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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



(Mark One)



|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------



For the fiscal year ended: June 30, 2003



OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------



For the transition period from
 to



Commission file number 0-14068



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Memry Corporation

(Exact name of registrant as specified in its charter)



|Delaware                                                       |  | 06-1084424                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|3 Berkshire Blvd., Bethel, CT                                  |  | 06801                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



Registrants
telephone number, including area code (203) 739-1100



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Securities registered pursuant to Section
12(b) of the Act:



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



Securities
registered pursuant to Section 12(g) of the Act: None



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.  Yes  x  No ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes ̈No  x



The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $45,144,090 on December 31, 2002 based upon the
closing trade price of $1.77 on that date.



The number of
shares outstanding of the registrants Common Stock as of September 19, 2003 was 25,537,522.



DOCUMENTS INCORPORATED BY REFERENCE:



Portions of the registrants Proxy Statement for its Annual Meeting of Stockholders to be held in December, 2003 are incorporated by reference into
Part III of this Annual Report on Form 10-K.

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Memry Corporation

For The Year Ended June 30, 2003



Index



|           |  |                                                                                                |  | Page
|---------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|Part I.    |  |                                                                                                |  |     
|           |  |                                                                                               
|Item 1     |  | Business                                                                                       |  | 1   
|           |  |                                                                                               
|Item 2.    |  | Properties                                                                                     |  | 8   
|           |  |                                                                                               
|Item 3.    |  | Legal Proceedings                                                                              |  | 8   
|           |  |                                                                                               
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                            |  | 9   
|           |  |                                                                                               
|Part II.   |  |                                                                                                |  |     
|           |  |                                                                                               
|Item 5.    |  | Market for Registrants Common Equity and Related Stockholder Matters                          |  | 9   
|           |  |                                                                                               
|Item 6.    |  | Selected Financial Data                                                                        |  | 9   
|           |  |                                                                                               
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  | 10  
|           |  |                                                                                               
|Item 7A.   |  | Quantitative and Qualitative Disclosures about Market Risk                                     |  | 16  
|           |  |                                                                                               
|Item 8.    |  | Financial Statements and Supplementary Data                                                    |  | 16  
|           |  |                                                                                               
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |  | 16  
|           |  |                                                                                               
|Item 9A.   |  | Controls and Procedures                                                                        |  | 16  
|           |  |                                                                                               
|Part III.  |  |                                                                                                |  |     
|           |  |                                                                                               
|Item 10.   |  | Directors and Executive Officers of the Registrant                                             |  | 17  
|           |  |                                                                                               
|Item 11.   |  | Executive Compensation                                                                         |  | 17  
|           |  |                                                                                               
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 17  
|           |  |                                                                                               
|Item 13.   |  | Certain Relationships and Related Transactions                                                 |  | 17  
|           |  |                                                                                               
|Item 14.   |  | Principal Accountant Fees and Services                                                         |  | 17  
|           |  |                                                                                               
|Part IV.   |  |                                                                                                |  |     
|           |  |                                                                                               
|Item 15.   |  | Exhibits, Financial Statement Schedules, and Reports on Form 8K                                |  | 17  
|           |  |                                                                                               
|Signatures |  |                                                                                                |  | 21  



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PART I.



ITEM 1. BUSINESS



INTRODUCTION



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



The Company conducts its operations from its two operating facilities located in Bethel, Connecticut, and Menlo Park, California. The Companys
principal executive offices are located at 3 Berkshire Blvd., Bethel, Connecticut 06801, and its telephone number at such address is (203) 739-1100.



TECHNOLOGY



Shape memory alloys (SMAs) are advanced materials which possess the ability to change their shape in response to thermal and mechanical
changes, and the ability to return to their original shape following deformations from which conventional materials cannot recover. These abilities result from the transformation of the crystalline structure of the SMA in reaction to thermal and
mechanical changes. As a result of the crystalline structure changes, SMAs are also able to produce forces many times greater than those produced by conventional materials.



The major defining properties of the SMAs with which the Company works are superelasticity and thermal
shape memory. Currently the predominant SMA utilized by the Company is a nickel-titanium alloy commonly referred to as nitinol. The mechanical properties that can be engineered into nitinol-based devices permit innovative product designs that
presently would be difficult or impossible to replicate with other materials. Unlike ordinary metal, certain SMAs are capable of fully recovering their shape after being deformed as much as six to eight percent, and of performing this recovery on a
repeated basis. This is more than ten times the recovery ability of ordinary metals. This superelasticity feature has applications for surgical instruments and devices, orthodontic apparatus, cellular telephone antennae, and other
devices. Thermal recovery applications typically involve instances where a device is controlled or actuated in response to a pre-determined thermal change. Examples of such uses include heat activated coupling or sealing devices, valve actuation
systems, and thermally actuated mechanical systems. The majority of todays commercial applications involve the use of the materials superelastic properties.



MARKETS



Medical Device Industry. Although the Company has expertise in a variety of SMAs, the Company utilizes primarily the superelastic characteristic of nitinol for
medical device applications. The value of nitinols superelastic characteristics in the medical device sector is its ability to provide ease of access and delivery of sophisticated medical devices. In addition, nitinol is kink resistant, exerts
a constancy of force, is biocompatible (non-toxic) and is non-ferromagnetic, thereby allowing the use of magnetic resonance imaging (MRI) on patients with nitinol-based implants. Because of these unique characteristics, nitinol is becoming integral
to the design of a variety of new medical products, notably for peripheral vascular and non-vascular stents, guidewires and catheters, urological products and orthopedic devices.



Stents are small tubes that hold open arteries, veins and other passageways in the body that have become obstructed as a
result of disease, trauma or aging. Stents are placed in the body using catheter-based delivery systems in minimally invasive procedures. Once deployed, stents exert a radial force against the walls of the vessel to enable these passageways to
remain open and functional. A number of different stent designs, materials and delivery systems, with varying characteristics, are currently available. The three most prevalent stent designs are lattice tubes made via laser cutting, coiled stents
and wire mesh stents.



Stents have emerged as one of the
fastest growing segments of the medical device market. Stents are used increasingly as adjuncts or alternatives to a variety of medical procedures because it is believed they are beneficial to overall patient outcome and may, over time, reduce total
treatment costs. From its infancy in 1990, the stent market has grown to estimated worldwide sales of approximately $3.5 billion in 2002. The vast majority of these stents are utilized in the treatment of coronary artery disease and are made
primarily of stainless steel. Coronary stents are normally deployed through the expansion of a balloon on a catheter-based delivery system with a second balloon frequently used to further expand the stent.



Guidewires and/or catheters, in this context, refer to tubes or wires
inserted into a vessel for diagnostic or therapeutic purposes. The guidewires and/or catheters can be used in the delivery of medical devices, drugs or stents. Because of the



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##### Index to Financial Statements

superelastic characteristic, together with other attributes of nitinol described above, nitinol is replacing stainless steel as the material of choice in
many of these instruments.



The use of nitinol in the
orthopedic marketplace utilizes both the super-elastic and shape memory characteristics of the material, depending upon the application. This market can be segregated into two product classifications, implantables and tools/instrumentation.
Implantable devices which benefit from the properties of nitinol range from bone staples, which utilize the shape memory properties of the material in total joints or trauma surgeries to reduce and ultimately enable repair of fractures, to fixation
devices which utilize the super-elastic characteristics of nitinol. The superelastic characteristics of nitinol enhance the capabilities of arthroscopic surgery by providing additional flexibility in the tools and instrumentation. This additional
flexibility is also valuable in spinal fusion devices and replacement products.



A wide range of retrieval devices, stents, and catheters for use in the urological market place are further enhanced by the superelastic characteristics of nitinol. Flexibility and placement options, heretofore
extremely difficult or impossible to obtain utilizing current materials are now much more readily accessible through the design inclusion of nitinol. Multifaceted assemblies, made from either nitinol wire or laser cut nitinol tubing in the form of
baskets, graspers, or coils are less invasive and less traumatic to the system due to the increased flexibility and pre-set response temperatures made possible by the properties of this alloy.



Memry currently produces the wire, strip and tubing that are used to
fabricate guidewires, catheters, stents, urological and orthopaedic components and increasingly provides completed sub assemblies to medical device companies, as well as other surgical and diagnostic instrument components. In fiscal 2003, sales to
medical device companies accounted for approximately 90% of revenue.



Non-Medical Markets. The non-medical industry sectors served by the Company include primarily the telecommunications, aerospace/defense and automotive industries. While the success of nitinol products in the
medical device industry is typically derived from the superelastic characteristics of nitinol, applications in these industrial sectors employ both the superelastic and the shape memory characteristics of nitinol. Although the development cycles in
these industries, particularly aerospace/defense and automotive, are longer than those of the medical device sector, once the product is adopted it typically provides for larger volume demand, is more easily leveraged into other customers, and does
not suffer from strict regulatory requirements.



Examples of
such products the Company currently provides to these markets include sealing devices, actuators and fasteners. Memry currently sells heat actuated sealing devices used in diesel engine fuel injection systems to maintain air pressure. Fasteners are
products that also employ the characteristics of shape memory to hold or couple two pieces of wire and/or metal together. A superelastic nitinol wire is sold as the element wire in retractable antennae for portable cellular telephones. It has
superior durability and quickly recovers its straight shape when bending stresses are removed. The superelasticity effect helps to avoid kinking and deformation. Non-medical sector sales accounted for approximately 10% of fiscal 2003 revenues.



OPERATIONS



The Company conducts its business through two manufacturing locations: Menlo
Park, California and Bethel, Connecticut. During fiscal 2001, the Company sold its Belgium facility, comprised of the Belgian corporation formerly known as Advanced Materials and Technologies, N.V., which was acquired by Memry in October 1998.



Located in Menlo Park, California, the western facility
produces semi-finished SMAs in two basic forms: wire and tube. This facility also provides added value to its tubular product through laser processing, shape setting and polishing procedures resulting in the delivery of finished stent components, as
well as certain other value-added activities.



Memrys
eastern manufacturing operations, located in the same facility as the Companys corporate headquarters in Bethel, Connecticut, processes wire into semi-finished strip, and produces formed components and value-added sub-assemblies, predominantly
based on wire and strip-based SMAs. The microcoil and guidewire components utilized in various medical procedures are fabricated and supplied from the Companys eastern operations in Bethel, Connecticut.



On October 31, 1998, the Company acquired all of the outstanding shares of
Advanced Materials and Technologies, N.V. (AMT), located in Herk-de-Stad, Belgium. Founded in 1989, AMT, renamed Memry Europe, N.V., specialized in the development and supply of both Nickel Titanium and other shape memory alloy
semi-finished products, principally wire products used in the commercial and industrial markets served by the Companys U.S. operations. On February 8, 2001, following a thorough business and strategic review, the Company sold Memry Europe in a
transaction described in Liquidity and Capital Resources below.



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PRODUCTS AND SERVICES



Beta-Titanium Alloy. Memry announced during fiscal year 2002 that it had received a patent for a new nickel-free
titanium alloy. The new alloy contains small amounts of molybdenum, aluminum, vanadium and niobium. The Company believes it is the first nickel-free titanium alloy that is also super-elastic and exhibits shape recovery properties. The Company is
currently engaged in research, including co-operative university programs, to further map the properties of the new alloy. Memry believes the new alloy may offer advantages over existing materials in a variety of applications, including eyewear,
orthodontia, and orthopedic devices. If the Company is successful in developing commercial applications for this material, it is likely that a combination of licensing and in-house processing of the material in semi-finished form will be employed to
realize value from the alloy.



Semi-Finished Materials.
Raw nitinol material from specialty alloy suppliers is processed into various shapes and sizes and referred to as semi-finished materials. These materials, characterized generally as wire, strip or tubing, are sold to customers in
standard configurations, processed further to meet specific customer specifications, or serve as the starting material for the formed components produced by the Company.



Wire. Memrys nitinol wire products are sold as standard products, available in a variety of sizes, produced in
non-standard sizes, to meet specific customer requirements, and used as the precursor to a formed component. Memry produces wire with a diameter ranging from .004 to .250 inches. In addition, the Company may apply a variety of finishing techniques,
depending on customer specifications, including such steps as polishing or coating. Applications for the Companys wire products include cellular phone antennae, guidewires, endodontic files and needles.



Strip. The Companys nitinol strip is sold in standard
dimensions, as well as custom sizes as specified by the customer. Memry produces strip with a thickness ranging from .001 to .01 inches and a width ranging from five to twenty times the thickness. The majority of the strip product, however, serves
as the starting material for formed components made by Memry. Example applications include the strip sold to original equipment manufacturers (OEMs) for wrapping around catheters for reinforcement of drainage catheters and biopsy
forceps.



Tube. Nitinol tubing, or micro-tubing as it is
sometimes called, is likewise sold in standard or customized sizes. Memry produces tubes with an outside diameter ranging from .012 to .205 inches and an outside diameter to internal diameter ratio from 1.15 to 1.70. Tubes are typically used in
applications requiring flexible shafts, pushability and torqueability. Examples of such applications include stents, catheters, delivery guides, needles, MRI instruments and surgical instruments.



Formed Components. Formed components are typically non-standard
products. Formed components are made by taking the semi-finished materials and further processing them by bending, kinking, stamping, crimping, laser cutting, electropolishing, etc., into specific forms as specified by customers. Examples of
applications for formed components include the bending or arching of wire for use as orthodontic braces, helical and strip actuators, micro coils, patented locking rings for electronic connectors, enabling components of medical instruments
(particularly stent structures), and sealing components.



Sub-Assemblies. Memry manufactures and sells value-added sub-assemblies to OEMs, principally in the medical device field. This comprises taking the semi-finished materials and/or formed components produced by Memry and combining or
assembling them with other products that have been outsourced by Memry to form a larger component or sub-assembly of the OEMs finished product. Memry combines its SMA expertise with additional manufacturing and process knowledge
and third-party supply chain management to cost-effectively produce a sub-assembled product for OEMs. The single largest portion of Memrys eastern business is selling assemblies and components to United States Surgical (USS), a
division of Tyco Medical, and other medical industry OEMs. The primary item sold by Memry to USS is a SMA sub-assembly used by USS for endoscopic instruments. The use of superelastic SMAs allows the instruments to be constrained outside the body,
inserted into the body in its constrained form through small passages, to then take a different shape while inside the body, and then to return to their constrained shape for removal. The primary value-added product produced by the Companys
Menlo Park operations are finished stent rings utilized by Medtronic AVE in their AneuRx AAA stent graft product.



Engineering Services. Memry is engaged in reimbursable development projects in which the Company designs, manufactures and sells prototype
components and products to customers. Memry is currently working on a number of programs to develop SMA components for OEM customers products. The Company will accept customer-sponsored development contracts when management believes that the
customer is likely to order a successfully developed component or product in sufficient quantity to justify the allocation of the engineering resources necessary. Generally under such programs, the identity of the customer is confidential; the data,
inventions, patents and intellectual property rights which specifically relate to the SMA component are either owned by the customer, or, in several instances, shared between the Company and the customer; and data, inventions, patents, and
intellectual property rights pertaining to the SMA technology that do not specifically relate to the customers product are owned by the Company.



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STRATEGY



The Companys strategy has several components which support each other. Most fundamental is to maintain the Companys leadership position in the provision
and processing of SMAs. This requires Memry to continue developing the relevant technology and also to become a very efficient and cost effective manufacturer. A second element of the strategy is to diversify and expand the Companys revenue
base by providing additional products and services. This will enable Memry to attract new customers and to expand our business with our existing customer base. A third element of the strategy is to obtain value from the Companys body of
intellectual property through licensing, joint venture, or sale of technology. Finally, Memry is beginning to explore the possibility of expanding the Companys product and service offerings through acquisition or joint venture. Each of these
strategic elements will be further described below.



Strengthen position in Shape Memory Alloys. Memrys core business remains focused on its expertise in shape memory alloys, particularly nitinol, with the objective of sustaining growth in both the medical and non-medical
markets. Because of the innovative nature of the medical device industry, however, the Company has found the return on invested development resources to be most attractive in the medical device sector. The Company therefore focuses the majority of
its engineering and manufacturing expertise on the development of products for the medical device markets, where the properties provided by SMAs provide significant performance advantages or, in many cases, represent the enabling component of the
medical device.



In cases where non-medical customers support
the engineering and process development expense and there is strategic interest on the part of Memry, however, the Company will also undertake the development of non-medical applications. In addition, the Company has in the past applied, and
anticipates in the future to apply, advancements made in the development of medical devices to applications in the lower margin, higher volume non-medical sectors where customers are not supporting development activities.



