-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BIiSIHgQeL7pZGUhIUZG9Wgo0aB313aie77JVxrqUd8FmjLLgjYtM09YCz660AJc Wr0CPCxs59FdIy8x8bavTQ== 0000927016-97-001185.txt : 19970430 0000927016-97-001185.hdr.sgml : 19970430 ACCESSION NUMBER: 0000927016-97-001185 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970429 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NITINOL MEDICAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0001017259 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 954090463 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21001 FILM NUMBER: 97589976 BUSINESS ADDRESS: STREET 1: 263 SUMMER STREET CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6177370930 MAIL ADDRESS: STREET 1: 263 SUMMER STREET CITY: BOSTON STATE: MA ZIP: 02210 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1997 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______ Commission file number: 0-21001 Nitinol Medical Technologies, Inc. ---------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 95-4090463 - ------------------------------------- ---------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 27 Wormwood Street, Boston, Massachusetts 02210 - ---------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) 617-737-0930 ------------ (Registrant's Telephone Number, Including Area Code) N/A --- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last 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 --- --- As of April 23, 1997, there were 9,553,331 shares of Common Stock, $.001 par value per share, outstanding. NITINOL MEDICAL TECHNOLOGIES, INC. INDEX -----
Part I. Financial Information Page Number ----------- Item 1. Consolidated Balance Sheets 3 at December 31, 1996 and March 31, 1997 Consolidated Statements of 4 Operations for the Three Months Ended March 31, 1997 and 1996 Consolidated Statements of Cash 5 Flows for the Three Months Ended March 31, 1997 and 1996 Notes to Consolidated Financial 6-10 Statements Item 2. Management's Discussion and 11-14 Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative N/A Disclosure about Market Risk Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 Exhibit 10.1 Exhibit 11.1 Exhibit 27.1
PART I FINANCIAL INFORMATION Nitinol Medical Technologies, Inc. and Subsidiaries Consolidated Balance Sheets
At At March 31, December 31, 1997 1996 ----------------- ----------------- ASSETS (Unaudited) (Audited) Current assets: Cash and cash equivalents $ 5,066,029 $ 4,082,486 Marketable securities 22,041,145 25,273,555 Accounts receivable 795,696 782,230 Inventories 927,130 745,977 Prepaid expenses and other current assets 997,635 610,017 ----------------- ----------------- Total current assets 29,827,635 31,494,265 ----------------- ----------------- Property and equipment, at cost: Leasehold improvements 1,221,659 1,191,498 Laboratory and computer equipment 968,460 925,166 Equipment under capital lease 572,143 548,063 Office furniture and equipment 100,666 93,031 ----------------- ----------------- 2,862,928 2,757,758 Less- Accumulated depreciation and amortization 613,938 504,909 ----------------- ----------------- 2,248,990 2,252,849 ----------------- ----------------- Long-term investments in marketable securities 2,698,289 1,083,763 Other assets 162,449 98,627 ----------------- ----------------- $ 34,937,363 $ 34,929,504 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 385,608 $ 420,424 Accrued expenses 581,777 678,164 Current portion of capital lease obligation 103,217 94,954 ----------------- ----------------- Total current liabilities 1,070,602 1,193,542 ----------------- ----------------- Capital lease obligation, net of current portion 407,031 415,591 Stockholders' equity Common stock, $.001 par value- Authorized-30,000,000 shares Issued and outstanding-9,488,552 and 9,435,922 shares at March 31, 1997 and December 31,1996, respectively 9,489 9,437 Paid-in Capital 35,381,767 35,321,821 Accumulated deficit (1,931,526) (2,010,887) ----------------- ----------------- Total stockholders' equity 33,459,730 33,320,371 ----------------- ----------------- $ 34,937,363 $ 34,929,504 ================= =================
The accompanying Notes are an integral part of these Consolidated Financial Statements. 3 Nitinol Medical Technologies, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited)
For the Three Months Ended March 31, 1997 1996 --------------------------------- Revenues: Product sales $1,899,043 $ 859,554 License fees 250,000 437,500 Product development 30,640 64,816 --------------------------------- 2,179,683 1,361,870 --------------------------------- Expenses: Cost of product sales 895,593 377,578 Research and development 752,753 523,146 General and administrative 676,226 452,263 Selling and marketing 137,741 48,168 In-process research and development - 1,111,134 --------------------------------- 2,462,313 2,512,289 --------------------------------- Loss from operations (282,630) (1,150,419) --------------------------------- Interest expense (9,430) (17,349) Interest income 411,921 42,339 --------------------------------- 402,491 24,990 --------------------------------- Income (loss) before provision for income taxes 119,861 (1,125,429) Provision for income taxes 40,500 - --------------------------------- Net income (loss) $ 79,361 $ (1,125,429) ================================= Net income (loss) per common and common equivalent share $ 0.01 $ (0.17) ================================= Weighted average common and common equivalent shares outstanding 10,938,656 6,819,262 =================================
