<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1998
or
[_] 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: 0-21001
Nitinol Medical Technologies, Inc.
----------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-4090463
- ------------------------------- ------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
27 Wormwood Street, Boston, Massachusetts 02210
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
617-737-0930
------------
(Registrant's Telephone Number, Including Area Code)
N/A
---
(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 _____
-----
As of April 29, 1998, there were 9,824,826 shares of Common Stock, $.001
par value per share, outstanding.
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC.
INDEX
-----
<TABLE>
<CAPTION>
Part 1. Financial Information Page Number
--------------------- -----------
<S> <C> <C>
Item 1. Financial Statements.
Consolidated Balance Sheets at December 31, 1997 1
and March 31, 1998
Consolidated Statements of Operations for the 3
Three Months Ended March 31, 1998 and 1997
Consolidated Statements of Cash Flows for the 4
Three Months Ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of 10
Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about 14
Market Risk.
Part II. Other Information
-----------------
Item 2. Changes in Securities and Use of Proceeds. 15
Item 6. Exhibits and Reports on Form 8-K. 15
Signatures 16
Exhibits 17
Exhibit 27.1 Financial Data Schedule
</TABLE>
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
AT AT
MARCH 31, DECEMBER 31,
ASSETS 1998 1997
------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................................... $ 6,062,275 $ 5,561,445
Marketable securities............................................................. 19,138,836 20,822,405
Accounts receivable, net of allowances for
doubtful accounts of $145,000 and
$125,000 as of March 31, 1998 and
December 31, 1997, respectively................................................. 2,576,526 2,317,408
Inventories....................................................................... 1,204,482 1,071,265
Prepaid expenses and other current assets......................................... 1,197,357 1,110,271
------------ ------------
Total current assets............................................. 30,179,476 30,882,794
------------ ------------
Property and equipment, at cost:
Laboratory and computer equipment................................................. 1,131,682 1,091,380
Leasehold improvements............................................................ 1,124,258 1,135,583
Equipment under capital lease..................................................... 948,155 948,155
Office furniture and equipment.................................................... 151,701 143,640
------------ ------------
3,355,796 3,318,758
Less-Accumulated depreciation and amortization.................................... 975,117 845,512
------------ ------------
2,380,679 2,473,246
------------ ------------
Investments in long-term marketable securities............................................ 2,772,174 1,478,058
Other assets.............................................................................. 227,105 171,415
------------ ------------
$ 35,559,434 $ 35,005,513
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................................................. $ 545,662 $ 166,248
Accrued expenses.................................................................. 859,712 986,128
Current portion of capital lease obligation....................................... 169,811 168,736
Deferred revenue.................................................................. -- 300,000
------------ ------------
Total current liabilities........................................ 1,575,185 1,621,112
------------ ------------
Capital lease obligation, net of current portion.......................................... 568,003 612,458
Stockholders' equity
Common stock, $.001 par value-
Authorized-30,000,000 shares
Issued and outstanding-9,823,186 shares at
March 31, 1998 and December 31, 1997.............................................. 9,824 9,824
Additional paid-in capital............................................................. 36,610,997 36,610,997
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Accumulated deficit................................... (3,204,575) (3,848,878)
------------ ------------
Total stockholders' equity.................... 33,416,246 32,771,943
------------ ------------
$ 35,559,434 $ 35,005,513
============ ============
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
-2-
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Product sales......................................................... $ 2,608,885 $ 1,899,043
License fees.......................................................... 768,299 250,000
Product development................................................... 1,453 30,640
----------- -----------
3,378,637 2,179,683
----------- -----------
Expenses:
Cost of product sales................................................. 1,019,679 895,593
Research and development.............................................. 764,435 752,753
General and administrative............................................ 680,201 676,226
Selling and marketing................................................. 320,897 137,741
----------- -----------
2,785,212 2,462,313
----------- -----------
Income (loss) from operations.................................... 593,425 (282,630)
----------- -----------
Interest expense........................................................... (15,727) (9,430)
