FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K





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, 2007

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    x      No     ̈

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

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: $259,985.

Market value of Common stock held by non-affiliates at April 11, 2008:  $3,517,016.

Shares of Common Stock outstanding at April 11, 2008: 93,663,284 shares

Documents incorporated by reference: None

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

EXPLANATORY NOTE

The filing amends the registrant’s filing on Form 10-KSB originally filed on April 14, 2008 and subsequently amended on Form 10-KSB/A on November 10, 2008. The amended filing is being made to revise the language in Items 8A and 8A(T).









FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K





TABLE OF CONTENTS




PagePART IItem 1.

Description of Business
1Item 2.

Description of Properties
9Item 3.

Legal Proceedings
9Item 4.

Submission of Matters to a Vote of Security Holders
9PART IIItem 5.

Market for Common Equity and Related Stockholder Matters
10Item 6.

Management’s Discussion and Analysis of Financial Condition and Results of Operations
11Item 7.

Financial Statements
15Item 8.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
15Item 8A(T).

Controls and Procedures
15Item 8B.

Other Information
16PART IIIItem 9.

Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
16Item 10.

Executive Compensation
18Item 11.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
19Item 12.

Certain Relationships and Related Transactions
21Item 13.

Exhibits
21Item 14.

Principal Accountant Fees and Services
22Report of Independent Registered Public Accounting Firm
24Consolidated Financial Statements
28Signatures
39Certifications
41


Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K








PART I





ITEM 1. 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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K








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. PAC was created to acquire promissory notes made by Positron Corporation, a publicly owned Texas corporation (“Positron”)





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. Imagin Nuclear Partners Corporation is headquartered in Niagara, New York.





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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K





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.





The Company intends to establish regional heart health centers throughout North America as freestanding outpatient facilities that will provide the most advanced imaging technology for the diagnosis and non-invasive management of coronary artery disease. An outstanding physician, nursing and technical staff will deliver this unsurpassed
level of care. The Company’s key strengths are operational expertise in state-of the art cardiovascular PET imaging technology, effective clinical algorithms for coronary artery disease regression and an experienced management team.





The Company’s operational expertise is based on the pioneering work of renowned cardiologist Dr. K. Lance Gould and Dr. Michael E. Merhige on coronary artery disease reversal and prevention through aggressive noninvasive medical management guided objectively in each individual patient by PET. When PET guided results were compared
to conventional management using Single Photon Emission Computed Tomography (SPECT), the experience resulted in a 50% reduction in the utilization of angiography and bypass surgery with an associated 25% reduction in treatment costs. Patient outcome analysis demonstrated a 50% reduction in cardiac mortality and a 50% reduction in myocardial infarction or heart attack.(4) This represents a “win-win-win”, for patients, practitioners and health care payers, through decreased utilization of the invasive
management of coronary artery disease (CABG and angiography).








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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






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 don’t 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, can 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 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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K





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.





Relationship with Beth Israel Hospital





In February 2006, Imagin Nuclear Partners purchased a Positron HZL-R Imaging Camera from Positron Corporation. The Company currently leases the PET camera along with Rb-82 pharmaceutical to Beth Israel Medical Center (“BIMC”).





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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






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.  Also on March 13, 2007, the Registrant
entered into employment agreements with Julia Rzeppa as President and Chairman, Corey Conn as Treasurer and Director and Domenic Hanzely as Vice President of Product Development and Chief Technology officer.  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. PAC was created to acquire Positron Corporation, a publicly owned Texas corporation (“Positron”).





On May 23, 2005, as an initial step, we 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 Collectible 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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






EMPLOYEES





On March 31, 2008, the Company had two full-time and one part-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.


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IMAGIN MOLECULAR CORPORATION
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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.





Dependence Upon Positron Corporation





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, 2007, the Company held 8,026,000 shares of Positron’s common stock and 722,358 shares of Positron’s Series B Convertible
Preferred stock for an aggregate of 12.1% of the outstanding common stock of Positron on a non-fully-diluted basis. In addition, as of December 31, 2007, the Company had advanced an additional $1,346,000 to Positron which on April 10, 2008 were memorialized in the form of a promissory note for the full amount of the advances, due and payable on December 31, 2008 with interest at the rate of eight percent (8%) per annum (the “Positron
Note”). The viability of our wholly-owed subsidiary Positron Acquisition Corporation, and the repayment of the Positron Note are dependent upon the relative success of Positron.  Investors are encouraged to review the filings of Positron with the Securities and Exchange Commission, which may be found at www.sec.gov.





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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K





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 theHealthcareMarket





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.








ITEM 2. DESCRIPTION OF PROPERTY





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








ITEM 3. LEGAL PROCEEDINGS





As of the date of this Report, no legal proceedings have been threatened against or settled by the Registrant.






ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K





PART II





ITEM 5. 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, 2006

High Bid


Low BidFourth Quarter


.08



.04Third Quarter


.19



.07Second Quarter


.39



.12First Quarter


1.08



.04Year Ended December 31, 2007

High Bid


Low BidFourth Quarter


.09



.04Third Quarter


.09



.05Second Quarter


.08



.04First Quarter


.08



.04






(b) Holders





As of December 31, 2007, we had 93,663,284 shares of Common Stock outstanding, held by approximately 1,186 holders or record:





(b)Recent Unregistered Sales of Securities





Om May 31, 2007, the Company sold 20,000,000 shares of its common stock to Solaris Opportunity Fund, L.P., a Delaware Limited partnership (“Solaris”) for a purchase price of $400,000, Solaris Managing Member’s Patrick G. Rooney, our former Chairman, Chief Executive Officer and principal shareholder and founder of the Company’s
wholly owned subsidiary Cipher Multimedia, Inc. Mr. Rooney also serves as the Chairman of Positron Corporation, a publicly owned Texas Corporation and affiliate of the Company, of which Solaris is also a principal shareholder.








Series A Preferred





On July 24, 2007, the Company consummated a Securities Purchase and Subscription Agreement with Solaris. Under the agreements the Company issued a total of 500,000 shares of Series A Convertible Preferred Stock for $200,000.  Each share of Series A Preferred Stock is convertible into 20 shares of the Registrant’s Common
Stock, votes as twenty shares of common stock or all matters which holders of common stock are entitled to vote or and is senior to the common stock upon liquidation..





On August 28, 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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






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.





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, 2007 and 2006. 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 10 of Part III below.








ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Overview





Imagin Molecular Corporation 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 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.





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. Imagin Nuclear Partners Corporation is headquartered in Niagara, New York.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K





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 efficacy 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”).




In accordance with the Agreement, BIMC shall pay INP rent for the lease of the equipment as follows:




-
The actual aggregate technical component reimbursement received by BIMC from all payer sources for all PET scans performed during the three (3) month period commencing on the Effective Date of the Agreement (the “Initial Period”).


-
$850 per scan for scans 1-60 performed in a given calendar month after the Initial Period.


-
$650 per scan for scans 61-120 performed in a given calendar month after the Initial Period.


-
$450 per scan for scans in excess of 120 performed in a given calendar month after the Initial Period.


-
A minimum monthly lease payment of $51,000 is due in the event less than 61 scans are performed by BIMC during any calendar month after the Initial Period.




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.  Also on March 13, 2007, the Registrant
entered into employment agreements with Julia Rzeppa as President and Chairman, Corey Conn as Treasurer and Director and Domenic Hanzely as Vice President of Product Development and Chief Technology officer.  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.




2007 Transactions




On May 31, 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.  Solaris' Managing
Member, Patrick G. Rooney, is the former Chief Executive Officer, Chairman and principal shareholder of the Company 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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K





On July 24, 2007, the Company consummated separate Securities Purchase and Subscription Agreements with Solaris. Under each of the agreements 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 20,000,000 shares of Imagin
common stock.





On August 28, 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 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.




During the year ended December 31, 2007, the Company advanced the sum of $1,346,000 to Positron Corporation and its wholly-owned subsidiary Imaging Pet Technologies (collectively “Positron”). As of the date hereof  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.   Patrick G. Rooney, the Managing Member of Solaris, is the Chairman of Positron Corporation




Results of Operations





For the years ended December 31, 2007 and 2006, the Company had net losses of $658,669 and $972,817, respectively.   The current year net loss includes an operating loss of $385,947.  The significantly higher loss during the year ended December 31, 2006 is attributed primarily to approximately
$764,000 of professional fees, the majority of which was issued in common stock to consultants.





Revenues– Revenue was generated exclusively from PET scans at Beth Israel Medical Center (“BIMC”) and totaled $259,985 and $183,198 for the years ended December 31, 2007 and December 31, 2006, respectively. Contractual adjustments arise due to
the terms of reimbursement of Medicaid, Medicare, and managed care providers and represent the difference between charges at established rates and estimated recoverable amounts.  Adjustments are recognized as a reduction of revenue in the period the services are rendered.  Based on the limited history of reimbursement rates, management has reduced gross revenues by 40% to reflect potential contractual adjustments, an amount it believes to be conservative. Gross revenues from patient scans
have been adjusted to reflect management’s estimate of reimbursable amounts.  For the year ended December 31, 2006, scans commenced in late February with March being the first full month of scan revenue. During the year ended December 31, 2007, PET scans at BIMC were temporarily suspended from February to May pending the re-negotiation of the contract between the Company and Beth Israel Hospital.   Costs of revenues, which consist primarily of monthly fixed costs associated with
performing the scans, operating the imaging camera and CTI infusion were $317,801 in 2007 and $343,254 in 2006.  The current year decrease reflects the temporary suspension of scans at BMIC discussed above.  During this period the Company did not purchase rubidium necessary to operate the PET imaging camera, a cost approximating $30,000 per month.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K





Operating Expenses – Marketing and general and administrative expenses for the year ended December 31, 2007 were $221,573 compared to $52,556 for the year ended December 31, 2006.  The increase over last year is attributed primarily to $174,000 in
compensation expense during the current year including $150,000 of stock-based compensation to employees. The Company did not record any compensation expense for the year ended December 31, 2006.  Professional fees were $106,558 and $829,493 for the years ended December 31, 2007 and 2006, respectively. During 2007, the Company issued shares of its common stock valued at $80,000 to a consultant for services performed. Similarly during 2006, the Company issued common stock valued at nearly $764,000 for
consulting services performed. Other professional fees include legal and accounting expenses.





