<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, 1998
---------------------------------------------
[ ] 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
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(Exact name of small business issuer as specified in its charter)
Delaware 06-1084424
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
57 Commerce Drive, Brookfield, Connecticut 06804
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(Address of principal executive offices)
(203) 740-7311
--------------
(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 April 12, 1998, 19,024,670
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
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<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of March 31, 1998 and June 30,
1997
Condensed Consolidated Statements of Operations for the three and nine
months ended March 31, 1998 and 1997
Condensed Consolidated Statements of Cash Flows for the nine months ended
March 31, 1998 and 1997
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
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEMRY CORPORATION & SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 261,000 $ 25,000
Accounts receivable, less allowance for doubtful
accounts 2,864,000 2,419,000
Inventories 1,893,000 1,664,000
Prepaid expenses and other 251,000 369,000
Assets of discontinued segment 764,000 936,000
------------ ------------
Total current assets 6,033,000 5,413,000
------------ ------------
Property, Plant and Equipment, at cost 4,415,000 4,109,000
Less accumulated depreciation (1,708,000) (1,344,000)
------------ ------------
2,707,000 2,765,000
------------ ------------
Other Assets
Patents and patent rights, less accumulated
amortization 1,767,000 1,868,000
Goodwill, less accumulated
amortization 923,000 974,000
Deferred financing costs, less accumulated
amortization 84,000 103,000
Deposits 29,000 29,000
------------ ------------
2,803,000 2,974,000
------------ ------------
Total assets $ 11,543,000 $ 11,152,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 2,232,000 $ 3,054,000
Notes payable 1,096,000 2,255,000
Reserve for loss on disposal - 90,000
Current maturities of capital lease obligations 11,000 29,000
------------ ------------
Total current liabilities 3,339,000 5,428,000
------------ ------------
Capital lease obligations, less current maturities 50,000 43,000
Stockholders' Equity
Common stock, $.01 par value; 30,000,000 authorized
shares; shares issued and outstanding:
March 31, 1998 - 18,922,096; June 30, 1997 -
17,029,570 190,000 170,000
Additional paid-in capital 40,195,000 39,630,000
Accumulated deficit (32,231,000) (34,120,000)
------------ ------------
Total stockholders' equity 8,154,000 5,681,000
------------ ------------
Total liabilities and stockholders' equity $ 11,543,000 $ 11,152,000
============ ============
</TABLE>
3
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MEMRY CORPORATION & SUBSIDIARY
Consolidated Statements of Operations
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenues
Product Sales $4,813,000 $2,828,000
Research and development 50,000 32,000
---------- ----------
4,863,000 2,860,000
---------- ----------
Cost of revenues
Manufacturing 2,302,000 1,695,000
Research and development 190,000 63,000
---------- ----------
2,492,000 1,758,000
---------- ----------
Gross profit 2,371,000 1,102,000
---------- ----------
Operating expenses
General, selling and administration 1,525,000 1,139,000
Depreciation and amortization 83,000 163,000
---------- ----------
1,608,000 1,302,000
---------- ----------
Operating income (loss) 763,000 (200,000)
Other income (expense)
Interest Expense (22,000) (71,000)
Gain on disposition of assets - -
---------- ----------
(22,000) (71,000)
---------- ----------
Income (loss) from continuing operations before income taxes 741,000 (271,000)
Provision for income taxes - -
---------- ----------
Income (loss) from continuing operations 741,000 (271,000)
Discontinued Operations
Loss from discontinued operations - (208,000)
Extraordinary gain on early retirement of debt - -
---------- ----------
- (208,000)
---------- ----------
Net income (loss) $ 741,000 $ (479,000)
========== ==========
Basic Earnings Per Share:
Income (loss) from continuing operations $0.04 $(0.02)
Loss from discontinued operations - (0.01)
------
$0.04 $(0.03)
===== =======
Diluted Earnings Per Share:
Income (loss) from continuing operations $0.04 $(0.02)
