<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(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, 1997
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-14068
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Memry Corporation
-----------------
(Exact name of small business issuer as specified in its charter)
Delaware 06-1084424
- --------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation of organization)
57 Commerce Drive, Brookfield, Connecticut 06804
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(Address of principal executive offices)
(203) 740-7311
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date. As of March 31, 1997, 16,717,354
shares of the registrant's common stock, par value $.01 per share, were issued
and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of March 31, 1997 and June 30,
1996
Condensed Consolidated Statements of Operations for the three months
ended March 31, 1997 and 1996 and the nine months ended March 31,
1997 and 1996
Condensed Consolidated Statements of Cash Flows for the nine months
ended March 31, 1997 and 1996
Notes to the Condensed Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II --- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Memry Corporation & Subsidiary
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
March 31, June 30,
1997 1996
--------------------- ----------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ - $ 57,000
Accounts receivable, less allowance for doubtful
accounts March $36,000; June $29,000 2,121,000 568,000
Inventories 2,035,000 2,044,000
Prepaid expenses and other 117,000 63,000
--------------------- ----------------------
Total current assets 4,273,000 2,732,000
--------------------- ----------------------
Property, Plant and Equipment, at cost 6,079,000 5,957,000
Less accumulated depreciation (2,433,000) (2,076,000)
--------------------- ----------------------
3,646,000 3,881,000
--------------------- ----------------------
Other Assets
Patents and patent rights, net 1,901,000 2,002,000
Costs in excess of business acquired, net 940,000 989,000
Deferred financing costs, net 133,000 36,000
Deposits 53,000 39,000
--------------------- ----------------------
3,027,000 3,066,000
--------------------- ----------------------
Total assets $ 10,946,000 $ 9,679,000
===================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 3,021,000 $ 1,733,000
Notes payable 2,635,000 1,698,000
Unearned revenue 150,000
Current maturities of capital lease obligations - 3,000
--------------------- ----------------------
Total current liabilities 5,656,000 3,584,000
--------------------- ----------------------
Capital lease obligations, less current maturities - 4,000
Stockholders' Equity
Preferred stock - 36,000
Common stock, $.01 par value; 30,000,000 authorized - -
shares; 16,717,354 shares issued and outstanding 167,000 130,000
Additional paid-in capital 39,049,000 39,034,000
Accumulated deficit (33,926,000) (33,109,000)
--------------------- ----------------------
Total stockholders' equity 5,290,000 6,091,000
--------------------- ----------------------
Total liabilities and stockholders' equity $ 10,946,000 $ 9,679,000
===================== ======================
</TABLE>
See notes to the consolidated financial statements.
3
<PAGE>
Memry Corporation & Subsidiary
Condensed Consolidated Statements of Operations
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
--------------------------------- ---------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues
Product Sales $ 3,379,000 $ 695,000 $ 9,357,000 $ 2,599,000
Research and development 33,000 57,000 172,000 334,000
--------------- --------------- --------------- ---------------
3,412,000 752,000 9,529,000 2,933,000
--------------- --------------- --------------- ---------------
Cost of revenues
Manufacturing 2,352,000 676,000 6,159,000 2,254,000
Research and development 63,000 71,000 229,000 306,000
--------------- --------------- --------------- ---------------
2,415,000 747,000 6,388,000 2,560,000
--------------- --------------- --------------- ---------------
Gross profit 997,000 5,000 3,141,000 373,000
--------------- --------------- --------------- ---------------
Operating expenses
General, selling and administration 1,228,000 544,000 3,363,000 1,525,000
Depreciation and amortization 176,000 24,000 530,000 72,000
--------------- --------------- --------------- ---------------
1,404,000 568,000 3,893,000 1,597,000
--------------- --------------- --------------- ---------------
Operating loss (407,000) (563,000) (752,000) (1,224,000)
Other income (expense)
Interest (73,000) (45,000) (215,000) (155,000)
Gain on disposition of assets - - 10,000 -
--------------- --------------- --------------- ---------------
(73,000) (45,000) (205,000) (155,000)
--------------- --------------- --------------- ---------------
Loss before extraordinary item (480,000) (608,000) (957,000) (1,379,000)
Extraordinary item, gain on early
retirement of debt - - 140,000 -
--------------- --------------- --------------- ---------------
Net loss $ (480,000) $ (608,000) $ (817,000) $ (1,379,000)
=============== =============== =============== ===============
Weighted average number of common
shares outstanding
16,717,354 8,261,207 15,792,802 8,173,896
=============== =============== =============== ===============
Earnings per share, extraordinary
item $ - $ - $ .01 $ -
=============== =============== =============== ===============
Net loss per share $ (.03) $ (.07) $ (.05) $ (.17)
=============== =============== =============== ===============
</TABLE>
See notes to the condensed consolidated financial statements.
