<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 20, 1998
---------------
VISION-SCIENCES, INC.
---------------------
(Exact name of registrant as specified in its charter)
Delaware 0-20970 13-3430173
- --------------- ----------- --------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
9 Strathmore Road, Natick, Massachusetts 01760
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 650-9971
Not Applicable
--------------
(Former name or former address, if changed since last report)
1
<PAGE>
The undersigned registrant hereby amends Item 7 of its Current Report on
Form 8-K dated August 20, 1998, and filed with the Securities and Exchange
Commission on September 4, 1998, to read in its entirety as follows.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a) Financial Statements of Investee: 3DV Systems Ltd.
Report of Independent Public Accountants 6
Balance Sheets as of December 31, 1997 and 1996 7
Statements of Operations for the Year Ended December
31, 1997, the Period from Inception (June 16, 1996) through
December 31, 1996 and the Period from Inception through
December 31, 1997 8
Statements of Changes in Shareholders' Equity for the Year Ended
December 31, 1997, the Period from Inception (June 16, 1996)
through December 31, 1996 and the Period from Inception
through December 31, 1997 9
Statements of Cash Flows for the Year Ended December
31, 1997, the Period from Inception (June 16, 1996)
through December 31, 1996 and the Period from
Inception through December 31, 1997 10
Notes to Financial Statements 12
b) Pro Forma Financial Information: Vision-Sciences, Inc.
Overview 31
Unaudited Pro Forma Statement of Operations for the
Year Ended March 31, 1998 34
Notes to Unaudited Pro Forma Statement of Operations
for the Year Ended March 31, 1998 34
Unaudited Pro Forma Statement of Operations
for the Three Months Ended June 30, 1998 35
2
<PAGE>
Notes to Unaudited Pro Forma Statement of Operations
for the Three Months Ended June 30, 1998 35
Unaudited Condensed Pro Forma Balance Sheet as
of June 30, 1998 36
Notes to Unaudited Condensed Pro Forma Balance
Sheet as of June 30, 1998 37
3
<PAGE>
a) Financial Statements of Investee: 3DV Systems Ltd.
3DV SYSTEMS LTD.
(A COMPANY IN THE DEVELOPMENT STAGE)
FINANCIAL STATEMENTS
DECEMBER 31, 1997
IN U.S. DOLLARS
4
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
<S> <C>
Auditors' Report 6
Balance Sheets 7
Statements of Operations 8
Statements of Changes in Shareholders' Equity, (Deficit) 9
Statements of Cash Flows 10
Notes to the Financial Statements 12
</TABLE>
5
<PAGE>
Tirat HaCarmel, October 26, 1998
Auditors' Report to the Shareholders of 3DV SYSTEM LTD.
We have audited the accompanying balance sheets of 3DV Systems Ltd. ("the
Company") as of December 31, 1997 and 1996, and the related statements of
operations, changes in shareholders' equity and cash flows for the year ended at
December 31, 1997 and for the six months ended December 31, 1996. These
financial statements are the responsibility of the Company's Board of Directors
and of its management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Israel, including those prescribed by the Auditors' Regulations (Mode of
Performance), 1973. Such auditing standards are substantially identical to
generally accepted auditing standards in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurances about
whether that the financial statements are free of material misstatement, whether
due to an error or intentional misrepresentation. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statements presentation. We believe that our audits provide a
fair basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997 and 1996, the results of its operations, changes in
shareholders' equity and cash flows for the year ended at December 31, 1997, and
for the six months ended December 31, 1996, in conformity with generally
accepted accounting principles in the United States (U.S. GAAP).
Without qualifying our opinion, we would like to draw attention to the
following:
1. As explained in Note 2 (b) to the accompanying financial statements, in
order to reduce the uncertainty about the Company's ability to continue as
a going concern, the Parent Company is committed to continue to provide the
financial support required by the Company to meet its financial obligations
as they become due for a period of not less than one year. Based on the
above commitment, the accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
2. The Company is in the development stage, whereby its principal activities in
the reported period are the development of products in the field of 3D laser
camera. The Company has not yet generated any revenues.
/s/ Somekh Chaikin
- -----------------------------------
Certified Public Accountants (Isr.)
6
<PAGE>
3DV Systems Ltd.
Balance Sheets as of December 31
- --------------------------------------------------------------------------------
In thousands of U.S. dollars
<TABLE>
<CAPTION>
1997 1996
--------- ---------
Note U.S.$ U.S.$
------- thousands thousands
--------- ---------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents 3 131 31
Accounts receivable 4 116 23
--------- ---------
247 54
--------- ---------
Cars leasing deposits 16a 10 8
--------- ---------
Amount funded for employees' rights
upon retirement 9 17 -
--------- ---------
Fixed assets, net 5 140 111
--------- ---------
Know-how, net 6 1 1
--------- ---------
415 174
--------- ---------
--------- ---------
Current liabilities
Accounts payable: 7
Trade 87 52
Other 77 33
Related parties 71 96
--------- ---------
235 181
--------- ---------
Long-term loans from Parent Company 8 1,711 321
--------- ---------
Employees' rights upon retirement 9 17 1
--------- ---------
Commitments 16 - -
--------- ---------
Shareholders' equity, (deficit) 10 (1,548) (329)
--------- ---------
415 174
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
3DV Systems Ltd.
Statements of Operations for the year ended December 31
- --------------------------------------------------------------------------------
In Thousands of U.S. dollars
<TABLE>
<CAPTION>
1997 * 1996 **
---------- ----------- Cumulative
----------
Note U.S.$ U.S.$ U.S.$
------ thousands thousands thousands
--------- --------- ---------
<S> <C> <C> <C> <C>
Research and development costs,
net 11 1,148 196 1,344
General and
administrative expenses 12 198 133 331
--------- --------- --------
Operating loss 1,346 329 1,675
Financing expenses (income), 13 (2) - (2)
net --------- --------- --------
Loss before income taxes 1,344 329 1,673
Income taxes 14 - - -
--------- --------- --------
Net loss 1,344 329 1,673
--------- --------- --------
--------- --------- --------
</TABLE>
* For the period of six months ended December 31, 1996.
** Cumulative amounts from the company's inception.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
3DV Systems Ltd.