The accompanying Notes are an integral part of these Consolidated Financial Statements. 4 Nitinol Medical Technologies, Inc and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 1997 1996 --------------------------------- Cash flows from operating activities: Net income (loss) $ 79,361 $ (1,125,429) Adjustments to reconcile net income (loss) to net cash used in operating activities- Depreciation and amortization 111,170 28,837 Common stock issued for in-process research and development - 806,174 Changes in assets and liabilities- Accounts receivable (13,466) (300,039) Inventories (181,153) (12,450) Prepaid expenses and other current assets (387,618) (28,626) Accounts payable (34,816) (262,449) Accrued expenses (96,387) 84,838 Deferred revenue - (72,492) --------------------------------- Net cash used in operating activities (522,909) (881,636) --------------------------------- Cash flows from investing activities: Maturities of marketable securities 1,617,884 - Purchases of property and equipment (81,091) (44,336) (Increase) decrease in other assets (65,963) 25,246 --------------------------------- Net cash provided by (used in) investing activities 1,470,830 (19,090) --------------------------------- Cash flows from financing activities: Payments of loan from distributor - (159,500) Proceeds from issuance of convertible preferred stock, net - 7,510,998 Distributions to stockholders - (100,000) Payments of capital lease obligations (24,376) - Exercise of stock options 59,998 --------------------------------- Net cash provided by financing activities 35,622 7,251,498 --------------------------------- Net increase in cash and cash equivalents 983,543 6,350,772 Cash and cash equivalents, beginning of period 4,082,486 533,247 --------------------------------- Cash and cash equivalents, end of period $5,066,029 $ 6,884,019 ================================= Supplemental disclosure of cash flow information: Cash paid during the period for- Interest $ 9,430 $ 3,582 ================================= Taxes $ 7,500 $ - ================================= Supplemental disclosure of non-cash investing and financing transactions: Equipment under capital lease obligation $ 24,079 $ - =================================
The accompanying Notes are an integral part of these Consolidated Financial Statements. 5 NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Operations Nitinol Medical Technologies, Inc. (the Company) designs, develops, and markets innovative medical devices that utilize advanced technologies and are delivered by minimally invasive procedures. The Company's products are designed to offer alternative approaches to existing complex treatments, thereby reducing patient trauma, shortening procedure, hospitalization and recovery times, and lowering overall treatment costs. The Company's patented medical devices include self-expanding stents, vena cava filters, and septal repair devices. At this time, the Company's stents have been commercially launched in Europe for certain indications, its vena cava filters are marketed in the United States and abroad, and the CardioSEAL device is in the clinical trials stage in U.S. and European markets. The Company is subject to a number of risks similar to those of other companies in this stage of development, including uncertainties regarding the development of commercially viable products, competition from alternative procedures and larger companies, dependence on key personnel and government regulation. 2. Interim Financial Statements The accompanying Consolidated Financial Statements as of March 31, 1997 and for the three-month period then ended are unaudited. In management's opinion, these unaudited Consolidated Financial Statements have been prepared on the same basis as the audited Consolidated Financial Statements included in the Company's Annual Report filed on Form 10-K dated March 12, 1997 and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results for such interim periods. The results of operations for the three months ended March 31, 1997 are not necessarily indicative of the results expected for the fiscal year ending December 31, 1997. 3. Cash and Cash Equivalents, Marketable Securities, and Long-Term Investments In accordance with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Company has classified certain of its marketable securities and long-term investments as held-to-maturity and certain of its marketable securities as available-for- sale. 6 NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. Cash and Cash Equivalents, Marketable Securities, and Long-Term Investments--(continued) Held-to-maturity securities represent those securities for which the Company has the intent and ability to hold to maturity and are reported at amortized cost. Available-for-sale securities represent those securities that do not meet the classification of held-to-maturity, are not actively traded and are reported at fair market value with any unrealized gains and losses included in stockholders' equity. The Company considers all investments with maturities of 90 days or less from the date of the purchase to be cash equivalents. Cash and cash equivalents, which are carried at cost and approximate market, consist of the following at:
MARCH 31, DECEMBER 31, 1997 1996 ------------------- ------------------ Cash $ 1,024,905 $ 816,124 Cash equivalents-- Commercial paper 3,961,323 2,994,829 Money market 79,801 271,533 ----------- ----------- $ 5,066,029 $ 4,082,486 =========== =========== Marketable securities consists of the following at: MARCH 31, DECEMBER 31, 1997 1996 ----------- ----------- Held-to-maturity-- Commercial paper $ 8,944,546 $10,958,453 Eurodollar bonds 8,858,129 11,084,143 Medium-term notes 500,612 501,596 Corporate debt securities 337,804 329,363 ----------- ----------- 18,641,091 22,873,555 Available-for-sale-- Taxable auction securities 3,400,054 2,400,000 ----------- ----------- $22,041,145 $25,273,555 =========== ===========
