains the same, and is a key factor to consider in
determining whether a distribution is a stock dividend.




Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying financial statements.





NOTE
3                   
GOING CONCERN





The
accompanying financial statements have been prepared on a going concern basis
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. At March 31, 2010, the Company has an accumulated
deficit of $95,000and had a net loss of
$1,432 and cash used in operations of $10,913 for the period ended March 31,
2010, respectively.





These
factors raise substantial doubt about the Company’s ability to continue as a
going concern and are dependent upon its ability to achieve profitable
operations or obtain adequate financing. The financial statements do not include
any adjustments related to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue in existence.





9


While the
Company is attempting to expand operations and produce additional revenues, the
Company’s cash position may not be significant enough to support the Company’s
daily operations. There are no assurances that it will complete the engagements
successfully or that these engagements will be extended or new engagements will
be obtained.





NOTE
4           STOCKHOLDERS’
DEFICIT





On March
21, 2009, the Company effectuated a 1 for 3.5 reverse stock split of its
outstanding shares of common stock.  All share and per share amounts
in these financial statements have been adjusted to give retroactive effect to
the reverse stock split.





During the three months ended March 31,
2010, the majority shareholder contributed $11,000 to the Company for working
capital.





NOTE
5           CONCENTRATION
OF RISK





For the
three months ended March 31, 2010, three unrelated customers The Dancel Group
(13.80%), Legal Wizard (23.25%), and Trial Exhibits, Inc. (51.52%) comprised
88.57% of total revenues.





For the
three months ended March 31, 2009, two unrelated customers Legal Wizard (67.31%)
and Visual Advantage (10.24%), comprised 77.55% of total revenues.





NOTE
6          RELATED PARTY
TRANSACTIONS





The
Company’s office space which serves as its principal address is provided to it
by its President. The Company paid rent of $1,200 in each of 2010 and 2009 for
use of these facilities. There is no written lease agreement.





NOTE
7          SUBSEQUENT
EVENTS





The
Company has evaluated all events that occurred after the balance sheet date of
March 31, 2010 through May 14, 2010, the date when the financial statements were
issued.  The Management of the Company determined that there were no
reportable events that occurred during that subsequent period to be disclosed or
recorded.





10


ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS




Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995




Information
set forth herein contains “forward-looking statements” which can be identified
by the use of forward-looking terminology such as “believes,” “expects,” “may,”
“should” or “anticipates” or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. We cannot assure you that
the future results covered by the forward-looking statements will be achieved.
We caution readers that important factors may affect our actual results and
could cause such results to differ materially from forward-looking statements
made by or on behalf of us.  These factors include our lack of
historically profitable operations, dependence on key personnel, the success of
our business, our ability to manage anticipated growth and other factors
identified in our filings with the U.S. Securities and Exchange Commission,
press releases and/or other public communications.




The
following discussion and analysis provides information which our management
believes to be relevant to an assessment and understanding of our results of
operations and financial condition. This discussion should be read together with
our financial statements and the notes to financial statements, which are
included in this report. Because of the nature of a relatively new and growing
company such as ours, the reported results will not necessarily reflect the
future.




Operations




We were
founded as an unincorporated business in January 2004 and became a C corporation
in the State of Nevada on February 1, 2005.  As of March 31, 2010, we
had one employee, Justin N. Craig, our founder and President. Mr. Craig devotes
his full time to our business.




We are a
digital medical illustrator and animator providing digital displays and
enhancements to companies that assist attorneys to prepare or enhance exhibits
for trials involving medical issues. Approximately 85% of our work is ultimately
used by plaintiff counsel and 15% is used by defense counsel.




Our
customers are almost always companies that assist attorneys to prepare or
enhance a wide range of exhibits for trials. We perform the digital medical
imaging that is needed by these companies. There are a limited number of these
companies.




Customers
typically hear of our services by word of mouth. They continue with us and
expand or decrease the amount of work that they send to us based on the quality
and timing of our output. We retain rights to the digital images that we
produce. These digital images form a library for us. Some of these digital
images can be sold to users who need generic types of images for their purposes.
This enables us to generate revenue without doing additional work. The longer
that we are in operation, the larger our library becomes.




