vista partners initiates coverage on itech medical, inc. - target price $1.85
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Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
1 Vista Partners www.vistapglobal.com
Analyst: Ross Silver Email: ross.silver@vistapglobal.com Phone: 415.738.6229
Overview:
iTech Medical, Inc. (“IMSU” or “the Company”) is
located in Huntington Beach, CA. To date, IMSU has
focused on developing a proprietary platform called
Muscle Pattern Recognition (MPR), a unique clinical tool
for the analysis of muscle function. MPR is a patented
clinical tool that uses the principles of Pattern
Recognition to analyze muscle function in patients
presenting with back pain. MPR analyzes patterns of
muscle recruitment - the engagement of muscles in
order to perform specific body movements - and
provides detailed, objective physiological information
on muscle function that can assist in the diagnosis and
treatment of back and neck injuries and illness. The
results of an MPR test are presented in a
comprehensive report that provides detailed
information on muscle function incorporating site,
nature and severity of dysfunction.
Website: www.itechmedical.com
Industry: Medical Instruments Price Target: $1.85 Market Cap: $19.2M Avg. Volume (3 month): 4,162 Cash & STI (mrq): $0.9M Float: 19.6M 52 Week Range: $0.18 – $0.63 Shares Outstanding: 36.4M Revenue (FY 2010): N/A Enterprise Value: $19.0M
Global market opportunity in excess of $1 billion
Superior and innovative technology – ability to become ‘gold standard’
Proprietary patent protected technology and IP
Capability to become market leader and create significant barriers to entry to competitors
Sustainable and high margin business model Attractive partner candidate Experienced management team, BOD and
Medical Advisory Board
Business Description ……….…….….. 2
Outlook & Conclusion ……….…….….. 2
MPR System ……….…….….. 5
Market Analysis ……….…….….. 6
Target Markets ……….…….….. 9
Risks & Competition ……….…….….. 11
Management Bios ……….…….….. 13
Board of Directors ……….…….….. 14
Financials ……….…….….. 17
Legal Notes & Disclosures ……….…….….. 20
Highlights: Table of Contents
Stock Data:
Corporate Information 1 Year Price Performance Price in USD (as of report): $0.63
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
2 Vista Partners www.vistapglobal.com
Unless otherwise indicated, we use “IMSU” and “the Company” in this
report to refer to the business of iTech Medical, Inc. IMSU has focused
on developing Muscle Pattern Recognition (“MPR”), a unique clinical
tool for the analysis of muscle function. MPR is a non-invasive,
proprietary technology platform that identifies abnormal muscular
recruitment patterns within the neck and back and any associated
muscular dysfunction.
iTech Medical, Inc., acquired a patent from MPR Health Systems, Inc., a
California corporation; a patented medical information system called
MPR with a value of $500,000 on September 9, 2003. On December 27,
2006, IMSU entered into a Plan and Agreement of Merger (the “reverse
merger”) with Freedom 1, Inc., a Delaware corporation and a “blank
check company,” as defined under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), whereby IMSU was the surviving
entity. Since December 2002 and continuing after the reverse merger,
IMSU has been involved in the development and pre-market clinical
testing of the MPR System.
Outlook
The Company needs to produce around $800K in revenues quarterly in
order to reach breakeven adjusted for non-cash expenses. We
anticipate breakeven to occur in calendar year 2012. The Company has
stated it will produce revenues in both Canada and the European Union
(“EU’) in 2011 and possibly begin producing revenues in the U.S in the
fourth quarter.
Conclusion
In February 2010, the Archives of Internal Medicine reported that the
direct costs of treatment for low back pain in the United States are over
$50 billion a year, we have seen estimates as high as $90B a year for
back pain. This is more than half the amount spent yearly on cancer
treatment. Lumbar injuries result in approximately 149 million lost work
days per year; about two thirds of these days are caused by
occupational injuries. The annual productivity losses resulting from lost
work days are estimated to be $28 billion*. U.S. total estimated
expenditures among patients with spine problems increased 65% from
1997 to 2005 - more rapidly than overall health expenditures *University of Cincinnati College of Medicine
IMSU is well positioned to capitalize on this large and growing market
through their MPR proprietary technology platform. MPR test results
Business Description
Outlook & Conclusion
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
3 Vista Partners www.vistapglobal.com
provide comprehensive information on muscle interactions that can
assist in the diagnosis and treatment of neck and back injuries and
illnesses saving patients, insurers and healthcare provider’s time and
money. Below is a chart depicting the MPR value chain:
Source: IMSU
We believe the MPR System to be a superior and innovative technology,
relative to other testing products and strongly believe the MPR System
has the ability to become the ‘gold standard’ of quantitative neck and
back muscle assessment tools. The Company has a strong proprietary
patent protected technology and IP and the capability to become the
market leader and create significant barriers to entry to competitors as
a result of their technology and IP portfolio. The Company is led by an
experienced management team, Board of Directors and Medical
Advisory Board which already filed for, and received, CE Marking
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
4 Vista Partners www.vistapglobal.com
approval to have the MPR System approved for sale in the European
Union. In addition, the Company filed for, and received, Health Canada
approval to begin selling MPR in Canada.
