Tableof Contents

 

 

 

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-Q**

** **

**x****      QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THEQUARTERLY PERIOD ENDED JUNE 30, 2009.**

** **

**OR**

** **

**o****         TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 FOR THE TRANSITION PERIOD FROM             TO            .**

** **

**Commission File Number  0-18592**

** **

**MERIT MEDICAL SYSTEMS, INC.**

(Exact name of Registrant as specified in its charter)

 

| **Utah**                                                       | ** ** | **87-0447695**              |
|----------------------------------------------------------------|------------|-----------------------------|
| (State or other jurisdiction of incorporation or organization) |       | (I.R.S. Identification No.) |

 

**1600 WestMerit Parkway, South Jordan, UT, 84095**

(Address of Principal Executive Offices,including Zip Code)

 

**(801)253-1600**

(Registrant’s telephone number, including areacode)

 

Indicate by check mark whether the Registrant: (1) hasfiled all reports required to be filed by Sections 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the Registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.    Yes x No o

 

Indicate by check mark whether the Registrant hassubmitted electronically and posted on its corporate web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T during the preceding 12 months (or for such shorter periodthat the Registrant was required to submit and post such files).   Yes o No o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

| Large Accelerated Filer o |   | Accelerated Filer x         |
|--------------------------------|--------|----------------------------------|
|                           |   |                             |
| Non-Accelerated Filer o   |   | Smaller Reporting Company o |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o No x

 

Indicate the number of shares outstanding of each ofthe Registrant’s classes of common stock, as of the latest practicable date.

 

| **Common Stock** |   | **27,964,296**                     |
|------------------|--------|------------------------------------|
| Title or class   |   | Number of Shares                   |
|             |   | Outstanding at August 3, 2009 |

 

 

 

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** **

**MERITMEDICAL SYSTEMS, INC.**

** **

**INDEXTO FORM 10-Q**

** **
| ** **        | **PAGE**                                                                                               |
|-------------------|--------------------------------------------------------------------------------------------------------|
| ** **        | ** **                                                                                             |
| **PART I.**  | **FINANCIAL  INFORMATION**                                                                             | ** ** |
|              |                                                                                                   |
| Item  1.          | Financial  Statements                                                                                  |   |
|              |                                                                                                   |   |
|              | Consolidated  Balance Sheets as of June 30, 2009 and December 31, 2008                       | 1 |
|              |                                                                                                   |   |
|              | Consolidated  Statements of Operations for the three and six months ended June 30,  2009 and 2008 | 3 |
|              |                                                                                                   |   |
|              | Consolidated  Statements of Cash Flows for the six months ended June 30, 2009 and 2008            | 4 |
|              |                                                                                                   |   |
|              | Notes to  Consolidated Financial Statements                                                            | 6 |
|              |                                                                                                   |   |
| Item 2.           | Management’s Discussion and Analysis  of Financial Condition and Results of Operations            | 14 |
|              |                                                                                                   |   |
| Item 3.           | Quantitative and Qualitative  Disclosures About Market Risk                                            | 18 |
|              |                                                                                                   |   |
| Item 4.           | Controls and Procedures                                                                                | 18 |
|              |                                                                                                   |
| **PART II.** | **OTHER INFORMATION**                                                                                  | ** ** |
| ** **        | ** **                                                                                             |
| Item 1.           | Legal Proceedings                                                                                      | 19 |
|              |                                                                                                   |   |
| Item  1A.         | Risk  Factors                                                                                          | 19 |
|              |                                                                                                   |   |
| Item 4.           | Submission of Matters to a Vote of  Security Holders                                                   | 19 |
|              |                                                                                                   |   |
| Item  6.          | Exhibits                                                                                               | 20 |
|              |                                                                                                   |   |
| SIGNATURES        | 21                                                                                                     |

 

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** **

**Part I - FINANCIAL INFORMATION**

 

**ITEM1.  FINANCIAL STATEMENTS**

 

**MERITMEDICAL SYSTEMS, INC. AND SUBSIDIARIES**

CONSOLIDATED BALANCESHEETS

JUNE 30, 2009 AND DECEMBER 31, 2008

(In thousands - unaudited)

 
| ** **                                                                               | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                               | ** ** | **2009**          | ** ** | **2008**              | ** ** |
| ASSETS                                                                                   |       |              |       |                  |       |
|                                                                                     |       |              |       |                  |       |
| CURRENT  ASSETS:                                                                         |       |              |       |                  |       |
| Cash  and cash equivalents                                                               |       | $                 | 4,873      |                  | $          | 34,030 |   |
| Trade  receivables - net of allowances of $621 and $505, respectively                    |       | 30,454            |       | 27,749                |       |
| Employee  receivables                                                                    |       | 139               |       | 126                   |       |
| Other  receivables                                                                       |       | 460               |       | 818                   |       |
| Inventories                                                                              |       | 46,308            |       | 38,358                |       |
| Prepaid  expenses and other assets                                                       |       | 1,959             |       | 985                   |       |
| Deferred  income tax assets                                                              |       | 2,781             |       | 2,782                 |       |
| Income  tax refunds receivable                                                           |       | 651               |       | 607                   |       |
|                                                                                     |       |              |       |                  |       |
| Total  current assets                                                                    |       | 87,625            |       | 105,455               |       |
|                                                                                     |       |              |       |                  |       |
| PROPERTY  AND EQUIPMENT:                                                                 |       |              |       |                  |       |
| Land  and land improvements                                                              |       | 7,992             |       | 7,992                 |       |
| Building                                                                                 |       | 49,903            |       | 49,793                |       |
| Manufacturing  equipment                                                                 |       | 73,640            |       | 68,184                |       |
| Furniture  and fixtures                                                                  |       | 15,113            |       | 16,689                |       |
| Leasehold  improvements                                                                  |       | 9,906             |       | 9,868                 |       |
| Construction-in-progress                                                                 |       | 9,219             |       | 7,599                 |       |
|                                                                                     |       |              |       |                  |       |
| Total                                                                                    |       | 165,773           |       | 160,125               |       |
| Less  accumulated depreciation                                                           |       | (58,260           | )          | (56,186               | )          |
|                                                                                     |       |              |       |                  |       |
| Property  and equipment—net                                                         |       | 107,513           |       | 103,939               |       |
|                                                                                     |       |              |       |                  |       |
| OTHER  ASSETS:                                                                           |       |              |       |                  |       |
| Other  intangibles - net of accumulated amortization of $3,986 and $3,122,  respectively |       | 26,503            |       | 6,913                 |       |
| Goodwill                                                                                 |       | 32,567            |       | 13,048                |       |
| Other  assets                                                                            |       | 2,730             |       | 2,325                 |       |
| Deferred  income tax assets                                                              |       | 36                |       | 23                    |       |
| Deposits                                                                                 |       | 91                |       | 73                    |       |
|                                                                                     |       |              |       |                  |       |
| Total  other assets                                                                      |       | 61,927            |       | 22,382                |       |
|                                                                                     |       |              |       |                  |       |
| TOTAL  ASSETS                                                                            |       | $                 | 257,065    |                  | $          | 231,776 |   |

 

See notes to consolidated financial statements.

 

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**MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES**

CONSOLIDATEDBALANCE SHEETS

JUNE 30, 2009 ANDDECEMBER 31, 2008

(In thousands -unaudited)

 
| ** **                                                                                                                                                 | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                 | ** ** | **2009**          | ** ** | **2008**              | ** ** |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                                                                                 |       |              |       |                  |       |
|                                                                                                                                                       |       |              |       |                  |       |
| CURRENT  LIABILITIES:                                                                                                                                      |       |              |       |                  |       |
| Trade  payables                                                                                                                                            |       | $                 | 14,304     |                  | $          | 10,622 |   |
| Other  payables                                                                                                                                            |       | 7,000             |       |                  |       |
| Accrued  expenses                                                                                                                                          |       | 12,182            |       | 9,973                 |       |
| Advances  from employees                                                                                                                                   |       | 428               |       | 211                   |       |
| Income  taxes payable                                                                                                                                      |       | 2,161             |       | 366                   |       |
|                                                                                                                                                       |       |              |       |                  |       |
| Total  current liabilities                                                                                                                                 |       | 36,075            |       | 21,172                |       |
|                                                                                                                                                       |       |              |       |                  |       |
| DEFERRED  INCOME TAX LIABILITIES                                                                                                                           |       | 8,789             |       | 8,771                 |       |
|                                                                                                                                                       |       |              |       |                  |       |
| LIABILITIES  RELATED TO UNRECOGNIZED TAX POSITIONS                                                                                                         |       | 2,818             |       | 2,818                 |       |
|                                                                                                                                                       |       |              |       |                  |       |
| DEFERRED  COMPENSATION PAYABLE                                                                                                                             |       | 2,736             |       | 2,348                 |       |
|                                                                                                                                                       |       |              |       |                  |       |
| DEFERRED  CREDITS                                                                                                                                          |       | 1,931             |       | 1,994                 |       |
|                                                                                                                                                       |       |              |       |                  |       |
| OTHER  LONG-TERM OBLIGATIONS                                                                                                                               |       | 386               |       | 368                   |       |
|                                                                                                                                                       |       |              |       |                  |       |
| Total  liabilities                                                                                                                                         |       | 52,735            |       | 37,471                |       |
|                                                                                                                                                       |       |              |       |                  |       |
| STOCKHOLDERS’  EQUITY:                                                                                                                                |       |              |       |                  |       |
| Preferred  stock—5,000 shares authorized as of June 30, 2009 and December 31,  2008; no shares issued                                       |       |              |       |                  |       |
| Common  stock—no par value; 100,000 shares authorized; 27,943 and 28,093 shares  issued at June 30, 2009 and December 31 2008, respectively |       | 60,343            |       | 61,689                |       |
| Retained  earnings                                                                                                                                         |       | 144,052           |       | 132,674               |       |
| Accumulated  other comprehensive loss                                                                                                                      |       | (65               | )          | (58                   | )          |
|                                                                                                                                                       |       |              |       |                  |       |
| Total  stockholders’ equity                                                                                                                           |       | 204,330           |       | 194,305               |       |
|                                                                                                                                                       |       |              |       |                  |       |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                           |       | $                 | 257,065    |                  | $          | 231,776 |   |

 

See notes toconsolidated financial statements.

