INFLUENCE INC, S-1, 1997-08-06

INFLUENCE INC
S-1, 1997-08-06
MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1997

REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------

INFLUENCE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 5047 13-3798523
(STATE OR OTHER JURISDICTION (PRIMARY SIC CODE) (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

601 MONTGOMERY STREET, SUITE 845
SAN FRANCISCO, CALIFORNIA 94111
(415)421-5600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

PETER A. BICK, M.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INFLUENCE, INC.
601 MONTGOMERY STREET, SUITE 845
SAN FRANCISCO, CALIFORNIA 94111
(415)421-5600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
PAUL I. RACHLIN, ESQ. HOWARD S. ROSENBLUM, ESQ.
ARNOLD & PORTER TESTA, HURWITZ & THIBEAULT, LLP
399 PARK AVENUE HIGH STREET TOWER
NEW YORK, NEW YORK 10022 125 HIGH STREET
(212)715-1000 BOSTON, MASSACHUSETTS 02110
(617)248-7000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
===========================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
OFFERING PRICE AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE PER OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Common Stock, par value per share
$0.001............................... 2,875,000 $13.00 $37,375,000 $11,325.76
===========================================================================================================
</TABLE>

(1) Includes 375,000 shares of Common Stock that the Underwriters have the
option to purchase solely to cover over-allotments, if any.

----------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

================================================================================
<PAGE> 2

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.

SUBJECT TO COMPLETION, DATED AUGUST 6, 1997

2,500,000 SHARES

[INFLUENCE LOGO]

COMMON STOCK

All of the shares of Common Stock, par value $.001 per share (the "Shares"
or the "Common Stock") being offered hereby (the "Offering"), are being offered
by Influence, Inc., a Delaware corporation. Prior to the Offering, there has
been no public market for the Common Stock. It is currently anticipated that the
initial public offering price will be between $11.00 and $13.00 per Share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. Influence has applied for listing of the
Common Stock on the Nasdaq National Market ("Nasdaq") under the symbol "INFL."

AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
==========================================================================================================
Proceeds
to
Price to Public Underwriting Discounts Company(2)
and Commissions(1)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Per Share...................................... $ $ $
Total(3)....................................... $ $ $
==========================================================================================================
</TABLE>

(1) See "Underwriting" for information regarding indemnification of the
Underwriters and other matters.

(2) Before deducting expenses payable by the Company, estimated at $600,000.

(3) Influence has granted to the Underwriters a 30-day option to purchase up to
375,000 additional shares of Common Stock solely to cover over-allotments,
if any. If the Underwriters exercise this option in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company will
be $ , $ and $ , respectively. See
"Underwriting."

The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters named herein, subject to receipt and acceptance by them,
and subject to their right to reject any order in whole or in part and to
withdraw, cancel or modify the offer without notice. It is expected that
delivery of the certificates representing such shares will be made against
payment therefor at the office of Montgomery Securities on or about
, 1997.

------------------------

MONTGOMERY SECURITIES
ROBERTSON, STEPHENS & COMPANY
UBS SECURITIES

, 1997.
<PAGE> 3

INFLUENCE PRODUCT DEVELOPMENT OVERVIEW

<TABLE>
<CAPTION>
PROPOSED REGULATORY PATH
PRODUCT/DESCRIPTION PRODUCT STATUS(1) OR STATUS(2)
- ---------------------------------------------------------- ----------------------- ---------------------------
<S> <C> <C>
[Each product description is preceded by an illustration of such product.]
INCONTINENCE THERAPEUTIC AND DIAGNOSTIC DEVICES
IN-TAC
A minimally invasive, reusable surgical system for Launched in U.S., 510(k) cleared February
performing bladder neck fixation and sling procedure Europe and Asia 2Q97 1997; CE Mark pending
surgery in women with stress incontinence.
IN-FAST
A minimally invasive, disposable surgical system for Launch expected 510(k) cleared April 1997;
performing bladder neck fixation and sling procedure worldwide in 4Q97 CE Mark pending
surgery in women with stress incontinence.
STRAIGHT-IN
A disposable surgical tool for open or laparoscopic Ongoing international 510(k) submitted July 1997
bladder neck fixation, sling procedure and vaginal vault pilot trial
prolapse surgery.
IN-FLOW
A temporary intraurethral valved catheter containing an Ongoing U.S. IDE trial; PMA path; CE Mark approved
intraluminal pump assembly operated by a remote-control Launched in Europe and March 1997
activator for women with atonic bladder (overflow Asia 2Q97
incontinence).
IN-SURE
A temporary intraurethral valved catheter that functions Ongoing international PMA path
as a remote-controlled artificial sphincter for women pilot trial
with stress incontinence.
IN-BIO
A wireless pelvic floor training and biofeedback Ongoing international 510(k) path
transmitter to measure intra-abdominal pressure and pilot trial
perineal muscle contractions.
IN-PROBE
A urodynamics and pressure recording system to record Ongoing international 510(k) path
urethral hypermobility, uroflowmetry (urine flow, pilot trial
pattern and volume) and leak point pressure.
IN-TELE
A wireless disposable transmitter that is inserted into Preclinical 510(k) path
the bladder to transmit bladder pressure to a
belt-mounted receiver.
IN-FLOW-M
A modified version of the In-Flow remote-controlled Preclinical PMA path
intraurethral catheter for men with atonic bladder
(overflow incontinence).
IN-SURE-M
A modified version of the In-Sure remote-controlled Preclinical PMA path
intraurethral catheter for men with stress incontinence
or post-surgical urinary retention.
IN-CUFF
A permanent, implantable, remote-controlled, artificial Preclinical PMA path
dynamic sphincter.
OBSTRUCTIVE SLEEP APNEA AND SNORING THERAPEUTIC DEVICE
SLEEP-IN
A minimally invasive, disposable surgical system for Ongoing international 510(k) submitted June 1997
treatment of obstructive sleep apnea and snoring. pilot trial
</TABLE>

- ---------------
(1) "Ongoing international pilot trial" means such product is currently
undergoing uncontrolled clinical trials in Europe and Israel. "Preclinical"
means the Company is in the process of refining product development and
design prior to initiation of any clinical trials.

(2) "510(k) path" indicates those products which the Company believes will
require a 510(k) clearance from the FDA prior to marketing in the U.S. "PMA
path" indicates those products which the Company believes will require a PMA
approval prior to marketing in the U.S. "CE Mark pending" means that a CE
Mark inspection of the Israeli manufacturing facility has taken place for
those products and the Company is waiting for a response.

Influence is in the development stage and most of its products are
currently under development. Many of the Company's proposed products discussed
herein have not been approved or cleared by the FDA, and there can be no
assurance that such proposed products will receive such approval or clearance on
a timely basis, or at all. See "Risk Factors -- No Assurance of Regulatory
Approvals; Potential Delays."

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SHARES, INCLUDING
PURCHASES OF THE SHARES TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE SHARES
TO COVER SOME OR ALL OF A SHORT POSITION IN THE SHARES MAINTAINED BY THE
UNDERWRITER AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 4

[The two fold-out pages contain two separate flowcharts, one for female
patients with urinary problems and one for male patients with urinary problems.
Each flowchart outlines the steps a physician would take in diagnosing and
treating female and male incontinence, respectively. The flowcharts also depict
which steps might incorporate the Company's proposed diagnostic and treatment
products, including In-Probe, In-Tele, In-Bio, In-Tac, In-Fast, Straight-In,
In-Sure, In-Flow, In-Sure-M, In-Flow-M and In-Cuff.]

3
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus. The Company is in the development stage and many
of its products are currently under development. The following discussion
necessarily contains certain forward-looking statements which reflect the
Company's plans, estimates and beliefs. The Company's actual results could
differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed elsewhere in this Prospectus, particularly in "Risk Factors."

THE COMPANY

To date, in the field of incontinence the Company has received 510(k)
clearance from the U.S. Food and Drug Administration ("FDA") for two of its
products, In-Tac and In-Fast, both designed to enable minimally invasive bladder
neck surgery for the treatment of certain types of urinary incontinence in
women. The Company has also received a CE Mark to distribute In-Flow in Europe
and has received marketing clearance for In-Flow in Canada. In addition to
In-Tac, In-Fast and In-Flow, a total of eight additional products addressing
both female and male incontinence are in various stages of development.

Urinary incontinence, the involuntary leakage of urine, is a significant
health problem afflicting approximately ten million women and three million men
in the U.S. It is estimated that 50% of the 1.5 million nursing home residents
suffer from incontinence. The U.S. Department of Health and Human Services
Agency for Health Care Policy and Research estimated in 1996 that costs
associated with the management and treatment of urinary incontinence in the U.S.
exceed $16 billion annually, including over $5 billion related to patients in
nursing homes. Incontinence may be caused by a wide range of factors, including
childbirth, menopause, surgery, obesity, drugs and neurological damage. Persons
suffering from urinary incontinence experience a variety of physical and
psychological problems including urinary tract infections, rashes, pressure
sores, embarrassment, decreased sexual activity, depression and loss of
productive activity.

The FDA-cleared In-Tac surgical system incorporates the Company's
proprietary bone anchors and reusable U-shaped anchor insertion device. The
FDA-cleared In-Fast surgical system incorporates bone screws and the Company's
proprietary disposable battery-operated U-shaped insertion device. Both the
In-Tac and In-Fast surgical systems enable incisionless, minimally invasive
transvaginal bladder neck fixation and bladder neck sling procedures. Bladder
neck fixations are performed primarily to relieve severe stress incontinence
that is caused by prolapse (descent) of the urethra and bladder neck, and
bladder neck sling procedures are performed primarily to relieve severe
incontinence that is caused by either prolapse (descent) of the urethra and
bladder neck or by bladder sphincter abnormalities known as intrinsic sphincter
deficiency. Approximately 120,000 bladder neck surgeries were performed in 1993
in the U.S. using methods which typically require abdominal or vaginal incisions
and general anesthesia. In contrast, the In-Tac and In-Fast procedures require
no abdominal or vaginal incisions, which introduces less trauma to the patient,
shortens the post-operative recovery period, reduces the need for
hospitalization and can be performed using local anesthesia. The Company is also
developing the Straight-In surgical system which uses technology similar to
In-Fast and is intended for physicians who continue to prefer open or
laparoscopic surgical procedures for bladder neck fixation and sling procedures,
as well as for the repair of vaginal vault prolapse. The Company submitted to
the FDA a 510(k) premarket notification ("510(k) Notification") for Straight-In
in July 1997.

The Company is also developing a non-surgical, remote-controlled,
intraurethral valved catheter, In-Flow, which incorporates an intraluminal pump
that can actively void a patient's bladder. In-Flow is intended

4
<PAGE> 6

to offer a convenient alternative to continuous Foley catheterization and
intermittent self-catheterization for patients with overflow incontinence
associated with atonic bladder. In-Flow includes a disposable silicone catheter
that is intended to be inserted by a health care provider into a woman's urethra
and replaced approximately once per month. The Company is also developing a
variation of this product, In-Sure, for the treatment of stress incontinence.
In-Sure incorporates a proprietary valve system that is opened and closed with a
remote control activator. In-Sure is intended to offer a non-surgical
alternative for the treatment of stress incontinence that is easy and convenient
for the patient to use. The FDA has determined that approval of the In-Flow
device will require a PMA submission in the U.S. The FDA has approved an
Investigational Device Exemption ("IDE") for this device and a clinical IDE
study commenced in June 1997. The FDA has indicated in correspondence with the
Company that the future PMA submission will receive expedited review, provided
that the conditions for granting expedited status remain valid. Additionally,
the Company has received marketing clearance in Europe and Canada for In-Flow.

The Company is also developing a number of complementary diagnostic and
therapeutic products to manage incontinence. In-Probe is an inexpensive
diagnostic system being designed to identify quantitatively the specific cause
of incontinence and assist the physician in choosing an appropriate course of
treatment. The Company believes its In-Tele device, a small wireless disposable
transmitter inserted into the bladder, will enable more accurate diagnosis of
urge incontinence and may reduce the incidence of unnecessary surgeries. In-Bio
is a portable wireless biofeedback device which is being designed to increase
the effectiveness of pelvic floor training exercises by providing a convenient
method of feedback to patients outside of a physician's office. The Company is
also developing In-Flow-M and In-Sure-M, male versions of In-Flow and In-Sure,
and is developing In-Cuff, a permanent, implantable, remote-controlled,
artificial sphincter for the treatment of incontinence in men.

Influence also is seeking to leverage its core technologies to address
additional markets outside the field of urinary incontinence. The Company has
initially targeted the treatment of obstructive sleep apnea ("OSA") and snoring.
OSA is a breathing disorder caused by upper airway obstruction during sleep
which is frequently associated with a prolapse of the tongue base. The Company's
product under development, Sleep-In, is a surgical system which incorporates
bone screws and the Company's proprietary suture passer and disposable
battery-operated insertion device. Sleep-In is a procedure designed to provide
support to the tongue and reduce the likelihood of obstruction. The National
Commission on Sleep Disorder Research reported in 1994 that approximately 20
million people in the U.S. have symptoms consistent with some degree of OSA.
Additionally, the incidence of snoring, which may be confused with and should be
differentiated from OSA, is seen in approximately 24% of men and 14% of women.
The Company filed a 510(k) Notification in June 1997 for the Sleep-In surgical
system.

------------------------

Except as otherwise indicated, references to "Influence" or the "Company"
are to Influence, Inc. together with its wholly owned subsidiaries. Except as
set forth in the Consolidated Financial Statements or as otherwise indicated,
all information in this Prospectus assumes (i) the conversion of all outstanding
shares of Series A Convertible Preferred Stock into Common Stock which will
become effective prior to the closing of the Offering and (ii) no exercise of
the Underwriters' over-allotment option. See "Description of Capital Stock" and
"Underwriting."

Influence(TM), In-Tac(TM), In-Fast(TM), Straight-In(TM), In-Sure(TM),
In-Flow(TM), In-Probe(TM), In-Tele(TM), In-Bio(TM), In-Sure-M(TM),
In-Flow-M(TM), In-Cuff(TM) and Sleep-In(TM) are trademarks of the Company. Any
other trademark appearing in this Prospectus is the property of the holder of
such trademark.

5
<PAGE> 7

THE OFFERING

Common Stock offered by the Company..... 2,500,000 Shares

Common Stock outstanding after the
Offering(1)............................. 10,209,277 Shares

Use of Proceeds......................... Expansion of sales and marketing
activities; research, product
development, clinical trials and
obtaining regulatory approvals;
capital expenditures and working
capital and other general corporate
purposes.

Proposed Nasdaq National Market
symbol.................................. INFL

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
NOVEMBER 9,
1994 YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
TO
DECEMBER 31, ------------------------- -------------------------
1994 1995 1996 1996 1997
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ -- $ -- $ -- $ -- $ 153,504
Cost of goods sold................................... -- -- -- -- 767,671
--------- ----------- ----------- ----------- ----------
Gross margin................................. -- -- -- -- (614,167)
Operating expenses:
Research and development........................... 300,000 1,250,196 3,219,207 985,340 1,249,883
Sales and marketing................................ -- -- 667,156 232,341 1,896,394
General and administrative......................... -- 459,271 1,768,557 250,480 669,122
--------- ----------- ----------- ----------- ----------
Total operating expenses..................... 300,000 1,709,467 5,654,920 1,468,161 3,815,399
--------- ----------- ----------- ----------- ----------
Operating loss....................................... (300,000) (1,709,467) (5,654,920) (1,468,161) (4,429,566)
Interest income (expense), net....................... -- 11,971 (117,758) 3,530 (405,046)
--------- ----------- ----------- ----------- ----------
Net loss............................................. $ (300,000) $(1,697,496) $(5,772,678) $(1,464,631) $(4,834,612)
========= =========== =========== =========== ==========
Pro forma net loss per share(2)...................... $ (0.78) $ (0.65)
=========== ==========
Shares used in computing pro forma net loss per
share(2)........................................... 7,442,460 7,488,217
=========== ==========
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------
ACTUAL AS ADJUSTED(3)
------------ ---------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments.................................. $ 11,952,713 $ 39,252,713
Working capital.................................................................... 11,830,694 39,130,694
Total assets....................................................................... 13,979,864 41,279,864
Deficit accumulated during the development stage................................... (12,604,786) (12,604,786)
Stockholders' equity............................................................... 12,734,587 40,034,587
</TABLE>

- ---------------
(1) Excludes (i) 1,022,346 shares issuable upon exercise of options outstanding
under the Company's 1995 Stock Option Plan (the "1995 Stock Option Plan") at
a weighted average exercise price of $6.10 per share, and (ii) 436,254
shares reserved for future issuances of stock options, in each case as of
the date of this Prospectus.

(2) See Note 2 of Notes to Consolidated Financial Statements for information
concerning computation of the per share data.

(3) Adjusted to give effect to the sale of the Shares offered by the Company
hereby, assuming an initial public offering price of $12.00 per Share (the
midpoint of the estimated initial public offering price range) after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company. See "Use of Proceeds."

6
<PAGE> 8

RISK FACTORS

The Company is in the development stage and many of its products are
currently under development. Therefore, this Prospectus necessarily contains
certain forward-looking statements, which reflect the Company's plans, estimates
and beliefs. The Company's actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include the risk factors set forth below and
elsewhere in this Prospectus.

DEVELOPMENT STAGE COMPANY; HISTORY OF LOSSES

The Company is in a development stage and has not conducted any significant
commercial operations to date. Since inception, the Company has derived minimal
revenues from product sales, and has accumulated a deficit during the
development stage through June 30, 1997 of $12.6 million mainly related to
research and development expenditures and expenses in connection with seeking
regulatory clearances and approvals and initial sales and marketing activities.
The Company expects its operating losses to increase over the foreseeable future
and there can be no assurance that the Company will be profitable in the future.
In addition, the Company expects that its operating results could fluctuate
significantly from quarter to quarter. Potential investors should be aware of
the problems, delays, expenses and difficulties encountered by an enterprise in
the Company's stage of development, any of which independently or in combination
could cause such losses or quarterly fluctuations in operating results, and many
of which may be beyond the Company's control. These include the completion of
development of the Company's products, progress and costs of clinical trials,
the timing and costs of various U.S. and foreign regulatory filings, the timing
and receipt or denial of various U.S. and foreign governmental clearances or
approvals, the costs involved in preparing, filing, presenting, maintaining and
enforcing patent claims, the timing and costs of product introduction, the
timing and extent to which the Company's products gain market acceptance,
production capacity constraints, the costs of developing marketing and
distribution capabilities, the timing of orders, the availability of third-party
reimbursement at acceptable levels and the technological advances of
competitors. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

RISKS RELATING TO PRODUCTS UNDER DEVELOPMENT

Most of the Company's products are still under development. Such products
will require further significant research, development, testing and regulatory
approvals or clearances prior to commercialization. The Company has only
performed a limited number of preclinical or clinical studies on certain of its
products under development, including In-Probe, In-Tele, In-Bio, In-Sure,
Straight-In, Sleep-In, In-Sure-M, In-Flow-M and In-Cuff. The number of patients
treated with In-Tac, In-Fast and In-Flow is small. Accordingly, there can be no
assurance that further experience or pilot or clinical studies will not
demonstrate some deficiency in the design or efficacy of these products that the
Company is unable to overcome. No assurance can be given that any of the
Company's products or proposed products will prove to be safe and efficacious,
receive or retain requisite regulatory clearances or approvals, demonstrate
substantial therapeutic benefit, be commercialized on a timely basis, if at all,
experience no design or manufacturing problems or be accepted by the
marketplace. The failure of the Company to achieve any one or more of these
objectives could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- The Influence
Incontinence Management System" and "Business -- The Influence OSA and Snoring
Therapeutic Device."

NO ASSURANCE OF REGULATORY APPROVALS; POTENTIAL DELAYS

The medical devices to be marketed and manufactured by the Company are
subject to extensive regulation by the FDA and, in some instances, by foreign
and state governments. Pursuant to the Federal Food, Drug, and Cosmetic Act, as
amended, and the regulations promulgated thereunder (the "FDC Act"), the FDA
regulates the clinical testing, manufacture, labeling, sale, distribution and
promotion of medical devices. A 510(k) Notification generally requires
supporting data, which may include clinical data. The process of obtaining
premarket approval ("PMA") is much more costly, lengthy and uncertain than a
510(k) Notification, because a PMA application requires extensive clinical data
and other supporting information.

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<PAGE> 9

When clinical data are required, there can be no assurance that any clinical
study proposed by the Company will be approved by the FDA, will be completed,
or, if completed, will provide data and information that will support clearance
or approval. There can be no assurance that 510(k) clearance or PMA approval
will ever be obtained or retained. Moreover, regulatory clearances or approvals,
if granted, may include significant limitations on the indicated uses for which
a product may be legally marketed in the United States.

The regulatory approval process often takes a number of years and requires
the expenditure of substantial resources. There can be no assurance that
proposed products that may be developed by the Company will be able to satisfy
the current or future requirements and regulations of the FDA or comparable
foreign agencies. There can be no assurance that the Company's proposed products
will not experience unanticipated delays in receiving FDA clearance or approval
or that such products will ever obtain the regulatory clearance or approval
required for marketing. In addition, there can be no assurance that government
regulations applicable to the Company's products or the interpretation of those
regulations will not change, and thereby prevent the Company from temporarily or
permanently marketing some or all of its products. Any such unanticipated delays
or lack of approval could have a material adverse effect on the Company's
business, financial condition and results of operations.

In August 1996, the Company received FDA clearance of a 510(k) Notification
for the In-Tac surgical system for use in bladder neck fixation. The Company
submitted an additional 510(k) Notification for the In-Tac surgical system for
use in bladder neck sling procedures in December 1996 and the Company received
FDA clearance for this use of the device in February 1997. In January 1997, the
Company submitted a 510(k) Notification for the In-Fast surgical system for use
in bladder neck fixation and sling procedures, which submission received FDA
clearance in April 1997.

In June 1997, the Company submitted a 510(k) Notification for the Sleep-In
surgical device for the treatment of OSA and snoring. In July 1997, the Company
submitted a 510(k) Notification for the Straight-In surgical tool for open or
laparoscopic bladder neck fixation, sling procedure and vaginal vault prolapse
surgery. In July 1997, the Company also submitted a 510(k) Notification for
material to be used in sling procedures for the treatment of urinary stress
incontinence. There can be no assurance that the FDA will not require the
submission of substantial clinical data to support these 510(k) Notifications,
that 510(k) clearances can be obtained in a timely manner, if at all, or that
the FDA will not require the submission of a PMA application for any or all of
these devices.

The FDA has determined that approval of the In-Flow device will require a
PMA submission. The FDA has approved an IDE for this device and a clinical IDE
study commenced in June 1997. The FDA has indicated in correspondence with the
Company that the future PMA submission will receive expedited review. However,
once a PMA application is submitted for In-Flow, there can be no assurance that
the FDA's condition for granting expedited status will remain valid, that the
FDA will review a future PMA on an expedited basis, or that PMA approval of
In-Flow could be obtained in a timely manner, if at all. The clinical data
obtained for In-Flow will be required to support the safety and effectiveness of
the device. Failure of any clinical data obtained for the device to support the
safety and effectiveness of the device could result in a delay or non-approval
of the future PMA submission and could have a material adverse effect on the
Company's business, financial condition and results of operations.

The Company intends to submit 510(k) Notifications in the future for its
In-Tele, In-Probe and In-Bio devices under development. The Company also intends
to submit a PMA application for the In-Sure device. Additionally, the Company
intends to submit PMA applications for its In-Sure-M, In-Flow-M, and In-Cuff
products under development. However, there can be no assurance that the FDA will
not require the submission of PMA applications for any or all of these devices,
or that 510(k) clearance or PMA approval could be obtained in a timely manner,
if at all.

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<PAGE> 10

with Medical Device Reporting ("MDR") requirements that a firm report to the FDA
any incident in which its product may have caused or contributed to a death or
serious injury, or in which its product malfunctioned and, if the malfunction
were to recur, it would be likely to cause or contribute to death or serious
injury. Labeling and promotional activities are subject to scrutiny by the FDA
and, in certain circumstances, by the Federal Trade Commission. Current FDA
enforcement policy prohibits the marketing of approved medical devices for
unapproved uses.

The Company is subject to routine inspection by the FDA for compliance with
the QSReg., MDR requirements, and other applicable regulations. To date, the
Company's facilities have not been inspected by the FDA for compliance with the
QSReg. Although the Company's facilities and manufacturing procedures are
designed to comply with QSReg. requirements, there can be no assurance that the
FDA would find them in compliance with all relevant aspects of the QSReg.
Noncompliance with applicable requirements, including QSReg., can result in,
among other things, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, failure of the government
to grant premarket clearance or premarket approval for devices, withdrawal of
marketing approvals or clearances and criminal prosecution.

International sales are subject to foreign government regulation, the
requirements of which vary substantially from country to country. The time
required to obtain approval by a foreign country may be longer or shorter than
that required for FDA clearance or approval, and the requirements may differ.
The Company also has sought ISO 9001 and ISO 9002 registration, international
manufacturing and design quality standards, and the CE Mark for its proposed
products. The CE Mark is recognized by countries that are members of the
European Union and the European Free Trade Association and, effective in 1998,
will be required to be affixed to all medical devices sold in the European
Union. The Company received ISO 9002 certification and CE Mark approval for
In-Flow in March 1997. In August 1997, the Company received clearance to market
In-Flow in Canada. The Company's manufacturing facilities underwent inspection
in July 1997 for ISO 9001 registration and such facilities also underwent
inspection in July 1997 for CE Mark approval for In-Fast and In-Tac. No
assurance can be given that the Company will obtain additional CE Mark approvals
for any of its proposed products or satisfy ISO 9001 standards, or that any
product which the Company may develop or intend to commercialize will obtain the
CE Mark, or will be able to obtain any other required international regulatory
clearance or approval on a timely basis, or at all. In the fourth quarter of
1997, the Company plans to relocate its manufacturing operations in Israel to a
new facility. No assurance can be given that the new facility will receive the
same certifications received by the current facility or that it will receive any
certifications at all. The loss of any such certifications or the denial of any
certifications to the new facility could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Government Regulation."

UNCERTAIN MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS

The Company's future growth and profitability will depend, in large part,
on the acceptance by the medical community of the Company's proposed products,
assuming products currently under development receive regulatory clearance or
approval. This acceptance will be substantially dependent on educating the
medical community as to the distinctive characteristics, perceived benefits and
clinical efficacy of the proposed products versus competitive products and the
need to train certain physicians in the proper application of the Company's
products. The Company believes that recommendations by urologists,
gynecologists, urogynecologists and otolaryngologists will be essential for
market acceptance of the Company's proposed products, and there can be no
assurance that any such recommendations will be obtained. In addition, physician
utilization will be dependent on the perceived utility demonstrated through the
Company's clinical trials and no assurance can be given that additional data
will not be required, which would delay or preclude market acceptance. New
reimbursement codes may be needed for certain of the Company's products, and the
inability of the Company to obtain such codes in a timely manner, if at all,
could affect market acceptance of such products. Furthermore, there can be no
assurance that the Company's products will be accepted by patients. For example,
of the approximately 209 patients treated to date with the In-Flow catheter,
approximately 50% of patients discontinued use within one week of starting
treatment due to discomfort or previously undetected symptoms of urge
incontinence, for which use of In-Flow is not indicated. After one

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<PAGE> 11

week of use, as the discomfort of a foreign body in the urethra appears to
dissipate in many patients, the drop-out rate appears to be significantly less
than during the first week of use. In addition, there can be no assurance that
patients will not develop adverse health effects while using the Company's
products. Any such adverse health effects, or the perception that such products
could cause any such adverse health effects, would have a material adverse
effect on market acceptance of such products. Finally, the Company has not yet
determined final pricing of its approved or its proposed products, and the
Company's pricing policies could adversely impact market acceptance of such
products as compared to competing products and treatments. Any of the foregoing
factors, or other factors, could limit or detract from market acceptance of the
proposed products. Insufficient market acceptance of any of the Company's
products could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Marketing and
Sales."

LIMITED MANUFACTURING EXPERIENCE

The Company has limited experience in manufacturing commercial quantities
of its products. The Company has not manufactured any of its products in
quantities that will be necessary for the achievement of significant product
sales or profitability. In order to successfully commercialize its products or
proposed products, the Company will have to increase the number of units it can
produce, reduce per-unit manufacturing costs and achieve or maintain the
extremely high quality standards required for such products. In order to
manufacture in commercial quantities on the foregoing basis, the Company will be
required either to enhance significantly its existing capabilities and equipment
and recruit and retain a sufficient number of skilled manufacturing personnel,
or to enter into arrangements with third parties to manufacture its proposed
products. The Company's current manufacturing facility in Israel is capable only
of limited manufacturing of its proposed products for use in clinical trials and
production of certain products in commercial quantities. In the fourth quarter
of 1997, the Company plans to relocate its Israeli operations to a larger
facility. The expansion of the Company's operations and integration into a new
facility may result in inefficiencies and delays. Prior to commencing
manufacturing of any products for commercial use in the United States, the
Company's facility will be required to comply with QSReg. requirements. There
can be no assurance that the Company will be able to establish manufacturing
capability, successfully make the transition to commercial manufacturing or
manufacture its products cost-effectively, or at all, or that the Company will
satisfy QSReg. requirements. Failure to do so could have a material adverse
effect on the Company's business, financial condition and results of operations.

During the first half of 1997, the Company experienced, and may continue to
experience, a shortage of In-Tac inserters due to production capacity
constraints. The Company is in the process of converting its subcontractor
component manufacturers from small-quantity machine shop production of In-Tac
components to an automated injection molded process capable of producing larger
quantities more efficiently, although there can be no assurance that such
transition will occur without further delay or that the Company will not
experience problems in the conversion to production in larger quantities. In
addition, clinical experience with certain of the Company's products has
necessitated certain design adjustments, which have caused delays in the
manufacturing process. Further design adjustments of existing or proposed
products would increase manufacturing costs and could further delay commercial
introduction of such products, which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Manufacturing."

INTENSE COMPETITION AND RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGE

The Company is engaged in rapidly evolving and highly competitive fields.
Competition from medical device manufacturers, pharmaceutical companies and
other competitors is intense and is expected to increase. Many of these
companies have substantially greater capital resources, research and development
staffs, facilities and experience in obtaining regulatory clearances or
approvals as well as in the manufacturing, marketing and distribution of
products than the Company. Academic institutions, hospitals, governmental
agencies and other public and private research organizations also conduct
research and seek patent protection and may develop competing products or
technologies on their own or through joint ventures. In addition, recently
developed technologies or technologies that may be developed in the future are,
or may be, the basis

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<PAGE> 12

for competitive products. The Company's products could be rendered obsolete or
uneconomical by technological advances by one or more of the Company's
competitors or by other therapies such as drugs to treat conditions addressed by
the Company's products. The Company's business, financial condition and results
of operations will depend upon whether the Company can compete effectively with
other developers of such medical devices and therapies.

In addition, many of the Company's competitors have greater experience than
the Company in conducting preclinical and clinical trials and obtaining FDA and
other regulatory approvals or clearances. Accordingly, the Company's competitors
may succeed in obtaining FDA or other regulatory approvals or clearances for
products more rapidly than the Company. Companies that complete clinical trials,
obtain required regulatory agency clearances or approvals and commence
commercial sale of their products before their competitors may achieve a
significant competitive advantage, including certain patent and marketing
exclusivity rights that would delay the Company's ability to market certain
products. There can be no assurance that products resulting from the Company's
research and development efforts will be able to compete successfully with
competitors' existing products or products under development or that they will
obtain regulatory clearance or approval in the United States or elsewhere. See
"Business -- Competition."

UNCERTAINTY RELATING TO THIRD-PARTY REIMBURSEMENT

In the United States, hospitals, physicians and other health care providers
that purchase medical devices generally rely on third-party payors, such as
private health insurance plans, health maintenance organizations, preferred
provider organizations, as well as government-sponsored programs, such as
Medicare and Medicaid, to reimburse all or part of the costs associated with the
treatment of patients. Medicare and many other third-party payors do not
reimburse for procedures deemed "experimental." However, effective November 1,
1995, Medicare began allowing local carriers the discretion to cover certain
devices with an approved IDE during clinical trials. The Company has received an
approved IDE for In-Flow. It is uncertain whether Medicare carriers will
reimburse for In-Flow and, if so, at what price. The failure to cover early use
of a procedure deters usage, delaying acceptance even longer. Furthermore, there
can be no assurance, even for products that are cleared or approved by the FDA
for new clinical applications, that any reimbursement will be available for such
procedures. A key component in the reimbursement decision by the United States
Health Care Financing Administration ("HCFA"), which administers Medicare, as
well as state Medicaid agencies and most private insurers is the assignment of a
Current Procedural Terminology ("CPT") code which is used in the submission of
claims to insurers for reimbursement of medical services. CPT codes are
assigned, maintained and revised by the CPT editorial board administered by the
American Medical Association. To date, the Company has launched only In-Tac in
the United States, and procedures using this product have received reimbursement
under existing CPT codes. There can be no assurance that such reimbursement will
continue and, if so, at what level. The Company intends to petition the CPT
editorial board for codes for its proposed products. In addition, the Company
will have to petition HCFA for supply codes for some of the Company's products.
There can be no assurance that the Company will succeed in securing recognition
by the CPT editorial board or HCFA of specific codes for its proposed products
and for services associated with such products, or that the Company will obtain
such codes in a timely manner. Failure to secure or retain recognition by the
CPT editorial board or HCFA could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
third-party payors are routinely limiting reimbursement coverage for medical
devices and in many instances are exerting significant pressure on medical
suppliers to lower their prices. The Company could also be adversely affected by
changes in reimbursement policies of government or private health care payors,
particularly to the extent that any such changes affect reimbursement for
therapeutic or diagnostic procedures in which the Company's products are used.
For example, effective January 1, 1999, HCFA will reimburse hospital outpatient
departments for services and supplies based on a prospective payment system,
which means that outpatient departments will be paid a flat fee for a procedure
regardless of the cost of a supply or device associated with a procedure.
Hospital inpatient procedures currently are reimbursed under such a system.
Failure by physicians, hospitals and other users of the Company's products to
obtain sufficient reimbursement from health care payors for procedures in which
the Company's products are used, or adverse changes in government and private
third-party payors'

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<PAGE> 13

policies toward reimbursement for such procedures, could have a material adverse
effect on the Company's business, financial condition and results of operations.

Market acceptance of the Company's products in international markets may be
dependent in part upon the availability of reimbursement within prevailing
health care payment systems. Reimbursement and health care payment systems in
international markets vary significantly by country, and include both
government-sponsored and private health care insurance. Although the Company
will seek international reimbursement approvals, obtaining such approvals can
require 12 to 18 months or longer and there can be no assurance that any such
approvals will be obtained in a timely manner, if at all. In addition, certain
countries may require additional clinical trials to be conducted which can be
costly and time consuming and could delay or prevent the Company from obtaining
reimbursement. Failure to receive additional international reimbursement
approvals could have a material adverse effect on market acceptance of the
Company's products in the international markets in which the Company is seeking
approvals and could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Third-Party
Reimbursement."

LIMITED MARKETING AND SALES CAPABILITY

The Company has limited experience marketing and selling products. The
Company has begun to establish a marketing and sales organization but has to
date not hired an executive responsible for coordinating worldwide marketing and
sales. Such function is currently performed by the President and Chief Executive
Officer, together with two regional directors of marketing. Establishing
marketing and sales capability sufficient to support sales in commercial
quantities will require significant resources, and there can be no assurance
that the Company will be able to recruit and retain qualified marketing
personnel, direct sales personnel or contract sales representatives or that
future sales efforts of the Company will be successful. Furthermore, due to the
innovative nature of the Company's proposed products and limited market
awareness, the Company anticipates that the marketing and sales process may be
lengthy, entailing the education of physicians in the proper use and advantages
of the Company's proposed products. In addition, the Company began marketing its
proposed products outside the United States through a direct sales force in
Germany and the United Kingdom, as well as through distributors. To date, the
Company has entered into distributor agreements in approximately 25 countries
and there can be no assurance that such distributors will prove successful or
that the Company will be able to engage qualified distributors in other markets
in a timely manner, if at all. With respect to Sleep-In, the proposed product to
treat OSA and snoring, the Company has not yet determined whether the Company
will develop a separate otolaryngological ("ENT") division to launch and conduct
marketing and sales of the Sleep-In device, or whether such technology will be
licensed to or marketed by a third party. If the Company decides to market and
sell its ENT products on its own, it will have to either develop its own
marketing and sales capability for this industry or else enter into
distributorship agreements both in the U.S. and abroad. While the Company is
committed to establishing effective distribution channels for its products,
there can be no assurance that the Company will be successful in doing so. The
failure to establish and maintain effective distribution channels for the
Company's products, or to retain qualified sales personnel to support commercial
sales of the Company's products, would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Marketing and Sales."

DEPENDENCE ON PATENTS, LICENSES AND PROPRIETARY TECHNOLOGY

The Company is dependent upon its proprietary technology and seeks to
protect such technology through a combination of patents and confidentiality
agreements. The Company has an exclusive worldwide license to one issued U.S.
patent, one pending U.S. patent application, six issued foreign patents and two
pending foreign patent applications, which cover certain technology related to
the In-Tac system, including the inserter device, the bone anchors with sutures
and a method of transvaginal bladder neck suspension surgery using an anchor and
suture inserted into the pubic bone. In addition, as of June 30, 1997, the
Company had seven pending U.S. patent applications, four pending Patent
Cooperation Treaty ("PCT") patent applications, three pending European Patent
Office applications and 19 foreign (national phase) patent applications pending
relating to

12
<PAGE> 14

the Company's technology underlying its products. The Company also has one
issued U.S. patent for technology unrelated to any of its products or currently
proposed products. There can be no assurance that any patents will issue from
such patent applications, that any claims obtained will provide adequate
protection for the Company's products, or that such issued patents will be
enforceable. In addition, methods of treating humans are generally not
patentable outside of the U.S., nor are claims directed to such methods
currently enforceable in the U.S. against medical practitioners or related
health care entities if the patents were issued after September 30, 1996. No
assurance can be given that the technologies used by the Company do not infringe
upon the proprietary rights of others. The Company could incur substantial costs
in seeking enforcement of its patents against infringement or unauthorized use
by others or in defending itself against patent infringement claims by others.

The medical device industry has been characterized by extensive litigation
over patents and other intellectual property rights, and companies in the
industry have employed intellectual property litigation to gain a competitive
advantage. There can be no assurance that the Company will not in the future
become involved in patent infringement claims and litigation, interference
proceedings commenced in the United States Patent and Trademark Office ("USPTO")
by an examiner or by a third party to determine the priority of inventions,
reexamination proceedings in the U.S. or opposition proceedings in a foreign
country. The defense and prosecution of intellectual property suits,
interference proceedings, reexamination proceedings, foreign opposition
proceedings and related legal and administrative proceedings are both costly and
time consuming. Litigation may be necessary to enforce or defend patents issued
to the Company, to protect the Company's trade secrets or know-how or to
determine the enforceability, scope and validity of the proprietary rights of
others. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States.

Any litigation, interference, reexamination or opposition proceedings
involving the Company will result in substantial expense to the Company and
significant diversion of effort by the Company's technical and management
personnel. An adverse determination in litigation, interference, reexamination
or opposition proceedings to which the Company may become a party could subject
the Company to significant liabilities to third parties or require the Company
to seek licenses from third parties. Although patent and intellectual property
disputes in the medical device area have often been settled through licensing or
similar arrangements, costs associated with such arrangements may be substantial
and could include ongoing royalties. Furthermore, there can be no assurance that
necessary licenses would be available to the Company on satisfactory terms, if
at all. Adverse determinations in a judicial or administrative proceeding or
failure to obtain necessary licenses could prevent the Company from
manufacturing and selling its products, which would have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company has been notified by a third party that it has filed a PCT patent
application directed to methods of and an apparatus for treating urinary
incontinence by bladder neck suspension through the use of an anchor and suture
inserted into bone and a procedure using an anchor with or without sutures. The
Company subsequently became aware of a U.S. patent issued to such third party.
The Company has conducted a review of the third party's relevant issued U.S.
patents and concluded that neither the Company's In-Tac device nor its use
infringes any valid claim of the patent. One of the third party's U.S. patents
in question contains claims related to a medical activity and such claims issued
after September 30, 1996. In accordance with a change in U.S. patent law which
became effective on September 30, 1996, such claims are currently unenforceable
against medical practitioners or related health care entities. To date, however,
there have been no judicial decisions interpreting this section, and there can
be no assurance that such patent will not become enforceable retroactively by
act of Congress or judicial decision. The Company has determined that its
products do not infringe the third party's apparatus and article of manufacture
claims. There can be no assurance, however, that U.S. or other patents will not
issue in the future in the name of this particular third party or another party
containing claims which would constrain the Company's ability to manufacture and
sell its products or prevent customers of the Company from practicing the method
of bladder neck suspension contemplated by use of the Company's In-Tac, In-Fast
or Straight-In surgical systems. Another entity has brought to the Company's
attention the existence of a Spanish patent having related European country
equivalents and concerning a staple inserter useful for bladder neck
suspensions. The Company has conducted an investigation of the likely scope of
this third party's patents in Europe and determined that no patent infringement
liability would exist

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<PAGE> 15

based upon the Company's sales and distribution of its In-Tac, In-Fast or
Straight-In surgical systems and related anchors or screws.

The Company is also aware of a number of U.S. patents of third parties
related to intraurethral valved catheters for the treatment of incontinence. The
Company believes that Influence's proposed devices will not infringe any valid
claims of those patents. The Company has been notified by a third party that its
intraurethral valved catheter may infringe the claims of an issued U.S. patent.
The Company has reviewed the patent, related documents and the prior art and
concluded that no valid claim is infringed. There can be no assurance that a
suit for patent infringement will not be filed by any of the patent owners or
licensees in the future, that the Company will prevail in any suit for patent
infringement, or that the Company will not be required to take a license under
unfavorable terms or be enjoined from manufacturing and selling its
intraurethral valved catheter incontinence devices.

In addition to patents, the Company relies on trade secrets and proprietary
know-how, which it seeks to protect, in part, through confidentiality,
employment and proprietary information agreements. These agreements generally
provide that all confidential information developed or made known to the
individual by the Company during the course of the individual's relationship
with the Company is to be kept confidential and not disclosed to third parties,
except in specific circumstances. The agreements also generally provide that all
inventions conceived by the individual in the course of rendering services to
the Company shall be the exclusive property of the Company. There can be no
assurance that proprietary information, employment or confidentiality agreements
with employees, consultants and others will not be breached, that the Company
will have adequate remedies for any breach, or that the Company's trade secrets
will not otherwise become known to or independently developed by competitors.
See "Business -- Patents, Licenses and Proprietary Technology."