In order to continue to advance the Companys leadership position in
SMAs, the Company continues to implement the following initiatives:



Continued Advancements in Processing Expertise and Quality Assurance. Nitinol is a non-linear material, which makes it a very difficult material to process. Memry believes that one of its competitive advantages
is its ability to effectively process this material. One of these processes is the production of tubes used primarily in the production of stents. The Company believes that this process, proprietary to the Company, will provide Memry with an
advantage over competitors with regard to product quality and cost for selected products when it is fully implemented. Memry has underway a number of process enhancement initiatives designed to enhance both the current manufacturing processes and
Memrys competitive position, some of which are intended to result in new patent applications. Because many of the materials produced by Memry are used in medical devices, the product quality requirements placed on Memry by its customers are
high. Both of Memrys U.S. manufacturing facilities are ISO 9001:1994 certified.



Modernizing Manufacturing Capabilities. To meet growing demand, particularly in the medical device market for the production of
nitinol stents and other components, the Company has committed to optimizing the manufacturing efficiency of its current facilities and expects to invest between $1.5 million and $2.5 million in capital equipment and facility improvements in fiscal
2004.



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



Provide new products and services.



Background. The medical device
industry has been undergoing significant change over the last few years. As part of that change, many of the larger participants have recognized that their competitive differentiation comes from two key elements: device design and product marketing.
These are the core competencies in which successful medical device companies excel and on which many medical device companies are focusing their resources. As a result, industry participants are looking to outsource to other companies with
specialized expertise some of the other essential parts of the business; especially engineering incorporating advanced material technologies and manufacturing processes. These factors have resulted in a growing trend towards outsourcing in the
medical device industry, impacting the full breadth of the manufacturing cycle from material engineering to final product assembly.



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The market drivers for the outsourcing trend include increased competitive pressures, a need to shorten the device development cycle, and efficient use of
resources.



Memry believes that it can
address the market opportunity created by these changes in the medical device industry. By combining a strong advanced materials technological capability to assist medical device companies with engineering skills that address issues involving the
characteristics of SMAs, as well as developing cost effective, high quality manufacturing processes and supply chain relationships, Memry believes that it can alleviate these issues for its OEM customers.



In order to expand on this fully-integrated
service concept, the Company has implemented the following:



Increase in Engineering Service Capabilities. Memry possesses significant expertise in the characterization and performance of various SMAs. This expertise is often critical in the design of medical devices.
Although Memry has in the past actively participated in the design of OEM customer products, the Company has a program to clearly characterize and communicate to customers both the Companys capabilities and the terms and conditions under which
the Company will contract to assist existing and potential customers through these services. In addition, it has increased the scope of service to the medical device market by adding sophisticated surface chemistry treatments.



Processing of Additional Formed Components. Over the
past several years, the Company has taken advantage of additional opportunities in the market to increase its business of processing semi-finished material into formed components. While the Company will continue to seek out new opportunities for
such formed components, in fiscal year 2004 the Company anticipates that it will focus its resources to a somewhat greater extent on seeking additional customers for existing component concepts and new opportunities for its semi-finished material.



Obtain value from intellectual property.Over the
years, Memry has developed a considerable amount of intellectual property (IP). Some of it is in the form of patents, other in the form of trade secrets and know-how. Recently the Company has been working on a program to obtain value from this IP in
other than its traditional route of manufacturing and selling product. The Company is currently in discussions with companies in several industries to attempt to license its new beta-titanium product (flexium) described above. If successful, Memry
would likely receive a royalty payment of some sort for the right to utilize the new alloy in a particular application. No royalty payments have been received to date, and there is no guarantee that Memry will be successful in these negotiations.
Memry also hopes to derive value from a technology that has applications in the oil-field service industry.



Expand Memrys product and service offering through acquisition or joint venture.While there remain attractive growth opportunities in the
core product/service areas described above, Memry plans to investigate broadening the Companys capabilities through acquisition or joint venture. Memry anticipates that any acquisition or joint venture would be in a business segment that is
strategically related to its current business.



MARKETING AND
SALES



Sales to Raychem. In 1996, in connection with
the acquisition by Memry of its West coast facility from Raychem Corporation (the Raychem Acquisition), Memry and Raychem entered into a Private Label/Distribution Agreement pursuant to which Raychem was made Memrys exclusive
distributor for the product line acquired by Memry in certain specified fields of use for an initial term of five years. Sales by the Company to certain customers, including USS, were excluded from the scope of this Agreement, as were any future
sales for all medical implant and certain consumer recreational applications. In February 2000, Memry and the Raychem division of Tyco International entered into a Sales Agency Agreement in order to replace the original agreement between the two
parties. Under the revised agreement, all medical applications were marketed and sold directly by Memrys internal sales and marketing organization. At the same time, Memry retained Raychem to be its exclusive sales agent for all industrial and
commercial applications served by the Company, including sales to the orthodentia and endodentia markets. Industrial and commercial sales handled by Raychem under the agreement are reported as gross sales, with commission due Raychem treated as
ordinary sales expense. The Company terminated this agreement effective September 30, 2002. Subsequent to this date, products previously sold by Raychem have been marketed and sold by Company personnel.



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



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Personnel. The Company currently has 9 sales and marketing personnel, of which 8 operate primarily
from headquarters, and 1 is the manager for the overall activity.



Material Customers. The Companys largest customers are Medtronic and Tyco, accounting for approximately 46% and 22% of the Corporations total revenue in fiscal year 2003. No other customer accounted for more than 10% of
total revenue.



Customer Agreements.The Company
executed supply agreements in fiscal year 2003 with two of the important customers.



Medtronic supply agreement. The Company executed this agreement during fiscal 2003 for a term of three years, however, Medtronic has the right to terminate this agreement after the second anniversary date for
any reason or no reason. In addition, the agreement provides for renewal terms of two years each at Medtronics option, subject to the Companys right to reject any renewal term, all on the terms set forth in the agreement. The agreement
covers all current products sold to Medtronic, and includes a right of first refusal during the term on next generation developments. The agreement also provides for research and development initiative support and collaboration. This agreement
provides for a forecast of product to be supplied by the customer to the Company, with a commitment of purchase at varying levels on a quarterly basis.



Tyco supply agreement. The Company and Tyco HealthCare Group LP executed this exclusive agreement for a term of three years wherein the Company is
the exclusive supplier for all nitinol base organ retrieval bags. The Company is also named as a preferred supplier for all successor products.



SOURCES OF SUPPLY



The principal raw material used by the Company is SMAs. The Company obtains its SMAs from two principal sources: Teledyne Wah Chang, of Albany,
Oregon and Special Metals Corporation, of New Hartford, New York. The Company expects to be able to continue to acquire SMAs in sufficient quantities for its needs from these suppliers. In addition, if the Company were, for whatever reason, not able
to secure an adequate supply of SMAs from these suppliers, the Company believes that other sources exist that would be able to supply the Company with sufficient quantities of SMAs, although the Company could suffer some transitional difficulties if
it had to switch to such alternative sources.



While the
Company also relies on outside suppliers for its non-SMA components of sub-assembled products, the Company does not anticipate any difficulty in continuing to obtain non-SMA raw materials and components necessary for the continuation of the
Companys business.



COMPETITION



The Company faces competition from other SMA processors, who compete with the
Company in the sale of semi-finished materials (primarily with the Companys California operation) and formed components (with Memrys Connecticut and California operations). There are several major U.S., European and Japanese companies
engaged in the supply or use of SMAs, some of which have substantially greater resources than the Company. Within the U.S., the two major SMA suppliers to both the Company and the industry as a whole are Teledyne Wah Chang and Special Metals
Corporation. Each of these companies has substantially greater resources than the Company and could determine that it wishes to compete with the Company in the Companys markets. Special Metals has in fact become a competitor of the Company for
semi-finished wire and strip materials. Japanese competitors include Furakawa Electric Co. and Daido, both of which produce SMAs and sell to users in Japan and internationally. The principal European competitors are Memometal, a private French
company, Minitubes SA, a private French nitinol tube supplier, and G. Rau/EuroFlex, a German company that has a business relationship with NDC (see below). In addition, AMT (formerly Memry Europe) is a European competitor. However, pursuant to the
License and Supply Agreement between Memry and AMT, the parties agreed that AMT has the rights to use certain of our technology only in Europe and Asia, while we have retained such rights elsewhere. The Company believes that Cordis/Johnson and
Johnson, through its subsidiary Nitinol Devices and Components Company (NDC), is the largest competitor, followed by Shape Memory Alloy Applications, Inc., recently acquired by Johnson Matthey Inc.



The Company intends to compete, and advance its position based primarily on
its manufacturing capabilities, its proprietary intellectual property positions, its knowledge of the processing parameter of the alloys, and its unique design and assembly capabilities, particularly in the medical device field. However, Memry has
experienced increased competitive pressure over the past fiscal year, and anticipates that this pressure will continue in the future. It is likely that this competitive activity will result in downward pressure on prices and have a negative impact
on gross margins.



6



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##### Table of Contents

##### Index to Financial Statements

PATENTS AND TRADEMARKS



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



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



While these acquired patents in no way dominate the entire field of shape memory metals, they do provide the Company with some competitive advantages in
the covered uses. In addition, notwithstanding the Companys acquisition of these patents and patent applications as part of the Raychem Acquisition, under certain circumstances the Company is required to license the acquired intellectual
property back to Raychem for specified uses. For example, (i) upon the termination of the Companys Sales Agency Agreement with Raychem, Raychem received a non-exclusive perpetual license to utilize these patents to sell products within
specified fields of uses for a specified royalty, and (ii) Raychem has a non-exclusive, transferable perpetual license to utilize these patents in connection with certain intellectual property relating to the medical products market that was not
acquired by the Company as part of the Raychem Acquisition. The Company believes that this latter license has been transferred to Medtronic, Inc., a medical products manufacturer (and a customer of the Company), when Medtronic purchased this
excluded (from the Raychem Acquisition) intellectual property from Raychem during fiscal 1997. The Company also has various other patents and trademarks which, while useful, are not individually material to the Companys operations.



The Companys patent rights do not dominate the field of
SMA utilization and the Company does not have specific patent protection for its most important present products or product components. The Companys patent rights obviously do not dominate any specific fields in which the Company sells
products. The Company does believe, however, that various patents provide it with advantages in the manufacture and sale of different products, and that its know-how relating to various SMAs provides the Company with a competitive advantage.



While a U.S. patent is presumed valid, the presumption of
validity is not conclusive, and the scope of a patents claim coverage, even if valid, may be less than needed to secure a significant market advantage. Gaining effective market advantage through patents can require the expense, uncertainty and
delay of litigation. Although the Companys technical staff is generally familiar with the SMA patent environment and has reviewed patent searches when considered relevant, the Company has not requested any legal opinion to determine whether
any of its current or contemplated products would infringe any existing patents.



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



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



RESEARCH AND DEVELOPMENT



During fiscal 2003, the Company spent approximately $2,465,000 on
pure research and development (i.e., research and development done by the Company at its own cost for purposes of developing future products). In comparison, the Company spent approximately $2,417,000 and $1,699,000 during fiscal years
2002 and 2001 respectfully on pure research and development. The Company anticipates modest increases in the amount of pure research and development that it undertakes as the Companys growth continues.



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##### Index to Financial Statements

In addition, the Company spent approximately $483,000 during fiscal 2003 on funded research
contributing to the development of SMA components pursuant to customer arrangements. These funded research and development costs are borne directly by the customers of the Company, as applicable, and, for purposes of the Companys
financial statements, are part of cost of revenues, rather than research and development. Prior to fiscal year 2003, funded research and development also included costs borne directly by the European Union and the Flemish
regional government (Belgium), which were associated with the Companys European subsidiary, which was sold in fiscal year 2001. By comparison, the Company spent approximately $636,000 and $676,000 on funded research and development
in fiscal 2002 and 2001 respectively, which amounts were accounted for as cost of revenues. The amount of funded research and development that the Company will undertake in the future will depend upon its customers
needs.



EMPLOYEES



As of June 30, 2003, the Company had 220 full-time employees and one
part-time employee. Of the full-time employees, 23 were executive or management personnel and 24 were science and research personnel.



None of the employees are represented by collective bargaining units. The Company believes that its relationship with its employees is generally good.



In addition, as of June 30, 2003, the Company had
approximately 20 temporary employees (i.e., employees of temporary manpower companies) working for the Company.



ITEM 2. PROPERTIES



Effective May
31, 2001, the Company relocated its headquarters and eastern manufacturing operations from Brookfield, CT to a new facility located approximately 5 miles away in Bethel, CT. The Company signed a lease effective May 25, 2001, to expire on June 17,
2011, for office and manufacturing space located at 3 Berkshire Blvd., Bethel, CT 06801. The building is a single story, brick and block construction facility located in Berkshire Corporate Park, a suburban office center. The premises has a floor
area of approximately 37,500 square feet, of which approximately 8,200 square feet is used by the Company for general administrative, executive, and sales purposes, and approximately 29,300 square feet is used for engineering, manufacturing,
research and development operations and an environmentally controlled area (clean room). The lease provides for an average monthly base rental of approximately $28,000. Effective June 1, 2003, the monthly base rent was adjusted to
$30,000 to reflect changes in the Consumer Price Index.



A leased facility located at 4065 Campbell Avenue, Menlo Park, California 94025 is the principal site of the Companys west coast operations. These premises have a floor area of approximately 28,032 square feet, which is used by the
Company for manufacturing, warehousing, general administrative and research and development operations. On August 27, 2001, the Company signed a lease, effective October 1, 2001, with 4065 Associates, L.P., the landlord of the facilities located at
4065 Campbell Avenue, Menlo Park, for a lease which was scheduled to end on March 31, 2003. The lease provided for a monthly base rental of approximately $49,000. On November 6, 2001, the Company amended the lease to extend the term until September
30, 2004. Under the terms of the amended lease, the Company was to continue to pay a monthly base rent of approximately $49,000 through March, 2003, and subsequent to that date, the monthly base rental would be modified to reflect changes in the
Consumer Price Index. A second amendment to the lease became effective July 1, 2003, extending the lease to June 30, 2008 and adjusting the monthly rent amount to $24,000. Subsequent rent adjustments of 3% per year are also set forth in the second
amendment. The other major provisions of the lease remain unchanged.



To accommodate growth in the Companys medical device components business, on March 15, 2000, the Company subleased approximately 10,000 square feet of additional light manufacturing and office space at 4020 Campbell Avenue, Menlo
Park, California. The sublease expires on September 30, 2004, and provides for an average monthly base rental of approximately $11,000. The Company has an option to extend the sublease through April 14, 2006.



Management believes that the existing facilities of the Company are suitable
and adequate for the Companys present needs and that the properties are adequately covered by insurance. If the Company is successful in achieving substantial growth, it is possible that the Company will require additional manufacturing and
office space over the next several years.



ITEM 3. LEGAL PROCEEDINGS



Not
applicable.



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##### Index to Financial Statements

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



Not applicable.



PART II.



ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



The Companys Common Stock trades on the American Stock Exchange under the symbol MRY. On June 30, 2003, there were approximately 3,468 holders of
record of the Companys Common Stock.



The
following table sets forth the quarterly high and low closing prices for the common stock over the past two years.



|            |  | Fiscal year ended June 30
|----------- |  | -------------------------
|            |  | 2003                     
|            |  | High                     
|1stQuarter  |  | $                        
|2nd Quarter |  |                          
|3rdQuarter  |  |                          
|4thQuarter  |  |                          



The Company has never
paid a cash dividend on its Common Stock and the Company does not contemplate paying any cash dividends on its Common Stock in the near future.



Pursuant to the Companys December 27, 2001 amended and restated loan agreement with its principal lender the Company is prohibited from declaring or
paying any dividends, or making a distribution to its stockholders, until the termination of such agreement and the repayment of all amounts due to such lender.



ITEM 6. SELECTED FINANCIAL DATA



(a) The
following table sets forth selected consolidated financial data with respect to the Company for the five years ended on June 30, 2003, which were derived from the audited consolidated financial statements and notes of the Company and should be read
in conjunction with them.



|                           |  | Years Ended                         |       
|-------------------------- |  | ----------------------------------- | ------
|                           |  | 2003                                |       
|                           |  | In thousands, except per share data |       
|Revenues                   |  | $                                   | 34,007
|Net income (loss)          |  |                                     | 8,828 
|Earnings (loss) per share: |  |                                     |       
|Basic                      |  |                                     | 0.35  
|Diluted                    |  |                                     | 0.34  
|Total Assets               |  |                                     | 30,127
|Long-term debt             |  |                                     | 980   
|Stockholders equity       |  |                                     | 25,648



(b) The following table sets forth
selected quarterly unaudited financial data for the years ended June 30, 2003 and June 30, 2002.



SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)



In thousands, except per share data



|             |  | FIRST QUARTER |  | SECOND QUARTER |  | THIRD QUARTER |  | FOURTH QUARTER |  | FISCAL YEAR
|------------ |  | ------------- |  | -------------- |  | ------------- |  | -------------- |  | -----------
|NET SALES    |  |               |  |                |  |               |  |                |  |            
|FY2003       |  | 8,896         |  | 9,395          |  | 8,460         |  | 7,256          |  | 34,007     
|FY2002       |  | 7,848         |  | 8,349          |  | 7,519         |  | 9,179          |  | 32,895     
|GROSS PROFIT |  |               |  |                |  |               |  |                |  |            
|FY2003       |  | 3,140         |  | 3,273          |  | 2,726         |  | 2,260          |  | 11,399     
|FY2002       |  | 4,155         |  | 3,898          |  | 2,731         |  | 3,769          |  | 14,553     
|NET INCOME   |  |               |  |                |  |               |  |                |  |            
|FY2003       |  | 798           |  | 7,717          |  | 277           |  | 37             |  | 8,828      



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##### Index to Financial Statements

|FY2002                     |  | 1,485 |  | 1,013 |  | 243  |  | 1,042 |  | 3,783
|-------------------------- |  | ----- |  | ----- |  | ---- |  | ----- |  | -----
|BASIC EARNINGS PER SHARE   |  |       |  |       |  |      |  |       |  |      
|FY2003                     |  | 0.03  |  | 0.30  |  | 0.01 |  | 0.00  |  | 0.35 
|FY2002                     |  | 0.06  |  | 0.04  |  | 0.01 |  | 0.04  |  | 0.16 
|DILUTED EARNINGS PER SHARE |  |       |  |       |  |      |  |       |  |      
|FY2003                     |  | 0.03  |  | 0.30  |  | 0.01 |  | 0.00  |  | 0.34 
|FY2002                     |  | 0.06  |  | 0.04  |  | 0.01 |  | 0.04  |  | 0.15 



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES



We have adopted various accounting policies to prepare the consolidated financial statements in accordance with accounting principles generally accepted in the United
States of America (U.S.). Our most significant accounting policies are disclosed in Note 1 to the consolidated financial statements.



The preparation of the consolidated financial statements, in conformity with accounting principles generally accepted in the U.S., requires us to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates and assumptions, including those related to bad debts, inventories, intangible assets, property, plant and equipment, sales
returns and discounts, and income taxes, are updated as appropriate, which in most cases is at least quarterly. We base our estimates on historical experience or various assumptions that are believed to be reasonable under the circumstances, and the
results form the basis for making judgments about the reported values of assets, liabilities, revenues and expenses. Actual results may materially differ from these estimates.



Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material
matters that are uncertain at the time the accounting estimates are made, and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period. Our
critical accounting estimates include the following:



Valuation of Deferred
Tax Assets. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The recognition of a valuation allowance for deferred taxes requires management to make estimates about the Companys future profitability. The estimates
associated with the valuation of deferred taxes are considered critical due to the amount of deferred taxes recorded on the consolidated balance sheet and the judgment required in determining the Companys future profitability. Deferred tax
assets were $6,806,000 and $0 at June 30, 2003 and 2002, respectively.



Valuation of Goodwill and Other Intangible Assets. Goodwill represents the excess of the aggregate purchase price over the fair value of net assets of the acquired business. Goodwill is tested for impairment annually, or more
frequently if changes in circumstance or the occurrence of events suggest an impairment exists. The test for impairment requires us to make several estimates about fair value. Goodwill was $1,038,000 at June 30, 2003 and 2002.



Other intangible assets consist primarily of patents and patent rights and are amortized
using the straight-line method over their estimated useful lives, ranging from 13 to 16 years. We review these intangible assets for impairment annually or as changes in circumstance or the occurrence of events suggest the remaining value is not
recoverable. Other intangible assets, net of accumulated amortization, were $1,067,000 and $1,200,000 as of June 30, 2003 and 2002, respectively.



RESULTS OF OPERATIONS



Years ended June 30, 2003 and June 30, 2002



Revenues. In the past several years, the Company has focused on increasing the amount of value-added products it provides to the marketplace, i.e.,
products where additional processing is performed on basic nitinol wire, strip, or tube before it is shipped to the customer. Currently, medical device applications represent some of the best opportunities for increasing the amount of value-added
business. The kink-resistant and self-expanding properties of nitinol have made peripheral stenting an area of



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##### Index to Financial Statements

special interest, and stent components manufactured for Abdominal Aortic Aneurysms (AAA) in particular have become a significant driver of the Companys
revenue. However, because the market for stent components is very dynamic and rapidly changing, the Company has found it difficult to accurately forecast demand for its stent components. Delays in product launches, uncertain timing on regulatory
approvals, inventory adjustments by our customers, market share shifts between competing stent platforms and the introduction of next-generation products have all contributed to the variability in revenue generated by shipments of medical stent
components.



Revenues increased 3% for the fiscal year ended
June 30, 2003, to $34,007,000 from $32,895,000 for the year ended June 30, 2002, a net increase of $1,112,000. Shipments of wire-based medical stent components increased approximately $1,250,000 between fiscal 2002 and fiscal 2003 and tube-based
medical stent components increased approximately $300,000 during the same period. Looking forward, Memry anticipates that AAA stent component shipments will be significantly reduced in fiscal 2004 versus fiscal 2003. This anticipated lower level of
shipments reflect both inventory adjustments by a major customer and new approved suppliers of AAA devices that compete with Memrys existing AAA customers and do not buy product from Memry.



Other medical device component shipments, including products utilized in minimally invasive
surgery and guidewire applications, increased approximately $750,000 between fiscal 2002 and fiscal 2003.



Revenues from sales of arch wire, high pressure sealing plugs, and locking devices increased approximately $700,000 during fiscal 2003 compared to fiscal 2002, and revenues from prototype development and R&D
activities increased $300,000 during the same period as compared to fiscal 2002.



These revenue increases were partially offset by a decrease of approximately $1,600,000 in shipments of superelastic tube, utilized in coronary applications and for other peripheral stenting, and a decrease of $550,000 in other superelastic
semi-finished materials utilized in various industrial applications. The Company anticipates that increasing competition will put pressure on pricing for superelastic tube as well as other selected segments of the business during fiscal 2004.



Costs and Expenses. Manufacturing costs increased from $17,706,000 in
fiscal 2002 to $22,125,000 in fiscal 2003, an increase of $4,419,000, or 25.0%. The Companys gross margin from sales decreased to 33.5% in fiscal year 2003 from 44.2% in fiscal year 2002. This cost increase and margin deterioration of fiscal
2003 compared to fiscal 2002 is the result of poor manufacturing yields in both the Companys wire and tube based AAA stent component businesses and a significant reduction in the percentage of high margin superelastic tube in the product mix
and a significant reduction in the percentage of high margin superelastic tube in the product mix. Superelastic tube shipments declined because a major customer of the Company that was a significant user of superelastic tube ceased production of a
product. The Company does not expect superelastic tube shipments to recover to the fiscal year 2002 levels in the near future.



The Company does not anticipate significant improvement in gross margins for the next six to nine months due to a weak forecast for AAA stent component
demand and the resultant negative impact on manufacturing plant absorption. Competitive pricing pressure on certain segments of the superelastic tube business will also result in pressure on gross margins.



General, selling and administrative (GSA) expenses decreased to
$8,929,000 in fiscal 2003 from $10,151,000 in fiscal 2002, a decrease of $1,222,000 or 12.0%. This decrease is primarily due to a reduction in consulting, bonuses and legal costs. The Company incurred research and development expenses of $2,465,000
relating to its own internal products as well as the development of future products in fiscal 2003 compared to $2,417,000 during fiscal 2002. Other expense decreased from $130,000 in fiscal 2002 to $65,000 in fiscal 2003, due primarily to an
increase in interest income associated with a higher cash balance along with a reduction in interest expense associated with a reduced level of borrowing.



Income Taxes. The Company recorded a tax benefit of $6,756,000 for fiscal 2003 versus a provision of $152,000 for the same period in
fiscal 2002. This change is due primarily to a decrease in the deferred tax valuation allowance during the second quarter of fiscal 2003 to recognize deferred tax assets at amounts considered by management, more likely than not, to be realized.
Based on the Companys recent history of profitability and its forecasts for future periods, management has estimated that operating loss carryforwards in the amount of $17,190,000 and other temporary differences will be realized.



Net Income. The Companys net income increased by $5,045,000,
to $8,828,000 for fiscal 2003 due primarily to the recognition of the deferred tax asset, as required by Statement of Financial Accounting Standards No. 109, in the amount of $6,806,000. This compares with the net income of $3,783,000 during fiscal
2002.



Years ended June 30, 2002 and June 30, 2001



Revenues. In the past several years, the Company has focused on
increasing the amount of value-added products it provides to the marketplace, i.e., products where additional processing is performed on basic nitinol wire, strip, or tube before it is



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##### Index to Financial Statements

shipped to the customer. Currently, medical device applications represent some of the best opportunities for increasing the amount of value-added business.
The kink-resistant and self-expanding properties of nitinol have made peripheral stenting an area of special interest, and stent components manufactured for Abdominal Aortic Aneurysms (AAA) in particular have become a significant driver of the
Companys revenue. However, because the market for stent components is very dynamic and rapidly changing, the Company has found it difficult to accurately forecast demand for its stent components. Delays in product launches, uncertain timing on
regulatory approvals, inventory adjustments by our customers, market share shifts between competing stent platforms and the introduction of next-generation products have all contributed to the variability in revenue generated by shipments of medical
stent components.



Revenues increased 10% for the fiscal year
ended June 30, 2002, to $32,895,000 from $29,913,000 for the fiscal year ended June 30, 2001, a net increase of $2,982,000. This increase is primarily due to a significant increase in sales of superelastic tube, utilized for medical applications.
Superelastic tube sales increased approximately $2,700,000 between fiscal 2001 and fiscal 2002. This higher level of tube sales was primarily due to increased demand in several medical device procedural areas, particularly embolic protection,
neurological, and orthopedic.



As noted above, the
kink-resistant and self-expanding properties of nitinol have made peripheral stenting an attractive market for the Company at this time. Higher levels of wire-based stent component sales more than offset the reduction in tube-based stent component
sales netting an increase in revenue of approximately $500,000 for the category as a whole in fiscal 2002.



Revenues from sales of arch wire and high pressure sealing plugs increased approximately $1,200,000 during fiscal 2002 while microcoil and guidewire
revenue increased approximately $200,000.



These revenue
increases were partially offset by a decrease of approximately $400,000 in revenue from sales of various commercial and industrial products and actuators and a decrease of approximately $1,300,000 in revenue from sales of bra wire, antenna wire, and
other semi-finished wire applications.



Costs and
Expenses. Manufacturing costs decreased from $17,734,000 in fiscal 2001 to $17,706,000 in fiscal 2002, a decrease of $28,000, or less than 1%. The Companys gross margin from sales increased to 44.2% in fiscal year 2002 from 38.5% in fiscal
year 2001. This increase was primarily attributable to the increase in sales of higher margin semi-finished tube for medical applications and in sales of stent components. In addition, manufacturing costs in fiscal 2001 were relatively high due to
one of the Companys most significant medical device component customers temporarily suspending shipments of its product in the first half of fiscal 2001. Because the Company believed the suspension to be temporary in nature, it decided to
retain much of its skilled labor during the period of reduced shipments, thereby having a negative effect on the fiscal 2001 gross margin of the Company. In addition, fiscal 2001 included costs associated with Memry Europe, which was sold during
fiscal 2001 (See Note 14 to Consolidated Financial Statements).



General, selling and administrative (GSA) expenses decreased to $10,151,000 in fiscal 2002 from $11,138,000 in fiscal 2001, a decrease of $987,000 or 8.9%. Approximately $600,000 of the reduction is a result of lower GSA
expenses following the sale of the Companys European subsidiary, Memry Europe, in fiscal 2001 and the balance is primarily due to reduced spending on investment banking fees and other corporate costs. Depreciation and amortization decreased to
$337,000 in fiscal 2002 from $512,000 in fiscal 2001, a decrease of $175,000, primarily attributable to the Companys adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets on July 1,
2001. Total operating expenses in fiscal 2001 also included a loss of $4,232,000 resulting from the sale of Memry Europe (See Note 14 to Consolidated Financial Statements). Other expenses decreased to $130,000 in fiscal 2002 from $358,000, a
decrease of $228,000. This decrease is primarily due to a decrease in interest expense of approximately $233,000 which is attributable to the lower level of borrowing during the fiscal year ended June 30, 2002 as compared to the fiscal year ended
June 30, 2001.



Income Taxes. The provision for income
taxes for the fiscal year ended June 30, 2002, consists solely of state taxes. The benefit for the fiscal year ended June 30, 2001, was minimal due to the net loss incurred. The Company has significant operating loss carryforwards for federal income
tax purposes.



Net Income/Loss. As a result of the Companys 10%
increase in revenues, along with a 1% reduction in manufacturing costs and a 8.9% decrease in GSA expenses, the Company had a net income of $3,783,000 during fiscal 2002. This compares with a net loss of $4,689,000 during fiscal 2001, which includes
a loss of $4,232,000 incurred on the sale of Memry Europe (See Note 14 to Consolidated Financial Statements).



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##### Index to Financial Statements

LIQUIDITY AND CAPITAL RESOURCES



At June 30, 2003, the Companys cash and cash equivalents balance was $7,509,000, an increase of $4,558,000 from
$2,951,000 at the end of fiscal year 2002. Cash provided by operations was $6,131,000 for the twelve months ended June 30, 2003. A significant component of the cash provided by operations and the increase in cash was a reduction in accounts
receivable of $2,131,000. The reduction was primarily due to a more focused effort by the Company to collect receivables due from major customers. Cash used in investing activities was $1,486,000, representing funds invested in property, plant and
equipment. During the twelve months ended June 30, 2003, cash used in financing activities totaled $87,000, consisting primarily of the payment of notes payable and capital lease obligations totaling $534,000 offset by proceeds from issuance of
common stock and proceeds from notes payable totaling $447,000. Working capital at June 30, 2003, was $11,355,000, an increase of $2,476,000 from $8,879,000 at June 30, 2002.



In fiscal 2002 and fiscal 2003, the primary capital requirements were to fund additions to property, plant, and equipment.



On April 2, 2002, New England Partners exercised 200,000
warrants at a price of $0.853 per warrant, and 400,000 warrants at $1.19 per warrant, to purchase 600,000 shares of common stock of the Company. The Company received $647,000 from this transaction.



On March 31, 2002, a former employee exercised 125,000 warrants at a price of
$.90 per warrant, to purchase 125,000 shares of common stock of the Company. The Company received $113,000 from this transaction.



On November 8, 2001, the Company completed a private equity placement with New England Partners and raised $750,000. Proceeds were raised through the sale
of units, each of which consisted of two shares of Common Stock and a warrant to purchase one share of Common Stock. Each unit was priced at $2.00. The warrants are exercisable at $1.25 per share, exercisable for a period of five years from the date
of issuance. New England Partners was granted piggyback registration rights to participate in the registration of the securities purchased in the private equity placement, which was completed in January 2001. The registration became effective August
28, 2002. Other terms and conditions were set forth in the definitive documents.



On February 8, 2001, the Company completed the sale of the stock of its European Subsidiary, Memry Europe, to Mr. Wilfried Van Moorleghem, for a cash consideration of $1,000,000. As part of the transaction, the
Company entered into a supply and license agreement with Memry Europe, pursuant to which Memry granted to Memry Europe a royalty-bearing license to certain technologies and agreed to supply Memry Europe with certain alloys and tubing.



On January 31, 2001, the Company completed a private equity placement and
raised $2,395,000. Proceeds were raised through the sale of units, each of which consisted of one share of Common Stock and a warrant to purchase one share of Common Stock. Each unit was priced at $1.00. The warrants are exercisable at $2.25 per
share, valid for a period of three years from the date of issuance. Notwithstanding the foregoing, if the fair market value of one share of Common Stock of the Company is equal to or greater than $3.50 for twenty (20) consecutive days during the
term of the warrant, the Company has the right to demand that the holder exercise the warrant within a 30-day period. Failure of the holder to exercise the warrant within thirty (30) days would cause the warrant to become void and the holder would
lose all rights that it has with respect to the warrant. In accordance with the Securities Act of 1933, as amended (the Securities Act), the Company filed a registration statement for the registration of the sale by the investors of
their Company securities on April 12, 2001. The registration became effective December 27, 2001. Other terms and conditions were set forth in the definitive documents.



On June 30, 1998, the Company and Webster Bank entered into a Commercial Revolving Loan, Term Loan, Line of Credit and
Security Agreement and related financing documents and agreements, with amendments to certain of such documents entered into on each of November 30, 1999, June 30, 2001 and December 31, 2001 (the Webster Facility).