The Company has a sustainable and high margin business model which
we believe is highly attractive to a partner candidate. As the Company
achieves each of its stated milestones, listed on the next page, we
believe valuation should increase. In addition, should the Company
secure a commercial partner valuation should increase as well. We
believe the Company is at an inflection point having received regulatory
approval in both Canada and the EU to sell the MPR System and
approval in the U.S. could occur in in the fourth quarter of 2011. We
strongly believe the valuation of IMSU will increase significantly in 2011.
With that said we should note that due to the lack of liquidity in the
market for shares, it will be difficult to attract institutional investment in
the open market. We believe individual investors will begin to take
positions prior to the Company achieving their 2011 milestones. As the
Company achieves each stated milestone, and we have a high degree of
confidence they will, we believe the liquidity profile will improve as will
the share price. As this improvement in liquidity and share price occurs
we believe the company will garner investment from institutions which
could come in the form of a direct investment which will strengthen the
Company’s balance sheet.
Valuation
IMSU trades at a steep discount relative to anticipated growth. We
have assigned a 12-month target price of $1.85 to the Company, which
is based on our risk adjusted net present value calculation, which we
conservatively estimate to be $60,000,000. We understand there is
significant execution and scientific risk for IMSU, with that said the
depressed valuation doesn’t reflect the potential upside. We highly
doubt IMSU will continue to trade at such a steep discount for much
longer.
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
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Milestones
Source: IMSU
Key Market Trends
Several trends have expanded the market for better solutions to diagnosing back problems:
increased employer and payer aggressiveness in quantifying and seeking ways to reduce the economic toll of back injuries, one of the largest segments of health care costs;
growing awareness of the need for objective information in medical-legal injury litigation;
need for measuring patient treatment effectiveness and managing patients to successful outcomes;
increased health care purchaser and provider attention to injury prevention; and
increased patient awareness of treatment alternatives. We believe the convergence of these trends has magnified the large business opportunity to provide clinically proven tools to reduce the costs and improve the outcomes of patients with back pain.
The Company’s MPR System is a patented clinical tool that analyzes
patterns of muscle recruitment - the engagement of muscles in order to
perform specific body movements. MPR test results provide detailed
physiological information on muscle function that may assist in the
diagnosis and treatment of back and neck injuries and illness. The
results of an MPR evaluation are presented in a comprehensive report
that analyzes muscle recruitment patterns and provides clinically
relevant information on the nature and severity of dysfunction at each
recorded muscle site.
MPR System
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
6 Vista Partners www.vistapglobal.com
The capabilities of the MPR System are unique and that the system
addresses an unmet market need for an objective, evidence-based test
that can be used by physicians and other health care professionals to
better assess and manage patients with impaired musculoskeletal
function. We believe the MPR System supports the cost-containment
and risk management goals of insurers, workers compensation carriers,
self-insured employers and managed care providers by providing
objective information to help control health care costs associated with
back and neck injuries.
Central to the MPR System is the fact that muscles in the back and the
neck function as an interactive system. In order to determine whether a
particular muscle is functioning within a normal range, it must be
examined in concert with all of the other muscle groups required for the
body to make specific movements. Muscles also interact in a
predictable manner that can be expressed in a kinesiological
relationship. These principles have been incorporated into the MPR test
and form the basis of a unique system that measures the relationships
among muscles in a given movement. By comparing relationships of
muscles, MPR is able to normalize subject performance against each
other and over time.