Interest income............................................................ 398,605 411,921
----------- -----------
382,878 402,491
----------- -----------
Income before provision for income taxes......................... 976,303 119,861
Provision for income taxes................................................. 332,000 40,5000
----------- -----------
Net income............................................................ $ 644,303 $ 79,361
=========== ===========
Basic net income per common share.......................................... $ 0.07 $0.01
=========== ===========
Weighted average common shares outstanding................................. 9,823,186 9,437,676
=========== ===========
Diluted net income per common share........................................ $ 0.06 $ 0.01
=========== ===========
Diluted weighted average common shares outstanding......................... 10,952,494 10,938,656
=========== ===========
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
-3-
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
1998 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................................. 644,303 79,361
Adjustments to reconcile net income to net cash
provided by (used in) operating activities-
Depreciation and amortization....................................... 131,994 111,170
Changes in assets and liabilities-
Accounts receivable........................................ (259,117) (13,466)
Inventories................................................ (133,217) (181,153)
Prepaid expenses and other current assets.................. (87,086) (387,618)
Accounts payable........................................... 379,414 (34,816)
Accrued expenses........................................... (126,416) (96,387)
Deferred revenue........................................... (300,000) --
-------------- --------------
Net cash provided by (used in) operating activities... 249,875 (522,909)
-------------- --------------
Cash flows from investing activities:
Maturities of marketable securities......................................... 389,453 1,617,884
Purchases of property and equipment......................................... (37,038) (81,091)
Decrease in other assets.................................................... (58,080) (65,963)
-------------- --------------
Net cash provided by investing activities............. 294,335 1,470,830
-------------- --------------
Cash flows from financing activities:
Payments of capital lease obligations....................................... (43,380) (24,376)
Exercise of stock options................................................... -- 59,998
-------------- --------------
Net cash provided by (used in) financing activities... (43,380) 35,622
-------------- --------------
Net increase in cash and cash equivalents......................................... 500,830 983,543
Cash and cash equivalents, beginning of period.................................... 5,561,445 4,082,486
-------------- --------------
Cash and cash equivalents, end of period.......................................... $ 6,062,275 $ 5,066,029
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for-
Interest........................................................... $ 15,727 $ 9,430
============== ==============
Taxes.............................................................. $ 7,824 $ 7,500
============== ==============
Supplemental disclosure of non-cash investing and financial transactions:
Equipment under capital lease obligation................................... $ -- $ 24,079
============== ==============
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
-4-
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Operations
Nitinol Medical Technologies, Inc. (the Company) designs, develops, and
markets innovative medical devices that utilize advanced technologies and
are delivered by minimally invasive procedures. The Company's products are
designed to offer alternative approaches to existing complex treatments,
thereby reducing patient trauma, shortening procedure, hospitalization and
recovery times and lowering overall treatment costs. The Company's patented
medical devices include self-expanding stents, vena cava filters and septal
repair devices. At this time, the Company's stents have been commercially
launched in Europe and in the United States for certain indications, its
vena cava filters are marketed in the United States and abroad, and its
CardioSEAL Septal Occluder is in the clinical trials stage in the United
States and is sold commercially in Europe and other international markets.
The Company is subject to a number of risks similar to those of other
companies in this stage of development, including uncertainties regarding
the development of commercially viable products, competition from
alternative procedures and larger companies, dependence on key personnel
and government regulation.
2. Interim Financial Statements
The accompanying Consolidated Financial Statements as of March 31, 1998 and
for the three month period then ended are unaudited. In management's
opinion, these unaudited Consolidated Financial Statements have been
prepared on the same basis as the audited Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the period ending
December 31, 1997 as filed with the Securities and Exchange Commission on
March 17, 1998 and include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the results for
such interim periods. The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of the results expected for
the fiscal year ending December 31, 1998.
3. Reclassifications
Certain prior period amounts have been reclassified to conform to current
period's presentation.
