Equity Research Report on ProUroCare Medical, Inc.

8/8/2019 Equity Research Report on ProUroCare Medical, Inc.

1/26

Trading Range Since 11/15/06

Equity Market Capitalization

Enterprise Value

Average Daily Trading Volume

Common Shares

Common Shares (Fully Diluted)

$1.15 - $1.90

$143 Million

$149 Million

NA

75 Million

102.5 Million

Commercializing an Imaging System or Prostate Cancer Detection

ProUroCare Medical Inc.OTCBB: PUMD

6440 Flying CloudDrive, Suite 101

Eden Prairie, MN55344

www.prourocare.com

INDUSTRY:Medical Devices

PHONE: 952-476-9093

Company Description

ProUroCare Medical, Inc. (ProUroCare or the Company) has developed, in cooperation

with Artann Laboratories, Inc., a proprietary sensor and sotware imaging platorm or im-

proved accuracy in detecting prostate abnormalities. The device is currently under submission

to the FDA or commercial clearance.

Investment Highlights

False Positives rom Current Detection Techniques Present Opportunity or the Company

Prostate cancer is one o the leading causes o death, so screening is typically recommended as

part o an annual physical or all men over age 50. However, current early detection techniques

identiy only about hal o men with the disease and lead to excessive alse positives.

Controversy and Malpractice Risks Under Current Regimen

The risk o unnecessary and painul treatment has led to controversy over the wisdom o screen-

ing everyone. Conversely, doctors may ace a legal risk or letting the patient decide based on

his risk prole, rather than to screen indiscriminately. This awkward situation is due to a mere

56% combined accuracy o the two major screening techniques.

Imaging Oers Objectivity and Record-keeping

The Companys ProUroScan probe and sotware system greatly improves the traditional rec-tal exam by providing a real-time image o the prostate, color coded to reveal areas o abnor-

mal tissue. The probe is more sensitive than a nger, and the images can be stored or reerence

against uture exams or as legal evidence o a proper evaluation.

Financial Resources

The Company has enjoyed the long-term support o several committed debt investors. In 2010

it also secured a commitment or $3.125 million in institutional equity nancing, $875,000 o

which has been delivered. However, receipt o the $2.25 million balance is subject FDA clear-

ance and to the shares trading above $2.50, so the Company may need to seek alternatives or

a renegotiation until those conditions are satised.

Share-Price Considerations

PUMD shares have been trending down

gradually on low volume since the May 10

resubmission o an FDA application or the

ProUroScan system that was originally led

in November 09.

The resubmission caused a delay that seemed

to disappoint many traders. However, the im-

plications o that decision could ultimately

prove positive, since the Company may now

dene its own regulatory class with the current

de novosubmission.

News rom the FDA is long overdue at nearly

one year since the resubmission.

Research 360, GmbH www.researchworks360.com/prourocare-(pumd)/

RESEARCH REPOR

UPDATE March 21, 20

Trading Range Since 11/15/06


Enterprise Value

Average Daily Trading Volume

Common Shares

Common Shares (Fully Diluted)

$1.15 - $1.90

$143 Million

$149 Million

NA

75 Million

102.5 Million

MARKET DATA

52 Week Price Range

Ave. Daily Volume (3 months)


Enterprise Value (E)

Common Shares (2.11.11)

$0.80 - 2.50

7,850

$16 Million

$17 million

15.6 Million

BALANCE SHEET $000s, data as o Dec 31, 2010

Cash

Current Assets

Total Assets

Current Liabilities

Total Liabilities

Shareholders Equity

419

556

575

1,725

2,202

(1,626)

www.researchworks360.coRIGOROUS EQUITY ANALYSIS SINCE 1992

THE RESEARCH WORKS

Mar. 21, 2010 CLOSING PRICE: $1.00

Nov$0.00

$4.00

$3.20

$2.40

$1.60

$0.80

NovMar Jul

PUMD -1 year range


2/26

www.researchworks360.com/prourocare-(pumd)/ Page2o26

ProUroCare-OTCBB:PUMD Update:March 21, 2010

Table of Contents

Prostate Cancer Overview 3

Description and Incidence 3

Treatment: Surgery Vs. Radiation Therapy 4

Costs o Treatment 5

Problems with Current Early-Detection Regimen 6

Digital Rectal Exam, PSA Exam 6

Controversy over Universal Screening 7

The ProUroCare Technology 8

Handheld Probe 8

Imaging Sotware, Hardware Units 9

Clinical Trials, FDA Application 10

Intellectual Property and Competing Imaging Technologies 11

Business Model 12

Financials 13

Balance Sheet 13

Income Statements 14

Cash Flow Statements 15

Share Price Considerations 16

Stock Chart and Discussion o Recent Events 16

Discussion o Revenue Possibilities 17

Comparable Company Analysis 18-20

Management and Board o Directors 21-23

Appendix 24-25

Disclaimer 26


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Exhibit 1: US men diagnosed, treated or and living with prostate cancer

Chart Source: ProUroCare presentation. 1 http://www.nytimes.com/2010/03/10/opinion/10Ablin.html?_r=1

Prostate Cancer Overview

Leading Cause o Death For Men Over 50

Prostate cancer is the second leading cause o death in US men over 50. Out o 43 million such men, 2.7

million have been diagnosed but not treated; they are evaluated every 6-12 months or the rest o their

lives. Each year 186,000 new cases are diagnosed, and 100,000 radical prostatectomies are perormed.

Prostate cancer is the uncontrolled growth o tissue that originates in the prostate, a golball-sized gland

that secretes fuid or aiding the survival and motility o sperm. The prostate surrounds the urethra and

consists o many small glands, the cells o which are prone to mutation.

About 2/3 o prostate cancer cases are slow-growing, and as a consequence many men with the condition

never experience any symptoms and live to old age to die rom other causes (1). Fast-growing cases are re-

quently deadly, since the cancer is prone to metastasizing in bone and the lymphatic system. Subsequent

to primary screening, the standard diagnostic or prostate cancer is a biopsy, the removal (by needle) and

examination o tissue rom targeted spots.

