UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





FORM
10-K/A








S ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2008





Commission file
number 0-23873





IMAGIN
MOLECULAR CORPORATION


(Exact
Name of Registrant in its Charter)





Delaware
              
              13-4099008(State
      or other jurisdiction of incorporation or organization)
              
              (IRS
      Employer Identification No.)





3
Grant Square, #315, Hinsdale, IL 60521


(Address
of principal executive offices   (Zip Code)





(630)
371-5583


(Registrant's
telephone number, including area code)





Securities
registered under Section 12(b) of the Exchange Act: None





Securities
registered under Section 12(g) of the Exchange Act:





Common
Stock, $.001 par value per share





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes £No S





Indicate
by a check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.





Yes  ̈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 xNo  ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K 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.  x




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
definitions of “large accelerated filer”, “accelerated filer”, or “smaller
reporting company in Rule 12b-2 of the Exchange Act (check one):





Large
      accelerated filer     ̈
              
              Accelerated
      filer     ̈Non-accelerated
      filer     ̈
              
              Smaller
      reporting Company    x







1





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.).





Yes  ̈ No x




Registrant's
revenues for its most recent fiscal year: $613,045.





Market
value of Common stock held by non-affiliates at April 14,
2009:  $3,683,164.





Shares of
Common Stock outstanding at April 14, 2009: 73,663,284 shares





Documents
incorporated by reference: None





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




2





TABLEOF CONTENTS




PagePART
      IItem
      1.
                          
                          Description of Business
                          
                          1Item
      2.
                          
                          Description of Properties
                          
                          12Item
      3.
                          
                          Legal Proceedings
                          
                          12Item
      4.
                          
                          Submission of Matters to a Vote of Security
      Holders
                          
                          12PART
      IIItem
      5.
                          
                          Market for Common Equity and Related Stockholder
      Matters
                          
                          13Item
      6.
                          
                          Selected Financial Data
                          
                          14Item
      7.
                          
                          Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
                          
                          14Item
      8.
                          
                          Financial Statements
                          
                          14Item
      9.
                          
                          Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure
                          
                          19Item 9A.
                          
                          Controls and Procedures
                          
                          19Item
      9B.
                          
                          Other Information
                          
                          22PART
      IIIItem
      10.
                          
                          Directors, Executive Officers, Promoters and Control Persons;
      Compliance with Section 16(a) of the Exchange Act
                          
                          22Item
      11.
                          
                          Executive Compensation
                          
                          23Item
      12.
                          
                          Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
                          
                          24Item 13.
                          
                          Certain Relationships and Related
    Transactions
                          
                          26Item
      14.
                          
                          Principal Accountant Fees and Services
                          
                          26Item
      15.
                          
                          Exhibits
                          
                          27Report of Independent Registered Public Accounting
      Firm
                          
                          29Consolidated Financial Statements
                          
                          30Signatures
                          
                          28Certifications





3
 Table of Contents





PART
I





ITEM1. DESCRIPTION OF BUSINESS








Special
Cautionary Notice Regarding Forward-Looking Statements





This
Report contains statements that constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and the Securities
Exchange Act of 1934. Various matters discussed in this document and in
documents incorporated by reference herein, including matters discussed under
the caption “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” may constitute forward-looking statements for purposes
of the Securities Act and the Securities Exchange Act. These statements are
based on many assumptions and estimates and are not guarantees of future
performance and may involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of
Imagin Molecular Corporation (the “Company” or “Imagin”) to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. The words “expect,” “anticipate,” “intend,”
“plan,” “believe,” “seek,” “estimate,” and similar expressions are intended to
identify such forward-looking statements. The Company’s actual results may
differ materially from the results anticipated in these forward-looking
statements due to a variety of factors, including, without
limitation:




The
effects of future economic conditions;





•
            The
      risks of changes in interest rates on the level and composition of
      deposits, loan demand, and the values of loan collateral, securities and
      interest-rate protection agreements, as well as interest-rate
      risks;




•
            The
      effects of competition from other financial institutions and financial
      service providers operating in the Company’s market area and elsewhere,
      including institutions operating locally, regionally, nationally and
      internationally, together with such competitors offering banking products
      and services by mail, telephone, and computer and the Internet;
      and





•
            The
      failure of assumptions underlying the establishment of reserves for
      possible loan losses and estimations of values of collateral and various
      financial assets and liabilities.




All
written or oral forward-looking statements attributable to the Company are
expressly qualified in their entirety by these cautionary
statements.





Imagin
Molecular Corporation, a Delaware corporation (“Imagin”, the “Registrant” or the
“Company”), refocused its business strategy in April 2005 to concentrate on
business opportunities in positron emission tomography (PET) through holdings in
strategically related divisions based in the manufacturing of PET devices
ownership of PET imaging centers and the diagnosis and treatment of cancer,
heart and neurological diseases. PET is an advanced medical diagnostic imaging
procedure used by physicians in the detection of certain cancers, coronary
disease and neurological disorders including Alzheimer's disease. Through its
wholly owned subsidiary, Imagin Nuclear Partners, a New York Corporation (“INP”)
the Registrant intends to acquire, operate and administer out-patient medical
diagnostic imaging centers that utilize PET and PET/CT scanning equipment. INP
specializes in using evidence based bioinformatics specifically positioned in
the market to provide the maximal cost effective benefit to their joint venture
partner and the community. The Registrant is also the parent of Positron
Acquisition Corporation, a Nevada corporation (“PAC”) which is the holder of
8,026,000 shares of common stock and 722,358 shares of Series B Convertible
Preferred Stock of Positron Corporation, a publicly owned Texas Corporation
(“Positron”), and manufacturers of certain of the PET scanners Imagin uses in
its operations. Imagin Molecular Corporation is also the parent of Cipher
Multimedia, Inc. (“Cipher”) formed in August 2002 as a new media marketing and
distribution solution company that provides distribution solutions for
publishers of digital content. As the Registrant focuses its business to
concentrate on opportunities in positron emission tomography, the operations of
Cipher have for the most part been discontinued.





4
 Table of Contents





CORPORATE
ORGANIZATION





Imagin
Molecular Corporation was incorporated under the laws of the State of Colorado
on September 19, 1997 as Buffalo Capital VIII, Ltd. (“Buffalo”). The Company
commenced its operations upon incorporation. On June 21, 2000, the shareholders
of Buffalo approved the merger of Buffalo with and into the Registrant. The
merger was effected on July 14, 2000. As a result, the corporate domicile and
name of Buffalo were changed to Delaware and Momentum Holdings Corporation
(“Momentum”), respectively.





On
September 15, 2003, Cipher Multimedia, Inc., an Illinois corporation (“Cipher”)
and Momentum executed a Share Exchange Agreement whereby Momentum exchanged
14,052,800 newly issued shares of common stock for all of the issued and
outstanding shares of capital stock of Cipher. As a result of the purchase and
exchange of shares, Cipher acquired voting control of Momentum on August 19,
2003 and became Momentum's majority shareholder. The total number of issued and
outstanding shares of Momentum after the Exchange increased to
16,452,811.





On
November 24, 2003, the Company amended its Articles of Incorporation to change
the name of the Company to Cipher Holding Corporation and to increase its
authorized capital stock to 100,000,000 shares, of which 95,000,000 are common
and 5,000,000 are "blank check" preferred stock authorizing the Company's Board
of Directors to set the rights and preferences of the preferred stock without
further stockholder action.





On April
19, 2005, Imagin formed Positron Acquisition Corp. (“PAC”) a wholly owned
subsidiary organized under the laws of the State of Nevada.





On
November 18, 2005 the Company formed a wholly owned subsidiary, Imagin Nuclear
Partners Corporation, a New York corporation (“INP”), to provide Positron
Emission Tomography myocardial perfusion imaging technology (“PET” or “PET
imaging technology”) and related technical and educational services to diagnose
and treat patients with coronary artery disease and patients who are at risk of
developing coronary heart disease.





On March
13, 2007, the Registrant redomiciled Cipher as a Nevada corporation through a
merger with and into Cipher Multimedia, Inc., a Nevada corporation. In
accordance with the Plan of Merger, each ten shares of Cipher were exchanged for
one share of Cipher-NV common stock.








BUSINESS
DEVELOPMENT





Through
its wholly-owned subsidiary, Imagin Nuclear Partners Corporation, the Company
utilizes Positron Emission Tomography myocardial perfusion imaging technology
(“PET” or “PET imaging technology”) and related technical and educational
services to lease their system to aid in the diagnosis and treatment of patients
with coronary artery disease as well as those who are at risk of developing
coronary heart disease. The Company will attempt to establish heart health
centers to provide imaging technology for the diagnosis and non-invasive
management of coronary artery disease. The Company plans to use PET perfusion
imaging and vigorous risk factor modification programs to diagnose and guide the
management of patients with coronary artery disease. This program is aimed at
the regression of coronary atherosclerosis and stabilization of plaque to
prevent the clinical events of myocardial infarction, sudden death and unstable
coronary syndromes requiring invasive intervention (PTCA or bypass
surgery).





The
Company’s methodology differs than that of traditional invasive coronary
procedures by health care providers that has not resulted in significant
improvement in clinical outcomes for coronary patients, primarily due to what
the Company perceives as limitations of the imaging technology currently
employed by health care providers and the failure to focus on lifestyle
modification programs for coronary patients. The Company believes that the
current barriers to entry of Positron Emission Tomography Myocardial Perfusion
Imaging (PET MPI) have prevented widespread utilization.





5
 Table of Contents





Studies
have shown that the utilization of PET imaging technology is a cost-effective
approach to the diagnosis of coronary artery disease when compared to the cost
of utilizing traditional imaging technology and invasive procedures. The current
approximate cost of a PET scanner, in excess of $1,500,000 continues to prevent
wide spread acceptance of the technology. The Company believes that if the
technology could be offered at prices equivalent to the less accurate, less
expensive, routinely used, diagnostic exam of Single Photon Emission Computed
Tomography (SPECT) that the barriers to entry may be significantly reduced
leading to an increased utilization.





INP does
not have a current center for these services, having terminated its sole
operations located at Beth Israel Medical Center in the First
Quarter 2009.  INP is currently seeking a purchaser or an alternate
business opportunity for the scanner located therein.








PRODUCTS
AND SERVICES





The
Company intends to market its cardiovascular PET and noninvasive coronary artery
disease reversal program to General/Family/Internal Medicine physicians in
metropolitan areas within the United States. These physicians are the primary
gatekeepers for patients suspected of having coronary artery disease and are
responsible 40% of all referrals for nuclear imaging. This referral patterned
has steadily increased more than 15% per year over the last 5 years, because of
the advent of lipid management programs.





The
Company anticipates its initial target states are New York, New Jersey,
Pennsylvania, Maryland, Florida and Texas, where cardiac patient demographics
and cardiovascular PET reimbursement are well established.





Cardiovascular
PET Perfusion Imaging





The
Company believes the therapeutic paradigm is now shifting away from expensive,
anatomically driven treatment (e.g., coronary angiography followed by
revascularization), toward identification of the vulnerable plaque, with
subsequent biological stabilization of the atherosclerotic process, using
aggressive lipid lowering medical management. A fundamental question for
General/Family/Internal Medicine physicians which manage patients with coronary
artery disease is which patients will require invasive intervention and which
only require noninvasive but aggressive medical management. In addition those
patients on noninvasive therapy we need to know how hard should we push lipid
reduction to achieve coronary disease reversal in the individual
patient?





PET
myocardial perfusion imaging (MPI) can now assist in answering these critical
questions for patients, insurers and referring doctors, because of the unique
physical advantages of positron imaging power of positron emission tomography.
PET's advantages over single photon emission computed tomography (SPECT) nuclear
imaging results in an improvement in diagnostic accuracy results that rivals
that of the angiogram itself.




Coronary
Disease Reversal Program





The
Company intends to educate referring physicians about the program and the
intensive patient / primary physician relationship necessary for
success.





6
 Table of Contents





Smoking
Cessation - Stopping smoking is an essential step in the reversal program. There
are many programs from insurance companies to help the patient
quit.





Diet
Modification - The diet that we currently recommend is no more than 10% of
calories as fat. This includes unrestricted vegetables and protein in the form
of skinless chicken, turkey, buffalo meat, venison, fish and all shellfish. Beef
and pork are once a month items. Fruit is appropriate for desert. For over
weight patients, carbohydrates sources such as bread, potatoes, rice, pasta,
pastry and sweets have to be portion controlled to achieve lean body mass. Once
lean mean body mass is achieved, we add back enough of carbohydrates to stay at
a static weight.





Exercise
Program - The three essential criteria for a successful program of physical
activity are (1) to determine individual preferences for the type of exercise,
(2) activity for at least thirty to sixty minutes per day for five to six days
per week, (3) do something each day even if the required minimum can not be
met.





Cholesterol
Management - Total cholesterol, through medical management, is controlled down
to 110 to 140 achieving levels similar to limiting those populations that simply
do not have coronary disease such as found in Central China and in Central
Africa. Our goal is to drive LDL below 90, HDL’s above 45 and triglycerides
below 90. Statin drugs are used to accomplish acceptable values. The physician
needs to check liver enzymes and the cholesterol profile each month for three
months. Dose modifications are necessary to achieve regression due to the
individual variability factor. Often combination therapy with two or more lipid
agents is necessary.








MARKET
ENVIRONMENT





Coronary
artery disease (CAD), remains the major cause of death in the U.S., claiming
over 650,000 lives annually, which constitutes more than 25% of all deaths in
adults over 35 years of age. Moreover, nearly twice this number of acute
myocardial infarctions occur each year. 60% of acute myocardial infarction and
sudden death occur unexpectedly, in previously apparently healthy people, with
no antecedent symptoms.





The
Company believes that excessive, invasive, cardiological procedures do not
result in improved clinical outcomes for patients. The frequency of utilization
of coronary arteriography (CATH), coronary artery bypass surgery (CABG) and
percutaneous transluminal coronary intervention (PTCI) procedures in the United
States has increased annually 50 - 150% with no subsequent improvement in the
hard endpoints of coronary death and recurrent MI at one year.





