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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: June 30, 2000
Commission file number 0-14068
Memry Corporation
(Name of small business issuer in its charter)
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Delaware 06-1084424
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
57 Commerce Drive, Brookfield, CT 06804
(Address of principal executive offices) (Zip Code)
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Issuer's telephone number (203) 740-7311
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
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Common Stock, par value $.01 per share American Stock Exchange
Securities registered under Section 12(g) of the Exchange Act: None
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 [ ]
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Consolidated revenues of the issuer for the fiscal year ended June 30, 2000
were $26,996,000.
The aggregate market value of voting stock held by non-affiliates of the
registrant was approximately $38.4 million on September 25, 2000 based upon the
closing trade price on that date. The number of shares of Common Stock
outstanding as of September 25, 2000 was 21,157,537.
Documents Incorporated by Reference:
The registrant's Proxy Statement for its Annual Meeting of Stockholders to be
held in November, 2000, is incorporated by reference into Part III of this
Annual Report on Form 10-KSB.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x]
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ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
Memry Corporation (referred to herein as "Memry" or the "Company"), a Delaware
corporation incorporated in 1981, is an advanced materials company engaged in
the business of developing, manufacturing and marketing semi-finished materials,
formed components, and value-added sub-assembled products utilizing the
properties exhibited by shape memory alloys, primarily those composed of Nickel
Titanium ("nitinol"). The Company also provides engineering services to assist
customers in the development of products based on the properties of shape memory
alloys. The Company sells its products and services primarily to the medical
device, telecommunications, aerospace and automotive industries.
The Company conducts its operations from its three operating facilities
located in Brookfield, Connecticut, Menlo Park, California and Herk-de-Stad,
Belgium. The Company acquired its Menlo Park, California operations and certain
assets therein from Raychem Corporation ("Raychem") in June 1996 and its
Herk-de-Stad, Belgium operations and the assets thereof when it purchased all of
the stock of Advanced Materials and Technologies, N.V. in October, 1998. The
Company's principal executive offices are located at 57 Commerce Drive,
Brookfield, Connecticut 06804, and its telephone number at such address is (203)
740-7311.
TECHNOLOGY
Shape memory alloys ("SMAs") are advanced materials which possess the ability
to change their shape in response to thermal and mechanical changes, and the
ability to return to their original shape following deformations from which
conventional materials cannot recover. These abilities result from the
transformation of the crystalline structure of the SMA in reaction to thermal
and mechanical changes. As a result of the crystalline structure changes, SMAs
are also able to produce forces many times greater than those produced by
conventional materials.
The major defining properties of the SMAs with which the Company works are
"superelasticity" and "thermal shape memory." The mechanical properties that can
be engineered into nitinol-based devices permit innovative product designs that
presently would be difficult or impossible to replicate with other materials.
Unlike ordinary metal, certain SMAs are capable of fully recovering their shape
after being deformed as much as six to eight percent, and of performing this
recovery on a repeated basis. This is more than ten times the recovery ability
of ordinary metals. This "superelasticity" feature has applications for surgical
instruments and devices, orthodontic apparatus, cellular telephone antennae, and
other devices. Thermal recovery applications typically involve instances where a
device is controlled or actuated in response to a pre-determined thermal change.
Examples of such uses include heat activated coupling or sealing devices, valve
actuation systems, and thermally-actuated mechanical systems. The majority of
today's commercial applications involve the use of the materials' "superelastic"
properties.
MARKETS
Medical Device Industry. Although the Company has expertise in a variety of
shape memory alloys, the Company utilizes primarily the superelastic
characteristic of nitinol for medical device applications. The value of
nitinol's superelastic characteristics in the medical device sector is its
ability to provide ease of access and delivery of sophisticated medical devices.
In addition, nitinol is kink resistant, exerts a constancy of force, is
biocompatible (non-toxic) and is non-ferromagnetic, thereby allowing the use of
magnetic resonance imaging (MRI) on patients with nitinol-based implants.
Because of these unique characteristics, nitinol is becoming integral to the
design of a variety of new medical products, notably for peripheral vascular and
non-vascular stents, guidewires and catheters.
Guidewires and/or catheters, in this context, refer to tubes or wires inserted
into a vessel for diagnostic or therapeutic purposes. The guidewires and/or
catheters can be used in the delivery of medical devices, drugs or stents.
Because of the superelastic characteristic, together with other attributes of
nitinol described above, nitinol is replacing stainless steel as the material of
choice in many of these instruments.
Stents are small tubes that hold open arteries, veins and other passageways in
the body that have become obstructed as a result of disease, trauma or aging.
Stents are placed in the body using catheter-based delivery systems in minimally
invasive procedures. Once deployed, stents exert a radial force against the
walls of the vessel to enable
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these passageways to remain open and functional. A number of different stent
designs, materials and delivery systems, with varying characteristics, are
currently available. The three most prevalent stent designs are lattice tubes
made via laser cutting, coiled stents and wire mesh stents. Stents, especially
those used in the treatment of coronary artery disease, have emerged as one of
the fastest growing segments of the medical device market. Stents are used
increasingly as adjuncts or alternatives to a variety of medical procedures
because it is believed they are beneficial to overall patient outcome and may,
over time, reduce total treatment costs. From its infancy in 1990, the stent
market has grown to estimated worldwide sales of approximately $2.5 billion in
2000.
Approximately 85% of the coronary stents currently manufactured are stainless
steel and require deployment through the expansion of a balloon on a catheter-
based delivery system with a second balloon frequently used to further expand
the stent. However, the vast majority of stents currently in clinical
development for peripheral applications, such as abdominal aortic aneuryism
stent grafts and carotid, vascular and illiac stents, employ nitinol. The
physical properties of nitinol allow placement of stents manufactured with this
metal to be self-expanding and avoid balloon occlusion of the vessel during
placement.
Memry currently produces both the wire and tubing that is used to fabricate
guidewires, catheters and stents, and increasingly provides completed stent
structures to medical device companies, as well as other surgical and diagnostic
instrument assemblies. In fiscal 2000, sales to medical device companies
accounted for approximately 70% of revenue.
Non-Medical Markets. The non-medical industry sectors served by the Company
include primarily the telecommunications, aerospace/defense and automotive
industries. While the success of nitinol products in the medical device industry
is typically derived from the superelastic characteristics of nitinol,
applications in these industrial sectors employ both the superelastic and the
shape memory characteristics of nitinol. Although the development cycles in
these industries, particularly aerospace/defense and automotive, are longer than
those of the medical device sector, once the product is adopted it typically
provides for larger volume demand, is more easily leveraged into other
customers, and does not suffer from strict regulatory requirements.
Examples of such products the Company currently provides to these markets
include sealing devices, actuators, fasteners and cellular phone antennae. Memry
currently sells heat actuated sealing devices used in diesel engine fuel
injection systems to maintain air pressure. Fasteners are products that also
employ the characteristics of shape memory to hold or couple two pieces of wire
and/or metal together. A superelastic nitinol wire is sold as the element wire
in retractable antennae for portable cellular telephones. It has superior
durability and quickly recovers its straight shape when bending stresses are
removed. The superelasticity effect helps to avoid kinking and deformation. Most
recently the Company has begun shipping formed, superelastic nitinol wires for
undergarment support. Non-medical sector sales accounted for approximately 30%
of fiscal 2000 revenues.
OPERATIONS
The Company conducts its business through three manufacturing locations. The
California facility consisting of most of the business acquired from Raychem
(the "Raychem Acquisition") in June, 1996, the Brookfield facility which prior
to the Raychem Acquisition constituted the Company's entire SMA business, and
the Belgian facility, comprised of the Belgian corporation formerly known as
Advanced Materials and Technologies, N.V., which was acquired by Memry in
October, 1998.
United States. On June 28, 1996, the Company acquired Raychem's nickel-
titanium product line. This business utilized inventory, leasehold improvements,
machinery and equipment and patent and other intellectual property rights to
manufacture and sell SMAs primarily composed of nitinol. Prior to the Raychem
Acquisition, Raychem was both a supplier of nickel-titanium SMAs to the Company
and a competitor in certain markets (particularly in the medical market for
formed, non-implant components). The acquired business differed from the SMA
business of the Company, however, in that where the Company had historically
specialized in the manufacture of finished products and formed components,
Raychem specialized more in the manufacture of semi-finished materials used by
original equipment manufacturers ("OEMs"). Not surprisingly, therefore, the
point at which Memry and Raychem most competed was at the level of formed
component sales to OEMs, particularly in the medical products industry. The
leased facility, inventory, machinery and equipment, leasehold improvements and
know-how purchased from Raychem now constitute Memry's western facility, except
that Raychem's operations
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relating to the finishing of materials into sub-assembled products for sales to
United States Surgical Corporation were relocated to Memry's eastern facility in
December, 1996.
Located in Menlo Park, California, the western facility produces semi-finished
SMAs in three basic forms: wire, strip and tube. This facility also provides
added value to its tubular product through laser processing, shape setting and
polishing procedures resulting in the delivery of finished stent components, as
well as certain other value-added activities.
Memry's Connecticut manufacturing operations, located in the same facility as
the Company's corporate headquarters in Brookfield, Connecticut, are engaged in
the production of formed components and of value-added sub-assemblies,
predominantly based on wire and strip-based SMAs. In 1999, the eastern operatons
became involved in the fabrication and supply of microcoil and guidewire
components utilized in medical procedures through the Company's acquisition of
the assets of Wire Solutions, Inc. of Wrentham, MA in March, 1999. These assets
have been integrated with the Company's eastern facility.
Europe. On October 31, 1998, the Company acquired all of the outstanding
shares of Advanced Materials and Technologies, N.V. ("AMT"), located in Herk-de-
Stad, Belgium. Founded in 1989, AMT, now renamed Memry Europe, n.v., specializes
in the development and supply of both Nickel Titanium and other shape memory
alloy semi-finished products, principally wire products used in the same general
markets served by the Company's U.S. operations. In addition, AMT has conducted
a substantial amount of European Union-funded and Belgian-funded development
programs to advance knowledge of and applications for shape memory alloys.
Memry's European operation is now the Company's worldwide manufacturing center
for thermal shape recovery actuators, consolidating the Company's efforts in
this product application area.
PRODUCTS AND SERVICES
Engineering Services. Memry is engaged in sponsored development projects in
which the Company designs, manufactures and sells prototype components and
products to customers. Memry is currently working on a number of programs to
develop SMA components for OEM customer's products. The Company will accept
customer-sponsored development contracts when management believes that the
customer is likely to order a successfully developed component or product in
sufficient quantity to justify the allocation of the engineering resources
necessary. Generally under such programs, the identity of the customer is
confidential; the data, inventions, patents and intellectual property rights
which specifically relate to the SMA component are either owned by the customer,
or, in several instances, shared between the Company and the customer; and data,
inventions, patents, and intellectual property rights pertaining to the SMA
technology that do not specifically relate to the customer's product are owned
by the Company.
Semi-Finished Materials. Raw nitinol material from specialty alloy suppliers
is processed into various shapes and sizes and referred to as "semi-finished"
materials. These materials, characterized generally as wire, strip or tubing,
are sold to customers in standard configurations, processed further to meet
specific customer specifications, or serve as the starting material for the
formed components produced by the Company.