Statements of Changes In Shareholder's Equity, (Deficit)
- --------------------------------------------------------------------------------
In thousands of U.S. dollars
<TABLE>
<CAPTION>
Total
Share Capital Employees' Accumulated Shareholders'
Capital Reserve Stock Options Loss Equity, (deficit)
------- ------- ------------- ----------- -----------------
U.S. $000's U.S. $000's U.S. $000's U.S. $000's U.S. $000's
<S> <C> <C> <C> <C> <C>
Shares issued 1 - - - 1
Linkage differences
on loans received
from Parent Company - (1) - - (1)
Net loss for
the period * - - - (329) (329)
----------- ----------- ------------ ----------- ----------------
Balance as of
December 31, 1996 1 (1) - (329) (329)
Shares issued 2 - - - 2
Linkage
differences
on loans received
from Parent Company - 6 - - 6
Employees'
stock options (see
Note 10(b),11) - - 117 - 117
Net loss for the year - - - (1,344) (1,344)
----------- ----------- ------------ ----------- ----------------
Balance as of
December 31, 1997 3 5 117 (1,673) (1,548)
----------- ----------- ------------ ----------- ----------------
----------- ----------- ------------ ----------- ----------------
Cumulative amounts
from the company's
inception
Shares issued 3 - - - 3
Linkage differences
on loans received
from Parent Company - 5 - - 5
Employees'
stock options (see
Note 10(b),11) - - 117 - 117
Deficit accumulated
during development
stage - - - (1,673) (1,673)
----------- ----------- ------------ ----------- ----------------
Balance as of
December 31, 1997 3 5 117 (1,673) (1,548)
----------- ----------- ------------ ----------- ----------------
----------- ----------- ------------ ----------- ----------------
</TABLE>
* For the period of six months ended December 31, 1996.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
3DV Systems Ltd.
Statement of Cash Flows for the year ended December 31
- --------------------------------------------------------------------------------
In thousands of U.S. dollars
<TABLE>
<CAPTION>
***
1997 * ** 1996 Cumulative
U.S.$ U.S.$ U.S.$
thousands thousands thousands
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss (1,344) (329) (1,673)
Adjustments required to reconcile
net loss to net cash used in
operating activities:
Severance pay, net (1) 1 -
Depreciation 30 3 33
Employees' stock options 117 - 117
Changes in operating assets
and liabilities:
Increase in accounts receivable (93) (23) (116)
Increase in accounts payable (1) 67 82 149
Increase (decrease) in related parties (2) (24) 96 72
----------- ------------ -----------
Net cash used in operating activities (1,248) (170) (1,418)
----------- ------------ -----------
Cash flows used in investing activities:
Payments for purchase of fixed assets (1) (53) (115) (168)
Cars leasing deposits (2) (8) (10)
----------- ------------ -----------
Net cash used in investing activities (55) (123) (178)
----------- ------------ -----------
Cash flow from financing activities:
Loans received from Parent Company 1,396 320 1,716
Shares issued (2) - 1 1
----------- ------------ -----------
Net cash provided by financing 1,396 321 1,717
activities ---------- ------------ -----------
Effect of exchange rate changes on cash 7 3 10
----------- ------------ -----------
Increase in cash and cash equivalents 100 31 131
Cash and cash equivalents
at beginning of year 31 - -
----------- ------------ -----------
Cash and cash equivalents at end of year 131 31 131
----------- ------------ -----------
----------- ------------ -----------
Supplementary information:
Income taxes paid - - -
Interest paid **** - - -
----------- ------------ -----------
</TABLE>
* For the period of six months ended December 31, 1996.
** Reclassified.
*** Cumulative amounts from the Company's inception.
**** Net of linkage differences equal to the changes in the U.S. dollar
exchange rate on monetary items in non U.S. dollar.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
3DV Systems Ltd.
Statement of Cash Flows for the year ended December 31
- --------------------------------------------------------------------------------
Transactions not involving cash flows
(1) The Company purchased fixed assets in the amount of U.S.$ 5 thousand
(U.S.$ 61 thousand in 1996) against accounts payable, bear no interest
and unlinked.
(2) The Company issued 840,000 shares of NIS 0.01 par value to its Parent
Company, against know-how which the Company received. (Note 6, 10(c)).
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Note 1 - General
3DV Systems Ltd. (hereinafter - "the Company") was incorporated on June
16, 1996, as an Israeli Company and commenced operations in July 1996.
The Company is in the development stage, whereby its principal activities
in the reported period are the development of products in the field of 3D
laser camera. The Company has not yet generated any revenues. The Company
is a wholly-owned subsidiary of R.D.C. Rafael Development Corporation
Ltd. (the "Parent Company"). See Note 18 a - subsequent events.
Note 2 - Basis of Presentation
1) The preparation of 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 amounts of expenses during the reporting periods. Actual
results could differ from those estimates.
2) The financial statements have been prepared assuming that the
Company will continue as a going-concern. The Parent Company is
committed to provide the financial support required by the Company
to meet its financial obligations as they become due, for a period
of not less than one year, beginning December 31, 1997.
Reporting currency
3) The accompanying financial statements are presented in U.S.
dollars in conformity with accounting principles generally
accepted in the United States. The Company's sales markets are
expected to be substantially outside of Israel in non-Israeli
currencies, mainly in U.S. dollars or linked thereto. Therefore,
the Company's functional currency is the U.S. dollar. The
Company's transactions denominated in currencies other than the
U.S. dollar are remeasured into U.S. dollars and recorded based
on the exchange rate at the time of the transaction. Monetary
balances in currencies other than the U.S. dollar are translated
into dollars using period-end exchange rates. Gains and losses
from the aforementioned re-measurements and translations are
recorded in the statement of operations.
12
<PAGE>
Note 2 - Basis of Presentation (cont'd)
4) Details of the exchange rate and the C.P.I. in Israel are given as
follows:
<TABLE>
<CAPTION>
Change % Changes %
December 31, December 31,
1997 1996 1997 1996
------------ ------------ ------- --------
<S> <C> <C> <C> <C>
Consumer Price Index * 153.1 143.1 6.99 10.59
U.S. Dollar 3.536 3.251 8.77 3.70
</TABLE>
* Average basis 1993 = 100
5) The high technology industry in which the Company is involved is
highly competitive and is characterized by the risks of rapidly
changing technologies and penetration into world market requires
investment of considerable resources and continuos development
efforts. The Company's future success is dependent upon several
factors including the technological quality and price\performance
of its products relative to those of its competitors. There can be
no assurance that the Company will be able to maintain the high
technological quality of its product or to continue to develop or
market its new products effectively.