We have
learned, while utilization of invasive coronary procedures in the US has
exploded over the past few years with no improvement of outcomes, from a large
number of well conducted lipid lowering trials, which employed quantitative
coronary arteriography, that aggressive noninvasive management of CAD with a
very low fat diet and lipid lowering drugs, may reduce acute MI and coronary
death by up to 85% or more. Interestingly this remarkable clinical benefit
occurs despite only minimal angiographic improvement in coronary lumen diameter.
This is because it is the young, mild, plaque which is actively inflamed that is
structurally vulnerable, and therefore prone to rupture suddenly, leading to
death or an acute coronary syndrome, rather than the older, more severe,
structurally stable stenosis, which is typically responsible for chronic stable
angina. It is this stable lesion that is usually the stenosis targeted for
mechanical intervention.





The
management of CAD in the new millennium is undergoing critical reappraisal
driven by the need for health care cost containment. The Company’s business plan
is to provide a basis for the shift away from expensive, anatomically driven
treatment (e.g., coronary angiography followed by revascularization), toward
identification of the vulnerable plaque, with subsequent biological
stabilization of the atherosclerotic process, using aggressive lipid lowering
medical management. Which patients will require invasive vs. aggressive
noninvasive management? How hard should we push lipid reduction to achieve
coronary disease reversal in the individual patient?








CUSTOMERS





The
Company’s primary potential customers are General/Family/Internal Medicine
physicians in Metropolitan areas. A metropolitan population can be defined as
having multiple General/Family/Internal Medicine physician offices and a
referral population of at least 500,000 patients.


7
 Table of Contents





IMAGIN
NUCLEAR PARTNERS CORPORATION





On
November 18, 2005 the Company formed a wholly owned subsidiary, Imagin Nuclear
Partners Corporation, a New York corporation (“INP”), the Company utilizes
Positron Emission Tomography myocardial perfusion imaging technology (“PET” or
“PET imaging technology”) and related technical and educational services to
lease their system to aid in the diagnosis and treatment of patients with
coronary artery disease as well as those who are at risk of developing coronary
heart disease. Imagin Nuclear Partners Corporation is headquartered in Niagara
Falls, New York.





Sales
and Marketing





To
fulfill its business plan Imagin Nuclear Partners will approach physicians who
primarily see Medicaid patients to solicit referrals. Medicaid physicians are
not routinely solicited for referrals due to the traditional low fees
associated. Imagin Nuclear Partners believes that the Medicaid population will
result in a significant portion of their monthly volume.  Imagin
Nuclear Partners hopes to solicit large self insured companies and present the
GM report with real patient data to justify the increased use of PET along with
Coronary Disease Reversal.





Government
Regulation





The
Company’s operations which assess medical imaging and physician referral will be
required to adhere to a wide variety of other regulations governing the
operation of its business. For example, federal regulations commonly known as
the “Stark Laws” impose civil penalties and exclusion from participation in the
Medicare program of reimbursement for referrals by physicians for “designated
health services” to certain entities with which the referring physician has a
financial relationship, if those referrals do not fall within an exception
created by law or regulation. “Designated health services” include PET services.
Implementing regulations have been issued regarding referrals for clinical
laboratory services, but no final implementing regulations have been issued
regarding PET services. It is possible that these proposed rules will be found
to apply to PET scanners, thereby restricting physician referrals for PET
services by an investor-physician or a physician who has a compensation
arrangement with Imagin Nuclear Partners.




In
addition, several states in which Imagin Nuclear Partners intends to operate
have enacted or are considering legislation that restricts physician referral
arrangements in a manner similar to the Stark Laws and requires physicians to
disclose any financial interest they have with a health care provider to their
patients to whom they recommend that provider. Possible sanctions for violating
these provisions include loss of medical licensure and civil and criminal
sanctions. These state laws vary from state to state and seldom have been
interpreted by the courts or regulatory agencies. Nonetheless, Imagin Nuclear
Partners expects that these laws will be strictly enforced.




The
Company will also be required to comply with other state and federal laws
prohibiting the payment or receipt of bribes, kickbacks, rebates and any other
direct or indirect remuneration in return for or to induce the referral of an
individual to a person for the furnishing, directing or arranging of services,
items or equipment, commonly referred to as anti-kickback laws. Violation of the
anti-kickback laws may result in civil and criminal penalties, loss of medical
licensure and exclusion from the Medicare and other federal health care programs
to the extent such federal reimbursement program beneficiaries are
involved.





Customers





Customers
for our imaging operations will be patients of the medical centers with whom we
intend to conduct our business either through joint ventures or equity
ownership.





8
 Table of Contents





Patents





We do not
have any patents or patents pending and rely on the intellectual property rights
of Positron Corporation and other third-party suppliers.








CIPHER
MULTIMEDIA, INC.





Cipher
Multimedia, Inc., a Nevada Corporation (“Cipher”) was formed in August 2002.
Cipher is a digital distribution solution and marketing company which secures
and allows access to digital content through proprietary encoding, encryption
and authorization technology. Cipher’s technology and services allow publishers
and distributors to distribute digital content in a secure format to mass
markets. Secured video and software content is distributed through new and
existing commercial product offerings and distribution channels.





Cipher’s
Digital Rights Management (“DRM”) technology protects or controls access to
digital content. Cipher’s technology allows publishers and distributors to
distribute full-feature video and/or software in a secure format. Secureddigital content is
delivered in the form of CD/DVDs, diskettes and Internet download format. The
consumer has the ability to view a sample of the video or demonstration of the
software before purchasing of the product by unlocking the full product for
immediate use on their personal computer. The purchase and delivery transactions
are immediate and are facilitated though Cipher’s transaction processing
service. Cipher’s technology protects publisher’s content from copyright
infringement by restricting access only to authorized purchasers.





On March
13, 2007, the Registrant reorganized Cipher as a Nevada corporation via merger
with Cipher Multimedia, Inc., a Nevada corporation (“Cipher-NV”).  In
accordance with the Plan of Merger, each ten shares of Cipher were exchanged for
one share of Cipher-NV common stock.  .  On March 14, 2007,
Cipher settled obligations with its two largest creditors by retiring
$148,973.46 in obligations to Patrick Rooney, the Registrant’s former chairman
and Chief Executive officer and Cipher’s founder, for 7,448,673 shares of
Cipher’s common stock, and retiring $35,750 in exchange for the issuance of
1,787,500 shares of Cipher’s common stock.  On March 20, 2007,
realizing that Cipher’s software encryption business no longer fit the
Registrant’s business model of medical imaging services, the Registrant’s Board
of Directors resolved to spin off the 3,513,200 shares of Cipher common stock
held by the Registrant as a special dividend to its Shareholders of record as of
March 26, 2007.  The operations of Cipher Multimedia, Inc. are limited
and have been discontinued from an accounting perspective.






POSITRON
ACQUISITION CORP.





On April
19, 2005, Imagin formed Positron Acquisition Corp. (“PAC”) a wholly-owned
subsidiary organized under the laws of the State of Nevada.
 
 On May
23, 2005, PAC acquired two convertible notes receivable issued by Positron (the
“Positron Notes”) in favor of IDC. The Positron Notes are convertible into
shares of Positron’s Series C and Series D Preferred Stock that are in turn
convertible, under certain circumstances, into 64,000,000 shares of Positron’s
common stock, par value $.01 per share. Imagin acquired the Positron Notes in
exchange for 30,000,000 newly issued shares of Imagin’s common
stock.  On September 30, 2006, Imagin exchanged the Positron Notes for
a total of 762,358 of Positron’s Series B Convertible Preferred Stock, par value
$1.00 per share (the “Series B”).  The Series B are convertible into
shares of Positron’s common stock, par value $0.001 per share, at the rate of
100 shares of Common stock for each Series B.  On September 7, 2006,
PAC converted 40,000 shares of Series B into 4,000,000 shares of common
stock.




Positron
designs, manufactures and markets medical imaging devices utilizing Positron
Emission Tomography (“PET”) technology. PET technology permits the measurement
of the biological processes of organs and tissues and produces anatomical and
structural images. PET systems are used by physicians in the diagnosis and
management of heart disease and certain other neurological and oncological
illnesses.





Following
the acquisition of the Positron Notes, the Company changed its principal
operations from multimedia encryption technology to positron emission tomography
and medical imaging and related services.





9
 Table of Contents





EMPLOYEES





On April
14, 2009, the Company had two full-time employees.








ITEM
1A - RISK FACTORS





We also
caution you that this Annual Report contains forward-looking statements. The
words "believes," "should be," "anticipates," "plans," "expects," "intends," and
"estimates," and similar expressions identify these forward-looking statements.
These forward-looking statements are contained principally under the headings
"Summary," "Risk Factors," "Financial Statements," "Management's Discussion and
Analysis of Operations," "Business," and "Management." Although we believe that
our expectations reflected in these forward-looking statements are based on
reasonable assumptions, our expectations may not prove to be correct. Because
these forward-looking statements are also subject to risks and uncertainties,
actual results may differ materially from the expectations expressed by these
forward-looking statements. Important factors that could cause actual results to
differ materially from the expectations reflected in our forward-looking
statements include the following risk factors:




It Is Difficult to Evaluate
the Company’s Business and Prospects Because it Does Not Have Any Operating
History





The
Company has yet to generate significant revenue from operations. The Company’s
lack of working capital, make it difficult to evaluate the Company’s current
business prospects or to accurately predict its future revenue or results of
operations. The Company’s revenue and income potential continue to be unproven,
and its business model is evolving. Because of the rapidly changing nature of
medical imaging and medical reimbursement, the Company may need to modify its
business model to adapt to these changes. Accordingly, the Company is subject to
all of the risks, uncertainties, expenses and difficulties frequently
encountered by companies seeking to break into a difficult-to-penetrate and
rapidly changing industry segment.





The Penny Stock Rules May
Have an Adverse Effect Upon Liquidity of the Company’s
Shares





If the
shares of the Company’s common stock are listed on The Nasdaq Stock Market or
certain other national securities exchanges and the price thereof is below
$5.00, then subsequent purchases of such securities will be subject to the
requirements of the penny stock rules absent the availability of another
exemption. The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on The Nasdaq
Stock Market). The penny stock rules require a broker-dealer to deliver a
standardized risk disclosure document required by the SEC, to provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction,
monthly account statements showing the market value of each penny stock held in
the customer's account, to make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules.





Lack of
Profitability





The
Company currently operates at a loss. No assurance can be given that the Company
will achieve sufficient revenues for profitability. We believe that we will
continue to incur operating and net losses for at least the foreseeable future.
The rate at which we will incur losses is expected to increase from current
levels for a period when we intend to increase our costs and expenses. Even if
the Company attains profitability, there is no assurance that it can sustain or
increase profitability on a quarterly or annual basis in the future. If revenues
grow slower than anticipated, or if operating expenses exceed expectations or
cannot be adjusted accordingly, the Company’s business, results of operations
and financial condition will be materially and adversely affected.





10
 Table of Contents





Dependence on Executive
Officers and Directors





The
Company’s success is dependent on the efforts and abilities of its officers and
directors. The Company currently does not have employment agreements with its
executive officers. The loss of the services of any of these individuals could
materially and adversely affect the development of the Company’s business
plan.





The
Company’s ability to attract and retain qualified marketing and management
personnel is critical to its operations. While management believes it will be
able to attract and retain sufficient professional employees to meet its needs,
there can be no assurance that management is correct. If the Company is unable
to employ the qualified employees needed, then its business would be materially
and adversely affected.





Dependence Upon Third Party
Relationships





The
Company will be dependent on various third parties for their technologies,
equipment and related services and even for providing customers to the Company.
As a result, the Company's ability to generate revenues may be adversely
affected by the failure of these third parties to provide equipment and related
services to the Company. In addition, there can be no assurance that the Company
will be successful in establishing and maintaining such relationships with those
entities on favorable terms.






Risks Associated with
Technological Change





The
market in which the Company competes is characterized by rapidly changing
technology; evolving industry standards, frequent new product and service
announcements, introductions and enhancements, and changing customer demands.
These market characteristics are heightened by the emerging nature of medical
imaging and health care industries.  Accordingly, the Company’s future
success will depend on its ability to adapt to rapidly changing technologies,
its ability to adapt its services to meet evolving industry standards. The
Company’s failure to successfully adapt to such changes in a timely manner could
have a material adverse effect on the Company’s business, results of operations
and financial condition.
 Government
Regulation





Laws and
regulations directly applicable to the reimbursement by government and private
insurance companies will have a material impact on our expected operations. Our
ability to obtain payment for services which we extend to patients is directly
related to governmental regulation, as well as, the manner in which we are able
to obtain business. A change in these regulations may occur in which we are
unable to adjust quickly enough in order to obtain payment to fund our
operations or materially modify our plan of operations.





Need for Future
Funding





The
Company may need to raise additional funds through public or private debt or
sale of equity to achieve our current business strategy. The financing we need
may not be available when needed. Even if this financing is available, it may be
on terms that we deem unacceptable or are materially adverse to your interests
with respect to dilution of book value, dividend preferences, liquidation
preferences, or other terms and may involve a substantial dilution to our
shareholders. Our inability to obtain financing will inhibit our ability to
implement our development strategy, and as a result, could require us to
diminish or suspend our development strategy and possibly cease our
operations.





11
 Table of Contents





If we are
unable to obtain additional financing on reasonable terms, we could be forced to
delay, scale back or eliminate certain product and service development programs.
In addition, such inability to obtain additional financing on reasonable terms
could have a negative effect on our business, operating results, or financial
condition to such extent that we are forced to restructure, file for bankruptcy,
sell assets or cease operations, any of which could put your investment dollars
at significant risk.





Potential Decrease in Market
Price





Sales of
substantial amounts of our common stock in the public market could decrease the
prevailing market price of our common stock. If this is the case, investors in
our shares of common stock may be forced to sell such shares at prices below the
price they paid for their shares, or in the case of the investors in the May
2006 financing, prices below the price they converted their notes and warrants
into shares. In addition, a decreased market price may result in potential
future investors losing confidence in us and failing to provide needed funding.
This will have a negative effect on our ability to raise equity capital in the
future.





General Condition of the
Healthcare Market





The
Company’s business is subject to global economic conditions, and in particular,
market conditions in the healthcare industry. The Company’s operations may be
adversely affected by the continued declines in employee benefit spending by
large corporations and small to medium sized businesses. If global economic
conditions worsen, or a prolonged slowdown in providing such benefits exists,
then the Company may experience adverse operating results.