Prostate cancer is defned as

the uncontrolled division o cells

originating in the prostage gland.

General

Screening

25 -30 MM

PSAs1

Urologist

Assessment

1 million

Biopsies/year

Urologist

Treatment

100,000 Radical

Prostatectomys

per year

2.7 million

diagnosed

and regularly

monitored


4/26



Exhibit 2: Outcome Comparison: Surgery vs. Radiotherapy

Outcome Radical Prostatectomy* Radiation**

Survival duration compared to conservative diseasemanagement1

8.6 years 4.6 years

15-year prostate cancer survival rate2 92% 87%

Survival rate for high-grade cancer patients 3 45% increase in overall survival rate vs. -

Risk of cancer-specic death for high-grade cancerpatients4

49% less risk vs. radiation -

Cancer recurrence5 Easy to detect Dicult to detect

Risk of rectal cancer (Within 10 year follow-up)6 5.1 out of 1000 10 out of 1000

Risk of bladder cancer7 0.8% develop bladder cancer 1.3% develop bladder cancer

Bowel function impairment8 - Signicantly greater vs. surgery

Disease-specic long-term quality of life9 Stable Unstable

Painful urination (at 18 month follow-up)10 1% of patients 30% of patients

Long-term erectile dysfunction11 Lower risk Higher risk

**External Beam Radiation Therapy (EBRT) unless otherwise noted in the citation

*Open surgery; comparable long-term data not yet available on da Vinci Prostatectomy.

1-11 See Appendix

Source: healthblog.ncpa.org

Prostate Cancer Treatments Involve Uncomortable Side-Eects and the Risk o Other Cancers

Radiation treatment or prostate cancer can be dangerous, as it elevates the risk o bladder and rectal

cancer, as well as causing impotence and painul urination. Increasingly, radical prostatectomy (complete

removal o the prostate) is oten considered the best option. As a major surgery, prostatectomy is not with-

out side-eects itsel, the most common o which are impotence, incontinence, inection, blood clots and

damage to the urinary tract. Dry orgasms are also the norm ater this procedure.

Radiation therapy involves tar-

geted high-energy x-rays or the

insertion o tiny radioactive rods

into the prostate.

Prostatectomy is the removal or

part or all o the prostate.


5/26



Exhibit 3: 2-Year Cost o Prostate Cancer Treatment

Chart Source: Alan Garber, Daniella J. Perlroth, Dana P. Goldman; and Leonhardt, In Health Reorm, a Cancer Oers and

Acid Test, New York Times, July 8, 2009

Expensive Treatment

Most treatment options range in price rom $12,000 to $100,000 over a 2-year course. A study published

in the February 2007 issue o the peer-revieved journal, CANCER, showed that the average cumulative

5-year cost o prostate cancer was $42,570, including treatment plus all associated costs. The study in-

cluded patients who chose watchul waiting instead o active treatment.

$28,872

$2,436

$12,224

$22,921

$51,069

$100,000

Watchful

Waiting

External Beam

Radiation

Prostate

Removal

Implanted

Radioactive

Seeds

Intensity-

modulation

Radiation

Proton

Radiation

Therapy


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Problems with Current Early-Detection Regimen

High Prevalence o False Positives

Because o the risk o side eects and high cost o treatment, as well as the stress o experiencing a cancer

diagnosis, it is critical to optimize the diagnostic process. Unortunately, the current regimen is lacking and

leads to many alse positives.

Early detection or the discussion thereo is typically part o an annual physical perormed by a general

practitioner. The American Cancer Society guidelines (pd on cancer.org) recommend that doctors base the

decision o whether to oer prostate cancer detection on a patients age, lie expectancy and amily history

o prostate cancer. Based upon the risk/reward prole, this may be oered as early as age 40, though or

men at average risk 50 is considered appropriate. The American Urological Association recommends early

detection procedures or all men over 40 who are expected to live at least 10 more years.

The most widely-used early detection techniques are a digital rectal exam (DRE) and a blood test or el-

evated levels o prostate specic antigen (PSA).

The Digital Rectal Exam (DRE)

and Prostate Specifc Antigen

(PSA) blood test only have a

combined accuracy rate o 56%.

Digital Rectal Exam (DRE)

DRE is a simple procedure wherein a doctor

uses a gloved, lubricated nger to eel or ir-

regular, hard or lumpy areas on the back o the

prostate. Due to the small size o the prostate

and variation in doctors skill and nger length,

as well as patients varying morphology (obese

patients are particularly dicult), this method

is most useul or detecting relatively advanced

cancers. Furthermore, DRE is relatively insen-

sitive, and as a subjective examination, it pro-

duces no images, objective documentation or

record o the results.

Blood Test or Elevated Levels o ProstateSpecifc Antigen (PSA)

PSA is a glycoprotein produced in the prostate

and some other tissues, and the eectiveness o

PSA screening is questionable, since there is a

very high alse positive rate o 70%. The read-

ing can be positive i there is an inection, or i

the subject has recently ejaculated or even had

a digital rectal exam. There is also a high alse-negative rate (25% o prostate cancer patients

show no elevation in PSA).

Positive PSA tests are usually ollowed up with

biopsies (removal o small tissue samples with

a needle), but o course due to the high alse

positive rate, up to 75% o biopsies are nega-

tive. Multiple alse positives and repeat biop-

sies (risky themselves) are common.

Exhibit 5:The relatively poor accuracy o PSA testing, and the quandary o

lower alse positives (increase cut-o level o PSA) vs. detecting more cancers

(decrease cut-o). Source: http://pmj.bmj.com

Exhibit 4: Digital Rectal

Exam.The doctor simply eels or

irregularities in the prostate.

Reach, poor sensitivity and

subjectivity are disadvantages.