In 2001 the World Health Organization declared lower back pain an
official epidemic. The market for neck and back dysfunction associated
with muscular strains and sprains has grown by sixty-five percent from
1997 to 2005. According to the U.S. National Institute for Occupational
Health and Safety (NIOSH), back pain is one of the most common and
significant musculoskeletal medical problems in the world. Neck and
back disorders pose a major burden on industrialized nations. Eighty-
five percent of working age adults, in developed countries, will seek
care at some time in their lives for low back pain. For most patients
back and neck symptoms are non-specific. Each year, fifteen to forty-
five percent of adults suffer from lower back pain and one in twenty
people present to a physician with a new episode. Ten percent of
patients develop chronic pain which leads to early retirement and high
health care costs. Other notable statistics include:
In Germany lower back pain is the most expensive illness to
treat with over $28 billion spent annually;
The United Kingdom estimates yearly costs associated with neck
and back pain to be over $800 million;
An EU study by the work foundation found that musculoskeletal
disorders such as neck and back pain and repetitive strain injury
Market Analysis
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
7 Vista Partners www.vistapglobal.com
conditions account for nearly 49% of all absences from work and 60% of
permanent incapacity in the EU. Annually, the estimated cost to society
in Europe is up to $312 billion;
Back pain is the second most common neurologic ailment in the
United States; only headache is more common;
Back injuries are the leading cause of disability in the United
States for people younger than 45 years of age and have been the most
expensive health care problem for the 20 to 50 year-old age group. One
third of all disability costs in the United States are due to low back
disorders;
U.S. Workers’ Compensation systems cover 127 million workers
with approximately 50% of the working population reporting back pain
every year;
In the U.S. health care expenditures related to spine problems
increased 65% between 1997 and 2005;
In the U.S. 16.2 million office visits result from back pain
conditions.
In one of the largest analyses of its kind, a team of Duke University
Medical Center researchers found that patients suffering from back pain
consume more than $90 billion annually in health-care expenses, with
approximately $26 billion of that amount directly attributable to
treating back pain. According to the Duke University study, published in
Spine in January 2004, the annual per capita expenditures for patients
with back pain were 1.6 times higher than those without back pain.
These increased expenditures were found in all categories including
inpatient charges, office visits, prescription drugs, outpatient services,
home health and emergency room care.
Back pain is classified into three categories based on the duration of
symptoms:
Acute back pain is arbitrarily defined as pain that has been present for six weeks or less.
Sub acute back pain has a six- to 12-week duration and
Chronic back pain lasts longer than 12 weeks.
For most patients, the cause or causes of persistent neck and back pain
remain poorly understood. Pain in these regions of the body can result
from multiple factors such as: mechanical, neurological and even
psychological. Which helps explain why in a shocking 80% of cases
doctors can't pinpoint why a person hurts.
Although imaging procedures, including computerized tomography (CT),
magnetic resonance imaging (MRI) and conventional x-ray are able to
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
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accurately define structural pathology, the correlation of these
anatomic findings with physiology, neck and back pain, and other
musculoskeletal clinical complaints is imprecise.
Physician management of lower back pain varies and current evidence
suggests that many tests are performed unnecessarily. A US study to
assess the management of LBP found that 26% of lumbar spine films
and 66% of CT scans and MRIs were inappropriately ordered. Another
study found that the overuse of imaging ranged from 20% in primary
care doctors to 70% among orthopedic surgeons.
Acute neck and back pain is often recurrent, and most patients with a
history of acute episodes eventually have more chronic
symptoms. Also, people who seek medical attention for back pain are
thought to be at increased risk for chronic pain and disability. Patients
in all three groups (acute, sub acute and chronic) are appropriate
candidates for MPR.
Annually, it is estimated that twenty-eight percent (967M) of the
world’s working population, ages 20 to 54, will experience disability
from a neck or back, strain or sprain dysfunction. An illustration of the
global market opportunity for IMSU is below:
iTech Medical
Global Target Market
Global Population
6,853,019,414
Global Working
Population (49%)
20-54 yrs old
3,357,979,513
36% of Work
Force experience
Neck or Back
Injury Annually
1,208,872,625
20% of N&BP Population
Result in structural injury
80% of N&BP
Population w/ Neck
&/or Back Dysfunction
Acute
Recovery < 6
weeks (70%)
Sub-Acute
Recovery > 6 wks.
