MEMRY CORP - 10-K Annual Report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ¨

Memry Corporation (referred to herein as “Memry” or the “Company”) was incorporated in 1981. Memry provides design, engineering, development and manufacturing services to the medical device and other industries using the Company’s proprietary shape memory alloy technologies. Medical device products include stent components, catheter components, guidewires, laparoscopic surgical sub-assemblies and orthopaedic instruments. The Company’s commercial and industrial businesses produce semi-finished materials and components. The Company also provides engineering services to assist customers in the development of products based on the properties of shape memory alloys.

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.

Medical Device Industry. Although the Company has expertise in a variety of SMAs, 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 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 $3.0 billion in 2001.

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 majority of stents currently in clinical development for peripheral applications, such as abdominal aortic aneurysm 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 2002, sales to medical device companies accounted for approximately 90% 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. Non-medical sector sales accounted for approximately 10% of fiscal 2002 revenues.

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 eastern manufacturing operations, located in the same facility as the Company’s corporate headquarters in Bethel, 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 operations 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. During May, 2001, the Company moved its headquarters and eastern manufacturing operations from Brookfield, CT to Bethel, CT, into a facility described in Item 2 below.

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, renamed Memry Europe, N.V., specialized in the development and supply of both Nickel Titanium and other shape memory alloy semi-finished products, principally wire products used in the commercial and industrial markets served by the Company’s U.S. operations. On February 8, 2001, following a thorough business and strategic review, the Company sold Memry Europe in a transaction described in “Liquidity and Capital Resources” below.

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.

Wire. Memry’s nitinol wire products are sold as standard products, available in a variety of sizes, produced in non-standard sizes, to meet specific customer requirements, and 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.

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 original equipment manufacturers (“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 a SMA sub-assembly used by USS for endoscopic instrument. 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. The primary value-added product produced by the Company’s Menlo Park operations are finished stent rings utilized by Medtronic AVE in their AneuRx AAA stent graft product.

Engineering Services. Memry is engaged in reimbursable 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.

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. This strategy is complemented by increased emphasis being placed on advancing the Company’s technological base through development of new intellectual property associated with both superelastic alloys and unique methods of processing for specific applications.

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 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.

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 for selected products 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, some of which will result in new patent applications. 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 9001:1994 certified.

Increase in Manufacturing Capacity. To meet growing demand, particularly in the medical device market for the production of nitinol stents and other components, the Company has committed to optimizing the manufacturing efficiency of its current facilities and expects to invest between $1.5 million and $2.5 million in capital equipment and facility improvements in fiscal 2003.

Restructuring of Manufacturing Operations. To accommodate the growing capacity requirements of the Company’s core medical OEM customer business, and to increase the efficiency of operation, the Company will continue to analyze the optimum manufacturing strategy for the Company, including which Memry facility should house each operation and what role outsourcing will play in overall operations. All critical technology development will be coordinated by the Company’s Office of Technology, located 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 a growing trend towards outsourcing in the medical device industry, impacting the full breadth of the manufacturing cycle from 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.

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.

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.

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 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. In addition, it has increased the scope of service to the medical device market by adding sophisticated surface chemistry treatments.

Processing of Additional Formed Components. Over the past several years, the Company has taken advantage of additional opportunities in the market to increase its business of processing semi-finished material into formed components. While the Company will continue to seek out new opportunities for such formed components, in FY2003 the Company anticipates that it will focus its resources to a somewhat greater extent on seeking additional customers for existing component concepts and new opportunities for its semi-finished material.

Sales to Raychem. In 1996, in connection with the acquisition by Memry of its West coast facility from Raychem Corporation (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 product line acquired by Memry in certain specified fields of use for an initial term of five years. 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 were 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. Industrial and commercial sales handled by Raychem under the agreement are reported as gross sales, with commission due Raychem treated as ordinary sales expense. The Company is currently in negotiations with Raychem regarding the possible termination of this agreement.

Sales to Memry Europe. In connection with the sale of Memry Europe to Wilfried Van Moorleghem, Memry entered into a License and Supply Agreement with Memry Europe (which has been renamed AMT). Pursuant to the License and Supply Agreement, Memry agreed to supply to Memry Europe certain alloys and tubing products. In addition, conditional upon Memry being granted certain patents, Memry agreed to grant to Memry Europe a right and royalty-bearing license to such patents and a right and royalty-bearing license to certain electropolishing technology and tubing technology.

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.

