<PAGE>
RULE NO. 424(b)(1)
REGISTRATION NO. 33-43119
PROSPECTUS
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3,838,755 SHARES
MEMRY CORPORATION
COMMON STOCK, PAR VALUE $0.01 PER SHARE
The 3,838,755 shares of common stock, par value $0.01 per share (the
"Common Stock") offered hereby (the"Offering"), including 2,123,935 shares that
are issuable upon the exercise of warrants held by certain stockholders, are
being sold by certain stockholders of Memry Corporation, a Delaware corporation
(the "Company"), with principal executive offices located at 57 Commerce Drive,
Brookfield, Connecticut 06804, telephone number (203) 740-7311. See "Selling
Stockholders." The Company will not receive any of the proceeds from the
Offering. The Company would, however, receive the exercise prices payable upon
issuance of the 2,123,935 shares of Common Stock eligible for sale hereunder
which underlie warrants. The Common Stock is traded on the OTC Bulletin Board
under the symbol "MRMY."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGES 3 THROUGH 7 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting
Price to Discounts Proceeds to
Public(1) and Selling Stockholders(2)
Commissions
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Per Share.. $ 3.81 N/A $ 3.81
Total...... $14,625,656 N/A $14,625,656
===================================================================
(1) Estimated based on the average of the closing bid and asked prices per
share of Common Stock of Memry Corporation reported on the OTC Bulletin
Board on December 19, 1997.
(2) Expenses payable by the Company are estimated to be $48,821 (approximately
$0.01 per share).
------------------------------------
The date of this Prospectus is December 30, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-2 (the "Registration
Statement," which term shall include all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder,
covering the offer and sale of the Common Stock being offered hereby (the
"Shares"). This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and to which
reference is hereby made. Statements made in this Prospectus as to the
provisions of any contract, agreement or other document referred to in the
Registration Statement are summaries of the material terms of such
contracts, agreements and other documents and are not necessarily complete.
With respect to each such contract, agreement or other document filed or
incorporated by reference as an exhibit to the Registration Statement,
reference is made to such exhibit for a more complete description of the
matter involved, and each such statement is qualified in its entirety by
such reference.
The Company is subject to the periodic reporting and other information
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Commission. Such reports, proxy
statements, the Registration Statement and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Regional Offices at 7 World
Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Although the Company currently does not intend to send copies of such
material to its stockholders, copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a Web site that contains reports, proxy and information
statements and other information regarding issuers, such as the Company,
that file electronically with the Commission, at http://www.sec.gov.
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
prospective purchaser of the Common Stock offered hereby should carefully
consider the following factors:
ABSENCE OF PROFITABLE OPERATING HISTORY
The Company was incorporated in Delaware in November 1981 and, until
the first quarter of fiscal 1998, its sales revenues have not been
sufficient to cover operating costs. While the Company had over $500,000
of net income for the first quarter of fiscal 1998, and believes that it
will continue to have net income going forward, the Company has accumulated
a net loss through September 30, 1997 of over $33 million. The Company's
operations have been financed principally by a series of equity sales, and
there can be no assurance that the Company will be able to obtain such
financing in the future or that the Company will remain profitable and able
to finance its operations through operating revenues.
WORKING CAPITAL
As of September 30, 1997, the Company had working capital of
approximately $800,000 (even with the inclusion of the approximately
$415,000 remaining unpaid of a $1.135 million five-year term loan made to
the Company in August of 1996 as a current liability because the lender
retained the contractual right to require full repayment of such loan at
any time upon demand.) Therefore, while the Company's liquidity has
significantly improved in the last year, the Company's ability to continue
its operations is dependent upon its ability to generate positive cash flow
from operations and/or raise additional funds. There can be no assurance
that the Company will be able to raise additional funds (or that if such
funds are available that they will be available at an acceptable cost), or
continue to generate cash flow from operations. Furthermore, any funds
raised through the issuance of equity will dilute individual interests in
the Company's outstanding equity. In addition, the Company's working
capital could be materially and adversely affected by the exercise by
Connecticut Innovations, Incorporated ("CII") of its contingent "put"
right, if such right were to be exercisable. See "-Requirement of
Connecticut Presence; CII Put Right" and "Selling Stockholders."
RISKS ASSOCIATED WITH ACQUISITIONS
On June 28, 1996, the Company consummated the acquisition (the
"Raychem Acquisition") of certain assets comprising the nickel-titanium
product line of Raychem Corporation ("Raychem"). Sales of the acquired
business in fiscal 1996 significantly exceeded the Company's consolidated
sales on a stand-alone basis. As is the case in most instances where a
small business acquires a larger one, the Company's ability to successfully
operate the acquired business will depend on many factors, including
management's ability to integrate the acquired business and personnel with
the Company's prior operations and work force, the ability of Raychem, as
the acquired business's exclusive distributor for most applications, to
generate end user demand for the acquired business's products, and
management's ability to operate the acquired business with substantially
less overhead than was used by Raychem. While the Company is pleased with
the progress it has made integrating and operating the acquired business to
date, there can be no assurances that the Company will be able to operate
the acquired business successfully in the future.
In addition, the Company intends to continue to pursue potential
acquisitions in the future as a means of growth. The Company's ability to
expand successfully by acquisition depends on many factors, including those
described in the preceding paragraph with respect to the Raychem
Acquisition, the ability to identify potential targets and the
consideration paid to effect any such acquisitions. The consummation of any
such future acquisitions, as well as the diversion of the attention of the
Company's management to effect any such acquisitions and integrate the
acquired operations with the Company, could have an adverse effect on the
Company's operations and financial results in the future.
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REQUIREMENT OF CONNECTICUT PRESENCE; CII PUT RIGHT
Due to the various agreements that the Company has entered into with
CII, the Company is required to transact certain portions of its operations
within the State of Connecticut. Specifically the Company must (a)
maintain its corporation headquarters and all of its product business
operations in the State of Connecticut (including the assembly of all
products to be sold to United States Surgical Corporation), excluding 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. While the aforesaid
restrictions have not to date adversely affected the Company's
competitiveness and/or the ability of the Company to enter into material
transactions with other parties, there can be no assurances that they will
not have such effect in the future. If the Company defaults on any of
these requirements, as well as other requirements set forth in the
agreements with CII, CII may exercise its right to "put" to the Company
certain securities of the Company that it owns. See "Selling
Stockholders." 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 $11,209,000. Such a put would
obviously significantly and adversely effect the Company's liquidity.
DEVELOPING MARKET AND TECHNOLOGICAL CHANGE
The market for the Company's shape memory alloy ("SMA") products is
relatively new and still developing, and is subject to technological
change. The future financial performance of the Company will depend in
part on the development and continuing growth of this market. There can be
no assurances that many of the Company's products will gain market
acceptance. Current or new competitors may introduce new products that
could adversely affect the Company's competitive position. The Company
believes that, to remain competitive, it must continue to improve its
products and develop and successfully market new products. There can be no
assurance that the Company will be able to do so. The success of new
products depends on a variety of factors, including understanding market
needs and being able to develop products that solve such needs. There can
be no assurances that the Company will be able to identify new product
opportunities successfully and develop and bring to market such new
products or that the Company will be able to respond effectively to
technological changes or new products developed by competitors.