Image source: wikimedia.org

Specifcity

Sensitivity

Specifcity/Sens

itivity(%)

2 4 6 8 10 12 14 16 18 20

PSA Cut O Point (ng/ml)

0

10

20

30

40

50

60

70

80

90

100

Bladder Rectum

Prostate


7/26



Combined Diagnostic Value o PRE and PSA

The combined diagnostic value o DRE and PSA together is just 56%,according to

a 2007 study published in the Annals o Internal Medicine.

A US study ound that prostate cancer screening made no signicant dierence to

the rate o death, and a European study ound only a 20% reduction in the death

rate.

This has lead to considerable controversy over the wisdom o screening the general population. A current

compromise suggested by the American Cancer Society is or a doctor to discuss the pros and cons with

each patient. Taking into account age, risk prole and personality, the patient must then decide or himsel

whether early detection is worth the risk o alse positives.

However, some doctors may be inclined against this type o discussion because o the legal risks involved.

At least one malpractice suit has been won over a alse diagnosis resulting rom shared decision-making, so

it may be legally saer to routinely order screening or all men over age 50 regardless o risk prole. This o

course will be expected to produce more alse positives and unnessary treatments.

There is a critical need to im-

prove the detection process.

Prostate cancer is a very com-

mon cause o death, but its mis-

diagnosis alone is an epidemic.


8/26



The ProUroCare Technology

Opportunities or Improvements in Early-Detection Techniques

This muddled detection environment presents an opportunity or improvements in early-detection tech-

niques. More accurate early detection can lead to ewer biopsies, ewer inaccurate cancer diagnoses, less

unnecessary treatment, and less risk o malpractice suits.

ProUroCare has developed a patented sensor and imaging system to complement the digital rectal exam and

PSA testing. The ProUroScan technology produces a real-time image o the prostate and creates a detailed

digital recording that can be reerenced against uture examinations or tests.

The Handheld Probe

The ProUroScan system consists o a handheld probe with sensors that measure the elasticity o tissue, and

sotware that keeps track o the probes position and creates 2D and 3D images o the prostate.

Requires Minimal Training

The system is designed or use by urologists to document abnormal results o a DRE perormed during an an-nual check-up. Minimal training is required to produce an accurate image o the prostate. The doctor inserts

the probe, as he or she would a nger, and palpates the prostate. The sotware creates a real-time map o the

area scanned, and guides the user to cover the entire surace.

Sensors on the probe help to ensure that it is inserted at the correct depth, a key advantage when consider-

ing that many physicians are women, whose smaller ngers may not be capable o comortably reaching

the upper portion o the prostate during DRE. An accelerometer and motion tracking sotware keep track o

areas that have already been palpated, and the sotware accounts or overlap when generating color images.

The Companys ProUroScan

system brings objectivity, record

keeping and enhanced sensitivity

to the digital rectal exam.

Exhibit 6:The Handheld Probe


9/26



Real-Time Color Coded Images o theProstate

The system is able to pinpoint abnormal tissue

by comparing the degree to which tissue de-

orms under pressure. Cancerous or otherwise

unhealthy prostate tissue is generally less elas-

tic than healthy tissue, and this dierence canbe precisely measured. The system generates a

color-coded map o the prostate, showing its

elasticity and the contrast in elasticity between

dierent regions.

Because this image is produced in real-time,

the physician can direct additional attention

to areas o interest as they appear. The system

can also be used to create a saved image o the

prostate to complement a regular DRE or docu-

ment areas o interest.

Highly Portable System

ProUroScan is currently congured as a complete cart-based unit with probe, processor, monitor and

printer.

A compact system is also in development, with simply a probe, laptop computer and calibration system.

The cart system has been used in laboratory studies and multiple clinical studies. Management intends to

ready the compact system or commercialization ater FDA clearance o the larger unit.

Exhibit 7: Real-time images to guide the examiner. Source: ProUroCare

Exhibit 9:The Compact SystemExhibit 8:The Cart System

Touch Screen

Monitor

Hand Held

Transrectal Probe

Compact ColorPrinter

Calibration Device

Keyboard

Enclosure with Computer

and Data Aquisition Unit

Medical Grade

Isolating Transormer

Prostate Image

Orthogonal Prostate

Cross-Section

Y-slice

Surace 1 53 kPaAbs

Norm40 kPa

20 kPa

Surace 2

Surace 338


10/26



Clinicals Successful; FDA Application Submitted

Clinical Study Completed

A pilot clinical study examined the eectiveness o ProUroScan on patients at the Robert Wood Johnson

Medical Center in New Brunswick, NJ. Dr. Robert Weiss and scientists rom the Companys technology

partner, Artann Laboratories, subsequently published the results in the March 2008 issue o the journal

Urology. They reported that the system successully created 2D and 3D maps o the prostate in 84% o168 patients studied.

FDA de novo Application Pending

ProUroScan is currently considered an investigational device by the FDA, pending an application or

510(k) clearance as a de novodevice. The initial 510(k) application was submitted in November 2009

under the rules or a device similar to one already cleared, claiming a sensor used or breast cancer as the

predicate. Following an exchange o letters with the FDA, the Company re-submitted in May 2010 under

the de novo rules.

A response was technically due within 60 days, and while the FDA has not ormally responded, it has been

in discussions with the Company. Such delays are common recently, as there is a substantial backlog at

the agency.

The application species that ProUroScan will only be used to create and document an image o the

prostate to identiy an abnormality, secondary to a DRE. The system is urthermore only to be used with

the prostate.

As this is a de novo application, the FDA requires text describing the new class o device that ProUroCare

is seeking to create. The Company has dened this class as a mechanical imaging system consisting o

a trans-rectal probe with an array o pressure sensors and a motion tracker, which is capable o producing

real-time images o the prostate.

This language o course describes ProUroScan, so i any competitor wants to use the ProUroScans

potential clearance as a predicate or an application o their own, they will have to meet product require-

ments that may violate one or more o 20 patents owned or licensed by the Company. Should the FDAaccept this language, it would urther dierentiate and protect the Companys intellectual property rom

competitors.