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Wire. Memry's nitinol wire products are sold as standard products,
available in a variety of sizes, and produced in non-standard sizes, to meet
specific customer requirements, and are used as the precursor to a formed
component. Memry produces wire with a diameter ranging from .004 to .250
inches. In addition, the Company may apply a variety of finishing techniques,
depending on customer specifications, including such steps as polishing or
coating. Applications for the Company's wire products include cellular phone
antennae, guidewires, endodontic files and needles, and undergarment support
wires.
Strip. The Company's nitinol strip is sold in standard dimensions, as
well as custom sizes as specified by the customer. Memry produces strip with a
thickness ranging from .001 to .01 inches and a width ranging from five to
twenty times the thickness. The majority of the strip product, however, serves
as the starting material for formed components made by Memry. Example
applications include the strip sold to OEMs for wrapping around catheters for
reinforcement of drainage catheters and biopsy forceps.
Tube. Nitinol tubing, or micro-tubing as it is sometimes called, is
likewise sold in standard or customized sizes. Memry produces tubes with an
outside diameter ranging from .012 to .205 inches and an outside diameter to
internal diameter ratio from 1.15 to 1.70. Tubes are typically used in
applications requiring flexible shafts, pushability and torqueability.
Examples of such applications include stents, catheters, delivery guides,
needles, MRI instruments and surgical instruments.
Formed Components. Formed components are typically non-standard products.
Formed components are made by taking the semi-finished materials and further
processing by bending, kinking, stamping, crimping, laser cutting,
electropolishing, etc., into specific forms as specified by customers. Examples
of applications for formed components include the bending or arching of wire for
use as orthodontic braces, helical and strip actuators, micro coils, patented
locking rings for electronic connectors, enabling components of medical
instruments (particularly stent structures), and sealing components.
Sub-Assemblies. Memry manufactures and sells value-added sub-assemblies to
OEMs, principally in the medical device field. This comprises taking the semi-
finished materials and/or formed components produced by Memry and combining or
assembling them with other products that have been outsourced by Memry to form a
larger component or "sub-assembly" of the OEMs' finished product. Memry combines
its SMA expertise with additional manufacturing and process knowledge and third-
party supply chain management to cost-effectively produce a sub-assembled
product for OEMs. The single largest portion of Memry's eastern business is
selling assemblies and components to United States Surgical ("USS"), a division
of Tyco Medical and other medical industry OEMs. The primary item sold by Memry
to USS is an SMA sub-assembly used by USS for endoscopic instruments. The use of
superelastic SMAs allows the instruments to be constrained outside the body,
inserted into the body in its constrained form through small passages, to then
take a different shape while inside the body, and then to return to its
constrained shape for removal.
Finished Products. Memry also manufactures, sells and markets limited
quantities of proprietary finished products, all sourced from Memry's eastern
facility. These products include the FIRECHECK(R) line of industrial fire safety
valves. The Company does not believe that sales of finished products will be
material to the Company's operations in the foreseeable future.
STRATEGY
The Company's strategy has three components: to further Memry's leadership
position in the provision and processing of SMAs; to expand vertically in the
medical device industry by providing additional engineering, component and sub-
assembly services; and to leverage the Company's strong customer base by
offering additional complementary advanced material technology expertise and
products.
Shape Memory Alloys. Memry's core business remains focused on its expertise in
shape memory alloys, specifically nitinol, with the objective of sustaining
growth in both the medical and non-medical markets. Because of the innovative
nature of the medical device industry, however, the Company has found the return
on invested development resources to be most attractive in the medical device
sector. The Company therefore focuses the majority of its engineering and
manufacturing expertise on the development of products for the medical device
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markets, where the properties provided by SMAs provide significant performance
advantages or, in many cases, represent the enabling component of the medical
device.
In cases where non-medical customers support the engineering and process
development expense and there is strategic interest on the part of Memry,
however, the Company will also undertake the development of non-medical
applications. In addition, the Company has in the past applied, and anticipates
in the future to apply, advancements made in the development of medical devices
to applications in the lower margin, higher volume non-medical sectors where
customers are not supporting development activities.
In order to continue to advance the Company's leadership position in SMAs the
Company is implementing the following initiatives:
Continued Advancements in Processing Expertise and Quality Assurance.
Nitinol is a non-linear material, which makes it a very difficult material to
process. Memry believes that one of its competitive advantages is its ability
to effectively process this material. One of these processes is the production
of tubes used primarily in the production of stents. The Company believes that
this process, proprietary to the Company, will provide Memry with an advantage
over competitors with regard to product quality and cost when it is fully
implemented. Memry has underway a number of process enhancement initiatives
designed to enhance both the current manufacturing processes and Memry's
competitive position. Because many of the materials produced by Memry are used
in medical devices, the product quality requirements placed on Memry by its
customers are high. Both of Memry's U.S. manufacturing facilities are ISO 9001
certified.
Increase in Manufacturing Capacity. To meet growing demand, particularly
in the medical device market for the production of nitinol stents, the Company
has committed to optimizing the manufacturing efficiency of its current
facilities and expects to invest between $2.0 million and $3.0 million in
capital equipment and facility improvements in fiscal 2001.
Restructuring of Manufacturing Operations. To accommodate the growing
capacity requirements of the Company's core medical OEM customer business, the
Company will continue to reallocate certain manufacturing activities,
including coordinating all critical technology development from the
corporation's new Office of Technology, based in Connecticut.
Vertical Integration. The medical device industry has been undergoing
significant change over the last few years. As part of that change, many of the
larger participants have recognized that their competitive differentiation comes
from two key elements: device design and product marketing. These are the core
competencies in which successful medical device companies excel and on which
many medical device companies are focusing their resources. As a result,
industry participants are looking to outsource to other companies with
specialized expertise some of the other essential parts of the business,
especially engineering incorporating advanced material technologies and
manufacturing processes. These factors have resulted in an increasing
outsourcing trend in the medical device industry, impacting the full breadth of
the manufacturing cycle from starting material engineering to final product
assembly. The market drivers for the outsourcing trend include:
Increased Competitive Pressures. Increased penetration by managed care
companies and a continued focus on the cost of publicly sponsored healthcare
programs, such as Medicare and Medicaid, have resulted in increasing pressure
for lower priced procedures. This pricing pressure is forcing medical device
companies to reduce their manufacturing costs in order to maintain margins.
Need to Shorten Device Development Cycles. To shorten the time required
to market a new product, medical device companies are seeking to outsource
certain supply responsibilities to third parties that are able to quickly
develop cost effective solutions to engineering and manufacturing issues.
Efficient Use of Resources. Many medical device companies are
reevaluating their business models with a focus on device design and sales and
marketing. As a result, medical device companies are increasingly outsourcing
many of the activities that traditionally were performed in-house, including
various aspects of the engineering, prototyping and pre-production processes,
as well as the manufacturing, of finished products and/or sub-assemblies
thereof.
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Memry recognizes these changes in the medical device industry and believes that
it can address this market opportunity. By combining a strong advanced materials
technological capability to assist medical device companies with engineering
skills that address issues involving the characteristics of SMAs, as well as
developing cost effective, high quality manufacturing processes and supply chain
relationships, Memry believes that it can alleviate these issues for its OEM
customers.
In order to expand on this "fully-integrated" service concept, the Company has
implemented the following:
Increase in Engineering Service Capabilities. Memry possesses significant
expertise in the characterization and performance of various SMAs. This
expertise is often critical in the design of medical devices. Although Memry
has in the past actively participated in the design of OEM customer products,
the Company has begun a program to clearly characterize and communicate to
customers both the Company's capabilities and the terms and conditions under
which the Company will contract to assist existing and potential customers
through these services.
Processing of Additional Formed Components. As part of the Company's
vertical integration strategy, the Company believes there exist additional
opportunities in the market to process semi-finished materials into formed
components in preparation for either further sub-assembly or direct sale to
OEM customers. This value-added business represents significant increased
margin opportunity and is often difficult for end-users to perform given the
intricacy of processing nitinol. Memry believes that in the past, lack of both
capital resources and sufficient personnel possessing the requisite skills has
hindered Memry's ability to capture this business. Memry has during fiscal
2000 and will continue to identify, develop and market those formed component
capabilities it believes most promising in order to expand this sector of its
business.
MARKETING AND SALES
Sales to Raychem. In connection with the Raychem Acquisition, Memry and
Raychem entered into a Private Label/Distribution Agreement pursuant to which
Raychem was made Memry's exclusive distributor for the acquired product line in
certain specified fields of use for an initial term of five years (the "Private
Label/Distribution Agreement"). Sales by the Company to certain customers,
including United States Surgical Corporation, were excluded from the scope of
this Agreement, as were any future sales for all medical implant and certain
consumer recreational applications. In February 2000, Memry and the Raychem
division of Tyco International entered into a Sales Agency Agreement in order to
replace the original agreement between the two parties. Under the revised
agreement, all medical applications are marketed and sold directly by Memry's
internal sales and marketing organization. At the same time, Memry retained
Raychem to be its exclusive sales agent for all industrial and commercial
applications served by the Company, including sales to the orthodentia and
endodentia markets. Unlike the former agreement, industrial and commercial sales
are now invoiced directly by Memry to the end customer. Customers for these
industrial and commercial products include cellular telephone antennae
manufacturers, who utilize the superelasticity of SMAs for a more durable
antennae, orthodontic manufacturers, who use SMA wire for braces, automotive
manufacturers, who use SMA plugs for high-pressure fuel injector sealant
devices, and industrial product manufacturers, who use SMAs for a wide variety
of other uses (including electronic connectors). In addition, Raychem purchases
some of Memry's components for its own use. Industrial and commercial sales
handled by Raychem under the agreement are reported as gross sales, with
commission due Raychem treated as ordinary sales expense.
Personnel. The Company currently has 11 sales and marketing personnel, of
which 6 operate primarily from headquarters, 3 operate primarily from
California, 1 operates primarily from Europe, and 1 is the manager for the
overall activity.
Material Customers. The Company's largest customers are Raychem and United
States Surgical, both purchased by Tyco International, accounting for
approximately 21% and 28% of the Corporation's total revenue in fiscal 2000, and
Medtronic, Inc., accounting for approximately 17% of the Corporation's total
revenue in fiscal 2000. No other customer accounted for more than 10% of total
revenue. Prior to February 2000, Memry and Raychem were party to the Private
Label/Distribution agreement whereby Raychem distributed the components it
purchased from Memry to over two hundred customers worldwide, thereby lessening
the risk that the loss of any one
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customer would have on Raychem's purchases from Memry. That agreement was
amended in February 2000, and under the amended agreement, medical applications
will be marketed and sold directly by Memry's internal sales and marketing
organization, and all sales, including industrial and commercial customers, will
be invoiced directly by Memry to the end customer.
SOURCES OF SUPPLY
The principal raw material used by the Company is SMAs. The Company obtains
its SMAs from two principal sources: Teledyne Wah Chang, of Albany, Oregon and
Special Metals Corporation, of New Hartford, New York. The Company expects to be
able to continue to acquire shape memory alloys in sufficient quantities for its
needs from these suppliers. In addition, if the Company was for whatever reason
not able to secure an adequate supply of SMAs from these suppliers, the Company
believes that other sources exist that would be able to supply the Company with
sufficient quantities of SMAs, although the Company could suffer some
transitional difficulties if it had to switch to such alternative sources.