to 12 wks. (20%)
Chronic
Recovery > than
12 wks. (10%)
Potential Annual MPR Test967M
Acute Dysfunction Potential Tests
677M
Sub-Acute Potential Tests
193M
Chronic Potential Tests
97M
1. Peter Rives, MD & Alan Douglas, MD - Evaluation & Treatment of Lower Back Pain in Family Practice
JABFP Nov-Dec ’04, Vol. #17 Supplement
2. Tim Carey, MD., MPH – The Rising Prevalence of Chronic Low Back Pain
ARCH INTERN MED/VOL 169 (#3), Feb 9, 2009
3. Peter Croft, PhD – Outcome of low back pain in general practice: a prospective study
BMJ 1998; 316;1356 (Published 2 May 1998)
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The target markets for MPR are large and include the following:
Primary care physicians, who initially treat the majority of
patients with back pain;
Specialists including neurologists, orthopedic surgeons, physical
medicine and rehabilitation physicians (PM&R) and
occupational medicine practitioners;
The employer market;
The Workers’ Compensation market;
Health Maintenance Organizations (HMOs); and
Insurance companies.
Primary Care Physicians
Primary care physicians typically include family practice physicians,
internists, obstetricians, gynecologists, and pediatricians. As back pain is
extremely common, these physicians actually see most of these private
patients and often have extensive experience in treating acute back
pain due to muscle dysfunctions.
Primary care physicians provide a non-invasive (non-surgical) approach
and often utilize prescription medications to help reduce pain and
inflammation, as well as using the services of physical therapists to
assist in maintaining range of motion and muscle tone. Often, they may
order a variety of spinal diagnostic procedures to more fully investigate
the potential causes of persistent back and neck pain and refer patients
to a specialist for further diagnosis and treatment.
Specialists
There are several areas of specialty medicine that we believe represent
target markets for MPR. They include:
Neurologists - A neurologist is a medical doctor who has trained
in the diagnosis and treatment of nervous system disorders,
which include diseases of the brain, the spinal cord, the nerves,
and the muscles.
Orthopedic Surgeons - Orthopedic surgeons treat the surgical
diseases, conditions and injuries of the bones, muscles and
joints.
Physical Medicine and Rehabilitation - Physical Medicine and
Rehabilitation (PM&R), also called physiatry, is the branch of
medicine that emphasizes the prevention, diagnosis and non-
surgical treatment of disorders - including those of the
Target Markets
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
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musculoskeletal system - that may produce temporary or
permanent impairment.
Occupational Medicine - Occupational Medicine is concerned
with the treatment of patients with occupational and
environmental illnesses and/or injuries.
Employers
We believe employers can directly benefit from reductions in the
medical and income continuation costs due to better diagnosis and
treatment of back problems.
The second component of this market, and a market segment unto its
own, is the use of MPR as an occupational assessment tool to prevent
injuries from occurring in the first place. For these employers, we
believe screening new and veteran employees to identify those with
positive MPR tests could improve job placement and identify high-risk
groups for future injury that may benefit from back strengthening and
flexibility exercises. This use of MPR as a preventative tool also blends
well with the trend towards preventative medicine.
Additionally, the Company may look at other occupational medicine
applications once MPR is fully tested for the back/neck.
Workers’ Compensation Market
Work-related back and neck injuries, or musculoskeletal disorders, are
caused or aggravated by the work environment. Work-related back and
neck injuries can result in reduced worker productivity, inability to
perform job tasks, work loss, and temporary or permanent disability.
We believe that Workers’ Compensation carriers stand to generate
savings and improve their competitive market position through the
adoption of the MPR technology. Although state laws vary, carriers are
usually able to dictate or influence the sources of care for back
problems, particularly in the crucial early period. Increasingly, managed
care organizations provide workers’ compensation services through
contractual relationships with physician groups. These organizations
have the authority to recommend the incorporation of MPR into their
assessment and treatment protocols.
Health Maintenance Organizations (HMOs)
HMOs contract with large medical groups to provide services under
both health benefit and workers’ compensation plans. We believe the
use of MPR can reduce the need for more expensive tests, reduce the
number of physician and non-essential therapy visits, and assist
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physicians in recommending appropriate rehabilitative therapy. For this
reason, we believe managed care organizations such as HMOs will be
highly motivated to adopt the cost-effective MPR technology.
