It all looks to be coming together for Implant Sciences (IMSC.PK). With probably the most significant key catalyst in the company's history expected to unfold this month - that being the potential TSA approval of the Quantum Sniffer (QS) B220 benchtop explosive trace detection (ETD) device, which has already completed certification readiness testing and moved on into the final phase of the approval process - Implant is also making strides in its global sales division while taking care of some financial house cleaning, as well.
Both developments bode well for the short and long term future of this company.
On the sales front, Implant announced earlier this week that the company will send 25 QS-H150 handheld explosives trace detectors to an unspecified location in Africa for use in defending critical infrastructure. For investors, some of whom had generally considered previous sales announcements to be the "onesie-twosie" types, an order of 25 units is a nice validation of customer confidence in the technology and a sign that Implant is starting to make significant headway in the African market. Sales progress on the European front was also noted over the past couple of weeks and the rush of new orders may relate to a comment an Implant employee made in an early-summer news report that indicated the QS production lines will soon be "bursting at the seams."
While the sudden burst in new sales is definitely a notable event leading into the expected approval catalyst this month, maybe even more significant for Implant and its investors is the extended credit agreement that the company managed to negotiate with its senior secured lender, DMRJ Group LLC. DMRJ holds over $20 million in Implant debt and some concerns were aired recently over the fact that much of the debt was coming due at the end of this month. Those concerns are now alleviated as DMRJ has 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 before having to worry about debt coming due.
Investors welcomed the news and vote of confidence with open arms as shares traded higher by twenty percent on Wednesday.
In addition to extending the due date of indebtedness, the two sides have 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.
The most immediate of those successes may unfold within weeks. As mentioned above, the QS B220 is currently "undergoing the final independent validation testing for TSA qualification for air cargo screening," according to a recent release by the company, and the expectation is that related news will be on the street by the end of the current month. In regards to the approval process, Implant is currently engaged in a quiet period. As we have seen this and last week, however, the Vice President of Global Sales and Marketing for Implant - and defector from competitor Morpho Detection - Dr. Darryl Jones has not been silent as a slew of new global orders have been secured. Some investors may speculate that the slew of new orders is a sign that customers believe that TSA approval is 'in the bag,' while others may take it as evidence that Implant could survive just as well, even without the expected approval.
Should the TSA approval take place - as many expect it will - then Implant would be positioned to potentially take advantage of the key December 3rd deadline imposed by the TSA stating that all inbound-US air cargo on passenger airliners will be screened for explosive traces. Given that the B220 is currently in the final phases of testing for precisely that indication, it's safe to assume that Implant intends on targeting some key contracts, should the B220 garner the TSA approval, which would also likely have very positive implications on the IMSC share price.
The alleviation of concerns relating to debt coming due at the end of this month combined with the anticipation of the TSA date has IMSC high on the radar right now. Although some may note the potential of short to mid term dilution in relation to the preferred stock, it's unlikely that such an event would take place before the expected near-term catalysts play out. Additionally, IMSC - with an overall market cap of still below $50 million - would still have room to move significantly higher if the approval pans out and government contract follows.
Remember, there are definitely no guarantees in the markets, but developments are unfolding soundly at the current time for Implant Sciences, and this is a story to be watched right now.
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.