While the Company also relies on outside suppliers for its non-SMA components
of sub-assembled products, the Company does not anticipate any difficulty in
continuing to obtain non-SMA raw materials and components necessary for the
continuation of the Company's business.
COMPETITION
The Company faces competition from other SMA processors, who compete with the
Company in the sale of semi-finished materials (i.e. mostly with the Company's
Californian and European operations) and formed components (i.e., with all of
Memry's operations). There are several major U.S., European and Japanese
companies engaged in the supply or use of SMAs, some of which have substantially
greater resources than the Company. Within the U.S., the two major SMA suppliers
to both the Company and the industry as a whole are Teledyne Wah Chang and
Special Metals Corporation. Each of these companies has substantially greater
resources than the Company and could determine that it wishes to compete with
the Company in the Company's markets. Special Metals has in fact become a
competitor of the Company for semi-finished wire and strip materials. Japanese
competitors include Furakawa Electric Co. and Daido, both of which produce SMAs
and sell to users in Japan and internationally. The principal European
competitors are Memometal, a private French company, Minitubes SA, a private
French Nitinol tube supplier, and G. Rau/EuroFlex, a German company with ties to
NDC (see below). Within North America, the Company believes that it is the
largest single processor of SMAs, accounting for approximately 35% of all SMA
consumption. The Company believes that Cordis/Johnson and Johnson, through its
subsidiary Nitinol Devices and Components Company (NDC), is the next largest,
followed by Shape Memory Alloy Applications, Inc.
The Company intends to compete, and advance its position, based upon its
direct worldwide medical sales activities, and its sales agency alliance with
Raychem Corporation, its proprietary intellectual property positions, its
knowledge of the processing parameters of the alloys, and unique design and
assembly capabilities, particularly in the medical device field. While price and
production capability are obviously important, the Company believes that it
competes principally on its technological capabilities.
PATENTS AND TRADEMARKS
As part of the Raychem Acquisition, the Company controls five U.S. patents, as
well as a variety of foreign patents and domestic and foreign patent
applications, relating primarily to the production and utilization of nickel-
titanium alloys having superelasticity and shape memory effect. While these
acquired patents in no way dominate the entire field of shape memory metals,
they do provide the Company with some competitive advantages in the covered
uses. In addition, notwithstanding the Company's acquisition of these patents
and patent applications as part of the Raychem Acquisition, under certain
circumstances the Company is required to license the acquired intellectual
property back to Raychem for specified uses. For example, (i) upon the
termination of the Company's Sales Agency Agreement with Raychem, Raychem will
have a non-exclusive perpetual license to utilize these patents to sell products
within specified fields of uses for a specified royalty, and (ii) Raychem has a
non-exclusive, transferable perpetual license to utilize these patents in
connection with certain intellectual property relating to the medical products
market that was not acquired by the Company as part of the Raychem Acquisition.
The Company believes that this latter license has been transferred to Medtronic,
Inc., a medical products manufacturer (and a
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customer of the Company), when Medtronic purchased this "excluded" (from the
Raychem Acquisition) intellectual property from Raychem during fiscal 1997. The
Company also has various other patents and trademarks which, while useful, are
not individually material to the Company's operations.
The Company's patent rights do not dominate the field of SMA utilization,
although the patents acquired from Raychem do dominate the use of nickel-
titanium alloys having a two-way shape memory effect, although not in the
medical instrument and in-body applications fields. The Company does not,
however, have specific patent protection for its most important present products
or product components. The Company's patent rights obviously do not dominate any
specific fields in which the Company sells products. The Company does believe,
however, that various patents provide it with advantages in the manufacture and
sale of different products, and that its know-how relating to various SMAs
provides the Company with a competitive advantage.
While a U.S. patent is presumed valid, the presumption of validity is not
conclusive, and the scope of a patent's claim coverage, even if valid, may be
less than needed to secure a significant market advantage. Gaining effective
market advantage through patents can require the expense, uncertainty and delay
of litigation. Although the Company's technical staff is generally familiar with
the SMA patent environment and has reviewed patent searches when considered
relevant, the Company has not requested any legal opinion to determine whether
any of its current or contemplated products would infringe any existing patents.
RESEARCH AND DEVELOPMENT
During fiscal 2000, the Company spent approximately $1,498,000 on "pure"
research and development (i.e., research and development done by the Company at
its own cost for purposes of developing future products). In comparison, the
Company spent approximately $1,013,000 during fiscal 1999 on "pure" research and
development. The Company anticipates modest increases in the amount of "pure"
research and development that it undertakes as the Company's growth continues.
In addition, the Company spent approximately $498,000 during fiscal 2000 on
"funded" research contributing to the development of SMA components pursuant to
customer and government-sponsored development arrangements. These "funded"
research and development costs are borne directly by the U.S. federal
government, the European Union, the Flemish regional government (Belgium) and
customers of the Company, as applicable, and, for purposes of the Company's
financial statements, are part of "costs of revenues," rather than research and
development. By comparison, the Company spent approximately $473,000 on "funded"
research and development in fiscal 1999, which amount was accounted for as
"costs of revenues". The amount of "funded" research and development that the
Company will undertake in the future will depend upon its customer's needs, but
the Company anticipates it increasing over time as the use of SMAs for various
purposes increases.
EMPLOYEES
As of June 30, 2000, the Company had 210 full-time employees and no part-time
employees. Of the full-time employees, 15 were executive or management personnel
and 25 were science and research personnel.
None of the employees are represented by collective bargaining units. The
Company believes that its relationship with its employees is generally good.
In addition, as of June 30, 2000, the Company had approximately 30 "temporary"
employees (i.e., employees of temporary manpower companies) working for the
Company.
ITEM 2. DESCRIPTION OF PROPERTY
The Company has a lease, which was renewed as of September 30, 1995, for a
term to expire on February 1, 2001, for office and manufacturing space located
at 57 Commerce Drive, Brookfield, Connecticut 06804. The premises have a floor
area of approximately 24,350 square feet, of which approximately 6,500 square
feet is used by the Company for general administrative, executive, and sales
purposes, and approximately 17,850 square feet is used
8
<PAGE>
for engineering, manufacturing, research and development operations and an
environmentally controlled area ("clean room"). The lease provides for an
average monthly base rental of approximately $14,000.
On March 26, 1998, the Company, as sublessee, and Raychem, as sublessor,
amended the sublease relating to office and manufacturing space located at 4065
Campbell Avenue, Menlo Park, California 94025 to extend the term of such
sublease to September 30, 2001. These premises, formerly used by Raychem, are
the principal site of the Company's west coast operations. These premises have a
floor area of approximately 28,032 square feet, which is used by the Company for
manufacturing, warehousing, general administrative and research and development
operations. The lease originally provided for a monthly base rental of
approximately $20,740, which amount was raised in October of 1998 to
approximately $43,500 (which amount is presently in effect), due to an
adjustment for increases in the fair market value of the premises. To
accommodate growth in the Company's medical device components business, on March
15, 2000, the Company subleased approximately 10,000 of additional light
manufacturing and office space at 4020 Campbell Avenue, Menlo Park, California.
The sublease is scheduled to expire on April 14, 2001 and provides for an
average monthly base rental of approximately $8,000.
On October 31, 1998, as part of its acquisition of AMT, the Company, through a
subsidiary, acquired a facility located at Daelemveld 1113, B-3540 Herk-de-Stad,
Belgium. Memry Europe owns approximately 27,600 square feet of land and a
manufacturing and office facility. The single building, in good condition,
consists of approximately 3,200 square feet of office space and 12,000 square
feet used for manufacturing, warehousing, and research and development. There is
an existing mortgage on the building and its assets of 10,000,000 BEF
(approximately $237,000).
Management believes that the existing facilities of the Company are suitable
and adequate for the Company's present needs and that the properties are
adequately covered by insurance. If the Company is going to be able to meet
projected growth requirements, it is likely that the Company will require
additional manufacturing and office space over the next several years. In
addition, the current leases on the Company's U.S. facilities are all scheduled
to expire in the next 13 months. Management is analyzing the facility
requirements and reviewing options to determine how to best meet these
requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, none of which are
believed to involve a claim for damages exceeding 10% of the current assets of
the Company. Although it is not feasible to predict the outcome of any such
proceedings, or any claims made against the Company, the Company does not
anticipate that the ultimate liability, if any, will materially affect the
Company's financial position, results of operation or liquidity/cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Effective July 13, 2000, The Company's Common Stock began trading on the
American Stock Exchange under the symbol MRY. During the period July 1, 1998
through June 30, 2000, the Company's Common Stock traded on the OTC Bulletin
Board under the symbol MRMY. On June 30, 2000, there were approximately 1,117
holders of record of the Company's Common Stock.
The following table sets forth the quarterly high and low closing prices for the
common stock as reported by the National Quotations Bureau. OTC Bulletin Board
prices are interdealer prices and may not represent actual transactions.
9
<PAGE>
Fiscal year ended
June 30 2000 1999
------- --------------- ---------------
High Low High Low
---- --- ---- ---
1st Quarter..........................$2.06 $1.69 $5.00 $3.42
2nd Quarter.......................... 2.00 1.25 3.88 2.44
3rd Quarter.......................... 3.31 1.75 3.19 1.53
4th Quarter.......................... 3.47 2.50 2.00 1.31
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 June 30, 1998 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Revenues. Revenues from continuing operations increased 42.9% for the fiscal
year ended June 30, 2000, to $26,996,000 from $18,886,000 for the fiscal year
ended June 30, 1999, a net increase of $8,110,000. The overall increase in
revenue was driven primarily by increased sales of the Company's products to the
medical device industry, particularly higher sales of components used in the
assembly of medical stents. Revenue from sales to the medical device industry
was approximately $19,000,000 in fiscal year 2000, an increase of approximately
$7,500,000 over fiscal year 1999 revenue. Revenues include $500,000 received in
June, 2000, from United Stenting, Inc. for assistance associated with the
development of United Stenting, Inc.'s proprietary Bilflex(TM) stent technology.
Approximately $875,000 of the total increase in revenue is attributable to the
acquisition of Memry Europe, which was acquired in October of 1998.
In August, 2000, the Company announced that one of its customers had temporarily
suspended orders for stent components. This suspension of orders is expected to
have a negative impact on revenue for the first half of fiscal 2001.
Costs and Expenses. Manufacturing costs increased from $11,135,000 in fiscal
1999 to $15,599,000 in fiscal 2000, an increase of $4,464,000, or 40.1%. Of this
increase, approximately $520,000 was attributable to the additional sales
contributed by the Memry Europe acquisition. The Company's gross margin from
sales increased to 40.4% in fiscal year 2000 from 38.5% in fiscal year 1999.
This increase was primarily attributable to the increase in sales of higher
margin stent components and other medical device components.
General, selling and administrative ("GSA") expenses increased to $8,695,000
in fiscal 2000 from $7,780,000 in fiscal 1999, an increase of $915,000 or 11.8%.
GSA in fiscal 1999 included a one-time charge of approximately $800,000 for
severance payments. The increase in GSA is primarily attributable to the 42.9%
increase in sales. Depreciation and amortization expenses decreased to $592,000
in fiscal 2000 from $595,000 in fiscal 1999, a decrease of $3,000. Other expense
increased from $27,000 in fiscal 1999 to $378,000 in fiscal 2000, an increase of
$351,000. The increase is primarily due to an increase in interest expense of
approximately $230,000 which is attributable to the higher level of borrowing
during the fiscal year ended June 30, 2000 as compared to the fiscal year ended
June 30, 1999.