4
<PAGE>
Memry Corporation & Subsidiary
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 1997 and 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------------- --------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss $ (817,000) $ (1,379,000)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 530,000 72,000
Gain on early retirement of debt (140,000) -
Non-cash compensation 65,000 -
Stock registration costs (50,000) -
Changes in working capital components:
(Increase) decrease in accounts receivable (1,553,000) 164,000
(Increase) decrease in inventories 9,000 (31,000)
(Increase) decrease in prepaid expenses and
other (54,000) 11,000
(Decrease) increase in accounts payable and
accrued expenses 1,288,000 (1,184,000)
(Decrease) increase in unearned revenue (150,000) -
Decrease (increase) in other assets (13,000) -
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Net cash used in operating activities (885,000) (2,347,000)
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Cash Flows From Investing Activities
Purchases of property, plant and equipment (122,000) 70,000
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Net cash used in investing activities (122,000) 70,000
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Cash Flows From Financing Activities
Proceeds from sale of stock, net - 1,744,000
Proceeds from (repayments of) short-term borrowings 1,077,000 (552,000)
Payments on capital lease obligations (7,000) -
Deferred financing costs (120,000) -
------------------ -------------------
Net cash provided by financing activities 950,000 1,192,000
------------------ -------------------
Decrease in cash and
cash equivalents (57,000) (1,085,000)
Cash and cash equivalents, beginning 57,000 1,145,000
------------------ -------------------
Cash and cash equivalents, ending $ - $ 60,000
================== ===================
</TABLE>
See notes to the condensed consolidated financial statements.
5
<PAGE>
MEMRY CORPORATION & SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles 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. Operating
results for the three and nine month periods ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Annual Report on Form 10-KSB
for the year ended June 30, 1996 of Memry Corporation (the "Company").
Note B. SUBSEQUENT EVENTS
On April 29, 1997 the Company's Board of Directors and on May 8, 1997 the Board
of Directors and the sole stockholder (being the Company) of Wright Machine
Corporation ("Wright"), the Company's subsidiary, voted in favor of ceasing
operations of Wright by June 30, 1997 and conducting an orderly liquidation of
the assets of Wright. On May 12, 1997, Wright entered into an agreement with
Thomas Industries Auction & Liquidation Corporation ("Thomas Industries")
regarding the sale of all of Wright's machinery and equipment to Thomas
Industries for a purchase price of $1,100,000. A deposit of $200,000 was paid
upon the execution of such agreement and the remaining $900,000 is payable upon
the closing of such sale, which is scheduled for June 6, 1997. Wright's real
property has also been listed for sale. The Company does not expect to incur a
loss as a result of such liquidation. However, no assurances can be made as to
the actual results of such liquidation. Wright will be classified as a
discontinued operation in the Company's fourth quarter financial statements.
Since the end of the third quarter, the Company has been engaged in a private
placement of shares of its Common Stock, pursuant to Regulation D promulgated
under the Securities Act of 1933, as amended, for an aggregate offering of
$500,000 of such shares (being 333,333 shares), at a price of $1.50 per share.
To date the Company has closed on sales aggregating $120,000, or 80,000 shares
of Common Stock. While the Company is actively pursuing the sale of the
remaining shares, no assurances can be given that such shares will actually be
sold.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results. Certain statements under this caption may constitute "forward-looking
statements". See Part II "Other Information".
