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tcm7: You are probably aware that I alerted the board 7+ months ago that Implant was in a downward spiral and perhaps heading for bankruptcy. Have not been involved much on this board since my warning, particularly over the past few months. However, though I could see the freight training heading toward us, and I belived and stated that I thought management was honest and simply dealt a bad hand (Platium's bum deal) I checked the board today and saw mention of bonuses to management related to the CIC and the achievement of management's goals. Have I read this right? Has the BK court actually paid management for their "achievements" and their work involving change in control? Like to have details if this has happened, such as filing, articles. I'm NOT a fan. Thanks to all.
Sorry. I rarely visit the board these days as I accept the fact our money is gone and that we'll be fortunate to walk away with 12 cents a share. Like everyone, I am disappointed. Like everyone, I am upset about the CIC. Management should suffer along with retail investors, though I am sure management had counted on their options to make them rich. They won't, so they aren't without loss.
But I remain amazed at those on this board who can't accept the fact that IMSC was/is worth only $117.5. I posted in June that the company would be lucky to get 2x FY16 revenue, which I estimated at $50 million. In fact, if $50 million was correct, the company sold for a slight premium to what I had estimated, which was $100 million.
I'm not a investment genius. It wasn't rocket science brainpower that enabled me to hit close to the right number. It was logic. Go look at my post, which is a sticky. Here's the jist of my post:
Smiths bought Morpho for 2x revenue. Morpho had annual revenue of approximately $350 million, low or no debt, had positive cash flow, and had products – more than one – that complemented Smiths. American Science and Engineering, right down the road from Implant, was sold just last month to OSI Systems for $269 million, approximately 2.5x revenue. ASEI was struggling, but it was cash flow positive, had no onerous debt and even paid a dividend of 5.4 percent.
--- Companies sell for 1x to 2 x revenue more often than not, unless they are a wildly innovate biotech or technology start up in an industry that generates revenue in the billions of dollars, and much of those purchases are paid in stock, not cash.
Why would any company pay even 2x Implant revenue when the company loses large sums every quarter, has dwindling margins and doesn’t even hint at its cash flow situation? Yes, it’s generating much more revenue than in the past, but it still bleeds money. The company lost almost $1 million in Q3. The average unit sales price of the B-220 decreased 38.6 percent. Gross margin was only 29.6 percent, and declining.
It comes as NO surprise that no one but L3 publicly bid for the company's assets. Those who thought a white knight would gallop in at the last second with a higher -- substantially higher -- bid was, as is wont on this board, fantasizing. McGann announced last December the company was for sale. In other words, bidders had a full year to digest Implant's numbers, what the future looked like, how its assets compared to the competition, etc. And only L3 raised its hand.
Now it would be wonderful if the equity committee could somehow pull a rabbit out of the hat and pin "criminal enterprise" on Platinum and its relationship with IMSC, that would be something. But I'm not holding my breathe.
Hardly boring. Opportunity to sell more systems at a loss. But create buzz. I can read the board's reaction: "New customer, more systems, NATO ally, lots of terrorism -- the 10 companies desperate to acquire a loser will be upping their offers. We're heading to the moon, and I'm loading up!!" It will get back to 52 cents, as the touts say, then back to the 20s. The shorts will make out, the True Believers will once again, as they have today, as they did last week, lose their shirts. Behold, a year ago IMSC was at 80+ cents a share. Today it is less than half that. And the True Believers have held on all the way down, losing half their capital, half their savings. And still they hold on. As suggested, Implant is a stock to trade, not to hold. The ONLY people to have made money in Implant for the past many years are shorts. They take advantage of the hype, which excites the True Believers, which drives the stock up temporarily, then, bang, money lost. Again.
Let's say you are correct and Zapata has truly revolutionary technology, technology that holds the key to future military, homeland security, medical and other applications. Let's also say you, Zeynoc, are CEO of Zapata. Why -- why in the world -- would you sell your company to a loser like Implant Sciences, which has proved over thirty (30) years that it has no idea how to make money. Legitimate question, right? Wouldn't you, Mr. Zeynoc, CEO of legendary Zapata Industries, shop your company to Lockheed, Rockwell, Honeywell, L3? As opposed to selling out for a ridiculously paltry sum to a loser in an entirely different industry -- 60 percent of the loser's stock and $15 million. It just doesn't pass the smell test.
Super coverage in Uganda too, but unfortunately I can't post the link. Technical issues. Still, we've got a lot going for us. There are ten (10) companies engaged in a bidding war that, since it's entering its ninth (9th) month, should more accurately be called a frenzy. Also to our advantage, with all the media attention we're getting, especially of Franky himself doing tricks on his board, other companies or governments will see the value in a classically combined Implant Sciences/Zapata Explosive Trace Detection/jet ski company and could very well make a very rich offer after the nuptials, making each one of us shareholders of ZAP, the proposed New York Stock Exchange symbol for the combined company, very wealthy. Ze only fly in ze ointment is, the French government could object to a well-known and powerful American security company, Implant Sciences, combining with France's best known jet ski company, with obvious military applications. The stock of the acquiring company naturally has reflected this concern, (known in the hallowed halls of Wilmington as "Ze French Disconnection), with the stock price of IMSC plummeting disconcertingly on the good news from 52 cents to 32 cents in 10 days. Crazy things happen when you've got a tiger by the tail! Even when it's the real deal!
