RESEARCH
RESEARCHNOVEMBER 1995
Stock Symbol
IMDS
NASDAQ BULLETIN BOARD
Telephone 305-746-0500
800-992-9008
FAX 305-746-9032
Imaging Diagnostic Systems, Inc. (IMDS) has developed a revolutionary imaging device for the detection of breast abnormalities. CTLMTM - Computer Tomography Laser Mammography Systems will be manufactured, marketed, and sold by the company in the U.S. and international markets.
Computed Tomography Laser Mammography (CTLM)
CTLM utilizes the
Company's ultra-fast laser imaging technology to acquire data to allow
visualization of the interior structure of the breast. The examination procedure
is simple. A woman lays down on a specialtable with one breast at a time
suspended freely in a scanning chamber. In 1 second, the laser beam in a
horizontal plane sweeps 360° around the breast. Each sweep acquires data on
tissue with a thickness of about 2 mm (0.080 inches). Each set of data is
referred to as a "slice plane" of data. The laser beam projection
apparatus and the detector ring is moved 2 mm and another slice plane of data is
acquired. Data from each individual slice plane is used to reconstruct an image
of the interior structure of the breast with a thickness of 2 mm. The process of
moving the laser beam and detectors is repeated until the entire breast from the
nipple to the chest wall is imaged. An analogy would be visualizing a loaf of
bread standing on end. Each slice of the loaf represents a slice plane of the
loaf. The individual slices can be taken out of the loaf, turned sideways, and
the bread bonded by the crust can be seen. Similarly, each slice plane image of
the scanned breast can be viewed and interpreted.
With CTLM the computer controls the entire sequence, unlike mammography where the technician's technique is critically important to the quality of the examination,. The technician's only tasks are to initiate the scan and assure that the woman lays still while the procedure is performed. After the first breast is scanned, the woman is moved to position her other breast within the scanning chamber. The prone position is comfortable and since no breast compression is required there is no discomfort during the examination. Lack of breast compression is a significant motivation for women to have the CTLM procedure performed. Bilateral examination of the breasts requires less than 10 minutes from undressing, scanning, and dressing.
A conventional mammography procedure produces an image of the breast looking sideways through the breast; the lateral view, and an image looking through the breast from top to bottom; the cranio-caudal view. The slice plane images initially produced by CTLM are in the horizontal plane and are not similar to the projections obtained from mammography. To allow for easier interpretation by the physician, the CTLM computer combines the slice plane data to create a 3-dimensional model of the breast in memory. The algorithm then produces slice plane images of the breast in the same projections that are seen when conventional mammography is performed.
Significant differences exist between the image obtained with conventional mammography and CTLM. Conventional mammography results in only one lateral and cranio-caudal image, and thus, a 3-dimensional object is reduced to a 2-dimensional image. On the other hand, CTLM provides a series of contiguous images that flow from the top to the bottom and from side to side of each breast. The number of lateral and cranio-caudal CTLM produced slices can be from as little as 5 or 10 for a small breast to as many as 150 for a large breast in both projections. Because the slice thickness is very thin, 2 ram, the 3-dimension breast is essentially imaged in 3-dimensions. In fact, a 3-dimensional hologram could be produced from the acquired data. The ability to localize an abnormality within the breast is greatly enhanced by the slice plane lateral and cranio-caudal images produced by CTLM.
CTLM images are stored on CD-ROM. The patient's entire CTLM scan history can easily be stored on one CD-ROM. This feature allows the physician to recall previous studies instantly for immediate comparison with the current study, even side-by-side on the same screen. With conventional mammography, the physician would most likely have to request that the films from the patient's previous examinations be retrieved from storage before this side-by-side comparison could be made. An additional feature is that each woman could have a duplicate CD-ROM of her studies that could be conveniently carded with her as she travels or moves to a new city.
Imaging Diagnostic Systems, Inc.: The Company merged with a public shell during April 1994. Fiscal Year - June 30 Total Authorized Shares - 48,000,000 common shares Shares outstanding as of June 30 - 18,614,713 Free Trading - 1.5 mil Management Control - 73% Current Price - .78 Market Cap - 14.75 mil Current Book Value - June 30 - .026 PE estimate 1996 - fiscal year June 15.6x PE estimate 1997 - fiscal year June 3.1x Dividend - NA Long term debt - $.00 Employees - 14 Legal proceeding - none Shareholders - 300 holders of record. Does not include amount in street name. Transfer Agent - Jersey Transfer Trust, 201-239-2712 Auditor - Margolies & Fink, 2301 W. Sample Road, Pompano Beach, FL 33073; 305-979-5440
Other :
June 12, 1995 - Imaging Diagnostic Systems, Inc. has announced it has applied for and received patent pending status on its CT Laser Mammography Technology (CTLM™). Imaging Diagnostic Systems, Inc. believes it is the first to file for a patent on the CTLM™ technology. Once the patent is issued, it offers protection on its technology for 17 years.