ITEM2. DESCRIPTION OF PROPERTY





The
Registrant leases its current office space in Oak Brook, Illinois on a month to
month basis.








ITEM3. LEGAL PROCEEDINGS





On March
16, 2009 the Company received a Notice of Right To Cure and Demand for Payment
from Cherry Creek Capital Partners  issued for all amounts past due
pursuant to the terms of a promissory note issued by the Company on September
11, 2006.






ITEM4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





None.





12
 Table of Contents





PART
II





ITEM5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS





(a)
Market Information.





Since
approximately November 1996, the Company’s common stock, its only class of
trading equity securities, has been traded on the NASD OTC Bulletin Board
(“OTCBB”) under the symbol "IMGM.OB". The following table sets forth the range
of high and low bid price information for the common stock for each fiscal
quarter for the past two fiscal years as reported by the OTCBB.  High
and low bid quotations represent prices between dealers without adjustment for
retail mark-ups, markdowns or commissions and may not necessarily represent
actual transactions.








Year
      Ended December 31, 2007
                
                High
      Bid
                
                
                Low
      BidFourth
      Quarter
                
                
                .09
                
                
                
                .04Third
      Quarter
                
                
                .09
                
                
                
                .05Second
      Quarter
                
                
                .08
                
                
                
                .04First
      Quarter
                
                
                .08
                
                
                
                .04Year
      Ended December 31, 2008
                
                High
      Bid
                
                
                Low
      BidFourth
      Quarter
                
                
                .08
                
                
                
                .01Third
      Quarter
                
                
                .08
                
                
                
                .04Second
      Quarter
                
                
                .10
                
                
                
                .05First
      Quarter
                
                
                .08
                
                
                
                .04






(b)
Holders





As of
December 31, 2008, we had 73,663,284 shares of Common Stock outstanding, held by
approximately 1,164 holders of record.


Series A
Preferred





As of
December 31, 2008 no shares of Series A Preferred were outstanding.





All of
the securities set forth above were issued by the Company pursuant to Section
4(2) of the Securities Act of 1933, as amended, or the provisions of Rule 504 of
Regulation D promulgated under the Securities Act. All such shares issued
contained a restrictive legend and the holders confirmed that they were
acquiring the shares for investment and without intent to distribute the shares.
All of the purchasers were friends or business associates of the Company’s
management and all were experienced in making speculative investments,
understood the risks associated with investments, and could afford a loss of the
entire investment. The Company has never utilized an underwriter for an offering
of its securities.





(c)
Dividends.





The
Registrant has paid no dividends during the fiscal years ended December 31, 2008
and 2007. There are no restrictions on the Registrant's present or future
ability to pay dividends.





The
payment by the Registrant of dividends, if any, in the future rests within the
discretion of its Board of Directors and will depend, among other things, upon
the Registrant's earnings, its capital requirements, and its financial
conditions, as well as other relevant factors.





(d)  Securities
authorized for issuance under equity compensation plans.





The
Company’s equity plan information required by this item is set forth under Item
11 of Part III below.





13
 Table of Contents





ITEM6. SELECTED FINANCIAL DATA





Not
applicable






ITEM7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS





Overview





Imagin
Molecular Corporation has focused its business strategy to concentrate on
business opportunities in positron emission tomography (PET) through holdings in
strategically related divisions based in the manufacturing of PET devices
ownership of PET imaging center and the diagnosis and treatment of cancer, heart
and neurological diseases. PET is an advanced medical diagnostic imaging
procedure used by physicians in the detection of certain cancers, coronary
disease and neurological disorders including Alzheimer's disease.





The
Company’s  wholly owned subsidiary, Imagin Nuclear Partners
Corporation, a New York corporation (“INP”), to provide Positron Emission
Tomography myocardial perfusion imaging technology (“PET” or “PET imaging
technology”) and related technical and educational services to diagnose and
treat patients with coronary artery disease and patients who are at risk of
developing coronary heart disease. Imagin Nuclear Partners Corporation is
headquartered in Niagara, New York.





14
 Table of Contents





Relationship
with Beth Israel Hospital





In
February 2006, Imagin Nuclear Partners purchased a Positron HZL-R Imaging Camera
from Positron as well as a CTI Infusion Cart from Bracco Diagnostics, Inc. Also,
in February 2006, the Company commenced operations of a PET center under the
name Imagin Nuclear Partners at the cardiac center located within
Beth Israel Medical Center (“BIMC”) in New York. The Company’s
intention is to leverage its existing relationship with the New York State
Department of Health Cardiac Advisory Committee to secure a “pilot program”
aimed at demonstrating the cost efficiency of cardiac PET in selected markets on
predetermined procedure indications. Under the initial contract with BIMC, the
Company reimbursed BIMC on a fixed monthly basis for various operating expenses
associated with performing scans, including physician’s fees, technologist fees,
rents and other administrative expenses.  In February 2007, the
Company and BIMC temporarily suspended operations at the facility pending
re-negotiation of the original contract.  The parties executed a new
agreement, the terms of which are discussed in detail below.




In May
2007, INP and Beth Israel Medical Center executed an
Equipment Lease Agreement (the “Agreement”) for certain positron emission
tomography (“PET”) scanning cameras and related radiologic equipment (the
“Equipment”).  Under the terms of the Agreement, BIMC will lease the
equipment for use in its on site PET Lab where it performs PET scans on its
patients.  The initial lease term is three (3) years commencing on
June 4, 2007 (the “Effective Date”).




On
December 31, 2008, INP advised BIMC that it had breached the Agreement for
failure to make certain payments under the Agreement.  In addition,
INP advised BIMC that it was seeking payment of $188,700 for 102 inpatient scans
that BIMC had requested it perform on behalf of BIMC patients and had failed to
reimburse INP for.




INP also
asserted other claims in the aggregate amount of $318,144 and ceased supplying
rubidium to BIMC thereafter.  Also in the first quarter 2009, BIMC
asserted that INP had breached the Agreement and demanded that INP remove the
scanner located therein.  INP is seeking a purchaser or another
business opportunity to implement the device, however, no assurance can be given
that such an agreement will be reached or if reached that it will be on terms
favorable to the Company.
  Cipher
Multimedia Reorganization
  On March
13, 2007, the Registrant reorganized Cipher as a Nevada corporation via merger
with Cipher Multimedia, Inc., a Nevada corporation (“Cipher-NV”).  In
accordance with the Plan of Merger, each ten shares of Cipher were exchanged for
one share of Cipher-NV common stock.   On March 14, 2007, Cipher
settled obligations with its two largest creditors by retiring $148,973.46 in
obligations to Patrick Rooney, the Registrant’s former chairman and Chief
Executive officer and Cipher’s founder, for 7,448,673 shares of Cipher’s common
stock, and retiring $35,750 in exchange for the issuance of 1,787,500 shares of
Cipher’s common stock.  On March 20, 2007, realizing that Cipher’s
software encryption business no longer fit the Registrant’s business model of
medical imaging services, the Registrant’s Board of Directors resolved to spin
off the 3,513,200 shares of Cipher common stock held by the Registrant as a
special dividend to its Shareholders of record as of March 26,
2007.  The operations of Cipher Multimedia, Inc. are limited and have
been discontinued from an accounting perspective.
  2008
Transactions
  Securities Exchange
Agreement among Positron Corporation, Imagin Molecular Corporation and Solaris
Opportunity Fund, L.P.
 
 On
November 18, 2008, the Company, Solaris Opportunity Fund, L.P.
(“Solaris”)   and Positron Corporation (“Positron”) executed and
consummated a Securities Exchange Agreement whereby the Company transferred and
assigned all of its rights title and interest to two notes receivable due from
Positron (“Note 1” and “Note 2”) and the related pledged securities of
Positron (“Pledged Shares”) to Solaris in exchange for the return of the
20,000,000 shares of the Company’s  common stock and 4,387,500 shares
of the Company’s Series A Preferred Stock, to be retired and cancelled on the
Company’s books and records and the retirement and satisfaction of any
obligations to the advances made in the amount of $200,000 to the Company by
Solaris. Simultaneously therewith, Solaris exchanged Note 1, Note 2 plus accrued
interest and the Pledged Shares and the retirement and satisfaction of any
obligations to the advances made to Positron Corporation in the aggregate amount
of $1,155,000 for the issuance of 100,000 shares of the Company’s Series S
Preferred Stock (the “Exchange”).  At December 31, 2008, the Company
had not yet retired its common shares received in the Exchange and therefore
those shares are being held in treasury.


15
 Table of Contents





Results
of Operations





For the
years ended December 31, 2008 and 2007, the Company had net losses $930,529 and
$658,669, respectively.   Despite significantly higher revenues
during the year ended December 31, 2008 as compared to 2007, net loss increased
due to an impairment charge to the carrying value of the Company’s investment in
the securities of Positron Corporation.
 
 Revenues–
Revenue was generated exclusively from PET scans at
Beth Israel Medical Center (“BIMC”) and totaled $613,045 and
$259,985 for the years ended December 31, 2008 and December 31, 2007,
respectively.  The increase is due to the minimum monthly lease
payment of $51,000 that is due under the lease agreement with BIMC that was
executed in May of 2007. September 2007 was the first month in which the minimum
payment was recognized. Due to the uncertainty surrounding reimbursement, prior
to executing the lease, the Company used an estimate of 40% for scans billed but
not reimbursable and therefore revenues recognized represented only 60% of scans
billed during the period.  Minimum lease payments are not dependent
upon reimbursable amounts.   Costs of revenues, which consist
primarily of monthly fixed costs associated with performing the scans, operating
the imaging camera and CTI infusion were $424,045 and $317,801 in 2008 and 2007,
respectively.  The 2008 costs reflect a full year of scans, whereas in
2007 scans were suspended between March and May pending the negotiation of the
lease.  During this period the Company did not purchase rubidium
necessary to operate the PET imaging camera, a cost approximating $30,000 per
month. Since the Company was under contract with the rubidium supplier to make
monthly purchases they were obligated to continue purchasing during the
suspended months.  The Company and its supplier agreed to add the
suspended months to the end of the contract period thus extending the period of
the contract. However, the Company terminated the contract in December 2008
making those deferred payments due immediately.  The Company has
charged those amounts to cost of scans for the year ended December 31,
2008.


16
 Table of Contents





Operating
Expenses – Marketing and general and administrative expenses for the year
ended December 31, 2008 were $177,093 compared to $328,131 for the year ended
December 31, 2007.  .For the year ended December 31, 2007, the Company
charged $200,000 to operations for common stock issued for services, including
$120,000 of compensation expense.  The Company did not issue any
common stock for services during the year ended December 31,
2008.  General and administrative expenses for the year ended December
31, 2008 consist primarily of legal, accounting and consulting
fees.




Other Income
(Expense)- Interest income of $67,875 represents interest earned on
notes receivable due from Positron Corporation.  Pursuant to a
Securities Exchanges Agreement dated November 18, 2008, the notes and the
accrued interest were exchanged for all certain common and preferred shares the
Company had previously issued to Solaris Opportunity Fund, a related
party.
 
 Interest
expense for the years ended December 31, 2008 and 2007, was $22,413 and $33,256,
respectively.   Interest expense is related to a note payable to
Cherry Creek Capital Partners, an unrelated party to whom the Company issued a
12% secured promissory note on September 11, 2006 in the amount of
$300,000.
 
 During
the year ended December 31, 2007, the Company adopted the equity method of
accounting for it’s investment in the securities of Positron Corporation
securities.  For the years ended December 31, 2008 and 2007 the
Company recorded equity in the losses of Positron of $258,351 and $219,480,
respectively.
 
 At
December 31, 2008, the Company recorded an other-than-temporary impairment
charge of $734,068 against the carrying value of its investment in the
securities of Positron Corporation.  The Company’s wholly-owned
subsidiary, PAC, holds both common and preferred shares of Positron Corporation.
The fair market value of the common was determined using Positron’s quoted stock
price on December 31, 2008 while the fair market value of the preferred shares
was based on relative values of the same class of securities sold by Positron
during recent private placements.
 
 
 Discontinued Operations of
Cipher Multimedia (“Cipher”)
 
 Income
from discontinued operations for the year ended December 31, 2008 was $4,521
compared to a loss of $19,986 for the same period in 2007.  No revenue
was recorded by Cipher in either period.  During the year ended
December 31, 2008, Cipher recorded other income of $22,009, the majority of
which is attributed to debt forgiveness of amounts accrued during 2006 and 2007.
Cipher’s loss for the year ended December 31, 2007 is attributable primarily to
professional fees and other general and administrative expenses.
  Liquidity
and capital resources
 
 At
December 31, 2008, the Company had current assets of $942 and current
liabilities of $535,968 compared to December 31, 2007 when the Company had
current assets and current liabilities of $144,542 and $722,748,
respectively.  Cash and cash equivalents at December 31, 2008 were
$942.  The Company’s investment in the securities of Positron
decreased to $376,167 at December 31, 2008 from $1,368,586 at December 31, 2007
as a result of recording its shares of proportionate shares of Positron losses
under the equity method of accounting, and an impairment charge against the
carrying value of the investment.
  Current
liabilities at December 31, 2008 include accounts payable and accrued
liabilities of $344,198 and the of the Cherry Creek note payable of $182,710. At
December 31, 2008 the Company is in default. On March 16, 2009 Cherry Creek
issued a Notice of Right To Cure and Demand for Payment of all past due amounts
totaling $100,278 plus late charges of $5,014.    The notice
gave the Company until March 31, 2009 to pay all past due amounts. Although the
Company did not make any additional payments by March 31, 2009, they are
currently negotiating a resolution with Cherry Creek. However, no assurance can
be given that such a resolution will be achieved or that it will be achieved on
terms favorable to the Company.
 The
Company had net cash provided by operating activities of $273,761 for the year
ended December 31, 2008 compared to net cash used in operating activities of
$112,924 for the same period in 2007.  The increase in cash flow from
operations is due primarily to cash received from BIMC for minimum lease
payments required by the operating agreement between the Company and
BIMC.
  The
Company used $902,875 in cash in investing activities related to the notes
receivable due from Positron Corporation during the year ended December 31,
2008, as compared to $1,346,000 for the same period in 2007, all of which was
also advanced to Positron.