7 NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. Cash and Cash Equivalents, Marketable Securities, and Long-Term Investments--(continued) Long-term investments, which are carried at cost and approximate market, are comprised of the following at:
MARCH 31, DECEMBER 31, 1997 1996 ------------------ ----------------- Held-to-maturity-- Eurodollar bonds $2,175,973 $1,083,763 Corporate debt securities 522,316 -- ---------- ---------- $2,698,289 $1,083,763 ========== ==========
In addition, the following amounts of interest receivable generated from the Company's cash and cash equivalents, marketable securities, and long-term investments are included in prepaid expenses and other current assets and in other assets in the accompanying balance sheets at:
MARCH 31, DECEMBER 31, 1997 1996 ------------------ ----------------- Short-term interest receivable $409,142 $237,643 Long-term interest receivable 41,416 16,953 -------- -------- $450,558 $254,596 ======== ========
4. Net Income (Loss) per Common and Common Equivalent Share Net income (loss) per common and common equivalent share is based on the weighted-average number of shares of common stock and common stock equivalents outstanding during the respective periods. All shares of capital stock, options and warrants issued during the 12 months immediately preceding the initial public offering on October 2, 1996 were treated as if they had been outstanding for all periods, in accordance with the Securities and Exchange Commission rules and regulations, calculated under the treasury stock method and based on the Offering price of $11.00 per share. 8 NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following at:
MARCH 31, DECEMBER 31, 1997 1996 --------- ------------ Components...... $692,224 $307,778 Finished Goods.. 234,906 438,199 -------- -------- $927,130 $745,977 ======== ========
Finished goods consist of materials, labor and manufacturing overhead. 6. Depreciation and Amortization The Company provides depreciation and amortization by charges to operations using the straight-line method, which allocates the cost of property and equipment over the following estimated useful lives: Asset Classification Estimated Useful Life -------------------- --------------------- Leasehold improvements Life of Lease Laboratory and computer equipment 3-7 Years Equipment under capital leases Life of Lease Office furniture and equipment 5-10 Years 7. Accrued Expenses Accrued expenses consist of the following at:
MARCH DECEMBER 31, 1997 1996 --------- ------------ Payroll and payroll related $ 17,853 $231,212 Leasehold improvements 48,553 108,553 Royalties 89,007 75,520 Other accrued expenses 426,364 262,879 -------- -------- Total accrued expenses.... $581,777 $678,164 ======== ========
9 NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES ------------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. Lease Finance Facility Agreement In June 1996, the Company entered into a $1,500,000 lease finance facility agreement with a bank under which the Company leases equipment at an interest rate that is 200 basis points above the bank's cost of funds. As of March 31, 1997, the Company has approximately $510,000 outstanding under this agreement. Leases under this agreement are payable in equal monthly installments over a period of 36-60 months and expire through November 2001. The Company may make borrowings under this agreement through March 1998. 9. New Accounting Standard In March 1997, the Financial Accounting Standards Board issued SFAS No. 128, Earnings Per Share. SFAS No. 128 establishes standards for computing and presenting earnings per share and applies to entities with publicly held common stock or potential common stock. This statement is effective for fiscal years ending after December 15, 1997 and early adoption is not permitted. When adopted, the statement will require restatement of prior years' earnings per share. The Company will adopt this statement for its fiscal year ended December 31, 1997. In addition, the Company believes that the adoption of SFAS No. 128 will not have a material effect on its financial statements. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q, other than the historical financial information, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements involve known and unknown risks, uncertainties or other factors which may cause actual results, performance or achievement of the Company to be materially different from any future results, performance, or achievement expressed or implied by such forward-looking statements. Factors that might cause such a difference include uncertainties in market demand and acceptance, government regulation and approvals, and intellectual property rights and litigation; the impact of healthcare reform programs and competitive products and pricing; risks associated with technology and product development and commercialization, potential product liability, management of growth, and dependence on significant corporate relationships, and other risks detailed in the Company's Annual Report on Form 10-K dated March 12, 1997 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Certain Factors That May Affect Future Results" filed with the Securities and Exchange Commission. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31, 1996 Revenues. Revenues for the three months ended March 31, 1997 increased to $2.2 million from $1.4 million for the three months ended March 31, 1996 (a 57% increase). Product sales increased to $1.9 million for the three months ended March 31, 1997 from $860,000 for the three months ended March 31, 1996 (a 121% increase). The increase in product sales was primarily due to increased unit sales of vena cava filters, a 3% increase in the price of vena cava filters, and the commencement of sales of the CardioSEAL Septal Occluder in connection with clinical trials at the end of September 1996. The Company recorded $250,000 in license fees from Boston Scientific Corporation ("Boston Scientific") related to its stent technology in the three months ended March 31, 1997 representing a quarterly minimum royalty payment. The three months ended March 31, 1996 included $250,000 in milestone payments and $187,500 in minimum royalty payments. Product development revenues from Boston Scientific (which consist of reimbursement of certain costs incurred by the Company) decreased to $31,000 for the three months ended March 31, 1997 from $65,000 for the three months ended March 31, 1996 (a 52% decrease), due to the completion of the Company's transfer of its stent technology to Boston Scientific in November 1995 which resulted in a reduction of stent development costs incurred by the Company on behalf of Boston Scientific. 11 Cost of Product Sales. Cost of product sales increased to $896,000 for the three months ended March 31, 1997 from $378,000 for the three months ended March 31, 1996 (a 137% increase). The cost of product sales for the three months ended March 31, 1996 was entirely related to sales of vena cava filters. The cost of product sales for the three months ended March 31, 1997 includes sales of vena cava filters and CardioSEAL Septal Occluders in connection with clinical trials. Cost of product sales, as a percent of product sales, increased to 47% for the three months ended March 31, 1997 from 44% for the three months ended March 31, 1996. This increase primarily reflects the impact of an increased share of sales of the vena cava straight-line delivery system, which has a higher unit manufacturing cost as a percentage of the selling price, and start- up manufacturing costs of the CardioSEAL Septal Occluder in connection with clinical trials. Research and Development. Research and development expenses increased to $753,000 for the three months ended March 31, 1997 from $523,000 for the three months ended March 31, 1996 (a 44% increase). The increase reflects increased activity in the Company's regulatory and clinical trial expenses of the CardioSEAL Septal Occluder in connection with clinical trials which commenced September 1996, as well as increased activity in the Company's development programs for vena cava filters and other products under development. Increased expenses resulted primarily from increases in personnel and related costs, engineering expenses and facilities related costs. The Company received reimbursement from Boston Scientific for $31,000 and $65,000 of these expenses in the three months ended March 31, 1997 and 1996, respectively, which amounts are included in revenues. General and Administrative. General and administrative expenses increased to $676,000 for the three months ended March 31, 1997 from $452,000 for the three months ended March 31, 1996 (a 50% increase). The increase consisted primarily of increases in personnel and related costs, legal and professional fees, facilities costs, consulting expenses, investor relations costs, and computer systems resulting from the Company's expanded scope of operations. Selling and Marketing. Selling and marketing expenses increased to $138,000 for the three months ended March 31, 1997 from $48,000 for the three months ended March 31, 1996 (a 188% increase). The increase related primarily to the pre- marketing activities related to the CardioSEAL Septal Occluder in connection with clinical trials which commenced September 1996. In-Process Research and Development: For the three months ended March 31, 1996, the Company recorded a charge of $1.1 million for in-process research and development related to the CardioSEAL Septal Occluder which was acquired in February 1996. See Note 3 of Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K as filed on March 12, 1997 with the Securities and Exchange Commission. 12 Interest Income, Net. Interest income, net was $402,000 for the three months ended March 31, 1997 as compared to $25,000 for the three months ended March 31, 1996. The increase was primarily due to the receipt of $7.5 million in net proceeds from the sale of Convertible Preferred Stock in February 1996 and the closing of the Company's initial public offering of 3,150,000 shares of common stock in October 1996 resulting in net proceeds to the Company of $31.2 million. Income Taxes. The Company had a provision for income taxes of $40,500 for the three months ended March 31, 1997 based on an operating income of $120,000 for the period. There was no provision for the three months ended March 31, 1996 as the Company incurred an operating loss for the period. LIQUIDITY AND CAPITAL RESOURCES In the three months ended March 31, 1997, the Company's operations utilized cash of $523,000 which was used primarily for working capital. In the three months ended March 31, 1996, the Company's operations utilized cash of $882,000 which was used primarily to fund an operating loss of $1,125,000 and for working capital. Purchases and capitalized leases of property and equipment for use in its research and development and general and administrative activities amounted to $105,000 for