I've been saying pretty much the same for more than a month. The company is a loser, unprofitable in the extreme, with sketchy "partners" who bled the company dry. The problem is, IMSC isn't in a position to play hardball. Platinum has the ball, bat, gloves and even the dam bases. What kind of leverage do retail shareholders -- or any other shareholders -- have? At the end of the inning, Platinum is in charge. 19 cents here we come. If lucky, because as you say, bankruptcy is a real possibility.
Yes, I think 19 cent a share is the best shareholders can do, assuming DMRJ at the end of October doesn't simply let the company go bankrupt, and as the creditor, take the IP and get what it can for it. It's what they've done, often. In any event, come Oct. 30 we'll be right back where we were on June 30, on the edge of the precipice, wondering where we are, what we're doing, what's happening. Someone mentioned, we have a tiger by the tail. No, the more accurate metaphor is, a tiger has US by the tail.
Shareholders have nothing to say, as was evidence in the filibuster McGann and Liscouski put on yesterday. Zapata may, many years from now, prove to be a visionary like the Wright Brothers. No matter, Zapata's vision is many, many years and many, many millions of dollars in the future. Not now. Now is the time of the tiger.
I agree on the price, just not the timing. $900 milllion in six months, not five years. Remember, ImZap not only has Seth but Platinum Partners as well, two visionary leaders well known for their Boy Scout image and ability to make money for ... hmmm ... well, themselves, but still...
You do understand that these videos are photoshopped fabrications, right? Created by a graphic designer who did a nice job of simulation. They aren't real. They aren't even prototypes. Perhaps in five to 10 years, they could maybe hopefully be real, and maybe hopefully be manufactured by Zapata. Time will tell. Do you have the time?
Not bad for a "high tech entertainment company that knows how to make a jet hover platform safer than a helicopter and later a plane." Really? You've jumped to THAT conclusion, based on what? Zapata's website -- almost all about racing, the business it knows -- says its "proof of concept" will, they plan and hope, result in a product in 2018. That's 1 1/2 to 2 1/2 years from now. Rots of Ruck!
Load up, man, load up!
If, as you say, "they (meaning management) are clueless," why would you, or anyone, maintain your investment? That's an honest question. If management can't be trusted to be effective and to work for an increase in shareholder value -- and Implant has PROVED the opposite since 2008 no matter who was at the helm --doesn't it make sense to ask if there are better places to put our hard earned money? I think management is honest, but either incompetent or simply inherited a losing hand and is now acting out of desperation. Management may not be incompetent; we'll never know how they would respond if previous management hadn't made that onerous deal with the devil (Platinum) in 2008, before most of present management came on board. Platinum bled Implant Sciences dry. Like it bleeds most of its clients. Now it apparently is under investigation for being a Ponzi scheme, according to today's Wall Street Journal. Paying off older investors with money from new investors, Madoff like. Who could imagine such a thing from a company based in the Cayman Islands!? Whether Implant management is incompetent or just unlucky, it does not represent a reasonable investment opportunity.
tcm7, I quote, verbatim, from the 8K filed late last week: "in connection with the Zapata Acquisition, the Company agreed, subject to the approval of its stockholders, to (i) re-domesticate from Massachusetts to Delaware and (ii) amend its Articles of Organization to increase its authorized share capital to 650,000,000 shares of Common Stock..."
Platinum is in control and continues to dilute existing shareholders! I quote another paragraph in the 8K:
"Issuance of Warrant
In connection with the loan extensions described above, on July 20, 2016, the Company issued to DMRJ a warrant (the “Warrant”) to purchase up to 50,657,894 shares of Common Stock at an exercise price of no lower than $0.19 per share with a five-year term, first exercisable on October 31, 2016."
What is it about dilution you, and others, don't understand. There will be only one (1) winner when this all shakes out, and it will be Platinum Partners, or at least those partners who aren't in jail. We've been had. I am not a johnny come lately to IMSC. AS you perhaps know, I was an investor for many years. I've come to my senses -- see my post of June 25, exactly a month ago today, where I explained what was happening in terms of valuation, and what it meant to the share price. Whether I was or wasn't short is irrelevant in terms of you, and others, taking beneficial action. If you believe Platinum Partners has your best interests at heart, and you believe a jet ski company in France can produce defense related products by 2018, the target year for moving its "proof of concept" into a real product, then I understand holding on to your shares. For me, dilution and that 19 cent a share number tell me everything I want to know.
Ted, clearly you are beginning to see the light, despite your follow up "hopeful" post of the evening. Your first post -- one based on actual facts -- tells the story of how the real world works. You are correct, there was no "panic" selling. Those who sold made a rational decision to put their money elsewhere, maybe under the mattress, maybe in a real company, but not a company that is dramatically diluting existing shareholders to the tune of authorizing a huge jump to 650 million shares, bought a jet ski sports and recreation company, can't sell its only real business, ETD, for what it considers an appropriate price after eight months of trying, and has signed up once again with the financiers whose usurious rate of interest basically put the company in the hole it is trying to dig its way out of.