6
<PAGE>
(a) LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended March 31, 1997, due to insufficient cash provided
by operations, the Company funded operations principally from cash flow obtained
through its revolving credit facility. The Company has historically satisfied
its cash requirements from borrowings and sales of equity securities. At March
31, 1997, the Company's cash and cash equivalents balance was $0, down $57,000
from the start of fiscal 1997 as a result of the use of cash in the amount of
$885,000 for operating activities and $122,000 for the purchases of property,
plant and equipment, significantly offset by cash provided by financing
activities of $950,000. The cash used in operating activities of $885,000 during
the nine months ended March 31, 1997 was significantly less than that of the
same period in 1996 of $2,347,000 primarily due to the acquisition in June 1996
of Raychem Corporation's nickel-titanium product line (the "Raychem
Acquisition") which generated significantly reduced net losses, and higher
receivables and payables. Cash provided by financing activities was $950,000
during the nine months ended March 31, 1997 compared to $1,192,000 for the
comparable period in 1996. The $950,000 provided by financing activities during
the nine months ended March 31, 1997 consists primarily of proceeds from the
refinancing of the bank debt (see below) of $1,078,000 net of repayments,
partially offset by the payment of deferred financing costs of $120,000. During
the nine months ended March 31, 1996 the cash provided by financing activities
of $1,192,000 consisted of net proceeds from the sale of stock of $1,744,000
offset by $552,000 of repayments on the then existing bank facility. As a result
of the foregoing, at March 31, 1997 the Company had a working capital (current
assets less current liabilities) deficit of $1,383,000, a $531,000 increase from
the working capital deficit of $852,000 at June 30, 1996. Since the end of the
third quarter, the Company has raised $120,000 through the sale of 80,000 shares
of Common Stock in private placements pursuant to exemptions provided by
Regulation D promulgated under the Securities Act of 1933, as amended. Such
sales are part of a contemplated total sale of $500,000 of shares of Common
Stock in which the Company is currently engaged. However, no assurances can be
given that the additional $380,000 of shares of common stock will actually be
sold.
On August 9, 1996, the Company entered into a term and revolving loan agreement
with Affiliated Business Credit Corporation ("ABCC"), a commercial financing
subsidiary of First Union Bank, allowing up to $2.635 million of aggregate
borrowings in the form of a term loan and a revolver. The term loan is a five
year $1.135 million loan, with principal payable in monthly installments of
approximately $19,000. An additional $135,000 of principal is due on or before
June 30, 1997. The entire unpaid balance, if not earlier demanded, is due and
payable on July 31, 2001; provided, however, that ABCC has the right to
accelerate the loan and require full payment upon demand. Interest on the term
loan accrues at the rate of prime plus 2.25%. The revolving credit facility
provides for borrowings at the lesser of $1.5 million or the sum of (a) 80% of
eligible accounts receivable plus (b) the lesser of $500,000 or 25% of eligible
inventory. Borrowings pursuant to the revolving loan agreement are due upon
demand and bear interest, payable monthly, at prime plus 2%. As of March 31,
1997 the Company had $1,211,000 outstanding on the revolving line of credit. The
loan documents contain standard covenants including restrictions on dividends
and other payments and provide for security interests in substantially all of
the Company's consolidated assets. At the August 9, 1996 closing, Wright's debt
to Fleet Bank was repaid with a $140,000, or 16% discount.
The company expects to make capital expenditures of approximately $200,000 prior
to fiscal 1997 year end. Said expenditures would be for machinery and equipment
requirements at Memry West as a result of new customer orders. During the second
quarter of fiscal 1997, the Company's liquidity was adversely affected by the
approximately $140,000 of expenses incurred in connection with the move of the
medical assemblies portion of the business purchased in the Raychem Acquisition
from Menlo Park, California to the Company's headquarters in Brookfield,
Connecticut (including related relocation expenses). The Company had previously
expected such relocation to cost only slightly more than $100,000.
7
<PAGE>
The Company has in the past grown through acquisitions (including both the
Raychem Acquisition and the Company's earlier acquisition of Wright) and, as
part of its continuing growth strategy, the Company expects to continue to
evaluate and pursue opportunities to acquire other companies, assets and product
lines that either complement or expand the Company's existing businesses within
the Memry Segment. However, at the present time, the Company has no immediate
plans for any such acquisition.
