<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, 1999
____________
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
For the transition period from to
____________
Commission File Number 0-14068
____________
Memry Corporation
____________
(Exact name of small business issuer as specified in its charter)
Delaware 06-1084424
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization
57 Commerce Drive, Brookfield, Connecticut 06804
(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 22, 1999 20,748,302 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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INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of March 31, 1999 and June 30, 1998
Condensed Consolidated Statements of Operations for the three and nine months
ended March 31, 1999 and 1998
Condensed Consolidated Statements of Cash Flows for the nine months ended March
31, 1999 and 1998
Notes to the Condensed Consolidated Financial Statements
PART II OTHER INFORMATION
ITEM 2. Changes in Securities
ITEM 6. Exhibits and Reports on Form 8K
2
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Memry Corporation & Subsidiaries
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 995,000 $ 1,189,000
Accounts receivable, less allowance for doubtful
accounts 3,370,000 3,534,000
Note receivable 260,000 325,000
Inventories 4,245,000 2,336,000
Prepaid expenses and other 230,000 62,000
Assets of discontinued segment, net - 210,000
------------ ------------
Total current assets 9,100,000 7,656,000
------------ ------------
Property, Plant and Equipment, at cost 7,552,000 4,593,000
Less accumulated depreciation (2,447,000) (1,876,000)
------------ ------------
5,105,000 2,717,000
------------ ------------
Other Assets
Patents and patent rights, less accumulated
Amortization 1,635,000 1,734,000
Goodwill, less accumulated
Amortization 4,509,000 906,000
Deferred financing costs, less accumulated
Amortization 32,000 43,000
Deposits - 29,000
6,176,000 2,712,000
------------ ------------
Total assets $ 20,381,000 $ 13,085,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 2,571,000 $ 2,230,000
Notes payable 620,000 100,000
Contingent liability 1,046,000 -
Unearned Revenue 91,000 -
Current maturities of capital lease obligations 16,000 31,000
------------ ------------
Total current liabilities 4,344,000 2,361,000
============ ============
Capital lease obligations, less current maturities 59,000 19,000
Notes Payable, less current maturities 2,628,000 580,000
------------ ------------
Total Liabilities 7,031,000 2,960,000
------------ ------------
Stockholders' Equity
Common stock, $.01 par value; 30,000,000 authorized
shares; shares issued and outstanding: 207,000 199,000
March 31, 1999 - 20,749,000; June 30, 1998 - 19,950,000
Additional paid-in capital 43,700,000 41,121,000
Accumulated deficit (30,137,000) (31,195,000)
Translation Adjustment (420,000) -
Total stockholders' equity 13,350,000 10,125,000
------------ ------------
Total liabilities and stockholders' equity $ 20,381,000 $ 13,085,000
============ ============
</TABLE>
3
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Memry Corporation & Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
-----------
<TABLE>
<CAPTION>
<S> <C> <C>
Revenues
1999 1998
---------- ----------
Product Sales $4,252,000 $4,813,000
Research and development 97,000 50,000
---------- ----------
4,349,000 4,863,000
Cost of revenues
Manufacturing 1,995,000 2,302,000
Research and development 73,000 190,000
---------- ----------
2,068,000 2,492,000
Gross profit 2,281,000 2,371,000
Operating expenses
General, selling and administration 1,806,000 1,525,000
Depreciation and amortization 257,000 83,000
---------- ----------
2,063,000 1,608,000
---------- ----------
Operating income 218,000 763,000
---------- ----------
Other income (expense)
Interest (expense) (39,000) (22,000)
Other income (expense) 15,000 -
---------- ---------
Income before income taxes 194,000 741,000
Provision for income taxes 97,000 -
---------- ----------
Net income $ 97,000 $ 741,000
========== ==========
Basic Earnings Per Share: $0.00 $ 0.04
========== ==========
Diluted Earnings Per Share: $0.00 $ 0.04
========== ==========
</TABLE>
4
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Memry Corporation & Subsidiaries
Consolidated Statements of Operations
For the Nine Months Ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Revenues
Product Sales $13,305,000 $13,207,000