The statements filed with the state of Massachusetts, the PR release on buying Zapata, the 8K, the very brief Q&A after the news broke were signals that the company is in desperate shape, if one needed convincing after looking at the balance sheet, the debt, the years of losses, the reasonable price the company could sell itself for (2x to 1x sales, or less). It is laughable that certain posters on this board couldn't, allegedly, understand why shareholders were heading for the exits. The better question is, what took them so long. Since I agree with your realistic view, and believe things will get very much worse, let me comment on your "Hopes."
1. The company could sell, and maybe, just maybe, for $135 million, as you suggest is possible, but it isn't probable.And whatever it sells for, how much is left for you and other existing shareholders? When you've got 650 million mouths to feed, a little doesn't go very far.
2. You're on to something here. Platinum does not care one bit about retail shareholders. It never has, it never will. It attracts investors because it is brilliant in the choices of what to finance, brilliant in hedging its risks. Platinum investors get rich. The shareholders in companies it backs, not so much. Read the press!
3. Implant has been for sale for eight months, maybe longer. Implant is an uncomplicated company. There is no bidding "war." Are there companies (three according to someone NOT in the know) interested in IMSC. No doubt. I must have tried a hundred times to get people to focus on valuation, not the sales process itself. It doesn't matter if there are a dozen tire kickers. A failed company -- and that's what Implant is -- does not demand a high valuation. A commodity company, which management termed IMSC just the other day, even less. If there were a half way decent offer on the table, Implant and/or Platinum would have taken it. The company can't delay. Literally every day its debt increases. Platinum can't delay. It needs the cash because a judge says so, the FBI is in its offices and one of its owners has been indicted for bribery.
4. Why was credit extended through Oct., instead of quarter end, September 30? I don't know, but it's doubtful that new contracts are the reason. Remember, all Implant's contracts just multiply losses. There's no such thing as profits in Implant's alternate universe.
5. See 4.
6. Dividends?! For 650 million shareholders? You know better.
7. Again, you are correct. Zapata will own 60 percent of the 650 million authorized shares if the deal goes through, plus $15 million in cash. Existing shareholders? We get the bag.
8. The market for flyboards may be large. It may be small. No one knows. If the market is large, it will attract larger, richer competitors. If it is small, who cares. But remember this: Zapata claims only "proof of concept." It does not have a defense-related product. It says on its website that it is shooting for a product in 2018. That's 2018, not today. And the $15 million it gets from Implant and/or Platinum is hardly enough to fund such a development. Zapata claims it is profitable. If it is, it's profitable because of its sports and recreation products. It has no other products. If I were running Zapata, I'd continue putting resources into the product line that generates my profits and keeps the doors open, and a little into R&D for the prospective "defense" products.
9. Management and PP may see untapped value in Zapata's "proof of concept." They must, but who knows if it's warranted? If management and PP couldn't make a success of Implant, why get excited about a flyer -- literally and figuratively -- that may or may not become real. It's fun to speculate, and with creative videos, as one poster on the board put it, "the buzz will be huge" but that's all in the relatively distant future. The videos that are making the Youtube rounds today are simulations. There is no medical flyboard, there is no warfare flyboard. A creative gamer obviously worked with Zapata and photoshopped, for want of a better term, the Zapata non-existent "products" into film sets.
10. Uplift to NASDQ. I believe that a basic requirement is to have the stock price at $2 or above. A reverse split appears more likely than Implant/product-less Zapata and its 650 million shares getting to $2. It's also an expensive process.I don't think whatever the new company is called will be in a hurry to spend its sparse capital on that, rather than turning a "proof of concept' into a real product. At least I would hope so.
11. Perhaps Platinum's presence will fade, but I can see the new company needing lots more capital, and PP coming to the "rescue." That's what they do.
12. I can explain the elimination -- Platinum believes that there is no way Implant or whatever the new company is called can reach a value of more than a buck a share, especially with the massive dilution. So why leave it in there. It's irrelevant. That's my best take anyway. Platinum does not leave money on the table if it thinks it can capture it.
Ted, you made a strong case in your first post detailing the reasons people have bailed out of IMSC for rational reasons. You and Zeynoc seem like good guys, though only one of you has seen the light so far. A principle of smart investing is: Preserve your capital. Another is, don't fight the trend. Implant's trend has for two years been inexorably down, with an occasional dead cat bounce. Mr. Market informs us every second what a company is worth. Mr. Market tells us that Implant Sciences is going lower. Under these dire circumstances, I think of a cartoon I once saw. It was a doctor talking to a sick patient. The caption read: "Let me put it this way, if you were a dog, you'd be shot." If Implant were a dog, it would be shot.