Insurance Companies
We believe the insurance companies are large targets because their
reimbursement policies and practices have a profound impact on the
medical diagnostic industry; they largely dictate pricing policies,
methods of distribution and growth strategies. Insurance companies are
also playing an increasingly important role as prescribers. We believe
MPR has the potential to control direct medical costs and indirect costs
such as lost time, disability claims, and litigation expenses and therefore
we believe that MPR will be well received by insurers. We also believe
they can become a major source of referrals, particularly in the workers’
compensation market.
MPR has the potential to serve all of the above markets. Because these
markets are inter-related, we believe marketing simultaneously to all
markets will reduce the sales cycle, sales and marketing costs and
increase market penetration in each segment.
A common trend in each of the market segments is increased
competition based not solely on price but also on health outcomes. For
employers, reduced toll of back injuries translates directly into higher
employee productivity and enhanced profits. Health care risk-bearing
and delivery organizations find that clients are demanding better health
outcomes, which in turn translate into higher productivity and
profitability. National organizations such as the National Committee for
Quality Assurance (NCQA) and the Joint Commission on Accreditation of
Healthcare Organizations (JCAHO) are promoting outcome-oriented
standards and requiring that organizations maintain records and report
on outcomes in a growing range of health domains. In this environment,
improved treatment of back injuries would provide a significant
competitive advantage, with demonstrably improved health and
economic outcomes. Given the potential use of MPR in measuring
treatment outcomes, we believe our company is well positioned to
benefit from the current health care environment.
Risks
The Company faces the following risks in operations:
The Company has a history of incurring net operating losses and
has operated at a loss since its inception and expects to
Risks & Competition
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12 Vista Partners www.vistapglobal.com
continue to incur losses for the foreseeable future and will need
to raise cash to fund planned operations.
Third-party payers reimbursement levels may be inadequate
Commission-based sales force and distributor channel partners,
limited direct sales force
Evolving domestic and international sales force and distribution
network
FDA & Regulatory approvals in both domestic and international
markets
For a comprehensive list of risk factors we encourage readers to
review the Company’s 10K (annual report).
Competition
Diagnostic tests are used to confirm an anatomical lesion (any
abnormality or disease) as a cause of back or neck pain. They are
particularly useful to pinpoint the source and extent of the lesion (such
as a herniated disc, degenerated disc, or the degree of
spondylolisthesis), which in turn assists in the diagnosis and
development of an appropriate back pain treatment plan.
The most common diagnostic tests include:
X-rays provide detail of the bone structures in the spine, and are
used to check for instability (such as spondylolisthesis), tumors
and fractures.
CT scans, which are essentially a very detailed x-ray, take cross
section images of the body. They provide excellent bony detail
and are also capable of imaging for specific conditions, such as a
herniated disc or spinal stenosis.
MRI scans are particularly useful to assess certain conditions by
providing detail of the disc (such as for degenerative disc
disease, isthmic spondylolisthesis) and nerve roots (such as for
herniated discs or spinal stenosis. MRI scans are also useful to
rule out tumors or spinal infections. Before an MRI scan is
performed, the physician usually has a good idea of what he or
she is looking for, and the scans are most commonly used for
pre-surgical planning, such as for a Microdiscectomy, spinal
fusion, or other types of back surgery.
There are a number of other imaging and electrical studies that may
also be used to help diagnose the causes of back pain, and some
injections are used for diagnostic purposes as well as for pain relief.
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There is little that all physicians agree on when it comes to diagnosing
and treating back pain, thus the opportunity for the MPR System to
become the “gold standard”.
Wayne Cockburn – President and CEO, Director
Mr. Cockburn joined iTech Medical in September 2003. Prior to iTech
Medical, Mr. Cockburn was President at MPR Health Systems from
January 2002 until September 2003 and Executive Vice President from
January 2000 until January 2002. From January 1995 to December 1999,
Mr. Cockburn was Vice President, Business Development for Lorus
Therapeutics, a public biotechnology company. Mr. Cockburn’s
background includes strategic planning, corporate finance, corporate
partnering, corporate governance and mergers and acquisitions. Mr.
Cockburn has served on the board of directors of several private and
public companies. Mr. Cockburn currently serves on the board of
directors of MPR Health Systems, Inc. and Red Juggernaut, Inc.