the three months ended March 31, 1997. In June 1996, the Company entered into a $1.5 million equipment lease line of credit agreement without covenants, which can be used through March 1998, of which approximately $930,000 was unused at March 31, 1997. In May 1996, the Company entered into a ten-year lease for a new manufacturing, research, and administrative facility which, beginning in the third quarter of 1996, increased its annual lease payments by approximately $400,000. The Company anticipates incurring costs for additional purchases of equipment, furniture and leasehold improvements as a result of entering into this lease. The Company is party to various other substantial contractual arrangements including salaries and fees for current employees and consultants which are likely to increase as additional agreements are entered into and additional personnel are retained. The Company also has committed to purchase certain minimum quantities of the vena cava filter from a supplier through June 2001. See Note 8 to the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 12, 1997. All of these arrangements require cash payments by the Company over varying periods of time. Certain of these arrangements are cancelable on short notice and certain require termination or severance payments as part of any early termination. 13 The Company believes that its existing resources and cash flow from current operations will be sufficient to fund its current level of operations and planned new product development, including increased working capital requirements and capital expenditures, for the foreseeable future. The Company expects to expend substantial resources to complete development of the Company's products, seek regulatory clearances or approvals, build its marketing, sales and manufacturing organizations and conduct further research and development. The Company may require additional funds for its research and product development programs, preclinical and clinical testing, operating expenses, regulatory processes, manufacturing and marketing programs and potential licenses and acquisitions. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. The Company's capital requirements will depend on numerous factors, including the sales of its products, the progress of its research and development programs, the progress of preclinical and clinical testing, the time and cost involved in obtaining regulatory approvals, the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, competing technological and market developments, developments and changes in the Company's existing research, licensing and other relationships and terms of any collaborative, licensing and other arrangements that the Company may establish. 14 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits -------- 10.1 1997 Employee Stock Purchase Plan. 11.1 Statement re: Company's Earnings Per Share. 27.1 Financial Data Schedule. (b) Reports on Form 8-K. -------------------- The Company did not file any Reports on Form 8-K during the quarter ended March 31, 1997. 15 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NITINOL MEDICAL TECHNOLOGIES, INC. Date: April 29, 1997 By: /s/Thomas M. Tully ---------------------------------------- Thomas M. Tully President and Chief Executive Officer Date: April 29, 1997 By: /s/Theodore I. Pincus ---------------------------------------- Theodore I. Pincus Executive Vice President and Chief Financial Officer 16 EXHIBIT INDEX Exhibits -------- 10.1 1997 Employee Stock Purchase Plan. 11.1 Statement re: Company's Earnings Per Share. 27.1 Financial Data Schedule. EX-10.1 2 STOCK PURCHASE PLAN EXHIBIT 10.1 NITINOL MEDICAL TECHNOLOGIES, INC. 1997 EMPLOYEE STOCK PURCHASE PLAN March 11, 1997 The purpose of this Plan is to provide eligible employees of Nitinol Medical Technologies, Inc. (the "Company") and certain of its subsidiaries with opportunities to purchase shares of the Company's common stock, $.001 par value (the "Common Stock"), commencing on October 1, 1997. Ninety-thousand (90,000) shares of Common Stock in the aggregate have been approved for this purpose. 1 Administration. The Plan will be administered by the Company's -------------- Board of Directors (the "Board") or by a Committee appointed by the Board (the "Committee"). The Board or the Committee has authority to make rules and regulations for the administration of the Plan and its interpretation and decisions with regard thereto shall be final and conclusive. 2 Eligibility. Participation in the Plan will neither be permitted ----------- nor denied contrary to the requirements of Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations promulgated thereunder. All employees of the Company, including Directors who are employees, and all employees of any subsidiary of the Company (as defined in Section 424(f) of the Code) designated by the Board or the Committee from time to time (a "Designated Subsidiary"), are eligible to participate in any one or more of the offerings of Options (as defined in Section 9) to purchase Common Stock under the Plan provided that: b. they are regularly employed by the Company or a Designated Subsidiary for more than 20 hours a week and for more than five months in a calendar year; and c. they have been employed by the Company or a Designated Subsidiary for at least three months prior to enrolling in the Plan; and d. they are employees of the Company or a Designated Subsidiary on the first day of the applicable Plan Period (as defined below). No employee may be granted an option hereunder if such employee, immediately after the option is granted, owns 5% or more of the total combined voting power or value of the stock of the Company or any subsidiary. For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of an employee, and all stock which the employee has a contractual right to purchase shall be treated as stock owned by the employee. 