VISION-SCIENCES INC. (DE) develops manufactures and markets products for endoscopy which have infection control advantages over conventional flexible endoscopes. Co. has developed and is marketing proprietary flexible endoscope systems designed to eliminate the risk of cross-contamination to patients and healthcare professionals which results from the reuse of conventional flexible endoscopes. VisionSciences Inc. has a market cap of $47.02 million; its shares were traded at around $1.34 with and P/S ratio of 4.75. VisionSciences Inc. had an annual average earning growth of 27.5% over the past 5 years.
Highlight of Business Operations:SpineView agreed to pay us $225 for certain non-recurring engineering costs, and to reimburse us for up to $40 of our out-of-pocket costs. After the completion of certain milestones and delivery of a prototype, SpineView has agreed to place an initial firm order with us for 50 video endoscopes at a purchase price of $27 per unit (the Initial Order), for a total of $1,350. Following delivery of the Initial Order, SpineView is to submit a forecast for the following 12 months, of which the first six months will be considered a firm order at a price of $23.5 per video endoscope. Payment for certain of these items is subject to the closing of certain of SpineViews fundraising activities. We are also to be the exclusive supplier to SpineView of visualization means for use with certain future SpineView products. We are currently working with SpineView on the first prototype of CCD-based video endoscope.
· During fiscal 07 (FY 07), upon receipt at the closing of $27,000, we recognized a net gain of $26,097 from the transaction. This gain reflects the initial payment of $27,000 received at the closing, less the net book value of the assets sold to Medtronic. The effect of this was to reduce our basis in the assets sold to Medtronic to zero;
· Total payments of $1,750 received during FY 08, were offset by $316 of expenses, primarily relating to the cost of a new production machine which we purchased and sold to Medtronic, and travel expenses related to the transition agreement, for a net gain of $1,434;
· Total payments of $3,250 received during Q1 09, which were offset by $20 of mainly travel expenses related to the transition agreement for a net gain of $3,230;
The total compensation expense for YTD 09, 2008 includes a one-time adjustment of $299, recorded in Q2 09, of which $176 represents expense for FY 07 and FY 08, representing stock based compensation expense for non-employees consultants that should have been calculated and recognized according to EITF 96-18 for the period between September 2006 and June 2008. During Q2 09, we discovered that we had accounted for our non-employees consultants compensation expenses according to SFAS 123R instead of according to EITF 96-18. The adjustment impacted COGS by $23, SG&A by $22 and R&D by $254. We reviewed the impact of these adjustments on the results of operations for FY 07 ($75), FY 08 ($101) and Q1 09 ($123), and found it to be immaterial.
Net sales for Q3 09 were $3,610, an increase of $1,766, or 96%, compared to sales of $1,844 for Q3 08. During Q3 09 net sales of our medical segment increased by $1,530, or 123%, from $1,246 to $2,776, and net sales of our industrial segment increased by $236, or 39%, from $598 to $834. Our sales growth this quarter is a result of (i) additional fiberscope sales over Q3 08, when our sales were severely impacted by the shortage of parts due to our dispute with Pentax; (ii) the availability of our new videoscopes, which were not available in Q3 08, and (iii) higher unit prices for our videoscope product line than for our fiberscope product line.
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