Implant Sciences Reports Third Quarter Fiscal 2016 Financial Results

WILMINGTON, Mass., May 16, 2016 /PRNewswire/ -- Implant Sciences Corporation (OTCQB:IMSC), a leading manufacturer of explosives trace detection (ETD) and drugs trace detection solutions for homeland security applications, today announced financial results for the three and nine months ended March 31, 2016. 

Revenues for the three months ended March 31, 2016 increased 230.5%, to $10.9 million, from $3.3 million for the comparable prior year period.  Our net loss for the three months ended March 31, 2016 was $4.1 million as compared with a net loss of $5.7 million for the comparable prior year period, a decrease of $1.6 million. 

Revenues for the nine months ended March 31, 2016 increased 386.8%, to $35.6 million, from $7.3 million for the comparable prior year period.  Our net loss for the nine months ended March 31, 2016 was $8.3 million as compared with a net loss of $17.4 million for the comparable prior year period, a decrease of $9.1 million.

Earnings before interest, income taxes, depreciation and amortization, stock-based compensation, warrants issued to non-employees and common stock issued to consultants ("Adjusted EBITDA"), which is reconciled to net income in this press release, was a loss of $994,000 in the three months ended March 31, 2016, compared to a loss of $2,266,000 in the comparable prior year period and for the nine months ended March 31, 2016, adjusted EBITDA income of $1,023,000, compared to a loss of $8,108,000 in the comparable prior year period.

Dr. William McGann, CEO of Implant Sciences, commented, "We are pleased with the results of our recently completed quarter, a quarter in which we recorded revenues of $10.9 million and have achieved nine month revenues of $35.6 million. We're equally pleased with the improvement in our operations which have resulted in substantial reductions in net operating losses of $1.6 million and $9.1 million, in the quarter and the nine month period, respectively. The improvement in our operating results are tempered somewhat by costs associated with our strategic alternative review and other one-time charges, which amounted to $559,000 and $908,000 in the three month and nine month periods, respectively. Shipments under the delivery order with the Transportation Security Administration are ongoing and on schedule. During the just concluded quarter we delivered QS-B220's to the Canadian Air Transport Security Authority, the significance of which cannot be dismissed. With this win, we believe that we are now the leading provider of ETD in North America. The production ramp continues unabated, demonstrating our capabilities from not only a manufacturing and supply chain perspective, but also from a working capital management perspective. Our execution in all facets is not perfect, but we are striving for and demonstrating continuous improvement in managing this exponential growth. We continue to generate the cash flow required from internal operations to fund the significant working capital required to deliver the record revenues being reported today. We're continuing to invest and expect to increase our investment in technology, with the intent to introduce new product that will increase the size of the security market we can penetrate."

Details for the three and nine months ended March 31, 2016 follow below.

Three Months Ended March 31, 2016 vs. March 31, 2015

• Revenues for the three months ended March 31, 2016 were $10,923,000 as compared with $3,305,000 for the comparable prior year period, an increase of $7,618,000, or 230.5%. The increase in revenue is due primarily to a 664.6% increase in the number of QS-B220 desktop units sold in the three months ended March 31, 2016, due to the shipments under our delivery order with the U.S. Transportation Security Administration, shipments to the Canadian Air Transport Security Authority and increased shipments to Asia in the current three month period, offset partially by a 38.6% decrease in the average unit sales prices, which resulted in a 369.7% increase in QS-B220 revenues. Factors impacting our average unit sales prices are mainly due to the competitive market conditions and $25,000 in early payment discounts in the three months ended March 31, 2016.
  
  QS-H150 handheld units sold in the three months ended March 31, 2016, decreased 32.7 %, compared to the prior period, due to decreased shipments to Europe and by an 8.6% decrease in the average unit sales prices, which resulted in a 38.5% decrease in QS-H150 revenues. 
  
  Sales of parts and supplies and service revenues increased 360.0% and 157.4%, respectively, in the three months ended March 31, 2016, due primarily to increased sales of consumables and other supplies that shipped with the QS-B220 desktop units and increased training and warranty revenue in the current three month period.