Loss from discontinued operations - (0.01)
------
$0.04 $(0.03)
===== =======
</TABLE>
4
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MEMRY CORPORATION & SUBSIDIARY
Consolidated Statements of Operations
For the Nine Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Revenues
Product Sales $13,207,000 $7,787,000
Research and development 158,000 172,000
----------- ----------
13,365,000 7,959,000
----------- ----------
Cost of revenues
Manufacturing 6,016,000 4,400,000
Research and development 475,000 229,000
----------- ----------
6,491,000 4,629,000
----------- ----------
Gross profit 6,874,000 3,330,000
----------- ----------
Operating expenses
General, selling and administration 4,480,000 3,124,000
Depreciation and amortization 249,000 491,000
----------- ----------
4,729,000 3,615,000
----------- ----------
Operating income (loss) 2,145,000 (285,000)
Other income (expense)
Interest Expense (121,000) (203,000)
Gain on disposition of assets 25,000 10,000
----------- ----------
(96,000) (193,000)
----------- ----------
Income (loss) from continuing operations before income taxes 2,049,000 (478,000)
Provision for income taxes (160,000) -
----------- ----------
Income (loss) from continuing operations 1,889,000 (478,000)
Discontinued Operations
Loss from discontinued operations - (480,000)
Extraordinary gain on early retirement of debt - 140,000
----------- ----------
- (340,000)
----------- ----------
Net Income $ 1,889,000 $ (818,000)
=========== ==========
Basic Earnings Per Share:
Income (loss) from continuing operations $0.11 $(0.03)
Loss from discontinued operations - (0.02)
------
$0.11 $(0.05)
===== =======
Diluted Earnings Per Share:
Income (loss) from continuing operations $0.09 $(0.03)
Loss from discontinued operations - (0.02)
------
$0.09 $(0.05)
===== =======
</TABLE>
5
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MEMRY CORPORATION & SUBSIDIARY
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss) $ 1,889,000 $ (817,000)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 536,000 530,000
Gain on early retirement of debt - (140,000)
Non-cash compensation 82,000 65,000
Stock Registration - (50,000)
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (40,000) (1,553,000)
Decrease (increase) in inventories (214,000) 9,000
Decrease (increase) in prepaid expenses and other 134,000 (54,000)
(Decrease) increase in accounts payable and
accrued expenses (1,130,000) 1,288,000
(Decrease) increase in other assets 47,000 (13,000)
(Decrease) increase in deferred income - (150,000)
----------- -----------
Net cash provided by (used in) operating activities 1,304,000 (885,000)
----------- -----------
Cash Flows From Investing Activities
Purchases of property, plant and equipment (306,000) (122,000)
----------- -----------
Net cash provided by (used in) investing activities (306,000) (122,000)
----------- -----------
Cash Flows From Financing Activities
Interdivisional cash advances 26,000 -
Proceeds from sale of common stock, net 503,000 -
Proceeds from (repayment of) short-term borrowings (964,000) 1,077,000
Principal payments on notes payable (195,000) -
Payments on capital lease obligations (11,000) (7,000)
Increase (decrease) in bank overdraft (121,000) -
Deferred financing costs - (120,000)
----------- -----------
Net cash provided by (used in) financing activities (762,000) 950,000
----------- -----------
(Decrease) increase in cash and
cash equivalents 236,000 (57,000)
Cash and cash equivalents, beginning of period 25,000 57,000
----------- -----------
Cash and cash equivalents, end of period $ 261,000 $ -
=========== ===========
</TABLE>
6
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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, 1998 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1998 ("fiscal 1998"). 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, 1997 ("fiscal 1997") of Memry
Corporation (the "Company"), as amended.
During the fourth quarter of fiscal 1997, the Company announced its decision to
cease operations at its wholly-owned subsidiary, Wright Machine Corporation
("Wright"), and to commence the liquidation of Wright's assets. All of Wright's
manufacturing operations ceased on June 5, 1997, and the results of operations
of Wright have therefore been presented as a discontinued operation in the
financial statements.
Additionally, certain 1997 financial statement amounts have been reclassified to
conform with the 1998 financial statement presentation.
