Overview
DigiPath, Inc., a Nevada corporation (“DigiPath,” “Company,” “we,” “us,” or “our”), was incorporated on October 5, 2010 in Nevada. ..
On February 14, 2011, we entered into a Revolving Promissory Note (the “Revolving Note”) with NYX Capital Advisors, Inc. (“NYX”). Eric Stoppenhagen, our CEO, has voting and investment control over the securities owned by NYX Capital Advisors, Inc as he is the sole owner. Under the terms of the Revolving Note, NYX agreed to advance to the Company, from time to time and at the request of the Company, amounts up to an aggregate of $500,000 until September 30, 2012. All advances shall be paid on or before September 30, 2012 and interest shall accrue from the date of any advances on any principal amount withdrawn, and on accrued and unpaid interest thereon, at the rate of eight percent (8%) per annum, compounded annually. The Company’s obligations under the Revolving Note will accelerate upon a bankruptcy event of the Company, any default by the Company of its payment obligations under the Revolving Note or the breach by the Company of any provision of any material agreement between the Company and the note holder. As of the date of the Revolving Note, $200,000 was deemed outstanding under the Revolving Note.
On March 23, 2011, the Company completed a private placement offering to certain investors (“Investors”) pursuant to which the Company sold an aggregate of 286,750 shares of the Company’s common stock resulting in gross proceeds of $28,675 to the Company. The Company intends to use proceeds of the offering for working capital. The Company has no material relationship with any of the investors participating in the private placement offering other than in respect of the investment. The Company paid no commissions in connection with the closing of the private placement offering.
DigiPath develops and sells the affordable, innovative, and reliable digital pathology solutions for 2nd opinion, consultation, tumor board, archiving, and educational purposes for improved workflow, analysis and data mining in support of pathology in academic medical centers, reference laboratories, biopharma organizations, and life science research institutions. Our digital pathology image-based information environment enabled by computer technology that allows for the management of information generated from a digital slide. Digital pathology is enabled in part by virtual microscopy, which is the practice of converting glass slides into digital slides that can be viewed, managed, and analyzed. Our digital pathology products, PathScope™, PathCloud™, PathReview™, and PathConsult™ provide a digital platform to share and store archive tissue images.
Digital Pathology Products Summary
DigiPath's digital pathology products are digital pathology solutions which employ the optical components of a standard microscope, robotic automated slide handling capabilities combined with proprietary imaging and communication software to capture high magnification images in digital format. These devices are comprised of both hardware and software.
DigiPath's digital pathology products, marketed under the names PathScope, PathCloud, PathReview, and PathConsult are used in hospital, educational pharmaceutical and research environments. Digital pathology solutions also include names of whole slide imaging and telepathology.
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PathScope™ hardware
DigiPath’s PathScope is affordable, innovative, and reliable digital pathology solution. Depending on configuration, the pricing ranges from $25,000 to $75,000 capital purchase option. The options include capacity (1, 2, 3, 20, 30), objective (2.5x, 5x, 10x, 20x, 40x, 60x, 100x), barcode, and file format (JPEG, JP2k, TIFF). The reliability is based on 14 day validation period option, HIPPA, and 21CFR11 compliance.
PathCloud™ service
DigiPath's PathCloud is an affordable digital pathology solution networked engineered and optimized for digital pathology performance and reliability. PathCloud includes a USA national backbone network with 8 points of presence, 1000 TB storage, and 100M bandwidth, optimized for digital pathology. The reliability is based on PathCloud’s service level agreement which includes; 100% availability, 100% packet delivery, sub 200 milliseconds latency, and sub 1 second viewing time.
PathReview™ and PathConsult TM software
DigiPath's PathReview provides a scanner agnostic viewer and image server to review images via third party browsers, including Chrome, Internet Explorer, Firefox, and Safari. PathConsult has the features of PathReview with capability of doing a report and searchable database.
PathXL Tutor™ and PathXL SimulateTM software
PathXL™ Tutor allows users to effectively create and manage digital slides and other content, publish online, share and view from anywhere in the world. PathXL Tutor provides on-line virtual microscopy teaching, educational, CPD and competency exam resources in minutes, significantly enhancing student, trainee and the professional experience. PathXL™ Simulate supports early stage training for residents in pathology. Trainees can work through real cases and assess how well they have performed. This approach to training has been completely embraced by numerous laboratories worldwide.
