I found Imaging3 valuation done by a former Investor. This investor looks quite knowledgeable in imaging marketplace.
If this is true, stock can march toward $2 even before FDA approval.
With FDA approval, we might see $5.
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I, Tom Fisher, declare:
1. I am a competent adult and reside in New Berlin, Wisconsin.
2. I have owned common stock in Imaging3, Inc. (the “Company”) from 2007 to the
present. My spouse and I current own 3,150,000 shares of Company stock.
3. I hold a BSCE (Civil Engineering) degree from the University of Wisconsin. I have been
a licensed Wisconsin Professional Engineer since 1976. I served as a City Alderman for New Berlin
from 1989 to 1995.
4. I have twenty-nine (29) years of in-depth experience and knowledge in the diagnostic imaging equipment market.
I spent several years with GE Medical (Healthcare) as the National Sales
Specialist within the GE MedFACS design/build group developing new multi-modality imaging centers,
imaging clinics, hospital radiology additions, and other related medical facility renovations including
CT, X-ray and MR systems throughout the United States.
5. For the past twenty (20) years, I have been with TEAL Electronics Corporation as the
Global Medical Accounts Manager responsible for all sales and account management functions for the
major diagnostic imaging and oncology equipment (OEM) companies. TEAL is the major provider of
semi-custom front-end power distribution and conditioning systems widely used by their customers
around the globe. My key major accounts include GE Healthcare, Siemens Medical Solutions, Philips
Healthcare, Toshiba Medical Systems, Samsung Electronics, Varian Medical Systems, Shimadzu
Medical Systems, Accuray (including former Tomotherapy), Elekta, Analogic, and Neusoft. In my
opinion these accounts (with the addition of Medtronic, Inc.) represent the universe of potential
acquirers or licensees of the Dominion product.
6. Because TEAL’s power system is a component in most medical imaging equipment my
accounts sell, I have current and detail knowledge about their manufacturing practices and capacities as
well as their pricing and cost structures for this equipment. This knowledge is directly relevant to the
valuation of the Dominion product of the Company.
7. I have reviewed the appraisal of the Mentor Group bearing the designation Doc 313-1. I
strongly disagree with the enterprise valuation methods used to the exclusion to the relevant method in
this case which is the Asset Accumulation Approach. While the Company may only have the capability
to produce the limited quantity used in the appraisal projections, major current manufacturers who are
the potential acquirers or licensees of the Dominion product would build and sell sufficient units to
satisfy all market demand as it arose.
8. In response to the Mentor Group appraisal, I conducted my own valuation of the
Dominion product based on my knowledge, skill and experience with the medical imaging market and
products. My written valuation is attached to this declaration as Exhibit A. Based on my analysis, it is
my opinion that the fair market value of the Company as of May 6, 2013 based solely on the Dominion
product is in the range of from $960 million to $2.4 billion.
VALUATION OF DOMINION PRODUCT BY TOM FISHLER
DATED: May 6, 2013
The Dominion Product
For the purposes of my valuation, I accepted as true Imaging3’s representations about its
Dominion product that are made to the public on certain web pages on its Imaging3.com website.
True and correct copies of those certain web pages are attached hereto as Exhibit 1. I did not rely
on Imaging3’s representations on the Dominion product market because my knowledge in this
area is stronger and more current. Product due diligence will determine whether the company’s
product claims are true.
Annual Global CT Market Sales-Conventional CT 16 slice and higher (No Real-time Imaging)
Annually, approximately 5,000 conventional CT’s (X-ray computed tomography imaging
devices) are sold per year. CT’s operate in dedicated shielded rooms (“fixed CT systems”). The
market breakout for the CT market’s major manufacturers based on their historical CT market
share are GE (1500), Siemens (1500), Philips (1200) and Toshiba (600) plus several other minor
CT manufacturers in the global market. These conventional fixed CT systems sell in a price
range from $400,000 to $1,800,000. CT’s emit radiation levels harmful to humans, require high
cost site prep work, and higher operating costs for the purchaser. As stated in Exhibit 1, there is
no real-time imaging product on the market and some manufactures may be forced to leave the
CT market without access to the Dominion product.