The Company faces competition from other SMA processors, who compete with the Company in the sale of semi-finished materials (primarily with the Company’s California operation) and formed components (with Memry’s Connecticut and California 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). In addition, AMT (formerly Memry Europe) is a competitor. However, pursuant to the License and Supply Agreement between Memry and AMT, the parties agreed that AMT has the rights to use certain of our technology only in Europe and Asia, while we have retained such rights elsewhere. The Company believes that Cordis/Johnson and

The Company intends to compete, and advance its position, based primarily on its manufacturing capabilities, its proprietary intellectual property positions, its knowledge of the processing parameter 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 and its ability to assist customers in the design process and bringing new products quickly to market.

In the last decade, the Company has received nine issuances of U.S. patents in fields of medical devices, automotive, valving mechanisms, sporting goods, and consumer products using shape memory alloys and related effects. These include recently issued U.S. patents on SMA sealing components for automotive and hydraulic applications as well as on pseudoelastic beta Ti alloys for eyewear, orthopedic, orthodontic and medical uses, trade-named “Flexium”. There are an additional seven applications in either pending or provisional status covering potential protection in eyewear, medical and oilfield related applications. The Company has foreign patents in force in various foreign countries covering some of its U.S. patents where the Company does business or where the Company otherwise determined to seek foreign patent coverage. The company has also applied for patent protection in several foreign countries.

As part of the Raychem Acquisition, the Company controls an additional seven U.S. patents, as well as a variety of foreign patents and domestic and foreign patent applications, relating primarily to alloy compositions, the production of semi-finished materials such as tubing, and the utilization of nickel-titanium alloys having superelasticity and shape memory effect. Also included in the Acquisition, the Company was assigned a non-exclusive license to use NiTiNb alloys and related processing technologies for coupling, connectors, and sealing devices in fields other than fluid fitting products for uses in marine, aerospace or nuclear markets.

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 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 and the Company does not 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.

The Company cannot assure you that any patent will be issued as a result of its pending applications in any foreign country or any future applications in any foreign country or that, if issued, these patents will be sufficient to protect the Company’s technology. The patent laws and laws concerning proprietary rights of some foreign countries may not protect the Company’s patent or proprietary rights to the same extent as do the laws of the United States. This may make the possibility of piracy of the Company’s technology and products more likely.

The Company cannot assure you that the steps it has taken to protect its patents will be adequate to prevent misappropriation of its technology. In addition, the Company cannot assure you that any existing or future United States or foreign patents will not be challenged, invalidated or circumvented, or that any patent granted will provide us with adequate protection or any competitive advantages.

During fiscal 2002, the Company spent approximately $2,417,000 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 $1,699,000 and $1,498,000 during fiscal years 2001 and 2000 respectfully 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 $636,000 during fiscal 2002 on “funded” research contributing to the development of SMA components pursuant to customer arrangements. These “funded” research and development costs are borne directly by the customers of the Company, as applicable, and, for purposes of the Company’s financial statements, are part of “cost of revenues,” rather than research and development. Prior to fiscal year 2002, “funded” research and development also included costs borne directly by the European Union and the Flemish regional government (Belgium), which were associated with the Company’s European subsidiary, which was sold in fiscal year 2001. By comparison, the Company spent approximately $676,000 and $498,000 on “funded” research and development in fiscal 2001 and 2000 respectively, which amounts were accounted for as “cost of revenues”. The amount of “funded” research and development that the Company will undertake in the future will depend upon its customer’s needs.

Effective May 31, 2001, the Company relocated its headquarters and eastern manufacturing operations from Brookfield, CT to a new facility located approximately 5 miles away in Bethel, CT. The Company signed a lease effective May 25, 2001, to expire on June 17, 2011, for office and manufacturing space located at 3 Berkshire Blvd., Bethel, CT 06801. The building is a single story, brick and block construction facility located in Berkshire Corporate Park, a suburban office center. The premises have a floor area of approximately 37,500 square feet, of which approximately 8,200 square feet is used by the Company for general administrative, executive, and sales purposes, and approximately 29,300 square feet is used 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 $28,000.

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, due to an adjustment for increases in the fair market value of the premises. On August 27, 2001, the Company signed a lease, effective October 1, 2001, with 4065 Associates, L.P., the landlord of the facilities located at 4065 Campbell Avenue, Menlo Park, for a lease which ends on March 31, 2003. This lease is for the exact same premises where the Company has previously been a sublessee of Raychem. The lease provides for a monthly base rental of approximately $49,000. On November 6, 2001, the Company amended its lease for its facilities located at 4065 Campbell Avenue, Menlo Park, California, to extend the term until September 30, 2004. Under the terms of the amended lease, the Company will continue to pay a monthly base rent of approximately $49,000 through March, 2003, and subsequent to that date, the monthly base rental shall be modified to reflect changes in the Consumer Price Index. The other major provisions of the lease remain unchanged.