The Webster Facility includes a revolving loan for borrowings up to the
lesser of (a) $5,000,000 or (b) an amount equal to the aggregate of (1) 85% of the eligible accounts receivable plus (2) 30% of eligible inventory provided, however, that at no time shall 85% of eligible accounts receivable be less than 50% of the
outstanding revolver balance. The termination date of the revolving loan is December 31, 2003. In connection with the amendment to the Webster Facility entered into on December 31, 2001, several existing term loans totaling $1,728,490 were
refinanced into a single term loan, which is due December 31, 2005. The Webster Facility includes an equipment loan line of credit that provides for equipment financing up to the lesser of $1,000,000 or 75% of the purchase price for eligible
equipment through December 31, 2002. At December 31, 2002, advances of $276,000 had been taken on the equipment line of credit. The Company, on January 1, 2003, converted amounts borrowed under the equipment line of credit to a term loan. The
equipment loan line of credit has been extended through December 31, 2003. As of June 30, 2003, advances of $339,000 have been taken on the equipment line. At June 30, 2003, an aggregate amount of approximately $1,878,000 was outstanding under the
Webster Facility. The Webster Facility is secured by substantially all of the Companys assets.



13



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##### Table of Contents

##### Index to Financial Statements

Interest on the revolving loan and equipment line of credit is variable based on LIBOR plus 2.5%.
Interest on the outstanding term loan from December 31, 2001 is at a fixed interest rate of 7.55% per annum. Interest on the equipment loan converted January 1, 2003, and the equipment line advance are at a variable rate based on LIBOR plus 2.5%



In addition, the Webster Facility contains various restrictive
covenants, including, among others, limitations on encumbrances and additional debt, prohibition on the payment of dividends or redemption of stock (except in connection with certain existing put rights), restrictions on management/ownership changes
and required compliance with specified financial ratios.



On
June 15, 2003, a promissory note with Chase Manhattan auto finance was completed to purchase a 1999 Saab 9000. Interest on the note is fixed at 5.9% with scheduled monthly payments ending June 2006.



The Company has in the past grown through acquisitions (including the
acquisition of Wire Solutions and Raychem Corporations nickel titanium product line). As part of its continuing growth strategy, the Company expects to continue to evaluate and pursue opportunities to acquire other companies, assets and
product lines that either complement or expand the Companys existing businesses. The Company intends to use available cash from operations, debt, and authorized but unissued common stock to finance any such acquisitions.



The Company has requirements to fund plant and equipment projects to support
the expected increased sales volume of SMAs and superelastic materials during the fiscal year ending June 30, 2004 and beyond. The Company expects that it will be able to pay for these expenditures through a combination of existing working capital
surplus, cash flow generated through operations and increased borrowings. The largest risk to the liquidity of the Company would be an event that caused an interruption of cash flow generated through operations, because such an event could also have
a negative impact on the Companys ability to access credit. The Companys current dependence on a limited number of products and customers represents the greatest risk to regular operations.



In connection with a December 1994 subordinated debt financing, the Company
granted Connecticut Innovations, Incorporated (CII), at the time the holder of both common stock and warrants of the Company, a put right if at any time before the earlier of June 28, 2006 and the date on which CII ceases to
hold at least 35% of the common stock underlying the convertible securities originally issued to it, the Company ceases to (a) maintain its corporate headquarters and all of its product business operations in the State of Connecticut (including the
assembly of all products to be sold to U.S. Surgical Corporation), excluding the Companys components and sub-assembly business acquired from Raychem, (b) base its president and chief executive officer, a majority of its senior executives, and
all of its administrative, financial, research and development, marketing and customer service staff relating to its product business (subject to the same inclusions and exclusions as clause (a)) in the State of Connecticut, (c) conduct all of its
operations relating to its product business directly or through subcontractors and through licensed operations in the State of Connecticut (subject to the same inclusions and exclusions as clause (a)), and (d) maintain its principal bank accounts
with banks located in the State of Connecticut (provided, however, that assets, revenues, employees, operations and bank accounts attributable to any entity acquired by the Company shall not be considered when determining if the Company has
satisfied such requirements so long as such entity (1) was acquired in an arms length transaction, (2) was not an affiliate of the Company and was not controlled by an affiliate of the Company prior to such acquisition, and (3) had been in
existence and operating as a business for at least one year at the time of the acquisition). Upon CIIs exercise of its put, the Company shall be obligated to purchase from CII all the Companys Common Stock then owned by CII and
underlying warrants then owned by CII at a price equal to the greater of the then current market price of the Companys common stock or $2.00 per share, less, in either event, the aggregate amount of unpaid exercise prices of all warrants put
to the Company by CII. Using $2.00 as the put price per share, which exceeds the market price for the Companys common stock on June 30, 2003, the aggregate put price that would have to be paid by the Company if the put were exercised would be
approximately $2.19 million. To the extent that the current market value of the Companys common stock exceeds $2.00 per share at any time, the put price would be greater. If CII were to have the right to put its securities and were to choose
to exercise that right, it would have a serious adverse effect on the Companys liquidity and the Company might have to seek equity financing to be able to meet its obligations to CII. However, the Company believes that it has the ability to
ensure that its operations do not move from Connecticut in a manner that would trigger CIIs put.



During the fourth fiscal quarter of 2001, the Company relocated to a facility located at 3 Berkshire Blvd., Bethel, CT 06801, to house the Companys
corporate headquarters and east coast manufacturing and assembly operation. The leased facility consists of approximately 37,500 square feet of manufacturing and office space located in a suburban industrial park. The total cost of leasehold
improvements, furnishings, and moving expenses associated with the new facility was approximately $2,600,000. The amended annual rent for the facility is approximately $355,000 versus the rent at the prior Brookfield location of approximately
$170,000 for 24,000 square feet.



On July 1, 2003, the Company
signed a second amendment for its manufacturing and office facility located at 4065 Campbell Avenue, Menlo Park, CA scheduled to end in June 2008. Under the terms of the amended lease, the Company will



14



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##### Table of Contents

##### Index to Financial Statements

continue to pay a monthly base rent of approximately $24,000 through June 2004, and subsequent to that date, the monthly base rental shall be modified to
reflect a 3% annual increase. The other major provisions of the lease remain unchanged.



Off-Balance Sheet Arrangements



The Company
does not have any off-balance sheet arrangements, other than operating leases in the normal course of business.



FORWARD-LOOKING INFORMATION



Certain statements in this Annual Report on Form 10-K that are not historical fact, as well as certain information incorporated herein by reference,
constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties and often depend on assumptions,
data or methods that may be incorrect or imprecise. The Companys future operating results may differ materially from the results discussed in, or implied by, forward-looking statements made by the Company. Factors that may cause such
differences include, but are not limited to, those discussed below and the other risks detailed in the Companys other reports filed with the Securities and Exchange Commission.



Forward-looking statements give our current expectations or forecasts of future events. You can usually identify these
statements by the fact that they do not relate strictly to historical or current facts. They often use words such as anticipate, estimate, expect, project, intend, plan,
believe, and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective products or product
approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.



Any or all of our forward-looking statements in this Annual Report on Form 10-K and information incorporated by reference
may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in this discussionfor example, product competition and the competitive
environmentwill be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially. The Company undertakes no obligation to revise any of these forward-looking
statements to reflect events or circumstances after the date hereof.



Other
Factors That May Affect Future Results



| |  | trends toward managed care, healthcare cost containment and other changes in government and private sector initiatives, in the U.S. and other countries in which we do business, that
are placing increased emphasis on the delivery of more cost-effective medical therapies
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the trend of consolidation in the medical device industry as well as among customers of medical device manufacturers, resulting in more significant, complex and long-term contracts
than in the past and potentially greater pricing pressures
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | efficacy or safety concerns with respect to marketed products, whether scientifically justified or not, that may lead to product recalls, withdrawals or declining sales
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | changes in governmental laws, regulations and accounting standards and the enforcement thereof that may be adverse to us
|- |  | ------------------------------------------------------------------------------------------------------------------------



| |  | other legal factors including environmental concerns
|- |  | ----------------------------------------------------



| |  | agency or government actions or investigations affecting the industry in general or us in particular
|- |  | ----------------------------------------------------------------------------------------------------



| |  | risks associated with maintaining and expanding international operations
|- |  | ------------------------------------------------------------------------



| |  | changes in business strategy or development plans
|- |  | -------------------------------------------------



| |  | business acquisitions, dispositions, discontinuations or restructurings
|- |  | -----------------------------------------------------------------------



| |  | the integration of businesses acquired by us
|- |  | --------------------------------------------



| |  | availability, terms and deployment of capital
|- |  | ---------------------------------------------



| |  | economic factors over which we have no control, including changes in inflation and interest rates
|- |  | -------------------------------------------------------------------------------------------------



| |  | the developing nature of the market for our products and technological change
|- |  | -----------------------------------------------------------------------------



| |  | intensifying competition in the SMA field
|- |  | -----------------------------------------



15



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##### Table of Contents

##### Index to Financial Statements

| |  | success of operating initiatives
|- |  | --------------------------------



| |  | operating costs
|- |  | ---------------



| |  | advertising and promotional efforts
|- |  | -----------------------------------



| |  | the existence or absence of adverse publicity
|- |  | ---------------------------------------------



| |  | our potential inability to obtain and maintain patent protection for our alloys, processes and applications thereof, to preserve our trade secrets and to operate without infringing
on the proprietary rights of third parties
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the possibility that adequate insurance coverage and reimbursement levels for our products will not be available
|- |  | ----------------------------------------------------------------------------------------------------------------



| |  | our dependence on outside suppliers and manufacturers
|- |  | -----------------------------------------------------



| |  | our exposure to potential product liability risks which are inherent in the testing, manufacturing, marketing and sale of medical products
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  | the ability to retain management
|- |  | --------------------------------



| |  | business abilities and judgment of personnel
|- |  | --------------------------------------------



| |  | availability of qualified personnel
|- |  | -----------------------------------



| |  | labor and employee benefit costs
|- |  | --------------------------------



| |  | natural disaster or other disruption affecting Information Technology and telecommunication infrastructures
|- |  | -----------------------------------------------------------------------------------------------------------



| |  | acts of war and terrorist activities.
|- |  | -------------------------------------



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Not Applicable



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



The consolidated financial statements of the Company and the report of independent certified public accountants thereon are set forth on pages F-1 through F-21 hereof.



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



None.



ITEM 9A. CONTROLS AND PROCEDURES



(a) Evaluation of disclosure controls and procedures.



We carried out an evaluation, under the supervision and with the participation of our management, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective. It should be noted that the design of any system controls
is based in part upon certain assumptions, and there can be no assurance that any design will succeed in achieving its stated goals.



(b) Changes in internal control over financial reporting.



There was no change in our internal control over financial reporting that occurred during the fourth quarter of fiscal year 2003 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.



16



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##### Table of Contents

##### Index to Financial Statements

PART III.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



The information required by this Item is incorporated herein by reference to the sections entitled Proposal No. 1Election of Directors, Executive Officers of the Company and
Section 16(a) Beneficial Ownership Reporting Compliance of the Companys Definitive Proxy Statement to be filed with the Commission within 120 days after June 30, 2003.



ITEM 11. EXECUTIVE COMPENSATION



The information required by this Item is incorporated herein by reference to the sections entitled Proposal No. 1Election of DirectorsCompensation of Directors and Executive Compensation of the
Companys Definitive Proxy Statement to be filed with the Commission within 120 days after June 30, 2003.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



The information required by this Item is incorporated herein by reference to the sections entitled Security Ownership of Certain Beneficial Owners
and Management and Equity Compensation Plan Information of the Companys Definitive Proxy Statement to be filed with the Commission within 120 days after June 30, 2003.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



The information required by this Item is incorporated herein by reference to the section entitled Proposal No. 1Election of DirectorsCertain Relationships and Transactions of the Companys
Definitive Proxy Statement to be filed with the Commission within 120 days after June 30, 2003.



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



Not applicable because this report is filed for a period ending prior to December 15, 2003. However, the description of fees paid to our independent auditors contained in the section entitled Independent Auditors of the
Companys Definitive Proxy Statement to be filed with the Commission within 120 days after June 30, 2003 is incorporated herein by reference in partial response to this item.



PART IV.



ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K



(a) The following documents are filed as part of this report:



| | (1) |  | Financial Statements: Independent Auditors Report; Consolidated Balance Sheets as of June 30, 2003 and 2002; Consolidated Statements of Operations for the Years Ended June 30,
2003, 2002, and 2001; Consolidated Statements of Stockholders Equity for the Years Ended June 30, 2003, 2002, and 2001; and Consolidated Statements of Cash Flows for the Years Ended June 30, 2003, 2002 and 2001; Notes to the Consolidated
Financial Statements.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) |  | Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------



(b) Reports on Form 8-K



The Company furnished on Form 8-K on May 7, 2003 under Item 9 Regulation FD Disclosure, a press release
announcing our earnings for the quarter ended March 31, 2003 and a transcript of the related conference call.



(c) Exhibit Listing



17



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##### Table of Contents

##### Index to Financial Statements

|ExhibitNumber |  | Description of Exhibit                                                                                                                                             |  |     
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|              |  |                                                                                                                                                                   
|3.1           |  | Certificate of Incorporation of the Company, as amended                                                                                                            |  | (13)
|              |  |                                                                                                                                                                   
|3.2           |  | By-Laws of the Company, as amended                                                                                                                                 |  | (5) 
|              |  |                                                                                                                                                                   
|3.3           |  | Amendment Number 1 to By-Laws of the Company, as amended                                                                                                           |  | (9) 
|              |  |                                                                                                                                                                   
|4.1           |  | Form of Warrant to Purchase Common Stock for private equity placement completed on January 31, 2001                                                                |  | (14)
|              |  |                                                                                                                                                                   
|4.2           |  | Warrant to Purchase Common Stock issued to Brooks, Houghton & Company, Inc., dated June 30, 2001                                                                   |  | (16)
|              |  |                                                                                                                                                                   
|4.3           |  | Warrant to Purchase Common Stock issued to Brooks, Houghton & Company, Inc., dated August 30, 2001                                                                 |  | (16)
|              |  |                                                                                                                                                                   
|4.4           |  | Warrant to Purchase Common Stock issued to New England Partners, dated November 6, 2001                                                                            |  | (16)
|              |  |                                                                                                                                                                   
|4.5           |  | Warrant to Purchase Common Stock issued by the Company to ipCapital Group, Inc., dated December 18, 2001                                                           |  | (17)
|              |  |                                                                                                                                                                   
|4.6           |  | Nontransferable Nonqualified Stock Option Agreement, dated January 31, 2002, between the Company and Robert J.
Thatcher                                            |  | (18)
|              |  |                                                                                                                                                                   
|4.7           |  | Warrant No. 02-05 to Purchase Common Stock of the Company, dated April 3, 2002, issued to ipCapital Group Inc.                                                     |  | (18)
|              |  |                                                                                                                                                                   
|4.8           |  | Warrant No. 02-06 to Purchase Common Stock of the Company, dated April 3, 2002, issued to ipCapital Group Inc.                                                     |  | (18)
|              |  |                                                                                                                                                                   
|4.9           |  | Warrant No. 03-01 to Purchase Common Stock of the Company, dated April 10, 2003, issued to Trautman Wasserman & Co.,
Inc.                                          |  | (19)
|              |  |                                                                                                                                                                   
|10.2          |  | Employee Non-Disclosure agreement, dated as of October 18, 1994, between the Company and James G. Binch                                                            |  | *(2)
|              |  |                                                                                                                                                                   
|10.3          |  | Convertible Subordinated Debenture Purchase Agreement, dated as of December 22, 1994, between the Company and
CII                                                  |  | (5) 
|              |  |                                                                                                                                                                   
|10.4          |  | First Amendment to Convertible Subordinated Debenture Purchase Agreement, dated October 11, 1995, between the Company and
CII                                      |  | (3) 
|              |  |                                                                                                                                                                   
|10.5          |  | First Addendum to Stock Subscription Warrant (re: Warrant No. 94-4), dated October 11, 1995, made by the Company and agreed to
by CII                              |  | (3) 
|              |  |                                                                                                                                                                   
|10.6          |  | First Addendum to Stock Subscription Warrant (re: Warrant No. 94-5), dated October 11, 1995, made by the Company and agreed to
by CII                              |  | (3) 
|              |  |                                                                                                                                                                   
|10.7          |  | Second Amendment to Convertible Subordinated Debenture Purchase Agreement, dated as of June 28, 1996, between the Company and
CII                                  |  | (5) 
|              |  |                                                                                                                                                                   
|10.8          |  | Amended and Restated Class I Warrant Certificate (Warrant Certificate No. 94-4A) issued by the Company to CII                                                      |  | (5) 
|              |  |                                                                                                                                                                   
|10.9          |  | Amended and Restated Class II Warrant Certificate (Warrant Certificate No. 94-5A) issued by the Company to CII                                                     |  | (5) 
|              |  |                                                                                                                                                                   
|10.12         |  | Employee Agreement on Inventions and Patents, between the Company and James G. Binch                                                                               |  | *(5)
|              |  |                                                                                                                                                                   
|10.13         |  | Memry Corporation Stock Option Plan, as amended                                                                                                                    |  | *(6)
|              |  |                                                                                                                                                                   
|10.14         |  | Form of Nontransferable Incentive Stock Option Agreement under the 1994 Plan                                                                                       |  | *(6)
|              |  |                                                                                                                                                                   
|10.15         |  | Form of Nontransferable Non-Qualified Stock Option Agreement under the 1994 Plan                                                                                   |  | *(6)
|              |  |                                                                                                                                                                   
|10.16         |  | Amended and Restated Time-Lock Supply Agreement, dated as of February 19, 1997, and effective as of December 20, 1996, between
the Company and Raychem Corporation |  | (7) 
|              |  |                                                                                                                                                                   
|10.17         |  | Memry Corporations 1997 Long Term Incentive Plan, as Amended                                                                                                      |  | *(8)
|              |  |                                                                                                                                                                   
|10.18         |  | Form of Nontransferable Incentive Stock Option Agreement under the 1997 Plan                                                                                       |  | *(8)
|              |  |                                                                                                                                                                   
|10.19         |  | Amended and Restated Commercial Revolving Loan, Term Loan, Line of Credit and Security Agreement, as of December 27, 2001,
between the Company and Webster Bank    |  | (17)



