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Stock Alert for Positron Corp. ($POSC)
Monday, May 10th, 2010 in Trade Alerts : by Editor
Positron Corp. (OTCBB: $POSC)
Positron Corp. (POSC) is a molecular imaging company focused on Nuclear Cardiology. Positron utilizes its product line to provide solutions to the Nuclear Medicine community ranging from imaging to radiopharmaceutical distribution. Positron products include the Attrius, a positron emission tomography (PET) imaging device; the Pulse, a single photon emission computerized tomography (SPECT) imaging device; the Nuclear Pharm-Assist, an automated radiopharmaceutical distribution device; and the Tech-Assist, a radiopharmaceutical injection shield. Positron’s SPECT and PET cardiac molecular imaging devices are installed in more than 175 hospitals and physician offices worldwide. Positron offers a cardiac reasonably priced PET system in North America. Positron, through its China based joint venture, Neusoft Positron Medical Systems, has upgraded its PET imaging system.
The Company was founded in 1983 and is headquartered in Fishers, Indiana.
Share Statistics (7-May-10) FY
2007
FY
2008
%
Chg
Q4 2008 Q4 2009 %
Chg
Symbol POSC Revenue, $Mn 3.31M 2.13M 35.6% 0.55M 0.56M 1.8%
Current price $0.11 Gross marg. 11.5% -38.2% 432.2% -165.5% -1.2% 99.3%
52wk Range: $0.30-0.02 Oper. margin -218.0% -391.7% 79.7% -945.5% -403.6% 57.3%
Avg Vol (3m): 5,899,710 Net margin -235.0 -421.6% 79.4% -1016% -516.1% 49.2%
Market Cap. 43.77M
Dil. Shares Outst. 397.9M EPS, $ -0.022 -0.007 -68.2% -0.01 -0.01 0.0%
Source: Reuters.com, SEC Filings.
Financial Summary
Consolidated results of operations for the year ended December 31, 2009, and 2008, include Positron and its wholly owned subsidiary Imaging Pet Technologies (“IPT”).
Revenues – The Company generated revenues of $1,446,000 and $2,126,000 for the years ended December 31, 2009, and 2008, respectively. Revenue from service contracts totaled $827,000 and $1,150,000 for the years ended December 31, 2009, and 2008, respectively. The decrease in service is due to in large part to the continuous decline of sales of both PET systems and PulseCDC gamma cameras. Additionally, some existing service contracts were either terminated or moved to time and materials billing, which resulted in lower revenue.
Costs of Sales – Costs of sales and gross profit (loss) percentage for the year ended December 31, 2009, were $1,319,000 and 8.8%, respectively compared to $2,939,000 and (38.3%) for the year ended December 31, 2008. The negative gross profit during the year ended December 31, 2008, was due primarily to activities in the Company’s subsidiary Positron Pharmaceuticals whose gross loss was approximately $554,000. Subsequent to the Company’s acquisition of Dose Shield, Pharma spent significant amounts on the re-design of its Nuclear Pharm-Assist systems that were already in process and for which POSC had established contract sales prices that were not adjusted. All additional costs were charged to the cost of the machines. In 2008, cost of sales also includes a write down of $412,000 taken upon the disposal of obsolete parts during the move from Ottawa to Indianapolis, and a charge for an additional reserve of $39,000 for slow moving parts.
For the year ended December 31, 2009, the Company recorded a gross loss on the sale of finished systems of $(167,000). The gross loss resulted mainly from production costs incurred for the manufacturing of the Nuclear Pharm-Assist systems. The Company executed a fixed price contract with a customer and therefore has been unable to pass production cost overages along to the customer. Cost of goods sold related to service contracts was approximately $527,500. Revenues from service yielded a 36.25% gross profit for the year ended December 31, 2009. Also in 2009, the Company recorded a $58,000 charge for slow moving and obsolete inventory.
Operating Expenses – The Company’s operating expenses were $4,956,000 for the year ended December 31, 2009, compared to $7,514,000 for the year ended December 31, 2008.
Selling, general and administrative expenses increased from $3,222,000 for the year ended December 31, 2008, as compared to $6,777,000 for the current year. The Company acquired Dose Shield in June 2008, closed the Canadian facility of IPT, and moved the operations to Indianapolis. Although salaries decreased from approximately $1.9 million in 2008 to $1.2 million in 2009, consulting fees increased from $842,000 in 2008 to $2.5 million for the year ended December 31, 2009. A significant amount of the consulting expense is fees paid pursuant to contracts with consultants hired to assist the Company with capital raising. For the year ended December 31, 2009, general and administrative expenses include stock based compensation expense of $2,258,000 related to stock option grants to employees.
Research and development costs for the year ended December 31, 2009, were $178,000 compared to $1,027,000 for the year ended December 31, 2008. Research and development costs for the year ended December 31, 2008, included costs that related to further development of the IS2 gamma cameras and other related technologies. For the year ended December 31, 2008, the Company also incurred research costs related to the NPMS joint venture and upgrade and modernization of the PET imaging system. The modernization development program was substantially completed in 2008 and the new system was submitted to the FDA in January 2009 and approved for marketing in April 2009.
