Implant Sciences Corporation (OTCMKTS:IMSC) Accelerates Its Slide
The stock of Implant Sciences Corporation (OTCMKTS:IMSC) has not only been falling down the chart for seven consecutive session but it seems that it is picking up even more downwards momentum. Yesterday the company suffered a correction of 8.8% closing the session at $0.62. The traded volume for the day of over 600 thousand shares is the biggest registered by the ticker for the past seven months.
The chart makes it rather obvious that the annual report filed by IMSC failed to get investors even remotely excited, which may seem rather strange at first. After all the revenues for the fourth quarter of the company’s fiscal year ended June 30 reached close to $5.7 million surpassing the ones for the same period last year by 271%. The annual revenues also showed a significant increase of 51.9% compared to the previous fiscal year. As of June 30 the balance sheet looked like this:
• $1.98 million cash
• $9.4 million total current assets
• $88.2 million total current liabilities
• $12.9 million annual revenues
• $21.5 million net loss
It is clear that IMSC is far from the typical pennystock but despite the growing revenues the company is still facing some serious problems. The net loss has remained massive and it is half a million bigger than the one for the fiscal year ended June 30, 2014. The most glaring red flag, however, is the amount of the liabilities that has increased by $22 million in just a year. In addition, a considerable portion of the debt can be converted into shares making the potential dilution rather scary. During the period covered by the report 9 million shares were issued as a conversion of debt bringing the outstanding shares to 75.1 million.
As of September 15 IMSC owed DMRJ $25 million under three promissory notes, $16.8 million under a revolving line of credit and $12.6 million in accrued interest. The company’s obligations to Montsant were $3.18 million under a promissory note and $1.9 million in accrued interest. Furthermore IMSC has obligations under several promissory notes amounting to $20 million with $798 thousand in accrued interest. Investors should pay particular notice to the amounts owed to Montsant because they can be converted into shares at just $0.08 per share. This is exactly what happened just a couple of days ago, on September 24, when $245,000 of the accrued interest was turned into 3,062,500 shares.
The company is moving forward with its business though and they have been announcing new clients rather regularly for the past several months. In fact, since April international airports in 11 EU countries have chosen IMSC‘s QS-B220 desktop explosives trace detectors with the orders totaling up to 883 units. In a PR issued yesterday IMSC also announced a follow-on order valued at $500 thousand from the Incheon International Airport, the largest airport in South Korea.
The company expects 2016 to be its biggest year even giving a revenue guidance of $40-$45 million. The effects of the massive debt and the fact that the conversions could continue for quite a while thanks to the increased authorized shares – from 50 million to 250 million, must be taken into account though. Do your own due diligence before committing to any trades.