• Gross margin for the three months ended March 31, 2016 was $3,232,000 or 29.6% of revenues as compared with $1,176,000 or 35.6% of revenues for the comparable prior year period. The decrease in gross margin as a percent of revenues is primarily due to a decrease in the average unit sales price on sales of our QS-B220 units of 38.6%. and an 8.6% decrease in the average unit sales price on sales of our QS-H150, and an increase in manufacturing overhead costs.

• Research and development expense for the three months ended March 31, 2016 was $1,040,000 as compared with $1,347,000 for the comparable prior year period, a decrease of $307,000 or 22.8%. The decrease in research and development expense is due primarily to a $104,000 decrease in stock-based compensation expense, a $48,000 decrease in materials and prototype expense, the relocation of the San Diego, CA advanced technology office, which resulted in a $78,000 decrease in rent expense and a $52,000 decrease in payroll and related fringe benefits.

• Selling, general and administrative expenses for the three months ended March 31, 2016 were $3,811,000 as compared with $3,318,000 for the comparable prior year period, an increase of $493,000, or 14.9%. The increase in selling, general and administrative expenses is due primarily to a $640,000 increase in payroll and related benefits due primarily to the provision of $487,000 for incentive compensation, a $284,000 increase in consulting expenses due to the issuance of shares of our common stock to two advisors for services rendered under the advisory and consulting services agreements and investment banker advisor fees, a $263,000 increase in legal fees attributable to our ongoing review of strategic alternatives, a $183,000 increase in variable selling expenses, and a $142,000 increase in travel expenses, partially offset by a $680,000 decrease in stock-based compensation on employee stock options, due primarily to additional stock-based compensation expense resulting from the amendments to our former CEO's existing vested stock options and to the accelerated vesting of certain options issued on July 2, 2014 in the prior year period, $274,000 of charges incurred pursuant to our Letter Agreement with Luveti in the prior year period and a $52,000 decrease in rent expense.

• For the three months ended March 31, 2016, other expense was $2,477,000 as compared with other expense of $2,242,000, for the comparable prior year period, an increase of $235,000, or 10.5%. The increase is due to increased interest expense on higher borrowings under our credit facilities with DMRJ and, to a lesser extent, the 1% increase in the BAM interest rate which took effect on April 1, 2015.

• Our net loss for the three months ended March 31, 2016 was $4,096,000 as compared with a net loss of $5,731,000 for the comparable prior year period, a decrease of $1,635,000, or 28.5%. The decrease in net loss is primarily due to increased revenues and gross margin, partially offset by increased operating expenses and an increase in interest expense.

Nine Months Ended March 31, 2016 vs. March 31, 2015

• Revenues for the nine months ended March 31, 2016 were $35,608,000 as compared with $7,315,000 for the comparable prior year period, an increase of $28,293,000, or 386.8%. The increase in revenue is due primarily to a 1,010.2% increase in the number of QS-B220 desktop units sold in the nine months ended March 31, 2016, due to increased shipments to European airports, shipments under our delivery order with the U.S. Transportation Security Administration, shipments to the Canadian Air Transport Security Authority and increased shipments to Asia, Africa and South America in the current nine month period, offset partially by a 32.2% decrease in the average unit sales prices, which resulted in a 652.5% increase in QS-B220 revenues. Factors impacting our average unit sales prices are mainly due to the competitive market conditions and our decision to offer early payment discounts to certain distributors to hasten collection of our accounts receivable, which discounts in the aggregate amounted to $325,000 in the nine months ended March 31, 2016.
  
  QS-H150 handheld units sold in the nine months ended March 31, 2016, increased 12.6 %, compared to the prior period, due to increased shipments to Asia and Africa, which is partially offset by a 4.9% decrease in the average unit sales prices, which resulted in a 7.0% increase in QS-H150 revenues.
  