Operating expenses in 2008 include a charge for impairment of the intangible asset recorded in conjunction with the acquisition of Dose Shield. At the date of acquisition in June 2008, the Company recorded the excess of purchase price over the fair value of the net assets of $3,265,000 as an intangible asset. The entire amount was deemed impaired at December 31, 2008.
Other Income (Expenses) – Interest expense was $1,416,000 and $687,000 for the years ended December 31, 2009, and 2008, respectively. The significant increase in interest is due mainly to interest and related charges pursuant to default provisions contained in the NIR debentures agreements. In May 2009, the Company defaulted on the entire outstanding amount of the NIR debenture principal and accrued interest. Default related charges totaled $472,000 (recorded as interest expense) and other interest on the NIR notes amounted to $70,000 for the year ended December 31, 2009. Additionally in 2009, interest expense included $700,000 of discount amortization related to convertible debentures. Interest expense in 2008 included $526,000 of discount amortization related to convertible debentures and $68,000 of interest on two notes payable to Imagin Molecular.
The Company recorded derivative gains of $499,000 for the year ended December 31, 2009, and $63,000 for the year ended December 31, 2008. Derivative gains resulted from changes in variables used to calculate fair market value using the Black Sholes Model. Specifically, decreases of the Company’s stock price and less price volatility yielded a lower fair market value of the conversion features resulting in a decrease to the derivative liability during the year.
Income Taxes – There is no provision for income taxes due to ongoing operating losses. As of December 31, 2009, POSC had net operating loss carry-forward of approximately $29,000,000 for Federal reporting purposes. These amounts expire at various times through 2029. The Company has provided a full valuation allowance against the net deferred tax assets at December 31, 2009, and 2008.
Under the provisions of Section 382 of the Internal Revenue Code a greater than 50% ownership change that occurs in the Company limits the Company’s ability to utilize certain pre-existing NOL’s to reduce future taxable income and related tax liabilities.
Section 382 allows an owner shift any time there is a transfer of stock by a person who directly, or indirectly, owns more than 5% of the corporation and the percentage of stock of the corporation owned by one or more five percent shareholders has increased, in the aggregate, by more than 50 percentage points over the lowest percentage of stock owned by such shareholders at any time during the “testing period.” The “testing period” is generally a three-year period ending on the date of any owner or equity structure shift.
The amount of post-change income that may be offset by pre-change losses is limited each year by the “Section 382 Limitation.” Generally, the Section 382 Limitation is an amount equal to the value of the old loss corporation multiplied by a long-term interest rate established monthly by the Internal Revenue Service. The Company has not yet determined the events and resulting limitation that may impact utilization of net operating losses against future periods.
Net Loss – For the year ended December 31, 2009, the Company had a net loss of $5,749,000, or $0.02 per share, compared to a net loss of $8,975,000, or $0.07 per share, for the year ended December 31, 2008.
Liquidity and Capital Resources
At December 31, 2009, the Company had current assets of $923,000 and total assets of $988,000 compared to December 31, 2008, when current assets were $1,033,000 and total assets were $1,104,000. The decrease in current assets is attributable primarily to decreases in inventory and accounts receivable both attributable to a decrease in overall sales and service revenue.
Current liabilities at December 31, 2009, were $7,947,000 compared to $7,254,000 at December 31, 2008. Accounts payable and accrued liabilities were $3,200,000 and $2,687,000 at December 31, 2009, and 2008, respectively. This increase is due in large part to a significant increase in accrued interest related to the NIR debentures. At December 31, 2009, current liabilities also included $1,358,000 of convertible debentures that were due in May and June 2009 and are currently in default related derivative liabilities of $2,104,000, and $540,000 of notes payable related to the acquisition of Dose Shield.
Net cash used in operating activities during the year ended December 31, 2009, was $3,345,000 compared to $3,407,000 used in operating activities during the year ended December 31, 2008.
Net cash used in investing activities was $21,000 for the year ended December 31, 2009, and was all related to purchases of property and equipment including $16,000 in building and leasehold improvements. Net cash provided by investing activities of $762,000 during the year ended December 31, 2008, included $835,000 of advances from Imagin Molecular Corp. that were converted to notes and subsequently exchanged for shares of the Company’s Series S Preferred Stock.
Net cash provided by financing activities was $3,519,000 and $2,415,000 for the years ended December 31, 2009, and 2008, respectively. During the year ended December 31, 2009, the Company issued preferred stock for cash totaling $1,699,000 and common stock for cash totaling $1,933,000, compared to the prior year when the Company issued preferred and common stock for cash totaling $1,115,000 and $50,000, respectively. During the year ended December 31, 2008, the Company also received proceeds from related parties of $1,288,000, the vast majority of which was received from the Solaris Opportunity Fund.