Income Taxes. The provision for income taxes consists solely of currently
payable state taxes for the fiscal years ended June 30, 2000 and 1999. The
Company has significant operating loss carryforwards for federal income tax
purposes in which the Company utilized a portion of these carryforwards in
fiscal 2000.
Net Income/Loss. As a result of the Company's 42.9% increase in revenues,
along with the 40.1% increase in manufacturing costs and 11.8% increase in GSA
expenses, and a 136% increase in interest expense, the Company had net income of
$1,109,000 during fiscal 2000, as compared to a net loss of $1,349,000, during
fiscal 1999. The Company expects net income to increase in future fiscal years
as sales increase.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1999, the primary capital requirements were to fund acquisitions
and additions to property, plant, and equipment and to cover the Company's loss
from operations. In fiscal 2000, the primary capital requirements were to fund
additions to property, plant, and equipment. The Company has historically
satisfied its capital requirements from sales of equity securities and
borrowings. During fiscal 2000, net cash provided by operating activities was
approximately $2.4 million, net cash provided by financing activities was
approximately $2.2 million and net cash used by investing activities was
approximately $4.2 million. As a result of the foregoing, the Company held cash
and cash equivalents at June 30, 2000 of $1,534,000, an increase of $343,000
from $1,191,000 at the close of fiscal 1999. The Company had positive working
capital (current assets less current liabilities) of approximately $1,068,000 at
the close of fiscal 2000, compared to positive working capital of approximately
$403,000 at the end of fiscal 1999.
Under the terms of the transaction whereby the Company purchased Memry Europe,
the Company was obligated to pay an additional $1,046,000 in cash to the
shareholders of Memry Europe on October 30, 1999. On September 16, 1999, the
Company signed an agreement to convert approximately $455,000 of the obligation
to a term loan which matured and was consequently paid on June 30, 2000. On
October 29, 1999, the Company paid approximately $258,000 to other former
shareholders of Memry Europe. On December 17, 1999, the Company signed an
agreement with the holder of approximately $333,000 of such obligation to
convert the obligation to a combination of common stock and warrants.
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
(prior to the amendment described below) included 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 provided 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 $1,000,000 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 financing up to the lesser of $750,000 or 75% of the purchase price
for eligible equipment each year through June 30, 2001. On June 30, 2000, the
Company converted $1,250,000 from the equipment line of credit into a term loan.
The Company has the remaining option of converting amounts borrowed under the
equipment line of credit to term loans on July 1, 2001.
On November 30, 1999, the Company and Webster Bank reached agreement on an
amendment to the Webster Facility. Under the terms of the agreement, the
revolving loan now provides for borrowings up to the lesser of (a) $5,000,000 or
(b) an amount equal to the aggregate of (1) 80% of eligible accounts receivable
and (2) the lesser of $1,000,000 or 35% of eligible inventory. The equipment
loan is amended to provide for equipment financing up to the lesser of
$1,250,000 or 75% of the purchase price for eligible equipment each year through
June 30, 2001. A new term loan in the amount of $1,000,000 was provided with the
requirement that not less than $500,000 of the term loan will be used to finance
new machinery and equipment purchases. The Company has since satisfied said
requirement. The other major provisions of the agreement remain unchanged. At
June 30, 2000, an aggregate amount of approximately $5,289,000 was outstanding
under the Webster Facility. The Webster Facility is secured by substantially all
of the Company's domestic 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.
11
<PAGE>
Memry Europe has a primary banking relationship with KBC Bank and Insurance
Group of Belgium. As of June 30, 2000, an aggregate of approximately $275,000
was outstanding with KBC in short-term and long-term debt.
The Company has in the past grown through acquisitions (including the
acquisition of Wire Solutions, Memry Europe 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 material
acquisitions for fiscal 2001.
The Company plans to spend between $2.0 and $3.0 million on capital expenditures
during the fiscal year ending June 30, 2001, in order to handle its expected
increased sales volume of SMA and superelastic materials. The Company expects
that it will be able to pay for these expenditures through a combination of cash
flow generated through operations, increased borrowings, and sale of stock.
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 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). 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 $3.31
per share, which was approximately the market price for the Company's common
stock on June 30, 2000, 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 $8.1 million. To the extent that the current market value of the
Company's common stock exceeds $3.31 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
Connecticut in a manner that would trigger CII's put.
In addition to funding normal operations, it is likely the Company will be
required to secure new facilities to house its east coast and west coast
operations during fiscal year 2001 and fiscal year 2002. The cost of these
moves and associated relocation expenses may be substantial, however the Company
believes that the combination of its borrowing facility, its ability to raise
equity capital, and what it believes will be material net profits from
operations during fiscal year 2001 and fiscal year 2002 will be sufficient to
meet the Company's total capital requirements.
NEW ACCOUNTING PRONOUNCEMENTS AND INTERPRETATIONS
In December 1999 the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements". SAB No. 101 summarizes some of the staff's interpretations of the
application of generally accepted accounting principles to revenue recognition.
The Company will adopt
12
<PAGE>
SAB No. 101 when required in the fourth quarter of fiscal year 2001. Management
believes the adoption of SAB No. 101 will not have a significant effect on its
financial statements.
EURO CONVERSION
The Company conducts business in multiple currencies, including the currencies
of various European countries in the European Union which began participating in
the single European currency by adopting the Euro as their common currency as of
January 1, 1999. During the period January 1, 1999 to January 1, 2002, the
existing currencies of the member countries will remain legal tender and
customers and vendors of the Company may continue to use these currencies when
conducting business. Currency rates during this period, however, will no longer
be computed from one legacy currency to another but instead will first be
converted into the Euro. The Company continues to evaluate the Euro conversion
and the impact on its business, both strategically and operationally. At this
time, the conversion to the Euro has not had, nor is expected to have, a
material adverse effect on the financial condition or results of operations of
the Company.
FORWARD-LOOKING INFORMATION
The statements in this Annual Report on Form 10-KSB 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 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 judgment 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 7. FINANCIAL STATEMENTS
The consolidated financial statements of the Company and the report of
independent certified public accountants thereon are set forth on pages F-1
through F-21 hereof.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT............................... F-1
FINANCIAL STATEMENTS
Consolidated balance sheets............................. F-2
Consolidated statements of operations................... F-3
Consolidated statements of stockholders' equity......... F-4
Consolidated statements of cash flows................... F-5
Notes to consolidated financial statements.............. F-7
</TABLE>
13
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
Memry Corporation and Subsidiaries
Brookfield, Connecticut
We have audited the accompanying consolidated balance sheets of Memry
Corporation and subsidiaries as of June 30, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Memry Corporation
and subsidiaries as of June 30, 2000 and 1999, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/S/ McGLADREY & PULLEN, LLP
New Haven, Connecticut
August 8, 2000
F-1
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
-----------------------------------
ASSETS (Note 5)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,534,000 $ 1,191,000
Accounts receivable, less allowance for doubtful accounts $166,000 in
2000 and $118,000 in 1999 (Note 7) 4,192,000 2,238,000
Inventories (Note 3) 3,700,000 3,182,000
Prepaid expenses and other current assets 36,000 21,000
Income taxes receivable - 89,000
-----------------------------------
Total Current Assets 9,462,000 6,721,000
-----------------------------------
Property, Plant and Equipment, net (Notes 4 and 9) 7,504,000 5,316,000
-----------------------------------
Other Assets
Patents and patent rights, less accumulated amortization $598,000 in
2000 and $462,000 in 1999 1,466,000 1,605,000
Goodwill, less accumulated amortization of $646,000 in 2000
and $386,000 in 1999 3,823,000 4,465,000
Deferred financing costs 15,000 29,000
Deposits 273,000 46,000
-----------------------------------
5,577,000 6,145,000
-----------------------------------
$ 22,543,000 $ 18,182,000
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses (Note 13) 4,649,000 2,662,000
Notes payable (Note 5) 3,617,000 2,571,000
Current maturities of capital lease obligations (Note 9) 24,000 39,000
Acquisition liability (Note 2) - 1,046,000
Income taxes payable 104,000 -
-----------------------------------
Total Current Liabilities 8,394,000 6,318,000
-----------------------------------
Capital Lease Obligations, less current maturities (Note 9) 57,000 36,000
Notes Payable, less current maturities (Note 5) 1,992,000 862,000
-----------------------------------
2,049,000 898,000
-----------------------------------
Commitments and Contingencies (Notes 9 and 11)
Stockholders' Equity (Notes 5 and 6)
Common stock 211,000 208,000
Additional paid-in capital 44,386,000 43,832,000
Accumulated deficit (31,435,000) (32,544,000)
Accumulated other comprehensive loss (1,062,000) (530,000)
-----------------------------------
12,100,000 10,966,000
-----------------------------------
$ 22,543,000 $ 18,182,000
===================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
2000 1999
---------------------------------------------
<S> <C> <C>
Revenues
Product sales (Note 7) $ 26,064,000 $ 18,164,000
Research and Development 932,000 722,000
---------------------------------------------
26,996,000 18,886,000
---------------------------------------------
Cost of Revenues
Manufacturing (Note 8) 15,599,000 11,135,000
Research and development 498,000 473,000
---------------------------------------------
16,097,000 11,608,000
---------------------------------------------
Gross profit 10,899,000 7,278,000
---------------------------------------------
Operating Expenses
General, selling and administrative (Notes 9, 11 and 13) 8,695,000 7,780,000
Depreciation and amortization 592,000 595,000
---------------------------------------------
9,287,000 8,375,000
---------------------------------------------
Operating income (loss) 1,612,000 (1,097,000)
---------------------------------------------
Other Income (Expense)
Interest expense (Note 5) (401,000) (170,000)
Interest income 23,000 78,000
Other income - 65,000
---------------------------------------------
(378,000) (27,000)
---------------------------------------------
Income (loss) before income taxes 1,234,000 (1,124,000)
Provision for income taxes (Note 10) 125,000 225,000
---------------------------------------------
Net income $ 1,109,000 $ (1,349,000)
=============================================
Basic earnings (loss) per share $ 0.05 $ (0.07)
=============================================
Diluted earnings (loss) per share $ 0.05 $ (0.07)
=============================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Accumulated
--------------------- Additional Other Comp-
Shares Par Paid-in Accumulated rehensive
Issued Value Capital Deficit Loss Total
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998 19,949,169 $ 199,000 $ 41,121,000 $ (31,195,000) $ - $ 10,125,000
Issuance of common stock 877,164 9,000 2,711,000 - - 2,720,000
Comprehensive loss:
Net loss - - - (1,349,000) - (1,349,000)
Foreign currency
translation adjustments - - - - (530,000) (530,000)
------------
Total comprehensive loss - - - - - (1,879,000)
-------------------------------------------------------------------------------------------
Balance, June 30, 1999 20,826,333 208,000 43,832,000 (32,544,000) (530,000) 10,966,000
Issuance of common stock
and warrants 304,143 3,000 554,000 - - 557,000
Comprehensive income:
Net income - - - 1,109,000 - 1,109,000
Foreign currency
translation adjustments - - - - (532,000) (532,000)
------------
Total comprehensive income - - - - - 577,000