3 Offerings. The Company will make one or more offerings --------- ("Offerings") to employees to purchase stock under this Plan. Offerings will begin each April and October, or the first business day thereafter (the "Offering Commencement Dates"). Each Offering Commencement Date will begin a six-month period (a "Plan Period") during which payroll deductions will be made and held for the purchase of Common Stock at the end of the Plan Period. The Board or the Committee may, at its discretion, choose a different Plan Period of twelve (12) months or less for subsequent Offerings. 4 Participation. An employee eligible on the Offering Commencement ------------- Date of any Offering may participate in such Offering by completing and forwarding a payroll deduction authorization form to the employee's appropriate payroll office at least 10 days prior to the applicable Offering Commencement Date. The form will authorize a regular payroll deduction from the Compensation received by the employee during the Plan Period. Unless an employee files a new form or withdraws from the Plan, his deductions and purchases will continue at the same rate for future Offerings under the Plan as long as the Plan remains in effect. The term "Compensation" means the amount of money reportable on the employee's Federal Income Tax Withholding Statement, excluding overtime, shift premium, incentive or bonus awards, allowances and reimbursements for expenses such as relocation allowances for travel expenses, income or gains on the exercise of Company stock options or stock appreciation rights, and similar items, whether or not shown on the employee's Federal Income Tax Withholding Statement, but including, in the case of salespersons, sales commissions to the extent determined by the Board or the Committee. 5 Deductions. The Company will maintain payroll deduction accounts ---------- for all participating employees. With respect to any Offering made under this Plan, an employee may authorize a payroll deduction in any dollar amount up to a maximum of 12% of the Compensation he or she receives during the Plan Period or such shorter period during which deductions from payroll are made. Payroll deductions may be at any rate between 2% and 12% of Compensation with any change in compensation during the Plan Period to result in an automatic corresponding change in the dollar amount withheld. No employee may be granted an Option (as defined in Section 9) which permits his rights to purchase Common Stock under this Plan and any other stock purchase plan of the Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value of such Common Stock (determined at the Offering Commencement Date of the Plan Period) for each calendar year in which the Option is outstanding at any time. 6 Deduction Changes. An employee may decrease or discontinue his ----------------- payroll deduction once during any Plan Period, by filing a new payroll deduction authorization form. However, an employee may not increase his payroll deduction during a Plan Period. If an employee elects to discontinue his payroll deductions during a Plan Period, but does not elect to withdraw his funds pursuant to Section 8 hereof, funds deducted prior to his election to discontinue will be applied to the purchase of Common Stock on the Exercise Date (as defined below). -2- 7 Interest. Interest will not be paid on any employee accounts, -------- except to the extent that the Board or the Committee, in its sole discretion, elects to credit employee accounts with interest at such per annum rate as it may from time to time determine. 8 Withdrawal of Funds. An employee may at any time prior to the ------------------- close of business on the last business day in a Plan Period and for any reason permanently draw out the balance accumulated in the employee's account and thereby withdraw from participation in an Offering. Partial withdrawals are not permitted. The employee may not begin participation again during the remainder of the Plan Period. The employee may participate in any subsequent Offering in accordance with terms and conditions established by the Board or the Committee, except that employees who are also directors or officers of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules promulgated there under may not participate again for a period of at least six months as provided in Rule 16b-3(d)(2)(i) or any successor provision. 9 Purchase of Shares. On the Offering Commencement Date of each ------------------ Plan Period, the Company will grant to each eligible employee who is then a participant in the Plan an option ("Option") to purchase on the last business day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter provided for, such number of whole shares of Common Stock of the Company reserved for the purposes of the Plan as does not exceed the number of shares determined by dividing 12% of such employee's annualized Compensation for the immediately prior six-month period by the price determined in accordance with the formula set forth in the following paragraph but using the closing price on the Offering Commencement Date of such Plan Period. The purchase price for each share purchased will be 85% of the closing price of the Common Stock on (i) the first business day of such Plan Period or (ii) the Exercise Date, whichever closing price shall be less. Such closing price shall