DEPENDENCE ON KEY CUSTOMERS
The Company's two largest customers, Raychem and United States
Surgical Corporation, together represented approximately $8.9 million (or
approximately 79%) of the Company's total revenues derived from product
sales from continuing operations during the Company's 1997 fiscal year.
The loss of either such customer would have a material adverse effect on
the Company. However, the Company has entered into a Private
Label/Distribution Agreement, dated as of June 28, 1996, as amended, with
Raychem, which requires Raychem to purchase certain products and materials
solely from the Company until June 30, 2001, unless earlier terminated for
whatever reason (and both the Company and Raychem have the right to
terminate for any reason at any time after June 30, 1999). There can be no
assurances that Raychem will continue to purchase materials at its current
rate or that it will not eventually terminate such agreement.
EFFECT OF POSSIBLE COMPETITION
The Company expects that competition will intensify in the SMA field
as the technology becomes more widely known. A small number of U.S.,
Belgian and Japanese companies pose a potential source of competition in
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SMA materials and products. Some of these companies, and other potential
competitors, have considerably greater resources than the Company, and have
(or have the ability to acquire) considerable technical resources.
INTELLECTUAL PROPERTY RISKS
The Company's success will depend in part on its ability to obtain and
maintain patent protection for its products, to preserve its trade secrets
and to operate without infringing on the proprietary rights of third
parties. The Company attempts to protect its technology by, among other
things, investing in, obtaining and maintaining patents, trademarks and
trade secrets. Although the Company has never been party to litigation
involving its technology, the SMA industry has produced disputes over
intellectual property rights which have resulted in significant and
expensive litigation. Any assertions of intellectual property claims could
require the Company to cease the manufacture and sale of infringing
products, to incur significant litigation costs and to develop non-
infringing technology or acquire licenses to the alleged infringed
technology. There can be no assurance that the Company would be able to
obtain such licenses on acceptable terms or to develop non-infringing
technology. In addition, there can be no assurance that any of the
Company's patents will not be challenged, invalidated or circumvented or
that rights granted thereunder will provide competitive advantages to the
Company. Furthermore, the laws of certain countries do not protect the
Company's intellectual property rights to the same extent as do the laws of
the United States.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends, in large part, upon a small number of
key managerial, engineering and technical personnel, and the loss of
certain key personnel could have an adverse effect on the Company's
business. The Company has obtained key man life insurance with respect to
its President in the amount of $2,200,000 ($500,000 of which has been
collaterally assigned to the Company's lender).
EXISTENCE OF CONSENT DECREE
On February 22, 1989, the Company entered into a consent decree (the
"Consent Decree") with the Securities and Exchange Commission (the "SEC")
in order to settle litigation brought by the Commission alleging that
during 1985 and 1986 the Company made false and/or misleading statements in
the registration statement relating to the Company's initial public
offering, in a series of press releases, in selling materials in connection
with a private placement of securities to foreign institutions and in a
registration statement with respect to a secondary shelf offering. While
certain portions of the Consent Decree have expired, the Company has in the
past failed to comply with the requirement that it timely file all of its
Annual Reports on Form 10-KSB and Quarterly Reports on Form 10-QSB. It
cannot be clear what, if any, effect such violations of the Consent Decree
may have upon the Company.
DIVIDENDS NOT LIKELY
For the foreseeable future, it is anticipated that earnings (if any)
will be used to finance the operations of the Company and that dividends
will not be paid. The Company's loan agreement with its principal lenders
prohibits the payment of dividends.
SIGNIFICANT STOCKHOLDERS
As of October 1, 1997, the Company's directors and executive officers
beneficially owned in the aggregate approximately 16.2% of the Company's
Common Stock. In addition, two institutional European investors
beneficially owned 24.7% and 8.3% of the Company's Common Stock,
respectively, Connecticut Innovations, Incorporated beneficially owned
approximately 15.8% of the Company's Common Stock and Raychem beneficially
owned approximately 12.2% of the Company's Common Stock. (Because of the
Securities and Exchange Commission's rules on calculating beneficial
ownership percentages, the percentage of the Company's Common Stock
beneficially owned by all of such parties combined as of such date would be
substantially less than if the aforesaid
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percentages were merely added together, but would still constitute
approximately 64% of the Company's outstanding Common Stock). This
concentration of Common Stock in the hands of a small number of individuals
and entities means that there may be little chance for other stockholders
to influence the business and affairs of the Company by the exercise of
voting rights. Furthermore, the aforesaid concentration in shares may cause
extreme fluctuations in the trading volume of the Company's Common Stock in
a given period, which in turn may cause the Company's Common Stock to
suffer market price fluctuations without regard to the Company's operating
results.
NO CUMULATIVE VOTING
The Certificate of Incorporation of the Company, as amended (the
"Certificate of Incorporation"), does not provide for cumulative voting.
Therefore, holders of less than a majority of the Company's outstanding
Common Stock have no right to elect any of the Company's directors.
POSSIBLE EFFECT OF PREFERRED STOCK ISSUANCES
The Certificate of Incorporation of the Company authorizes the
issuance of up to 100,000 shares of preferred stock, $100 par value per
share ("Preferred Stock"). The Board of Directors is authorized to issue
shares of Preferred Stock from time to time in one or more series and,
subject to the limitations contained in the Certificate of Incorporation
and any limitations prescribed by law, to establish and designate series
and to fix the number of shares and the relative rights, conversion rights,
voting rights, rights and terms of redemption (including sinking fund
provisions) and liquidation preferences of each such series. Currently, no
Preferred Stock is outstanding. If shares of Preferred Stock are issued,
such issuance could adversely affect the voting rights of the holders of
the Company's Common Stock by increasing the number of outstanding shares
having voting rights, or by the creation of class or series voting rights,
and, if such shares have conversion rights, could increase the number of
shares of Common Stock outstanding. In addition, shares of Preferred Stock
could have preferences with respect to dividend and liquidation rights.
The Company has no present plans to issue Preferred Stock.
LIQUIDITY OF STOCK
The Company was de-listed from the National Association of Securities
Dealers Automated System ("NASDAQ") in November of 1992 due to the Company
not meeting various requirements of NASDAQ. The Company's Common Stock is
currently trading on the OTC Bulletin Board. Thus, only bid and asked
prices between dealers (rather than sales prices) are currently available
with respect to the Common Stock. The fact that the Company is trading on
the OTC Bulletin Board rather than on NASDAQ or an exchange could have the
effect of significantly reducing news coverage of the Company and might
cause the market price of the Common Stock to be lower than it otherwise
would be. Although the Company intends to apply for listing on NASDAQ as
soon as possible, it currently would not qualify to be so listed. Thus,
holders of the Common Stock might not realize the extent of liquidity as
they might were the stock listed on NASDAQ or a national securities
exchange.