Other Income (Expense) - Interest income of $145,218 in the prior year represents accrued interest on the notes receivable from Positron Corporation, including
amortization of discount, through the date of conversion to Positron Series B Preferred Stock in September 2006. Through June 30, 2007, the preferred stock was valued at the previous carrying value of the note receivable and accrued interest at the date of conversion.  During the third quarter the Company adopted the equity method of accounting for its investment in Positron Corporation.  For the year ended
December 31, 2007 the Company recorded equity in the losses of Positron of $219,480.





Interest expense for the years ended December 31, 2007 and 2006, was $33,256 and $24,717, respectively.  Current year interest expense represents for 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. Interest
expense on the Cherry Creek note for 2006 was approximately $8,000. In addition, 2006 interest expense includes approximately $13,000 of interest on a related party note payable that was settled in January 2007.





Discontinued Operations of Cipher Multimedia (“Cipher”)





Losses from discontinued operations for the year ended December 31, 2007 and 2006 were $18,463 and 51,213, respectively.  No revenue was recorded by Cipher in either period. The loss for the year ended December 31, 2007 is attributable in large part to $30,000 of compensation expense in the form of Cipher common stock.  Expenses
were offset in part by reversals of previously accrued interest and professional fees.  The loss l for the year ended December 31, 2006 includes a settlement payment of $25,000 to a former officer of Cipher.





After the reorganization of Cipher Multimedia, Inc. in March 2007, the Company owns approximately 25% of the reorganized subsidiary, Cipher-NV.  As a result the Company has recorded majority interest in the losses of Cipher of $1,523 for the year ended December 31, 2007.




Liquidity and capital resources





At December 31, 2007, the Company had current assets of $ 144,542 and current liabilities of $722,748 compared December 31, 2006 when the Company had current assets and current liabilities of $166,677 and $848,240, respectively.  Cash and cash equivalents at December 31, 2007 were $24,120 and accounts receivable from scan revenue
was $120,422.  The Company also had $1,346,000 due from Positron Corporation, a related party, at December 31, 2007.





Current liabilities at December 31, 2007 include accounts payable and accrued liabilities including accrued interest of $292,318 and the current portion of the Cherry Creek note payable of $128,850.





The Company used net cash from operating activities of $112,924 for the year ended December 31, 2007 compared to $299,679 for the year ended December 31, 2006.  The increase in cash flow from operations is due in large part to third party reimbursements for scan revenue generated by INP at the Beth Israel Medical Center.





For the year ended December 31, 2007, net cash used in investing activities was $1,346,000, all of which were for advances to Positron Corporation, a related party and manufacturer of PET Imaging Systems. In the prior year the Company used $241,105 to purchase capital assets for INP, most notably the PET Imaging System used to
perform scans at BIMC.





Net cash provided by financing activities was $1,479,906 and $542,546 for the years ended December 31, 2007 and 2006, respectively.  During 2007 the Company raised $1,397,000 by issuing 20,000,000 shares of common stock and 2,362,500 shares of its Series A Preferred stock to the Solaris Opportunity Fund, a related party.




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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






On December 31, 2007 the Company had an accumulated deficit of $2,617,392 and total equity of $2,003,640.  The Company is dependent upon the
success of INP and PET scanning under the lease agreement with BIMC, the repayment of amounts advanced to Positron Corporation and/or raising additional debt or equity financings to resolve the Company’s liquidity issues and allow it to continue to operate as a going concern.








ITEM 7. 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.








ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE




None.






Item 8A. 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-10K, 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 concluded that that there are material weaknesses in our disclosure controls and procedures.

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.

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.
 
 
 Item 8A(T) Controls and Procedures

Internal Control Over Financial Reporting

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, 2007.
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 concluded that there is a there is a significant deficiency and a material weakness in our internal control over financial reporting.

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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K







ITEM 8B.  OTHER INFORMATION.





On October 5, 2007, November 4, 2007, November 30, 2007 and December 14, 2007 the Company consummated sales of its Series A Convertible Preferred Stock (the “Series A”) with Solaris Opportunity Fund, L.P.., a Delaware limited partnership ("Solaris").  Solaris acquired 500,000, 500,000, 187,500 and 175,000 shares, respectively,
of the Series A for respective purchase prices of $200,000, $200,000, $97,000 and $100,000.  Solaris' Managing Member, Patrick G. Rooney, is the former Chief Executive Officer, Chairman and principal shareholder of the Registrant and founder of its wholly-owned subsidiary Cipher Multimedia, Inc.  Mr. Rooney is also the Chairman of Positron Corporation, a publicly owned Texas corporation and an affiliate of the Registrant.