 

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** **

**MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES**

CONSOLIDATEDSTATEMENTS OF OPERATIONS

FOR THE THREE AND SIXMONTHS ENDED JUNE 30, 2009 AND 2008

(In thousands, except percommon share - unaudited)

 
| ** **                            | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|---------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                            | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                            | ** ** | **2009**               | ** ** | **2008**             | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                  |       |                   |       |                 |       |   |   |   |   |
| NET  SALES                            |       | $                      | 64,837     |                 | $          | 57,441 |   | $ | 123,208 |   | $ | 110,994 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| COST  OF SALES                        |       | 36,694                 |       | 32,939               |       | 70,257 |   | 64,900 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| GROSS  PROFIT                         |       | 28,143                 |       | 24,502               |       | 52,951 |   | 46,094 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| OPERATING  EXPENSES:                  |       |                   |       |                 |       |   |   |   |   |
| Selling,  general, and administrative |       | 16,287                 |       | 12,839               |       | 31,116 |   | 25,911 |   |
| Research  and development             |       | 2,893                  |       | 2,654                |       | 4,972 |   | 4,570 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| Total  operating expenses             |       | 19,180                 |       | 15,493               |       | 36,088 |   | 30,481 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| INCOME  FROM OPERATIONS               |       | 8,963                  |       | 9,009                |       | 16,863 |   | 15,613 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| OTHER  INCOME (EXPENSE):              |       |                   |       |                 |       |   |   |   |   |
| Interest  income                      |       | 28                     |       | 162                  |       | 150 |   | 312 |   |
| Other  (expense) income               |       | (6                     | )          | (16                  | )          | 46 |   | (21 | ) |
|                                  |       |                   |       |                 |       |   |   |   |   |
| Other  income - net                   |       | 22                     |       | 146                  |       | 196 |   | 291 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| INCOME  BEFORE INCOME TAXES           |       | 8,985                  |       | 9,155                |       | 17,059 |   | 15,904 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| INCOME  TAX EXPENSE                   |       | 3,144                  |       | 3,337                |       | 5,681 |   | 5,769 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| NET  INCOME                           |       | $                      | 5,841      |                 | $          | 5,818 |   | $ | 11,378 |   | $ | 10,135 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| EARNINGS  PER COMMON SHARE:           |       |                   |       |                 |       |   |   |   |   |
| Basic                                 |       | $                      | .21        |                 | $          | .21 |   | $ | .41 |   | $ | .37 |   |
| Diluted                               |       | $                      | .21        |                 | $          | .21 |   | $ | .40 |   | $ | .36 |   |
|                                  |       |                   |       |                 |       |   |   |   |   |
| AVERAGE  COMMON SHARES:               |       |                   |       |                 |       |   |   |   |   |
| Basic                                 |       | 27,924                 |       | 27,603               |       | 27,990 |   | 27,547 |   |
| Diluted                               |       | 28,427                 |       | 28,325               |       | 28,487 |   | 28,311 |   |

 

See notes toconsolidated financial statements.

 

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**MERITMEDICAL SYSTEMS, INC. AND SUBSIDIARIES**

CONSOLIDATED STATEMENTSOF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(In thousands - unaudited)

 
| ** **                                                                         | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                         | ** ** | **June 30,**    | ** ** |
| ** **                                                                         | ** ** | **2009**             | ** ** | **2008** | ** ** |
|                                                                               | ** ** | ** **           | ** ** | ** ** | ** ** |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                             |       |                 |       |   |   |
| Net  income                                                                        |       | $                    | 11,378     |   | $ | 10,135 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                 |       |   |   |
| Depreciation  and amortization                                                     |       | 5,710                |       | 5,113 |   |
| Losses  on sales and/or abandonment of property and equipment                      |       | 201                  |       | 209 |   |
| Write-off  of a certain patent and trademarks                                      |       | 72                   |       | 77 |   |
| Amortization  of deferred credits                                                  |       | (63                  | )          | (53 | ) |
| Purchase  of trading investments                                                   |       | (221                 | )          | (180 | ) |
| Net  unrealized (gains)/losses on trading investments                              |       | (185                 | )          | 90 |   |
| Deferred  income taxes                                                             |       |                 |       | (1,277 | ) |
| Stock-based  compensation                                                          |       | 575                  |       | 337 |   |
| Excess  tax benefit attributable to appreciation of common stock options exercised |       | (422                 | )          | (310 | ) |
| Changes  in operating assets and liabilities net of effects from acquisitions:     |       |                 |       |   |   |
| Trade  receivables                                                                 |       | (1,662               | )          | 1,664 |   |
| Employee  receivables                                                              |       | (11                  | )          | 18 |   |
| Other  receivables                                                                 |       | 344                  |       | 377 |   |
| Inventories                                                                        |       | (5,725               | )          | (2,006 | ) |
| Prepaid  expenses and other assets                                                 |       | (731                 | )          | (347 | ) |
| Income  tax refund receivable                                                      |       | (41                  | )          | (38 | ) |
| Deposits                                                                           |       | (18                  | )          |   |   |
| Trade  payables                                                                    |       | 3,509                |       | 1,301 |   |
| Accrued  expenses                                                                  |       | 1,656                |       | 1,254 |   |
| Advances  from employees                                                           |       | 210                  |       | 66 |   |
| Income  taxes payable                                                              |       | 2,212                |       | 411 |   |
| Current  liabilities related to unrecognized tax positions                         |       |                 |       | (1,023 | ) |
| Deferred  compensation payable                                                     |       | 388                  |       | 144 |   |
| Other  long-term obligations                                                       |       | (1                   | )          | (49 | ) |
|                                                                               |       |                 |       |   |   |
| Total  adjustments                                                                 |       | 5,797                |       | 5,778 |   |
|                                                                               |       |                 |       |   |   |
| Net  cash provided by operating activities                                         |       | 17,175               |       | 15,913 |   |
|                                                                               |       |                 |       |   |   |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                             |       |                 |       |   |   |
| Capital  expenditures for:                                                         |       |                 |       |   |   |
| Property  and equipment                                                            |       | (8,358               | )          | (7,931 | ) |
| Patents  and trademarks                                                            |       | (782                 | )          | (139 | ) |
| Proceeds  from the sale of property and equipment                                  |       | 15                   |       | 25 |   |
| Cash  paid in acquisitions                                                         |       | (35,241              | )          | (1,509 | ) |
|                                                                               |       |                 |       |   |   |
| Net  cash used in investing activities                                             |       | (44,366              | )          | (9,554 | ) |
|                                                                                    |            |                      |            |  |  |  |  |

 

See notes toconsolidated financial statements.

