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8/8/2019 PUMD Initial Report 11.11.2010
http://slidepdf.com/reader/full/pumd-initial-report-11112010 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 a proprietary sen-
sor and sotware imaging platorm or improved accuracy in detecting prostate abnormalities
The device is currently under submission to the FDA or commercial approval.
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 Company’s 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.
Solid Financial Backing
The Company has enjoyed the long-term support o several committed investors. It also re-
cently secured a commitment or $3.125 million in institutional nancing, arranged by Lane
Capital Markets, which management expects will be sucient to prepare its technology or
the market.
Share-Price Considerations
PUMD shares have been trading fat on rela-
tively low volume since the May ‘10 resub-
mission o an FDA application that was origi-
nally led in November ‘09. The resubmission
caused a delay that seemed to disappoint some
traders, leading to a all in the share price.
The actual implications may be however bepositive, since the Company may now dene
its own regulatory class with the current de
novo submission.
The $22 million market cap leaves plenty o
upside. Even modest commercial success by
2012 could bring a our-old increase in stock
price, as comparable medical device compa-
nies trade at high price:sales ratios.
Potential $100M market
The shares could appreciate more dramati-
cally i a partnership deal is struck with a largermedical products company. The giant poten-
tial market (nearly every man over 50) may
attract suitors once the complete technology
package is ready.
Research 360, GmbH • www.researchworks360.com/prourocare-(pumd)/
RESEARCH REPOR
INITIAL REPORT • November 11, 20
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
MARKET DATA
52 Week Price Range
Ave. Daily Volume (3 months)
Equity Market Capitalization
Enterprise Value (E)
Common Shares
$0.95 - 4.00
1,939
$22 Million
$24 million
15 Million
BALANCE SHEET $000s, data as o Sept 30, 2010
Cash
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders’ Equity
1,128
1,307
1,452
2,651
2,652
(1,199)
www.researchworks360.coRIGOROUS EQUITY ANALYSIS SINCE 1992
THE R ESEARCH W ORKS
11.11.2010 CLOSING PRICE: $1.45
Nov$0.00
$4.00
$3.20
$2.40
$1.60
$0.80
OctFeb Jun
PUMD - 1 year range
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 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
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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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
Exhibit 1: US men diagnosed, treated or and living with prostate cancer
Source: ProUroCare presentation
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
PSA’s
Urologist
Assessment
1 million
Biopsies/year
Urologist
Treatment
100,000 Radical
Prostatectomy’s
per year
2.7 million
diagnosed
and regularly
monitored
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
Exhibit 2: Outcome Comparison: Surgery vs. Radiotherapy
Outcome Radical Prostatectomy* Radiation**
Survival duration compared to conservative diseasemanagement 1
8.6 years 4.6 years
15-year prostate cancer survival rate 2 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 cancerpatients 4
49% less risk vs. radiation -
Cancer recurrence 5 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 cancer 7 0.8% develop bladder cancer 1.3% develop bladder cancer
Bowel function impairment 8 - Signicantly greater vs. surgery
Disease-specic long-term quality of life 9 Stable Unstable
Painful urination (at 18 month follow-up) 10 1% of patients 30% of patients
Long-term erectile dysfunction 11 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
Radiation Therapy - Uncomortable Side-Eects and Risk o Other Cancers
Prostate cancer is particularly deadly because it is one o the slowest growing and thereore hardest to
detect cancers. The radiation treatment regimen can also be quite dangerous, elevating the risk o bladder
and rectal cancer, as well as causing impotence and painul urination. For these reasons, a radical prosta-
tectomy (complete removal o the prostate) is oten considered the best option.
Radiation therapy involves tar-
geted high-energy x-rays or the
insertion o tiny radioactive rods
into the prostate.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
Exhibit 3: 2-Year Cost o Prostate Cancer Treatment
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
As a major surgery, prostatectomy is not without side-eects itsel, the most common o which are impo-
tence, incontinence, inection, blood clots and damage to the urinary tract. Dry orgasms are also the norm
ater this procedure.
Expensive Treatment
Most treatment options range in price rom $12,000 to $100,000 over a 2-year course.
Increasingly avored over radia-
tion therapy, prostatectomy is
the removal or part or all (radical)
o the prostate.
$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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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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 patient’s 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, 75% o biopsies are negative.
Multiple alse positives and repeat biopsies
(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
S p e c i f c i t y / S e n s
i t i v i t y ( % )
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
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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 or be ajdunctive to digital
rectal exam and PSA testing. The ProUroScan™ technology produces a real-time image o the prostate and
creates a detailed digital and recording that can 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 probe’s position and creates 2D and 3D images o the prostate.
Requires Minimal Training
The system is designed or use by urologists to conrm abnormal results recorded during an annual 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 Company’s ProUroScan™
system brings objectivity, record
keeping and enhanced sensitivity
to the digital rectal exam.
Exhibit 6:The Handheld Probe
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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 portable 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 portable system or commercialization ater FDA approval o the larger unit.