The Company employ 5 key employees who owns major intellectual
property. Management is of the opinion that if several of the above
employees leave, than the Company will be vulnerable to the risk of
a near term severe impact and severe adverse impact on the
Company's know-how.
Significant Accounting Policies:
(1) Fixed Assets
Fixed assets are stated at depreciated cost. The Company provides
for depreciation which is computed by the straight-line method over
the estimated useful life of the assets as follows:
<TABLE>
<S> <C> <C>
Computers 3-4 years
Instruments and laboratory equipment 7-15 years
Motor vehicles 7 years
Office furniture and equipment 17 years
</TABLE>
13
<PAGE>
(2) Research and Development Costs
Research and development costs, net of related government
participation from the Chief Scientist are charged to the statement
of operations as incurred. Government participation is recorded on
an accrual basis.
(3) Deferred Taxes
The Company accounted for deferred taxes under the liability
method. As described in FAS 109 when it is not more likely than not
that deferred tax assets will be realized, the Company provides for
valuation allowance against deferred tax assets resulted from
operating loss carryforward and from timing differences between the
recognition of expenses in the financial statements and for tax
purposes.
(4) Stock based compensation
As allowed by Statement of Financial Accounting Standards
No.123 ("SFAS 123"), The Company measures compensation
cost of stock issued to employees under Accounting
Principles Board Opinion No.25 ("APB 25"). (See Note
10b)
(5) Disclosures regarding fair value of financial
instruments
The financial instruments of the Company consist mainly of cash,
accounts receivable, fund of employees' rights upon retirement and
accounts payable and accruals. Due to the nature of such financial
instruments, their fair value does not materially differ from their
carrying amount.
(6) Disclosure of cumulative amounts from the company inception
Under FAS 7, the Company provides cumulative amounts, from the
Company's inception till December 31, 1997, in the statement of
operations, cash flows and shareholders' equity.
14
<PAGE>
Note 3 - Cash and Cash Equivalents
<TABLE>
<CAPTION>
December December
31, 31,
1997 1996
--------- ---------
U.S.$ U.S.$
thousands thousands
<S> <C> <C>
Israeli Currency 131 31
--------- ---------
--------- ---------
</TABLE>
Cash equivalents include bank deposits, bearing an annual interest rate
of 12.6% (13.5% - 1996) unlinked and which the date of maturity at the
time of the deposit was not in excess of three months. The carrying
amount of cash equivalents approximates market value.
Note 4 - Accounts Receivable *
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
----------- ------------
U.S.$ U.S.$
thousands thousands
--------- ---------
<S> <C> <C>
Due from the Chief Scientist (See Note 11, 16(c)) 88 -
Government institutions 25 19
Deposit - 2
Prepaid expenses 1 1
Employees 2 -
Accrued interest - 1
----------- ------------
116 23
----------- ------------
----------- ------------
</TABLE>
* See Note 17, 2e(5).
15
<PAGE>
Note 5 - Fixed Assets, Net
<TABLE>
<CAPTION>
Instruments
& Office
Furniture
Laboratory Motor and
Computers Equipment Vehicles Equipment Total
--------- --------- -------- --------- -----
U.S.$ U.S.$ U.S.$ U.S.$ U.S.$
thousands thousands thousands thousands thousands
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cost
Balance at 69 1 17 27 114
beginning of
year
Additions 36 7 - 16 59
--------- --------- --------- --------- ---------
Balance at
end of year 105 8 17 43 173
--------- --------- --------- --------- ---------
Accumulated
depreciation
Balance at
beginning 2 - 1 - 3
of year
Depreciation
for the year 23 - 2 5 30
--------- --------- --------- --------- ---------
Balance at
end of year 25 - 3 5 33
--------- --------- --------- --------- ---------
Depreciated cost
at December 31,
1997 80 8 14 38 140
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Depreciated cost
at December 31,
1996 67 1 16 27 111
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
16
<PAGE>
Note 6 - Know-How, Net
According to an agreement between the Parent Company and the Company, the
Parent Company and Rafael Armament Development Authority ("Rafael") had
transferred to the Company all their rights and interest in the Laser
Photo Project and the Laser Photo Technology ("the know-how") against
issuance of 840,000 Ordinary Shares par value NIS 0.01 (see Note 10(c)).
Rafael preserves the rights to utilize the know-how, royalty-free,
perpetual and non-transferable, for military purpose only.
According to U.S. GAAP, transfer of non-monetary asset (the know-how) to
a private company (3DV System Ltd.) by its shareholders (the Parent
Company) in exchange for stock, should be recorded at the transferor's
historical cost basis determined under generally accepted accounting
principles. The know-how which was transferred to the Company stated in
the balance sheet of the Company at the value of (a notional value) U.S.$
1 thousand.
In June 1998, the Company agreed with the tax authority to record
retroactivity on June 30, 1996, an asset, for tax purposes only, of U.S.$
180 thousand of know-how. This asset can be amortized at a fixed rate of
12.5% per year using the straight line method.
Note 7 - Accounts Payable **
<TABLE>
<CAPTION>
December 31, December 31,
1997 * 1996
------------ ------------
U.S.$ U.S.$
thousands thousands
------------ ------------
<S> <C> <C>
Trade
Open accounts 47 39
Checks payable 40 13
------------ ------------
87 52
------------ ------------
------------ ------------
Other
Institutions 24 11
Liabilities to employees 30 11
Accrued expenses 23 11
------------ ------------
77 33
------------ ------------
------------ ------------
Related parties (See Note 15b) 71 96
------------ ------------
------------ ------------
</TABLE>
* Reclassified.
** See Note 17, 2e(5).
17
<PAGE>
Note 8 - Long-Term Loans from Parent Company
Since its incorporation the Company received loans of U.S.$ 1,716
thousand from its Parent Company, in order to finance its operational
activities. These loans are linked to the Consumer Price Index, bear no
interest and their maturity date has not yet been determined.
