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Business Summary

The Company: ImaSight Inc.

ImaSight Inc. (formerly Imascope Inc.) is a Canadian developer and supplier of digital radiography solutions for veterinary, chiropractic and medical clinics. ImaSight's major business is making digital X-ray sensors (not the X-ray machines) that offer hospital grade digital images at an affordable price to small and medium sized clinics. The main advantage is that ImaSight can retrofit existing X-ray systems by simply replacing their traditional film-based technology with their digital sensor. That can update existing X-ray machines, which typically last 15 to 20 years, instead of clients having to buy a much more expensive all digital system.

The company has been developing the technology since 2001 and has specific patents that relate to the light path that allows them to get a better image at a cheaper price than competitors in the digital radiology business. This is an emerging field as the radiology industry moves from film to digital, just as the camera industry has done.

In North America, there are about 30,000 veterinarians and 27,000 chiropractors who have X-ray systems currently installed. Even at wholesale prices, ImaSight sees billion dollar sales potential in those two markets plus larger opportunities in the developing world.

In January 2008, ImaSight did a reverse takeover of Liponex, a TSX listed biopharmaceutical company that is developing natural source products for the treatment of cholesterol and acquired their assets as part of their company. ImaSight shareholders form the majority ownership in the company (about 2/3 to 1/3).

Founded: ImaSight was founded and incorporated in 2002 by ImaSight's President, Jean Caseault, a senior engineer with 25 years experience in digital video and signal processing as well as two decades of experience in high-technology start-ups and 10 years in corporate management.

CEO: John Brooks has been with ImaSight for two years. Previously, he guided two life science companies through an IPO on the main TSX exchange in Toronto, was a Director and Chair of the Finance Committee at BiotechCanada and was a VP at CIBC Wood Gundy. He was named as the Ottawa Innovator of the Year and as one of the top 10 people in Ottawa by Ottawa Life Magazine.

John was born and raised in Kenora, Ontario and holds a Masters in Physiology from the University of Toronto. He is also a Certified Financial Analyst.

COMPANY BACKGROUND

ImaSight has funding from several investors including Fonds Soutien Outaouais (FSO), an investment fund for companies based in the Gatineau area. FSO is a joint initiative between municipalities in the Outaouais region and the Quebec government.

Regarding the reverse takeover of the biopharmaceutical company Liponex in early 2008, Brooks says that he felt there was a significant asset left in Liponex's technology plus $1-1/2 million left in the treasury as well as $12-million in tax losses that Liponex had accumulated. He says how the tax losses can be used will be based on the facts in the future, once he sees how the two operations develop. Brooks has publicly stated that they are working with potential partners to spin out the Liponex business so that it won't be a cash burden for them and they can focus on their main business, which is the digital X-ray.

ImaSight Inc. is a 100% owned sub of ImaSight Corp.; ImaSight Inc. is the digital radiology business, while the parent includes the Liponex assets. The public reporting on TSX is for the combined business only.

REVENUE

ImaSight Inc. has had $1-million in equipment sales to date since November 2007 when they brought the product to market.

ImaSight Corp. announced earnings results for the eight months ended June 30, 2008. For the period, the company reported sales of $574,387 and a comprehensive and net loss of $1,029,950.

The link for ImaSight Corp. (IAS:TSX-V) is: http://cxa.marketwatch.com/TSX/en/Market/companyinformation.aspx?symb=IAS

Home base and branch offices: ImaSight is based in Gatineau, Quebec with a sales office in Toronto. The company recently doubled their Gatineau space to keep manufacturing and testing of their products on home ground to maintain quality control. Their secondary business, Liponex, maintains a separate office in Ottawa.

Staff: There are 15 ImaSight employees including the management team, engineers and technicians in product research and development, and sales. Of the 15 employees, three come from the Liponex operations. Liponex is run as a separate division with 20 employees.

The product: The ImaSight 4600 series ImaSight's technology only changes the image display; it is not involved in the X-ray process. Much like a digital camera, ImaSight's digital X-ray centre box converts an X-ray into a digital image that can be stored in a computer and manipulated as a computer image. The ImaSight sensor has tremendous dynamic range that can distinguish between different types of tissue, making for better diagnosis than traditional X-rays. The digital images can also be viewed on a large monitor, emailed, or burned on a CD. The ImaSight sensor has been approved for sale by Health Canada.

