Impact Medical Solutions, Inc. - FORM 10-K

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EX-32.1 - Impact Medical Solutions, Inc.	v181188_ex32-1.htm
EX-31.1 - Impact Medical Solutions, Inc.	v181188_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended: December 31, 2009

o	Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number: 000-52117

ITECH MEDICAL, INC.

(Exact Name of registrant as specified in its charter)


Delaware		20-5153331
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)


17011 Beach Blvd., Suite 900, Huntington Beach, CA		92647
(Address of Principal Executive Offices)		(Zip Code)

(714) 841-2670

(Issuer’s Telephone Number, Including Area Code)

Copies to:

The Sourlis Law Firm

Virginia K. Sourlis, Esq.

214 Broad Street

Red Bank, New Jersey 07701

Telephone: (732) 530-9007

www.SourlisLaw.com

Securities Registered Pursuant to Section 12(b) of the Act.

Common Stock, par value $0.0001 per share		N/A
(Title of each class)		(Name of exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if registrant is not required to file reports pursuant to Rule 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer		o		Accelerated filer		o
Non-accelerated filer		o (Do not check if a smaller reporting company)		Smaller reporting company		x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The registrant had no revenues for the fiscal year ended December 31, 2009.

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as a specified date within the past 60 days: $6,387,576 based on a closing sales price of $0.39 per share on April 13, 2010.

As of April 13, 2010 there were 26,691,732 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

Transitional Small Business Disclosure Format (check one): Yes o No x

TABLE OF CONTENTS

		Page
PART I

Item 1.	Business	4

Item 1A.	Risk Factors	16

Item 1B.	Unresolved Staff Comments	21

Item 2.	Properties	21

Item 3.	Legal Proceedings	21

Item 4.	Submission of Matters to a Vote of Security Holders	21


PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	22

Item 6.	N/A	28

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	29

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 8.	Financial Statements and Supplementary Data	32

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	32

Item 9A(T).	Controls and Procedures	32

Item 9B.	Other Information	33

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	33

Item 11.	Executive Compensation	37

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	38

Item 13.	Certain Relationships and Related Transactions and Director Independence	40

Item 14.	Principal Accountant Fees and Services	41

PART IV

Item 15.	Exhibits and Financial Statement Schedules	41

	SIGNATURES	42

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of iTech Medical, Inc. (the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

PART I

As used in this annual report and unless otherwise indicated, the terms the “Company,” “iTech Medical,” “we,” “us,” and “our” refer to iTech Medical, Inc., a Delaware corporation.

Item 1. Business

iTech Medical, Inc. (a development stage company) (the "Company" or “ITM”), a Delaware corporation formerly known as Impact Medical Solutions, Inc., was incorporated on October 20, 1997 as a Nevada corporation. On September 9, 2003, ITM acquired a patent from MPR Health Systems, Inc., a California corporation; a patented medical information system called Muscle Pattern Recognition (“MPR”) with a value of $500,000. On December 27, 2006, ITM entered into a Plan and Agreement of Merger (the “reverse merger”) with Freedom 1, Inc., a Delaware corporation and a “blank check company,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whereby ITM was the surviving entity. Since December 2002 and continuing after the reverse merger, ITM has been involved in the development and pre-market clinical testing of the MPR System.

MPR is a non-invasive, proprietary technology platform that objectively discriminates between normal and abnormal musculoskeletal function. The Company’s MPR System is a patented clinical tool that analyzes patterns of muscle recruitment - the engagement of muscles in order to perform specific body movements. MPR test results provide detailed physiological information on muscle function that we believe can assist in the diagnosis and treatment of back and neck injuries and illness. The results of an MPR evaluation are presented in a comprehensive report that confirms normal muscle recruitment patterns or provides clinically relevant information on the nature and severity of dysfunction at each recorded muscle site.

We believe that the capabilities of the MPR System are unique and that the system addresses an unmet market need for an objective, evidence-based test that can be used by physicians and other health care professionals to better assess and manage patients with impaired musculoskeletal function. We believe the MPR System supports the cost-containment and risk management goals of insurers, workers compensation carriers, self-insured employers and managed care providers by providing objective information to help control health care costs associated with back and neck injuries.

Central to the MPR System is the fact that muscles in the back and the neck function as an interactive system. In order to determine whether a particular muscle is functioning within a normal range, it must be examined in concert with all of the other muscle groups required for the body to make specific movements. Muscles also interact in a predictable manner that can be expressed in a kinesiological relationship. These principles have been incorporated into the MPR test and form the basis of a unique system that measures the relationships among muscles in a given movement. By comparing relationships of muscles, MPR is able to normalize subjects against each other.

The standardized protocol of movements that make up the MPR test provides the ability to compare patients to a database of normal subjects. When patients replicate the same carefully administered, standardized movements performed by the subjects in the normalized database, an accurate comparison can be made. Using a data analysis system (described in greater detail below), the comparison of a patient's patterns with those of the "normal" subjects in our database is the basis of the MPR System.

During the years ended December 31, 2009 and 2008, we incurred a net loss of $3,413,454 and $1,589,500, respectively, and had $146,477 cash on hand as of December 31, 2009. We are in the development stage and have not earned any revenue since our inception.

We continue to develop and enhance the features and performance of our technology with the goal of introducing new products based on our core research and development activities. Three of our five employees and three of our four independent consultants currently devote at least a portion of their time to our research and development activities. We anticipate increasing levels of resources will be dedicated to research and clinical development in the implementation of our business strategy within the next 12 months.

As our business grows, we anticipate hiring additional employees and retaining additional consultants.

Research and Development

We expense our research and developments expenses. Research and development expenses consisted of costs associated with the design, development, testing, and enhancement of the MPR System. The primary costs are salaries, consulting fees and non-recurring software development costs. Research and development expenses increased to $316,004 in 2009 from $258,179 in 2008 due to an increase in the costs associated with our clinical trial. In February 2009, we initiated a pilot clinical trial in Salt Lake City, Utah which we expect to complete during the second half of 2010.

Market Opportunity

Overview

Back pain is one of the most common and significant musculoskeletal medical problems in the world. Back injuries are the leading cause of disability in the United States for people younger than 45 years of age and have been the most expensive health care problem for the 20 to 50 year-old age group. Eighty percent (80%) of adults seek care at some time for low back pain, and approximately one third of all disability costs in the United States are due to back disorders.

For most patients, the cause or causes of persistent back pain remain poorly understood. Although imaging procedures, including computerized tomography (CT) and magnetic resonance imaging (MRI), are able to accurately define structural anomalies, the correlation of these anatomic findings with physiology, back pain, and other clinical complaints is imprecise.

Back pain is classified into three categories based on the duration of symptoms:

	·	Acute back pain is arbitrarily defined as pain that has been present for six weeks or less.

	·	Sub acute back pain has a six- to 12-week duration and

Chronic back pain lasts longer than 12 weeks.

Acute low back pain is often recurrent, and most patients with a history of acute episodes eventually have more chronic symptoms. Also, persons who seek medical attention for back pain are thought to be at increased risk for chronic pain and disability. We believe patients in all three groups (acute, sub acute and chronic) are appropriate candidates for MPR.

Key Market Trends

Several trends have expanded the market for better solutions to diagnosing back problems:

	·	increased employer and payor aggressiveness in quantifying and seeking ways to reduce the economic toll of back injuries, one of the largest segments of health care costs;

	·	growing awareness of the need for objective information in medical-legal injury litigation;

	·	need for measuring patient treatment effectiveness and managing patients to successful outcomes;

	·	increased health care purchaser and provider attention to injury prevention; and

increased patient awareness of treatment alternatives.

We believe the convergence of these trends has magnified the large business opportunity to provide clinically proven tools to reduce the costs and improve the outcomes of patients with back pain.

Target Markets for MPR

The target markets for MPR are large and include the following:

	·	Primary care physicians, who initially treat the majority of patients with back pain;

	·	Specialists including neurologists, orthopedic surgeons, physical medicine and rehabilitation physicians (PM&R) and occupational medicine practitioners (occmed);

	·	The employer market;

	·	The Workers’ Compensation market;

	·	Health Maintenance Organizations (HMOs); and

	·	Insurance companies.

Primary Care Physicians

Primary care physicians typically include family practice physicians, internists, obstetricians, gynecologists, and pediatricians. As back pain is extremely common, these physicians actually see most of these private patients and often have extensive experience in treating acute back pain due to muscle dysfunctions.

Primary care physicians provide a non-invasive (non-surgical) approach and often utilize prescription medications to help reduce pain and inflammation, as well as using the services of physical therapists to assist in maintaining range of motion and muscle tone. Often, they may order a variety of spinal diagnostic procedures to more fully investigate the potential causes of persistent back and neck pain and refer patients to a specialist for further diagnosis and treatment.

Specialists

There are several areas of specialty medicine that we believe represent target markets for MPR. They include:

	·	Neurologists - A neurologist is a medical doctor who has trained in the diagnosis and treatment of nervous system disorders, which include diseases of the brain, the spinal cord, the nerves, and the muscles.

	·	Orthopedic Surgeons - Orthopedic surgeons treat the surgical diseases, conditions and injuries of the bones, muscles and joints.

	·	Physical Medicine and Rehabilitation - Physical Medicine and Rehabilitation (PM&R), also called physiatry, is the branch of medicine that emphasizes the prevention, diagnosis and non-surgical treatment of disorders - including those of the musculoskeletal system - that may produce temporary or permanent impairment.

	·	Occupational Medicine - Occupational Medicine is concerned with the treatment of patients with occupational and environmental illnesses and/or injuries.

Employers

We believe employers can directly benefit from reductions in the medical and income continuation costs due to better diagnosis and treatment of back problems.

The second component of this market, and a market segment unto its own, is the use of MPR as an occupational assessment tool to prevent injuries from occurring in the first place. For these employers, we believe screening new and veteran employees to identify those with positive MPR tests could improve job placement and identify high-risk groups for future injury that may benefit from back strengthening and flexibility exercises. This use of MPR as a preventative tool also blends well with the trend towards preventative medicine.

Additionally, the Company may look at other occupational medicine applications once MPR is fully tested for the back/neck.

Workers’ Compensation Market

Work-related back and neck injuries, or musculoskeletal disorders, are caused or aggravated by the work environment. Work-related back and neck injuries can result in reduced worker productivity, inability to perform job tasks, work loss, and temporary or permanent disability.

We believe that Workers’ Compensation carriers stand to generate savings and improve their competitive market position through the adoption of the MPR technology. Although state laws vary, carriers are usually able to dictate or influence the sources of care for back problems, particularly in the crucial early period. Increasingly, managed care organizations provide workers’ compensation services through contractual relationships with physician groups. These organizations have the authority to recommend the incorporation of MPR into their assessment and treatment protocols.

Health Maintenance Organizations (HMOs)

HMOs contract with large medical groups to provide services under both health benefit and workers’ compensation plans. We believe the use of MPR can reduce the need for more expensive tests, reduce the number of physician and non-essential therapy visits, and assist physicians in recommending appropriate rehabilitative therapy. For this reason, we believe managed care organizations such as HMOs will be highly motivated to adopt the cost-effective MPR technology.

Insurance Companies

We believe the insurance companies are large targets because their reimbursement policies and practices have a profound impact on the medical diagnostic industry; they largely dictate pricing policies, methods of distribution and growth strategies. Insurance companies are also playing an increasingly important role as prescribers. We believe MPR has the potential to control direct medical costs and indirect costs such as lost time, disability claims, and litigation expenses and therefore we believe that MPR will be well received by insurers. We also believe they can become a major source of referrals, particularly in the workers’ compensation market.

MPR has the potential to serve all of the above markets. Because these markets are inter-related, we believe marketing simultaneously to all markets will reduce the sales cycle, sales and marketing costs and increase market penetration in each segment.

A common trend in each of the market segments is increased competition based not solely on price but also on health outcomes. For employers, reduced toll of back injuries translates directly into higher employee productivity and enhanced profits. Health care risk-bearing and delivery organizations find that clients are demanding better health outcomes, which in turn translate into higher productivity and profitability. National organizations such as the National Committee for Quality Assurance (NCQA) and the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) are promoting outcome-oriented standards and requiring that organizations maintain records and report on outcomes in a growing range of health domains. In this environment, improved treatment of back injuries would provide a significant competitive advantage, with demonstrably improved health and economic outcomes. Given the potential use of MPR in measuring treatment outcomes, we believe our company is well positioned to benefit from the current health care environment.

Our Product Offerings

The MPR System

The MPR System is a clinical tool that performs a biomechanical and mathematical analysis of muscle function. Test results are based on the simultaneous measurement of surface electromyography (sEMG) signals produced by specific back and neck muscles during the execution of distinct body movements (an MPR Test). A patient's readings are digitized and processed by a proprietary data analysis system that generates graphic images of recognizable muscle activity patterns. A computer-assisted comparison of a patient's patterns with those produced by normal subjects is then provided in a report that forms the basis of the clinical evaluation.

The MPR System consists of three components:

· MPR Data Acquisition Device;

· MPR Data Analysis System; and

· MPR Report

The MPR Data Acquisition Device

The MPR Data Acquisition Device consists of a commercially available laptop computer system and a recording system equipped with a set of signal amplifiers. The amplifiers are attached to customized skin-surface electrodes that pick up the electrical signals produced by the underlying muscles. The recording system and signal amplifiers are purchased from one of several suppliers in the market place.

The Data Acquisition Device is controlled by proprietary data collection software developed and owned by ITM. The software prompts and guides the Technician (operator) in performing the required data collection tasks; it assists patient and operator in the execution of body movements by providing visual and audio prompts; and it provides a real-time graphical display of muscle activity. The MPR Technician is therefore assisted in completing successfully and reliably the data collection process, and is further guided in archiving and transmitting the data for clinical analysis.

The MPR Data Analysis System

The data collected during each MPR Test is processed by our computerized Data Analysis System. Proprietary analytical software, also developed and owned by ITM, is used to assess the quality of the MPR data and to derive a number of complex measures which characterize the patient’s muscle recruitment patterns. These measures are then compared to their respective equivalent derivations from a normative database of non-injured and pain-free subjects. The results of the analysis are presented in an MPR Report, which is electronically transmitted to the referring health care provider.

The MPR Report

The MPR Report provides the health care provider with findings that help to classify the patient as normal or with a graded level of muscle dysfunction (abnormal). The MPR Report includes graphic, statistical and narrative representations of each muscle group’s recruitment patterns as compared to normative patterns and provides critical information about the muscle groups examined. This information includes:

Evidence of dysfunction:	Reports if muscle recruitment is normal or abnormal and if abnormal, the location of the abnormality.

Conditions of occurrence and severity of dysfunction:	Reports the severity of the dysfunction as compared to normal, and the motor movement(s) in which a dysfunction was observed. Also reports if the dysfunction is due to hyperactivity (muscle spasm) or hypoactivity (muscle weakness).

Patterns of abnormal muscle recruitment:	Provides a graphic presentation of the abnormal muscle patterns, including the patterns of abnormal muscle compensation.

MPR - based Clinical Evaluation

The MPR Report and a health care provider clinical examination would form the basis of an MPR - based evaluation. At the discretion of the referring health care provider, patients may be retested to measure the progress of treatment and assist in making a decision for discharge. We believe several other critical questions are implicitly addressed when a patient is retested to ascertain if additional treatment is advisable. For example:

	·	Is the patient's muscle recruitment pattern now within the range of normal?

	·	If not, have the patient’s recruitment patterns improved through treatment?

Should the payer continue to fund further (or alternative) treatment?

These questions address issues of rehabilitation, short and long term disability, and the ability of a person to return to work.

Manufacturing and Service

We use commercially available data recording equipment and disposable electrodes from Thought Technology Ltd., an unaffiliated biofeedback and psycho-physiological instrument manufacturer based in Montreal, Canada. Thought Technology maintains all relevant manufacturing facility registrations and Quality System certifications (ISO 13485) for the sEMG/ECG equipment and disposables used in the MPR System, and is in full compliance with FDA, Health Canada and European (CE Marking) requirements.

ITM currently performs the final assembly of the MPR Data Acquisition Device, which includes software installation, system configuration, and final system testing. The MPR software is produced and released by ITM. ITM is currently responsible for first-line service, including software support. Individual equipment is serviced by their corresponding manufacturers.

The MPR Data Analysis System (central application server and related software) is configured, maintained, and operated by ITM.

Regulatory Requirements

US Procedures

The Food and Drug Administration (FDA) regulates all medical devices manufactured in the United States. Within the FDA, the Center for Devices and Radiological Health (CDRH) is specifically charged with assuring the public that a device is safe and effective for its intended use.

The level of regulatory scrutiny is determined in good part by the class of a device. Device classification, which is risk-based and assessed based on the intended use of the device, falls into three classes: Class I, II and III, with Class I devices requiring the least stringent controls and Class III devices requiring the most stringent controls. All classes of devices are subject to General Controls, which include establishment (manufacturing/assembly site) registration, device listing, labeling, and current Good Manufacturing Practices (GMP) in compliance with the Quality System Regulation. The FDA does not actually test devices, but through various committees, it reviews pre-marketing applications for devices to assure their safety and effectiveness in accordance with their classification.

For a Class II device, a manufacturer must first demonstrate that the device is “substantially equivalent” to a legally marketed device that has already been classified (known as a “predicate” device). This is accomplished by submitting a Premarket Notification under Section 510(k) of the Food, Drug, & Cosmetic Act. If after the 510(k) review the new device is found to be “substantially equivalent” to its “predicate” device, the FDA will allow the sale of the new device.

Thought Technology’s EMG equipment used in the Data Acquisition Device of the MPR System is a Class II device and has been cleared by the FDA under Section 510(k). The MPR Data Analysis System has not yet been cleared however we intend to treat it as a Class II device and have already identified suitable predicate devices which we believe are substantially equivalent and will support a new 510(k) submission, expected in 2010. We anticipate filing additional performance and marketing claims with the FDA in 2011 after we complete an independent clinical trial of the MPR System, expected to begin in the second half of 2010. We believe the results from this trial will determine the degree of clinical utility for the MPR test as a diagnostic tool in its own right along with demonstrating the economic benefits to the health care system when the MPR System is used in diagnosing and treating patients with back and neck pain. (For more information on the clinical trial, see Major Medical Market)

EU Procedures

The regulation of medical devices in the EU is different than in the Unites States and is guided by three European Commission (EC) Directives. The main directive, which covers the vast majority of medical devices - including the MPR System - is the Medical Devices Directive (MDD). The MDD, along with the other two EC Directives, have been enacted into the national laws of each EU Member State, resulting in a legislative framework comprised of literally dozens of medical device laws.

Before a company can sell a medical device within the EU, it must place a CE Mark (CE Marking) on its product. The CE Mark for medical devices is not a quality mark nor is it intended for consumers. It is a legally binding statement by the manufacturer that their product has met all of the requirements of the MDD. Before the CE Mark may be affixed to the MPR System, we must complete the following:

·	Compile a medical device CE Marking Technical File with evidence of compliance to the MDD;

·	Appoint a European Authorized Representative since we have no physical location in Europe;

·	Receive a device-specific EC Certificate from a Notified Body, and;

·	Register the MPR System with the appropriate Competent Authorities, where applicable.

Only after these CE Marking requirements are satisfied, will we be allowed to place the CE Marking on the MPR System.

The need for clinical data in the CE marking process arises from the requirement to demonstrate that a device is safe, that it performs as intended by the manufacturer, and that any risks are acceptable when weighed against the benefits of the device. The term "clinical data" within the meaning of the MDD is a broad concept that includes everything from bench testing to clinical trials in human subjects. As stated in the MDD, the clinical data used for CE marking may be in one of two forms:

·	either a compilation of the relevant scientific literature currently available on the intended purpose of the device and the techniques employed, together with, if appropriate, a report containing a critical evaluation of the compilation; and

·	the results and conclusions of a specifically designed clinical investigation.

The first option, also referred to as the "literature route," is commonly used by manufacturers for the CE marking of low- to medium-risk devices like the MPR System for which safety and performance can be adequately demonstrated by a combination of nonclinical data and clinical data that already exists on the device (published or unpublished) or by analogy with published data generated on an equivalent device. This is the route we anticipate taking when pursuing the CE marking for the MPR System, anticipated to occur in the second half of 2010.