be (a) the closing price on any national securities exchange on which the Common Stock is listed, (b) the closing price of the Common Stock on the Nasdaq National Market or (c) the average of the closing bid and asked prices in the over-the-counter-market, whichever is applicable, as published in The Wall Street Journal. If no sales of Common Stock were made on such a day, - ----------------------- the price of the Common Stock for purposes of clauses (a) and (b) above shall be the reported price for the next preceding day on which sales were made. Each employee who continues to be a participant in the Plan on the Exercise Date shall be deemed to have exercised his Option at the Option Price on such date and shall be deemed to have purchased from the Company the number of full shares of Common Stock reserved for the purpose of the Plan that his accumulated payroll deductions on such date will pay for pursuant to the formula set forth above (but not in excess of the maximum number determined in the manner set forth above). Any balance remaining in an employee's payroll deduction account at the end of a Plan Period will be automatically refunded to the employee, except that any balance which is -3- less than the purchase price of one share of Common Stock will be carried forward into the employee's payroll deduction account for the following Offering, unless the employee elects not to participate in the following Offering under the Plan, in which case the balance in the employee's account shall be refunded. 10 Issuance of Certificates. Certificates representing shares of ------------------------ Common Stock purchased under the Plan may be issued only in the name of the employee, in the name of the employee and another person of legal age as joint tenants with rights of survivorship, or (in the Company's sole discretion) in the street name of a brokerage firm, bank or other nominee holder designated by the employee. 11 Rights on Retirement, Death or Termination of Employment. In the -------------------------------------------------------- event of a participating employee's termination of employment prior to the last business day of a Plan Period, no payroll deduction shall be taken from any pay due and owing to an employee and the balance in the employee's account shall be paid to the employee or, in the event of the employee's death, (a) to a beneficiary previously designated in a revocable notice signed by the employee (with any spousal consent required under state law) or (b) in the absence of such a designated beneficiary, to the executor or administrator of the employee's estate or (c) if no such executor or administrator has been appointed to the knowledge of the Company, to such other person(s) as the Company may, in its discretion, designate. If, prior to the last business day of the Plan Period, the Designated Subsidiary by which an employee is employed shall cease to be a subsidiary of the Company, or if the employee is transferred to a subsidiary of the Company that is not a Designated Subsidiary, the employee shall be deemed to have terminated employment for the purposes of this Plan. 12 Optionees Not Stockholders. Neither the granting of an Option to -------------------------- an employee nor the deductions from his pay shall constitute such employee a stockholder of the shares of Common Stock covered by an Option under this Plan until such shares have been purchased by and issued to him. 13 Rights Not Transferable. Rights under this Plan are not ----------------------- transferable by a participating employee other than by will or the laws of descent and distribution, and are exercisable during the employee's lifetime only by the employee. 14 Application of Funds. All funds received or held by the Company -------------------- under this Plan may be combined with other corporate funds and may be used for any corporate purpose. 15 Adjustment in Case of Changes Affecting Common Stock. In the ---------------------------------------------------- event of a subdivision of outstanding shares of Common Stock, or the payment of a dividend in Common Stock, the number of shares approved for this Plan, and the share limitation set forth in Section 9, shall be increased proportionately, and such other adjustment shall be made as may be deemed equitable by the Board or the Committee. In the event of any other -4- change affecting the Common Stock, such adjustment shall be made as may be deemed equitable by the Board or the Committee to give proper effect to such event. 16 Merger. If the Company shall at any time merge or consolidate ------ with another corporation and the holders of the capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 80% by voting power of the capital stock of the surviving corporation ("Continuity of Control"), the holder of each Option then outstanding will thereafter be entitled to receive at the next Exercise Date upon the exercise of such Option for each share as to which such Option shall be exercised the securities or property which a holder of one share of the Common Stock was entitled to upon and at the time of such merger, and the Committee shall take such steps in connection with such merger as the Committee shall deem necessary to assure that the provisions of Paragraph 15 shall thereafter be applicable, as nearly as reasonably may be, in relation to the said securities or property as to which such holder of such Option might thereafter be entitled to receive thereunder. In the event of a merger or consolidation of the Company with or into another corporation which does not involve Continuity of Control, or of a sale of all