 

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**MERITMEDICAL SYSTEMS, INC. AND SUBSIDIARIES**

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(In thousands - unaudited)

 
| ** **                                                                               | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                               | ** ** | **June 30,**    | ** ** |
| ** **                                                                               | ** ** | **2009**             | ** ** | **2008** | ** ** |
|                                                                                     | ** ** | ** **           | ** ** | ** ** | ** ** |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                                                   |       |                 |       |   |   |
| Proceeds  from issuance of common stock                                                  |       | $                    | 385        |   | $ | 2,148 |   |
| Additions  to long-term debt                                                             |       | 10,000               |       |   |   |
| Payment  on long-term debt                                                               |       | (10,000              | )          |   |   |
| Payment  of taxes related to an exchange of common stock                                 |       | (254                 | )          |   |   |
| Common  stock repurchased and retired                                                    |       | (2,474               | )          |   |   |
| Excess  tax benefits from stock-based compensation                                       |       | 422                  |       | 310 |   |
|                                                                                     |       |                 |       |   |   |
| Net  cash (used in) provided by financing activities                                     |       | (1,921               | )          | 2,458 |   |
|                                                                                     |       |                 |       |   |   |
| EFFECT  OF EXCHANGE RATES ON CASH                                                        |       | (45                  | )          | 365 |   |
|                                                                                     |       |                 |       |   |   |
| NET  (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS                                    |       | (29,157              | )          | 9,182 |   |
|                                                                                     |       |                 |       |   |   |
| CASH  AND CASH EQUIVALENTS:                                                              |       |                 |       |   |   |
| Beginning  of period                                                                     |       | 34,030               |       | 17,574 |   |
|                                                                                     |       |                 |       |   |   |
| End  of period                                                                           |       | $                    | 4,873      |   | $ | 26,756 |   |
|                                                                                     |       |                 |       |   |   |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION—Cash paid during the period for: |       |                 |       |   |   |
| Interest                                                                                 |       | $                    | 11         |   | $ | 5 |   |
|                                                                                     |       |                 |       |   |   |
| Income  taxes                                                                            |       | $                    | 3,526      |   | $ | 7,609 |   |
|                                                                                     |       |                 |       |   |   |
| SUPPLEMENTAL  DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES                 |       |                 |       |   |   |
| Property  and equipment purchases in accounts payable                                    |       | $                    | 1,576      |   | $ | 1,877 |   |

 

Duringthe six months ended June 30, 2009, 23,829 shares of the Company’s commonstock were surrendered in exchange for the Company’s recording of payroll taxliabilities in the amount of approximately $254,000, related to the exercise ofstock options.  The shares were valuedbased upon the closing price of the Company’s common stock on the surrenderdate.

 

Duringthe six months ended June 30, 2009, 21,556 shares of the Company’s commonstock, with a value of approximately $230,000 were surrendered in exchange forthe exercise of stock options.

 

See notes to consolidatedfinancial statements.

 

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**MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES**

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

**1**.  **Basis of Presentation**. The interimconsolidated financial statements of Merit Medical Systems, Inc. (“Merit,”“we” or “us”) for the three and six-month periods ended June 30, 2009 and2008 are not audited. Our consolidated financial statements are prepared inaccordance with the requirements for unaudited interim periods, andconsequently, do not include all disclosures required to be made in conformitywith accounting principles generally accepted in the United States of America.In the opinion of management, the accompanying consolidated financialstatements contain all adjustments, consisting of normal recurring accruals,necessary for a fair presentation of our financial position as of June 30,2009, and our results of operations and cash flows for the three and six-monthperiods ended June 30, 2009 and 2008. The results of operations for thethree and six-month periods ended June 30, 2009 are not necessarilyindicative of the results for a full-year period.  These interim consolidated financialstatements should be read in conjunction with the financial statements includedin our Annual Report on Form 10-K for the year ended December 31,2008 filed with the Securities and Exchange Commission (the “SEC”).

 

Reclassifications. Subsequent to the issuance of ourQuarterly Report on Form 10-Q for the quarter ended June 30, 2008, wedetermined that changes to our deferred compensation plan balances should moreproperly be reflected as net cash provided by operating activities.  Accordingly, we have reclassified suchchanges from investing activities and financing activities to operatingactivities.  Our management has concludedthat the error was not material to our consolidated financial statements, andaccordingly the prior period presentation has been revised for 2008 byincreasing net cash provided by operating activities by approximately $54,000,decreasing net cash used in investing activities by approximately $90,000 anddecreasing net cash provided by financing activities by approximately $144,000.

 

**2. Inventories**. Inventories are stated at the lower ofcost or market.  Inventories at June 30,2009 and December 31, 2008 consisted of the following (in thousands):

 
| ** **      | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|-----------------|------------|-------------------|------------|-----------------------|------------|
| ** **      | ** ** | **2009**          | ** ** | **2008**              | ** ** |
| Finished  goods |       | $                 | 20,924     |                  | $          | 17,818 |   |
| Work-in-process |       | 5,873             |       | 4,790                 |       |
| Raw  materials  |       | 19,511            |       | 15,750                |       |
|            |       |              |       |                  |       |
| Total           |       | $                 | 46,308     |                  | $          | 38,358 |   |

 

**3.  Reporting Comprehensive Income. **Comprehensive income for the three and six-monthperiods ended June 30, 2009 and 2008 consisted of net income and foreigncurrency translation adjustments.  As of June 30,2009 and December 31, 2008, the cumulative effect of such adjustmentsdecreased stockholders’ equity by approximately $65,000 and approximately$58,000, respectively.  Comprehensiveincome for the three and six-month periods ended June 30, 2009 and 2008has been computed as follows (in thousands):

 
| ** **                    | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                    | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                    | ** ** | **2009**               | ** ** | **2008**             | ** ** | **2009** | ** ** | **2008** | ** ** |
| Net  income                   |       | $                      | 5,841      |                 | $          | 5,818 |   | $ | 11,378 |   | $ | 10,135 |   |
| Foreign  currency translation |       | 62                     |       | (33                  | )          | (7 | ) | 156 |   |
| Comprehensive  income         |       | $                      | 5,903      |                 | $          | 5,785 |   | $ | 11,371 |   | $ | 10,291 |   |

 

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** **

**4.  Stock-based****Compensation.**  Stock-based compensationexpense for the three and six-month periods ended June 30, 2009 and 2008has been categorized as follows (in thousands):

 
| ** **                           | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                           | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                           | ** ** | **2009**               | ** ** | **2008**             | ** ** | **2009** | ** ** | **2008** | ** ** |
| Cost  of sales                       |       | $                      | 43         |                 | $          | 35 |   | $ | 93 |   | $ | (3 | ) |
| Research  and development            |       | 14                     |       | 10                   |       | 27 |   | 10 |   |
| Selling,  general and administrative |       | 220                    |       | 194                  |       | 455 |   | 330 |   |
| Stock-based  compensation            |       | $                      | 277        |                 | $          | 239 |   | $ | 575 |   | $ | 337 |   |

 

The excess incometax benefit created from the exercises of stock options was $50,000 and$422,000 for the three and six-month periods ended June 30, 2009,respectively, when compared to $47,000 and $310,000 for the three and six-monthperiods ended June 30, 2008, respectively.  As of June 30, 2009,the total remaining unrecognized compensation cost related to non-vested stockoptions, net of forfeitures, was approximately $3.5 million and is expected tobe recognized over a weighted average period of 3.54 years. During the sixmonths ended June 30, 2009, there were no stock award grants and duringthe six months ended June 30, 2008, we granted 499,000 stock awards.  We use the Black-Scholes methodology to valuethe stock compensation expense for options. In applying the Black-Scholes methodology to the option grants, we usedthe following assumptions:

 
| ** **                 | ** ** | **Six Months**          | ** ** |
|----------------------------|------------|-------------------------|------------|
| ** **                 | ** ** | **Ended June 30,** | ** ** |
| ** **                 | ** ** | **2009**                | ** ** | **2008** | ** ** |
| Risk-free  interest rate   |       | N/A                     |       | 3.24-3.55% |   |
| Expected  option life      |       | N/A                     |       | 4.2-6 |   |
| Expected  price volatility |       | N/A                     |       | 38-41-66.00% |   |

 

We estimate theaverage risk-free interest rate using the U.S. Treasury rate in effect as ofthe date of grant, based on the expected term of the stock option.  We estimate the expected term of the stockoptions using the historical exercise behavior of employees.  We estimate the expected price volatilityusing a weighted average of daily historical volatility of our stock price overthe corresponding expected option life and implied volatility based on recenttrends of the daily historical volatility.

 

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** **

**5.  SharesUsed in Computing Net Income Per Share.**The following table sets forth the computation of thenumber of shares used in calculating basic and diluted net income  per share (in thousands):

** **
| ** **                                                                                                                             | ** ** | **Three Months** | ** ** | **Six Months** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|----------------|------------|
| ** **                                                                                                                             | ** ** | **Net**          | ** ** | ** **     | ** ** | **Per Share** | ** ** | **Net** | ** ** | ** ** | ** ** | **Per Share** | ** ** |
| ** **                                                                                                                             | ** ** | **Income**       | ** ** | **Shares**     | ** ** | **Amount** | ** ** | **Income** | ** ** | **Shares** | ** ** | **Amount** | ** ** |
| Ended  June 30, 2009:                                                                                                             |       |             |       |           |       |   |   |   |   |   |   |   |   |
| Basic  EPS                                                                                                                             |       | $                | 5,841      |           | 27,924     |   | $ | 0.21 |   | $ | 11,378 |   | 27,990 |   | $ | 0.41 |   |
| Effect  of dilutive stock options and warrants                                                                                         |       |             |       | 503            |       |   |   |   |   | 497 |   |   |   |
|                                                                                                                                   |       |             |       |           |       |   |   |   |   |   |   |   |   |
| Diluted  EPS                                                                                                                           |       | $                | 5,841      |           | 28,427     |   | $ | 0.21 |   | $ | 11,378 |   | 28,487 |   | $ | 0.40 |   |
|                                                                                                                                   |       |             |       |           |       |   |   |   |   |   |   |   |   |
| Weighted-average  shares under stock options excluded from the calculation of common stock equivalents  as the impact was antidilutive |       |             |       | 1,360          |       |   |   |   |   | 1,692 |   |   |   |
|                                                                                                                                   |       |             |       |           |       |   |   |   |   |   |   |   |   |
| Ended  June 30, 2008:                                                                                                             |       |             |       |           |       |   |   |   |   |   |   |   |   |
| Basic  EPS                                                                                                                             |       | $                | 5,818      |           | 27,603     |   | $ | 0.21 |   | $ | 10,135 |   | 27,547 |   | $ | 0.37 |   |
| Effect  of dilutive stock options and warrants                                                                                         |       |             |       | 722            |       |   |   |   |   | 764 |   |   |   |
|                                                                                                                                   |       |             |       |           |       |   |   |   |   |   |   |   |   |
| Diluted  EPS                                                                                                                           |       | $                | 5,818      |           | 28,325     |   | $ | 0.21 |   | $ | 10,135 |   | 28,311 |   | $ | 0.36 |   |
|                                                                                                                                   |       |             |       |           |       |   |   |   |   |   |   |   |   |
| Weighted-average  shares under stock options excluded from the calculation of common stock equivalents  as the impact was antidilutive |       |             |       | 1,083          |       |   |   |   |   | 1,045 |   |   |   |