4. Cash and Cash Equivalents and Investments in Marketable Securities
-5-
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
In accordance with Statement of Financial Accounting Standards (SFAS) No.
115, Accounting for Certain Investments in Debt and Equity Securities, the
Company has classified its marketable securities and long-term investments
as held-to-maturity.
Held-to-maturity securities represent those securities which the Company
has the intent and ability to hold to maturity and which are reported at
amortized cost. The Company considers all investments with maturities of 90
days or less from the date of purchase to be cash equivalents. Investments
with maturities greater than one year from the balance sheet date are
considered to be long-term investments.
Cash and cash equivalents, which are carried at cost and approximate
market, consist of the following at:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Cash $1,112,790 $1,626,074
Cash equivalents--
Commercial paper 3,966,017 2,964,195
Money market 983,468 971,176
---------- ----------
$6,062,275 $5,561,445
---------- ----------
</TABLE>
Marketable securities, with a weighted average maturity of approximately
six months and three months at March 31, 1998 and December 31, 1997,
respectively, are carried at cost and approximate market and consist of the
following at:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Held-to-maturity--
Eurodollar bonds $ 9,876,571 $10,619,598
Commercial paper 5,000,000 5,985,895
Corporate debt securities 2,732,301 2,388,681
Zero coupon bonds 1,179,987 1,162,233
Medium-term notes 349,977 665,998
----------- -----------
$19,138,836 $20,822,405
=========== ===========
</TABLE>
Long-term investments, with a weighted average maturity of approximately 15
months and 15 1/2 months at March 31, 1998 and December 31, 1997,
respectively, are carried at cost and approximate market and consist of the
following at:
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<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Held-to-maturity--
Eurodollar bonds $1,665,197 $
Corporate debt securities 604,914 975,590
Medium-term notes 502,063 502,468
---------- ----------
$2,772,174 $1,478,058
========== ==========
</TABLE>
In addition, the following amounts of interest receivable generated from
the Company's cash and cash equivalents, marketable securities, and long-
term investments are included in prepaid expenses and other current assets
and in other assets in the accompanying balance sheets at:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Short-term interest
receivable $561,480 $476,559
Long-term interest
receivable 24,403 5,676
-------- --------
$585,883 $482,235
======== ========
</TABLE>
5. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following at:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Components $ 591,524 $ 625,381
Finished Goods 612,958 445,884
---------- ----------
$1,204,482 $1,071,265
========== ==========
</TABLE>
Finished goods consist of materials, labor and manufacturing overhead.
-7-
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. Depreciation and Amortization
The Company provides for depreciation and amortization by charges to
operations using the straight-line method, which allocates the cost of
property and equipment over the following estimated useful lives:
<TABLE>
<CAPTION>
Asset Classification Estimated Useful Life
-------------------- ---------------------
<S> <C>
Laboratory and computer equipment 3-7 Years
Leasehold improvements Life of Lease
Equipment under capital leases Life of Lease
Office furniture and equipment 5-10 Years
</TABLE>
7. Net Income per Common and Common Equivalent Share
In 1997, the Company adopted SFAS No. 128, Earnings per Share, effective
December 15, 1997. SFAS No. 128 establishes standards for computing and
presenting earnings per share and applies to entities with publicly held
common stock or potential common stock. Calculations of basic and diluted
net income per share are as follows:
<TABLE>
<CAPTION>
March 31,
1998 1997
---- ----
<S> <C> <C>
Net income available to common
stockholders $ 644,303 $ 79,361
============ ===========
Weighted average common
shares outstanding 9,823,186 9,437,676
Potential common stock pursuant
to stock options 1,129,308 1,500,980
------------ -----------
Diluted weighted average shares
outstanding 10,952,494 10,938,656
============ ===========
Basic income per share $ .07 $ .01
============ ===========
Diluted income per share $ .06 $ .01
============ ===========
</TABLE>
8. Lease Finance Facility Agreement
In June 1997, the Company entered into a $1.0 million lease finance
facility agreement with a bank under which the Company leases equipment at
an interest
-8-
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
rate that is 200 basis points above the bank's cost of funds. Leases under
this agreement are payable in equal monthly installments over a period of
36-60 months and expire through March 2003. Borrowings of $376,000 and
$250,000 have been made under this agreement by the Company and its
affiliate, Image Technologies Corporation ("ITC"), respectively, of which
$332,000 and $218,000 was outstanding as of March 31, 1998 for the Company
and ITC, respectively. On April 1, 1998, the Company entered into a new
agreement with the bank that provides the Company and ITC with similar
terms and the option to borrow up to $750,000 through March 31, 2003. No
borrowings have been made under this new agreement. The Company also has
outstanding borrowings of $406,000 under an expired lease finance facility
agreement with the same bank. The Company guarantees the outstanding leases
of ITC under these agreements.