DEPENDENCE ON SOLE-SOURCE SUPPLIER

The Company may be dependent on sole-source suppliers to supply
manufactured components of certain of its products, including the coated
Dacron(R) material for bladder neck sling procedures performed using the
Company's In-Tac, In-Fast and Straight-In surgical systems. The Company
currently has no written supply agreement for such coated Dacron(R) material,
and there can be no assurance that the Company will reach a definitive agreement
with such supplier, or that any such agreement will contain terms favorable to
the Company. The Company does not intend to maintain an extensive inventory of
this material. An interruption in supply could have a material adverse effect on
the Company's business, financial condition or results of operations. In
addition, the Company filed a 510(k) Notification in July 1997 with the FDA with
respect to the sling material. The loss of this sole supplier could require the
Company to file a new 510(k) Notification for replacement material, which could
necessitate a delay in marketing the Company's products for sling procedures.
Such delay could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Manufacturing."

ABILITY TO MANAGE EXPANDING OPERATIONS

In order to achieve its business objectives, the Company must undergo
substantial changes in its operations to transition from a company primarily
involved in research and development to a company which develops, manufactures,
markets, and supports multiple products and services for multiple markets. These
changes have placed, and are expected to continue to place, a significant strain
on the Company's limited managerial, administrative, operational and financial
resources. The Company only recently has begun the process of developing the
management and operational capabilities and financial and accounting systems and
controls necessary for this transition. The ability of the Company to achieve
its business objectives will depend in large part on its ability to build or
subcontract efficient manufacturing operations, to develop its operational and
sales and marketing capabilities and its financial and management information
systems, to develop the management skills of its managers and supervisors, and
to train, motivate and manage both its existing employees and the additional
employees that will be required if the Company is to achieve its business
objectives. There can be no assurance that the Company will succeed in
developing all or any of these capabilities, and any failure to do so would have
a material adverse effect on the Company's business, financial

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condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Management."

DEPENDENCE ON KEY PERSONNEL

The Company's future success will likely depend to a significant extent on
its executive officers and key employees, including Dr. Peter Bick, Dr.
Mordechay Beyar, Oren Globerman, Ze'ev Sohn, and other technical, managerial and
marketing personnel. The loss of the services of any of these individuals could
have a material adverse effect on the Company's business, financial condition
and results of operations. Dr. Bick has entered into an employment agreement
with Influence. Each of Dr. Beyar and Mr. Globerman has entered into an
agreement with the Company pursuant to which each will devote such time to the
Company as is necessary for the management of the business and affairs of the
Company and which include covenants not to compete with the Company. To date,
Dr. Beyar and Mr. Globerman have devoted substantial and significant time to the
Company, although they engage in other activities and have financial interests
and employment positions outside of the Company. The Company does not have, and
is not contemplating securing, key man life insurance on any of its executive
officers or other key personnel. There can be no assurance that any of these
individuals or any other key employee will not voluntarily terminate his or her
employment with or service to the Company. The Company believes that its future
success will also depend significantly on its ability to attract, motivate and
retain additional highly skilled technical, managerial and marketing personnel.
Competition for qualified personnel is intense, especially in Israel, where the
Company's main research and development facility is located, and there can be no
assurance that the Company will be successful in attracting, assimilating and
retaining the personnel required to grow and operate profitably. In addition,
key personnel in Israel, including Dr. Beyar and Mr. Globerman, are required to
perform annual reserve military duty. See "Risk Factors -- Potential Conflicts
of Interests," "Risk Factors -- Principal Subsidiary's Location in Israel,"
"Business -- Employees," "Management -- Directors, Executive Officers and Key
Employees," and "Management -- Employment Agreements."

POTENTIAL CONFLICTS OF INTEREST

Certain key employees of the Company also are affiliated with other
companies. Oren Globerman, a founder, principal stockholder and Vice Chairman of
Influence and a General Manager of Influence's Israeli subsidiary, Influence
Medical Technologies Ltd. ("IMT") is also a Co-General Manager of InStent
Israel, Ltd. ("InStent"), a subsidiary of Medtronic, Inc., a medical device
manufacturer and principal stockholder of Influence. Dr. Mordechay Beyar, a
founder, principal stockholder and Vice Chairman of Influence and a General
Manager of IMT, is a Co-General Manager of InStent. In addition, Mr. Globerman
and Dr. Beyar also control and supervise another developer of medical technology
which is not involved in incontinence, otolaryngology or related fields. The
pursuit of these other business interests could distract them from pursuing
opportunities on behalf of the Company and could lead to potential conflicts of
interest related to corporate opportunities. The Company intends to have all
transactions in which directors are interested parties referred to the Audit
Committee of the Board of Directors. There can be no assurance, however, that
all conflicts of interest will be resolved in the Company's favor. See
"Principal Stockholders" and "Certain Transactions."

PRODUCT LIABILITY EXPOSURE

Medical product companies face an inherent business risk of financial
exposure to product liability claims in the event that the use of their products
results in personal injury. The Company's products are and will be designed with
numerous safety features, but it is possible that patients' health could be
adversely affected by use of the Company's products or that death or serious
injury could occur. Further, in the event that any of the Company's products
prove to be defective, the Company may be required to recall and redesign such
products. Market clearance or approval of the Company's products by the FDA will
not shield the Company from product liability exposure. Although the Company has
not experienced any material losses to date due to product liability claims,
there can be no assurance that it will not experience such losses in the future.
The Company maintains liability insurance. However, there can be no assurance
that such coverage will continue to be available on terms acceptable to the
Company or that such coverage will be adequate for liabilities

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<PAGE> 17

actually incurred, and the Company anticipates that it will review such coverage
from time to time. In the event the Company is found liable for damages in
excess of the limits of its insurance coverage, or if any claim or product
recall results in significant adverse publicity against the Company, the
Company's business, financial condition and results of operations could be
materially and adversely affected. See "Business -- Product Liability and
Warranties."

UNCERTAINTY OF FUTURE CAPITAL REQUIREMENTS

The Company's capital requirements will depend on numerous factors. These
include the completion of development of the Company's products, progress and
costs of clinical trials, the timing and costs of various U.S. and foreign
regulatory filings, the timing and receipt or denial of various U.S. and foreign
governmental approvals or clearances, the costs involved in preparing, filing,
presenting, maintaining and enforcing patent claims, the timing and extent to
which the Company's products gain market acceptance, the timing and costs of
product introduction, the costs of maintaining and developing marketing and
distribution capabilities, and the technological advances of competitors. The
timing and amount of such capital requirements cannot accurately be predicted.
Consequently, there can be no assurance that the Company will not require
additional funding or that such additional funding, if needed, will be available
on terms attractive to the Company, or at all. Any additional equity financing
may be dilutive to stockholders, and debt financing, if available, may involve
restrictive covenants. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

CONCENTRATION OF OWNERSHIP

Upon completion of the Offering, and assuming no exercise of the
Underwriters' over-allotment options, the officers, directors, and principal
stockholders of the Company, as a group, will beneficially own approximately
47.6% of the outstanding shares of Common Stock. As a result, until there is a
substantial decrease in the percentage of the outstanding shares of Common Stock
held by such principal stockholders, such principal stockholders could act
together to elect all of the members of the Board of Directors, to approve all
matters requiring shareholder approval and to significantly influence the
affairs of the Company. See "Management" and "Principal Stockholders."

POSSIBLE ADVERSE IMPACT ON MARKET PRICE OF SHARES ELIGIBLE FOR FUTURE SALE

Sales of Common Stock (including shares issued upon the exercise of
outstanding options) in the public market after the Offering could materially
and adversely affect the market price of the Common Stock. Such sales also might
make it more difficult for the Company to sell equity securities or
equity-related securities in the future at a time and price that the Company
deems appropriate. Upon the completion of this Offering, the Company will have
10,209,277 shares of Common Stock outstanding, of which the 2,500,000 shares
offered hereby will be freely tradeable (unless held by affiliates of the
Company) without restriction. The remaining 7,701,277 shares will be restricted
securities within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). The Company's directors, executive officers and certain of
its stockholders, who in the aggregate hold 5,075,997 of the shares of Common
Stock of the Company outstanding immediately prior to the completion of the
Offering, have entered into lock-up agreements under which they have agreed not
to sell, directly or indirectly, any shares owned by them for a period of 180
days after the date of this Prospectus without the prior written consent of
Montgomery Securities. Montgomery Securities may, in its sole discretion and at
any time without notice, release all or any portion of the shares subject to
such lock-up agreements. Upon consummation of the Offering, 2,633,280 shares of
Common Stock will be eligible for public resale, subject in some cases to volume
limitations pursuant to Rule 144 under the Securities Act ('Rule 144"). Upon
expiration of the 180 day lock-up agreements, approximately 4,656,210 additional
shares of Common Stock will become eligible for public resale, subject in some
cases to volume limitations pursuant to Rule 144. The remaining approximately
419,787 shares held by Medtronic will become eligible for public resale in June
1998, subject to volume limitations. In addition, the Company has granted
certain registration rights to Medtronic which require the Company, upon the
request of Medtronic at any time beginning six months following the completion
of the Offering, to prepare and file under the Securities Act a registration
statement

16
<PAGE> 18

covering a proposed offer and sale of Medtronic's 419,787 shares of Common
Stock. See "Shares Eligible for Future Sale."

ABSENCE OF PRIOR MARKET FOR SHARES; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public trading market for the
Shares, and there can be no assurance that an active trading market will develop
or be sustained after the Offering. The stock market has from time to time
experienced extreme price and volume fluctuations which often have been
unrelated to the operating performance of particular companies. Moreover,
especially with the current uncertainty about health care policy, reimbursement
and coverage in the United States, there has recently been significant
volatility in the market price and trading volume of securities of medical
device and other health care companies unrelated to the performance of such
companies. Announcements of technological or medical innovations or new
commercial products by the Company or its competitors, developments or disputes
concerning intellectual property rights, changes in governmental regulation or
the status of the Company's regulatory clearances approvals or applications,
changes in earnings, changes in health care policies and practices, economic and
other external factors, political, economic and other developments in the State
of Israel, fluctuations in financial results of the Company, which may be
particularly pronounced during the introduction of new products, and comments by
financial analysts may have a significant impact on the market price and
marketability of the Shares. Fluctuations or decreases in the trading price of
the Shares may adversely affect the liquidity of the trading market for the
Shares and, in the event that the Company seeks to raise capital through future
equity financing, the Company's ability to raise such equity capital. The
initial public offering price of the Shares in the Offering will be determined
by negotiations among the Company and the Representatives (as defined herein) of
the Underwriters based on several factors and may not be indicative of prices
that will prevail in the open market. See "Risk Factors -- Development Stage
Company; History of Losses" and "Underwriting."

ABSENCE OF DIVIDENDS

Influence has not paid any dividends on its Shares and does not presently
anticipate paying any dividends on such Shares in the foreseeable future. Since
the Company's Israeli subsidiary will generate most of the operating revenues of
the Company, Influence will be dependent upon the dividend distributions it
receives from its Israeli subsidiary as a source for any payment of cash
dividends to Influence shareholders. The Company's Israeli subsidiary may pay
cash dividends in any fiscal year only out of "profits," as determined for
Israeli statutory purposes. In addition, dividends paid by the Company's Israeli
subsidiary will be subject to Israeli withholding tax. As a result, the ability
of Influence to pay dividends to stockholders may be limited. Moreover, the
Company's manufacturing facility in Israel has been deemed an "Approved
Enterprise" and will receive certain benefits under Israeli law. The payment of
dividends by the Company's Israeli subsidiary out of the income derived from
revenues from the Approved Enterprise until two years after the first year in
which such subsidiary has taxable income would subject the Company to certain
Israeli taxes to which it would not otherwise be subject. The Company's ability
to pay dividends may thus be further limited. See "Dividend Policy" and "Israeli
Taxation and Investment Programs."

PRINCIPAL SUBSIDIARY'S LOCATION IN ISRAEL

The Company's product development and production facilities, including its
proposed new production facility, are located in the State of Israel, and the
Company is directly affected by the political, economic and military conditions
to which that country is subject. Accordingly, any major hostilities involving
Israel or the interruption or curtailment of trade between Israel and its
present trading partners could have a material adverse effect on the Company's
business, financial condition and results of operations.

Since the establishment of the State of Israel in 1948, a state of
hostility has existed, varying in degree and intensity, between Israel and the
Arab countries. In addition, Israel and companies doing business with Israel
have been the subject of an economic boycott initiated by the Arab countries
since Israel's establishment. Although Israel has entered into certain
agreements with Egypt, Jordan and the Palestinian

17
<PAGE> 19

National Authority, and certain aspects of the Arab boycott have been relaxed,
no prediction can be made as to whether a full resolution of these problems will
be achieved or as to the nature of any such resolution.

Many of the Company's officers and employees are currently obligated to
perform annual reserve duty in the Israel Defense Forces and are subject to
being called for active military duty at any time. The Company has operated
effectively under these requirements to date. No prediction can be made as to
the effect on the Company of any expansion of these obligations.

The Company's manufacturing facility in Israel has been granted Approved
Enterprise status and will receive certain tax benefits under Israeli law. The
Company has applied to have its new facility deemed an "Approved Enterprise." If
such approval is not obtained or if such income tax benefits are terminated or
reduced substantially, there could be a material adverse effect on the Company's
business, financial condition and results of operations. See "Israeli Taxation
and Investment Programs."

INTERNATIONAL REVENUES

The Company expects that revenues from customers outside the U.S. will
account for a substantial portion of its revenues. International sales are
subject to a number of risks, including the following: agreements may be
difficult to enforce and receivables difficult to collect through a foreign
country's legal system; foreign customers may have longer payment cycles;
foreign countries could impose additional withholding taxes or otherwise tax the
Company's foreign income, impose tariffs or adopt other restrictions on foreign
trade; fluctuations in exchange rates could affect product demand; and the
protection of intellectual property in foreign countries may be more difficult
to enforce. There can be no assurance that these factors will not have a
material adverse effect on the Company's future international sales and,
consequently, on the Company's business, financial condition and results of
operations. In addition, fluctuations in exchange rates may render the Company's
products less competitive relative to local product offerings, or could result
in foreign exchange losses, depending upon the currency in which the Company
sells its products. To date, the Company has not engaged in exchange rate
hedging activities to minimize the risks of such fluctuations. The Company may
seek to implement hedging techniques in the future with respect to its foreign
currency transactions. There can be no assurance, however, that the Company will
be successful in such hedging activities.

IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS

A portion of the Company's expenses are expected to be incurred in New
Israeli Shekels ("NIS") while most of the Company's sales are and will be in
other currencies. The Company is exposed to risk to the extent that the rate of
inflation in Israel exceeds the rate of devaluation of the NIS in relation to
such other currencies or if the timing of such devaluation lags behind inflation
in Israel. In the past several years, the inflation rate in Israel has exceeded
the rate of devaluation of the NIS against the U.S. dollar. To date, the Company
has not engaged in hedging transactions. In the future, the Company may enter
into currency hedging transactions to decrease the risk of financial exposure
from fluctuations in the exchange rate of the dollar or other currencies against
the NIS; however, no assurance can be given that such measures will adequately
protect the Company from material adverse effects arising from the impact of
inflation in Israel. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Israeli Taxation and Investment
Programs."

IMMEDIATE AND SUBSTANTIAL DILUTION

A purchaser of Shares in the Offering will experience immediate and
substantial dilution of approximately $8.08 per Share. The net tangible book
value of the Shares outstanding subsequent to the Offering will be substantially
less than the per share public offering price of the Shares. Such investors will
suffer additional dilution upon exercise of outstanding options. See "Dilution."

SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS

Influence's principal subsidiary is incorporated in Israel, certain of its
officers and directors are non-residents of the United States, and a substantial
portion of the assets of such persons and the Company are

18
<PAGE> 20

located outside the United States. It may be difficult for investors to (i)
effect service of process against certain of the Company's officers and
directors who reside outside the United States, or (ii) enforce, in United
States courts, judgments against such officers and directors who may be deemed
to be underwriters, which are obtained in such courts predicated upon the civil
liability provisions of the United States federal securities laws. In addition,
the Company understands that there is doubt as to whether the courts of Israel
would enforce, in original actions brought in such courts, civil liabilities
against the Company or such persons predicated solely upon the federal
securities laws of the United States. The Company understands that Israeli
courts may enforce a foreign (including United States) final executory judgment
for liquidated damages in a civil suit, obtained after due trial before a court
of competent jurisdiction (as determined under Israeli law), provided that (i)
the courts of such jurisdiction would enforce similar Israeli judgments, (ii)
due service of process with respect to the Israeli enforcement action has been
effected upon the party against whom the foreign judgment is to be enforced,
(iii) such judgment or its enforceability is not contrary to the law, public
policy, security or sovereignty of the State of Israel, (iv) such judgment was
not obtained by fraud and does not conflict with any other such judgment in the
same matter between the same parties, and (v) an action between the same parties
with regard to the same subject matter was not pending in any court or tribunal
in Israel at the time the original lawsuit was instituted in the foreign court.
Foreign judgments enforced by Israeli courts will generally be payable in
Israeli currency and a specific permit of the Israeli Controller of Foreign
Exchange will be required to convert such currency into dollars and to transfer
out of Israel proceeds of a foreign judgment enforced in Israel. Judgment
creditors bear the risk of unfavorable exchange rates.

19
<PAGE> 21

THE COMPANY

Influence, Inc. was incorporated in Delaware on November 9, 1994, and IMT,
its Israeli subsidiary, was formed on November 22, 1994. Influence Medical
Technologies GmbH, a German subsidiary of IMT, was organized on November 7,
1996. The Company's corporate headquarters are located at 601 Montgomery Street,
Suite 845, San Francisco, California 94111; the telephone number is (415)
421-5600. The Company's research and development facilities, Israeli
headquarters and manufacturing facilities are located in Ramat Gan (a suburb of
Tel Aviv), Israel.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Shares
offered hereby are estimated to be approximately $27.3 million (approximately
$31.5 million if the Underwriters' over-allotment option is exercised in full)
assuming an initial public offering price of $12.00 Share, and after deducting
the underwriting discounts, commissions and estimated offering expenses payable
by the Company.

The Company intends to use approximately $10.0 million of such net proceeds
for sales and marketing activities, and $8.0 million for additional research and
product development, including conducting clinical trials and obtaining
regulatory approvals, approximately $1.0 million for capital expenditures,
primarily to develop the Company's manufacturing facilities and the remainder
for working capital and general corporate purposes. The Company may also use a
portion of such net proceeds to finance potential acquisitions of businesses,
products or technology. As of the date of this Prospectus, the Company has no
current plans or commitments regarding any such acquisitions, and no
acquisitions are currently under negotiation. Pending use of the proceeds from
the Offering as described above, the Company intends to invest the proceeds
primarily in United States government obligations or other investment-grade,
interest-bearing investments.

The Company believes that the net proceeds of the Offering, together with
its existing capital resources and interest income, will be sufficient to fund
its operating expenses and capital requirements as currently planned at least
through the end of 1998. There can be no assurance, however, that such funds
will be sufficient to fund its operating expenses and capital requirements
during such period. The Company's actual cash requirements may vary materially
from those now planned and will depend upon numerous factors. These factors
include the completion of development of the Company's products, progress and
costs of clinical trials, the timing and costs of various U.S. and foreign
regulatory filings, the timing and receipt or denial of various U.S. and foreign
governmental approvals and clearances, the costs involved in preparing, filing,
presenting, maintaining and enforcing patent claims, the timing and extent to
which the Company's products gain market acceptance, the timing and costs of
product introduction, the costs of maintaining and developing marketing and
distribution capabilities and the technological advances of competitors. See
"Risk Factors--Uncertainty of Future Capital Requirements."

DIVIDEND POLICY

Influence has never paid dividends and does not presently intend to pay
dividends in the foreseeable future. Influence intends to retain its earnings to
finance the development of its business. Any future dividend policy will be
determined by Influence's Board of Directors (the "Board") based upon conditions
then existing, including the Company's earnings, financial condition, tax
position and capital requirements as well as such economic and other conditions
as the Board may deem relevant. Since the Company's Israeli subsidiary will
generate most of the operating revenues of the Company, Influence will be
dependent upon the dividend distributions it receives from its Israeli
subsidiary as a source for any payment of cash dividends to Influence
shareholders. The Company's Israeli subsidiary may pay cash dividends in any
fiscal year only out of "profits," as determined for Israeli statutory purposes.
In addition, dividends paid by the Company's Israeli subsidiary will be subject
to Israeli withholding tax. As a result, the ability of Influence to pay
dividends to its stockholders may be limited. Moreover, the Company's
manufacturing facility in Israel has been deemed an Approved Enterprise and will
receive certain benefits under Israeli law. The payment of dividends by the
Company's Israeli subsidiary out of the income derived from the Approved
Enterprise until two years after the first year in which such subsidiary has
taxable income would subject the Company to certain Israeli taxes to which it
would not otherwise be subject. The Company's ability to pay dividends may thus
be further limited. See "Israeli Taxation and Investment Programs."

20
<PAGE> 22

CAPITALIZATION

The following table sets forth as of June 30, 1997, (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
to give effect to the automatic conversion of each outstanding share of the
Company's Series A Convertible Preferred Stock into 1.56 shares of Common Stock
immediately prior to the closing of the Offering and (iii) the pro forma
capitalization as adjusted to give effect to the receipt of the estimated net
proceeds from the sale of Shares offered by the Company hereby, after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by the Company. This table should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Stockholders' equity(1):
Series A Convertible Preferred Stock, par value
$0.01, 750,000 shares authorized, 713,000
shares issued and outstanding actual; none
outstanding pro forma and as adjusted.......... $ 7,130 $ -- $ --
Common Stock, par value $0.001, 30,000,000 shares
authorized 6,596,997 shares issued and
outstanding actual; 7,709,277 shares issued and
outstanding pro forma and 10,209,277 shares
issued and outstanding as adjusted............. 4,327 5,439 7,939
Additional paid-in capital........................ 25,542,976 25,548,994 52,846,494
Deferred compensation............................. (215,060) (215,060) (215,060)
Deficit accumulated during the development
stage.......................................... (12,604,786) (12,604,786) (12,604,786)
------------ ------------ ------------
Total stockholders' equity..................... 12,734,587 12,734,587 40,034,587
------------ ------------ ------------
Total capitalization...................... $ 12,734,587 $ 12,734,587 $ 40,034,587
============ ============ ============
</TABLE>

- ---------------

(1) Excludes (i) 1,022,346 shares issuable upon exercise of options outstanding
as of August 6, 1997 under the 1995 Stock Option Plan at a weighted average
exercise price of $6.10 per share, and (ii) 436,254 shares reserved for
future issuances of stock options as of August 6, 1997.

21
<PAGE> 23

DILUTION

Dilution represents the difference between the offering price per Share
paid by the purchasers in the Offering and the pro forma net tangible book value
per share immediately after completion of the Offering. The consolidated net
tangible book value of the Company as of June 30, 1997 was $12.7 million, or
approximately $1.65 per share. "Consolidated net tangible book value per share"
represents the amount of (i) total consolidated tangible assets, less total
consolidated liabilities, divided by (ii) the number of shares outstanding on
such date, including the conversion of all shares of Series A Convertible
Preferred Stock. After giving effect to the sale of shares of Common Stock
offered hereby at an assumed initial public offering price of $12.00 per Share,
resulting in net proceeds to the Company at approximately $27.3 million, the pro
forma consolidated net tangible book value of the Company as of June 30, 1997
would have been $40.0 million, or approximately $3.92 per share. This represents
an immediate increase in consolidated net tangible book value of approximately
$2.27 per share to existing shareholders and an immediate dilution of
approximately $8.08 per share to new investors. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $12.00
Pro forma net tangible book value before the Offering..... $1.65
Increase attributable to new investors.................... 2.27
-----
Pro forma net tangible book value after the Offering........ 3.92
------
Dilution to new investors................................... $ 8.08
======
</TABLE>

The following table summarizes on a pro forma basis as of June 30, 1997,
the number of shares purchased from the Company, the total cash consideration
paid and the average price per share paid by existing stockholders and to be
paid by purchasers of Shares offered hereby at an assumed initial offering price
of $12.00 before deducting the underwriting discounts and commissions and
estimated offering expenses payable by the Company.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders...... 7,709,277 76% $23,931,863 47% $ 3.10
New investors....... 2,500,000 24 30,000,000 53 12.00
---------- --- ----------- ---
Total............. 10,209,277 100% $53,931,863 100%
========== === =========== ===
</TABLE>

The foregoing assumes (i) the conversion of all shares of Series A
Convertible Preferred Stock into Common Stock prior to closing of the Offering,
(ii) no exercise of the Underwriters' over-allotment option and (iii) no
exercise of any outstanding stock options. At August 6, 1997, there were
outstanding options to purchase an aggregate of 1,022,346 shares of Common Stock
at a weighted average exercise price of $6.10 per share. To the extent such
outstanding options are exercised, there will be further dilution to new
investors. See "Management--Stock Option Plans" and Notes 6 and 9 of Notes to
Consolidated Financial Statements.

22
<PAGE> 24

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of December 31, 1995
and 1996 and for the period from November 9, 1994 (inception) through December
31, 1994 and for the years ended December 31, 1995 and 1996 have been derived
from the Consolidated Financial Statements of the Company as set forth elsewhere
in this Prospectus that have been audited by Price Waterhouse LLP, independent
accountants. The selected consolidated financial data as of June 30, 1997 and
for the six months ended June 30, 1996 and 1997 have been derived from unaudited
Consolidated Financial Statements of the Company as set forth elsewhere in this
Prospectus, which, in management's opinion, reflects all adjustments (consisting
only of normal recurring adjustments) necessary for a proper statement of the
results for such periods. The financial data set forth below should be read in
conjunction with the Consolidated Financial Statements, related Notes and other
financial information contained in this Prospectus.

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(NOVEMBER 9,
1994)
TO YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
DECEMBER 31, ------------------------- -------------------------
1994 1995 1996 1996 1997
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales....................... $ -- $ -- $ -- $ -- $ 153,504
Cost of goods sold.............. -- -- -- -- 767,671
--------- ----------- ----------- ----------- -----------
Gross margin.................. -- -- -- -- (614,167)
Operating expenses:
Research and development...... 300,000 1,250,196 3,219,207 985,340 1,249,883
Sales and marketing........... -- -- 667,156 232,341 1,896,394
General and administrative.... -- 459,271 1,768,557 250,480 669,122
--------- ----------- ----------- ----------- -----------
Total operating expenses...... 300,000 1,709,467 5,654,920 1,468,161 3,815,399
--------- ----------- ----------- ----------- -----------
Operating loss.................. (300,000) (1,709,467) (5,658,920) (1,468,161) (4,429,566)
Interest income (expense),
net........................... -- 11,971 (117,758) 3,530 (405,046)
--------- ----------- ----------- ----------- -----------
Net loss........................ $(300,000) $(1,697,496) $(5,772,678) $(1,464,631) $(4,834,612)
========= =========== =========== =========== ===========
Pro forma net loss per
share(1)...................... $ (0.78) $ (0.65)
=========== ===========
Shares used in computing pro
forma net loss per share(1)... 7,442,460 7,488,217
=========== ===========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------- JUNE 30,
1994 1995 1996 1997
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments......................... $ -- $ 1,375,262 $16,849,583 $ 11,952,713
Working capital....................... (296,470) 1,011,833 16,123,936 11,830,694
Total assets.......................... -- 1,626,902 17,957,421 13,979,864
Deficit accumulated during the
development stage................... (300,000) (1,997,496) (7,770,174) (12,604,786)
Stockholders' equity (deficit)........ (296,470) 1,147,079 (3,336,267) 12,734,587
</TABLE>

- ---------------

(1) See Note 2 of Notes to Consolidated Financial Statements for information
concerning computation of the per share data.

23
<PAGE> 25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company is in the development stage and many of its products are
currently under development. The Company only recently commenced initial sales
and manufacturing activities for two products. Therefore, the following
discussion necessarily contains certain forward-looking statements which reflect
the Company's plans, estimates and beliefs. The Company's actual results could
differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed below and elsewhere in this Prospectus, particularly in "Risk
Factors." The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto which appear elsewhere
in this Prospectus.

OVERVIEW

The Company is primarily engaged in the design, development and
commercialization of a disease-management system of products for the diagnosis
and treatment of urinary incontinence in both women and men. The Company's
products and proposed products include diagnostic tools, remote controlled
intraurethral valved catheter systems and proprietary surgical tools and
equipment for performing minimally invasive surgery. The Company is also
developing a surgical system, based on one of its core technologies, for the
treatment of obstructive sleep apnea ("OSA") and snoring.

Since inception, the Company has derived minimal revenues from product
sales, and has accumulated a deficit at June 30, 1997 of $12.6 million, mainly
related to research and development expenditures, product launch costs and
expenses related to clinical trials and sales and marketing expenses. Influence
expects to continue to incur significant and increasing operating losses through
at least 1999 as the Company continues to complete product development, conduct
clinical trials, seek regulatory approvals for its products and expand sales and
marketing activities. In addition, the Company anticipates incurring significant
expenses for marketing and sales efforts in contemplation of product
introductions and market development, and increasing administrative expenses to
support the growth of the Company.

Many of the Company's products are still under development. The Company
only recently has commenced initial sales and manufacturing activities for its
In-Tac and In-Fast surgical systems and for In-Flow, and has only performed a
limited number of preclinical and clinical studies on its products under
development. In-Tac and In-Fast have received FDA clearance for marketing in the
U.S., and distribution of In-Tac has commenced in the U.S. and certain European
and Asian countries. In-Fast is expected to be launched in the fourth quarter of
1997. Distribution of In-Flow has commenced in Europe and Asia, but has not
received FDA clearance for marketing in the U.S. The Company's other proposed
products will require significant additional research, development, testing and
regulatory clearances or approvals prior to commercialization. There can be no
assurance that any of the Company's proposed products will receive requisite
regulatory approvals or clearances, demonstrate substantial therapeutic benefit,
be commercialized on a timely basis or be accepted by the marketplace.

In December 1996, Medtronic Inc. ("Medtronic"), a world leading medical
technology company, invested $20 million in the Company in exchange for a
convertible debenture from the Company bearing interest at the prime rate (the
"Debenture"). At the same time, Medtronic received an option from certain of the
stockholders to acquire substantially all of the outstanding shares of the
Company for approximately $180 million and the Company agreed not to proceed
with its planned initial public offering for a period of six months. The
Medtronic option expired unexercised on June 10, 1997, at which time the
Debenture by its terms automatically converted into 419,787 shares of Common
Stock, representing approximately 5.5% of the outstanding Common Stock. See
"-- Liquidity and Capital Resources" and "Certain Transactions."

24
<PAGE> 26

RESULTS OF OPERATIONS

Six Months Ended June 30, 1997, Compared to Six Months Ended June 30, 1996

Net Sales and Cost of Goods Sold. There were no sales in 1996. Initial
sales of In-Tac and In-Flow commenced in 1997 and generated revenues of $153,504
for the six months ended June 30, 1997. Related cost of goods sold was $767,671
because of high costs associated with start-up manufacturing and small volumes.

Research and Development. Research and development costs increased from
$985,340 in the first six months of 1996 to $1.2 million in the first six months
of 1997. The increase was primarily due to higher product development activity
for In-Tac, In-Fast and In-Flow with a higher number of personnel, increased
regulatory activity both in the U.S. and Europe, and the development of
processes for the manufacture of these products.

Sales and Marketing. Sales and marketing costs increased from $232,341 in
the first half of 1996 to $1.9 million in the six months ended June 30, 1997.
This increase was attributable to the establishment of direct sales forces in
the U.S., Germany and the U.K., expanded marketing, and initial sales activities
related to In-Tac and In-Flow.

General and Administrative Expenses. General and administrative expenses
increased from $250,480 in the first half of 1996 to $669,122 in the six months
ended June 30, 1997. The increase was attributable primarily to the addition of
executive and administrative personnel employed in 1997.

Interest. Net interest income was $3,530 in the six months ended June 30,
1996 compared to net interest expense of $405,046 in the six months ended June
30, 1997. Interest expense was incurred in the first six months of 1997 on the
$20.0 million Debenture issued to Medtronic.

Year Ended December 31, 1996, Compared to the Year Ended December 31, 1995

Research and Development. Research and development costs increased from
$1.3 million in 1995 to $3.2 million in 1996. The increase was due to higher
product development activity primarily for In-Tac, In-Fast and In-Flow,
increased regulatory activity both in the U.S. and Europe, and expenses
associated with the development of manufacturing processes. Also included in
1996 was $652,960 of non-cash compensation resulting from the grants of stock
options to consultants.

Sales and Marketing. Sales and marketing costs increased from zero in 1995
to $667,156 in 1996. The expenses in 1996 were attributable to initial marketing
activities for In-Tac and In-Flow and the hiring of the first direct sales
personnel in the U.S. and Europe. Also included in 1996 was $184,090 of non-cash
compensation resulting from the grants of stock options to potential
distributors.

General and Administration. General and administrative expenses increased
from $459,271 in 1995 to $1.8 million in 1996. The increase was attributable
primarily to hiring executive officers, establishing an office in San Francisco;
and expenses of approximately $450,000 relating to an initial public offering in
1996 that was not consummated. Also included in 1996 was $327,282 of non-cash
compensation resulting from the grants of stock options to employees.

Interest. Net interest expense was $117,758 in 1996 compared to interest
income of $11,971 in 1995 because of higher loan balances in 1996.

Year Ended December 31, 1995, Compared to the Period from Inception (November
9, 1994) through December 31, 1994

The Company did not conduct any operations from its inception until January
1, 1995. In connection with the founding of Influence, certain of the Company's
core technology was transferred to the Company in 1994 from NMB, in exchange for
$300,000 to reimburse NMB for development expenditures prior to that time.

25
<PAGE> 27

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations to date principally through a
private placement of the Company's Series A Convertible Preferred Stock, the
issuance of shareholder promissory notes, and a convertible debenture issued to
Medtronic. During 1995, the Company raised approximately $3.6 million through
the issuance of Series A Convertible Preferred Stock. During 1996, a shareholder
of the Company loaned the Company an aggregate of $3.0 million. The Company
repaid such debt plus interest thereon. In December 1996, the Company received
$20 million from Medtronic. In exchange for the loan, Medtronic received a
convertible debenture bearing interest at the prime rate and an option to
acquire substantially all of the outstanding shares of the Company for $180
million, and the Company agreed to suspend its initial public offering and
negotiate exclusively with Medtronic for a period of six months. In June 1997,
when Medtronic's option lapsed, the convertible debenture and accrued interest
automatically converted into 419,787 shares of Common Stock of the Company. Cash
used to fund operations since inception was approximately $10.1 million and the
Company's capital expenditures through June 30, 1997 have aggregated
approximately $1.0 million. At June 30, 1997, the Company had cash, cash
equivalents and short-term investments of $12.0 million.

From inception through June 30, 1997, the Company has accumulated a deficit
of $12.6 million. The Company expects to incur significant additional losses
over each of the next several years and expects cumulative losses to increase
significantly as the Company continues to expand its research and development,
clinical trials and marketing efforts. The Company anticipates that the proceeds
of the Offering and interest thereon, together with existing cash, cash
equivalents and short-term investments, will be sufficient to fund its
operations, including increased working capital expenditures, through at least
1998.

Future liquidity and capital requirements of the Company will depend upon a
number of factors. These include the completion of development of the Company's
products, progress and costs of clinical trials, the timing and costs of various
U.S. and foreign regulatory filings, the timing and receipt or denial of various
U.S. and foreign governmental approvals or clearances, the costs involved in
preparing, filing, presenting, maintaining and enforcing patent claims, the
timing and extent to which the Company's products gain market acceptance, the
timing and costs of product introduction, the costs of developing marketing and
distribution capabilities, and the technological advances of competitors. As of
June 30, 1997, in connection with the Company's move to its new manufacturing
facility in Israel, management intends to invest approximately $800,000 in
equipment and facility improvements over the next 18 months. The Company may be
required to seek additional funds through debt or equity financing, arrangements
with corporate partners or from other sources. Issuance of additional equity
securities could result in substantial dilution in ownership and control to the
then existing shareholders. There can be no assurance that any such funds will
be available on terms acceptable to the Company, or at all.

IMPACT OF INFLATION

Although the U.S. dollar is the Company's functional currency, a
significant portion of the Company's employment related expenses is incurred in
New Israeli Shekels ("NIS"). The dollar cost of such expenses is impacted by
several factors including (i) the rate of inflation in Israel, (ii) the
devaluation of the NIS relative to the dollar in comparison to the rate of
inflation, and (iii) the timing of such devaluation. Consequently, the Company
may experience an adverse effect should the rate of the devaluation of the NIS
relative to the dollar significantly lag behind the rate of inflation in Israel.

CHANGE IN ACCOUNTANT

The Company changed independent public accountants in February 1997 at the
recommendation and with the approval of the Board of Directors of the Company.
Prior to February 1997 Coopers & Lybrand L.L.P. ("C&L") had been the Company's
independent accountants. In the period from November 1994 through January 1997
C&L issued no audit report which was qualified or modified as to uncertainty,
audit scope or accounting principles, nor any adverse opinions or disclaimers of
opinion on any of the Company's financial statements. Such change was not the
result of disagreements with the predecessor accountants over accounting
practices or principles.

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<PAGE> 28

INCOME AND OTHER TAXES

The Company anticipates that most of the Company's future revenues and
profits, if any, would be derived through the Company's Israeli subsidiary, IMT,
which holds most of the rights to utilize commercially the Company's core
technologies. As of December 31, 1996, IMT had net operating loss carryforwards
and other future tax deductions for Israeli tax purposes of approximately $3.8
million and $1.7 million, respectively. See Note 5 of Notes to Consolidated
Financial Statements appearing elsewhere in this Prospectus. IMT has received
"Approved Enterprise" status under the Law for Encouragement of Capital
Investments, 1959 for its current Israeli facility. Undistributed income derived
from the Company's Approved Enterprise will be tax exempt for two years from the
first year it generates income and will be subject to a reduced tax (dependent
on percentage of foreign shareholder ownership) for an additional period of up
to eight years. The Company anticipates that a significant portion of the
Company's taxable income, if any, over the next several years will be tax exempt
or subject to reduced tax rates in Israel. License fees paid by IMT to the U.S.
parent company will be subject to a 15% Israeli withholding tax. See "Israeli
Taxation and Investment Programs -- Law for the Encouragement of Capital
Investments, 1959." The Company expects, however, that it will pay taxes in the
U.S. based on interest income, intercompany service fees, commissions and
licensing fees paid by IMT to Influence. Accordingly, Influence will be subject
to U.S. corporate income taxes on a portion of its income. See "United States
Federal Income Taxation." In addition, the Company expects to pay taxes in
Germany on profits derived from sales and services performed by IMT's wholly
owned German subsidiary.

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<PAGE> 29

BUSINESS

The Company is in the development stage and many of its products are
currently under development. Therefore, the following discussion necessarily
contains certain forward-looking statements which reflect the Company's plans,
estimates and beliefs. The Company's actual results could differ materially from
those discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below and elsewhere in
this Prospectus, particularly in "Risk Factors."

GENERAL

Influence is engaged primarily in the design, development and
commercialization of a disease management system of products for the diagnosis
and treatment of urinary incontinence in both women and men. The Company's
products and proposed products include diagnostic tools, remote-controlled
intraurethral valved catheter systems and proprietary surgical tools and
equipment for performing minimally invasive surgery. These products are designed
to address the inadequacies of current diagnostic and treatment options and to
offer cost-effective solutions to improve clinical outcomes and enhance quality
of life. To date, the Company has received 510(k) clearance from the FDA for two
of its products, In-Tac and In-Fast, both designed to enable minimally invasive
bladder neck surgery for the treatment of certain types of urinary incontinence
in women. The Company has also received a CE Mark to distribute In-Flow in
Europe and has received marketing clearance for In-Flow in Canada. In addition
to In-Tac, In-Fast and In-Flow, a total of eight additional products addressing
both female and male incontinence are in various stages of development.

The FDA-cleared In-Tac surgical system incorporates the Company's
proprietary bone anchors and reusable U-shaped anchor insertion device. The
FDA-cleared In-Fast surgical system incorporates bone screws and the Company's
proprietary disposable battery-operated U-shaped insertion device. Both the
In-Tac and In-Fast surgical systems enable incisionless, minimally invasive
transvaginal bladder neck fixation and bladder neck sling procedures. Bladder
neck fixations are performed primarily to relieve severe stress incontinence
that is caused by prolapse (descent) of the urethra and bladder neck, and
bladder neck sling procedures are performed primarily to relieve severe
incontinence that is caused by either prolapse (descent) of the urethra and
bladder neck or by bladder sphincter abnormalities known as intrinsic sphincter
deficiency. Approximately 120,000 bladder neck surgeries were performed in 1993
in the U.S. using methods which typically require abdominal or vaginal incisions
and general anesthesia. In contrast, the In-Tac and In-Fast procedures require
no abdominal or vaginal incisions, which introduces less trauma to the patient,
shortens the post-operative recovery period, reduces the need for
hospitalization and can be performed using local anesthesia. The Company is also
developing the Straight-In surgical system which uses technology similar to the
In-Fast and is intended for physicians who continue to prefer open or
laparoscopic surgical procedures for bladder neck fixation and bladder neck
sling procedures as well as for the repair of vaginal vault prolapse. The
Company submitted to the FDA a 510(k) Notification for Straight-In in July 1997.

The Company is also developing a non-surgical, remote-controlled,
intraurethral valved catheter, the In-Flow, which incorporates an intraluminal
pump that can actively void a patient's bladder. In-Flow is intended to offer a
convenient alternative to continuous Foley catheterization and intermittent
self-catheterization for patients with overflow incontinence associated with
atonic bladder. In-Flow includes a disposable silicone catheter that is intended
to be inserted by a health care provider into a woman's urethra and replaced
approximately once per month. The Company is also developing a variation of this
product, In-Sure, for the treatment of stress incontinence. In-Sure incorporates
a proprietary valve system that is opened and closed with a remote control
activator. In-Sure is intended to offer a non-surgical alternative for the
treatment of stress incontinence that is easy and convenient for the patient to
use. The Company has completed pilot trials of In-Flow in Israel and Europe. The
FDA has determined that approval of the In-Flow device will require a PMA
submission in the U.S. The FDA has approved an Investigational Device Exemption
("IDE") for this device and a clinical IDE study commenced in June 1997. The FDA
has indicated in correspondence with the Company that the future PMA submission
will receive expedited review, provided that the conditions for granting
expedited status remain valid. Additionally, the Company has received marketing
clearance in Europe and Canada for the In-Flow.