Research and development 621,000 158,000
----------- -----------
13,926,000 13,365,000
Cost of revenues
Manufacturing 6,983,000 6,016,000
Research and development 388,000 475,000
----------- -----------
7,371,000 6,491,000
Gross profit 6,555,000 6,874,000
Operating expenses
General, selling and administration 4,783,000 4,480,000
Depreciation and amortization 406,000 249,000
----------- -----------
5,189,000 4,729,000
Operating income 1,366,000 2,145,000
Other income (expense)
Interest (expense) (24,000) (121,000)
Other income (expense) 32,000
Gain on disposition of assets - 25,000
----------- -----------
8,000 (96,000)
Income before income taxes 1,374,000 2,049,000
Provision for income taxes 316,000 160,000
----------- -----------
Net income $ 1,058,000 $ 1,889,000
=========== ===========
Basic Earnings Per Share: $0.05 $0.11
=========== ===========
Diluted Earnings Per Share $0.05 $0.09
=========== ===========
</TABLE>
5
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Memry Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Three and Nine Ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
3/31/99 3/31/98 3/31/99 3/31/98
============ ============ =========== ===========
<S> <C> <C> <C> <C>
Net Income $ 97,000 $741,000 $1,058,000 $1,889,000
Other Comprehensive Income
Foreign Currency Translation
Adjustments, net of tax (352,000) 0 (420,000) 0
------------ ------------ ---------- ----------
Comprehensive Income $ (255,000) $ 741,000 $ 638,000 $1,889,000
============ ============= ========== ==========
</TABLE>
6
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Memry Corporation & Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 1,058,000 $ 1,889,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 830,000 536,000
(Gain) loss on disposal of assets (9,000) -
Compensation paid by issuance of common stock - 82,000
Change in operating assets and liabilities, net of assets
acquired in business combination:
(Increase) decrease in accounts receivable 699,000 (40,000)
Decrease in notes receivable 541,000 -
(Increase) in inventories (1,739,000) (214,000)
(Increase) decrease in prepaid expenses and other assets (225,000) 181,000
(Decrease) in accounts payable (187,000) (1,130,000)
----------- -----------
Net cash provided by operating activities 968,000 1,304,000
Cash Flows From Investing Activities
Purchase of Advanced Materials and Technologies, n.v.
property, plant and equipment (1,298,000) -
Purchase of Wire Solutions property, plant and equipment (248,000) -
Purchases of property, plant and equipment (1,133,000) (306,000)
Procedes from sales of property, plant and equipment 309,000
Deposits (34,000) -
----------- -----------
Net cash used in investing activities (2,404,000) (306,000)
Cash Flows From Financing Activities
Proceeds from issuance of common stock 267,000 503,000
(Repayment of) current portion of notes payable (884,000) (938,000)
(Repayment of) current portion of capital lease (15,000) -
Proceeds from (repayment of) notes payable 1,860,000 (316,000)
(Repayment of) capital lease (1,000) (11,000)
Gain on foreign currency fluctuations 15,000 -
----------- -----------
Net cash provided by (used in) financing activities 1,242,000 (762,000)
----------- -----------
Increase (decrease) in cash and cash equivalents (194,000) 236,000
Cash and cash equivalents, beginning of year 1,189,000 25,000
----------- -----------
Cash and cash equivalents, end of period $ 995,000 $ 261,000
=========== ===========
</TABLE>
Memry Corporation & Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 1999 and 1998
(Unaudited)
Supplemental Schedule of Noncash Investing and Financing Activities
Acquisitions of Advanced Materials and Technologies, n.v. and Wire
Solutions, Inc.
Purchase price $ 5,063,000
===========
Fair value of assets acquired
Property, plant and equipment 2,013,000
Accounts receivable 601,000
Notes receivable 525,000
Inventory 187,000
Other 22,000
Goodwill 4,096,000
-----------
7,444,000
Less
Liabilities assumed (2,381,000)
-----------
$ 5,063,000
===========
Source of Funds
Cash $ 1,533,000
Contingent liability 1,046,000
Issuance of common stock 2,484,000
-----------
$ 5,063,000
===========
7
<PAGE>
MEMRY CORPORATION & SUBSIDIARIES
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, 1999 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1999 ("fiscal 1999"). 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, 1998 ("fiscal 1998") of Memry
Corporation (the "Company"), as amended.