17
 Table of Contents





Net cash
provided by financing activities during the year ended December 31, 2008 was
$605,936 which included a total of $970,000 in equity investments and advances
made by Solaris Opportunity Fund (“Solaris”), a related party. Financing
activities also includes approximately $71,000 of payments to Cherry Creek
against the note payable and repayment of amounts borrowed from affiliates of
approximately $293,000. During the year ended December 31, 2007, the Company had
cash provided by financing activities of $1,479,906 which included a $1,397,000
equity investment from Solaris, approximately $111,000 of funds advanced by
Positron Corporation and $5,100 received from a shareholder.





18
 Table of Contents





On
December 31, 2008 the Company had an accumulated deficit of $3,547,921 and total
stockholders’ deficit of $205,764.  The Company is dependent upon the
success of INP and PET scanning and raising additional debt or equity financings
to resolve the Company’s liquidity issues and allow it to continue to operate as
a going concern.








ITEM8. FINANCIAL STATEMENTS





The
required Financial Statements and notes thereto are contained in a separate
section of this report beginning with the page following the signature
page.








ITEM9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE




None.






Item9A. CONTROL AND PROCEDURES




Disclosure
Controls and Procedures




In
accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 as amended
(the “Exchange Act”), as of the end of the period covered by this Annual Report on Form 10-K,
the Company’s management evaluated, with the participation of the Company’s
principal executive and financial officer, the effectiveness of the design and
operation of the Company’s disclosure controls and procedures (as defined in
Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act). Disclosure controls
and procedures are defined as those controls and other procedures of an issuer
that are designed to ensure that the information required to be disclosed by the
issuer in the reports it files or submits under the Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s
rules and forms. Based on their evaluation of these disclosure controls and
procedures, the Company’s chairman of the board and chief executive and
financial officer has determined that that there are material weaknesses in our
disclosure controls and procedures and therefore we have concluded that the
Company’s disclosure controls and procedures were not effective as of December
31, 2008.


The
material weaknesses in our disclosure control procedures are as
follows:





1.
            Lack of
      formal policies and procedures necessary to adequately review significant
      accounting transactions.The Company
      utilizes a third party independent contractor for the preparation of its
      financial statements. Although the financial statements and footnotes are
      reviewed by our management, we do not have a formal policy to review
      significant accounting transactions and the accounting treatment of such
      transactions. The third party independent contractor is not involved in
      the day to day operations of the Company and may not be provided
      information from management on a timely basis to allow for adequate
      reporting/consideration of certain transactions. In the case of the
      Company’s recent restatement of the investment in Positron securities, a
      periodic review (not less than quarterly) and discussion of significant
      transactions (i.e. increasing advances to a related party) may have led to
      more timely adoption of the proper method of
  accounting.





2.
            Audit
      Committee and Financial Expert. The Company does not have a formal
      audit committee with a financial expert, and thus the Company lacks the
      board oversight role within the financial reporting process.





We intend
to initiate measures to remediate the identified material weaknesses including,
but not necessarily limited to, the following:





·
            Establishing
      a formal review process of significant accounting transactions that
      includes participation of the Chief Executive Officer, the Chief Financial
      Officer and the Company’s corporate legal
  counsel.





·
            Form
      an Audit Committee that will establish policies and procedures that will
      provide the Board of Directors a formal review process that will among
      other things, assure that management controls and procedures are in place
      and being maintained consistently.






Item9A(T) CONTROL AND PROCEDURES




Internal
Control Over Financial Reporting





19
 Table of Contents




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act). Our management assessed the effectiveness of our
internal control over financial reporting as of December 31, 2008. In making
this assessment, our management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control-Integrated Framework. Based on its evaluation, our management determined
that there is a significant deficiency and a material weakness in our internal
control over financial reporting and therefore has concluded that the
Company’s
internal controls over financial reporting were not effective as of December 31,
2008.




The
significant deficiency relates to a lack of segregation of duties due to the
small number of employees involvement with general administrative and financial
matters. However, management believes that compensating controls are in place to
mitigate the risks associated with the lack of segregation of duties.
Compensating controls include outsourcing certain financial functions to an
independent contractor.





The
material weakness relates to a lack of formal policies and procedures necessary
to adequately review significant accounting transactions.The Company utilizes a
third party independent contractor for the preparation of its financial
statements. Although the financial statements and footnotes are reviewed by our
management, we do not have a formal policy to review significant accounting
transactions and the accounting treatment of such transactions. The third party
independent contractor is not involved in the day to day operations of the
Company and may not be provided information from management on a timely basis to
allow for adequate reporting/consideration of certain transactions. We intend to
initiate measures to remediate the identified material weaknesses including
establishing a formal review process for significant accounting transactions
that includes the participation of the Company’s  management and
corporate legal counsel, and establishing a formal audit committee.




This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report
in this annual report.




20
 Table of Contents





ITEM9B.  OTHER INFORMATION.





None.


PART
III








ITEM10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT





(a)
Identify Directors and Executive Officers.





The
following table sets forth: (1) names and ages of all persons who presently are
and who have been selected as directors of the Registrant; (2) all positions and
offices with the Registrant held by each such person; (3) the term or office of
each person named as a director; and (4) any period during which he or she has
served a such:





21
 Table of Contents





SUMMARY
COMPENSATION TABLE




Name
              Duration
      and Date of Expiration of Present Term
              Position
      and Office with Registrant
              Age
      and Director SinceJoseph
      G. Oliverio
              One
      year
                December
      31, 2008
              Chief
      Executive Officer,
                Director
              39
                August
      18, 2006Corey
      Conn
              One
      year
                December
      31, 2008
              Chief
      Financial Officer,
                Director
              47
                August
      19, 2003Neil
      Sy
              One
      year
                December
      31, 2008
              Chairman
                Director
              39
                August
      19, 2005








There is
no understanding or arrangement between any directors or any other person or
persons pursuant to which such individual, was or is to be, selected as a
director or nominee of the Registrant.





Business
Experience





Joseph G.
Oliverio – Age 39, Mr. Oliverio commenced service as the Company’s Chief
Executive Officer and was also appointed to serve on the Company’s Board of
Directors. Mr. Oliverio also serves as the President of Positron Corporation, a
publicly-owned Texas corporation, and affiliate of the Registrant. Mr. Oliverio
was the former Chief Operating Officer of Michael E. Merhige, M.D., LLC, a well
known coronary disease reversal and prevention center in Niagara, New York. Mr.
Oliverio earned an MBA from the University of Phoenix and a BS in Nuclear
Medicine Technology from State University of New York at Buffalo. Mr. Oliverio
is a certified nuclear medicine technologist.





Corey
Conn - Age 47, Chief Executive Officer, Director: Mr. Conn is a co-founder
of Cipher Multimedia, Inc. Mr. Conn also serves as the Chief Financial
Officer and director of Positron Corporation, a publicly-owned Texas
corporation, an affiliate of the Registrant. Since September, 1999.
Mr. Conn has served as Managing Director of Virtual Partnerships, LLC, a
business development and business strategy consulting firm. Previously,
Mr. Conn was Vice President of Business Development at iLX, an e-business
and e-transformation services provider from June 1996 to September
1999.





Neil Sy -
Age 39, Chairman, Director: Mr. Sy is currently engaged in capital raising
ventures including consumer medicine and real estate properties in Chicago,
Illinois and Las Vegas, Nevada. Prior thereto and from 1997 to 2003, Mr. Sy was
a member of the Chicago Board Options Exchange as a market maker. Prior thereto,
and from 1992 to 1997, Mr. Sy worked on the Chicago Board Options Exchange as a
trade manager. Mr. Sy received a Bachelor’s Degree in Business Administration
from Southern Illinois University.





Directorship





Except as
disclosed in this Item, each director of the Registrant has indicated to the
Registrant that he is not presently a director in any other Registrant with a
class of securities registered pursuant to Section 12 of the 34 Act or subject
to the requirements of Section 15(d) of such act or any investment company
registered under the Investment Company Act of 1940.





(b)
Identification of Certain Significant Employees





The
Registrant does not presently employ any person as a significant employee who is
not an executive officer but who makes or is expected to make a significant
contribution to the business of the Registrant.





(c)
Family Relationships





No family
relationship exists between any director or executive officer of the
Registrant.





22
 Table of Contents





(d)
Involvement in Certain Legal Proceedings





No event
listed in Sub-paragraphs (1) through (4) of Subparagraph (d) of Item 401 of
Regulation S-K, has occurred with respect to any present executive officer or
director of the Registrant or any nominee for director during the past five
years which is material to an evaluation of the ability or integrity of such
director or officer.





Compliance
with Section 16(a) of the Exchange Act





Section
16(a) of the Exchange Act, as amended, requires the Registrant's executive
officers and directors and persons who own more than 10% of a registered class
of the Registrant's equity securities, to file with the SEC initial statements
of beneficial ownership, reports of changes in ownership and annual reports
concerning their ownership, of Common Stock and other equity securities of the
Registrant on Forms 3, 4, and 5, respectively. Executive officers, directors and
greater than 10% shareholders are required by SEC regulations to furnish the
Registrant with copies of all Section 16(a) reports they file. To the
Registrant's knowledge, all beneficial owners of greater than 10% of
Registrant's Common Stock have complied with all Section 16(a) filing
requirements applicable to them during the Registrant's most recent fiscal
year.





Code
of Ethics





The
Registrant has adopted its Code of Ethics and Business Conducts that applies to
all officers, directors, and employees of the Registrant.





ITEM11. EXECUTIVE COMPENSATION.




The
following Summary Compensation Table shows certain compensation information for
each of the Named Executive Officers.  Compensation data is shown for
the years ended December 31, 2008 and 2007.  This information
includes the dollar value of base salaries, bonus awards, the number of stock
options granted, and certain other compensation, if any, whether paid or
deferred.


Name
      and Principal Position
                                                                    
                                                                    Year
                                                                    
                                                                    Salary
                                                                    
                                                                    
                                                                    Bonus
                                                                    
                                                                    
                                                                    Stock
      Awards (a)
                                                                    
                                                                    
                                                                    Option
      Awards
                                                                    
                                                                    
                                                                    Nonequity
      incentive plan compensation
                                                                    
                                                                    
                                                                    Non-qualified
      deferred  comp
                                                                      earnings
                                                                    
                                                                    
                                                                    All
      Other Compensation (b)
                                                                    
                                                                    
                                                                    TotalJoseph
      G. Oliverio
                                                                    
                                                                    2008
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —Chief
      Executive Officer, Director
                                                                    
                                                                    2007
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    $
                                                                    120,000
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    $
                                                                    120,000Corey
      Conn
                                                                    
                                                                    2008
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —Chief
      Financial Officer, Director
                                                                    
                                                                    2007
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    $
                                                                    34,000
                                                                    
                                                                    
                                                                    $
                                                                    34,000Neil
      Sy
                                                                    
                                                                    2008
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —Chairman,
      Director
                                                                    
                                                                    2007
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —





(a)           On
May 15, 2007, the Company issued 3,000,000 shares of common stock, par value
$0.001, valued at $0.04 per share, to Joseph G. Oliverio, Chief Executive
Officer for compensation.





(b)          
Includes a lump sum cash payment of $24,000 and on March 14, 2007, the Company
issued a total of 500,000 shares of the Registrant’ subsidiary, Cipher
Multimedia, Inc. common stock, par value $0.001, valued at $0.02 per
share.





23
 Table of Contents





Equity
Compensation Plan Information




The
following table summarizes share and exercise information about the Company's
equity compensation plans as of December 31, 2008.




Plan
      Category
                
                Number
      of Securities to be Issued Upon Exercise of Outstanding Options, Warrants
      and Rights
                
                
                Weighted-Average
      Exercise Price of Outstanding Options, Warrants and Rights
                
                
                Number
      of Securities Remaining Available for Future Issuance Under Equity
      Compensation Plans (excluding securities included in 1st column)All
      Equity Compensation Plans Approved by Security
Holders
                
                
                —
                
                
                
                —
                
                
                
                5,000,000




2007
Stock Option Plan




Imagin
Molecular Corporation’s Board administers the 2007 Stock Option Plan (the "2007
Plan"), which was adopted by the Board effective May 14, 2007.  The
2007 Plan provides for the grant stock options to directors, officers, employees
and consultants.  The administrator is authorized to determine the
terms of each award granted under the plan, including the number of shares,
exercise price, term and exercisability.   Options may not be
exercised more than five years after the date of grant.  In the case
of an optionee who is a director or officer of the Company, upon termination of
employment for any reason other than death or termination for cause, each option
may be exercised for a period of 90 days; to the extent it is exercisable on the
date of termination. In the case of an optionee who is an employee or consultant
of the Company, upon termination of employment for any reason other than death
or termination for cause, each option may be exercised for a period of 60 days;
to the extent it is exercisable on the date of
termination.    In the case of a termination due to death,
an option will remain exercisable for a period of one year; to the extent it is
exercisable on the date of termination.  . In the case of a
termination due to cause, any unexercised options shall expire
immediately.  A total of 5,000,000 shares of Common Stock have been
authorized for issuance under the 2007 Plan.  As of December 31, 2008,
no shares had been issued to under the 2007 Plan.








ITEM12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT





(a) Security Ownership of Certain
Beneficial Owners. The information is furnished as of December 31, 2008,
as to the number of shares of the Registrant's Common Stock, $.001 par value per
share, owned beneficially, or known by the Registrant to own beneficially, more
than 5% of any class of such security:





24
 Table of Contents








Name
      and Address  of Beneficial Owner
                  
                  Amount
      and Nature of Beneficial Ownership
                  
                  
                  Percentage
      of Class(a)Patrick
      G. Rooney
                  
                  
                  12,407,625
                  
                  
                  
                  16.8
                  %Cipher
      Multimedia, Inc (c)
                  
                  
                  1,900,000
                  (b)
                  
                  
                  2.6
                  %




(a)
            Based
      on 73,663,284 shares of Common Stock outstanding on April 14,
      2009.




(b)
            Represents
      shares owned directly.  The address for Cipher Multimedia, Inc
      is 3801 N. Washington Street Oak Brook,
      Illinois 60523.




(c)
            Patrick
      G. Rooney is the principal stockholder of Cipher Multimedia, Inc. and
      holds dispositive voting power.