In connection with a December 1994 subordinated debt financing, the Company
granted Connecticut Innovations, Incorporated ("CII"), currently the holder of
both common stock and warrants of the Company, a "put" right if: (i) at any time
before the earlier of June 28, 2006 and the date on which CII ceases to hold at
least 35% of the common stock underlying the convertible securities originally
issued to it, the Company ceases to (a) maintain its corporate headquarters and
all of its product business operations in the State of Connecticut (including
the assembly of all products to be sold to U.S. Surgical Corporation), excluding
business operations relating to Wright's production of screw machine products
and taper pins and the Company's components and sub-assembly business acquired
from Raychem, (b) base its president and chief executive officer, a majority of
its senior executives, and all of its administrative, financial, research and
development, marketing and customer service staff relating to its product
business (subject to the same inclusions and exclusions as clause (a)) in the
State of Connecticut, (c) conduct all of its operations relating to its product
business directly or through subcontractors and through licensed operations in
the State of Connecticut (subject to the same inclusions and exclusions as
clause (a)), and (d) maintain its principal bank accounts with banks located in
the State of Connecticut, excluding all banks associated with Wright; or (ii)
the Company fails to keep the Registration Statement on Form S-2 that went
effective on January 31, 1997 (the "Registration Statement"), covering the offer
and sale by certain of the Company's shareholders (including CII) of up to
3,550,630 shares (including up to 3,041,963 shares beneficially owned by CII) of
the Company's common stock, in effect for an aggregate of 120 days during any
rolling twelve month period during the three years which the Company is required
to maintain the effectiveness of the Registration Statement. Upon CII's exercise
of its put, the Company shall be obligated to purchase from CII all the
Company's Common Stock then owned by CII and underlying warrants then owned by
CII at a price equal to the greater of the then current market price of the
Company's common stock or $2.00 per share, less, in either event, the aggregate
amount of unpaid exercise prices of all warrants put to the Company. Using $2.00
per share as the put price per share, the aggregate put price that would have to
be paid by the Company if the put were exercised would be approximately
$4,085,500. If CII were to have the right to put its securities and were to
choose to exercise that right, it would have a serious adverse effect on the
Company's liquidity and the Company would most likely have to seek equity
financing to be able to meet its obligations to CII. However, the Company
believes that it has the ability to insure that its operations do not move from
Connecticut in a manner that would trigger CII's put, and the Company intends to
cause the Registration Statement to be maintained in a manner that would prevent
CII's put from being operative.
The Company believes that the combination of its improved borrowing facility,
its historical ability to raise equity capital, the liquidation of Wright, and
the generation of operating profit from those portions of the Company's Memry
Segment business acquired in the Raychem Acquisition will be sufficient to meet
the Company's working capital requirements in the short-term (assuming both that
ABCC does not demand immediate repayment of the term loan and that CII's put
rights are not triggered and exercised and, as stated above, the Company intends
not to cause said put rights to become exercisable). With proceeds from the
orderly liquidation of Wright's assets, the Company expects to pay down debt and
augment working capital. The Company is currently engaged in a private placement
of shares of Common Stock at a purchase price of $1.50 per share for a maximum
of $500,000 of shares of Common Stock.
8
<PAGE>
The Company does not expect that there are any contingencies, other than as set
forth above, which would have a material effect on the Company's financial
condition, future operating results and/or liquidity.
(b) RESULTS OF OPERATIONS
Nine Months Ended March 31, 1997 compared to nine months ended March 31, 1996
- -----------------------------------------------------------------------------
Sales Overview. Overall revenues increased 225%, to $9,529,000, in the first
- ---------------
nine months of fiscal 1997 from $2,933,000 during the same period in fiscal
1996. Revenues relating to the Memry Segment were responsible for all of the
increase.
Memry Sales. Revenues at the Memry Segment increased 936% to $8,098,000 during
- ------------
the nine month period ended March 31, 1997, as compared with $782,000 during the
same period in fiscal 1996. The significant increase in revenues is entirely due
to product sales resulting from the Raychem Acquisition. Medical material, parts
and component sales were responsible for 60% of the Memry Segment revenue
increase. Research and development revenues at the Memry Segment were $172,000,
as compared to $334,000, in the nine month periods ended March 31, 1997 and
1996, respectively, decreasing 49%, or $162,000. This decrease was the result of
reduced labor hours available to work on government contracts due to the efforts
made to prepare for the medical assemblies unit which moved from California to
the Connecticut location.
Wright Sales. Revenues relating to Wright Machine Corporation (the "Wright
- -------------
Segment") revenues decreased 33% in the period ended March 31, 1997, from
$2,149,000 to $1,430,000. The decrease in product sales is the result of a
decrease in product orders.