Management's opinion is that these loans would not be repayable in the
current year. These loans do not bear real market interest and therefore,
linkage differences on these loans are credited to separate component in
the shareholders' equity.
Note 9 - Employees' Rights upon Retirement *
The Company is required to make severance payments to dismissed
employees. The Company covers its obligations for severance pay by making
payments of premiums to insurance companies. The amounts accumulated at
the insurance companies are not under the control and the management of
the Company. The balances presented in the financial statements represent
the liability for severance pay and the amounts accumulated at the
insurance companies as mentioned above. Accordingly, the net liability is
as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
----------- ------------
U.S.$ U.S.$
thousands thousands
----------- ------------
<S> <C> <C>
Employees' rights upon retirement 17 1
Amount funded for employees' rights upon 17 -
retirement ----------- ------------
- 1
----------- ------------
----------- ------------
</TABLE>
* See Note 2e(5).
18
<PAGE>
Note 10 - Share Capital
1) Shareholders' equity
<TABLE>
<CAPTION>
Authorized Issued and paid for
---------------- -------------------
Number of shares Number of shares
---------------- ----------------
<S> <C> <C>
Ordinary Shares of NIS (0.01) each 5,170,000 850,000
---------------- -------------------
---------------- -------------------
Ordinary Shares A of NIS (0.01) each 900,000 15,000
---------------- -------------------
---------------- -------------------
</TABLE>
On April 30, 1997, pursuant to the Company's general shareholders meeting,
it was decided to alter the share capital of the Company as follows:
1) To subdivide all the existing 29,400 Ordinary Shares into
2,940,000 Ordinary Shares of NIS 0.01 value each.
2) To increase the Company's authorized share capital by NIS 31,300,
to be composed of 2,230,000 Ordinary Shares of NIS 0.01 par value
each and 900,000 Ordinary Shares A of NIS 0.01 value each. The
rights of the Ordinary Shares A are the same as the Ordinary
Shares except for rights to participate or to vote in shareholders
meetings. The Ordinary Shares A shall be converted into Ordinary
Shares, on a one-to-one basis and without any payment,
automatically upon the registration of any of the Company's shares
for trade in any stock market, in Israel or abroad.
19
<PAGE>
Note 10 - Share Capital (cont'd)
2) Employee Stock Option Plan
The Board of Directors of the Company, at its meeting on August 25, 1997,
approved the following resolutions:
1. To adopt the Company's employee stock option plan ("ESOP"), providing
for the allotment without consideration of options to employees of
the Company, whose eligibility will be determined from time to time
by the Company's salary committee, for the purchase of up to
135,000 Ordinary Shares A of the Company of par value NIS 0.01
each. Each option will entitle the holder to purchase one Ordinary
Share A of par value NIS 0.01 each at an exercise price of NIS 0.01
per option. The options vest over a period of two to four years and
are exercisable for a period of eight years from the date of grant.
The options will be allotted to a trustee who will hold them in
trust on behalf of the employees, in accordance with Section 102 of
the Income Tax Ordinance in Israel and related regulations.
2. To allot 15,000 Ordinary Shares A of the Company, of a par value of
NIS 0.01 each, to a key employee, at a price equal to their par
value. Such shares will constitute 1.73% of the Company's share
capital after the allotment.
Based on the above resolutions, the Company allotted 60,500 options to
employees until year end and 15,000 Ordinary Shares A to key employee.
Management of the Company evaluated the fair value of the Company's
Ordinary Shares A based upon the price per Ordinary Share in a private
placement which took place on August 25, 1998 (See Note 18.b).
Management's assumption is that the fair value of the Company's Ordinary
Shares A grew at a fixed rate commencing the Company inception until the
above private placement date. Accordingly, the Company evaluated the
fair value of Ordinary Shares A, issued prior to the private placement,
by the straight-line method over the period commencing the inception of
the Company (at such time the Company's price per share is assumed to
the U.S.$ 0 (nil)) through the private placement date, in order to
compute a discount from the private placement price, for such Ordinary
Shares A. The Company did not take into account a discount due to the
fact that the Company's Ordinary Shares A do not have the right to vote
as mentioned in Note 10(a)(2) above because the Stock Option Plan
provides that upon initial public offering, under certain other
conditions, Ordinary
20
<PAGE>
Note 10 - Share Capital (cont'd)
2) Employee Stock Option Plan (cont'd)
Shares A will automatically be converted into Ordinary Shares. The
Company recorded compensation cost in 1997 of U.S.$ 0 (nil) thousand due
to Ordinary Shares A granted to key employees based upon the fair value
of Ordinary Shares A as described above. The Company applied APB 25 and
recorded compensation cost of U.S.$ 117 thousand due to the above
options equal to the intrinsic value of the above options using the fair
value of Ordinary Shares A as described above. A company which applies
APB 25 should provide pro-forma net income as if the fair value based
accounting method in FAS 123 had been used to account for stock option
compensation cost. Since the exercise price of the above options is a
symbolic value and at this stage the Company can not estimate the
standard deviation of its price per share, the Company can not measure
the fair value based accounting method described in FAS 123.
Under the ESOP as of the balance sheet date, the Company is obligated to
issue additional 74,500 options with contingent compensation cost of
U.S.$ 472 thousand.
3) Issuance shares to Parent Company against know-how.
In August 1997, the Company allotted 840,000 Ordinary Shares par value
NIS 0.01 each to the Parent Company in consideration of the know-how
which the Company received (see Note 6).
21
<PAGE>
Note 11 - Research and Development Costs, Net
<TABLE>
<CAPTION>
Year ended Six months
ended
December 31, December 31,
**
1997 * 1996 Cumulative
----------- ------------ -----------
U.S.$ U.S.$ U.S.$
thousands thousands thousands
----------- ------------ -----------
<S> <C> <C> <C>
Salaries and related expenses (1) 659 43 702
Patent registration expenses 57 45 102
Materials 231 78 309
Subcontractors 93 - 93
Vehicle expenses 64 8 72
Communications 14 - 14
Overseas travel 75 18 93
Depreciation 23 2 25
Rent and maintenance 34 1 35
Professional publication 9 - 9
Other 5 1 6
----------- ------------ -----------
1,264 196 1,460
Less: grants received from
the Chief Scientist 116 - 116
----------- ------------ -----------
1,148 196 1,344
----------- ------------ -----------
----------- ------------ -----------
(1) Include compensation
expenses
in respect of options granted. 117 - 117
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
* Reclassified.