11


Comparison
of the Three Months ended March 31, 2010 and 2009




A summary of operations
follows:




2010
            
            
            2009Revenue
            
            $
            18,750
            
            
            $
            13,750Operating
      Expenses:Selling,
      general and administrative
            
            
            8,582
            
            
            
            13,978Compensation
            
            
            11,600
            
            
            
            9,364Total
      operating expenses
            
            
            20,182
            
            
            
            23,342Loss
      from operations
            
            
            (1,432
            )
            
            
            (9,592
            )Other
      income:Recovery
      of bad debt
            
            
            -
            
            
            
            10,000-
            
            
            
            10,000Income
      (loss) before income taxes
            
            $
            (1,432
            )
            
            $
            408





Revenue – For the three
months ended March 31, 2010, three unrelated customers The Dancel Group
(13.80%), Legal Wizard (23.25%), and Trial Exhibits, Inc. (51.52%) comprised
88.57% of total revenues.  For the three months ended March 31, 2009,
two unrelated customers, Legal Wizard (67.31%) and The Visual Advantage
(10.24%), comprised 77.55% of total revenues.  This trend of relying
on a very limited number of customers is likely to continue for the foreseeable
future.




Compensationrelates entirely
to Justin N. Craig.




Selling,
general and administrative consist of:




2010
            
            
            2009Accounting
            
            $
            1,500
            
            
            $
            -Automobile
            
            
            392
            
            
            
            454Computer
      supplies
            
            
            126
            
            
            
            216Depreciation
            
            
            1,707
            
            
            
            2,596Dues
            
            
            195
            
            
            
            98Employee
      benefits
            
            
            1,946
            
            
            
            4,527Entertainment
            
            
            216
            
            
            
            264Insurance
            
            
            325
            
            
            
            -Internet
      expenses
            
            
            130
            
            
            
            130Office
      expense
            
            
            -
            
            
            
            1,000Outside
      services
            
            
            -
            
            
            
            2,400Rent
            
            
            1,200
            
            
            
            1,200Repairs
      and maintenance
            
            
            -
            
            
            
            246Salaries
            
            
            600
            
            
            
            -Taxes
            
            
            46
            
            
            
            46Telephone
            
            
            482
            
            
            
            389Travel
            
            
            -
            
            
            
            412Total
            
            $
            8,865
            
            
            $
            13,978





12


Other




As a
corporate policy, we will not incur any cash obligations that we cannot
satisfy with known resources, of which there are currently none except as
described in “Liquidity” below.  We believe that the perception that
many people have of a public company make it more likely that they will accept
restricted securities from a public company as consideration for indebtedness to
them than they would from a private company.  We have not performed
any studies of this matter.  Our conclusion is based on our own
observations.  However, there can be no assurances that we will be
successful in any of those efforts even if we are a public
entity.  Additionally, issuance of restricted shares would necessarily
dilute the percentage of ownership interest of our stockholders.




Liquidity




On
January 21, 2010 and March 4, 2010, our majority shareholder, Vision Opportunity
Master Fund, Ltd., contributed $11,000 to our capital to support our working
capital needs.




Private
capital, if sought, will be sought from former business associates of our
founder or private investors referred to us by those business associates. To
date, we have not sought any funding source and have not authorized any person
or entity to seek out funding on our behalf. If a market for our shares ever
develops, of which there can be no assurances, we may use restricted shares of
our common stock to compensate employees/consultants and independent contractors
wherever possible.  We believe that operations are generating sufficient
cash to continue operations for the next 12 months provided that our costs of
being a public company remain equal to or below the maximum estimate provided
below.