Note B. INVENTORIES
Inventories at March 31, 1999 and June 30, 1998, are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
--------------- --------------
<S> <C> <C>
Raw Materials $ 893,000 $ 455,000
Work-in-process 2,898,000 1,783,000
Finished goods 1,055,000 836,000
Allowance for slow-moving
and obsolete inventory (601,000) (738,000)
---------- ----------
$4,245,000 $2,336,000
========== ==========
</TABLE>
8
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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, 1999 and, as required by Statement No. 128, has
restated all per share information for the prior periods to conform with the
March 31, 1999 presentation. The following is information about the computation
of weighted-average shares utilized in the computation of basic and diluted
earnings (loss) per share.
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
3/31/99 3/31/98 3/31/99 3/31/98
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Number of Basic Shares Outstanding 20,691,961 18,504,856 20,313,298 17,691,103
Effect of Dilutive Securities:
Warrants 727,345 2,050,584 922,792 2,582,983
Options 263,787 407,957 421,962 356,526
---------- ---------- ---------- ----------
Number of Fully Diluted Shares
Outstanding 21,683,093 20,963,397 21,658,052 20,630,612
========== ========== ========== ==========
</TABLE>
9
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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, 1999 compared to nine months ended March 31,1998
Revenues. Revenues from continuing operations increased 4% to $13,926,000 for
the first nine months of fiscal year 1999 from $13,365,000 during the same
period in fiscal 1998. The increase of $561,000 is primarily due to an increase
in products sold to medical device companies.
Costs and Expenses. Manufacturing costs (including costs associated with
research and development revenues) increased to $7,371,000 for the nine months
ended March 31, 1999 from $6,491,000 during the same nine month period in fiscal
1998. This increase of $880,000 or 14% was attributable primarily to the 4%
increase in revenues, an increase in fixed costs in the Company's West Coast
facility, and the addition of fixed costs with respect to the company's European
facility, and a reduction in high margin medical product sales to United States
Surgical Corporation from the Company's East Coast facility. In October of 1998,
Memry Corporation's largest customer, United States Surgical Corporation was
acquired by Tyco International, Ltd. US Surgical accounted for approximately
$7.3 million, or 38%, of Memry's fiscal 1998 revenues. Subsequent to the
acquisition, Memry was informed that Tyco International, Ltd. would implement a
plan to reduce United States Surgical Corporation's inventory levels. Although
this plan to reduce inventory levels did not have an adverse effect on Memry's
first quarter fiscal 1999 financial statements, the implementation of such an
inventory adjustment caused an estimated $1.2 million reduction in anticipated
second quarter sales and a $1.4 million reduction in anticipated third quarter
sales. Correspondingly, the Company's gross margin from sales decreased to 47%
for the nine months ended March 31, 1999, from a 51% margin in the comparable
period in fiscal 1998.
General, selling and administrative expenses (excluding amortization) increased
$303,000 or 7%, to $4,783,000 for the nine months ended March 31, 1999, as
compared to $4,480,000 during the same period of fiscal 1998. This increase is
primarily attributable to an increase in staffing in the West Coast and cost
associated with the Company's European operations. The Company also witnessed a
significant increase in non-cash depreciation and amortization expense due to
the acquisition of Advanced Materials and Technologies, n.v. The Company's
depreciation and amortization expense increased $157,000, or 63%, to $406,000 in
the nine months ended March 31, 1999 versus $249,000 in the nine months ended
March 31, 19998. The Company recognized net interest expense of $24,000 for the
nine month period ended March 31, 1999 versus interest expense of $121,000 for
the nine month period ended March 31, 1998. This favorable net interest position
was primarily due to the Company's net positive cash position together with more
favorable borrowing rates for the majority of the first nine months of fiscal
1999 versus the first nine months of fiscal 1998. The Company recorded a
provision for income taxes of $316,000 for the first nine months of fiscal 1999
relative to a provision for income tax of $160,000 for the first nine months of
fiscal 1998. The Company under accrued for income taxes payable in fiscal 1998
and the higher provision for income taxes in fiscal 1999 appropriately reflects
the Company's estimated tax liability for fiscal 1999.