** Cumulative amounts from the Company's inception.
22
<PAGE>
Note 12 - General and Administrative Expenses
<TABLE>
<CAPTION>
Year ended Six months
ended
December 31, December 31,
**
1997 (*) 1996 Cumulative
----------- ------------ -----------
U.S.$ U.S.$ U.S.$
thousands thousands thousands
----------- ------------ -----------
<S> <C> <C> <C>
Salaries and related expenses 96 88 184
Accounting services by
Parent Company 8 3 11
Legal and accounting 14 18 32
Consulting 5 - 5
Insurance 1 - 1
Office expenses 8 8 16
Maintenance 14 4 18
Communications 11 2 13
Overseas travel 7 - 7
Entertainment 6 1 7
Vehicle expenses 6 8 14
Tax of benefits 7 - 7
Depreciation 7 1 8
Transporting 5 - 5
Other 3 - 3
----------- ------------ -----------
198 133 331
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
* Reclassified.
** Cumulative amounts from the Company's inception.
23
<PAGE>
Note 13 - Financing Expenses (Incomes), Net
<TABLE>
<CAPTION>
Year ended Six months
ended
December 31, December 31,
1997 1996 * Cumulative
----------- ------------ ------------
U.S.$ U.S.$ U.S.$
thousands thousands thousands
----------- ------------ ------------
<S> <C> <C> <C>
Interest income and
linkage difference
relating to monetary items (6) (1) (7)
Bank expenses 4 1 5
----------- ------------ ------------
(2) - (2)
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
* Cumulative amounts from the Company's inception.
Note 14 - Income Taxes
1) The Israel tax is computed on the basis of the Company's results in
nominal NIS determined for statutory purposes. The Company is assessed
for tax purposes under the Income Tax Law (Inflationary Adjustments
1985), the purpose of which is to prevent taxation on inflationary
profits.
2) As of the balance sheet date the Company accumulated losses for tax
purposes are U.S.$ 1,482 thousand. These losses are linked to the
Consumer Price Index and may be utilized against future taxable
income.
3) Deferred income taxes are provided for primarily operating loss for
tax purposes and for all the differences between the tax and the
accounting basis of assets and liabilities bases on the tax rate that
is expected to be in effect at the time the deferred income taxes will
be realized. Realization of the deferred tax assets is dependent on
generating sufficient
24
<PAGE>
Note 14 - Income Taxes (cont'd)
taxable income in the period that deferred tax assets are realized.
Based on all available information, Management believes that all of
the deferred tax assets are not realizable. Under FAS 109, a
valuation allowance was established in respect of all of the deferred
tax assets because it is not more likely than not that such assets
will be realized in the foreseeable future.
4) The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
----------- ------------
U.S.$ U.S.$
thousands thousands
----------- ------------
<S> <C> <C>
Deferred tax assets:
Employees' rights liabilities 15 2
Employee stock options 42 -
Non deductible research and development costs 23 51
Know-how for tax purpose only (see Note 6) (1) 53 66
Loss for tax purposes 533 69
------------ ------------
666 188
Valuation allowance (1) (666) (188)
------------ ------------
- -
------------ ------------
Statutory tax rate 36% 36%
------------ ------------
------------ ------------
</TABLE>
(1) The tax asset generating from the know-how was recorded against capital
reserve which was offset by the valuation allowance.
25
<PAGE>
Note 14 - Income Taxes (cont'd)
5) Reconciliation of theoretical tax expenses to the actual tax expense.
<TABLE>
<CAPTION>
Six months
Year ended ended
December 31, December 31,
1997 1996
------------ ------------
U.S.$ U.S.$
thousands thousands
------------ ------------
<S> <C> <C>
Loss before income taxes as reported in
the statements of operations (1,344) (329)
------------ ------------
------------ ------------
Statutory tax on the above amount (36%) (484) (118)
Increase in taxes resulting from
permanent differences:
Non-deductible operating expenses 8 1
------------ ------------
(476) (117)
Timing differences in respect of which
valuation allowance were recorded
against deferred tax asset:
Non-deductible expenses in respect of
employees' liabilities 45 2
Non-deductible research and
development expenses 23 51
Depreciation of know-how for tax purpose (8) (4)
only
Research and Development expenses which
were
recorded in the books of fiscal year 1996 and
are
tax deductible in fiscal year (46) -
1997
Loss for tax purposes carryforward
from fiscal year 1996 (68) -
Loss for tax purposes in the current year 533 69
Others (3) (1)
------------ ------------
- -
------------ ------------
------------ ------------
</TABLE>
26
<PAGE>
Note 14 - Income Taxes (cont'd)
6) Composition of taxes on income included in the statements of
operations:
<TABLE>
<CAPTION>
Year ended Six months
ended
December 31, December 31,
1997 1996
------------ ------------
U.S.$ U.S.$
thousands thousands
------------ ------------
<S> <C> <C>
Current tax expenses - -
Deferred tax 491 122
Valuation allowance (491) (122)
------------ ------------
- -
------------ ------------
------------ ------------
</TABLE>
Note 15 - Related Parties Transactions and Balances
<TABLE>
<CAPTION>
Six months
Year ended ended
December 31, December 31,
1997 * 1996
------------ ------------
U.S.$ U.S.$
thousands thousands
------------ ------------
<S> <C> <C>
a. Transactions:
Payments to:
Parent Company 54 79
------------ ------------
Rafael 227 29
------------ ------------
Vsoft Ltd. 11 -
------------ ------------
Accounting services by Parent Company 8 3
------------ ------------
Motor vehicles purchased from Parent Company - 17
------------ ------------
Computers purchased from Vsoft Ltd. 15 59
------------ ------------
Leasing payments to Albar Ltd. 39 -
------------ ------------
Deposit to Albar Ltd. 2 8
------------ ------------
</TABLE>
* Reclassified.