Advisory service(s)
DigiPath’s advisors bring over 60 years combined expertise in pioneering digital pathology, implementing over 500 installations at academic medical centers, reference laboratories, biopharma organizations, and life science research institutions worldwide. DigiPath provides advisory services for clients involved with digital pathology. Our current services range the full breadth of management operations for marketing, product development, sales outreach, operations, and customer support services. Our current clients seek our assistance in rolling out affordable, innovative, and reliable digital pathology solutions. Our potential clients include manufacturer (hardware and software), distribution and service firms, laboratories (reference, hospital owned, independent), private pathology practices (associated with hospitals), and centers of excellence.
Product Distribution
The Company sells its products either directly to end users, through exclusive distributors, non-exclusive distributors, and OEM (third party brands) depending on the application and the geographical location of the customer. Generally, qualified distributors and OEM are already in the business of selling bright field microscopes, equipment for medical analysis, or other laboratory equipment. Under the terms of the Company’s standard distribution agreements, distributors and OEM partners are assigned exclusive or non-exclusive territories or markets and, in turn, commit to purchasing a minimum amount of DigiPath products on either a quarterly or monthly basis.
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Competitive Conditions
The digital pathology market is highly competitive, and many of our competitors have greater resources and better name recognition than we do. We primarily compete on affordability, innovation, and reliability. Our competitors in the digital pathology market include, Aperio, Apollo Telemedicine, D-Metrix, Hamamatsu, Nikon, Olympus, Carl Zeiss, OMNYX (owned by GE and UPMC), Leica (owned by Danaher), Phillips, Sakura, Roche, Claro, and MikroScan.
For advisory services, there are other firms providing such advisory services in the digital pathology space. There is currently an abundant need for such advisory services and we have not seen this as inhibiting our ability to garner new clients. Additionally, on larger engagements, we currently work with other advisory service firms which may be deemed as competitors. Some firms which we identified as clients may provide competitive services.
Industry
Digital pathology is the process of creating virtual slides by building digital images of physical tissue samples. Digital pathology allows drug developers, pathologists and researchers to be view tissue images through a computer or over a standard Internet connection and can be stored for later interpretation and archiving; and data mining in support of computer aided quantitative histopathology. The digital pathology markets can be categorized by type of tissue (human or animal) and use (clinical or research).
Digital pathology may improve patient care with a faster diagnosis time, more accurate diagnosis, more reproducible diagnosis, and probable lower medical costs. The improvement areas are a result of digital pathology means to provide faster turnaround time, faster access to sub-specialist, fast access to 2nd opinion, and more cost effective medical diagnosis’s.
Digital pathology is rapidly gaining momentum by reduce laboratory expenses, improve operational efficiency, enhance productivity, and improve treatment decisions and patient care. It is used worldwide in drug development, reference lab, hospital, and academic medical center settings. Applications include education, research, image analysis, archival and retrieval, laboratory information system (“LIS”) integration, secondary consultations, and virtual slide sharing. Today, education and training is the most common use for labs using digital pathology. The biggest barrier to more clinical use is the cost of scanning digital slides, which does not eliminate the need to first prepare glass slides.
Human Pathology
We estimate a total of 16,500 pathologists in the United States, with approximately two-thirds or 11,000 practicing anatomic pathology. These pathologists generally practice within one or more market segments, including hospital based pathology labs, integrated health systems, and commercial and academic research.
Pathologists focusing on human disease study the origin, course and indicators of disease. Pathology divides into clinical pathology the analysis of fluids such as urine and blood and DigiPath's market, anatomic pathology the analysis of tissue. Clinical pathology market is dominated by large national laboratories that use large-scale automation and is generally a high volume, low margin business. The technology for the automation of anatomic pathology has lagged that of clinical pathology. As a result, anatomic pathology remains a less consolidated and higher margin industry.
Animal (Veterinary) Pathology
Animal pathology includes testing in research and clinical treatment of both pets and livestock. Animal pathology for treatment is mainly conducted by labs providing services to veterinary practices. The majority of animal pathology is conducted by pharmaceutical and biotechnology companies for drug development.
The dynamics of veterinary pathology for treatment resemble human clinical pathology. Veterinary pathologists seek to improve access to clinical specialists: and aim to improve management and archiving of data workflow and tissue analysis.
The key market segments in animal pathology are pharmaceutical toxicology groups, academic and government research, contract research organizations (“CROs”), and biotechnology firms.
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Digital Pathology Applications
Digital pathology products share common uses in both human and animal pathology, including consultation, communication and collaboration, education and publication, archiving and management, workflow, and analysis, as described below.