Since inception, the Company has expended substantial resources on research and development. Consequently, POSC has sustained substantial losses. Due to the limited number of systems sold or placed into service each year, revenues have fluctuated significantly from year to year. The Company had an accumulated deficit of $91,329,000 at December 31, 2009. The Company will need to increase system sales and apply the research and development advancements to achieve profitability in the future. POSC expects to experience an increase in sales with the launch of Attrius Cardiac PET system and through sales of radiopharmaceutical delivery systems and recurring revenue from delivery of radiopharmaceuticals with Nuclear Pharm-Assist systems. Through the Company’s joint venture with Neusoft Medical Systems, PET system material cost of goods and labor costs will be significantly lower. The Company expects that these developments will have a positive impact on the sales & service volumes and increased net margins. However, there is no assurance that the Company will be successful in selling new systems.
POSC’s ability to achieve its objectives is dependent on its ability to sustain and enhance its revenue stream and to continue to raise funds through loans, credit and the private placement of restricted securities until such time as the Company achieves profitability. To date, management has been successful in raising cash on an as-needed basis for the continued operations of the Company. There is no guarantee that management will be able to continue to raise needed cash in this fashion.
The Company’s current financial condition raises doubt as to its ability to continue as a going concern. The report of the Company’s independent public accountants, which accompanied the financial statements for the year ended December 31, 2009, was qualified with respect to that risk. If the Company is unable to obtain debt or equity financing to meet its cash needs it may have to severely limit or cease business activities or may seek protection from creditors under the bankruptcy laws.
The Company has no material commitments for capital expenditures at this time. The Company has no “off balance sheet” source of liquidity arrangements.
Financial Strength (7-May-2010) Company Industry Sector S&P 500
Quick Ratio (MRQ) 0.04 1.69 2.55 0.80
Current Ratio (MRQ) 0.12 2.09 3.06 0.93
Long-Term Debt to Equity (MRQ) – 187.99 23.80 124.49
Total Debt to Equity (MRQ) – 222.99 30.76 184.90
Source: Reuters.com, SEC Filings.
Analyst Consensus
No chart available.
Source: www.ft.com
No consensus analysis data available.
Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=POSC.OB
Investment Highlights
POSC recently announced the highlights from the Company’s presentation before NASDAQ on May 5, 2010. POSC’s management introduced the Company at the NASDAQ Marketsite. This forum is of great value to POSC since it provides broad exposure and access to a far reaching investment community.
The Company set out to explain the foundation of its business, the confirmation of a strategic partnership and potential revenue. Management discussed most all aspects of the Company’s plans, which it was at liberty to disclose. A transcript of the presentation will be filed with the Securities and Exchange Commission on a Form 8-K immediately when it becomes available in coming days.
POSC representatives did confirm an agreement with an industry leading strategic partner that will give the Company the ability to greatly expand the Company’s revenue stream and our position in the molecular imaging market by offering imaging systems and radiopharmaceutical distribution. In a recent press release, Patrick Rooney, POSC’s CEO stated, “We would have liked to introduce a certain synergistic business partner as was stated in the press; however it was the recommendation of both companies to not disclose further details due to a potential expansion relationship and certain strategic competitive advantages. We anticipate additional information will be disclosed in the near future.”
The Company also gave guidance as to its target revenue. Based on the Company’s research and unique positioning in the marketplace, POSC projects significant sales growth quarter-over-quarter, year-over-year. The Company projects that in the next five years the nuclear cardiology market will approach $1.5 billion in revenue annually. The projections reflected sales from POSC’s PET device and radiopharmaceutical devices and services. POSC may potentially achieve greater revenue as it expands into new markets with broader indications that the Company expects will be fully supported by Medicare and private payers.
Source: http://www.positron.com/
Technical Analysis
Source: http://stockcharts.com
POSC is trading above its 50-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.
POSC’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, POSC is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.
POSC’s MACD is indicating a weak bearish signal. Although the indicator is above the critical level of 0, which implies that the underlying moving averages are bullish, the MACD has crossed below its 9-day moving average or signal line. This suggests that positive momentum has begun to slow.
Comparative Analysis
Company Name Ticker Price per Mrkt. Cap. P/E P/S
May-7-2010 symbol Share, $ $ Mn 2009 2010 2009 2010
iCAD Inc. ICAD 1.36 62.14M n/a n/a 2.29 n/a
Imaging Diagnostic Systems Inc. IMDS 0.03 29.00M n/a n/a 408.39 n/a
ZOLL Medical Corp. ZOLL 27.45 586.14M 65.02 n/a 1.61 n/a
Medical Equipment Median 225.76M n/a n/a 137.43 n/a
Positron Corp. POSC 0.11 43.77M n/a n/a 52.29 n/a
Source: Thomson Financial
Insider Trading Activity
NET SHARES PURCHASE ACTIVITY
Inside Purchases – Last 6 Months
Shares Transaction
Purchases n/a 0
Sales n/a 0
Net Shares Purchased (Sold) n/a 0
Total Insider Shares Held 35.90M n/a
% Net Shares Purchased (Sold) 0.0% n/a
Net Institutional Purchases — Prior Qtr to Latest Qtr
Shares
Net Shares Purchased (Sold) n/a
% Change in Institutional Shares Held n/a
Source: Yahoo Finance
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