On April 10, 2008, the Company formalized the advances in the amount of $1,346,000 it had made to its affiliate Positron Corporation (“Positron”).  Positron executed a promissory note for the full amount of the advances, with interest at the rate of eight percent (8%) per annum, due on December 31, 2008 (the “Positron
Note”).  The Positron Note is secured by a pledge of 100,000,000 shares of Positron’s common stock, par value $0.001 per share (the “Pledged Shares”) in accordance with a Stock Pledge Agreement (the “Pledge”).  Upon a default of the Note or the Pledge, the Company may sell the Pledged Shares to repay any and all amounts due under the Positron Note.


PART III








ITEM 9. 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:


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K







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
38
August 18, 2006Corey Conn
One year
December 31, 2008
Chief Financial Officer,
Director
46
August 19, 2003Neil Sy
One year
December 31, 2008
Chairman
Director
38
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 38, 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 46, Chief Executive Officer, Director: Mr. Conn is a co-founder of Cipher Multimedia, Inc. Mr. Conn also serves as the Chief Financial Officer of Positron Corporation, a publicly-owned Texas corporation, and 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. Mr. Conn served as a member of the Board of Directors of Uniloc, Inc., from April 2000 to July 2002.





Neil Sy - Age 38, 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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






(d) Involvement in Certain Legal Proceedings





No event listed in Sub-paragraphs (1) through (4) of Subparagraph (d) of Item 401 of Regulation S-B, 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.





ITEM 10. 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, 2007 and 2006.  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
2007


—



—


$
120,000



—



—



—



—


$
120,000Chief Executive Officer, Director
2006


—



—



—



—



—



—



—



——



—



—



—



—



—



—



—Patrick G. Rooney
2007


—



—



—



—



—



—



—



—Former Chief Executive Officer
2006—



—



—



—



—



—



—



—Corey Conn
2007


—



—



—



—



—



—


$
34,000


$
34,000Chief Financial Officer, Director
2006


—



—



—



—



—



—



—



——



—



—



—



—



—



—



—Neil Sy
2007


—



—



—



—



—



—



—



—Chairman, Director
2006


—



—



—



—



—



—



—



—





(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.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K







Equity Compensation Plan Information




The following table summarizes share and exercise information about the Company's equity compensation plans as of December 31, 2007.




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, 2007, no shares had been issued to under the 2007 Plan.








ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





(a) Security Ownership of Certain Beneficial Owners.The information is furnished as of December 31, 2007, 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:


19
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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K








Name and Address  of Beneficial Owner

Amount and Nature of Beneficial Ownership

Percentage of Class(a)(b)Solaris Opportunity Fund, LP

67,250,000 (c)

47.72%Patrick G. Rooney (d)

12,407,625 (d)

8.81%Cipher Multimedia, Inc (f)

1,900,000 (e)

2.03%




(a)
Based on 93,663,284 shares of Common Stock outstanding on March 30, 2008.




(b)
The percentage of outstanding Common Stock assumes full conversion Convertible Series A Preferred Stock into Common Stock and is based on the Company's outstanding shares of Common Stock as of March 30, 2008.




(c)
Includes 20,000,000 shares owned directly and shares issuable upon full conversion of 2,362,500 shares of Series A Preferred Stock into Common Stock.  The address for the Solaris Opportunity Fund is 700 Commerce Drive Suite 400 Oak Brook, Illinois 60523.




(d)
Patrick G. Rooney is also the Managing Member of Solaris Opportunity Fund, L.P.




(e)
Represents shares owned directly.  The address for Patrick G. Rooney is 3801 N. Washington Street Oak Brook, Illinois 60523.




(f)
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, 2007, 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

3.20%104 W. Chestnut # 315.Hinsdale, IL 60521Corey Conn

800,000

.85%104 W. Chestnut # 315.Hinsdale, IL 60521Neil Sy

360,000

.38%104 W. Chestnut # 315Hinsdale, IL 60521All Officers and Directors

4,160,000

4.43%as a Group


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K








ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





During the period covering this Annual Report on Form 10-K, Solaris Opportunity Fund, L.P., a Delaware limited partnership (“Solaris”) acquired an aggregate of 20,000,000 shares of the Company’s common stock, par value $0.001 per share and 2,362,500 shares of the Company’s Series A Convertible
Preferred Stock, par value $0.001 per share (the “Series A”) for an aggregate purchase price of $1,397,000.  The Series A is convertible into shares of common stock at the ratio of 20 shares of common stock for each share of Series A converted. Holders of the Series A are entitled to vote on all matters holdings of the Company’s common stock are entitled to vote upon at rate of 20 votes per share. The Series A is senior to the Company’s common stock in liquidation. As a result
of Solaris has become the Company’s controlling Shareholder.







ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K





(a) Exhibits:


EXHIBITS







10.1
Promissory Note by Positron Corporation dated April 10, 2008
 
 10.2
Stock Pledge Agreement by Positron Corporation dated April 10, 2008


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


21
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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






ITEM 14. PRINCIPAL ACCOUNTANT FEESAND SERVICES





The following table sets forth the aggregate fees billed to us for fiscal years ended December 31, 2007 and 2006 by our auditors, Frank L. Sassetti & Co.