** **

**6.  Acquisitions.**** **On June 2, 2009, we enteredinto an asset purchase agreement with Hatch Medical, L.L.C., a Georgia limitedliability corporation (“Hatch”), to purchase an EN Snare® foreign bodyretrieval system.  We paid$14 million in June 2009 and have accrued an additional $7 million inother payables, which is payable on December 31, 2009. Our financial statements for the three and six months ended June 30,2009 reflect royalty income subsequent to the acquisition date of approximately$143,000 and  net income of approximately$43,000, related to the Hatch acquisition.

 

We arein the process of finalizing our valuation of tangible and intangible assets,and residual goodwill.  The purchaseprice allocation will be completed no later than one year from the date ofacquisition, and may change as more detailed analyses are completed andadditional information about fair value of assets and liabilities becomes available.  The purchase price was preliminarilyallocated as follows (in thousands):

 

| **Assets Acquired**     |   |   |   |
|-------------------------|--------|--------|--------|
| **Intangibles**         |   |   |   |
| Developed  technology   |   | 8,100  |   |
| Customer  list          |   | 590    |   |
| Non-compete             |   | 240    |   |
| Trademark               |   | 650    |   |
| Goodwill                |   | 11,420 |   |
| Total  assets acquried  |   | 21,000 |   |
|                    |   |   |   |
| **Liabilities Assumed** |   | None   |   |
|                    |   |   |   |
| Net  assets acquired    |   | $      | 21,000 |   |
|                         |        |        |        |  |

 

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We intend toamortize developed technology over 11 years, customer lists on an acceleratedbasis over seven months, a non-compete covenant over seven years and atrademark over fifteen years.

 

Thegoodwill arising from the acquisitions discussed above consists largely of thesynergies and economies of scale we hope to achieve from combining the acquiredoperations with our historical operations. The goodwill recognized from these acquisitions is expected to bedeductible for income tax purposes.

 

On March 9, 2009, we entered into an asset purchase agreement withAlveolus, Inc., a North Carolina corporation (“Alveolus”), to purchasetheir non-vascular interventional stents used for esophageal, tracheobronchial,and biliary stenting procedures.  We paidAlveolus $19.1 million in March 2009.  The grossamount of trade receivables we acquired from Alveolus is approximately $1.0million, of which $49,000 is expected to be uncollectible.  Our consolidated financial statements for thethree and six-month periods ended June 30, 2009 reflect sales subsequentto the acquisition date of approximately $1.8 million and $2.3 million,respectively, and a net loss of approximately $780,000 and $1.0 million(includes approximately $220,000 net of tax in legal and accounting costs incurred in the first quarter of 2009),respectively,  related to our Alveolusacquisition.  We are in the process offinalizing our valuation of certain tangible and intangible assets, andresidual goodwill.  Slight changes weremade to the assets acquired and liabilities assumed during the three-monthperiod ended June 30, 2009, but we do not believe those changes arematerial to our financial statements.  We intend to complete the purchase price allocation no later than oneyear from the date of acquisition, and that allocation may change as moredetailed analyses are completed and additional information about fair value ofassets and liabilities becomes available. The purchase price was preliminarily allocated as follows (inthousands):

 

| **Assets Acquired**                 |   |   |   |
|-------------------------------------|--------|--------|--------|
| Inventories                         |   | $      | 2,010  |   |
| Trade receivable                    |   | 974    |   |
| Other assets                        |   | 241    |   |
| Property and equipment              |   | 547    |   |
| **Intangibles**                     |   |   |   |
| Developed technology                |   | 5,700  |   |
| Trademarks                          |   | 1,400  |   |
| Customer lists                      |   | 1,100  |   |
| In-process research and development |   | 400    |   |
| Goodwill                            |   | 7,759  |   |
| Total assets acquired               |   | 20,131 |   |
|                                |   |   |   |
| **Liabilities Assumed**             |   |   |   |
| Accounts payable                    |   | 467    |   |
| Other liabilities                   |   | 572    |   |
| Total liabilities assumed           |   | 1,039  |   |
|                                |   |   |   |
| Net assets acquired                 |   | $      | 19,092 |   |

 

We intend to amortizedeveloped technology and trademarks over 15 years and customer lists on anaccelerated basis over 7 years.  We intend to amortize in-process researchand development over 15 years, which will begin once the product issuccessfully launched in the market.   The acquired trademarks arescheduled to renew in 4.03 years (based on a weighted-average, from June 30,2009 until the trademark renewal date). While U.S. trademarks can be renewed indefinitely, we currently estimatethat we will generate cash flow from the acquired trademarks for 15 years.

 

On March 3,2009, we paid $500,000 to GMA Company, Ltd (“GMA”) representing the finalpayment due on our distribution agreement. The total amount paid to GMA under this agreement was approximately $2.0million and was allocated as a distribution agreement and we anticipate that itwill be amortized over an estimated life of 11 years.

 

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On February 19,2009, we entered into an asset purchase and supply agreement with BiosearchMedical Products, Inc., a New Jersey corporation (“Biosearch”), to purchase a bipolar coagulation probe andgrafted biliary stents.  We paid$1.1 million in February 2009 and paid an additional $500,000 in June 2009. Our financial statements for the three andsix-month periods ended June 30, 2009 reflect sales subsequent to theacquisition date of approximately $366,000 and $499,000, respectively, and  net income of approximately $60,000 and$90,000, respectively,  related to theBiosearch acquisition.

 

We arein the process of finalizing our valuation of tangible and intangible assets,and residual goodwill.  We intend tocomplete the purchase price allocation no later than one year from the date ofacquisition, and may change that allocation as more detailed analyses arecompleted and additional information about fair value of assets and liabilitiesbecomes available.  The purchase pricewas preliminarily allocated as follows (in thousands):

 

| **Assets Acquired**     |   |   |   |
|-------------------------|--------|--------|--------|
| Inventories             |   | $      | 214    |   |
| Propery  and equipment  |   | 31     |   |
| **Intangibles**         |   |   |   |
| Developed  technology   |   | 380    |   |
| Customer  lists         |   | 660    |   |
| Non-compete             |   | 25     |   |
| Goodwill                |   | 290    |   |
| Total  assets acquried  |   | 1,600  |   |
|                    |   |   |   |
| **Liabilities Assumed** |   | None   |   |
|                    |   |   |   |
| Net  assets acquired    |   | $      | 1,600  |   |

 

We intend toamortize developed technology over 15 years, customer lists on an acceleratedbasis over eight years, and a non-compete covenant over seven years.

 

The following tablesummarizes our unaudited consolidated result of operations for the three andsix-month periods ended June 30, 2009 and 2008, as well as the unauditedpro forma consolidated results of operations as though the Hatch, Alveolus andBiosearch acquisitions had occurred on January 1, 2008:

 
| ** **                  | ** ** | **Three Months Ended** | ** ** | **Three Months Ended** | ** ** |
|-----------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                  | ** ** | **June 30, 2009** | ** ** | **June 30, 2008** | ** ** |
| ** **                  | ** ** | **As  Reported**       | ** ** | **Pro  Forma**         | ** ** | **As  Reported** | ** ** | **Pro  Forma** | ** ** |
|                        |       |                   |       |                   |       |   |   |   |   |
| Sales                       |       | $                      | 64,837     |                   | $          | 65,091 |   | $ | 57,441 |   | $ | 60,270 |   |
| Net  income                 |       | 5,841                  |       | 5,912                  |       | 5,818 |   | 4,980 |   |
| Earnings  per common share: |       |                   |       |                   |       |   |   |   |   |
| Basic                       |       | $                      | .21        |                   | $          | .21 |   | $ | .21 |   | $ | .18 |   |
| Diluted                     |       | $                      | .21        |                   | $          | .21 |   | $ | .21 |   | $ | .18 |   |

 
| ** **                  | ** ** | **Six Months Ended**   | ** ** | **Six Months Ended**   | ** ** |
|-----------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                  | ** ** | **June 30, 2009** | ** ** | **June 30, 2008** | ** ** |
| ** **                  | ** ** | **As  Reported**       | ** ** | **Pro  Forma**         | ** ** | **As  Reported** | ** ** | **Pro  Forma** | ** ** |
|                        |       |                   |       |                   |       |   |   |   |   |
| Sales                       |       | $                      | 123,208    |                   | $          | 125,660 |   | $ | 110,994 |   | $ | 116,875 |   |
| Net  income                 |       | 11,378                 |       | 11,318                 |       | 10,135 |   | 8,977 |   |
| Earnings  per common share: |       |                   |       |                   |       |   |   |   |   |
| Basic                       |       | $                      | .41        |                   | $          | .40 |   | $ | .37 |   | $ | .33 |   |
| Diluted                     |       | $                      | .40        |                   | $          | .40 |   | $ | .36 |   | $ | .32 |   |

 

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The unaudited pro formacondensed consolidated income statements are for informational purposes onlyand should not be considered indicative of actual results that would have beenachieved if Alveolus, Biosearch and Hatch had been acquired the beginning of2008, or results that may be obtained in any future period.