Alan J. Goldman, M.D. - Vice President, Clinical and Medical Affairs
Dr. Goldman joined iTech Medical in September 2003. Prior to joining
iTech Medical, Dr. Goldman was a practicing Board Certified neurologist
for 32 years and an Associate Clinical Professor of Neurology at the
University of California (Irvine). Through his practice, Dr. Goldman
attained extensive experience with work-related injuries. He served as a
neurology consultant to numerous insurers and served for four years on
the Medical Advisory Board of Blue Cross. Dr. Goldman serves as an
expert witness in Workers’ Compensation and general liability litigation
matters and was recently appointed as a Medical Panel Chairperson for
the State of Utah Labor Commission. His Workers’ Compensation
appointments include Independent Medical Examiner for the State of
California in 1990, Qualified Medical Evaluator, State of California in
1991 and Agreed Medical Evaluator, State of California in 1992. Dr.
Goldman is also a member of the American Academy of Neurology, the
California Medical Association, the Utah Medical Association and a Past-
President of the Orange County Neurological Society.
At iTech Medical, Dr. Goldman is responsible for all the clinical and
medical affairs of the Company. In addition to being a key member of
the management team, Dr. Goldman also serves as Chairman of the
Company's Medical Advisory Board.
Steeve Asselin - Vice President, Research and Development
Management Bios
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Prior to joining iTech Medical in September 2003, Mr. Asselin was the
Director of the Biomechanics Lab at HealthSouth Inc. from September
2000 to December 2002. Mr. Asselin was responsible for the
development of the Biomechanics Lab at HealthSouth to enhance and
support the clinical programs and services of the company. From May
1994 until September 1999, Mr. Asselin was Research Coordinator at
Spinex Medical Technologies. From February 1992 until March 1994,
Mr. Asselin was Director, Clinical and Spinoscopy Affairs with a physician
group in Boston, Mass. Prior to that, Mr. Asselin was a Research
Assistant at Spinex Medical Technologies from September 1989 until
February 1992. Mr. Asselin is coauthor of six scientific publications
dealing with back injuries and back function and author and/or coauthor
of approximately 30 scientific abstracts.
Karl Wolcott - VP Sales/Marketing
Karl Wolcott is an accomplished sales and marketing executive with
proven success in driving dynamic growth for global companies
including Picker Health Care Products, , a $1.6B manufacturer /
marketer of medical imaging equipment and distributor of imaging
supplies and accessories.
As Corporate Vice President, Business Development and Integrations,
Wolcott led a multi-disciplinary team to evaluate growth opportunities
for new Information Technology product and service offerings to
complement core business product portfolio. As Vice President and
General Manager, Health Care Products Division, a $535M, nine
hundred employee business-unit, Wolcott was directly responsible for
all business operations including two manufacturing plants as well as
selling and distributing imaging supplies, accessories, ancillary capital
equipment, and image management products.
Other prominent medical experience includes Vice President, Global
Sales and Marketing - Microbiology Division for AccuMed International
Inc. and Chief Operating Officer for Ridgeway Biosystems Inc.
Wayne Cockburn – President and CEO, Director
See Management Bio
Donald W. Paterson - President, Cavandale Corporation
Since May 1986, Mr. Paterson has been President of Cavandale
Corporation, a company principally engaged in providing strategic
corporate consulting to emerging growth companies within the
Board of Directors
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technology and healthcare industries. Prior to founding Cavandale
Corporation, Mr. Paterson was a Director and Vice-President of Wood
Gundy Inc., a Canadian investment bank, from Jan. 1982 to Sep. 1988
where he was directly involved in leading the firm’s activities in
financing Canadian and international high technology companies. Mr.
Paterson currently serves on the board of directors of Angoss Software
Corp., Homeservice Technologies Inc., NewGrowth Corp. and Utility
Corp.
George D. Angelidis – Healthcare Consultant
Mr. Angelidis is an independent healthcare consultant. From 1998 until
2008, Mr. Angelidis was the President of Hospital Network, Inc. (HNI), a
partnership initially consisting of 6 Michigan-based hospitals. During his
tenure, Mr. Angelidis expanded HNI to 17 hospitals by adding 11 new
hospital members and structuring a new entity, Hospital Network
Healthcare Services L.L.C. He was directly responsible for the company's
mobile MRI, bone density and TUMT services, mobile Occupational
Wellness, and Medical Waste Disinfection programs. Additionally, the
Network provided medical record scanning and archiving under Mr.