2007


2006Audit Fees (1)

$
19,100


$
30,000Non-Audit Fees:


—



—Audit Related Fees (2)


—



—Tax Fees (3)


—



—Total Fees paid to auditors

$
19,100


$
30,000





(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 assurance and related services that are reasonably related to the performance of the audit or review of Imagin's consolidated financial statements and are not reported under "Audit Fees".





(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.





(4) All other fees consist of fees for products and services other than the services reported above.





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.


22
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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






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
14, 2009.





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


23
 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K








Frank L. 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, 2007 and 2006, 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, 2007 and 2006, 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.




As discussed in Note 6 to the financial statements, the accompanying 2007 consolidated financial statements have been restated.


/s/ Frank L. Sassetti & Co.





April 11, 2008, except for Notes 2 and 6, as to which the date is November 6, 2008.


Oak Park, Illinois








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


24
 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K








IMAGIN MOLECULAR CORPORATION AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


DECEMBER 31, 2007 AND 2006





ASSETS2007


2006Current assets:Cash

$
24,120


$
3,138Accounts receivable


120,422



163,539Total current assets


144,542



166,677Property and equipment, net


208,909



234,666Other assets:Due from related party


1,346,000Investment in securities of Positron Corporation


1,368,586



1,588,066Total assets

$
3,068,037


$
1,989,409LIABILITIES AND STOCKHOLDERS' (DEFICIT)Current liabilities:Accounts payable

$
104,951


$
97,577Advances from shareholder


5,100



69,616Accrued expenses


182,373



158,246Current portion of promissory note


128,580



81,684Notes payable


—



130,000Advance from related party


296,750



235,385Interest Payable


4,994



75,732Total current liabilities


722,748



848,240Promissory note payable – less current portion


125,404



205,860Majority interest in consolidated subsidiary


216,245



—Total liabilities


1,064,397



1,054,100Stockholders’ equity:Preferred Stock, $0.001 par value; 5,000,000 shares Authorized, 2,362,500 shares issued and outstanding


2,362



—Common stock, $0.001 par value; 95,000,000 shares authorized 93,663,284 and 67,276,617 shares issued and outstanding, on December 31, 2007 and 2006.


93,663



67,277Additional paid-in capital


4,525,007



2,826,755Accumulated deficit


(2,617,392
)


(1,958,723
)Total stockholders’ equity


2,003,640



935,309Total liabilities and stockholders’ equity

$
3,068,037


$
1,989,409





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


25
 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K








IMAGIN MOLECULAR CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF OPERATIONS


FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006





2007


2006Revenues

$
259,985


$
183,198Costs of revenues


317,801



343,254Gross loss


(57,816
)


(160,056
)Operating expenses:Professional fees


106,558



829,493Marketing, general and administrative


221,573



52,556Total operating expenses


328,131



882,049Loss from operations


(385,947
)


(1,042,105
)Other income (expenses):Interest income


—



145,218Interest expense


(33,256
)


(24,717
)Equity in losses of Positron Corporation


(219,480
)


—Total other income


(252,736
)


120,501Loss from continuing operations before income taxes  majority interest  in consolidated subsidiary


(638,683
)


(921,604
)Majority interest in  loss of consolidated subsidiary


(1,523
)


—Loss from continuing operations before income taxes


(640,206
)


(921,604
)Income taxes


—



—Loss from continuing operations


(640,206
)


(921,604
)Loss from discontinued operations


(18,463
)


(51,213
)Net loss

$
(658,669
)

$
(972,817
)Per share amounts:From continuing operations

$
(.0080
)

$
(.0140
)From discontinued operations

$
(.0002
)

$
(.0008
)Net loss

$
(.0082
)

$
(.0148
)Weighted average common Shares


80,464,197



65,612,591





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


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 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






IMAGIN MOLECULAR CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY


FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006





Series A Preferred


Common StockNumber of





Number of





Additional paidShares


Amount


Shares


Amount


in Capital


Deficit


TotalJanuary 1, 2006


—


$
—



50,680,311


$
50,680


$
1,812,378


$
(985,906
)

$
877,152Common shares issued for services


—



—



9,060,000



9,060



754,640



—



763,700Common shares issued for debt repayment


—



—



7,536,306



7,537



259,737



—



267,274Net loss


—



—



—



—



—



(972,817
)


(972,817
)December 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
)

$
2,003,640


27
 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K





IMAGIN MOLECULAR CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF CASH FLOWS


FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006






2007


2006Cash flows from operating activities::Loss from continuing operations

$
(640,206
)

$
(921,604
)Loss from discontinued operations


(18,463
)


(51,213
)Net loss


(658,669
)


(972,817
)Adjustments to reconcile net loss to net cash used in operating activitiesDepreciation expense


25,757



9,536Common stock issued for services


200,000



763,700Subsidiary common stock issued for services


30,000



—Equity in losses of Positron Corporation


219,480Majority interest in loss of consolidated subsidiary


1,523



—Amortization of discount on notes receivable


—



(54,378
)Changes in operating  assets and liabilitiesAccounts receivable


43,117



(163,539
)Interest receivable


—



(93,638
)Accounts payable  and accrued liabilities


25,868



194,628Interest payable


—



16,829Net cash used in operating activities


(112,924
)