18



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##### Index to Financial Statements

|      |  |                                                                                                                                                                                                                      
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.20 |  | Consolidated and Amended and Restated Term Loan Note, dated December 27, 2001, by the Company in favor of Webster
Bank                                                                                               
|      |  |                                                                                                                                                                                                                      
|10.22 |  | Stock Purchase Agreement, dated October 30, 1998, by and among Memry Holdings, S.A. and the Shareholders of Advanced Metals and
Technologies, N.V.                                                                   
|      |  |                                                                                                                                                                                                                      
|10.23 |  | Separation Agreement dated as of August 17, 1999, between the Company and William H. Morton                                                                                                                          
|      |  |                                                                                                                                                                                                                      
|10.28 |  | Second Amended and Restated Revolving Loan Note, dated December 27, 2001, by the Company in favor of Webster
Bank                                                                                                    
|      |  |                                                                                                                                                                                                                      
|10.29 |  | Equipment Loan Note, dated December 27, 2001, by the Company in favor of Webster Bank                                                                                                                                
|      |  |                                                                                                                                                                                                                      
|10.30 |  | Agreement, dated as of December 17, 1999, among Memry Holdings, S.A., the Company and G.I.M.V.                                                                                                                       
|      |  |                                                                                                                                                                                                                      
|10.34 |  | Employment Agreement, dated as of January 1, 2000, between the Company and James G. Binch                                                                                                                            
|      |  |                                                                                                                                                                                                                      
|10.35 |  | Sublease, dated February 3, 2000, by and between the Company and Pacific Financial Printing                                                                                                                          
|      |  |                                                                                                                                                                                                                      
|10.36 |  | Form of Securities Purchase Agreement for third party European investors used in private equity placement completed on January
31, 2001                                                                              
|      |  |                                                                                                                                                                                                                      
|10.37 |  | Form of Securities Purchase Agreement for officers and directors of the Company used in private equity placement completed on
January 31, 2001                                                                       
|      |  |                                                                                                                                                                                                                      
|10.38 |  | Lease, dated February 8, 2001, between Berkshire Industrial Corporation and the Company                                                                                                                              
|      |  |                                                                                                                                                                                                                      
|10.39 |  | Business Park Lease, dated August 27, 2001, between 4065 Associates, L.P. and the Company, together with Agreement to Defer
Certain Work, dated August 27, 2001, by and between 4065 Associates, L.P. and the Company
|      |  |                                                                                                                                                                                                                      
|10.40 |  | Form of Securities Purchase Agreement, dated as of November 6, 2001, by and among the Company and the investors listed
therein                                                                                       
|      |  |                                                                                                                                                                                                                      
|10.41 |  | Amended and Restated Employment Agreement, dated as of September 1, 2001, between Robert P. Belcher and the
Company                                                                                                  
|      |  |                                                                                                                                                                                                                      
|10.42 |  | Amended and Restated Employment Agreement, dated as of September 21, 2001, between Ronald Burke and the Company                                                                                                      
|      |  |                                                                                                                                                                                                                      
|10.43 |  | Amendment to Lease, dated November 6, 2001, between 4065 Associates L.P. and Memry Corporation, with Amendment to Agreement,
dated November 6, 2001, by and between 4065 Associates L.P. and the Company             
|      |  |                                                                                                                                                                                                                      
|10.44 |  | Advanced Payment Agreement, dated as of January 15, 2001, by and between Medtronic AVE, Inc. and the Company.                                                                                                        
|      |  |                                                                                                                                                                                                                      
|10.45 |  | Settlement Agreement and Mutual Release, dated as of January 28, 2002, by Robert J. Thatcher.                                                                                                                        
|      |  |                                                                                                                                                                                                                      
|10.46 |  | Amended and Restated Secured Promissory Note, dated January 28, 2002, by Robert J. Thatcher in favor of the
Company.                                                                                                 
|      |  |                                                                                                                                                                                                                      
|10.47 |  | Amended and Restated Statutory Form Mortgage Deed, dated January 28, 2002, granted by Robert J. Thatcher and Jayne M. Thatcher
to the Company                                                                        
|      |  |                                                                                                                                                                                                                      
|10.48 |  | Sublease extension, dated September 2, 2003, by and between the Company and Pacific Financial Printing                                                                                                               
|      |  |                                                                                                                                                                                                                      
|10.49 |  | Amendment to Lease, dated July 24, 2003, between 4065 Associates L.P. and the Company, with Second Amendment to Agreement,
dated July 24, 2003, by and between 4065 Associates L.P. and the Company                  
|      |  |                                                                                                                                                                                                                      
|10.50 |  | Master Supply Agreement, date June 13, 2003, by and between Medtronic, Inc. and the Company                                                                                                                          
|      |  |                                                                                                                                                                                                                      
|10.51 |  | Agreement, dated as of January 30, 2003, by and between the Company and United States Surgical, Division of Tyco Healthcare
Group, LP                                                                                
|      |  |                                                                                                                                                                                                                      
|10.52 |  | Employment Agreement, dated as of May 20, 2003, between Dean Tulumaris and the Company                                                                                                                               
|      |  |                                                                                                                                                                                                                      
|21.1  |  | Information regarding Subsidiaries                                                                                                                                                                                   



19



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##### Index to Financial Statements

|     |  |                                                                                                                                                  
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|23.1 |  | Consent of McGladrey & Pullen, LLP                                                                                                               
|     |  |                                                                                                                                                  
|31.1 |  | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934                                
|     |  |                                                                                                                                                  
|31.2 |  | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934                                
|     |  |                                                                                                                                                  
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|     |  |                                                                                                                                                  
|32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

---

|* |  | Management contract or compensatory plan of arrangement.
|- |  | --------------------------------------------------------

|+ |  | Confidential information is omitted from this exhibit and filed separately with the Securities and Exchange Commission accompanied by a confidential treatment request pursuant to
Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(1) |  | Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 1991.
|--- |  | --------------------------------------------------------------------------------------------------------------

|(2) |  | Incorporated by reference to the Companys Annual Report on Form 10-KSB for the fiscal year ended June 30, 1994.
|--- |  | ----------------------------------------------------------------------------------------------------------------

|(3) |  | Incorporated by reference to the Companys Annual Report on Form 10-KSB for the fiscal year ended June 30, 1995.
|--- |  | ----------------------------------------------------------------------------------------------------------------

|(4) |  | Incorporated by reference to the Companys Current Report on Form 8-K filed July 15, 1996.
|--- |  | ------------------------------------------------------------------------------------------

|(5) |  | Incorporated by reference to the Companys Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996, as amended.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------

|(6) |  | Incorporated by reference to the Companys Quarterly Report on Form 10-QSB for the fiscal quarter ended December 31, 1996.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

|(7) |  | Incorporated by reference to the Companys Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997, as amended.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------

|(8) |  | Incorporated by reference to the Companys Quarterly Report on Form 10-QSB for the fiscal quarter ended December 31, 1997.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

|(9) |  | Incorporated by reference to the Companys Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998.
|--- |  | ----------------------------------------------------------------------------------------------------------------

|(10) |  | Incorporated by reference to the Companys Current Report on Form 8-K filed November 12, 1998.
|---- |  | ----------------------------------------------------------------------------------------------

|(11) |  | Incorporated by reference to the Companys Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999.
|---- |  | ----------------------------------------------------------------------------------------------------------------

|(12) |  | Incorporated by reference to the Companys Quarterly Report on Form 10-QSB for the fiscal quarter ended December 31, 1999.
|---- |  | --------------------------------------------------------------------------------------------------------------------------

|(13) |  | Incorporated by reference to the Companys Annual Report on Form 10-KSB for the fiscal year ended June 30, 2000.
|---- |  | ----------------------------------------------------------------------------------------------------------------

|(14) |  | Incorporated by reference to the Companys Quarterly Report on Form 1O-Q for the fiscal quarter ended December 31, 2000.
|---- |  | ------------------------------------------------------------------------------------------------------------------------

|(15) |  | Incorporated by reference to the Companys Annual Report on Form 1O-K for the fiscal year ended June 30, 2001, as amended by Amendment No. 1 thereto.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(16) |  | Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001.
|---- |  | -------------------------------------------------------------------------------------------------------------------------

|(17) |  | Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2001.
|---- |  | ------------------------------------------------------------------------------------------------------------------------

|(18) |  | Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002.
|---- |  | ---------------------------------------------------------------------------------------------------------------------

|(19) |  | Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003.
|---- |  | ---------------------------------------------------------------------------------------------------------------------

|(20) |  | Filed herewith.
|---- |  | ---------------



20



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##### Index to Financial Statements

SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Date: September 29, 2003



MEMRY CORPORATIONBy:

/S/    JAMES G. BINCHJames G. Binch CEO and Chairman of the Board (Principal Executive Officer)By:

/S/    ROBERT P. BELCHERSenior Vice PresidentFinance and Administration Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)




Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.



|Signature                                         |  | Title    |  | Date              
|------------------------------------------------- |  | -------- |  | ------------------
|                                                  |  |         
|/S/    JAMES G. BINCHJames G. Binch               |  | Director |  | September 29, 2003
|                                                  |  |         
|/S/    KEMPTON J. COADY, IIIKempton J. Coady, III |  | Director |  | September 29, 2003
|                                                  |  |         
|/S/    JACK HALPERINJack Halperin                 |  | Director |  | September 29, 2003
|                                                  |  |         
|/S/    W. ANDREW KRUSEN, JRW. Andrew Krusen, Jr   |  | Director |  | September 29, 2003
|                                                  |  |         
|/S/    D. ANDREW L. LUXD. Andrew L. Lux           |  | Director |  | September 29, 2003
|                                                  |  |         
|/S/    EDWIN SNAPEEdwin Snape                     |  | Director |  | September 29, 2003



21



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##### Index to Financial Statements

CONTENTS



|                                               
|-----------------------------------------------
|                                               
|INDEPENDENT AUDITORS REPORT                   
|                                               
|                                               
|FINANCIAL STATEMENTS                           
|Consolidated balance sheets                    
|Consolidated statements of operations          
|Consolidated statements of stockholders equity
|Consolidated statements of cash flows          
|Notes to consolidated financial statements     
|                                               



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##### Index to Financial Statements

INDEPENDENT AUDITORS REPORT



To the Stockholders and Board of Directors

Memry Corporation and Subsidiaries

Bethel, Connecticut



We have audited the accompanying consolidated balance sheets of Memry Corporation and subsidiaries as of June 30, 2003 and 2002, and the related consolidated statements
of operations, stockholders equity, and cash flows for each of the three years in the period ended June 30, 2003. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion
on these financial statements based on our audits.



We conducted our audits in
accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Memry Corporation and
subsidiaries as of June 30, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2003 in conformity with accounting principles generally accepted in the United States of
America.



/S/     MCGLADREY & PULLEN, LLP



New Haven, Connecticut

August 11, 2003



F-1



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##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

June 30, 2003 and 2002

---



|                                                                                                            |  | 2003 |             |   | 2002 |  
|----------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|ASSETS                                                                                                      |  |      |             |   |      |  
|Current Assets                                                                                              |  |      |             |   |      |  
|Cash and cash equivalents                                                                                   |  | $    | 7,509,000   |   |      | $
|Accounts receivable, less allowance for doubtful accounts of $148,000 in 2003 and $207,000 in 2002 (Note 9) |  |      | 3,809,000   |   |      |  
|Inventories (Note 2)                                                                                        |  |      | 3,353,000   |   |      |  
|Prepaid expenses and other current assets                                                                   |  |      | 74,000      |   |      |  
|Income tax refund receivable                                                                                |  |      | 109,000     |   |      |  
|                                                                                                            |  |      |             |   |      |  
|Total current assets                                                                                        |  |      | 14,854,000  |   |      |  
|                                                                                                            |  |      |             |   |      |  
|Property, Plant and Equipment, net (Note 4)                                                                 |  |      | 6,040,000   |   |      |  
|                                                                                                            |  |      |             |   |      |  
|Other Assets                                                                                                |  |      |             |   |      |  
|Patents and patent rights, less accumulated amortizationof $998,000 in 2003 and $864,000 in 2002            |  |      | 1,067,000   |   |      |  
|Goodwill                                                                                                    |  |      | 1,038,000   |   |      |  
|Deferred financing costs                                                                                    |  |      | 6,000       |   |      |  
|Note receivable - related party (Note 3)                                                                    |  |      | 110,000     |   |      |  
|Deferred tax asset (Note 12)                                                                                |  |      | 6,806,000   |   |      |  
|Deposits and other                                                                                          |  |      | 206,000     |   |      |  
|                                                                                                            |  |      |             |   |      |  
|                                                                                                            |  |      | 9,233,000   |   |      |  
|                                                                                                            |  |      |             |   |      |  
|                                                                                                            |  | $    | 30,127,000  |   |      | $
|                                                                                                            |  |      |             |   |      |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                        |  |      |             |   |      |  
|Current Liabilities                                                                                         |  |      |             |   |      |  
|Accounts payable and accrued expenses (Notes 6 and 16)                                                      |  | $    | 2,587,000   |   |      | $
|Notes payable (Note 7)                                                                                      |  |      | 912,000     |   |      |  
|Current maturities of capital lease obligations                                                             |  |      |            |   |      |  
|Income taxes payable                                                                                        |  |      |            |   |      |  
|                                                                                                            |  |      |             |   |      |  
|Total current liabilities                                                                                   |  |      | 3,499,000   |   |      |  
|                                                                                                            |  |      |             |   |      |  
|Notes Payable, less current maturities (Note 7)                                                             |  |      | 980,000     |   |      |  
|                                                                                                            |  |      |             |   |      |  
|Commitments and Contingencies (Notes 8, 11 and 13)                                                          |  |      |             |   |      |  
|Stockholders Equity (Notes 7 and 8)                                                                        |  |      |             |   |      |  
|Common stock, $.01 par value, 40,000,000 shares authorized;                                                 |  |      |             |   |      |  
|25,537,522 shares issued and outstanding in 2003 and 25,252,546 shares issued and outstanding in 2002       |  |      | 255,000     |   |      |  
|Additional paid-in capital                                                                                  |  |      | 48,906,000  |   |      |  
|Accumulated deficit                                                                                         |  |      | (23,513,000 | ) |      |  
|                                                                                                            |  |      |             |   |      |  
|                                                                                                            |  |      | 25,648,000  |   |      |  
|                                                                                                            |  |      |             |   |      |  
|                                                                                                            |  | $    | 30,127,000  |   |      | $
|                                                                                                            |  |      |             |   |      |  



See Notes to Consolidated Financial
Statements.