(b) Security Ownership of
Management. The following information is furnished as of December 31,
2008, as to the number of shares of the Registrant's Common Stock, $.001 par
value per share owned beneficially by each executive officer and director of the
Registrant and by all executive officers and directors as a group:




Name
      and Address Of Beneficial Owner
                                        
                                        Amount
      and Nature of Beneficial Ownership
                                        
                                        
                                        Percentage
      of ClassJoseph
      G. Oliverio
                                        
                                        
                                        3,000,000
                                        
                                        
                                        
                                        4.1
                                        %3
      Grant Square # 315.Hinsdale,
      IL 60521Corey
      Conn
                                        
                                        
                                        800,000
                                        
                                        
                                        
                                        1.1
                                        %3
      Grant Square # 315.Hinsdale,
      IL 60521Neil
      Sy
                                        
                                        
                                        360,000
                                        
                                        
                                        
                                        .5
                                        %3
      Grant Square # 315Hinsdale,
      IL 60521All
      Officers and Directors
                                        
                                        
                                        4,160,000
                                        
                                        
                                        
                                        5.7
                                        %as
      a Group





25
 Table of Contents





ITEM13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





During
the year ended December 31, 2007, the Company advanced funds to Positron
Corporation and its wholly-owned subsidiary Imaging Pet Technologies
(collectively “Positron”).  Imagin’s  Chief Executive
Officer and Director, Joseph Oliverio and its Chief Financial Officer and
Director, Corey Conn are both officers and directors of Positron
Corporation..  On April 10, 2008, the advances were formalized into a
promissory note (“Note 1”), with interest at 8%, due on December 31, 2008 and
secured by a pledge of 100,000,000 shares of Positron’s common stock (the
“Security”). During the nine months ended September 30, 2008, the Company
advanced Positron additional funds in the amount of $835,000.  On
August 18, 2008, those advances were formalized into a promissory note (“Note
2”), with interest at 8%, due on December 31, 2008. The August 18, 2008 note is
also secured by the Security.  Accrued interest due to the Company for
the note was $67,875 at September 30, 2008.





On
November 18, 2008, the Company, Solaris Opportunity Fund, L.P. and Positron
Corporation executed and consummated a Securities Exchange Agreement whereby the
Company transferred and assigned all of its rights title and interest to Note 1,
Note 2 and the Pledged Shares to Solaris in exchange for the return of the
20,000,000 shares of the Company’s  common stock and 4,387,500 shares
of the Company’s Series A Preferred Stock, to be retired and cancelled on the
Company’s books and records and the retirement and satisfaction of any
obligations to the advances made in the amount of $200,000 to the Company by
Solaris. Simultaneously therewith, Solaris exchanged Note 1, Note 2 plus accrued
interest and the Pledged Shares and the retirement and satisfaction of any
obligations to the advances made to Positron Corporation in the aggregate amount
of $1,155,000 for the issuance of 100,000 shares of the Company’s Series S
Preferred Stock (the “Exchange”).  At December 31, 2008, the Company
had not yet retired its common shares received in the Exchange and therefore
those shares are being held in treasury.


.


26
 Table of Contents





ITEM14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





The
following table sets forth the aggregate fees billed to us for fiscal years
ended December 31, 2008 and 2007 by our auditors, Frank L. Sassetti &
Co.





2008
                    
                    
                    2007Audit
      Fees (1)
                    
                    $
                    35,485
                    
                    
                    $
                    19,100Non-Audit
      Fees:Audit
      Related Fees (2)
                    
                    
                    1,290
                    
                    
                    
                    —Tax
      Fees (3)
                    
                    
                    2,100
                    
                    
                    
                    —Total
      Fees paid to auditors
                    
                    $
                    38.875
                    
                    
                    $
                    19,100





(1) Audit
fees consist of fees billed for professional services rendered for the audit of
the Registrant's annual financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided in connection with statutory and regulatory filings
or engagements.





(2)
Audit-Related fees consist of fees billed for consultation regarding financial
accounting and reporting matters.




(3) Tax
fees consist of fees billed for professional services rendered for tax
compliance, tax advice and tax planning (domestic and international). These
services include assistance regarding federal, state and international tax
compliance, acquisitions and international tax planning.





The Board
of Directors has considered the role of Frank L. Sassetti & Co. in providing
certain tax services to Imagin and has concluded that such services are
compatible with Frank L. Sassetti Co.’s independence as our auditors. In
addition, the Board of Directors has approved providing certain tax services
since the effective date of the SEC rules. The rule states that an auditor is
not independent of an audit client if the services it provides to the client are
not appropriately approved. The Board of Directors will continue to pre-approve
all audit and permissible non-audit services provided by the independent
auditors until an audit committee is formed which will then be responsible for
approving audit fees. We are looking for new board members that would be
qualified to serve on an audit committee. When the audit committee is formed one
of their first assignments will be to propose to the board a code of
ethics.





The Board
of Directors has adopted a policy for the pre-approval of services provided by
the independent auditors, pursuant to which it may pre-approve any service
consistent with applicable law, rules and regulations. Under the policy, the
Board of Directors may also delegate authority to pre-approve certain specified
audit or permissible non-audit services to one or more of its members, including
the Chairman. A member to whom pre-approval authority has been delegated must
report its pre-approval decisions, if any, to the Board of Directors at its next
meeting, and any such pre-approvals must specify clearly in writing the services
and fees approved. Unless the Board of Directors determines otherwise, the term
for any service pre-approved by a member to whom pre-approval authority has been
delegated is twelve months.


ITEM15. EXHIBITS AND REPORTS ON FORM 8-K
 
 (a)
Exhibits:
 EXHIBITS
 
 31.1
                                        
                                        Chairman
      of the Board Certification of Periodic Financial Report Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002*31.2
                                        
                                        Chief
      Financial Officer Certification of Periodic Financial Report Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002*32.1
                                        
                                        Chairman
      of the Board Certification Pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to section 906 of the Sarbanes-Oxley Act of
  2002#32.2
                                        
                                        Chief
      Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to section 906 of the Sarbanes-Oxley Act of
      2002#*
                                        
                                        Filed
      herewith#
                                        
                                        Furnished
      herewith


27
 Table of Contents





SIGNATURES





Pursuant
to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned persons, and in the capacities so indicated on April 15,
2009.





Imagin
      Molecular CorporationBy:
                  /s/ Joseph G. OliverioJoseph
      G. OliverioChief
      Executive Officer,DirectorBy:
                  /s/Corey ConnCorey
      ConnChief
      Financial Officer (Principal Accounting Officer)Director





28
 Table of Contents





FrankL. Sassetti & Co.


Certified
Public Accountants








The Board
of Directors


Imagin
Molecular Corporation








REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





We have
audited the accompanying consolidated balance sheets of Imagin Molecular
Corporation and Subsidiaries as of December 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended.  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 audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  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 consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Imagin Molecular Corporation
and Subsidiaries as of December 31, 2008 and 2007, and the results of its
operations and its cash flows for the years then ended, 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, the Company has a significant accumulated deficit which
raises substantial doubt about the Company's ability to continue as a going
concern.  Management's plans in regard to these matters are described
in Note 1.  The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.







/s/ Frank
L. Sassetti & Co.





April 15,
2009


Oak Park,
Illinois








6611 W.
North Avenue * Oak Park, Illinois 60302 * Phone (708) 386-1433 * Fax (708)
386-0139





29
 Table of Contents





IMAGINMOLECULAR CORPORATION AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


DECEMBER
31, 2008 AND 2007





ASSETS2008
                    
                    
                    2007Current
      assets:Cash
                    
                    $
                    942
                    
                    
                    $
                    24,120Accounts
      receivable, net of allowance of $51,000 and $0
                    
                    
                    --
                    
                    
                    
                    120,422Total
      current assets
                    
                    
                    942
                    
                    
                    
                    144,542Property
      and equipment, net
                    
                    
                    183,153
                    
                    
                    
                    208,909Other
      assets:Due
      from related party
                    
                    
                    --
                    
                    
                    
                    1,346,000Investment
      in securities of Positron Corporation
                    
                    
                    376,167
                    
                    
                    
                    1,368,586Total
      assets
                    
                    $
                    560,262
                    
                    
                    $
                    3,068,037LIABILITIES
      AND STOCKHOLDERS' (DEFICIT) EQUITYCurrent
      liabilities:Accounts
      payable
                    
                    $
                    64,046
                    
                    
                    $
                    104,951Advances
      from shareholder
                    
                    
                    5,200
                    
                    
                    
                    5,100Accrued
      expenses
                    
                    
                    280,152
                    
                    
                    
                    187,367Current
      portion of promissory note
                    
                    
                    182,710
                    
                    
                    
                    128,580Advances
      from related party
                    
                    
                    3,860
                    
                    
                    
                    296,750Total
      current liabilities
                    
                    
                    535,968
                    
                    
                    
                    722,748Promissory
      note payable – less current portion
                    
                    
                    --
                    
                    
                    
                    125,404Majority
      interest in consolidated subsidiary
                    
                    
                    230,058
                    
                    
                    
                    216,245Total
      liabilities
                    
                    
                    766,026
                    
                    
                    
                    1,064,397Stockholders’
      (deficit) equity:Preferred
      Stock, $0.001 par value; 5,000,000 shares Authorized, 0 and 2,362,500
      shares issued and outstanding
                    
                    
                    --
                    
                    
                    
                    2,362Common
      stock, $0.001 par value; 95,000,000 shares authorized, 93,663,284 and
      93,663,284 shares issued, and 73,663,284 and 93,663,284 outstanding, on
      December 31, 2008 and 2007.
                    
                    
                    93,663
                    
                    
                    
                    93,663Additional
      paid-in capital
                    
                    
                    3,628,794
                    
                    
                    
                    4,525,007Accumulated
      deficit
                    
                    
                    (3,547,921
                    )
                    
                    
                    (2,617,392
                    )Treasury
      stock
                    
                    
                    (380,300
                    )
                    
                    
                    --Total
      stockholders’ (deficit) equity
                    
                    
                    (205,764
                    )
                    
                    
                    2,003,640Total
      liabilities and stockholders’ equity
                    
                    $
                    560,262
                    
                    
                    $
                    3,068,037





See
accompanying notes to financial statements.





30
 Table of Contents





IMAGIN
MOLECULAR CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


FOR THE
YEARS ENDED DECEMBER 31, 2008 AND 2007





2008
                
                
                2007Revenues
                
                $
                613,045
                
                
                $
                259,985Costs
      of revenues
                
                
                424,045
                
                
                
                317,801Gross
      profit (loss)
                
                
                189,000
                
                
                
                (57,816)Operating
      expenses:Marketing,
      general and administrative
                
                
                177,093
                
                
                
                328,131Total
      operating expenses
                
                
                177,093
                
                
                
                328,131Income
      (loss) from operations
                
                
                11,907
                
                
                
                (385,947)Other
      income (expenses):Interest
      income
                
                
                67,875
                
                
                
                —Interest
      expense
                
                
                (22,413)
                
                
                
                (33,256)Equity
      in losses of Positron Corporation
                
                
                (258,351)
                
                
                
                (219,480)Impairment
      of investment in securities of Positron Corporation
                
                
                (734,068)
                
                
                
                —Total
      other expense
                
                
                (946,957)
                
                
                
                (252,736)Loss
      from continuing operations before income taxes
                
                
                (935,050)
                
                
                
                (638,683)Income
      taxes
                
                
                —
                
                
                
                —Loss
      from continuing operations
                
                
                (935,050)
                
                
                
                (638,683)Gain
      (loss) from discontinued operations
                
                
                4,521
                
                
                
                (19,986)Net
      loss
                
                $
                (930,529)
                
                
                $
                (658,669)Per
      share amounts:From
      continuing operations
                
                $
                (.0102)
                
                
                $
                (.0080)From
      discontinued operations
                
                $
                (.0000)
                
                
                $
                (.0002)Net
      loss
                
                $
                (.0102)
                
                
                $
                (.0082)Weighted
      average common Shares
                
                
                91,313,557
                
                
                
                80,464,197





See
accompanying notes to financial statements.





31
 Table of Contents





IMAGIN
MOLECULAR CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY


FOR THE
YEARS ENDED DECEMBER 31, 2008 AND 2007





Series
      A Preferred
                                                                  
                                                                  
                                                                  Common
      StockNumber
      of
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  Number
      of
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  Additional
      Paid
                                                                  
                                                                  
                                                                  Accumulated
                                                                  
                                                                  
                                                                  TreasuryShares
                                                                  
                                                                  
                                                                  Amount
                                                                  
                                                                  
                                                                  Shares
                                                                  
                                                                  
                                                                  Amount
                                                                  
                                                                  
                                                                  in
      Capital
                                                                  
                                                                  
                                                                  Deficit
                                                                  
                                                                  
                                                                  Stock
                                                                  
                                                                  
                                                                  TotalDecember
      31, 2006
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  $
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  67,276,617
                                                                  
                                                                  
                                                                  $
                                                                  67,277
                                                                  
                                                                  
                                                                  $
                                                                  2,826,755
                                                                  
                                                                  
                                                                  $
                                                                  (1,958,723
                                                                  )
                                                                  
                                                                  $
                                                                  —
                                                                  
                                                                  
                                                                  $
                                                                  935,309Common
      shares issued for services
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  5,000,000
                                                                  
                                                                  
                                                                  
                                                                  5,000
                                                                  
                                                                  
                                                                  
                                                                  195,000
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  200,000Common
      shares issued for debt repayment
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  1,386,667
                                                                  
                                                                  
                                                                  
                                                                  1,386
                                                                  
                                                                  
                                                                  
                                                                  128,614
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  130,000Common
      shares issued for cash
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  20,000,000
                                                                  
                                                                  
                                                                  
                                                                  20,000
                                                                  
                                                                  
                                                                  
                                                                  380,000
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  400,000Preferred
      shares issued for cash
                                                                  
                                                                  
                                                                  2,362,500
                                                                  
                                                                  
                                                                  
                                                                  2,362
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  994,638
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  997,000Net
      loss
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  (658,669
                                                                  )
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  (658,669
                                                                  )December
      31, 2007
                                                                  
                                                                  
                                                                  2,362,500
                                                                  
                                                                  
                                                                  $
                                                                  2,362
                                                                  
                                                                  
                                                                  
                                                                  93,663,284
                                                                  
                                                                  
                                                                  $
                                                                  93,663
                                                                  
                                                                  
                                                                  $
                                                                  4,525,007
                                                                  
                                                                  
                                                                  $
                                                                  (2,617,392
                                                                  )
                                                                  
                                                                  $
                                                                  —
                                                                  
                                                                  
                                                                  $
                                                                  2,003,640Preferred
      shares issued for cash
                                                                  
                                                                  
                                                                  2,025,000
                                                                  
                                                                  
                                                                  
                                                                  2,025
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  767,975
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  770,000Notes
      receivable plus accrued interest due from affiliated company exchanged for
      outstanding securities
                                                                  
                                                                  
                                                                  (4,387,500
                                                                  )
                                                                  
                                                                  
                                                                  (4,387
                                                                  )
                                                                  
                                                                  
                                                                  (20,000,000
                                                                  )
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  (1,664,188
                                                                  )
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  (380,300
                                                                  )
                                                                  
                                                                  
                                                                  (2,048,875
                                                                  )Net
      loss
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  (930,529
                                                                  )
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  (930,529
                                                                  )December
      31, 2008
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  $
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  73,663,284
                                                                  
                                                                  
                                                                  $
                                                                  93,663
                                                                  
                                                                  
                                                                  $
                                                                  3,628,794
                                                                  
                                                                  
                                                                  $
                                                                  (3,547,921
                                                                  )
                                                                  
                                                                  
                                                                  (380,300
                                                                  )
                                                                  
                                                                  $
                                                                  (205,764
                                                                  )








See
accompanying notes to financial statements.