Consultation, Communication and Collaboration
Pathologists frequently consult with other pathologists and specialists in carrying out their daily work. There are often delays in consulting due to the transportation of slides or having to travel to distant locations in order to meet face-to-face. DigiPath's products allow sharing of images real time, eliminating the need for slide transportation or travel. Pathologists and specialists are able to simultaneously view and manipulate the slides and provide consultation in real-time. In addition, communication is improved as multiple pathologists and specialists can view and manipulate the same slide simultaneously.
Education and Publication
Tissue images are critical to pathology publications and instruction. Traditional publications are limited to the inclusion of a snapshot of one location on the slide or references to glass slide archives. DigiPath's products allow whole slides to be cited in publications and accessed in a digital format, improving the availability of high quality samples and facilitating sample access.
Archiving and Management
Viewing and accessing multiple tissue samples is critical to anatomic pathology workflow. Typically, tissue images are incomplete and stored in cumbersome formats with no efficient links to associated data. DigiPath's products under development are designed to link a digital slide together with relevant data in a flexible and easily accessible digital archive.
Employees and Consultants
We presently have no employees apart from our management. Currently, we utilize numerous consultants to gather new business leads and staff engagements. We expect to grow the number of our employees as we bring on new clients and there is stability in our revenues.
Regulatory Issues
The United States Food and Drug Administration (the "FDA") regulates design, testing, manufacturing, labeling, distribution, marketing, sales and service of image analysis products and services. Such products and services are marketed in the U.S. according to premarket notifications to the FDA under Section 510(k) of the Federal Food, Drug and Cosmetic Act. Unless an exemption applies, each image analysis product that we wish to market in the U.S. must first receive either 510(k) clearance or premarket approval from the FDA.
Certain of DigiPath's products can be considered medical devices and subject to regulation by the United States Food and Drug Administration ("FDA"). The FDA categorizes medical devices into three classes; these classes are referred to as Class I, Class II, and Class III.
Class I devices are subject to the least regulatory control. General controls include provisions that relate to adulteration; misbranding; device registration and listing; premarket notification; banned devices; notification, including repair, replacement, or refund; records and reports; restricted devices; and good manufacturing practices. Class I devices are not intended for use in supporting or sustaining life or to be of substantial importance in preventing impairment to human health, and they may not present a potential unreasonable risk of illness or injury.
Class II devices are those for which general controls alone are insufficient to assure safety and effectiveness, and existing methods are available to provide such assurances. In addition to complying with general controls, Class II devices are also subject to special controls. Devices in Class II are held to a higher level of assurance than Class I devices, and are designed to perform as indicated without causing injury or harm to patient or user.
A Class III device is one for which insufficient information exists to assure safety and effectiveness solely through the general or special controls sufficient for Class I or Class II devices. Such a device needs premarket approval, a scientific review to ensure the device's safety and effectiveness, in addition to the general controls of Class I. Class III devices are usually those that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury
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Currently, the Company’s products and services are not registered with FDA. The Company is marketing its digital pathology solutions as Research Use Only, and specifically for applications for 2nd option, consultations, education, and research.
There can be no assurances that the FDA may state that Company is required to achieve Class 1, 2 or 3 registrations. The Company can make no assurance that it can achieve a Class 1, 2, or 3 certification. Failure to obtain this certification may limit the use of this product in the market. Additionally, delays in obtaining clearances or approvals will adversely affect our ability to market and sell our products and services and may subject us to significant regulatory fines or penalties, which would result in a decline in revenue and profitability.
Intellectual Property, Trade Names, Trademarks and Service Marks
Intellectual property rights that apply to our various services include copyrights, trade secrets, and trademarks. We also protect certain details about our processes and strategies as trade secrets, keeping confidential the information that we believe provides us with a competitive advantage. We have ongoing programs designed to maintain the confidentiality of such information. We rely on trade secrets, know-how and continuing knowledge to achieve and thereafter maintain a competitive advantage with respect to the Digital Pathology consulting. Although we have entered into and we intend to enter into confidentiality and invention agreements with employees, consultants, certain potential customers and advisors, no assurance can be given that such agreements will be honored or that we will be able to effectively protect our rights to our unpatented trade secrets and know-how.
We may, as circumstances require, develop and implement DigiPath trademarks and/or service marks which will enhance a customer's ability to identify the Company, as well as the products and services to be offered by the Company. We have been granted a registered trademark for DigiPath from the United States Patent and Trademark Office.