  Sales of parts and supplies and service revenues increased 511.1% and 446.9%, respectively, in the nine months ended March 31, 2016, due primarily to increased sales of consumables and other supplies that shipped with the QS-B220 desktop units and increased training and warranty in the current nine month period.

• Gross margin for the nine months ended March 31, 2016 was $13,342,000 or 37.5% of revenues as compared with $2,158,000 or 29.5% of revenues for the comparable prior year period. The increase in gross margin as a percent of revenues is primarily due to increased manufacturing overhead absorption, due to increased QS-B220 unit volume and lower material costs for the QS-B220 due to volume purchasing price reductions, partially offset by a 32.2% decrease in the average unit sales price on sales of our QS-B220 units and by a decrease in the average unit sales price on sales of our QS-H150 units of 4.9% and an increase in manufacturing overhead costs.

• Research and development expense for the nine months ended March 31, 2016 was $3,024,000 as compared with $3,919,000 for the comparable prior year period, a decrease of $895,000 or 22.8%. The decrease in research and development expense is due primarily to the relocation of the San Diego, CA advanced technology office, which resulted in a $303,000 decrease in payroll and benefit costs, a $200,000 decrease in materials and prototype expenses, a $215,000 decrease in stock-based compensation, a $62,000 decrease in regulatory testing expenses, and a $93,000 decrease in rent expense, offset partially by a $41,000 increase in travel expenses incurred in support of the ECAC system deployments in the current period.

• Selling, general and administrative expenses for the nine months ended March 31, 2016 were $11,067,000 as compared with $9,188,000 for the comparable prior year period, an increase of $1,879,000, or 20.5%. The increase in selling, general and administrative expenses is due primarily to a $1,931,000 increase in payroll and benefit costs, due to the provision of $1,440,000 for incentive compensation and a $200,000 sign on bonus for Mr. Liscouski, our President, a $1,041,000 increase in variable selling expenses due to increased revenues, a $872,000 increase in consulting expenses due to the issuance of shares of our common stock to two advisors for services rendered under the advisory and consulting services agreements and investment banker advisor fees, a $221,000 increase in travel expense incurred to support QS-B220 system installations domestically and in Europe, the $76,000 charge recorded for the plaintiff's counsel fee and expenses, resulting from the Miller litigation, a $255,000 increase in legal fees attributable to our ongoing review of strategic alternatives and an $86,000 increase in business insurance, due to increased revenues, offset partially by separation benefits of $725,000 provided to our former CEO due to his resignation in the prior year period, a $1,086,000 decrease in stock-based compensation on employee stock options, due primarily to additional stock-based compensation expense resulting from the amendments to our former CEO's existing vested stock options and to the accelerated vesting of certain options issued on July 2, 2014 in the prior year period, $274,000 of charges incurred pursuant to our Letter Agreement with Luveti in the prior year period, a $207,000 decrease in stock-based compensation expense on non-employee warrants, a $54,000 decrease in bad debt expense, and a $98,000 decrease in rent expense.

• For the nine months ended March 31, 2016, other expense was $7,571,000 as compared with other expense of $6,401,000, for the comparable prior year period, an increase of $1,170,000, or 18.3%. The increase is due to increased interest expense on higher borrowings under our credit facilities with DMRJ and, to a lesser extent, the 1% increase in the BAM interest rate which took effect on April 1, 2015.

• Our net loss for the nine months ended March 31, 2016 was $8,320,000 as compared with a net loss of $17,350,000 for the comparable prior year period, a decrease of $9,030,000, or 52.0%. The decrease in the net loss is primarily due to increased revenues and gross margin, partially offset by increased operating expenses and an increase in interest expense.