Reimbursement for MPR - CPT Coding

When billing insurance companies for services like MPR, health practitioners use “codes”. Reimbursement claims require the use of two coding systems: one that identifies the patient's disease or medical condition (the International Classification of Diseases, 9th Revision, Clinical Modification, or ICD-9-CM, codes) and another that describes the procedures, services or supplies a practitioner provides to their patients (the Current Procedural Terminology, or CPT, codes).

CPT coding was developed by the American Medical Association (AMA) in 1966 in response to the increasing need for standardized terminology and clarity so that physicians and other health care providers could describe their work for purposes of billing health insurers. CPT is also used for administrative management purposes such as claims processing and developing guidelines for medical care review.

The process for requesting a new CPT code is well defined and the AMA has developed a formal process for evaluating coding suggestions. Requests are sent to the CPT Editorial Panel and reviewed by appropriate members of the CPT Advisory Committee. Coding proposals must contain detailed information on the procedure described, including a clinical vignette of the typical patient and, if a surgical procedure, an operative report. Copies of peer-reviewed articles published in U.S. journals describing the safety and effectiveness of the procedure must also be included.

MPR has been reimbursed in the past under a general CPT code for “Alternative Neuromuscular Disorders” (Code #95999). We believe that to obtain broad acceptance of the MPR System with health care practitioners, it may be important for us to obtain a more specific CPT code for the test than Code #95999.

Patents and Trademarks

Our technology is protected by the following patent:

Patent		Information		Dates		Status		US Serial		Expiration
Muscle Pattern Recognition		Full application		August, 2001		Approved		6,280,395		January, 2020

Our Muscle Pattern Recognition patent protects the method for determining muscle dysfunction of a subject; the system for determining muscle dysfunction of a subject; the computer readable medium having stored instructions (computer programs) for analyzing the muscle dysfunction of a subject; a muscle dysfunction evaluation network (data collection, analysis, reporting and communications links) for determining muscle dysfunction of subjects; and a muscle dysfunction report.

We have not applied for patent protection for the MPR technology in any country other than the United States, although we anticipate doing so if and when any U.S. patents are issued.

Sales and Marketing

Overview

We believe today’s health care environment in the U.S. is very complex, and the development and introduction of a new medical device such as MPR involves not just an FDA approval process, but overcoming significant reimbursement hurdles and complex commercial challenges associated with training and educating physicians, patients and payors.

We believe the traditional delivery of health care, when decision-making was based on the sole discretion of the treating physicians, has evolved toward a more financially based, protocol-driven medical care that is now known as evidence-based medicine. We believe this new healthcare paradigm has created new and complex relationships between all organizations that populate every point of the health care compass - integrated insurers, self-insured employers, managed care organizations, third party administrators, risk managers and physician networks. We believe complicated new relationships have evolved and must all be considered as part of the marketing effort of MPR.

The Marketing Plan

We believe there are three broad markets for MPR under which all other target markets fall. The three markets are the Major Medical market, the Workers’ Compensation market and the Medical/Legal market. Our initial target market for MPR is the Major Medical market because we believe successfully penetrating this market will allow us to reach the largest audience of potential users and referrers of the test.

Major Medical Market

The target markets for MPR within the medical profession include Neurologists, Orthopedic Surgeons, Physical Medicine and Rehabilitation Specialists (Physiatrists), Occupational Medicine Practitioners (OccMed), Primary Care Physicians (GPs) and Physical Therapists.

For MPR to be accepted by this market we believe there are three important conditions that must be met:

	1.	The clinical effectiveness of MPR must be demonstrated in independent clinical studies and the results must be published in one or more peer-reviewed journals;

	2.	Medical professionals must be certain that they will be reimbursed if they prescribe the test; and,

There must be minimal disruption in the way physicians treat their patients when introducing MPR into their practice.

To meet the first condition, we have started an independent clinical trial of MPR at two North American sites with plans to expand to four. Patient recruitment to this trial is currently on hold and will remain so until we obtain further funding.

Integrated medical practices (physicians with rehabilitation capability) and independent rehabilitation hospitals and clinics were approached to participate in our clinical trial. Site selection was important and was ultimately based on three criteria:

1. The participating site should be, in our view, recognized as a leading center for the treatment of back and neck injuries;

2. Each site must meet certain commitments regarding patient recruitment; and,

3. Each site must have the potential of becoming an MPR customer after the trial has been completed.

We believe each of the four participating centers also has the potential to serve as a provider of the technical services (i.e. perform the MPR test) for potential new customers such as Workers’ Compensation members and local employers.

We believe successful completion of the clinical trial will allow us to receive all necessary regulatory bodies’ clearance for the U.S., Canadian and European markets. Concomitantly, we believe it will provide all necessary data for the preparation and submission of independent scientific papers to peer-reviewed journals and the participation in selected scientific and medical conferences.

Following the clinical trial, we intend to use the recognition and influence of our Medical Advisory Board (MAB) members to assist in the process of MPR methodology acceptance in the medical community at key scientific and medical conferences.

We anticipate target marketing will follow from industry and trade awareness campaigns to specific executions directed at specific customers and customer segments. We expect individual physicians and occupational clinic settings involved in Workers’ Compensation will be an early initiative under our marketing plan.

The Workers’ Compensation system is a legally-driven medical delivery system and we believe that many physicians do not wish to become involved in litigated matters and defer such cases to those specialists who are familiar with the compensation laws. It is this latter group of health care providers who take care of the overwhelming majority of such cases. The specialties of Occupational Medicine, Orthopedic Surgery, Neurology and Physical Medicine and Rehabilitation (Physiatry) are the most common care providers to the injured worker. It is to these groups of providers that we will initially concentrate our efforts. Through publications in medical journals, presentations at national medical conferences, lectures at smaller local medical societies and hospitals, discussions with selected teaching hospitals and universities, and the writings and endorsements of the members of our MAB members, we believe we can appropriately present the MPR technology to a wide audience of users. As the members of a medical community tend to speak freely amongst themselves about emerging technologies, we believe we can also expect a greater awareness of MPR from simple doctor-to-doctor word of mouth.

We believe that as the awareness of the MPR technology increases, it will be easier for a physician to request a test just as he/she can request an x-ray or an MRI. And because it is only the physician who can institute a rehabilitative treatment program for an injured patient, he/she can also order follow-up MPR testing to monitor a patient’s progress during their rehabilitative recovery phase and assist in bringing that case to closure.

At approximately the same time, we expect to contact and begin all of the necessary activity to join with other high-profile providers of healthcare and work with them as beta-sites to help spread the word and independently demonstrate the benefits of the MPR technology in the diagnosis and treatment of back and neck injuries.

Discussions have already begun with healthcare providers and large key national employers and insurers. They have all indicated their interest and intention to become involved with us both as users and buyers of the MPR services upon completion of the clinical trial and with our FDA clearance, if obtained.

Under these ‘joint ventures’, we believe that we will soon thereafter generate the support and data necessary to obtain our own CPT code (reimbursement code), a key, we believe, to more widely spreading the awareness and utilization of the MPR technology and a key, we believe, to meeting the second condition in obtaining acceptance by the medical profession.

Finally, we believe that it is well-known that health care providers, specifically medical doctors, use testing and examination methodologies that they have learned through their years of training and practice and that changing the way in which they treat their patients is a difficult challenge for companies like ours. To overcome this challenge (the third condition listed above), we expect to start contacting medical schools after the completion of the clinical trial to begin training those specialists that have been identified as the main prospective users of MPR (i.e. occupational medicine doctors, physiatrists, neurologists, and orthopedic surgeons). We intend to approach influential medical schools to start such a program that we believe will allow the MPR methodology to become a part of the training curriculum for the clinical evaluation of patients with non-surgical back and /or neck injuries.

Workers’ Compensation

History and Overview

In almost all states, employers are required to purchase insurance for their employees from a workers' compensation insurance company - also called an insurance carrier. In some states, larger employers who are clearly solvent are allowed to self-insure or act as their own insurance company, while smaller companies (with fewer than three or four employees) are not required to carry workers' compensation insurance at all. When a worker is injured, his or her claim is filed with the insurance company - or self-insuring employer - who pays medical and disability benefits according to a state-approved formula.

The workers' compensation system provides replacement income, medical expenses and sometimes vocational rehabilitation benefits (i.e. on the job training, schooling or job placement assistance). An employee temporarily unable to work due to work-related injury is often entitled to receive two-thirds of their average wage up to a fixed ceiling. These payments are tax-free, so they would fare reasonably well in most states. Many employees are eligible for these wage-loss replacement benefits as soon as they've lost a few days of work because of an injury (i.e. back injury) that is covered by workers' compensation.

Although state laws vary, insurance carriers are usually able to dictate or influence the sources of care for back problems, particularly in the crucial early period. These organizations have the authority to recommend the use of MPR in their assessment and treatment protocols. We believe Workers' Compensation boards and self-insured companies stand to generate substantial savings by using MPR because of the enormous costs involved in lost productivity associated with employee time away from work.

There are many players involved in the many facets of the implementation of the workers' compensation system. They include:

	·	the medical profession in the broadest definition of 'medical' ‘;

	·	insurance companies;

	·	employers and employer organizations;

	·	injured workers;

	·	labor unions and workers' organizations;

	·	attorneys and their organizations; and

the state agencies that regulate and implement the workers’ compensation program.

We believe all of the players are in some way linked to each other under the workers’ compensation system, and we believe each stakeholder represents a distinct market for MPR and requires a unique marketing approach. The one common element, however, that underscores each of these markets is that to be successful, we believe MPR must gain the acceptance of the medical profession and the insurance companies.

Insurance Companies and Medical/Legal Market

Addressing the needs of the insurance companies will be one of the other prime focuses of our marketing plan. Their reimbursement policies and practices may have a profound impact on our methods of distribution, our growth strategy and ultimately on our revenues because their reimbursement procedures largely dictate the pricing policies for our product. We believe that by addressing the needs of the insurance companies, we are also addressing the needs of the medical professionals who use MPR. Third party payers can be very controlling and onerous for physicians to deal with on a day-to-day basis and if we are successful in establishing clear reimbursement policies for MPR, we believe physicians will be more likely to use the test because they may be saved the aggravation of fighting the insurance company over billing and payment for the test.

When billing insurance companies for services like MPR, health practitioners use reimbursement codes. Reimbursement claims require the use of a coding system: one that identifies the patient's disease or medical condition and another that describes the procedures, services or supplies a practitioner provides to their patients (the Current Procedural Terminology, or CPT code).

The process for requesting a new CPT code is well defined by the American Medical Association which has developed a formal process for evaluating coding suggestions for products like MPR. In the past, MPR has been reimbursed under a general CPT code for “Alternative Neuromuscular Disorders” (Code #95999). To obtain broad acceptance of the MPR System with insurance companies and other third party payers, we believe it may be necessary to obtain a more specific CPT code for the test than Code #95999. To help us achieve this goal, we are working with a leading specialized consulting firm that provides financial and regulatory services to companies that operate in regulated industries.

If we are successful in obtaining a CPT code for MPR, the marketing emphasis with the insurance companies is likely to shift from proving the safety and effectiveness of MPR to demonstrating the economic benefits associated with using the test to identify and treat muscle dysfunction of the back and the neck. We believe this shift can be accomplished through one or more independent cost/benefit studies which we plan on beginning after the current clinical trial has been completed.

We believe the value of these cost/benefit studies to us is great because insurance companies are also playing an increasingly important role as prescribers. And because we believe MPR has the potential to control direct medical costs and indirect costs such as lost time, disability claims, and litigation expenses, we believe that MPR will be well received by insurers who have the potential to become a major source of referrals, particularly in the workers’ compensation market. The cost of these studies is expected to be less than those associated with the current clinical trial and may be absorbed by one or more potential customers.

Other Target Markets

Employers

Most employers are experience-rated for workers’ compensation. They can directly benefit from reductions in the medical and income continuation costs due to better discernment in the diagnosis and treatment of back problems. In addition, many employers retain significant financial risk for disability and lost wages as well as health care costs under health benefit plans they purchase on behalf of their employees and dependents. We believe these employers stand to reduce their health care costs by using MPR.

Self-insurance, in the context of workers’ compensation (WC), is a program under which an employer assumes the risk for the vast majority of its WC liabilities, and purchases some form of excess, or stop-loss coverage, designed to protect the employer from catastrophic losses. We will initially focus our sales and marketing efforts with those employers where we believe the MPR System’s strengths and economic advantages are most easily recognized and quantified. Some of these employers include previous users of MPR.

We will also target specific employers where MPR has the ability to serve as an occupational health assessment tool that we believe can be used not only to reduce the overall cost of health care and health care insurance but also as an assessment tool to prevent back injuries in those employees who may have a pre-existing condition. Examples of these employers include those companies working in the automobile manufacturing sector, airlines, ground transportation and heavy manufacturing.

Health Care Plan Administrators will also be targeted. These large organizations provide services to public and private self-insured employers. In their role to manage private plans, they can influence care strategies and/or treatment selection criteria, and they may have authority to commit funds for evaluation and treatment. Most of them have financial incentives to contain costs and limit payors' exposure related to ongoing treatment and disability.

Other target markets include firms servicing insurance companies, third-party plan administrators for self-insured employers, and risk and case management companies. We plan on targeting the medical care providers that service these markets such as hospitals, rehabilitation clinics, industrial clinics, diagnostic centers, physical therapists and MRI imaging centers. We feel this second group is also an important component of our strategy because, in addition to its capacity to prescribe MPR, it may serve as a delivery vehicle for the test.

Health Maintenance Organizations (HMOs) are expected to be of vital importance to us due to their leadership role in the cost containment drive and the considerable market share they enjoy.

We will also attempt to recruit hospitals, independent clinics and diagnostic centers as evaluation centers for MPR evaluations. We believe these providers have the potential to become the delivery system for corporate clients and insurance companies. They have the ability to service the medical/legal market and may later become the sites for entry into the medical back pain and physical medicine market.

We also believe that the MPR technology can have a significant impact on the cost containment related to the conservative management of back and neck patients in the rehabilitation industries. The large increase in the cost of treatments over the last decade has resulted in more and more reimbursement being based on capitation. Under the capitation system, health care providers are awarded a fixed maximum in their fees for services. At this time, we believe there are no known objective measures that can monitor if a patient needs more treatment or not. We believe we can provide this objective evidence, and we are planning to build relationships with major national rehabilitation organizations that we believe will result in the establishment of best care practices for the delivery of back and neck rehabilitation protocols.

We also expect to enter into agreements with local and regional medical product distributors to reinforce the sales and marketing of MPR, and to act as service providers to their customers and to other strategic partners. We believe that developing longer sales cycle opportunities will be accomplished through more comprehensive strategic marketing and foreign and domestic partnerships. We anticipate that this combination of efforts will establish the product awareness and acceptance.

Growth through Partnership

We are in the process of developing corporate alliances for the development, sales and marketing of MPR in a number of important markets including North America and the European Union (EU). Initially, we are targeting strategic alliances with corporate partners to gain ‘footholds’ in specific markets outside the United States.

The second level of partnerships is expected to be with U.S. corporate partners to gain access to our key domestic markets. Together we hope to encourage pilot projects with carefully selected customers - employers, workers' compensation carriers, managed care organizations and physicians groups that deliver significant services under workers' compensation.

We have entered into discussions with a European-based company for the sales, marketing and distribution of MPR in the EU but no agreement has been reached at this time. We have also entered into discussions with another company for a distribution deal in Canada but no agreement has been reached.

Research and Development

We continue to develop and enhance the features and performance of our technology with the goal of introducing new products based on our research and development activities. Two of our four employees spend 100% of their time on research and development activities and one other spend a portion of his time on such activities. We engage consultants on an as needed basis and pay them on an hourly basis. In 2009, we paid our consultants an aggregate of $13,279 compared to $9,527 in 2008. We anticipate increasing our research and development activities upon our obtainment of additional funds, of which there can be no assurances.

Employees

We have four full-time employees including one research and development employee, one medical and clinical employee who devotes a portion of his time to research and development activities, and two administrative employees. Three of our employees are members of management. To the best of our knowledge, we are in compliance with local prevailing wage, contractor licensing and insurance regulations. None of our employees is represented by any collective bargaining agreement, and our relationship with our employees is good.

We also engage independent consultants on an “as needed” basis. In 2009, we paid our consultants an aggregate of $31,005, compared to $9,527 in 2008.

Available Information

Our website is www.itechmedical.com. On our website, we make available at no cost our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished as soon as reasonably practicable after we electronically file such material with, or furnish them to, the United States Securities and Exchange Commission (“SEC”). These documents are also publicly available free of charge at the SEC’s website. www.sec.gov. The information contained on our website is not a part of this annual report on Form 10-K nor is it incorporated herein.

Item 1A. Risk Factors.

You should carefully consider the risks described below before making an investment decision in our securities. These risk factors are effective as of the date of this Form 10-K and shall be deemed to be modified or superseded to the extent that a statement contained in our future filings incorporated herein by reference modifies or replaces such statement. All of these risks may impair our business operations. The forward-looking statements in this Form 10-K and in the documents incorporated herein by reference involve risks and uncertainties and actual results may differ materially from the results we discuss in the forward-looking statements. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected.

We are a development stage company with a limited operating history and no revenues.

As a development stage company, our operations are subject to all the risks inherent in launching a new business enterprise, in developing and marketing a new product or service, and in establishing a name and a business reputation. The likelihood of our success must be considered in light of problems, expenses, difficulties and delays frequently encountered in converting prototype designs into viable production designs, and in achieving market acceptance with a new type of product or service. We have had no product revenues to date, have operated at a loss since inception, and will likely sustain operating losses for an indeterminate time period. There can be no assurance that we will ever generate material revenues or that we will ever be profitable.

We may need to raise additional capital in the future, but that capital may not be available.

During the years ended December 31, 2009 and 2008, we incurred a net loss of $3,413,454 and $1,589,500, respectively, and had $146,477 cash on hand as of December 31, 2009 and an accumulated deficit of $10,757,603. We are in the development stage and have not earned any revenue since our inception. Due to the foregoing facts, our auditors have expressed their doubt as to our ability to continue as a going concern. Current funds available to us will not be adequate for us to complete our clinical program. Therefore, we will need to raise additional funds in order to fully implement our business plan. However, there can be no assurance that we will be successful in raising such additional funds. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we might seek to compensate providers of services by issuance of stock in lieu of cash.

Our continued operations therefore will depend upon our ability to raise additional funds through equity or debt financing. There is no assurance that we will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to us. If we cannot obtain needed funds, we may be forced to curtail or cease our activities. We may encounter difficulty in obtaining these funds and/or credit lines. Moreover, even if additional financing or credit lines were to become available, it is possible that the cost of such funds or credit would be high and possibly prohibitive.

Your share ownership will be diluted if we issue shares for capital raising purposes.

A large portion of our financing to date has been through the issuance of shares or through equity financing. There can be no assurances that we will become self-sufficient. Therefore, we may continue to issue shares to further the business, and existing shareholders may suffer a dilutive effect on the price of their shares as well as a loss of voting power in the Company.

We operate in a new and uncertain market.

Until now, muscle injuries have always been diagnosed and evaluated subjectively by physicians through physical examination. Accordingly, there is no established demand for a computer assisted procedure to assist in the diagnosis of such injuries, and it is difficult to predict if, and when, the procedure will gain wide acceptance by prescribers. A prerequisite to our success will be our ability to establish MPR as a standard medical practice for use in the diagnosis of muscle dysfunction. We believe it will take a minimum of three to five years for such awareness to be achieved, if it can be achieved at all. Factors that may affect market acceptance could include resistance to change, concerns over the lack of track record of the procedure, and the risk for insurance companies to use the results of the procedure to challenge or overrule the diagnostic or treatment decisions of a physician.

We may not be able to protect important intellectual property, and we could incur substantial costs defending against claims that our products infringe on the proprietary rights of others.

We currently hold one United States patent on the MPR technology. While we believe that we have a proprietary position for our product, we believe that our ability to be successful will be contingent on our ability to protect the MPR technology, its future developments and its knowhow. There can be no assurance, however, that this patent will provide substantial protection of the MPR technology or that its validity will not be challenged. We could incur substantial costs in prosecuting or defending patent infringement suits or otherwise protecting our intellectual property rights. While we have attempted to safeguard and maintain our proprietary rights, we do not know whether we have been or will be completely successful in doing so.

We presently have no patent protection of the MPR technology outside the United States.

We have only developed a single product which has no sales. The failure of such product to achieve market acceptance would result in our having to raise additional funds for research and development for new products.