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<PAGE> 30

BUSINESS STRATEGY

Influence's primary goal is to develop an innovative disease management
system of products for the diagnosis and treatment of urinary incontinence in
both women and men. The Company also plans to selectively leverage its
proprietary technologies in additional markets. Key elements of the Company's
business strategy include:

- Develop a broad portfolio of products addressing female and male
incontinence. Incontinence is a significant medical problem afflicting
13 million patients in the U.S. alone, with associated costs in excess of
$16 billion annually. Influence plans to offer physicians, patients and
payors a comprehensive set of therapeutic and diagnostic devices that
provide an integrated solution for the cost-effective management of
incontinence. In addition to the FDA-cleared In-Tac and In-Fast surgical
devices, Influence is developing several additional devices for urinary
incontinence. All of these products are designed to reduce long-term
health care costs by improving diagnosis or convenience of therapy, and
to improve quality of life.

- Penetrate the worldwide incontinence market. In the U.S., the Company's
strategy involves direct sales to physicians, including urologists,
urogynecologists and gynecologists. Internationally, the Company has
established direct sales forces in Germany and the U.K. and utilizes
distributors addressing approximately 25 countries in Europe, Australasia
and South America. The Company expects that marketing efforts initially
will be focused on prominent physicians and will also include conference
participation, direct advertising and training seminars to increase
awareness of the Company's products. The Company may also implement a
general media campaign intended to raise the awareness of incontinence
and the available treatment options.

- Pursue third-party reimbursement. To enable reimbursement for use of its
products, the Company is performing outcome studies in conjunction with
clinical trials on several of its products to establish their efficacy
and cost-effectiveness compared to competing products and procedures. In
the U.S., the Company also intends to pursue the establishment of
standard CPT reimbursement codes for Medicare as well as other
third-party payors.

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<PAGE> 31

- Leverage core technologies to address additional markets. The Company
intends to develop additional products when there is a compelling market
opportunity to expand the application of one of its core technologies.
One example of this strategy is the Company's significant efforts aimed
at the development of its Sleep-In product for the treatment of OSA and
snoring.

- Achieve technological leadership. The Company has a commitment to
advanced research and engineering, as evidenced by its portfolio of novel
products. Through continued investment in research and engineering, the
Company intends to use innovation as its path to establish a leadership
position in targeted markets.

INCONTINENCE OVERVIEW

Urinary incontinence, the involuntary leakage of urine, is a significant
health problem afflicting approximately ten million women and three million men
in the U.S. It is estimated that 50% of the 1.5 million nursing home residents
suffer from incontinence. The U.S. Department of Health and Human Services
Agency for Health Care Policy and Research ("AHCPR") estimated in 1996 that
costs associated with the management and treatment of urinary incontinence in
the U.S. exceed $16 billion annually, including over $5 billion related to
patients in nursing homes. Incontinence may be caused by a wide range of
factors, including childbirth, menopause, surgery, obesity, drugs and
neurological damage. Persons suffering from urinary incontinence experience a
variety of physical and psychological problems including urinary tract
infections, rashes, pressure sores, embarrassment, decreased sexual activity,
depression and loss of productive activity.

Anatomy and Physiology of the Urinary Tract System

The urinary tract aids the body in eliminating waste. The kidneys process
blood and filter waste products from the circulatory system, creating urine to
remove the waste. The ureters drain urine from the kidneys into the bladder,
which serves as a reservoir until urination. The urethral sphincter is a group
of muscles at the base of the bladder that surrounds the bladder neck and
urethra and aids the bladder in maintaining continence. The urethra is the tube
through which urine flows when the bladder empties. Emptying the bladder is
caused by a combination of involuntary and voluntary nervous system activity.
When the bladder becomes full, stretch receptors located in the bladder wall
transmit impulses through the nervous system initiating a desire to urinate. A
reflex signal is transmitted to both the bladder wall (the detrusor muscle),
causing it to contract, and to the urethral sphincter which relaxes, allowing
urination to occur.

Types and Causes of Incontinence

There are four main types of urinary incontinence, as defined in the
Clinical Practice Guideline issued by the AHCPR. Each type of incontinence may
be caused by multiple underlying pathologies, and patients may experience more
than one type of incontinence, often making effective diagnosis and treatment
difficult.

Stress incontinence. Stress incontinence is the involuntary loss of urine
during physical activities which increase abdominal pressure, such as exercise,
laughing, coughing and sneezing. In women, stress incontinence is commonly
caused by hypermobility of the bladder neck and the urethra -- a kind of
prolapse (descent) of the urethra and bladder neck during exertion. Urethral
hypermobility is generally caused by childbirth, obesity, menopause,
hysterectomy or chronic coughing. Stress incontinence may also result from
intrinsic sphincter deficiency, which is dysfunction of the muscles of the
bladder sphincter. Intrinsic sphincter deficiency can result from previous
pelvic surgery, such as bladder neck suspension procedures, pelvic or urethral
trauma, radiation therapy, or a lower spinal cord disorder. Stress incontinence
is the primary pathology in approximately 50% of women with incontinence. Vault
prolapse of the vagina is a condition wherein the top of the vagina prolapses
(descends) and it is a condition frequently associated with stress incontinence
in women. Stress incontinence in men may be caused by sphincter damage from
prostate or urethral surgery or from pelvic or urethral trauma.

Urge incontinence. Urge incontinence results from an abrupt and
uncontrollable desire to void. It is caused by involuntary contractions (spasms)
of the bladder wall muscle that may be the result of a stroke or

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<PAGE> 32

neurological disorders such as multiple sclerosis. In men, benign prostatic
hyperplasia ("BPH") can cause such bladder wall muscle instability.

Mixed incontinence. Mixed incontinence involves a combination of urge and
stress incontinence. Many frail or elderly patients have mixed incontinence that
can be exacerbated by impairments of physical or cognitive functioning.

Overflow incontinence. Overflow incontinence is the involuntary loss of
urine resulting from an overdistended bladder, frequently associated with an
underactive (atonic) bladder wall muscle, which leads to the bladder becoming
filled with urine, without a corresponding desire to void. At a certain point,
too much urine collects in the bladder to be contained, and the urine overflows
through the urethra. Underlying conditions that may cause overflow incontinence
include chronic urethral obstruction that impairs detrusor activity, use of
certain medications, fecal impaction, pelvic surgery, or neurologic conditions
such as diabetic neuropathy or low spinal cord injury. Patients with multiple
sclerosis often develop overflow incontinence due to the use of certain
medications. Patients with overflow incontinence often have recurrent urinary
tract infections due to urine that remains in the bladder after voiding, leaving
a stagnant pool of urine prone to infection.

Current Diagnostic Techniques

Incontinence is usually evaluated by gynecologists, urologists or
urogynecologists. Accurate diagnosis of the type of incontinence is essential as
different types of incontinence indicate different treatment options. The basic
tools and techniques used by physicians for diagnosing incontinence include
patient questionnaires, urodynamic evaluations (cystometry), leak point pressure
tests and "Q-tip" tests.

Cystometry is the urodynamic evaluation of bladder function in men and
women performed in a physician's office. Office-based cystometrograms are
currently performed using machines which the Company estimates cost
approximately $10,000 to $80,000. As part of these evaluations, a catheter is
passed through the urethra into the bladder, and water is pumped into the
bladder. One sensor at the end of the catheter measures bladder pressure and a
second sensor in the rectum or vagina measures intra-abdominal pressure. Relying
on these sensors, the physician attempts to measure the patient's daily range of
bladder pressure and behavior, including an indication of bladder contractions
(indicating the presence of urge incontinence), the patient's feeling of
fullness, a measurement of maximum bladder capacity and uroflowmetry (urine flow
pattern and volume). The physician also attempts to visually determine leak
point pressure, the point at which urine leaks out of the urethra. Leak point
pressure provides a measure of the integrity of the urethral musculature.

The "Q-tip" test is the test most frequently used to diagnose stress
incontinence in women caused by urethral hypermobility, and to distinguish this
condition from incontinence caused by intrinsic sphincter deficiency. In this
test, the physician inserts a cotton swab into the urethra of a female patient
and visually assesses the degree of movement of the swab while the patient
coughs or bears down. A greater change in angle is equated with urethral
hypermobility, for which bladder neck suspension surgery may be the preferred
treatment. Little or no movement, together with low leak point pressure, is
equated with intrinsic sphincter deficiency, for which bladder neck suspension
surgery is not recommended.

The Company believes that the currently available diagnostic tools and
techniques either rely on expensive machinery, which are not generally available
in many health care facilities, or are inaccurate, and may lead to frequent
misdiagnoses of stress and urge incontinence. A significant potential
consequence of the misdiagnosis of incontinence is the performance of
inappropriate surgery.

Current Treatments

Physicians currently treat incontinence with a variety of techniques and
therapies that correspond with the type and severity of incontinence diagnosed.
The discussion below describes the principal treatment options available,
including certain products of which the Company is aware that are under
development or are not yet available for commercial sale in the U.S.

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<PAGE> 33

Diapers and absorbent pads. Adult diapers and pads, which capture urine
upon leakage, function similarly to baby diapers, and are used for all types of
incontinence. While these products have improved over the past several years,
drawbacks include the lack of control over urine flow, bulky size, rashes and
related discomfort. These may lead to embarrassment about appearance and odor,
perceived social stigma, and a significant compromise in freedom of lifestyle.
The Company believes that many patients choose absorbent products to manage
incontinence due to the convenience and privacy of purchasing these products
without seeing a physician. The Company estimates that a typical urinary
incontinence sufferer in the U.S. who regularly uses adult diapers and
incontinence pads spends approximately $1,200 to $1,500 per year on these
products and that U.S. retail sales of adult diapers and absorbent pads exceeded
$2 billion in 1993.

Behavioral therapy. Behavioral therapy and related techniques, which are
used to treat both stress and urge incontinence in women, include bladder habit
training, pelvic muscle exercises, biofeedback and pelvic floor muscle
electrical stimulation. Pelvic muscle training exercises are generally designed
to improve pelvic muscle strength in patients with stress incontinence.
Biofeedback treatments, which are designed to improve the success of pelvic
muscle training exercises, often involve numerous training sessions with vaginal
probes, usually in a physician's office. A survey conducted by The National
Association for Continence of its members revealed that 50% of respondents with
incontinence practice pelvic muscle training exercises. A 1992 AHCPR publication
estimated that 75% of patients performing pelvic muscle training exercises
improved, while only 12% of such patients were cured.

Vaginal inserts. Inserts or pessaries are devices used to treat stress
incontinence in women. These devices are roughly the size and shape of
contraceptive diaphragms and are used to achieve continence by obstructing the
bladder neck and urethra by applying pressure through the neighboring vaginal
cavity or by elevating the bladder neck and urethra to a preprolapsed position.
While often helpful, these devices are not curative. Potential side effects from
the use of these devices include infection, vaginal discharge and tissue
erosion. These devices require daily removal and cleaning.

Catheters, clamps and urethral plugs. Patients with overflow and stress
incontinence may also be treated with simple devices that either obstruct or
allow controlled flow of urine from the body. Female patients with overflow
incontinence may use a permanent catheter or a single-use catheter to repeatedly
self-catheterize when voiding is desired, as often as four to six times per day.
Women with stress incontinence may be treated with single-use intraurethral
plugs or externally applied adhesive patches, both of which are intended to stop
the flow of urine. Male patients experiencing overflow incontinence may be
treated with an indwelling Foley catheter or condom catheter with an external
urine collection bag, or a penile clamp device. These products enable the
continuous or intermittent flow of urine. The Company believes these products
may be inconvenient for certain patients to use, and may cause irritation,
tissue erosion and recurrent urinary tract infections.

Pharmaceuticals. In general, drugs available for the treatment of urinary
incontinence act on the nerve receptors associated with the bladder
neurotransmitter system, and are used to treat urge incontinence in men and
women. Although drugs can alleviate the symptoms of urge incontinence, they are
not curative. Additionally, drugs may cause potential adverse cardiovascular
side effects, dizziness, weakness, and urinary retention.

Injectable materials. Women experiencing stress incontinence caused by
intrinsic sphincter deficiency may be treated with injectable bulking agents,
including Teflon(R), collagen and other materials, which are inserted through a
needle into the area around the urethra to create a mild obstruction. These
procedures often require repeat injections, making this treatment expensive and
time consuming.

Surgery. Surgery is commonly used to treat women whose primary pathology
is stress incontinence. In the surgical procedure known as a bladder neck
suspension, the physician elevates and stabilizes the urethra and the bladder
neck in order to restore continence by preventing urethral and bladder neck
prolapse (descent) during exertion. This repositioning is accomplished by
elevating the bladder neck and urethra together with periurethral tissue to
their original position. If intrinsic sphincter deficiency is present, a
surgical procedure known as a sling operation can be performed, in which a sling
is made across the urethra and bladder neck. Both types of surgery are
complicated procedures in which the outcome depends on a number of

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<PAGE> 34

factors, including the severity of pathology and the surgeon's skill. Current
surgical procedures require vaginal or abdominal incisions, which are traumatic,
and which normally require a hospital stay and a period of several weeks until
full recovery. Approximately 120,000 bladder neck suspensions were performed in
the United States in 1993.

Men with stress incontinence may be treated with a surgically implantable
device which applies pressure around the urethra and closes its lumen to restore
continence. The implanted device contains a fluid filled reservoir in the
abdomen and a manually activated pump located in the scrotum to release
periurethral pressure and permit urination. The Company believes that this
device is used relatively infrequently primarily because of its inconvenience,
significant complication rate, and pain associated with misuse.

THE INFLUENCE INCONTINENCE MANAGEMENT SYSTEM

The Company's goal is to provide health care practitioners and payors with
a comprehensive set of protocols utilizing its diagnostic and therapeutic
devices for the management of incontinence. The Company's product development
strategy is based on the belief that current incontinence diagnostic tools and
treatment options have significant limitations. The Company intends to offer the
physician complementary diagnostic and therapeutic products for the management
of incontinence. The Company's proposed incontinence management system is shown
on the inside front cover of this Prospectus.

The Company is developing a range of products to provide an integrated
solution for the diagnosis and treatment of urinary incontinence in women and
men. The Company believes that its products, if successfully introduced and
adopted, can result in significant cost savings in the management of
incontinence. Statements regarding the timing of patient studies and regulatory
filings, and the proposed regulatory path for the Company's proposed products
are forward-looking statements reflecting the Company's current plans, estimates
and beliefs. Factors which may cause actual results to differ materially from
such statements include, but are not limited to, those discussed in "Risk
Factors -- Development Stage Company; History of Losses," "Risk Factors -- Risks
Relating to Products under Development" and "Risk Factors -- No Assurance of
Regulatory Approvals; Potential Delays" and "Risk Factors -- Uncertain Market
Acceptance of the Company's Products."

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INFLUENCE URINARY INCONTINENCE PRODUCT DEVELOPMENT OVERVIEW

[EACH PRODUCT DESCRIPTION IS PRECEDED BY AN ILLUSTRATION OF SUCH PRODUCT.]

<TABLE>
<CAPTION>
PROPOSED REGULATORY
PRODUCT DESCRIPTION PRODUCT STATUS(1) PATH OR STATUS(2)
- ------------ ------------------------------------- ---------------------- ---------------------------
<S> <C> <C> <C>
INCONTINENCE FEMALE THERAPEUTIC DEVICES
In-Tac A minimally invasive, reusable Launched in U.S., 510(k) cleared February
surgical system for performing Europe and Asia 2Q97 1997;
bladder neck fixation and sling CE Mark pending
procedure surgery in women with
stress incontinence.
In-Fast A minimally invasive, disposable Launch expected 510(k) cleared April 1997;
surgical system for performing worldwide in 4Q97 CE Mark pending
bladder neck fixation and sling
procedure surgery in women with
stress incontinence.
Straight-In A disposable surgical tool for open Ongoing international 510(k) submitted July 1997
or laparoscopic bladder neck pilot trial
fixation, sling procedure and vaginal
vault prolapse surgery.
In-Flow A temporary intraurethral valved Ongoing U.S. IDE PMA path;
catheter containing an intraluminal trial; Launched in CE Mark approved March 1997
pump assembly operated by a remote Europe and Asia 2Q97
control activator for women with
atonic bladder (overflow
incontinence).
In-Sure A temporary intraurethral valved Ongoing international PMA path
catheter that functions as a pilot trial
remote-controlled artificial
sphincter for women with stress
incontinence.
In-Bio A wireless pelvic floor training and Ongoing international 510(k) path
biofeedback transmitter to measure pilot trial
intra-abdominal pressure and perineal
muscle contractions.
INCONTINENCE DIAGNOSTIC DEVICES
In-Probe A urodynamics and pressure recording Ongoing international 510(k) path
system to record urethral pilot trial
hypermobility, uroflowmetry (urine
flow, pattern and volume) and leak
point pressure.
In-Tele A wireless disposable transmitter Preclinical 510(k) path
that is inserted into the bladder to
transmit bladder pressure to a
belt-mounted receiver.
INCONTINENCE MALE THERAPEUTIC DEVICES
In-Flow-M A modified version of the In-Flow Preclinical PMA path
remote-controlled intraurethral
catheter for men with atonic bladder
(overflow incontinence).
In-Sure-M A modified version of the In-Sure Preclinical PMA path
remote-controlled intraurethral
catheter for men with stress
incontinence or post-surgical urinary
retention.
In-Cuff A permanent, implantable, remote- Preclinical PMA path
controlled, artificial dynamic
sphincter.
</TABLE>

- ---------------

(1) "Ongoing international pilot trial" means such product is currently
undergoing uncontrolled clinical trials in Europe and Israel. "Preclinical"
means the Company is in the process of refining product development and
design prior to initiation of any clinical trials.

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<PAGE> 36

Female Incontinence Therapeutic Devices

Minimally invasive surgical systems. The Company has designed minimally
invasive surgical systems for performing bladder neck fixation and sling surgery
in women with stress incontinence. Variations of these systems have been
developed consisting of either bone anchors or bone screws and reusable or
disposable insertion devices to address physician preferences and different
techniques, as well as to account for country-specific preferences for reuse or
disposability.

The In-Tac surgical system. The Company has developed a system which
incorporates the Company's proprietary bone anchors and spring-loaded
anchor insertion device to enable incisionless, minimally invasive
transvaginal bladder neck fixation and sling procedures. In the In-Tac
fixation procedure, the physician affixes prolapsed periurethral tissue to
the pubic bone by means of bone anchors threaded with sutures, in order to
return the urethra and bladder neck to their original, preprolapsed
positions, and to prevent urethral hypermobility when the patient's
intra-abdominal pressure increases through exertion. In the In-Tac sling
procedure, the bone anchors and sutures are used to secure a piece of graft
or synthetic material beneath the bladder neck, which acts as a strut or
support. This sling material prevents prolapse of the bladder neck and
urethra when the patient's intra-abdominal pressure increases through
exertion, as well as providing support to bladder sphincter muscles which
are damaged in patients with intrinsic sphincter deficiency. Both the
fixation and sling procedures are performed transvaginally by a physician
utilizing the Company's proprietary reusable insertion device which inserts
the bone anchors threaded with sutures through the anterior vaginal wall
and into the posterior wall of the pubic bone. Neither technique requires
abdominal or vaginal incisions, thereby reducing the post-operative
recovery period and the need for hospitalization. The bone anchors used in
these procedures are made from medical-grade nitinol, an alloy with a shape
memory, and are designed to resist being pulled out from their insertion
point in the pubic bone.

The Company received FDA clearance of its 510(k) Notification for the
In-Tac surgical system in August 1996 for bladder neck fixation surgery and
in February 1997 for sling procedures. A CE Mark is pending. To date,
approximately 115 patients in the United States and 152 patients in the
rest of the world have undergone treatment with the In-Tac surgical system,
with the longest follow-up being 26 months. Results reveal a success rate
of approximately 85% as defined by continence and there were no adverse
experiences of bleeding or osteomyelitis (bone infection). The success rate
reported to date compares favorably with the results reported in the
scientific literature for traditional, more invasive surgical procedures
performed by urologists and gynecologists. Most patients were catheterized
with a Foley catheter after an In-Tac procedure and suprapubic
catheterization was not needed. The Foley catheter was removed an average
of one to three days after the procedure. Additionally, in July 1997, the
Company submitted a 510(k) Notification to the FDA for a coated Dacron(R)
sling material which the Company intends to market with In-Tac, In-Fast and
Straight-In. Distribution of In-Tac has been initiated in several European
and Asian countries, and in June 1997 was launched in the U.S. through a
direct sales force. See "Business -- Government Regulation."

In-Fast surgical system. The In-Fast surgical system includes a
device which is used to perform procedures similar to In-Tac for enabling
incisionless, minimally invasive, transvaginal bladder neck fixation and
sling procedures. The principal difference is that In-Fast utilizes
titanium, self-tapping bone screws rather than nitinol bone anchors, and
these screws are deployed using a disposable, battery-operated inserter
rather than a reusable mechanical inserter. In-Fast offers an alternative
to those physicians who prefer disposable over reusable inserters.
Approximately 20 patients have undergone treatment with the In-Fast
surgical system with the longest follow-up being six months. Preliminary
results have been equivalent to In-Tac. The Dacron(R) sling material
described for In-Tac can also be used for sling procedures using the
In-Fast surgical system. In-Fast received 510(k) clearance in April 1997 in
the U.S. for fixation and sling procedures and a CE Mark is pending.
In-Fast will be launched in the U.S. in the fourth quarter of 1997.
Distribution of In-Fast will be initiated in several European countries and
Asia in the fourth quarter of 1997.

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Straight-In surgical system. The Straight-In surgical system
comprises the same titanium bone screws used with In-Fast and the Company's
proprietary, disposable, battery-operated, linear-shaped insertion device.
Straight-In is intended for use in open or laparoscopic surgical procedures
for bladder neck fixation and bladder neck sling procedures, as well as for
the transvaginal repair of vaginal vault prolapse, a condition often
associated with urinary stress incontinence in which the vagina has lost
its anatomical position and support. Straight-In was developed to provide
an Influence device alternative for physicians who continue to prefer open
or laparoscopic procedures. The Dacron(R) sling material described for
In-Tac can also be used for sling procedures using Straight-In. Straight-In
is currently conducting international pilot trials. A 510(k) Notification
was submitted to the FDA in July 1997.

In-Flow. In-Flow, for women with overflow incontinence caused by atonic
bladder, is a temporary intraurethral valved catheter containing an intraluminal
pump assembly which functions as a remote-controlled artificial sphincter and
urine pump providing complete and controllable continence and normalized urine
flow. To urinate, the patient holds a battery-powered remote control device near
the lower abdomen and presses a switch which activates a pump in the catheter,
utilizing the Company's proprietary magnetic energy transfer technology, to draw
urine from the bladder until the bladder is completely emptied. When urine flow
has completely stopped, the patient releases the switch to stop the pump, and
thereby reestablishes continence between urinations. The In-Flow catheter is
designed to be inserted by a health care professional into the urethra without
anesthesia in an atraumatic, non-surgical outpatient procedure approximately
once per month and can be easily and atraumatically removed. In-Flow is designed
to protect the patient from overdistension of the bladder, overflow incontinence
and post-voiding residual urine complications, including recurrent urinary tract
infection. The Company is not currently aware of any products under development
that can conveniently and quickly empty an atonic bladder, while restoring
continence between urinations.

The Company received a CE Mark in March 1997 to distribute In-Flow in
Europe and has initiated sales in Asia. In August 1997, the Company also
received marketing clearance for In-Flow in Canada. In the U.S., an IDE has been
approved for a clinical trial on 150 patients in 10 sites. The study commenced
in June 1997. In correspondence with the Company, the FDA has indicated that the
future PMA submission will receive expedited review provided that the conditions
for granting expedited status remain valid. The Company is also performing an
international pilot clinical trial in elderly nursing home patients with
residual urine caused by atonic bladder or atonic bladder secondary to drugs
used to treat bladder detrusor instability. See "Business -- Government
Regulation."

Approximately 209 patients have been treated with In-Flow, with the longest
follow-up being 26 months. Approximately 50% of such patients discontinued use
within one week of starting treatment due to discomfort or previously undetected
symptoms of urge incontinence or intrinsic sphincter deficiency, for which use
of In-Flow is not indicated. After one week of use, during which time the
discomfort of a foreign body in the urethra appears to dissipate in many
patients, the drop-out rate appears to be much lower than during the first week
of use. Those patients who remain on treatment have reported being dry, and
enjoying a significant improvement in their quality of life, in particular those
patients with multiple sclerosis and diabetes who were previously
self-catheterizing every few hours. Although it may be premature to estimate due
to the small number of patients to date and the fact that some patients in early
trials were given prophylactic antibiotics, the urinary tract infection ("UTI")
rate of patients has been low, at approximately one to two UTIs per patient year
of In-Flow treatment.

In-Sure. In-Sure, similar in design to In-Flow, is intended for women with
stress incontinence. In-Sure is a temporary intraurethral valved catheter that
functions as a remote-controlled artificial sphincter, providing complete and
controllable closure of the urethra. The remote control activator, which opens
and closes the sphincter, is wireless, small and easy for the patient to
operate. To urinate, the patient holds the remote-control unit near the lower
abdominal area and presses the "open" switch, allowing urine to flow through the
urethra. Pressing the "close" switch closes the valve and reestablishes
continence between urinations. In-Sure offers a non-surgical alternative for the
treatment of stress incontinence for women in whom surgery is contraindicated or
undesirable. In-Sure is inserted and removed approximately once per month in the
same manner as In-Flow.

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The Company has finalized the design of the In-Sure device, and started
international pilot trials in 1996. The Company is currently evaluating its
regulatory strategy for the In-Sure device and while the Company currently is
working under the assumption that a PMA will be required, the Company intends to
engage in further discussions with the FDA prior to making another regulatory
submission for the device. See "Business -- Government Regulation."

In-Bio. In-Bio is a wireless pelvic floor training and biofeedback device
that is inserted into the vagina to measure intra-abdominal pressure and
contractions of perineal muscles. These measurements, which are wirelessly
transmitted to a small, portable monitor worn on the patient's belt, are
intended to help a patient learn to contract pelvic floor musculature without
increasing abdominal pressure. Unlike other biofeedback devices, In-Bio is
wireless, allowing the patient to train while doing other activities. In-Bio is
designed to provide immediate and continuous feedback to the patient, rather
than relying on a physician's observations during brief and infrequent office
visits. In-Bio may reduce the number of patients referred for surgery by
increasing the acceptance, practice and success of pelvic floor training
exercises.

The Company is conducting an ongoing international pilot trial for In-Bio.
The Company currently expects to submit a 510(k) Notification to the FDA with
respect to this product. See "Business -- Government Regulation."

Incontinence Diagnostic Devices

In-Probe. In-Probe, which is comprised of a disposable catheter and an
attached monitor, is a portable, low-cost cystometry and uroflowmetry system
combined with sensors which permit quantitative measurement of urethral
hypermobility and bladder leak point pressure. In-Probe is designed to provide a
more accurate and quantitative diagnosis of urethral hypermobility than the
diagnosis achievable using current procedures, such as the Q-tip test. The
Company intends to market In-Probe as an effective, inexpensive, portable
diagnostic tool.

The Company is conducting an ongoing international pilot trial to finalize
product design, and currently plans to submit a 510(k) Notification to the FDA
with respect to this product. See "Business -- Government Regulation."

In-Tele. In-Tele is a small wireless disposable transmitter which is
inserted into the bladder of a male or female patient. The patient carries a
reusable, belt mounted receiver, which records bladder pressure activity for
eight to 24 hours, enabling more accurate diagnosis of urge incontinence or
other bladder abnormalities than current, in-office diagnostic techniques. By
detecting urge incontinence in patients for whom bladder neck surgery is likely
to fail, In-Tele has the potential to reduce the incidence of unnecessary
surgeries.

Male Incontinence Therapeutic Devices

In-Flow-M. The Company is also developing a modified version of In-Flow
for use in men with atonic bladder. The internal structure of the device is
similar to that of the female product. Externally, the catheter will have a
different shape for temporary placement and retention between the bulbar urethra
and the bladder neck. In-Flow-M is being designed to be inserted under topical
anesthesia. The Company intends to conduct clinical trials in 1998 to finalize
the design of this product.

In-Sure-M. The Company is developing a modified version of In-Sure for use
in men with stress incontinence or acute post-surgical urinary retention. The
internal structure of the device is similar to that of the female product.
Externally the catheter will be similar to In-Flow-M and will be inserted in the
same way. This device is currently in preclinical development.

In-Cuff. In-Cuff is a permanent, implantable, remote-controlled,
artificial sphincter. In-Cuff is expected to have an intra-abdominal pressure
regulator balloon connected to a periurethral cuff, and to allow sphincter

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pressure to adjust dynamically to changes in abdominal pressure, thereby
minimizing the risk of urethral atrophy caused by constant sphincteric pressure.
Using the Company's proprietary energy transfer technology, the device is
designed to be operated by a remote control unit to fully open or close the
periurethral cuff, permitting normal urination, obviating the need for an
intra-scrotal, hand-operated pump. In-Cuff is in an early stage of preclinical
development.

OBSTRUCTIVE SLEEP APNEA AND SNORING OVERVIEW

The foregoing discussion of obstructive sleep apnea ("OSA") and snoring is
provided as a background to the Company's Sleep-In product which is in the early
stages of development. The Company believes that its Sleep-In product, if
successfully developed and introduced, could provide an effective treatment,
either used alone or in combination with other treatments for OSA and snoring.
There can be no assurance, however, that the Company will successfully develop
this product, or that it will receive regulatory clearance, approval or market
acceptance. See "Risk Factors -- Development Stage Company; History of Losses,"
"Risk Factors -- Risks Relating to Products under Development," "Risk
Factors -- No Assurance of Regulatory Approvals; Potential Delays," and "Risk
Factors -- Uncertain Market Acceptance of the Company's Products."

OSA is a disorder characterized by the repeated cessation of breathing
during sleep due to obstruction of the upper airway. It is associated with
impotence, heart disease, strokes, debilitating daytime drowsiness, automobile
accidents and an increased mortality rate. The preponderance of OSA is difficult
to assess because many people with OSA are unaware of the existence of their
condition. The National Commission on Sleep Disorder Research reported in 1994
that approximately 20 million people in the U.S. have symptoms which are
consistent with a diagnosis of some degree of OSA. The incidence of snoring,
which may be confused with and should be differentiated from OSA, is seen in
approximately 24% of men and 14% of women. In many patients with OSA, a
principal contributory factor is prolapse of the base of the tongue during
sleep.

Current methods to treat OSA have low patient compliance or are highly
invasive and painful, resulting in many patients electing to remain untreated.
Current treatments for OSA and snoring include:

Continuous Positive Airways Pressure ("CPAP"). This treatment involves a
patient sleeping with a mask over the nose, or nose and mouth, which blows a
constant minimal positive air pressure inwards in an effort to maintain airway
patency. Lack of patient compliance limits the effectiveness of this treatment.

Uvulopalatopharyngoplasty ("UPPP"). UPPP is an invasive open surgical
procedure to widen the anatomy at the back of the mouth by cutting out
extraneous tissues. The procedure is often associated with significant
post-operative pain and other complications.

Mandibular Advancement, Hyoid Advancement or Midglossectomy. These
procedures are designed to relieve airway obstruction through advancement of the
muscles of the tongue or excision of tongue musculature. These procedures are
highly invasive and require a prolonged post-surgical recovery period.

Laser Uvulopalatoplasty ("LAUP") and Radio Frequency ("RF")
Uvulopalatoplasty. LAUP is a laser procedure for removing tissues at the back
of the mouth, thereby widening the air passages. LAUP is a treatment designed to
stop snoring but has also been used to treat patients with OSA. In patients with
OSA treated with LAUP, the symptoms of snoring may be relieved without resolving
the airway obstruction, leaving a patient with the dangerous condition of a
silent OSA syndrome. The procedure also is associated with significant
post-operative pain and debilitation (difficulty eating and delayed return to
work), and needs to be repeated two to five times in order to show a therapeutic
effect. More recently, uvulopalatoplasty procedures have been performed using RF
energy to ablate the soft palate and cause submucosal soft tissue volume
reduction in patients with habitual snoring.

THE INFLUENCE OSA AND SNORING THERAPEUTIC DEVICE

Sleep-In. The Company is developing Sleep-In, a minimally invasive
surgical system for surgery to the tongue for the treatment of OSA and snoring.
The Company is seeking to establish Sleep-In as a therapy for patients with OSA
and snoring to be used either alone or in combination with other treatments. The
Sleep-In device is similar to the In-Fast device in that it involves the use of
a titanium self-tapping screw which is

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inserted into the mandible at the floor of the mouth using a disposable,
battery-operated, U-shaped inserter. Using a proprietary suture passer to loop a
suture through the tongue base, and attaching this suture to the mandibular bone
screw, the Sleep-In procedure effectuates a suspension of the tongue base so
that it is less likely to prolapse during sleep. This procedure is thereby
expected to reduce the incidence of OSA and snoring.

[Diagram of a jawbone and tongue showing the bone screw placement of a
Sleep-In procedure and path of suture within the tongue.]

The Company filed a 510(k) Notification in June 1997 for Sleep-In. The
Company has completed six cases of the Sleep-In procedure in an international
pilot trial.

MARKETING AND SALES

In the U.S., the Company has established a direct sales force of 10
salespersons plus support staff to distribute its products to physicians
specializing in managing incontinence, including gynecologists, urologists and
urogynecologists. The Company expects that marketing efforts initially will be
focused on prominent physicians and will also include conference participation,
direct advertising and training seminars to increase awareness of the Company's
products. The Company may also implement a general media campaign intended to
raise the awareness of incontinence and the available treatment options. The
Company is also seeking alliances with various patient groups, including
incontinence groups and various support organizations. Internationally, the
Company has established direct sales forces in Germany and the U.K., comprising
a full-time urologist, five salespersons, plus support staff. The Company has
signed distribution alliances in approximately 25 countries to introduce, market
and sell its products. The Company is coordinating worldwide marketing and sales
from its U.S. corporate headquarters and has a European sales office established
in Germany and an Asian sales office located in Australia. The Company is in the
process of evaluating whether to use distributors or develop its own direct
sales force for its Sleep-In product.

Developing a marketing and sales capability sufficient to support sales in
commercial quantities will require significant resources, and there can be no
assurance that the Company will be able to recruit and retain qualified
marketing personnel, direct sales personnel or contract sales representatives or
that future sales efforts of the Company will be successful. Furthermore, due to
the innovative nature of the Company's proposed products and the limited market
awareness of such products, the Company anticipates that the marketing process
may be lengthy, entailing the education of physicians in the proper use and
advantages of the Company's proposed products. While the Company is committed to
establishing effective distribution channels for its products, there can be no
assurance that the Company will be successful in doing so. The failure to
establish and maintain effective distribution channels for the Company's
products, or to retain qualified sales personnel to support commercial sales of
the Company's products, would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Risk Factors --
Limited Marketing and Sales Capability."

THIRD-PARTY REIMBURSEMENT

In the U.S., the Company's products generally will be purchased directly by
patients, physician groups, hospitals and suppliers. Although some of the
Company's products may not be reimbursed, the Company's success will be
significantly dependent on its ability to obtain satisfactory reimbursement for
its products and for services associated with such products from third-party
payors, including private insurance companies, health maintenance organizations,
preferred provider organizations, other managed care providers, Medicare and
Medicaid.

The Health Care Finance Administration ("HCFA") administers the Medicare
program and determines whether to provide coverage for a particular medical
product, procedure or other service. The Company intends to make application to
HCFA for coverage of its products and associated medical services. Under the
Medicaid program, states generally reimburse for approved procedures on a
fee-schedule basis. In addition, private insurance companies often follow HCFA's
decisions regarding reimbursement.

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A key component in the reimbursement decision by HCFA, state Medicaid
agencies and most private insurers is the assignment of a Current Procedural
Terminology ("CPT") code which is used in the submission of claims to insurers
for reimbursement of medical services. CPT codes are assigned, maintained and
revised by the CPT editorial board administered by the American Medical
Association. The Company believes that surgical procedures using the In-Tac and
In-Fast, the Company's first two products cleared by the FDA, are covered under
existing CPT codes for bladder neck surgery. The Company intends to petition the
CPT editorial board for codes for its other products. There can be no assurance
that the Company will succeed in securing recognition by the CPT editorial board
of specific codes for medical services associated with its proposed products. In
addition, HCFA assigns other codes to supplies. The Company will petition HCFA
for new supply codes where necessary. There can be no assurance that the Company
will succeed in obtaining these supply codes.

Medicare and many other third-party payors do not reimburse for procedures
deemed "experimental." See "Business -- Government Regulation." However,
effective November 1, 1995, Medicare began allowing local carriers the
discretion to cover certain devices with an approved IDE during clinical trials.
The Company has received an approved IDE for In-Flow. It is uncertain at this
time whether Medicare carriers will reimburse for In-Flow and, if so, at what
price. Furthermore, there can be no assurance, even if the Company's future
products are cleared or approved by the FDA for new clinical applications, that
any reimbursement will be available for such procedures.

The Company's strategy for obtaining reimbursement in the U.S. is to obtain
appropriate reimbursement codes and perform outcome studies in conjunction with
clinical trials to establish the efficacy and cost effectiveness of its products
compared to competing diagnostic and therapeutic products. The Company intends
to use this health economics data when approaching health care payors to obtain
coverage and reimbursement authorization.

The Company currently has minimal experience in obtaining reimbursement for
its products in the United States or other countries. In addition, third-party
payors are routinely limiting reimbursement coverage for medical devices and in
many instances are exerting significant pressure on medical suppliers to lower
their prices. The Company could also be adversely affected by changes in
reimbursement policies of government or private health care payors, particularly
to the extent that any such changes affect reimbursement for therapeutic or
diagnostic procedures in which the Company's products are used. For example,
effective January 1, 1999, HCFA will reimburse hospital outpatient departments
for services and supplies based on a prospective payment system, which means
that outpatient departments will be paid a flat fee for a procedure regardless
of the cost of a supply or device associated with a procedure. Hospital
inpatient procedures currently are reimbursed under such a system. Failure by
physicians, hospitals and other users of the Company's products to obtain
sufficient reimbursement from health care payors for procedures in which the
Company's products are used, or adverse changes in government and private
third-party payors' policies toward reimbursement for such procedures, could
have a material adverse effect on the Company's business, financial condition
and results of operations.

There is widespread concern that health care reform proposals and related
market initiatives in the U.S. may lead third-party payors to decline or further
limit reimbursement. The extent to which third-party payors may determine that
the use of the Company's products will save costs or will at least be cost
effective is highly uncertain, and it is possible that they will limit coverage
and reimbursement for products developed by the Company. Because of
uncertainties regarding the possible federal and state health care reform
measures that could be proposed and initiatives to reduce costs by private
payors, the Company cannot predict whether reimbursement for the Company's
products will be affected or, if affected, the extent of any effect. Third-party
payors may also decline to reimburse for procedures, supplies or services
determined to be not "medically necessary" or "reasonable."

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approvals, obtaining such approvals can require 12 to 18 months or longer and
there can be no assurance that any such approvals will be obtained in a timely
manner, if at all. In addition, certain countries may require additional
clinical trials to be conducted, which can be costly and time consuming and
could delay or prevent the Company from obtaining reimbursement. Failure to
receive additional international reimbursement approvals could have a material
adverse effect on market acceptance of the Company's products in the
international markets in which the Company is seeking approvals and could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors -- Uncertainty Related to Third Party
Reimbursement."

MANUFACTURING

The Company currently intends to assemble substantially all of its products
at its facility in Israel. Most components of the Company's products are
manufactured by subcontractors in Israel, Germany and other locations. The
Company's employees at the facility in Israel currently assemble components,
perform quality assurance and control and package the products. Currently,
assembled products are sterilized by a subcontractor. The Company is planning to
move to a larger facility in Israel in the fourth quarter of 1997, where it will
be able to expand manufacturing lines and perform sterilization in-house.
Beginning in the fourth quarter of 1997, certain components, which have to date
been individually manufactured by machine shops in Israel and elsewhere, will be
produced by subcontractors using automated injection molding. The Company has
minimal experience in manufacturing commercial quantities of its proposed
products and currently has a facility capable only of limited manufacturing of
its proposed products for use in clinical trials and production of certain
products in commercial quantities. The Company had a product backlog in the
first half of 1997 with respect to the In-Tac inserter due to production
capacity constraints and is in the process of converting its subcontractor
component manufacturers from small-quantity machine shop production of In-Tac
components to an automated injection molded process. In order to successfully
commercialize its proposed products, the Company will have to increase the
number of units it can produce, reduce per-unit manufacturing costs and achieve
the extremely high quality standards required for such products. In order to
manufacture in commercial quantities on the foregoing basis, the Company will be
required either to enhance significantly its existing capabilities and equipment
and recruit and retain a sufficient number of skilled manufacturing personnel,
or to enter into arrangements with third parties to manufacture its proposed
products. The Company has implemented a Quality System based on the requirements
of the QSReg., ISO 9001 and EN-46001. The Quality System is presently certified
for ISO 9002 and EN-46002. The Company recently underwent an audit for extending
the certification to ISO 9001 and EN-46001 as well as CE Marking the In-Fast and
In-Tac devices, and the Company believes it has resolved the minor outstanding
items that were raised during this audit. No additional visit is required and
certification is expected to be finalized shortly. To date, the Company's
facility has not been inspected by the FDA for compliance with the QSReg. There
can be no assurance that the Company will be able to establish manufacturing
capability, successfully undergo inspection by the FDA, successfully make the
transition to commercial manufacturing or manufacture its products
cost-effectively, or at all. Failure to do so could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the Company's new facility in Israel will require reinspection and
recertification before manufacturing operations can be transferred from the old
facility. See "-- Facilities."