 

On January 29,2008, we entered into an asset purchase and supply agreement with MicrusEndovascular Corporation, a Delaware corporation, to purchase threecatheter platforms for $3.0 million dollars. We paid $1.5 million in January 2008 and an additional $1.5 millionin December of 2008.   We also paid$12,300 in acquisition costs.  The purchaseprice was allocated to inventories for $143,939, customer lists for $270,000,developed technology for $330,000, and goodwill for approximately $2.3million.  We are currently amortizingcustomer lists on an accelerated basis over fourteen years, and developedtechnology over fifteen years.

 

**7.  Recent Accounting Pronouncements. **In June 2009, the Financial Accounting StandardsBoard (“FASB”) issued Statement No. 168, the *FASBAccounting Standards Codification* (“Codification”). Codification will become the source of authoritative U.S. General AcceptedAccounting Principles (“GAAP’) recognized by the FASB to be applied by nongovernmentalentities. Once the Codification is in effect, all of its content will carry thesame level of authority.  The Codification becomes effective for interimand annual periods ending after September 15, 2009.  We will applythe Codification in the third quarter of fiscal 2009.  The adoption of theCodification will not have an effect on our financial position and results ofoperations. However, because the Codification completely replaces existingstandards, it will affect the way U.S. GAAP is referenced within theconsolidated financial statements and accounting policies.

** **

In May 2009, theFASB issued Statement No. 165, *Subsequent Events*,which provides guidance on the assessment of subsequent events.  Thisstatement defines the period after the balance sheet date during which weshould evaluate events or transactions that may occur for potential recognitionor disclosure in the financial statements, and the required disclosures forsuch events.  The statement is effective for interim or annual reportingperiods ending after June 15, 2009. We adopted this statement in thesecond quarter of 2009.  We have performed an evaluation of subsequentevents through August 6, 2009, which is the date the financial statementswere issued.

 

In April 2009, the FASB staff issued StaffPosition (“FSP”) No. FAS 107-1 and Accounting Principles Board (“APB”)28-1, *Interim Disclosures about Fair Valueof Financial Instruments*(“FSP No. FAS 107-1 and APB 28-1,respectively”). FSP No. 107-1 amends FASB Statement No. 107, *Disclosures about Fair Value of Financial Instruments*,to require disclosures about fair value of financial instruments in interimfinancial statements as well as in annual financial statements. FSP 107-1 alsoamends APB Opinion No. 28*, InterimFinancial Reporting*, to require these disclosures in all interimfinancial statements. The adoption of this pronouncement did not have amaterial impact on our consolidated financial statements six months ended June 30,2009.

 

In December 2007,the FASB issued Statement of Financial Accounting Standards No. 141(R), *Business Combinations* (“SFAS 141(R)”). SFAS 141(R) requiresall business combinations completed after the effective date to be accountedfor by applying the acquisition method (previously referred to as the purchasemethod).  Companies applying this methodwill have to identify the acquirer, determine the acquisition date and purchaseprice and recognize at their acquisition-date fair values of the identifiableassets acquired, liabilities assumed, and any noncontrolling interests in theacquiree.  In the case of a bargainpurchase, the acquirer is required to reevaluate the measurements of therecognized assets and liabilities at the acquisition date and recognize a gainon that date if an excess remains. We adopted the provisions of SFAS No. 141(R) onJanuary 1, 2009; however, the effect of adoption on our consolidatedfinancial statements will depend upon the nature of any acquisitions completedafter adoption.  We expensed costsrelated to the acquisitions of Alveolus, Biosearch and Hatch of approximately$374,000 during the six months ended June 30, 2009, which would have beencapitalized under SFAS No. 141.

 

**8.  Income Taxes.**  Our overall effective tax rate for the three months endedJune 30, 2009 and 2008 was 35.0% and 36.5%, respectively.  Our overall effective tax rate for the sixmonths ended June 30, 2009 and 2008 was 33.3% and 36.3%.  The decrease in the effective income tax ratefor the three and six months ended June 30, 2009, when compared to the prioryear period, was primarily related to the profitability of our Irish operationswhich are taxed at a lower tax rate than our U.S. and other foreign operations.

 

**9.  Fair Value Measurements**.  The fair value of a financial instrument is the amountthat could be received upon the sale of an asset or paid to transfer aliability in an orderly transaction between market participants at themeasurement date.  Financial assets aremarked to bid prices and financial liabilities are marked to offer prices.  Fair value measurements do not includetransaction costs.  A fair value hierarchy is used toprioritize the quality 

 

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and reliability of theinformation used to determine fair values. Categorization within the fair value hierarchy is based on the lowestlevel of input that is significant to the fair value measurement.  The fair value hierarchy is defined into thefollowing three categories:

 

Level 1: Quoted marketprices in active markets for identical assets or liabilities.

Level 2: Observablemarket based inputs or unobservable inputs that are corroborated by marketdata.

Level 3: Unobservableinputs that are not corroborated by market

 

The following tableprovides our financial assets and liabilities carried at fair value measured ona recurring basis as of June 30, 2009 (in thousands):

 
| ** **                       | ** ** | ** **              | ** ** | **Fair Value Measurements Using** | ** ** |
|----------------------------------|------------|-------------------------|------------|-----------------------------------|------------|
| ** **                       | ** ** | **Total Fair**          | ** ** | **Quoted prices in**              | ** ** | **Significant other** | ** ** | **Significant** | ** ** |
| ** **                       | ** ** | **Value at**            | ** ** | **active  markets**               | ** ** | **observable  inputs** | ** ** | **Unobservable  inputs** | ** ** |
| **Description**                  | ** ** | **June 30,  2009** | ** ** | **(Level  1)**                    | ** ** | **(Level  2)** | ** ** | **(Level  3)** | ** ** |
|                             |       |                    |       |                              |       |   |   |   |   |
| Deferred compensation assets (1) |       | $                       | 2,730      |                              |       |   | $ | 2,730 |   |   |   |
|                                  |            |                         |            |                                   |            |  |  |  |  |  |  |

 

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(1)          The deferred compensation investments are held in aRabbi trust under an insurance-based deferred compensation plan.  The investments of the Rabbi trust are valuedbased upon unit values multiplied by the number of units held.  The unit value is based upon the investment’snet asset value adjusted for some administrative fees.

 

During the six monthsended June 30, 2009, we had a write-off of approximately $72,000 relatedto the measurement of non-financial assets at fair value on a nonrecurringbasis subsequent to their initial recognition.

 

Thecarrying amount of cash and equivalents,  receivables and trade payablesapproximates fair value.

** **

**10. ****Goodwill and Intangible Assets. **The changes in the carrying amount ofgoodwill for the six months ended June 30, 2009 are as follows (in thousands):

 
| Goodwill  balance at December 31, 2008 |   | $      | 13,048 |   |
|---------------------------------------------|--------|--------|--------|--------|
| Additions  as the result of acquistions     |   | 19,519 |   |
| Goodwill  balance at June 30, 2009     |   | $      | 32,567 |   |

 

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During the six months ended June 30, 2009, wepaid $50,000 to Lightek Corporation related to their achieving certain saleslevel in our agreement dated July 17, 2007.   This amount was included as part of goodwill.