Since our incorporation, we have been involved in the research and development of a single product: the Muscle Pattern Recognition System. The MPR System uses patented technology to analyze muscle function in the back and neck. To date, we have achieved no sales of this product and it has yet to achieve market acceptance. Unless we are able to successfully market its MPR System, we will need to raise additional funds to engage in the research and development of new products. We may be unable to raise additional funds on terms acceptable to us, if at all. We have a limited operating history and will continue to incur costs in launching our products.

We may not be able to grow at a rapid pace.

There is no established demand for the MPR System and we may be unable to create such a demand. We cannot predict whether or not the MPR System will gain acceptance by doctors, chiropractors or other health professionals. In the event we are unable to create such acceptance, we will be unable to achieve significant revenues and may have to raise additional funds for research and development of additional products.

Our management controls a substantial percentage of our stock and therefore has the ability to exercise substantial control over our affairs.

As of the date of December 31, 2009, our directors and executive officers owned or controlled an aggregate of 10,313,333 shares, or approximately 38.64%, of our outstanding common stock. Because of the large percentage of stock held by our directors and executive officers, these persons could influence the outcome of any matter submitted to a vote of our stockholders and resist any takeover bids, thereby precluding our stockholders from receiving a premium bid price on their common stock.

The loss of our executive officers and certain other key personnel could hurt our business.

Our success wholly depends upon the personal efforts and abilities of our executive officers, Wayne Cockburn, Alan Goldman and Steve Asselin. The loss of or unavailability of the services of any one of these individuals would have a material adverse effect on our business prospects and/or potential earning capacity.

We may not be able to hire and retain qualified personnel.

Competition for qualified personnel in the healthcare industry is intense, and we may not be successful in attracting and retaining such personnel. Failure to attract qualified personnel could harm the proposed growth of our business. In addition, companies in our industry whose employees accept positions with competitors frequently claim that the competitors have engaged in unfair hiring practices. We may receive such notices in the future as we seek to hire qualified personnel and such notices may result in material litigation and related disruption to our operations.

Because we became public by means of a reverse merger, we may not be able to attract the attention of major brokerage firms.

There may be risks associated with our becoming public through a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of us because there is no incentive to brokerage firms to recommend the purchase of our common stock. We cannot assure you that brokerage firms will ever want to conduct any secondary offerings on our behalf.

The limited prior public market and trading market may cause possible volatility in our stock price.

To date, there has only been a limited public market for our securities and there can be no assurance that we can attain an active trading market for our securities. Our common stock trades on the OTC Bulletin Board (“OTCBB”) under the ticker symbol, IMSU.OB. The OTCBB is an unorganized, inter-dealer, over-the-counter market that provides significantly less liquidity than the national securities exchanges.

Quotes for securities quoted on the OTCBB are not listed in the financial sections of newspapers as are those for the national securities exchanges. Moreover, in recent years, the overall market for securities has experienced extreme price and volume fluctuations that have particularly affected the market prices of many smaller companies. The trading price of our common stock is expected to be subject to significant fluctuations including, but not limited to, the following:

	·	Quarterly variations in operating results and achievement of key business metrics;

	·	Changes in earnings estimates by securities analysts, if any;

	·	Any differences between reported results and securities analysts’ published or unpublished expectations;

	·	Announcements of new products by us or our competitors;

	·	Market reaction to any acquisitions, joint ventures or strategic investments announced by us or our competitors;

	·	Demand for our products;

	·	Shares sold pursuant to Rule 144 or upon exercise of warrants and options; and

	·	General economic or stock market conditions unrelated to our operating performance.

These fluctuations, as well as general economic and market conditions, may have a material or adverse affect on the market price of our common stock.

The OTCBB is a quotation system, not an issuer listing service, market or exchange. Therefore, buying and selling stock on the OTCBB is not as efficient as buying and selling stock through an exchange. As a result, it may be difficult for you to sell your common stock or you may not be able to sell your common stock for an optimum trading price.

The OTCBB executes trades and quotations using a manual process and cannot guarantee the market information for securities. In some instances, quote information, or even firm quotes, may not be available. The OTCBB’s manual execution process may delay order processing and as a result, a limit order may fail to execute or a market order may execute at a significantly different price due to intervening price fluctuations. Trade execution, execution reporting and legal trade confirmation delivery may be delayed significantly. Consequently, one may not be able to sell shares of our common stock at the optimum trading prices.

OTCBB securities are frequent targets of fraud or market manipulation not only because of their generally low price, but also because the OTCBB reporting requirements for these securities are less stringent than for listed or Nasdaq traded securities, and no exchange requirements are imposed. Dealers may dominate the market and set prices that are not based on competitive forces. Individuals or groups may create fraudulent markets and control the sudden, sharp increase of price and trading volume and the equally sudden collapse of the market price for shares of our common stock.

When fewer shares of a security are being traded on the OTCBB, the security’s market price may become increasingly volatile and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes of our common stock, there may be a lower likelihood that one's orders for our common stock will be executed, and current prices may differ significantly from the price one was quoted by the OTCBB at the time of one's order entry.

Orders for OTCBB securities may be canceled or edited like orders for other securities. All requests to change or cancel an order must be submitted to, received and processed by the OTCBB. As mentioned earlier in this document, the OTCBB executes trades using a manual process, which could cause delays in order processing and reporting, and could hamper one’s ability to cancel or edit one's order. Consequently, selling shares of our common stock at the optimum trading prices may be impossible.

The dealer's spread (the difference between the bid and ask prices) may be large and may result in substantial losses to the seller of our common stock on the OTCBB if the stock must be sold immediately. Further, purchasers of our common stock may incur an immediate "paper" loss due to the price spread. Moreover, dealers may not have a bid price for our common stock on the OTCBB. Due to the foregoing factors, demand for our common stock on the OTCBB may be decreased or eliminated.

Our common stock is considered a “penny stock.” The application of the “penny stock” rules to our common stock could limit the trading and liquidity of the common stock, adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

The Securities and Exchange Commission has adopted regulations which generally define a “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. As a result, our shares of common stock are subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established clients and “accredited investors”. For transactions governed by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities, must obtain the purchaser's written consent to the transaction, and must deliver to the purchaser a SEC-mandated, penny stock risk disclosure document, all prior to the purchase. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our shares of common stock and may affect the ability of investors to sell such shares of common stock in the secondary market and may affect the price at which investors can sell such shares.

Investors should be aware that the market for penny stocks has suffered in recent years from patterns of fraud and abuse, according to the Commission. Such patterns include:

	·	Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

	·	Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

	·	“Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

	·	Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

Our management is aware of the abuses that have occurred historically in the penny stock market.

Future sales of our common stock could put downward selling pressure on our common stock, and adversely affect the per share price. There is a risk that this downward pressure may make it impossible for an investor to sell shares of common stock at any reasonable price, if at all.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933 (Securities Act), subject to certain limitations. In general, Rule 144 permits the unlimited sale of securities by our stockholders that are non-affiliates that have satisfied a six month holding period and affiliates of our Company may sell within any three month period a number of securities that does not exceed 1% of our then outstanding shares of common stock. Any substantial sale of our common stock pursuant to Rule 144 or pursuant to any resale prospectus may have material adverse effect on the market price of our securities.

Limitations on director and officer liability and our indemnification of officers and directors may discourage shareholders from bringing suit against a director.

Our certificate of incorporation and bylaws provide, with certain exceptions as permitted by governing Delaware law, that a director or officer shall not be personally liable to us or our shareholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage shareholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by shareholders on our behalf against a director. In addition, our certificate of incorporation and bylaws provide for mandatory indemnification of directors and officers to the fullest extent permitted by Delaware law.

We may experience difficulties in the future in complying with Sarbanes-Oxley Section 404.

In this Annual Report, we are required to evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or stockholder litigation. Any inability to provide reliable financial reports could harm our business. Section 404 of the Sarbanes-Oxley Act will require that for the year ending December 31, 2010 that our independent registered public accounting firm issue an attestation report on management’s evaluation of our system of internal controls. The auditor attestation requirement does not apply to the current fiscal year. Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation of adequate controls over our financial processes and reporting in the future, could harm our operating results or cause us to fail to meet our reporting obligations.

If we fail to maintain proper and effective internal controls in future periods, it could adversely affect our operating results, financial condition and our ability to run our business effectively and could cause investors to lose confidence in our financial reporting.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We lease approximately 200 square feet of office space from Premier Business Centers at 17011 Beach Boulevard, Suite 900, Huntington Beach, California, 92647 pursuant to a month-to-month lease. We paid an aggregate amount of $26,429 under this lease in 2009, which is subject to adjustments every six months. The space can house approximately two employees. We lease approximately 300 square feet of office and clinical space at 5250 Commerce Drive, Suite 200, Murray, Utah 84107 pursuant to a month-to-month lease. We paid an aggregate amount of $30,000 under this lease in 2009. We leased approximately 500 square feet at 2020 University Street, Suite 2000, Montreal, Quebec, H3A 2A5, Canada pursuant to a General Services Agreement with Roy Bonnell & Associates. Under the terms of the General Services Agreement, the lease payments for 2009 are deemed to be paid in full against a payment of 200,000 shares of common stock to Roy Bonnell & Associates.

Item 3. Legal Proceedings.

The Company is not a party to any legal proceedings and to our knowledge, there are no legal proceedings pending or threatened with respect to our company. The Company is not aware of any legal proceedings contemplated by any governmental authorities involving either us or our property. None of our directors, officers or affiliates is an adverse party in any legal proceedings involving us, or has an interest in any proceeding which is adverse to us.

Item 4. Submission of Matters to a Vote of Security Holders.

None during the fourth quarter of the 2009 fiscal year covered by this report.

Item 4A. Executive Officers of the Company.

The following table sets forth certain information regarding the executive officers of the Company.

Name	Position	Age
Wayne D. Cockburn	President and Chief Executive Officer	53
Alan Goldman, MD	Vice President, Clinical and Medical Affairs	64
Steeve Asselin	Vice President, Research and Development	47

There are no family relationships between any of the executive officers.

Mr. Cockburn was elected President and Chief Executive Officer in September 2003.

Dr. Goldman has served as Vice President, Clinical and Medical Affairs for more than five years.

Mr. Asselin has served as Vice President, Research and Development for more than five years.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters, and Issuer Purchases of Equity Securities

Since September 4, 2007, our common shares have been quoted on the Over-the-Counter Bulletin Board (OTCBB) administered by the Financial Regulatory Authority (FINRA), formerly the NASD, under the symbol IMSU.OB, as well as the Pink Sheets under the symbol IMSU.PK. Stocks traded on the OTCBB and Pink Sheets are usually thinly traded, highly volatile, and not followed by analysts. Investors in our common stock may experience a loss or liquidity problem with their share holdings. The table below gives the range of high low bid information for our common stock in 2009. The source of the data is Finance 500, Inc. and the quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

Fiscal Year 2009	Low Bid		High Bid
First Quarter 01-1-09 to 03-31-09	$	0.15	$	0.51
Second Quarter 4-1-09 to 6-30-09	$	0.25	$	0.43
Third Quarter 7-1-09 to 9-30-09	$	0.17	$	0.36
Fourth Quarter 10-1-09 to 12-31-09	$	0.15	$	0.25

The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer's securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, the Company has no plans to register its securities in any particular state. Further, the Company's shares are be subject to the provisions of Section 15(g) and Rule 15g- 9 of the Exchange Act, commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

The SEC generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the SEC; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the issuer's net tangible assets; or exempted from the definition by the SEC. Broker- dealers who sell penny stocks to persons other than established customers and accredited investors (generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse), are subject to additional sales practice requirements.

For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, monthly statements must be sent to clients disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in the Company's common stock and may affect the ability of stockholders to sell their shares.

Issuer Purchases of Equity Securities

The Company has not purchased any equity securities.

Shares Held by Affiliates.

Of the 26,691,732 shares issued and outstanding as of December 31, 2009, 10,313,333 are held by affiliates and are therefore “restricted” and can be sold only in compliance with the resale restrictions of Rule 144 under the Securities Act. This means that there are 16,378,399 shares that are free trading.

Holders

As of the date of this Annual Report, we have 98 holders of record of our Common Stock.

Description of Our Securities

Our authorized capital stock consists of 100,000,000 shares of common capital stock, $0.0001 par value, of which 26,691,732 shares are considered issued and outstanding as of our fiscal year-end, December 31, 2009, and 10,000,000 shares of “blank check” preferred stock, $0.0001 par value, of which none are outstanding. “Blank check” preferred stock may be issued in any one or more series, and any series shall be comprised of such number of shares and may have such voting powers and such designations, preferences and rights as shall be stated and expressed in resolutions of the Board of Directors of the Company, without stockholder approval. To date, the Board has not designated any series of preferred stock.

Voting Rights

Stockholders are entitled to one vote on all matters to be voted upon for each share of common stock held. The shares do not have the right to cumulative voting for directors, meaning that holders of more than 50 percent of the shares voting for the election of directors can elect all of the directors if they choose to do so.

Liquidation Rights

In the event of liquidation, dissolution or a winding up of us or our affairs, holders of common stock would be entitled to receive pro rata all of our remaining assets that are available and distributable to the shareholders after first satisfying claims of creditors and anyone else having rights that are superior to those of the common stockholders (e.g., Preferred Stockholder).

Preemptive Rights

Stockholders do NOT have a preemptive right to acquire our unissued shares of common stock.

Dividends and Dividend Policy

To date, we have neither declared nor paid any dividends on our common stock nor do we anticipate that such dividends will be paid in the foreseeable future. Rather, we intend to retain any earnings to finance the growth and development of our business. Any payment of cash dividends on our common stock in the future will be dependent, among other things, upon our earnings, financial condition, capital requirements and other factors which the board of directors deems relevant. In addition, restrictive covenants contained in any financing agreements entered into in the future may preclude us from paying any dividends.

Securities Issuances/Recent Sales of Unregistered Securities

Since 2003, we have funded the Company through the issuance of various securities including borrowings from certain shareholders and related parties. All securities have been issued pursuant to exemptions from registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), afforded the Company by Section 4(2) promulgated under the Securities Act in light of the fact that the issuances did not involve a public offering of securities of the Company.

The following table sets forth information on loans to the Company, including the name of the lender, the lender’s affiliation, the aggregate principal amount of the issued loan, the maturity date of the loan, the number and series of warrants granted, and the fair value of the warrants (1). All loans carry an annualized interest rate of 10.0%.

Name

Affiliation

Loan

Amount

Issue or

Renewal

Date

Maturity

Date

Warrant

Series (1)

Wts.

Granted

Fair Value

Cavandale Corporation

Affiliate

CDN$145,000

(2)

November 1, 2004

211,270

$4,225

November 1, 2005

July 1, 2005

100,000

$19,246

July 1, 2005

July 1, 2006

100,000

$16,450

July 1, 2006

July 1, 2007

100,000

$39,095

July 1, 2007

July 1, 2008

100,000

$44,484

July 1, 2008

October 1, 2008

145,000

$27,562

October 1, 2008

January 1, 2009

145,000

$12,642

January 1, 2009

July 1, 2009

290,000

$33,214

July 1, 2009

October 31, 2009

145,000

$13,508

October 31, 2009

January 31, 2010

145,000

$6,765

Alan Goldman

Officer

$40,000

December 3, 2007

March 3, 2008

40,000

$14,126

March 3, 2008

June 3, 2008

40,000

$11,920

June 3, 2008

October 31, 2008

40,000

$14,780

October 31, 2008

January 31, 2009

40,000

$1,846

January 1, 2009

April 30, 2009

40,000

$5,211

April 30, 2009

July 31, 2009

40,000

$1,304

July 31, 2009

October 31, 2010

40,000

$1,868

October 31, 2010

January 31, 2010

40,000

$1,866

(1)

Series ‘A’ common stock purchase warrants allow holders to purchase shares of common stock at $0.50 per share until June 30, 2011. Series ‘B’ common stock purchase warrants allow holders to purchase shares of common stock at $1.00 per share until December 31, 2011. The fair value of the Series ‘A’ and Series ‘B’ warrants that were granted to the lenders has been calculated using the Black-Scholes valuation method based on the time of issuance and is reflected as a discount on the loan in the accompanying financial statements and has been amortized over the original life of the loan as an interest expense. The following weighted average assumptions were used to calculate the warrants issued in 2009: term of .21 – 2.54 years, risk-free interest rate of 0.875% - 1.875%, volatility ranging from 78% - 122% and a weighted fair value ranging from $0.0104 - $0.1339.

(2)	Various days from July to October 2004.

Convertible Debt

During 2007 and 2008, the Company issued convertible promissory notes totaling $452,991 to fourteen individuals, each of whom qualifies as an “accredited investor” under Regulation D of the Securities Act. The notes carried an annual interest rate of 12%, matured on July 30, 2009 and were convertible into common shares at a rate of $1.00 per share until December 31, 2009. The fourteen note holders were granted a total 684,487 Series B warrants for their initial loans and for agreeing to extend the maturity date throughout the lives of the loans. The value attributed to the warrants in 2009 totaled $3,693 at the issuance dates and are being amortized to interest expense over the life of the loans.

On June 30, 2009, all fourteen individuals agreed to convert the outstanding principal amounts of their loans into common shares at a rate of 3.333 shares of common stock for each dollar of principle outstanding for a total of 1,509,970 common shares.

See Note 5 Convertible Debt in the financial statements for the 2007 and 2008 convertible promissory notes information and the extension of these notes in 2008 and 2009.

Loans from Related Parties

During 2009, the Company issued three short-term promissory notes totaling $70,000 to MPR Health Systems, Inc, an affiliate shareholder. The notes carried an annual interest rate of 10% and had various maturity dates. MPR Health Systems was granted a total 25,000 Series A warrants, 65,000 Series B warrants and 25,000 Series C warrants for its loans and for agreeing to extend the maturity date throughout the lives of the loans. The value attributed to the warrants in 2009 totaled $7,581 at the issuance dates and were amortized to interest expense over the life of the loans.

In September, 2009, MPR Health Systems agreed to convert the outstanding principal amounts of their loans into common shares at a rate of 3.333 shares of common stock for each dollar of principal outstanding for a total of 233,334 common shares.

During 2007 and 2008, the Company borrowed a total of $31,500 from Wayne Cockburn, its CEO. The short-term promissory notes carried an annual interest rate of 10% and had various maturity dates. Mr. Cockburn was granted a total 166,000 Series B warrants for his loans and for agreeing to extend the maturity date throughout the lives of the loans. The value attributed to the warrants in 2009 totaled $ 3,633 at the issuance dates and were amortized to interest expense over the life of the loans.

In September, 2009, Mr. Cockburn agreed to convert the outstanding principal amounts of his loans into common shares at a rate of 3.333 shares of common stock for each dollar of principal outstanding for a total of 105,000 common shares.

During 2007, the Company borrowed a total of $25,000 from George Angelidis, one of its directors. The short-term promissory note carried an annual interest rate of 10% and had a maturity date of July 30, 2009. Mr. Angelidis was granted a total 250,000 Series B warrants for his loan and for agreeing to extend the maturity date throughout the life of the loan. The value attributed to the warrants in 2009 totaled $ 4,072 at the issuance dates and were amortized to interest expense over the life of the loans.

In September, 2009, Mr. Angelidis agreed to convert the outstanding principal amount of his loan into common shares at a rate of 3.333 shares of common stock for each dollar of principal outstanding for a total of 83,333 common shares.

During 2007, the Company borrowed a total of $40,000 from Alan Goldman, one of its officers. The short-term promissory note carries an annual interest rate of 10% and has a maturity date of January 31, 2010. Dr. Goldman has been granted a total 320,000 Series B warrants for his loan and for agreeing to extend the maturity date throughout the life of the loan. The value attributed to the warrants in 2009 totaled $ 10,249 at the issuance dates and are being amortized to interest expense over the life of the loans.

In 2004, the Company borrowed a total of CD$145,000 from Cavandale Corporation, a Company owned by one of the directors. The loan carries an annual interest rate of 10% and has a maturity date of January 31, 2010. Cavandale has been granted a total of 211,270 Series A warrants and 1,270,000 Series B warrants for its loan and for agreeing to extend the maturity date throughout the life of the loan. The value attributed to the warrants in 2009 totaled $ 53,487 at the issuance dates and are being amortized to interest expense over the life of the loans.