-------------------------------------------------------------------------------------------
Balance, June 30, 2000 21,130,476 $ 211,000 $ 44,386,000 $ (31,435,000) $ (1,062,000) $ 12,100,000
===========================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2000 and 1999
------------------------------------------------------------------------------------------------------------------------
2000 1999
----------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $ 1,109,000 $ (1,349,000)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Provision for loss on note receivable - 325,000
Depreciation and amortization 1,748,000 1,217,000
Gain (loss) on disposal of assets 6,000 (7,000)
Compensation paid by issuance of common stock 151,000 103,000
Warrants issued related to settlement of acquisition liability 39,000 -
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,998,000) 1,588,000
Increase in inventories (564,000) (683,000)
(Increase) decrease in prepaid expenses and other current assets (273,000) 30,000
(Increase) decrease in other assets (10,000) 56,000
Increase in income taxes payable/receivable 193,000 (89,000)
Increase in accounts payable and accrued expenses 2,049,000 133,000
----------------- ----------------
Net cash provided by operating activities 2,450,000 1,324,000
----------------- ----------------
Cash Flows from Investing Activities
Purchases of equipment (3,528,000) (1,632,000)
Cash paid related to settlement of acquisition liability (713,000) -
Purchase of AMT and Wire Solutions - (1,533,000)
Proceeds from sales of equipment - 310,000
----------------- ----------------
Net cash used in investing activities (4,241,000) (2,855,000)
----------------- ----------------
Cash Flows from Financing Activities
Proceeds from sale of common stock, net 34,000 133,000
Proceeds from notes payable 1,000,000 -
Net increase in revolving loans payable 1,817,000 2,288,000
Principal payments on notes payable (607,000) (304,000)
Principal payments on capital lease obligations (45,000) (35,000)
----------------- ----------------
Net cash provided by financing activities 2,199,000 2,082,000
----------------- ----------------
Effect of foreign currency exchange rate changes on cash and
cash equivalents (65,000) (549,000)
----------------- ----------------
Increase in cash and cash equivalents 343,000 2,000
Cash and cash equivalents, beginning of year 1,191,000 1,189,000
----------------- ----------------
Cash and cash equivalents, end of year $ 1,534,000 $ 1,191,000
================= ================
Supplemental Disclosures of Cash Flow Information
Cash payments for interest $ 374,000 $ 155,000
================= ================
Cash payments (refunds) for income taxes $ (68,000) $ 145,000
================= ================
</TABLE>
F-5
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
Years Ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
------------------------------------
<S> <C> <C>
Supplemental Schedule of Noncash Investing and Financing Activities
Acquisition of AMT:
Cash purchase price $ - $ 1,298,000
====================================
Fair value of assets acquired
Accounts receivable $ - $ 575,000
Notes receivable - 525,000
Inventory - 187,000
Goodwill - 3,743,000
Property and equipment - 2,012,000
Other - 22,000
------------------------------------
- 7,064,000
Less
Common stock issued - (2,363,000)
Acquisition liability - (1,046,000)
Liabilities assumed - (2,357,000)
------------------------------------
$ - $ 1,298,000
====================================
Acquisition of Wire Solutions, Inc.:
Cash purchase price $ - $ 235,000
====================================
Fair value of assets acquired
Accounts receivable $ - $ 26,000
Goodwill - 353,000
Property, plant and equipment - 1,000
------------------------------------
- 380,000
Less
Common stock issued - (121,000)
Liabilities assumed - (24,000)
------------------------------------
$ - $ 235,000
====================================
Common stock issued in connection with settlement of acquisition liability $ 333,000 $ -
====================================
Capital lease obligation incurred for equipment $ 61,000 $ 21,000
====================================
Conversion of revolving loans payable to equipment term loan $ 1,250,000 $ 668,000
====================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
--------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies
Nature of business
------------------
Memry Corporation, a Delaware corporation incorporated in 1981, is engaged in
the businesses of developing, manufacturing and marketing products and
components utilizing the properties exhibited by shape memory alloys. The
Company's sales are primarily to customers in the medical device industry
located throughout the United States and Europe. The Company extends credit to
its customers all on an unsecured basis on terms that it establishes for
individual customers.
Accounting estimates
--------------------
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Principles of consolidation
----------------------------
The financial statements include the accounts of Memry Corporation ("Memry") and
its wholly owned subsidiary, Memry Holdings, S.A. and its wholly-owned
subsidiary, Memry Europe, N.V. (collectively, the "Company"). Memry Holdings,
S.A. is a holding company whose principal asset consists of an investment in its
wholly owned subsidiary, Memry Europe, N.V. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Cash and cash equivalents
-------------------------
For purposes of the consolidated statements of cash flows, the Company considers
all highly liquid investments with a maturity of three months or less, when
purchased, to be cash equivalents. The carrying amount of these financial
instruments approximates fair value because of the short maturity of these
instruments.
Inventories
-----------
Inventories consist principally of various metal alloy rod and shape memory
alloys. Inventories are stated at the lower of cost, determined on the first-
in, first-out method, or market.
Impairment of assets
--------------------
The Company reviews its long-lived assets and certain identifiable intangible
assets for impairment whenever events or circumstances indicate that the
carrying amount of the assets may not be recoverable.
Foreign Currency Exchange and Translation
-----------------------------------------
The financial statements of foreign subsidiaries have been translated into U.S.
dollars in accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation". All balance sheet accounts have been translated
using the exchange rates in effect at the balance sheet date. Income statement
amounts have been translated using the average exchange rate for the year.
Gains and losses resulting from changes in exchange rates from year to year have
been reported in comprehensive income (loss). The effect on the consolidated
statements of operations of foreign currency transaction gains and losses is
insignificant.
F-7
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
Effective January 1, 1999, the European Economic and Monetary Union (the "EMU")
created a single Eurocurrency (the "Euro") for its member countries, including
Belgium, which is a member of the EMU and where the Company's European
operations are conducted. On January 1, 1999, Belgium irreversibly established
fixed conversion rates between their existing sovereign currency, the Belgian
Franc, and the Euro, and adopted the Euro as its common legal currency on that
date. On January 1, 1999, the exchange rate between the Belgian Franc and Euro
was 40.34 to 1.
Revenue recognition
-------------------
Revenues from product sales are recognized when the related products are
shipped. Certain revenues are earned in connection with research and development
grants and contracts which are principally with various governmental agencies.
Such revenues are recognized when services are rendered. Some of the Company's
research and development projects are customer-sponsored and typically provide
the Company with the production rights or pay a royalty to the Company if a
commercially viable product results.
Included in product sales for the year ended June 30, 2000 is approximately
$500,000 in royalties earned in connection with an agreement with an unrelated
party. The provisions of the agreement stipulate that Memry is to receive a
royalty on sales of products which use certain technology. The maximum royalties
to be earned under the agreement totals $2.5 million.
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements". SAB No. 101 summarizes some of the staff's interpretations of the
application of generally accepted accounting principles to revenue recognition.
The Company will adopt SAB No. 101 when required in the fourth quarter of fiscal
year 2001. Management believes the adoption of SAB No. 101 will not have a
significant effect on its financial statements.
Depreciation and amortization
-----------------------------
Depreciation of equipment is computed using the straight-line method over the
estimated useful lives of the respective assets, ranging from three to ten
years. Leasehold improvements are amortized over the life of the lease, or the
improvements' estimated useful life, if shorter.
Costs of obtaining patents and patent rights are amortized using the straight-
line method over the patents' expected period of benefit which ranges from
thirteen to sixteen years.
Goodwill represents the cost of acquired assets in excess of values ascribed to
net tangible assets and is being amortized using the straight-line method over
15 years.
Costs incurred in obtaining financing are capitalized and are being amortized
over the term of the related debt.
401(k) plan
-----------
The Company maintains a 401(k) profit sharing and savings plan for the benefit
of substantially all its employees. The plan provides for contributions by the
Company in such amounts as the Board of Directors may annually determine.
F-8
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
Research and development expense
--------------------------------
The Company incurred research and development expense relating to its own
internal products as well as the development of future products for the years
ended June 30, 2000 and 1999 aggregating approximately $1,498,000 and
$1,013,000, respectively.
Income taxes
------------
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws on the date of enactment.
Earnings per share
------------------
Basic earnings (loss) per share amounts are computed by dividing net income
(loss) 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.
For the periods presented, there were no items which changed net income (loss)
as presented in the consolidated statements of operations and the amounts used
to compute basic and diluted earnings (loss) per share. The following is
information about the computation of weighted-average shares utilized in the
computation of basic and diluted earnings (loss) per share. For the year ended
June 30, 1999, common stock equivalents have been excluded from the computation
of the net loss per share because inclusion of such equivalents is anti-
dilutive.
<TABLE>
<CAPTION>
2000 1999
--------------------------------
<S> <C> <C>
Weighted average number of basic shares
outstanding 20,993,850 20,297,134
Effect of dilutive securities:
Warrants 666,953 -
Options 339,644 -
--------------------------------
Weighted average number of fully diluted
shares outstanding 22,000,447 20,297,134
================================
</TABLE>
F-9
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
Note 2. Business Combinations
The Company purchased Advanced Materials and Technologies, n.v. ("AMT") and the
assets of Wire Solutions, Inc. on October 30, 1998 and March 19, 1999,
respectively. Details of the transactions, which were accounted for as
purchases, are as follows:
A summary of the purchase payments in connection with the acquisitions is as
follows:
<TABLE>
<CAPTION>
Wire
Solutions,
AMT Inc.
--------------------------------
<S> <C> <C>
Cash paid to sellers at closing $ 1,040,000 $ 209,000
Issuance of 675,000 shares of common
stock to sellers 2,363,000 -
Issuance of 62,500 shares of common
stock to sellers - 121,000
Acquisition liability 1,046,000 -
Acquisition costs 258,000 26,000
------------------------------
$ 4,707,000 $ 356,000
==============================
A summary of the net assets acquired in connection with the acquisitions is as
follows:
Wire
Solutions,
AMT Inc.
------------------------------
Assets acquired
Accounts receivable $ 575,000 $ 26,000
Notes receivable 525,000 -
Inventory 187,000 -
Goodwill 3,743,000 353,000
Property, plant and equipment 2,012,000 1,000
Other 22,000 -
Liabilities assumed (2,357,000) (24,000)
------------------------------
$ 4,707,000 $ 356,000
==============================
</TABLE>
F-10
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
Note 3. Inventories
Inventories at June 30, 2000 and 1999, are summarized as follows:
<TABLE>
<CAPTION>
2000 1999
---------------------------------
<S> <C> <C>
Raw materials and supplies $ 1,109,000 $ 690,000
Work-in-process 1,517,000 1,789,000
Finished goods 1,509,000 1,304,000
Allowance for slow-moving and obsolete inventory (435,000) (601,000)
---------------------------------
$ 3,700,000 $ 3,182,000
=================================
</TABLE>
The decrease in the allowance for slow-moving and obsolete inventory in fiscal
2000 resulted from the actual disposition of certain inventory and had no effect
on earnings for the year ended June 30, 2000.