 

Intangible assets at June 30, 2009 and December 31,2008, consisted of the following (in thousands):

 
| ** **                            | ** ** | **June 30, 2009** | ** ** | **December 31, 2008** | ** ** |
|---------------------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                            | ** ** | **Gross**              | ** ** | ** **                 | ** ** | **Net** | ** ** | **Gross** | ** ** | ** ** | ** ** | **Net** | ** ** |
|                                  | ** ** | **Carrying**           | ** ** | **Accumulated**            | ** ** | **Carrying** | ** ** | **Carrying** | ** ** | **Accumulated** | ** ** | **Carrying** | ** ** |
|                                  | ** ** | **Amount**             | ** ** | **Amortization**           | ** ** | **Amount** | ** ** | **Amount** | ** ** | **Amortization** | ** ** | **Amount** | ** ** |
|                                  |       |                   |       |                       |       |   |   |   |   |   |   |   |   |
| Covenant not to compete               |       | $                      | 315        |                       | $          | (18 | ) | $ | 297 |   | $ | 50 |   | $ | (18 | ) | $ | 32 |   |
| Customer lists                        |       | 4,755                  |       | (1,405                     | )          | 3,350 |   | 2,465 |   | (1,073 | ) | 1,392 |   |
| Developed technology                  |       | 15,969                 |       | (297                       | )          | 15,672 |   | 1,730 |   | (119 | ) | 1,611 |   |
| Distribution agreement                |       | 2,401                  |       | (259                       | )          | 2,142 |   | 1,901 |   | (178 | ) | 1,723 |   |
| In-process research and development * |       | 400                    |       |                       |       | 400 |   |   |   |   |   |   |   |
| License agreements                    |       | 403                    |       | (346                       | )          | 57 |   | 403 |   | (242 | ) | 161 |   |
| Patents                               |       | 3,414                  |       | (1,118                     | )          | 2,296 |   | 2,704 |   | (1,019 | ) | 1,685 |   |
| Royalty agreements                    |       | 267                    |       | (186                       | )          | 81 |   | 267 |   | (159 | ) | 108 |   |
| Trademark                             |       | 2,565                  |       | (357                       | )          | 2,208 |   | 515 |   | (314 | ) | 201 |   |
|                                  |       |                   |       |                       |       |   |   |   |   |   |   |   |   |
| Total                                 |       | $                      | 30,489     |                       | $          | (3,986 | ) | $ | 26,503 |   | $ | 10,035 |   | $ | (3,122 | ) | $ | 6,913 |   |

 

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* In-process research anddevelopment was capitalized as per the adoption of SFAS No. 141(R), inconnection with our acquisition of Alveolus. Our in process research and development intangible is currently notsubject to amortization but amortization will commence upon the related productlaunch.

 

The aggregateamortization expense for the six months ended June 30, 2009 wasapproximately $864,000.

 

Estimated amortization expense for the intangibleassets for the next five years consisted of the following (in thousands):

 
| Remaining  2009 |   | $     | 1,586  |   |
|-----------------|--------|-------|--------|--------|
| 2010            |   | 2,599 |   |
| 2011            |   | 2,236 |   |
| 2012            |   | 2,039 |   |
| 2013            |   | 1,986 |   |

 

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** **

**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

## ***Disclosure Regarding Forward-Looking Statements***

## *** ***

This Report includes “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of1933, as amended, and Section 21E of the Securities Exchange Act of 1934,as amended (the “Exchange Act”).  Allstatements in this Report, other than statements of historical fact, areforward-looking statements for purposes of these provisions, including anyprojections of earnings, revenues or other financial items, any statements ofthe plans and objectives of management for future operations, any statementsconcerning proposed new products or services, any statements regarding futureeconomic conditions or performance, and any statements of assumptionsunderlying any of the foregoing.  Allforward-looking statements included in this Report are made as of the date hereofand are based on information available to us as of such date.  We assume no obligation to update anyforward-looking statement.   In somecases, forward-looking statements can be identified by the use of terminologysuch as “may,” “will,” “expects,” “plans,” “anticipates,”  “intends,” “believes,” “estimates,” “potential,”or “continue,” or the negative thereof or other comparable terminology.  Although we believe that the expectationsreflected in the forward-looking statements contained herein are reasonable,there can be no assurance that any such expectations or any forward-lookingstatement will prove to be correct.  Ouractual results will vary, and may vary materially, from those projected orassumed in the forward-looking statements. Our financial condition and results of operations, as well as anyforward-looking statements, are subject to inherent risks and uncertainties,including, unanticipated consequencesof Merit’s recent or future acquisitions; challenges associated with Merit’sefforts to pursue new market opportunities, including opportunities in thegastroenterology and pulmonary markets; infringementof Merit’s technology or the assertion that Merit’s technology infringes therights of other parties; product recalls and product liabilityclaims; downturn of thenational economy and its effect on Merit’s revenues, collections and supplierrelations; termination of supplier relationships, orfailure of suppliers to perform; inability to successfully manage growththrough acquisitions; delays in obtaining regulatory approvals, or the failureto maintain such approvals; concentration of Merit’s revenues among a fewproducts and procedures; development of new products and technology that couldrender Merit’s products obsolete; market acceptance of new products;introduction of products in a timely fashion; price and product competition;availability of labor and materials; cost increases; and fluctuations in andobsolescence of inventory; volatility of the market price of Merit’s commonstock; foreign currency fluctuations; changes in key personnel; work stoppage ortransportation risks; modification or limitation of governmental or privateinsurance reimbursement procedures; changes in health care markets related tohealth care reform initiatives; and other factors referred to in our pressreleases and reports filed with the SEC, including our Annual Report on Form 10-Kfor the year ended December 31, 2008. All subsequent forward-lookingstatements attributable to us or persons acting on our behalf are expresslyqualified in their entirety by these cautionary statements.  Additional factors that may have a directbearing on our operating results are discussed in Part I, Item 1A “RiskFactors” in our Annual Report on Form 10-K for the year ended December 31,2008.

 

**Overview**

 

For the quarter ended June 30,2009, we reported record revenues of $64.8 million, up 13% from the threemonths ended June 30, 2008 of $57.4 million.  Revenues for the six months ended June 30,2009 were a record $123.2 million, compared with $111.0 million for the firstsix months of 2008, a gain of 11%.

 

Gross margins were 43.4%and 43.0% of sales for the three and six-month periods ended June 30,2009, respectively, compared to 42.7% and 41.5% of sales for the three and six-monthperiods ended June 30, 2008, respectively. This improvement can be attributed primarily to lower average fixedoverhead unit costs through increased productivity as fixed costs are sharedover an increased number of units, reduction in material costs and a favorableEuro to U.S. dollar exchange rate which reduced our unit costs in our Irishoperations. During 2009, we plan to implement new automation and manufacturingcost-saving improvements related to logistics and product labeling, andintroduce new products through organic growth and acquisitions, which webelieve will increase our average product margins.

 

Net income for the periodended June 30, 2009 was $5.8 million, or $0.21 per share, compared to $5.8million, or $0.21 per share, for the comparable period of 2008.  Net income for the six-month period ended June 30,2009 was $11.4 million, up 12% to $0.40 per share, compared to $10.1 million,or $0.36 per share, for the comparable period of 2008. When compared to theprior year period, net income for the six months ended June 30, 2009 was 

 

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primarily affected byhigher sales and gross margins, and a lower effective income tax rate, all ofwhich offset  higher selling, general andadministrative expenses and research and development expenses, primarilyassociated with our acquisitions of Alveolus and Biosearch in the first quarterof 2009, and the acquisition of Hatch in the second quarter of 2009.

 

**Resultsof Operations**

 

The followingtable sets forth certain operational data as a percentage of sales for thethree and six-month periods ended June 30, 2009 and 2008:

 
| ** **                                    | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                    | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                                    | ** ** | **2009**               | ** ** | **2008**             | ** ** | **2009** | ** ** | **2008** | ** ** |
| Sales                                         |       | 100.0                  | %          | 100.0                | %          | 100.0 | % | 100.0 | % |
| Gross  profit                                 |       | 43.4                   |       | 42.7                 |       | 43.0 |   | 41.5 |   |
| Selling,  general and administrative expenses |       | 25.1                   |       | 22.4                 |       | 25.3 |   | 23.3 |   |
| Research  and development expenses            |       | 4.5                    |       | 4.6                  |       | 4.0 |   | 4.1 |   |
| Income  from operations                       |       | 13.8                   |       | 15.7                 |       | 13.7 |   | 14.1 |   |
| Other  income                                 |       | 0.0                    |       | 0.3                  |       | 0.2 |   | 0.3 |   |
| Net  income                                   |       | 9.0                    |       | 10.1                 |       | 9.2 |   | 9.1 |   |

 

Sales. Sales for the three months ended June 30, 2009 increased by 13%, orapproximately $7.4 million, compared to the same period of 2008.   Sales for the six months ended June 30,2009 increased by 11%, or approximately $12.2 million, compared to the sameperiod of 2008.   We report sales in fiveproduct categories.  Listed below are thesales relating to these product categories for the three and six-month periodsended June 30, 2009 and 2008 (in thousands):

 
| ** **                       | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                       | ** ** | **June 30,**      | ** ** | **June 30,**    | ** ** |
| ** **                       | ** ** | **% Change**           | ** ** | **2009**             | ** ** | **2008** | ** ** | **% Change** | ** ** | **2009** | ** ** | **2008** | ** ** |
| Stand-alone  devices             |       | 11%                    |       | $                    | 19,587     |   | $ | 17,573 |   | 10% |   | $ | 37,021 |   | $ | 33,523 |   |
| Custom  kits and procedure trays |       | 16%                    |       | 19,280               |       | 16,610 |   | 13% |   | 36,677 |   | 32,376 |   |
| Inflation  devices               |       | (6)%                   |       | 14,707               |       | 15,726 |   | (5)% |   | 28,994 |   | 30,647 |   |
| Catheters                        |       | 20%                    |       | 9,070                |       | 7,532 |   | 23% |   | 17,704 |   | 14,448 |   |
| Gastroenterology  devices        |       |                   |       | 2,193                |       |   |   |   |   | 2,812 |   |   |   |
| Total                            |       | 13%                    |       | $                    | 64,837     |   | $ | 57,441 |   | 11% |   | $ | 123,208 |   | $ | 110,994 |   |

 

The sales growthof 13% for the second quarter of 2009, and the sales growth of 11% for the sixmonth-period ended June 30, 2009, when compared to the comparable periodsof 2008, was favorably affected by increased sales  of custom kits and procedure trays,gastroenterology devices related to the recent acquisition of Alveolus duringthe first quarter of 2009, stand-alone devices (maps, needles and stopcocks),and  catheters (particularly our Prelude®sheath product line, Mini access catheter product line, and Resolve® lockingdraining catheter line).  These salesincreases helped offset a decrease in sales of 1.9% related to the exchangerate between our foreign currencies (primarily the Euro) for the three and sixmonths ended June 30, 2009 and the U.S. Dollar and a decrease in inflationdevice sales to an OEM customer of 2.0% and 1.6% respectively, for the threeand six months ended June 30, 2009, when compared to the correspondingperiods of 2008.