DILUTION
As of October 31, 1997, there were outstanding warrants to purchase
5,248,207 shares of Common Stock of the Company at exercise prices ranging
from $0.01 per share to $5.00 per share and outstanding options to purchase
1,007,750 shares at exercise prices ranging from $0.90 per share to $4.25
per share. Because of the substantial increase in the market value of the
Company's Common Stock, it is likely that many or all of those warrants and
options will be exercised. Since the exercise prices would be likely to be
less than the market value of the Common Stock, the market value of each
share of Common Stock would be reduced by any such exercise, and holders of
Common Stock would to that extent suffer a dilution of the value of their
Common Stock. In addition, 87,750 shares of Common Stock are reserved for
issuance upon the exercise of additional options which may be granted under
the Memry Corporation Stock Option Plan and an additional 2,000,000 shares
of Common
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Stock are reserved for issuance upon the exercise of options which may be
granted under the Memry Corporation 1997 Long-Term Incentive Plan.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. However, the Company would receive the exercise prices payable upon
issuance of the 2,123,935 shares of Common Stock eligible for sale
hereunder which underlie warrants issued to certain Selling Stockholders.
If all of these warrants are exercised at their current exercise prices,
the Company will receive $2,052,457 in proceeds from the exercise thereof.
The Company would use the proceeds from exercise of these warrants for
general working capital purposes. The principal reason for the Offering is
to satisfy certain contractual obligations to CII as well as to certain
other stockholders. See "Selling Stockholders."
SELLING STOCKHOLDERS
An aggregate of up to 3,838,755 shares of Common Stock may be offered
by the Selling Stockholders. Because the Selling Stockholders may offer
from time to time some or all of the Shares that they hold (including
Shares issuable upon exercise of certain securities), no estimate can be
given as to the amount of Shares that will be offered for sale by the
Selling Stockholders hereunder at any particular time. The following table
sets forth certain information with respect to the Selling Stockholders for
which the Company is registering Shares for resale to the public as of
December 1, 1997. The Company will not receive any of the proceeds from
the sale of such Shares. However, the Company would receive an aggregate
of $2,052,457 in proceeds from the exercise of certain warrants held by
certain Selling Stockholders, which warrants are exercisable to purchase
2,123,935 shares of Common Stock, which shares of Common Stock are eligible
for resale hereunder, as described below.
<TABLE>
<CAPTION>
Number of Shares of
Number of Shares of Maximum Number Common Stock to Percentage
Common Stock of Shares To Be be Owned After Ownership After
Owned Prior to Offered by Selling Completion of the Completion Of the
Selling Stockholder Offering Stockholder Offering(1) Offering(1)(2)
- ------------------- -------------------- ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Connecticut 3,041,963(4) 3,041,963(4) 0 *
Innovations,
Incorporated(3)
Peter J. Creedon 136,144 108,644 27,500 *
Harry C. Hagerty, 91,335 66,335 25,000 *
Jr.
Andrew Olear II & 33,529(5) 33,529(5) 0 *
Barbara L. Olear
Precision Castings, 23,077 23,077 0 *
Inc.
Max Ambach 66,000 40,000 26,000 *
The Amerling 10,000 10,000 0 *
Company
Jonathan Olear 5,882 5,882 0 *
</TABLE>
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<TABLE>
<CAPTION>
Number of Shares of
Number of Shares of Maximum Number Common Stock to Percentage
Common Stock of Shares To Be be Owned After Ownership After
Owned Prior to Offered by Selling Completion of the Completion Of the
Selling Stockholder Offering Stockholder Offering(1) Offering(1)(2)
- ------------------- -------------------- ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Mary O'Lear 11,765 11,765 0 *
Frank Ciardullo, Jr. 105,769 17,435 88,334 *
Wendy A. 30,383(7) 5,883 24,500(7) *
Gavaghan(6)
James L. Winter 11,765 11,765 0 *
Donald Resnick 143,589 48,352 95,237 *
Dawn M. Morton(8) 123,667(9) 18,000(9) 105,667 *
Dominion Financial 218,000(11) 18,000(11) 200,000 1.2%
Group International,
LDC(10)
Whitman & Ransom 30,800 30,800 0 *
Connecticut 46,200 46,200 0 *
Affiliated Law
Partners (12)(16)
Edward A. 13,000 13,000 0 *
Murphy(13)(16)
J. Allen Kosowsky, 8,125 8,125 0 *
CPA, P.C. (14)
Stig Host 25,000 25,000 0 *
Pediatric and 25,000 25,000 0 *
Adolescent
Healthcare, P.C.
Employee Pension
Trust
Peggyanne Kahn 30,000 30,000 0 *
The Alan W. 50,000 50,000 0 *
Steinberg Limited
Partnership
BG Development 50,000 50,000 0 *
Corp. Pension Fund
Harbour Holdings 1,964,765 100,000 1,864,765 10.9%
Limited Partnership
(15)
</TABLE>
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<PAGE>
* Less than 1%
(1) Assumes that all shares of Common Stock the disposition of which is
being registered hereby on behalf of the Selling Stockholders are sold
pursuant to this Prospectus and that no additional shares of Common
Stock or other securities of the Company convertible into or
exercisable for shares of Common Stock are issued to or sold by the
Selling Stockholders.
(2) In each case where shares underlying options or warrants are included
as beneficially owned by a person or entity, the percentage of all
shares owned by such person or entity is calculated as if all such
securities owned by such person or entity had been exercised prior to
such calculation.
(3) As of October 1, 1997, CII was the beneficial owner of 15.8% of the
Company's Common Stock.
(4) Includes 2,087,935 shares underlying warrants issued to CII.
(5) Includes 23,529 shares of Common Stock owned by Andrew Olear II
individually.
(6) From September 24, 1994, Ms. Gavaghan was Corporate Controller and
Secretary of the Company, and from September 1994, she was a director
and Secretary of Wright Machine Corporation, the Company's subsidiary
("Wright"). Ms. Gavaghan left the employ of the Company and Wright,
and ceased to hold any of such positions, as of March 15, 1997. From
September 1994 until December 1995, Ms. Gavaghan was also Treasurer of
Wright.
(7) Includes options exercisable to purchase 24,500 shares of Common
Stock. Ms. Gavaghan is required by contract to exercise these options
not later than May 31, 1998.
(8) Ms. Morton's husband, William H. Morton, Jr., has been Senior Vice
President and Chief Operating Officer of the Company since November 7,
1995.
(9) Includes 18,000 shares of Common Stock underlying warrants issued to
Ms. Morton by the Company at an exercise price of $1.50 per share.
Also includes: (i) options to purchase 50,000 shares of the Company's
Common Stock at $0.90 per share owned by Ms. Morton's husband, William
H. Morton, Jr. (which options represent the currently exercisable
portion of options exercisable to purchase an aggregate of 125,000
shares of Common Stock, which options are exercisable in five equal
annual installments beginning on November 7, 1996); (ii) 50,000 shares
of Common Stock owned by Ms. Morton's husband; (iii) 4,000 shares of
Common Stock owned by Ms. Morton's children; and (iv) options to
purchase 1,667 shares of the Company's Common Stock at $1.78 per share
owned by Mr. Morton (which options represent the currently exercisable
portion of options exercisable to purchase 5,000 shares of Common
Stock, which options are exercisable in three equal annual
installments beginning on December 5, 1997).