To see where the stock price is going from this point, I suggest that boarders go to the stickies and read my contribution of June 25, which basically called this disaster. I make the suggestion not to pat myself on the back, because I really do feel bad for all the folks who have lost a lot of money over the past few days (again, no popcorn for me; it's all for pumper stumper). I make the suggestion because this is not the end of the story; those who continue to hang on (and I listed rationalizations for not selling near the end of the piece) will lose more money, because the downside, including possible bankruptcy, is more likely than a return to the 50 cent level. There was never a chance that Implant was going to sell for $550 million. That was pure fantasy, pure wishful thinking. And I laid out the reasons why it was non=sensical. Using numbers and logic, I laid out the case for the company going for 2x revenue at best ($100 million), but calculated -- again with logic, not hope -- that it would sell for 1x revenue or lower. So as someone who had it figured out, let me caution those who are hanging on, the stock price is going lower. Much lower (and to anticipate the accusation that it's the shorts driving the stock down, anyone who tried to short it at this point probably couldn't, and certainly shouldn't. The shorts have already made most of their money.) Anyway, here's the logic as to why it is going lower:
Management is confused, demoralized and in chaos: Ask yourself the basic question: IS the company --the ETD company we invested in -- going to be sold, or is it not? Management has no idea. On the one hand it suggested it was talking to possible buyers, meaning a willingness to sell its ETD valuables such as vortex, the refreshed handheld that doesn't exist, bench, in-line and all the other assets (words really) that have hypnotized the true believers . On the other hand management, in its press release, suggested that there was synergy between Implant's ETD assets and Zapata. Which is it? Management has thrown a Hail Mary, pure and simple, and -- like the last holdouts on this board -- HOPE it works out. Does one want to stay invested in a company whose management evidently doesn't know what it is doing. Confused about what to do with its only asset? Management that obviously is running away from communicating with shareholders. Who can blame them from running from their responsibilities-- they have no idea what to tell us. It hasn't filed the 8K it promised. There is no shareholder conference call in the works apparently. They know they have a train wreck on their hands and don't want to deal with a shareholder group that is besides itself in anger and their own confusion.
IMSC can't be sold at a price the L3s of the world will pay. IMSC is allegedly talking to "a number" of companies. Well, "1" is a number. In any case, the number of prospective buyers is not as relevant as the cold hard fact that the company has been for sale since the beginning of the strategic review Dec 3 (or before) and has not been sold and doesn't appear to be close to being sold. Why is that, in spite of vortexes, in-lines, bench tops and all the other mostly to comes it has on offer? Because a prospective buyer with savvy, sophisticated M&A departments, puts very limited value in the company. It's a grossly money losing, deeply in debt company with perhaps marginally better technology in a niche market that is dwarfed by the much larger defense business of a potential acquirer. Face it! It's not worth much! Those who maintain there is a bidding war, and at the end of a couple of months we'll get that $1.50 a share, $3, or whatever remain in fantasy land. The nine month auction is over. It now remains to pick up the pieces. Or, buy a jet ski company. In France Led by a guy named WHAT/?! Yup, a jet ski company that has no experience in military or security sales and maybe put an ETD sensor on the end of the proof of concept product we may eventually manufacture. A sensor on a concept! But maybe we sell the ETD sensor, so we don't have anything to put on the end of the jet ski we may purchase. This is the definition of insanity, doing (or believing in) the same thing over and over and getting the same disastrous results.
Here's where the logic of this fiasco is leading us. Platinum Partners has grossly diluted the company with its 50.6 million new 19 cent options, and its 50 million shares for giving Implant another 2 1/2 months for the privilege of maybe purchasing Zapata. Given they control the company, I see three possible scenarios. One, Platinum partners will sell the company for what it can get, which isn't much, and whatever is left over will go into its pockets, not retail shareholders. Two, Platinum will, on Oct. 31, once again roll over the debt, and for the privilege give itself 50 million options at nine cents, or Platinum will sim[ply let the company go bankrupt and then will sell the assets for a price that they hope will cover the debt owed them.. That's what Platinum does. It enriches itself. That its business. There is no surprising upside for retail investors. It's going to get worse.
I could go on sharing more logic why this is and will continue to end badly, but I'll end here. If you haven't gotten the picture, there's no hope. I just can't imagine being stranded and needing a medical evacuation and an Implant overboard comes rescue me. Just can't. But if you can, and if you can imagine the rescue taking place soon, then hang on to the stock. For me, I deal in logic, not in what might be. As Bill Parcles used to say, I go by what I see, not by what I hear. I see a train wreck. What do you see?