Angelidis, and was a regional PACs archiving service, and a member
Telehealth service. Mr. Angelidis also managed three affiliated ventures
for the fifteen healthcare partners.
Prior to joining Hospital Network, Mr. Angelidis spent eighteen years
with Eastman Kodak Company where his most recent position was
Senior Technical Sales Representative for the Health Sciences Division.
Mr. Angelidis spent time with Picker International in Cleveland, Ohio as
their Regional Sales Manager, Manager Group Accounts and Zone Sales
Manager and was responsible for over five hundred million dollars in
annual sales.
Prior to Picker International, Mr. Angelidis was Vice President of Sales
and Manager at King’s Medical in Hudson, Ohio where he gained
experience in capital equipment programs. Once introduced to mobile
services Mr. Angelidis spent five years with Medical Consultants
Imaging, Co. located in Cleveland as Vice President of Sales, Marketing
and Business Development. Medical Consultants Imaging Co. was the
first joint venture partner of Hospital Network in 1986.
Craig Lunsman - President, William Jamieson Group
Mr. Lunsman is the Founder and Managing Director of William Jamieson
Group, Inc., a consulting group that provides securities valuation and
corporate advisory services to public and private small cap
companies. Prior to founding William Jamieson Group in 1993, Mr.
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Lunsman was a Co- Founder and Principal in Houlihan Valuation
Advisors, Inc., a company specializing in providing services related to
business valuations, fairness opinions and other valuation and economic
issues. Mr. Lunsman received his BS from the University of Southern
California in 1970 and graduate work for his MBA and has been involved
in providing strategic planning, financing and other corporate advisory
services since that time. He has served as an Expert Witness on
business valuation and other related financial matters in California and
other states, and has also testified before the Internal Revenue Service
relative to valuation matters. He has been a member of the American
Society of Appraisers, San Francisco Chapter and has been a published
author and a frequent speaker on issues relating to business
valuation. As an outside director, Mr. Lunsman acts as Chairman of the
Company's Audit Committee as well as serve on each of the
Compensation and Corporate Governance Committees.
Wim Peters
In 1973, Mr. Peters founded Stako B.V., a Dutch company that develops
and manufactures large-scale, automated welding and cutting systems
for the international market. In 2007, Mr. Peters sold Stako and is
currently the CEO of a real estate holding company. Mr. Peters
graduated from the Eindhoven University of Technology in 1972 with a
degree in Mechanical Engineering.
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
17 Vista Partners www.vistapglobal.com
September 30, December 31,
2010 2009
ASSETS
Current assets
Cash and equivalents 90,268$ 146,477$
Prepaid expenses 30,231 4,219
Total current assets 120,499 150,696
Furniture and equipment, net of accumulated depreciation 10,781 7,549
Patent, net of accumulated amortization 291,665 313,724
422,945$ 471,969$
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Loans from related parties, net of unamortized discount 180,926$ 175,306$
Notes payable 34,613 34,613
Accounts payable 314,438 337,160
Accrued interest 225,852 213,156
Accrued vacation 92,819 83,170
Accrued salaries, bonuses and other payroll items 1,136,838 1,010,500
Director compensation 87,500 37,500
Total current liabilities 2,072,986 1,891,405
Commitments and contingencies - -
Shareholders' deficit
Preferred stock, 10,000,000 shares authorized, $.0001 par value,
no shares issued and outstanding - -
Common stock, 100,000,000 shares authorized, $.0001 par value,
30,231,733 and 26,691,733 shares issued and outstanding
September 30, 2010 and December 31, 2009, respectively 3,023 2,669
Additional paid-in capital 11,184,031 9,593,824
Deferred option and warrant costs (48,347) (258,326)
Deficit accumulated during the development stage (12,788,748) (10,757,603)
Total shareholders' deficit (1,650,041) (1,419,436)
422,945$ 471,969$
Balance Sheet
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
18 Vista Partners www.vistapglobal.com
Cumulative
from inception
(October 20,
1997) to
2010 2009 2010 2009 Sept. 30, 2010
Costs and expenses:
Research and development 31,236$ 31,600$ 141,609$ 95,824$ 1,148,165$
Medical and clinical 71,859 35,674 204,453 147,947 1,615,518
General and administrative 731,459 535,914 1,666,899 1,569,633 8,511,165
Operating loss (834,554) (603,188) (2,012,961) (1,813,404) (11,274,848)
Other income (expense):
Interest expense (4,838) (42,661) (17,263) (467,816) (1,506,119)