COSTS AND EXPENSES
Manufacturing Costs Overview. Manufacturing costs increased to $6,159,000 in the
- -----------------------------
nine months ended March 31, 1997, from $2,254,000 during the same nine month
period in fiscal 1996. This increase of $3,905,000, or 173%, is due to the
increased sales volume related to the aforementioned Raychem Acquisition. Gross
margins increased to 33% for the nine month period ended March 31, 1997, from a
13% margin in the same fiscal 1996 period, due to the higher margin product
sales resulting from the Raychem Acquisition.
Memry Manufacturing Costs. Memry Segment manufacturing costs increased to
- --------------------------
$4,399,000 in the nine months ended March 31, 1997 from $402,000 in the
comparable period in 1996, a 994% increase. The $3,997,000 increase is the
result of the increased sales volume of Memry Segment products. Gross margins
increased for the nine month period ending March 31, 1997 to 43%, compared with
a margin of approximately 11% in the same fiscal 1996 period, due to the
allocation of fixed costs to a much greater volume of sales due to the lines of
business acquired in the Raychem Acquisition.
Wright Manufacturing Costs. The Wright Segment manufacturing costs decreased 5%
- ---------------------------
to $1,759,000 in the nine months ended 1997 from $1,848,000 in the same period
in 1996. The decreased manufacturing costs are due to the decrease in related
revenues. In the period, gross margins decreased from 14% to negative 23% due
primarily to the reduced sales volume and an increase in direct costs. The
increase in direct costs was due to a combination of product mix change (from
products with higher margins to products with lower margins), along with
increased labor and material costs.
9
<PAGE>
Research and Development Costs. Research and development costs decreased 25%, to
- -------------------------------
$229,000, in the first nine months of fiscal 1997 as compared with $306,000 in
the same period of fiscal 1996. This is the result of the decrease in external
research and development projects as evidenced by the 49% decrease in related
revenues, offset by increased internal development costs.
General, Selling and Administrative Expense ("GS&A"). Overall GS&A increased
- -----------------------------------------------------
$1,838,000, or 121%, to $3,363,000 in the nine months ended March 31, 1997, as
compared to $1,525,000 during the same period of fiscal 1996. The increase is
directly related to the addition of the California facility, which accounted for
approximately 55% of the increase. The remaining 45% is attributable to expenses
incurred by the Connecticut facility, due in large part to the Raychem
Acquisition, which incurred approximately $94,000 of expenses related to the
move of the medical assemblies unit to Brookfield from California, employee
relocation expense of $70,000, an approximate $270,000 increase in
administrative salary expense, an increase of $85,000 in travel expense, an
approximate increase of 90,000 in professional fees and to the absence in the
first nine months of fiscal 1997 of $116,000 of negotiated supplier discounts
taken in the corresponding period of fiscal 1996.
Depreciation and Amortization Expense. Depreciation and amortization expense
- --------------------------------------
increased 636%, or $458,000, primarily as a result of the patents and goodwill
purchased as part of the Raychem Acquisition. In addition, the Company is
amortizing over a five year period certain debt financing costs relating to the
ABCC financing.
Other Income(Expense). Interest expense increased $60,000, or 39%, as a result
- ----------------------
of the $937,000 increase in notes payable due to the ABCC financing. The Company
realized a gain through the sale of fully depreciated equipment of approximately
$10,000.
Gain on Retirement of Debt. The Company, through a re-financing (as described
- ---------------------------
above in the liquidity and capital resources section) repaid $718,000 of
principal debt, representing payment in full, to Wright's bank, Fleet Bank, on
loans of $858,000. The discount of $140,000 of such debt by Fleet Bank resulted
in a gain of $140,000.
NET LOSS
Overview. Net loss for the first nine months of fiscal 1997 was $817,000, as
- ---------
compared with a net loss of $1,379,000 for the first nine months of fiscal 1996,
an improvement of $562,000. The improvement in net loss, absent the
extraordinary gain on the debt retirement, would have been $422,000. The overall
improvement is a result of the increase in revenues and margins resulting from
the Raychem Acquisition and the discount of $140,000 given by Wright's former
bank, Fleet Bank, on its principal debt. The improvement would have been greater
had there not been significant increases in GS&A expenses at the Connecticut
facility and a product mix change at the Wright Segment. The net loss, however,
included approximately $257,000 of non-recurring expenses attributable to the
acquisition of the nickel-titanium line, such as the move of the medical
assemblies unit to Connecticut, which was approximately $94,000, relocation
expense of $125,000 and incentive bonus expenses for various California
employees of $38,000.
