IMSC – Implant Sciences
January 17, 2010 by AfterIt100
IMSC IS CURRENTLY TRADING AT A MARKET CAPITALIZATION OF APPROXIMATELY $9 MIL WITH 15.5 MIL SHARES OUTSTANDING.
The story behind IMSC is a long term one, in my opinion. While there is the potential for a significant return in the short term my thesis on this name revolves around the company becoming one of two things: an acquisition target or a serious player in the domestic security market. Their technology is a very interesting, useful, and increasingly relevant one on a global scale.
IMSC has a seemingly great product line with multiple advantages over what’s currently available in the explosive detection device industry. Their product offers a lower cost of ownership, a larger and customizable catalog of threatening substances, non-contact and non-radioactive sample collection, and rapid reset once a threat has been detected.
I found a couple notable pieces to IMSC’s story. China’s decision to employ this technology for security at the recent Olympics was a huge positive, in my opinion. China took the Olympics extremely seriously as it was their chance to gain further respect as a true global player. Their use of IMSC’s devices tells me that the technology is indeed of the highest quality as China would have assuredly only used the best product available for the Games. As a follow up China recently ordered $400,000 worth of further devices which is evidence of quality through the action of the ‘repeat customer’. The next notable event is occurring as I type. The domestic legislation mandating that 100% of cargo on passenger flights be scanned beginning in August 2010 will prove to be a huge boon for one of these explosive detection companies (ICXT, OSIS, IMSC). Based on the comparative advantages of IMSC’s product over its competitors, I suspect IMSC will soon see a drastic increase in orders as companies struggle to ensure they are in compliance by August.
My final optimistic point of interest is that all of IMSC’s competitors appear to be in much stronger financial positions. This begs the question of whether it will be less expensive for them to develop their own competing/better technology or to simply acquire IMSC. If the technology has been properly patented and is indeed better (more cost-efficient, simpler to use, better detection capability) than anything else currently on the market I would not be surprised to see acquirers start sniffing around.
My main concern is that their financial position is terrible. They’ve got a negative tangible book value of ~9mm, with DMRJ Group (their primary lender) encompassing ~7mm of their liabilities. DMRJ recently gave notice of IMSC’s default and dissolution, then revoked that notice of default and dissolution shortly thereafter without waiving the actual default.
Even with the potential dilution resulting from a deal between the two companies and/or any other potential financiers, I expect that the future of IMSC and that of its share price will be a bright one as long as the company remains at the forefront of substance detection technology.
WITH A CURRENT MARKET CAPITALIZATION OF APPROXIMATELY $9 MIL AND SOME NEW FINANCING, THERE SHOULD BE AMPLE ROOM FOR GROWTH.
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