I wanted to wait a bit to jump in here, I honestly feel terrible for board participants who have lost a lot of money today, and probably more tomorrow. I have not broken out the popcorn, because I know that so many hopes and dreams were riding on the success of IMSC. I was there once. It's a case of falling in love with a stock, a story, a story stock. A small company overcoming the odds developing great technology and beating the global big guys. But there was just too much to overcome: the competition has adequate technology too, with established customers, and deeper pockets; they have been able to weather a price war, a war that has seen IMSC go into greater debt. The company has never been profitable, and would never be, given how ingrained and fundamental the debt is. The hope was a big company would pay a premium for the technology. But as I pointed out many times, that was simply not in the cards. I'm sure there were companies that would like to acquire Implant's technology, but after nine months of a strategic review, which no doubt entailed talking to all the big boys, the big boys , sophisticated M&A guys as they are, were not about to open their wallets.. The technology couldn't cancel out the debt, the eternal losses, etc. Implant, like people on the board, wanted too much, and the big boys walked. And even if the company were sold, not for $25 million, but say something short of $100 million, DMRJ and others that are part of Platinum would have kept virtually all the remaining cash. When you swim with sharks, expect to be bitten. In this case, consumed whole. The future? I can't wait to read the 8K. I think we'll discover an even messier situation than we have today. IMSC has no experience in hovercrafts, or water skis. Zapata has no experience dealing with the U> S> military. It does';t even have a military product, just a hope its "proof of concept" can lead to one. Some on the board are still spinning this as a positive. They've been spinning everything as a positive. Wake up. Again, I am sorry. My perspective was honest;y stated over the past six months or so, and I feel bad they weren't heeded.
I can, I can! American Science & Engineering (ASEI) is a company literally just down the road from IMSC, In Billerica, Ma, in the very same industry, security, though with advanced x-ray technology focused more on cargo. It's a perfect example of what one could reasonably expect in a buy out. ASEI was acquired by OSI Systems in June for $269 million, all cash, a premium of 25 percent, after a "strategic review" of its options. . You can go to the website and look at the press releases for details. Since the company is in the same industry and is being acquired by a company similar in many ways to L3 (assuming that's IMSC's suitor), you could on first glance extrapolate a 25 percent increase on Implant's present stock price of 48 cents and you'll put 60 cents in your pocket when and if the company is sold. But hold on! We're doing due diligence, so let's look a little closer. ASEI's sales in FY16 were $103 million, meaning the $269 million it sold for was somewhat more than 2x revenue. If Implant is sold for the same ratio, Implant would sell for around $120 million. But hold on! ASEI lost a bit of money in FY16, a total of $3.2 million, compared to a profit a year ago. That FY16 loss is not quite equal to IMSC's loss in Q2, $3.3 million, and much less than IMSC's loss of $4 million in Q4. ASEI was cash flow positive to the tune of $6.8 million; IMSC? Not reported. ASEI had little debt to speak of. Implant owes Platinum $60 or $80 million, which must be paid out first. ASEI had an excellent portfolio of patents! (Fancy that!) Great customer list, profits most years. A real company. THIS is the company you want to look to to estimate what IMSC will bring. Not that Morpho Detection also isn't a bad comparison, bought by Smiths for 2x revenue, or in IMSC terms, $100 million. Minus debt of course. So subtract $60 million or $80 million that goes to Platinum's companies, including DMRJ and, I believe, Monstant, and you've got what's left over for others, say, $60 million give or take a million. THAT's your payday. That's honest, practical due diligence, not wishful thinking. Bottom line, you can expect about 2x revenue or a bit more in any transaction in the lower echelons of the security industry. Don't look at big pharma or other industries, as they don't apply. Apples to bread. Interesting note: ASEI's Chairman of the Board, when commenting on the sale, thanked everyone, management and all employees, top to bottom, for their hard work. A victory dance of sorts. Good luck all IMSC longs. This could be the BUY signal you've been waiting for all you life.
Implant has patents. Might Smiths and Morpho have patents too? And other companies in the industry, such as Block MEMS mentioned a few posts ago? Yes, Block MEMS might not be TSA certified, but a $10 million development contract from the U. S. government is a nice beginning. Implant didn't get it and inquiring minds wonder why. And as to TSA certification, Smiths has it too. They simply didn't want to give away their systems at cut rate prices like Implant. And to beat a dead horse, Morpho is ECAC certified and selling as strongly as Implant, maybe more so, in Europe.. AS to the statement that the market Implant competes in is valued at many billions annually, I quote McGann's statement on the Q2 conference call: "We currently see the total available market today at around $850 million annually....this consists of products, service, consumables, R&D funding, really a roll up of the entire available market as we see it.." He went on to say it is growing at 12 percent a year. So it's an OK market, not a huge market. A market where it is difficult to make money because competitors are willing to radically cut their prices. Competitors who sell a wide range of products, not just one or two. I also wonder that since it's an $850 million market and Implant only has recently captured sales of $50 million, who got the rest? Will Implant really add tremendous value to an acquirer, or just a little bit? And how would a potential acquirer put a valuation on whatever Implant adds? A lot, or just a little bit?
There are other incantations we hear frequently, such as "in line, vortex and new hand-held." These are promises, not reality. Let's take the new hand-held for an example. Again quoting from the Q2 conference call, McGann said "We are going to complete our next handheld refresh in this fiscal year (FY16) and launch it for a robust year next year and we have plans to do so." So we're looking out a ways on that product reaching the market, and your guess is as good as mine as to exactly when that will be. Importantly, McGann went on to say "Our handheld largely will play to the 2000 unit installed base..." How much money can be made from what is clearly a small base?