(10) W. Andrew Krusen, Jr., a director of the Company, is the President and
a principal shareholder of Dominion Financial Group, Inc., which is
the managing general partner of Dominion Capital Partners. Dominion
Capital Partners is the majority stockholder in Dominion Financial
Group International, LDC.
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(11) Includes shares of Common Stock underlying warrants issued to Dominion
Financial Group International, LDC by the Company, at an exercise
price of $1.50 per share.
(12) Over the last four years, Connecticut Affiliated Law Partners has
provided various legal services to the Company under the name Whitman
Breed Abbott & Morgan.
(13) From April 13, 1994 until September 22, 1995, Mr. Murphy was President
and a director of Wright Machine Corporation, the Company's
subsidiary, and Vice President of the Company.
(14) Mr. J. Allen Kosowsky, the principal of J. Allen Kosowsky, CPA, P.C.,
served as the Company's interim de facto chief financial officer from
-- -----
March 1, 1997 through August 31, 1997. Mr. Kosowsky was paid $12,000
per month for such services, plus an additional $30,000 subsequent to
his retention. In addition, Mr. Kosowsky was issued the aforesaid
shares.
(15) James G. Binch, the Chairman, President and Chief Executive Officer of
the Company, is the president and chief executive officer of Harbour
Investment Corporation, the sole general partner of Harbour Holdings
Limited Partnership.
(16) All shares offered by such selling stockholder have been sold.
__________________________________
The Shares to be sold by CII are shares of Common Stock acquired by
CII or to be acquired upon the exercise of warrants issued to CII by the
Company. Such securities were issued to CII for consideration comprised of
cash and forgiveness of indebtedness in connection with a Convertible
Subordinated Debenture Purchase Agreement, dated as of December 22, 1994
(the "Purchase Agreement"), as amended. Pursuant to the Purchase
Agreement, on December 22, 1994 the Company issued to CII the following
securities (the "CII Securities"): (i) a Convertible Subordinated
Debenture dated December 22, 1994 from the Company to CII in the principal
amount of $763,208 (the "Debenture"), (ii) a warrant dated December 22,
1994 to purchase 508,805 shares of Common Stock at an initial exercise
price of $2.15 per share (the "Class I Warrants"), (iii) a warrant dated
December 22, 1994 to purchase 305,283 shares of Common Stock at an initial
exercise price of $2.75 per share (the "Class II Warrants"), and (iv) a
warrant dated December 22, 1994 to purchase 100,000 shares of Common Stock
at an initial exercise price of $1.00, such warrant being an amendment and
restatement of a warrant previously held by CII to purchase 10,000 shares
of Common Stock at an exercise price of $10.00 per share (the "Class III
Warrants"). On October 12, 1995, the Purchase Agreement and the CII
Securities were modified, such that the Debenture became convertible into
954,010 shares of Common Stock, and due to anti-dilution provisions, the
Class I Warrants became exercisable for 1,176,269 shares of Common Stock at
an exercise price of $0.93 per share and the Class II Warrants became
exercisable for 705,485 shares of Common Stock at an exercise price of
$1.19 per share. The number of shares of Common Stock for which the Class
III Warrants were exercisable remained the same, but the exercise price per
share was adjusted to $0.65. On June 24, 1996, the parties agreed that in
order to help the Company market the Common Stock sold to fund the
acquisition of Raychem's nickel-titanium product line, CII would convert
the Debenture into equity, and a further amendment to the Purchase
Agreement was executed by CII and the Company, which amendment became
effective on June 28, 1996. Pursuant to such amendment, on June 28, 1996,
the Debenture was converted into 285,528 shares of Common Stock and 66.85
shares of Series H Preferred Stock (the "Series H Shares"). The parties
agreed that additional shares of Common Stock which were issuable to CII
due to a penalty
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adjustment provision of the Debenture would be folded into the Class I
Warrants. Accordingly, the number of shares of Common Stock for which the
Class I Warrants are exercisable was increased to 1,282,450, with the
exercise price per share of such Class I Warrants being adjusted to $0.853
per share. The Class II and III Warrants were not adjusted. As of the close
of business on September 4, 1996, all of the Series H Shares automatically
were converted into 668,500 shares of Common Stock, pursuant to the terms
of the Certificate of Designations, Rights and Preferences of the Series H
Preferred Stock.
The Class I, II and III Warrants are subject to certain antidilution
rights. In addition, pursuant to the terms of the Purchase Agreement, as
amended, the Company is required to file a registration statement (the
"Registration Statement") to cover, inter alia, the resale by CII of the
----- ----
shares of Common Stock underlying the CII Securities and the Series H
Shares (the "Registrable Securities"). The registration statement to which
this Prospectus relates has been filed to fulfill such obligation. The
Company is required to cause the Registration Statement to become effective
no later than January 31, 1997, maintain the effectiveness of the
Registration Statement for a period of three years from its effective date,
subject to the provisions of the Purchase Agreement, as amended, and use
its best efforts to allow CII to continually sell Registrable Securities
pursuant to such Registration Statement free from any stop orders or
suspensions by the Company or advice of counsel to the contrary. CII also
has been granted 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
Registrable Securities the Company ceases to (a) maintain its corporation
headquarters and all of its product business operations in the State of
Connecticut, (including, after January 1, 1997, the assembly of all
products to be sold to the U.S. Surgical Corporation), excluding 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; or (ii) the Company fails
to keep the Registration Statement effective for an aggregate of 120 days
during any rolling twelve month period. Upon CII's exercise of its put,
the Company would be obligated to purchase from CII all CII Securities and
Registrable Securities held at that time by CII for a price equal to the
greater of (x) the then current market price of such CII Securities and
Registrable Securities (on an as-converted basis) and (y) $2.00, multiplied
by the number of CII Securities and Registrable Securities (on an as-
converted basis), less in the case of Common Stock underlying the Class I
Warrants, the Class II Warrants or the Class III Warrants, any exercise
price that would have to be paid to acquire such Common Stock.
By letter agreement dated May 22, 1995 between Harbour Holdings
Limited Partnership ("Harbour") and the Company, Harbour agreed to accept
the issuance to it by the Company of 747,500 shares of Common Stock as
payment in full of declared, accrued and unpaid dividends in the amount of
$598,000 that accrued prior to June 30, 1993 with respect to shares of
Series A Preferred Stock and Series B Preferred Stock held at such time by
Harbour.
Between April 5, 1997 and July 8, 1997, the Company issued an
aggregate amount of 188,125 shares of its Common Stock to various Selling
Stockholders at a price of $1.50 per share. The issuances were comprised
of 50,000 shares of Common Stock to each of The Allen W. Steinberg Limited
Partnership and BG Development Corp. Pension Fund, 30,000 shares to
Peggyanne Kahn, 25,000 shares to each of Stig Host and Pediatric and
Adolescent Healthcare, P.C. Employee Pension Trust and 8,125 shares to J.