(299,679
)Cash flows from  investing activities:Purchase of fixed assets


—



(241,105
)Advances to related party


(1,346,000
)


—Net cash used in investing activities


(1,346,000)



(241,105
)Cash flows from financing activities:Advances from shareholders


5,100



69,616Advance from related party


111,365



185,385Proceeds from promissory note


—



305,111Payment of notes payable


(33,559
)


(17,566
)Proceeds from issue of common stock


400,000



—Proceeds from issue of preferred stock


997,000



—Net cash provided by financing activities


1,479,906



542,546Net increase (decrease) in cash


20,982



1,762Cash at beginning of period


3,138



1,376Cash at end of period

$
24,120


$
3,138Supplemental cash flow information:Interest paid

$
28,256


$
2,780Income taxes paid


—



—





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


28
 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K








IMAGIN MOLECULAR CORPORATION


CONSOLIDATED STATEMENT OF CASH FLOWS


FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006


(CONTINUED)





Supplementary Schedule of Noncash Transactions





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.








2006





On January 4, 2006, the Company issued 481,481 shares of common stock to a non-affiliated shareholder in final satisfaction of a $13,000 advance made to the Company. The shares were valued at $0.027 per share.





On January 4, 2006, the Company issued 7,054,825 shares of common stock to an affiliated shareholder in final satisfaction of a $253,974 advance made to the Company. The shares were valued at $0.036 per share.





On April 13, 2006, the Company issued 50,000 shares of common stock to a consultant for services performed. The shares were valued at $0.26 per share.





On May 26, 2006, the Company issued 3,000,000 shares of common stock to a consultant for services performed. The shares were valued at $0.17 per share





During September 2006, the Company converted notes receivable and accrued interest due from Positron Corporation into 762,358 shares of Positron Corporation Series B Preferred Stock, par value $1.00.  The Company subsequently converted 40,000 shares of Positron Series B Preferred Stock into 4,000,000 shares of Positron Corporation
common stock.





On November 29, 2006, the Company issued 10,000 shares of common stock to a consultant for services performed. The shares were valued at $0.07 per share.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K








IMAGIN MOLECULAR CORPORATION


NOTES TO CONSOLIDATED STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006







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”) operates 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. 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. Operations began in the second quarter of 2006 and the Company no longer operates in the development stage. See Positron Acquisition Corp. and Imagin Nuclear Partners discussions below. The results of Cipher are presented as discontinued operations in the Company’s consolidated statements of operations and cash flows.




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.





In accordance with the terms of the Exchange, Exchange Shares were distributed to the equity holders of IDC.





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 and expects volume to increase once marketing efforts result in increased physician awareness.


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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






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.





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 $2,617,392 as of December 31, 2007.  The Company’s ability to continue as a going concern is dependent in part upon the success of INP and the PET scanning at the Beth Israel Medical Center, but in large part the success of INP will be its ability to execute additional lease or similar agreements with other 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, 2007, the Company held 4,000,000 shares of Positron’s common stock and 722,358 shares of Positron’s
Series B Convertible Preferred stock for an aggregate of 11% of the outstanding common stock of Positron on a non-fully-diluted basis. In addition, as of December 31, 2007, the Company had advanced an additional $1,346,000 to Positron. The viability of our wholly-owed subsidiary Positron Acquisition Corporation, and the repayment of the advances, is dependent upon the relative success of Positron





While the Company is expending its best efforts to achieve it 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 advance 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, 2007 and 2006, the financial statements include the accounts and transactions of Cipher Multimedia, Inc., 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.





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.


31
 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






In September 2006, the FASB released 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. This interpretation is effective for fiscal years
beginning after December 15, 2006.  The provisions of FIN 48 were adopted in the first quarter of 2007 and did not have a material effect on the Company's financial statements.




Revenue recognition





The Company recognizes revenue from PET scans when the procedure is performed.  Scan revenue represents the amount charged to patients net of contractual adjustments.  Contractual adjustments 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.





New Accounting Pronouncements








In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements. SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities. The standard also requires expanded disclosures about the extent to which companies measure assets and liabilities at fair value,
the information used to measure fair value and the effect of fair value measurements on earnings. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not expect the adoption of Statement No. 157 to materially impact the Company’s financial statements.





In February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities". SFAS No. 159 permits entities to choose, at specified election dates, to measure eligible items at fair value (the "fair value option"). A business entity shall report unrealized gains and losses on items for which the
fair value option has been elected in earnings at each subsequent reporting date. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, "Fair Value Measurements". The Company does not expect the adoption of Statement No. 159 to materially impact the Company’s financial statements.


32
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FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






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.