9. Accrued Expenses
Accrued expenses consist of the following at:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Income taxes payable $316,176 $ (8,000)
Royalties 146,196 116,012
Payroll and payroll related 90,081 252,425
Leasehold improvements -- 48,553
Other accrued expenses 307,259 577,138
-------- --------
$859,712 $986,128
======== ========
</TABLE>
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This Quarterly Report on Form 10-Q, other than the historical financial
information, contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements involve known and unknown risks, uncertainties or other factors which
may cause actual results, performance or achievement of the Company to be
materially different from any future results, performance, or achievement
expressed or implied by such forward-looking statements. Factors that might
cause such a difference include uncertainties in market demand and acceptance,
government regulation and approvals, and intellectual property rights and
litigation, the impact of healthcare reform programs and competitive products
and pricing, risks associated with technology and product development and
commercialization, potential product liability, management of growth and
dependence on significant corporate relationships and other risks detailed in
the Company's Annual Report on Form 10-K for the period ending December 31, 1997
as filed with the Securities and Exchange Commission on March 17, 1998.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1997
Revenues. Revenues for the three months ended March 31, 1998 increased to $3.4
million from $2.2 million for the three months ended March 31, 1997 (a 55%
increase). Product sales increased to $2.6 million for the three months ended
March 31, 1998 from $1.9 million for the three months ended March 31, 1997 (a
37% increase) primarily due to increased unit sales of vena cava filters and
CardioSEAL Septal Occluders during the three months ended March 31, 1998 as
compared with the three months ended March 31, 1997. License fees for the three
months ended March 31, 1998 increased to $768,000 from $250,000 for the three
months ended March 31, 1997 (a 207% increase). Specifically, the Company
recorded $375,000 in minimum quarterly license fees, $300,000 in milestone
payments and $93,000 in cost reduction incentives from Boston Scientific
Corporation ("Boston Scientific") related to its stent technology in the three
months ended March 31, 1998. The three months ended March 31, 1997 included
$250,000 of minimum royalty payments. Product development revenues from Boston
Scientific (which consist of reimbursement of certain costs incurred by the
Company) decreased to $1,500 for the three months ended March 31, 1998 from
$31,000 for the three months ended March 31, 1997 (a 95% decrease), due to the
completion of the Company's transfer of its stent technology to Boston
Scientific in November 1995, which resulted in a significant reduction of stent
development costs incurred by the Company on behalf of Boston Scientific.
Cost of Product Sales. Cost of product sales increased to $1.0 million for the
three months ended March 31, 1998 from $896,000 for the three months ended March
31, 1997 (a 12% increase) primarily due to the increase in unit sales of the
vena cava
-10-
<PAGE>
filter and CardioSEAL Septal Occluder. Cost of product sales, as a percent of
product sales, decreased to 38% for the three months ended March 31, 1998 from
47% for the three months ended March 31, 1997. This decrease primarily reflects
the impact of the Company's reorganization of its vena cava filter operations
during the second quarter of 1997, which has resulted in lower per unit
manufacturing costs for the vena cava filter.
