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As we near the end of August, it becomes a particularly exciting time to be an investor in Implant Sciences (OTCQB:IMSC), an emerging safety, security, and defense company whose explosive trace detection (ETD) products have now been deployed across the world with increasing utility. By month's end, the Transportation Security Administration (TSA) is expected to rule on Implant's proprietary handheld ETD system, the Quantum Sniffer, which could open doors for the company to sell its products to large entities in both the private and public sector (who are otherwise indispensable).

It's at that point that the pieces of a long-coming puzzle will suddenly fit together -- beginning with orders for domestic airports, train stations, and maybe even distribution centers run by couriers like FedEx (NYSE:FDX) or UPS (NYSE:UPS). This, in itself, is far nearer realization than most might think, as I looked at how a piece of legislation requiring 100% of global air cargo entering the United States after Dec. 3, 2012, to be screened would create a significant market opportunity for ETD technologies here. This -- and another catalyst expected in late August to early September -- could continue to reward investors' patience well into 2013.

Implant Sciences has gained notable traction in the People's Republic of China recently with major market exposure, singularly in event-based purchases and through recurring transactions with the government. In 2008, the Chinese granted IMSC an opportunity to demonstrate the efficacy of its Quantum Sniffer technology at the Beijing Olympic games. The Beijing Police purchased six of the company's benchtop ETD devices for security screening along with a small arsenal of previously purchased handheld devices. The systems performed so well that the Chinese government has become a major client of Implant Sciences since the games, as different facets of the governing body make recurring purchases. The PRC extended orders into 2010 with an $850,000 buy that brought the total number of Quantum Sniffer devices deployed in China to 650, followed shortly there after by orders specifically for use in the Beijing subway, one of the largest public transportation systems in the world. The China Railway Administration is a long-time proponent of these ETD devices (since 2007) and continues, along with local law enforcement, to implement the technology in security screening and bomb detection.

China's expanding aviation infrastructure and industry represent an enormous market for explosive detection equipment. The International Trade Administration reports that global airline infrastructure is growing at astonishing rates, and that China alone may build 50 airports in the next decade to accommodate its burgeoning transportation demand. Post-recession air travel rebounded with a 6% passenger increase in 2010, and a 25% increase in cargo traffic, which will soon require screening as well. But alongside the growing industry come tighter security and safety expectations. The airport security equipment market was projected to grow to $137 billion in 2010, with particular emphasis on explosive detection. China's 175 civil airports have already begun implementing the technology -- many include Implant Science's systems -- and more orders are expected. An official with the Civil Aviation Administration of China said last April that the country has plans to build an additional 56 airports by 2016.

I recently came across this article (and there are many like it) that details the dangers of existing security screening devices. People across the country question both the privacy violations and the health risks of existing screening technology; every week a new story reveals the inadequacies of the TSA's techniques. An article in the Huffington Post explains not only the privacy implications of full-body scans, but also cancer and radiation problems. Former Miss USA Susie Castillo even joined in the outrage last year after opting out of an X-ray screener in favor of a pat down. With mounting pressure from the public, the TSA may be forced to shift technologies and methods. Implant Sciences' is an obvious choice in the search for a safer, swifter alternative. Unlike products from American Science and Engineering (NASDAQ:ASEI) and Rapiscan (NASDAQ:OSIS), Implant's technology lacks any form of radiation; it is the only explosive detection device that utilizes zero radioactive material. While the Quantum Sniffer is still in the TSA approval process -- for which analysts expect a decision this month -- its approval may be the final nod for the TSA to begin implementing safer screening methods.

Implant's next catalyst arrives under the guise of uncertainty. In September, the company's largest debt fixture will mature. The DMRJ Group holds roughly $25 million -- all -- of Implant Sciences' credit facility. The group already expresses full faith in IMSC, having increased its credit limit last year and extended its maturity date for the second time in February. With significant weight behind the company and improving revenue, DMRJ will most likely convert the debt into common shares at a discount, or simply extend the maturity date; the group has nothing to gain by forcing immediate rectification. DMRJ's parent company, Platinum Partners, was one of the best-performing mid-sized funds through the economic recession, with annualized returns of 20% since inception in 2003. Platinum's President, Uri Landesman, recently told Fox Business that while he is bearish on the broader market, he sees opportunity in specific micro-cap equities, particularly in "software and security."

TSA approval is the last barrier to entry for Implant Sciences and sales generated post-approval will ratchet quickly upwards. If the company can capture even a fraction of the $137 billion-plus aviation security market, it will be a significant windfall for IMSC and shareholders alike. Taser International (NASDAQ:TASR), a developer of self-defense products with a similar business model to IMSC, trades at 3 times sales revenues; other comparable small-cap in the SS&D sector trade between 3 times and 5 times last 12 months' sales. If, for example, Implant Sciences grows to generate $50 million in sales in the next 12-24 months the company could swiftly jump to a $150 million to $200 million valuation, depending on growth trajectory. Taser, for example, generates roughly $100 million in sales and is valued at a 3 times sales multiple, arguably on the lower end because an argument can be made that the company has "peaked." TSA approval will inevitably promote sales for Implant Sciences on a global scale, which could prove my estimate conservative. However, with these facts in mind 2012 may be the final year of uncertainty for Implant Sciences as two major catalysts approach and pass in late August and into September.

Source: Implant Sciences Approaches August-September Catalysts: Final Hurdles?