Note B. INVENTORIES
Inventories at March 31, 1998 and June 30, 1997, are summarized as follows:
<TABLE>
<CAPTION>
March June
----------- -----------
<S> <C> <C>
Raw Materials $ 894,000 $ 398,000
Work-in-process 911,000 1,478,000
Finished goods 778,000 478,000
Allowance for slow-moving
and obsolete inventory (690,000) (690,000)
---------- ----------
</TABLE> 1,893,000 1,664,000
Note C. EARNINGS PER SHARE
The FASB has issued Statement No. 128, "Earnings per Share," which supersedes
APB Opinion No. 15. Statement No. 128 requires the presentation of earnings per
share by all entities that have common stock or potential common stock, such as
options and warrants, outstanding which trade in a public market. The Company
now presents basic earnings (loss) per share and diluted earnings (loss) per
share in its statement of operations. Basic earnings (loss) per share amounts
are computed by dividing income (loss) from continuing and discontinued
operations by the weighted-average number of common shares outstanding. Diluted
per-share amounts assume exercise of all potential common stock instruments
unless the effect is to reduce the loss or increase the income per common share
from continuing operations.
The Company has initially applied Statement No. 128 for the three month and nine
month periods ended March 31, 1998 and as required by Statement No. 128, has
restated all per share information for the prior periods to conform with the
March 31, 1998 presentation.
For the periods presented, there were no items which changed the income (loss)
from continuing and discontinued operations as presented in the statements of
operations and the amounts used to compute basic and diluted earnings (loss) per
share. The following is information about the computation of weighted-average
shares utilized in the computation of basic and diluted earnings (loss) per
share. For the three month and nine month periods ended March 31, 1997, common
stock equivalents have been excluded from the computation of the net loss per
share because inclusion of such equivalents is antidilutive.
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
3/31/98 3/31/97 3/31/98 3/31/97
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Number of Basic Shares Outstanding 18,504,856 16,717,354 17,691,103 15,792,802
Effect of Dilutive Securities:
Warrants 2,050,584 * 2,582,983 *
Options 407,957 * 356,526 *
---------- ------------ ---------- -----------
Number of Fully Diluted Shares
Outstanding 20,963,397 16,717,354 20,630,612 15,792,802
========== ========== ========== ===========
</TABLE>
7
<PAGE>
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".
(a) RESULTS OF OPERATIONS
Nine months ended March 31, 1998 compared to nine months ended March 31, 1997
- -----------------------------------------------------------------------------
Revenues. Revenues from continuing operations increased 68% to $13,365,000 for
the first nine months of fiscal year 1998 from $7,959,000 during the same period
in fiscal 1997. The increase of $5,406,000 is primarily due to significantly
increased product sales to Raychem Corporation ("Raychem") pursuant to the
Company's private label/distribution agreement with Raychem, to Raychem as an
original equipment manufacturer, to United States Surgical Corporation and of
shape memory alloy ("SMA") products for various medical applications to various
other customers.
Costs and Expenses. Manufacturing costs (including costs associated with
research and development revenues) increased to $6,491,000 for the nine months
ended March 31, 1998 from $4,629,000 during the same nine month period in fiscal
1997. This increase of $1,862,000 or 40% was attributable to the 68% increase in
revenues. Due to both increased efficiencies from greater sales volume and a
change in the Company's product mix away from low margin industrial and consumer
products and towards higher margin medical industry products, the Company's
gross margin from sales increased to 51% for the nine months ended March 31,
1998 from a 42% margin in the comparable period in fiscal 1997.
General, selling and administrative expenses (including amortization) increased
$1,114,000, or 31%, to $4,729,000 for the nine months ended March 31, 1998, as
compared to $3,615,000 during the same period of fiscal 1997. This increase is
due both to the greater size of the organization and one time expenses
attributable to consulting costs related to the upgrading of the Company's
information systems. Interest expense decreased to $121,000 in the first nine
months of fiscal 1998 from $203,000 in the comparable period of fiscal 1997. The
decrease was due to (i) lower interest rates on the Company's current credit
facilities when compared to higher interest rates of its prior credit facility
which was refinanced in the first quarter of fiscal 1997 and (ii) a reduced
average balance in the Company's revolving line of credit as compared to the
same period in fiscal 1997. The Company recorded a provision for income taxes of
$160,000 for the first nine months of fiscal 1998. No such provision was
recorded for the first nine months of fiscal 1997. Such provision reflects an
effective tax rate less than the statutory rate due principally to the benefits
arising from net operating loss carryforwards available to the Company.