 

Gross Profit.** **Gross margins were 43.4% and 43.0% of sales for thethree and six-month periods ended June 30, 2009, respectively, compared to42.7% and 41.5% of sales for the three and six-month periods ended June 30,2008, respectively.  This improvement canbe attributed primarily to lower average fixed overhead unit costs throughincreased productivity as fixed costs are shared over an increased number ofunits, reduction in material costs and a favorable Euro to U.S. Dollar exchangerate which reduced our unit costs in our Irish operations.

 

OperatingExpenses.** **Selling, general and administrativeexpenses increased to 25.1% of sales for the three months ended June 30,2009, compared with 22.4% of sales for the three months ended June 30,2008.   For the six months ended June 30,2009, selling, general and administrative expenses increased to 25.3% comparedwith 23.3% of sales for the six months ended June 30, 2008.  Selling, general and administrative expensesincreased 

 

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27% to $16.4million for the three months ended June 30, 2009 from $12.8 million forthe three months ended June 30, 2008. Selling, general and administrative expenses increased 20% to $31.1million for the six months ended June 30, 2009 from $25.9 million for thesix months ended June 30, 2008. These expense increases were primarily due to the increased expenseassociated with our operation of the business and assets we acquired fromAlveolus, and the hiring of additional domestic and international salesrepresentatives. Research and development expenses decreased to 4.5% of salesfor the three months ended June 30, 2009, compared with 4.6% of sales forthe three months ended June 30, 2008.     Research and development expenses decreased to 4.0% of sales for the sixmonths ended June 30, 2009, compared to 4.1% of sales for the six monthsended June 30, 2008.  Research anddevelopment expenses increased 9% to $2.9 million for the three months ended June 30,2009 from $2.7 million for the three months ended June 30, 2008.  For the six months ended June 30, 2009research and development expenses increased 9% to $5.0 million from $4.6million during the six months ended June 30, 2008.  The increase in expenses related, in largepart, to the Alveolus acquisition.

 

Other Income(Expense).  Other income for the second quarter of 2009was approximately $22,000, compared to other income of approximately $146,000for the comparable period in 2008.  Otherincome for the six months ended June 30, 2009 was approximately $196,000,compared to other income of approximately $291,000 for the corresponding periodin 2008.  The net change in other incomefor the three and six-month periods ended June 30, 2009, when compared tothe comparable periods in 2008, was primarily the result of a decrease ininterest income attributable to lower average cash balances, when compared tothe corresponding periods in 2008.

 

Income Taxes. Our effective tax rate for the three months ended June 30, 2009 was35.0%, compared to 36.5% for the corresponding period of 2008.  For the six months ended June 30, 2009,our effective tax rate was 33.3%, compared to 36.3% for the comparable periodin 2008.  The decrease in the effectivetax rate for the three and six-month periods ended June 30, 2009, whencompared to the corresponding periods of 2008, was primarily related to theprofitability of our Irish operations which are taxed at a lower tax rate thanour U.S. and other foreign operations.

 

Income.  During thesecond quarter of 2009, and the comparable period of 2008, we reported incomefrom operations of approximately $9.0 million. For the six months ended June 30, 2009, we reported income fromoperations of $16.9 million, an increase of 8% from $15.6 million for thecomparable period in 2008. When compared to the corresponding period of 2008,income from operations for the six-month period ended June 30, 2009, waspositively affected by increased sales volumes and higher gross margins.  These factors, along with a lower effectiveincome tax rate, helped offset higher selling, general and administrativeexpenses and research and development expenses, primarily associated with ouracquisition of Alveolus in the first quarter of 2009, and contributed to netincome of $5.8 and $11.4 million for the three and six-month periods ended June 30,2009, respectively, compared to net income of $5.8 million and $10.1 millionfor the same periods of 2008.

 

**Liquidityand Capital Resources**

** **

Our workingcapital as of June 30, 2009 and December 31, 2008 was $51.6 millionand $84.3 million, respectively.  Thedecrease in working capital was primarily the result of a decrease in cashrelated to the Alveolus, Biosearch and Hatch acquisitions, for a total of $34.7million and the repurchase of common stock for $2.5 million.  As of June 30, 2009, we had a currentratio of 2.4 to 1.

 

On December 7,2007, we entered into an unsecured loan agreement with Bank of America, wherebythey agreed to provide us a line of credit in the amount of $30 million,expiring on December 7, 2010. During the quarter ended June 30, 2009,we borrowed on a temporary basis $10.0 million to close our Hatchacquisition.  In addition, on December 8,2007, we entered into an unsecured loan agreement with Zion’s First NationalBank, whereby they agreed to provide us with a line of credit in the amount of$1.0 million, expiring on December 1, 2009.  We had $0 outstanding under our lines ofcredit at June 30, 2009.  Wegenerated cash from operations of $17.2 million for the six months ended June 30,2009.

 

Historically, wehave incurred significant expenses in connection with product development andintroduction of new products. Substantial capital has also been required to finance the increase inour receivables and inventories associated with our increased sales. Ourprincipal source of funding for these and other expenses has been cashgenerated from operations, sale of equity, cash from loans on equipment, andbank lines of credit.  We currentlybelieve that our present sources of liquidity and capital are adequate to fundour current operations and for the foreseeable future.

 

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** **

**CriticalAccounting Policies**

** **

The SEC has requestedthat all registrants address their most critical accounting policies.  TheSEC has indicated that a “critical accounting policy” is one which is bothimportant to the representation of the registrant’s financial condition andresults and requires management’s most difficult, subjective or complexjudgments, often as a result of the need to make estimates about the effect ofmatters that are inherently uncertain.  We base our estimates on pastexperience and on various other assumptions our management believes to bereasonable under the circumstances, the results of which form the basis formaking judgments about carrying values of assets and liabilities that are notreadily apparent from other sources.  Actual results will differ, and maydiffer materially from these estimates under different assumptions orconditions.  Additionally, changes in accounting estimates could occur inthe future from period to period.  Our management has discussed thedevelopment and selection of our most critical financial estimates with theaudit committee of our Board of Directors.  The following paragraphsidentify our most critical accounting policies:

 

**InventoryObsolescence Reserve****. **Our management reviews on a regular basis inventory quantities on hand forunmarketable and/or slow-moving products that may expire prior to beingsold.  This review of inventory quantities for unmarketable and/or slow movingproducts is based on estimates of forecasted product demand prior to expirationlives.  If market conditions become less favorable than those projected byour management, additional inventory write-downs may be required.  Webelieve that the amount included in our obsolescence reserve has been ahistorically accurate estimate of the unmarketable and/or slow moving productsthat may expire prior to being sold.

 

**Allowancefor Doubtful Accounts****. ** Amajority of our receivables are with hospitals which, over our history, havedemonstrated favorable collection rates.  Therefore, we have experiencedrelatively minimal bad debts from hospital customers.  In limitedcircumstances, we have written off bad debts as the result of the terminationof our business relationships with foreign distributors.  The mostsignificant write-offs over our history have come from U.S. packers who bundleour products in surgical trays.

 

We maintain allowancesfor doubtful accounts relating to estimated losses resulting from the inabilityof our customers to make required payments.  The allowance is based uponhistorical experience and a review of individual customer balances.  Ifthe financial condition of our customers were to deteriorate, resulting in animpairment of their ability to make payments, additional allowances may berequired.

 

**Stock-BasedCompensation.** ****We account for stock-based compensation inaccordance with Statement of Financial Accounting Standards No. 123(R), *Share-Based Payment*(“SFAS 123(R)”). Under the fair valuerecognition provisions of SFAS 123 (R), we measure share-based compensationcost at the grant date based on the value of the award and recognize thecost as an expense over the term of the vestingperiod.  Judgment is required in estimating the amount of share-basedawards that are expected to be forfeited.  If actual results differsignificantly from these estimates, stock-based compensation expense and ourresults of operations could be materially impacted.