During 2007, the Company borrowed a total of $100,000 from Frans Berndsen, one of its shareholders. During the second quarter, $65,000 of these loans were issued and treated as 12% convertible notes payable as described in Note 4 Loans from related parties. In September 2007 the Company and Mr. Berndsen agreed there had been a misunderstanding and a debt restructuring occurred. The original $65,000 in loans was restructured to modify the original terms, as well as for the remaining $35,000 which was received in the third quarter. The Company negotiated with Mr. Berndsen to convert these promissory notes totaling $100,000 plus accrued interest of $22,807 and other accrued liabilities of $45,000 into 984,964 shares of the Company’s common stock valued at $.30 per share. This transaction resulted in a loss on extinguishment of debt of $127,682, which is included in general and administrative expenses in the accompanying statement of operations. Mr. Berndsen was granted a total 700,000 Series B warrants for his loan and for agreeing to extend the maturity date throughout the life of the loan.

See Note 4 Loans from related parties in the financial statements for the notes information and the extension of these notes in 2008 and 2009.

Other Loans

During 2008, the Company borrowed a total of $10,000 from Gregory Harrison, an individual who also loaned the Company $100,000 in the convertible note program. This loan, evidenced by a short-term promissory note carried an annual interest rate of 10% and matured on July 31, 2009. Mr. Harrison was granted a total 50,000 Series B warrants for his loan and for agreeing to extend the maturity date throughout the life of the loan. The value attributed to the warrants in 2009 totaled $ 1,629 at the issuance dates and are being amortized to interest expense over the life of the loan.

In September, 2009, Mr. Harrison agreed to convert the outstanding principal amount of his loan into common shares at a rate of 3.333 shares of common stock for each dollar of principle outstanding for a total of 33,333 common shares.

See Note 6 Other loans payable in the financial statements for the notes information and the extension of this note in 2008 and 2009.

Common Stock Issued

In March 2009, the Board of Directors authorized a private placement to sell up to 500,000 units of the Company’s common stock and Series A warrants at $.30 per unit. Each unit shall be comprised of one share of the Company’s common stock and one Series A warrant. The Series A warrants may be exercised to purchase an equivalent number of common shares at $0.50 per share and expire June 30, 2011. On May 22, 2009, the Board of Directors increased the private placement to sell an additional 166,667 units of the Company’s common stock and Series A warrants at $.30 per unit. During the quarter ended June 30, 2009, the Company sold 666,666 units for gross proceeds of $200,000 to six non-US purchasers pursuant to Regulation S.

On April 16, 2009, the Company entered into a one year consulting agreement for strategic communications services. Payment terms include issuance of 200,000 shares of the Company’s shares valued at $66,000 (the trading price on the contract date was $0.33) for services. See note 7 for additional information about this contract. The value of the shares was deferred and is being amortized over the life of the contract.

On May 15, 2009, the Company negotiated a settlement with two of its creditors. The creditors agreed to accept 80,000 of the Company’s common shares valued at $36,000 (the trading price on the date of settlement was $0.45) to settle $68,000 in accounts payable, resulting in a $32,000 gain on settlement of debt. The gain on settlement of debt is included in general and administrative expenses in the accompanying statement of operations.

On June 12, 2009, the Board of Directors authorized issuance of 300,000 shares of the Company’s common shares valued at $129,000 (the trading price on the date of grant was $0.43) for services.

During the third quarter of 2009, the Company negotiated a settlement with one of its creditors. The creditor agreed to accept 265,000 of the Company’s common shares valued at $79,500 to settle $79,250 in accounts payable, resulting in a $250 loss on settlement of debt. The loss on settlement of debt is included in general and administrative expenses in the accompanying statement of operations.

During the third quarter of 2009, the Company negotiated settlements with holders of all of its convertible debt, many of its related party loans and its other loan payable. Specific details of these transactions are described in notes 2 through 4 of these financial statements. Common shares issued for these transactions totaled 2,949,934: 2,723,911 for principal amount of debt, 76,023 for accrued interest and 150,000 for consulting fees.

During the third quarter of 2009, the Board of Directors authorized a private placement to sell up to 1,500,000 shares of the Company’s common stock at $.30 per share. Each unit shall be comprised of one share of the Company’s common stock and one Series A warrant. The Series A warrants may be exercised to purchase an equivalent number of common shares at $0.50 per share and expire June 30, 2011. In 2009, the Company sold 411,667 shares for gross proceeds of $123,500.

On December 4, 2009, the Board of Directors authorized a bridge financing to sell up to 740,000 shares of the Company’s common stock at $.25 per share. Each unit shall be comprised of one share of the Company’s common stock and two Series E warrants. The Series E warrants are exercisable at $.30 per share and expire December 31, 2012. The Company sold all 740,000 in December 2009 for gross proceeds of $185,000.

On December 4, 2009, the Board of Directors granted its CEO 1,800,000 shares to recognize his service to the Company. The shares were valued at $522,000 (the trading price on the date of grant was $0.29) and are included in general and administrative expenses in the accompanying financial statements.

On December 31, 2009, the Company signed a new agreement with one of its consultants to cancel 240,000 shares of common stock and 300,000 Series C warrants for the issuance of 300,000 Series A warrants.

Stock options

In October 2003, the Company adopted the Stock Option Plan (the "2003 Plan"), which was also approved by its stockholders in October 2003. The 2003 Plan expired on December 31, 2007. The maximum number of shares of common stock that could be issued pursuant to awards granted under the 2003 Plan was increased on March 19, 2004 from 2,250,000 to 4,850,000, subject to certain adjustments to prevent dilution. Any shares of common stock subject to an award, which for any reason expires or terminates unexercised, are again available for issuance under the 2003 Plan. On March 10, 2004, a total of 4,173,600 options were granted. The grant price was $0.25, with 2,120,000 options vesting immediately and the remaining 2,053,600 options vesting on March 10, 2005. 305,000 options were cancelled in 2006, 915,000 options were cancelled in 2009, and the remaining 2,953,600 options expire on March 10, 2014. Options under the 2003 Plan were granted under Item 701 of the Securities Act.

In February 2008, the Company adopted the 2008 Equity Incentive Plan (the “2008 Plan”). The purpose of the 2008 Plan is to attract, retain, and motivate certain key employees of the Company by giving them incentives which are linked directly to increases in the value of the common stock of the Company. Each director, officer, employee, or consultant of the Company is eligible to be considered for the grant of awards under the 2008 Plan. The maximum number of shares of common stock that may be issued pursuant to awards granted under the 2008 Plan 1,000,000, subject to certain adjustments to prevent dilution. Any shares of common stock subject to an award, which for any reason expires or terminates unexercised, are again available for issuance under the 2008 Plan. Grants under the 2008 Plan are exercisable at the market value of the Company's stock on the date of such grant. All options under the 2008 Plan are exercisable at times as determined by the board of directors, not to exceed 10 years from the date of grant. No options were granted during 2009.

Securities Authorized for Issuance under Equity Compensation Plans

As described above, 2,953,600 shares of our common stock are authorized for issuance upon the exercise of 2,953,600 outstanding options awards granted under the 2003 Plan at $0.25 per share. The 2003 Plan, which was approved by stockholders in October 2003, expired on December 31, 2007.

In February 2008, we adopted the 2008 Plan. Under the 2008 Plan, there are 1,000,000 shares authorized for issuance as awards. To date, no awards have been granted under the 2008 Plan.

We have not registered the shares issuable upon the exercise of options granted under our 2003 Plan.

The table below sets forth information regarding our equity compensation awards issued as of December 31, 2009:

EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2009
	Number of securities to be issued upon the exercise of outstanding option, warrants and rights (a)		Weighted average exercise price of outstanding options, option, warrants and rights (b)		Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		2,953,600	$	0.25		0

Equity compensation plans not approved by securities holders		0		0		0

Total		2,953,600	$	0.25		0

Item 6. Selected Financial Data.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The information set forth and discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is derived from the Financial Statements of iTech Medical, Inc. and the related notes thereto which are included as exhibits to this current report. The following information and discussion should be read in conjunction with such Financial Statements and notes. Additionally, this Management’s Discussion and Analysis of Financial Condition and Results of Operations constitutes forward-looking statements. We encourage you to review our “Cautionary Note Regarding Forward-Looking Statements” at the front of this current report, and our “Risk Factors” set forth above.

Overview

We were formed on October 20, 1997 to pursue a business combination. We purchased the assets of MPR Health Systems, Inc. on September 9, 2003, including a patent and trademark for the Muscle Pattern Recognition (MPR) System. On December 27, 2006, we entered into a Plan and Agreement of Merger (the “Merger Agreement”) with Freedom 1, Inc. (“Freedom 1”), a “blank check company,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Since December 2002 and continuing after the Merger, we have been involved in the development and pre-market clinical testing of the MPR System.

Plan of Operations

In the next 12 months, we anticipate reaching a number of clinical and regulatory milestones. They include:

·	completing the current clinical trial of the MPR System at the Utah Spine and Joint Center;

·	initiating an outcome study of the MPR System at one or more research sites in North America;

·	obtaining the CE Marking for the MPR System in Europe;

·	obtaining commercial approval of the MPR System in Canada, and;

·	submitting an application to have our MPR System cleared for marketing and sales in the US.

Strategic Plan

There are many challenges that we will encounter as we build our business. To meet these challenges, we believe it is important to assemble a team of experienced healthcare executives and medical opinion leaders to work with us to carry out the business and marketing plans of the Company. We also believe that to be successful in the development and commercialization of the MPR System, we must not only meet the milestones discussed above, but we must also:

·	Develop an awareness of MPR with physicians, employers, insurance companies, HMOs and other potential users of the MPR System;

·	Develop a template for consistent usage patterns of MPR in key reference accounts;

·	Form relationships with key strategic partners with access to insurers, self insured employers and other health care organizations that could use the MPR System;

·	Establish MPR in selected key reference accounts in geographic markets throughout the U.S., creating a delivery system to perform the tests as and where needed; and,

·	Form corporate alliances for the development, sales and marketing of MPR in a number of important foreign markets.

Current funds available to us will not be adequate for us to complete these programs. During the years ended December 31, 2009 and 2008, we incurred a net loss of $3,413,454 and $1,589,500, respectively, and had $146,477 cash on hand as of December 31, 2009. We are in the development stage and have not earned any revenue since our inception. Therefore, we will need to raise additional funds in order to fully implement our business plan. However, there can be no assurance that we will be successful in raising such additional funds on favorable terms if at all. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we might seek to compensate providers of services by issuance of stock in lieu of cash.

Our continued operations therefore will depend upon our ability to raise additional funds through bank borrowings, equity or debt financing. Given the turbulence and volatility in the capital markets, there is no assurance that we will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to us. If we cannot obtain needed funds, we may be forced to curtail or cease our activities. We may encounter difficulty in obtaining these funds and/or credit lines. Moreover, even if additional financing or credit lines were to become available, it is possible that the cost of such funds or credit would be high and possibly prohibitive.

As our business grows, we anticipate hiring additional employees and retaining additional consultants.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We rely on historical experience and on other assumptions we believe to be reasonable under the circumstances in making our judgment and estimates. Actual results could differ from those estimates. We consider our critical accounting policies to be those that are complex and those that require significant judgments and estimates, including the following: recognition of revenue, expensing of software development costs and valuation of our intangible assets and the determination of the valuation allowance of our deferred income taxes.

Development Stage Company

We are a development stage company as defined in Accounting Standards Codification ("ASC") 915, Development Stage Entities. We are devoting substantially all of our present efforts to establish a new business, and our planned principal operations have not yet commenced. We have not generated any material revenues throughout our history and our ability to continue in business is dependent upon obtaining sufficient financing or attaining future profitable operations.

Patent

Patent consists of U.S. Patent No. 6,280,395 and legal fees incurred in maintaining the patent for our product. These costs are amortized over a period of seventeen years using the straight-line method.

Long Lived Assets

Long-lived assets (primarily furniture and equipment and patents) are reviewed annually for impairment whenever events or changes in circumstances indicate that carrying amount of an asset may not be recoverable. Impairment is necessary when the undiscounted cash flows estimated to be generated by the asset are less than the carrying amount of the asset.

Research and Development Costs

Costs and expenses that can be clearly identified as research and development are charged to expense as incurred in accordance with ASC 730, “Research and Development”.

Stock-based Compensation

We have adopted the provisions of ASC 718 and have measured compensation cost related to stock options issued to employees at their fair value using the Black-Scholes method. Stock based compensation issued to persons other than employees is also reflected in the financial statements at fair value computed using the Black-Scholes method.

Results of Operations

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Net Losses; Revenues

We incurred net losses of $3,413,454 for the year ended December 31, 2009 and $1,589,500 for the year ended December 31, 2008. We had no revenues for the year ended December 31, 2009 and no revenues for the year ended December 31, 2008.

Research and Development

We expense our research and developments costs as incurred. Research and development expenses consisted of costs associated with the design, development, testing, and enhancement of the MPR System. The primary costs are salaries, consulting fees and non-recurring software development costs. Research and development expenses increased marginally to $134,504 in 2009 from $134,327 in 2008.

Medical and Clinical

Medical and clinical expenses consisted of costs associated with the preparation for the clinical trials for the MPR System. The primary costs are salaries, consulting fees, clinical trial protocol development costs and clinical research organization costs. Medical and clinical expenses increased to $181,500 in 2009 from $123,852 in 2008. The increase from 2008 to 2009 is primarily due to the ongoing clinical trial at the Utah Spine and Joint Center.

General and Administrative Expenses

General and administrative expenses increased to $2,612,279 in 2009 from $960,683 in 2008 primarily due to an increase of $1,066,009 in common stock issued for services and interest; an increase of $251,691 in the issuance of warrants for services, and; an increase of $122,095 in the amortization of loan discounts. We expect that we will require approximately $2.0 million of cash for operating activities in 2010. This is due primarily to the work required to complete the MPR analytical software, the completion of the clinical trial program for the MPR System, and the regulatory filings we expect to make in North America and Europe before the end of 2010.

Interest Income and Expense

During 2009 and 2008, we relied on short term borrowings to finance our operating activities. The interest expense for the year ended December 31, 2009 increased to $484,255 as compared with $369,775 for the year ended December 31, 2008 primarily due to an increase in short term borrowings. The actual “cash” interest accrual for 2009 was $74,898 versus $82,513 for 2008. The decrease in the interest expense was due to much of the short-term borrowings converted to common stock in the third quarter

The assumptions used to calculate the discounts and beneficial conversion features vary from year to year. In 2009, we extended the expiration dates of our Series A and B warrants to June 30, 2011 and December 31, 2011, respectively, and $304,540 was subsequently recorded as interest. This increase in “non-cash interest” was offset however because our share price was lower for most of 2009 versus 2008, and the time frame that the lenders have to exercise the warrants continues to decline, the amount of the discount also declines and the beneficial conversion feature was negative and therefore not reported.

The average borrowing was approximately $27,586 in 2009 and $28,026 in 2008, and when discounts from warrants and conversion features are taken into account, the average interest expense for each note was approximately $15,133 in 2009 and $12,716 in 2008. The weighted average interest rate for the short term borrowings outstanding at December 31, 2009 is 11.82% in 2009 and 17.19% in 2008, after taking into account the discounts from warrants and conversion features.

Liquidity and Capital Resources; Going Concern

We are in the development stage and have not earned any revenue since our inception. These factors have caused our auditors to express substantial doubt as to our ability to continue as a going concern. During the years ended December 31, 2009 and 2008, we incurred a net loss of $3,413,454 and $1,589,500, respectively.

At December 31, 2009 and 2008, we had cash on hand of $146,477 and $34,015, respectively. We utilized cash of approximately $483,732 in the period ended December 31, 2009 compared to $368,956 for the same period ended December 31, 2008. The cash used in operating activities in 2009 is higher than 2008 due to the resumption of our research and clinical programs. We have funded our operations primarily through private placements of equity securities. In 2009, we raised gross proceeds of approximately $70,000 from loans from related parties and $508,500 from the issuance of common stock.

We will need to raise additional capital to support our projected increases in staffing and other operating expenses, which we cannot give any assurance we will be able to accomplish. If we are unable to raise additional capital, it will be necessary for us to significantly reduce expenses to stay in business. In addition, any new equity or debt financing which we secure may not be available to us at prices that would be acceptable. Our failure to reduce expenses or obtain necessary financing could impair our ability to stay in business. See “Risk Factors -- We may need to raise additional capital in the future, but that capital may not be available.”

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

None.

Item 8. Financial Statements.

Our audited financial statements are included after the signature page of this Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A(T). Controls and Procedures.

Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

iTech Medical’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. As required by Rule 13a-15(c) under the Exchange Act, iTech Medical’s management carried out an evaluation, with the participation of iTech Medical’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its internal control over financial reporting as of the end of the last fiscal year. The framework on which such evaluation was based is contained in the report entitled “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Report”).

iTech Medical’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on its assessment, management has concluded that iTech Medical maintained effective internal control over financial reporting as of December 31, 2009, based on criteria in “Internal Control - Integrated Framework” issued by the COSO.

Change in Internal Controls

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Commission that permit us to provide only management’s report in this annual report.

Item 9B. Other Information

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The name, initial year of service as a director, age, and position or office of each member of our board of directors, is as follows:

Name	Director Since	Age	Position
Wayne D. Cockburn	2003	53	President, Chief Executive Officer and Director

Donald Paterson(1)(2)(3)	2003	77	Chairman of the Board and Director

George Angelidis(4)(5)(6)	2003	64	Director

Craig Lunsman(7)	2007	63	Director

(1)

Member of the Audit Committee since January 2004.

(2)

Member of the Compensation Committee since January 2004.

(3)

Member of the Corporate Governance Committee since January 2004.

(4)

Member of the Audit Committee and Stock Option Committee since January 2004.

	(5)	Member of the Nominating Committee since January 2004.

	(6)	Member of the Compensation Committee since January 2004.

	(7)	Member of the Audit, Compensation and Corporate Governance Committees since September 2007.

The business experience, principal occupations and directorships in publicly-held companies of the members of our board of directors are set forth below.

Wayne Cockburn – President and CEO, Director

Mr. Cockburn joined iTech Medical in September 2003. Prior to iTech Medical, Mr. Cockburn was President at MPR Health Systems from January 2002 until September 2003 and Executive Vice President from January 2000 until January 2002. From January 1995 to December 1999, Mr. Cockburn was Vice President, Business Development for Lorus Therapeutics, a public biotechnology company. Mr. Cockburn’s background includes strategic planning, corporate finance, corporate partnering, corporate governance and mergers and acquisitions. Mr. Cockburn has served on the board of directors of several private and public companies. Mr. Cockburn currently serves on the board of directors of MPR Health Systems, Inc. and Red Juggernaut, Inc.

Donald W. Paterson - President, Cavandale Corporation

Since May 1986, Mr. Paterson has been President of Cavandale Corporation, a company principally engaged in providing strategic corporate consulting to emerging growth companies within the technology and healthcare industries. Prior to founding Cavandale Corporation, Mr. Paterson was a Director and Vice-President of Wood Gundy Inc., a Canadian investment bank, from Jan. 1982 to Sep. 1988 where he was directly involved in leading the firm’s activities in financing Canadian and international high technology companies. Mr. Paterson currently serves on the board of directors of Angoss Software Corp., Homeservice Technologies Inc., NewGrowth Corp. and Utility Corp.

George D. Angelidis – Healthcare Consultant

Mr. Angelidis is an independent healthcare consultant. From 1998 until 2008, Mr. Angelidis was the President of Hospital Network, Inc. (HNI), a partnership initially consisting of 6 Michigan-based hospitals. During his tenure, Mr. Angelidis expanded HNI to 17 hospitals by adding 11 new hospital members and structuring a new entity, Hospital Network Healthcare Services L.L.C. He was directly responsible for the company's mobile MRI, bone density and TUMT services, mobile Occupational Wellness, and Medical Waste Disinfection programs. Additionally, the Network provided medical record scanning and archiving under Mr. Angelidis, and was a regional PACs archiving service, and a member Telehealth service. Mr. Angelidis also managed three affiliated ventures for the fifteen healthcare partners.

Prior to joining Hospital Network, Mr. Angelidis spent eighteen years with Eastman Kodak Company where his most recent position was Senior Technical Sales Representative for the Health Sciences Division. Mr. Angelidis spent time with Picker International in Cleveland, Ohio as their Regional Sales Manager, Manager Group Accounts and Zone Sales Manager and was responsible for over five hundred million dollars in annual sales.