Net Income. Primarily as a result of the Company's 68% increase in revenues and
a proportionately smaller increase in manufacturing costs and general, selling
and administrative expenses, the Company was able to realize income from
continuing operations of $1,889,000 for the nine month period ended March 31,
1998 as compared with a loss from continuing operations of $478,000 for the same
period in fiscal 1997. For the same reasons, the Company realized net income of
$1,889,000 for the first nine months of fiscal 1998, as opposed to a net loss of
$818,000 for the first nine months of fiscal 1997.
8
<PAGE>
Three months ended March 31, 1998 compared to three months ended March 31,
- ----------------------------------------------------------------------------
1997.
- -----
Revenues. Revenues from continuing operations increased 70% to $4,863,000 for
the third quarter of fiscal year 1998 from $2,860,000 during the same period in
fiscal 1997. The increase of $2,003,000 is primarily due to significantly
increased product sales to Raychem Corporation ("Raychem") pursuant to the
Company's private label/distribution agreement with Raychem, to United States
Surgical Corporation and of shape memory alloy ("SMA") products for various
medical applications.
Costs and Expenses. Manufacturing costs (including costs associated with
research and development revenues) increased to $2,492,000 for the three months
ended March 31, 1998 from $1,758,000 during the same three month period in
fiscal 1997. This increase of $734,000 or 42% was attributable to the 70%
increase in revenues. Due to both increased efficiencies from greater sales
volume and a change in the Company's product mix away from lower margin
industrial applications and into the higher margin medical device and medical
assemblies business, the Company's gross margin from sales increased to 49% for
the three months ended March 31, 1998, from a 39% margin in the comparable
period in fiscal 1997.
General, selling and administrative expenses (including amortization) increased
$306,000 or 24%, to $1,608,000 for the three months ended March 31, 1998, as
compared to $1,302,000 during the same period of fiscal 1997. This increase is
primarily attributable to the Company's recent efforts to higher additional
professional employees and manufacturing staff to support increased sales volume
and consulting expense related to information system upgrades. Interest
expense decreased to $22,000 in the third quarter of fiscal 1998 from $71,000
during the comparable quarter of fiscal 1997. The decrease was due primarily to
a reduced average balance in the Company's working capital line of credit as
compared to the same period in fiscal 1997. The Company recorded no provision
for income taxes in the third quarter of fiscal 1998 as previous accruals during
fiscal 1998 appear sufficient. Similarly, no tax provision was recorded for the
third quarter of fiscal 1997. Such tax planning reflects an effective tax rate
less than the statutory rate due principally to the benefits arising from net
operating loss carryforwards available to the Company.
Net Income. Primarily as a result of the Company's 70% increase in revenues and
a significantly smaller relative increase in manufacturing costs, the Company
was able to realize income from continuing operations of $741,000 for the three
month period ended March 31, 1998 as compared with a loss from continuing
operations of $271,000 for the same period in fiscal 1997. For the same reasons,
the Company realized net income of $741,000 for the third quarter of fiscal
1998, as opposed to net loss of $479,000 for the third quarter of fiscal 1997.
9
<PAGE>
(b) LIQUIDITY AND CAPITAL RESOURCES
At March 31 1998, the Company's cash and cash equivalents balance was $261,000,
an increase of $236,000 from $25,000 at the start of fiscal 1998. Cash provided
by operations was $1,304,000 for the nine months ended March 31, 1998.
Offsetting in part the cash provided by operations was cash used in investing
activities of $306,000 for the purchase of property, plant and equipment, and
$762,000 used in financing activities, primarily to repay debt. Cash provided by
operations of $1,304,000 for the nine months ended March 31, 1998 represents a
significant improvement from the comparable period in fiscal 1997 when $885,000
was used for operations (including discontinued operations). This improvement is
primarily due to increased sales volume, with accompanying increased margins and
the shut down of Wright. Cash used in financing activities for the nine month
period ended March 31, 1998 was $762,000 as opposed to $950,000 of cash provided
by financing activities for the comparable period in fiscal 1997. The $762,000
of cash used in financing activities during the nine months ended March 31, 1998
was for debt reduction of $1,265,000 offset by $503,000 of proceeds from the
sale of common stock and the exercise of outstanding warrants to purchase common
stock. During the nine months ended March 31, 1998 cash provided by financing
activities consisted of increased bank borrowings needed to finance increased
sales volume which generated much higher receivables. Working capital at March
31, 1998 was $2,694,000, up significantly from a working capital deficit of
$15,000 at June 30, 1997.