We have
become a public company and, by doing so, have incurred and will continue to
incur additional significant expenses for legal, accounting and related
services. Since we became a public entity, subject to the reporting requirements
of the Securities Exchange Act of 1934, we are incurring ongoing expenses
associated with professional fees for accounting, legal and a host of other
expenses for annual reports and proxy statements. These obligations will reduce
our ability and resources to fund other aspects of our business. We will reduce
the compensation levels paid to management if there is insufficient cash
generated from operations to satisfy these costs.




There are
no current plans to seek private investment.  We do not have any
current plans to raise funds through the sale of securities.  We hope
to be able to use our status as a public company to enable us to use non-cash
means of settling obligations and compensate persons and/or firms providing
services or products to us, although there can be no assurances that we will be
successful in any of those efforts.  We believe that the perception
that many people have of a public company make it more likely that they will
accept restricted securities from a public company as consideration for
indebtedness to them than they would from a private company.  We have
not performed any studies of this matter.  Our conclusion is based on
our own beliefs. Issuing shares of our common stock to such persons instead of
paying cash to them would increase our chances to expand our
business.  Having shares of our common stock may also give persons a
greater feeling of identity with us which may result in
referrals.  However, these actions, if successful, will result in
dilution of the ownership interests of existing shareholders, may further dilute
common stock book value, and that dilution may be material. Such issuances may
also serve to enhance existing management’s ability to maintain control because
the shares may be issued to parties or entities committed to supporting existing
management.




13




Off-Balance
Sheet Arrangements




We have
no off-balance sheet arrangements, obligations under any guarantee contracts or
contingent obligations. We also have no other commitments, other than the costs
of being a public company that will increase our operating costs or cash
requirements in the future.




Seasonality




We have
not noted a significant seasonal impact in our business.




Recently-Issued
Accounting Pronouncements




In June
2003, the U.S. Securities and Exchange Commission adopted final rules under
Section 404 of the Sarbanes-Oxley Act of 2002, as amended by SEC Release No.
33-9072 on October 13, 2009. Commencing with our annual report for the year
ended December 31, 2010, we will be required to include a report of management
on our internal control over financial reporting. The internal control report
must include a statement.




§
            of
      management’s responsibility for establishing and maintaining adequate
      internal control over our financial
reporting;




§
            of
      management’s assessment of the effectiveness of our internal control over
      financial reporting as of year end;
and




§
            of
      the framework used by management to evaluate the effectiveness of our
      internal control over financial
reporting.




Furthermore,
in the following fiscal year, management is required to file the registered
accounting firm’s attestation report separately on our internal control over
financial reporting on whether it believes that we have maintained, in all
material respects, effective internal control over financial
reporting.




14


In
August 2009, the FASB issued the FASB Accounting Standards Update No.
2009-04 “Accounting for
Redeemable Equity Instruments - Amendment to Section 480-10-S99” which
represents an update to section 480-10-S99, distinguishing liabilities from
equity, per EITF Topic D-98, Classification and Measurement of
Redeemable Securities.  The Company does not expect the
adoption of this update to have a material impact on its consolidated financial
position, results of operations or cash flows.




In
August 2009, the FASB issued the FASB Accounting Standards Update No.
2009-05 “Fair Value
Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair
Value”, which provides amendments to subtopic 820-10, Fair Value
Measurements and Disclosures – Overall, for the fair value measurement of
liabilities.  This Update provides clarification that in circumstances
in which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using one or
more of the following techniques: 1. A valuation technique that uses: a. The
quoted price of the identical liability when traded as an asset b. Quoted prices
for similar liabilities or similar liabilities when traded as assets. 2. Another
valuation technique that is consistent with the principles of topic 820; two
examples would be an income approach, such as a present value technique, or a
market approach, such as a technique that is based on the amount at the
measurement date that the reporting entity would pay to transfer the identical
liability or would receive to enter into the identical liability. The amendments
in this Update also clarify that when estimating the fair value of a liability,
a reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of the liability. The amendments in this Update also clarify that both
a quoted price in an active market for the identical liability when traded as an
asset in an active market when no adjustments to the quoted price of the asset
are required are Level 1 fair value measurements.  The Company does
not expect the adoption of this update to have a material impact on its
consolidated financial position, results of operations or cash
flows.