F-2



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##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended June 30, 2003, 2002 and 2001

---



|                                                          |  | 2003 |            |   | 2002 |   |            | 2001 | 
|--------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- | 
|Revenues                                                  |  |      |            |   |      |   |            |      | 
|Product sales (Note 9)                                    |  | $    | 33,105,000 |   |      | $ | 32,055,000 |      | 
|Research and development                                  |  |      | 902,000    |   |      |   | 840,000    |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|                                                          |  |      | 34,007,000 |   |      |   | 32,895,000 |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|Cost of Revenues                                          |  |      |            |   |      |   |            |      | 
|Manufacturing (Note 10)                                   |  |      | 22,125,000 |   |      |   | 17,706,000 |      | 
|Research and development                                  |  |      | 483,000    |   |      |   | 636,000    |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|                                                          |  |      | 22,608,000 |   |      |   | 18,342,000 |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|Gross profit                                              |  |      | 11,399,000 |   |      |   | 14,553,000 |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|Operating Expenses                                        |  |      |            |   |      |   |            |      | 
|General, selling and administrative (Notes 11, 13 and 16) |  |      | 8,929,000  |   |      |   | 10,151,000 |      | 
|Depreciation and amortization                             |  |      | 333,000    |   |      |   | 337,000    |      | 
|Loss on disposal of subsidiary (Note 14)                  |  |      |           |   |      |   |           |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|                                                          |  |      | 9,262,000  |   |      |   | 10,488,000 |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|Operating income (loss)                                   |  |      | 2,137,000  |   |      |   | 4,065,000  |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|Other Income (Expense)                                    |  |      |            |   |      |   |            |      | 
|Interest expense (Note 7)                                 |  |      | (126,000   | ) |      |   | (160,000   | )    | 
|Interest income                                           |  |      | 61,000     |   |      |   | 30,000     |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|                                                          |  |      | (65,000    | ) |      |   | (130,000   | )    | 
|                                                          |  |      |            |   |      |   |            |      | 
|Income (loss) before income taxes                         |  |      | 2,072,000  |   |      |   | 3,935,000  |      | 
|                                                          |  |      |           
|Benefit (provision) for income taxes (Note 12)            |  |      | 6,756,000  |   |      |   | (152,000   | )    | 
|                                                          |  |      |            |   |      |   |            |      | 
|Net income (loss)                                         |  | $    | 8,828,000  |   |      | $ | 3,783,000  |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|Basic earnings (loss) per share                           |  | $    | 0.35       |   |      | $ | 0.16       |      | 
|                                                          |  |      |            |   |      |   |            |      | 
|Diluted earnings (loss) per share                         |  | $    | 0.34       |   |      | $ | 0.15       |      | 
|                                                          |  |      |            |   |      |   |            |      | 



See Notes to Consolidated Financial
Statements.



F-3



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##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Years Ended June 30, 2003, 2002 and 2001

---



|                                                     |  | Common Stock |  | Additional Paid-inCapital |         | AccumulatedDeficit |   |            | Accumulated Other Comp- rehensive Loss |   |             | Total | 
|---------------------------------------------------- |  | ------------ |  | ------------------------- | ------- | ------------------ | - | ---------- | -------------------------------------- | - | ----------- | ----- | 
|                                                     |  | SharesIssued |  | Par Value                 |         |                    |   |           
|Balance, June 30, 2000                               |  | 21,130,476   |  | $                         | 211,000 |                    | $ | 44,386,000 |                                        | $ | (31,435,000 | )     | 
|                                                     |  |              |  |                           |         |                   
|Issuance of commonstock and warrants                 |  | 2,504,107    |  |                           | 25,000  |                    |   | 2,632,000  |                                        |   |            |       | 
|                                                     |  |              |  |                           |         |                   
|Comprehensive income (loss):                         |  |              |  |                           |         |                    |   |            |                                        |   |             |       | 
|Net loss                                             |  |             |  |                           |        |                    |   |           |                                        |   | (4,689,000  | )     | 
|Foreign currencytranslation adjustments              |  |             |  |                           |        |                    |   |           |                                        |   |            |       | 
|                                                     |  |              |  |                           |         |                    |   |            |                                        |   |             |       | 
|Total comprehensive loss                             |  |             |  |                           |        |                    |   |           |                                        |   |            |       | 
|                                                     |  |              |  |                           |         |                    |   |            |                                        |   |             |       | 
|Balance, June 30, 2001                               |  | 23,634,583   |  |                           | 236,000 |                    |   | 47,018,000 |                                        |   | (36,124,000 | )     | 
|                                                     |  |              |  |                           |         |                   
|Issuance of common stock andother equity instruments |  | 1,617,963    |  |                           | 17,000  |                    |   | 1,690,000  |                                        |   |            |       | 
|                                                     |  |              |  |                           |         |                   
|Net income                                           |  |             |  |                           |        |                    |   |           |                                        |   | 3,783,000   |       | 
|                                                     |  |              |  |                           |         |                    |   |            |                                        |   |             |       | 
|Balance, June 30, 2002                               |  | 25,252,546   |  |                           | 253,000 |                    |   | 48,708,000 |                                        |   | (32,341,000 | )     | 
|                                                     |  |              |  |                           |         |                   
|Issuance of common stock andother equity instruments |  | 284,976      |  |                           | 2,000   |                    |   | 198,000    |                                        |   |            |       | 
|                                                     |  |              |  |                           |         |                   
|Net income                                           |  |             |  |                           |        |                    |   |           |                                        |   | 8,828,000   |       | 
|                                                     |  |              |  |                           |         |                    |   |            |                                        |   |             |       | 
|Balance, June 30, 2003                               |  | 25,537,522   |  | $                         | 255,000 |                    | $ | 48,906,000 |                                        | $ | (23,513,000 | )     | 
|                                                     |  |              |  |                           |         |                    |   |            |                                        |   |             |       | 



See Notes to Consolidated Financial
Statements.



F-4



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##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended June 30, 2003, 2002 and 2001

---



|                                                                                        |  | 2003 |            |   | 2002 |   |            | 2001 | 
|--------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- | 
|Cash Flows From Operating Activities                                                    |  |      |            |   |      |   |            |      | 
|Net income (loss)                                                                       |  | $    | 8,828,000  |   |      | $ | 3,783,000  |      | 
|Adjustments to reconcile net income (loss) to net cashprovided by operating activities: |  |      |            |   |      |   |            |      | 
|Provision for doubtful accounts                                                         |  |      | (59,000    | ) |      |   | 136,000    |      | 
|Writedown of note receivable                                                            |  |      |           |   |      |   | 30,000     |      | 
|Depreciation and amortization                                                           |  |      | 1,958,000  |   |      |   | 1,938,000  |      | 
|Impairment of idle equipment                                                            |  |      |           |   |      |   | 120,000    |      | 
|(Gain) loss on disposal of assets                                                       |  |      | (12,000    | ) |      |   | 13,000     |      | 
|Deferred taxes                                                                          |  |      | (6,806,000 | ) |      |   |           |      | 
|Compensation paid by issuance of common stock and other equity instruments              |  |      | 152,000    |   |      |   | 196,000    |      | 
|Loss on sale of European subsidiary                                                     |  |      |           |   |      |   |           |      | 
|Change in operating assets and liabilities:                                             |  |      |            |   |      |   |            |      | 
|Decrease (increase) in accounts receivable                                              |  |      | 2,131,000  |   |      |   | (1,860,000 | )    | 
|Decrease (increase) in inventories                                                      |  |      | 943,000    |   |      |   | (616,000   | )    | 
|(Increase) decrease in prepaid expenses and othercurrent assets                         |  |      | (49,000    | ) |      |   | 71,000     |      | 
|Decrease (increase) in other assets                                                     |  |      | 122,000    |   |      |   |           |      | 
|Increase in note receivable                                                             |  |      |           |   |      |   |           |      | 
|Decrease in accounts payable and accrued expenses                                       |  |      | (959,000   | ) |      |   | (578,000   | )    | 
|(Decrease) increase in advances payable                                                 |  |      |           |   |      |   | (600,000   | )    | 
|Decrease increase in income taxes payable/receivable                                    |  |      | (118,000   | ) |      |   | (62,000    | )    | 
|                                                                                        |  |      |            |   |      |   |            |      | 
|Net cash provided by operating activities                                               |  |      | 6,131,000  |   |      |   | 2,571,000  |      | 
|                                                                                        |  |      |            |   |      |   |            |      | 
|Cash Flows From Investing Activities                                                    |  |      |            |   |      |   |            |      | 
|Net proceeds from sale of European subsidiary                                           |  |      |           |   |      |   |           |      | 
|Purchases of equipment                                                                  |  |      | (1,526,000 | ) |      |   | (1,091,000 | )    | 
|Proceeds from the sale of equipment                                                     |  |      | 40,000     |   |      |   |           |      | 
|                                                                                        |  |      |            |   |      |   |            |      | 
|Net cash used in investing activities                                                   |  |      | (1,486,000 | ) |      |   | (1,091,000 | )    | 
|                                                                                        |  |      |            |   |      |   |            |      | 
|Cash Flows From Financing Activities                                                    |  |      |            |   |      |   |            |      | 
|Proceeds from sale of common stock, net                                                 |  |      | 48,000     |   |      |   | 1,511,000  |      | 
|Proceeds from notes payable                                                             |  |      | 399,000    |   |      |   | 2,000,000  |      | 
|Principal payments on notes payable                                                     |  |      | (529,000   | ) |      |   | (2,441,000 | )    | 
|Net proceeds from equipment line of credit                                              |  |      |           |   |      |   | 216,000    |      | 
|Net increase (decrease) in revolving loans payable                                      |  |      |           |   |      |   | (886,000   | )    | 
|Principal payments on capital lease obligations                                         |  |      | (5,000     | ) |      |   | (4,000     | )    | 
|                                                                                        |  |      |            |   |      |   |            |      | 
|Net cash (used in) provided by financing activities                                     |  |      | (87,000    | ) |      |   | 396,000    |      | 
|                                                                                        |  |      |            |   |      |   |            |      | 
|Effect of foreign currency exchange rate changes on cashand cash equivalents            |  |      |           |   |      |   |           |      | 
|                                                                                        |  |      |            |   |      |   |            |      | 
|Increase (decrease) in cash and cash equivalents                                        |  |      | 4,558,000  |   |      |   | 1,876,000  |      | 
|                                                                                        |  |      |           
|Cash and cash equivalents, beginning of year                                            |  |      | 2,951,000  |   |      |   | 1,075,000  |      | 
|                                                                                        |  |      |            |   |      |   |            |      | 
|Cash and cash equivalents, end of year                                                  |  | $    | 7,509,000  |   |      | $ | 2,951,000  |      | 
|                                                                                        |  |      |            |   |      |   |            |      | 



F-5



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##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued

Years Ended June 30, 2003, 2002 and 2001

---



|Supplemental Disclosures of Cash Flow Information                  |  |   |         |  |   |         |  |   |         |  
|------------------------------------------------------------------ |  | - | ------- |  | - | ------- |  | - | ------- | -
|Cash payments for interest                                         |  | $ | 129,000 |  | $ | 168,000 |  | $ | 373,000 |  
|                                                                   |  |   |         |  |   |         |  |   |         |  
|Cash payments (refunds) for income taxes                           |  | $ | 168,000 |  | $ | 214,000 |  | $ | (9,000  | )
|                                                                   |  |   |         |  |   |         |  |   |         |  
|Supplemental Schedule of Noncash Investingand Financing Activities |  |   |         |  |   |         |  |   |         |  
|Conversion of revolving loans payable to equipment term loan       |  | $ | 276,000 |  | $ |        |  | $ | 250,000 |  
|                                                                   |  |   |         |  |   |         |  |   |         |  
|Reclassification of idle equipment to other assets                 |  | $ |        |  | $ | 75,000  |  | $ |        |  
|                                                                   |  |   |         |  |   |         |  |   |         |  
|Note payable incurred for purchase of fixed asset                  |  | $ | 14,000  |  | $ |        |  | $ |        |  
|                                                                   |  |   |         |  |   |         |  |   |         |  



See Notes to Consolidated Financial
Statements.



F-6



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MEMRY CORPORATION AND SUBSIDIARIES



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2003, 2002 and 2001

---



Note 1. Summary of Significant Accounting Policies



Nature of business



Memry Corporation, a Delaware corporation incorporated in 1981, is engaged in the business
of developing, manufacturing and marketing products and components utilizing the properties exhibited by shape memory alloys. The Companys sales are primarily to customers in the medical device industry located throughout the United States and
Europe. The Company extends credit to its customers on an unsecured basis on terms that it establishes for individual customers.



Accounting estimates



The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.



Principles of consolidation



The financial statements include the accounts of Memry Corporation (Memry) and
its wholly-owned subsidiary, Memry Holdings, S.A. and, for periods ending on or prior to February 8, 2001, its former wholly-owned subsidiary, Memry Europe, N.V. (collectively, the Company). Memry Holdings, S.A. is a holding company
whose principal asset consisted of an investment in its wholly-owned subsidiary, Memry Europe, N.V., which was sold on February 8, 2001 (see Note 14). All significant intercompany accounts and transactions have been eliminated in consolidation.



Cash and cash equivalents



For purposes of the consolidated statements of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less, when purchased, to be cash equivalents. The carrying amount of these financial instruments approximates fair value because of the short maturity of these instruments. During the year
ended June 30, 2003, the Company had cash deposits in excess of FDIC insured limits at various banks. The Company has not experienced any losses from such excess deposits.



Accounts receivable



Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all
outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customers financial condition, credit history, and current economic
conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are credited to the allowance for doubtful accounts when received.



Inventories



Inventories consist principally of various metal alloy rod and shape memory alloys.
Inventories are stated at the lower of cost, determined on the first-in, first-out method, or market.



Impairment of assets



The Company reviews its long-lived assets and certain identifiable intangible assets with finite useful lives for impairment whenever events or circumstances indicate
that the carrying amount of the assets may not be recoverable. The Company measures impairment by comparing the assets estimated fair value to its carrying amount. The estimated fair value of these assets is based on estimated future cash
flows to be generated by the assets, discounted at a market rate of interest.



F-7



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##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



Goodwill



Goodwill represents the cost of acquired assets in excess of values ascribed to net tangible assets and was being amortized using the
straight-line method over 15 years through June 30, 2001. Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142) was adopted July 1, 2001, and accordingly amortization of
goodwill, including previously existing goodwill and intangible assets with indefinite useful lives, was discontinued and such intangible assets are now tested for impairment annually.



Foreign Currency Exchange and Translation



The financial statements of foreign subsidiaries have been translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards No. 52, Foreign Currency Translation. All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Income statement amounts have
been translated using the average exchange rate for the year. Gains and losses resulting from changes in exchange rates from year to year have been reported in comprehensive income (loss). The effect on the consolidated statements of operations of
foreign currency transaction gains and losses is insignificant.



Revenue recognition



Revenues from
product sales are recognized when the related products are shipped. Certain revenues are earned in connection with research and development grants and contracts which are principally with various governmental agencies. Such revenues are recognized
when services are rendered. Some of the Companys research and development projects are customer-sponsored and typically provide the Company with the production rights or pay a royalty to the Company if a commercially viable product results.
Such revenues are recognized when products are shipped or services rendered.



Depreciation and amortization



Depreciation of equipment is computed using the straight-line method over the estimated useful lives of the respective assets. The estimated useful lives of the assets are as follows:



|Building               |  | 20 years  
|---------------------- |  | ----------
|Furniture and fixtures |  | 5-10 years
|Tooling and equipment  |  | 3-10 years
|Office equipment       |  | 3-5 years 



Leasehold improvements are amortized
over the life of the lease, or the improvements estimated useful life, if shorter.



Costs of obtaining patents and patent rights are amortized using the straight-line method over the patents expected period of benefit which ranges from thirteen to sixteen years.



Costs incurred in obtaining financing are capitalized and are being amortized over the term
of the related debt.



401(k) plan



The Company maintains a 401(k) profit sharing and savings plan for the
benefit of substantially all of its employees. The Plan provides for contributions by the Company in such amounts as the Board of Directors may annually determine.



F-8



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



Research and development expense



The Company incurred research and development expense relating to its own internal products
as well as the development of future products for the years ended June 30, 2003, 2002 and 2001 aggregating approximately $2,465,000, $2,417,000, and $1,699,000, respectively.



Income taxes



Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects
of changes in tax laws on the date of enactment.



Earnings per share



Basic earnings (loss) per share amounts
are computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted per share amounts assume exercise of all potential common stock instruments unless the effect is to reduce the loss or increase the
income per common share.



For the periods presented, there were no items which
changed net income (loss) as presented in the consolidated statements of operations and the amounts used to compute basic and diluted earnings (loss) per share. The following is information about the computation of weighted-average shares utilized
in the computation of basic and diluted earnings (loss) per share. For the year ended June 30, 2001, common stock equivalents have been excluded from the computation of the net loss per share because inclusion of such equivalents is anti-dilutive.



|                                                           |  | 2003       |  | 2002       |  | 2001      
|---------------------------------------------------------- |  | ---------- |  | ---------- |  | ----------
|Weighted average number of basic sharesoutstanding         |  | 25,466,769 |  | 24,386,015 |  | 22,616,343
|Effect of dilutive securities:                             |  |            |  |            |  |           
|Warrants                                                   |  | 90,180     |  | 250,306    |  |          
|Options                                                    |  | 120,720    |  | 157,361    |  |          
|                                                           |  |            |  |            |  |           
|Weighted average number of fully dilutedshares outstanding |  | 25,677,669 |  | 24,793,682 |  | 22,616,343
|                                                           |  |            |  |            |  |           



Stock compensation plans



Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date
based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of
accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other
measurement date) over the amount an employee must pay to acquire the stock. Stock options issued to employees and directors under the Companys stock option and warrant plans have no intrinsic value at the grant date, and under Opinion No. 25
no compensation cost is recognized for them. On January 1, 2003, the Company adopted SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, an Amendment of FASB Statement No. 123. The Company has elected
to continue with the accounting methodology in Opinion No. 25 and, as a result, has provided pro forma disclosures of



F-9



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



net income (loss) and earnings (loss) per share and other disclosures, as if the fair value based method of accounting had been applied.