The principal materials used in the Company's products are currently
available from several sources. Currently, however, the Company has only one
source for the supply of the coated Dacron(R) sling material. The Company may,
in the future, seek to enter into supply agreements with certain suppliers if it
considers this to be a cost-effective means of assuring the availability of
essential materials. Any interruption in the supply of raw materials currently
used by the Company could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Risk
Factors -- Limited Manufacturing Experience," "Risk Factors -- Ability to Manage
Expanding Operations," and "Risk Factors -- Dependency On Sole-Source Supplier."

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PATENTS, LICENSES AND PROPRIETARY TECHNOLOGY

The Company's success will depend in part on its ability to obtain and
maintain patent protection for its products, to preserve its trade secrets and
to operate without infringing the proprietary rights of third parties. The
Company's strategy regarding the protection of its proprietary rights and
innovations is to seek patents on those portions of its technology that it
believes are patentable and to protect as trade secrets other confidential and
proprietary information.

The Company has an exclusive world-wide license to one issued U.S. patent,
one pending U.S. patent application, six issued foreign patents and two pending
foreign patent applications, which cover certain technology related to the
In-Tac surgical system, including the inserter device, the bone anchors with
sutures and a method of transvaginal bladder neck suspension surgery using an
anchor and suture inserted into the pubic bone. In consideration for this
license, the Company will pay to the owner thereof a royalty of 0.5% of the
income derived from that technology. In addition, as of June 30, 1997, the
Company had seven pending U.S. patent applications, four pending PCT patent
applications, three pending European Patent Office applications and 19 foreign
(national phase) patent applications pending relating to the Company's
technology underlying its products. The Company also has one issued U.S. patent
for technology unrelated to any of its products or currently proposed products.
However, there can be no assurance as to the degree of protection offered by the
claims of the issued patent or that any patents will be issued with respect to
the Company's pending patent applications. In addition, methods of treating
humans are generally not patentable outside of the United States, nor are claims
directed to such methods enforceable in the United States against medical
practitioners or related health care entities if the claims issued after
September 30, 1996.

Some of the technology used in, and that may be important to, the Company's
products is not covered by any patent or patent application of the Company. The
Company seeks to maintain the confidentiality of its proprietary technology by
requiring employees who work with proprietary information to sign
confidentiality agreements and by limiting access by parties outside the Company
to such confidential information. There can be no assurance, however, that these
measures will prevent the unauthorized disclosure or use of this information, or
that others will not be able to independently develop such information.
Moreover, as is the case with the Company's patent rights, the enforcement by
the Company of its trade secret rights can be lengthy and costly, with no
guarantee of success.

To date, no lawsuits have been filed against the Company alleging that its
technology or products infringe intellectual property rights of others. However,
there can be no assurance that such lawsuits will not be brought against the
Company in the future or that any such claims will not be successful. The
Company has been notified by a third party that it has filed a PCT patent
application directed to methods of and an apparatus for treating urinary
incontinence by bladder neck suspension through the use of an anchor and suture
inserted into bone and a procedure using an anchor with or without sutures. The
Company subsequently became aware of a U.S. patent issued to such third party.
The Company has conducted a review of the third party's relevant issued U.S.
patents and concluded that neither the Company's In-Tac device nor its use
infringes any valid claim of the patents. One of the third party's patents in
question contains claims related to a medical activity and such patent issued
after September 30, 1996. In accordance with a change in U.S. patent law which
became effective on September 30, 1996, such claims are currently unenforceable
against medical practitioners or related health care entities. To date, however,
there have been no judicial decisions interpreting this section, and there can
be no assurance that such patent is not enforceable against the Company or that
it will not become enforceable retroactively by act of Congress or judicial
decision. The Company has determined that its products do not infringe the third
party's apparatus and article of manufacture claims. There can be no assurance,
however, that U.S. or other patents will not issue in the future in the name of
this particular third party or another party containing claims which would
constrain the Company's ability to manufacture and sell its products or prevent
customers of the Company from practicing the method of bladder neck suspension
contemplated by use of the Company's In-Tac, In-Fast or Straight-In surgical
systems. Another entity has brought to the Company's attention the existence of
a Spanish patent having related European country equivalents and concerning a
staple inserter useful for bladder neck suspensions. The Company has conducted
an investigation of the likely scope of this third party's patents in

42
<PAGE> 44

Europe and determined that no patent infringement liability would exist based
upon the Company's sales and distribution of its In-Tac, In-Fast or Straight-In
surgical systems and related anchors and/or screws.

The Company is also aware of a number of U.S. patents of third parties
related to intraurethral valved catheters for the treatment of incontinence. The
Company believes that Influence's proposed devices will not infringe any valid
claims of those patents. The Company has been notified by a third party that its
intraurethral valved catheter infringes on claims of an issued U.S. patent. The
Company has reviewed the patent, related documents and the prior art and
concluded that no valid claim is infringed. There can be no assurance that a
suit for patent infringement will not be filed by any of the patent owners or
licensees in the future, that the Company will prevail in any suit for patent
infringement, or that the Company will not be required to take a license under
unfavorable terms or be enjoined from manufacturing and selling its
intraurethral valved catheter incontinence devices. See "Risk
Factors -- Dependence on Patents, Licenses and Proprietary Technology."

GOVERNMENT REGULATION

The medical devices to be marketed and manufactured by the Company are
subject to extensive regulation by the FDA and, in some instances, by foreign
governments. Pursuant to the FDC Act, the FDA regulates the clinical testing,
manufacture, labeling, distribution and promotion of medical devices.
Noncompliance with applicable requirements can result in, among other things,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, failure of the government to grant premarket
clearance or premarket approval for devices, withdrawal of marketing approvals
or clearances and criminal prosecution.

Under the FDC Act, medical devices are classified into one of three classes
(i.e., class I, II, or III) based on the controls deemed necessary to reasonably
ensure their safety and effectiveness. Safety and effectiveness can reasonably
be assured for class I devices through general controls (e.g., labeling,
premarket notification and adherence to the QSReg.) and for class II devices
through the use of general and special controls (e.g., performance standards,
post market surveillance, patient registries, and FDA guidelines). Generally,
class III devices are those which must receive premarket approval by the FDA to
ensure their safety and effectiveness (e.g., life-sustaining, life-supporting
and implantable devices, or new devices which have been found not to be
substantially equivalent to legally marketed devices).

Before a new device can be commercially introduced to the market, the
manufacturer generally must obtain FDA marketing clearance through a 510(k)
premarket notification or marketing approval through a premarket approval
application ("PMA"). Clearance of a 510(k) Notification will be granted if the
submitted information and data establish that the proposed device is
"substantially equivalent" to a legally marketed class I or class II medical
device, or to a class III medical device for which the FDA has not called for
PMAs. Commercial distribution of a device for which a 510(k) Notification is
required can begin only after the FDA issues an order finding the device to be
"substantially equivalent" to a predicate device. The FDA recently has been
requiring a more rigorous demonstration of substantial equivalence than in the
past. The FDA sometimes requires the submission of clinical data in order to
make a substantial equivalence determination. It generally takes from four to 12
months from submission to obtain 510(k) premarket clearance, but may take
longer. The FDA may determine that the proposed device is not substantially
equivalent, or that additional data are needed before a substantial equivalence
determination can be made. A "not substantially equivalent" determination, or a
request for additional data, could delay the market introduction of new products
that fall into this category and could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
modifications or enhancements to the Company's products that are cleared through
the 510(k) process that could significantly affect safety or effectiveness of
the device or that constitute a major change in the intended use of the device
will require new 510(k) submissions. If the FDA requires the Company to submit a
new 510(k) Notification for any device modification, the Company may be
prohibited from marketing the modified device until the 510(k) Notification is
cleared by the FDA.

A PMA application must be filed if a proposed device is not substantially
equivalent to a legally marketed class I or class II device, or if it is a class
III device for which the FDA has called for PMAs. Certain class III

43
<PAGE> 45

devices that were on the market before May 28, 1976 ("preamendments class III
devices"), and devices that are substantially equivalent to them, can be brought
to market through the 510(k) Notification process until the FDA, by regulation,
calls for PMA applications for the devices. In addition to demonstrating
substantial equivalence, 510(k) clearance for such devices generally requires
that the facilities at which they are manufactured successfully undergo an FDA
preapproval QSReg. inspection. If the FDA calls for a PMA for a preamendments
class III device, a PMA must be submitted for the device even if the device has
already received 510(k) clearance. However, the FDC Act requires the FDA to
either down-classify preamendments class III devices to class I or class II, or
to publish a classification regulation retaining the devices in class III. If
the FDA down-classifies a preamendments class III device to class I or class II,
a PMA application is not required. Manufacturers of preamendments class III
devices that the FDA retains in class III must have a PMA application accepted
for filing by the FDA 90 days after the publication of a final regulation in
which the FDA calls for PMAs.

A PMA application must be supported by valid scientific evidence which
typically includes extensive data, including human clinical trial data to
demonstrate the safety and effectiveness of the device. The PMA application must
also contain the results of all relevant bench tests, laboratory and animal
studies, a complete description of the device and its components, and a detailed
description of the methods, facilities and controls used to manufacture the
device. In addition the submission must include the proposed labeling,
advertising literature, and training methods (if required).

Upon receipt of a PMA application, the FDA makes a threshold determination
as to whether the application is sufficiently complete to permit a substantive
review. Once the submission is accepted for filing, the FDA begins an in-depth
review of the PMA. An FDA review of a PMA application generally takes one to two
years from the date the PMA application is accepted for filing, but may take
significantly longer. The review time is often significantly extended by the FDA
asking for more information or clarification of information already provided in
the submission. During the review period, an advisory committee, typically a
panel of clinicians, will likely be convened to review and evaluate the
application and provide recommendations to the FDA as to whether the device
should be approved. The FDA is not bound by the recommendations of the advisory
panel. Toward the end of the PMA review process, the FDA generally will conduct
an inspection of the manufacturer's facilities to ensure that the facilities are
in compliance with applicable QSReg. requirements.

If the FDA's evaluations of both the PMA application and the manufacturing
facilities are favorable, the FDA will either issue an approval letter or an
approvable letter, which usually contains a number of conditions which must be
met in order to secure final approval of the PMA. The FDA may also determine
that additional clinical trials are necessary, in which case PMA approval may be
significantly delayed while additional clinical trials are conducted. The PMA
process can be expensive, uncertain and lengthy and a number of devices for
which FDA approval has been sought by other companies have never been approved
for marketing.

If human clinical trials of a device are required in connection with either
a 510(k) Notification or a PMA, and the device presents a "significant risk,"
the sponsor of the trial (usually the manufacturer or the distributor of the
device) is required to file an investigational device exemption ("IDE")
application prior to commencing human clinical trials. The IDE application must
be supported by data, typically including the result of animal and laboratory
testing. If the IDE application is reviewed and approved by the FDA and one or
more appropriate Institutional Review Boards ("IRBs"), human clinical trials may
begin at a specific number of investigational sites with a specific number of
patients, as approved by the FDA. If the device presents a "nonsignificant risk"
to the patient, a sponsor may begin the clinical trial after obtaining approval
for the study by one or more appropriate IRBs, but not the FDA. Sponsors of
clinical trials are permitted to sell those devices distributed in the course of
the study provided such compensation does not exceed recovery of the costs of
manufacture, research, development and handling. An IDE supplement must be
submitted to and approved by the FDA before a sponsor or an investigator may
make a change to the investigational plan that may effect the scientific
soundness or the rights, safety or welfare of human subjects.

44
<PAGE> 46

Tac surgical system, which included a bladder neck sling procedure in December
1996, and received clearance of that notification in February 1997. In January
1997, the Company submitted a 510(k) Notification for the In-Fast surgical
system for use in bladder neck fixation and sling procedures, which submission
received FDA clearance in April 1997.

The FDA has determined that approval of the In-Flow device will require a
PMA submission. The FDA has approved an IDE for this device and a clinical IDE
study commenced in June 1997. The FDA has indicated in correspondence with the
Company that the future PMA submission will receive expedited review. However,
there can be no assurance that, once a PMA application is submitted for In-Flow,
the FDA's condition for granting expedited status will remain valid, that the
FDA will review a future PMA on an expedited basis, or that PMA approval of
In-Flow could be obtained in a timely manner, if at all. There can be no
assurance that clinical data obtained for In-Flow will demonstrate the safety
and effectiveness of the device. Failure of any clinical data obtained for the
device to support the safety and effectiveness of the device could result in a
delay or non-approval of the future PMA submission and could have a material
adverse effect on the Company's business, financial condition, and results of
operations. Moreover, there can be no assurance that any animal or clinical data
intended to support a 510(k) notification or PMA application would be sufficient
to obtain clearance or approval of the device.

The Company intends to submit 510(k) Notifications in the future for its
In-Tele, In-Probe and In-Bio devices under development. However, there can be no
assurance that the FDA will not require the submission of PMA applications for
any or all of these devices, or that if 510(k) Notifications are submitted,
510(k) clearance could be obtained in a timely manner, if at all. The Company
also intends to submit a PMA application for the In-Sure device. Failure of any
clinical data obtained for the device to support the safety and effectiveness of
the device could result in a delay or non-approval of the future PMA submission
and could have a material adverse effect on the Company's business, financial
condition and results of operations.

In June 1997, the Company submitted a 510(k) Notification for the Sleep-In
surgical device for the treatment of OSA and snoring. In July 1997, the Company
submitted a 510(k) Notification for the Straight-In surgical tool for open or
laparoscopic bladder neck fixation, sling procedure and vaginal vault prolapse
surgery. In July 1997, the Company also submitted a 510(k) Notification for the
coated Dacron(R) material to be used in sling procedures for the treatment of
urinary stress incontinence. There can be no assurance that the FDA will not
require the submission of substantial clinical data to support these 510(k)
Notifications, that 510(k) clearance can be obtained in a timely manner, if at
all, or that the FDA will not require the submission of a PMA application for
either or both of these devices.

The In-Cuff is a class III preamendments device for which the FDA has
published a proposed rule in the Federal Register calling for the submission of
PMA applications. Before PMA applications must be submitted, however, the FDA is
required to publish a final rule indicating a specific date after which PMA
applications will be required. As a result, if the Company obtains 510(k)
clearance for the In-Cuff prior to the date PMA applications are required, the
Company will be required to have a PMA application accepted for filing by the
FDA within 90 days after the date the FDA calls for PMA applications. There can
be no assurance that the Company would be able to have a PMA application
accepted for filing within the required time frame or that any data or
information submitted in a PMA application would be adequate to support approval
of the device.

Any devices manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA and certain state agencies. Manufacturers of medical devices for
marketing in the United States are required to adhere to the FDA's QSReg., which
impose certain procedural and documentation requirements with respect to device
design, development, manufacturing, and quality assurance activities.
Manufacturers must also comply with Medical Device Reporting ("MDR")
requirements that a firm report to the FDA any incident in which its product may
have caused or contributed to a death or serious injury, or in which its product
malfunctioned and, if the malfunction were to recur, it would be likely to cause
or contribute to death or serious injury. Labeling and promotional activities
are subject to scrutiny by the FDA and, in certain circumstances, by the Federal
Trade

45
<PAGE> 47

Commission. Current FDA enforcement policy prohibits the marketing of approved
medical devices for unapproved uses.

Labeling and promotion activities are subject to scrutiny by the FDA and in
certain instances, by the Federal Trade Commission. The FDA actively enforces
regulations prohibiting marketing of products for unapproved uses. The Company
and its products are also subject to a variety of state laws and regulations in
those states or localities where its products are or will be marketed. Any
applicable state or local regulations may hinder the Company's ability to market
its products in those states or localities. Manufacturers are also subject to
numerous federal, state and local laws relating to such matters as safe working
conditions, manufacturing practices, environmental protection, fire hazard
control and disposal of hazardous or potentially hazardous substances. There can
be no assurance that the Company will not be required to incur significant costs
to comply with such laws and regulations now or in the future or that such laws
or regulations will not have a material adverse effect upon the Company's
ability to do business.

The Company and its products may also be subject to other Federal, state,
local or foreign regulations relating to health and safety, environmental
matters, quality assurance and the like. The Company's compliance with laws that
regulate the discharge of materials into the environment or otherwise relate to
the protection of the environment does not have a material effect on the ongoing
operations of the Company. The Company has not made any material expenditures
for environmental control facilities, nor does it anticipate any such
expenditures for the remainder of 1997.

Changes in existing requirements or adoption of new requirements or
policies could adversely affect the ability of the Company to comply with
regulatory requirements. Failure to comply with regulatory requirements could
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that the Company will not
be required to incur significant costs to comply with laws and regulations in
the future or that laws or regulations will not have a material adverse effect
upon the Company's business, financial condition or results of operations.

The Company has implemented a Quality System based on the requirements of
the QSReg., ISO 9001 and EN-46001. The Quality System is presently certified for
ISO 9002 and EN-46002. The Company recently underwent an audit for extending the
certification to ISO 9001 and EN-46001 as well as CE Marking the In-Fast and
In-Tac devices, and the Company has resolved the several minor outstanding items
that were raised during such audit. No additional visit is required and
certification is expected to be finalized shortly. The European Union (the "EU")
requires that medical devices receive a CE Mark by mid-1998 in order to
commercially market and sell medical products in the countries of the European
Economic Area. While the Company intends to satisfy the requisite policies and
procedures that will permit it to receive ISO 9001 and CE Mark certification for
future products, there is no assurance that it will be successful in meeting
such certification requirements.

See also "Risk Factors -- No Assurance of Regulatory Approvals; Potential
Delays."

RESEARCH AND DEVELOPMENT

The primary activity of the Company to date has been the research and
development of technology for the diagnosis and treatment of urinary
incontinence. In addition, the Company has identified other potential
applications for its core proprietary technologies. The Company believes that
its future success will depend in large part upon its ability to enhance its
proposed products and to develop new products. Accordingly, the

46
<PAGE> 48

Company intends to devote significant funds and efforts to research and
development. The Company conducts all of its research and development activities
in Israel. As of June 30, 1997, substantially all of the employees of the
Company in Israel were involved in research and development. To June 30, 1997,
the Company has spent approximately $6.0 million on research and development.
See "Risk Factors -- Intense Competition and Risks Associated with Rapid
Technological Change," "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and
"Business -- Competition."

The Company's proprietary technology may be applicable in medical devices
other than those currently under development. The Company's proprietary remote
control technology is being applied to the development of a penile prosthesis
for men with impotence, to compete with currently available prostheses which
operate on a manual pressure system. The Company has commenced development of a
valveless intraluminal left ventricle cardiac assist device which will employ
the Company's proprietary wireless magnetic energy transfer technology. The
Company believes that its bone screws and proprietary bone anchors and related
inserters developed for the bladder neck fixation and sling procedures, may be
developed or licensed for use in orthopedic applications. The Company believes
that the petal-like fins which enable the urethral catheter to be fixated at the
bladder neck may be applied in non-urological devices, such as tracheostomy and
gastrostomy devices.

COMPETITION

The Company is engaged in rapidly evolving and highly competitive fields.
The Company believes that the primary competitive factors include the level of
physician and consumer awareness and acceptance of available treatment methods,
consistency of product quality and delivery, price, technical capability and the
training of health care professionals and consumers in the use of available
treatment methods. The Company's ability to compete in this industry will also
be affected by its product development capabilities and innovation, its ability
to obtain required regulatory clearances and approvals, its ability to protect
the proprietary technology included in its products, its manufacturing and
marketing capabilities and its ability to attract and retain skilled employees.
Current major competitors who compete in the incontinence market include
Kimberly-Clark Corp., Procter & Gamble Co., Johnson & Johnson, C.R. Bard Inc.,
Kendall Co., Mentor Corp. and Baxter Technologies, Inc. Current major
competitors who compete in the market for surgical or implantable products for
incontinence include Boston Scientific Corporation, American Medical Systems,
Inc., C.R. Bard, Inc., Mentor Corp. and Johnson & Johnson. The Company is aware
that Rochester Medical Corp., UroQuest Medical Corporation, UroHealth Inc.,
UroMed Corp. and HK Medical Technologies have developed or are developing
intra-urethral devices for the treatment of incontinence. Companies with devices
available or under development to treat OSA or snoring include Healthdyne
Technologies Inc., Nellcor Puritan Bennett Incorporated, Respironics, Inc.,
ResMed, Inc. and Somnus Medical Technologies, Inc.

Many of the Company's competitors and potential competitors have
significantly greater financial, manufacturing, marketing, distribution and
technical resources and experience than the Company. It is possible that other
large health care and consumer products companies may enter markets targeted by
the Company. Furthermore, academic institutions, governmental agencies and other
public and private research organizations will continue to conduct research,
seek patent protection and establish arrangements for commercializing products.
Such products may compete directly with any products which may be offered by the
Company. Finally, competitors in the medical device industry have in the past
and may in the future employ litigation to gain a competitive advantage. See
"Risk Factors -- Dependence on Patents, Licenses and Proprietary Technology" and
"Risk Factors -- Intense Competition and Risks Associated with Rapid
Technological Change."

EMPLOYEES

As of June 30, 1997, the Company employed 76 individuals on a full-time
basis, 50 of which were located at the Company's facility in Israel. Nineteen of
the Company's employees were engaged in manufacturing and quality control, 18
were engaged in research and development, 20 were involved in sales and
marketing and 15 were engaged in general and administrative activities. The
Company believes that it has been highly successful

47
<PAGE> 49

in attracting experienced and capable personnel. However, there can be no
assurance that the Company will continue to do so. See "Risk
Factors -- Dependence upon Key Personnel."

The Company is not a party to any collective bargaining agreements.
However, the Company's Israeli operations are subject to various Israeli labor
laws and labor practices, and to administrative orders extending certain
provisions of collective bargaining agreements between the Histadrut (Israel's
General Federation of Labor) and the Coordinating Bureau of Economic
Organizations (the Israeli federation of employers' organizations) to all
private sector employees. For example, mandatory cost of living adjustments,
which compensate Israeli employees for a portion of the increase in the Israeli
consumer price index, are determined on a nationwide basis. Israeli law also
requires the payment of severance benefits upon the termination or death of an
employee, and, in certain circumstances, upon the retirement of an employee. In
order to meet these requirements, the Company contributes on an ongoing basis
towards "managers' insurance" funds that combine pension, insurance and, if
applicable, severance pay benefits. These contributions are expected to cover a
significant portion of the Company's obligations, but certain additional sums
may be payable by law. In addition, Israeli employers and employees are required
to pay specified percentages of wages to the National Insurance Institute, which
is similar to the United States Social Security Administration. Other provisions
of Israeli law or regulation govern matters such as the length of the workday,
minimum wages, other terms of employment and restrictions on discrimination. See
"Risk Factors -- Principal Subsidiary's Location in Israel."

FACILITIES

The Company maintains its principal executive office in a 1,300 square foot
facility in San Francisco, California, pursuant to a lease expiring in June
1998. These operations will move to a 3,100 square foot facility in San
Francisco in the fourth quarter of 1997, pursuant to a lease expiring in June
1999. The Company currently leases approximately 8,000 square feet in Ramat Gan,
Israel, pursuant to a lease expiring in February 1998. The Israeli facility is
dedicated to research and development, manufacturing and administration. The
current manufacturing space is adequate to support production for the Company's
ongoing clinical trials and the Company's planned commercialization of only
certain of its products. The Company will move these operations to a larger
facility of approximately 18,000 square feet in Herzliya, Israel, in the fourth
quarter of 1997. The Company believes that the new facility will provide
adequate space for the manufacture and assembly of commercial quantities of its
products. The FDA regulates facilities that manufacture medical devices intended
for sale in the U.S. Although the Company's facilities and manufacturing
procedures are designed to comply with QSReg. requirements, there can be no
assurance that the FDA would find them in compliance with all relevant aspects
of the QSRegs. During the investigational device trial phase, the Company is
exempt from these formal requirements. In addition, the Company's new facility
in Herzliya will be required to receive a new ISO 9001 certification. See "Risk
Factors -- No Assurance of Regulatory Approvals; Potential Delays," "Risk
Factors -- Limited Manufacturing Experience," "Risk Factors -- Principal
Subsidiary's Location in Israel," "Business -- Manufacturing" and
"Business -- Government Regulation."

PRODUCT LIABILITY AND WARRANTIES

The testing, marketing and sale of medical devices entail a risk of product
liability claims by consumers and others. The Company maintains product
liability insurance with an aggregate coverage limit of $5 million. The Company
expects to review the adequacy of such coverage from time to time. There can be
no assurance that the Company will be able to secure or maintain product
liability insurance in such amounts that management believes to be reasonably
sufficient to cover foreseeable product liability claims. Furthermore, market
clearance or approval of the Company's products by the FDA will not shield the
Company from product liability exposure. See "Risk Factors -- Product Liability
Exposure."

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings, nor is the
property of the Company the subject of any such proceedings.

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<PAGE> 50

SCIENTIFIC ADVISORY COMMITTEE

The Company has established a Scientific Advisory Committee consisting of
experts in the field of urology or gynecology which will review clinical studies
and recommend product development strategies. Certain members of the Scientific
Advisory Committee listed below have received options to purchase shares of
Common Stock in connection with previous services to the Company. Members of the
Scientific Advisory Committee annually may be granted options to purchase shares
of Common Stock. In addition, members will be reimbursed for their out-of-pocket
expenses and will be paid consulting fees for each meeting of the Scientific
Advisory Committee they attend.

<TABLE>
<CAPTION>
NAME POSITION
- ------------------------------ -------------------------------------------------------------
<S> <C>
David Barrett, M.D. .......... Professor of Urology, Mayo Graduate School of Medicine;
Chairman, Department of Urology, Mayo Clinic, Rochester,
Minnesota
Jerry Blaivas, M.D. .......... Clinical Professor of Urology, Cornell University Medical
School
Richard Bump, M.D. ........... Associate Professor and Chief, Gynecologic Specialties, Duke
University
Shlomo Raz, M.D. ............. Professor of Urology, University of California at Los Angeles
Medical Center
Stewart Stanton, M.B.B.S. .... Director of the Urogynecology Unit and Co-Director of the
Pelvic Floor Reconstruction Centre at St. George's Hospital
in London, England
Alan Wein, M.D. .............. Professor and Chair of the Urology Department, University of
Pennsylvania Medical School; Chief of Urology, Hospital of
the University of Pennsylvania
</TABLE>

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<PAGE> 51

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The directors, executive officers and key employees of Influence, Inc. and
IMT, the Company's Israeli subsidiary, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- ---- --------------------------------------------------------
<S> <C> <C>
Peter A. Bick, M.D............. 43 Chief Executive Officer, President and Director
Mordechay Beyar, M.D........... 41 General Manager of IMT and Vice Chairman of the Board of
Directors
Oren Globerman................. 37 General Manager of IMT and Vice Chairman of the Board of
Directors
John M. Harland................ 45 Vice President, Finance, Chief Financial Officer and
Treasurer
Nir Cohen...................... 34 Vice President, Operations of IMT
Ze'ev Sohn, Ph.D............... 36 Vice President, Research of IMT
Michael Arad................... 50 Vice President, Manufacturing of IMT
Lewis C. Pell.................. 53 Chairman of the Board of Directors
Shimon Eckhouse, Ph.D.......... 52 Director
</TABLE>

Dr. Bick has been Chief Executive Officer and President of Influence since
May 1996, and a director since July 1996. From June 1994 to February 1996, he
was a partner at Sequoia Capital, a venture capital firm. Prior to his
employment at Sequoia, Dr. Bick was a partner at Burr, Egan, Deleage & Co., a
venture capital firm, beginning in January 1993. Previously, Dr. Bick was
President of Quintiles, Inc., a U.S. subsidiary of Quintiles Transnational Ltd.,
a contract research, sales and manufacturing organization, which he joined in
1990. Dr. Bick is a physician and Board Certified psychiatrist who completed his
training at Harvard Medical School. He holds an M.B., B.S. from the Royal Free
Hospital School of Medicine at the University of London and an M.B.A. from
Columbia University.

Dr. Beyar is a founder of Influence and has served as a director since its
inception in November 1994. Dr. Beyar also serves as a General Manager of the
Company's Israeli subsidiary. In addition to his work for the Company, from 1994
to the present, Dr. Beyar has served part-time as a practicing urologist at
B'nai Zion Hospital in Haifa, Israel. He holds numerous patents in the field of
medical devices. Dr. Beyar was a founder of InStent Inc., a developer of medical
stents, and served as a director of InStent Inc. from its founding in 1991 until
its acquisition by Medtronic, Inc. From 1991 to the present, Dr. Beyar has also
served as a Co-General Manager of the Israeli subsidiary of InStent. Dr. Beyar
received an M.D. from Tel Aviv University Medical School.

Mr. Globerman is a founder of Influence and has served as a director since
its inception in November 1994. He also serves as a General Manager of the
Company's Israeli subsidiary. Mr. Globerman has also served as the Co-General
Manager for the Israeli subsidiary of InStent since that company's founding in
April 1991. Mr. Globerman holds a B.Sc. in Engineering from Tel Aviv University.

Mr. Harland has been Vice President, Finance and Chief Financial Officer of
Influence, since October 1996, and was appointed Treasurer in June 1997. From
May 1995 to October 1996, he was Vice President, Finance, Chief Financial
Officer and Secretary of Indigo Medical, Incorporated, a urology device company.
From January 1994 until May 1995, Mr. Harland served as Vice President of
Finance and Chief Financial Officer of Neurobiological Technologies, Inc., a
biotechnology company. Previously, he was Vice President, Finance, Chief
Financial Officer and Secretary of Cardiovascular Imaging Systems, Inc., a
cardiovascular device company, from September 1989 to September 1993. Mr.
Harland is a Certified Public Accountant and holds an M.A. in Natural Sciences
and Business Studies from Cambridge University and an M.B.A. from Golden Gate
University.

Mr. Cohen has been Vice President, Operations of IMT since January 1997.
From January 1992 to January 1997, he was employed by Orbotech, Inc., a
technology company, most recently as Customer Support

50
<PAGE> 52

Manager in charge of operations in the Central U.S. Mr. Cohen holds a B.Sc. in
Electrical Engineering from the Technion-Israel Institute of Technology and an
M.B.A. from Tel-Aviv University.

Dr. Sohn has been Vice President, Research of IMT since January 1995. Prior
to joining Influence, Dr. Sohn was a research and development engineer for
Orbotech, Ltd., an Israeli technology company, from December 1993 to December
1994. From January 1991 to December 1993, Dr. Sohn was an engineer at Israel
Aircraft Industries, an aerospace manufacturer. Dr. Sohn holds a Ph.D. in
mechanical engineering from Columbia University.

Mr. Arad has been Vice President, Manufacturing of IMT since March 1995.
From 1988 to 1995, Mr. Arad was Chief Engineer and Manager of Quality Assurance
at Dan Sprinklers, Ltd. in Israel, and previously was a Group Leader in the
Research and Development Department of BMY, Inc., a subsidiary of Harsco Corp.,
a defense products manufacturer. Mr. Arad holds a B.Sc. in Mechanical
Engineering from the Technion-Israel Institute of Technology.

Mr. Pell is a founder of Influence and has served as Chairman of the Board
since its inception in November 1994. In 1991, Mr. Pell co-founded InStent, and
served as its Chairman until InStent was acquired by Medtronic, Inc. in June
1996. Mr. Pell was a director of Heart Technology Inc. from April 1989 until it
was acquired by Boston Scientific Corp. in December 1995. Since May 1992, Mr.
Pell has served as Vice Chairman and a director of Vision Sciences Inc., a
publicly held medical device company. Mr. Pell is a founder or co-founder of a
number of other privately held medical device and biotechnology companies.

Dr. Eckhouse has been a director of Influence since July 1996. Since April
1992, Dr. Eckhouse has served as Chief Executive Officer and a Director of ESC
Medical Systems Ltd., an Israeli company which develops and manufactures medical
equipment ("ESC") and since January 1997 Dr. Eckhouse has served as Chairman of
the Board of Directors of ESC. From 1986 to 1991, he was the manager of the
advanced product development department of Maxwell Laboratories Inc. Dr.
Eckhouse holds a Ph.D. in physics from the University of California at Irvine.

COMMITTEES

Prior to the consummation of the Offering, the Board of Directors will
establish an audit committee to oversee the auditing of the Company's
consolidated financial statements and a compensation committee to make
recommendations concerning the salaries and incentive compensation of employees
of the Company, and to administer the 1995 Stock Option Plan.

COMPENSATION OF DIRECTORS

Directors currently receive no cash fees for services provided in that
capacity but may be reimbursed for out-of-pocket expenses they incur in
connection with their attendance at meetings of the Board of Directors.

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<PAGE> 53

EXECUTIVE COMPENSATION

The following table sets forth certain information for the years ended
December 31, 1995 and 1996 with respect to the annual and long-term compensation
of the Company's Chief Executive Officer and each executive officer whose annual
salary and bonus exceeded $100,000 (collectively, the "Named Executive
Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)
- ------------------------------------------ ---- --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Peter A. Bick, M.D. ...................... 1996 $ 88,303 (2) -- 296,400
President and Chief Executive Officer(1)
Mordechay Beyar, M.D. .................... 1995 35,000 -- -- --
General Manager, IMT(3) 1996 150,000 -- 38,324 --
Oren Globerman............................ 1995 35,000 -- -- --
General Manager, IMT(3) 1996 150,000 -- 38,324 --
Andrew M. Smith........................... 1995 150,000 -- -- --
Vice President and Chief Operating 1996 150,000 -- -- --
Officer(4)
</TABLE>

- ---------------

(1) Dr. Bick joined the Company in 1996. Dr. Bick's 1996 salary does not include
$30,000 paid to Dr. Bick in 1996 for consulting services to the Company
prior to becoming President and Chief Executive Officer. See
"Management -- Employment Agreements" regarding terms of Dr. Bick's
employment agreement, including the grant of options to him.

(2) Dr. Bick was awarded a $50,000 bonus in 1997 for services to the Company
from May 1996 through May 1997. None of such bonus was paid in 1996.

(3) Includes amounts paid to NMB for the services of Dr. Beyar and Mr.
Globerman. See "Management -- Employment Agreements" and "Certain
Transactions."

(4) Mr. Smith resigned from the Company on May 15, 1996. His 1996 salary
includes severance payments.

STOCK OPTION INFORMATION

The following table sets forth certain information concerning stock options
granted during the fiscal year ended December 31, 1996 to the Named Executive
Officers.

OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED IN APPRECIATION FOR
OPTIONS FISCAL EXERCISE OPTION TERMS($)(4)
GRANTED 1996 PRICE EXPIRATION ----------------------------------
NAME (#)(1) (%)(2) ($/SH)(3) DATE 0% 5% 10%
- --------------------- ---------- ---------- --------- ------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Peter A. Bick,
M.D. .............. 296,400 56.9% $3.21 May 31, 2005 $379,392 $1,216,348 $2,500,402
</TABLE>

- ---------------

(1) Options were granted under the Company's 1995 Stock Option Plan.

(2) Based on an aggregate of 534,300 options granted by the Company in the year
ended December 31, 1996, to employees of and consultants to the Company,
including the Named Executive Officers.

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<PAGE> 54

(3) The exercise price per share of each option was below the fair market value
of the underlying Common Stock on the date of grant. The Company will
recognize non-cash compensation expense associated with these options.

(4) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the fair
market value of the Common Stock on the date of grant ($4.49 per share)
appreciates at the indicated annual rate compounded annually for the entire
term of the option and that the option is exercised and sold on the last day
of its term for the appreciated stock price. The 0%, 5% and 10% assumed
annual rates of stock price appreciation are mandated by the rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of the Company's future Common Stock prices. Actual
gain, if any, on stock options exercised are dependent on the future
performance of the Common Stock and overall stock market condition. The
amounts reflected in the table may be higher or lower than the amounts
actually realized.

OPTION EXERCISES IN 1996 AND FISCAL YEAR END OPTION VALUES

The following table sets forth certain information with respect to stock
option exercises during the fiscal year ended December 31, 1996 by the Named
Executive Officers and the value of stock options held by such individuals at
the end of the year.

OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter A. Bick, M.D. ........ 23,400 $224,874 163,800 109,200 1,439,802 $ 959,868
</TABLE>

- ---------------

(1) Based on the estimated fair market value on the date of exercise of $12.82
per share, less the exercise price of $3.21 per share.

(2) Based on a value of $12.00 per share, the initial public offering price,
less the per share exercise price shown in the Option Grant Table,
multiplied by the number of shares underlying the unexercised options.

EMPLOYMENT AGREEMENTS

Under the terms of an employment agreement dated May 31, 1996 between the
Company and Dr. Bick, Dr. Bick receives a salary of $150,000 per annum, plus a
performance bonus to be determined by the Board of Directors. In addition, Dr.
Bick was granted options to purchase 296,400 shares of Common Stock at an
exercise price of $3.21 per share, 132,600 of which vested immediately, 54,600
which vested on May 31, 1997 and the remainder of which vests in equal
installments on May 31, 1998 and 1999. If Dr. Bick is terminated without cause,
his salary and health benefits will be paid for six months and the next
succeeding vesting date of his stock options will be accelerated to the date of
termination. Upon a change in control of the Company, any stock options not yet
vested will, under certain circumstances, immediately vest. Dr. Bick's
employment agreement expires on May 31, 1999.

Each of Mr. Globerman and Dr. Beyar entered into agreements with the
Company in August 1996 pursuant to which each was to receive an annual salary of
$150,000 and devote such time to the Company as is necessary for the management
of the business and affairs of the Company. Such salary was intended to be in
lieu of any further payments to NMB Medical Applications Ltd. ("NMB"), a
research and development company controlled by Mr. Globerman and Dr. Beyar,
which had been made at the rate of $7,000 per month prior to July 1, 1996. At
the subsequent request of Dr. Beyar and Mr. Globerman, the Company has fulfilled
its obligations under the agreements by continuing to pay NMB the amounts due
Dr. Beyar and Mr. Globerman under such agreements.

53
<PAGE> 55

Under the terms of an employment agreement dated October 1, 1996 between
the Company and Mr. Harland, Mr. Harland receives a salary of $125,000 plus a
performance bonus. In addition, Mr. Harland was granted options to purchase
46,800 shares of Common Stock at an exercise price of $3.21 per share, of which
15,600 vested immediately and the remainder of which will vest in equal
installments on September 30, 1997 and 1998. Upon a change of control of the
Company any stock options not yet vested will, under certain circumstances,
immediately vest. Mr. Harland's employment agreement expires on October 1, 1998.

STOCK OPTION PLANS

The Company has reserved a total of 1,497,600 shares of Common Stock for
issuance pursuant to the Company's stock option plan (the "1995 Stock Option
Plan"). As of the date of this Prospectus, the Company has granted to employees
and to certain individuals who provided valuable services to the Company options
to purchase an aggregate of 1,090,206 shares of Common Stock at a weighted
average exercise price of $6.40 per share under the 1995 Stock Option Plan. Of
these, options to purchase 39,000 shares have been exercised and options to
purchase 536,364 shares are exercisable immediately. The remaining options are
exercisable from 1997 through 2000. See "Shares Eligible for Future Sale."

The 1995 Stock Option Plan is administered by the Compensation Committee of
the Board of Directors. Subject to the provisions of the 1995 Stock Option Plan,
the Compensation Committee has the authority to select the optionees or stock
recipients and determine the terms of the options or restricted stock granted,
including: (i) the number of shares, (ii) option exercise terms, (iii) the
exercise or purchase price, (iv) the duration of the option and (v) the time,
manner and form of payment for restricted stock and upon exercise of an option.
An option is not transferable by the optionholder except by will or by the laws
of descent and distribution, or, in the case of nonqualified options only,
pursuant to a valid domestic relations order.

54
<PAGE> 56

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of June 30, 1997, and
as adjusted to reflect the sale by the Company of the Common Stock being offered
hereby, with respect to beneficial ownership of Common Stock by: (i) each person
who is known by the Company to be the beneficial owner of more than 5% of
Influence's outstanding shares of Common Stock; (ii) each of the Company's Named
Executive Officers; (iii) each of the Company's directors; and (iv) all
directors and executive officers of the Company as a group. Except where
otherwise indicated, Influence believes, based on information furnished by such
owners, that the beneficial owners of the Shares listed below have sole
investment and voting power with respect to such shares.

<TABLE>
<CAPTION>
PERCENT OF TOTAL
SHARES ---------------------------
BENEFICIALLY PRIOR TO AFTER
NAME OWNED(#)(1) OFFERING(%) OFFERING(%)
- --------------------------------------------------------- --------- ----------- -----------
<S> <C> <C> <C>
Oren Globerman(2)........................................ 1,291,680 16.75% 12.65%
Mordechay Beyar, M.D.(3)................................. 1,047,540 13.59 10.26
Lewis C. Pell(4)......................................... 825,240 10.70 8.08
Katsumi Oneda(5)......................................... 785,460 10.19 7.69
Medtronic Asset Management, Inc.(6)...................... 419,787 5.45 4.11
Peter A. Bick, M.D.(7)................................... 187,200 2.38 1.80
All directors and executive officers as a group (9
persons)(8)............................................ 3,744,909 47.57 36.10
</TABLE>

- ---------------

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, based on factors including voting and
investment power with respect to Shares. Applicable percentage ownership is
based on 7,709,277 Shares outstanding as of June 30, 1997 (assuming the
conversion of Series A Convertible Preferred Stock) and 10,209,277 Shares
outstanding after the Offering. Shares of Common Stock subject to the
options currently exercisable, or exercisable within 60 days after June 30,
1997, are deemed outstanding for computing the percentage ownership of the
person holding such options, but are not deemed outstanding for computing
the percentage ownership of any other person.

(2) Mr. Globerman owns all of such shares through Globerman Engineering Ltd., a
company organized under the laws of the State of Israel, of which Mr.
Globerman and his brother are the sole shareholders. Does not include
156,000 shares of Common Stock owned by Benjamin Globerman, Mr. Globerman's
brother, and 15,600 shares of Common Stock owned by Arie Spectorovsky, Mr.
Globerman's cousin, beneficial ownership of all such shares being disclaimed
by Mr. Globerman. Mr. Globerman's address is care of Influence Medical
Technologies, Ltd., Abba Hillel 14, Ramat Gan 52506, Israel.

(3) Dr. Beyar owns all of such shares through UroTek Ltd., a company organized
under the laws of the State of Israel, of which Dr. Beyar and his wife are
the sole shareholders. Does not include 312,000 shares of Common Stock
beneficially owned by Raphael Beyar, Dr. Beyar's brother, 15,600 shares of
Common Stock owned by Foster Padway, Dr. Beyar's brother-in-law, and 15,600
shares of Common Stock owned by Meyer Bachar, Dr. Beyar's cousin, beneficial
ownership of all such shares being disclaimed by Dr. Beyar. Dr. Beyar's
address is c/o Influence Medical Technologies, Ltd., Abba Hillel 14, Ramat
Gan 52506, Israel.