 

**IncomeTaxes.**   We adopted the provisions of FASBInterpretation No. 48, *Accounting for Uncertaintyin Income Taxes*(“FIN 48”), effective January 1, 2007. UnderFIN 48, tax positions shall initially be recognized in the financial statementswhen it is more likely than not the position will be sustained upon examinationby the tax authorities.  Such taxpositions shall initially and subsequently be measured as the largest amount oftax benefit that has a greater than 50% likelihood of being realized upon ultimatesettlement with the tax authorities assuming full knowledge of the position andall relevant facts.  Although we believe our provisions for FIN 48unrecognized tax positions are reasonable, we can make no assurance that thefinal tax outcome of these matters will not be different from that which wehave reflected in our income tax provisions and accruals.  The tax law is subject to variedinterpretations, and we have taken positions related to certain matters wherethe law is subject to interpretation.  Such differences could have amaterial impact on our income tax provisions and operating results in theperiod(s) in which we make such determination.

 

**Goodwilland Intangible Assets Impairment. **We test our goodwill balances as of July 1,during the third quarter of each year for impairment, or whenever impairmentindicators arise.  We utilize severalreporting units in evaluating goodwill for impairment.  We assess the estimated fair value ofreporting units based on discounted future cash flows.  If the carrying amount of a reporting unitexceeds the fair value of the reporting unit, an impairment charge isrecognized in an amount equal to the excess of the carrying amount of thereporting unit goodwill over implied fair value of that goodwill.  This analysis requires significant judgments,including 

 

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estimationof future cash flows and the length of time they will occur, which is based oninternal forecasts, and a determination of a discount rate based on ourweighted average cost of capital.

 

We evaluate therecoverability of intangible assets whenever events or changes in circumstancesindicate that its carrying amount may not be recoverable in accordance withSFAS No. 144, *Accounting for theImpairment or Disposal of Long-lived Assets.*This analysis requiressimilar significant judgments as those discussed above regarding goodwill,except for cash flows are based on an undiscounted cash flow to determine thefair value of the intangible.  All of ourintangible assets are subject to amortization.

 

**ITEM 3**.**  QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

** **

Our principal market riskrelates to changes in the value of the Euro and Great Britain Pound (“GBP”)relative to the value of the U.S. Dollar.  We also have a limited marketrisk relating to the Swiss and Danish Kroner.   Our consolidated financial statements are denominated in, and ourprincipal currency is, the U.S. Dollar.  A portion of our revenues ($6.3million, representing approximately 9.8% of aggregate revenues), for thequarter ended June 30, 2009 was attributable to sales that weredenominated in foreign currencies.  Allother international sales were denominated in U.S. Dollars.  Certainexpenses are also denominated in foreign currencies, which partially offsetrisks associated with fluctuations of exchanges rates between foreigncurrencies on the one hand, and the U.S. Dollar on the other hand.  During the quarter ended June 30, 2009, the exchange rate between ourforeign currencies against the U.S. Dollar resulted in a decrease of our grossrevenues of approximately $1.2 million and an increase of 0.14% in grossprofit.

 

On May 29, 2009, weforecasted a net exposure for June 30, 2009 representing the differencebetween Euro- and GBP-denominated receivables and Euro and GBP denominatedpayables of approximately 115,000 Euros and 268,000 GBPs, respectively. In order to partially offset such risks, on May 29, 2009, we entered intoa 30-day forward contract for Euros and GBPs.  We generally enter intosimilar economic transactions at various times during the year to partiallyoffset exchange rate risks we bear throughout the year.  During thequarter ended June 30, 2009, we recorded a net loss of approximately$6,000 on these transactions executed during the quarter ended June 30,2009, in an effort to limit our exposure to exchange rate fluctuations betweenthe Euro and GBP against the U.S. Dollar. We do not purchase or hold derivative financial instruments forspeculative or trading purposes.  The fair value of our open positions at June 30,2009 was not material to our financial condition.

 

As of June 30, 2009, we had no variable rate debt. As long as we do not have variable rate debt, our interest expense would not be affected by changes in interest rates.

 

**ITEM 4.  CONTROLS ANDPROCEDURES**

** **

**(a) Evaluationof disclosure controls and procedures**

 

An evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2009 was performed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer.  Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported as specified in the SEC’s rules and forms.

 

**(b) Changesin Internal Control Over Financial Reporting**

 

There was no change in our internal control over financial reporting during the quarter ended June 30, 2009 that materially affected, or that we believe is reasonably likely to materially affect, our internal control over financial reporting.

 

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** **

**PART II - OTHER INFORMATION**

** **

**ITEM 1.   LEGAL PROCEEDINGS**

** **

We are subject tocertain legal actions which we consider routine to our businessactivities.  As of June 30, 2009,our management concluded, after consultation with legal counsel, that theultimate outcome of such legal matters is not likely to have a material adverseeffect on our financial position, liquidity or results of operations.

 

**ITEM 1A.   RISK FACTORS**

** **

In addition toother information set forth in this Report, you should carefully consider thefactors discussed in Part I, “Item 1A. Risk Factors” in our Annual Reporton Form 10-K for the year ended December 31, 2008, which couldmaterially affect our business, financial condition or future results.  The risks described in our Annual Report on Form 10-Kare not the only risks we face. Additional risks and uncertainties not currently known to us or that wecurrently deem to be immaterial also may materially and adversely affect ourbusiness, financial condition and/or operating results.

 

**ITEM 4.  SUBMISSION OFMATTERS TO A VOTE OF SECURITY HOLDERS**

** **

On May 20,2009 we held our 2009 Annual Meeting of Shareholders (the “Annual Meeting”) atwhich our shareholders considered and voted as follows on the items describedbelow:

 

1. The shareholders considered whether to elect the following persons asdirectors, each to serve for a term of three years, as indicated below, oruntil his respective successor shall have been duly elected and shall qualify:

 

| ** **               | ** ** | **Votes**    | ** ** |
|--------------------------|------------|--------------|------------|
| ** **               | ** ** | **Received** | ** ** | **Withheld** | ** ** |
| Fred  P. Lampropoulos    |       | 24,978,594   |       | 869,970 |   |
| Franklin  J Miller, M.D. |       | 24,916,156   |       | 932,408 |   |

 

In addition to thedirectors elected at the Annual Meeting, the terms of Rex C. Bean, Richard W.Edelman, Michael E. Stillabower, M.D., Kent W. Stanger and James J. Elliscontinue after the meeting.  The terms ofMessrs. Bean and Edelman, and Dr. Stillabower are scheduled to expirein 2010.    The terms of Messrs. Stangerand Ellis are scheduled to expire in 2011.

 

2.  Our shareholders also considered a proposalto amend the Merit Medical Systems, Inc. 2006 Long-Term Incentive Plan(the “Incentive Plan”) as amended, for the purpose of  increasing thenumber of shares of our common stock authorized for the grant of awards underthe Incentive Plan from 1,500,000 shares to 3,000,000 shares,  modifyingthe Incentive Plan’s definition of “Change in Control” to eliminate thediscretionary ability of our Board of Directors to determine that certainnon-specified events constitute a Change in Control, and  reducing thestock transfer threshold for determination of a Change in Control under theIncentive Plan from 50% of the total voting power of our outstanding securitiesto 30% of the total voting power of our outstanding securities.  There were 20,154,418 votes cast in favor ofthe proposal, 3,407,213 votes cast against the proposal and 163,669 votesabstained.

 

3.  Our shareholders also considered a proposalto ratify the appointment by the Audit Committee of our Board of Directors ofDeloitte & Touche, LLP as our auditors for the fiscal year ending December 31,2009.  There were 25,344,989 votes castin favor of the proposal, 406,731 votes cast against the proposal, and 96,844votes abstained.

 

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** **

**ITEM  6.  EXHIBITS**

 
| **Exhibit No.** | ** ** | **Description**                                                                                           |
|----------------------|------------|-----------------------------------------------------------------------------------------------------------|
| 31.1                 |       | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002 |
|                 |       |                                                                                                      |
| 31.2                 |       | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002 |
|                 |       |                                                                                                      |
| 32.1                 |       | Certification of Chief  Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of  2002 |
|                 |       |                                                                                                      |
| 32.2                 |       | Certification of Chief  Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of  2002 |

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

 
| MERIT  MEDICAL SYSTEMS, INC. |                 |                                   |
|------------------------------|----------------------|----------------------------------------|
| REGISTRANT                   |                 |                                   |
|                         |                 |                                   |
|                         |                 |                                   |
| Date:                        | August 6,  2009 |                                   | /s/ Fred  P. Lampropoulos |
|                         |                 | FRED  P. LAMPROPOULOS                  |
|                         |                 | PRESIDENT  AND CHIEF EXECUTIVE OFFICER |
|                         |                 |                                   |
| Date:                        | August 6,  2009 |                                   | /s/ Kent  W. Stanger |
|                         |                 | KENT  W. STANGER                       |
|                         |                 | CHIEF  FINANCIAL OFFICER               |

 

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