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





On March 13, 2007, the Registrant reorganized its wholly-owned subsidiary Cipher Multimedia, Inc., an Illinois corporation (“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.  Also on March 13, 2007, the Registrant entered into employment agreements on behalf of Cipher-NV with Julia Rzeppa as President and Chairman, Corey Conn as Treasurer and Director and Domenic Hanzely as Vice President of Product Development and Chief Technology officer.  Pursuant to the terms of the employment agreements, each received 500,000 shares of Cipher common stock as compensation.  Mr. Conn is also the Registrant’s
Chief Financial Officer.  On March 14, 2007, Cipher settled obligations with its two largest creditors by retiring $148,973 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-NV common stock, and retiring $35,750 of interest payable to a third-party 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.





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 year ended December 31, 2007 continue to be consolidated in the Registrant’s financial statements and are reflected as discontinued operations.







Summarized financial information for discontinued operations for the years ended December 31, 2007 and 2006 were as follows:





December 31, 2007


December 31, 2006Operating expenses

$
29,990


$
28,105Other expenses (income)


(11,527
)


23,108Loss before majority interest


(18,463
)


(51,213
)Majority interest in loss


(1,523
)


--Net loss

$
( 19,986
)

$
(51,213
)Total assets

$
846


$
390Total liabilities


236,603



156,269Majority interest


1,523



--Stockholders’ deficit


(235,757
)


(155,879
)


33
 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






NOTE 5. DUE FROM RELATED PARTY





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.  At December 31, 2007 the outstanding amount due the Company from Positron is $1,346,000.  On April 10, 2008, the advances were formalized into a promissory note, with interest at 8%, due on December 31, 2008 and secured by a pledge of 100,000,000 shares of Positron’s common stock.




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.





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 were intitially valued at the previous carrying value of the note receivable and accrued interest at the date of conversion  and carried at that value through June 30, 2007  However, in considering the guidance of paragraph 17 of APB 18 with respect to the investment in Positron, and events and transactions
occurring during the current quarter (see discussion below) as well as the current relationship between the Company and Positron, during the third quarter of 2007  the Company adopted the equity method of accounting with respect to the Positron securities. 
 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% 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, 2008. 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.
 
 Adoption of the equity method of accounting for the Positron securities has resulted in restatement of the Company’s financial statements previously filed in its December 31, 2007 annual report on Form 10-K. Based on its percentage of ownership of Positron common stock, for the year ended December 31, 2007, the Company
recorded equity in the losses of Positron of $219,480 reducing the carrying value of the Positron securities to $1,368,586 at December 31, 2007.  At December 31, 2007, the Company’s 4,000,000 shares of Positron’s common stock had an aggregate market value of $272,000.




34
 Table of Contents




The following table summarizes the impact of the restatement for the year ended December 31, 2007:




AsReportedDecember 31, 2007


Adjustment


RestatedDecember 31, 2007Net loss

$
(439,189
)

$
(219,480
)

$
(658,669
)Basic and diluted loss per share

$
(0.0055
)

$
(0.0027
)

$
(0.0082
)Balance Sheet As December 31, 2007Total Assets

$
3,287,517


$
(219,480
)

$
3,068,037Accumulated deficit

$
(2,397,912
)

$
(219,480
)

$
(2,617,392
)
 
   Summarized financial information for Positron for the years ended December 31, 2007 and 2006 follows:
  2007


2006Revenues

$
3,309,000


$
2,213,000Loss from operations


7,212,000



3,813,000Net loss


7,780,000



6,586,000Loss per share

$
(0.08
)

$
(0.08
)Weighted average shares outstanding


95,875,000



81,508,000
 
   2007


2006Current assets

$
2,071,000


$
4,949,000Total assets


2,277,000



5,271,000Current liabilities


4,147,000



3,521,000Total liabilities


7,220,000



6,403,000Stockholders’ deficit


(4,943,000
)


(1,132,000
)Common shares outstanding


102,555,302



86,205,202
   The underlying common shares related to anti-dilutive securities not included in Positron’s net loss per share calculation as of December 31, 2007 were as follows:
   Convertible Series A Preferred Stock


464,000Convertible Series B Preferred Stock


592,611,000Convertible Series G Preferred Stock


11,139,000Stock Warrants


57,624,000Stock Options


19,425,000681,263,000






NOTE 7.  PROPERTY AND EQUIPMENT





Property and equipment at December 31, 2007 and December 31, 2006 consisted of the following:








Dec. 31, 2007


Dec. 31, 2006Machinery and equipment

$
234,760


$
234,760Computers and software


9,442



9,442Subtotal


244,202



244,202Less: accumulated depreciation


(35,293
)


(9,536
)Total

$
208,909


$
234,666


35
 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






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, 2007 the principal balance of the promissory
note is $253,984, of which $128,580 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, 2007, no amounts had been recorded for these items.