Had compensation cost for issuance of such options and warrants been recognized based on the
fair values of awards on the grant dates, in accordance with the method described in SFAS No. 123, reported net income (loss) and per share amounts for 2003, 2002 and 2001 would have been decreased or increased to the pro forma amounts shown below:



|                                                                                                                                                           |  | 2003 |           |   | 2002 |   | 2001      | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | 
|Net income (loss), as reported                                                                                                                             |  | $    | 8,828,000 |   |      | $ | 3,783,000 | 
|(Deduct) Add: total stock-based employee compensation (expense) income determined under fair value based method for all awards,
net of related tax effects |  |      | (103,000  | ) |      |   | 119,000   | 
|                                                                                                                                                           |  |      |           |   |      |   |           | 
|Pro forma net income (loss)                                                                                                                                |  | $    | 8,725,000 |   |      | $ | 3,902,000 | 
|                                                                                                                                                           |  |      |           |   |      |   |           | 
|Basic earnings (loss) per share:                                                                                                                           |  |      |           |   |      |   |           | 
|As reported                                                                                                                                                |  | $    | 0.35      |   |      | $ | 0.16      | 
|                                                                                                                                                           |  |      |           |   |      |   |           | 
|Pro forma                                                                                                                                                  |  | $    | 0.34      |   |      | $ | 0.16      | 
|                                                                                                                                                           |  |      |           |   |      |   |           | 
|Diluted earnings (loss) per share:                                                                                                                         |  |      |           |   |      |   |           | 
|As reported                                                                                                                                                |  | $    | 0.34      |   |      | $ | 0.15      | 
|                                                                                                                                                           |  |      |           |   |      |   |           | 
|Pro forma                                                                                                                                                  |  | $    | 0.34      |   |      | $ | 0.16      | 
|                                                                                                                                                           |  |      |           |   |      |   |           | 



For 2002, the pro forma net income is
higher than the reported net income due to the effect on pro forma compensation of stock options that were expired/canceled in 2002.



The fair value of each grant, used to determine the proforma information above, is estimated at the grant date using the fair value option-pricing model with the
following weighted average assumptions for grants awarded during the years ended June 30, 2003, 2002 and 2001:



|                                          |  | 2003         |   |  | 2002 |   |  | 2001 |  
|----------------------------------------- |  | ------------ | - |  | ---- | - |  | ---- | -
|Dividend rate                             |  |             |   |  |     |   |  |     |  
|Risk free interest rate                   |  | 1.47% - 1.79 | % |  | 5.47 | % |  | 4.73 | %
|Weighted average expected lives, in years |  | 3            |   |  | 3.7  |   |  | 4    |  
|Price volatility                          |  | 79           | % |  | 66.7 | % |  | 59.8 | %



Note 2. Inventories



Inventories at June 30, 2003 and 2002, are summarized as follows:



|                                                 |  | 2003 |           |   | 2002 |  
|------------------------------------------------ |  | ---- | --------- | - | ---- | -
|Raw materials and supplies                       |  | $    | 1,094,000 |   |      | $
|Work-in-process                                  |  |      | 1,656,000 |   |      |  
|Finished goods                                   |  |      | 751,000   |   |      |  
|Allowance for slow-moving and obsolete inventory |  |      | (148,000  | ) |      |  
|                                                 |  |      |           |   |      |  
|                                                 |  | $    | 3,353,000 |   |      | $
|                                                 |  |      |           |   |      |  



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



Note 3. Note Receivable  Related Party



On August 29, 2000, the Company made a loan to an executive officer which has been collateralized by his personal residence. The loan was
part of the executive officers overall compensation package and was to be forgiven, providing certain conditions were met, over a four-year period. During 2001, the executive officer was terminated and the note became current at that time. The
terms of the note have subsequently been amended such that the note, in the amount of $110,000, is now due on January 28, 2005, or at such time that the residence is sold, whichever occurs first. (See Note 17)



Note 4. Property, Plant and Equipment



Property, plant and equipment at June 30, 2003 and 2002, is summarized as follows:



|                                               |  | 2003 |            | 2002
|---------------------------------------------- |  | ---- | ---------- | ----
|Furniture and fixtures                         |  | $    | 958,000    |     
|Tooling and equipment                          |  |      | 10,484,000 |     
|Leasehold improvements                         |  |      | 2,471,000  |     
|                                               |  |      |            |     
|                                               |  |      | 13,913,000 |     
|Less accumulated depreciation and amortization |  |      | 7,873,000  |     
|                                               |  |      |            |     
|                                               |  | $    | 6,040,000  |     
|                                               |  |      |            |     



Note 5. Goodwill



The Company elected to early adopt the provisions of SFAS 142. Therefore, effective July 1,
2001, all goodwill and intangible assets determined to have an indefinite useful life acquired in a purchase business combination are no longer amortized, and are evaluated for impairment under SFAS 142. Based on the Companys initial goodwill
impairment test, goodwill was not impaired at the date of adoption of SFAS 142. Based on the Companys annual impairment testing, no goodwill impairment has occurred since the adoption of SFAS 142. In addition, the following represents the
effect of adopting SFAS 142 on the Companys net income (loss) and earnings (loss) per share for all periods presented.



|                                 |  | 2003 |           | 2002 |   | 2001      | 
|-------------------------------- |  | ---- | --------- | ---- | - | --------- | 
|Reported net income (loss)       |  | $    | 8,828,000 |      | $ | 3,783,000 | 
|Add back: Goodwill amortization  |  |      |          |      |   |          | 
|                                 |  |      |           |      |   |           | 
|Adjusted net income (loss)       |  | $    | 8,828,000 |      | $ | 3,783,000 | 
|                                 |  |      |           |      |   |           | 
|Basic earnings (loss) per share: |  |      |           |      |   |           | 
|Reported net income (loss)       |  | $    | 0.35      |      | $ | 0.16      | 
|Goodwill amortization            |  |      |          |      |   |          | 
|                                 |  |      |           |      |   |           | 
|Adjusted net income (loss)       |  | $    | 0.35      |      | $ | 0.16      | 
|                                 |  |      |           |      |   |           | 
|Diluted earnings per share:      |  |      |           |      |   |           | 
|Reported net income (loss)       |  | $    | 0.34      |      | $ | 0.15      | 
|Goodwill amortization            |  |      |          |      |   |          | 
|                                 |  |      |           |      |   |           | 
|Adjusted net income (loss)       |  | $    | 0.34      |      | $ | 0.15      | 
|                                 |  |      |           |      |   |           | 



F-11



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



Note 6. Accounts Payable and Accrued Expenses



Accounts payable and accrued expenses at June 30, 2003 and 2002 are summarized as follows:



|                         |  | 2003 |           | 2002
|------------------------ |  | ---- | --------- | ----
|Accounts payable         |  | $    | 611,000   |     
|Accrued bonuses          |  |      |          |     
|Accrued vacation pay     |  |      | 497,000   |     
|Accrued severance        |  |      | 50,000    |     
|Accrued expenses - other |  |      | 1,429,000 |     
|                         |  |      |           |     
|                         |  | $    | 2,587,000 |     
|                         |  |      |           |     



Note 7. Notes Payable



Notes payable consist of the following at June 30, 2003 and 2002:



|                                                                                                                                                                                                  |  | 2003 |           | 2002
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ----
|Term note payable to a bank pursuant to amended June 30, 1998 credit facility, due in monthly installments of $41,667, plus
interest at 7.55% per annum, due December 31, 2005.                   |  | $    | 1,292,000 |     
|                                                                                                                                                                                                  |  |     
|Equipment loan payable pursuant to amended June 30, 1998 credit facility, due in monthly installments of $5,754, plus interest at
LIBOR plus 2.5% (3.6% at June 30, 2003), due December 31, 2006. |  |      | 247,000   |     
|                                                                                                                                                                                                  |  |     
|Equipment loan advance pursuant to amended June 30, 1998 credit facility, interest payable monthly at LIBOR plus 2.5% (3.6% at
June 30, 2003), due December 31, 2003.                             |  |      | 339,000   |     
|                                                                                                                                                                                                  |  |     
|Promissory note to Chase Manhattan Auto Finance, due in monthly installments of $437 at a fixed interest rate of 5.9%, due June
16, 2006.                                                         |  |      | 14,000    |     
|                                                                                                                                                                                                  |  |      |           |     
|                                                                                                                                                                                                  |  |      | 1,892,000 |     
|Less current maturities                                                                                                                                                                           |  |      | 912,000   |     
|                                                                                                                                                                                                  |  |      |           |     
|                                                                                                                                                                                                  |  | $    | 980,000   |     
|                                                                                                                                                                                                  |  |      |           |     



Future maturities of notes payable at
June 30, 2003 are as follows:



|2004 |  | $ | 912,000  
|---- |  | - | ---------
|2005 |  |   | 574,000  
|2006 |  |   | 366,000  
|2007 |  |   | 40,000   
|     |  |   |          
|     |  | $ | 1,892,000
|     |  |   |          



On December 31, 2001, the Company and
Webster Bank reached an agreement on a third amendment to the Companys credit facility (the Webster Facility). Under the terms of the third amendment which expires on December 31, 2003, the revolving loan provides for borrowings up
to the lesser of (a) $5,000,000 or (b) an amount equal to the aggregate of (1) 85% of the eligible accounts receivable plus (2) 30% of eligible inventory provided, however, that at no time shall 85% of eligible accounts



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



receivable be less than 50% of the outstanding revolver balance. Several existing term loans totaling $1,728,490 were refinanced into a single term loan
which is due December 31, 2005. The Webster Facility, as amended, includes an equipment loan line of credit that provides for equipment financing up to the lesser of $1,000,000 or 75% of the purchase price for eligible equipment through December 31,
2002. The equipment loan line of credit may be extended through December 31, 2003, at Webster Banks option. The Company, on January 1, 2003, had the option of converting amounts borrowed under the line of credit to a term loan. Approximately
$276,000 was converted to a term loan at that time. The other major provisions of the Webster Facility remain unchanged. At June 30, 2003, an aggregate amount of approximately $1,878,000 was outstanding under the Webster Facility. The Webster
Facility is secured by substantially all of the Companys assets.



In
addition, the Webster Facility contains various restrictive covenants, including, among others, limitations on encumbrances and additional debt, prohibition on the payment of dividends or redemption of stock (except in connection with certain
existing put rights), restrictions on management/ownership changes and required compliance with specified financial ratios.



The carrying amount of these financial instruments approximates fair value. The fair value of the Companys long-term debt is estimated based on the current rates
offered to the Company for debt of the same remaining maturities with similar collateral requirements.



Note 8. Capital Stock



Common stock



During the years ended
June 30, 2003, 2002 and 2001, 50,000, 102,000 and 91,000 shares of common stock at an aggregate price of $73,000, $107,000 and $126,000, respectively, were issued to Company directors as compensation. During the year ended June 30, 2002, the Company
issued 40,000 shares of common stock at an aggregate price of $33,000 to a former officer of the Company as compensation. In addition, during the years ended June 30, 2003, 2002 and 2001, 235,000, 726,000 and 18,000 shares of common stock were
issued at an aggregate price of $48,000, $761,000 and $27,000, respectively, through the exercise of options and warrants.



Compensation expense recognized for the issuance of shares of common stock is calculated utilizing the fair market value of the common stock at the date of issuance.



On January 31, 2001 the Company completed a private equity placement and
raised $2,395,000. Proceeds were raised through the sale of units, each of which consisted of one share of common stock and a warrant to purchase one share of common stock. Each unit was priced at $1.00. The warrants are exercisable at $2.25 per
share, valid for a period of three years from the date of issuance. Notwithstanding the foregoing term of the warrant, if the fair market value of one share of common stock of the Company is equal to or greater than $3.50 for twenty consecutive days
during the term of the warrant, the Company has the right to demand that the holder exercise the warrant within a 30-day period. Failure of the holder to exercise the warrant within thirty days would cause the warrant to become void and the holder
would lose all rights that it has with respect to the warrant.



On November 8,
2001, the Company completed a private equity placement with New England Partners and raised $750,000. Proceeds were raised through the sale of units, each of which consisted of two shares of Common Stock and a warrant to purchase one share of Common
Stock. Each unit was priced at $2.00. The warrants are exercisable at $1.25 per share, exercisable for a period of five years from the date of issuance. New England Partners was granted piggyback registration rights to participate in the
registration of the securities purchased in the private equity placement, which was completed in January 2001. Other terms and conditions were set forth in the definitive documents.



F-13



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



Common stock reserved for issuance at June 30, 2003, is as follows:



|                                     |  | Number ofShares
|------------------------------------ |  | ---------------
|For exercise of outstanding warrants |  | 3,360,167      
|For exercise of stock options        |  | 4,502,294      
|                                     |  |                
|                                     |  | 7,862,461      
|                                     |  |                



Various agreements with a certain
investor provide that upon the occurrence of specified events, primarily the Company ceasing to maintain its principal offices within the State of Connecticut, the investor would have the right to put all securities of the Company held by the
investor at that time for a price equal to the greater of the then current market price per share of such securities or $2 per share, less the aggregate amount of the unpaid exercise prices of all such warrants, if warrants are being held by such
investor at such time. Using $2.00 as the put price per share, which exceeded the market price for the Companys stock at June 30, 2003, the aggregate put price that would have to be paid by the Company if the put were exercised would be
approximately $2,190,000. This put option expires on the date the investor ceases to hold at least 35% of the common stock underlying the convertible securities originally issued to the investor. If the investor were to have the right to put its
securities and were to choose to exercise that right, such an event would have a serious adverse effect on the Companys liquidity and the Company would most likely have to seek equity financing to be able to meet its obligations to the
investor. However, the Company has the ability to insure that its operations do not move from Connecticut.



In accordance with Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, transactions involving the issuance of equity instruments to other than employees are
accounted for based on the fair value of the consideration received or the fair value of the equity instruments, whichever is more reliably measurable. If the value of the equity instruments is more reliably measurable, that value is calculated
using the fair value optionpricing model.



Incentive plans



In 1994, the Company adopted the Memry
Corporation Stock Option Plan (the 1994 Plan). Pursuant to this plan, incentive stock options were granted at prices equal to or greater than the fair market value of the Companys common stock at the date of grant, and were
exercisable at the date of grant unless otherwise stated. In addition, non-qualified options were granted at prices determined by the Companys compensation committee, which may have been less than the fair market value of the Companys
common stock at date of grant, in which case an expense equal to the difference between the option price and fair market value was recognized. The exercise period for both the incentive and non-qualified stock options generally could not exceed ten
years. The Plan also allowed the granting of Stock Appreciation Rights, however, only a minimal amount of such rights were granted.



During the year ended June 30, 1998, the Company adopted the Memry Corporation Long-term Incentive Plan (the 1997 Plan). Under the 1997 Plan, incentive and
non-qualified options may be granted to employees and non-employee directors under terms similar to the 1994 Plan. Also, under the 1997 Plan, Stock Appreciation Rights (SARs), Limited Stock Appreciation Rights (Limited SARs),
restricted stock, and performance shares may be granted to employees. With respect to SARs, upon exercise, the Company must pay to the employee the difference between the current market value of the Companys common stock and the exercise price
of the SARs. The SARs terms are determined at the time of each individual grant. However, if SARs are granted which are related to an incentive stock option, then the SARs will contain similar terms to the related option. Limited SARs may be granted
in relation to any option or SARs granted. Upon exercise, the Company must pay to the employee the difference between the current market value of the Companys common stock and the exercise price of the related options or SARs. Upon the
exercise of SARs or Limited SARs, any related option or SARs outstanding will no longer be exercisable.



Restricted shares of common stock may also be granted to employees for no consideration. The terms of the restriction are determined at the time of each individual grant. Generally, if employment is terminated during
the restriction period, the participant must forfeit any stock still subject to restriction. Performance shares are granted to employees based on individual



F-14



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



performance goals, and may be paid in shares or cash determined based on the shares earned and the market value of the Companys common stock at the end
of certain defined periods.



Also, under the 1997 Plan, each quarter, all
non-employee directors are granted shares of the Companys common stock with a value equal to $7,500, determined based on the market value of the Companys stock at the end of each quarter. During the year ended June 30, 2002, this policy
was amended such that all non-employee directors, each quarter, are now granted shares of the Companys common stock with a value equal to $3,000 and stock options with a value equal to $4,500, determined based on the market value of the
Companys stock over a three day period prior to the end of each quarter.