Imaging3 Dominion 3D/CT system (Real-time Imaging)
It is my opinion as an expert in the CT marketplace that if the Dominion product operates as
represented by the company, it will claim 20% or more (> 1000 units) of the conventional CT
market by year 3 after FDA approval. Unlike conventional CT operating conditions, the
Dominion with 3D real-time imaging is a true mobile system, using low voltage power without
the need for a radiation shielded operating space due to the low level radiation to the human
patient.
For a new technology valuation in the CT marketplace, the industry standard is multiples of 3, 4
or 5 times gross sales or gross margins in year 3. Years 1 and 2 should project sales during global
market introduction and the ramp-up production. Year 3 establishes the base for mature sales for
technology that will exceed 1,000 units per year. I have applied these factors to the Dominion
product to estimate its value. The units sold per year and selling price and cost per Dominion
product unit are given as my opinion based on my knowledge of these factors for the major
manufactures in the CT marketplace.
VALUATION BASED ON GROSS SALES IN YEAR 3
Dominion Global Customer Sales Estimate:
1st year of sales; 300 units
2nd year of sales: 500 units
3rd year of sales: 800 units
Year 4 thru 10: >1,000 units per year
Average Sell price in years 1-2: $750,000
Average Sell price in years 3 thru 10: $600,000
Estimated 3rd year sales of 800 units @ selling price of $600,000 = $480M in sales revenues.
Range of Valuation based on Annual Sales Revenue in Year 3
Low-end: 3x $480M = $1.44B
Mid-range: 4x $480M = $1.92B
Hi-end: 5x $480M = $2.4B
VALUATION BASED ON GROSS MARGIN
Dominion Production Total Cost Estimate:
Manufacture the Dominion will likely be in 2-3 global factory locations in these low cost
countries: USA, Mexico, China, Korea and Japan
Total Cost to manufacture in years 1-2: $250,000
Total Cost to manufacture in years 3 thru 10; <$200,000
Dominion Gross Margin Estimate:
Gross margin (dollar amount difference between the Dominion sales price ($600,000) and total
production cost ($200,000) is $400,000. This estimated gross margin on each Dominion sold will
be 66% which fits within the industry standard medical equipment manufacturer gross margin
range of 60-70% for new technology products.
Estimated 3rd year sales of 800 units @ gross margin of $400,000 = $320M in gross margin
Range of Valuation based on Gross Margin in Year 3
Low-end: 3x $320M = $960M
Mid-range: 4x $320M = $$1.28B
Hi-end: 5x $320M = $1.6B
Estimated Total Market Valuation of the Dominion 3D/CT system (Real-time Imaging)
My estimate for the value of the Dominion product is in the range of from $960 million to $2.4
billion.
Other Valuation Notes:
1. My valuation does NOT include the annual service contract projected at $50,000 per year
per unit sold based on a typical service contract (internal to the company) at 8% to 12%
of the equipment selling price. The expected net profit on the service contract is in the 20-
25% range.
2. My valuation does NOT include the additional annual Dominion sales to be expected
from the current global C-arm market. The need for a lower cost, multi-use imaging
system such as the Dominion in the C-arm market should unfold over time into 15% to
20% market share.
3. My valuation does NOT include the added future seven (7) markets listed in Mentor
Group valuation, to wit: 1. Trauma Centers, 2. Cardiology, 3. Pain Management, 4.
Neuro-vascular, 5. Orthopedic 6. Vascular and 7. Radiation Therapy. (Document 313-1,
page 13) This real-time imaging technology with the new Dominion system will be only
the start of a new global medical device/ low cost approach to healthcare delivery and
excellence.