A clinical study on 168 patients

at Robert Wood Johnson Medica

Center demonstrated 84% suc-

cess at mapping the prostate.

FDA eedback lead to the applica

tion as a new class o medical

device. By narrowly defning the

class, potential competitors will

not be able to piggyback withoutviolating the Companys patents.


11/26



Intellectual Property

Patents

The Company has seven US and seven oreign patents or its imaging technology, as well as our oreign

patent applications. The Company also licenses two US patents and one application rom its technology

partner, Artann Laboratories. This is an exclusive agreement relating to image generation and analysis that

includes all uture applications and knowledge related to male urology, and includes permission to sub-license.

Developed by a Grant-Funded Research Lab

The Companys technology was developed by Dr. A. Sarvazyan, the Chie Scientic Ocer o Artan Labo-

ratories, starting with his work on mechanical imaging in the late 1980s. Much o the development has

been unded by more than $3 million in NIH and SBIR government grants.

Strenthening the IP Portolio

The Company is working with a patent law rm to review all o its patent claims and identiy new enhance-

ments. The goal is to strengthen pending claims and to identiy areas or new applications. A reedom tooperate assessment was also recently completed with positive results or existing patents.

Competing Imaging Technologies

MRI, nuclear medicine and computed tomography are capable o producing an image o the prostate, but

these are each limited by their costs and poor resolution o prostate abnormalities. Transrectal ultrasound is

the only method commonly used on the prostate, but due to poor resolution it is only helpul or directing

a biopsy needle, not as a diagnostic tool.

7 US Patents

7 Foreign Patents

4 Applications

+ licensed IP


12/26



Business Model

Razorblade/iTunes Model

The Company intends to generate revenue rom the sale o diagnostic units (cart and mobile) and more

importantly by billing or tests. However, until a unique CPT insurance code can be obtained or ProU-

roScan, patients will have to pay out o pocket or the test.

The patient-pay model is possible because o the readily-understood advantages o a mechanical scan over

DRE alone and the high level o awareness o prostate cancer among the population. Especially in medical

oces where the clientele is better educated and has a higher level o income, patients may be willing

to pay perhaps $200-300 or the use o the Companys technology. This model could be used in the early

commercial stages as the industry becomes more aware o the technology through high-prole medical

centers and as it becomes a standard o care.

A bigger player may want to license the ProUroScan IP

Rather than develop a sales and marketing team, ProUroCare may simply partner with a larger medical de-

vice or health company with interests in urology or prostate cancer. According to management, to attract

a high bid the Company should meet its current milestones o FDA clearance, a ully-developed compact

system, and possibly a lower-cost sensor probe.

Technology Platorm may lead to more products

The core imaging technology could potentially be developed or other markets besides prostate disease.

Clinical tests conducted by Artann suggest that the technology has very high specicity and sensitivity,

especially considering its low cost, portability and ease o use. It may be an eective supplement to other

detection and imaging modalities. O course, the Company would have to reach an agreement with Ar-

tann or any such urther commercial uses.

The Companys units are to be

priced in the $5,000-19,000

range. Each exam could be

priced at $200-300.


13/26



Financials

Balance Sheet

As of: 31.12.10 30.09.10 31.12.09 31.12.08

Assets

Current Assets

Cash & Equiv. 419 1,128 1,001 48

Other 136 179 58 32

Total Current 556 1,307 1,059 80

Long Term Assets

PP&E 15 15 1 -

Other 4 - - 267

Deferred Charges 130 130 27 730

Total Assets 575 1,452 1,088 1,077

Liabilities

Current Liabilities

Accounts Payable 801 874 2,850 3,503

Short/ Current

LT Debt925 1,525 1,925 4,447

Other Current - 252 - -

Total Current 1,725 2,651 4,775 7,950

Long-term Liabilities

Long Term Debt - - 643 384

Total Liabilities 2,202 2,652 5,418 8,334

Stockholders Equity

Retained Earnings (33,899) (33,429) (27,880) (20,936)

Capital Surplus 32,273 32,230 23,550 13,678

Total Stockholders Equity (1,626) (1,199) (4,330) (7,258)

Net Tangible Assets (1,626) (1,199) (4,330) (7,258)

All fgures in $1000s.


14/26



Financials

Debt Mostly Convertible, and Owed to Supportive Parties

The Companys debt consists mostly o secured 6% promissory notes. Two bank notes, a $900,000 note

held by Crown Bank that matures March 28, 2011 and a $100,000 note held by Central Bank that matures

on January 17, 2012, are guaranteed by large investors in the Company, including one Director. There is

also a $300,000 note held by a large investor that matures on August 8, 2012. In early 2011, both the$100k and $300k notes were renanced and extended rom earlier maturity dates. Management antici-

pates that the Company will be continue to be able to renew or renance a signicant portion o these

notes i required. The investors may also be oered an opportunity to convert their notes to equity prior to

their maturity dates. The $900k note is secured by all o the Companys assets and certain licenses, so these

may not be used as collateral or any other purposes.

Year Ending: 31.12.10 31.12.09 31.12.08

Operating Expenses

R&D Exp. (235) (2,240) (598)

SG&A (1,878) (1,711) (2,027)

Total Op. Exp. (2,113) (3,951) (2,624)

Continuing Operations

Other Net Exp. (2,538) (1,773) (123)

EBIT (3,479) (5,307) (2,748)

Interest 1,368 1,221 1,910

Pre-tax income (4,847) (6,528) (4,658)

Net Income to Common (6,019) (6,944) (4,658)


The Company has consistently

been able to roll over its

commitments at a relatively low

6% interest rate, largely payable

in shares.

