Shares of Preventia, Inc. (OTCBB: PVTA) skyrocketed on Monday, surging from an opening of 0.1650 to a high of 0.7701 following their announcement of a License Agreement with Private Trading Systems PLC granting Preventia, Inc. a worldwide and exclusive license which will enable PVTA to “use, sub-license, enforce, and otherwise exploit, PTS UK’s proprietary trading system.”
As described in Monday’s press release this License Agreement supplies PVTA with PTS UK’s proprietary trading system is “designed to facilitate the trading of instruments, investments, securities and assets between buyers and sellers in a trading environment (the “System”) and all intellectual property incorporated therein and related thereto (collectively, the “System IP”), which includes, but is not limited to, United States Patent No. 8,165,952 for “Electronic Trading System” (the “U.S. Patent”) and all improvements thereof and thereupon.”
PVTA followed Monday’s announcement with a press release on Tuesday that detailed the launch of their operational unit subsidiary, Preventia Group Corporation, to create and distribute financial products. In the release PVTA stated they expect “to immediately develop and market financial products for dematerialization reaching out to firms positioned to run their own electronic trading operations.”
Clearly PVTA needs to start creating and distributing these products given the fact that they generated no revenue during their most recently completed quarter ended March 31, 2012. It would appear to be rather optimistic to think that the company’s financial conditional will change dramatically in the near future and this is good reason to exercise some caution prior to building a position in PVTA, especially with their share price trading at its current level.
While that share price has slipped from Monday’s high of 0.7701 down to a closing of 0.63 on Tuesday it remains substantially higher than the low of 0.0800 it was trading at on Friday. Given the fact that PVTA’s two most recent press releases don’t relate to the generation of revenue it wouldn’t come as any surprise to see that share price plummet soon.
Looking back at the License Agreement announced on Monday, the details of this deal with Private Trading Systems PLC include PVTA paying out a minimum of $2,000,000 annually for their rights. PVTA could be paying more than that as the agreement was structured so that Preventia pay 50% of gross revenues earned and received in connection with the use, sub-licensing, enforcement and/or other exploitation of the System and/or the System IP (less amounts paid by the registrant to legal counsel and other third parties with respect to litigation or other enforcement proceedings as such litigation and/or enforcement proceedings pertain to the enforcement of the System IP).
Obviously PVTA is hoping that they generate enough gross revenues to surpass that $2 million mark but that would require a minimum of $4,000,000 in gross revenues and for a company that doesn’t have much in the way of experience in generating revenue that could be a daunting task.
Despite the challenge PVTA CEO, Robert Stevens, expressed confidence regarding the company’s future and the impact that this License Agreement will have, stating “I’m delighted about the license from PTS and the opportunity to use and license their system. Given the nature and direction of trading in today’s marketplace, I believe our exclusive license with PTS is a landmark step forward in the globalization of financial products. One that has opened the door for Preventia to develop, market and facilitate a broad, new range of financial products for dematerialization and electronic trading worldwide.”
We will likely see if investors share that confidence in the coming days but with Wednesday’s trading action less than 30 minutes into play shares of PVTA have already fallen to 0.5300 so it doesn’t look good.