Note 4. Property, Plant and Equipment
Property, plant and equipment at June 30, 2000 and 1999, is summarized as
follows:
<TABLE>
<CAPTION>
2000 1999
----------------------------------
<S> <C> <C>
Land and building $ 483,000 $ 483,000
Furniture and fixtures 2,196,000 1,475,000
Tooling and equipment 8,145,000 5,802,000
Leasehold improvements 588,000 247,000
----------------------------------
11,412,000 8,007,000
Less accumulated depreciation and amortization 3,908,000 2,691,000
----------------------------------
$ 7,504,000 $ 5,316,000
==================================
</TABLE>
Note 5. Notes Payable
Notes payable consist of the following at June 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
--------------------------------
<S> <C> <C>
Revolving loan payable pursuant to June 30, 1998
credit facility, interest payable monthly at the prime rate plus .75%
(10.25% and 8.75% at June 30, 2000 and 1999), due
June 30, 2001. $ 2,367,000 $ 1,800,000
Term note payable to a bank pursuant to June 30, 1998
credit facility, due in monthly installments of $8,333,
plus interest at 8.75% per annum, due June 30, 2003. 308,000 408,000
</TABLE>
F-11
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
----------------------------------
<S> <C> <C>
Equipment loan payable pursuant to June 30, 1998 credit
facility, due in monthly installments of $18,555, plus
interest at prime plus .75% (10.25% and 8.75% at June 30,
2000 and 1999), due June 30, 2002. 464,000 668,000
Equipment loan payable pursuant to amended June 30, 1998
credit facility, due in monthly installments of $16,667,
plus interest at prime plus .75% (10.25% at June 30, 2000),
due January 1, 2005. 900,000 -
Equipment loan payable pursuant to amended June 30, 1998
credit facility, due in monthly installments of $34,722,
plus interest at prime plus .75% (10.25% at June 30,
2000), due June 30, 2003. 1,250,000 -
Mortgage note payable to a bank, due July 14, 2000 plus
accrued interest at 4.88% per annum. 237,000 -
Term note payable to a bank, due in annual installments
including interest at 9.75%, due February 21, 2001. 45,000 88,000
Term note payable to a bank due in monthly installments
plus interest at 5.70%, due October 10, 2001 38,000 72,000
Term note payable to Swissmetal, due on November 30,
1999 plus accrued interest at 5% per annum. - 128,000
Mortgage note payable to a bank, due July 14, 1999 plus
accrued interest at 9.09% per annum. - 256,000
Term note payable to a bank, due in annual installments
plus interest at 6.92%, due on August 5, 1999. - 13,000
----------------------------------
5,609,000 3,433,000
Less current maturities 3,617,000 2,571,000
----------------------------------
$ 1,992,000 $ 862,000
==================================
</TABLE>
Future maturities of notes payable at June 30, 2000 are as follows:
2001 $ 3,617,000
2002 967,000
2003 717,000
2004 208,000
2005 100,000
---------------
$ 5,609,000
===============
F-12
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
The credit facility entered into on June 30, 1998 includes a revolving loan, a
line of credit and a $500,000 term loan. During the year ended June 30, 2000,
the credit facility was amended to provide for revolving loan borrowings up to
the lesser of $5,000,000 or the sum of (a) 80% of eligible accounts receivable
and (b) the lesser of $1 million or 35% of eligible inventory; and for the
payment of a commitment fee equal to .25% per annum of the daily unused portion
of the revolving loan. In addition, the amended agreement provides for an
additional term loan up to $1,000,000 to be used for the purchase of eligible
equipment. The line of credit was also amended to provide for equipment
financing up to the lesser of $1,250,000 or 75% of the purchase price for
eligible equipment each year through June 30, 2001. The Company, on July 1 of
each year through 2001, has the option of converting amounts borrowed under the
line of credit to term loans. On June 30, 2000 and 1999, the Company converted
$1,250,000 and $668,000, respectively, from the equipment line of credit into a
term loan. This credit facility is secured by substantially all the assets of
the Company.
Interest on the revolving loan and line of credit loan 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 additional debt, payment of dividends,
management and ownership changes and compliance with specified financial ratios.
The carrying amounts of these financial instruments approximates fair value.
Note 6. Capital Stock
Common stock
On June 30, 2000 and 1999, the Company had 40,000,000 and 30,000,000 authorized
shares of common stock, par value $0.01 per share, of which there were
21,130,476 and 20,826,333 shares issued and outstanding at June 30, 2000 and
1999, respectively.
During the years ended June 30, 2000 and 1999, 61,000 and 38,000 shares of
common stock at an aggregate price of $123,000 and $99,000, respectively, were
issued to Company directors as compensation. In addition, during the years ended
June 30, 2000 and 1999, 32,000 and 102,000 shares of common stock were issued at
an aggregate price of $34,000 and $133,000, respectively, through the exercise
of options and warrants. During the year ended June 30, 2000, 15,000 shares at
an aggregate price of $28,000 were issued as compensation to an outside
consultant. Also during the year ended June 30, 2000, the Company issued 196,000
shares of common stock and 39,000 warrants at an aggregate price of $372,000 in
connection with the settlement of a contingent liability related to the purchase
of AMT. Compensation expense recognized for the issuance of shares of common
stock was calculated utilizing the fair market value of the common stock at the
date of issuance. The value of the common stock issued in connection with the
settlement of the contingent liability was calculated utilizing the fair market
value of the common stock at the date of issuance. Also, the value of the
warrants related to this transaction were calculated utilizing the Black-Scholes
pricing model.
F-13
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
Common stock reserved for issuance at June 30, 2000, is as follows:
Number of
Shares
-------------
For exercise of outstanding warrants 1,461,772
For exercise of stock options 2,969,834
-------------
4,431,606
=============
Various agreements with a certain investor provide that upon the occurrence of
specified events, primarily should the Company cease to maintain its principal
offices within the State of Connecticut, the investor would have the right to
put all securities of the Company held by the investor at that time for a price
equal to the greater of the then current market price per share of such
securities or $2 per share, less, if warrants are being held by such investor at
such time, the aggregate amount of the unpaid exercise prices of all such
warrants. Using $3.31 per share, which is the market price per share at June 30,
2000, 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 $8,076,000.
This put option expires on the date the investor ceases to hold at least 35% of
the common stock underlying the convertible securities originally issued to it.
If the investor were to have the right to put its securities and were to choose
to exercise that right, such an event 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 the investor. However, the
Company has the ability to insure that its operations do not move from
Connecticut.
Incentive Plans
---------------
In 1994, the Company adopted the Memry Corporation Stock Option Plan (the "1994
Plan"). Pursuant to this plan, incentive stock options were granted at prices
equal to or greater than the fair market value of the Company's common stock at
the date of grant, and were exercisable at the date of grant unless otherwise
stated. In addition, non-qualified options were granted at prices determined by
the Company's compensation committee, which may have been less than the fair
market value of the Company's common stock at date of grant, in which case an
expense equal to the difference between the option price and fair market value
was recognized. The exercise period for both the incentive and non-qualified
stock options generally could not exceed ten years. The Plan also allowed the
granting of Stock Appreciation Rights, however, only a minimal amount of such
rights were granted.
During the year ended June 30, 1998, the Company adopted the Memry Corporation
Long-term Incentive Plan (the "1997 Plan). Under the 1997 Plan, incentive and
non-qualified options may be granted to employees and non-employee directors
under terms similar to the 1994 Plan. Also, under the 1997 Plan, Stock
Appreciation Rights ("SARs"), Limited Stock Appreciation Rights ("Limited
SARs"), restricted stock, and performance shares may be granted to employees.
With respect to SARs, upon exercise, the Company must pay to the employee the
difference between the current market value of the Company's common stock and
the exercise price of the SARs. The SARs terms are determined at the time of
each individual grant. However, if SARs are granted which are related to an
incentive stock option, then the SARs will contain similar terms to the related
option. Limited SARs may be granted in relation to any option or SARs granted.
Upon exercise, the Company must pay to the employee the difference between the
current market value of the Company's common stock and the exercise price of the
related options or SARs. Upon the exercise of SARs or Limited SARs, any related
option or SARs outstanding will no longer be exercisable.
Restricted shares of common stock may also be granted to employees for no
consideration. The terms of the restriction are determined at the time of each
individual grant. Generally, if employment is terminated during the restricted
period, the participant must forfeit any stock still subject to restriction.
Performance shares are granted to
F-14
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continue
June 30, 2000 and 1999
--------------------------------------------------------------------------------
employees based on individual performance goals, and may be paid in shares or
cash determined based on the shares earned and the market value of the Company's
common stock at the end of certain defined periods.
Also, under the 1997 Plan, each quarter, all non-employee directors are granted
shares of the Company's common stock with a value equal to $7,500, determined
based on the market value of the Company's stock at the end of each quarter.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), established standards for stock-based
compensation plans under which employees receive shares of stock or other equity
instruments, such as stock options or warrants, of the employer. This Statement
provides for a fair value based method of expense recognition for stock-based
compensation plans and encourages, but does not require, entities to adopt this
method in place of other existing generally accepted accounting principles. As
permitted by SFAS No. 123, for options granted where the exercise price at date
of grant is equal to or exceeds the fair market value of the Company's stock,
the Company has elected to continue under existing generally accepted accounting
principles and to account for the options granted under APB Opinion No. 25, and
accordingly, no compensation cost has been recognized in the consolidated
statements of operations for grants under the option plan. Had compensation cost
for the stock option plans been recognized based on the grant date fair values
of awards, the method described in SFAS No. 123, the reported net income (loss)
would have been increased/decreased to the pro forma amounts shown below:
2000 1999
------------------------------
Net income (loss):
As reported $ 1,109,000 $ (1,349,000)
==============================
Pro forma $ 843,000 $ (1,845,000)
==============================
Basic earnings per share:
As reported $ 0.05 $ (0.07)
==============================
Pro forma $ 0.04 $ (0.09)
==============================
Diluted earnings per share:
As reported $ 0.05 $ (0.07)
==============================
Pro forma $ 0.04 $ (0.09)
==============================
The fair value of each grant, used to determine the proforma information above,
is estimated at the grant date using the fair value option-pricing model with
the following weighted average assumptions for grants awarded during the years
ended June 30, 2000 and 1999:
2000 1999
----------------------
Dividend rate - -
Risk free interest rate 6.39% 5.82%
Weighted average expected lives, in years 4 4
Price volatility 35.9% 111.6%
F-15
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
A summary of the status of the Company's stock option plans at June 30, 2000 and
1999, and changes during the years then ended, is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise
Reserved Options Outstanding Price
--------------------------------------------------
<S> <C> <C> <C>
Balance, June 30, 1998 3,056,000 1,543,000 $ 2.63
Canceled (83,290) $ 2.69
Granted 216,466 $ 2.05
Exercised (82,166) $ 1.60
--------------------------------------------------
Balance, June 30, 1999 2,973,834 1,594,010 $ 2.60
Canceled (298,529) $ 3.48
Granted 996,772 $ 2.25
Exercised (4,000) $ 1.78
--------------------------------------------------
Balance, June 30, 2000 2,969,834 2,288,253 $ 2.34
==================================================
</TABLE>
At June 30, 2000 and 1999, 932,641 and 764,037 (weighted average exercise price
of $2.06 and $2.12) of the outstanding options were exercisable, respectively.
The weighted-average grant date fair value per option of options granted during
the years ended June 30, 2000 and 1999 was $0.85 and $1.31, respectively. For
the years ended June 30, 2000 and 1999, all options granted carried an exercise
price equal to the fair market value of the Company's stock at the date of
grant.