Commitment rom New Equity Investor, Pending Conditions

Assuming the FDA clears ProUroScan, additional capital will be needed to scale up manuacturing and

marketing eorts. The hedge und, Seaside 88, LP (Please see Disclosures on page 21) has committed to

provide $750,000 within 30 days o FDA clearance, and ve subsequent traunches o $300,000 each in

30-day increments thereater, or a total investment o $3.125 million including the $875,000 already

delivered.

The terms o the Seaside deal provide or a sale o unregistered common shares at a price equal to 50% o

the 10-day volume-weighted average price (VWAP) as o the day prior to each closing. A scheduled sale

will not occur i the VWAP on each closing date is below a $2.50 price foor. As unregistered shares, each

investment must be held or at least 6 months under SEC rules.

As the shares have allen below $2.50 and FDA clearance is still pending, the Company may have to seek

alternatives or a renegotiation o the Seaside terms.


15/26



Financials

Cash Flow Statements

Year Ending: 31.12.10 31.12.09 31.12.08

Net Income (6,019) (6,944) (4,658)

Operating Activities

Depreciation 539 1,398 1,406

Adj. to Net Income 3,641 1,914 455

Chnages in Liab. (241) 427 1,657

Change in Other

Op. Activities(78) 55 45

Total Op. Cash

Flows

(2,159) (3,150) (1,095)

Investing ActivitiesCapex. (14) (2) -

Other - 44 -

Total Investing

Cash Flows(14) 43 0

Financing Activities

Sale Purchase of

Stock1,107 3,931 (34)

Net Borrowing 485 266 732

Total Financing

Cash Flows

1,592 4,104 698

Change in Cash & Equiv. (582) 997 (397)


Solid debt and now equity

investor backing has kept the

company out o liquidity trouble

in recent years.


16/26



Share Price Considerations

Trading Languid as Market Awaits FDA Decision

PUMD shares have traced out recent news events, starting with a high-volume surge rom $1.25 to $4.00

in December 2009 upon the rst submission o the 510(k) ling. The May 2010 news that a resubmission

(under the de novorules) would instead be necessary sent the shares as low as $1.00. Subsequent to the

new ling, trading has been lighter and the price has hovered near the $1.00 level as investors await theFDAs response.

Low volume trading on the lack

o news lately.

Gauging the Fundamentals

With roughly 15 million shares outstanding, the current market capitalization is about $16 million. Taking

into account liabilities and cash, the enterprise value is approximately $17 million. A undamental assess-

ment o this valuation must take into account the chances or FDA clearance and the possible stream o

uture earnings rom the Companys imaging technology.

The odds o FDA clearance are notoriously dicult to handicap, but the ProUroScan system has several

advantages. It has been submitted as a low-risk Class II device, since it is unlikely to cause harm in and

o itsel. Nor is the system supposed to replace existing diagnostics, but merely to serve as an aid or adjunct

to DRE (specically, to create and store an image o the prostate subsequent to DRE). Furthermore, thelabeling claim sought by the Company limits the expected outcome to generating an image to document

prostate abnormalities ollowing a DRE.

Assuming the odds are good or FDA clearance in early 2011, the next hurdle will be nancing. The exist-

ing agreement with Seaside 88 should ulll this need (so long as the stock price does not violate the $2.50

foor, or i it does, i new terms are reached).

Exhibit 10: 1-Year Stock History

v

Source: Bigcharts.com

v

Source: Bigcharts.com

PUMD Daily

Volume

3/21/11

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

400

300

200

100

0Apr May Jun Jul Aug Sep Oct Nov Dec 11 Feb Mar


17/26



Organic Commercialization Scenario

The medical markets acceptance o the new technology is arguably the most important valuation consid-

eration. The market or prostate cancer screening, detection and diagnosis is enormous, with 25-30 mil-

lion PSA tests given annually in the US. This is ollowed by more than a million biopsies by urologists on

patients with suspicious PSA or DRE results. Finally, there are 2.7 million men with prostate cancer who

have chosen not to be treated.

The number o prostate cancer patients will continue to increase as the population ages and detection

techniques improve. Though detection technology is advancing, ProUroScan provides one o the clear-

est images o abnormalities in the prostate.

Partnership Opportunities or ProUroScan

O course, what is even more interesting about this technology is the potential or a large medical device

concern to orm a partnership with the Company to take the marketing eort to a higher level. A larger

medical device or company with an interest in urology may jump at the opportunity to add to its oering

or the aging baby boomer market. With a large partner a sizeable sales increase would seem to be achiev-

able given the size o the market and the need to improve the accuracy o prostate abnormality detection.

In the meantime, the shares remain much nearer to 12 month lows than highs, and there is very littleawareness o the Company in the market. Expect big movements one way or another as soon as there some

word rom the FDA. Obviously a clearance or ProUroScan would be a major milestone, oering the

chance or revenues starting in 2011.

Even a tiny market penetration

could generate solid revenues,

but the real goal is or a larger

frm to leverage its sales orce

behind ProUroCares technology.


18/26



Comparable Company Analysis

Exhibit 9: Pre-Revenue Medical Device Stocks

Company Ticker Product(s) MCap (M)

Genmark Diagnostics GNMK Biomarker detection for diagnostics 48.7

VICOR Technologies VCRT.OB Cardiac analyzer 29.5

Advanced Biomedical ABMT.PK Screws, rods, ties for binding fractured bones 28.0

C-RAD AB CRAD-B.ST Prostate radiation therapy products 27.1

Sunshine Heart SHC.AX Emergency heart assist device 25.0

Ultra Shape Medical ULSP.TA Ultrasound fat reduction 23.0

Aethlon Medical AEMD.OB Blood ltration device 20.4

CellCura ASA C6L.F Workstations for in-vitro fertilization 17.7

ProUroCare PUMD.OB Prostate abnormality detection device 15.6

InsuLine Medical INSL.TA Diabetes care devices 15.9

Flowsense Medical DOROT-L.TA Urine monitor 15.7

EnteroMedics ETRM Neuroblocking obesity treatment 14.7

Micropos Medical MPOS.ST Prostate surgery imaging equipment 14.7

Group Median 20.4

Source: Bloomberg, The Research Works

A quick survey shows that ProUroCares market valuation is in line with peers in the medical device space

that have yet to generate sales. Such a look does not take into account the widely varying market potential

among these stocks, but it is a starting point.