Allen Kosowsky (which shares were then transferred
-11-
<PAGE>
by Mr. Kosowsky to the J. Allen Kosowsky, CPA, P.C.). All such Selling
Stockholders paid cash for such Common Stock. Mr. Kosowsky, acquired his
shares for consulting services rendered.
Other than as set forth above, there are no material relationships
between the Selling Stockholders and the Company (or any affiliate of the
Company), nor have any such material relationships existed within the past
three years, and the Selling Stockholders do not hold any other securities
of the Company.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock, $0.01 par value per share, and 100,000 shares of
Preferred Stock, $100.00 par value per share.
The holders of Common Stock are entitled to one vote per share. The
Common Stock has non-cumulative voting rights, which means that holders of
more than 50% of the shares voting for the election of directors can elect
all of the directors and take most other actions submitted to a vote of
stockholders, if they so determine. In such event, the holders of the
remaining shares will not be able to elect any directors or take such other
actions. The holders of Common Stock have no preemptive rights to maintain
their respective percentage ownership interest in the Company or other
subscription or conversion rights for other securities of the Company.
The Company has never paid a cash dividend on its Common Stock and the
Company does not contemplate paying any cash dividends on its Common Stock
in the near future. Pursuant to the Company's August 9, 1996 loan
agreement with its principal lender, the Company is prohibited from
declaring or paying any dividends, or making a distribution to its
stockholders, until the termination of such agreement and the repayment of
all amounts due to such lender.
CII has certain antidilution protections as well as a put right in
connection with the CII Securities. See
"Selling Stockholders."
PLAN OF DISTRIBUTION
The Shares covered hereby may be offered and sold from time to time by
the Selling Stockholders. The Selling Stockholders will act independently
of the Company in making decisions with respect to the timing, manner and
size of each sale. Such sales may be made in the over-the-counter market
or otherwise, at prices related to the then current market price or in
negotiated transactions, including one or more of the following methods:
(a) purchases by a broker-dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; (b) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and
(c) block trades in which the broker-dealer so engaged will attempt to sell
the Shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction. The Company has been advised by
each of the Selling Stockholders that such Selling Stockholder has not made
any arrangements relating to the distribution of the Shares covered by this
Prospectus. In effecting sales, broker-dealers engaged by the Selling
Stockholders may arrange for other broker-dealers to participate. Broker-
dealers may receive commissions or discounts from the Selling Stockholders
in amounts to be negotiated.
-12-
<PAGE>
In offering the Shares covered hereby, the Selling Stockholders and
any broker-dealers and any other participating broker-dealers who execute
sales for the Selling Stockholders may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales, and
any profits realized by the Selling Stockholders and the compensation of
such broker-dealer may be deemed to be underwriting discounts and
commissions. In addition, any Shares covered by this Prospectus which
qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Prospectus.
In connection with the Offering, each of the Selling Stockholders has
agreed that during such time as it may be engaged in a distribution of
Shares covered hereby, it will not engage in any stabilization activity in
connection with the Company's Common Stock, will make arrangements with the
Company to furnish to each purchaser and/or broker-dealer through which
Shares covered hereby may be offered copies of this Prospectus and its
accompanying documents and reports and that it will not bid for or purchase
any securities of the Company or attempt to induce any person to bid or
purchase any securities of the Company except as permitted under the
Exchange Act. Each of the Selling Stockholders has agreed to inform the
Company when the distribution of its Shares is completed.
This Offering will terminate on the earlier of January 31, 2000 and
the date on which all Shares offered hereby have been sold by the Selling
Stockholders.
In order to comply with certain states' securities laws, if
applicable, the Shares offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, the
Shares may not be sold in certain states unless they have been registered
or qualified for sale in such state or an exemption from regulation or
qualification is available and is complied with. The Company intends to
use its best efforts to register or qualify the Shares for resale or to
seek an exemption from registration or qualification in any state required
in order to facilitate as to a particular sale, the resale of the Shares by
the Selling Stockholders.
CERTAIN FINANCIAL INFORMATION
The financial statements included in this Prospectus, as previously
filed with the Commission on September 13, 1996 as part of the Company's
Form 8-K/A-1, reflect historical and pro forma financial information
regarding the business acquired through the Raychem Acquisition. Other
than the Statement of Assets Acquired, such financial statements were not
reflected in the Company's Annual Report on Form 10-KSB, as amended, for
the fiscal year ended June 30, 1996.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Section 145 of the General Corporation Law of the State of Delaware
empowers a corporation incorporated under the General Corporation Law to
indemnify its directors, officers, employees and agents and its former
directors, officers, employees and agents and those who serve in such
capacities with another enterprise at its request, against expenses
(including attorneys' fees), as well as judgments, fines and amounts paid
in settlements actually and reasonably incurred by them in connection with
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by
or in the right of the corporation), in which they or any of them were or
are made parties or are threatened to be made parties by reason of their
serving
-13-
<PAGE>
or having served in such capacity. The power to indemnify shall only exist
where such officer, director, employee or agent has acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, in the case of a criminal action, such
person had no reasonable cause to believe his conduct was unlawful. In a
threatened, pending or completed action or suit by or in the right of the
corporation, the corporation may indemnify such person only for expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if such
person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, except that if
such person has been adjudged liable to the corporation then the
corporation shall have no power of indemnification unless and only to the
extent that a court shall determine upon application. Indemnity is
mandatory as to expenses (including attorneys' fees) actually and
reasonably incurred by a director, officer, employee or agent of a
corporation to the extent a claim, issue or matter has been successfully
defended. Expenses (including attorneys' fees) incurred by an officer or
director in defending any such action, suit or proceeding may be paid by
the corporation in advance of final disposition upon receipt of an
undertaking by or on behalf of such person to repay such amount if it is
ultimately determined that he is not entitled to be indemnified by the
corporation. Indemnification is not deemed exclusive of any other rights to
which those indemnified may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise. The determination
to make indemnification pursuant to Section 145 shall be made by (i) a
majority vote of disinterested directors even though less than a quorum,
(ii) if there are no such directors or if such directors so direct, by
independent legal counsel in a written opinion, or (ii) by the
stockholders. A Delaware corporation also has the power to purchase and
maintain insurance on behalf of the persons it has the power to indemnify,
whether or not indemnity against such liability would be allowed under the
statute.
Article VIII of the By-Laws of the Company provides as follows:
The Corporation shall, to the fullest extent permitted by subsections
(a) through (e) of Section 145 of the General Corporation Law of the
State of Delaware (as such statute may, from time to time, be
amended), indemnify any and all persons whom it shall have power to
indemnify against any and all expenses, liabilities and other matters.