(4) Does not include 7,800 shares of Common Stock held by Aron Pell, Mr. Pell's
brother, 15,600 shares of Common Stock held by Norman Pell, Mr. Pell's
father, 156,000 shares of Common Stock held by Jessica H. Pell, Mr. Pell's
daughter and 156,000 shares of Common Stock held by Phyllis L. Pell, Mr.
Pell's wife as custodian for Candice Pell, their daughter, beneficial
ownership of all such shares being disclaimed by Lewis C. Pell. Mr. Pell's
address is 40 Ramland Road South, Suite 18, Orangeburg, New York 10962.

(5) Does not include 156,000 Shares held by Hidetoshi Oneda and 156,000 Shares
held by Nami Oneda, Mr. Oneda's son and daughter, respectively. Mr. Oneda's
address is 40 Ramland Road South, Orangeburg, New York 10962.

(6) Medtronic Asset Management Inc. is a wholly owned subsidiary of Medtronic,
Inc., whose address is 7000 Central Avenue N.E., Minneapolis, Minnesota
55432.

(7) Including options to purchase 163,800 shares of Common Stock exercisable
within 60 days of June 30, 1997. Dr. Bick's address is care of the Company
at 601 Montgomery Street, Suite 845, San Francisco, California 94111.

(8) Includes options held by Dr. Bick, as described in footnote (7).

55
<PAGE> 57

CERTAIN TRANSACTIONS

In connection with the founding of the Company, NMB Medical Applications
Ltd. ("NMB"), a company controlled by Oren Globerman and Dr. Mordechay Beyar,
founders, directors and principal stockholders of the Company, transferred
certain of the Company's core technology to the Company in exchange for
$300,000. In March 1995, the Company paid NMB $26,500 to reimburse NMB for
development expenditures related to additional technology transferred to the
Company. During 1995, the Company purchased equipment from NMB for $25,000. From
March 1995 until June 30, 1996, Influence paid NMB a consulting fee of $7,000
per month principally for the services of Dr. Beyar and Mr. Globerman, who
received no direct compensation from the Company. Dr. Beyar and Mr. Globerman
each entered into agreements with the Company in August 1996 pursuant to which
each was to receive an annual salary of $150,000. At the subsequent request of
Dr. Beyar and Mr. Globerman, the Company has fulfilled its obligations under the
agreements by continuing to pay NMB the amounts due Dr. Beyar and Mr. Globerman
under such agreements.

During 1995, the Company sold an aggregate of 713,000 shares of Series A
Convertible Preferred Stock to investors at a purchase price of $5.00 per share.
Each share of Series A Convertible Preferred Stock is convertible into 1.56
shares of Common Stock and has a liquidation value of $5.00 per share. In
September 1996, the Company received stockholder approval of an amendment to the
Series A Convertible Preferred Stock to provide for the automatic conversion of
the Series A Convertible Preferred Stock prior to completion of a public
offering.

On September 20, 1995, the Company repurchased 62,400 shares of Common
Stock at a price of $3.21 per share from each of Mordechay Beyar, Oren Globerman
and Ze'ev Sohn, executive officers of the Company.

Mr. Lewis C. Pell, the Chairman of the Board of Directors of Influence,
made loans to Influence on June 10, August 14, and November 7, 1996, in the
aggregate amount of $3 million. All outstanding principal and interest were
repaid to Mr. Pell on December 18, 1996. In April 1996, the Company entered into
an agreement with Jessco Medical Supply Company ("Jessco"), a company owned by
Mr. Pell. Under the agreement the Company pays $2,500 per month to Jessco for
consulting services. During 1996, the Company paid $22,500 to Jessco for such
services. The Company believes that such transactions were on terms no less
favorable to the Company than those obtainable from a third party.

Medtronic became a shareholder of the Company in connection with an
agreement, dated November 10, 1996 (the "Medtronic Agreement") between
Medtronic, the Company and substantially all of the stockholders of the Company.
Under the terms of the Medtronic Agreement, Medtronic received, in December
1996, an option to acquire substantially all of the shares of common and
preferred stock of the Company for approximately $180 million, or for
approximately $22 per share on a fully diluted basis. Pursuant to the Medtronic
Agreement, Medtronic invested $20 million in the Company and received a
convertible debenture of the Company (the "Debenture"). Medtronic's option to
acquire the Company expired unexercised on June 10, 1997. Pursuant to the terms
of the Debenture, all outstanding principal and accrued interest on June 10,
1997, which amounted to $20,837,808, automatically converted into Common Stock
at a conversion price of $49.64 per share, which resulted in the issuance to
Medtronic of 419,787 shares, or approximately 5.5% of the outstanding Common
Stock of the Company prior to the completion of the Offering.

The Company has agreed pursuant to the Debenture to prepare and file under
the Securities Act of 1933 (the "Securities Act") a registration statement
covering the offer and sale of Medtronic's shares of Common Stock, upon the
request of Medtronic at any time six months following the completion of the
Offering. In addition, the Company has agreed to include Medtronic's shares in
any registration statement (other than the registration statement of which this
Prospectus is a part) filed by the Company under the Securities Act. See "Shares
Eligible for Future Sale."

Certain technology related to In-Probe is licensed to the Company by one of
its inventors. Pursuant to that license, the inventor is entitled to a royalty
of 3% of In-Probe sales. The inventor retains the right to sell the device in
countries in which the Company has not engaged a distributor. The Company and
the inventor

56
<PAGE> 58

have an agreement in principle that the inventor will assign all his rights in
In-Probe to the Company in exchange for options to purchase 20,000 shares of
Common Stock at the initial public offering price.

For a description of certain employment agreements, see
"Management -- Employment Agreements."

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of Influence consists of 30,000,000 shares of
Common Stock, $0.001 par value per share, and 850,000 shares of Preferred Stock,
$0.01 par value per share. Prior to the Offering, there were outstanding an
aggregate of 6,596,997 shares of Common Stock and 713,000 shares of Series A
Convertible Preferred Stock which will convert into 1,112,280 shares of Common
Stock prior to the closing of the Offering.

The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of Influence, Inc.'s Second Amended and
Restated Certificate of Incorporation (the "Certificate") which is included as
an exhibit to the Registration Statement, and by the provisions of applicable
law.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters
to be voted on by stockholders. Voting rights are not cumulative, with the
result that holders of more than 50% of the shares of Common Stock are able to
elect all of the Directors. Holders of Common Stock are entitled to receive
dividends, when, as and if declared by the Board of Directors in its discretion
out of funds legally available therefor. See "Dividend Policy." The holders of
Common Stock are entitled to receive on a pro rata basis all assets remaining
for distribution to stockholders, subject to the rights of any Preferred Stock
outstanding, upon liquidation or dissolution of the Company. The Common Stock
does not have preemptive or other subscription rights, any conversion rights or
any redemption or sinking fund provisions. The outstanding shares of Common
Stock are, and the shares of Common Stock offered hereby will be when sold,
validly issued, fully paid and nonassessable.

PREFERRED STOCK

Upon the closing of the Offering, the Board of Directors will have the
authority to issue 850,000 shares of Preferred Stock in one or more series and
to fix the relative rights, preferences, privileges, qualifications, limitations
and restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the stockholders. The Board of
Directors could, without the approval of the stockholders, issue Preferred Stock
having voting or conversion rights that could adversely affect the voting power
of the holders of Common Stock, and the issuance of Preferred Stock could be
used, under certain circumstances, to render more difficult or discourage a
hostile takeover of the Company. The Company has no present plans to issue any
shares of Preferred Stock.

LIMITATION OF LIABILITY

The Certificate contains provisions which stipulate that a director will
not be personally liable for monetary damages to the Company or its shareholders
which result from breaches of a director's fiduciary duty other than liability
for breaches of the duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, violations
under Section 174 of the Delaware General Corporation Law or for any transaction
from which the director derived improper personal benefit. Further, the
Certificate provides generally for indemnification of the directors and officers
of the Company to the fullest extent permitted under Delaware law, and permits
indemnification for all other persons whom the Company is permitted to
indemnify. Management believes that such provisions are necessary to attract and
retain qualified directors and officers.

57
<PAGE> 59

CERTAIN STATUTORY PROVISIONS

In addition to the directors' ability to issue shares of Preferred Stock in
one or more series, certain provisions of Delaware law are commonly considered
to have an anti-takeover effect. The Company is subject to the provisions of
Section 203 of the Delaware General Corporation Law. In general, the statute
prohibits a publicly held Delaware corporation from engaging in a "business
combination" (which includes a wide range of transactions) with an "interested
stockholder" (a stockholder who has acquired more than 15% but less than 85% of
the outstanding voting shares of a corporation which is subject to the statute)
for a period of three years subsequent to the date on which the stockholder
became an "interested stockholder." The prohibition does not apply if (1) prior
to the completion of the three year period, the corporation's Board of Directors
approved the transaction through which the stockholder became an "interested
stockholder" or (2) the "business combination" is approved by the corporation's
Board of Directors and is authorized by a vote of at least two-thirds of the
outstanding stock of the corporation not owned by the "interested stockholder."

A Delaware corporation may "opt out" of the Anti-Takeover Law with an
express provision either in its original certificate of incorporation or in its
certificate of incorporation or by-laws resulting from a stockholders' amendment
approved by at least a majority of the outstanding voting shares. The Company is
a Delaware corporation that is subject to the Anti-Takeover Law and has not
"opted out" of its provisions.

The foregoing provisions of Delaware law and the Company's Certificate and
Bylaws could have the effect of discouraging others from attempting hostile
takeovers of the Company and, as a consequence, they may also inhibit temporary
fluctuations in the market price of the Common Stock that might result from
actual or rumored hostile takeover attempts. Such provisions may also have the
effect of preventing changes in the management of the Company. It is possible
that such provisions could make it more difficult to accomplish transactions
which stockholders may otherwise deem to be in their best interests.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock will be .

58
<PAGE> 60

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price of
the Common Stock prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could adversely affect
prevailing market prices and the ability of the Company to raise equity capital
in the future. See "Underwriting."

Upon consummation of the Offering, 10,209,277 shares of Common Stock will
be outstanding (assuming no exercise of the Underwriters' over-allotment
option). The 2,500,000 Shares of Common Stock sold in the Offering will be
freely tradable within the public market without restriction or further
registration under the Securities Act, except for any shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 ("Rule 144")
promulgated under the Securities Act. The remaining 7,709,277 outstanding shares
of Common Stock are deemed to be "restricted securities" within the meaning of
Rule 144 and may be publicly resold only if registered under the Securities Act
or sold in accordance with an eligible exemption from registration, such as Rule
144.

The Company, its executive officers and directors and certain stockholders
of Influence, Inc. holding an aggregate of 5,075,997 shares of Common Stock have
agreed that, for a period of 180 days after the date of this Prospectus, they
will not, directly or indirectly, offer, sell, contract to sell, grant any
option to sell or otherwise dispose of, directly or indirectly, any shares of
Common Stock or securities convertible into or exchangeable for, or any rights
to purchase or acquire, Common Stock, without the prior written consent of
Montgomery Securities. Montgomery Securities, in its sole discretion and at any
time without notice, may release all or any portion of the securities subject to
the 180-day lock-up agreement.

There are currently outstanding options to purchase 1,022,346 shares of
Common Stock, all of which will be subject to restriction on transfer for at
least 180 days from the date of this Prospectus. The Company may in the future
cause the shares issuable pursuant to stock options granted to employees and
directors of the Company to be registered under the Securities Act. See
"Management -- Stock Option Plans."

Upon consummation of the Offering, 2,633,280 shares of Common Stock will be
eligible for public resale, subject in some cases to volume limitations pursuant
to Rule 144. Upon expiration of the 180-day lock-up agreements, approximately
4,656,210 additional shares of Common Stock will become eligible for public
resale, subject in some cases to volume limitations pursuant to Rule 144. The
remaining 419,787 shares held by Medtronic will become eligible for public
resale in June 1998, subject to volume limitations.

The Company has agreed pursuant to the Debenture issued to Medtronic to
prepare and file under the Securities Act a registration statement covering a
proposed offer and sale of Medtronic's shares of Common Stock, upon the request
of Medtronic at any time beginning six months following the completion of the
Offering. In addition, the Company has agreed to include Medtronic's shares in
any registration statement (other than the registration statement of which this
Prospectus is a part) filed by the Company under the Securities Act.

In general, under Rule 144, a person (including an "affiliate," as that
term is defined below) who has been deemed to have beneficially owned restricted
securities (as defined in Rule 144) for at least one year from the date such
restricted securities were acquired from Influence or an affiliate, is entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of one percent of the then-outstanding number of shares of Influence
or the average weekly trading volume of the shares on the Nasdaq National Market
during the four calendar weeks preceding the date on which notice of such sale
was filed under Rule 144. A person (or persons whose shares are required to be
aggregated) who is not deemed an "affiliate" of Influence and who has
beneficially owned shares for at least two years, is entitled to sell such
shares under Rule 144 without regard to the volume limitations described above.
Affiliates continue to be subject to such limitations. As defined in Rule 144,
an "affiliate" of an issuer is a person that directly, or indirectly through one
or more intermediaries, controls or is controlled by, or is under common control
with, such issuer. Sales under Rule 144 are also subject to certain provisions
relating to the manner of sale, notice of sale and the availability of current
public information about the Company.

59
<PAGE> 61

An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non-Affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this Prospectus. In addition, non-Affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provision of
Rule 144.

60
<PAGE> 62

ISRAELI TAXATION AND INVESTMENT PROGRAMS

The following is a summary of the current tax structure applicable to
companies in Israel, with special reference to its effect on the Company, and
certain Israeli Government programs benefitting the Company. The following also
contains a discussion of certain Israeli tax consequences to persons purchasing
the Shares offered hereby. To the extent that the discussion is based on new tax
legislation which has not been subject to judicial or administrative
interpretation, there can be no assurance that the views expressed in the
discussion will be accepted by the taxing authorities in question. In addition,
reductions have been proposed in certain Government benefit programs discussed
herein, and there can be no assurance that such benefits will continue at their
current levels, or at all. The discussion should not be construed as legal or
professional tax advice and is not exhaustive of all possible tax
considerations.

GENERAL ISRAELI CORPORATE TAX STRUCTURE

Income of the Company's wholly-owned Israeli subsidiary, IMT, will be
subject to Israeli tax. The corporate tax rate in Israel is 36%. Nevertheless,
the effective tax rate payable by a company which derives income from an
"Approved Enterprise" may be considerably less. IMT's Israeli manufacturing
facility was granted Approved Enterprise status. See "-- Law for the
Encouragement of Capital Investments, 1959" below.

LAW FOR THE ENCOURAGEMENT OF CAPITAL INVESTMENTS, 1959

General

The Law for the Encouragement of Capital Investments, 1959 (the "Investment
Law") provides that capital investments in a production facility (or other
eligible assets) may, upon application to the Israel Investment Center, be
designated as an Approved Enterprise. Each certificate of approval for an
Approved Enterprise relates to a specific investment program in the Approved
Enterprise, delineated both by the financial scope of the investment and by the
physical characteristics of the facility or the asset. The tax benefits derived
from any such certificate of approval relate only to taxable profits
attributable to the specific Approved Enterprise. An Approved Enterprise is
entitled to certain benefits, including Israeli Government cash grants and tax
benefits. The Company's manufacturing facility in Israel was granted Approved
Enterprise status in June 1996. IMT has requested that certain research and
development and manufacturing equipment, which was acquired before the Approved
Enterprise status was granted, be neutralized for determining IMT's taxable
income. Management expects to receive such approval in the near future.

Tax Benefits

Taxable income derived from an Approved Enterprise is subject to a reduced
corporate tax rate of 25%. Such income is eligible for further reductions in tax
rates depending on the percentage of the foreign investment in the company's
share capital (conferring rights to profits, voting and appointment of
directors) and of its combined share and loan capital which is owned by
non-Israeli residents. The tax rate is 20% if the foreign investment is 49% or
more but less than 74%, 15% if the foreign investment is 74% or more but less
than 90%; and 10% if the foreign investment is 90% or more. These tax benefits
are granted for a limited period until the earlier of (i) seven years (or 10
years for companies which are at least 25% foreign owned) from the first year in
which the Approved Enterprise has taxable income, (ii) 12 years from
commencement of production, and (iii) 14 years from the date of approval of the
Approved Enterprise status. For companies, such as the Company's Israeli
subsidiary, whose foreign shareholding exceeds 25%, Approved Enterprise status
creates entitlement to reduced tax rates for a period not to exceed 10 tax years
rather than the maximum seven tax years applicable to companies without foreign
investment. There can be no assurance, however, that the provisions of the law
will not change.

A company that received Approved Enterprise status after April 1, 1986 may
elect to receive grants under the Investment Law or, in lieu of such grants, to
participate in an alternative benefits program (the "Alternative Benefits
Program"), under which the undistributed income from the Approved Enterprise is
fully exempt from Corporate Tax for a defined period of time. The period of tax
exemption ranges between two and

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ten years, depending upon the location within Israel of the Approved Enterprise
and the type of the Approved Enterprise. On expiration of the exemption period,
the Approved Enterprise would be eligible for beneficial tax rates under the
Investment Law for the remainder, if any, of the otherwise applicable benefits
period.

The Company's manufacturing facility was granted Approved Enterprise status
under the Investment Law, and the Company has elected the Alternative Benefits
Program with regard to such approvals. Subject to compliance with applicable
requirements, income derived from the Company's Approved Enterprise facility
will be tax exempt for a two year period after the Company first has taxable
income, and will be subject to a reduced rate (depending upon the level of
foreign investment) for the following eight years. The Company received approval
for its original Approved Enterprise application, which was for its facility
located in Ramat Gan. The Company plans to move to a larger facility in a
different location, Herzliya, in the fourth quarter of 1997, and has requested
an approval from the Investment Center to transfer the Approved Enterprise
status to the new facility. The Company has not yet received a reply from the
Investment Center. If the Investment Center recognizes the Herzliya facility as
being in compliance with the related Approved Enterprise and grants the approval
authorizing the Company to move, then income derived from the Herzliya facility
would be tax exempt for a period of two years after the Company first has
taxable income, and subject to a reduced rate for the following year (depending
upon the level of foreign investment). If the request is not approved, the
Company may be subject to income tax at the regular 36% rate. The failure of the
Investment Center to recognize the implementation of the Herzliya facility as
being in compliance with the related Approved Enterprise could have a material
adverse effect on the Company. See "Risk Factors -- Principal Subsidiary's
Location in Israel."

The certificate of approval for the Company's Approved Enterprise relates
to an investment program of $1,120,000 in manufacturing-related fixed assets.
Such approval is conditioned upon the investment taking place by December 30,
1998, and upon an additional equity investment in IMT by Influence of 30% of the
investment program ($336,000).

A company that has elected to participate in the Alternative Benefits
Program and that subsequently pays a dividend out of the income derived from the
Approved Enterprise during the tax exemption period will be subject to corporate
tax in respect of the amount distributed (including the tax thereon) at the rate
that would have been applicable had the company not elected the Alternative
Benefits Program. The dividend recipient is taxed at the reduced rate of 15%
applicable to dividends from Approved Enterprises if the dividend is distributed
within 12 years after the tax exemption period. In the case of a company with
over 25% foreign shareholding (as defined by law), the 12-year limitation on
reduced withholding tax on dividends does not apply. This tax may be withheld by
the company at source, regardless of whether the dividend is converted into
foreign currency. See "Risk Factors -- Absence of Dividends" and "-- Capital
Gain and Income Taxes Applicable to Non-Israeli Shareholders."

If only a part of a company's taxable income is derived from an Approved
Enterprise or if a company operates under more than one approval, its effective
corporate tax rate is a weighted combination of the various applicable rates.

Other Benefits

An Approved Enterprise is also entitled to other incentives from the
Israeli Government, whether or not the Alternative Benefits Program is elected.
These include accelerated depreciation on property and equipment, generally
ranging from 200% (in respect of equipment) to 400% (in respect of buildings) of
the ordinary depreciation rates (and not special depreciation rates, see "Law of
Encouragement of Industry (Taxes), 1969") during the first five tax years of the
operation of these assets, subject to a ceiling of 20% per year with respect to
depreciation on buildings.

The benefits available to an Approved Enterprise are conditional upon the
fulfillment of certain conditions stipulated in the Investment Law and its
regulations and the criteria set forth in the certificate of approval, including
meeting certain export requirements. In the event that these conditions are
violated, in whole or in part, the Company's Israeli subsidiary would be
required to refund the amount of benefits, with the addition of the Israeli CPI
linkage differences and interest.

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<PAGE> 64

LAW FOR THE ENCOURAGEMENT OF INDUSTRY (TAXES), 1969

Under the Law for the Encouragement of Industry (Taxes), 1969 (the
"Industry Encouragement Law"), a company qualifies as an "Industrial Company" if
it is resident in Israel and at least 90% of its income in a given tax year
(exclusive of income from certain specified sources) is derived from Industrial
Enterprises owned by that company. An "Industrial Enterprise" is defined as an
enterprise whose principal activity in a particular tax year is industrial
manufacturing.

Pursuant to the Industry Encouragement Law, an Industrial Company is
entitled, among other things, to deduct the purchase price of patents or certain
other intangible property rights (other than goodwill) over a period of eight
years beginning with the year in which such rights were first used.

Under certain income tax regulations, special depreciation rates have been
determined for machinery, equipment and buildings used by an Industrial
Enterprise. These rates differ based on factors including the date of
commencement of operation and the number of work shifts. An Industrial Company
owning an Approved Enterprise may choose between the above depreciation rates
and the depreciation rates available to Approved Enterprises.

Qualification as an Industrial Company under the Industry Encouragement Law
is not conditioned upon the receipt of prior approval from any Israeli
Government authority. Although the Company believes that it qualifies as an
Industrial Company, no assurance can be given that the Company's Israeli
subsidiary actually so qualifies or will in the future be able to avail itself
of any benefits available to companies so qualifying.

TAXATION UNDER INFLATIONARY CONDITIONS

The Income Tax (Inflationary Adjustments) Law, 1985 (the "Inflationary
Adjustments Law") attempts to overcome some of the problems presented to a
traditional tax system by an economy experiencing rapid inflation, which was the
case in Israel at the time the law was enacted. Generally, the Inflationary
Adjustments Law provides significant tax deductions and adjustments to
depreciation methods and tax loss carryforwards to compensate for loss of value
resulting from an inflationary economy. The Company's Israeli subsidiary's
taxable income is determined under this law.

The Israeli Income Tax Ordinance and the Inflationary Adjustments Law allow
"Foreign-Invested Companies," which maintain their accounts in U.S. dollars in
compliance with regulations published by the Israeli Minister of Finance, to
base their tax returns on the operating results as reflected in the dollar
financial statements or to adjust their tax returns based on exchange rate
changes rather than changes in the Israeli CPI (in lieu of the principles set
forth by the Inflationary Adjustments Law). For these purposes, a Foreign-
Invested Company is a company, like the Company's subsidiary, more than 25% of
the share capital of which (in terms of rights to profits, voting and
appointment of directors) and of the combined share and loan capital of which is
held by persons who are not residents of Israel. From inception, the Company's
Israeli subsidiary has measured its results for tax purposes on the basis of the
changes in the NIS/U.S. dollar exchange rate.

TAX BENEFITS AND GOVERNMENT SUPPORT FOR RESEARCH AND DEVELOPMENT

Under the Law for the Encouragement of Industrial Research and Development,
1984 (the "Research Law") research and development programs approved by a
research committee are eligible for grants or loans upon meeting certain
criteria against payment of royalties from the sale of the product developed in
accordance with the program. Regulations promulgated under the Research Law
generally provide for the payment of royalties to the Office of the Chief
Scientist ("OCS") ranging from 3% to 5% on sales of products developed as a
result of a research project so funded until 100% of the dollar-linked grant is
repaid. The Research Law requires that the manufacture of any product developed
as a result of research and development funded by the Israeli Government take
place in Israel. Under the regulations, if the Chief Scientist permits the
manufacture of any such product outside of Israel, the royalty rate increases
substantially, to approximately 33% or higher. In addition, the total amount to
be repaid to the OCS is adjusted to 120%, 150% or 300% of the grant if the
manufacturing volume that is performed in Israel is more than 50%, between 10%
and 50% or less than 10%, respectively. The Research Law also provides that
know-how from the research and development

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<PAGE> 65

which is used to produce the project may not be transferred to third parties
without the approval of a research committee. Such approval is not required for
the export of any products resulting from such research or development.

Israeli tax law allows, under certain conditions, a tax deduction in the
year incurred for expenditures (including depreciation on capital expenditures)
on scientific research and development, if the expenditures are approved by the
relevant Israeli Government Ministry (determined by the field of research) and
the research and development is for the promotion of the enterprise and is
carried out by or on behalf of the company seeking such deduction. Expenditures
not so approved are deductible over a three-year period. However, expenditures
made out of proceeds made available to the Company through Government grants are
not deductible, according to Israeli Supreme Court decisions.

The Israeli authorities have indicated that the government may reduce or
abolish OCS grants in the future. The Company has never applied for any grants
from the Office of the Chief Scientist, nor has the Company applied for
accelerated depreciation of any research and development expenditures.

CAPITAL GAIN AND INCOME TAXES APPLICABLE TO NON-ISRAELI SHAREHOLDERS

Israeli law generally imposes a capital gains tax on the sale of securities
and any other capital asset. The basic tax rate applicable to corporations is
36%. The maximum tax rate for individuals is 50%. These rates are subject to the
provisions of any applicable bilateral double taxation treaty. The Convention
between the Government of the State of Israel and the Government of the United
States of America With Respect to Taxes on Income (the "Treaty") governs double
taxation between the United States and Israel.

Under the Treaty, dividends of an Israeli company derived from the income
of an Approved Enterprise will be subject to a 15% dividend withholding tax. The
Treaty further provides that a 12.5% Israeli dividend withholding tax would
apply to dividends paid to a U.S. corporation owning 10% or more of an Israeli
company's voting stock for, in general, the current tax year and the preceding
tax year of the Israeli company. The lower 12.5% rate applies only on dividends
from income not derived from an Approved Enterprise in the applicable period and
does not apply if the Company has certain amounts of passive income.

Pursuant to the Treaty, the sale, exchange or disposition of shares of an
Israeli corporation by a person who qualifies as a resident of the United States
within the meaning of the Treaty and who is entitled to claim the benefits
afforded to such residents under the Treaty ("Treaty U.S. Resident") will not be
subject to the Israeli capital gains tax unless such Treaty U.S. Resident holds,
directly or indirectly, shares representing 10% or more of the voting power of
such company during any part of the 12-month period preceding such sale,
exchange or disposition. However, under the Treaty, such Treaty U.S. Resident
would be permitted to claim a credit for such taxes against the U.S. income tax
imposed on any gain from such sale, exchange or disposition, subject to the
limitations applicable to foreign tax credits. In addition, the Treaty restricts
taxation in Israel to the sale, exchange or other disposition of stock directly
held in an Israeli corporation. Therefore, a sale, exchange or disposition of
shares of Common Stock sold in the Offering by a Treaty U.S. Resident should not
be subject to tax in Israel.

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UNITED STATES FEDERAL INCOME TAXATION

The following general discussion sets forth certain United States federal
income tax consequences applicable to the Company and its shareholders depending
on the status of either the Company or IMT as a Personal Holding Company,
Foreign Personal Holding Company, Controlled Foreign Corporation and Passive
Foreign Investment Company. The discussion should not be construed as legal or
professional advice and is not exhaustive of all possible tax considerations
that may be relevant to a decision whether to invest in the Shares. The precise
tax consequences of an investment in the Shares will vary depending on an
investor's particular position. In particular, taxes may be imposed on certain
investors in the Shares by jurisdictions other than the United States and Israel
(including states and localities of the United States), and certain investors
may be subject to special taxes in connection with their investment in the
Shares (including United States federal alternative minimum taxes).

The summary of United States income tax laws set out below is based on the
Internal Revenue Code of 1986, as amended, Treasury regulations, judicial
decisions, published positions of the Internal Revenue Service and the Treaty as
of the date hereof and is subject to any changes occurring after that date.
Prospective investors are urged to consult with their own tax advisors before
making an investment in Shares.

IN GENERAL

The Company will be subject to United States federal income tax at rates
applicable to regular corporations (currently ranging up to 35%). If the Company
receives distributions from IMT, the Company will be entitled, subject to
certain limitations, to a credit for Israeli taxes imposed on the Company and
withheld with respect to such distributions, and may also be entitled in certain
circumstances to a credit for Israeli income taxes paid by IMT. In certain
circumstances, the combined Israeli and United States tax burden on the Company
may exceed the maximum United States tax rates described above.

PERSONAL HOLDING COMPANY

If more than 50% of the Company's stock is owned directly, indirectly or by
application of certain attribution rules, by five or fewer individuals
(including certain tax-exempt organizations, certain trusts, and citizens or
residents of the United States or another country) at any time during the last
half of the Company's taxable year, and at least 60% of the Company's adjusted
ordinary gross income for the taxable year is personal holding company income,
the Company will be subject to United States personal holding company tax, in
addition to its regular income tax, at a current rate of 39.6% on its
undistributed personal holding company income for the taxable year.

For this purpose, the "personal holding company income" of a corporation is
the portion of the corporation's adjusted ordinary gross income that consists of
certain types of passive income, including certain dividends, interest,
annuities, rents and royalties (even if the rents and royalties are derived from
the active conduct of a trade or business). The "undistributed personal holding
company income" of a corporation is based on its net taxable income (which
excludes, for example, income exempt from regular federal income tax), adjusted
to reflect (among other things) deductions for federal income taxes and
dividends to shareholders paid by the Company.

The Company believes that it is currently a personal holding company. It is
unclear, however, whether the Company will be a personal holding company after
the Offering and no assurance can be given that it will not be.

FOREIGN PERSONAL HOLDING COMPANY

A foreign corporation (such as IMT) is treated as a foreign personal
holding company (a "FPHC") if more than 50% of its stock is owned directly,
indirectly (such as through the Company) or by application of certain
attribution rules, by five or fewer individuals who are United States citizens
or residents and at least 60% (50%, in certain circumstances) of its gross
income is foreign personal holding company income. Each direct United States
stockholder of a FPHC (including the Company, if IMT is a FPHC) is generally
required to include in its income as a dividend an amount equal to its pro rata
share of the FPHC's undistributed foreign personal holding company income for
the year. This amount is subject to United States

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income tax (without any credit for foreign taxes paid for the FPHC) and, if the
stockholder is a personal holding company, personal holding company tax. If a
corporation ceases to satisfy the FPHC stock ownership test on a date prior to
the end of a taxable year due to changes in its stock ownership, its direct
United States stockholders are required to include only a proportion of its
undistributed foreign personal holding company income for the year, based on the
period prior to such date.

For this purpose, a corporation's "foreign personal holding company income"
and "undistributed foreign personal holding company income" are, with certain
exceptions, generally determined in the same manner as the corporation's
personal holding company income and undistributed personal holding company
income, respectively, except that such amounts are not limited to United States
source income.

Based on the current ownership of the Company, the Company is not presently
a FPHC and does not expect to become a FPHC after the Offering.

CONTROLLED FOREIGN CORPORATION

IMT is a controlled foreign corporation (a "CFC") for United States federal
income tax purposes and it is anticipated that IMT will continue to be a CFC in
the foreseable future. As a result, the Company will be required to include in
its income its pro rata share of IMT's subpart F income, and may also be
required to include in its income certain additional amounts if IMT has
investments in United States property. For this purpose "subpart F income"
includes certain income derived from transactions with related parties and
certain types of passive income such as dividends, interest, rents, royalties,
and annuities, but does not include, among other things, rents and royalties
derived from transactions with unrelated parties in the active conduct of a
trade or business.

The Company does not currently expect that IMT will have any material
amount of subpart F income or any material investments in United States
property. However, no assurance can be given in this regard.

PASSIVE FOREIGN INVESTMENT COMPANY

A foreign corporation is treated as a passive foreign investment company (a
"PFIC") if 75% or more of its income is passive income, or the average
percentage of its assets (based upon the adjusted basis of such assets) which
produces passive income or are held for the production of passive income is at
least 50%. For this purpose passive income generally includes dividends,
interest, rents, royalties, and annuities, but does not include, among other
things, rents and royalties derived from transactions with unrelated parties in
the active conduct of a trade or business. In addition, a foreign corporation
which is a CFC will not be treated as a PFIC with respect to a United States
Shareholder (defined generally in the Code as a United States person who owns or
is treated as owning 10% or more of the voting stock of such foreign
corporation) during the portion of such shareholder's holding period which is
after December 31, 1997.

Each United States shareholder of a PFIC is required to pay, in addition to
regular federal income tax, a deferred tax amount if the shareholder disposes of
any stock in the PFIC or receives an excess distribution from the PFIC. For this
purpose, a distribution is an "excess distribution" to the extent that it,
combined with other distributions received in the same taxable year, exceeds
125% of the average amount received by the shareholder during the three
preceding taxable years (or, if shorter, the period for which the shareholder
has held the stock).

If a United States shareholder of a PFIC makes an election, the PFIC will
be treated as a qualified electing fund (a "QEF") with respect to the
shareholder. In that case, the deferred tax amount will not be required to be
paid by the shareholder, but the shareholder will be required to include in
income its pro rata share of the QEF's earnings and profits for the year.

The Company believes that IMT will not be a PFIC at the time of the
Offering. In view of the anticipated composition of IMT's assets and income, and
although no assurance can be given in this regard, the Company does not
currently expect that IMT will become a PFIC following the Offering. In
addition, assuming that IMT continues to be a CFC and that the Company continues
to be a United States Shareholder (as defined in the Code) of IMT, IMT will not
be a PFIC for the Company's holding period which is after December 31, 1997.

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UNDERWRITING

The underwriters named below (the "Underwriters"), represented by
Montgomery Securities, Robertson, Stephens & Company LLC and UBS Securities LLC
(the "Representatives"), have severally agreed, subject to the terms and
conditions set forth in the Underwriting Agreement, to purchase from the Company
the number of shares of Common Stock indicated below opposite their respective
names at the initial public offering price less the underwriting discount set
forth on the cover page of this Prospectus. The Underwriting Agreement provides
that the obligations of the Underwriters are subject to certain conditions
precedent, and that the Underwriters are committed to purchase all of the shares
if they purchase any.

<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------- --------
<S> <C>
Montgomery Securities..............................................................
Robertson, Stephens & Company LLC..................................................
UBS Securities LLC.................................................................
-------
Total....................................................................
=======
</TABLE>

The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $ per share; and the Underwriters may
allow, and such dealers may reallow, a concession of not more than $
per share to certain other dealers. After the Offering, the offering price and
other selling terms may be changed by the Representatives. The Common Stock is
offered subject to receipt and acceptance by the Underwriters, and to certain
other conditions, including the right to reject orders in whole or in part.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a maximum
of 375,000 additional shares of Common Stock to cover over-allotments, if any,
at the same price per share as the initial shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise this option, the
Underwriters will be committed, subject to certain conditions, to purchase such
additional shares in approximately the same proportion as set forth in the above
table. The Underwriters may purchase such shares only to cover over-allotments
made in connection with the Offering.

Each director and officer of the Company and certain other of its
stockholders prior to the Offering, as well as certain other holders of options
to purchase Common Stock, who immediately following the Offering (assuming no
exercise of the over-allotment option) collectively will beneficially own
4,802,997 shares of Common Stock, have agreed not to directly or indirectly
sell, offer, contract or grant any option to sell, pledge, transfer, establish
an open put equivalent position or otherwise dispose of any rights with respect
to any shares of Common Stock, any options or warrants to purchase Common Stock,
or any securities convertible into or exchangeable for Common Stock, owned
directly by such holders or with respect to which they have the power of
disposition for a period of 180 days after the date of this Prospectus without
the prior written consent of Montgomery Securities. Montgomery Securities may,
in its sole discretion and at any time without notice, release all or any
portion of the securities subject to these lock-up agreements. In addition, the
Company has agreed not to sell, offer to sell, contract to sell or otherwise
sell or dispose of any shares of Common Stock or any rights to acquire Common
Stock, other than pursuant to its stock plans or upon the exercise of
outstanding options and warrants, for a period of 180 days after the date of
this Prospectus without the prior consent of Montgomery Securities. See "Shares
Eligible for Future Sale."

The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the Underwriters may be required
to make in respect thereof.

In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock, including over-allotment, stabilization, syndicate covering
transactions and imposition of penalty bids. In an over-allotment, the
Underwriters would not allot more

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shares of Common Stock to their customers in the aggregate than are available
for purchase by the Underwriters under the Underwriting Agreement. Stabilizing
means the placing of any bid, or the effecting of any purchase, for the purpose
of pegging, fixing or maintaining the price of a security. In a syndicate
covering transaction, the Underwriters would place a bid or effect a purchase to
reduce a short position created in connection with the Offering. Pursuant to a
penalty bid, Montgomery Securities, on behalf of the Underwriters, would be able
to reclaim a selling concession from an Underwriter if shares of Common Stock
originally sold by such Underwriter are purchased in syndicate covering
transactions. These transactions may result in the price of the Common Stock
being higher than the price that might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise, and, if commenced, may be discontinued at
any time.

The Representatives have informed the Company that the Underwriters do not
expect to make sales of Common Stock offered by this Prospectus to accounts over
which they exercise discretionary authority in excess of 5% of the number of
shares of Common Stock offered hereby.

In 1995, certain employees of Montgomery Securities and UBS Securities LLC
acquired 2,000 and 23,000 shares of Series A Convertible Preferred Stock,
respectively, for $5.00 per share, which shares are convertible into an
aggregate of 3,120 and 32,760 shares of Common Stock, respectively.

Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined by
negotiations between the Company and the Representatives. Among the factors to
be considered in such negotiations will be the history of, and the prospects
for, the Company and the industry in which it competes, an assessment of the
Company's management, the Company's past and present operations, the prospects
for future earnings of the Company, the present state of the Company's
development, the general condition of the securities markets at the time of the
Offering, the market price of and demand for publicly traded common stocks of
comparable companies in recent periods and other factors deemed relevant. The
estimated initial public offering price range set forth on the cover page of
this Prospectus is subject to change as a result of market conditions and other
factors.

The Company entered into a letter agreement with Montgomery Securities in
July 1997 pursuant to which the Company shall give Montgomery Securities the
first right of refusal to act as the Company's exclusive representative and
financial advisor in connection with any sale of the Company occurring within 12
months after the closing of the Offering.

The Company will apply to have the Common Stock listed on the Nasdaq
National Market under the symbol "INFL."

LEGAL MATTERS

The validity of the Shares offered hereby will be passed upon for the
Company by Arnold & Porter, New York, New York, and for the Underwriters by
Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.

EXPERTS

The Consolidated Financial Statements and Notes thereto as of December 31,
1995 and 1996 and for the period from inception (November 9, 1994) to December
31, 1994, for the years ended December 31, 1995 and 1996 and for the periods
from inception (November 9, 1994) to December 31, 1996, included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

Certain of the statements in this Prospectus under the captions "Risk
Factors -- Dependence upon Patents, Licenses and Proprietary Technology" and
"Business -- Patents, Licenses and Proprietary Rights" have been reviewed and
approved by Levisohn, Lerner, Berger & Langsam, New York, New York, patent
counsel to the Company, as experts on such matters, and are included herein in
reliance upon that review and approval. Andrew S. Langsam, a member of Levisohn,
Lerner, Berger & Langsam, owns 1,800 shares of

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Series A Convertible Preferred Stock which will, immediately prior to the
completion of the Offering, convert into 2,808 shares of Common Stock.

AVAILABLE INFORMATION

Influence has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the Shares being offered hereby. This Prospectus, which constitutes
part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits and schedules filed
therewith. For further information with respect to Influence and the Shares
being offered, reference is hereby made to such Registration Statement and to
the exhibits and schedules filed therewith. Statements contained in this
Prospectus regarding the contents of any agreement are not necessarily complete,
and in each instance reference is made to the copy of such agreement filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. As a result of the Offering, Influence will
become subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and in accordance therewith will be
required to file periodic reports and other information with the Commission,
subject to certain exceptions described below. The Registration Statement,
including the exhibits and schedules thereto, may be inspected without charge at
the principal office of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, or at the Regional Offices of the Commission: Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a
Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. In addition, application has been made to have the Shares
listed for quotation on the Nasdaq National Market and, if accepted for
quotation, the Registration Statement, including exhibits thereto, and reports
and other information concerning Influence may be inspected and copied at the
offices of the National Association of Securities Dealers, Inc., 9513 Key West
Avenue, Rockville, Maryland 20850.