or substantially all of the assets of the Company while unexercised Options remain outstanding under the Plan, (a) subject to the provisions of clauses (b) and (c), after the effective date of such transaction, each holder of an outstanding Option shall be entitled, upon exercise of such Option, to receive in lieu of shares of Common Stock, shares of such stock or other securities as the holders of shares of Common Stock received pursuant to the terms of such transaction; or (b) all outstanding Options may be cancelled by the Board or the Committee as of a date prior to the effective date of any such transaction and all payroll deductions shall be paid out to the participating employees; or (c) all outstanding Options may be cancelled by the Board or the Committee as of the effective date of any such transaction, provided that notice of such cancellation shall be given to each holder of an Option, and each holder of an Option shall have the right to exercise such Option in full based on payroll deductions then credited to his account as of a date determined by the Board or the Committee, which date shall not be less than ten (10) days preceding the effective date of such transaction. 17 Amendment of the Plan. The Board may at any time, and from time --------------------- to time, amend this Plan in any respect, except that (a) if the approval of any such amendment by the shareholders of the Company is required by Section 423 of the Code or by Rule 16b-3 under the Exchange Act, such amendment shall not be effected without such approval, and (b) in no event may any amendment be made which would cause the Plan to fail to comply with Section 16 of the Exchange Act and the rules promulgated thereunder, as in effect from time to time, or Section 423 of the Code. 18 Insufficient Shares. In the event that the total number of ------------------- shares of Common Stock specified in elections to be purchased under any Offering plus the number of shares purchased under previous Offerings under this Plan exceeds the maximum number of shares -5- issuable under this Plan, the Board or the Committee will allot the shares then available on a pro rata basis. 19 Termination of the Plan. This Plan may be terminated at any time ----------------------- by the Board. Upon termination of this Plan all amounts in the accounts of participating employees shall be promptly refunded. 20 Governmental Regulations. The Company's obligation to sell and ------------------------ deliver Common Stock under this Plan is subject to listing on a national stock exchange or quotation on the Nasdaq National Market and the approval of all governmental authorities required in connection with the authorization, issuance or sale of such stock. The Plan shall be governed by Delaware law except to the extent that such law is preempted by federal law. The Plan is intended to comply with the provisions of Rule 16b-3 promulgated under the Securities Exchange Act of 1934. Any provision inconsistent with such Rule shall to that extent be inoperative and shall not affect the validity of the Plan. 21 Issuance of Shares. Shares may be issued upon exercise of an ------------------ Option from authorized but unissued Common Stock, from shares held in the treasury of the Company, or from any other proper source. 22 Notification upon Sale of Shares. Each employee agrees, by -------------------------------- entering the Plan, to promptly give the Company notice of any disposition of shares purchased under the Plan where such disposition occurs within two years after the date of grant of the Option pursuant to which such shares were purchased. 23 Effective Date and Approval of Shareholders. The Plan shall take ------------------------------------------- effect on March 11, 1997 subject to approval by the shareholders of the Company as required by Rule 16b-3 under the Exchange Act and by Section 423 of the Code, which approval must occur within twelve months of the adoption of the Plan by the Board. Adopted by the Board of Directors on March 11, 1997 Approved by the stockholders on _______________, 1997 [Amended on _______________, 199 ] -6- EX-11.1 3 EARNINGS PER SHARE EXHIBIT 11.1 NITINOL MEDICAL TECHNOLOGIES, INC. STATEMENT RE: EARNINGS PER SHARE (UNAUDITED)
For the Three Months Ended March 31, 1997 1996 ----------------------------------- Net Income (Loss) $ 79,361 $ (1,125,429) =================================== Weighted average common shares outstanding 9,437,676 4,037,189 Stock issued within twelve months of initial public offering (1) - 2,782,073 Common stock equivalents 1,500,980 - ----------------------------------- Weighted average number of common and common equiv- alent shares outstanding 10,938,656 6,819,262 ----------------------------------- Net income (loss) per share amount $ 0.01 $ (0.17) ===================================
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, stock, stock options, and stock warrants issued at prices below the initial public offering price during the 12-month period immediately preceding the initial filing date of the Company's Registration Statement of its initial public offering have been included as outstanding for all periods presented. The dilutive effect of the common stock equivalents was computed in accordance with the treasury stock method. EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 5,066,029 24,739,434 795,696 0 927,130 29,827,635 2,862,928 613,938 34,937,363 1,070,602 0 0 0 9,489 33,459,730 34,937,363 1,899,043 2,179,683 895,593 1,566,720 0 0 (402,491) 119,861 40,500 79,361 0 0 0 79,361 .01 .01
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