The Certificate of Incorporation of the Company was amended in June
1989, as permitted by the Delaware General Corporation Law, pursuant to a
vote of its stockholders, to provide that, to the fullest extent
permissible under the Delaware General Corporation Law, directors of the
Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of the fiduciary duty as a director except
for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law,
(iii) for improper dividend payment or unlawful stock purchases or
redemption, or (iv) for any transaction from which the director derived an
improper personal benefit.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
-14-
<PAGE>
INCORPORATION BY REFERENCE
The Company's Annual Report on Form 10-KSB, as amended by Form 10-
KSB/A1, as previously filed with the Commission, is hereby incorporated by
reference into this Prospectus for the fiscal year ended June 30, 1997.
All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since June 30, 1997 and prior to the termination of the
Offering shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of the Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon his written or oral request, a copy of any or
all of the documents incorporated herein by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into the documents which this Prospectus incorporates). Written
or telephone requests should be directed to the Company, 57 Commerce Drive,
Brookfield, Connecticut 06804 (telephone 203/740-7311), Attention: Katie
Terhune.
This Prospectus is accompanied by a copy of the Company's Form 10-KSB
filed with the Commission for the fiscal year of the Company ended June 30,
1997 (as the same has been amended). In lieu of the foregoing, this
Prospectus shall be accompanied by a copy of the Company's Form 10-KSB,
together with any amendments thereto, filed with the Commission for each
subsequent fiscal year of the Company during the duration of this Offering.
If a Form 10-QSB has been filed since the date of the Form 10-KSB described
above, this Prospectus is also accompanied by a copy of the Company's
latest Form 10-QSB filed with the Commission with respect to the most
recent fiscal quarter which ends after the end of the latest fiscal year of
the Company for which the Company has delivered the Form 10-KSB as
described above.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Finn Dixon & Herling LLP,
Stamford, Connecticut.
EXPERTS
The consolidated financial statements of Memry Corporation and its
subsidiary at June 30, 1997 and 1996 and for the years then ended,
incorporated by reference in this Prospectus and Registration Statement
from the Company's Form 10-KSB for the period ended June 30, 1997, as
amended, have been audited by McGladrey & Pullen, LLP, independent
auditors, and are incorporated herein in reliance upon such report given
upon the authority of such firm as experts in auditing and accounting.
-15-
<PAGE>
The statement of net assets acquired as of June 28, 1996 and the
statements of operations for each of the two years ended June 30, 1996 of
the Nickel-Titanium Product Line of the Electronics Business Segment of
Raychem Corporation included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants,
given on authority of said firm as experts in auditing and accounting.
-16-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED
---------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Index to Financial Statements F-1
Report of Independent Accountants F-2
dated August 30, 1996
Statement of Assets Acquired F-3
as of June 28, 1996
Statements of Operations for the years F-4
ended June 30, 1996 and 1995
Notes to Statement of Assets Acquired F-5
and Statements of Operations
Pro Forma Financial Information F-9
Pro Forma Consolidated Statement F-10
of Operations (unaudited) for
year ended June 30, 1995
Pro Forma Consolidated Statement F-11
of Operations (unaudited) for
year ended June 30, 1996
Notes to Pro Forma Financial F-12
Information
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Raychem Corporation
We have audited the accompanying statement of assets acquired of the Nickel-
Titanium Alloy Product Line (the "Product Line") of the Electronics Business
Segment of Raychem Corporation as of June 28, 1996, and the statements of
operations of the Product Line for each of the two years in the period ended
June 30, 1996. These statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statements were prepared solely to present the assets of the
Product Line acquired by Memry Corporation and the statements of operations
of the Product Line for each of the two years in the period ended June 30,
1996, in order to comply with the requirements of the Securities and Exchange
Commission (for inclusion in the Current Report on Form 8-K/A of Memry
Corporation) as described in Note 1 and are not intended to be a complete
presentation of the assets and liabilities of the Product Line.
In our opinion, the statements referred to above present fairly, in all
material respects, the assets acquired of the Product Line at June 28, 1996
and the results of operations of the Product Line for each of the two years
in the period ended June 30, 1996, in conformity with generally accepted
accounting principles.
As discussed in Notes 1 and 3 to the statements, the Product Line has had
extensive transactions and relationships with its parent, Raychem
Corporation. It is possible that the terms of these transactions are not the
same as those which would result from transactions among wholly unrelated
parties.
/s/ Price Waterhouse LLP
San Jose, California
August 30, 1996
F-2
<PAGE>
Nickel-Titanium Alloy Product Line
(A Business Unit of Raychem Corporation)
Statement of Assets Acquired
June 28, 1996
- --------------------------------------------------------------------------------
Assets acquired:
<TABLE>
<S> <C>
Inventory $1,393,000
Property and equipment, net 1,681,000
----------
$3,074,000
==========
</TABLE>
See accompanying notes to statement of assets acquired and statements of
operations.
F-3
<PAGE>
Nickel-Titanium Alloy Product Line
(A Business Unit of Raychem Corporation)
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
June 30,
1996 1995
<S> <C> <C>
Revenues $11,169,000 $ 6,238,000
Cost of goods sold 4,897,000 3,856,000
---------- -----------
Gross profit 6,272,000 2,382,000
---------- -----------
Operating expenses:
Research and development 1,884,000 2,035,000
Selling and marketing 1,427,000 1,314,000
General and administrative 1,051,000 1,643,000
Restructuring charge 678,000 280,000
---------- -----------
5,040,000 5,272,000
---------- -----------
Income (loss) before income taxes 1,232,000 (2,890,000)
Provision for income taxes 40,000 -
---------- -----------
Net income (loss) $1,192,000 $(2,890,000)
========== ===========
</TABLE>
See accompanying notes to statement of assets acquired and statements of
operations.
F-4
<PAGE>
Nickel-Titanium Alloy Product Line
(A Business Unit of Raychem Corporation)
Notes to Statement of Assets Acquired and Statements of Operations
- --------------------------------------------------------------------------------
1. Basis of Presentation
Raychem Corporation ("Raychem") invents, makes and sells high-performance
products based on its expertise in materials science, product design and
process engineering. Raychem serves customers that fall into three business
segments --industrial, electronics and telecommunications. The nickel-
titanium alloy product line (the "Product Line") has operated as part of the
electronics business segment ("Electronics"). The Product Line has been
engaged in designing, developing, processing, manufacturing and marketing
nickel-titanium alloy components for OEM applications. All activities of the
Product Line were combined with Electronics' other activities for purposes
of both external and internal reporting and, therefore, except for
inventory, property and equipment, net and statement of operations
information which was maintained at the Product Line level, separate
financial statement information for the Product Line is not available. The
accompanying financial information presents the net book value of the assets
of the Product Line acquired by Memry Corporation ("Memry") on June 28,
1996. This information is not intended to be a complete presentation of the
assets and liabilities of the Product Line. The accompanying statements of
operations for the two years ended June 30, 1996 were prepared to comply
with the requirements of the Securities and Exchange Commission (for
inclusion in the Current Report on Form 8-K/A of Memry).