69
<PAGE> 71

INFLUENCE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Balance Sheet............................................................ F-3
Consolidated Statement of Operations.................................................. F-4
Consolidated Statement of Stockholders' Equity (Deficit).............................. F-5
Consolidated Statement of Cash Flows.................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 72

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Influence, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows present fairly, in all material respects, the financial position of
Influence, Inc. (a development stage company) and its subsidiaries at December
31, 1995 and 1996, and the results of their operations and their cash flows for
the period from inception (November 9, 1994) through December 31, 1994, for each
of the two years in the period ended December 31, 1996 and for the period from
inception (November 9, 1994) through December 31, 1996, in conformity with
generally accepted accounting principles. 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 of these financial statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

San Jose, California
July 25, 1997, except as to Note 9,
which is as of August 6, 1997

F-2
<PAGE> 73

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY
-------------------------- JUNE 30, AT JUNE 30,
1995 1996 1997 1997
---------- ----------- ------------ ------------
(UNAUDITED) (NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $1,375,262 $16,747,000 $ 6,658,590
Short-term investments............. -- 102,583 5,294,123
Inventories (Note 3)............... -- 243,755 621,958
Other current assets............... 116,394 224,286 501,300
---------- ----------- ------------
Total current assets....... 1,491,656 17,317,624 13,075,971
Property and equipment, net (Note
3)................................. 135,246 639,797 903,893
---------- ----------- ------------
$1,626,902 $17,957,421 $ 13,979,864
========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................... $ 379,192 $ 680,207 $ 475,633
Accrued expenses (Note 3).......... 100,631 513,481 769,644
---------- ----------- ------------
Total current
liabilities.............. 479,823 1,193,688 1,245,277
Convertible debenture (Notes 4 and
8)................................. -- 20,100,000 --
Commitments and contingencies (Note
8)
Stockholders' equity (deficit):
Series A Convertible Preferred
Stock, $0.01 par value; 750,000
shares authorized; 713,000
shares issued and outstanding at
December 31, 1995 and 1996 and
June 30, 1997; no shares
outstanding pro forma........... 7,130 7,130 7,130 $ --
Common Stock, $0.001 par value;
4,800,000, 30,000,000 and
30,000,000 shares authorized at
December 31, 1995 and 1996 and
June 30, 1997, respectively;
6,138,210, 6,177,210, and
6,596,997 shares issued and
outstanding at December 31, 1995
and 1996 and June 30, 1997,
respectively 7,709,277 shares
outstanding pro forma........... 3,868 3,907 4,327 5,439
Additional paid-in capital......... 3,133,577 4,705,588 25,542,976 25,548,994
Deferred compensation.............. -- (282,718) (215,060) (215,060)
Deficit accumulated during the
development stage............... (1,997,496) (7,770,174) (12,604,786) (12,604,786)
---------- ----------- ------------ ------------
Total stockholders' equity
(deficit)................ 1,147,079 (3,336,267) 12,734,587 $ 12,734,587
---------- ----------- ------------
============
$1,626,902 $17,957,421 $ 13,979,864
========== =========== ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE> 74

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM PERIOD FROM
INCEPTION INCEPTION INCEPTION
(NOVEMBER 9, (NOVEMBER 9, (NOVEMBER 9,
1994) TO YEAR ENDED DECEMBER 31, 1994) TO SIX MONTHS ENDED JUNE 30, 1994) TO
DECEMBER 31, ------------------------- DECEMBER 31, ------------------------- JUNE 30,
1994 1995 1996 1996 1996 1997 1997
------------ ----------- ----------- ------------ ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $ -- $ -- $ -- $ -- $ -- $ 153,504 $ 153,504
Cost of goods sold.......... -- -- -- -- -- 767,671 767,671
--------- ------------ ------------ ------------ ------------ ------------ -------------
Gross margin................ -- -- -- -- -- (614,167) (614,167)
Operating expenses:
Research and
development............. 300,000 1,250,196 3,219,207 4,769,403 985,340 1,249,883 6,019,286
Sales and marketing....... -- -- 667,156 667,156 232,341 1,896,394 2,563,550
General and
administrative.......... -- 459,271 1,768,557 2,227,828 250,480 669,122 2,896,950
--------- ------------ ------------ ------------ ------------ ------------ -------------
Total operating
expenses.............. 300,000 1,709,467 5,654,920 7,664,387 1,468,161 3,815,399 11,479,786
--------- ------------ ------------ ------------ ------------ ------------ -------------
Operating loss.............. (300,000) (1,709,467) (5,654,920) (7,664,387) (1,468,161) (4,429,566) (12,093,953)
Interest income (expense),
net....................... -- 11,971 (117,758) (105,787) 3,530 (405,046) (510,833)
--------- ------------ ------------ ------------ ------------ ------------ -------------
Net loss.................... $ (300,000) $(1,697,496) $(5,772,678) $(7,770,174) $(1,464,631) $(4,834,612) $(12,604,786)
========= ============ ============ ============ ============ ============ =============
Pro forma net loss per share
(Note 2).................. $ (0.78) $ (0.65)
============ ============
Shares used in computing pro
forma net loss per share
(Note 2).................. 7,442,460 7,488,217
============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE> 75

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
SERIES A DEFICIT
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE
---------------- ------------------ PAID-IN DEFERRED NOTE DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION RECEIVABLE STAGE TOTAL
-------- ------ ---------- ------ ----------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued for
cash of $0.001 per
share................ -- $ -- 5,506,800 $3,530 $ -- $ -- $ -- $ -- $ 3,530
Common stock issued for
$0.001 per share..... -- -- 818,610 525 -- -- (525) -- --
Net loss............... -- -- -- -- -- -- -- (300,000) (300,000)
------- ------ --------- ------ ----------- --------- ----- ----------- -----------
Balance at December 31,
1994................. -- -- 6,325,410 4,055 -- -- (525) (300,000) (296,470)
Sale of Series A
Convertible Preferred
Stock for cash of
$5.00 per share...... 713,000 7,130 -- -- 3,557,870 -- -- -- 3,565,000
Cash received for note
receivable........... -- -- -- -- -- -- 525 -- 525
Issuance of stock
options in connection
with services
rendered at fair
values of $1.13 to
$1.23 per option..... -- -- -- -- 175,520 -- -- -- 175,520
Repurchase of Common
Stock for cash of
$3.21 per share...... -- -- (187,200) (187) (599,813) -- -- -- (600,000)
Net loss............... -- -- -- -- -- -- -- (1,697,496) (1,697,496)
------- ------ --------- ------ ----------- --------- ----- ----------- -----------
Balance at December 31,
1995................. 713,000 7,130 6,138,210 3,868 3,133,577 -- -- (1,997,496) 1,147,079
Issuance of
compensatory stock
options to employees
at an exercise price
of $3.21 per share... -- -- -- -- 610,000 (610,000) -- -- --
Exercise of stock
options.............. -- -- 39,000 39 124,961 -- -- -- 125,000
Issuance of stock
options in connection
with services
rendered at fair
values of $7.47 to
$10.15 per option.... -- -- -- -- 837,050 -- -- -- 837,050
Amortization of
deferred
compensation......... -- -- -- -- -- 327,282 -- -- 327,282
Net loss............... -- -- -- -- -- -- -- (5,772,678) (5,772,678)
------- ------ --------- ------ ----------- --------- ----- ----------- -----------
Balance at December 31,
1996................. 713,000 7,130 6,177,210 3,907 4,705,588 (282,718) -- (7,770,174) (3,336,267)
Amortization of
deferred compensation
(unaudited).......... -- -- -- -- -- 67,658 -- -- 67,658
Conversion of debenture
to common stock at
$49.64 per share
(unaudited).......... -- -- 419,787 420 20,837,388 -- -- -- 20,837,808
Net loss (unaudited)... -- -- -- -- -- -- -- (4,834,612) (4,834,612)
------- ------ --------- ------ ----------- --------- ----- ----------- -----------
Balance at June 30,
1997 (unaudited)..... 713,000 $7,130 6,596,997 $4,327 $25,542,976 $(215,060) $ -- $(12,604,786) $12,734,587
======= ====== ========= ====== =========== ========= ===== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE> 76

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM PERIOD FROM
INCEPTION INCEPTION INCEPTION
(NOVEMBER 9, YEAR ENDED DECEMBER 31, (NOVEMBER 9, SIX MONTHS ENDED JUNE 30, (NOVEMBER 9,
1994) TO 1994) TO 1994) TO
DECEMBER 31, ------------------------- DECEMBER 31, -------------------------- JUNE 30,
1994 1995 1996 1996 1996 1997 1997
------------ ----------- ----------- ------------ ----------- ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows used in operating
activities:
Net loss.................. $ (300,000) $(1,697,496) $(5,772,678) $(7,770,174) $(1,464,631) $ (4,834,612) $(12,604,786)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation............ -- 10,297 56,780 67,077 11,657 63,414 130,491
Interest on convertible
debenture............. 100,000 100,000 -- 737,808 837,808
Amortization of deferred
compensation.......... -- -- 327,282 327,282 188,767 67,658 394,940
Stock compensation...... -- 175,520 837,050 1,012,570 -- -- 1,012,570
Changes in assets and
liabilities:
Inventories........... -- -- (243,755) (243,755) -- (378,203) (621,958)
Other current
assets.............. -- (116,394) (107,892) (224,286) (144,536) (277,014) (501,300)
Accounts payable...... 296,470 82,722 301,015 680,207 139,005 (204,574) 475,633
Accrued expenses...... -- 100,631 412,850 513,481 4,348 256,163 769,644
--------- ----------- ----------- ----------- ----------- ----------- ------------
Net cash used in
operating
activities........ (3,530) (1,444,720) (4,089,348) (5,537,598) (1,265,390) (4,569,360) (10,106,958)
--------- ----------- ----------- ----------- ----------- ----------- ------------
Cash flows used in investing
activities:
Purchases of short-term
investments............. -- -- (102,583) (102,583) -- (5,191,540) (5,294,123)
Purchases of property and
equipment............... -- (145,543) (561,331) (706,874) (283,504) (327,510) (1,034,384)
--------- ----------- ----------- ----------- ----------- ----------- ------------
Net cash used in
investing
activities........ -- (145,543) (663,914) (809,457) (283,504) (5,519,050) (6,328,507)
--------- ----------- ----------- ----------- ----------- ----------- ------------
Cash flows from financing
activities:
Proceeds from issuance of
Common Stock............ 3,530 -- -- 3,530 -- -- 3,530
Proceeds from note
receivable.............. -- 525 -- 525 -- -- 525
Proceeds from issuance of
Series A Convertible
Preferred Stock......... -- 3,565,000 -- 3,565,000 -- -- 3,565,000
Repurchase of Common
Stock................... -- (600,000) -- (600,000) -- -- (600,000)
Proceeds from exercise of
stock options........... -- -- 125,000 125,000 -- -- 125,000
Proceeds from notes
payable to
stockholder............. -- -- 3,000,000 3,000,000 1,000,000 -- 3,000,000
Repayment of principal on
notes payable to
stockholder............. -- -- (3,000,000) (3,000,000) -- -- (3,000,000)
Proceeds from convertible
debenture............... -- -- 20,000,000 20,000,000 -- -- 20,000,000
--------- ----------- ----------- ----------- ----------- ----------- ------------
Net cash provided by
financing
activities........ 3,530 2,965,525 20,125,000 23,094,055 1,000,000 -- 23,094,055
--------- ----------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease) in
cash and cash
equivalents............... -- 1,375,262 15,371,738 16,747,000 (548,894) (10,088,410) 6,658,590
Cash and cash equivalents at
beginning of period....... -- -- 1,375,262 -- 1,375,262 16,747,000 --
--------- ----------- ----------- ----------- ----------- ----------- ------------
Cash and cash equivalents at
end of period............. $ -- $ 1,375,262 $16,747,000 $16,747,000 $ 826,368 $ 6,658,590 $ 6,658,590
========= =========== =========== =========== =========== =========== ============
Supplemental disclosure of
noncash financing
activities:
Conversion of convertible
debenture and accrued
interest into Common
Stock................... $ -- $ -- $ -- $ -- $ -- $ 20,837,808 $ 20,837,808
Supplemental cash flow
disclosure:
Interest paid............. $ -- $ -- $ 79,248 $ 79,248 $ -- $ 32,067 $ 111,315
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-7
<PAGE> 77

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND NATURE OF BUSINESS:

Influence, Inc. was incorporated in Delaware on November 9, 1994. Its
wholly-owned subsidiary, Influence Medical Technologies, Ltd. ("IMT"), an
Israeli Corporation, was incorporated on November 22, 1994 and commenced
operations on January 1, 1995. On November 7, 1996, IMT incorporated a wholly-
owned subsidiary, Influence Medical Technologies GmbH, in Germany. Influence,
Inc. and its wholly-owned subsidiaries (the "Company") are primarily engaged in
the design, development and commercialization of a disease management system of
products for the diagnosis and treatment of urinary incontinence in both women
and men. The Company's products and proposed products include diagnostic tools,
remote-controlled intraurethral valved catheter systems and proprietary surgical
tools and equipment for performing minimally invasive surgery. At December 31,
1996, the Company had no products approved by the United States Food and Drug
Administration or comparable agencies in other countries and was a development
stage enterprise. The Company's primary efforts to date have been devoted to
research and development, raising capital, acquiring equipment and initial sales
and marketing activities.

The Company has sustained net losses and negative cash flows from
operations since its inception and expects these conditions to continue for the
foreseeable future. Management believes that the aggregate amount of cash and
cash equivalents at December 31, 1996, as well as cash to be generated from
operations, will provide sufficient working capital to enable the Company to
continue to operate through June 30, 1998. However, the Company will need to
raise additional financing after June 30, 1998 through public or private equity
or debt financing, collaborative or other arrangements with corporate sources,
or other sources of financing to fund operations and fully implement its
business plan. There can be no assurance that such additional funds will be
available to the Company, or if available, on terms acceptable to management.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Influence,
Inc. and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles 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 amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

FOREIGN CURRENCY TRANSLATION

The Company and its subsidiaries consider their functional currency to be
the U.S. dollar. All of the Company's financing activity is in U.S. dollars.
Further, substantially all of the Company's revenues and purchases of materials
and components are also denominated in U.S. dollars. Accordingly, the primary
economic environment in which the Company operates is the U.S. dollar.

Monetary assets and liabilities denominated in currencies other than U.S.
dollars are remeasured using the exchange rates in effect at the balance sheet
date, while nonmonetary items are remeasured at historical rates. Remeasurement
adjustments and foreign currency transaction gains or losses are recognized in
the consolidated statement of operations. Such gains and losses were not
material for the years ended December 31, 1995 and 1996 or for the unaudited six
month periods ended June 30, 1996 and 1997.

F-8
<PAGE> 78

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The net assets of the Company's Israeli subsidiary accounted for 9%, 8% and
20% of the consolidated net assets at December 31, 1995 and 1996 and at June 30,
1997, respectively. The deficit accumulated in the development stage of the
Company's Israeli subsidiary accounted for 68%, 60% and 88% of the consolidated
deficit accumulated in the development stage at December 31, 1995 and 1996 and
at June 30, 1997, respectively.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments which have an original
maturity of three months or less to be cash equivalents. The carrying amount
reported in the consolidated balance sheet for cash and cash equivalents
approximates its fair value. Cash equivalents include time deposits of
$16,002,008 at December 31, 1996, and commercial paper and corporate obligations
of $5,980,490 at June 30, 1997 (unaudited).

FINANCIAL INSTRUMENTS

The Company accounts for its short-term investments under Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"). SFAS 115 establishes standards for
financial accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities. Each investment is classified into one of three categories:
held-to-maturity, available-for-sale or trading.

The Company's short-term investments consist of bank deposits, commercial
paper and corporate obligations. All of the Company's investment securities are
classified as available-for-sale and are stated at fair market value, which
approximates cost. The Company did not have any material realized or unrealized
gains or losses on its investments in any period presented.

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Bank deposits................................. $ -- $ 102,583 $ 1,017,022
Corporate obligations......................... -- -- 3,287,511
Commercial paper.............................. -- -- 989,590
-------- ----------
$ -- $ 102,583 $ 5,294,123
======== ==========
</TABLE>

CONCENTRATION OF RISKS

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and short-term investments. Cash equivalents and short-term investments are
placed in high credit quality instruments and their composition and maturities
are regularly monitored by management. The Company deposits most of its cash
with a single financial institution. Substantially all of the Company's cash
equivalents and short-term investments are managed by a single investment
manager.

The Company is required to purchase a certain component used with one of
its products from a sole supplier. Although there is currently only one
manufacturer of this component, management believes that other suppliers could
provide a similar component at comparable terms. However, the loss of this
supplier could delay the shipment of one of the Company's products and have a
material adverse effect on the Company's results of operations.

The Company's product development and production facilities, including its
new production facility, are located in the State of Israel, and the Company is
directly affected by the political, economic and military conditions to which
that country is subject. Accordingly, any major hostilities involving Israel or
the

F-8
<PAGE> 79

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

interruption or curtailment of trade between Israel and its present trading
partners could have a material adverse effect on the Company's business,
financial condition and results of operations.

INVENTORIES

Inventories are stated at the lower of cost, determined using the moving
average basis, or market.

PROPERTY AND EQUIPMENT

Office furniture and equipment, machinery and equipment, motor vehicles and
leasehold improvements are stated at cost, less accumulated depreciation.
Property and equipment are depreciated on a straight-line basis over their
estimated useful lives or over the life of the lease, whichever is shorter.
Useful lives range from three to twelve years for office furniture and equipment
and seven to ten years for machinery and equipment. Motor vehicles have a useful
life of seven years.

REVENUE RECOGNITION

Revenues are recognized as products are shipped.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred. All costs
associated with patents are also expensed as incurred.

PRO FORMA STOCKHOLDERS' EQUITY

If the offering contemplated by this prospectus (the "Offering") is
consummated (see Note 9), all shares of Series A Convertible Preferred Stock
outstanding will automatically convert into 1,112,280 shares of Common Stock.
The pro forma effect of this conversion has been reflected in the accompanying
unaudited balance sheet at June 30, 1997.

PRO FORMA NET LOSS PER SHARE

Pro forma net loss per share is computed using the weighted average number
of common and common equivalent shares outstanding during each period presented.
Common equivalent shares for the year ended December 31, 1996 and the six month
period ended June 30, 1997 consist of Common Stock issuable upon the conversion
of the Company's Series A Convertible Preferred Stock using the if-converted
method. Pursuant to the requirements of the Securities and Exchange Commission,
common stock equivalent shares relating to stock options issued subsequent to
August 1, 1996, using the treasury stock method and the assumed public offering
price, are included in the computation of pro forma net loss per share for all
periods presented as if they were outstanding for the entire period. The effect
of the convertible debenture has been excluded from the computation of pro forma
net loss per share as the debenture converted into shares of Common Stock at a
per share price in excess of the assumed public offering price. Earnings per
share data prior to 1996 have not been presented as such amounts are not deemed
meaningful.

INCOME TAXES

The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires that the Company recognize deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the consolidated financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined on the
basis of the difference between the income tax basis of assets and

F-9
<PAGE> 80

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

liabilities and their respective financial reporting amounts at enacted tax
rates in effect for the periods in which the differences are expected to
reverse.

STOCK-BASED COMPENSATION

During 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") was issued which requires
companies to measure employee stock compensation based using the fair value
method of accounting or to continue to apply the provisions of Accounting
Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees," and provide pro forma footnote disclosure under the fair value
method described in SFAS 123. The Company adopted SFAS 123 on January 1, 1996,
and will continue to apply the principles of APB 25, while providing the pro
forma footnote disclosure required by SFAS 123.

INTERIM FINANCIAL INFORMATION (UNAUDITED)

The financial information at June 30, 1997 and for the six month periods
ended June 30, 1996 and 1997 is unaudited. In the opinion of management, this
information has been prepared on the same basis as the audited consolidated
financial statements and includes all adjustments, consisting solely of normal
recurring adjustments, necessary for the fair statement of results for the
interim periods. The results of operations and cash flows for the period ended
June 30, 1997 are not necessarily indicative of the results for any future
period.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
SFAS 128 is effective for the Company's fiscal year ending December 31, 1997.
Under SFAS 128, primary earnings per share is replaced by basic earnings per
share and fully diluted earnings per share is replaced by diluted earnings per
share. If the Company had adopted SFAS 128 for the year ended December 31, 1996
and for the six month period ended June 30, 1997, the Company's loss per share
would have been as follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, 1997
1996 -----------
------------ (UNAUDITED)
<S> <C> <C>
Basic loss per share................................ $(0.79) $ (0.66)
Diluted loss per share.............................. $(0.79) $ (0.66)
</TABLE>

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes standards for the reporting of comprehensive income
and its components in a full set of general-purpose financial statements for
periods ending after December 15, 1997. Reclassification of financial statements
for earlier periods for comparative purposes is required. The Company will adopt
SFAS 130 in 1997 and does not expect such adoption to have a material effect on
the consolidated financial statements.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of An
Enterprise and Related Information" ("SFAS 131"). SFAS 131 revises information
regarding the reporting of operating segments. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company will adopt SFAS 131 beginning in 1998 and does not expect
such adoption to have a material effect on the consolidated financial
statements.

F-10
<PAGE> 81

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 -- BALANCE SHEET COMPONENTS:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1995 1996 1997
-------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Inventories consist of the following:
Raw materials................................... $ -- $185,890 $ 545,492
Work-in-process................................. -- 23,319 59,394
Finished goods.................................. -- 34,546 17,072
-------- -------- ----------
$ -- $243,755 $ 621,958
======== ======== =========
Property and equipment consist of the following:
Office furniture and equipment.................. $ 34,866 $184,514 $ 356,562
Machinery and equipment......................... 108,000 395,476 516,668
Motor vehicles.................................. -- 105,393 139,663
Leasehold improvements.......................... 2,677 21,491 21,491
-------- -------- ----------
145,543 706,874 1,034,384
Less accumulated depreciation..................... (10,297) (67,077) (130,491)
-------- -------- ----------
$135,246 $639,797 $ 903,893
======== ======== =========
Accrued expenses consist of the following:
Accrued compensation and related payroll
taxes........................................ $ 68,872 $212,505 $ 437,775
Professional fees............................... 19,263 247,334 208,555
Other........................................... 12,496 53,642 123,314
-------- -------- ----------
$100,631 $513,481 $ 769,644
======== ======== =========
</TABLE>

NOTE 4 -- CONVERTIBLE DEBENTURE:

In December 1996 the Company issued a convertible debenture to Medtronic,
Inc. in exchange for $20 million (see Note 8). The convertible debenture accrued
interest at the prime rate which at December 31, 1996 was 8.25%. Accrued
interest on the convertible debenture totaled $100,000 at December 31, 1996. The
convertible debenture, plus accrued interest of $837,808, converted into 419,787
shares of Common Stock at a conversion price of $49.64 per share on June 10,
1997.

NOTE 5 -- INCOME TAXES:

No provision for income taxes has been recorded as the Company has incurred
net operating losses since inception. Domestic and foreign losses are comprised
of the following:

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(NOVEMBER 9, (NOVEMBER 9,
1994) TO YEAR ENDED DECEMBER 31, 1994) TO
DECEMBER 31, --------------------------- DECEMBER 31,
1994 1995 1996 1996
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Domestic....................... $ (300,000) $ (341,322) $(1,413,527) $ (2,054,849)
Foreign........................ -- (1,356,174) (4,359,151) (5,715,325)
--------- ----------- ----------- -----------
$ (300,000) $(1,697,496) $(5,772,678) $ (7,770,174)
========= =========== =========== ===========
</TABLE>

F-11
<PAGE> 82

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company's Israeli manufacturing facility has received "Approved
Enterprise" status under Israeli tax law. As such, undistributed income derived
from the Company's manufacturing facility in Israel, subject to compliance with
applicable requirements, will be tax exempt for a two year period after IMT has
taxable income, and will be subject to a reduced income tax rate for the
following eight years (depending upon the level of foreign investment). The
Company has applied for similar status for its new manufacturing facility in
Israel. If this application is not approved, income from the new facility may be
subject to income tax at the regular rate of 36%. Further, license fees paid by
IMT to the U.S. parent company may be subject to a 15% Israeli withholding tax.

Deferred tax assets are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
--------- -----------
<S> <C> <C>
Net operating loss carryforwards..................... $ 190,000 $ 618,000
Expenses not currently deductible.................... 121,000 410,000
--------- ---------
311,000 1,028,000
Valuation allowance.................................. (311,000) (1,028,000)
--------- ---------
$ -- $ --
========= =========
</TABLE>

At December 31, 1996, the Company has net operating loss carryforwards and
other future tax deductions for Israeli tax purposes of $3,800,000 and
$1,700,000, respectively, which management believes will be utilized to offset
future taxable income during a zero tax rate holiday period. Accordingly, a full
valuation allowance has been provided for all such Israeli amounts. At December
31, 1996, the Company also has a net operating loss carryforward for U.S. income
tax purposes of $592,000 which will expire in 2009 through 2011. Under the Tax
Reform Act of 1986, the amount of and benefit from U.S. net operating losses may
become subject to an annual limitation as a result of a change in ownership. The
net operating loss carryforward relating to the Company's wholly-owned
subsidiary in Germany was not significant.

Management believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realizability of
the U.S. and Israeli deferred tax assets such that a full valuation allowance
has been recorded. These factors include the Company's history of losses, recent
increases in expense levels and the uncertainty regarding market acceptance of
the Company's products. The Company will continue to assess realizability of its
deferred tax assets in future periods.

NOTE 6 -- STOCKHOLDERS' EQUITY (DEFICIT):

COMMON STOCK

Holders of the Company's Common Stock are entitled to one vote per share.
The Company's Board of Directors (the "Board") is elected by a majority vote of
the shares of Common Stock voting thereon and any action to be taken by
stockholders requires a majority vote of the shares of Common Stock voting
thereon. In September 1995 the Company repurchased 187,200 shares of Common
Stock from three founders for $600,000 in cash.

SERIES A CONVERTIBLE PREFERRED STOCK

At December 31, 1996, the Company had authorized 850,000 shares of
preferred stock, 750,000 of which have been designated as Series A Convertible
Preferred Stock. The holders of the Series A Convertible Preferred Stock have no
voting rights but their shares are convertible at any time at the option of the
holder on a 1-for-1.56 basis into Common Stock. Each share of Series A
Convertible Preferred Stock is automatically converted into 1.56 shares of
Common Stock prior to the closing of an initial public offering. Upon the

F-12
<PAGE> 83

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

dissolution or liquidation of the Company, the holders of the Series A
Convertible Preferred Stock are entitled to receive $5.00 per share before any
payments are made to the holders of any other shares of stock. Any remaining
amount available after this payment will be distributed to holders of all
outstanding shares equally.

Dividends, when and as declared by the Board, shall be payable to the
holders of the Common and Series A Convertible Preferred Stock in amounts
consistent with the conversion ratio in effect on the dividend date.

STOCK OPTION PLAN

During 1995 and 1996, the Board authorized 873,600 shares of Common Stock
to be reserved for issuance to employees, directors and consultants under the
Influence, Inc. 1995 Stock Option Plan (the "1995 Plan"). Options vest over
various periods, generally not exceeding four years, and terminate ten years
from the date of grant. At December 31, 1996, there were 94,258 shares available
for future grant under the 1995 Plan. On January 31, 1997, the Board authorized
an additional 312,000 shares of Common Stock to be added to the 1995 Plan. At
June 30, 1997, there were 377,910 (unaudited) shares available for future grant
under the 1995 Plan.

Under the 1995 Plan, the Company issued fully vested options to consultants
of 149,760 and 109,200 during 1995 and 1996, respectively, in exchange for
services. These options were valued using the minimum value method with the
following assumptions: dividend yield of 0%; risk free interest rate of 5.86% to
6.89%; and an expected option term of three years. The Company recognized
consulting expense associated with these options of $175,520 and $837,050 for
the years ended December 31, 1995 and 1996, respectively.

A summary of activity under the 1995 Plan is as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE OPTIONS EXERCISE
PRICE OUTSTANDING PRICE
------------ ----------- --------
<S> <C> <C> <C>
Outstanding as of December 31, 1994..................... $ -- -- $ --
Granted............................................... 3.21 252,330 $ 3.21
Exercised............................................. -- -- $ --
Canceled.............................................. -- -- $ --
---------- -------
Outstanding as of December 31, 1995..................... 3.21 252,330 $ 3.21
Granted............................................... 3.21-6.42 534,300 $ 3.81
Exercised............................................. 3.21 (39,000) $ 3.21
Canceled.............................................. 3.21 (21,060) $ 3.21
---------- -------
Outstanding as of December 31, 1996..................... 3.21-6.42 726,570 $ 3.65
Granted (unaudited)................................... 16.03 49,920 $16.03
Exercised (unaudited)................................. -- -- $ --
Canceled (unaudited).................................. 3.21 (7,800) $ 3.21
---------- -------
Outstanding as of June 30, 1997 (unaudited)............. $3.21-$16.03 768,690 $ 4.45
========== =======
</TABLE>

F-13
<PAGE> 84

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At December 31, 1996 and June 30, 1997, 407,068 and 505,164 options
(unaudited) with weighted average exercise prices of $4.01 and $3.85,
respectively, were exercisable.

The following table summarizes information about stock options outstanding
and vested under the 1995 Plan at June 30, 1997 (unaudited):

<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------- JUNE 30, 1997
WEIGHTED ---------------------------------------
AVERAGE WEIGHTED
REMAINING AVERAGE
NUMBER NUMBER CONTRACTUAL NUMBER NUMBER REMAINING
EXERCISE PRICE OUTSTANDING VESTED LIFE OUTSTANDING VESTED CONTRACTUAL
- ------------------------------- ----------- ------- ----------- ----------- ----------- LIFE
(UNAUDITED) (UNAUDITED) -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
$3.21........................ 625,170 305,668 9.05 years 617,370 403,764 8.56 years
$6.42........................ 101,400 101,400 9.86 years 101,400 101,400 9.37 years
$16.03....................... -- -- --......... 49,920 -- 9.59 years
----------- ------- ----------- -----------
726,570 407,068 ........... 768,690 505,164
========= ======= ========= =========
</TABLE>

The Company accounts for stock options granted to employees in accordance
with the provisions of APB 25. Had compensation expense for the 1995 Plan been
determined based upon the estimated grant date fair value pursuant to SFAS 123,
the Company's net loss for the years ended December 31, 1995 and 1996 and for
the six month periods ended June 30, 1996 and 1997 would have been as follows:

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- ---------------------------
1995 1996 1996 1997
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net loss:
As reported............................. $1,697,496 $5,772,678 $ 1,464,631 $ 4,834,612
Pro forma............................... $1,697,496 $6,077,495 $ 1,728,841 $ 5,123,401
Net loss per share:
As reported............................. $ (0.78) $ (0.65)
Pro forma............................... $ (0.82) $ (0.68)
</TABLE>

The fair value of each option is estimated on the date of grant using the
minimum value method with the following assumptions: dividend yield of 0% for
all periods presented; risk-free annual interest rates of 5.21% to 6.89%, 5.21%
to 6.42%, 5.21% to 6.42% and 6.04% for the years ended December 31, 1995 and
1996 and the unaudited six month periods ended June 30, 1996 and 1997,
respectively; and an expected option term of three years for all periods
presented.

Because the determination of the fair value of all options granted after
the Company becomes a public entity will include an expected volatility factor
in addition to the factors described in the preceding paragraph, the above
results are not representative of future periods.

During 1996, the Company issued 475,644 options to employees at exercise
prices below the estimated fair value of the Common Stock. The weighted average
fair value of these options was $3.19 per option. The exercise prices of all
other options granted were at the estimated fair value of the Common Stock as
determined by management and the Board on the grant date.

NOTE 7 -- RELATED PARTY TRANSACTIONS:

During 1994 and 1995, the Company acquired certain technologies for use in
its research and development programs from NMB Medical Applications Ltd.
("NMB"), an affiliate of the Company by way

F-14
<PAGE> 85

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

of common ownership. As consideration for the technology, the Company paid
$300,000 in 1994 and $26,500 in 1995 and expensed both amounts as the technology
had no alternative future use.

Under the terms of a management agreement, in principle, which commenced in
March 1995, the Company was obligated to pay a minimum management fee of $7,000
per month to NMB in lieu of compensation to two of its founders. The Company
incurred management fees in connection with this agreement totaling $70,000 and
$224,000 for the years ended December 31, 1995 and 1996, respectively. As of
July 1, 1996 required payments under the formal management agreement have ceased
and the two founders entered into employment agreements pursuant to which each
was to receive an annual salary of $150,000 and certain other fringe benefits.
Subsequently, at the founders requests, payments have continued to NMB to
fulfill the Company's obligation under such agreements. Included in accrued
expenses at December 31, 1995 and 1996 were management fees payable totaling
approximately $7,000 and $144,000, respectively.

In April 1996, the Company entered into an agreement with Jessco Medical
Supply ("Jessco") under which the Company pays $2,500 per month for consulting
services. One of the Company's Board members is the owner of Jessco. During
1996, the Company paid $22,500 to Jessco for marketing services.

Between June 10, 1996 and November 7, 1996, the Company borrowed $3 million
from a stockholder in exchange for promissory notes which bore interest at the
Applicable Federal Rate as defined by the Internal Revenue Code. On December 18,
1996, the Company repaid the notes, plus accrued interest of $58,724.

A founder of the Company is also a General Manager of InStent Israel, Ltd.,
("InStent") a subsidiary of Medtronic, Inc., a principal stockholder of the
Company. There have been no material related party transactions between InStent
and the Company.

NOTE 8 -- COMMITMENTS AND CONTINGENCIES:

Future minimum rental payments under noncancelable operating leases at
December 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
---------------------------------------------
<S> <C>
1997......................................... $ 223,000
1998......................................... 399,000
1999......................................... 338,000
2000......................................... 310,000
2001 and beyond.............................. 504,000
----------
$1,774,000
=========
</TABLE>

Rent expense totaled approximately $34,000 and $66,000 for the years ended
December 31, 1995 and 1996, respectively, and $32,000 and $37,000 for the
unaudited six month periods ended June 30, 1996 and 1997, respectively.

In May and June 1997, the Company entered into operating leases for new
facilities in Israel and the U.S., respectively. Commitments associated with
these leases have been reflected in the preceding table.

In November 1996, the Company entered into an agreement with Medtronic,
Inc. ("Medtronic") which granted Medtronic an option to purchase the Company on
or before June 10, 1997 at a purchase price of $180 million (the "Agreement").
The Agreement provided for the issuance of a convertible debenture to Medtronic
in exchange for $20 million (see Note 4). Upon termination of the purchase
option, the convertible

F-15
<PAGE> 86

INFLUENCE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

debenture and accrued interest automatically converted into shares of the
Company's Common Stock at a per share price equal to $400 million divided by the
then outstanding Common Stock and equivalents as defined in the Agreement. On
June 10, 1997, Medtronic's purchase option expired and the debenture converted
into 419,787 shares of Common Stock.

In 1995, the Company entered into an exclusive worldwide license agreement
with Dimotech Ltd. ("Dimotech") to develop, manufacture and market products
utilizing certain Dimotech technology. The term of the license agreement runs
through the expiration date for the underlying patent, which is 2012. As
consideration for the license, the Company agreed to prepay $50,000 of royalties
upon the execution of the agreement and $300,000 payable upon the earlier of
December 31, 1996 or the completion of an initial public offering of the
Company's Common Stock. Royalties of 0.5% of total income derived from the
direct or indirect use of the patent are payable to Dimotech under the
agreement. During the year ended December 31, 1995, the Company recognized
expense of $350,000 related to this agreement. During the year ended December
31, 1996, the Company did not recognize any expense related to this agreement.
At December 31, 1995 and 1996, $300,000 was included in accounts payable and was
paid in January 1997.

The Company has entered into employment agreements with two of its officers
which expire in October 1998 and May 1999. Such agreements provide for minimum
annual salary levels ($125,000 and $150,000), as well as for incentive bonuses
which are payable upon attainment of certain performance criteria established
from time to time by the Board of Directors.

The Company has committed to grant stock options to purchase 30,000 shares
of the Company's Common Stock upon the completion of an initial public offering.
The option exercise price will be equal to the initial public offering price and
vesting will occur 25% immediately and 25% annually on each grant anniversary
date over a three year period.

As of June 30, 1997, in connection with the Company's move to its new
manufacturing facility in Israel, management intends to invest approximately
$800,000 in equipment and facility improvements over the next 18 months.

Israeli labor laws and agreements require IMT to make severance payments to
employees in certain circumstances. Severance accruals are recorded in the
consolidated balance sheet and funded by the purchase of managers' insurance
policies with insurance companies and by deposits made with a recognized
severance fund. The severance liability was $19,280, $84,062 and $127,265
(unaudited) at December 31, 1995, December 31, 1996 and June 30, 1997,
respectively. The corresponding amounts funded were $4,773, $44,881 and $67,436
(unaudited) at December 31, 1995, December 31, 1996 and June 30, 1997,
respectively.

The Company is subject to various legal proceedings and patent infringement
and other matters which arise in the ordinary course of business. In the opinion
of management, the amount of any ultimate liability with respect to these
matters will not materially affect the results of operations or financial
position of the Company.

NOTE 9 -- SUBSEQUENT EVENTS:

On August 6, 1997, the Board authorized the Company to proceed with an
initial public offering of the Company's Common Stock. In contemplation of the
offering, the Board also approved a Common Stock dividend of 0.56 shares for
every share of outstanding Common Stock together with a corresponding adjustment
to outstanding stock options and to the conversion ratio of the Series A
Convertible Preferred Stock. All share and per share data in the accompanying
consolidated financial statements have been adjusted retroactively to give
effect to the stock dividend.

F-16
<PAGE> 87

======================================================

No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering, other than those made in this Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any of the Underwriters. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the shares of Common Stock to which it relates or an offer to, or a solicitation
of, any person in any jurisdiction in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.

----------------------------
TABLE OF CONTENTS
----------------------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 7
The Company........................... 20
Use of Proceeds....................... 20
Dividend Policy....................... 20
Capitalization........................ 21
Dilution.............................. 22
Selected Consolidated Financial
Data................................ 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 28
Management............................ 50
Principal Stockholders................ 55
Certain Transactions.................. 56
Description of Capital Stock.......... 57
Shares Eligible for Future Sale....... 59
Israeli Taxation and Investment
Programs............................ 61
United States Federal Income
Taxation............................ 65
Underwriting.......................... 67
Legal Matters......................... 68
Experts............................... 68
Available Information................. 69
Index To Consolidated Financial
Statements.......................... F-1
</TABLE>

----------------------------

Until , 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock offered hereby, whether or
not participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligation of dealers to deliver
a Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
======================================================
======================================================
2,500,000 SHARES
[INFLUENCE LOGO]
COMMON STOCK
----------------------------
PROSPECTUS
----------------------------
MONTGOMERY SECURITIES

ROBERTSON, STEPHENS & COMPANY

UBS SECURITIES
, 1997
======================================================
<PAGE> 88

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered under the Registration
Statement, other than underwriting discounts and commissions, are estimated in
the following table. All of such expenses will be borne by Influence, Inc.
("Influence"), to be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 11,326
NASD filing fee................................................... 4,238
Nasdaq listing fee................................................ 17,500
Printing and engraving expenses................................... 100,000
Legal fees and expenses........................................... 200,000
Accounting fees and expenses...................................... 125,000
Blue Sky fees and expenses (including counsel fees)............... 15,000
Miscellaneous expenses............................................ 126,936
----------
Total................................................... $600,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Influence, Inc., a Delaware corporation, is empowered by Section 145 of the
Delaware General Corporation Law (the "Delaware Act"), subject to the procedures
and limitations stated therein, to indemnify certain parties. Section 145 of the
Delaware Act provides in part that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Similar indemnity is authorized for such persons against
expenses (including attorneys' fees) actually and reasonably incurred in defense
or settlement of any threatened, pending or completed action or suit by or in
the right of the corporation, if such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and provided further that (unless a court of competent jurisdiction
otherwise provides) such person shall not have been adjudged liable to the
corporation. Any such indemnification may be made only as authorized in each
specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct. Where an officer or a director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually or reasonably incurred. Section 145 provides further that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.

Article Tenth of the Company's Second Restated Certificate of
Incorporation, as amended (the "Certificate") provides that the Company shall
indemnify any and all persons whom it has the power to indemnify under Section
145 of the Delaware Act to the fullest extent permitted under such section, and
such indemnity shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

II-1
<PAGE> 89

Article Ninth of the Company's Certificate eliminates the personal
liability of the Company's directors to the fullest extent permitted under
Section 102(b)(7) of the Delaware Act, as amended. Such section permits a
company's certificate of incorporation to eliminate or limit the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the Delaware Act (which
addresses director liability for unlawful payment of a dividend or unlawful
stock purchase or redemption) or (iv) for any transaction from which the
director derived an improper personal benefit.

The Company intends to apply for a directors' and officers' insurance
policy.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Described below are sales of unregistered securities by the registrant
within the past three years:

(1) On December 14, 1994, the registrant issued 5,506,800 shares of
Common Stock in consideration of the par value of such shares to the
founders of the Company.

(2) From March 1995 through November 1995, 713,000 shares of Series A
Preferred Stock were sold to 48 accredited investors at a price of $5.00
per share.

(3) Pursuant to the 1995 Stock Option Plan, options to purchase
836,550 shares of Common Stock at exercise prices from $3.21 to $16.03 per
share were issued to employees of the registrant and certain other persons
who had performed valuable services to the Company, such as consulting and
preclinical testing assistance.

(4) Medtronic, Inc. ("Medtronic") became a stockholder of the Company
in connection with an agreement, dated December 10, 1996 (the "Medtronic
Agreement") between Medtronic, the Company, and substantially all of the
stockholders of the Company. Under the terms of the Medtronic Agreement,
Medtronic received in December 1996 an option to acquire all the shares of
Common and Preferred stock in the Company for approximately $180 million,
or for approximately $22 per share on a fully diluted basis. In
consideration of this option, Medtronic invested $20 million in the Company
in exchange for a convertible debenture of the Company (the "Debenture").
Medtronic's option to acquire the Company expired unexercised on June 10,
1997. Pursuant to the terms of the Debenture, all outstanding principal and
accrued interest on June 10, 1997, which amounted to $20,837,808,
automatically converted into common stock at a conversion price of $49.64
per share, which resulted in the issuance to Medtronic of 419,787 shares,
or approximately 5.5% of the outstanding Common Stock of the Company prior
to the completion of the Offering.

The sales of securities referenced in paragraphs (1), (2) and (4) were
either sold to persons outside the United States or were deemed to be exempt
from registration under the Securities Act of 1933 in reliance on Section 4(2)
thereof. The securities referenced in paragraph (3) were either granted to
persons outside the United States or were deemed to be exempt from registration
under the Securities Act of 1933 in reliance on Rule 701 promulgated under
Section 3(b) thereof, as transactions by an issuer not involving a public
offering or transactions pursuant to compensatory benefit plans and contracts
relating to compensation as provided under Rule 701. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All recipients had
adequate access, though their relationships with the Company, to information
about the Registrant.

II-2
<PAGE> 90

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Specimen Certificate for Shares*
5.1 Opinion of Arnold & Porter, U.S. Counsel to the Registrant*
10.1 Letter Agreements between Dimotech Ltd. and the Registrant*
10.2 Employment Agreement dated May 31, 1996 between Peter A. Bick, M.D., and the
Registrant
10.3 Agreement between Influence Medical Technologies Ltd. and Jerry G. Blaivas, M.D.*
10.4 Agreement between Oren Globerman and the Registrant
10.5 Agreement between Dr. Mordechay Beyar and Registrant
10.6 1995 Stock Option Plan of the Registrant, together with a form of agreement pursuant
thereto
10.7 Lease for Herzliya, Israel Facility*
10.8 Lease for San Francisco Office*
10.9 Debenture dated December 10, 1996 issued by the Registrant to Medtronic, Inc.
11.1 Statement of Computation of Loss Per Share
16.1 Letter re Change in Certifying Accountant*
21.1 Subsidiaries of the Registrant
23.1 Consent of Arnold & Porter, U.S. Counsel to the Registrant (contained in Exhibit
5.1)*
23.2 Consent of Price Waterhouse LLP, independent accountants
23.3 Consent of Levisohn, Lerner, Berger & Langsam, Patent Counsel to the Registrant*
24.1 Powers of Attorney**
27.1 Financial Data Schedule
</TABLE>

- ---------------

* To be filed by amendment.