Prior to Picker International, Mr. Angelidis was Vice President of Sales and Manager at King’s Medical in Hudson, Ohio where he gained experience in capital equipment programs. Once introduced to mobile services Mr. Angelidis spent five years with Medical Consultants Imaging, Co. located in Cleveland as Vice President of Sales, Marketing and Business Development. Medical Consultants Imaging Co. was the first joint venture partner of Hospital Network in 1986.

Craig Lunsman, President, William Jamieson Group

Mr. Lunsman is the Founder and Managing Director of William Jamieson Group, Inc., a consulting group that provides securities valuation and corporate advisory services to public and private small cap companies. Prior to founding William Jamieson Group in 1993, Mr. Lunsman was a Co- Founder and Principal in Houlihan Valuation Advisors, Inc., a company specializing in providing services related to business valuations, fairness opinions and other valuation and economic issues. Mr. Lunsman received his BS from the University of Southern California in 1970 and graduate work for his MBA and has been involved in providing strategic planning, financing and other corporate advisory services since that time. He has served as an Expert Witness on business valuation and other related financial matters in California and other states, and has also testified before the Internal Revenue Service relative to valuation matters. He has been a member of the American Society of Appraisers, San Francisco Chapter and has been a published author and a frequent speaker on issues relating to business valuation. As an outside director, Mr. Lunsman acts as Chairman of the Company's Audit Committee as well as serve on each of the Compensation and Corporate Governance Committees.

Familial Relationships

There are no family relationships among the officers and directors.

Audit, Nominating and Compensation Committees

Donald Paterson, George Angelidis and Craig Lunsman constitute the Board of Director’s Audit, Corporate Governance and Compensation Committees. The Board does not have an “audit committee financial expert” (as defined in Item 407(d)(5)(ii) to Regulation S-B promulgated under the Exchange Act) serving on its Audit Committee. The Board anticipates appointing a financial expert to its Audit Committee in the near future.

Code of Ethics

On April 23, 2004, our Board adopted a Code of Ethics which is filed as exhibits to this Annual Report.

Involvement in Certain Legal Proceedings

During the past five years no director or executive officer of the company (i) has been involved as a general partner or executive officer of any business which has filed a bankruptcy petition; (ii) has been convicted in any criminal proceeding nor is subject to any pending criminal proceeding; (iii) has been subjected to any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (iv) has been found by a court, the Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law.

Information Concerning Non-Director Executive Officers

The name, age, position or office, and business experience of each of our non-director executive officers is as follows:

Name	Age	Position
Alan J. Goldman, MD	64	Vice President, Clinical and Medical Affairs

Steeve Asselin	47	Vice President, Research and Development

Alan J. Goldman, M.D. - Vice President, Clinical and Medical Affairs

Dr. Goldman joined iTech Medical in September 2003. Prior to joining iTech Medical, Dr. Goldman was a practicing Board Certified neurologist for 32 years and an Associate Clinical Professor of Neurology at the University of California (Irvine). Through his practice, Dr. Goldman attained extensive experience with work-related injuries. He served as a neurology consultant to numerous insurers and served for four years on the Medical Advisory Board of Blue Cross. Dr. Goldman serves as an expert witness in Workers’ Compensation and general liability litigation matters and was recently appointed as a Medical Panel Chairperson for the State of Utah Labor Commission. His Workers’ Compensation appointments include Independent Medical Examiner for the State of California in 1990, Qualified Medical Evaluator, State of California in 1991 and Agreed Medical Evaluator, State of California in 1992. Dr. Goldman is also a member of the American Academy of Neurology, the California Medical Association, the Utah Medical Association and a Past-President of the Orange County Neurological Society.

At iTech Medical, Dr. Goldman is responsible for all the clinical and medical affairs of the Company. In addition to being a key member of the management team, Dr. Goldman also serves as Chairman of the Company's Medical Advisory Board.

Steeve Asselin - Vice President, Research and Development

Prior to joining iTech Medical in September 2003, Mr. Asselin was the Director of the Biomechanics Lab at HealthSouth Inc. from September 2000 to December 2002. Mr. Asselin was responsible for the development of the Biomechanics Lab at HealthSouth to enhance and support the clinical programs and services of the company. From May 1994 until September 1999, Mr. Asselin was Research Coordinator at Spinex Medical Technologies. From February 1992 until March 1994, Mr. Asselin was Director, Clinical and Spinoscopy Affairs with a physician group in Boston, Mass. Prior to that, Mr. Asselin was a Research Assistant at Spinex Medical Technologies from September 1989 until February 1992. Mr. Asselin is coauthor of six scientific publications dealing with back injuries and back function and author and/or coauthor of approximately 30 scientific abstracts.

Information Concerning Non-Director, Non-Executive Medical Consultants

The name, position or office, and business experience of each of our non-director, non-executive medical consultants are as follows:

Medical Advisory Board

The Company has established a Medical Advisory Board (MAB) whose members provide advice on the clinical, medical and scientific affairs of IMS, and who work with the Company on new product development. The MAB is chaired by Alan Goldman, MD, the Company’s Vice President of Clinical and Medical Affairs.

Gunnar B.J. Andersson, MD, PhD

Dr. Andersson is the Chairman Emeritus of Orthopedic Surgery at the Rush University Medical Center in Chicago; past managing partner of Midwest Orthopedic; past President of the International Society for the Study of the Lumbar Spine and past Chairman of the American Academy of Orthopedic Surgeons Research Development Committee.

V. Reggie Edgerton, PhD

Dr. Edgerton is Distinguished Professor of the Departments of Physiological Sciences and Neurobiology at the UCLA Medical Center. He is also Project Program Director of studies on neuromuscular plasticity following spinal cord injury and conducts studies of physiological changes in microgravity for NASA.

Scott Haldeman DC, MD, PhD

Dr. Haldeman is a Clinical Professor of Neurology at the University of California, Irvine and Adjunct Professor in the Research Division at the UCLA Medical Center. Dr. Haldeman is also Chairman of the Research Council of the World Federation of Chiropractic and a Past-President of the North American Spine Society.

Steven L. Wolf, PhD

Dr. Wolf is a Professor in the Department of Rehabilitation Medicine; a Professor in Geriatrics in the Department of Medicine, and; Associate Professor in the Department of Cell Biology at the Emory School of Medicine. Dr. Wolf is also a Professor in Health and Elder Care in the Nursing School at Emory and is on the Advisory Council of the National Center for Medical Rehabilitation Research (NIH -NICHHD).

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Exchange Act requires the Company’s directors and officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company’s securities with the SEC of Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

Item 405 of Regulation S-1 requires every small business issuer that has a class of equity securities registered pursuant to Section 12 of the Exchange Act to identify each person who, at any time during the fiscal year, was a director, officer or beneficial owner of more than 10 percent of any class of equity securities registered pursuant to Section 12 of the Exchange Act that failed to file on a timely basis, as disclosed in the above forms as well as other information. As of the date hereof, our executive officers and directors and the stockholders listed in Item 11 who beneficially own more than 10% of our common stock have filed their Forms 3, 4 or 5 with the Securities and Exchange Commission. Other than the foregoing, the Company believes that no other person who, at any time during such fiscal year, was a director, officer or beneficial owner of more than 10% of the Company’s common stock failed to comply with all Section 16(a) filing requirements during such fiscal year.

Item 11. Executive Compensation.

Summary Compensation Table

The following table sets forth certain compensation information, paid and accrued, for: (i) each person who served as the chief executive officer of iTech Medical at any time during the year ended December 31, 2009, regardless of compensation level, and (ii) each of our other executive officers, other than the chief executive officer, serving as an executive officer at any time during 2009. The foregoing persons are collectively referred to in this Form 10-K as the “Named Executive Officers.” Compensation information is shown for fiscal years 2009 and 2008.

Name/Principal Position	Year		Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Wayne D. Cockburn
President and		2009		164,420		—		522,000		—		—		—		—		686,420
Chief Executive Officer		2008		90,000		—		—		—		—		—		—		90,000

Alan J. Goldman, MD
Vice President,		2009		90,000		—		—		—		—		—		—		90,000
Clinical and Medical Affairs		2008		90,000		—		—		—		—		—		—		90,000

Steeve Asselin
Vice President,		2009		87,275		—		—		—		—		—		—		87,275
Research and Development		2008		90,000		—		—		—		—		—		—		90,000

There are no employment agreements between iTech Medical and any executive officer of iTech Medical.

Outstanding Option Awards at Year End

The following table provides certain information regarding unexercised options to purchase common stock, stock options that have not vested, and equity-incentive plan awards outstanding at December 31, 2009, for each Named Executive Officer.

Outstanding Equity Awards At Fiscal Year-End

	Option Awards										Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Wayne Cockburn		1,060,200		0		0	$	0.25		3/10/14		0		n/a		0		0
Alan Goldman		511,200		0		0	$	0.25		3/10/14		0		n/a		0		0
Steeve Asselin		412,200		0		0	$	0.25		3/10/14		0		n/a		0		0

Director Compensation

The following table sets forth the compensation paid to our directors for our fiscal year ended December 31, 2009, excluding iTech Medical’s Chief Executive Officer Wayne D. Cockburn, whose compensation is set forth in the Summary Compensation Table for Named Executive Officer, set forth above.

Director Compensation

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)	Option Awards ($)		Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)	Total ($)
George Angelidis (1)		0	0		0	0		0	0		0
Craig Lunsman (2)		0	0		0	0		0	0		0
Donald Paterson (3)		0	0		0	0		0	0		0

(1)	At December 31, 2009, Mr. Angelidis had exercisable options to purchase 280,000 shares of our common stock at $0.25 per share. These options were granted in March 2004.

(2)	At December 31, 2009, Mr. Lunsman had exercisable options to purchase 100,000 shares of our common stock at $0.25 per share. These options were granted in March 2004.

(3)	At December 31, 2009, Mr. Paterson had exercisable options to purchase 310,000 shares of our common stock at $0.25 per share. These options were granted in March 2004.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.

The following table sets forth, as of April 8, 2010, certain information concerning the beneficial ownership of common stock by (i) each person known by the Company to be the owner of more than 5% of the outstanding Common Stock, (ii) each director, (iii) each Named Executive Officer, and (iv) all directors and executive officers as a group. In general, “beneficial ownership” includes those shares a shareholder has the power to vote or the power to transfer, and stock options and other rights to acquire Common Stock that are exercisable currently or become exercisable within 60 days. Except as indicated otherwise, the persons named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them. The calculation of the percentage owned is based on 26,691,732 shares of Common Stock outstanding. Unless otherwise stated, the address of each of the directors and executive officers listed below is c/o iTech Medical, Inc., 17011 Beach Boulevard, Suite 900, Huntington Beach, California, 92647.

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership
	Amount and Nature of Beneficial Ownership			Percent of Class
Wayne Cockburn 23 Valley Trail Newmarket, Ontario Canada L3Y 4V8		9,925,000	(1)		37.18	%
MPR Health Systems, Inc. 23 Valley Trail Newmarket, Ontario Canada L3Y 4V8		8,000,000			29.97	%
George Angelidis 6380 Brogan Hill Kalamazoo, Michigan 49009		183,333			0.69	%
Craig Lunsman 154 Lombard Street Suite 60 San Francisco, California 94111		105,000			0.39	%
Donald Paterson 24 Elgin Avenue Toronto, Ontario. Canada M5R 1G6		8,100,000	(2)(3)		30.35	%
Vespa Family Entities 1075 Old Mohawk Road Ancaster Ontario Canada L9G 3K9		2,100,000			7.87	%
All Officers and Directors as a Group (6 people)		12,413,333	(4)		46.51	%

(1)	Includes 8,000,000 shares held by MPR Health Systems, Inc. Mr. Cockburn may be deemed to share voting and investment power with respect to these shares by virtue of being a director and the chief executive officer of that corporation.

(2)	Includes 8,000,000 shares held by MPR Health Systems, Inc.; Mr. Paterson may be deemed to share voting and investment power with respect to these shares by virtue of being a director of that corporation.

(3)	Includes 100,000 shares of common stock held by Cavandale Corporation. Mr. Paterson is President and sole owner of Cavandale Corporation.

(4)	Includes securities in footnotes (1), (2) and (3). 8,000,000 shares held by MPR Health Systems, Inc. counted once for aggregate number of shares owned as a group.

Changes in Control. There are no arrangements which may result in a change of control of the Company.

Our Certificate of Incorporation authorizes 10,000,000 shares of “blank check” preferred stock, $0.0001 par value. “Blank check” preferred stock may be issued in any one or more series, and any series shall be comprised of such number of shares and may have such voting powers and such designations, preferences and rights as shall be stated and expressed in resolutions of the Board of Directors of the Company. Accordingly, under our Certificate of Incorporation, the Board is authorized to designate one or more classes of preferred stock which could be issued to effect a change in control. To date, the Board has not designated any series of preferred stock.

Item 13. Certain Relationships and Related Transactions and Directors Independence.

During 2009, the Company issued three short-term promissory notes totaling $70,000 to MPR Health Systems, Inc, an affiliate shareholder. The notes carried an annual interest rate of 10% and had various maturity dates. MPR Health Systems was granted a total 25,000 Series A warrants, 65,000 Series B warrants and 25,000 Series C warrants for its loans and for agreeing to extend the maturity date throughout the lives of the loans. In September, 2009, MPR Health Systems agreed to convert the outstanding principal amounts of their loans into common shares at a rate of 3.333 shares of common stock for each dollar of principle outstanding for a total of 233,334 common shares.

During 2007 and 2008, the Company borrowed a total of $31,500 from Wayne Cockburn, its CEO. The short-term promissory notes carried an annual interest rate of 10% and had various maturity dates. Mr. Cockburn was granted a total 166,000 Series B warrants for his loans and for agreeing to extend the maturity date throughout the lives of the loans. In September, 2009, Mr. Cockburn agreed to convert the outstanding principal amounts of his loans into common shares at a rate of 3.333 shares of common stock for each dollar of principle outstanding for a total of 105,000 common shares.

During 2007, the Company borrowed a total of $25,000 from George Angelidis, one of its directors. The short-term promissory note carried an annual interest rate of 10% and had a maturity date of July 30, 2009. Mr. Angelidis was granted a total 250,000 Series B warrants for his loan and for agreeing to extend the maturity date throughout the life of the loan. In September, 2009, Mr. Angelidis agreed to convert the outstanding principal amount of his loan into common shares at a rate of 3.333 shares of common stock for each dollar of principle outstanding for a total of 83,333 common shares.

During 2007, the Company borrowed a total of $100,000 from Frans Berndsen, one of its shareholders. During the second quarter, $65,000 of these loans were issued and treated as 12% convertible notes payable as described in Note 4 Loans from related parties. In September 2007 the Company and Mr. Berndsen agreed there had been a misunderstanding and a debt restructuring occurred. The original $65,000 in loans was restructured to modify the original terms, as well as for the remaining $35,000 which was received in the third quarter. The Company negotiated with Mr. Berndsen to convert these promissory notes totaling $100,000 plus accrued interest of $22,807 and other accrued liabilities of $45,000 into 984,964 shares of the Company’s common stock valued at $.30 per share. This transaction resulted in a loss on extinguishment of debt of $127,682, which is included in general and administrative expenses in the accompanying statement of operations. Mr. Berndsen was granted a total 700,000 Series B warrants for his loan and for agreeing to extend the maturity date throughout the life of the loan.

Item 14. Principal Accountant Fees and Service.

Our independent registered public auditors are Farber Hass Hurley LLP. Their office is located at 888 W. Ventura Blvd. Suite A, Camarillo, CA 93010.

Audit Fees

The aggregate fees billed by the Company’s auditors for professional services rendered in connection with the audit of the Company's annual consolidated financial statements and quarterly reviews for the fiscal years ended December 31, 2008 and 2009 were approximately $63,000 and $61,000, respectively.

Audit-Related Fees

The Company’s auditors did not bill any additional fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company's financial statements.

Tax Fees

The aggregate fees billed by the Company's auditors for professional services for tax compliance, tax advice, and tax planning were $0 for each of the fiscal years ended December 31, 2008 and 2009.

All Other Fees

The aggregate fees billed by the Company's auditors for all other non-audit services, such as attending meetings and other miscellaneous financial consulting, for each of the fiscal years ended December 31, 2008 and 2009 were $0.

Pre-Approval Policies and Procedures

The Company’s audit committee currently has a policy in place that requires its review and pre-approval of all audit and permissible non-audit services provided by its independent auditors. These services requiring pre-approval by the audit committee may include audit services, audit related services, tax services and other services.

PART IV

Item 15. Exhibits.

Exhibit No.		Description
3.2 (1)		Bylaws of iTech Medical, Inc.

10.3(1)		Code of Ethics

31.1(2)		Certification of the Company’s Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002, with respect to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2009.

32.1(2)		Certification of the Company’s Principal Executive Officer and Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

(1)	Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on December 29, 2006 and incorporated by reference herein.

(2)	Not deemed to be "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section.

iTech Medical, Inc.

(Formerly known as Impact Medical Solutions, Inc)

Financial Statements

For the fiscal year ended December 31, 2009

Contents


Index to Financial Statements			F-1

Report of Farber Hass Hurley LLP, a PCAOB Registered Accounting Firm			F-2

Audited Financial Statements
Balance Sheets			F-3
Statements of Operations			F-4
Statements of Cash Flows			F-5
Statements of Changes in Stockholders’ Equity			F-6

Notes to Financial Statements			F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of iTech Medical, Inc. (Formerly known as Impact Medical Solutions, Inc)

We have audited the accompanying balance sheet of iTech Medical, Inc. (Formerly known as Impact Medical Solutions, Inc), a development stage company (the "Company") as of December 31, 2009 and December 31, 2008, and the related statements of operations, shareholders' equity (deficit), and cash flows for each of the years ended December 31, 2009, 2008 and 2007 and October 20, 1997 (date of inception) to December 31, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of iTech Medical, Inc. (Formerly known as Impact Medical Solutions, Inc)as of December 31, 2009, and the results of its operations and its cash flows for each of the years ended December 31, 2009, 2008 and 2007, and October 20, 1997 (date of inception) to December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, Company has not recognized any revenue since inception and has a shareholders deficit of $(1,419,436). These factors raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Farber Hass Hurley, LLP

April 14, 2010

Camarillo, California

F-2

iTech Medical, Inc.

(Formerly known as Impact Medical Solutions, Inc.)

(A Development Stage Company)

Balance Sheets

	December 31,
	2009			2008
ASSETS
Current assets
Cash	$	146,477		$	34,015
Prepaid expenses		4,219			5,218

Total current assets		150,696			39,233

Furniture and equipment, net of accumulated depreciation of
$52,257 and $58,119 at December 31, 2009 and 2008, respectively		7,549			17,270

Patent, net of accumulated amortization of $186,276 and $156,864
at December 31, 2009 and 2008, respectively		313,724			343,136
	$	471,969		$	399,639

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Loans from related parties, net of unamortized discount of $2,908 and
$3,258 at December 31, 2009 and 2008, respectively	$	175,306		$	311,896
Convertible debt, net of unamortized discount of $4,267 at December 31, 2008		-			448,724
Other loan payable, net of unamortized discount of $116 at December 31, 2008		-			9,884
Note payable		34,613			34,613
Accounts payable		337,160			279,282
Accrued interest		213,156			153,229
Accrued vacation		83,170			64,133
Accrued salaries, bonuses and other payroll related items		1,010,500			589,600
Director compensation		37,500			-
Other accrued liabilities		-			30,000
Total current liabilities		1,891,405			1,921,361

Commitments and contingencies		-			-

Shareholders' deficit
Preferred stock, 10,000,000 shares authorized, $.0001 par value,
no shares issued and outstanding		-			-
Common stock, 100,000,000 shares authorized, $.0001 par value,
26,691,733 and 18,768,466 shares issued and outstanding
at December 31, 2009 and 2008, respectively		2,669			1,877
Additional paid-in capital		9,593,824			6,432,631
Deferred option and warrant costs		(258,326	)		(612,081	)
Deficit accumulated during the development stage		(10,757,603	)		(7,344,149	)
Total shareholders' deficit		(1,419,436	)		(1,521,722	)
	$	471,969		$	399,639

The accompanying notes are an integral part of these financial statements.

F-3

iTech Medical, Inc.

(Formerly known as Impact Medical Solutions, Inc.)