During the years ended June 30, 2003 and 2002, the Company directors were issued 75,000 and 11,000 options at an aggregate fair value price of $56,000 and $3,000, respectively.



A summary of the status of the Companys stock option plans at June 30, 2003, 2002 and 2001, and changes during the years then ended,
is as follows:



|                       |  | SharesReserved |  | OptionsOutstanding |   |  | WeightedAverageExercisePrice
|---------------------- |  | -------------- |  | ------------------ | - |  | ----------------------------
|Balance, June 30, 2000 |  | 2,969,834      |  | 2,288,253          |   |  | $                           
|Canceled               |  |                |  | (318,867           | ) |  | $                           
|Granted                |  |                |  | 710,374            |   |  | $                           
|Exercised              |  |                |  |                   |   |  | $                           
|                       |  |                |  |                    |   |  |                             
|Balance, June 30, 2001 |  | 2,969,834      |  | 2,679,760          |   |  | $                           
|Canceled               |  |                |  | (645,856           | ) |  | $                           
|Granted                |  |                |  | 499,723            |   |  | $                           
|Exercised              |  |                |  | (125,650           | ) |  | $                           
|                       |  |                |  |                    |   |  |                             
|Balance, June 30, 2002 |  | 2,844,184      |  | 2,407,977          |   |  | $                           
|Canceled               |  |                |  | (346,225           | ) |  | $                           
|Granted                |  |                |  | 939,098            |   |  | $                           
|Exercised              |  |                |  | (37,498            | ) |  | $                           
|                       |  |                |  |                    |   |  |                             
|Balance, June 30, 2003 |  | 4,502,294      |  | 2,963,352          |   |  | $                           
|                       |  |                |  |                    |   |  |                             



At June 30, 2003, 2002 and 2001,
1,695,274, 1,438,327 and 1,299,182 (weighted average exercise price of $2.48, $2.53 and $2.34) of the outstanding options were exercisable, respectively. The weighted-average grant date fair value per option of options granted during the years ended
June 30, 2003, 2002 and 2001 was $0.68, $0.89 and $0.91, respectively. For the years ended June 30, 2003, 2002 and 2001, all options granted carried an exercise price equal to the fair market value of the Companys stock at the date of grant.



F-15



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



A further summary of options outstanding at June 30, 2003, is as follows:



|                         |  | Options Outstanding |  | Options Exercisable                                   
|------------------------ |  | ------------------- |  | ------------------------------------------------------
|Range of Exercise Prices |  | Number Outstanding  |  | Weighted- Average Remaining ContractualLife (In Years)
|$.90 to $4.00            |  | 2,963,352           |  | 6.68                                                  



Warrants



The Company has also issued stock warrants to
employees and others. The cost charged to operations for warrants granted for professional fees incurred during the years ended June 30, 2003, 2002 and 2001 was $23,000, $46,000 and $109,000, respectively.



The following table summarizes warrants outstanding at June 30, 2003, 2002 and 2001, and the
changes in warrants during the years then ended:



|                       |  | SharesReserved |  | WarrantsOutstanding |   |  | Weighted- AverageExercisePrice
|---------------------- |  | -------------- |  | ------------------- | - |  | ------------------------------
|Balance, June 30, 2000 |  | 1,345,105      |  | 1,345,105           |   |  | $                             
|Canceled               |  |                |  | (100,000            | ) |  | $                             
|Granted                |  |                |  | 2,735,167           |   |  | $                             
|Exercised              |  |                |  | (18,000             | ) |  | $                             
|                       |  |                |  |                     |   |  |                               
|Balance, June 30, 2001 |  | 3,962,272      |  | 3,962,272           |   |  | $                             
|Canceled               |  |                |  | (1,187,935          | ) |  | $                             
|Granted                |  |                |  | 1,750,435           |   |  | $                             
|Exercised              |  |                |  | (600,000            | ) |  | $                             
|                       |  |                |  |                     |   |  |                               
|Balance, June 30, 2002 |  | 3,924,772      |  | 3,924,772           |   |  | $                             
|Canceled               |  |                |  | (39,170             | ) |  | $                             
|Granted                |  |                |  | 62,500              |   |  | $                             
|Exercised              |  |                |  | (587,935            | ) |  | $                             
|                       |  |                |  |                     |   |  |                               
|Balance, June 30, 2003 |  | 3,360,167      |  | 3,360,167           |   |  | $                             
|                       |  |                |  |                     |   |  |                               



F-16



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



A further summary of warrants outstanding at June 30, 2003 is as follows:



|                         |  | Warrants Outstanding |  | Warrants Exercisable                                   
|------------------------ |  | -------------------- |  | -------------------------------------------------------
|Range of Exercise Prices |  | Number Outstanding   |  | Weighted- Average Remaining Contractual Life (In Years)
|$1.05 to $2.25           |  | 3,360,167            |  | 1.10                                                   



Note 9. Major Customers



Product sales revenue for the years ended June 30, 2003, 2002 and 2001,
includes sales to major customers, each of which accounted for greater than 10% of the total sales of the Company. A summary of sales to these customers during the years ended June 30, 2003, 2002 and 2001, and accounts receivable from these
customers at June 30, 2003, 2002 and 2001, is as follows:



|          |  | 2003  |            | 2002               |   | 2001     
|--------- |  | ----- | ---------- | ------------------ | - | ---------
|          |  | Sales |            | AccountsReceivable |   | Sales    
|Company A |  | $     | 7,385,000  |                    | $ | 972,000  
|Company B |  |       | 15,492,000 |                    |   | 1,691,000
|Company C |  |       |           |                    |   |         
|          |  |       |            |                    |   |          
|          |  | $     | 22,877,000 |                    | $ | 2,663,000
|          |  |       |            |                    |   |          



Note 10. Major Suppliers



The Company currently purchases a significant portion of raw materials
from two suppliers. However, management believes that several other suppliers could provide similar materials on comparable terms without significantly impacting shipping or sales.



Note 11. Leases



The Company leases its Connecticut and California manufacturing and office facilities under operating leases. The lease on the Connecticut facility expires in June 2011
and the lease on the principal California facility expires in June 2008.



Future minimum lease payments under significant noncancelable operating leases, with remaining terms of one year or more, are as follows at June 30, 2003:



|           |  | OperatingLeases
|---------- |  | ---------------
|2003       |  | $              
|2004       |  |                
|2005       |  |                
|2006       |  |                
|2007       |  |                
|Thereafter |  |                
|           |  |                
|           |  | $              
|           |  |                



F-17



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



Rent expense under operating leases for the years ended June 30, 2003, 2002 and 2001, approximated $1,607,000,
$1,582,000 and $1,413,000, respectively.



Note 12. Income Taxes



Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. For financial reporting purposes, deferred tax assets were reduced by a valuation allowance of $7.6 million at June
30, 2002 based on managements opinion at that time regarding the estimated realizability of operating loss carryforwards and temporary differences due to the absence of sustained profitability of the Company. During the year ended June 30,
2003, the valuation allowance was eliminated based on managements assessment of the Companys operating performance and realizability of operating loss carryforwards and other temporary differences. Based on the Companys recent
history of profitability and its forecasts for future periods, management has estimated that operating loss carryforwards and other temporary differences will be realized. The approximate effect of the carryforwards and temporary differences that
give rise to deferred tax assets and liabilities at June 30, 2003 and 2002, is as follows:



|                                                     |  | 2003 |           | 2002 |  
|---------------------------------------------------- |  | ---- | --------- | ---- | -
|Deferred tax assets:                                 |  |      |           |      |  
|Allowance for doubtful accounts and notes receivable |  | $    | 191,000   |      | $
|Inventory reserves                                   |  |      | 60,000    |      |  
|Capitalization of inventory costs                    |  |      | 462,000   |      |  
|Vacation accruals                                    |  |      | 200,000   |      |  
|Tax credit carryforwards                             |  |      | 42,000    |      |  
|Net operating loss carryforwards                     |  |      | 5,851,000 |      |  
|                                                     |  |      |           |      |  
|Total deferred tax assets                            |  |      | 6,806,000 |      |  
|Valuation allowance                                  |  |      |          |      |  
|                                                     |  |      |           |      |  
|Net deferred tax assets                              |  | $    | 6,806,000 |      | $
|                                                     |  |      |           |      |  



The provision (benefit) for income
taxes consists of the following:



|          |  | 2003 |            |   | 2002 |   | 2001    | 
|--------- |  | ---- | ---------- | - | ---- | - | ------- | 
|Current:  |  |      |            |   |      |   |         | 
|Federal   |  | $    | 14,000     |   |      | $ |        | 
|State     |  |      | 36,000     |   |      |   | 152,000 | 
|          |  |      |            |   |      |   |         | 
|          |  |      | 50,000     |   |      |   | 152,000 | 
|          |  |      |            |   |      |   |         | 
|Deferred: |  |      |            |   |      |   |         | 
|Federal   |  |      | (6,657,000 | ) |      |   |        | 
|State     |  |      | (149,000   | ) |      |   |        | 
|          |  |      |            |   |      |   |         | 
|          |  |      | (6,806,000 | ) |      |   |        | 
|          |  |      |            |   |      |   |         | 
|          |  | $    | (6,756,000 | ) |      | $ | 152,000 | 
|          |  |      |            |   |      |   |         | 



Income (loss) before income taxes
consists of:



|         |  | 2003 |           | 2002 |   | 2001      | 
|-------- |  | ---- | --------- | ---- | - | --------- | 
|Domestic |  | $    | 2,072,000 |      | $ | 3,935,000 | 
|Foreign  |  |      |          |      |   |          | 
|         |  |      |           |      |   |           | 
|         |  | $    | 2,072,000 |      | $ | 3,935,000 | 
|         |  |      |           |      |   |           | 



F-18



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



A reconciliation of the anticipated income tax expense (benefit) (computed by applying the Federal statutory income
tax rate of 34% to the income (loss) before taxes) to the provision (benefit) for income taxes as reported in the consolidated statements of operations is as follows:



|                                                               |  | 2003 |            |   | 2002 |      |    | 2001 |  
|-------------------------------------------------------------- |  | ---- | ---------- | - | ---- | ---- | -- | ---- | -
|Provision (benefit) for income taxes at statutory Federal rate |  | $    | 705,000    |   |      | 34   | %  |      | $
|Increase (decrease) resulting from:                            |  |      |            |   |      |      |    |      |  
|State corporation income tax, net of federal tax benefit       |  |      | 86,000     |   |      | 4    | %  |      |  
|Decrease in valuation allowance for deferred taxes             |  |      | (7,569,000 | ) |      | (365 | )% |      |  
|Foreign operations statutory tax rate differentials            |  |      |           |   |      |     |    |      |  
|Nondeductible loss on sale of European subsidiary              |  |      |           |   |      |     |    |      |  
|Permanent items and other                                      |  |      | 22,000     |   |      | 1    | %  |      |  
|                                                               |  |      |            |   |      |      |    |      |  
|Provision (benefit) for income taxes                           |  | $    | (6,756,000 | ) |      | 326  | %  |      | $
|                                                               |  |      |            |   |      |      |    |      |  



The decrease in the valuation
allowance for deferred taxes of $271,000 for 2001 is net of $1,763,000 of federal and state net operating loss carryforwards that have expired during the year ended June 30, 2001.



At June 30, 2003, the Company has federal net operating loss carryforwards for income tax purposes, which expire as follows:



|Year |  | Amount
|---- |  | ------
|2006 |  | $     
|2007 |  |       
|2008 |  |       
|2009 |  |       
|2010 |  |       
|2011 |  |       
|     |  |       
|     |  | $     
|     |  |       



In addition, the Company has tax
credit carryforwards available to offset future taxable income aggregating approximately $49,000 which expire in various amounts from 2004 through 2010. The Company also has charitable contributions which were converted to net operating losses
aggregating approximately $18,000 which expire in various amounts from 2012 through 2023.



Note 13. Commitments



401(K) Plan



During the years ended
June 30, 2003, 2002 and 2001, Company contributions to its 401(k) profit sharing and savings plan approximated $214,000, $193,000 and $180,000, respectively.



Bonus Plan



The Company has a bonus plan under which its employees may earn a bonus based on various earnings measures. The actual payment of bonuses is subject to annual approval by
the Board of Directors. Expenses recognized under this plan were approximately $-0-, $763,000 and $400,000, for the years ended June 30, 2003, 2002 and 2001, respectively.



F-19



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



Note 14. Loss on Disposal of Subsidiary



On February 8, 2001, the Company sold the stock of its European subsidiary, Memry Europe, N.V. (Memry Europe), for approximately
$1,000,000. As part of this transaction, the Company entered into a supply and license agreement with Memry Europe, pursuant to which Memry granted to Memry Europe a royalty-bearing license to certain technologies and agreed to supply Memry Europe
with certain alloys and tubing. The loss on disposal of this subsidiary reflected in the consolidated statement of operations for the year ended June 30, 2001 aggregated $4,232,000.



Note 15. Operating Segments



The Company is engaged principally in one line of business, the development, manufacturing and marketing of products utilizing properties exhibited by shape memory
alloys, which represents more than 95% of consolidated revenues. The following table presents information about the Company by geographic area. There were no material amounts of sales or transfers among geographic areas and no material amounts of
United States export sales.



|2003                |  | United States |            |   | Europe |   |            | Consolidated | 
|------------------- |  | ------------- | ---------- | - | ------ | - | ---------- | ------------ | 
|Total revenues      |  | $             | 34,007,000 |   |        | $ |           |              | 
|Operating income    |  |               | 2,137,000  |   |        |   |           |              | 
|Identifiable assets |  |               | 30,127,000 |   |        |   |           |              | 
|                    |  |               |           
|2002                |  | United States |            |   | Europe |   |            | Consolidated | 
|Total revenues      |  | $             | 32,895,000 |   |        | $ |           |              | 
|Operating income    |  |               | 4,065,000  |   |        |   |           |              | 
|Identifiable assets |  |               | 22,188,000 |   |        |   |           |              | 
|                    |  |               |           
|2001                |  | United States |            |   | Europe |   |            | Consolidated | 
|Total revenues      |  | $             | 29,010,000 |   |        | $ | 903,000    |              | 
|Operating loss      |  |               | (3,342,000 | ) |        |   | (1,037,000 | )            | 
|Identifiable assets |  |               | 19,051,000 |   |        |   | 2,000      |              | 



The operating loss of $3,342,000
attributed to U.S. operations in the year ended June 30, 2001 includes the $4,232,000 loss on disposal of the Companys European subsidiary described above.



It is not practical to disclose revenues for each product and service or each group of products and services because such data is not
readily available.



Note 16. Severance



During the fourth quarter of the year ended June 30, 2001, the Company announced the
termination of Robert J. Thatcher as president and chief operating officer. In connection with Thatchers termination, the Company accrued severance and related costs of $522,000 of which $21,000 was paid in fiscal 2001, leaving a remaining
obligation of $501,000 at June 30, 2001. Total payments charged to this liability through June 30, 2002 were $378,000 leaving a remaining obligation at such date of $144,000. As of June 30, 2003, this liability has been paid in full.



During the second quarter of the year ended June 30, 2002, a severance agreement was entered
into with one former employee who held a management position while employed at the Company. For the year ended June 30, 2002, $86,000 was charged to operations under this agreement, of which $79,000 was paid, leaving a remaining obligation of $7,000
at June 30, 2002. As of June 30, 2003, this liability has been paid in full.



F-20



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##### Table of Contents

##### Index to Financial Statements

MEMRY CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

June 30, 2003, 2002 and 2001

---



During the fourth quarter of the year ended June 30, 2002, severance agreements were entered into with two former
employees, both of whom held management positions while employed at the Company. For the year ended June 30, 2002, $375,000 was charged to operations under this agreement, of which $22,000 was paid, leaving a remaining obligation of $353,000 at June
30, 2002. Total payments charged to this liability through June 30, 2003 are $325,000, leaving a remaining obligation at June 30, 2003 of $50,000, which has been included in Note 6.



Note 17. Litigation



On August 22, 2001, a director and former officer of the Company filed two lawsuits against the Company relating to his termination during the year ended June 30, 2001. A
settlement was reached on January 28, 2002, whereby the Company made a cash payment to the former officer in the amount of $25,000 and issued 75,000 non-plan stock options with an exercise price of $1.20 per share and a fair value of approximately
$8,000. The fair value of the options has been recorded as an operating expense and additional paid-in capital as of June 30, 2002. In accordance with Statement of Financial Accounting Standards No. 123, Accounting for Stock-based
Compensation, the Company calculated the fair value of these options using the fair value option-pricing model. In addition, the terms of a note receivable from said officer were amended. (See Note 3).



Note 18. Pending Accounting Pronouncement



In May 2003, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150). SFAS 150 establishes standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously
classified as equity. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS 150
is not expected to have a significant impact on the Companys financial statements.



F-21