August 21, 1995 - Imaging Diagnostic Systems, Inc. has received an initial order for 5 CTLM™ totalling over $1 million to be delivered during 1996 to customers in India, Singapore, Taiwan, Hong Kong and China.
September 6, 1995 - Imaging Diagnostic Systems, Inc. has been invited by the Venezuela Ministry of Health, the Venezuela Cancer Society and the Caracus Rotary Club to make a presentation detailing IDSI's new breast imaging device. The CTLM™ breast imaging system uses ultra-fast laser pulses in place of x-rays, requires no breast compression or discomfort and produces cross-sectional images similar to conventional CT scanners.
October 11, 1995 - Imaging Diagnostic Systems, Inc. will begin clinical studies on its CT Laser Mammography breast imaging device on November 1, 1995. The company said that the Gertrude and Phil Strax Breast Cancer Detection Institute of Florida will compare the Imaging Diagnostic breast imager with conventional mammography and ultrasound technologies.
The data obtained will be used to formulate a CD-ROM atlas of case studies that radiologists will use as a guide when imaging patients.
IDSI will exhibit its CTLM™ at the annual Radiological Society of North America (RSNA) meeting in Chicago November 26 - December 1, 1995.
National Cancer Institute (for any questions relating to any cancer form - 1-800-422-6237).
Early detection is obviously the key to reducing the mortality of breast cancer in women. The standard and preferred method of detection, mammography, a screening modality that is 40 years, is based on x-ray technology. The technology is coming on line that will produce superior results. When you consider that mammography has an overall accuracy approaching 93%, but for tumors less than 1 centimeter, the sensitivity decreases to 75% to 80%. In larger dense breasts, the sensitivity decreases to less than 75%. Silicone implants hide up to 80% of the breast from mammographic imaging. Special techniques that effectively double the radiation exposure are used in attempts to image more of the breast. MRI, CT and ultrasound are sometimes used to image augmented breasts, but the results are marginal.
New technology such as computer tomography laser mammography in our opinion appears to detect smaller tumors earlier than other methods, quick and harmless and dramatic detailing of scanned breasts. It is our opinion that CTLM™ may emerge as the new standard for scanned breasts for early detection of breast abnormalities.
| Company | Symbol | Current Price | Earnings/sh E for current Fiscal year & PE Est | Earnings/sh E next year & PE est |
| Imaging Diagnostic Systems Inc. | IMDS (NASDAQ BB) | .78 | .05
(FY 96) June PE 15.6 | .26 (FY 97) June Pe 3 |
| Thermotrex | TKN (ASE) | 33 1/8 | .41 (FY 95) Dec PE 80 | .43 (FY 96) Dec PE 77 |
| Fischer Imaging Corp. | FIMG (NASDAQ) | 8 3/4 PE 175 | .05 (FY 95) Dec PE 36 | .24
(FY 96) Dec |
| Hologic, Inc. | HOLX (NASDAQ) | 26.375 | .45
(FY 95) Dec PE 58 | 1.23 (FY 96) Dec PE 21 |
| Positron Corp. | POSI (NASDAQ) | 4 | (-.75 FY 95) Dec PE NM | -- |
Chart AA
| Year End June 30 | |||
| 1996E | 1997E | 1998E | |
| Revenues | 3 mil | 9 mil | 21.7 mil |
| Net Income | 1 mil | 5.5 mil | 17.4 mil |
| Income/Sh | .05¢ | 26¢ | .81¢ |
| Shares outstanding | 20 mil | 21.5 mil | 21.5 mil |
| Book value | 0 3 | .32 | 1.13 |
| Price/Cash flow | 16.2 | 3.1 | 1 |
| Price to sales | 5.4 | 1.9 | .8 |
| PE ratio | 16.2 | 3.1 | 1 |
Note 1: During fiscal 96 management anticipates an infusion of cash by doing an equity financing (roughly 1.5 million new shares)
Note 2: During fiscal 97 an additional equity financing is also anticipated (roughly 1.5 million shares)
Note 3: During fiscal 95 ending June 30, equity equalled $490K. Taking into account equity financing resulting in $1.5 mil and expenses relating to CTLM™ centers results in a $2 mil expense.
Note 4: Due to equity financing, we are assuming $3 mil raised by selling 1.5 mil shares at $2.00.
Note 5: Price of stock used for 13/16 calculation includes net income and D&A.