In
September 2009, the FASB issued the FASB Accounting Standards Update No.
2009-09 “Accounting for
Investments-Equity Method and Joint Ventures and Accounting for Equity-Based
Payments to Non-Employees”.  This Update represents a
correction to Section 323-10-S99-4, Accounting by an Investor for
Stock-Based Compensation Granted to Employees of an Equity Method
Investee. Additionally, it adds observer commentAccounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees
to the Codification. The Company does not expect the adoption to have a material
impact on its consolidated financial position, results of operations or cash
flows.




In
January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-01
“Equity Topic 505 – Accounting
for Distributions to Shareholders with Components of Stock and Cash”,
which clarifies that the stock portion of a distribution to shareholders that
allows them to elect to receive cash or stock with a potential limitation on the
total amount of cash that all shareholders can elect to receive in the aggregate
is considered a share issuance that is reflected in EPS prospectively and is not
a stock dividend for purposes of applying Topics 505 and 260 (Equity and
Earnings Per Share (“EPS”)).  Those distributions should be accounted
for and included in EPS calculations in accordance with paragraphs 480-10-25- 14
and 260-10-45-45 through 45-47 of the FASB Accounting Standards
codification.  The amendments in this Update also provide a technical
correction to the Accounting Standards Codification.  The correction
moves guidance that was previously included in the Overview and Background
Section to the definition of a stock dividend in the Master
Glossary.  That guidance indicates that a stock dividend takes nothing
from the property of the corporation and adds nothing to the interests of the
stockholders.  It also indicates that the proportional interest of
each shareholder remains the same, and is a key factor to consider in
determining whether a distribution is a stock dividend.




15


Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying consolidated financial statements.




Critical
Accounting Policies




The
preparation of financial statements and related notes requires us to make
judgments, estimates, and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities.




An
accounting policy is considered to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, and if different estimates that reasonably
could have been used, or changes in the accounting estimates that are reasonably
likely to occur periodically, could materially impact the financial
statements.




Financial
Reporting Release No. 60 requires all companies to include a discussion of
critical accounting policies or methods used in the preparation of financial
statements.  There are no critical policies or decisions that rely on
judgments that are based on assumptions about matters that are highly uncertain
at the time the estimate is made.




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not
required




ITEM
4. CONTROLS AND PROCEDURES




(a)           Evaluation
of Disclosure Controls and Procedures.




An
evaluation was carried out under the supervision and with the participation of
the our management, including our Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”) (in this case the same person), of the effectiveness
of our disclosure controls and procedures as of March 31, 2010.  Based
on that evaluation, our CEO/CFO has concluded that our disclosure controls and
procedures are ineffective to provide reasonable assurance that: (i) information
required to be disclosed by us in reports that we file or submit under the
Securities Exchange Act of 1934 is accumulated and communicated to our
management, including our CEO/CFO, as appropriate to allow timely decisions
regarding required disclosure by us; and (ii) information required to be
disclosed by us in reports that we file or submit under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and
forms.




(b)           Changes
in Internal Controls.




During
the quarter ended March 31, 2010, there were no changes in our internal control
over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.




16





PART
      II - OTHER INFORMATIONITEM
      1.
            LEGAL
      PROCEEDINGSNoneITEM
      1A.
            RISK
      FACTORSNot
      requiredITEM
      2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDSNoneITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIESNoneITEM
      4.
            RESERVEDITEM
      5.
            OTHER
      INFORMATIONNoneITEM
      6.
            EXHIBITS





Exhibit
              Number
            
            Description31.1
            
            Section
      302 Certification of Chief Executive Officer and Chief Financial
      Officer.32.1
            
            Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 – Chief Executive Officer and Chief
      Financial Officer.





17


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.






Date:
      May 14, 2010
              Medical Design Studios,
      Inc.By:
              /s/ Justin
      N. CraigJustin
      N. CraigPresident
      and Chief Financial Officer(principal
      executive officer and principalfinancial
      and accounting officer)
  18