The accompanying financial information has been prepared from the historical
accounting records of Raychem and does not purport to reflect the assets and
liabilities or results of operations that would have resulted if the Product
Line had operated as an unaffiliated independent company. The financial
information presented is based on Raychem's historical cost and does not
give consideration to the adjustments that will result from Memry's
acquisition. Since only certain assets are being acquired and no liabilities
are being assumed by Memry, a statement of cash flows is not applicable. On
June 28, 1996, the assets of the Product Line reflected in the accompanying
Statement of Assets Acquired were acquired by Memry for $4 million in cash,
and warrants which provide Raychem the right to acquire up to 1,250,000
shares of Memry common stock at $2.00 per share and up to 1,130,000 shares
of Memry common stock at $0.01 per share. In addition, pursuant to a private
label/distribution agreement entered into between Raychem and Memry
concurrent with the acquisition, Raychem will be the exclusive distributor
for an initial term of five years for non-implant applications of products
in the Product Line to certain customers which comprised approximately 70%
of fiscal 1996 revenues. Sales to Raychem under the distributor agreement
will be discounted to allow Raychem to recover its sales and marketing
expenses and to realize a profit upon resale of such products to its
customers.
F-5
<PAGE>
Nickel-Titanium Alloy Product Line
(A Business Unit of Raychem Corporation)
Notes to Statement of Assets Acquired and Statements of Operations
- --------------------------------------------------------------------------------
The accompanying Statements of Operations reflect the "carved-out" results
of operations of the Product Line as if the Product Line had been operating
as a separate company. Certain corporate, general and administrative
expenses of Raychem have been allocated to the Product Line (discussed in
Note 3) on various bases which, in the opinion of management, are
reasonable. However, such expenses are not necessarily indicative of, and it
is not practicable for management to estimate the level of, expenses which
might have been incurred had the Product Line been operating as a separate
company.
The preparation of the accompanying statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, revenues and
expenses. Actual results could differ from those estimates.
2. Summary of Significant Accounting Policies
Revenue Recognition
The Product Line recognizes revenue upon shipment of product. Bad debt
expense is included as an element of general and administrative expenses in
the accompanying statements of operations and was not material for the
periods presented.
For the year ended June 30, 1996, revenues from two customers represented
32% and 17% of total revenues. For the year ended June 30, 1995, revenues
from one customer represented 41% of total revenues. Revenues from shipments
to customers outside the United States, primarily in Europe and Asia,
represented 38% and 24% of total revenues for the years ended June 30, 1996
and 1995, respectively. Revenues from sales to European customers
represented 33% and 16% of total revenues for the years ended June 30, 1996
and 1995, respectively. All sales are denominated in U.S. dollars.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or
market. The cost of inventory includes material, labor and manufacturing
overhead.
F-6
<PAGE>
Nickel-Titanium Alloy Product Line
(A Business Unit of Raychem Corporation)
Notes to Statement of Assets Acquired and Statements of Operations
- --------------------------------------------------------------------------------
Property and equipment
Machinery and equipment, and leasehold improvements are stated at cost.
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the assets, generally three to ten years,
or the life of the lease, whichever is shorter. Depreciation and
amortization expense related to the property and equipment acquired by Memry
totaled $569,000 and $552,000 for the years ended June 30, 1996 and 1995,
respectively.
Income taxes
The results of the Product Line's operations are included in Raychem's
consolidated U.S. federal and applicable state income tax returns. The
provision for income taxes of $40,000 recorded for the year ended June 30,
1996 primarily represents alternative minimum taxes the Product Line would
have provided on a standalone basis. No current provision or benefit for
income taxes would have been provided on a standalone basis for the year
ended June 30, 1995 as the Product Line incurred a net operating loss for
income tax purposes and had no carryback potential. In addition, no deferred
provision or benefit for income taxes would have been recorded on a
standalone basis for fiscal 1995 as the Product Line was in a net deferred
tax asset position for which a full valuation allowance would have been
provided.
Earnings per share
Since there is no separate capitalization, nor are any shares of stock
specifically attributable to the Product Line upon which a per share
calculation can be based, earnings per share data is not presented in the
accompanying statements.
3. Relationship and Transactions with Raychem Corporation
The statements of operations include allocations to the Product Line of
certain administrative costs incurred by Raychem Corporation related to
facilities, sales, purchasing, human resources, management information
systems, accounting, credit and certain other corporate expenses. For the
years ended June 30, 1996 and 1995, these allocated costs were $3,049,000
and $2,285,000, respectively.
In the opinion of management, these allocations of expenses were made on a
reasonable basis. However, they are not necessarily indicative of the level
of expenses which may have been experienced on a standalone basis. The
F-7
<PAGE>
Nickel-Titanium Alloy Product Line
(A Business Unit of Raychem Corporation)
Notes to Statement of Assets Acquired and Statements of Operations
- --------------------------------------------------------------------------------
amounts that would have or will be incurred on a separate company basis
could differ significantly from the allocated amounts due to economies of
scale, differences in management and/or operational practices or other
factors.
4. Details of Inventory and Property and Equipment
Inventory consists of the following:
<TABLE>
<S> <C>
Raw materials $ 204,000
Work in progress 1,037,000
Finished goods 152,000
----------
$1,393,000
==========
Property and equipment consist of the following:
Machinery and equipment $2,636,000
Leasehold improvements 2,050,000
----------
4,686,000
Less accumulated depreciation and amortization (3,005,000)
----------
$1,681,000
==========
</TABLE>
5. Restructuring Charges
During the year ended June 30, 1996, the Product Line recorded a
restructuring charge totaling $678,000. The restructuring charge primarily
represents severance costs for employees that will not be retained by Memry
or Raychem. In addition, during the year ended June 30, 1995, the Product
Line recorded a restructuring charge totaling $280,000, primarily
representing severance costs for employees of the Product Line, in
connection with steps taken by Raychem to streamline its operations.
F-8
<PAGE>
Pro Forma Financial Information
-------------------------------
The accompanying unaudited pro forma consolidated statements of operations
are presented to illustrate the effect of the June 28, 1996 acquisition by Memry
Corporation of Raychem Corporation's Nickel-Titanium Alloy Product Line on Memry
Corporation's Statements of Operations for the fiscal years ended June 30, 1995
and 1996, as if such acquisition had occurred at July 1, 1994. While Memry's
stand-alone results of operations for the fiscal year ended June 30, 1995 have
been audited, the audit on Memry's results of operations for the fiscal year
ended June 30, 1996, has not yet been completed, and there can be no assurances
that the final audited results may not vary from the unaudited results set forth
herein.
The accompanying unaudited pro forma consolidated statements of operations
should be read in conjunction with the notes thereto appearing immediately
following the statements. The pro forma consolidated statements of operations
are presented for informational purposes only and are not necessarily indicative
of what actual results would have been had the acquisition taken place on July
1, 1994, nor do they purport to represent results of future operations of Memry.