Imaging Diagnostic Systems, Inc. (IMDS - NASDAQ BB) is preparing to emerge from a developmental stage into a junior revenue and earnings based high technological medical product company. In Chart AA one will observe revenue and earnings estimates for the next 31 months. All values are based upon a share valuation of 78¢. According to management growth should be quite dramatic with huge profit potential. If we examine fiscal 96 with respect to estimated book value, price/cash flow, price to sale and PE, IMDS looks moderately attractive for risk oriented investors who have the ability to look into the future and anticipate accelerated revenue and earnings. The current market cap of IMDS is 14.4 mil. It is in our opinion that the majority of this value is based upon the cutting edge technology that Computed Tomography Laser Mammography (CTLM™) offers investors. In our opinion this is quite impressive since IMDS has not received an FDA approval based upon a Product Marketing Application (PMA) or a 510(K) pre-market notification procedure (Note: *Product Non-Invasive - CTLM should easily receive approval - Note: The majority of sales during 1996 is Asia).
When we examine fiscal 1997E, an extremely attractive situation emerges with respect to P/CF, PSR and PE. If IMDS can indeed meet or exceed these estimates, there is little chance that the share price will remain anywhere near its current levels. If we take a close look at P/CF and PE for fiscal 97 (values of 3.1 and 3.2, respectively) and double the P/CF value to 6.2 and the PE estimate to say 12x, which of course are very conservative with respect to other medical technologies companies, then our share valuation equals $1.56 and $3.12, respectively. A far cry from the current share valuation.
If we examine fiscal 98, which of course is a long way off, our valuation becomes even more distorted with respect to P/CF, PSR and PE. If we are to assume that IMDS could sport values of 6, 2 and 12x, respectively of the above variables then our share valuations would equal $4.86, $2.00 and $9.72, respectively. Please keep in mind that all these values are all estimates. Our main purpose is to convey to investors that a dramatic upside potential exists with calculated downside risk. It is usually very difficult for investors to warm up to new and changing technological advancements without a sense of disbelief. Note: Those who risk the most often reap the greatest reward. The medical imaging industry worldwide exceeds $5.7 billion, and the domestic market is $2.3 billion. The domestic market for the mammo-graphy segment is $150 million and the worldwide market is $400 million. During the next few years industry predictions are that mammography sales will increase due to the replacement of older systems. New technology, of course, will prevail and IMDS will be there!
Geared towards "risk tolerant investors". Dramatic growth potential exists during the next 9 - 24 months. IMDS is considered speculative and all risk adverse accounts should fully understand all the adversities of investing in unseasoned micro-mini caps. We have decided to monitor IMDS shares in our 900# portfolio for percentage gain performance. We began monitoring on October 23, 1995.
Our main reasoning for Chart A is to demonstrate to investors how Medical Imaging companies trade with respect to PE valuations for the current fiscal year as well as the next fiscal year. The four companies, Thermotrex, Fischer Imaging Corp., Holgic, Inc. and Positron Corp. all are involved with some aspect of medical imaging with respect to emerging technological changes. The PE values for the first three companies are extremely rich in our opinion, but expected growth in revenue and earnings due to advancing technology may very well deserve high multiples.
In Chart AA we analyzed IMDS using very conservative valuations - the point that we would like to convey to investors is that as revenue and earnings develop PE multiples sky rocket. We are not qualifying nor believe that such high multiples should be sported by these companies, but obviously someone or something believes that they deserve such lofty valuation - it is quite possible that once IMDS receives greater exposure; in addition, revenues and earnings begin to flow that greater multiple expansion will surpass our conservative values. ONLY TIME WILL TELL!
We anticipate that impressive growth for new and innovative high tech medical products, which offer important therapeutic and diagnostic advances will continue to reward public company shareholders quite handsomely.
A major factor that at times has held up corporate growth has been FDA approval. Recently the FDA has made efforts to speed up its new product review process and more changes are forthcoming. The 510(K) regulations are becoming more streamlined and should benefit IMDS approval on a more fat track, until approval is obtained from their non-invasive cutting edge CTLM™ sales will be offshore; namely, Asia and Europe.
On the surface, Imaging Diagnostic Systems, Inc. may not appeal to every investor due to its limited track record with respect to its statement of operations and balance sheet, but if one looks a little closer, we see a company that has created an advanced technological procedure that can save lives and in essence could save millions and enhance the quality of life for women with breast abnormalities.
At the current price of 78¢, investors are at little risk when one takes in account the huge potential that exists for this new advanced mammo-graphy investment opportunity. Fundamentally speaking, variables that we reviewed, i.e., P/CF, PSR and PE, demonstrate a very cheap situation if the company can meet or exceed management's estimates.
CHART 3-A
X-RAY MAMMOGRAPHY
Mammography has become the standard for breast cancer screening, The technique has been refined over the past 40 years and has achieved the following status:
X-RAY COMPUTED TOMOGRAPHY
X-ray computed tomography (CT) is a technique that uses a computer to build an image of the interior of the body based on information acquired as an energy beam is passed through the body while the beam is rotated around the body,
Computed tomography Laser Mammography (CTLMTM) is a new technique in the field of medical optical imaging. Instead of x-ray, a laser beam is used to examine the breast using computed tomography techniques. CTLMTM has the following features:
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