High Risk High Reward Scenario for Implant Sciences Corporation (OTCMKTS:IMSCQ) Shares


Implant Sciences Corporation (OTCMKTS:IMSCQ) shares were up 16.39% on Friday to $0.125 and flat in after-hours trading. The company has a market cap of $11.91 million at 79.88 million shares outstanding. Share prices have been trading in a 52-week range of $0.06 to $0.85.

Implant Science Corporation is a company that develops, manufactures and sells sensors and systems for the security, safety and defense industries. It operates through the Security Products segment and has developed technologies used in explosives trace detection and narcotics trace detection systems. These systems are used by private companies and government agencies to screen baggage, cargo, other objects and people for the detection of trace amounts of explosives and narcotics.

The company’s systems use Quantum Sniffer technologies, including a photon-based, non-radioactive ion source in combination with ion mobility spectrometry, which is a detection tool sensitive to the speeds with which ions of various substances move through the air to electronically detect minute quantities of explosives vapor and particles. Its products include Quantum Sniffer QS-H150 Portable Explosives Detector and Quantum Sniffer QS-B220 Desktop Explosives and Narcotics Detector.

Implant Science Corporation declared bankruptcy on October 10, 2016 and filed Chapter 11 in Delaware. The company agreed to sell all of its assets to L-3 Communications Holdings for $117.5mm and the assumption of a large amount of its non-financial liabilities. This makes L-3 Communications Holdings the stalking horse bidder in a 363 auction to be held on December 12, 2016 if any additional qualifying bids are received by December 8. The sale hearing will be held on December 16.

An equity committee was formed on October 24, indicating that equity will have some support against management. However, the members of that committee are all long-time shareholders that are likely to approve an acquisition of Zapata, which could lend further downside. After all, this company doesn’t seem to have much connection to Implant Science Corporation current focus on explosives and narcotics detection. Zapata sells backpacks and boards such as Flypack 3.0 and Jetpack 1.0. Management would need 67% votes in favor for this acquisition to push through, and some investors believe that it would be a desperate attempt for committee members to keep running a public company and paying themselves large salaries.

Other shareholders of Implant Sciences Corporation are calling for Platinum Partners investigation, alleging that company’s primary source of debt was a series of bonds issued to a family of funds managed by Platinum.

First, these chapter 11 cases involve facts giving rise to a strong suspicion of wrongdoing that caused [Implant Sciences], and, in turn, their shareholders substantial harm,” an attorney for the shareholders said in court papers.

With that, Implant Sciences Corporation shareholders are set to ask Judge Brendan Shannon to force the company, Platinum and its funds to hand over their books at a November 29 hearing in U.S. Bankruptcy Court. If this motion is granted, Implant Sciences Corporation could be poised for a bounce, particularly if the books later on reveal that Platinum had a hand in pushing the company to bankruptcy. Court papers show the bonds were allowed to be converted into equity interests.

Implant Sciences Corporation has until December 23 to wrap up this investigation of Platinum and its affiliates, DMRJ Group LLC and Monstant Partners LLC. As court papers showed, DMRJ and Monstant were part of the group that provided Implant Services with about $68 million in debt.
DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.