Initiation of Coverage - January 7, 2011
OTCBB Symbol: IMSU
Analyst: Ross Silver Email: ross.silver@vistapglobal.com Phone: 415.738.6229
Corporate Information
1 Year Price Performance Price in USD (as of report): $0.63
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
Stock Data: Industry: Market Cap: Cash & STI (mrq): 52 Week Range: Revenue (FY 2010):
Medical Instruments $19.2M $0.9M $0.18 – $0.63 N/A
Highlights:
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
Price Target: Avg. Volume (3 month): Float: Shares Outstanding: Enterprise Value:
$1.85 4,162 19.6M 36.4M $19.0M
Table of Contents 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
1 Vista Partners
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Initiation of Coverage - January 7, 2011
Business Description
OTCBB Symbol: IMSU
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 & Conclusion
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 2 Vista Partners
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OTCBB Symbol: IMSU
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 3 Vista Partners
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OTCBB Symbol: IMSU
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.
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Initiation of Coverage - January 7, 2011
OTCBB Symbol: IMSU
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. MPR System
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.
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OTCBB Symbol: IMSU
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. Market Analysis
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. Eightyfive 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 fortyfive 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 6
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OTCBB Symbol: IMSU
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 7 Vista Partners
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OTCBB Symbol: IMSU
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 Test 967M 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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Target Markets
OTCBB Symbol: IMSU
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 nonsurgical treatment of disorders - including those of the 9
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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 10 Vista Partners
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OTCBB Symbol: IMSU
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 workersâ&#x20AC;&#x2122; 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 & Competition
Risks The Company faces the following risks in operations: ď&#x201A;ˇ
The Company has a history of incurring net operating losses and has operated at a loss since its inception and expects to 11
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OTCBB Symbol: IMSU
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”. Management Bios
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 PastPresident 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
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OTCBB Symbol: IMSU
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. Board of Directors
Wayne Cockburn â&#x20AC;&#x201C; 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 14
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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. 15 Vista Partners
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OTCBB Symbol: IMSU
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.
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OTCBB Symbol: IMSU
Balance Sheet September 30, 2010
December 31, 2009
ASSETS Current assets Cash and equivalents Prepaid expenses
$
Total current assets Furniture and equipment, net of accumulated depreciation Patent, net of accumulated amortization $ LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities Loans from related parties, net of unamortized discount Notes payable Accounts payable Accrued interest Accrued vacation Accrued salaries, bonuses and other payroll items Director compensation Total current liabilities 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 Additional paid-in capital Deferred option and warrant costs Deficit accumulated during the development stage Total shareholders' deficit
$
90,268 30,231
$
120,499
150,696
10,781
7,549
291,665 422,945
313,724 471,969
180,926 34,613 314,438 225,852 92,819 1,136,838 87,500 2,072,986
$
$
175,306 34,613 337,160 213,156 83,170 1,010,500 37,500 1,891,405
-
-
-
-
3,023 11,184,031 (48,347) (12,788,748) (1,650,041) $ 422,945
2,669 9,593,824 (258,326) (10,757,603) (1,419,436) $ 471,969
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146,477 4,219
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OTCBB Symbol: IMSU
Income Statement
Three months ended September 30, 2010 2009
Nine months ended September 30, 2010 2009
Cumulative from inception (October 20, 1997) to Sept. 30, 2010
Costs and expenses: Research and development Medical and clinical General and administrative
$ 31,236 71,859 731,459
Operating loss
$
31,600 35,674 535,914
$ 141,609 204,453 1,666,899
$
95,824 147,947 1,569,633
$
1,148,165 1,615,518 8,511,165
(834,554)
(603,188)
(2,012,961)
(1,813,404)
(11,274,848)
(4,838)
(42,661)
(17,263)
(467,816)
(1,506,119)
-
-
43
333
(4,838)
(42,661)
(17,263)
(467,773)
(1,505,786)
(839,392)
(645,849)
(2,030,224)
(2,281,177)
(12,780,634)
-
-
(921)
(959)
(8,114)
Other income (expense): Interest expense Interest income
Loss before provision for taxes Provision for taxes
-
Net loss
$ (839,392) $ (645,849) $ (2,031,145) $ (2,282,136) $ (12,788,748)
Basic and diluted net loss per share
$
Basic and diluted weighted average number of common shares outstanding
29,691,523
(0.03) $
(0.03) $
21,138,515
(0.07) $
28,084,788
(0.11)
20,446,137
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OTCBB Symbol: IMSU
Cash Flow Statement
Nine months ended Sept. 30, 2010 2009 Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization Loss on disposal of equipment Loss on extinguishment of debt Amortization of loan discount Issuance of common stock for services & interest Issuance of stock options and warrants for services Decrease (increase) in prepaid expenses Increase (decrease) in accounts payable Increase (decrease) in accrued expenses Net cash used by operating activities
$
(2,031,145)
$
(2,282,136)
Cumulative from inception (October 20, 1997) to Sept. 30, 2010 $
(12,788,748)
25,615 2,908 763,540 (26,012) (22,722) 198,683 (1,089,133)
29,912 458 95,932 398,453 863,206 279,666 15,465 208,171 (390,873)
280,679 1,215 95,932 1,235,164 2,138,151 2,254,301 (30,231) 314,438 1,543,009 (4,956,090)
(6,788) (6,788)
(1,867) (1,867)
(84,340) (84,340)
125,000 912,000 1,037,000
70,000 284,500 354,500
536,500 452,991 10,000 (65,387) 4,200,668 5,134,772
Effect of exchange rate changes
2,712
14,906
(4,074)
Net increase (decrease) in cash Cash, beginning of period Cash, end of period
$
(56,209) 146,477 90,268
$
(23,334) 34,015 10,681
$
90,268 90,268
Non-cash investing and financing activities: Issuance of common stock & note payable for patent Issuance of warrants with debt Conversion of debt to equity
$ $ $
125,000
$ $ $
91,418 -
$ $ $
500,000 930,624 689,491
Cash flows from investing activities: Capital expenditures Net cash used by investing activities Cash flows from financing activities: Proceeds from loans from related parties Proceeds from convertible notes Proceeds from loans from others Payments on note payable Issuance of common stock, net of costs Net cash provided by financing activities
19 Vista Partners
www.vistapglobal.com
Initiation of Coverage - January 7, 2011
Legal Notes & Disclosures
OTCBB Symbol: IMSU
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.
20 Vista Partners
www.vistapglobal.com