(A Development Stage Company)

Statements of Operations

										Cumulative
										from inception
										(October 20,
										1997) to
	Year ended December 31,									December 31,
	2009			2008			2007			2009

Costs and expenses:
Research and development	$	134,504		$	134,327		$	151,217		$	1,006,556
Medical and clinical		181,500			123,852			105,767			1,411,065
General and administrative		2,612,279			960,683			666,632			6,844,266

Operating loss		(2,928,283	)		(1,218,862	)		(923,616	)		(9,261,887	)

Other income (expense):

Interest expense		(484,255	)		(369,775	)		(338,294	)		(1,488,856	)
Interest income		43			-			15			333

		(484,212	)		(369,775	)		(338,279	)		(1,488,523	)

Loss before provision for taxes		(3,412,495	)		(1,588,637	)		(1,261,895	)		(10,750,410	)

Provision for taxes		959			863			1,594			7,193


Net loss	$	(3,413,454	)	$	(1,589,500	)	$	(1,263,489	)	$	(10,757,603	)

Basic and diluted net loss per share	$	(0.16	)	$	(0.09	)	$	(0.08	)


Basic and diluted weighted average
number of common shares
outstanding		21,690,964			16,833,629			15,996,205

Maximum number of common shares (not included in denominator of diluted loss per share
calculation due to their anti-dilutive nature) attributable to exercise of:
Outstanding options		2,953,600			3,868,600			3,868,600
Outstanding warrants (Series A-E)		14,710,463			10,852,382			7,945,636

The accompanying notes are an integral part of these financial statements.

F-4

iTech Medical, Inc.

(Formerly known as Impact Medical Solutions, Inc.)

(A Development Stage Company)

Statements of Cash Flow

										Cumulative
										from inception
										(October 20,
										1997) to
	Year ended December 31,									December 31,
	2009			2008			2007			2009
Cash flows from operating activities:
Net loss	$	(3,413,454	)	$	(1,589,500	)	$	(1,263,489	)	$	(10,757,603	)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization		39,785			43,827			43,970			255,064
Loss on disposal of assets		1,215			-			-			1,215
Loss on extinguishment of debt		95,932			-			-			95,932
Amortization of loan discount		409,357			287,262			290,227			1,232,256
Issuance of common stock for services & interest		1,506,268			440,259			81,464			2,138,151
Issuance of stock options and warrants for services		310,924			59,233			64,119			1,490,761
Decrease (increase) in prepaid expenses		999			21,468			(21,677	)		(4,219	)
Increase (decrease) in accounts payable		57,878			9,407			103,402			337,160
Increase (decrease) in accrued expenses		507,364			359,088			171,474			1,344,326
Net cash used by operating activities		(483,732	)		(368,956	)		(530,510	)		(3,866,957	)

Cash flows from investing activities:
Capital expenditures		(1,867	)		(4,514	)		(564	)		(77,552	)
Net cash used by investing activities		(1,867	)		(4,514	)		(564	)		(77,552	)

Cash flows from financing activities:
Proceeds from loans from related parties		70,000			21,500			175,000			411,500
Proceeds from convertible debt		-			120,000			332,991			452,991
Proceeds from loans from others		-			10,000			-			10,000
Payments on note payable		-			-			-			(65,387	)
Issuance of common stock, net of costs		508,500			270,000			-			3,288,668
Net cash provided by financing activities		578,500			421,500			507,991			4,097,772

Effect of exchange rate changes		19,561			(29,159	)		27,320			(6,786	)

Net increase (decrease) in cash		112,462			18,871			4,237			146,477
Cash, beginning of period		34,015			15,144			10,907			-
Cash, end of period	$	146,477		$	34,015		$	15,144		$	146,477

Non-cash investing and financing activities:
Issuance of common stock & note payable for patent	$	-		$	-		$	-		$	500,000
Issuance of warrants with debt	$	100,085		$	212,546		$	353,036		$	930,624
Conversion of debt to equity	$	689,491		$	-		$	-		$	689,491

The accompanying notes are an integral part of these financial statements.

F-5

iTech Medical, Inc.

(Formerly known as Impact Medical Solutions, Inc.)

(A Development Stage Company)

Statements of Changes in Shareholders’ Equity (Deficit)

From Inception (October 20, 1997) to December 31, 2009

										Deficit
							Deferred Share,			Accumulated			Total
	Common Stock				Additional		Option &			During the			Shareholders'
	Number				Paid-in		Warrant			Development			Equity
	of Shares		Total		Capital		Cost			Stage			(Deficit)
Initial capitalization		3,000,000	$	1,500	$	1,250	$	-		$	-		$	2,750
Net loss for 1997		-		-		-		-			(2,750	)		(2,750	)
Balance, December 31, 1997		3,000,000		1,500		1,250		-			(2,750	)		-
Net loss for 1998		-		-		-		-			-			-
Balance, December 31, 1998		3,000,000		1,500		1,250		-			(2,750	)		-
Net loss for 1999		-		-		-		-			-			-
Balance, December 31, 1999		3,000,000		1,500		1,250		-			(2,750	)		-
Net loss for 2000		-		-		-		-			-			-
Balance, December 31, 2000		3,000,000		1,500		1,250		-			(2,750	)		-
Net loss for 2001		-		-		-		-			-			-
Balance, December 31, 2001		3,000,000		1,500		1,250		-			(2,750	)		-
Net loss for 2002		-		-		-		-			-			-
Balance, December 31, 2002		3,000,000		1,500		1,250		-			(2,750	)		-
Net loss for 2003		-		-		-		-			(181,023	)		(181,023	)
Shares issued for patent		8,000,000		4,000		396,000		-			-			400,000
Shares issued for cash net of share issue costs of $86,096		2,086,000		1,043		434,361		-			-			435,404
Balance, December 31, 2003		13,086,000		6,543		831,611		-			(183,773	)		654,381
Net loss for 2004		-		-		-		-			(733,248	)		(733,248	)
Stock option costs		-		-		5,009		-			-			5,009
Warrants issued with loans payable		-		-		4,225		-			-			4,225
Shares issued for cash net of share issue costs of $17,602		895,000		448		561,950		-			-			562,398
Balance, December 31, 2004		13,981,000		6,991		1,402,795		-			(917,021	)		492,765
Net loss for 2005		-		-		-		-			(1,496,992	)		(1,496,992	)
Stock warrant costs		-		-		238,892		(199,946	)		-			38,946
Amortization of stock warrant costs		-		-		-		85,273			-			85,273
Warrants issued with loans payable		-		-		16,450		-			-			16,450
Shares issued for services		60,160		30		60,130		-			-			60,160
Shares issued for cash net of share issue costs of $52,689		1,045,000		522		991,789		-			-			992,311
Balance, December 31, 2005		15,086,160	$	7,543	$	2,710,056	$	(114,673	)	$	(2,414,013	)	$	188,913

(continued)

The accompanying notes are an integral part of these financial statements.

F-6

iTech Medical, Inc.

(Formerly known as Impact Medical Solutions, Inc.)

(A Development Stage Company)

Statements of Changes in Shareholders’ Equity (Deficit)

From Inception (October 20, 1997) to December 31, 2009

										Deferred Share,			Accumulated			Total
	Common Stock						Additional			Option &			During the			Shareholders'
	Number						Paid-in			Warrant			Development			Equity
	of Shares			Total			Capital			Cost			Stage			(Deficit)
Balance, December 31, 2005		15,086,160		$	7,543		$	2,710,056		$	(114,673	)	$	(2,414,013	)	$	188,913
Shares issued for cash		517,305			259			517,046			-			-			517,305
Shares issued for services		50,000			25			49,975			-			-			50,000
Impact shares converted to Freedom 1 at 1 to 1		-			(6,262	)		6,262			-			-			-
Shares issued upon merger		200,000			20			(20	)		-			-			-
Value of warrants issued		-			-			1,101,523			(430,046	)		-			671,477
Amortization of stock warrant costs		-			-			-			500,062			-			500,062
Net loss for 2006		-			-			-			-			(2,077,147	)		(2,077,147	)
Balance, December 31, 2006		15,853,465			1,585			4,384,842			(44,657	)		(4,491,160	)		(149,390	)
Shares issued for services		625,000			63			454,937			(455,000	)		-			-
Value of warrants issued		-			-			386,399			(33,363	)		-			353,036
Amortization of share, option and warrant cost		-			-			-			145,583			-			145,583
Net loss for 2007		-			-			-			-			(1,263,489	)		(1,263,489	)
Balance, December 31, 2007		16,478,465			1,648			5,226,178			(387,437	)		(5,754,649	)		(914,260	)
Shares issued for cash, net of issuance costs of $30,000		400,001			40			269,960			-			-			270,000
Settlement of liability		100,000			10			69,990									70,000
Shares issued for services		1,790,000			179			468,321			(356,000	)		-			112,500
Value of warrants issued		-			-			398,182			(185,636	)		-			212,546
Amortization of share, option and warrant cost		-			-			-			316,992			-			316,992
Net loss for 2008		-			-			-			-			(1,589,500	)		(1,589,500	)
Balance, December 31, 2008		18,768,466			1,877			6,432,631			(612,081	)		(7,344,149	)		(1,521,722	)
Shares issued for services and interest		3,621,023			362			1,207,162			(373,216	)		-			834,308
Value of warrants issued		-			-			628,788			(450	)		-			628,338
Shares issued for cash		1,818,333			182			508,318			-			-			508,500
Shares issued upon conversion of debt		2,723,911			272			816,901			-			-			817,173
Amortization of share, option and warrant cost		-			-			-			727,421			-			727,421
Cancellation of shares		(240,000	)		(24	)		24			-			-			-
Net loss for 2009		-			-			-			-			(3,413,454	)		(3,413,454	)
Balance, December 31, 2009		26,691,733		$	2,669		$	9,593,824		$	(258,326	)	$	(10,757,603	)	$	(1,419,436	)

The accompanying notes are an integral part of these financial statements.

F-7

iTech Medical, Inc.

(Formerly known as Impact Medical Solutions, Inc.)

(A Development Stage Company)

Notes to Financial Statements

December 31, 2009

1.	Organization and summary of significant accounting policies

Organization and Line of Business

iTech Medical, Inc., formerly known as Impact Medical Solutions, (a development stage company) (the "Company" or “IMS”), a Nevada corporation, was incorporated on October 20, 1997. On September 9, 2003, IMS acquired a patent from MPR Health Systems, Inc., a California corporation; a patented medical information system called Muscle Pattern Recognition (“MPR”) with a value of $500,000. Since inception, iTech Medical has been involved in the development and pre-market clinical testing of the MPR system.

Merger of iTech Medical, Inc. into Freedom 1, Inc.

On December 27, 2006, Freedom 1, Inc., a Delaware corporation (“Freedom 1”), entered into a Plan and Agreement of Merger (the “Merger Agreement”) with iTech Medical, a privately held Nevada corporation (“iTech Medical”), pursuant to which iTech Medical purchased 1 share of Freedom 1 for $1.00, and Freedom 1 became a wholly owned subsidiary of iTech Medical (the “Sale”). Following the Sale, Freedom 1 effected a short-form parent-subsidiary merger pursuant to the Merger Agreement of iTech Medical with and into Freedom 1, pursuant to which the separate existence of iTech Medical terminated and Freedom 1 changed its name to “iTech Medical, Inc.”

Concurrently with the merger, stockholders of iTech Medical received 1 share of Freedom 1’s common stock for each issued and outstanding share of iTech Medical’s common stock. As a result, at closing Freedom 1 issued 15,653,465 shares of its common stock to the stockholders of iTech Medical, representing 100% of Freedom 1’s outstanding common stock immediately following the Merger. In addition, 200,000 shares of the Company’s stock were issued to the former shareholder of Freedom 1.

Common stock options and warrants exercisable into 11,010,241 shares of iTech Medical before the merger are exercisable into the same number of shares of IMS after the merger.

Development Stage Company

The Company is a development stage company as defined in Accounting Standards Codification (“ASC”) 915, Development Stage Entities. The Company is devoting substantially all of its present efforts to establish a new business, and its planned principal operations have not yet commenced. The Company has not generated any material revenues throughout its history. The Company's ability to continue in business is dependent upon obtaining sufficient financing or attaining future profitable operations.

F-8

1.	Organization and summary of significant accounting policies (continued)

Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States that contemplate continuation of the Company as a going concern. However, during the years ended December 31, 2009, 2008 and 2007, the Company incurred a net loss of $3,413,454, $1,589,500, and $1,263,489, respectively, and is in the development stage at December 31, 2009. The Company has not earned any revenue since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Recovery of the Company's assets is dependent upon future events, the outcome of which is indeterminable. In addition, successful completion of the Company's clinical development program and its transition to the attainment of profitable operations is dependent upon obtaining adequate financing to fulfill its development activities and achieving a level of sales adequate to support the Company's cost structure. In view of these matters, realization of a major portion of the assets in the accompanying balance sheets is dependent upon the Company's ability to meet its financing requirements and the success of its plans to sell its products. On March 19, 2010, the Company entered into a financing agreement with a European investor for $2.2 million of equity financing over the next 12 months. The investor has the option to provide another $1.0 million of equity financing during the following six months (See Note 11, Subsequent events). The Company is attempting to raise approximately $2,000,000 in additional funds over the next year through private placements. However, there can be no assurance that the Company will be successful in raising such additional funds. The Company may also seek to compensate providers of services by issuance of stock in lieu of cash.

Cash and cash equivalents, other cash flow statement supplemental information and concentration of risk

The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. Balances in bank accounts may, from time to time, exceed insured limits. The Company believes that its loss exposure is limited due to quality of the financial institutions that hold its deposits.

Income taxes of $959, $863, and $1,594 were paid in 2009, 2008 and 2007, respectively. No interest payments were made in 2009, 2008 and 2007.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Furniture and Equipment

Furniture and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, which is 5 years.

Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. When furniture and equipment are retired or disposed of, the related costs and accumulated depreciation are eliminated from the accounts, and any gain or loss on such disposition is reflected in operations.

F-9

1.	Organization and summary of significant accounting policies (continued)

Patent

Patent consists of U.S. Patent No. 6,280,395 and legal fees incurred in maintaining the patent for the Company's product. These costs are amortized over a period of seventeen years using the straight-line method.

Long-lived assets

Research and Development Costs

Costs and expenses that can be clearly identified as research and development are charged to expense as incurred in accordance with ASC 730, Research and Development.

Income Taxes

The Company accounts for income taxes under the liability method required by ASC 740, Income Taxes, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. Tax returns are subject to examination by taxing authorities and the returns for years 2005 – 2008 are still open.

Share-based payments

Compensation costs for all share-based awards to employees are measured based on the grant date fair value of those awards and recognized over the period during which the employee is required to perform service in exchange for the award (generally over the vesting period of the award). The Company has no awards with market or performance conditions. Excess tax benefits are recognized as an addition to additional paid-in-capital.

Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on the Company’s historical experience, the Company expects no forfeitures.

The Company had no share-based compensation expenses for the years ended December 31, 2009, 2008 and 2007.

F-10

1.	Organization and summary of significant accounting policies (continued)

Share-based payments (continued)

Since the Company has a net operating loss carryforward as of December 31, 2009, no excess tax benefits for the tax deductions related to share-based awards were recognized in the statement of operations. Additionally, no incremental tax benefits were recognized from stock options exercised in the years ended December 31, 2009, 2008 and 2007 which would have resulted in a reclassification to reduce net cash provided by operating activities with an offsetting increase in net cash provided by financing activities.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with accounting principles generally accepted in the United States. For certain of the Company's financial instruments, including cash, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities. The amounts shown for convertible debt, note payable, loans from related parties and other loans also approximate fair value because current interest rates offered to the Company for notes payable of similar maturities are substantially the same.

Valuation Hierarchy

ASC 820 establishes a three-level valuation hierarchy for the use of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date:

Level 1. Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 assets and liabilities include debt and equity securities and derivative financial instruments actively traded on exchanges, as well as U.S. Treasury securities and U.S. Government and agency mortgage-backed securities that are actively traded in highly liquid over the counter markets.

Level 2. Observable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs that are observable or can be corroborated, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 assets and liabilities include debt instruments that are traded less frequently than exchange traded securities and derivative instruments whose model inputs are observable in the market or can be corroborated by market observable data. Examples in this category are certain variable and fixed rate non-agency mortgage-backed securities, corporate debt securities and derivative contracts.

Level 3. Inputs to the valuation methodology are unobservable but significant to the fair value measurement. Examples in this category include interests in certain securitized financial assets, certain private equity investments, and derivative contracts that are highly structured or long-dated.

F-11

1.	Organization and summary of significant accounting policies (continued)

Fair Value of Financial Instruments – (continued)

Determination of Fair Value

During 2009, the Company issued warrants with notes payable and for the extension of loan due dates. These warrants were valued at fair value using the Black-Scholes method, a level 3 input. Further details of the assumptions used in the Black-Scholes calculation may be found in Note 8.

Net Loss Per Share

Basic loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include dilutive options, warrants and other potential common stock outstanding during the period. None of the outstanding options or warrants were included in the computation of loss per share because they were anti-dilutive.

Recent accounting pronouncements

In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No.161, “Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB statement No.133” (ASC 815). This standard requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008, with early application encouraged. As such, the Company adopted these provisions at the beginning of the fiscal year ending December 31, 2009 and adoption had no impact on these financial statements.

In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60" (ASC 460). This standard interprets and amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included within the scope of that Statement. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years. As such, the Company adopted these provisions at the beginning of the fiscal year ended December 31, 2009 and adoption had no impact on these financial statements.

In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" (ASC 450). This standard establishes principles and requirements for subsequent events, and is effective for interim or annual financial periods ending after June 15, 2009. As such, the Company adopted this standard in the second quarter with no significant effect on the Company's consolidated financial statements.

F-12

1.	Organization and summary of significant accounting policies (continued)

Recent accounting pronouncements (continued)

In June 2009, the FASB issued SFAS No. 166 "Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140"(ASC 860). This standard improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. The standard is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. As such, the Company is required to adopt this standard in the year ended December 31, 2010. The Company is evaluating the impact the adoption of this standard will have on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167 "Amendments to FASB Interpretation No. 46(R)" (ASC 810). This standard improves financial reporting by enterprises involved with variable interest entities and is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. As such, the Company is required to adopt this standard in the year ended December 31, 2010. The Company is evaluating the impact the adoption of this standard will have on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles" (ASC 105). This standard establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP, and is effective for financial statements issued for interim and annual periods ending after September 15, 2009. As such, the Company adopted this standard in the third quarter with no material effect on its financial statements

F-13

1.	Organization and summary of significant accounting policies (continued)

In June 2009, the FASB amended its guidance on accounting for variable interest entities ("VIE"). Among other things, the new guidance requires a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE; requires continuous assessments of whether an enterprise is the primary beneficiary of a VIE; enhances disclosures about an enterprise's involvement with a VIE; and amends certain guidance for determining whether an entity is a VIE. Under the new guidance, a VIE must be consolidated if the enterprise has both (a) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The requirements of the amended accounting guidance are effective for interim and annual periods beginning after November 15, 2009 and early adoption is prohibited. The Company believes that the adoption of this guidance does have an impact on the Company's financial statements in connection with its relationship with an entity named Salus Research Inc. (“Salus”), a Canadian entity owned by a Company Officer and two members of the Company’s Board of Directors. See footnote 11 to these financial statements for additional information.

In October 2009, the FASB issued Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging Issues Task Force," ("ASU 2009-13"). This update provides amendments to the criteria of ASC 605, "Revenue Recognition," for separating consideration in multiple-deliverable arrangements. The amendments to this update establish a selling price hierarchy for determining the selling price of a deliverable. This Accounting Standards Update will be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Alternatively, an entity can elect to adopt this standard on a retrospective basis. The Company is currently evaluating the potential impact this standard may have on its financial position and results of operations upon adoption.

In January 2010, the FASB issued ASU 2010-06, an update that improves the requirements related to Fair Value Measurements and Disclosures Subtopic 820-10 of the FASB Accounting Standards Codification originally issued as FASB Statement 157. This update requires disclosures about transfers between Level 1, Level 2 and Level 3 assets and the disaggregated activity in the roll forward for level 3 Fair Value measurements. These new disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company does not expect the adoption of ASU 2010-06 to have a material impact on its financial statements.

On August 27, 2008, the SEC announced that it will issue for comment a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board. Under the proposed roadmap, the Company could be required in fiscal 2014 to prepare financial statements in accordance with IFRS, and the SEC will make a determination in 2011 regarding the mandatory adoption of IFRS. The Company has not yet assessed the impact that this potential change would have on its financial statements.