Company Webcast and Conference Call

The Company will host a webcast and conference call on Monday, May 16, 2016 at 4:15 PM Eastern time to review financial results for the quarter ended March 31, 2016. Following the Company's prepared remarks, there will be a Q&A session. The call can be accessed by dialing: 877-381-5456 within the U.S. or 262-558-6161 outside the U.S. The conference ID or passcode is 11555976. Participants are asked to call the assigned number approximately 5 minutes before the conference call begins.  A replay of the conference call will be available approximately two hours after the call for seven days by dialing: 855-859-2056 within the U.S. or 404-537-3406 U.S. The conference ID or passcode to access the conference call replay is 11555976. The conference call will also be available live over the Internet at the "Webcasts" page of the Investor Relations section of Implant Sciences' website at www.implantsciences.com.  A replay of the webcast will be available for seven days after the call.

About Implant Sciences

Implant Sciences is a leader in developing and manufacturing advanced detection capabilities to counter and eliminate the ever-evolving threats from explosives and drugs. The Company's team of dedicated trace detection experts has developed proprietary technologies used in its commercial products, thousands of which have been sold across more than 60 countries worldwide. The Company's ETDs have received approvals and certifications from several international regulatory agencies including the TSA in the U.S., ECAC in Europe, CAAC and the Ministry of Public Safety in China, Russia FSB, STAC in France, and the German Ministry of the Interior. It has also received the 2015 GSN Airport/Seaport/Border Security Award for "Best Security Checkpoint".  All Implant Sciences products are recognized as Qualified Anti-Terrorism Technologies by the Department of Homeland Security. For further details on the Company and its products, please visit the Company's website at www.implantsciences.com.

Cautionary Note Regarding Forward-Looking Statements

This press release and any statements of employees, representatives and partners of Implant Sciences Corporation (the "Company") related thereto contain or may contain certain "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995.  Such statements may include, without limitation, statements with respect to the Company's plans, objectives, projections, expectations and intentions and other statements identified by words such as "projects," "may," "will," "could," "would," "should," "believes," "expects," "anticipates," "estimates," "intends," "plans," "potential" or similar expressions.   Such statements are based on management's current expectations and are subject to significant risks and uncertainties (many of which are beyond the Company's control) that could cause the Company's actual results to differ materially from the forward-looking statements. Such risks and uncertainties include, but are not limited to, the risks that we will be required to repay substantially all of our indebtedness to our secured lenders by June 30, 2016 and will be required to repay the remainder of our indebtedness by December 30, 2016; if we are unable to satisfy our obligations to our secured lenders and to raise additional capital to fund operations, our lenders may seize our assets and our business may fail; we continue to incur substantial operating losses and may never be profitable; our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern; there is no guaranty that the Transportation Security Administration (TSA) or any other U.S. or foreign government and law enforcement agencies or commercial consumers will purchase any of our explosives detection products or that any new products we may develop will be accepted by the TSA or by such other governments, agencies or consumers; economic, our backlog does not necessarily represent actual future shipments since orders, including our delivery order with the TSA, may be delayed or cancelled by our customers without financial penalty.  The rate of customer order cancellations can vary quarter to quarter and year to year. Customers may also reject nonconforming products; political and other risks associated with international sales and operations could adversely affect our sales; liability claims related to our products or our handling of hazardous materials could damage our reputation and have a material adverse effect on our financial results; our business is subject to intense competition; our markets are subject to rapid technology change and our ability to generate revenue and profit will depend on our ability to develop and introduce new products; we may not be able to retain our management and key employees or identify, hire and retain additional personnel as needed; we may not be able to enforce our patent and other intellectual property rights or operate without infringing on the proprietary rights of others; and other risks and uncertainties described in our filings with the Securities and Exchange Commission, including our most recent Forms 10-K, 10-Q and 8-K.  In light of these risks and uncertainties, readers are cautioned that actual results may differ significantly from those described or anticipated in the forward-looking statements.  The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future presentations or otherwise, except as required by applicable law.

Contact:
Implant Sciences Corporation
Company Contact:
Robert Liscouski, President
978-752-1700 x 116

Investor Relations Contact:
Barry Kaplan Associates
Andrew Kaplan
732-747-0702

SOURCE Implant Sciences Corporation

Related Links

http://www.implantsciences.com