27
<PAGE>
Note 15 - Related Parties Transactions and Balances (cont'd)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
----------- ------------
U.S.$ U.S.$
thousands thousands
----------- ------------
<S> <C> <C>
b. Balance amounts due to:
Accounts payable - Current accounts:
Parent Company 19 2
----------- ------------
Rafael 48 28
----------- ------------
Vsoft Ltd 4 66
----------- ------------
Long-term liabilities:
Loans from Parent Company (see Note 8, 2(b)) 1,711 321
----------- ------------
</TABLE>
Note 16 - Commitments
1) During 1996, 1997, the Company signed operating lease contracts with
Albar Ltd. (related party) for the rental of vehicles for a period of
three years. The rental payments are linked to the Consumer Price Index.
The Company has deposited an amount of U.S.$ 10 thousand represents
rental payment for three months in respect of this contract. The deposit
is linked to the Consumer Price Index, and bears no interest. The
Company has also guaranteed its commitment in respect of this contract.
As of December 31, 1997, the maximum credit risk for these guarantees
totaled U.S.$ 69 thousand.
2) The Company sub-leases its premises from its Parent Company. Minimum
future rental payment for a year, due under the Company and the Parent
Company's lease agreement is U.S.$ 34 thousand. Rental payment is
linked to the Consumer Price Index and updated by 1% each year.
3) The Company is committed to pay royalties to the Government of Israel
in respect of sales of product, the research and development of which
were made with the participation of the Chief Scientist. The amount
of royalty payment is computed on the portion of sales proceeds from
such products at rates varying from 3% to 5%. The commitment is
limited to the amount of the received participation, U.S.$ 116
thousand.
28
<PAGE>
Note 17 - Concentration of Currency Risk - Monetary Balances in Non - U.S.
Dollar Currencies
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
--------------------- -----------------------
Israeli currency * Israeli currency *
--------------------- -----------------------
U.S.$ thousands U.S.$ thousands
--------------------- -----------------------
Unlinked Linked ** Unlinked Linked **
---------------------- -----------------------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents 131 - 31 -
Accounts receivable 115 - 21 -
Cars leasing deposits - 10 - 8
------- ------ ------ ---------
246 10 52 8
------- ------ ------ ---------
------- ------ ------ ---------
Liabilities:
Current liabilities:
Accounts payable 230 - 176 -
Non-current liabilities:
Long-term loans from Parent - 1,711 - 321
Company
------- ------ ------ ---------
230 1,711 176 321
------- ------ ------ ---------
------- ------ ------ ---------
</TABLE>
* Does not include balances in U.S. dollars or linked thereto.
** To the Israeli CPI.
29
<PAGE>
Note 18 - Subsequent Events
1) In August 1998, the Company, the Parent Company and Vision Sciences Inc.
("VSI") a Delaware corporation signed an Investment Agreement ("the
Agreement"). According to this Agreement, the Company issued 338,099
Ordinary Shares, par value NIS 0.01 per share which represent 25% of the
fully diluted share capital of the Company in consideration for U.S.$ 3
million in cash. In addition, VSI has the right to acquire an additional
60% of the share capital of the Company in the future from the Parent
Company, at the then fair market value, under certain conditions, and the
Parent Company has the right to require VSI to purchase up to the remaining
75% including 15% which would be owned by employees of the Company under
certain conditions ("Put/Call Rights"). VSI is required to advance funds
needed to finance the operations of the Company in fiscal years 1999 and
2000. In consideration, the Company will issue to VSI non-interest bearing,
redeemable capital notes convertible into ordinary shares of the Company if
the Put/Call Rights are not exercised by either the Parent Company or VSI.
2) In August 1998, the Company signed a License and Manufacturing Agreement
("L&M Agreement") with VSI granting VSI exclusive, perpetual, royalty free
and worldwide rights under all of the Company's patents and know-how to
commercially exploit products in certain fields of use that incorporate, or
use, component parts embodying technology developed by the Company. VSI
shall have the right to sublicense certain of these rights to any Approved
Assign as defined in the L&M Agreement.
3) In August 1998, the Company signed an agreement with ASAHI Optical Co. Ltd.
("AOC") a Japanese corporation. AOC is an Approved Assign and has licensed
certain proprietary technology rights of the Company. This agreement set
forth the principles for future collaboration between the parties relating
to the commercialization of certain products and to establish certain
rights reserved to the Company to manufacture and sell certain components.
AOC and the Company shall cooperate with each other to research and develop
3D cameras or 3D imaging modules or devices (the "Developed Technologies").
The Company is committed to pay royalties equal to 3% of the gross revenue
derived by the Company from the sale of certain components in the field of
operation of VSI or an Approved Assign and resulting from the above
Developed Technologies. The Company shall not be entitled to use the
Developed Technologies or otherwise grant a license of the Developed
Technologies in connection with any other collaborative research and joint
development arrangement between the Company and any non-affiliate of the
Company without the prior written consent of AOC.
4) Based upon the Company's unaudited financial statements as of September
30, 1998, the Company accumulated an additional accounting operating loss
of U.S.$ 1,663 thousand for the period of nine months ended September 30,
1998.
30
<PAGE>
b) Pro Forma Financial Information: Vision-Sciences, Inc.
OVERVIEW
On August 20, 1998, pursuant to an Investment Agreement, dated August
6, 1998 between Vision-Sciences, Inc., ("VSI") and 3DV Systems, Ltd., a
privately-held Israeli company ("3DV"), (the "Agreement") VSI purchased 338,099
shares of common stock of 3DV (the "Shares"), for a purchase price of $3 million
in cash, $500,000 of which VSI had previously advanced to 3DV in May 1998. VSI
funded the purchase price from proceeds of $5 million received from Asahi
Optical Co., Ltd., (Asahi Kogaku Kogyo Kabushiki Kaisha), a Japanese corporation
("Asahi"), in exchange for 2,000,000 shares of VSI's common stock, $.01 par
value per share (the "Common Stock"), and certain rights pursuant to the License
Agreement between VSI and Asahi described below. The Shares were previously
unissued shares of common stock of 3DV and, after the closing of the
transaction, represent 25% of the fully diluted share capital of 3DV. Prior to
the investment by VSI, 3DV was a wholly-owned subsidiary of RDC Rafael
Development Corporation Ltd. ("RDC"), an Israeli company.