Look, Implant Sciences is a company desperately seeking to stay alive. I know board members don't even want to hear the word bankruptcy, never mind contemplate it. They say the government wouldn't allow it, because of the TSA contract. The government WOULD allow it, because the intellectual property and other assets would not go away. Platinum would simply sell them (that's what they do) to someone and the TSA would get its systems. It would be a hiccup, that's it. If there is no bankruptcy, there will probably be a sale. A sale of a small, debt laden, money-losing company in a relatively small market niche with cut throat competitors who can profit from a range of other products, where it is virtually impossible to make a profit. How much is THAT worth?
I am obviously negative on Implant stock. My motivation for being on the board expressing my doubts relates to the fact that previously I was a large, long-term investor and have been exchanging messages with various members here for years. I really would like to save them from further losses, as the stock, drip by drip, drops further. So let me summarize my concerns:
1. A critical premise for longs here is the belief that Implant has the only certified ETD system. As I've said many times, it is not. Smiths system was certified by the TSA and rated exactly the same as the B220, "excellent." (Morpho's system was rated "good" which wasn't good enough to compete). Implant won the TSA contract over Smiths based on factors beyond technology and certification.
2. Another critical premise is that Implant, having been the first to earn ECAC certification, is cleaning up in Europe. Implant has won many tenders, but both Smiths and Morpho's system (non-rad introduced last year) also have been ECAC certified and selling well themselves. Morpho in particular is winning many tenders, including for Germany, Italy and Spain among others, and claims it has sold more ECAC systems than any other company. True or not, the point is, IMSC does not have the market to itself; it has fierce competitors who have deeper pockets and can afford the price war that is raging at the moment.
3. Another premise is, the government, in the form of the TSA, wouldn't let Implant go bankrupt because the TSA has bought and is installing Implant systems nation wide. I am not suggesting that Implant will go bankrupt, though it could. But if it did, it is highly unlikely it would go out of business. Many companies filing for bankruptcy just reorganize, wiping out debt and the stock held by common shareholders, and the next day begin functioning as a lighter entity. This happens frequently, so the TSA is not worrying about Implant's future as a going concern. It's probably not the best example, but when GM filed for bankruptcy in 2009, it was back in business the next month. Unfortunately, bond holders, shareholders, pensioners and holders of warranties covering cars bought previously were not so lucky. They got wiped out.
4. I'm concerned about Platinum Partners and where its interests lie in a perilous moment for them. In truth, I've always been concerned about a financier based in the Cayman Island! No matter, it's present day legal difficulties and its apparent need to raise capital have me worried. Message participant 611 reported that Platinum's second largest holding, Echo Theraputics, plunged yesterday, just heightening the concern. Platinum controls the company, owns the company, and as it unwinds a good portion of its holdings, and potential buyers understand its vulnerability, is it in a position to make a favorable deal, or forced to hold a fire sale? As a corollary to this concern, it's clear that IMSC management has little or no leverage in any negotiations taking place. An opinion, yes, but no leverage.
5. I wonder why, if Implant and its technology is so attractive, it wasn't bought out previously, or couldn't refinance. It was sitting there, beginning to generate more revenue, with technology as good as or, as it claimed, better than the competition's. We're now going into the eighth month of a review of "strategic alternatives," racking up enormous legal and investment banking fees, and it's as quiet as a graveyard. Yet many on the board interpret every rustling leaf as good news. I don't get it.
Yes I did say I suspect that Platinum and BAM are essentially the same, though they may have been set up of as different legal entities. You can follow the same trail I did to come to this conclusion, and I urge you to do so, as some on this board think I make things up. Start by Googling BAM Administrative Services. You will find a link to an 8K filing by Pacific Energy Co., or PEDVCO. BAM is one of the financiers of PEDVCO. So too is a company called RJ Credit LLC. RJ Credit's address is 250 W. 55th St., 14th floor, NY, NY 10019. Platinum Partners' address is 250 W. 55th St., 14th floor, NY, NY 10019. So I deduced that RJ Credit and Platinum are owned/controlled by the same people. While BAM's address in Manhattan is on 6th Avenue, it is close, sharing the same zip code. Maybe BAM is separate and only Platinum and RJ Credit are essentially the same, but for me, it's too much of a coincidence that all these companies providing credit to small, under-capitalized, high risk firms are different. It is normal for hedge funds investing in risky companies to establish different entities to protect themselves. It's not illegal. But if one believes that the "group of (unamed) institutional investors" going by BAM Administrative Services, LLC, is essentially the same as DMRJ (which is the same as Platinum) it is not surprising that DMRJ gave BAM the right to Implant's intellectual property in the refinancing. There is no fundamental distinction between DMRJ, BAM and Platinum Partnews (and RJ Credit for that matter) I also encourage you to Google Platinum Partners and read the article about Platinum being hot. "maybe too hot." It's one of the first articles to come up. I believe someone on the board linked or copied the article, which basically said that Platinum's smart, experienced people are well known for protecting their high risk loans by tying up a firm's IP and doing what it chooses to get its value out, while shareholders get nothing. But please, don't take my word for it, read the article.