** Contained on page II-4.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement, Shares in
such denominations and registered in such names as required by the Underwriters
to permit prompt delivery of Shares to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 91

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York on the 6th day of August 1997.

INFLUENCE, INC.

By: /s/ LEWIS C. PELL
------------------------------------
Name: Lewis C. Pell
Title: Chairman of the Board of
Directors

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Lewis C. Pell and Peter A. Bick, M.D.,
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement as well as any
registration statement filed pursuant to Rule 462(b) of the Securities Act of
1933, as amended, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------ ------------------------------------ ----------------
<S> <C> <C>

/s/ LEWIS C PELL Chairman of the Board of Directors August 6, 1997
- ------------------------------------ and Director
Lewis C. Pell

/s/ MORDECHAY BEYAR Vice Chairman of the Board of August 6, 1997
- ------------------------------------ Directors and Director
Mordechay Beyar, M.D.

/s/ OREN GLOBERMAN Vice Chairman of the Board of August 6, 1997
- ------------------------------------ Directors and Director
Oren Globerman

/s/ PETER A. BICK President, Chief Executive Officer August 6, 1997
- ------------------------------------ and
Peter A. Bick, M.D. Director (Principal Executive
Officer)

Director August , 1997
- ------------------------------------
Shimon Eckhouse

/s/ JOHN M. HARLAND Vice President, Chief Financial August 6, 1997
- ------------------------------------ Officer
John M. Harland and Treasurer (Principal Accounting
and Financial Officer)
</TABLE>

II-4
<PAGE> 92

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement*...........................................
3.1 Certificate of Incorporation of the Registrant............................
3.2 Bylaws of the Registrant..................................................
4.1 Specimen Certificate for Shares*..........................................
5.1 Opinion of Arnold & Porter, U.S. Counsel to the Registrant*...............
10.1 Letter Agreements between Dimotech Ltd. and the Registrant*...............
10.2 Employment Agreement dated May 31, 1996 between Peter A. Bick, M.D., and
the Registrant............................................................
10.3 Agreement between Influence Medical Technologies Ltd. and Jerry G.
Blaivas, M.D.*............................................................
10.4 Agreement between Oren Globerman and the Registrant.......................
10.5 Agreement between Dr. Mordechay Beyar and Registrant......................
10.6 1995 Stock Option Plan of the Registrant, together with a form of
agreement pursuant thereto................................................
10.7 Lease for Herzliya, Israel Facility*......................................
10.8 Lease for San Francisco Office*...........................................
10.9 Debenture dated December 10, 1996 issued by the Registrant to Medtronic,
Inc.......................................................................
11.1 Statement of Computation of Loss Per Share................................
16.1 Letter re Change in Certifying Accountant*
21.1 Subsidiaries of the Registrant............................................
23.1 Consent of Arnold & Porter, U.S. Counsel to the Registrant (contained in
Exhibit 5.1)*.............................................................
23.2 Consent of Price Waterhouse LLP, independent accountants..................
23.3 Consent of Levisohn, Lerner, Berger & Langsam, Patent Counsel to the
Registrant*...............................................................
24.1 Powers of Attorney**......................................................
27.1 Financial Data Schedule...................................................
</TABLE>

- ---------------

* To be filed by amendment.

** Contained on page II-4.

<PAGE> 1
EXHIBIT 3.1

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
INFLUENCE, INC.

INFLUENCE, INC., a corporation duly organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that:

I. The amendment to the Corporation's Certificate of Incorporation
set forth below was duly adopted in accordance with the provisions of Section
242 and has been consented to in writing by the stockholders, and written notice
has been given, in accordance with Section 228 of the General Corporation Law of
the State of Delaware.

II. Article FOURTH of the Corporation's Certificate of Incorporation
is amended to read in its entirety as follows:

"FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 30,850,000 shares consisting of 30,000,000 shares of
Common Stock with a par value of one tenth of one cent ($.001) per share and
850,000 shares of Preferred Stock with a par value of one cent ($0.01) per
share, of which 750,000 shares shall be designated Series A Preferred Stock with
terms as set forth below and of which 100,000 shares may be issued from time to
time in classes or series and shall have such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolutions of the Board of Directors providing for the issuance of such stock.
The holders of the Preferred Stock shall have no voting rights except as
required by law or as expressed in the resolutions of the Board of Directors
providing for the issuance of such shares.

* * * *

Series A Preferred Stock

The express terms and provisions of the shares so classified and
designated Series A Preferred Stock, which series shall consist of 750,000
shares, are as follows:

(i) The holders of Series A Preferred Stock shall not be entitled to vote on
any matters requiring or submitted to a vote of the stockholders of the
Corporation, except as expressly provided by the General Corporation Law of the
State of Delaware.

(ii) Holders of the shares of Series A Preferred
Stock may at any time convert such preferred shares into
shares of Common Stock at the rate of one (1) share of Common
Stock for
<PAGE> 2

each share of Preferred Stock. Upon the execution and delivery
by the Corporation of a firm commitment underwriting agreement
for the public offering of Common Stock of the Corporation,
each share of Series A Preferred Stock shall automatically,
without further acts by the Corporation or the holders of
Series A Preferred Stock, convert into one (1) share of Common
Stock.

(iii) Upon the dissolution or liquidation of the
Corporation, the holders of Series A Preferred Stock shall be
entitled to receive from the assets available for distribution
to the stockholders, payment of five dollars ($5.00) per share
before any payment shall be made to the holders of the shares
of any other class of stock. These payments made to the
holders of Series A Preferred Stock shall be referred to as
the "Liquidation Amounts." The remainder of the assets
available for distribution of the Corporation, after the
payment of five dollars ($5.00) per share to the holders of
the Series A Preferred Stock shall be distributed to the
holders of all outstanding shares, Common and Preferred,
equally on a per share basis.

(iv) Upon the occurrence of an Extraordinary
Preferred Stock Event (as defined below), the Liquidation
Amounts shall be adjusted by multiplying the then effective
Liquidation Amounts by a fraction, the numerator of which
shall be the number of shares of Series A Preferred Stock
outstanding immediately prior to such Extraordinary Preferred
Stock Event and the denominator of which shall be the number
of shares of Series A Preferred Stock outstanding immediately
after such Extraordinary Preferred Stock Event, and the
product so obtained shall thereafter be the Liquidation
Amount. The Liquidation Amount, as so adjusted, shall be
readjusted in the same manner upon the occurrence of any
subsequent Extraordinary Preferred Stock Event or Events. An
"Extraordinary Preferred Stock Event" means (A) the issuance
of the additional shares of Series A Preferred Stock as a
dividend or other distribution of outstanding shares of Series
A Preferred Stock of the Corporation, (B) a subdivision of
outstanding shares of Series A Preferred Stock into a greater
number of shares of Series A Preferred Stock, or (C) a
combination of outstanding shares of Series A Preferred Stock
into a smaller number of shares of Series A Preferred Stock.

(v) Upon the occurrence of an Extraordinary Common
Stock Event (as defined below), the number of shares of Common
Stock into which each share of Series A Preferred Stock may be
converted shall be adjusted by multiplying the then number of

<PAGE> 3

shares of Common Stock issuable upon conversion of Series A
Preferred Stock immediately prior to such Extraordinary Common
Stock Event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately prior to
such Common Preferred Stock Event, and the product so obtained
shall thereafter be the adjusted number of shares of Common
Stock issuable upon conversion. Such rate of conversion, as so
adjusted, shall be readjusted in the same manner upon the
occurrence of any subsequent Extraordinary Common Stock Event
or Events. An "Extraordinary Common Stock Event" means (A) the
issuance of additional shares of the Common Stock as a
dividend or other distribution on outstanding Common Stock of
the Corporation, (B) a subdivision of outstanding shares of
Common Stock, or (C) a combination of outstanding shares of
Common Stock into a smaller number of shares of Common Stock;
provided, however, that in any of such cases, if a similar
event occurs resulting in a proportionate increase or decrease
in the number of shares of the Series A Preferred Stock, then
no adjustment shall be made pursuant to this provision.

(vi) If the Common Stock issuable upon the
conversion of Series A Preferred Stock shall be changed into
the same or a different number of shares of any class or
classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend) then and in each such
event the holders of the shares of Series A Preferred Stock
shall have the right thereafter to convert such shares into
the kind and amount of shares of stock and other securities
and property receivable upon such reorganization,
reclassification or other change by the holders of the number
of shares of Common Stock into which such shares of Series A
Preferred Stock could have been converted immediately prior to
such reorganization, reclassification or change, all subject
to further adjustment as provided herein.

(vii) If at any time or from time to time there
shall be a merger or consolidation of the Corporation with or
into another corporation where the Corporation is not the
surviving entity, then, as part of such merger or
consolidation, provision shall be made so that the holders of
Series A Preferred Stock shall thereafter be entitled to
receive, upon conversion of the Series A Preferred Stock, the
number of shares of stock or other securities or property of
the successor corporation resulting from such merger or
consolidation to which such holder would have been entitled if
such holder had converted its share of Series A Preferred
Stock immediately prior to such merger or consolidation.
<PAGE> 4

(viii) To exercise its conversion privilege (except
where such conversion is automatic or contemplated by clause
(ii) above), a holder of Series A Preferred Stock shall
surrender the certificate or certificates representing the
shares being converted to the Corporation at its principal
office, and shall give written notice to the Corporation at
that office that such holer elects to convert such shares.
Such notice shall also state the name or names (with address
or addresses) in which the certificate or certificates for
shares of Common Stock issuable upon such conversion shall be
issued. If the conversion is effected automatically under
clause (ii) above, a holder of Series A Preferred Stock shall
surrender the certificate or certificates representing the
shares being converted to the Corporation at its principal
office or at such other place as requested by the Corporation.
The certificate or certificates for shares of Series A
Preferred Stock surrendered for conversion shall be
accompanied by proper assignment thereof to the Corporation or
in blank. The date when such written notice is received by the
Corporation, together with the certificate or certificates
representing the shares of Series A Preferred Stock being
converted, shall be the "Conversion Date," except in the case
of an automatic conversion where the Conversion Date shall be
the date of such automatic conversion. As promptly as
practicable after the Conversion Date, the Corporation shall
issue and deliver to the holder of the shares of Series A
Preferred Stock being converted, or on its written order, such
certificate or certificates as it may request for the number
of shares of Common Stock issuable upon the conversion of such
shares of Series A Preferred Stock in accordance with the
provisions of this Article FOURTH, and cash, as provided in
provision (ix) hereafter, in respect of any fraction of share
of Common Stock issuable upon such conversion. Such conversion
shall be deemed to have been effected immediately prior to the
close of business on the Conversion Date.

(ix) No fractional shares of Common Stock or scrip
representing fractional shares shall be issued upon the
conversion of shares of Series A Preferred Stock. Instead of
any fractional shares of Common Stock which would otherwise be
issuable upon conversion of Series A Preferred Stock, the
Corporation shall pay to the holder of the shares of Series A
Preferred Stock which were converted, the cash value of such
fractional shares in an amount based on the fair market value
per share of the Common Stock as determined by the Board of
Directors, as of the close of business on the Conversion Date.

(x) In the event some but not all of the shares of
Series

<PAGE> 5

A Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Corporation shall
execute and deliver to or on the order of the holder, at the
expense of the Corporation, a new certificate representing the
number of shares of Series A Preferred Stock which were not
converted.

(xi) The Corporation shall at all times reserve and
keep available authorized but unissued shares of Common Stock
as shall from time to time be sufficient for the conversion of
all outstanding shares of Series A Preferred Stock into shares
of Common Stock.

Dividends, when and as declared by the Board of Directors, shall be
payable to the holders of the Common and Series A Preferred Stock equally on a
per share basis. The provisions of this subsection relating to Series A
Preferred Stock shall apply only so long as there are any shares of Series A
Preferred Stock outstanding.

* * * *

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by Peter A. Bick, its authorized officer, on this day of November,
1996.

/s/ Peter A. Bick
----------------------
Peter A. Bick
President and Chief Executive Officer

<PAGE> 6

CERTIFICATE OF AMENDMENT

INFLUENCE, INC.

*******************************************

Influence, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, does hereby certify:

FIRST: That the Board of Directors of said corporation by the unanimous
written consent of its members adopted a resolution proposing and declaring
advisable the following amendment to the Certificate of Incorporation of said
corporation:

RESOLVED, that the Certificate of Incorporation of Influence, Inc. be
amended by changing Article FOURTH so that said Article be and read as follows:

"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 5,550,000 shares
consisting of 4,800,000 shares of Common Stock with a par value
of one tenth of one cent ($.001) per share and 750,000 shares of
Preferred Stock with a par value of one cent ($.01) per share."

SECOND: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 242 and 228 of the General Corporation Law of
the State of Delaware.

<PAGE> 7

IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by Andrew Smith, its president, this 3rd day of November, 1995.

INFLUENCE, INC.

By: /s/ Andrew M. Smith
-------------------------
Andrew M. Smith
Vice President-Operations

2
<PAGE> 8

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

INFLUENCE, INC.

Influence, Inc., organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby amend and restate its
Certificate of Incorporation as follows: The Corporation was incorporated on
November 9, 1994. This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the applicable provisions of Sections 241 and
245 of the General Corporation Law of the State of Delaware.

FIRST: The name of the corporation is Influence, Inc. (the
"Corporation").

SECOND: The address of its registered office in the State of Delaware is
32 Loockerman Square, Suite L-100, Dover, Delaware 19901, County of Kent. The
name of the registered agent at such address is The Prentice-Hall Corporation
System, Inc.

THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.

FOURTH: the total number of shares of stock which the corporation shall
have authority to issue is 5,550,000 shares consisting of 5,000,000 shares of
Common Stock with a par value

3
<PAGE> 9

of one cent ($.01) per share and 550,000 shares of Preferred Stock, with a par
value of five dollars ($5.00) per share.

The Board of Directors shall be elected to the Board of Directors by a
majority vote of the shares of Common Stock voting thereon.

Any action to be taken by stockholders shall require a majority vote of the
shares of Common Stock voting thereon. The holders of a majority of the Common
Stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of stockholders
for the transaction of business.

The express terms and provisions of the shares so classified and designated
Preferred Stock, are as follows:

(i) The holders of both Preferred Stock shall not be entitled
to vote on any matters requiring or submitted to a vote of the
stockholders of the Corporation, except as expressly provided by the
General Corporation Law of the State of Delaware.

(ii) Holders of the shares of Preferred Stock may at any time
convert such preferred shares into shares of Common Stock at the rate
of one (1) share of Common Stock for each share of Preferred Stock.

(iii) Upon the dissolution or liquidation of the Corporation,
the holders of Preferred Stock shall be entitled to receive from the
assets available for distribution to the stockholders, payment of five
dollars (($5.00) per share before any payment shall be made to the
holders of the shares of any other class of stock. These payments
made to the holders of Preferred Stock shall be referred to as the
"Liquidation Amounts." The remainder of the assets available for
distribution of the Corporation, after the payment of five dollars
(($5.00) per share to

4
<PAGE> 10

the holders of the Preferred Stock shall be distributed to the holders
of all outstanding shares, Common and Preferred, equally on a per
share basis.

(iv) Upon the occurrence of an Extraordinary Preferred Stock
Event (as defined below), the Liquidation Amounts shall be adjusted by
multiplying the then effective Liquidation Amounts by a fraction, the
numerator of which shall be the number of shares of Preferred Stock
outstanding immediately prior to such Extraordinary Preferred Stock
Event and the denominator of which shall be the number of shares of
Preferred Stock outstanding immediately after such Extraordinary
Preferred Stock Event, and the product so obtained shall thereafter be
the Liquidation Amount. The Liquidation Amount, as so adjusted, shall
be readjusted in the same manner upon the occurrence of any subsequent
Extraordinary Preferred Stock Event or Events. An "Extraordinary
Preferred Stock Event" means (A) the issuance of the additional shares
of Preferred Stock as a dividend or other distribution of outstanding
shares of Preferred Stock of the Corporation, (b) a subdivision of
outstanding shares of Preferred Stock into a greater number of shares
of Preferred Stock, or ((C) a combination of outstanding shares of
Preferred Stock into a smaller number of shares of Preferred Stock.

(v) Upon the occurrence of an Extraordinary Common Stock Event
(as defined below), the number of shares of Common Stock into which
each share of Preferred Stock may be converted shall be adjusted by
multiplying the then number of shares of Common Stock issuable upon
conversion of Preferred Stock immediately prior to such Extraordinary
Common Stock Event and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such Common
Preferred Stock Event, and the product so obtained shall thereafter be
the adjusted number of shares of Common Stock issuable upon
conversion. Such rate of conversion, as so adjusted, shall be
readjusted in the same manner upon the occurrence of any subsequent
Extraordinary Common Stock Event or Events.

5
<PAGE> 11

An "Extraordinary Common Stock Event" means (A) the issuance of
additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock of the Corporation, (B) a
subdivision of outstanding shares of Common Stock, or (C) a
combination of outstanding shares of Common Stock into a smaller
number of shares of Common Stock; provided, however, that in any of
such cases, if a similar event occurs resulting in a proportionate
increase or decrease in the number of shares of the Preferred Stock,
then no adjustment shall be made pursuant to this provision.

(vi) If the Common Stock issuable upon the conversion of
Preferred Stock shall be changed into the same or a different number
of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend) then and in
each such event the holders of the shares of Preferred Stock shall
have the right thereafter to convert such shares into the kind and
amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change by the
holders of the number of shares of Common Stock into which such shares
of Preferred Stock could have been converted immediately prior to such
reorganization, reclassification or change, all subject to further
adjustment as provided herein.

(vii) If at any time or from time to time there shall be a
merger or consolidation of the Corporation with or into another
corporation where the Corporation is not the surviving entity, then,
as part of such merger or consolidation, provision shall be made so
that the holders of Preferred Stock shall thereafter be entitled to
receive, upon conversion of the Preferred Stock, the number of shares
of stock or other securities or property of the successor corporation
resulting from such merger or consolidation to which such holder had
converted its share of Preferred Stock immediately prior to such
merger or consolidation.

6
<PAGE> 12

(viii) To exercise its conversion privilege, a holder of
Preferred Stock shall surrender the certificate or certificates
representing the shares being converted to the Corporation at its
principal office, and shall give written notice to the Corporation at
that office that such holder elects to convert such shares. Such
notice shall also state the name or names (with address or addresses)
in which the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The certificate or
certificates for shares of Preferred Stock surrendered for conversion
shall be accompanied by proper assignment thereof to the Corporation
or in blank. The date when such written notice is received by the
Corporation, together with the certificate or certificates
representing the shares of Preferred Stock being converted, shall be
the "Conversion Date." As promptly as practicable after the
Conversion Date, the Corporation shall issue and deliver to the holder
of the shares of Preferred Stock being converted, or on its written
order, such certificate or certificates as it may request for the
number of shares of Common Stock issuable upon the conversion of such
shares of Preferred Stock in accordance with the provisions of this
Article FOURTH, and cash, as provided in provision (ix) hereafter, in
respect of any fraction of share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date.

(ix) No fractional shares of Common Stock or scrip
representing fractional shares shall be issued upon the conversion of
shares of Preferred Stock. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon conversion of Preferred
Stock, the Corporation shall pay to the holder of the shares of
Preferred Stock which were converted, the cash value of such
fractional shares in an amount based on the fair market value per
share of the Common Stock as determined by the Board of Directors, as
of the close of business on the Conversion Date.

7
<PAGE> 13

(x) In the event some but not all of the shares of Preferred
Stock represented by a certificate or certificates surrendered by a
holder are converted, the Corporation shall execute and deliver to or
on the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Preferred Stock which
were not converted.

(xi) The Corporation shall at all times reserve and keep
available authorized but unissued shares of Common Stock as shall from
time to time be sufficient for the conversion of all outstanding
shares of Preferred Stock into shares of Common Stock.

Dividends, when and as declared by the Board of Directors, shall be payable
to the holders of the Common and Preferred Stock equally on a per share basis.

FIFTH: The name and mailing address of the incorporator are as follows:

Name Mailing Address
---- ---------------

D. M. Baker 32 Loockerman Square
Suite L-100
Dover, Delaware 19904

SIXTH: The Corporation is to have perpetual existence.

SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or

8
<PAGE> 14

of any receiver or receivers appointed for this corporation under the provisions
of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
this corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths in value of
the creditors or class or creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class or creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.

EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:

1. The management of the business and for the conduct of the affairs
of the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed by,
or in the manner provided in, the By-Laws. The phrase "whole Board" and the

9
<PAGE> 15

phrase "total number of directors" shall be deemed to have the same meaning, to
wit, the total number of directors which the corporation would have if there
were no vacancies. No election of directors need be by written ballot.

2. After the original or other By-Laws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the By-Laws of the corporation may
be exercised by the Board of Directors of the corporation; provided, however,
that any provision for the classification of directors of the corporation for
staggered terms pursuant to the provisions of subsection (d) of Section 141 of
the General Corporation Law of the State of Delaware shall be set forth in an
initial By-Law or in a By-Law adopted by the stockholders entitled to vote of
the corporation unless provisions for such classification shall be set forth in
this certificate of incorporation.

3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote, at any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under the
provisions of the certificate of incorporation

10
<PAGE> 16

shall entitle the holder thereof to the right to vote at any meeting of
stockholders except as the provisions of paragraph (2) of subsection (b) of
section 242 of the General Corporation Law of the State of Delaware shall
otherwise; provided, that no share of any such class which is otherwise denied
voting power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.

NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented.

TENTH: The corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have the power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any B-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the

11
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benefit of the heirs, executors and administrators of such a person.

ELEVENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.

IN WITNESS WHEREOF, the corporation has issued its corporate seal to be
affixed thereto and this amended and restated certificate of incorporation to be
signed by its Incorporator this 11th day of January, 1995.

/s/ Lewis C. Pell
-----------------------
Lewis C. Pell
Director

<PAGE> 1
EXHIBIT 3.2

DATED: JULY 24, 1996

BY-LAWS
OF
INFLUENCE, INC.

ARTICLE I
OFFICES

Section 1. Principal Office. The principal office of the Corporation
shall be located in San Francisco, California or such other location as the
Board may from time to time determine.

Section 1.2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.

ARTICLE II
MEETINGS OF SHAREHOLDERS

Section 2.1. Place of Meetings. All meetings of shareholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.

Section 2.2. Annual Meetings. The annual meeting of shareholders shall be
held at such time on such day as the Board of Directors in each year determines.
At the annual meeting, the shareholders entitled to vote for the election of
directors shall elect, by a
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plurality vote, a Board of Directors and transact such other business as may
properly come before the meeting.

Section 2.3. Special Meetings. Special meetings of shareholders, for any
purpose or purposes, may be called by the Board of Directors and shall be called
promptly by the Board of Directors at the written request of a majority of the
entire Board of Directors then in office or the holders of record of at least
twenty-five per cent (25%) of the issued and outstanding shares of the Common
Stock of the Corporation. Any such request shall state the purpose or purposes
of the proposed meeting. At any special meeting of shareholders, only such
business may be transacted as is related to the purpose or purposes set forth in
the notice of such meeting.

Section 2.4. Notice of Meetings. Written notice of every meeting of
shareholders, stating the place, date and hour thereof, and, in the case of a
special meeting of shareholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the President, the Secretary, or the persons calling the
meeting, to each shareholder of record entitled to vote at such meeting.
Nothing herein contained shall preclude the shareholders from waiving notice as
provided in Section 4.1 hereof.

Section 2.5. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may
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transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.

Section 2.6. Quorum. The holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of shareholders. If, however, such
quorum shall not be present or represented at any meeting of shareholders, the
shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented, when any business may be transacted that might have been transacted
at the meeting as originally noticed. Notwithstanding the foregoing, if after
any such adjournment the Board of Directors shall fix a new record date for the
adjourned meeting, a notice of such adjourned meeting shall be given as provided
in Section 2.4 of these By-Laws, but such notice may be waived as provided in
Section 4.1 hereof.

Section 2.7 . Organization. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in his absence by the President,
or in his absence by a Vice President, if any, or in the absence of the
foregoing persons by a chairman designated by the Board of Directors, or in the
absence of such designation by a chairman chosen at the meeting. The Secretary
shall act as secretary of the meeting, but in his absence the chairman of the
meeting may appoint any person to act as secretary of the meeting.
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Section 2.8. Voting. At each meeting of shareholders, each holder of
record of shares of stock entitled to vote shall be entitled to vote in person
or by proxy, and each such holder shall be entitled to one vote for every share
standing in his name on the books of the Corporation as of the record date fixed
by the Board of Directors or prescribed by law and, if a quorum is present, a
majority of the shares of such stock present or represented at any meeting of
shareholders shall be the vote of the shareholders with respect to any item of
business, unless otherwise provided by any applicable provision of law, by these
By-Laws or by the Certificate of Incorporation.

Section 2.9. Proxies. (a) Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after 3 years from its
date, unless the proxy provides for a longer period.

(b) Without limiting the manner in which a stockholder may authorize
another person or persons to act for him as proxy of this section, the following
shall constitute a valid means by which a stockholder may grant such authority.

(1) A stockholder may execute a writing authorizing another person
or persons to act for him as proxy. Execution may be
accomplished by the stockholder or his authorized officer,
director, employee or agent signing such writing or causing his
or her signature to be affixed to such writing by any reasonable
means including, but not limited to, by facsimile signature.
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DATED: JULY 24, 1996

(2) A stockholder may authorize another person or persons to act for
him as proxy by transmitting or authorizing the transmission of
a telegram, cablegram, or other means of electronic transmission
to the person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of
the proxy to receive such transmission, provided that any such
telegram, cablegram or other means of electronic transmission
must either set forth or be submitted with information from
which it can be determined that the telegram, cablegram or other
electronic transmission was authorized by the stockholder. If
it is determined that such telegrams, cablegrams or other
electronic transmissions are valid, the inspectors or, if there
are no inspectors, such other persons making that determination
shall specify the information upon which they relied.

(c) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this section may
be substituted or used in lieu of the original writing or transmission for any
and all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission.

(d) A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the
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interest with which it is coupled is an interest in the stock itself
or an interest in the corporation generally.

Section 2.10. Written Consents. (a) Whenever a vote of shareholders
at a meeting thereof is required or permitted to be taken in connection with any
corporate action, the meeting and vote of shareholders may be dispensed with if
a consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office, its
principal place of business, or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.

(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered in the manner required by this Section to the
corporation, written consents signed by a sufficient number of holders to take
action are delivered to the corporation by delivery to its registered office,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.
<PAGE> 7

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DATED: JULY 24, 1996

(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to all
stockholders.

ARTICLE III
DIRECTORS

Section 3.1. Numbers. The number of directors of the Corporation
which shall constitute the entire Board of Directors shall be fixed from time to
time by a vote of a majority of the entire Board and shall be not less than one
(1) nor more than seven (7).

Section 3.2. Qualifications, Election and Tenure. Directors shall be
at least eighteen (18) years of age but need not be residents of the State of
Delaware. Directors need not be shareholders of the Corporation. Except as
otherwise provided in these By-Laws, directors shall be elected at the annual
meeting of shareholders, and each director so elected shall hold office until
the next annual meeting of shareholders and until his successor has been elected
and has qualified.

Section 3.3. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation and, to the extent permitted
by law, any director may be removed, either with or without cause, at any time
by vote of the shareholders at a special meeting called for that purpose or by
the Board of Directors with cause.

Section 3.4. Newly Created Directorships and Vacancies. Newly
created directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever, except
the removal of directors without
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DATED: JULY 24, 1996

cause, shall be filled by vote of the Board. If the number of directors then in
office is less than a quorum, such newly created directorships and vacancies may
be filled by a vote of a majority of the directors then in office. Any director
elected to fill a vacancy shall be elected until the next meeting of
shareholders at which the election of directors is in the regular course of
business, and until his successor has been elected and qualified. Vacancies
occurring in the Board by reason of the removal of directors without cause shall
be filled by vote of the shareholders unless the shareholders shall adopt a By-
Law provided that the Board may fill such vacancies.

Section 3.5. Powers and Duties. Subject to the applicable provision
of law, these By-Laws or the Certificate of Incorporation, but in furtherance
and not in limitation of any rights therein conferred, the Board of Directors
shall have the control and management of the business and affairs of the
Corporation and do all such lawful acts and things as may be exercised by the
Corporation.

Section 3.6. Place of Meetings. All meetings of the Board of
Directors may be held either within or without the State of Delaware.

Section 3.7. Annual Meetings. An annual meeting of each newly
elected Board of Directors shall be held immediately following the annual
meeting of shareholders, and no notice of such meeting to the newly elected
directors shall be necessary in order legally to constitute the meeting,
provided a quorum shall be present, or the newly elected directors may meet at
such time and place as shall be fixed by the written consent of all such
directors.
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Section 3.8. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, at such time and at
such place as shall from time to time be determined by the Board.

Section 3.9. Special Meetings. Special meetings of the Board of
Directors may be called by the President and shall be called promptly by the
President or the Secretary upon the written request of any director specifying
the special purpose thereof, on not less than twenty four (24) hours notice to
each director. Such request shall state the date, time and place of meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.

Section 3.10. Notice of Meetings. Notice of each special meeting of
the Board (and of each regular meeting for which notice shall be required) shall
be given by the President, the Secretary or an Assistant Secretary and shall
state the place, date and time of the meeting. Notice of each such meeting
shall be given orally or shall be mailed to each director at his residence or
usual place of business. If notice of less than one week is given, it shall be
oral, whether by telephone or in person, or sent by special delivery mail or
telegraph. If mailed, the notice shall be given when deposited in the United
States mail, postage prepaid. Notice of any meeting need not be given to any
director who shall submit, either before or after the meeting, a signed waiver
of notice of who shall attend such meeting without protesting, prior to or at
its commencement, the lack of notice to him. Notice of any adjourned meeting,
including the place, date and time of the new meeting, shall be given to
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DATED: JULY 24, 1996

all directors not present at the time of the adjournment, as well as
to the other directors unless the place, date and time of the new meeting is
announced at the adjourned meeting.

Section 3.11. Quorum and Voting. At all meetings of the Board of
Directors a majority of the Directors then in office shall be necessary to and
shall constitute a quorum for the transaction of business at any meeting of
directors, unless otherwise provided by any applicable provision of law, by
these By-Laws, or by the Certificate of Incorporation. The act of a majority of
the directors present at the time of the vote, if a quorum is present at such
time, shall be the act of the Board of Directors, unless otherwise provided by
any applicable provision of law, by these By-Laws or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, until a quorum shall be present.

Section 3.12. Compensation. The Board of Directors, by the
affirmative vote of a majority of the directors then in office, and irrespective
of any personal interest of any of its members, shall have authority to
establish reasonable compensation of all directors for services to the
Corporation as directors, officers or otherwise.

Section 3.13. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.

Section 3.14. Action Without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board of the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents
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thereto by the members of the Board or committee shall be filed with the minutes
of the proceedings of the Board or committee.

Section 3.15. Telephone Participation. Any one or more members of
the Board, or any committee of the board, may participate in a meeting of the
Board or committee by means of a conference telephone call or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at a meeting.

Section 3.16. Committee of the Board. The Board, by resolution
adopted by a majority of the entire Board, may designate from among its members
an executive committee and other committees, each consisting of one (1) or more
directors. The Board may designate one or more directors as alternate members
of any such committee. Such alternate members may replace any absent member or
members at any meeting of such committee. Each committee (including the members
thereof) shall serve at the pleasure of the Board and shall keep minutes of its
meetings and report the same to the Board.

Section 3.17. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board of Directors may
make, alter and repeal rules for the conduct of its business. In the absence of
such rules each committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to Article III of these by-
laws.

Section 3.18. Authority of Committees; Duties of Directors. Except
as otherwise provided by law, each such committee, to the extent provided in the
resolution establishing, shall have and may exercise all the authority of the
Board with respect to
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all matters. The designation of any committee and the delegation of authority
thereto shall not alone relieve any director of his duty to the Corporation.

ARTICLE IV
WAIVER
Section 4.1. Waiver. Whenever a notice is required to be given by
any provision of law, by these By-Laws, or by the Certificate of Incorporation,
a waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person
attends the meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.

ARTICLE V
OFFICERS

Section 5.1. Executive Officers. The Board of Directors shall elect
a President, a Secretary, a Chairman, and may choose one or more Vice-Chairmen,
a Vice President, a Treasurer and one or more Assistant Secretaries. Any number
of offices may be held by the same person. The executive officers of the
Corporation shall be elected annually (and from time to time by the Board of
Directors, as vacancies occur), at the annual meeting of the Board of Directors
following the meeting of shareholders at which the Board
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of Directors was elected. The election of any director as President shall
require the vote of a majority of disinterested directors.

Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including additional Vice Presidents and one or more
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, as it
shall at any time or from time to time deem necessary or advisable.

Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the business and affairs of the Corporation as may
be provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.

Section 5.4. Tenure and Removal. The officers of the Corporation
shall be elected or appointed to hold office until their respective successors
are elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting. The removal of any director as
President shall require the vote of a majority of disinterested directors.

Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, may be filled by the Board of Directors for the
unexpired term.

Section 5.6. Compensation. The salaries and other compensation of
all officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
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Section 5.7. The Chairman. The Chairman shall preside at all
meetings of the shareholders and the directors. The Chairman shall have
general management of the business of the Corporation, subject to the control of
the Board of Directors. In the absence of the Chairman, a Vice-Chairman, if
there shall be any, shall preside at all meetings of the shareholders and
directors.

Section 5.8. President. The President shall be the chief executive
officer of the Corporation. The President, in the absence of the Chairman and
Vice-Chairman, if any, shall preside at all meetings of the shareholders and the
directors. The President shall have active management responsibility for the
business and affairs of the Corporation and be responsible for its day-to-day
operations, subject to the control of the Board of Directors, and shall see to
it that all orders and resolutions of the Board of Directors are carried into
effect.

Section 5.9. Vice Presidents. The Vice President, if there be one,
or, if there shall be more than one, each Vice President, shall have such powers
and shall perform such duties as may from time to time be assigned to him by the
Board of Directors.

Section 5.10. Secretary. The Secretary shall attend all meetings of
the shareholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meeting in a book to be kept for that purpose; he
shall see that all notices of meetings of shareholders and special meetings of
the Board of Directors are duly given in accordance with the provisions of these
By-Laws or as required by law; he shall be the custodian of the records and of
the corporate seal or seals of the Corporation; he, or an Assistant Secretary,
shall have authority to affix the corporate seal or seals to all documents, the
execution of which, on behalf of the Corporation, under its seal, is duly
authorized, and when so affixed
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it may be attested by his signature or the signature of such Assistant
Secretary; and in general, he shall perform all duties incident to the office of
the Secretary of a corporation, and such other duties as the Board of Directors
may from time to time prescribe. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.

Section 5.11. Treasurer. The Treasurer, if there shall be one, shall
have charge of and be responsible for all funds, securities, receipts and
disbursements of the Corporation and shall deposit, or cause to be deposited, in
the name and to the credit of the Corporation, all moneys and valuable effects
in such banks, trust companies, or other depositaries as shall from time to time
be selected by the Board of Directors. He shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation; he shall
render to the Chairman, the President and to each member of the Board of
Directors, whenever requested, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation; and in general, he
shall perform all of the duties incident to the office of the Treasurer of a
corporation, and such other duties incident to the office of the Treasurer of a
corporation, and such other duties as the Board of Directors may from time to
time prescribe.

Section 5.12. Other Officers. The Board of Directors may also elect
or may delegate to the President the power to appoint such other officers as it
may at any time or from time to time deem advisable, and any officers so elected
or appointed shall have such authority and perform such duties as the Board of
Directors or the President, if he shall have appointed them, may from time to
time prescribe.
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ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES
AND SHAREHOLDERS

Section 6.1. Form and Signature. The shares of the Corporation shall
be represented by certificates signed by the Chairman, if any, or the President
or by any Vice President, if any, and the Secretary or an Assistant Secretary,
if any, or the Treasurer, if any, or an Assistant Treasurer, if any, and shall
bear the seal of the Corporation or a facsimile thereof. Any or all of the
signatures on the certificate may be a facsimile. Each certificate representing
shares shall state upon its face (a) that the Corporation is formed under the
laws of the State of Delaware, (b) the name of the person or persons to whom it
is issued, (c) the number of shares which such certificate represents and (d)
the par value, if any, of each such share represented by such certificate.

Section 6.2. Registered Shareholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares of stock, and shall not be bound
to recognize any equitable or legal claim to or interest in such shares on the
part of any other person.

Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer; and, in the event that the
certificate refers to any agreement restricting
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transfer of the shares which it represents, proper evidence of compliance with
such agreement, a new certificate shall be issued to the person entitled
thereto, and the old certificate cancelled and the transaction recorded upon the
books of the Corporation.

Section 6.4. Lost Certificates, etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost, mutilated, stolen or destroyed certificate, or
his legal representatives, to make an affidavit of that fact and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of any such certificate or the issuance of any
such new certificate.

Section 6.5. Record Date. For the purposes of determining the
shareholders entitled to notice of, or to vote at, any meeting of shareholders
or any adjournment thereof, or to express consent to, or dissent from, any
proposal without a meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividend or the allotment of any rights, or
for the purpose of any other action, the Board may fix, in advance, a record
date. Such date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors and which record date:
(1) in the case of determination of stockholders entitled to vote at any meeting
of stockholders or adjournment thereof, shall, unless otherwise required by law,
not be more than sixty nor less than ten days before the date of such meeting;
(2) in the case of determination of stockholders entitled to express consent to
corporate action in writing without a meeting, shall not be more
<PAGE> 18

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DATED: JULY 24, 1996

than ten days from the date upon which the resolution fixing the record date is
adopted by the Board of Directors; and (3) in the case of any other action,
shall not be more than sixty days prior to such other action. If no record date
is fixed: (1) the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting when no prior action of
the Board of Directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the corporation in accordance with applicable law, or, if prior
action by the Board of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action; and (3) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.

Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to
<PAGE> 19

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DATED: JULY 24, 1996

appoint, one or more transfer agents and one or more registrars and may require
all certificates for shares of capital stock to bear the signature or signatures
of any of them.

ARTICLE VII
GENERAL PROVISIONS

Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument binding upon the Corporation to determine what,
if any, dividends or distributions shall be declared and paid or made.

Section 7.2. Checks, etc. All checks or demands for money and notes
or other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.

Section 7.3. Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.

Section 7.4. Fiscal Year. The fiscal year of the Corporation shall
be determined by the Board of Directors.
<PAGE> 20

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DATED: JULY 24, 1996

Section 7.5. General and Special Bank Accounts. The Board may
authorize from time to time the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated.

ARTICLE VIII
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHER PERSONS

Section 8.1. Right to Indemnification. The corporation shall
indemnify and hold harmless, to the fullest extent permitted by applicable law
as it presently exists or may hereafter be amended, any person who was or is
made or is threatened to be made a party or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or non-profit entity, including service with
respect to employee benefit plans, against all liability and loss suffered and
expenses reasonably incurred by such person. The corporation shall be required
to indemnify a person in connection with a proceeding initiated by such person
only if the proceeding was authorized by the Board of Directors of the
corporation.
<PAGE> 21

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DATED: JULY 24, 1996

Section 8.2. Prepayment of Expenses. The corporation shall pay the
expenses, including attorneys' fees, of any person entitled by this Article VIII
to be indemnified if such expenses were incurred in defending any proceeding in
advance of its final disposition, provided, however, that the payment of
expenses incurred by any person in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by such person to
repay all amounts advanced if it should be ultimately determined that such
person is not entitled to be indemnified under this Article or otherwise.

Section 8.3. Claims. If a claim for indemnification or payment of
expenses under this Article is not paid in full within sixty days after a
written claim therefor has been received by the corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification or payment of
expenses under applicable law.

Section 8.4. Determination of Indemnification. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
applicable law. Such determination shall be made (1) by the board of directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if
<PAGE> 22

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DATED: JULY 24, 1996

obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.

Section 8.5. Non-Exclusivity of Rights. The rights conferred on any
person by this Article VIII shall not be exclusive of any other rights which
such person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, these by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.

Section 8.6. Other Indemnification. The corporation's obligation, if
any, to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or non-profit entity shall be reduced by any amount such
person may collect as indemnification from such other corporation, partnership,
joint venture, trust, enterprise or non-profit enterprise.

Section 8.7. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VIII shall not adversely affect any right
or protection hereunder of any person in respect of any act or omission
occurring prior to the time of such repeal or modification.

ARTICLE IX
ADOPTION AND AMENDMENTS

Section 9.1. Power to Amend. These By-Laws may be amended or
repealed and any new By-Law may be adopted at any annual or special meeting by
vote of a majority of the shareholders of the Corporation entitled at the time
to vote for the election of directors; or by unanimous written consent of such
shareholders without a meeting. These
<PAGE> 23

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DATED: JULY 24, 1996

By-Laws may be ratified, amended or repealed and any new By-Law may be adopted
by a majority of the entire Board of Directors at any duly held meeting;
provided that any By-Laws so ratified, amended or adopted by said majority may
be amended or repealed, and any By-Law repealed by the Board of Directors may be
reinstated, by a majority of the shareholders of the Corporation entitled to
vote at the time for the election of directors.

<PAGE> 1
EXHIBIT 10.2
------------

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is dated as of May 31, 1996 (this
"Employment Agreement") between Influence, Inc., a Delaware corporation (the
"Company"), and Peter A. Bick (the "Executive").