To accommodate growth in the Company’s medical device components business, on March 15, 2000, the Company subleased approximately 10,000 square feet of additional light manufacturing and office space at 4020 Campbell Avenue, Menlo Park, California. The sublease is scheduled to expire on September 30, 2003, and provides for an average monthly base rental of approximately $11,000. The Company has an option to extend the sublease through September 30, 2006.

On October 31, 1998, as part of its acquisition of AMT, the Company, through a subsidiary, acquired an approximately 15,200 square foot facility located at Daelemveld 1113, B-3540 Herk-de-Stad, Belgium. This facility and the accompanying land were among the assets sold by the Company on February 8, 2001, to Wilfried Van Moorleghan.

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. Management is analyzing the facility requirements and reviewing options to determine how to best meet these requirements.

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, 2000 through July 12, 2000, the Company’s Common Stock traded on the OTC Bulletin Board under the symbol MRMY. On June 30, 2002, there were approximately 3,382 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 over the past two years. For the period July 1, 2000 through July 12, 2000, the prices are as reported by the National Quotations Bureau. OTC Bulletin Board prices are inter-dealer prices and may not represent actual transactions. The common stock price beginning July 13, 2001, are closing prices as reported on the American Stock Exchange.

	Years Ended
	2002	2001		2000	1999		1998
	In thousands, except per share data
Revenues	32,895	29,913		26,996	18,886		19,077
Net income (loss)	3,783	(4,689	)	1,109	(1,349	)	2,925
Earnings (loss) per share:
Basic	0.16	(0.21	)	0.05	(0.07	)	0.16
Diluted	0.15	(0.21	)	0.05	(0.07	)	0.14
Total Assets	22,188	19,053		22,543	18,182		13,085
Long-term debt	1,292	1,215		2,049	898		599
Stockholders’ equity	16,620	11,130		12,100	10,966		10,125

FY2001	6,465		6,519		8,781	8,148	29,913
GROSS PROFIT
FY2002	4,155		3,898		2,731	3,769	14,553
FY2001	1,201		2,132		4,171	3,999	11,503
NET INCOME (LOSS)
FY2002	1,485		1,013		243	1,042	3,783
FY2001	(1,797	)	(5,203	)(a)	1,147	1,164	(4,689	)
BASIC EARNINGS (LOSS) PER SHARE
FY2002	0.06		0.04		0.01	0.04	0.16
FY2001	(0.08	)	(0.24	)(a)	0.05	0.05	(0.21	)
DILUTED EARNINGS (LOSS) PER SHARE
FY2002	0.06		0.04		0.01	0.04	0.15
FY2001	(0.08	)	(0.24

Delaware		06-1084424
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3 Berkshire Blvd., Bethel, CT		06801
(Address of principal executive offices)		(Zip Code)

Title of each class		Name of each exchange on which registered
Common Stock, par value $.01 per share		American Stock Exchange

		Page
Part I.
Item 1	Business	1
Item 2.	Description of Property	7
Item 3.	Legal Proceedings	8
Item 4.	Submission of Matters to a Vote of Security Holders	8

Part II.
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	9
Item 6.	Selected Financial Data	9
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	16
Item 8.	Financial Statements and Supplementary Data	16
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	16

Part III.
Item 10.	Directors and Executive Officers of the Registrant	17
Item 11.	Executive Compensation	17
Item 12.	Security Ownership of Certain Beneficial Owners and Management	17
Item 13.	Certain Relationships and Related Transactions	17

Part IV.
Item 14.	Controls and Procedures	17
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8K	18

Signatures		21

Certifications		22

	Fiscal year ended June 30
	2002				2001
	High		Low		High		Low
1st Quarter	$	1.15	$	0.76	$	4.12	$	1.94
2nd Quarter		1.35		0.85		2.00		.88
3rd Quarter		1.68		1.10		1.38		.80
4th Quarter		2.61		1.65		1.15		.60

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	FIRST QUARTER	SECOND QUARTER	THIRD QUARTER	FOURTH QUARTER	FISCAL YEAR
NET SALES
FY2002	7,848	8,349	7,519	9,179	32,895