Research and Development. Research and development expenses increased to
$764,000 for the three months ended March 31, 1998 from $753,000 for the three
months ended March 31, 1997 (a 1% increase). The increase reflects increased
activity in the Company's development programs for vena cava filters and other
products under development. Increased expenses resulted primarily from
increases in personnel and related costs and engineering expenses. The Company
received reimbursement from Boston Scientific for $1,500 and $31,000 of these
expenses in the three months ended March 31, 1998 and 1997, respectively, which
amounts are also included in revenues.
General and Administrative. General and administrative expenses for the three
months ended March 31, 1998 were $680,000 and remained relatively consistent
with the $676,000 of expenses recorded in the three month period ended March 31,
1997 (a 1% increase). The increase is the result of the Company's expanded
scope of operations.
Selling and Marketing. Selling and marketing expenses increased to $321,000 for
the three months ended March 31, 1998 from $138,000 for the three months ended
March 31, 1997 (a 133% increase). The increase related primarily to marketing
activities related to the CardioSEAL Septal Occluder in connection with the
commencement of commercial sales of this product in Europe and other
international markets in June 1997.
Interest Income, Net. Interest income, net was $383,000 for the three months
ended March 31, 1998 as compared to $402,000 for the three months ended March
31, 1997 (a 5% decrease). The decrease was primarily a result of the Company's
investments earning slightly lower interest rates and lower average cash and
investment balances during the three months ended March 31, 1998, as compared to
the three months ended March 31, 1997.
Income Taxes. The Company had a provision for income taxes of $332,000 and
$40,500 for the three months ended March 31, 1998 and 1997, respectively, based
on an operating income of $976,000 and $120,000 for the respective periods and
an estimated effective tax rate of 34%.
LIQUIDITY AND CAPITAL RESOURCES
In the three months ended March 31, 1998, the Company's operations provided cash
of $250,000. In the three months ended March 31, 1997, the Company's operations
utilized cash of $523,000, which was used primarily for working capital.
-11-
<PAGE>
Purchases of property and equipment for use in its research and development,
manufacturing and general and administrative activities amounted to $37,000 and
$81,000 for the three months ended March 31, 1998 and 1997, respectively. In
June 1997, the Company entered into a $1.0 million equipment lease line of
credit agreement with the bank without covenants. Borrowings of $376,000 and
$250,000 have been made under this agreement by the Company and its affiliate,
Image Technologies Corporation ("ITC"), respectively, of which $332,000 and
$218,000 was outstanding as of March 31, 1998, respectively. On April 1, 1998,
the Company entered into a new agreement with the bank that provides the Company
and ITC with similar terms and the option to borrow up to $750,000 through March
31, 2003. No borrowings have been made under this new agreement. The Company
also has outstanding borrowings of $406,000 under an expired lease finance
facility agreement with the same bank. The Company guarantees the outstanding
leases of ITC under these agreements.
In connection with the Company's acquisition of a 23% ownership interest in ITC,
the Company extended to ITC a credit line of up to $2.0 million of senior debt.
The Company anticipates that it will begin funding the operations of ITC in May
1998 through this credit line for a period of approximately twelve months. Any
credit extended to ITC under this credit line will bear interest at a rate equal
to ten percent (10%) per annum.
The Company is party to various other significant contractual arrangements,
including salaries and fees for current employees and consultants, the number of
which is likely to increase as additional agreements are entered into and
additional personnel are retained. The Company also has committed to purchase
certain minimum quantities of the vena cava filter from a supplier through June
2001. See Note 8 to the Notes to Consolidated Financial Statements included in
the Company's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission on March 17, 1998. All of these arrangements require cash
payments by the Company over varying periods of time. Certain of these
arrangements are cancelable on short notice and certain require termination or
severance payments as part of any early termination.
