Implant Sciences Corporation (PINK:IMSC.PK) is a company that develops scanners to detect explosives and drugs. IMSC stock caught the attention of many traders on Wednesday 16th January, when news was released stating that the TSA had notified the company that their Quantum Sniffer™ product had met the necessary requirements for acceptance into the Air Cargo Screening Technology List (ACSTL). On that day, IMSC traded 3.86 million shares, many times more than it had traded on previous days, and closed up 22%. TSA approval for IMSC was no small feat, given that it was only the third trace detection manufacturer to have achieved it, and the first sole American-owned company.
I believe that IMSC's recent moves could be just the beginning, as there are several strong catalysts that could propel IMSC further upwards:
- The announcement of ACSTL acceptance means it's now possible that the TSA will make an order for a certain number of Quantum Sniffer units at some point
- If not the TSA, we could see Implant Sciences now take orders from major transportation companies such as UPS, FedEX and DHL
- IMSC's proven explosive detection products have an extremely wide application, not just in airport security and transportation. Security for prisons, schools, border crossings, government buildings, sports facilities and more all have demand for IMSC's product. With terrorism and security remaining important issues I cannot foresee a drop in demand for explosive-detection anytime in the near future
- IMSC has numerous patents, and a product that is therefore not easily replicated. They have spent millions on research and development ($1,337,000 was spent on research and development for just the 3 months ended September 30th, 2012)
- The limited number of direct competitors that IMSC does have all have far higher valuations. One of IMSC's competitors is American Science & Engineering, Inc. (NASDAQ:ASEI) which, with a current valuation of well over $500 million, is currently worth roughly 10 times as much as IMSC. Of course, at this valuation ASEI is currently in far better shape than IMSC (its financials are far stronger and they are profitable) but it's easy to see how IMSC has enormous room for growth and a far higher valuation in future. A couple of IMSC's other competitors include FLIR Systems, Inc. (NASDAQ:FLIR) and L-3 Communications Holdings, Inc. (NYSE:LLL) which have valuations in the billions of dollars
- IMSC is currently trading on the Pink Sheets, and I believe they are aiming to be listed on the NASDAQ. If and when IMSC does get listed on the NASDAQ, it's likely it'll gain more attention among traders and investors
- In the best case scenario, a buy-out of IMSC from one of its larger competitors is certainly possible, given IMSC's unique technology and ACSTL acceptance; if that were to happen investors could see very large returns
Given all the above, many traders and speculators are now long on IMSC. In particular, a very profitable trader by the online handle of "superman", who has a very strong history of buying low-float stocks shortly before they spike upwards, is extremely bullish on IMSC. "Superman" runs a premium stock alert service where he alerts potential low-float winners (presumably IMSC was alerted to members early on) and has publicly announced he is confident IMSC will rise further, as we can see from this recent tweet:
My research so far has led me to believe that there is a very strong chance of IMSC spiking further and that buying IMSC in the low $1's represents a good risk/reward scenario. However, I do not hold a position in the stock myself and do not plan on initiating any position in the near future due to IMSC's worrying financials. On September 30th 2012, Implant Sciences Corporation reported total assets of $6,579,000, total liabilities of $42,182,000, revenues of $1,415,000 for the three months ended September 30th, and a net loss of $12,748,000 for the three months ended September 30th. Cash reserves are extremely limited (though it's possible IMSC is now in a better position since its latest 10Q was published) and there is a risk that IMSC will have trouble continuing to finance its operation if its revenues do not improve shortly. Anyone taking a position in IMSC must be aware of the risk involved and conduct their own due-diligence.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.