Exhibit 7: Real-time images to guide the examiner. Source: ProUroCare
Exhibit 9:The Portable 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
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
Clinicals Successful; FDA Application Submitted
Clinical Study Completed
A 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 Company’s 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% o 168 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 novo device. The initial 510(k) application was submitted in November 2009 un-
der the rules or a device similar to one already approved, 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 rules or new device.
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 exactly describes ProUroScan™, so i any competitor wants to use the
ProUroScan™’s potential approval as a predicate or an application o their own, they will have to meet
product requirements that will likely violate more than 20 patents owned or licensed by the Company.Should the FDA accept this language, it would urther dierentiate and protect the Company’s 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 Company’s patents.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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 one US patent and three applications 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 urology, and includes permission to sub-license.
Developed by a Grant-Funded Research Lab
The Company’s 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 to
operate 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
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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™, most 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 Company’s 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
device or health company with interests in urology or prostate cancer, such as American Medical Systems
Holdings. According to management, to attract a high bid the Company should meet its current milestones
o FDA approval, a ully-licensed portable system, and possibly a cheap disposable diagnostic component.
Technology Platorm may lead to more products
The core imaging technology could potentially be developed or other markets besides prostate cancer.
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 Company’s units are to be
priced in the $5,000-19,000
range. Each exam could be
priced at $200-300.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
Financials
Balance Sheet
As of: 30.09.10 31.12.09 31.12.08 31.12.07
Assets
Current Assets
Cash & Equiv. 1,128 1,001 48 445
Other 179 58 32 22
Total Current 1,307 1,059 80 466
Long Term Assets
PP&E 15 1 - 1
Other - - 267 439
Deferred Charges 130 27 730 133
Total Assets 1,452 1,088 1,077 1,039
Liabilities
Current Liabilities
Accounts Payable 874 2,850 3,503 1,176
Short/ Current
LT Debt1,525 1,925 4,447 274
Other Current 252 - - 110
Total Current 2,651 4,775 7,950 1,560
Long-term Liabilities
Long Term Debt - 643 384 3,171
Total Liabilities 2,652 5,418 8,334 4,730
Stockholders’ Equity
Retained Earnings (33,429) (27,880) (20,936) (16,278)
Capital Surplus 32,230 23,550 13,678 12,586
Total Stockholders’ Equity (1,199) (4,330) (7,258) (3,692)
Net Tangible Assets (1,199) (4,330) (7,258) (3,692)
All fgures in $1000s.
Cash balance o $960,000 as
o Oct 12th, and a burn rate o
$130k/mo.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
Financials
Debt Mostly Convertible, and Owed to Supportive Parties
The Company’s debt consists o a handul 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, 2011, 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 March 28, 2011. Managementexpects that, except or a reasonable principal reduction on the Crown Bank, the investors will extended
the loans and guarantees o all these notes. The Company may oer the investors an opportunity to convert
their notes to equity prior to their maturity dates.
Income Statements
Year Ending: 31.12.09 31.12.08 31.12.07
Operating Expenses
R&D Exp. (2,240) (598) 144
SG&A (1,711) (2,027) 1,305
Total Op. Exp. (3,951) (2,624) (1,449)
Continuing Operations
Other Net Exp. (1,773) (123) (352)
EBIT (5,307) (2,748) (1,801)
Interest 1,221 1,910 1,312
Pre-tax income (6,528) (4,658) (3,113)
Net Income to Common (6,944) (4,658) (3,113)
All fgures in $1000s.
The Company has been able to
roll over its commitments at a
relatively low 6% interest rate,
largely payable in shares.
Strong Commitment rom New Equity Investor
The Company’s cash position is comortable, thanks in large part to a recent equity investment and urther
commitment by the hedge und, Seaside 88, LP (Please see Disclosures on page 21), which was arranged
by Lane Capital Markets. As o October 12 there was approximately $960,000 in the bank. At the current
burn rate o $130,000/mo, this oers a 7 month runway.
Assuming the FDA approves ProUroScan™, additional capital will be needed to scale up manuacturing
and sales eorts. Seaside 88 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 clos-
ing. 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.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
Financials
Cash Flow Statements
Year Ending: 31.12.09 31.12.08 31.12.07
Net Income (6,944) (4,658) (3,113)
Operating Activities
Depreciation 1,398 1,406 868
Adj. to Net Income 1,914 455 1,064
Chnages in Liab. 427 1,657 183
Change in Other
Op. Activities55 45 36
Total Op. Cash
Flows
(3,150) (1,095) (963)
Investing ActivitiesCapex. (2) - -
Other 44 - (44)
Total Investing
Cash Flows43 0 (44)
Financing Activities
Sale Purchase of
Stock3,931 (34) 498
Net Borrowing 266 732 908
Total Investing
Cash Flows
4,104 698 398
Change in Cash & Equiv. 997 (397) 398
All fgures in $1000s.
Solid debt and now equity
investor backing has kept the
company out o liquidity trouble
in recent years.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
Share Price Considerations
Trading Languid as FDA Decision Draws Near
PUMD shares have traced out the news events o the last year, starting with a high-volume surge rom
$1.25 to $4.00 last December upon the rst submission o the 510(k) ling. The news that a resubmission
(under the de novo rules) would instead be necessary sent the shares as low as $1.00 last May. Subsequent
to the new ling, trading has been lighter and the price has hovered near the $1.50 level as investors awaitthe FDA’s response.