Memry Segment. Memry Segment's loss for the first nine months of fiscal 1997 was
- --------------
$338,000, as compared with a net loss of $1,194,000 during the same fiscal 1996
period. The improvement of $856,000 results from the significantly increased
revenues and margins.
10
<PAGE>
Wright Segment. The Wright Segment operating loss for the first nine months of
- ---------------
fiscal 1997 was $620,000 as compared with $159,000 during the same nine month
period in fiscal 1996. However, after the extraordinary gain on the forgiveness
of $140,000 of Wright's debt, the net loss was reduced to $480,000. The $321,000
increase in net loss is directly related to the 33% reduction in revenues and an
increase in direct costs.
Three Months Ended March 31, 1997 compared to three months ended March 31, 1996
- --------------------------------------------------------------------------------
Sales Overview. Overall revenues increased 354%, to $3,412,000, in the three
- ---------------
months ended March 31, 1997, from $752,000 during the same period in fiscal
1996. Revenues relating to the Memry Segment were responsible for all of the
increase.
Memry Sales. Revenues at the Memry Segment increased 1,282%, to $2,860,000,
- ------------
during the three month period ended March 31, 1997 as compared with $207,000
during the same period in fiscal 1996. The significant increase in revenues is
entirely due to the increase in product sales resulting from the acquisition of
the nickel-titanium product line from Raychem. Medical material, parts and
component sales were responsible for approximately 60% of the Memry Segment
revenue increase. Research and development revenues were $33,000 as compared to
$57,000, in the three month periods ended March 31, 1997 and 1996, respectively,
decreasing 42%, or $24,000. This decrease continued to be the result of reduced
labor hours available to work on government contracts due to the continuing
involvement of research personnel in the operations of the medical assemblies
unit which moved from California to Connecticut at the end of the second
quarter.
Wright Sales. Wright Segment revenues increased 2% in the period ended March
- -------------
31, 1997, to $552,000 from $543,000 for the same period in fiscal 1996.
COSTS AND EXPENSES
Manufacturing Costs Overview. Manufacturing costs increased to $2,352,000 in the
- -----------------------------
three months ended March 31, 1997, from $676,000 during the same three month
period in fiscal 1996. This 248% increase is due to the increased sales volume
related to the Raychem Acquisition. Gross margins increased during the period
ended March 31, 1997 to 29%, from a 1% margin in the same fiscal 1996 period,
due to the greater volume of products sold by the Memry Segment (due to the
Raychem Acquisition) and its concomitant higher margins and a reduction in sales
by the Wright Segment and its concomitant lower margins.
Memry Manufacturing Costs. Memry Segment manufacturing costs increased to
- --------------------------
$1,695,000 from $122,000, or 1,289%, in the three month periods ended March 31,
1997 and 1996, respectively. The $1,573,000 increase is the result of the
increased sales volume. Gross margins for the three month period ending March
31, 1997 were 39%, from a margin of 12% in the three month period ending March
31, 1996. The increase in margin is due to higher margin product sales as a
result of the Raychem Acquisition.
Wright Manufacturing Costs. The Wright Segment manufacturing costs increased
- ---------------------------
19%, to $657,000 from $551,000, in the three month periods ending March 31, 1997
and 1996, respectively. The increase in manufacturing costs, in excess of the 2%
increase in sales, was due to a combination of product mix change (from products
with higher margins to products with lower margins) and increased labor and
material costs. The gross margins decreased to a negative 19% from a negative 1%
in the same three month fiscal periods ended March 31, 1997 and 1996,
respectively, due primarily to the reduced sales volume and a high level of
costs.
11
<PAGE>
Research and Development Costs. Research and development costs decreased 11%, to
- -------------------------------
$63,000, in the three month period ended March 31, 1997, as compared with
$71,000 in the same period of fiscal 1996. The decrease is a result of the
decrease in external research and development projects as evidenced by the
related revenue decrease of 42% and the increase in internal development costs
of 8%. During the three month period ended March 31, 1997, internal costs
accounted for 75%, or $47,000, of the total research and development costs, as
compared with 62%, or $44,000, in the same period of fiscal 1996. This increase
in internal development costs arose from the continuing involvement of research
personnel in the operations of the medical assemblies unit which moved from
California to Connecticut at the end of the second quarter.