We might. Then again, we might not. WE might get something Tuesday. Then again, we might not. Wednesday's a possibility. Then again, Thursday looks like a possibility. Friday? Who's to say that's not the day. Or that it may not be the day. It may be good news. Then again it may be bad news.
OK, thanks. I don't know laser technology, but still..?
That's great. But it still begs the question, why didn't the Air Force ask the universe's leading ETD company, with the father of ETD at the helm, to do so? I don't know; as I said, it's simply a red flag.
Block MEMS (a weird name for sure) not only "wants" to compete with Implant, it IS (present tense) competing with Implant. It's won a contract to develop long range ETD worth $9.8, or almost what Implant makes in a quarter from multiple contracts. Wonder why the Air Force didn't choose "the leading ETD company, with the best technology" to develop the system. I don't know, and there may be good reasons, but Implant is very well known in Homeland Security circles, so I raise this as a red flag, nothing more.
And as to Implant being the only independent ETD company, check out this article in yesterday's Government Security News Daily Homeland Security Insider. I know nothing about the company, but if ETD is as critical as the board makes out, Implant will -- and seemingly has -- company:
Block MEMS selected by Air Force for chemical detection contract
Thu, 2016-07-07 06:37 AM
MARLBOROUGH, MA, July 6, 2016 Block MEMS, a leading developer of Quantum Cascade Laser (QCL) based infrared detection systems, has been awarded a $9.8M contract from the Intelligence Advanced Research Projects Activity (IARPA) to develop a system that can detect trace quantities of chemicals at standoff distances of at least 100 ft. The award is part of IARPA's Standoff Illuminator for Measuring Absorbance and Reflectance Infrared Light Signatures (SILMARILS) program and is managed by the U.S. Air Force Research Laboratory at Wright-Patterson Air Force Base, Ohio.
Dr. Anish Goyal, Block's VP of Technology and Principal Investigator of the contract, commented, "Standoff detection of trace chemicals, such as explosive residues, chemical warfare agents and toxic industrial materials, is a critical unmet need within the Intelligence Community, Department of Defense, and Department of Homeland Security. There are also many commercial applications for sensitive, standoff chemical detection. Block's QCL technology combined with advanced data analytics makes it possible to meet the challenging performance goals of the SILMARILS Program."
For full story, link to:
http://gsnmagazine.com/article/46789/block_mems_selected_air_force_chemical_detection_c
Yes, I too was wondering about that.
Doesn't this Corgenix deal tell you something Joe? Corgenix was a leader in its field, with leading edge technology. Like Implant. The company's revenues were between $9 and $10 million annually the two years before the company was sold. It sold for, as the article notes, "about $16 million", or about 1 1/2 times revenue. I looked at the company's murky 10Ks and 8Ks and believe it had no significant debt. Losses, yes, but no where in the range, proportionally, as Implant's. And Implant groans under its debt. It is beyond understanding why the board insists that a company in dramatically worse shape -- that would be Implant Sciences -- would sell for 3x, 4x, 8x, 11x revenue. It appears to me that the board has hypnotized itself. Joe, tell me where I am wrong, and that there is legitimate reasons for IMSC going for, say, 5x revenue when Corgenix, which YOU highlight, went for a song. Tell me what I am missing, please. I might get back in.
Breaking news: Implant's technology is NOT special. Excellent, but not special.
Yeah, that's the ticket, 10 times revenue.
Yeah, that's the ticket. Seven to eight times revenue.
Yeah, that's the ticket. 6+ times revenue.
Bye bye, American pie...
Yeah, it's the paperwork. Sure.
You are correct. Holding on to the stock of this company is irrational. I, too am irrational, trying in vain to convince board participants they'll be disappointed in the price they get for their shares. So I'll cut back on my contributions and enjoy this glorious weekend, and wish all a dandy 4th of July.
guigulch, If this continues with nothing until Tuesday morning or longer I take this as positive.
And why is that? Of course I would expect you and others on the board to continue your magical thinking. But it really would be interesting to learn the LOGIC behind your statement.
For me, the fact we didn't hear anything TODAY, one day after most of the company's financing ran out and the company was as quiet as a tomb, would be scary. Remember this: Bill McGann announced the company was pursuing strategic alternatives on Dec. 3 of last year. Seven months ago. He announced investment bankers and attorneys who would be hired to assist in looking at alternatives. Given the money Implant has had to pay them -- and presumably continues to pay them -- they're doing a heck of a job, putting in countless hours in behalf of their client. Still, no alternatives in sight. Is there?
Implant Sciences is a small, fairly uncomplicated company in terms of its products and markets. Even more telling, there is clearly a very limited range of companies who would need ETD technology to flesh out their line. In other words, the review should have been expeditious, one would think. That the company is still in limbo should not make anyone feel good, or optimistic, or I can't wait for Tuesday because things get better every day...
Now we agree! Yes, this will be the last day investors can get IMSC shares at this level.
It would be wise to consider some facts. Not suggesting you sell, just that you listen. Or not. It's not going to matter to me. Even if you think I'm trying to drive the price down, let's face it, it can't go down much from here. Just 50 cents.