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. Due to payments on the term loan, including a prepayment
upon the sale of Wright's machinery and equipment, the unpaid balance of the
term loan as of March 31, 1998 was $280,000. 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, 1998, the Company had $446,000 outstanding on the revolving line of
credit and had unused availability under the line of credit of $1,054,000. 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 has in the past grown through acquisitions (including both the
acquisition of Raychem's nickel-titanium product line 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. The Company intends to use available cash from
operations, sales of equity and, when and if obtained, an acquisition credit
facility, to finance any such
10
<PAGE>
acquisitions that may be sought in the future. The Company does not currently,
however, contemplate any material acquisitions for fiscal 1998.
The Company intends to spend between $600,000 and $800,000 on capital
expenditures prior to fiscal 1998 year end in order to handle its expected
continuing increased sales volume of SMA materials and expansion into the
medical device and medical assembly business. The Company expects that it will
be able to pay for these expenditures out of existing working capital and/or
cash flow generated from its operations during the current fiscal year. The
Company may, however, enter into capital lease arrangements to finance select
fixed assets where management deems such financing arrangements to be
appropriate.
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,
250,000 of which have been sold pursuant to the Registration Statement) 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 $4.00
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
$10,209,000 (and, if the market price were greater than $4.00 per share, the put
price would be higher as well). If CII were to have the right to put its
securities and were to choose to exercise that right, it would obviously 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 operating profits and
its historical ability to raise equity capital will be sufficient to meet the
Company's working capital requirements in the short-term (assuming that CII's
put
11
<PAGE>
rights are not triggered and exercised and, as stated above, the Company intends
not to cause said put rights to become exercisable).
The Company does not expect that there are any contingencies, other than as set
forth above, which would have a material adverse effect on the Company's
financial condition, future operating results and/or liquidity.
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; and 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 statements 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 2. CHANGES IN SECURITIES
On March 6, 1997, the Company sold 535,714 shares of its common stock to Raychem
Corporation ("Raychem") upon the full exercise by Raychem of its warrant to
purchase 1,250,000 shares of the Company's common stock at a purchase price of
$2.00 per share on a net-exercise
12
<PAGE>
basis, whereby Raychem's equity interest in some warrants was used to pay the
purchase price for the warrants being exercised. The offer and sale to Raychem
was exempt from the registration requirments of the Securities Act pursuant to
Sections 3(a)(9) and 4(2) of the Securities Act of 1933, as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Description of Exhibit
- ------ ----------------------
27 Financial Data Schedule*
- ---------
* Submitted herewith, electronically.
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: March 13, 1998 /s/ James G.Binch
- ----------------------- -----------------
James G. Binch
President, CEO, Treasurer and Chairman
of the Board
Date: March 13, 1998 /s/ Thomas D. Carey
- ----------------------- -------------------
Thomas D. Carey
Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOUND ON PAGES 3-5 OF THE COMPANY'S FORM 10QSB FOR THE YEAR-TO-DATE
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> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 261000
<SECURITIES> 0
<RECEIVABLES> 2864000
<ALLOWANCES> 0
<INVENTORY> 1893000
<CURRENT-ASSETS> 6033000
<PP&E> 4415000
<DEPRECIATION> 1708000
<TOTAL-ASSETS> 11543000
<CURRENT-LIABILITIES> 3339000
<BONDS> 0
0
0
<COMMON> 40195000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11543000
<SALES> 13207000
<TOTAL-REVENUES> 13365000
<CGS> 6016000
<TOTAL-COSTS> 6491000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 121000
<INCOME-PRETAX> 2049000
<INCOME-TAX> 160000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1889000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