A further summary of options outstanding at June 30, 2000, is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------- ------------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (In Years) Price Exercisable Price
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$.90 to $4.00 2,288,253 4 $ 2.34 932,641 $ 2.06
</TABLE>
Warrants
--------
The Company has also issued stock warrants to employees and others. The cost
charged to operations for warrants granted in connection with the settlement of
the contingent liability relating to the purchase of AMT was $39,000 during the
year ended June 30, 2000. The compensation cost charged to operations for
warrants granted to employees was $5,000 during the year ended June 30, 1999.
F-16
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
The following table summarizes warrants outstanding at June 30, 2000 and 1999,
and the changes in warrants during the years then ended:
<TABLE>
<CAPTION>
Weighted-
Average
Shares Warrants Exercise
Reserved Outstanding Price
---------------------------------------------
<S> <C> <C> <C>
Balance, June 30, 1998 1,470,602 1,470,602 $ 1.13
Canceled - $ -
Granted - $ -
Exercised (20,000) $ 0.01
---------------------------------------------
Balance, June 30, 1999 1,450,602 1,450,602 $ 1.15
Canceled (116,667) $ 2.00
Granted 39,170 $ 2.00
Exercised (28,000) $ 0.97
---------------------------------------------
Balance, June 30, 2000 1,461,772 1,345,105 $ 1.10
=============================================
</TABLE>
A further summary of warrants outstanding at June 30, 2000 is as follows:
<TABLE>
<CAPTION>
Warrants Outstanding Warrants Exercisable
---------------------------------------------- ------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (In Years) Price Exercisable Price
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$.85 to $2.00 1,345,105 1.74 $ 1.10 1,345,105 $ 1.10
</TABLE>
Note 7. Major Customers
Product sales revenue for the years ended June 30, 2000 and 1999, includes sales
to major customers, each of which accounted for greater than 10% of the total
sales of the Company. A summary of sales to these customers during the years
ended June 30, 2000 and 1999, and accounts receivable from these customers at
June 30, 2000 and 1999, is as follows:
<TABLE>
<CAPTION>
2000 1999
------------------------------------ -------------------------------------
Accounts Accounts
Customer Sales Receivable Sales Receivable
----------------- ------------------------------------ -------------------------------------
<S> <C> <C> <C> <C>
Company A $ 5,663,000 $ 117,000 $ 7,909,000 $ 817,000
Company B 7,435,000 1,286,000 6,290,000 753,000
Company C 4,538,000 1,022,000 23,000 11,000
------------------------------------ -------------------------------------
$ 17,636,000 $ 2,425,000 $ 14,222,000 $ 1,581,000
==================================== =====================================
</TABLE>
F-17
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
Sales to Company A through February 2000 were made under a private
label/distribution agreement wherein Company A became the exclusive distributor
of certain products. In February 2000, this agreement was replaced by a sales
agency agreement wherein Company A became the exclusive sales agent for certain
commercial industrial products for an initial term expiring on June 30, 2004.
Company A and B are divisions of the same parent company and controlled and
operated under common ownership.
Note 8. Major Suppliers
The Company currently purchases a significant portion of raw materials from two
suppliers. However, management believes that several other suppliers could
provide similar materials on comparable terms without significantly impacting
shipping or sales.
Note 9. Leases
The Company leases its Connecticut and California manufacturing and office
facilities under operating leases. The lease on the Connecticut facility expires
in February 2001 and the lease on the principal California facility expires in
September 2001. The Company also leases certain equipment under noncancelable
leases which have been recorded as capital leases and are included in the
accompanying consolidated balance sheets under the caption "Property, Plant and
Equipment".
Future minimum lease payments under capital leases and significant noncancelable
operating leases, with remaining terms of one year or more, are as follows at
June 30, 2000:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
----------------------------------
<S> <C> <C>
2001 $ 28,000 $ 525,000
2002 25,000 126,000
2003 18,000 120,000
2004 11,000 116,000
Thereafter 9,000 96,000
---------------- ------------
91,000 $ 983,000
============
Less amount representing interest 10,000
----------------
Present value of future minimum lease payments 81,000
Less current maturities 24,000
----------------
$ 57,000
================
</TABLE>
Rent expense under operating leases for the years ended June 30, 2000 and 1999,
approximated $935,000 and $770,000, respectively.
F-18
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
Note 10. Income Taxes
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. For financial reporting purposes,
a valuation allowance of $11.2 million and $11.5 million has been recognized at
June 30, 2000 and 1999, respectively, to reflect the estimated amount of
operating loss carryforwards and temporary differences which may not be
realized, due to the absence of sustained profitability of the Company. The
approximate effect of carryforwards and temporary differences that give rise to
deferred tax assets and liabilities at June 30, 2000 and 1999, is as follows:
<TABLE>
<CAPTION>
2000 1999
-----------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 185,000 $ 120,000
Inventory reserves 140,000 242,000
Capitalization of inventory costs 710,000 635,000
Vacation accruals 137,000 112,000
Research and development credit carryforwards 81,000 126,000
Net operating loss carryforwards 9,921,000 10,305,000
-----------------------------------
Total deferred tax assets 11,174,000 11,540,000
Valuation allowance (11,174,000) (11,540,000)
-----------------------------------
Net deferred tax assets $ - $ -
===================================
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
2000 1999
-------------------------------
<S> <C> <C>
Current:
State $ 125,000 $ 225,000
-------------------------------
$ 125,000 $ 225,000
===============================
</TABLE>
Income (loss) before income taxes consists of:
<TABLE>
<CAPTION>
2000 1999
-----------------------------------
<S> <C> <C>
Domestic $ 2,017,000 $ (444,000)
Foreign (783,000) (680,000)
-----------------------------------
$ 1,234,000 $ (1,124,000)
===================================
</TABLE>
F-19
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLDATED FINANCIAL STATEMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
A reconciliation of the anticipated income tax expense (computed by applying the
Federal statutory income tax rate of 34% to the income (loss) before taxes) to
the provision for income taxes as reported in the consolidated statements of
operations is as follows:
<TABLE>
<CAPTION>
2000 1999
-----------------------------------------------------
<S> <C> <C> <C> <C>
Provision (benefit) for income
taxes at statutory Federal rate $ 420,000 34% $ (382,000) (34)%
Increase (decrease) resulting from:
State corporation income tax, net of
federal tax benefit 71,000 6% 148,000 13%
(Decrease) increase in valuation
allowance for deferred taxes (366,000) (30)% 459,000 41%
-----------------------------------------------------
Provision for income taxes $ 125,000 10% $ 225,000 20%
=====================================================
</TABLE>
At June 30, 2000, the Company has Federal and state net operating loss
carryforwards for income tax purposes, which expire as follows:
<TABLE>
<CAPTION>
Federal State
--------------------------- ----------------------------
Year Amount Year Amount
--------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
2003 $ 450,000 2000 $ 1,246,000
2004 1,859,000 2001 2,119,000
2005 2,842,000 2002 1,732,000
2006 4,669,000 ---------------
2007 3,237,000 $ 5,097,000
2008 1,956,000 ===============
2009 3,120,000
2010 2,497,000
2011 2,619,000
---------------
$ 23,249,000
===============
</TABLE>
Also, the Company has foreign net operating loss carryforwards of $4,201,000,
which do not expire.
In addition, the Company has tax credit carryforwards available to offset future
taxable income aggregating approximately $81,000 which expire in various amounts
from 2001 through 2008.
F-20
<PAGE>
MEMRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATMENTS, Continued
June 30, 2000 and 1999
--------------------------------------------------------------------------------
Note 11. Commitments
401(K) Plan
-----------
During the years ended June 30, 2000 and 1999, Company contributions to its
401(k) profit sharing and savings plan approximated $69,000 and $74,000,
respectively.
Bonus Plan
----------
The Company has a bonus plan under which its employees may earn a bonus based on
various earnings measures. The actual payment of bonuses is subject to annual
approval by the Board of Directors. Expenses recognized under this plan were
approximately $600,000 and $60,000, for the years ended June 30, 2000 and 1999,
respectively.
Note 12. Operating Segments
The Company is engaged principally in one line of business, the development,
manufacturing and marketing of products utilizing the properties exhibited by
shape memory alloys, which represents more than 95% of consolidated revenues.
The following table presents information about the Company by geographic area.
There were no material amounts of sales or transfers among geographic areas and
no material amounts of United States export sales.
<TABLE>
<CAPTION>
2000 United States Europe Consolidated
---- -------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $ 25,144,000 $ 1,852,000 $ 26,996,000
Operating income (loss) 2,378,000 (766,000) 1,612,000
Identifiable assets 16,792,000 5,751,000 22,543,000
1999 United States Europe Consolidated
---- ---------------------------------------------------
<S> <C> <C> <C>
Total revenues $ 17,912,000 $ 974,000 $ 18,886,000
Operating loss (366,000) (731,000) (1,097,000)
Identifiable assets 12,375,000 5,807,000 18,182,000
</TABLE>
See Note 7 for sales to major customers.
Note 13. Severance
During the fourth quarter of the year ended June 30, 1999, the Company
terminated 6 employees and thereafter entered into various severance agreements
with such employees. These employees held management positions while employed at
the Company. For the year ended June 30, 1999, $784,000 was charged to
operations and is included in accrued expenses at June 30, 1999 in the
accompanying consolidated financial statements relating to these benefits.
F-21
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required by this Item is incorporated herein by reference to
the sections entitled "Proposal No. 1--Election of Directors," "--Executive
Officers of the Company" and "--Section 16(a) Beneficial Ownership Reporting
Compliance" of the Company's Definitive Proxy Statement to be filed with the
Commission within 120 days after June 30, 2000.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to
the sections entitled "Proposal No. 1--Election of Directors--Compensation of
Directors" and "--Executive Compensation" of the Company's Definitive Proxy
Statement to be filed with the Commission within 120 days after June 30, 2000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference to
the section entitled "Security Ownership of Certain Beneficial Owners and
Management" of the Company's Definitive Proxy Statement to be filed with the
Commission within 120 days after June 30, 2000.
