Replies to post #17058 on Secure Point Technologies Inc (fka IMSCQ)

[Doctor Detroit]

I agree that IMSC isn’t under any threat of imminent doom and its doors will remain open even if the IDIQ doesn’t surface in the near future. I’m not sure how I feel about that. From an organization point of view, the ability to continue to obtain financing is a great strength as it allows IMSC to weather storms. But while I can’t speak for anyone else, from this investor’s point of view, it’s a bit of a mixed blessing.

IMSC “purchases time” by borrowing through convertible debt. If converted, the stockholder’s interest in the overall organization is diluted. Management has been able to protect its proportionate interest in the organization by adopting two incentive plans in the past couple of years and issuing a boat load of options. But you don’t get issued options for being a patient investor.

Don’t get me wrong: I understand dilution is inevitable. In a best case scenario, the share price will take off and Implant would conduct a private placement for an additional 20 or 30 million shares (at a substantial haircut to market price) to pay off some of the debt and fund development. If you haven’t factored that dilution into your long-term plans, you should probably consider it.

The question I wrestle with is, given the lack of sales to fund operations, at what point does the continued dilution through convertible debt along with the eventual dilution through a private placement water down the potential gain in IMSC to the point that it is incapable returning the level of financial gain that is commensurate with the level of risk being undertaken. So I end up going through incomprehensible DHS budgets to determine whether the TSA is actually going to buy anything, because I don’t have confidence in the guidance provided by the company. Without available financing, if they were wrong in their guidance they would be forced to sell the company now and we might get a 10 to 20% gain on the current price levels and be done with it. But with the financing, there is no consequence to being wrong in their guidance (they don’t even have shareholder meetings to elect the board) and you’re stuck trying to find a nugget of truth between true believers and doom sayers on message boards.