Net Income. Primarily as a result of an increase in general, selling and
administrative expenses, and depreciation and goodwill associated with the
Advanced Materials and Technologies, n.v. acquisition as described above, the
Company's net income decreased by $831,000, or 44% to, $1,058,000 in the first
nine months of fiscal 1999 compared to $1,889,000 for the first nine months of
fiscal 1998.
Three Months Ended March 31, 1999 compared to three months ended March 31, 1998
Revenues. Revenues decreased 11% to $4,349,000 for the third quarter of fiscal
year 1999 from $4,863,000 during the same period in fiscal 1998. The decrease
of $514,000 is primarily due to a decrease in sales to United States Surgical
Corporation.
10
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Costs and Expenses. Manufacturing costs (including costs associated with
research and development revenues) decreased to $2,068,000 for the three months
ended March 31, 1999 from $2,492,000 during the same three month period in
fiscal 1998. This decrease of $424,000, or 17%, is attributable to the reduced
level of sales and a one-time adjustment to appropriately align cost of sales
with inventory levels as opposed to recognizing these costs as a period expense.
Correspondingly, the Company's gross margin from sales increased to 52% for the
three months ended March 31, 1999, from a 49% margin in the comparable period in
fiscal 1998.
General, selling and administrative expenses (excluding amortization) increased
$281,000 or 18%, to $1,806,000 for the three months ended March 31, 1999, as
compared to $1,525,000 during the same period of fiscal 1998. This increase is
primarily attributable to the Company's increased staffing burdens (inclusive of
relocation expense) for the addition of European personnel and the addition of
laser processing and micro-coiling capabilities. In addition, the Company has
incurred significant restructuring charges related to the West Coast operations.
The Company also witnessed a significant increase in non-cash depreciation and
amortization expense due to the acquisition of Advanced Materials and
Technologies, n.v. The Company's depreciation and amortization expense
increased $174,000, or 210%, to $257,000 in third quarter of fiscal 1999 versus
$83,000 in the third quarter of fiscal 1998. The Company recognized net
interest expense of $39,000 in the third quarter of fiscal 1999 compared to
interest expense of $22,000 in the comparable quarter of fiscal 1998. This
unfavorable net interest position was due primarily to an increased average
balance in the Company's working capital line of credit as compared to the same
period in fiscal 1998. The Company recorded a provision for income taxes of
$97,000 for the third quarter of fiscal 1999 compared to a tax provision of $0
for the third quarter of fiscal 1998. The Company under accrued for income
taxes payable in fiscal 1998 and the higher provision for income taxes in fiscal
1999 appropriately reflects the Company's estimated tax liability for fiscal
1999.
Net Income. Primarily as a result of an increase in general, selling and
administrative expenses, and depreciation and goodwill associated with the
Advanced Materials and Technologies, n.v. acquisition as described above, the
Company's net income decreased by $644,000 or 87% to $97,000 for the three month
period ended March 31, 1999 as compared to $741,000 for the same period in
fiscal 1998.
(b) LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company's cash and cash equivalents balance was $995,000,
a decrease of $194,000 from $1,189,000 at the start of fiscal 1999. Cash
provided by operations was $968,000 for the nine months ended March 31, 1999.
Cash used in investing activities was $2,404,000. This was primarily due to
funds needed to consummate the acquisitions of Advanced Materials and
Technologies, n.v and Wire Solutions, Inc. The Company consummated the purchase
of Advanced Materials and Technologies, N. V. of Herk-de-Stad, Belgium ("AMT")
on October 30, 1998. The terms of the transaction included a cash payment of
$1.3 million and 675,000 shares of Memry Corporation common stock. In addition,
Memry may be obligated to pay up to an additional $1.05 million in cash if,
twelve months from the closing date, the value of the Memry shares is below
$5.55 per share. The Company believes that the revenue generated by AMT for
consolidation on Memry Corporation's financial statements will approximate $1.5
million in fiscal 1999. The Company consummated the purchase of Wire Solutions,
Inc, on March 19, 1999. The terms of the transaction included a cash payment of
$235,000 and 62,500 shares of Memry Corporation common stock. The Company
believes that the revenue generated by Wire Solutions for consolidation on Memry
Corporation's financial statement will approximate $150,000 for fiscal 1999.