Pursuant to the Agreement, VSI also issued 500,000 shares of its Common
Stock to RDC in exchange for certain rights. These rights include an option to
purchase all of the remaining shares of capital stock of 3DV owned by RDC, which
represent 62.85% of the fully-diluted share capital of 3DV, at the then fair
market value of such shares. In addition, RDC has the right to require VSI to
purchase up to the remaining 75% of the fully-diluted share capital of 3DV,
including 12.15% that would be owned by employees of 3DV, at the then fair
market value of such shares.
In connection with these transactions with 3DV and RDC, VSI also
entered into a License and Manufacturing Agreement (the "L&M Agreement") with
3DV, dated August 6, 1998, pursuant to which VSI obtained exclusive, worldwide,
perpetual and royalty-free rights to commercially exploit products in certain
fields of use that incorporate, or use, component parts embodying technology
developed by 3DV. The L&M Agreement allows VSI to sublicense certain of these
rights to approved assigns. Asahi, which manufactures and markets a wide variety
of cameras, medical endoscopes and industrial imaging systems worldwide under
the brand name Pentax, is the sole approved assign under the L&M Agreement, and
VSI has sublicensed certain of its rights under the L&M Agreement to Asahi
pursuant to the License Agreement described below.
On August 6, 1998, VSI executed a Memorandum of Understanding (the
"MOU") with Imagineering, Ltd., pursuant to which VSI will acquire exclusive
rights to research to be performed in association with certain innovations (the
"Innovations") that are designed to improve the performance of CMOS-based Image
Sensors. The MOU grants VSI exclusive rights to any resulting patent
applications and patent rights that result from such research. A consultant to
Imagineering, Ltd. will perform the research, and VSI plans to grant the
consultant a
31
<PAGE>
nonstatutory stock option for 1,000,000 shares of VSI's Common Stock, which will
vest 100% upon the delivery of the Innovations. In addition, VSI will fund the
cost of the research by Imagineering, Ltd., initially for a period of one year.
The terms of the MOU were determined on the basis of arms'-length negotiations.
VSI also executed a License Agreement (the "License") with Asahi, dated
August 6, 1998, pursuant to which VSI granted Asahi exclusive rights, as an
approved assign under the L&M Agreement, to certain technology in certain fields
and to acquire from VSI and 3DV certain products having application in those
fields. Notwithstanding the License, VSI has reserved the right to use the
technology licensed to Asahi in products bearing VSI's own trademarks within
certain fields of use. In addition, the License grants Asahi a worldwide,
perpetual, royalty-free license to patentable and non-patentable technology
relating to the utilization or application of CMOS-based Image Sensors, as
researched or developed by VSI, pursuant to the MOU with Imagineering, Ltd. On
August 17, 1998, Asahi paid VSI $5 million in cash in exchange for the rights
described above in the License Agreement and the issuance by VSI to Asahi of
2,000,000 shares of Common Stock. The terms of the License Agreement were
determined on the basis of arms'-length negotiations.
The acquisition of the share capital of 3DV was financed with $3
million of VSI's cash, $500,000 of which VSI had previously advanced to 3DV in
May 1998, and the issuance of 500,000 shares of VSI's common stock. VSI received
$5 million from Asahi for the issuance of 2 million shares of common stock to
Asahi, less $67,000 of fees. The price paid by Asahi for the common stock was
$2.50 per share, and reflects the market price of the common stock and certain
rights pursuant to the License Agreement between VSI and Asahi described above.
VSI recorded the value of common stock at $1.4938 per share, the
average closing price of VSI's shares on Nasdaq for the ten trading days ended
August 20, 1998. The difference between the market value of VSI's common stock
and the gross proceeds was recorded as a deferred development fee, representing
a prepayment of $2,012,000 by Asahi for future development costs to be funded by
VSI. VSI incurred fees of $67,000, $44,000 of which was applied to additional
paid-in capital, and $23,000 of which was applied to the deferred development
fee.
The deferred development fee is comprised of $657,000 of expected
development costs to be incurred by Imagineering and funded by VSI, and
$1,332,000 of expected development costs to be incurred by 3DV and funded by
VSI's investment in 3DV. The amount applicable to Imagineering is based upon the
MOU, and other costs that VSI expects to incur during the CMOS development. If
the costs related to Imagineering are greater than the estimate, VSI will record
charges to its statement of operations. Any losses incurred by 3DV in excess of
$1,332,000 will be recorded in the statement of operations of VSI.
32
<PAGE>
VSI will account for the investment in 3DV using the equity method of
accounting. Due to the fact that VSI has committed to finance the working
capital needs of 3DV for the calendar years 1999 and 2000, VSI will absorb 100%
of the losses of 3DV, up to the value of VSI's investment in 3DV.
The Pro Forma Statements of Operations for the year ended March 31,
1998 and the three months ended June 30, 1998 assume the investment in 3DV
occurred on April 1, 1997 and include the actual results of operations of 3DV
for the year ended December 31, 1997 and the three months ended March 31,
1998, respectively. The calculation of basic and diluted net loss per common
share assumes the 2,000,000 and 500,000 shares of common stock issued to
Asahi and RDC, respectively, were issued on April 1, 1997.
33
<PAGE>
Vision-Sciences, Inc.
Unaudited Pro Forma Statement of Operations
Year Ended March 31, 1998
(in 000's, except per share data)
<TABLE>
<CAPTION>
As Reported Adjustments Notes Pro Forma
----------- ----------- ----- ---------
<S> <C> <C> <C> <C>
Net sales $ 7,998 $ 7,998
Cost of sales 6,579 6,579
----- -----
Gross profit 1,419 1,419
Selling, general and
administrative expenses 3,559 3,559
Research and development
expenses 762 762
------ ------
Loss from operations (2,902) (2,902)
Interest income, net 147 147
Other income (expense), net 177 (1,344) A 165
- 1,332 B -
----- -------- ------
Net loss $ (2,578) $ (12) $ (2,590)
--------- -------- --------
--------- -------- --------
Basic and diluted net loss per
common share $ (.17) $ (.15)
--------- --------
--------- --------
Shares used in computing
basic and diluted net loss per
common share 15,224 2,500 C 17,724
--------- -------- --------
--------- -------- --------
</TABLE>
Notes to Unaudited Pro Forma Statement of Operations for the Year
Ended March 31, 1998.
A) To recognize equity in 100% of the loss of 3DV for the year ended
December 31, 1997.