Convertible note with related party




On December 28, 2004, the Company modified and amended a promissory note made by Imagin in favor of John Rooney, brother of the Registrant’s former Chairman, President and Chief Executive Officer and current principal shareholder, in the principal amount of $130,000.  Pursuant to the terms of the amended
note, the Company accepted the obligation for the payment of the note for the release of the obligation of Imagin to repay principal and interest.  The due date of the note was extended to December 31, 2007, with interest at the rate of 10%.  The note was amended to be convertible into 1,386,667 shares of the Company’s common stock.  Additional shares may be converted for unpaid interest at $.09375. As of December 31, 2007 the note and accrued interest of $39,000 was unpaid This
interest was converted into 1,787,500 shares of common stock of Cipher Multimedia, Inc., the Company’s wholly-owned subsidiary.  On January 10, 2007 the Company issued of 586,667 shares of common stock to Mr. Rooney as full and final settlement of the note




Advances from shareholder




Patrick G. Rooney, the company’s former Chairman, President and Chief Executive Officer, advanced funds to finance the Company’s working capital requirements. On December 31, 2007 and 2006 advances and loans, including accrued interest, made to the Company by Mr. Rooney totaled $5,100 and $98,973, respectively.




NOTE 9. EQUIPMENT LEASE AGREEMENT




In May 2007, the Company’s wholly-owned subsidiary, INP and Beth Israel Medical Center (“BIMC”) 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”).




36
 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






In accordance with the Agreement, BIMC shall pay INP rent for the lease of the equipment as follows:




-
The actual aggregate technical component reimbursement received by BIMC from all payer sources for all PET scans performed during the three (3) month period commencing on the Effective Date of the Agreement (the “Initial Period”).


-
$850 per scan for scans 1-60 performed in a given calendar month after the Initial Period.


-
$650 per scan for scans 61-120 performed in a given calendar month after the Initial Period.


-
$450 per scan for scans in excess of 120 performed in a given calendar month after the Initial Period.


-
A minimum monthly lease payment of $51,000 is due in the event less than 61 scans are performed by BIMC during any calendar month after the Initial Period




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.





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, 2007, the Company had net operating loss (“NOL”) carryforwards for income tax purposes of approximately $2,500,000, which expire in 2022 through 2027.  Under
the provisions of Section 382 of the Internal Revenue Code the greater than 50% ownership changes of the Company’s common stock limited 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 rate established monthly by the Internal Revenue Service




For the years ended December 31, 2007 and 2006, the Company applied the Federal statutory tax rate of 34%.


Deferred income taxes consist of the following December 31, 2007 and 2006:






2007


2006Deferred tax assetsNet operating loss carryforwards

$
1,170,000


$
830,000Current year provision


150,000



340,0001,320,000



1,170,000Valuation allowance


(1,320,000
)


(1,170,000
)$
-


$
0





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




The Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" as of January 1, 2007. The Company has reviewed the status of possible tax uncertainties through 2007. The company's review did not result in any
uncertain tax 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. The Company has not changed any of its tax policies nor adopted any new tax positions during 2007 and believes it has filed appropriate tax returns in all jurisdictions for which it has nexus. This review included the Company's net deferred income tax assets and valuation
allowance.


37
 Table of Contents




FY2007
IMAGIN MOLECULAR CORPORATION
FORM 10-K






NOTE 12.  RELATED PARTY TRANSACTIONS





In September 2006, INP purchased from Positron, a refurbished HZL Positron Emission Tomography (“PET”) Imaging System.  The machine is being used at the cardiac imaging center located in Beth Israel Medical Center in New York City. The total cost of the machine, which includes sales tax and installation
was $234,760. The Company also executed a service and maintenance contract with Positron for the machine. For the years ended December 31, 2007, Positron billed the Company $55,000 under the service contract. 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





Advances from related parties at December 31, 2007 and December 31, 2006 consisted of the following:





December 31, 2007


December 31, 2006Positron Corporation and Subsidiaries

$
296,750


$
185,385




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.  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 July 24, 2007 and August 28, 2007, the Company consummated separate Securities Purchase and Subscription Agreements with Solaris. Under each of the agreements 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 20,000,000 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.





During the year ended December 31, 2007, the Company advanced funds to Positron Corporation. At December 31, 2007 the outstanding amount of these advances totaled $1,346,000. The advances are non-interest bearing. On April 10, 2008, the advances
were formalized into a promissory note, with interest at 8% per annum, due December 31, 2008 and secured by a pledge of 100,000,000 shares of Positron’s common stock.




NOTE 13. STOCKHOLDERS' EQUITY





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.


38
 Table of Contents




FY2007
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.





On January 2, 2006, the Company entered into a settlement agreement with a non-affiliated shareholder whereby the Company issued 481,481 shares of the common stock in full and final satisfaction of unpaid and unreimbursed expenses and advances made on behalf of the Registrant in the aggregate amount of $13,000.  The
obligation was converted at the closing bid price of the Company’s common stock as of the settlement date ($0.027).





On January 2, 2006 the Company entered into an additional settlement agreement with Patrick G.  Rooney, the Registrant’s former Chairman, President and Chief Executive Officer and affiliate shareholder whereby Mr. Rooney agreed to accept 7,054,825 of the Company’s common stock in exchange for the
full and final satisfaction of unpaid and unreimbursed expenses in the aggregate amount of $253,974. The obligation was converted into shares of the Company’s common stock at the average of the closing bid price five (5) trading days preceding the conversion ($0.036).





In 2006the Company issued 9,060,000 shares of common stock in exchange for consulting services and other professional fees and recorded consulting fees expenses of $763,700 to reflect the fair market value of the common shares issued.






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