19/26



Exhibit 9: Medical Imaging and Diagnostic Device Stocks with Revenues

Company Ticker Product(s) T12MSales (M)

MCap (M)

Universal Biosensors UBI.AX In-vitro diagnostics 11.2 250.9

Neoprobe NEOP.OB Cancer detection and treatment equipment 10.0 142.3

Novadaq Technologies NDQ.TO Vascular and ophthalmic disease equipment 14.4 111.0

Aerocrine AB 0GNY.L Inammatory disease diagnosis 12.0 92.3

Itamar Medical ITMR.TA Heart signal monitoring equipment 11.3 85.5

Hansen Medical HNSN Robotics for catheters 20.4 85.0

Medi-Stim ASA 0F7Z.L Quality control equipment for cardiac surgery 25.5 76.3

Vieworks 100120.KQ Camera systems for diagnostic equipment 20.1 64.0

Geratherm GME.DE Temperature and blood pressure monitors 22.3 59.6

LiDCO Group LID.L Heart monitors 8.7 56.8

EKF Diagnostics Holdings EKF.L Blood analysis equipment 0.2 56.7

Vision-Sciences VSCI Endoscopy equipment 9.6 53.9

Mazor Surgical MZOR.TA Robotics and 3D imaging 2.0 52.8

Noveko International EKO.TO Surgical masks and portable ultrasound 14.3 50.7

Psychemedics PMD Drug detection in hair samples 19.3 48.9

Positron POSC.OB Positron scan imaging of organs 2.1 45.6

TearLab TEAR Eye diagnostics 1.2 43.4

Medical Compressions Systems MLLDF.PK Blood circulation systems 3.3 41.6

Guided Therapeutics GTHP.OB Cervical cancer early-detection 2.8 39.0

CellaVision CEVI.ST Fast blood analysis and diagnosis 14.3 38.9

Exalenz Bioscience BRTI.TA Breath analysis diagnostics 0.3 29.6

Ophthalmic Imaging Systems OISI.OB Digital imaging for ocular pathologies 18.1 29.0

Spectral Diagnostics SDI.TO Cardiac diagnostics 2.9 25.7

Zecotek Photonics ZMS.V Medical imaging 0.2 25.3

Chembio Diagnostics CEMI.OB Infectious disease diagnostics 14.6 23.6

Imaging Diagnostic Systems IMDS.OB Non-invasive breast imaging 0.2 21.2

NewCardio NWCI.OB Electrocardiogram equipment 0.1 20.7

Cambridge Heart CAMH.OB Non-invasive cardio diagnostics 2.9 16.7

Response Biomedical RBM.TO Diagnostic tests 7.4 16.4

Cyclopharm CYC.AX Radiopharmaceutical imaging of thorax 8.8 14.9

Source: Bloomberg, The Research Works


20/26



The above table gives some hint as to what may happen to the ProUroCare shares ater the Company has

received FDA clearance and has generated modest sales. Companies that have commercialized medical

diagnostic or imaging devices tend to trade at very high multiples to sales. The groups median market capi-

talization is over seven times trailing 12 month revenues.

Investors are cautioned that any conclusions drawn regarding the Companys liklihood o commercial suc-

cess are highly speculative and subject to change. The coming months will shed more light on the situation

as we hear rom the FDA, await the completion o the Seaside 88 investment, and witness the receptiveness

o the urology community.


21/26



Management

The Company runs a tight operation with minimal employee and oce overhead (rent is a mere $1000/mo

and cash salaries total near $30k/mo), relying on the ull-time services o its CEO and CFO while outsourc-

ing legal, engineering and manuacturing support unctions.

Richard C. CarlsonChie Executive Ofcer and Director since 2006 and Acting Chairman o the Board

Rick has extensive experience in bringing new medical products to market during his more than 32 years

in the medical industry. He has served in a broad range o operating roles including positions in market-

ing, sales, international and strategic planning with Companies marketing urology, orthopedic, cardiology,

ophthalmology and neurology products. Most recently, he was with SurModics, Inc. where he was Vice

President o Marketing/Sales and Strategic Planning. Prior to that he provided marketing support or one o

Boston Scientics specialty businesses in Europe. Mr. Carlson has held senior management positions at C.

R. Bard, Advanced Surgical Intervention, Medtronic and American Medical Systems. Mr. Carlson has a BS

in Business Economics and MBA in Marketing rom the University o Minnesota.

Richard B. Thon

Chie Financial Ofcer

Mr. Thon has been ProUroCares CFO since 2001. From 2001 to 2004, Mr. Thon was also the CFO o

CHdiagnostics, LLC, a start-up company marketing blood glucose monitoring equipment. He has held

senior nancial management roles in a variety o companies including Sano Diagnostics Pasteur, MED-

genesis Inc., Instant Web Companies, Data Med Clinical Support Services Inc., and Control Data Corpora-

tion, and has Big-4 public accounting experience. Mr. Thon has an MBA in Finance rom the University o

Wisconsin and a BBA in Accounting rom the University o Michigan.

Outside Directors:

Michael Chambers, JD, Ph.D.

Elected Director on March 1, 2010

Dr. Chambers is an experienced attorney, angel investor and entrepreneur. Dr. Chambers currently serves

as President and CEO o Swit Biotechnology, a company he recently co-ounded. Swit is pursuing devel-

opment o screening technologies, developed by the Mitchell Cancer Institute or gynecological cancers.