Steep rise and all over the
previous FDA drama.
Good support at $1.25, but thin
volume while we await the
news.
Gauging the Fundamentals
With roughly 15 million shares outstanding, the current market capitalization is about $22 million. Taking
into account liabilities and cash, the enterprise value is approximately $26 million. A undamental assess-
ment o this valuation must take into account the chances or FDA approval o and the possible stream o
uture earnings rom the Company’s imaging technology.
FDA approval odds are notoriously dicult to handicap, but the ProUroScan™ system has several advan-
tages. 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
abnormalities ollowing a DRE.”
Assuming the odds are good or FDA approval in early 2011, the next hurdle would be nancing. The
existing 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
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
Organic Commercialization Scenario
The medical market’s 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 annually in the US by general practice physicians. 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, only ProUroScan™ provides an objective
image o abnormalities in the prostate.
I ProUroScan™ were oered to just a small raction o patients that have an abnormal DRE in advance o a
biopsy (1+ million per year), useage could total 50,000 patients per year. At a conservative net to the Com-
pany o $150 per test, recurring revenues could be $8 million. This excludes the initial sale o diagnostic
units at perhaps $9,000-$21,500 each, which in such a scenario may total over $4 million. Management
estimates that gross prots on the machines could be roughly 50%. Taking selling expenses into account,
the estimated $10 million in gross prots rom this modest scenario may justiy a three-old increase rom
today’s share price, not considering any additional growth.
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 com-
pany like ellow Minnesota-based Medtronic (NYSE: MDT) or urology-ocused American Medical Systems
(NASDAQ: AMMD) may jump at the opportunity to tap the baby boomer market or an extra $100+ mil-
lion in sales. With a large partner such a gure would seem to be achievable given the size o the market
and the need to improve the accuracy o prostate abnormality detection. To reach the $100 million mark,
ProUroScan™ would need approximately 40% market penetration (i the market is dened as men who
are to undergo a biopsy; much lower penetration is neccessary i the market includes the 25+ million men
having a DRE or PSA who do not get a biopsy).
The above best-case outcome could obviously lead to a valuation approaching a billion dollars. Given the
excellent network o relationships that management has built in the medical device world, this should beviewed as a realistic goal, as should the development and commercialization o additional imaging solu-
tions rom the technology.
In the meantime, the shares remain much nearer to 12 month lows than highs, and there is very little
awareness o the Company in the market. Expect big movements one way or another as soon as there some
word rom the FDA. Obviously an approval or ProUroScan™ would be a major milestone, oering the
chance or revenues starting in 2011 and perhaps well over $10 million in sales by 2012.
Even a tiny market penetration
could generate solid revenues,
but the real goal is or a larger
frm to leverage its sales orce
behind ProUroCare’s technology.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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 17.2
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 ProUroCare’s 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.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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
Group Median 7.6
Source: Bloomberg, The Research Works
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
The above table gives some hint as to what may happen to the ProUroCare shares ater the Company has
received FDA approval and has generated modest sales. Companies that have commercialized medical
diagnostic or imaging devices tend to trade at very high multiples to sales. As o early November 2010, the
group’s median market capitalization was 7.6 times trailing 12 month revenues.
I ProUroScan™ begins to get traction among urologists by 2012, and sales climb to perhaps $15 million,
to be in line with this group the market cap would have to appreciate to $114 million. Even allowing or
the issuance o up to 4 million new shares (or a total o 19 million) to und commercialization eorts, the
price per share in this scenario could top $6.00. O course, the potential market or this technology is large
enough to support much higher numbers, and i sales are ramping quickly the price:sales ratio is likely to
be above the peer average.
Investors are cautioned that the above valuation scenario is highly speculative and subject to change, since
there are a number o hurdles to cross on the way to a successul commercialization. The coming months
will shed more light on the situation as we hear rom the FDA, await the completion o the Seaside 88 invest-
ment, and witness the receptiveness o the urology community.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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 Scientic’s 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 ProUroCare’s 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.
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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 nation’s 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 ProUroCare’s 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
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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 F2’s Regional Director o Sales or Private Equity, where he advised
private equity rms on market and competitive intelligence issues. Mr. Smith’s 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 Company’s 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.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
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
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Supplemental Appendix Reerences 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.
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ProUroCare - OTCBB:PUMDInitial Report: November 1, 2010
Disclosures This 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 RW’s 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 RW’s independent analysis and judgment.
The materials upon which this report is based are believed to be reliable, but RW does not guarantee the inormation’saccuracy 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 RW’s web site (www.
researchworks360.com), RW and its aliated entities and persons may purchase and hold positions in the securities o
its clients, but they are prohibited rom selling 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 Seaside’s general partner. He
exerts no management control over the general partner o Seaside and thereby has no input into changes in Seaside’s
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 Company’s press releases and elsewhere. Such statements are based on RW’s 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 Company’s 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.