The Company has reviewed its internal computer systems and their capability of
recognizing the year 2000 and years thereafter. The Company expects that any
costs related to ensuring that systems will be year 2000 compliant will not be
material to the financial condition or results of operations of the Company.
The Company believes that its existing resources and cash flow from current
operations will be sufficient to fund its current level of operations and
planned new product development, including increased working capital
requirements and capital expenditures, for the foreseeable future. The Company
expects to expend substantial resources to complete development of the Company's
products, to seek regulatory clearances or approvals, to build its marketing,
sales and manufacturing organizations and to conduct further research and
development.
-12-
<PAGE>
The Company may require additional funds for its research and product
development programs, preclinical and clinical testing, operating expenses,
regulatory processes, manufacturing and marketing programs and potential
licenses and acquisitions. Any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may involve restrictive
covenants. The Company's capital requirements will depend on numerous factors,
including the sales of its products, the progress of its research and
development programs, the progress of preclinical and clinical testing, the time
and cost involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights, competing technological and market developments, developments
and changes in the Company's existing research, licensing and other
relationships and the terms of any collaborative, licensing and other
arrangements that the Company may establish.
-13-
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable
-14-
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
(c) Recent Sales of Unregistered Securities. During the quarterly period
---------------------------------------
ended March 31, 1998, the Company granted options to employees and
directors to purchase an aggregate of 160,100 shares, including: (i)
incentive stock options under the 1996 Stock Option Plan to purchase
100,100 shares at a weighted average exercise price of $7.49; (ii)
non-qualified stock options under the 1996 Stock Option Plan for Non-
Employee Directors to purchase 10,000 shares at a weighted average
exercise price of $7.38; (iii) non-qualified stock options under the
1996 Stock Option Plan to purchase 25,000 shares at a weighted average
exercise price of $10.50; and iv) non-qualified stock options to
purchase 25,000 shares at an exercise price of $10.50.
(d) Uses of Proceeds from Registered Securities. There has been no change
-------------------------------------------
to the information previously provided by the Company on its Quarterly
Report on Form 10-Q for the period ended September 30, 1997, as
amended, relating to securities sold by the Company pursuant to its
Registration Statement on Form S-1 (Registration No. 333-06463), which
was declared effective on September 27, 1996.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
--------
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
--------------------
The Company did not file any Reports on Form 8-K during the quarter ended
March 31, 1998.
-15-
<PAGE>
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.
NITINOL MEDICAL TECHNOLOGIES, INC.
Date: May 6, 1998 By: /s/Thomas M. Tully
-------------------------------------------
Thomas M. Tully
President and Chief Executive Officer
Date: May 6, 1998 By: /s/Theodore I. Pincus
-------------------------------------------
Theodore I. Pincus
Executive Vice President and Chief
Financial Officer
-16-
<PAGE>
EXHIBIT INDEX
Exhibits
- --------
27.1 Financial Data Schedule
-17-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 1998 AND FOR THE THREE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,062,275
<SECURITIES> 21,911,010
<RECEIVABLES> 2,721,526
<ALLOWANCES> 145,000
<INVENTORY> 1,204,482
<CURRENT-ASSETS> 30,179,476
<PP&E> 3,355,796
<DEPRECIATION> 975,117
<TOTAL-ASSETS> 35,559,434
<CURRENT-LIABILITIES> 1,575,185
<BONDS> 0
0
0
<COMMON> 9,824
<OTHER-SE> 33,406,422
<TOTAL-LIABILITY-AND-EQUITY> 35,559,434
<SALES> 2,608,885
<TOTAL-REVENUES> 3,378,637
<CGS> 1,019,679
<TOTAL-COSTS> 1,765,533
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (382,878)
<INCOME-PRETAX> 976,303
<INCOME-TAX> 332,000
<INCOME-CONTINUING> 644,303
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 644,303
<EPS-PRIMARY> .07
<EPS-DILUTED> .06
</TABLE>