Prior to Swit, he helped ound InnoRx Pharmaceuticals in 1999, a privately held company that specialized

in the development o drugs and drug delivery systems or ocular disease. He served as President and CEO

o InnoRx until negotiating its sale to SurModics in 2005. At InnoRx he managed development o multiple

pipeline technologies and licensing opportunities in the US and world-wide. He speaks fuent French

and Spanish. In addition to his law degree, he was awarded a doctorate rom the University o Geneva

in Switzerland where he was a Swiss Conederation Fellow, and previously studied in France as a Rotary

Ambassadorial Scholar. He is O Counsel to the law rm o Cabaniss Johnston and requently advises

companies and academic institutions on growth, nancing and licensing opportunities related to newtechnologies. Dr. Chambers is a member o the Governance and Nominating Committee.


22/26



James L. Davis

Elected Director in 2010

Mr. Davis is an active investor in ProUroCare and other entrepreneurial companies throughout the U.S.

He has considerable experience developing and implementing business and nancing strategies or early

stage growth companies. He also has previous board experience and has participated in compensation

reviews and policy development. Mr. Davis is President o Davis & Associates, Inc., a company he ounded

more than 30 years ago that represents the leading edge lighting and controls manuacturers throughoutthe upper Midwest. Mr. Davis is a member o the board o directors o Cachet Financial Solutions, a lead-

ing provider o remote deposit capture (RDC) solutions or nancial institutions and their customers. Mr.

Davis was a ounding Board Member o Arcadia Financial, LTD, which beore its sale to CitiFinancial

became the nations largest independent provider o automobile nancing ater raising more than $315

million in debt and equity nancing. Mr. Davis is a member o the Compensation Committee.

David F. Koenig

Director since 2004

Mr. Koenig served as a director o ProUroCares predecessor company, ProUroCare Inc. (PUC), rom

1999 until April 2004, when he became a director o the Company upon the merger o PUC with an

acquisition subsidiary o the Company (the Merger). From 1996 to 2005, Mr. Koenig was the Executive

Vice President and Chie Operating Ocer o Solar Plastics, Inc., a manuacturer o custom rotationallymolded plastic parts. Mr. Koenig is Chairman o the Compensation Committee.

Mr. Koenig has also served as Chie Financial Ocer and director o Quadion Corporation, a manuacturer

o precision-made rubber and plastic components and assemblies or industrial uses. In this role, he had

ull responsibility or strategic planning, acquisitions, inormation services, real estate and legal services,

and helped create the plans and implement the programs that took this company rom sales o $22 million

rom three domestic plants to sales exceeding $100 million rom six domestic and three oreign plants.

Prior to this time, Mr. Koenig providing consulting services to small to medium-sized companies in the

areas o strategic planning and implementation, acquisitions, nancing and organizational restructuring.

Earlier, Mr. Koenig was employed by Dain Rauscher as an investment banker, and by General Mills, Inc.

and the Kroger Co. with responsibilities in strategic planning, acquisitions and nance. Mr. Koenig re-

ceived his undergraduate degree in business administration rom Indiana University and his M.B.A. rom

Harvard Graduate School o Business. Mr. Koenig is Chairman o the Compensation Committee.

Robert J. Rudelius

Director since 2007

Since 2003, Mr. Rudelius has been the Managing Director and CEO o Noble Ventures, LLC, a company he

ounded, providing advising and consulting services to early-stage companies in the inormation technol-

ogy, renewable energy and loyalty marketing elds. Mr. Rudelius is also the Managing Director and CEO

o Noble Logistics, LLC, a holding company he ounded in 2002 to create, acquire and grow a variety o

businesses in the reight management, logistics and inormation technology industries. Prior to 2002, Mr.

Rudelius held senior management positions at McKinsey & Company, AT&T Solutions and Control Data

Systems, and ounded Media DVX, Inc. Mr. Rudelius is currently a member o the board o directors o

LecTec Corporation, an intellectual property (IP) licensing and holding company. Mr. Rudelius is the

Chairman o the Governance and Nomination Committee and a member o the Audit Committee.

Scott E Smith

Director since 2006

Mr. Smith currently serves as the Managing Director or Adams Harris, a consulting & proessional services

rm specializing in the areas o internal audit, accounting and nance, corporate tax, and technology


23/26



process and controls; providing consulting, co-sourcing, out-sourcing, and project management solutions.

He was previously employed by F-2 Intelligence Group (F2), a company engaged in providing critical

insights to multinational corporations and private equity clients on a broad range o strategic issues. From

2004 to 2008, Mr. Smith served as F2s Regional Director o Sales or Private Equity, where he advised

private equity rms on market and competitive intelligence issues. Mr. Smiths expertise gained through

23 years o experience in public accounting (including 10 years as an audit partner at Arthur Andersen)

is invaluable to the Company. Mr. Smith provides leadership and guidance on the Companys accountingand nancial reporting issues. Mr. Smith is a Certied Public Accountant and a Certied Management Ac-

countant. Mr. Smith is Chairman o the Audit Committee and a member o the Compensation Committee.

Pysician Advisory Council

The Company has cultivated relationships with a committed group o highly-respected physicians at lead-

ing US and Canadian medical institutions with particular ocus on urology. There are eight members o

the advisory council. In addition to proving user eedback and spreading awareness, these individuals can

help with clinical studies and serve as Principal Investigators or authors or journal articles and presenta-

tions.


24/26



Supplemental AppendixVery high rate o diagnosis in the

US, but average mortality.

Exhibit A1: Prostate Cancer - Incidence and Mortality Rates Worldwide, Age-Standardized,

Selected Countries, 2002 Estimates

Source: inocancerresearchus.org

USA

AUSTRALIA

ITALY

CANADA

NETHERLANDS

ZIMBABWE

INDIA

SWEDEN

FRANCE

DENMARK

JAPAN

SWITZERLAND

UK

BRAZIL

SINGAPORE

CHINA

0 20 40 60 80 100 120 140

Rate Per 100,000 Males

Incidence

Mortality


25/26



Supplemental AppendixReerences or Exhibit 1

1. Tewari A, Raman JD, Chang P, Rao S, Divine G, Menon M. Long-term survival probability in men

with clinically localized prostate cancer treated either conservatively or with denitive treatment

(radiotherapy or radical prostatectomy). Urology. 2006 Dec;68(6):1268-74.

