Viking Systems Inc. (OTCBB: VKNG)

Viking Systems Inc. (VKNG) develops, manufactures and markets visualization medical devices to aid surgeons during minimally invasive outpatient surgical procedures. The Company partners with other medical device manufacturers and medical facilities to deploy the Company’s proprietary technology to aid surgeons and minimize recovery time of patients.

The Company’s 2D digital cameras are sold to end-users through third-party companies through original equipment manufacture (OEM) programs.

Its proprietary visualization system, called 3Di Vision System, is sold to hospitals and outpatient facilities worldwide. Additionally, the Company’s CardioCam/MiniCam products are sold through its distribution network.

Founded in 1998, the Company is headquartered in Westborough, Massachusetts.

Source: Reuters.com, SEC Filings.

Financial Summary

Source: Reuters.com, SEC Filings.

Analyst Consensus

No analyst rates shares of VKNG at this time.

Investment Highlights

Medical Device Market & Trend

The United States and Europe are the two largest markets of medical devices, with the United States ranking No. 1 at approximately $80 billion in 2005, according to research firm, Themedica.

Demographics of the U.S. and Europe reveal that approximately 25,000 individuals will turn 60 years old each day for the next 20 years. As the population of aged individuals grows, the demand for small medical devices is expected to grow as well. Socialized medical systems of Europe and the present third-party payer system of Medicare will provide the industry financial stability over the long term.

A recent survey released in the first quarter of 2009 showed that 56% of medical device makers intend to increase spending through the next 12 months, 20% expect no change in procurements. Nearly one in three buyers of medical devices is actively seeking partnerships with suppliers to reduce costs and to stretch working capital.

Competition within the industry is rising, with more multinational companies expanding into each significant market throughout the world. Multinational market penetration, mergers, joint ventures and acquisitions are expected to increase over time. Larger device makers are exploring smaller developing markets to fund future growth in anticipation of rapid growth in the emerging market space. The recent announcement on September 28 that Aspect Medical Systems (NASDAQ: ASPM) accepted a tender offer of $210 million by Irish health care tech company Covidien is the most recent example of the expected trend toward M&A activity in the sector.

Company

Since the Company’s inception, funding for the development of its products came through the sale of equity securities and convertible debt. From January 1, 2004, through September 30, 2009, the Company raised $10,750,00 through common and preferred stock sales and $13,600,000 through the issuance of debt. As of the close of the latest quarter ending September 30, 2009, the Company reported $214,510 in cash.

In 2008, the Company’s board of directors redirected its business strategy to invest more in its 3Di technology and increase distribution of the technology. Recent trends in the industry confirm that management’s strategy has been prudent.

Executing the Company’s strategy, however, will require additional capital. In November, the Company engaged the services of an investment banking firm to explore raising additional funds. Since November, the Company has entered into several agreements with various third parties. A sale of the Company is not a viable option at this time, leaving the Company the option of raising $2 million to $3 million to fund the development and launch of the Company’s “Next Generation” 3DHD system in anticipation of losses and capital needs in 2010.

In October 2009, the Company received a purchase order of $897,400 from the U.S. Army for the Company’s proprietary 3Di technology. Payment is expected in November 2009.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui?s=VKNG

VKNG trades above its 13-day moving average. This bullish sign is less significant because the 13-day moving average is sloped downwardly.

The MACD for VKNG currently indicates a bullish signal. The MACD is above the signal line, a 9-day moving average of the MACD. The MACD is above the critical level of 0, which implies the past price action had been positive. Overall, the chart is bullish.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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