Interest income - - - 43 333
(4,838) (42,661) (17,263) (467,773) (1,505,786)
Loss before provision for taxes (839,392) (645,849) (2,030,224) (2,281,177) (12,780,634)
Provision for taxes - - (921) (959) (8,114)
Net loss (839,392)$ (645,849)$ (2,031,145)$ (2,282,136)$ (12,788,748)$
Basic and diluted net loss
per share (0.03)$ (0.03)$ (0.07)$ (0.11)$
Basic and diluted weighted
average number of common
shares outstanding 29,691,523 21,138,515 28,084,788 20,446,137
Nine months
ended September 30,
Three months
ended September 30,
Income Statement
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
19 Vista Partners www.vistapglobal.com
Cumulative
from inception
(October 20, 1997)
2010 2009 to Sept. 30, 2010
Cash flows from operating activities:
Net loss (2,031,145)$ (2,282,136)$ (12,788,748)$
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 25,615 29,912 280,679
Loss on disposal of equipment - 458 1,215
Loss on extinguishment of debt - 95,932 95,932
Amortization of loan discount 2,908 398,453 1,235,164
Issuance of common stock for services & interest - 863,206 2,138,151
Issuance of stock options and warrants for services 763,540 279,666 2,254,301
Decrease (increase) in prepaid expenses (26,012) - (30,231)
Increase (decrease) in accounts payable (22,722) 15,465 314,438
Increase (decrease) in accrued expenses 198,683 208,171 1,543,009
Net cash used by operating activities (1,089,133) (390,873) (4,956,090)
Cash flows from investing activities:
Capital expenditures (6,788) (1,867) (84,340)
Net cash used by investing activities (6,788) (1,867) (84,340)
Cash flows from financing activities:
Proceeds from loans from related parties 125,000 70,000 536,500
Proceeds from convertible notes - - 452,991
Proceeds from loans from others - - 10,000
Payments on note payable - - (65,387)
Issuance of common stock, net of costs 912,000 284,500 4,200,668
Net cash provided by financing activities 1,037,000 354,500 5,134,772
Effect of exchange rate changes 2,712 14,906 (4,074)
Net increase (decrease) in cash (56,209) (23,334) 90,268
Cash, beginning of period 146,477 34,015 -
Cash, end of period 90,268$ 10,681$ 90,268$
Non-cash investing and financing activities:
Issuance of common stock & note payable for patent -$ -$ 500,000$
Issuance of warrants with debt -$ 91,418$ 930,624$
Conversion of debt to equity 125,000$ -$ 689,491$
Nine months ended Sept. 30,
Cash Flow Statement
Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU
20 Vista Partners www.vistapglobal.com
This report has been prepared by Vista Partners LLC (“Vista”) with the assistance iTech Medical, Inc. (“the
Company”) based upon information provided by the Company. Vista has not independently verified such
information, and in addition, Vista has been compensated by the Company for advisory services for a one year
period. Statements in this report that are not historical facts are “forward-looking statements” that involve risks
and uncertainties. Forward-looking statements can be identified by the use of words such as “opportunities,”
“trends,” “potential,” “estimates,” “may,” “will,” “could,” “should,” “anticipates,” “expects” or comparable
terminology or by discussions of strategy. Such statements involve known and unknown risks, uncertainties and
other factors that may cause actual results, performance or achievements to be materially different from the
results, performance or achievements expressed or implied by such forward-looking statements. Additional risks,
uncertainties and other factors are identified under the captions “Risk Factors” and “Special Note Regarding
Forward-Looking Statements” in the Company’s reports filed from time to time with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the current fiscal year. Vista and the Company disclaim
any intention or obligation to update publicly or revise any forward-looking statements, whether as a result of
new or additional information, future events or otherwise. The Company is solely responsible for the accuracy of
that information. Information as to other companies has been prepared from publicly available information and
has not been independently verified by the Company or Vista. For more complete information about the
Company. The reader is directed to the Company's website, www.itechmedical.com.
This report is published solely for informational purposes and is not to be construed as an offer to sell or the
solicitation of an offer to buy any security in any state. Past performance does not guarantee future performance.
Free additional information about the Company and its public filings, as well as free copies of this report can be
obtained in either a paper or electronic format by calling 877.215.4813.
Legal Notes & Disclosures
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