During the nine months ended March 31, 1999 cash provided by financing
activities consisted of increased bank borrowings needed to finance the Wire
Solution's acquisition and fund working capital of $1,242,000. Working capital
at March 31, 1999 was $4,756,000, down from $5,295,000 at June 30, 1998.
On June 30, 1998, the Company and Webster Bank entered into a Commercial
Revolving Loan, Term Loan, Line of Credit and Security Agreement and related
financing documents and agreements (the "Webster Facility"). Upon entering into
the Webster Facility, the Company paid off all amounts outstanding under its
prior credit facility with First Union National Bank. The Webster Facility
includes a revolving loan, an equipment loan line of credit and a $500,000 term
loan. The term loan is to be repaid in equal monthly installments of principal
over its five year term. The revolving loan provides for borrowings up to the
lesser of (a) $3,000,000 or (b) an amount equal to the aggregate of (1) 80% of
eligible accounts receivable and (2) the lesser of $750,000 or 35% of eligible
inventory. The revolving loan requires the payment of a commitment fee equal to
.25% per annum of the daily unused portion of the revolving loan. The equipment
loan line of credit provides for equipment
11
<PAGE>
financing up to the lesser of $750,000 or 75% of the purchase price for eligible
equipment each year through June 30, 2001. The Company has the option of
converting amounts borrowed under the equipment line of credit to term loans on
July 1, 1999, 2000, and 2001. At March 31, 1999 an aggregate of approximately
$872,000 was outstanding under the Webster Facility. The Webster Facility is
secured by substantially all of the Company's assets. Interest on the revolving
loan and equipment line of credit is variable based on either LIBOR or the Prime
Rate as published in the Wall Street Journal, as elected by the Company.
Interest on the term loan and converted equipment loans is either fixed, at a
rate based on the U.S. Treasury yield, or variable based on the Prime Rate, as
elected by the Company. The Company has the ability to convert between the
different rates from time to time subject to certain conditions. In addition,
the credit facility contains various restrictive covenants, including, among
others, limitations on encumbrances and additional debt, prohibition on the
payment of dividends or redemption of stock (except in connection with certain
existing put rights), restrictions on management/ownership changes and required
compliance with specified financial ratios.
The Company has in the past grown through acquisitions (including the
acquisition of Wire Solutions, AMT and Raychem Corporation's nickel titanium
product line). 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 and
authorized but unissued common stock to finance any such acquisitions. The
Company does not currently, however, contemplate any additional material
acquisitions for fiscal 1999.
The Company has spent approximately $1.1 million on capital equipment through
the nine months ended March 31, 1999. The Company intends to spend approximately
$400,000 on capital equipment during the fourth quarter of fiscal 1999 in order
to handle its expected continuing increased sales volume. The Company expects
that it will be able to pay for these expenditures out of cash flow generated
from its sale of products during the fourth quarter of fiscal 1999.
