vista partners initiates coverage on itech medical, inc. - target price $1.85

Initiation of Coverage - January 7, 2011 OTCBB Symbol: IMSU

1 Vista Partners www.vistapglobal.com

Analyst: Ross Silver Email: [email protected] 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

mailto:[email protected]

http://www.itechmedical.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



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



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.



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



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



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



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)



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



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



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



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.



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



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



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.



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.



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



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



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



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

vista partners initiates coverage on itech medical, inc. - target price $1.85

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