32
 Table of Contents





IMAGIN
MOLECULAR CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR THE
YEARS ENDED DECEMBER 31, 2008 AND 2007




2008
                
                
                2007Cash
      flows from operating activities::Loss
      from continuing operations
                
                $
                (935,050
                )
                
                $
                (638,683
                )Income
      (loss) from discontinued operations
                
                
                4,521
                
                
                
                (19,986
                )Net
      loss
                
                
                (930,529
                )
                
                
                (658,669
                )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesDepreciation
      expense
                
                
                25,757
                
                
                
                25,757Common
      stock issued for services
                
                
                —
                
                
                
                200,000Subsidiary
      common stock issued for services
                
                
                —
                
                
                
                30,000Equity
      in losses of Positron Corporation
                
                
                258,351
                
                
                
                219,480Impairment
      of investment in securities of Positron Corporation
                
                
                734,068
                
                
                
                —Majority
      interest in loss of consolidated subsidiary
                
                
                13,812
                
                
                
                1,523Changes
      in operating  assets and liabilitiesAccounts
      receivable
                
                
                120,422
                
                
                
                43,117Accounts
      payable  and accrued liabilities
                
                
                51,880
                
                
                
                25,868Net
      cash provided by (used in) operating activities
                
                
                273,761
                
                
                
                (112,924
                )Cash
      flows from  investing activities:Advances
      to related party
                
                
                (902,875
                )
                
                
                (1,346,000
                )Net
      cash used in investing activities
                
                
                (902,875
                )
                
                
                (1,346,000
                )Cash
      flows from financing activities:Advances
      from shareholders
                
                
                100
                
                
                
                5,100Advances
      from related party
                
                
                (292,890
                )
                
                
                111,365Payment
      of notes payable
                
                
                (71,274
                )
                
                
                (33,559
                )Proceeds
      from issue of common stock
                
                
                —
                
                
                
                400,000Proceeds
      from deposits on and issues of preferred stock
                
                
                970,000
                
                
                
                997,000Net
      cash provided by financing activities
                
                
                605,936
                
                
                
                1,479,906Net
      increase (decrease) in cash
                
                
                (23,178
                )
                
                
                20,982Cash
      at beginning of period
                
                
                24,120
                
                
                
                3,138Cash
      at end of period
                
                $
                942
                
                
                $
                24,120Supplemental
      cash flow information:Interest
      paid
                
                $
                17,861
                
                
                $
                28,256Income
      taxes paid
                
                $
                —
                
                
                $
                —








See
accompanying notes to financial statements.





33
 Table of Contents





IMAGIN
MOLECULAR CORPORATION


CONSOLIDATED
STATEMENT OF CASH FLOWS


FOR THE
YEARS ENDED DECEMBER 31, 2008 AND 2007


(CONTINUED)





Supplementary Schedule of
Noncash Transactions





2008





On
November 18, 2008, Solaris, Positron and the Company executed and consummated a
Securities Exchange Agreement whereby the Company transferred and assigned all
of its rights title and interest to notes receivable and accrued interest
totaling $2,248,875 due from Positron in exchange for the return of the
20,000,000 shares of the Company’s common stock and 4,387,500 shares of Series A
to be retired and cancelled on the Company’s books and records and the
retirement and satisfaction of any obligations to the advances made in the
amount of $200,000.








2007





On
January 10, 2007 and March 12, 2007, the Company issued 586,667 and 800,000
shares of common stock, par value $0.001, respectively, to two non-affiliated
shareholders in final satisfaction of a $130,000 note payable made to the
Company. The shares were valued at $0.06 per share.





On March
14, 2007, the Company issued 7,448,673 shares of its subsidiary, Cipher
Multimedia, Inc. common stock, par value $0.001 to an affiliated shareholder in
final satisfaction of $148,973 of advances and other notes payable made to the
Company. The shares were valued at $0.02 per share.





On March
14, 2007, the Company issued 1,787,500 shares of its subsidiary, Cipher
Multimedia, Inc. common stock, par value $0.001 to a non-affiliated shareholder
in final satisfaction of $35,750 of interest payable related to a note payable
made to the Company. The shares were valued at $0.02 per share.





On March
14, 2007, the Company issued a total of 1,500,000 shares of its subsidiary,
Cipher Multimedia, Inc. common stock, par value $0.001 to three employees,
including 500,000 shares to Corey N. Conn, the Registrant’s Chief Financial
Officer, pursuant to their employment agreements. The shares were valued at
$0.02 per share.





On May
14, 2007, the Company issued 2,000,000 shares of common stock, par value $0.001,
to a consultant for services performed. The shares were valued at $0.04 per
share.





On May
15, 2007, the Company issued 3,000,000 shares of common stock, par value $0.001,
to Joseph G. Oliverio, Chief Executive Officer for compensation. The shares were
valued at $0.04 per share.








See
accompanying notes to financial statements.





34
 Table of Contents





IMAGIN
MOLECULAR CORPORATION


NOTES TO
CONSOLIDATED STATEMENTS


FOR THE
YEARS ENDED DECEMBER 31, 2008 AND 2007







NOTE
1. BUSINESS ORGANIZATION





Imagin
Molecular Corporation (“Imagin” or the “Company”) was originally incorporated
under the laws of the State of Delaware.  Imagin commenced operations
upon incorporation and was in the development stage through the first quarter of
2006 and through that period had very little revenue.  Imagin’s
subsidiary Cipher Multimedia, Inc (“Cipher”) operated Imagin’s original
business, a digital distribution solution and marketing company which secures
and allows access to digital content through proprietary encoding, encryption
and authorization technology.





In 2005
Imagin’s Board of Director’s resolved to change the Company’s principal
operations from multimedia encryption technology to positron emission tomography
and medical imaging. Operations began in the second quarter of 2006 and the
Company no longer operated in the development stage. On March 20, 2007, the
Company’s Board of Directors authorized the spin-off of Cipher to the Company’s
Shareholders of record on March 26, 2007 The results of Cipher are presented as
discontinued operations in the Company’s consolidated statements of operations
and cash flows.  See Positron Acquisition Corp. and Imagin Nuclear
Partners discussions below.




Positron
Acquisition Corp.





On April
19, 2005, the Company organized a wholly owned subsidiary, under the laws of the
state of Nevada, named Positron Acquisition Corp. (“PAC”).  Imagin’s
original intent to create PAC was to acquire controlling interest in Positron
Corporation (“Positron”), a publicly owned Texas corporation.





On May
23, 2005 the Company’s Board of Directors and shareholders holding approximately
60.1% of the Company’s issued and outstanding and common stock par value $.001
per share (the “Common Stock”), approved a Securities Exchange Agreement (the
“Exchange”) between the Company’s  wholly-owned subsidiary Positron
Acquisition Corp., a Nevada corporation (“PAC”) and Imagin Diagnostic Centres,
Inc., a Canadian corporation (“IDC”).  Pursuant to the terms of the
Exchange, the Company issued 30,000,000 shares (the “Exchange Shares”) of its
common stock, par value $.001 per share (the “Common Stock”) in exchange for
three convertible promissory notes issued by Positron Corporation (“Positron”),
a publicly owned Texas corporation.  The Positron notes are
convertible into shares of Positron’s Series C and Series D Preferred Stock
which convert, under certain circumstances, into 64,000,000 shares of Positron’s
common stock, par value $.01 per share (the “Conversion Shares”).  In
September 2006 the Company converted principal and interest of $818,066
outstanding upon the Series D Secured Convertible Promissory Notes and 770,000
shares of Series C Preferred Stock into 762,358 shares of Positron Corporation
Series B Preferred Stock, and subsequently converted 40,000 shares of Series B
Preferred Stock into 4,000,000 shares of the Positron Common Stock.




Imagin
Nuclear Partners Corporation





In 2006,
the Company’s wholly-owned subsidiary Imagin Nuclear Partners Corporation
(“INP”) commenced scanning patients using Positron Emission Tomography
myocardial perfusion imaging technology (“PET” or “PET imaging technology”) at a
cardiac imaging center located in Beth Israel Medical Center in
New York City (“BIMC”).  Through BIMC, the Company has performed PET
imaging on several hundred patients.





35
 Table of Contents





In May
2007, INP and BIMC executed a new lease agreement whereby BIMC leases PET
scanning cameras and other related radiologic equipment from INP for the purpose
of operating a PET Lab at its site.  The initial term of the agreement
is three years. (See NOTE
8) INP intends to joint venture with hospitals or physician groups to own
or operate nuclear medicine imaging centers throughout North America.  The
Company plans to offer a full spectrum of Positron Emission Tomography imaging
services as well as a robust coronary disease reversal and prevention program.
The Company intends to partner with cardiology groups who are less invasively
oriented and desire program differentiation from competition.  The Company
believes that their methodology to detection and management is more cost
effective than traditional methods currently employed.





On
December 31, 2008, INP advised BIMC that it had breached the Agreement for
failure to make certain payments under the Agreement.  In addition,
INP advised BIMC that it was seeking payment for certain inpatient scans that
BIMC had requested it perform on behalf of BIMC patients and had failed to
reimburse INP for.




INP also
asserted other claims in the aggregate amount of $318,144 and ceased supplying
rubidium to BIMC thereafter.  Also in the first quarter 2009, BIMC
asserted that INP had breached the Agreement and demanded that INP remove the
scanner located therein.  INP is seeking a purchaser or another
business opportunity to implement the device, however, no assurance can be given
that such an agreement will be reached or if reached that it will be on terms
favorable to the Company.
 
 
 NOTE
2.  GOING CONCERN
 
 These
financial statements have been prepared in accordance with generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and the satisfaction of liabilities and commitments in the
normal course of business.  The Company has sustained losses since
inception and has accumulated losses of $3,547,921 and total stockholders’
deficit of $205,764 as of December 31, 2008.  The Company’s ability to
continue as a going concern is dependent in part upon  the success of
INP and its ability to execute  lease or similar agreements
with  facilities that perform PET imaging for patients.  In
addition the Company will need to raise additional capital to continue
operations. Management plans to raise equity capital to finance the operating
and capital requirements of the Company.


The
Company has made a significant investment into the securities of Positron
Corporation, a publicly owned Texas Corporation and affiliate of the Company
(“Positron”).  As of December 31, 2008, the Company held 4,000,000
shares of Positron’s common stock and 722,358 shares of Positron’s Series B
Convertible Preferred stock.





While the
Company is expending its best efforts to achieve it’s operating goals, there is
no assurance that such activity will generate sufficient funds to accomplish its
business purpose, or that the Company’s business plan will be successful.
Furthermore, there can be no assurance that amounts invested in and advanced to
Positron Corporation will ever be realized.






NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles
of Consolidation and Nature of Operations





For the
years ended December 31, 2008 and 2007, the financial statements include the
accounts and transactions of Cipher Multimedia, Inc. (a discontinued operation),
Positron Acquisition Corp. and Imagin Nuclear Partners Corporation
(subsidiaries). All Intercompany transactions and balances have been
eliminated.


.


Cash
and Cash Equivalents





The
Company considers all highly liquid instruments with original maturities of
three months or less to be cash equivalents.





36
 Table of Contents





Revenue
recognition





The
Company recognizes revenue from PET scans when the procedure is performed or as
determined on a contractual basis between the Company and the
provider.  Scan revenue represents the amount charged to patients net
of contractual adjustments.  Contractual adjustments may arise due to
the terms of reimbursement of Medicaid, Medicare and managed care
providers.  Such adjustments represent the difference between the
charges at established rates and estimated recoverable amounts and are
recognized as a reduction of revenue in the period services are
rendered.  Any differences between estimated contractual adjustments
and actual final settlements under reimbursement contracts are recognized as
contractual adjustments in the period final settlements are
determined.





Loss
Per Share





Loss per
share is computed based on the weighted average number of shares of common stock
outstanding.  Stock options and warrants are not included in the
computation of the weighted average number of shares outstanding for dilutive
net loss per common share during each of the periods presented in the Statement
of Operations, as the effect would be antidilutive.





Use
of Estimates





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 disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.





Income
Taxes





The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes”.  Under Statement No.
109, the asset and liability method is used in accounting for income
taxes.  Deferred taxes are recognized for temporary differences
between the bases of assets and liabilities for financial statement and income
tax purposes.  The temporary differences relate primarily to net
operating loss carryforwards.  A valuation allowance is recorded for
deferred tax assets when it is more likely than not that some or all of the
deferred tax assets will not be realized through future operations.





In
addition, the Company follows the provisions of   FASB
Interpretation No. 48,"Accounting for Uncertainty in Income Taxes," an
interpretation of FASB Statement No.109 ("FIN 48"). FIN 48 prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. A company must determine whether it is "more-likely-than-not" that a
tax position will be sustained upon examination, including resolution of any
related appeals or litigation procedures, based on the technical merits of the
position.  Once it is determined that a position meets the
more-likely-than-not recognition threshold, the position is measured to
determine the amount of benefit to recognize in the financial statements. Review
of the Company’s possible tax for 2008 and 2007 did not result in any positions
requiring disclosure.  Should the Company need to record interest
and/or penalties related to uncertain tax positions, or other tax authority
assessments, it would classify such expenses as part of the income tax
provision.




