Shareholders of Implant Sciences Corporation (PINK: IMSC) have been displaying a renewed level of confidence in the technology supplier of systems and sensors for homeland security markets following the comments made by John S. Pistole, Administrator, Transportation Security Administration, before the House Committee on Homeland Security, Subcommittee on Transportation Security on June 2, 2011. In his address Pistole noted that the TSA was continuing to “explore and implement emerging explosive detection methodologies that have been subjected to extensive, rigorous research and testing.” Pistole went on to say the TSA “works with these organizations to determine how to harness these methodologies to gain the maximum explosives detection efficiency in the transportation system.”
For those holding positions in IMSC this is seen as a potential breakthrough for the company as they try to work their way into the U.S. market after making some impressive inroads on the international level. IMSC has been placing a significant emphasis on the U.S. market simply because of their projections which estimate that the global explosives trace detection market will grow to approximately $1 billion by 2014 with 42% of that market in the U.S. So important is the U.S. market that IMSC recently created a specialized Government Marketing and Sales team aimed at serving the needs of domestic homeland security in the U.S.
To date IMSC has very little to speak of in regards to government contracts, reporting in May that the three month period ending March 31, 2011 produced $0 in revenue from government-funded contracts and other services. This represents a $92,000 drop from the same period last year, the result of a number of existing contracts expiring without renewals. It would seem that this failure to gain renewals would be of some concern to shareholders, especially knowing that IMSC’s QS-H150, a hand-held explosives trace detector that uses Ion Mobility Spectrometry (IMS) to rapidly detect and identify trace amounts of a wide variety of military, commercial, improvised, and homemade explosives and has the ability to automatically and continuously self-calibrate, has been designated as Qualified Anti-Terrorism Technology by the U.S. Department of Homeland Security under the Support Anti-terrorism by Fostering Effective Technology Act of 2002 (the SAFETY Act).
What could be easing some of those concerns is IMSC’s relationship with Dr. William McGann, one of the original developers of commercial ion mobility spectrometry technology for explosives trace detection (ETD) at Ion Track Instruments, a company that was later sold to General Electric and then to Safran as part of the GE Homeland Security group divestiture. In mid-April IMSC announced that they had retained the advisory services of McGann and with his “extensive expertise in ETD and his institutional knowledge of the U.S. Transportation Security Administration (TSA)” it is hoped that the company will be able to deploy “more units of its Quantum Sniffer™ H-150 ETD device for the security and protection of Americans,” a device that has sold over 1,300 units worldwide, generating more than $30 million in sales.
Of course McGann will also have the task of pushing IMSC’s newest development, the QS-B220, their bench-top explosives and narcotics trace detector engineered to meet the needs of a wide range of security applications, including the requirements of the U.S. Transportation Security Administration (TSA).The QS-B220 was introduced at the Force Protection Equipment Demonstration in May, an event sponsored by the Department of Defense and Department of Energy. With a number of federal, state and local decision makers having attended the event IMSC had the perfect venue to highlight their security equipment and they are banking on purchase orders.
Capable of detecting narcotics, as well as explosives, the QS-B220 provides more opportunities for IMSC as it expands from security checkpoints at airports and air cargo screening facilities to prisons and border crossings. Upon the launch of their new device IMSC CEO Glenn Bolduc stated, “The QS-B220 is poised to fill a market need for a bench-top ETD that offers the same advantages as our portable QS-H150, as well as some new innovations. We anticipate that the QS-B220 will help drive increasing revenues through our expanding sales channels.” Those expanding sales channels include 32 distributors on six continents. Among the most recent additions to the distributor list are R. Nicholls Distributors, Inc. in Canada and Ormax Technologia en Seguranca in Brazil, both distributors having extensive experience in the sale of security equipment within government and private industry.
While it was the QS-B220 that was just released it was the QS-H150 that was making all the headlines in May as the company announced a number of new international orders including a Chinese order on May 17 that totaled $1.3 million for the use in transportation security in the southern China, another Chinese order on May 18 valued at over $586,000 to supply the QS-H150 for security screening at the 2011 Summer Universiade in Shenzhen, China, and finally on May 19 IMSC announced they had received orders for its QS-H150 portable explosives trace detection (ETD) device which total approximately $700,000 with those orders being delivered into China, Spain, the United Kingdom and Russia, and representing a mixture of new and repeat customers. The QS-H150 will be used in a variety of security applications including airport passenger screening and port security.
In what could be considered a modest statement following the third announcement in three days Sr. Vice President of Sales and Marketing Bruce Bower said, “We are beginning to reap the benefits of our focus on expanding sales, marketing, and distribution channels internationally as we penetrate into new markets. Equally pleasing are the repeat orders from existing customers, proof of the advantages of the Quantum Sniffer.”
Just a few days later IMSC announced they had received two orders totaling $329,000 from China and Saudi Arabia for its Quantum Sniffer™ QS-H150 portable explosives trace detection (ETD) device. The QS-H150 units will be deployed for law enforcement in China and force protection in Saudi Arabia, pushing the value of orders from May 17 to May 24 at roughly $2.9 million.
Without question there is a tremendous need for ETD devices and given the continued unrest in the Middle East along with the growing threat of terrorist attacks on the international targets IMSC should find themselves in a strong position soon. Add to the fact that they could also become a significant player in border crossing patrol and prisons with the introduction of their QS-B220 and they really could find solid growth. What shouldn’t be forgotten by investors is the fact that IMSC owns an intellectual property portfolio that contains seventeen security-related patents and patents pending: ten issued United States patents, five United States patents pending, and two licensed patents.
Investors appear ready to believe that growth is set to explode as shares pushed to a 52-week high of 1.13 on Friday, one day after TSA Administrator John S. Pistole spoke before the House Committee on Homeland Security, Subcommittee on Transportation Security. Shares closed at 1.03 on Friday and have fallen back on Monday, trading around the 0.95 – 0.97 range but that remains above the 50-day moving average of 0.67 and 200-day moving average of 0.52. The price per share should climb significantly higher if IMSC is able to produce some sales of the QS-B220 and they continue to develop the products that they have in their pipeline.
Even if IMSC is unable to tap into the U.S. market they have established an international venue and security isn’t something that only sells in America.