B) To record the equity in 100% of the loss of 3DV for the year ended
December 31, 1997 by amortizing the deferred development fee up to $1,332.
C) The additional outstanding shares are shown as if they were issued on
April 1, 1997.
34
<PAGE>
Vision-Sciences, Inc.
Unaudited Pro Forma Statement of Operations
Three Months Ended June 30, 1998
(in 000's, except per share data)
<TABLE>
<CAPTION>
As Reported Adjustments Notes Pro Forma
----------- ----------- ----- ---------
<S> <C> <C> <C> <C>
Net sales $ 1,877 $ 1,877
Cost of sales 1,565 1,565
----- -----
Gross profit 312 312
Selling, general and
administrative expenses 690 690
Research and development
expenses 52 52
------- ------
Loss from operations (430) (430)
Interest income, net 35 35
Other income (expense), net 1 (598) A (597)
--------- ------- -------
Net loss $ (394) $ (598) $ (992)
--------- ------- -------
--------- ------- -------
Basic and diluted net loss per
common share $ (.02) $ (.05)
--------- -------
--------- -------
Shares used in computing basic
and diluted net loss per common
share 16,649 2,500 B 19,149
--------- ------- -------
--------- ------- -------
</TABLE>
Notes to Unaudited Pro Forma Statement of Operations for the
Three Months Ended June 30, 1998.
A) To recognize equity in 100% of the loss of 3DV for the three months ended
March 31, 1998.
B) The additional outstanding shares are shown as if they were issued on
April 1, 1997.
35
<PAGE>
Vision-Sciences, Inc.
Unaudited Pro Forma Condensed Balance Sheet
June 30, 1998
(in 000's, except per share data)
<TABLE>
<CAPTION>
As Reported Adjustments Notes Pro Forma
----------- ----------- ----- ---------
ASSETS
------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 2,461 $ 4,932 A $ 4,893
(2,500) B
Accounts receivable, net 1,223 1,223
Inventories 713 713
Prepaid expenses and deposits 84 - 84
------- -------- -------
Total current assets 4,481 2,432 6,913
Net property and equipment 786 786
Investment in equity of 3DV and 2,500 B
other assets 680 747 B 3,927
------- -------- -------
Total assets $ 5,947 $ 5,679 $11,626
------- -------- -------
------- -------- -------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 2,503 $ 2,503
Deferred development fee - 1,989 A 1,989
Common stock 167 20 A 192
5 B
Additional paid-in capital 48,105 2,923 A 51,770
742 B
Accumulated deficit (44,828) - (44,828)
------- -------- -------
Total stockholders' equity 3,444 3,690 7,134
Total liabilities and stockholders' ------- -------- -----
equity $ 5,947 $ 5,679 $11,626
------- -------- -------
------- -------- -------
</TABLE>
36
<PAGE>
Notes to Unaudited Condensed Pro Forma Balance Sheet as of June
30, 1998.
A) To record the investment by Asahi in 2,000,000 shares of common stock of VSI
at $2.50 per share. The value of the common stock is based upon the average
closing price of VSI's common stock, $1.4938 per share, as reported by Nasdaq
for the ten trading days ended August 20, 1998. The difference between the
market value of the common stock and the cash received was recorded as a
deferred development fee, relating to work to be performed by Imagineering
and 3DV, and funded by VSI. In the event that VSI fails to comply with the
terms of the License, it may be required to repurchase the stock issued to
Asahi. Management believes that all events that would require repurchase
are within the control of VSI. Therefore, the stock purchased by Asahi
has been classified as elements of stockholders' equity.
B) To record the acquisition of 25% of the outstanding share capital of 3DV. The
cost is comprised of $2,500,000 of cash and 500,000 shares of VSI's common
stock. The common stock is valued at $1.4938 per share, the average closing
price of VSI's common stock as reported by Nasdaq for the ten trading days
ended August 20, 1998. Included in other assets at June 30, 1998 is a
nonrefundable advance deposit of $500,000 that is part of the total amount
that VSI paid for its investment in 3DV.
37
<PAGE>
<TABLE>
<CAPTION>
(c) Exhibits:
---------
<S> <C> <C>
10.1* - Investment Agreement dated as of August 6, 1998 by and
among VSI, 3DV Systems Ltd. and RDC Rafael Development
Corporation Ltd.
10.2* - License and Manufacturing Agreement dated as of
August 6, 1998 between VSI and 3DV Systems Ltd.
10.3* - Memorandum of Understanding dated August 6, 1998
between VSI and Imagineering, Ltd.
10.4* - License Agreement dated as of August 6, 1998 between
VSI and Asahi Optical Co., Ltd.
23.1 - Consent of Somekh Chaikin
</TABLE>
* Previously Filed. Confidential treatment requested as to certain portions,
which portions have been deleted and filed separately with the Securities and
Exchange Commission.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 3, 1998 VISION-SCIENCES, INC.
By: /s/ James A. Tracy
---------------------------
James A. Tracy
Vice President, Finance
39
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
10.1* - Investment Agreement dated as of August 6, 1998 by
and among VSI, 3DV Systems Ltd. and RDC Rafael
Development Corporation Ltd.
10.2* - License and Manufacturing Agreement dated as of
August 6, 1998 between VSI and 3DV Systems Ltd.
10.3* - Memorandum of Understanding dated August 6, 1998
between VSI and Imagineering, Ltd.
10.4* - License Agreement dated as of August 6, 1998
between VSI and Asahi Optical Co., Ltd.
23.1 - Consent of Somekh Chaikin
</TABLE>
- ---------------------
* Previously Filed. Confidential treatment requested as to certain portions,
which portions have been deleted and filed separately with the Securities and
Exchange Commission.
40
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
registration statements of Vision-Sciences, Inc. on Form S-8 (File Nos.
33-57298, 33-80762 and 33-80764) of our report dated October 26, 1998 (based
on our audit which was completed on February 19, 1998), the financial
statements of 3DV Systems Ltd. as of December 31, 1997.
The consent should not be considered in any way as an approval or
confirmation of the information regarding 3DV Systems which is included in
the Current Report on Form 8-K of Vision-Sciences, Inc.
/s/ Somekh Chaikin
-------------------------
SOMEKH CHAIKIN
Tirat HaCarmel, Israel
November 3, 1998
41