Ki2002rom last night in a lengthy post characterized IMSC a "growth rocket." If you're thinking of North Korea, you're right. Otherwise, not so much. It will come as a surprise to some on this board that the purpose of business is profits. Revenue minus expenses equals profits. Make a lot of profits and if you're on the market, you're an attractive takeover candidate. Consistently lose money, not so much. IMSC has NEVER made a profit. Quarter over quarter, year after year after year, it loses money. FY16 Q2, for example, the loss was $3.3 million on $10.3 million in revenue. The latest quarter, FY16 Q3, was worse, a loss of $4 million on revenue of $10.9 million. The trend isn't your friend. Nor is the claim that the company is "self funding." Sure, if you ignore the interest on the enormous debt, and that is something most of the board does indeed ignore. Consider the $20 million loan our friends from BAM granted us. Our friends rasied the interest rate from 15 to 16 percent when it renewed the credit agreement, meaning that the interest Implant pays on that loan alone, never mind the 15 percent paid on something like $60 million owed to DRMJ, is $3.2 million, annually. The annual interest -- not principal -- owed to BAM and DMRJ is probably in the neighborhood of $12 to $13 million a year. Sisyphus never had it so bad.
Consider also that margins are being squeezed. The competition wants to hurt IMSC, as Morpho did when it protested the TSA win. As Morpho and Smith are doing today. Gross margins for Q3 were 29.6 percent of revenue. The quarter before they were 37.4 percent of revenue. Rich companies with a wide product line can afford a price war. A basketcase like Implant Sciences can not.
Consider that the board believes that Implant's cutting edge technology will save the day. Implant was first to market with a non-res ETD system. That was yesterday's news. Smiths and Morpho have non-res ETD. Smiths system has been certified by the TSA and was a strong candiate for the TSA contract. Implant won it with price cutting, as of course they needed to do.
Consider the perspective of an acquiring company. It would be buying a failed company bleeding losses, with enormous debt. Ki said he believe the company would be sold for $550 million. Really? That statement was not supported with facts, just wishful thinking. Folks, look at the facts, and weep.
We – you and I – are apparently and innocently involved in an episode of American Greed. The Wall Street Journal reported yesterday that Platinum Partners may buy out the investment the New York corrections union made in PP’s Value Arbitrage Fund because it was allegedly arranged through bribery. Platinum in mid-June received a notice of default connected to $30 million of notes, according to Forbes. That’s a total of $50 million Platinum needs to raise quickly. Where is it coming from? The dissolution of its Value Arbitrage Fund, which houses some or all of PP’s Implant Sciences holdings, among other assets. Now we know why it was at the very last minute, March 31, that Implant announced it had renewed its financing deal with Platinum when all previous renewals were announced a week or two in advance. I assume that the delay was because Implant management balked at eliminating the requirement that Platinum could not own more than 4.99 percent of the company. Balked, but had no leverage, as PP could have simply refused to extend its loan, putting IMSC out of business. So on March 31, a “time limited” loan extension was announced that included an agreement on Implant’s part “to amend the terms of the Series H Convertible preferred Stock, Series I Convertible Preferred Stock and Series J Convertible Preferred Stock.” The press release went on to say that “the amended terms also dictate that such shares of preferred stock will, upon the sale of the company, be paid the amounts that they would have been paid if converted to common stock, without such shares being required to be converted” Other limitations also were eliminated, basically giving Platinum full and immediate control of the company. On April 12, Implant management felt compelled to clarify the agreement, making it perfectly clear that Platinum had full control of the company and could do what it wished with it. Some of us wondered why the “fence” keeping Platinum’s hands off IMSC was eliminated. Now we know.
What we retail investors didn’t know was that at the time the credit extension was being negotiated, there was an investigation going on into the $20 million that the corrections union put into the Value Arbitrage Fund, an investigation that led to the indictment of Murray Huberfeld, a Platinum Partners owner, and, just a week ago, according to Reuters, to the FBI raiding Platinum’s offices in New York. I think that we can agree that this is not the ideal time to sell Implant Sciences. Two or three years from now, yes. The company has just in the past three quarters turned itself around in terms of selling product and generating revenue. However, it’s still grossly unprofitable and laden with the debt Platinum clearly wants to convert to cash. In fact, needs to convert to cash. Nordlicht says there will be no fire sale of the assets in the Value Arbitrage Fund. I’ll leave it to you to determine whether there is any way he can avoid such a sale. My view is, he can’t. (Google Platinum Partners, Mark Nordlitch and Murray Huberfeld for more details.)
As I said in a post a few minutes ago, my point wasn't to identify a particular price. I'm not that smart. It was to point out that the value the board here was assigning to Implant is much too high. I don't have the foggiest notion of exactly what the price will be, or even if there will be a sale (I believe there will be). It could be zero for all I know. Or 57 cents, where it's at today, or even $1. But I'm comfortable projecting that it will be 99 cents or less. That's my OPINION. Nothing more, nothing less. I am done with the debate. I sincerely wish everyone good luck. Good luck to all Implant longs...