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BOSTON (TheStreet) -- Small-cap stocks have enjoyed a tremendous rally since the March 2009 low, although the recent losing streak for equity markets has stoked fears that bankruptcy for some companies with share prices below $5 is imminent.

There are few reliable ways of determining which companies are at a greater risk of going bankrupt than others. The Altman Z-score, a formula developed by New York University professor Edward Altman in 1968, is one of them.

The

Altman Z-score

measures companies' financial health to predict which may enter bankruptcy within two years. The gauge was 80% to 90% accurate on samples of distressed firms one year prior to bankruptcy by examining working capital, retained earnings and other measures, according to Altman's study.

Altman Z-scores carry three classifications. Companies with an Altman Z-score of at least 3 are considered "safe," while those with 1.8 or less are "distressed." Those in between are in a gray zone. Some stocks trading under $5 even have a negative score.

With data provided by iMetrix,

TheStreet

found

10 companies

on the

New York Stock Exchange

, NYSE Amex and

Nasdaq

trading at less than $5 with the lowest Altman Z-scores. The current ratio for each company is given, as that gauge can help investors measure the ability to meet short-term obligations. If a company with a low Altman Z-score runs into cash-flow problems, a failed new product or unexpected expenses, for example, the chance of bankruptcy rises.

TheStreet Recommends

10.

PositiveID

(PSID)

Company Profile

: Formed after the 2009 merger of VeriChip and Steel Vault, PositiveID provides health- and security-identification tools to protect consumers and businesses.

Altman Z-score

: -33.47

Current Share Price

: 34 cents (June 7)

2011 Return

: -45%

Current Ratio

: 1.5, indicating that PositiveID should be able to meet its short-term liabilities with its current assets.

9.

LightPath Technologies

(LPTH) - Get LightPath Technologies, Inc. Class A Report

Company Profile

: LightPath Technologies produces optical components and technologies that serve the medical, industrial, defense and communications industries.

Altman Z-score

: -35.47

Current Share Price

: $1.66 (June 7)

2011 Return

: -8%

Current Ratio

: 2.90, indicating that LightPath would be able to meet its short-term liabilities with its current assets.

8.

Cell Therapeutics

( CTICD)

Company Profile

: Cell Therapeutics is a biopharmaceutical company with a focus on oncology. Last month,

TheStreet's

Adam Feuerstein reported that the

Food and Drug Administration had again rejected pixantrone

, which is Cell Therapeutics' treatment for non-Hodgkin's lymphoma.

Altman Z-score

: -37.19

Current Share Price

: $2.19 (June 7)

2011 Return

: The stock is unchanged this year.

Current Ratio

: 1.20, indicating that Cell Therapeutics should be able to meet its short-term liabilities with its current assets.

7.

MGT Capital Investments

(MGT)

Company Profile

: MGT Capital Investments is a holding company with investments Medicsight and Moneygate Group Limited. Medicsight is a developer of computer-aided detection (CAD) and image analysis software for the medical-imaging market. Moneygate is a U.K.-based financial-services business.

Altman Z-score

: -43.28

Current Share Price

: 20 cents (June 7)

2011 Return

: -23%

Current Ratio

: 5.3, indicating that MGT Capital would easily be able to meet its short-term liabilities with its current assets.

6.

TearLab

(TEAR)

Company Profile

: Formerly known as

OccuLogix

, TearLab is an ophthalmic-device company commercializing a proprietary in-vitro diagnostic-tear testing platform, the TearLab test for dry-eye disease.

Altman Z-score

: -49.68

Current Share Price

: $2.20 (June 7)

2011 Return

: 0.5%

Current Ratio

: 0.80, indicating that TearLab would have some trouble meeting its short-term liabilities with its current assets.

5.

eDiets.com

( DIETD)

Company Profile

: eDiets.com develops and markets Internet-based diet and fitness programs.

Altman Z-score

: -52.5

Current Share Price

: $1.35 (June 7)

2011 Return

: -41%

Current Ratio

: 0.50, indicating that eDiets.com would be unable to meet its short-term liabilities with its current assets.

4.

Asure Software

(ASUR) - Get Asure Software, Inc. Report

Company Profile

: Asure Software is a workforce-management software company, previously known as Forgent Networks until the 2007 acquisition of iEmployee. The company has been in frequent patent disputes, including a 2007 case against

Echostar

(SATS) - Get EchoStar Corporation Class A Report

in which a jury found that Forgent's patent was invalid. Before a 1-for-10 reverse stock split in December 2009, Asure shares traded as low as 25 cents.

Altman Z-score

: -61.94

Current Share Price

: $2.81 (June 7)

2011 Return

: -4%

Current Ratio

: 0.90, indicating that Asure would have some trouble meeting its short-term liabilities with its current assets.

3.

EntreMed

(ENMD)

Company Profile

: EntreMed is a clinical-stage pharmaceutical company working on treatments of cancer and inflammatory diseases.

Altman Z-score

: -86.84

Current Share Price

: $3.80 (June 7)

2011 Return

: -27%

Current Ratio

: 2.90, an indication that EntreMed should be able to meet its short-term liabilities with its current assets.

2.

SulphCo

( SUF)

Company Profile

: SulphCo has developed its proprietary Sonocracking technology, which uses ultrasonic sound waves as part of a desulfurization process of crude oil products.

Altman Z-score

: -115.40

Current Share Price

: 6 cents (June 7)

2011 Return

: -67%

Current Ratio

: 0.80, indicating that SulphCo may have trouble meeting its short-term liabilities with its current assets.

1.

Radient Pharmaceuticals

( RPC)

Company Profile

: Radient Pharmaceuticals produces and sells diagnostic tests to monitor and detect types of cancer. Last month,

TheStreet's

Adam Feuerstein reported that

Radient missed a loan payment

of $843,750 in May, putting the company in default.

Altman Z-score

: -629.33

Current Share Price

: 20 cents (June 7)

2011 Return

: -80%

Current Ratio

: 0.01, indicating that Radient would have major difficulties covering its short-term liabilities with its current assets.

>>To see these stocks in action, visit the

Stocks Under $5 at Risk of Bankruptcy

portfolio on Stockpickr.

-- Written by Robert Holmes in Boston

.

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