F-14

2.	Furniture and equipment

	2009			2008			2007
Furniture and equipment	$	59,806		$	75,389		$	70,875
Less accumulated depreciation		(52,257	)		(58,119	)		(43,704	)
	$	7,549		$	17,270		$	27,171
Depreciation expense	$	10,373		$	14,415		$	14,558

Patents

	2009		2008		2007
Patents
Gross carrying amount	$	500,000	$	500,000	$	500,000
Accumulated amortization	$	186,276	$	156,864	$	127,452
Amortization expense	$	29,412	$	29,412	$	29,412

Amortization of patents is expected to be $29,412 in each of the next five years.

4.	Loans from related parties

On September 17, 2009, the Company borrowed a total of $25,000 from MPR Health Systems, Inc. (MPR). This loan, evidenced by a short-term promissory note issued on September 17, 2009, bears interest at 10% per annum and matures on January 1, 2010. MPR was also granted 25,000 Series A common stock purchase warrants to purchase 25,000 shares of common stock at $.50 per share until June 30, 2011. The fair value of the warrants using the Black-Scholes valuation method totaled $2,536 and was reflected as a discount on the loans and was amortized through the end of September when MPR agreed to convert the principal amount of this loan into common shares at a rate of $.30 per share for a total of 83,333 shares.

On April 2, 2009, the Company borrowed a total of $20,000 from MPR Health Systems, Inc. This loan, evidenced by a short-term promissory note issued on April 2, 2009, bears interest at 10% per annum and matured on July 2, 2009. MPR was also granted 20,000 Series B common stock purchase warrants to purchase 20,000 shares of common stock at $1.00 per share until December 31, 2011. The fair value of the warrants using the Black-Scholes valuation method totaled $208 and was reflected as a discount on the loans and was amortized over the life of the loan as interest expense. On July 2, 2009, the maturity date of the $20,000 promissory note to MPR was extended to October 31, 2009. MPR was granted an additional 20,000 Series B common stock purchase warrants to purchase 20,000 shares of common stock at $1.00 per share until December 31, 2011. The fair value of the warrants using the Black-Scholes valuation method totaled $2,677 and was reflected as a discount on the loan and amortized over the extended life of the loan as interest expense. In September 2009, MPR agreed to convert the principal amount of this note into common shares at a rate of $0.30 per share for a total of 66,667 shares.

F-15

4.	Loans from related parties (continued)

On February 20, 2009, the Company borrowed a total of $25,000 from MPR. This loan, evidenced by a short-term promissory note issued on February 20, 2009, bears interest at 10% per annum and matures on May 20, 2009. MPR was also granted 25,000 Series C common stock purchase warrants to purchase 25,000 shares of common stock at $1.25 per share until September 1, 2011. The fair value of the warrants using the Black-Scholes valuation method totaled $3,127 and was reflected as a discount on the loans and was amortized over the extended life of the loans as interest expense. On May 20, 2009, the maturity date of the $25,000 promissory note to MPR was extended to August 20, 2009. MPR was granted 25,000 Series B common stock purchase warrants to purchase 25,000 shares of common stock at $1.00 per share until December 31, 2011. The fair value of the warrants using the Black-Scholes valuation method totaled $1,710 and was reflected as a discount on the loan and was amortized over the extended life of the loan as interest expense. In September 2009, MPR agreed to convert the principal amount of this note into common shares at a rate of $0.30 per share for a total of 83,334 shares.

During 2008, the Company borrowed a total of $1,500 from Wayne Cockburn, its CEO. This loan, evidenced by a short-term promissory note issued on June 17, 2008, bears interest at 10% per annum and matured on September 17, 2008. Mr. Cockburn was also granted 1,500 Series B common stock purchase warrants to purchase 1,500 shares of common stock at $1.00 per share until December 31, 2009. The fair value of the warrants using the Black-Scholes valuation method totaled $470 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On September 17, 2008, the maturity date of the $1,500 promissory note to Mr. Cockburn was extended to December 17, 2008. Mr. Cockburn was granted an additional 1,500 Series B common stock purchase warrants to purchase 1,500 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $144 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On December 17, 2008, the maturity date of the $1,500 promissory note to Mr. Cockburn was extended to April 30, 2009. Mr. Cockburn was granted an additional 1,500 Series B common stock purchase warrants to purchase 1,500 shares of common stock at $1.00 per share until December 31, 2011 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $77 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On April 30, 2009, the maturity date of the $1,500 promissory note to Mr. Cockburn was extended to July 29, 2009. Mr. Cockburn was granted an additional 1,500 Series B common stock purchase warrants to purchase 1,500 shares of common stock at $1.00 per share until December 31, 2011 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $49 at the time of issuance, and is reflected as a discount on the loan in the accompanying financial statements and is being amortized over the life of the loan as interest expense. In September 2009, Mr. Cockburn agreed to convert the principal amount of this note into common shares at a rate of $0.30 per share for a total of 5,000 shares.

F-16

4.	Loans from related parties (continued)

During 2008, the Company borrowed a total of $10,000 from Wayne Cockburn, its CEO. This loan, evidenced by a short-term promissory note issued on June 2, 2008, bears interest at 10% per annum and matured on September 2, 2008. Mr. Cockburn was also granted 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009. The fair value of the warrants using the Black-Scholes valuation method totaled $3,695 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On September 2, 2008, the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to December 2, 2008. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $2,582 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On December 2, 2008, the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to April 30, 2009. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2011 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $389 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On April 30, 2009, the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to July 29, 2009. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2011 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $326 at the time of issuance, and is reflected as a discount on the loan in the accompanying financial statements and is being amortized over the life of the loan as interest expense. In September 2009, Mr. Cockburn agreed to convert the principal amount of this note into common shares at a rate of $0.30 per share for a total of 33,333 shares.

During 2008, the Company borrowed a total of $10,000 from Wayne Cockburn, its CEO. This loan, evidenced by a short-term promissory note issued on April 1, 2008, bears interest at 10% per annum and matured on July 1, 2008. Mr. Cockburn was also granted 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009. The fair value of the warrants using the Black-Scholes valuation method totaled $2,879 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On July 1, 2008, the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to October 31, 2008. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $1,901 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On October 31, 2008, the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to January 31, 2009. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $462 at the time of issuance, and is reflected as a discount on the loan in the accompanying financial statements and is being amortized over the life of the loan as interest expense. On January 31, 2009, this loan was extended to April 30, 2009 and Mr. Cockburn was granted 10,000 Series B warrants for extending the due date. The fair value of the warrants using the Black-Scholes valuation method totaled $1,303 at the time of issuance, and was reflected as a discount on the loan and was amortized over the extended life of the loan as interest expense. On April 30, 2009, the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to July 29, 2009. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2011 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $326 at the time of issuance, and is reflected as a discount on the loan in the accompanying financial statements and is being amortized over the life of the loan as interest expense. In September 2009, Mr. Cockburn agreed to convert the principal amount of this note into common shares at a rate of $0.30 per share for a total of 33,333 shares.

F-17

4.	Loans from related parties (continued)

F-18

4.	Loans from related parties (continued)

During 2007, the Company borrowed a total of $10,000 from Wayne Cockburn, its CEO. This loan, evidenced by a short-term promissory note issued on October 26, 2007, bears interest at 10% per annum and matured on January 26, 2008. Mr. Cockburn was also granted 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009. The fair value of the warrants using the Black-Scholes valuation method totaled $3,148 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On January 26, 2008 the maturity date of the promissory note was extended to April 30, 2008. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $1,901 at the time of issuance, and was reflected as a discount on the loan and was amortized over the extended life of the loan as interest expense. On April 30, 2008 the maturity date of the promissory note was extended to July 1, 2008. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $1,167 at the time of issuance, and was reflected as a discount on the loan and was amortized over the extended life of the loan as interest expense. On July 1, 2008, the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to October 31, 2008. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $1,901 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On October 31, 2008, the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to January 31, 2009. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $462 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On January 31, 2009, this loan was extended to April 30, 2009 and Mr. Cockburn was granted 10,000 Series B warrants for extending the due date. The fair value of the warrants using the Black-Scholes valuation method totaled $1,303 and was reflected as a discount on the loan and was amortized over the extended life of the loan as interest expense. On April 30, 2009, the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to July 29, 2009. Mr. Cockburn was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2011 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $326 at the time of issuance, and is reflected as a discount on the loan in the accompanying financial statements and is being amortized over the life of the loan as interest expense. In September 2009, Mr. Cockburn agreed to convert the principal amount of this note into common shares at a rate of $0.30 per share for a total of 33,334 shares.

F-19

4.	Loans from related parties (continued)

During 2007, the Company borrowed a total of $100,000 from Frans Berndsen, one of its shareholders. During the second quarter, $65,000 of these loans were issued and treated as 12% convertible notes payable as described in note 5. As such, the shareholder was granted one Series B warrant for every $2.00 loaned for a total of 32,500 Series B common stock purchase warrants to purchase 32,500 shares of common stock at $1.00 per share until December 31, 2009, and a total debt discount of $23,599 was recorded to be amortized over the life of the loan. On September 27, 2007 the Company and the lender agreed there had been a misunderstanding and a debt restructuring occurred. The original $65,000 in loans were restructured to modify the original terms, as well as for the remaining $35,000 which was received in the third quarter and for which 17,500 Series B warrants had been issued. These loans, evidenced by short-term promissory notes issued on May 31, 2007, June 8, 2007 and July 17, 2007, bear interest at 10% per annum and matured on September 27, 2007. The 50,000 Series B warrants previously issued were cancelled and in connection with the short-term promissory notes, the shareholder was granted 100,000 Series B common stock purchase warrants to purchase 100,000 shares of common stock at $1.00 per share until December 31, 2009. The fair value of the warrants using the Black-Scholes valuation method totaled $44,154 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the original life of the loan as interest expense. The future cash payments of the new loan exceed the carrying value of the loan as of the restructuring date, so no gain was recorded. On September 27, 2007 the maturity date of the promissory note was extended to December 27, 2007. The shareholder was granted an additional 100,000 Series B common stock purchase warrants to purchase 100,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $18,023 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the extended life of the loan as interest expense. On December 27, 2007, the maturity date of the promissory note was extended to March 31, 2008. Mr. Berndsen was granted an additional 100,000 Series B common stock purchase warrants to purchase 100,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $34,624 at the time of issuance, and was reflected as a discount on the loan and was amortized over the extended life of the loan as interest expense. On March 31, 2008, the maturity date of the promissory note was extended to July 1, 2008. Mr. Berndsen was granted an additional 100,000 Series B common stock purchase warrants to purchase 100,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $28,793 at the time of issuance, and was reflected as a discount on the loan and was amortized over the extended life of the loan as interest expense. On July 1, 2008, the maturity date of the $100,000 promissory note to Mr. Berndsen was extended to October 31, 2008. Mr. Berndsen was granted an additional 100,000 Series B common stock purchase warrants to purchase 100,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $19,008 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On October 31, 2008, the maturity date of the $100,000 promissory note to Mr. Berndsen was extended to January 31, 2009. Mr. Berndsen was granted an additional 100,000 Series B common stock purchase warrants to purchase 100,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $4,616 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On January 31, 2009, this loan was extended to April 30, 2009 and Mr. Berndsen was granted 100,000 Series B warrants for extending the due date. The fair value of the warrants using the Black-Scholes valuation method totaled $13,028 and is reflected as a discount on the loan and is being amortized over the extended life of the loan as interest expense. The Company negotiated with Mr. Berndsen to convert these promissory notes totaling $100,000 plus accrued interest of $22,807 and other accrued liabilities of $45,000 into 984,964 shares of the Company’s common stock valued at $.30 per share. This transaction resulted in a loss on extinguishment of debt of $127,682, which is included in general and administrative expenses in the accompanying statement of operations.

F-20

4.	Loans from related parties (continued)

F-21

4.	Loans from related parties (continued)

F-22

5.	Convertible debt

On December 22, 2008, the Company issued a convertible promissory note totaling $50,000 to an individual who qualifies as an accredited investor under Regulation D of the Securities Act of 1933, as amended. The note bears interest at 12%, matures on April 30, 2009 and is convertible into common shares at a rate of $1.00 per share. The note holder was also granted one Series B warrant for every $2.00 loaned, for a total of 25,000 Series B warrants. In accordance with emerging Issues Task Force Issue 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments (“EITF 00-27”), the Company recognized the value attributable to the warrants in the amount of $1,283 to additional paid-in capital and a discount against the convertible promissory notes. The debt discount is being amortized to interest expense over the life of the loan. The Company valued the warrants in accordance with EITF 00-27 using the Black-Scholes valuation method and the following weighted average assumptions: term of 1 year, risk-free interest rate of 1.125%, volatility of 85% and a weighted fair value of $.0513.

On January 4, 2008, the Company issued a convertible promissory note totaling $70,000 to an individual who qualifies as an accredited investor under Regulation D of the Securities Act of 1933, as amended. The note bears interest at 12%, matured on January 25, 2008 and is convertible into common shares at a rate of $1.00 per share. The note holder was also granted one Series B warrant for every $2.00 loaned, for a total of 35,000 Series B warrants. In accordance with EITF 00-27, the Company recognized the value attributable to the warrants in the amount of $7,424 to additional paid-in capital and a discount against the convertible promissory notes. The debt discount was amortized to interest expense over the life of the loan. The Company valued the warrants in accordance with EITF 00-27 using the Black-Scholes valuation method and the following weighted average assumptions: term of 1.92 years, risk-free interest rate of 3.25%; volatility of 84% and a weighted fair value of $.2121.

During 2007, the Company issued convertible promissory notes totaling $332,991 to eleven individuals (after restructuring), each of whom qualifies as an accredited investor under Regulation D of the Securities Act of 1933, as amended. The notes bear interest at 12%, matured on January 25, 2008 and are convertible into common shares at a rate of $1.00 per share. The note holders were also granted one Series B common stock purchase warrant for every $2.00 loaned, for a total of 166,496 Series B warrants. In accordance with guidance issued by the Financial Accounting Standards Board and the Emerging Issues Task Force regarding Accounting for Convertible Securities with a Beneficial Conversion Feature or Contingently Adjustable Conversion Ratios, the company recognized an embedded beneficial conversion feature present in the convertible promissory notes. The Company recognized and measured an aggregate of $72,511 of the proceeds, which is equal to the intrinsic value of embedded beneficial conversion feature, to additional paid-in capital and a discount against the convertible promissory notes. In accordance with EITF 00-27, the Company recognized the value attributable to the warrants in the amount of $78,248 to additional paid-in capital and a discount against the convertible promissory notes. The Company valued the warrants in accordance with EITF 00-27 using the Black-Scholes valuation method and the following assumptions: term of 2-2.92 years, risk-free interest rate of 3.25% - 4.875%; volatility of 63-83% and a weighted fair value of $.3190- $.4533. The total debt discount of $149,745 was amortized to interest expense over the life of the loan.

During the quarter ended September 30, 2007, $65,000 of this debt was restructured. See note 4.

On January 25, 2008, the due date of the convertible loans issued to that time was extended to April 30, 2008 in exchange for 100,748 Series B warrants. The fair value of the warrants using the Black-Scholes valuation method totaled $19,150 at the time of issuance, and was reflected as a discount on the loan and was amortized over the extended life of the loan as interest expense.

On April 30, 2008, the due date of the convertible loans issued to that time was extended to October 31, 2008 in exchange for 100,748 Series B warrants. The fair value of the warrants using the Black-Scholes valuation method totaled $11,758 at the time of issuance, and was reflected as a discount on the loan and was amortized over the extended life of the loan as interest expense.

F-23

5.	Convertible debt (continued)

On October 31, 2008, the due date of the convertible loans issued to that time was extended to April 30, 2009 in exchange for 100,748 Series B warrants. The fair value of the warrants using the Black-Scholes valuation method totaled $4,650 at the time of issuance, and was reflected as a discount on the loan and was amortized over the extended life of the loan as interest expense.

On April 30, 2009, the due date of the convertible loans was extended to July 30, 2009. In exchange for extending the due date, the convertible note holders were granted 113,248 Series B warrants. The fair value of the warrants using the Black-Scholes valuation method totaled $3,693 was be reflected as a discount on the loan and will be amortized over the extended life of the loan as interest expense beginning May 1, 2009.

On September 2, 2009, the Board passed a resolution to convert only the principal amount of these loans into common shares at a rate of $0.30 per share for a total of 1,509,970 shares. Interest has been accrued on these loans and is included in the caption “accrued interest” in the accompanying financial statements.

6.	Other loan payable

On April 22, 2008, the Company borrowed a total of $10,000 from Gregory Harrison, an individual who has also loaned the Company $100,000 in the convertible note program. This loan, evidenced by a short-term promissory note issued on April 22, 2008, bears interest at 10% per annum and matures on July 22, 2008. Mr. Harrison was also granted 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009. The fair value of the warrants using the Black-Scholes valuation method totaled $3,346 at the time of issuance, and was reflected as a discount on the loan and was amortized over the life of the loan as interest expense. On July 22, 2008, the maturity date of the $10,000 promissory note to Mr. Harrison was extended to October 1, 2008. Mr. Harrison was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $2,503 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On October 1, 2008, the maturity date of the $10,000 promissory note to Mr. Harrison was extended to January 31, 2009. Mr. Harrison was granted an additional 10,000 Series B common stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per share until December 31, 2009 for the extension. The fair value of the warrants using the Black-Scholes valuation method totaled $462 at the time of issuance, and was reflected as a discount on the loan in the accompanying financial statements and was amortized over the life of the loan as interest expense. On January 31, 2009, this loan was extended to April 30, 2009 and Mr. Harrison was granted 10,000 Series B warrants for extending the due date. The fair value of the warrants using the Black-Scholes valuation method totaled $1,303 and was reflected as a discount on the loans and was amortized over the extended life of the loans as interest expense. On April 30, 2009 this loan was extended to July 30, 2009. In exchange for extending the due date, Mr. Harrison was granted 10,000 Series B warrants. The fair value of the warrants using the Black-Scholes valuation method totaled $326 at the time of issuance and is reflected as a discount on the loan and is being amortized over the extended life of the loan as interest expense beginning May 1, 2009. In September 2009, Mr. Harrison agreed to convert the principal amount of this note into common shares at a rate of $0.30 per share for a total of 33,333 shares.

F-24

7.	Note payable

In 2003, the Company purchased a patent from MPR Health Systems, Inc. for 8,000,000 shares of the Company’s common stock and a 5-year $100,000 Demand Promissory Note (the “Note”). The Note bears interest at 2% and was due and payable on August 23, 2008. On August 23, 2008, the due date of the note was extended to January 31, 2009 with the same terms. On January 31, 2009 the due date of the note was extended to April 30, 2009 with the same terms, and on April 30, 2009 the due date of the note was extended to July 30, 2009 with the same terms. On July 30, 2009 the due date of the note was extended to November 30, 2009 with the same terms. On November 30, 2009 the due date of the note was extended to November 30, 2010 with the same terms.

8.	Shareholders’ equity

Stock splits

In April 2000, the Board of Directors approved a 7 for 1 stock split. In March 2003, the Board approved a 3 for 7 reverse stock split. Per-share amounts in the accompanying financial statements have been adjusted for these splits.

Preferred stock

Preferred stock may be issued in any one or more series, and any series shall be comprised of such number of shares and may have such voting powers and such designations, preferences and rights as shall be stated and expressed in resolutions of the Board of Directors of the Company. To date, the Board has not designated any series of preferred stock.

Common stock issuances

In 1997, the Company issued 3,000,000 shares of common stock for $2,750.

In 2003, the Company sold 2,086,000 shares of common stock for $.25 per share or a total of $521,500 in connection with a private placement. Costs relating to these shares totaled $86,096. A Series A Warrant was issued with each share sold. Holders of the Series A Warrants are entitled to purchase additional shares of common stock at $0.50 per common share prior to June 30, 2011.

During 2003, the Company also issued 8,000,000 shares of common stock and a $100,000 Promissory Note for a patent of MPR Health Systems, Inc.