F-9
<PAGE>
PRO FORMA FINANCIAL INFORMATION
MEMRY CORPORATION AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
----------------------------
Historical Raychem Other Pro Forma
----------- ----------- -- ----------- -----------
<S> <C> <C> <C> <C>
PRODUCT SALES $4,729,000 $6,238,000 A ($1,268,000) $9,699,000
COST OF SALES 4,147,000 3,856,000 B (775,000)
C (267,000)
D 335,000 7,296,000
----------- ----------- ----------- -----------
Gross profit 582,000 2,382,000 (561,000) 2,403,000
OPERATING EXPENSES
General, selling and administrative 2,374,000 2,957,000 B (1,461,000)
C (12,000)
E (884,000)
F 496,000
D 574,000 4,044,000
Research and development - 2,035,000 B (49,000)
C (25,000)
E (1,609,000)
F 85,000
D 50,000 487,000
Depreciation and amortization 240,000 - G 591,000 831,000
Restructuring charge - 280,000 J (280,000) -
----------- ----------- ----------- -----------
Total operating expenses 2,614,000 5,272,000 (2,524,000) 5,362,000
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (2,032,000) (2,890,000) 1,963,000 (2,959,000)
Interest expense, net 360,000 - - 360,000
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (2,392,000) (2,890,000) $1,963,000 (3,319,000)
----------- ----------- ----------- -----------
Provision for income taxes - - - -
----------- ----------- ----------- -----------
NET INCOME (LOSS) ($2,392,000) ($2,890,000) $ 1,963,000 ($3,319,000)
=========== =========== =========== ===========
Average Shares Outstanding
Including Common Stock Equivalents 5,353,222 - I 2,000,000 7,353,222
LOSS PER SHARE ($0.45) ($0.45)
=========== =========== =========== ===========
</TABLE>
F-10
<PAGE>
PRO FORMA FINANCIAL INFORMATION
MEMRY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
----------------------------
Historical Raychem Other Pro Forma
----------- ----------- -- ----------- -----------
<S> <C> <C> <C> <C>
PRODUCT SALES $3,691,000 $11,169,000 A ($2,804,000) $12,056,000
COST OF SALES 3,323,000 4,897,000 B (830,000)
C (283,000)
D (329,000) 7,436,000
----------- ----------- ----------- -----------
Gross profit 368,000 6,272,000 (2,020,000) 4,620,000
OPERATING EXPENSES
General, selling and administrative 2,123,000 2,478,000 B (1,864,000)
C (58,000)
E (548,000)
F 436,000
D 572,000 3,139,000
Research and development - 1,884,000 B (356,000)
C (28,000)
E (1,132,000)
F 85,000
D 50,000 503,000
Depreciation and amortization 90,000 - G 591,000 681,000
Restructuring charge - 678,000 J (678,000) -
----------- ----------- ----------- -----------
Total operating expenses 2,213,000 5,040,000 (2,930,000) 4,323,000
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (1,845,000) 1,232,000 910,000 297,000
Interest expense, net 297,000 - - 297,000
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (2,142,000) 1,232,000 910,000 -
----------- ----------- ----------- -----------
Provision for income taxes - 40,000 H 30,000 70,000
----------- ----------- ----------- -----------
NET INCOME (LOSS) ($2,142,000) $1,192,000 $880,000 ($70,000)
=========== =========== =========== ===========
Average Shares Outstanding Including
Common Stock Equivalents 8,280,452 - I 1,995,838 10,276,290
LOSS PER SHARE ($0.26) ($0.01)
=========== =========== =========== ===========
</TABLE>
F-11
<PAGE>
Notes to the Unaudited Pro Forma Financial Information
------------------------------------------------------
A Pursuant to an agreement between Memry Corporation ("Memry") and Raychem
Corporation ("Raychem"), Raychem will act as Memry's exclusive distributor
for certain products within a defined Field of Use, and Memry will sell
such products to Raychem at a discount from the anticipated resale price by
Raychem to its customers. Because the historical information reflects
sales by Raychem to its customers, the adjustment reflects the discount at
which Memry would have sold such products to Raychem.
B To reflect the elimination of Raychem's corporate allocations which include
sales, marketing and distribution costs relating to the sale of certain
products now sold to Raychem pursuant to the agreement as described in Note
A above. Pursuant to Note D, pro forma Memry corporate allocations are
provided for.
C To reflect the elimination of Raychem's depreciation expenses. Pursuant to
Note G, depreciation and amortization in the manner that Memry will be
depreciating and amortizing the property acquired from Raychem is provided
for.
D To provide for Memry's corporate allocations. See also Note B above.
E To reflect the elimination of all Raychem's payroll expenses. Pursuant to
Note F, pro forma Memry payroll expenses are provided for. Much of the
eliminated payroll relates to research and development activities relating
to certain medical applications which were not acquired by Memry.
F To provide for Memry's pro forma payroll expenses to operate the acquired
business, based upon actual post-acquisition costs. See also Note E above.
G To provide for Memry's pro forma depreciation and amortization of the
assets acquired from Raychem. This includes: depreciation of $2,700,000
of machinery and equipment over an estimated annual life of 7 years, for
$385,714 per year; (ii) amortization of $2,000,000 of patents and patent
rights over an estimated useful life of 15 years, for $133,333 per year;
(iii) amortization of $321,500 of acquisition costs over an estimated
useful life of 15 years, for $21,433 per year; (iv) amortization of $36,000
of deferred financing costs over the 5 year life of the related debt, for
$7,200 per year; and (v) amortization of $666,779 of acquired goodwill over
15 years, for $44,452 per year.
H To provide for the difference between (i) $70,000 of California state
income taxes, which would have been recorded based on the pro forma
profitability of Memry's California operations, minus (ii) the $40,000 of
federal alternative minimum taxes recorded by Raychem (which would not have
been recorded due to Memry's operating losses on a pro forma basis).
F-12
<PAGE>
I To treat the sale of 2,000,000 shares of Memry's Common Stock that occurred
on June 28, 1996, in order to finance the acquisition as if the sale had
occurred on July 1, 1994. The pro forma adjustment for fiscal 1996 is less
than 2,000,000 shares because the shares were included in actual numbers
for the last three days of fiscal 1996.
J To reflect the elimination of restructuring charges taken by Raychem.
F-13
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION WHERE, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
----------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
=============================================
<S> <C>
Available Information........................ 2
Risk Factors................................. 3
Updates to Description of Business........... 7
Use of Proceeds.............................. 7
Selling Stockholders......................... 8
Description of Securities.................... 12
Plan of Distribution......................... 12
Certain Financial Information................ 13
Limitation of Liability and Indemnification
Matters..................................... 13
Incorporation by Reference................... 14
Legal Matters................................ 15
Experts...................................... 15
Index to Financial Statements................ 16
- ----------------------------
</TABLE>
UNTIL FEBRUARY 8, 1997 (40 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
- --------------------------------------------------------------------------------
3,838,755 SHARES
MEMRY CORPORATION
----------------------------
COMMON STOCK, $0.01 PAR VALUE PER SHARE
----------------------------
PROSPECTUS
DECEMBER 30, 1997
----------------------------