Fair
Value of Financial Instruments





The
Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles.  SFAS No. 157, “Fair Value
Measurements,” requires certain disclosures regarding the fair value of
financial instruments.  For certain of the Company’s financial
instruments, including cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities, the carrying amounts approximate fair value due
to their short maturities.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (SFAS
157). This statement defines fair value, establishes a framework for measuring
fair value and expands the related disclosure requirements.  The
statement indicates, among other things, that a fair value measurement assumes
that the transaction to sell an asset or transfer a liability occurs in the
principal market for the asset or liability or, in the absence of a principal
market, the most advantageous market for the asset or liability based upon an
exit price model.





SFAS
No. 157 prescribes a fair value hierarchy in order to increase consistency
and comparability in fair value measurements and related
disclosures.  The hierarchy is broken down into three levels based on
the reliability of inputs as follows:





37
 Table of Contents





Level 1—Valuations
based on quoted prices in active markets for identical assets.  Since
valuations are based on quoted prices that are readily and regularly available
in an active market, valuation of these products does not entail a significant
degree of judgment.





Level 2—Valuations
based on quoted prices in markets that are not active or for which all
significant inputs are observable, directly or indirectly.  Quoted
prices for similar instruments in active markets, quoted prices for identical or
similar instruments in markets that are not active, or other inputs that are
observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities.





Level 3—Valuations
based on inputs that are unobservable and significant to the overall fair value
measurement.





In
accordance with SFAS 157, the following table represents the Company’s fair
value hierarchy for its  investments in securities of Positron
Corporation (“Positron”) measured at fair value on a recurring basis as of
December 31, 2008:


Securities
      Owned
                    
                    Level
      1
                    
                    
                    Level
      2
                    
                    
                    Level
      3
                    
                    
                    TotalInvestment
      securities of Positron Corporation
                    
                    $
                    80,000
                    
                    
                    $
                    296,167
                    
                    
                    $
                    --
                    
                    
                    $
                    376,167Total
                    
                    $
                    80,000
                    
                    
                    $
                    296,167
                    
                    
                    $
                    --
                    
                    
                    $
                    376,167




Fair
market value of the Level 1 securities were determined by applying the quoted
stock price at December 31, 2008 to the 4,000,000 shares of common stock portion
component of the securities.  At December 31, 2008 Positron’s quoted
stock price was $0.02 per share.





Fair
market value of the Level 2 securities were determined by applying the relative
per share fair market of the 722,358 shares of Series B Preferred Stock
component of the investment. The fair market value was based on the price per
share offered by Positron in its most recent private placement of Series B
securities.





The
changes in Level 1 and 2 assets measured at fair value on a recurring basis
for the year ended December 31, 2008 were:





Fair
      Value at December 31, 2007
                      
                      
                      Total
      Unrealized Losses
                      
                      
                      Other
      Adjustments To Assets
                      
                      
                      Fair
      Value at December 31, 2008Level
      1 securities
                      
                      $
                      272,000
                      
                      
                      $
                      (140,588
                      )
                      
                      $
                      (51,412
                      )
                      
                      $
                      80,000Level
      2 securities
                      
                      $
                      1,096,586
                      
                      
                      $
                      (593,480
                      )
                      
                      $
                      (206,939
                      )
                      
                      $
                      296,167Total
                      
                      $
                      1,368,,586
                      
                      
                      $
                      (734,068
                      )
                      
                      $
                      (258,351
                      )
                      
                      $
                      376,167





New
Accounting Pronouncements




In
December 2007, the FASB issued SFAS No. 141(R),'Business Combinations -
Revised, that improves the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its
financial reports about a business combination and its effects. To accomplish
that, this statement establishes principles and requirements how the acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any non-controlling interest in the
acquiree, recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase, and determines what information
to disclose to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. The changes to current
practice resulting from the application of SFAS No. 141(R) are effective for
financial statements issued for fiscal years beginning after December 15, 2008.
The adoption of SFAS No. 141(R) before December 15, 2008 is prohibited. The
Company has not determined the effect, if any, that may result from the adoption
of SFAS No. 141(R) on its financial statements.





38
 Table of Contents





In March
2008, the FASB issued FASB Statement No. 161Disclosures about Derivative
Instruments and Hedging Activities an amendment of FASB Statement No. 133
(“SFAS No. 161”), which changes the disclosure requirements for derivative
instruments and hedging activities.  Pursuant to SFAS No.161, entities
are required to provide enhanced disclosures about (a) how and why an entity
uses derivative instruments, (b) how derivative instruments and related hedged
items are accounted for under Statement 133 and its related interpretations, and
(c) how derivative instruments and related hedged items affect an entity’s
financial position, financial performance, and cash flows.  SFAS No.
161 is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008 with early application encouraged.
SFAS No. 161 encourages but does not
require disclosures for earlier periods presented for comparative purposes at
initial adoption.  In years after initial adoption, this Statement
requires comparative disclosures only for periods subsequent to initial
adoption.  The Company does not expect the adoption of SFAS No. 161 to
have a material impact on the financial results of the Company.





In April
2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of
Intangible Assets. FSP 142-3 amends the factors an entity should consider
in developing renewal or extension assumptions used in determining the useful
life of recognized intangible assets under SFAS 142, Goodwill and Other Intangible
Assets, and adds certain disclosures for an entity’s accounting policy of
the treatment of the costs, period of extension, and total costs
incurred.  FSP 143-3 must be applied prospectively to intangible
assets acquired after January 1, 2009.  The Company is currently
evaluating the impact that FSP 142-3 will have on its financial position or
results of operations.





In May
2008, the Financial Accounting Standards Board (the “FASB”) issued FAS No. 162,
“The Hierarchy of Generally Accepted Accounting Principles” (“FAS 162”). This
statement identifies the sources of accounting principles and the framework for
selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in accordance with GAAP. With the
issuance of this statement, the FASB concluded that the GAAP hierarchy should be
directed toward the entity and not its auditor, and reside in the accounting
literature established by the FASB as opposed to the American Institute of
Certified Public Accountants (AICPA) Statement on Auditing Standards No. 69,
“The Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles.” This statement is effective 60 days following the SEC’s approval of
the Public Company Accounting Oversight Board amendments to AU Section 411, “The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles.” The adoption of FAS 162 is not expected to have a material impact
on the Company’s results from operations or financial position.





Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying financial statements.







NOTE
4. CIPHER MULTIMEDIA INC. REORGANIZATION / DISCONTINUED OPERATIONS








After the
merger between Cipher and Cipher-NV, the Registrant no longer holds a majority
of the common stock of the reorganized subsidiary,
Cipher-NV.   However, in applying the requirements of Financial
Accounting Standards Board Interpretation No. 46, as revised, (“FIN 46(R)”), the
Registrant believes itself to be the primary beneficiary as evidenced by
continued management control over the operations of the subsidiary. This being
the case, the operations of Cipher-NV for the years ended December 31, 2008 and
2007 continue to be consolidated in the Registrant’s financial statements and
are reflected as discontinued operations.





39
 Table of Contents





Summarized
financial information for discontinued operations for the years ended December
31, 2008 and 2007 were as follows:





December 31,
      2008
              
              
              December 31,
      2007Operating
      expenses
              
              $
              3,676
              
              
              $
              29,990Other
      expenses (income)
              
              
              (22,009)
              
              
              
              (11,527)Income
      (loss) before majority interest
              
              
              18,333
              
              
              
              (18,463)Majority
      interest
              
              
              (13,812)
              
              
              
              (1,523)Net
      income (loss)
              
              $
              4,521
              
              
              $
              (
      19,986)Total
      assets
              
              $
              --
              
              
              $
              846Total
      liabilities
              
              
              230,908
              
              
              
              236,603Majority
      interest
              
              
              15,335
              
              
              
              1,523Stockholders’
      deficit
              
              
              (231,236)
              
              
              
              (235,757)





40
 Table of Contents





NOTE
5.  RELATED PARTIES AND SECURITIES EXCHANGE AGREEMENT





Between
May 2007 and March 2008, Solaris Opportunity Fund, L.P. (“Solaris”) made
equity investments in the Company in the amount of $2,167,000.  The
Company issued Solaris 20,000,000 common shares and 4,387,500 shares of Series A
Preferred Stock.  Pursuant to the terms of a Securities Exchange
Agreement dated November 18, 2008 (see discussion below), the Company exchanged
two notes receivable plus accrued interest due from Positron Corporation and
reacquired all the outstanding common and preferred stock issued to
Solaris.  In addition, in June 2008 Solaris advanced the Company an
additional $200,000. This advanced was also settled upon execution of the
Securities Exchange Agreement dated November 18, 2008.





During
the year ended December 31, 2007, the Company advanced funds to Positron
Corporation and its wholly-owned subsidiary Imaging Pet Technologies
(collectively “Positron”).  Imagin’s  Chief Executive
Officer and Director, Joseph Oliverio and its Chief Financial Officer and
Director, Corey Conn are both officers and directors of Positron
Corporation..  On April 10, 2008, the advances were formalized into a
promissory note (“Note 1”), with interest at 8%, due on December 31, 2008 and
secured by a pledge of 100,000,000 shares of Positron’s common stock (the
“Security”). During the period January 1 – August 18,   2008, the
Company advanced Positron additional funds in the amount of
$835,000.  On August 18, 2008, those advances were formalized into a
promissory note (“Note 2”), with interest at 8%, due on December 31, 2008. The
August 18, 2008 note is also collateralized by the Security.  Accrued
interest due to the Company for the note was $67,875 at September 30,
2008.





Securities Exchange
Agreement among Positron Corporation, Imagin Molecular Corporation and Solaris
Opportunity Fund, L.P.


Advances from shareholder and related
parties


Advances
from related parties at December 31, 2008 and 2007 consisted of the
following:





December 31,
      2008
                    
                    
                    December 31,
      2007Positron
      Corporation and Subsidiaries
                    
                    $
                    3,860
                    
                    
                    $
                    296,750







NOTE
6. IMAGIN DIAGNOSTIC CENTRES INC. CONVERTIBLE NOTES RECEIVABLE AND
RESTATEMENT





On June
29, 2005, through our wholly-owned subsidiary Positron Acquisition Corporation,
(“PAC”), we purchased notes receivable for 30,000,000 restricted shares valued
at $1,304,000. Below is a brief history of those notes. On May 26, 2004 and June
17, 2004, Positron Corporation (“Positron”)) sold two separate secured
convertible promissory notes under a Note Purchase Agreement dated May 21, 2004,
to IMAGIN Diagnostic Centres, Inc. (“IDC”) in the principal amounts of $400,000
and $300,000, respectively. Interest is charged on the outstanding principal at
the rate of ten percent (10%) per annum and is payable annually to the extent of
positive cash flow of Positron on the anniversary dates of these notes. The
principal and any unpaid interest were originally due on the earlier to occur of
May 21, 2006 or when declared due and payable by IDC upon occurrence of an event
of default. The Company and Positron extended the due date to September 30,
2006, on which date the notes were converted to Positron Series B Convertible
Preferred Stock.





In a
second stage of the financing IDC agreed to purchase additional secured
convertible promissory notes in the aggregate principal amount of $1,300,000.
These notes were to be purchased over a six and a half month period, commencing
July 15, 2004. These notes are due and payable on May 21, 2006, the due date was
subsequently extended to September 30, 2006. These notes are initially
convertible into new shares of Series D Preferred Stock that, in turn is
convertible into an aggregate of 52,000,000 shares of Positron common stock. As
of June 30, 2005, principal of $1,208,500 has been advanced related to these
notes. On June 30, 2005, IDC converted $575,000 of these promissory notes into
shares of Series D Preferred Stock that, in turn were converted into 23,000,000
shares of the Positron common stock. This conversion reduced the principal owed
under these promissory notes from $1,208,500 to $633,500. On October 21, 2005,
$770,000 of unpaid principal and interest was converted into 770,000 shares of
Positron’s Series C Convertible Preferred Stock.





41
 Table of Contents





On
September 30, 2006 the Company converted $818,066 of principal and interest
outstanding on the Series D Convertible Promissory Notes and the 770,000 Shares
of Series C into 762,358 shares of Positron’s Series B Convertible Preferred
Stock, par value $1.00 per share (the “Series B”) and subsequently converted
40,000 Series B Preferred Stock into 4,000,000 shares of common stock, par value
$0.01.  Each share of Series B is convertible into 100 shares of
Positron Corporation common stock and has 100 votes on all matters which
Positron shares are entitled to vote.  Due to the restrictions on sale
or transfer of these securities and the significant number of underlying common
shares relative to the issuers’ outstanding common shares, management believes
that any adjustment of its investment to fair value under FAS 115 would result
in an overstatement of the value of the investment. As such the securities are
valued at the previous carrying value of the note receivable and accrued
interest at the date of conversion. In considering the guidance of paragraph 17
of APB 18 with respect to the investment in Positron, and events and
transactions occurring during the third quarter of 2007(see discussion
below) as well as the current relationship between the Company and
Positron, the Company adopted the equity method of accounting with respect to
the Positron securities during the third quarter of 2007.





At
December 31, 2007, the Company owned approximately 4% of Positron’s outstanding
common stock and 722,358 Series B Preferred Shares or approximately 11.5% of the
class.  Despite holdings of less than 20% of the voting stock of
Positron, management believes that events and transactions occurring during the
second half of 2007 and continuing into the first quarter of 2008 has given the
Company the ability to exercise an increasing degree of influence over certain
operating and financial policies.  The events and transactions include
advances of funds by the Company to Positron beginning in July 2007 and totaling
$1,346,000 at December 31, 2007. The advances were subsequently converted to a
note receivable that is collateralized by Positron common stock.  In
addition to the financing, on January 2, 2008 Corey Conn, who serves as Chief
Financial Officer for both companies, was elected to the Positron Board of
Directors. The two companies share one other common director; however Positron
has four directors that are not on the Company’s Board.





Based on
its percentage of ownership of Positron common stock, for the year ended
December 31, 2008 and 2007, the Company recorded equity in the losses of
Positron of $258,351 and $219,480, respectively.  Additionally at
December 31, 2008, the Company recorded an impairment charge of $734,068 against
the carrying value of the investment.  The impairment charge was
computed by comparing current fair market value of the investment with the
carrying value.