Regulatory approvals: In Canada, ImaSight has veterinary and Health Canada approval, necessary for the chiropractic market. In the U.S. and Europe, the company has approvals for veterinary use but is still waiting on approvals for the human side (Brooks expects them to take about a month longer). Health approvals are not difficult because the ImaSight sensor is only involved after the X-ray has passed through the person.

Product Price: A veterinary can convert to the ImaSight sensor for about $45,000 compared to $65,000 - $70,000 for a completely new digital system. A chiropractic clinic can convert for a little over $50,000 (additional tilt features for chiropractors allow them to get clear images of hard to access spots). The ImaSight can produce "hospital quality" images that far exceed the American College of Radiology minimum standards for a fraction of the price of a big hospital digital X-ray machine costing $500,000.

Projected growth: Brooks hopes to achieve sales of several million dollars next year.

Profit Margin: Brooks says ImaSight's profit margin is consistent with other manufacturers of equipment, in the 55 to 60 per cent range.

Competition: Brooks says there's a fair amount of competition in the digital radiology business. Big international giants like Kodak and Agfa are involved specifically in this area as well as numerous small companies, such as Imaging Dynamics in Calgary.

Marketing: ImaSight markets their technology through independent distributors because that's the way X-ray equipment in the veterinary and chiropractic markets has been traditionally sold. It also tends to be the same distributors who sell to both veterinarians and chiropractors. So ImaSight selected various distributors to carry their product and bring it to the clients rather than direct sales because those distributors already have the trust of the potential clients and can also service the X-ray machines as needed. (X-ray machines must be calibrated on a regular basis to make sure that radiation levels are appropriate.)

Brooks says that while they have made a few direct sales to people whom they know locally, the company does not intend to set up online sales. They do some promotion but any leads coming from promotions are turned over to the distributors to do the sale and ongoing service. Brooks believes that it's important to maintain that existing relationship.

Goal: To create a company that's strong in the medical device area. Brooks says that he's looking at other applications that would be complimentary to their digital X-ray technology so that they can grow into a major medical device company. With an aging population and the desire for more and better health care, he believes that the sky is the limit. He also believes that ImaSight's digital technology can save the health care system money, so he sees a lot of future for ImaSight.

Major strength: Brooks says ImaSight's greatest strength is its innovative technology which tests favourably against what's already in the marketplace.

Major challenge: Brooks says that some of their competitors, like Kodak and Agfa, are much larger with deeper pockets.

ADVICE WANTED FROM THE PANEL

1. International development: What is the best way to reach out to international foundations and health organizations to potentially develop partnerships with the developing world?

Tuberculosis (TB) is still a major problem around the world, with twice as many people dying of TB as malaria. The best way to diagnose it properly is with a chest X-ray. Any immigrant coming to Canada or the U.S. still requires a chest X-ray so it's the standard of care. John Brooks says that ImaSight's digital radiography technology system is the ideal solution for TB testing in developing countries because of its tremendous dynamic range (it can distinguish between lung tissue and other tissue) and economical price (their system costs much less than outfitting a standard hospital room). ImaSight can also automate their system so that in a third world setting, it's a simplified red light/green light setup. The person operating the system can read simply whether the X-ray has a positive or negative result.

They approached CIDA but were frustrated by the agency's typical 18-month lead time in establishing industrial partnerships. Brooks says that as an entrepreneur, he thinks quicker than that, but the company doesn't have the resources to spend millions to establish their technology in developing countries. He asks how the panel would approach this exciting market.

2. Creative financing: Is there a way that we could finance a pay per use for our customers yet still get the monies we need to develop?

In this uncertain financial environment, many of ImaSight's potential customers don't have large capital budgets for equipment and have asked about a pay per use basis, much like the way that photocopiers were sold years ago. Brooks says that he'd love to be able to supply them but ImaSight doesn't have the financial resources to have lots of machines out in the field and slowly receive the money back. He wonders if this type of financing is viable or if there is some creative way for them to finance the customer. He also asks if there are other ways that the panel could suggest to help the customer who is reluctant to make a capital investment at this time. (There's a pay back in cost savings for the client in about two years.)

3. Competitive testing and quality testing: How do we get true independent testing of the various systems that are on the market?

Brooks says that they have a system that gets consistently good images. He'd like to see comparative testing within their industry so that quality can be demonstrated by independent parties. He'd like to encourage the medical community to develop standards for testing comparative machines so that the tests mean something and are not just marketing claims. He asks how you go about encouraging the type of consumer reports that you see in consumer goods in a field like digital radiology so that buyers can see what they're getting.

Website: www.imasight.com