2. Tewari A, Raman JD, Chang P, Rao S, Divine G, Menon M. Long-term survival probability in men

with clinically localized prostate cancer treated either conservatively or with denitive treatment

(radiotherapy or radical prostatectomy). Urology. 2006 Dec;68(6):1268-74.

3. Tewari A, Divine G, Chang P, Shemtov MM, Milowsky M, Nanus D, Menon M. Long-term survival

in men with high grade prostate cancer: a comparison between conservative treatment, radiation

therapy and radical prostatectomy--a propensity scoring approach. J Urol. 2007 Mar;177(3):911-5.

Erratum in: J Urol. 2007 May;177(5):1958.

4. Tewari A, Divine G, Chang P, Shemtov MM, Milowsky M, Nanus D, Menon M. Long-term survival

in men with high grade prostate cancer: a comparison between conservative treatment, radiation

therapy and radical prostatectomy--a propensity scoring approach. J Urol. 2007 Mar;177(3):911-5.

Erratum in: J Urol. 2007 May;177(5):1958.5. Di Blasio, C. J., A. C. Rhee, et al. (2003). Predicting clinical end points: treatment nomograms in

prostate cancer. Semin Oncol 30(5): 567-86.

6. Baxter NN, Tepper JE, Durham SB, Rothenberger DA, Virnig BA. Increased risk o rectal cancer ater

prostate radiation: a population-based study. Gastroenterology. 2005 Apr;128(4):819-24.

7. Boorjian S, Cowan JE, Konety BR, DuChane J, Tewari A, Carroll PR, Kane CJ; Cancer o the Prostate

Strategic Urologic Research Endeavor Investigators. Bladder cancer incidence and risk actors in

men with prostate cancer: results rom Cancer o the Prostate Strategic Urologic Research Endeavor.

J Urol. 2007 Mar;177(3):883-7; discussion 887-8.

8. Litwin MS, Sadetsky N, Pasta DJ, Lubeck DP. Bowel unction and bother ater treatment or

early stage prostate cancer: a longitudinal quality o lie analysis rom CaPSURE. J Urol. 2004

Aug;172(2):515-9.

9. Miller, D. C., M. G. Sanda, et al. (2005). Long-term outcomes among localized prostate cancer

survivors: health-related quality-o-lie changes ater radical prostatectomy, external radiation, and

brachytherapy. J Clin Oncol 23(12): 2772-80.

10. 1Buron, C., B. Le Vu, et al. (2007). Brachytherapy versus prostatectomy in localized prostate cancer:

Results o a French multicenter prospective medico-economic study. Int J Radiat Oncol Biol Phys

67(3): 812-22.

11. Di Blasio, C. J., A. C. Rhee, et al. (2003). Predicting clinical end points: treatment nomograms in

prostate cancer. Semin Oncol 30(5): 567-86.


26/26


DisclosuresThis report was prepared by Research 360, GmbH (RW), which is a web-based publisher o inormation about stocks

and is not an investment adviser. Eective October 14, 2010, in consideration or RWs equity research services relating

to this Company, including this report, to be perormed through November 2, 2011, the Company agreed to pay RW a

ee o $15,000 (reundable under certain conditions). This report is based on RWs independent analysis and judgment.

The materials upon which this report is based are believed to be reliable, but RW does not guarantee the inormationsaccuracy or completeness. Unless otherwise noted, any interpretations, earnings estimates, and conclusions contained

in this report are those o RW. This report is not intended to constitute a recommendation or any particular investor to

purchase or sell any particular security or that any particular security is suitable or any particular investor. This report

should not be construed as a recommendation or request to engage in any transaction, or an oer or solicitation o an

oer to buy or sell any security or investment, and investors are advised to consult their personal broker or investment

advisor beore making any investment decision concerning any o the companies mentioned herein. Use o this report

may be subject to applicable rules o any sel-regulatory organization o which you may be a member. The inorma-

tion contained in this report is subject to change without notice, and RW assumes no responsibility to update the

inormation contained in this report. Subject to certain restrictions posted in the Legal section o RWs web site (www.

researchworks360.com), RW may purchase and hold positions in the securities o its clients, but is prohibited rom sell-

ing any securities o a RW client during the RW service period to such client. Research 360, GmbH, 2011. All rights

reserved. Additional and supporting inormation is available upon request.

Michael J. Ritger, who authored this report, has been an equity research analyst since 2003. He passed the Uniorm

Investment Adviser Law Examination, Series 65, in August 2003, and he holds a BA (English) rom Bates College and a

Masters degree rom the Yale School o Forestry and Environmental Studies. Mr. Ritger certies that the views expressed

in this report are an accurate representation o his personal views about the Company and its publicly traded securities.

Mr. Ritger holds an indirect interest in the shares o ProUroCare through his being (i) a beneciary o a trust that owns

both a partnership interest in Seaside 88, LP Seaside and (ii) a membership interest in Seasides general partner. He

exerts no management control over the general partner o Seaside and thereby has no input into changes in Seasides

portolio positions.

The Private Securities Litigation Reorm Act o 1995 provides a sae harbor or orward-looking statements. In order to

comply with the terms o the sae harbor, RW notes that except or the description o historical acts contained herein,

this report may contain certain orward-looking statements that involve risks and uncertainties as detailed herein and

rom time to time in the Companys press releases and elsewhere. Such statements are based on RWs current expec-

tations and are subject to a number o actors and uncertainties, which could cause actual results to dier materially

rom those described in the orward-looking statements. These actors include those described in the Companys press

releases and SEC lings, all o which are hereby incorporated by reerence. No orward-looking statements are a guar-

antee o uture results or events, and one should avoid placing undue reliance on such statements.

Equity Research Report on ProUroCare Medical, Inc.

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