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, the Executive has been employed by the Company prior to the
date hereof and has provided valuable services to the Company and its subsidiary
in the development and organization of its business and affairs;

WHEREAS, the Company has agreed to employ the Executive in an
executive capacity, and desires to be assured of his continued services as such,
on the terms and conditions set forth in this Agreement; and

WHEREAS, the Executive accepts such employment on the terms and
conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and intending to be legally bound, the Company
and the Executive confirm the terms of the Executive's employment and agree as
follows:
<PAGE> 2

1. EMPLOYMENT.

(a) Responsibilities. The Company employs the Executive as the President
and Chief Executive Officer of the Company and in such capacity the Executive
shall have such responsibilities and duties consistent with his executive
position and of such a nature as are usually associated with the position of an
executive officer as may be designated from time to time by the Board of
Directors of the Company (the "Board").

(b) Performance. The Executive accepts such employment and agrees to
discharge his duties hereunder faithfully and diligently and use his best
efforts to implement the policies established by the Board. The Executive shall
devote substantially his full business time to the business and affairs of the
Company and he will not, during the Employment Term, devote any of his business
time to the performance of services for remuneration to others than the Company,
except as expressly contemplated by this Section 1 below or with the prior
written consent of the Company. The Executive shall be entitled to fulfill his
teaching obligation through the end of 1996, to serve as an outside director of
no more than two companies (other

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<PAGE> 3

than the Company), which shall not be public companies, and to undertake such
other activities (not including the performance of services for remuneration to
others than the Company) that may entail an insubstantial portion of his
business time, provided that such services and other activities shall not
interfere or conflict in any material respect with the performance of any of the
Executive's duties as a director and employee of the Company and that the
Executive shall have disclosed such services and other activities to the Company
in advance.

(d) Director. During the Employment Term, the Company agrees to use its
best efforts to cause the Executive to be appointed as a member of the Board.

2. TERM OF EMPLOYMENT. The Company employs the Executive, and the
Executive accepts such employment, for a term commencing on the date hereof and
ending on May 31, 1999 or such earlier date that

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<PAGE> 4

the employment of the Executive is sooner terminated pursuant to Section 4
hereof (the "Employment Term").

3. COMPENSATION; BENEFITS; EXPENSE REIMBURSEMENT.

(a) Base Salary. The Company shall pay to the Executive so long as he
shall be employed hereunder a base salary (subject to applicable withholding of
income taxes, social security taxes, and other deductions) at the annual rate of
one hundred and fifty thousand dollars ($150,000) or such greater amount as may
be approved by the Board in its sole discretion, payable in accordance with the
payroll policy of the Company as in effect from time to time.

(b) Bonus Compensation. The Company shall pay to the Executive so long
as he shall be employed hereunder an annual bonus (based on a percentage of the
Executive's annual base salary and earned based on the attainment of certain
performance criteria established from time to time by the Board and the
Executive). Such annual bonus shall be payable in accordance with the policies
established by the Board.

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<PAGE> 5

(c) Business Expenses. The Company shall pay or reimburse the Executive
for all reasonable expenses actually incurred or paid by him in the performance
of his services under this Agreement, upon presentation of expense statements or
vouchers or other supporting information as the Company may reasonably require.

(d) Automobile Allowance. During the Employment Term, the Executive
shall receive an automobile allowance of $400 per month (plus reimbursement of
parking costs at a parking garage located near the Executive's office), which
shall be paid in addition to the Executive's base salary.

(e) Vacation. The Executive shall be entitled to annual vacation of four
(4) weeks per year. Any unused vacation in one year may be carried over to the
next year unless the Company shall elect to pay the Executive (based on the
Executive's annual salary) for such unused vacation.

(f) Other Benefits. During the Employment Term, the Executive shall be
entitled to receive health and dental coverage for the Executive and his
immediate

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<PAGE> 6

family in accordance with the programs maintained by the Company and made
available to employees generally. The Company shall also maintain a term life
insurance policy in the benefit amount of $250,000 covering the Executive for
the benefit of the Executive or his designated beneficiaries. The Executive
shall also be entitled to participate in all employee benefit plans, practices
and programs maintained by the Company and made available to employees (or to
all executives) generally and which are of a character different than the plans,
practices and programs specifically contemplated for the Executive under this
Agreement. The Company also will provide to the Executive customary
indemnification rights to the fullest extent permitted under Delaware law and
may obtain officers and directors insurance in connection with any public
offering of securities of the Company provided that such insurance is available
to the Company on commercially reasonable terms.

4. TERMINATION.

(a) Termination for Cause. Notwithstanding the provisions of Section 2
hereof, the obligations of the Company hereunder and the employment of the
Executive

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<PAGE> 7

hereunder shall be (in the case of subparagraph (1) below) or may be (in the
case of subparagraphs (2) and (3) below) terminated by the Company on the
earliest of the following events:

1. Death. The date of the death of the Executive.

2. Incapacity. Thirty days (30) after the date on which the Company
shall have given the Executive notice of termination of his employment
hereunder by reason of his physical or mental incapacity on a permanent
basis. The Executive shall be deemed to be physically or mentally
incapacitated on a permanent basis if the Executive is unable, by reason
of any physical or mental incapacity, for a period of 90 days (whether
or not consecutive) during any 12-month period to perform his duties and
responsibilities hereunder in a reasonably satisfactory manner.

3. For Cause. Upon notice in writing to the Executive, "for cause",
which shall mean

(A) the commission by the Executive of a willfully wrongful act
or grossly negligent act (which may include, without limitation, a
breach of fiduciary duty) that is materially detrimental to the
Company or its subsidiaries;

(B) the commission or perpetration by the Executive of any
criminal act (other than a traffic offense) to which the Executive
has pled guilty, entered a nolo contendere plea or of which the
Executive has otherwise been convicted, and that is materially
detrimental to the Company or its subsidiaries;

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<PAGE> 8

(D) any material violation by the Executive of his obligations
under this Employment Agreement or any violation by the Executive of
his obligations under Section 6 hereof, which violation continues
uncured for ten days following written notice to the Executive.

(b) Compensation upon Termination for Cause. In the event that the
employment of the Executive is terminated pursuant to Section 4(a) hereof, (i)
the Executive shall thereupon be released from any further obligations under
Section 1 hereof, (ii) the Company shall thereupon be released from any further
obligations under this Employment Agreement other than those accruing under this
Agreement through the date of termination of the Executive's employment
hereunder, including accrued but unused vacation, and other than the Company's
obligations in respect of vested stock options described hereunder, and (iii)
all options to purchase shares of Common Stock that have not previously vested
shall be cancelled by the Company and the Executive shall not have any further
rights in such options or the underlying shares of Common Stock. Termination
pursuant to Section 4(a) shall in no way abrogate or relieve the Executive of
his obligations under Section 6 hereof.

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<PAGE> 9

(c) Termination Without Cause. The Company may terminate the
Executive's employment hereunder other than for the reasons set forth in
paragraph (a) at any time upon ten days prior written notice to Executive. In
consideration of such termination, the Company agrees (1) to pay to the
Executive the base salary payable to Executive for a period of six months, (2)
to pay the Executive the cost of continuing health coverage under COBRA for the
next succeeding six months, and (3) the next succeeding vesting date for stock
options granted under Section 5 shall be accelerated to the date of such
termination. For purposes of this Section (c), any breach by the Company of
Section 1(c) of this Agreement shall be deemed a termination of the Executive by
the Company without cause.

(d) Change in Control.

(i) Subject to Section 4(d)(iii) below and after taking into account any
vesting of options pursuant to Section 4(c) above, in the event of a "change in
control" of the Company (as defined in Section 4(d)(ii) below), any stock
options granted pursuant to Section 5 that have not yet vested will vest and
become immediately exercisable upon the earliest to occur of

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<PAGE> 10

the following: (A) termination of the Executive's employment at any time after
such change in control for any reason other than voluntary resignation or (B)
voluntary resignation by the Executive for any reason at any time within 13
months after such change in control.

(ii) For purposes of this Agreement a "change in control" shall have
occurred upon (1) the acquisition after the date hereof of fifty percent (50%)
or more of the Common Stock of the Company by any "person" or "group" (which
terms shall have the meanings set forth in Section 13(d) of the Securities
Exchange Act of 1934, as amended) that does not currently own at least (10%) of
the outstanding Common Stock of the Company, (2) the sale of substantially all
the assets of the Company and its subsidiaries to another company, the majority
shareholders of which do not constitute majority shareholders of the Company, or
(3) the consummation of a merger, consolidation or reorganization involving the
Company, unless the shareholders of the Company immediately before such merger,
consolidation or reorganization, own directly or indirectly immediately
following such merger,

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<PAGE> 11

consolidation or reorganization, at least 50% of the combined voting power of
the outstanding voting securities of the corporation resulting from such merger,
consolidation or reorganization.

(iii) The provisions of Section 4(d)(i) above will not be effective
until the earlier of: (A) the Company obtains approval of such Section 4(d)(i)
from the holders of at least 75% of the Company's outstanding voting stock in
accordance with Section 280G(b)(5) of the Internal Revenue Code or (B) the
Company has an initial public offering. The Company will use its best efforts
to obtain such stockholder approval as soon as reasonably practicable.

5. STOCK OPTIONS.

(a) Grant of Stock Options. As an inducement to the Executive to become
an employee of the Company and as an incentive for future performance by the
Executive of his duties hereunder, the Company grants the Executive stock
options for 190,000 shares of Common Stock, each such option exercisable at an
exercise price of $5.00 per share of Common Stock, subject to the vesting
schedule and on the other terms

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<PAGE> 12

and conditions described below. Stock options granted hereunder which have
vested in accordance with the terms of this Agreement prior to or on the date of
the termination of the Executive's employment hereunder shall expire upon the
earlier of (1) three months after the date of termination of the Executive's
employment with the Company for any reason, or (2) ten years after the date
hereof.

(b) Exercise of Stock Options. Subject to the vesting schedule
described below, vested stock options may be exercised at any time, in whole or
in part, by the Executive by delivering to the Company a notice of exercise in
form reasonably satisfactory to the Company accompanied by the payment of the
exercise price (together with any withholding taxes required to be withheld by
the Company) for the options covered by the notice of exercise. Payment of the
exercise price (and any applicable withholding taxes) shall be made in cash or,
from and after the completion of the Company's initial public offering, may be
made using a "cashless exercise" feature that enables the Executive to pay the
exercise price of vested stock options by directing the Company to withhold and
retain a number of the shares

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<PAGE> 13

of Common Stock issuable on exercise of the stock option with a value (based on
the Fair Market Value (as defined below) of the Common Stock at the time of
exercise)) equal to the aggregate exercise price of the options being exercised.
For purposes of this Section 5(b) the term "Fair Market Value" of a share of
Common Stock of the Company shall mean, as of any date of determination, the
last closing price for a share of the Company's Common Stock as quoted on the
NASDAQ National Market or otherwise in the over-the-counter market.

(c) Vesting Schedule. The stock options granted to the Executive under
paragraph (a) above shall be subject to the following vesting schedule (as the
same may be modified pursuant to Sections 4(c) and 4(d)): (1) 85,000 stock
options shall vest immediately, as of the date hereof; (2) 35,000 shall vest on
May 31, 1997; (3) 35,000 shall vest on May 31, 1998; and (4) 35,000 shall vest
on May 31, 1999. The stock options granted hereunder shall only become
exercisable upon vesting in accordance with the above schedule and in accordance
with Sections 4(c) or 4(d). Stock options that have not vested on or before the

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<PAGE> 14

date of the termination of the Executive's employment with the Company shall be
cancelled with no further rights associated therewith.

(d) Nontransferability. Stock options granted hereunder shall not be
transferable otherwise than (a) by will or the laws of descent and distribution,
(b) pursuant to a qualified domestic relations order as defined in Section
414(p) of the Internal Revenue Code of 1986, as amended, or (c) to the
Executive's spouse, children, parents, siblings, or any trust established for
the benefit of the Executive or such persons.

(e) Capital Adjustments. The number and class of shares of Common Stock
subject to each outstanding option granted hereunder, the option exercise price
and the aggregate number and class of shares of Common Stock for which the stock
option granted hereunder may be exercised shall be subject to such adjustment,
if any, as appropriate to reflect such events as stock dividends, stock splits
or recapitalizations by or of the Company.

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<PAGE> 15

(f) Restriction on Shares of Common Stock Issued Upon Exercise.
Notwithstanding any other provision of this Agreement, the Executive agrees, for
himself and his successors, that upon the issuance of any shares of Common Stock
upon the exercise of any stock options granted hereunder, the Executive will not
sell, pledge or otherwise dispose of such shares of Common Stock so issued
unless and until the Company is furnished with an opinion of counsel to the
effect that registration of such shares pursuant to the Securities Act of 1933,
as amended (the "Act"), is not required by that Act and the rules and
regulations thereunder. The Executive further agrees that the Company may place
a legend embodying such restriction on the certificates evidencing such shares.
In addition, the Executive agrees not to sell any shares of Common Stock
issuable on exercise of any stock options until the expiration of the "lock-up"
period agreed to by the Company with the underwriters in connection with the
initial public offering of the Company's Common Stock. In addition, the
Executive agrees that the Board may adopt from time to time reasonable
restrictions applicable to the sale of shares of Common Stock by officers and
directors of the Company, including the Executive.

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<PAGE> 16

(g) Rights as Stockholder. The Executive shall have no rights as a
stockholder with respect to any shares of Common Stock subject to the stock
options granted hereunder until and unless such options have been validly
exercised and the shares covered by such options are issued to the Executive
pursuant to this Agreement. Without limiting the generality of the foregoing,
no adjustment shall be made for dividends or other rights for which the record
date is prior to the issuance of shares on exercise of the stock options. The
Company will issue a certificate evidencing shares issuable upon exercise of the
stock options promptly following the valid exercise of stock options by the
Executive.

6. NON-COMPETITION; CONFIDENTIALITY; DISCLOSURE OF INFORMATION.

(a) Non-Competition. Without the prior written consent of the Board,
the Executive shall not, directly or indirectly, during the Employment Term and
until the second anniversary of the termination of the Employment Term.

1. render consulting, or advisory services to or financially support
in any manner, or be a proprietor, a director, an officer, an employee,
an agent, a partner, a shareholder (other than ownership of less than two
(2%) percent of the outstanding voting securities of any entity whose
voting securities are traded on a national

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<PAGE> 17

securities exchange (including NASDAQ); provided that any of the other
restrictions contained in this sentence are not applicable) or a lender
to, or otherwise promote, any business, enterprise, person, firm,
corporation, partnership, association or other entity that competes
anywhere in the world with the Company or any of its subsidiaries in the
business of the manufacture, distribution, design or sale of such
products of the general type that the Company (including its
predecessors) or its subsidiaries manufacture, distribute, design or sell
during the Employment Term or which the Company (including its
predecessors) or its subsidiaries is planning the manufacture,
distribution, design or sale;

2. interfere with, disrupt or attempt to disrupt existing or any
then existing relationship, contractual or otherwise, between the Company
or its subsidiaries and any of their customers, suppliers, clients,
executives, employees or other persons with whom the Company or its
subsidiaries deal; or

3. solicit for employment, attempt to employ or assist any other
entity in employing or soliciting for employment any employee or
executive who is at that time employed by the Company or its
subsidiaries.

(b) Confidentiality. The Executive shall not, directly or indirectly,
without the specific prior written consent of the Company, at any time after the
date hereof, divulge to any business, enterprise, person, firm, corporation,
partnership, association or other entity, or use for the Executive's own
benefit, (i) any confidential information concerning the businesses, affairs,
customers, suppliers or clients of

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<PAGE> 18

the Company or its subsidiaries or their affiliates, or (ii) any non-public data
or statistical information of the Company or its subsidiaries or their
affiliates, whether created or developed by the Company or its subsidiaries or
their affiliates or on their behalf or with respect to which the Executive may
have knowledge or access (including without limitation any of the foregoing
created or developed by the Executive), it being the intent of the Company and
the Executive to restrict the Executive from disseminating or using any data or
information which is at the time of such use or dissemination unpublished and
not readily available or generally known to persons involved or engaged in
businesses of the type engaged in from time to time by the Company or its
subsidiaries.

(c) Non-Disclosure. The Executive will promptly disclose to the Company
all processes, trademarks, inventions, improvements, discoveries and other
information related to the business of the Company, its subsidiaries or their
affiliates (collectively "developments") conceived, developed or acquired by
him alone or with others during the Employment Term, whether or not conceived
during regular working hours

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<PAGE> 19

or through the use of Company or subsidiary time, material or facilities or
otherwise. All such developments shall be the sole and exclusive property of
the Company, and upon request the Executive shall deliver to the Company all
drawings, sketches, models, codes, data and records relating to such
developments. In the event any such developments shall be deemed by the Company
to be patentable, the Executive shall, at the expense of the Company (which
shall, in the event the Executive shall no longer be employed hereunder, include
compensation to the Executive at a rate equal to his base salary prorated for
the time involved), assist the Company in obtaining a patent or patents thereon
and execute all documents and do all other things necessary or proper to obtain
letters patent and to vest the Company with full title and rights thereto.

(d) Restrictions on Scope of Agreement. Although the restrictions
contained in Section 6 hereof are considered by the parties hereto to be fair
and reasonable in the circumstances, it is recognized that restrictions of the
nature contained in Section 6 may fail for technical reasons, and accordingly if
any of such restrictions shall be adjudged by a court of

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<PAGE> 20

competent jurisdiction to be void or unenforceable for whatever reason, but
would be valid if part of the wording thereof were deleted, or the period
thereof reduced or the area dealt with thereby reduced in scope, the
restrictions contained in Section 6 shall apply, at the election of the Company,
with such modifications as may be necessary to make them valid, effective and
enforceable in the particular jurisdiction in which such restrictions are
adjudged to be void or unenforceable.

(e) Successors. The covenants contained in this Section 6 shall inure
to the benefit of the Company, any successor of the Company and each subsidiary
of the Company.

7. MISCELLANEOUS.

(a) Entire Agreement. This Employment Agreement contains the entire
agreement between the Company and the Executive with respect to the matters
covered by this Employment Agreement and supersedes all prior arrangements or
understandings with respect thereto.

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<PAGE> 21

(b) Assignment. This Employment Agreement may be assigned by the
Company to any business, enterprise, person, firm, corporation, partnership,
association or other entity acquiring (by purchase, merger or otherwise),
directly or indirectly, the business and substantially all of the assets of the
Company or of the subsidiaries of the Company. Notwithstanding the foregoing,
any assignment permitted under this Section 7(b) shall not affect the
acceleration of the stock options vesting schedule upon the occurrence of a
Change of Control.

(c) Governing Law. This Employment Agreement shall be governed by and
construed in accordance with the laws of the State of California without giving
effect to the conflict of law principles thereof.

(d) Headings. The descriptive headings used in this Employment
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Employment Agreement.

(e) Notices. All notices or other communications which are required or
permitted pursuant

- 21 -
<PAGE> 22

to this Employment Agreement shall be in writing and sufficient if delivered
personally or by telecopier (with a confirmation copy sent by mail) or sent by
registered or certified mail, postage prepaid, addressed as follows:

If to the Company:

Influence, Inc.
601 Montgomery Street
Suite 845
San Francisco, California 94111
Attention: Lewis C. Pell
Telephone Number: (415) 421-5600

with a copy to:

Paul I. Rachlin
Arnold & Porter
399 Park Avenue
New York, New York 10022

If to the Executive:

Mr. Peter A. Bick
637 Steiner Street
San Francisco, California 94117

Any party may by written notice change the address to which notices to such
party are to be delivered or mailed.

(f) Waiver. Any waiver of any term or condition, or any amendment or
supplementation, of this Employment Agreement shall be effective only if in
writing and, in the case of any waiver by the Company

- 22 -
<PAGE> 23

and any amendment or supplementation consented to by the Company, if approved by
the Chairman or the Board.

(g) Performance by Executive. The performance by the Executive of his
duties under this Employment Agreement is the personal obligation of the
Executive and may not be delegated by the Executive; however, the Executive may
delegate duties and responsibilities to other employees or agents of the Company
or its subsidiaries incident to normal and customary management practices.

(h) Remedies. If a violation by the Executive of any covenant contained
in this Employment Agreement occurs or is threatened, the Company and the
Executive agree and acknowledge that such violation or threatened violation will
cause irreparable injury to the Company and its subsidiaries, and the remedy at
law for any such violation or threatened violation shall be inadequate and that
the Company shall be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damages.

- 23 -
<PAGE> 24

(i) Legal Expenses. The Company shall reimburse the Executive for the
Executive's reasonable legal fees and expenses in negotiating and documenting
this Agreement.

* * * * *

- 24 -
<PAGE> 25

IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Employment Agreement on and as of the date first above written.

INFLUENCE, INC.

By: /s/ Lewis C. Pell
-----------------
Name: Lewis C. Pell
Title: Chairman of the Board

/s/ Peter A. Bick
-----------------
Peter A. Bick

- 25 -

<PAGE> 1
EXHIBIT 10.4

INFLUENCE, INC.
601 MONTGOMERY STREET, SUITE 845
SAN FRANCISCO, CALIFORNIA 94111

July 1, 1996

Oren Globerman
14 Jericho Street
Holon, Israel

Dear Mr. Globerman:

This letter (the "Letter" or "Agreement") establishes certain points of
agreement between you and Influence, Inc., a Delaware corporation (the
"Company"), regarding your relationship with the Company and its subsidiary.

1. Confidentiality. You acknowledge that you will not, directly or
indirectly, without the specific prior written consent of the Company, at any
time after the date hereof, divulge to any business, enterprise, person, firm,
corporation, partnership, association or other entity, or use for your own
benefit, (i) any confidential information concerning the businesses, affairs,
customers, suppliers or clients of the Company, its subsidiaries or their
affiliates (including, but not limited to, trade secrets, know-how, proprietary
information regarding the Company's Products (as such term is defined below),
inventions, formulae, manufacturing methods, processes, specifications,
laboratory protocols, business plans or strategy and non-public lists of clients
and suppliers), or (ii) any non-public data or statistical information of the
Company, its subsidiaries or their affiliates, whether created or developed by
the Company, its subsidiaries or their affiliates or on their behalf or with
respect to which you may have knowledge or access (including without limitation
any of the foregoing created or developed by you), it being the intent of the
Company and you to restrict you from disseminating or using any data or
information which is at the time of such use or dissemination unpublished and
not readily available or generally known to persons involved or engaged in
businesses of the type engaged in from time to time by the Company or its
subsidiaries.

2. Non-Competition. From and after the date hereof until the second
anniversary of the date on which you cease to serve as an employee or consultant
<PAGE> 2

Oren Globerman
July 1, 1996
Page 2

of the Company or any of its subsidiaries, you will not either alone or through
or in any capacity with another legal entity, directly or indirectly, (a) render
consulting, or advisory services to or financially support in any manner, or be
a proprietor, a director, an officer, an employee, an agent, a partner, a
shareholder (other than ownership of less than two (2%) percent of the
outstanding voting securities of any entity whose voting securities are traded
on a national securities exchange (including NASDAQ); provided that any of the
other restrictions contained in this sentence are not applicable) or a lender
to, or otherwise promote, any business, enterprise, person, firm, corporation,
partnership, association or other entity that competes directly or indirectly
anywhere in the world with the Company or any of its subsidiaries in the
business of the manufacture, distribution, design or sale of such products of
the type that the Company (including its predecessors) or its subsidiaries
manufacture, distribute, design or sell during the term of your service to the
Company or which the Company (including its predecessors) or any of its
subsidiaries is planning during the term of your service to the Company
hereunder the possible manufacture, distribution, design or sale (the "Company's
Products", except that such definition shall not include stents and stent
delivery systems); (b) interfere with, disrupt or attempt to disrupt existing or
any then existing relationship, contractual or otherwise, between the Company or
its subsidiaries and any of their customers, suppliers, clients, executives,
employees or other persons with whom the Company or its subsidiaries deal; or
(c) employ, solicit for employment, attempt to employ or assist any other entity
in employing or soliciting for employment any employee or executive who is at
that time employed by the Company or its subsidiaries.

3. Release. You hereby remise, release, convey and relinquish unto the
Company, its successors and assigns, forever all the right, title and interest
which you or your affiliates (including entities you control or in which you
have a controlling interest) may have, if any, in, to or arising out of any
inventions (whether patentable or unpatentable, whether or not reduced to
practice, and including trade secrets), any improvements thereto, and any
patents, patent applications and patent disclosures, together with any re-
issuances, continuations, continuations in part, divisionals, revisions,
extensions and re-
<PAGE> 3

Oren Globerman
July 1, 1996
Page 3

examinations thereof, whether in the United States or abroad, relating to the
Company's Products, including any right to any remuneration (other than any
remuneration actually paid to you or your affiliates prior to the date hereof)
in respect of the foregoing or otherwise in respect of prior services you have
rendered to the Company or its subsidiaries. You agree to make prompt written
disclosure to the Company of, to hold in trust for the sole right and benefit of
the Company, and will and hereby do assign to the Company all right, title and
interest in and to any ideas, inventions, developments, improvements or trade
secrets related to the Company's Products which you may solely or jointly
conceive or reduce to practice, or cause to be conceived or reduced to practice
during the period contemplated by section 4 hereof. You agree to take such
other actions, provide such other assurances and execute such other instruments
and assignments that the Company may reasonably request in order to give effect
to this Section 3.

4. Compensation. Effective July 1, 1996 and so long as you shall be an
officer of the Company or its subsidiary or performing substantial services to
the Company or its subsidiaries, the Company will cause its subsidiary,
Influence Medical Technologies, Ltd. ("IMT") to pay to you a salary or fee of
$150,000 per annum, payable in equal monthly installments in accordance with the
IMT's payroll practices, payable in New Israeli Shekels and subject to any
withholdings required to be made by applicable law. You agree to devote to the
Company and to its subsidiaries such of your business time as is necessary for
the management of the business and affairs of the Company and its subsidiaries.

5. Remedies. The Company shall have the right to enforce this Agreement
and any of its provisions by injunction, specific performance or other equitable
relief, without bond. The foregoing rights of the Company are in addition to
and shall not derogate from any other rights the Company may have for a breach
of this Agreement.

6. Severability and Enforcement. In the event that any provision in this
Agreement is held unenforceable in a court of law, it shall not be deemed to
void this Agreement as a whole and the remaining provisions shall be unaffected
thereby.
<PAGE> 4

Oren Globerman
July 1, 1996
Page 4

7. Delay, Omission or Waiver. No delay or Omission of the Company to
exercise any right, power or remedy accruing to the Company under this Agreement
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any breach or default; nor shall any waiver by the Company of any
single breach or default on your behalf be deemed a waiver of any other breach
or default on your behalf theretofore or thereafter occurring.

8. Governing Law. This Agreement will be governed by the laws of the
State of New York, without giving effect to the conflict of law rules thereof.

* * *

This Agreement constitutes the entire agreement between you and the Company
and supersedes all prior understandings or agreements with respect to the
subject matter hereof. This Agreement may not be assigned by the parties
hereto, except that the rights and benefits inuring to the Company hereunder
shall also inure to the benefit of the Company's subsidiaries and their
successors and assigns.

You represent that this agreement does not in any way conflict with any
other agreement or commitment undertaken by you at this time which could
prohibit or impair the performance of your obligations hereunder.

Kindly acknowledge your agreement with the terms of this letter by signing
in the space provided below and returning this letter to me.

Sincerely,

INFLUENCE, INC.

By:/s/ Peter A. Bick
--------------------
Name: Peter A. Bick
Title: President

AGREED AND ACCEPTED
as of this 1st day of
July, 1996

/s/ Oren Globerman
- - ------------------
Oren Globerman

<PAGE> 1

EXHIBIT 10.5

INFLUENCE, INC.
601 MONTGOMERY STREET, SUITE 845
SAN FRANCISCO, CALIFORNIA 94111

July 1, 1996

Mordechay Beyar, M.D.
5 Ha'Eshcolit Street
PO Box 1455
Caesaria, Israel 38900

Dear Dr. Beyar:

2. Non-Competition. From and after the date hereof until the second
anniversary of the date on which you cease to serve as an employee or consultant
<PAGE> 2

Mordechay Beyar, M.D.
July 1, 1996
Page 2

Mordechay Beyar, M.D.
July 1, 1996
Page 3

part, divisionals, revisions, extensions and re-examinations thereof, whether in
the United States or abroad, relating to the Company's Products, including any
right to any remuneration (other than any remuneration actually paid to you or
your affiliates prior to the date hereof) in respect of the foregoing or
otherwise in respect of prior services you have rendered to the Company or its
subsidiaries. You agree to make prompt written disclosure to the Company of, to
hold in trust for the sole right and benefit of the Company, and will and hereby
do assign to the Company all right, title and interest in and to any ideas,
inventions, developments, improvements or trade secrets related to the Company's
Products which you may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice during the period contemplated by
section 4 hereof. You agree to take such other actions, provide such other
assurances and execute such other instruments and assignments that the Company
may reasonably request in order to give effect to this Section 3.

6. Severability and Enforcement. In the event that any provision in this
Agreement is held unenforceable in a court of law, it shall not be deemed
<PAGE> 4

Mordechay Beyar, M.D.
July 1, 1996
Page 4

to void this Agreement as a whole and the remaining provisions shall be
unaffected thereby.

8. Governing Law. This Agreement will be governed by the laws of the
State of New York, without giving effect to the conflict of law rules thereof.

* * *

Kindly acknowledge your agreement with the terms of this letter by signing
in the space provided below and returning this letter to me.

Sincerely,

INFLUENCE, INC.

By:/s/ PETER A. BICK
--------------------
Name: Peter A. Bick
Title: President

AGREED AND ACCEPTED
as of this 1st day of
July, 1996

/s/ MORDECHAY BEYAR
- - ---------------------
Mordechay Beyar, M.D.

<PAGE> 1

EXHIBIT 10.7

INFLUENCE, INC.
1995 Stock Option Plan

1. DEFINITIONS

In this Plan, except; where the context otherwise indicates, the
following definitions apply:

(a) "Agreement" means the written agreement implementing a grant of an
Option or an award of Restricted Stock.

(b) "Board" means the Board of Directors of the Company.

(d) "Committee" means the committee of the Board meeting the standards
of Rule 16b-3(c)(2)(i) of the Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any similar successor
rule, appointed by the Board to administer this Plan. Unless otherwise
determined by the Board, the Compensation Committee of the Board or the Board as
a whole shall be the Committee.

(e) "Common Stock" means the common stock, par value $0.001 per share,
of the Company.

(f) "Company" means Influence, Inc., a Delaware corporation.

(g) "Date of Exercise" means the date on which the Company receives
notice pursuant to Section 7(a) of the exercise of an Option.

(h) "Date of Grant" means the date on which an Option is granted or an
award of Restricted Stock is authorized by the action of the Committee or such
later date as may be specified in the grant or authorization.

(i) "Director" means any person who is a director of the Company or any
Subsidiary.

(j) "Director-employee" means an Employee who is also a Director of the
Company.

<PAGE> 1
EXHIBIT 10.9

$20,000,000.00 December 10, 1996
San Francisco, California

DEBENTURE

FOR VALUE RECEIVED, the undersigned, INFLUENCE, INC., a Delaware
corporation (hereinafter, together with its successors in title and assigns,
called "Borrower"), promises and agrees to pay on the one year anniversary of
the date hereof (unless this Debenture is converted as provided in Section 3
below) to the order of MEDTRONIC, INC. (hereinafter, together with its
successors in title and assigns, called "Holder"), at 7000 Central Avenue N.E.,
Minneapolis, Minnesota 55432 or such other address provided to Borrower by
written notice, the principal sum of Twenty Million Dollars ($20,000,000.00) in
immediately available funds, together with interest from the date hereof on the
unpaid principal amount at a per annum rate (computed on the basis of actual
number of days elapsed in a 365-day year) equal to the "prime" or "reference"
rate in effect from time to time as announced by Norwest Bank Minnesota N.A.
This Debenture is being issued pursuant to the letter agreement (the "Letter
Agreement") dated November 8, 1996 among Borrower, Medtronic and certain
stockholders of Borrower. Capitalized terms not defined in this Debenture have
the meanings set forth in the Letter Agreement.

The obligations of Borrower and the rights of each Holder under and
pursuant to this Debenture shall be subject to all of the following terms and
conditions, and Borrower and Holder agree to be bound by such terms and
conditions:

1. Event of Default. The entire principal amount outstanding and all
accrued but unpaid interest thereon shall, at the option of Holder, become
immediately due and payable upon the occurrence of any of the following "Events
of Default" (whether such occurrence shall be voluntary or involuntary or come
about or be effected by operation of law or otherwise):

(a) if Borrower or any of its subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its inability to
pay or generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of Borrower or any of its subsidiaries or of any
substantial part of the assets of Borrower or any of its subsidiaries or shall
commence any case or other proceeding relating to Borrower or any of its
subsidiaries under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or if any such petition or application
shall be filed or any such case or other proceeding shall be commenced against
Borrower or any of its subsidiaries; or

(b) if there shall remain in force, undischarged, unsatisfied
and unstayed, for more than thirty (30) days, whether or not consecutive, any
final (as to which the time for further appeals has expired or to which the
appeals process has been exhausted) judgment against

<PAGE> 2

Borrower or any of its subsidiaries that, with other outstanding final judgments
undischarged against Borrower or any of its Subsidiaries, exceeds in the
aggregate $500,000; or

(c) if Borrower shall be in default under the terms of any
other debt or such other event has occurred resulting in the acceleration of any
other debt in the aggregate amount of $500,000 or more; or

(d) if Borrower materially breaches any of its
representations, warranties, covenants or agreements set forth herein or in the
Letter Agreement.

2. Remedies. When any Event of Default has occurred and is continuing,
Holder shall have the option to declare the unpaid principal balance hereof and
all accrued and unpaid interest thereon (through the date of full payment
hereof) to be immediately due and payable. In addition, Holder shall have and
may exercise all other rights and remedies permitted by law.

3. Mandatory Conversion to Common Stock. In the event this Debenture
has not previously become due and payable and Holder does not exercise the
Option under the Letter Agreement prior to the Option's Termination Date, then,
unless there has been a material breach by Borrower or the Signing Stockholders
of the representations, warranties or agreements hereunder or under the Letter
Agreement, the unpaid principal and interest under this Debenture shall be
converted as of the Termination Date into such number of shares of common stock
of Borrower (the "Conversion Shares") as results by dividing the unpaid
principal and interest under this Debenture by the "Per Share Conversion Price."
The "Per Share Conversion Price" shall be equal to $400 million divided by the
sum of the total number of shares of common stock of Borrower then outstanding
plus the total number of shares of common stock of Borrower subject to then
outstanding convertible securities, options, warrants or other rights to acquire
directly or indirectly Borrower common stock. In the event of such conversion of
this Debenture, Borrower shall on the Termination Date deliver to Holder, or to
such person or persons as designated in writing by Holder, a certificate or
certificates representing the number of fully paid and nonassessable Conversion
Shares together with any cash payable in respect of a fractional share. Such
conversion shall be deemed to have been effected at the close of business on the
Termination Date, so that the person entitled to receive the Conversion Shares
shall be treated for all purposes as having become the record holder of such
shares at such time.

4. Authorization and Reservation of Shares. Borrower covenants and
agrees that all Conversion Shares which may be issued upon conversion of this
Debenture will, upon issuance, be duly authorized and issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof. Borrower further covenants and agrees that Borrower shall at all
times have authorized, and reserved for the purpose of issue upon conversion
hereof, a sufficient number of shares of its common stock for the conversion of
this Debenture.

5. Registration Rights. If this Debenture is converted into Conversion
Shares, then thereafter each time Borrower determines to prepare and file a
registration statement under the Securities Act of 1933 (the "Securities Act")
in connection with the proposed offer and sale of

-2-
<PAGE> 3

any of its securities by it or any of its security holders other than Borrower's
initial public offering ("IPO") of any of its securities, Borrower will give
written notice thereof to the Holders of the Conversion Shares. Upon the written
request of any such Holder, Borrower will cause such Holder's Conversion Shares
to be included in such registration statement. If any registration pursuant to
this Section will be underwritten on a firm commitment basis, Borrower may
require that the Conversion Shares requested for inclusion be included in the
underwriting on the same terms and conditions as securities otherwise being sold
through the underwriters, subject to customary underwriter cutbacks (in which
case such cutbacks shall be distributed pro rata among the Holders of the
Conversion Shares and all other selling stockholders participating in the
registration). In connection with Borrower's IPO, each Holder agrees to enter
into a customary agreement not to sell following the IPO any of the Holder's
Conversion Shares in the public market for such period of time (the "lock-up
period"), not to exceed 180 days, that is no greater than the shortest lock-up
period to which a Borrower stockholder of equal or greater holdings or a
Borrower director or officer is subject; provided, Holder will not be required
to enter into any such lock-up agreement unless each Borrower stockholder of
equal or greater holdings and each Borrower director and officer is also subject
to such a lock-up. In addition, at any time after the initial public offering of
stock by Borrower, Borrower will prepare and file a registration statement, at
its expense, upon the request of Holders of at least 50% of the Conversion
Shares not previously sold through a registration, to register such Conversion
Shares on behalf of such Holders for resale and maintain such registration,
including registrations under applicable state securities laws, for a period of
six months if Borrower is not eligible to use Form S-3 for such registration or
for 12 months if Borrower is eligible to use Form S-3 for such registration.
Borrower will give notice to each of the other Holders of Conversion Shares who
did not join in such request and afford them a reasonable opportunity to do so.
Borrower will bear all expenses incurred by it in the registrations described in
this paragraph. Borrower shall also pay up to an aggregate of $15,000.00 of
legal fees incurred in such registration by one counsel for all of the Holders.
The Holders shall pay all underwriting discounts and selling commissions with
respect to the sale of the Conversion Shares, the expenses of underwriters, if
any, engaged by the Holders in connection with the Holders' demand registration
and the fees and expenses of the Holders' counsel in excess of the
above-referenced $15,000.00. Borrower will provide the Holders and their
underwriters, if any, customary indemnification covering the accuracy and
completeness of the registration statement and prospectus involved in such
registrations.

6. Miscellaneous

(a) Upon default in its obligations hereunder, Borrower shall
pay the costs, including reasonable attorneys' fees, of Holder in the pursuit of
such Holder's remedies hereunder.

(b) Borrower hereby waives presentment, demand for payment,
notice of dishonor, and all other notices or demands in connection with the
delivery, acceptance, performance, default or endorsement of this Debenture.

(c) No delay or failure on the part of Holder in exercising any
right or remedy hereunder, or at law or at equity, shall operate as a waiver of
or preclude the exercise of such

-3-
<PAGE> 4

right or remedy or of any other right or remedy, and no single or partial
exercise by Holder of any such right or remedy shall preclude or estop another
or further exercise thereof or exercise of any other right or remedy. No waiver
by Holder shall be effective unless in writing signed by Holder. A waiver on any
one occasion shall not be construed as a waiver of any such right or remedy on
any prior or subsequent occasion.

(d) No amendment, modification or waiver of any provision of
this Debenture shall be effective unless the same shall be in writing and signed
by Holder.

(e) This Debenture shall be governed by and construed in
accordance with the laws of the State of Minnesota.

(f) If any provision or application of this Debenture is held
unlawful or unenforceable in any respect, such illegality or unenforceability
shall not affect other provisions or applications which can be given effect.

(g) The terms and provisions of this Debenture shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of Borrower and the Holders.

(h) Upon receipt of evidence reasonably satisfactory to
Borrower of the loss, theft, destruction or mutilation of this Debenture and, in
the case of any such mutilation, upon surrender of this Debenture to Borrower
for cancellation, Borrower shall issue a new Debenture identical in form to the
lost, stolen, destroyed or mutilated Debenture.

IN WITNESS WHEREOF, Borrower has caused this Debenture to be
signed by its authorized officer and dated as of the date stated above.

INFLUENCE, INC.

By: /s/ PETER BICK
--------------------------
Its: President & CEO

- 4 -

<PAGE> 1
EXHIBIT 11.1

INFLUENCE INC.
STATEMENT OF COMPUTATION OF
PRO FORMA NET LOSS PER SHARE

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
Pro forma net loss per share: 1996 1997
---------------------------------------------------------
<S> <C> <C>
Net loss $(5,772,678) $(4,834,612)
---------------------------------------------------------

Shares used in computing pro-forma
net loss per share 7,442,460 7,488,217
---------------------------------------------------------

Pro forma net loss per share $(0.78) $(0.65)
=========================================================

Computation of pro forma weighted
average shares outstanding:

Weighted average number of common
shares 6,177,210 6,222,967

Weighted average number of shares
issuable upon exercise of options,
net of shares repurchased (1) 152,970 152,970

Weighted average number of shares
issuable upon assumed conversion
of Series A Convertible Preferred
Stock (2) 1,112,280 1,112,280
---------------------------------------------------------
Shares used in computing pro
forma net loss per share
7,442,460 7,488,217
=========================================================
</TABLE>

(1) All options exercisable at below the expected offering price
issued within one year of the filing date have been included as
outstanding for the entire periods presented, net of shares repurchased
under the "treasury stock" method, assuming a public offering price of
$12.00.

(2) Series A Convertible Preferred Stock issuable upon completion of an
initial public offering have been included as outstanding for the
entire periods presented using the "if-converted" method.

Outstanding options (other than those included in (1)) have been
excluded from the computation since the impact would be anti-dilutive.

Presentation of a separate fully diluted loss per share has been
excluded since the presentation would be identical to the calculation above.

<PAGE> 1

EXHIBIT 21.1

Subsidiaries of the Registrant

<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
---- ---------------
<S> <C>
Influence Medical Technologies, Ltd. Israel
Influence Medical Technologies, GmbH Germany
</TABLE>

<PAGE> 1

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated July 25, 1997, except as
to Note 9 which is as of August 6, 1997, relating to the consolidated financial
statements of Influence, Inc., which appears in such Prospectus. We also consent
to the references to us under the headings "Experts" and "Selected Consolidated
Financial Data" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Selected Consolidated
Financial Data."

/s/ PRICE WATERHOUSE LLP
- -------------------------
PRICE WATERHOUSE LLP

San Jose, California
August 6, 1997

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 6,659 16,747
<SECURITIES> 5,294 103
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 622 244
<CURRENT-ASSETS> 501 224
<PP&E> 1,034 640
<DEPRECIATION> 130 57
<TOTAL-ASSETS> 13,980 17,957
<CURRENT-LIABILITIES> 1,245 1,194
<BONDS> 0 0
0 0
7 7
<COMMON> 4 4
<OTHER-SE> 12,735 4,706
<TOTAL-LIABILITY-AND-EQUITY> 13,980 3,336
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 3,815 7,764
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 405 106
<INCOME-PRETAX> (4,835) (7,770)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,835) (7,770)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,835) (7,770)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>