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
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 (provided, however, that assets, revenues, employees, operations and
bank accounts attributable to any entity acquired by the Company shall not be
considered when determining if the Company has satisfied such requirements so
long as such entity (1) was acquired in an arm's length transaction, (2) was not
an affiliate of the Company and was not controlled by an affiliate of the
Company prior to such acquisition, and (3) had been in existence and operating
as a business for at least one year at the time of the acquisition); 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 2,123,463 shares beneficially owned at such time by CII)
of the Company's common stock, in effect for an aggregate of 120 days during any
rolling twelve month period during the three years which the Company is required
to maintain the effectiveness of the Registration Statement. Upon CII's exercise
of its put, the Company shall be obligated to purchase from CII all the
Company's Common Stock then owned by CII and underlying warrants then owned by
CII at a price equal to the greater of the then current market price of the
Company's common stock or $2.00 per share, less, in either event, the aggregate
amount of unpaid exercise prices of all warrants put to the Company. Using $2.00
per share, which was the approximate market price at May 7, 1999, as the put
price per share, the aggregate put price that would have to be paid by the
Company if the put were exercised would be approximately $4.3 million. To the
extent that the current market value of the Company's common stock exceeds $2.00
per share at any time, the put price would be greater. If CII were to have the
right to put its securities and were to choose to exercise that right, it would
have a serious adverse effect on the Company's liquidity and the Company would
most likely have to seek equity financing to be able to meet its obligations to
CII. However, the Company believes that it has the ability to insure that its
operations do not move from
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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 working capital surplus, its
improved borrowing facility, its ability to raise equity capital in the past and
anticipated net profits from operations during fiscal 1999 and thereafter will
be sufficient to meet the Company's capital requirements for the foreseeable
future.
YEAR 2000 ISSUE
The "Year 2000 Issue" results from computer programs being written using two
digits, instead of four, to define a given year. Programs running time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000, which could result in disruptions to various activities and operations,
miscalculations and even system failures.
The Company has recently upgraded all of its internal computer systems such that
the Company believes all of such internal systems are Year 2000 compliant. The
Company has recently begun (i) to formally test such new systems, (ii) to
commence an investigation regarding the Year 2000 readiness of its other
equipment, and (iii) to inquire of its suppliers and customers as to whether the
Year 2000 Issue will create substantial risks or disruption. The Company
believes that the cost of undertaking such an investigation and developing and
effecting such a plan will be less than $50,000. The Company has not reserved
funds for such costs and, therefore, such costs, if expended, will have a direct
negative impact on the Company's future income.
13
<PAGE>
The Company plans to complete such investigation and effect its plans to correct
any deficiencies before the end of fiscal 1999. As part of the Company's Year
2000 investigation, the Company plans to seek third-party confirmations with
respect to such third-party's computers, software and systems. The Company also
plans to review all of its equipment (other than its recently upgraded computer
systems) to determine what, if any, Year 2000 concerns exist and then to address
any material concerns. Based upon preliminary data, the Company does not
believe that the Year 2000 Issue will have a material adverse impact on the
Company's financial condition, results of operation or future cash flows. If,
however, the Company determines through its investigation that its suppliers,
customers and other third parties with whom the Company maintains business
relations will be unable to resolve any arising Year 2000 problems in a timely
manner, risk to the Company's financial condition could result. In addition, in
the event that the economy as a whole is materially and adversely effected by
widespread disruptions, or by failures of key infrastructure providers (such as
banks and utilities), it is likely that the Company's financial condition and
results of operations would be materially adversely effected.
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 subsidiaries 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 19, 1999, the Company issued 62,500 shares of its common stock to Wire
Solutions, Inc. as part of the consideration (along with cash) paid to such
entity in exchange for substantially all of the operating assets of Wire
Solutions, Inc. The Company believes that the offer and sale of its stock to
Wire Solutions Inc. was exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), by virtue of Section
4(2) thereof.
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Description of Exhibits
- ------ -----------------------
27 Financial Data Schedule*
(6) Reports on Form 8-K
On November 12, 1998, the Company filed a Current Report on Form 8-K reporting
the acquisition of the capital stock of AMT described elsewhere herein. On
January 15, 1999, the Company filed an amendment to such Current Report on Form
8-K providing historical financial information regarding AMT's assets and
operations and pro forma financial information showing how the Company's actual
assets and operations would have been effected by the assets and operations of
AMT as at certain dates and for certain periods.
*Filed separately herewith.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by undersigned, thereunto duly
authorized.
Memry Corporation
Date: May 11, 1999 /s/ James G.Binch
- ------------------- -----------------
James G. Binch
President, CEO, Treasurer and Chairman
of the Board
Date: May 11, 1999 /s/ Thomas D. Carey
- ------------------- --------------------
Thomas D. Carey
Chief Financial Officer
16
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<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
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