F-25

8.	Shareholders’ equity (continued)

Common stock issuances (continued)

Between January and June of 2004, the Company sold 420,000 shares of common stock for $.25 per share, for a total of $105,000 in a private placement. A Series A Warrant was issued with each share sold. Holders of the Series A Warrants are entitled to purchase additional shares of common stock at $0.50 per common share prior to June 30, 2011. Between September and November of 2004, the Company sold 475,000 shares for $1.00 per share or a total of $475,000 in a private placement. A Series B Warrant was issued with each share sold. Holders of the Series B Warrants are entitled to purchase additional shares of common stock at $1.00 per common share prior to December 31, 2011. Costs relating to shares sold in 2004 totaled $17,602.

During 2005, the Company sold 1,045,000 shares for $1.00 per share or a total of $1,045,000 in a private placement. A Series B Warrant was issued with each share sold. Holders of the Series B Warrants are entitled to purchase additional shares of common stock at $1.00 per common share prior to December 31, 2011. Costs relating to shares sold in 2005 totaled $52,689.

During April and May 2005, the Company issued a total of 60,160 shares to two vendors for services. The services were valued at $1.00 per share.

During 2006, the Company sold 517,305 shares for $1.00 per share or a total of $517,305 in a private placement. A Series B Warrant was issued with each share sold. Holders of the Series B Warrants are entitled to purchase additional shares of common stock at $1.00 per common share prior to December 31, 2011.

In September 2006, the Company issued a total of 50,000 shares to an individual to settle a dispute. The shares were valued at $1.00 per share.

In December 2006, the Company issued a total of 200,000 shares to the former shareholder of Freedom 1 as part of the merger agreement described in Note 1.

During 2007, the Company issued a total of 625,000 shares to three vendors for consulting services. The services were valued at $.71 - $1.00 per share for a total of $455,000, and the value of the services is being amortized over the period of the consulting agreements.

On June 12, 2008, the Board authorized a private placement of 1,000,000 units of common stock and Series C and D purchase warrants. The unit price is $0.75 and each unit is comprised of one share of common stock, one Series C warrant and one half Series D warrant. In addition, for each Series D warrant exercised, the holder will receive an additional Series C warrant. In June and July 2008, the Company sold 400,001 units of its private placement for gross proceeds of $300,000 less issuance costs of $30,000.

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8.	Shareholders’ equity (continued)

Common stock issuances (continued)

In July 2008, the Company negotiated a settlement with one of its creditors. The creditor agreed to take $75,000 cash and 100,000 of the Company’s common shares valued at $70,000 (the trading price on the date of settlement was $.70) to settle a $117,400 account payable, resulting in a $27,600 loss on settlement of debt. The loss on settlement of debt is included in general and administrative expenses in the accompanying statement of operations.

In August 2008, the Company entered into a consulting contract for the period August 5, 2008 to December 31, 2008. Payment for the consulting services will be 30,000 shares of the Company’s common stock. At September 30, 2008, the consultant had not begun work, so the commencement of the contract was re-negotiated from August 5, 2008 to December 1, 2008. This contract was ultimately cancelled and no shares were issued.

On August 1, 2008, the Company entered into a one year consulting contract. Payment for consulting services will be 240,000 shares of the Company’s common stock and 300,000 Series C common stock purchase warrants. At September 30, 2008, the consultant had not begun work, so the commencement of the contract was re-negotiated from August 1, 2008 to December 1, 2008. The services were valued at $.40 per share for the common stock and $31,472 for the entire amount of the warrants (using the Black-Scholes method) for a total of $127,472, and the value of the services is being amortized over the period of the consulting agreement.

In December 2008, the Company issued a total of 1,300,000 shares of the Company’s common stock to two consultants and a related party for consulting services. Under the terms of the consulting agreements, the vendors had the ability to earn an additional 1,000,000 shares upon reaching a certain milestone defined in the agreements. All shares pursuant to the consulting agreements were subject to resale restrictions under Rules 504 and 505, Regulation D of the Securities Act of 1933. In February 2009 the agreements were amended whereby the 1,000,000 additional shares were issued immediately to the vendors; however the resale restrictions were amended to reflect Regulation S of the Securities Act of 1933 (Rules Governing offers and Sales Made Outside the United States Without Registration). The 1,300,000 shares, issued in December 2008 under Regulation D, were returned to the Company to be held until April 30, 2009. If a certain milestone is not met by April 30, 2009, the vendors have agreed to have the shares cancelled and returned to the Company. If the milestone is met, the shares will be returned to the vendors. On June 12, 2009, the Board of Directors cancelled 500,000 shares of the original 1,300,000 shares issued, and on June 30, 2009 the consulting agreements were further amended to state that the remaining 800,000 shares from the original issuance would be held by the Company until a certain milestone is met. If that milestone is not achieved by November 30, 2009, the vendors have agreed to have the shares cancelled and returned to the Company. On November 30, 2009, the vendors had partially met the milestone and the Company agreed to allow the vendors to keep the shares.

On December 13, 2008, the Board granted 250,000 shares of the Company’s common stock to Mr. Frans Berndsen, a related party, for services rendered. The services were valued at $.45 per share for a total of $112,500 and was expensed to general and administrative expenses in the accompanying statement of operations.

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8.	Shareholders’ equity (continued)

Common stock issuances (continued)

On February 3, 2009 the Company issued 500,000 shares of its common stock in exchange for a two year promissory note with 3974715 Canada Ltd. The note bears interest at 5% per annum, with quarterly payments beginning July 1, 2009. On June 29, 2009 the Company and 3974715 Canada Ltd. agreed to cancel the 500,000 shares and related promissory note.

In June 2008, the Company entered into a two year consulting agreement with a related party. Payment on this contract was 500,000 Series C warrant to purchase 500,000 shares of the Company’s common stock. In March 2009, this contract was extended for an additional year in exchange for 250,000 shares of common stock.

On June 12, 2009, the Board of Directors authorized issuance of 300,000 shares of the Company’s common shares valued at $129,000 (the trading price on the date of grant was $0.43) for services.

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8.	Shareholders’ equity (continued)

Common stock issuances (continued)

Warrants

During 2003, the Company issued 2,086,000 Series A common stock purchase warrants in connection with a private placement.

During 2004, the Company issued 420,000 Series A common stock purchase warrants and 475,000 Series B common stock purchase warrants in connection with private placements.

In addition, the Company issued 211,270 Series A common stock purchase warrants along with loans payable from July to October 2004. See note 4.

The Company also issued 250,000 Series A common stock purchase warrants to an individual for corporate finance consulting services in July 2004.

During 2005, the Company issued 1,045,000 Series B common stock purchase warrants in connection with private placements.

In addition, the Company issued 100,000 Series B common stock purchase warrants in February 2005 and 100,000 in August 2005 to extend the due date of loans payable to July 2005. See note 4.

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8.	Shareholders’ equity (continued)

Warrants (continued)

Other 2005 issuances include 1,100,000 Series B common stock purchase warrants in connection with three, two year consulting agreements and 41,250 Series B common stock purchase warrants as share issuance costs. The warrants issued for consulting fees were valued at $238,892 using the Black-Scholes method and are being amortized over the life of the consulting agreement. The warrants issued as share issuance costs were valued at $7,939.

The following weighted average assumptions were used to calculate the warrants issued in 2005: term of 2.5 years, risk-free interest rate of 3.255%; volatility of 25% and a weighted fair value of $.0011.

Between January and July 2006, the Company issued 517,305 Series B common stock purchase warrants in connection with private placements.

In September 2006, the Company extended the expiration dates of both the Series A and Series B common stock purchase warrants. The Series A expiration date was extended from September 9, 2008 to June 30, 2009 and the Series B expiration date was extended from July 31, 2007 to December 31, 2009.

As a result of the due date extensions, the 250,000 Series A and 1,100,000 Series B warrants issued for consulting fees were re-valued at $580,324 and the resulting expense is included in general and administrative expenses in the accompanying statement of operations. In addition, the 211,270 Series A and 200,000 Series B warrants issued to extend the loan due date were re-valued at $205,187 and the resulting expense is included in interest expense in the accompanying statement of operations.

The following weighted average assumptions were used to calculate the warrants re-valued in 2006: term of 2.75 - 3.25 years, risk-free interest rate of 4.625%; volatility of 49% and a weighted fair value of $.39 - $.60.

Other 2006 Series B common stock purchase warrant issuances include 100,000 warrants issued in July to extend the due date of loans payable (see note 4), 50,000 issued to settle a dispute and 658,316 issued for consulting fees. The 100,000 shares were valued at $39,095, as described in note 4. The remaining warrants were valued at a total of $276,917 and expensed as general and administrative expenses in the accompanying statements of operations.

The following weighted average assumptions were used to calculate the warrants issued in 2006: term of 3.25 years, risk-free interest rate of 4.625%; volatility of 49% and a weighted fair value of $.39.

During 2007, the Company issued 550,000 Series B warrants in connection with loans to related parties or the extension of due dates for those loans. See note 4. In addition, the Company issued 166,496 Series B warrants in connection with convertible debt. See note 5.

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8.	Shareholders’ equity (continued)

Warrants (continued)

Other 2007 Series B common stock purchase warrant issuances include 75,000 issued for consulting fees. These warrants were valued at a total of $33,363 and were expensed as general and administrative expenses in the accompanying statements of operations.

The following weighted average assumptions were used to calculated the warrants issued in 2007: term of 2 – 2.92 years, risk-free interest rate of 3.25% - 4.875%, volatility ranging from 66% - 83% and a weighted fair value ranging from $.1802 - $.4533.

During 2008, the Company issued 944,500 Series B warrants in connection with loans or the extension of due dates for loans. See note 4. In addition, the Company issued 362,244 Series B warrants in connection with convertible debt or the extension of due dates for convertible debt. See note 5.

The following weighted average assumptions were used to calculate the warrants issued in 2008: term of 1-2 years, risk-free interest rate of 1.125% - 3.25%, volatility ranging from 70% - 94% and a weighted fair value ranging from $.0389 - $.3695.

During 2008, the Board passed resolutions to authorize 1,500,000 Series C warrants and 500,000 Series D warrants. The Series C warrants may be used to purchase an equivalent number of common shares at $1.25 per share and expire September 1, 2011, while the Series D warrants may be used to purchase an equivalent number of common shares at $0.95 per share and expire on September 1, 2010.

During 2008, the Company issued 1,000,000 Series C common stock purchase warrants for three consulting contracts to be provided over the next two years. These warrants were valued at a total of $185,636 and were classified as deferred warrants on the accompanying balance sheet and are being amortized to general and administrative expenses over the lives of the contracts. The following weighted average assumptions were used to calculate the Series C warrants issued: term of 2.75 - 3.25 years, risk-free interest rate of 1.25% - 2.625%; volatility of 72% – 85% and a weighted fair value of $.1049 - $.2202.

During 2008, the Company issued 400,001 Series C common stock purchase warrants and 200,001 Series D warrants in connection with the private placement described above.

On June 29, 2009, the Company extended the expiration dates of both the Series A and Series B common stock purchase warrants. The Series A expiration date was extended from June 30, 2009 to June 30, 2011 and the Series B expiration date was extended from December 31, 2009 to December 31, 2011.

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8.	Shareholders’ equity (continued)

Warrants (continued)

As a result of the due date extensions, the 300,000 Series A and 1,883,316 Series B warrants issued for consulting fees were re-valued at $211,058 and the resulting expense is included in general and administrative expenses in the accompanying statement of operations. In addition, the 211,270 Series A and 3,072,988 Series B warrants issued for loans or convertible debt and the extension of loan due dates were re-valued at $304,540 and the resulting expense is included in interest expense in the accompanying statement of operations. The following weighted average assumptions were used to calculate the extension date for the Series A and Series B warrants: term of 2 to 2.5 years; risk-free interest rate of 1.875%; volatility of 85% to 93%; and a weighted fair value of $.08926 to $.1432.

During 2009, the Company issued 1,078,333 Series A common stock purchase warrants in connection with a private placement.

Other 2009 Series A common stock purchase warrant issuances include 25,000 issued in connection with debt (see note 4) and 350,000 issued for consulting fees. The 350,000 warrants issued for consulting fees were valued at $13,105 and are being expensed as general and administrative expenses in the accompanying statements of operations.

During 2009, the Company issued 1,139,748 Series B common stock purchase warrants in connection with debt and the extension of due dates for loans. The Company also issued 25,000 Series C common stock purchase warrants in connection with debt in February 2009. See notes 4, 5, and 6.

On September 1, 2009, the Company extended the expiration date of the Series D common stock purchase warrants from September 1, 2009 to September 1, 2010.

In December 2009, the Company issued 1,480,000 Series E common stock purchase warrants in connection with a private placement.

The following weighted average assumptions were used to calculate the warrants issued in 2009: term of .21-2.54 years, risk-free interest rate of 0.875% - 1.875%, volatility ranging from 78% - 122% and a weighted fair value ranging from $.0090 - $.1432.

Stock options

2003 stock option plan

In October 2003, the Company adopted the Stock Option Plan (the "2003 Plan"), which was also approved by its stockholders in October 2003. The purpose of the 2003 Plan is to attract, retain, and motivate certain key employees of the Company by giving them incentives which are linked directly to increases in the value of the common stock of the Company. Each director, officer, employee, or consultant of the Company is eligible to be considered for the grant of awards under the 2003 Plan. The maximum number of shares of common stock that may be issued pursuant to awards granted under the 2003 Plan was increased on March 19, 2004 from 2,250,000 to 4,850,000, subject to certain adjustments to prevent dilution. Any shares of common stock subject to an award, which for any reason expires or terminates unexercised, are again available for issuance under the 2003 Plan. Grants under the 2003 Plan are exercisable at the market value of the Company's stock on the date of such grant. All options under the 2003 Plan are exercisable at times as determined by the board of directors, not to exceed 10 years from the date of grant.

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8.	Shareholders’ equity (continued)

2003 stock option plan (continued)

March 10, 2004 a total of 4,173,600 options were granted. The grant price was $.25, with 2,120,000 options vesting immediately and the remaining 2,053,600 options vesting on March 10, 2005. 305,000 options were cancelled in 2006, 915,000 were cancelled in 2009 and the remaining 2,953,600 options expire on March 10, 2014.

2008 stock option plan

In February 2008, the company adopted the 2008 Equity Incentive Plan (the “2008 Plan”). The purpose of the 2008 Plan is to attract, retain, and motivate certain key employees of the Company by giving them incentives which are linked directly to increases in the value of the common stock of the Company. Each director, officer, employee, or consultant of the Company is eligible to be considered for the grant of awards under the 2008 Plan. The maximum number of shares of common stock that may be issued pursuant to awards granted under the 2008 Plan is 1,000,000, subject to certain adjustment to prevent dilution. Any shares of common stock subject to an award, which for any reason expires or terminates unexercised, are again available for issuance under the 2008 Plan. Grants under the 2008 Plan are exercisable at the market value of the Company’s stock on the date of such grant. All options under the 2008 Plan are exercisable at times as determined by the board of directors, not to exceed 10 years from the date of grant. To date, no options have been granted under the 2008 Plan.

9.	Income taxes

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting and tax bases of its assets and liabilities. Deferred tax assets are reduced by a valuation allowance when deemed appropriate. For 2009, 2008 and 2007 there are no material differences between income tax expense and the amount computed by applying the federal statutory income tax rate.

At December 31, 2009, the Company has a net operating loss carryforward for federal tax purposes of approximately $9,360,000, which, if unused to offset future taxable income, will begin to expire in 2023. The Company also has a California net operating loss carryforward of approximately $9,360,000 which, if unused to offset future taxable income, will begin to expire in 2013.

The Company had deferred tax assets of $4,080,000 at December 31, 2009, relating to its net operating loss. A valuation allowance has been recognized to offset the entire related deferred tax asset due to the uncertainty of realizing the benefit. The valuation allowance increased $1,211,000 in 2009 and $372,000 in 2008, primarily related to the net taxable loss and to change in estimate for certain deductions.

The Company has not yet filed its 2008 corporate income tax returns and may be subject to late filing penalties.

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10.	Commitments and contingencies

Lease

The Company leases its office space in Huntington Beach, California on a month-to-month basis. Effective August 1, 2008, the Company also leases three rooms in a medical clinic in Salt Lake City, Utah on a month-to-month basis. Additionally, effective October 2008, the Company leased office space in Toronto, Canada on a month-to-month basis. Effective December 9, 2008, the Company entered into a General Services Agreement with Roy Bonnell and Associates to lease 2 office spaces in Montreal, Canada. Under the terms of the agreement, the lease payments for 2009 for 2 offices are deemed to be paid in full against a payment of 200,000 shares of common stock to Roy Bonnell and Associates. During a portion of 2007, the Company leased space in Quebec, Canada as well. Total rent expense charged to operations totaled $68,214 in 2009, $42,811 in 2008 and $58,803 in 2007.

11.	Subsequent events (unaudited)

Events subsequent to December 31, 2009, have been evaluated through April,8 2010, the date these financial statements were available to be issued, to determine whether they should be disclosed to keep the financial statements from being misleading.

On January 22, 2010 the Company entered into a research and development contract with Salus Research, Inc. (“Salus”), a Canadian entity owned by a Company officer and two members of the Company’s Board of Directors. Salus began conducting scientific research and experimental development activities in Canada ("SR&ED") and plans to claim for Canadian Scientific Research and Experimental Development tax credits. The Company funds 100% of these expenditures, is at risk for 100% of its losses and owns 100% of all scientific discoveries, and as a result is the party that is the primary beneficiary of the relationship as defined by FASB ASC 810-10-05. Salus has no other financing other than amounts received from the Company. The Company has determined Salus to be a variable interest entity. Starting in January 2010 the Company will be required to consolidate the financial results of Salus for financial reporting purposes to comply with Accounting Principles Generally Accepted in the United States. In the period of January 2010 to April 8, 2010, the Company remitted $45,000 to Salus to fund scientific research and experimental development and is obligated to remit an additional $910,000.

On January 31, 2010, the CD$145,000 loan from Cavandale Corporation, a Company owned by one of the directors, was extended to August 1, 2010.

On January 31, 2010, the $4,000 loan from Alan Goldman, an officer of the Company, was extended to July 1, 2010.

On February 11, 2010, the Company signed a three year manufacturing agreement with Thought Technology Ltd. of Montreal, Quebec for the Company’s proprietary Muscle Pattern Recognition (MPR) system. The manufacturing agreement is non-exclusive and sets out the terms and conditions between Thought Technology and the Company, including pricing and delivery, for the MPR hardware.

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11.	Subsequent events (unaudited) (continued)

On March 19, 2010, the Company entered into a financing agreement with a European investor for $2.2 million of equity financing over the next 12 months. The investor has the option to provide another $1.0 million of equity financing during the following six months. Under the financing agreement, the investor has agreed to purchase, on a monthly basis through March 2011, a total of four million shares of common stock for $0.30 per share and a total of two million shares of common stock for $0.50 per share. In connection with those purchases, the investor will receive warrants to purchase a total of six million shares of common stock at prices ranging from $0.40 per share to $0.80 per share, expiring between August 31, 2013 and February 28, 2014. Pursuant to the financing agreement, the investor may elect to pay the purchase price for the shares of common stock in either United States dollars or Euros. These purchase prices were based on the United States dollar/Euro exchange rate on December 5, 2009. This release reflects the purchase obligation in United States dollars.

In addition, for a 60-day period, commencing upon the date the Company files with the United States Food and Drug Administration its 510(k) application covering its MPR technology, the investor will have right to elect to provide an additional $1.0 million of equity financing through the purchase of common stock at $0.50 per share over a six-month period. In connection with those purchases, the investor will receive warrants to purchase a total of four million shares of common stock at prices ranging from $0.40 per shares to $0.80 per share, expiring October 31, 2014.

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SIGNATURES

In accordance with Section 13 and 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: April 15, 2010	ITECH MEDICAL, INC.
	By:	/s/ Wayne Cockburn
		Wayne Cockburn
		President Chief Executive Officer, Secretary, Treasurer and Interim Chief Financial Officer and a Member of the Board of Directors (Principal Executive Officer and Principal Financial and Accounting Officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date


/s/ Wayne D. Cockburn	President, Chief Executive Officer,	April 15, 2010
Wayne D. Cockburn	Secretary, Treasurer and Interim Chief Financial Officer and a Member of the Board of Directors (Principal Executive Officer and Principal Financial Officer)


/s/ Donald Paterson	Chairman of the Board of Directors	April 15, 2010
Donald Paterson


/s/ George Angelidis	Director	April 15, 2010
George Angelidis


/s/ Craig Lunsman	Director	April 15, 2010
Craig Lunsman

Attached files

Impact Medical Solutions, Inc. Reports

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