2 Milestone Sales Events Mark Pivot Point For Implant Sciences

Dec. 6.12 | About: Implant Sciences (IMSCQ)

On the heels of an announcement last week that Implant Sciences (IMSC.PK) had shipped the largest order in company history to India's Ministry of Defense for a total value of six million dollars worth of product, Implant again made noise this week by announcing that it had secured contracts to provide its Quantum Sniffer (QS) explosives trace detector units to various agencies of the US Government. Although the associated press release (linked above) does not specify to which US agencies the units are destined, the order entails a total of twelve units - a combination consisting of both the handheld H-150 and the desktop B-220 units. The significance of this order should not be ignored as many skeptical investors had questioned the company's ability to infiltrate the US homeland defense market, even as sales continued to grow overseas.

Maybe of even more significance is the inclusion of the B-220 in this order. That unit in particular has been under review for quite some time by the US Transportation Security Administration (TSA) for testing and validation, and Implant officials have noted in recent conference calls that the process is nearly complete. The fact that US government agencies are already jumping on board could boost the already confident opinion of many long-sided investors that the validation will soon turn into an all-out approval.

Regardless, Monday's announcement is a sign that Implant's strategy of building an experienced sales and management force with numerous government connections - some of whom bailed from competing companies - could be starting to pay off in a big way.

With government agencies starting to jump on board, another catalyst to look out for is the much-discussed infiltration into the air cargo screening market. Those that have followed Implant are well aware that the TSA has set December 3rd as the target date for all air cargo inbound to the US on passenger airliners to be screened for explosive traces. Should that plan go into full effect, it could open another large market for Implant's technology.

Previous to the US order, Implant announced last week shipment of the largest order in company history, a six million dollar deal consisting of QS H-150s handheld units and associated support destined for the India's Ministry of Defense. Exact figures were not immediately available for the US deal, but the two shipments combined are likely over seven million dollars in value and a sign that the company could be ready to enter a rapid growth phase, given that the total far surpasses that registered in the previous quarter. Pending the TSA approval, 2013 could turn into a pivotal year for Implant in terms of growing sales.

Another positive stemming from these two recent announcements is that investors can rest easier that Implant will be able to meet its debt obligations to the company's primary creditor, DMRJ Group, LLC. As noted a few months ago, the two sides agreed to push back until the end of next March some of the debt that was set to come due sooner. DMRJ holds over $20 million in Implant debt and some concerns were aired earlier in the year that much of the debt was coming due at the end of September. Those concerns were alleviated for the short term when DMRJ agreed to extend the terms of the agreement until the end of March, 2013, providing a full two quarters of development and progress for Implant to boost revenue. Indications are that the company is doing just that.

In addition to extending the due date of indebtedness a couple of months ago, the two sides also agreed to convert $12 million of the existing $23 million line of credit into a "senior secured convertible promissory note that is convertible into a new Series H Convertible Preferred Stock." The preferred stock will be "convertible into Implant Sciences' common stock at a price of $1.09 per share," according to the Wednesday release. The convertible price of $1.09 significantly boosts the foundation set by previous agreements and places DMRJ in a more strategic position alongside shareholders, all of whom stand to benefit by any future successes registered by Implant.

While there are never any guarantees in the world of business and especially in the stock market, the road is being paved for this company to meet its obligations and alleviate any future debt concerns.

The notable boost in sales - and the potential for a further push into the US Government and homeland defense markets - may have Implant positioned to take its business to the next level. Investors have long-waited for some of these catalysts to start playing out as they are, and with the pace of news developments picking up steam, Implant could close out the year with a splash.

Volume is up a bit, but still not to the point where investors may believe that the stock is attracting widespread interest. That means the potential for even more significant moves higher could be in store once this story starts gaining more attention.

Worth keeping an eye on. It's all starting to come together for this company.

Disclosure: I am long IMSC.PK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.