ITEM 12. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference to
the section entitled "Proposal No. 1--Election of Directors--Certain
Relationships and Transactions" of the Company's Definitive Proxy Statement to
be filed with the Commission within 120 days after June 30, 2000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation of the Company, as amended.......................................... (13)
3.2 By-Laws of the Company, as amended............................................................... (5)
3.3 Amendment Number 1 to By-Laws of the Company, as amended......................................... (9)
10.1 Lease Agreement, dated January 24, 1991 between the Company and Brookfield Commerce relating
to 57 Commerce Drive, Brookfield, CT............................................................. (1)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
10.2 Employee Non-Disclosure agreement, dated as of October 18, 1994, between the Company and
James G. Binch...................................................................................... (2)
10.3 Convertible Subordinated Debenture Purchase Agreement, dated as of December 22, 1994,
between the Company and CII......................................................................... (5)
10.4 First Amendment to Convertible Subordinated Debenture Purchase Agreement, dated October 11,
1995, between the Company and CII................................................................... (3)
10.5 First Addendum to Stock Subscription Warrant (re: Warrant No. 94-4), dated October 11, 1995,
made by the Company and agreed to by CII............................................................ (3)
10.6 First Addendum to Stock Subscription Warrant (re: Warrant No. 94-5), dated October 11, 1995,
made by the Company and agreed to by CII............................................................ (3)
10.7 Second Amendment to Convertible Subordinated Debenture Purchase Agreement, dated as of June
28, 1996, between the Company and CII............................................................... (5)
10.8 Amended and Restated Class I Warrant Certificate (Warrant Certificate No. 94-4A) issued by
the Company to CII.................................................................................. (5)
10.9 Amended and Restated Class II Warrant Certificate (Warrant Certificate No. 94-5A) issued by
the Company to CII.................................................................................. (5)
10.10 Sublease, dated as of June 28, 1996, between the Company and Raychem Corporation.................... (4)
10.11 Amendment to Lease Agreement between the Company and Brookfield Commerce relating to 57
Commerce Drive, Brookfield, CT...................................................................... (5)
10.12 Employee Agreement on Inventions and Patents, between the Company and James G. Binch................ (5)
10.13 Memry Corporation Stock Option Plan, as amended..................................................... (6)
10.14 Form of Nontransferable Incentive Stock Option Agreement under the 1994 Plan........................ (6)
10.15 Form of Nontransferable Non-Qualified Stock Option Agreement under the 1994 Plan.................... (6)
10.16 Amended and Restated Time-Lock Supply Agreement, dated as of February 19, 1997, and
effective as of December 20, 1996, between the Company and Raychem Corporation...................... (7)
10.17 Memry Corporation's 1997 Long Term Incentive Plan, as Amended....................................... (8)
10.18 Form of Nontransferable Incentive Stock Option Agreement under the 1997 Plan........................ (8)
10.19 Commercial Revolving Loan, Term Loan, Line of Credit and Security Agreement, dated June 30,
1998, between the Company and Webster Bank.......................................................... (9)
10.20 Term Loan Note, dated June 30, 1998, by the Company in favor of Webster Bank in principal
amount of $500,000.................................................................................. (9)
10.21 Amendment of Sublease, dated March 26, 1998, between Raychem Corporation and the Company............ (9)
10.22 Stock Purchase Agreement, dated October 30, 1998, by and among Memry Holdings, S.A. and the
Shareholders of Advanced Metals and Technologies, N.V............................................... (10)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
10.23 Separation Agreement dated as of August 17,1999, between the Company and William H. Morton............. (11)
10.24 Letter Agreement, dated February 2, 1999, from the Company to James L. Proft.......................... (11)
10.25 Letter Agreement, dated July 12, 1999, from the Company to Tom Carey.................................. (11)
10.26 Loan Agreement, dated September 16, 1999, between Swissmetal and the Company.......................... (12)
10.27 Amendment Agreement, dated November 30, 1999, between the Company and Webster Bank.................... (12)
10.28 Amended and Restated Revolving Loan Note, dated November 30, 1999, by the Company
in favor of Webster.Bank.............................................................................. (12)
10.29 Amended and Restated Equipment Loan Note, dated November 30, 1999, by the Company
in favor of Webster.Bank.............................................................................. (12)
10.30 Agreement, dated as of December 17, 1999, among Memry Holdings, S.A., the Company and G.I.M.V......... (12)
10.31 Employment Agreement, dated as of January 1, 2000, between the Company and Robert J. Thatcher......... (13)
10.32 Employment Agreement, dated as of January 1, 2000, between the Company and Robert P. Belcher.......... (13)
10.33 Employment Agreement, dated as of January 1, 2000, between the Company and Joe Pasqualucci............ (13)
10.34 Employment Agreement, dated as of January 1, 2000, between the Company and James G. Binch............. (13)
10.35 Sales Agency Agreement, dated January 20, 2000, between the Company and Tyco Electronics.............. (13)
10.36 Sublease, dated February 3, 2000, by and between the Company and Pacific Financial Printing........... (13)
21.2 Information regarding Subsidiaries.................................................................... (13)
23.1 Consent of McGladrey & Pullen, LLP.................................................................... (13)
27 Financial Data Schedule............................................................................... (13)
</TABLE>
____________________
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1991.
(2) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1994.
(3) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1995.
(4) Incorporated by reference to the Company's Current Report on Form 8-K filed
July 15, 1996.
16
<PAGE>
(5) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1996, as amended.
(6) Incorporated by reference to the Company's Quarterly Report on Form 10-
QSB for the fiscal quarter ended December 31, 1996.
(7) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1997, as amended.
(8) Incorporated by reference to the Company's Quarterly Report on Form 10-
QSB for the fiscal quarter ended December 31, 1997.
(9) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1998.
(10) Incorporated by reference to the Company's Current Report on Form 8-K
filed November 12, 1998.
(11) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1999.
(12) Incorporated by reference to the Company's Quarterly Report on Form 10-
QSB for the fiscal quarter ended December 31, 1999.
(13) Filed herewith.
_______________________
(b) Reports on Form 8-K
None.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEMRY CORPORATION
Date: September 27, 2000
By: /s/ JAMES G. BINCH
--------------------------
James G. Binch
CEO and Chairman of the Board
(Principal Executive Officer)
By: /s/ ROBERT P. BELCHER
-----------------------------
Robert P. Belcher
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ James G. Binch Director September 27, 2000
---------------------------------
James G. Binch
/s/ Patrick Cleary Director September 27, 2000
---------------------------------
Patrick Cleary
Director September 27, 2000
---------------------------------
Kempton J. Coady, III
/s/ Jack Halperin Director September 27, 2000
---------------------------------
Jack Halperin
/s/ W. Andrew Krusen, Jr. Director September 27, 2000
---------------------------------
W. Andrew Krusen, Jr.
/s/ Robert J. Thatcher Director September 27, 2000
---------------------------------
Robert J. Thatcher
18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Certificate of Incorporation of the Company, as amended..................................... (13)
3.2 By-Laws of the Company, as amended.......................................................... (5)
3.3 Amendment Number 1 to By-Laws of the Company, as amended.................................... (9)
10.1 Lease Agreement, dated January 24, 1991 between the Company and Brookfield Commerce (1)
relating to 57 Commerce Drive, Brookfield, CT...............................................
10.2 Employee Non-Disclosure agreement, dated as of October 18, 1994, between the Company (2)
and James G. Binch..........................................................................
10.3 Convertible Subordinated Debenture Purchase Agreement, dated as of December 22, 1994, (5)
between the Company and CII.................................................................
10.4 First Amendment to Convertible Subordinated Debenture Purchase Agreement, dated October (3)
11, 1995, between the Company and CII.......................................................
10.5 First Addendum to Stock Subscription Warrant (re: Warrant No. 94-4), dated October 11, (3)
1995, made by the Company and agreed to by CII..............................................
10.6 First Addendum to Stock Subscription Warrant (re: Warrant No. 94-5), dated October 11, (3)
1995, made by the Company and agreed to by CII..............................................
10.7 Second Amendment to Convertible Subordinated Debenture Purchase Agreement, dated as of (5)
June 28, 1996, between the Company and CII..................................................
10.8 Amended and Restated Class I Warrant Certificate (Warrant Certificate No. 94-4A) issued by (5)
the Company to CII..........................................................................
10.9 Amended and Restated Class II Warrant Certificate (Warrant Certificate No. 94-5A) issued by (5)
the Company to CII..........................................................................
10.10 Sublease, dated as of June 28, 1996, between the Company and Raychem Corporation............ (4)
10.11 Amendment to Lease Agreement between the Company and Brookfield Commerce relating to (5)
57 Commerce Drive, Brookfield, CT...........................................................
10.12 Employee Agreement on Inventions and Patents, between the Company and James G. Binch........ (5)
10.13 Memry Corporation Stock Option Plan, as amended............................................. (6)
10.14 Form of Nontransferable Incentive Stock Option Agreement under the 1994 Plan................ (6)
10.15 Form of Nontransferable Non-Qualified Stock Option Agreement under the 1994 Plan............ (6)
10.16 Amended and Restated Time-Lock Supply Agreement, dated as of February 19, 1997, and (7)
effective as of December 20, 1996, between the Company and Raychem Corporation..............
10.17 Memry Corporation's 1997 Long Term Incentive Plan, as Amended............................... (8)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
10.18 Form of Nontransferable Incentive Stock Option Agreement under the 1997 Plan................ (8)
10.19 Commercial Revolving Loan, Term Loan, Line of Credit and Security Agreement, dated June (9)
30, 1998, between the Company and Webster Bank..............................................
10.20 Term Loan Note, dated June 30, 1998, by the Company in favor of Webster Bank in principal (9)
amount of $500,000..........................................................................
10.21 Amendment of Sublease, dated March 26, 1998, between Raychem Corporation and the (9)
Company.....................................................................................
10.22 Stock Purchase Agreement, dated October 30, 1998, by and among Memry Holdings, S.A. and (10)
the Shareholders of Advanced Metals and Technologies, N.V...................................
10.23 Separation Agreement dated as of August 17, 1999, between the Company and William H. (11)
Morton......................................................................................
10.24 Letter Agreement, dated February 2, 1999, from the Company to James L. Proft................ (11)
10.25 Letter Agreement, dated July 12, 1999, from the Company to Tom Carey........................ (11)
10.26 Loan Agreement, dated September 16, 1999, between Swissmetal and the Company................ (12)
10.27 Amendment Agreement, dated November 30, 1999, between the Company and Webster Bank.......... (12)
10.28 Amended and Restated Revolving Loan Note, dated November 30, 1999, by the Company in (12)
favor of Webster Bank.......................................................................
10.29 Amended and Restated Equipment Loan Note, dated November 30, 1999, by the Company in (12)
favor of Webster Bank.......................................................................
10.30 Agreement, dated as of December 17, 1999, among Memry Holdings, S.A., the Company and (12)
G.I.M.V.....................................................................................
10.31 Employment Agreement, dated as of January 1, 2000, between the Company and Robert J. (13)
Thatcher....................................................................................
10.32 Employment Agreement, dated as of January 1, 2000, between the Company and Robert P. (13)
Belcher.....................................................................................
10.33 Employment Agreement, dated as of January 1, 2000, between the Company and Joe (13)
Pasqualucci.................................................................................
10.34 Employment Agreement, dated as of January 1, 2000, between the Company and James G. (13)
Binch.......................................................................................
10.35 Sales Agency Agreement, dated January 20, 2000, between the Company and Tyco (13)
Electronics.................................................................................
10.36 Sublease, dated February 3, 2000, by and between the Company and Pacific Financial (13)
Printing....................................................................................
21.2 Information regarding Subsidiaries.......................................................... (13)
23.1 Consent of McGladrey & Pullen, LLP.......................................................... (13)
27 Financial Data Schedule..................................................................... (13)
</TABLE>
<PAGE>
____________________
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1991.
(2) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1994.
(3) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1995.
(4) Incorporated by reference to the Company's Current Report on Form 8-K filed
July 15, 1996.
(5) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1996, as amended.
(6) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
for the fiscal quarter ended December 31, 1996.
(7) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1997, as amended.
(8) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
for the fiscal quarter ended December 31, 1997.
(9) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1998.
(10) Incorporated by reference to the Company's Current Report on Form 8-K filed
November 12, 1998.
(11) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1999.
(12) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
for the fiscal quarter ended December 31, 1999.
(13) Filed herewith.
_______________________