At
December 31, 2008 the investment in the securities of Positron had an estimated
fair market value of $376,167.





Summarized
financial information for Positron for the years ended December 31, 2008 and
2007 follows:





2008
                    
                    
                    2007Revenues
                    
                    $
                    2,126,000
                    
                    
                    $
                    3,309,000Loss
      from operations
                    
                    
                    (8,327,000
                    )
                    
                    
                    (7,212,000
                    )Net
      loss
                    
                    
                    (8,975,000
                    )
                    
                    
                    (7,780,000
                    )Loss
      per share
                    
                    $
                    (0.07
                    )
                    
                    $
                    (0.08
                    )Weighted
      average shares outstanding
                    
                    
                    134,556,000
                    
                    
                    
                    95,875,000







2008
                  
                  
                  2007Current
      assets
                  
                  $
                  1,033,000
                  
                  
                  $
                  2,071,000Total
      assets
                  
                  
                  1,104,000
                  
                  
                  
                  2,277,000Current
      liabilities
                  
                  
                  4,940,000
                  
                  
                  
                  4,147,000Total
      liabilities
                  
                  
                  7,654,000
                  
                  
                  
                  7,220,000Stockholders’
      deficit
                  
                  
                  (6,550,000
                  )
                  
                  
                  (4,943,000
                  )Common
      shares outstanding
                  
                  
                  160,240,384
                  
                  
                  
                  102,555,302





42
 Table of Contents





The
underlying common shares related to anti-dilutive securities not included in
Positron’s net loss per share calculation as of December 31, 2008 were as
follows:








Convertible
      Series A Preferred Stock
                  
                  
                  457,000Convertible
      Series B Preferred Stock
                  
                  
                  621,486,000Convertible
      Series G Preferred Stock
                  
                  
                  11,139,000Convertible
      Series S Preferred Stock
                  
                  
                  1,000,000,000Stock
      Warrants
                  
                  
                  60,588,000Stock
      Options
                  
                  
                  19,425,0001,713,095,000








NOTE
7.  PROPERTY AND EQUIPMENT





Property
and equipment at December 31, 2008 and 2007 consisted of the
following:








Dec. 31,
      2008
                    
                    
                    Dec. 31,
      2007Machinery
      and equipment
                    
                    $
                    234,760
                    
                    
                    $
                    234,760Computers
      and software
                    
                    
                    9,442
                    
                    
                    
                    9,442Subtotal
                    
                    
                    244,202
                    
                    
                    
                    244,202Less:
      accumulated depreciation
                    
                    
                    (61,049)
                    
                    
                    
                    (35,293)Total
                    
                    $
                    183,153
                    
                    
                    $
                    208,909





43
 Table of Contents





NOTE
8.  NOTES PAYABLE




On
September 11, 2006, the Company issued a 12% secured promissory note to Cherry
Creek Capital Partners (“Cherry Creek”), an unrelated party, in the amount of
$300,000.  Pursuant to the terms of the note, commencing on October 1,
2006, as amended the Company made a payment of $17,566 in November 2006 and is
required to make 30 consecutive monthly installments of $11,142, including
interest, commencing in July 2007.  A final payment of all outstanding
principal and accrued interest is due and payable on March 10,
2010.   The promissory note is secured by certain assets of the
Company including 4,000,000 shares of common stock of Positron Corporation, for
which the Company has granted Cherry Creek a security interest. As of December
31, 2008 the principal balance of the promissory note is $182,710, all of which
is included in current liabilities.




As a
condition of the promissory note, on September 11, 2006 the Company and Cherry
Creek entered into an Assignment of Economic Interests whereby the Company shall
be obligated to pay Cherry Creek, on a quarterly basis, an amount equal to 5% of
operating income (as defined in the agreement), and upon the occurrence of a
liquidity event, a payment in the amount of 5% of the net proceeds of such
transaction. At December 31, 2008, no amounts had been recorded for these
items.




NOTE 9. EQUIPMENT LEASE
AGREEMENT


NOTE
10. SERIES A PREFERRED STOCK




On July
24, 2007 the Board of Directors authorized a new series of preferred stock
designated Series A Convertible Preferred Stock.  The number of shares
authorized was 5,000,000.  Each share of Series A Preferred Stock
$.001 par value is convertible into 20 shares of the Company’s Common Stock.
Holders of the Series A Preferred Stock are entitled to 20 votes per share on
all matters requiring shareholder vote.  While Series A Preferred
Stock is outstanding no Common Stock dividends may be paid or declared by the
Company. As of December 31, 2007 there were 2,362,500 shares of Series A
Preferred Stock outstanding.  During the year ended December 31, 2008,
the Company issued an additional 2,025,000 shares.  On November 18,
2008, pursuant to the Securities Exchange Agreement discussed in Note 5, all
issued and outstanding shares were reacquired by the Company.  As of
December 31, 2008 no shares of Series A Preferred Stock were
outstanding.





44
 Table of Contents





NOTE
11. INCOME TAXES





The
Company has incurred losses since its inception and, therefore, has not been
subject to federal income taxes.  As of December 31, 2008, the Company
had net operating loss (“NOL”) carryforwards for income tax purposes of
approximately $3,800,000 which expire in 2022 through 2028.  Under the
provisions of Section 382 of the Internal Revenue Code the greater than 50%
ownership change of the Company’s common stock limits the Company’s ability to
utilize its NOL carryforwards 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




Deferred
income taxes consist of the following as of December 31, 2008 and
2007:






2008
                
                
                2007Deferred
      tax assetsNet
      operating loss carryforwards
                
                $
                1,282,000
                
                
                $
                1,320,000Accounts
      receivable allowance
                
                
                17,000Unrealized
      loss on investment impairment and equity in losses of Positron
      Corporation
                
                
                412,000
                
                
                
                75,0001,711,000
                
                
                
                1,395,000Valuation
      allowance
                
                
                (1,711,000)
                
                
                
                (1,395,000)$
                -
                
                
                $
                -





Due to
the uncertainty of future realization of the net deferred tax asset, a valuation
allowance has been placed against this asset.





45
 Table of Contents





FY2008
              IMAGIN
      MOLECULAR CORPORATION
              FORM
      10-K






NOTE
12. STOCKHOLDERS' EQUITY





On
January 28, 2008, the Company consummated a Securities Purchase and Subscription
Agreement with Solaris Opportunity Fund, L.P., a Delaware limited partnership
("Solaris").  Solaris acquired 175,000 shares of the Registrant's
Series A Convertible Preferred Stock for $70,000.  The preferred
shares are convertible into a total of 3,500,000 shares of Imagin common stock.
Solaris' Managing Member, Patrick G. Rooney, is the principal shareholder of the
Company and its former Chairman and Chief Executive Officer, and founder of its
subsidiary Cipher–NV.  Mr. Rooney is also the Chairman of
Positron Corporation, a publicly owned Texas corporation and an affiliate of the
Company.





On March
10, 2008 the Company consummated a Securities Purchase and Subscription
Agreements with Solaris. Under the Agreement Solaris acquired 1,850,000 shares
of the Registrant's Series A Convertible Preferred Stock for
$700,000.  The preferred shares are convertible into a total of
37,000,000 shares of Imagin common stock.





On
November 18, 2008, Solaris, Positron and the Company executed and consummated a
Securities Exchange Agreement whereby the Company transferred and assigned all
of its rights title and interest to notes receivable and accrued interest due
from Positron exchange for the return of the 20,000,000 shares of the Company’s
common stock and 4,387,500 shares of Series A to be retired and cancelled on the
Company’s books and records and the retirement and satisfaction of any
obligations to the advances made in the amount of $200,000. (See Note
5).





On
January 10, 2007 and March 12, 2007, the Company issued 586,667 and 800,000
shares of the Registrant’s common stock, par value $ .001 to John Rooney,
brother of the Company’s former Chairman, President and Chief Executive Officer,
and Jaega Corporation, respectively, as final satisfaction of a $130,000 note
payable to John Rooney. Pursuant to the terms of the agreement between the
Company and Mr. Rooney, the note was convertible into 1,386,667 shares of the
Company’s common stock.  In December 2006, Mr. Rooney assigned the
conversion rights for 800,000 of the shares to Jaega Corporation.





46
 Table of Contents





FY2008
              IMAGIN
      MOLECULAR CORPORATION
              FORM
      10-K








On May
14, 2007, the Company issued 2,000,000 shares of the Registrant’s common stock,
par value $0.001, to a consultant for services performed. The shares were valued
at $0.04 per share.





On May
15, 2007, the Company issued 3,000,000 shares of the Registrant’s common stock,
par value $0.001, to Joseph G. Oliverio, Chief Executive Officer as
compensation. The shares were valued at $0.04 per share.





On July
24, 2007, the Company consummated a Securities Purchase and Subscription
Agreement with Solaris Opportunity Fund, L.P., a Delaware limited partnership
("Solaris").  Solaris acquired 20,000,000 shares of the Registrant's
common stock, par value $0.001 per share for a purchase price of
$400,000.





On July
24, 2007, the Company consummated a Securities Purchase and Subscription
Agreement with Solaris. Solaris acquired 500,000 shares of the Registrant's
Series A Convertible Preferred Stock for $200,000.  The preferred
shares are convertible into a total of 10,000,000 shares of Imagin common
stock.





On August
28, 2007, the Company consummated Securities Purchase and Subscription
Agreements with Solaris. Solaris acquired 500,000 shares of the Registrant's
Series A Convertible Preferred Stock for $200,000.  The preferred
shares are convertible into a total of 10,000,000 shares of Imagin common
stock.





On
October 5, 2007 the Company consummated a Securities Purchase and Subscription
Agreements with Solaris. Under the Agreement Solaris acquired 500,000 shares of
the Registrant's Series A Convertible Preferred Stock for
$200,000.  The preferred shares are convertible into a total of
10,000,000 shares of Imagin common stock.





On
November 4, 2007 the Company consummated a Securities Purchase and Subscription
Agreements with Solaris. Under the Agreement Solaris acquired 500,000 shares of
the Registrant's Series A Convertible Preferred Stock for
$200,000.  The preferred shares are convertible into a total of
10,000,000 shares of Imagin common stock.





On
November 30, 2007 the Company consummated a Securities Purchase and Subscription
Agreements with Solaris. Under the Agreement Solaris acquired 187,500 shares of
the Registrant's Series A Convertible Preferred Stock for
$97,000.  The preferred shares are convertible into a total of
3,750,000 shares of Imagin common stock.





On
December 14, 2007 the Company consummated a Securities Purchase and Subscription
Agreements with Solaris. Under the Agreement Solaris acquired 175,500 shares of
the Registrant's Series A Convertible Preferred Stock for
$100,000.  The preferred shares are convertible into a total of
3,500,000 shares of Imagin common stock.


NOTE
13. LOSS PER SHARE
 
 The
following information details the computation of basic and diluted loss per
share:
 
 
 Years
      EndedDecember 31,
      2008
                        
                        
                        December 31,
      2007NumeratorBasic
      and diluted loss
                        
                        $
                        (930,529
                        )
                        
                        $
                        (658,669
                        )DenominatorBasic
      and diluted earnings per share- weighted average shares
      outstanding
                        
                        
                        91,313,557
                        
                        
                        
                        80,464,197Basic
      and diluted loss per common share
                        
                        $
                        (0.0102
                        )
                        
                        $
                        (0.0082
                        )
 
 
 Anti-dilutive
securities (based on conversions to common shares) not included in the net loss
per share calculation:
  47
  December 31,
      2008
                      
                      
                      December 31,
      2007Series
      A Preferred Stock
                      
                      
                      --
                      
                      
                      
                      47,250,000
 
 
 NOTE 14.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
 
 
 Quarter
      endedMarch 31,
      2008
                      
                      
                      June 30,
      2008
                      
                      
                      September 30,
      2008
                      
                      
                      December 31,
      2008Net
      sales
                      
                      $
                      153,000
                      
                      
                      $
                      153,000
                      
                      
                      $
                      154,045
                      
                      
                      $
                      153,000Gross
      profit (loss)
                      
                      
                      62,685
                      
                      
                      
                      62,685
                      
                      
                      
                      63,730
                      
                      
                      
                      (100
                      )Net
      income (loss)
                      
                      
                      (20,134
                      )
                      
                      
                      (27,286
                      )
                      
                      
                      78,743
                      
                      
                      
                      (961,852
                      )Net
      loss per share:Basic
                      
                      $
                      (0.0002
                      )
                      
                      $
                      (0.0003
                      )
                      
                      $
                      (0.0008
                      )
                      
                      $
                      (0.0100
                      )Diluted
                      
                      $
                      (0.0002
                      )
                      
                      $
                      (0.0003
                      )
                      
                      $
                      (0.0004
                      )
                      
                      $
                      (0.0100
                      )Weighted
      average sharesBasic
                      
                      
                      93,663,284
                      
                      
                      
                      93,663,284
                      
                      
                      
                      93,663,284
                      
                      
                      
                      84,315,458Diluted
                      
                      
                      93,663,284
                      
                      
                      
                      93,663,284
                      
                      
                      
                      181,413.284
                      
                      
                      
                      84,315,458
 
 
 Quarter
      endedMarch 31,
      2007
                      
                      
                      June 30,
      2007
                      
                      
                      September 30,
      2007
                      
                      
                      December 31,
      2007Net
      sales
                      
                      $
                      35,628
                      
                      
                      $
                      12,581
                      
                      
                      $
                      65,091
                      
                      
                      $
                      146,685Gross
      profit (loss)
                      
                      
                      (33,270
                      )
                      
                      
                      (16,449
                      )
                      
                      
                      (51,999
                      )
                      
                      
                      43,902Net
      loss
                      
                      
                      (90,125
                      )
                      
                      
                      (229,532
                      )
                      
                      
                      (166,536
                      )
                      
                      
                      (172,476
                      )Net
      loss per share – basic and diluted
                      
                      $
                      (0.0013
                      )
                      
                      $
                      (0.0032
                      )
                      
                      $
                      (0.0019
                      )
                      
                      $
                      (0.0018
                      )Weighted
      average basic and diluted shares
                      
                      
                      67,966,988
                      
                      
                      
                      71,190,757
                      
                      
                      
                      88,663,284
                      
                      
                      
                      93,663,284




48