General, Selling and Administrative Expense ("GS&A"). Overall GS&A increased
- -----------------------------------------------------
$684,000, or 126%, to $1,228,000 in the three months ended March 31, 1997, as
compared to $544,000 during the same period of fiscal 1996. The increase is
directly related to the addition of the California facility, which accounted for
approximately 52% of the increase. The remaining 48% of the increase is related
to the operations of the Connecticut facility, which incurred an approximate
increase of $160,000 in salary and benefit expense, an approximate increase of
$90,000 in professional fees and an approximate increase of $25,000 in travel
expense during the three months ended March 31, 1997.
Depreciation and Amortization Expense. Depreciation and amortization expense
- --------------------------------------
increased 633%, or $152,000, primarily as a result of the patents and goodwill
purchased as part of the Raychem Acquisition. In addition, the Company is
amortizing certain debt financing costs relating to the ABCC financing over a
five year period.
Other Income(Expense). Interest expense increased $28,000, or 62%, as a result
- ----------------------
of the $937,000 increase in notes payable.
NET LOSS
Overview. Net loss for the three months ended March 31, 1997 was $480,000, as
- ---------
compared with a net loss of $608,000 for the same period of fiscal 1996, an
improvement of $128,000.
Memry Segment. Memry Segment's loss for the three months ended March 31, 1997
- --------------
was $274,000, as compared with a net loss of $439,000 during the same fiscal
1996 period. The improvement of $165,000 results from the significantly
increased revenues and margins.
Wright Segment. The Wright Segment loss for the three months ended March 31,
- ---------------
1997 was $208,000, as compared with a $143,000 loss during the same three month
period in fiscal 1996. The increased loss of $65,000 is the result of decreased
revenues and resulting negative gross margins.
12
<PAGE>
PART II - OTHER INFORMATION
The statements in this quarterly report on Form 10-QSB that are not
historical fact constitute "forward-looking statements". Said forward-looking
statements involve risks and uncertainties which may cause the actual results,
performance or achievements of the Company and its subsidiary to be materially
different from any future results, performance or achievements, express or
implied by such forward-looking statements.
These forward-looking statements are identified by their use of forms of
such terms and phrases as "expects", "intends", "goals","estimates", "projects",
"plans", "anticipates", "should", "future", "believes" and "scheduled".
The variables which may cause differences include, but are not limited to,
the following: general economic and business conditions; competition; success of
operating initiatives; operating costs; advertising and promotional efforts; the
existence or absence of adverse publicity; changes in business strategy or
development plans; the ability to retain management; availability, terms and
deployment of capital; business abilities and judgement of personnel;
availability of qualified personnel; labor and employee benefit costs;
availability and costs of raw materials and supplies; changes in, or failure to
comply with, government regulations. Although the Company believes that the
assumptions underlying the forward looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking included in this filing will prove to
be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and expectations of the Company will be achieved.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Description of Exhibit
- - ------ -------------------
27 Financial Data Schedule *
* Submitted herewith electronically
(b) REPORTS ON FORM 8-K
None
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by undersigned, thereunto duly
authorized.
Memry Corporation
-----------
Date: May 15, 1997 /s/ James G.Binch
----------------- -------------------------------
James G. Binch
President, CEO, Treasurer and Chairman
of the Board
(Principal Executive Officer and
Principal Financial Officer)
14
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- - ------ ------------------
27 Financial Data Schedule *
* Submitted herewith electronically
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MEMRY
CORPORATION'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,157,000
<ALLOWANCES> 36,000
<INVENTORY> 2,035,000
<CURRENT-ASSETS> 4,273,000
<PP&E> 6,079,000
<DEPRECIATION> 2,433,000
<TOTAL-ASSETS> 10,946,000
<CURRENT-LIABILITIES> 5,656,000
<BONDS> 0
0
0
<COMMON> 167,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,946,000
<SALES> 9,357,000
<TOTAL-REVENUES> 9,529,000
<CGS> 6,388,000
<TOTAL-COSTS> 10,281,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (817,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 140,000
<CHANGES> 0
<NET-INCOME> (817,000)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
