WILMINGTON, MA -- (Marketwire) -- 11/14/12 -- Implant Sciences Corporation (OTCQB: IMSC), a high technology supplier of systems and sensors for the homeland security market and related industries, today announced financial results for the fiscal quarter ended September 30, 2012.

Revenues for the first quarter ended September 30, 2012, increased 37%, to $1.4 million, from $1.0 million for the comparable prior year period. Our net loss for the quarter ended September 30, 2012 was $12.7 million as compared with a net loss of $3.0 million for the comparable prior year period, an increase of $9.7 million. The increase in the net loss is primarily due to $9.3 million of stock-based compensation recorded on the September 2012 officer and director option grants, increased operating expenses and increased interest expense.

Glenn D. Bolduc, President and CEO of Implant Sciences, commented, "During our recently concluded first quarter, Implant Sciences achieved a number of important strategic goals that we believe position the Company for long term growth, and we remain excited about our future prospects. We have taken important steps to broaden the markets we serve, increase our revenue opportunities, and improve our financial stability. These include the following recent developments:

• Our QS-B220 Benchtop Explosives and Narcotics Trace Detector continued to progress through final independent validation testing with the Transportation Security Laboratory ("TSL") to qualify for placement on the Transportation Security Administration ("TSA") Air Cargo Screening Technology List.
• Continued to increase our geographic distribution with sales to Europe, Africa, Asia and the Middle East. Increased diversification of markets served in the recently ended quarter to include; banks, hotels, bomb squads, airports, sporting venues and the petroleum industry.
• Extended the maturity of our credit agreements with DMRJ Group LLC through March 31, 2013 and negotiated the conversion of $12 million of the line of credit to a convertible term note.
• Enhanced our technology team with the addition of Dr. Hacene Boudries and our sales team with the recruitment of two industry experienced sales managers; Nav Mosey, most recently Sales Manager for Rapiscan Systems and Jimmy Mo, former Director, Asia Pacific Sales and Marketing for GE Ion Track. Dr. Boudries was most recently with Morpho Detection Inc. where he was Director, Research & Technology, Chemical/Biological Detection & Chemical Sensing at Morpho Detection's Advanced Technology Programs. Previously, Dr. Boudries was Research and Development Manager in charge of Chemical/Biological Detection at General Electric Security.
• Achieved all of the technical requirements of our contract with the India Ministry of Defence and expect to complete the required modifications to our standard computer-based training in the near term.

Mr. Bolduc concluded, "We continue to expand our distribution network, under the leadership of Darryl Jones, which we believe will provide a solid foundation from which to build upon as we work to grow market share and revenues. We have much work ahead of ourselves, but remain excited about our future prospects."

Details for the quarter ended September 30, 2012 follow below.

Quarter Ended September 30, 2012 vs. September 30, 2011

• Revenues for the quarter ended September 30, 2012 were $1,415,000 as compared with $1,036,000 for the comparable prior year period, an increase of $379,000, or 36.6%. The increase in revenue is primarily due to a 36% increase in the number of QS-H150 handheld units sold during the three months ended September 30, 2012 and sales of our QS-B220 benchtop units, which we began shipping commercially in the third quarter of fiscal 2012, partially offset by a 9% decrease in average unit sell prices on sales our QS-H150 handheld units.
• Gross loss for the quarter ended September 30, 2012 was ($39,000) or (2.8%) of revenues as compared with gross margin of $399,000 or 38.5% of revenues for the comparable prior year period, resulting primarily from increased manufacturing overhead spending due to stock-based compensation recorded on the September 2012 officer and director option grants, increased manufacturing personnel costs and by the 9% decrease in the average unit sell prices on sales of our QS-H150 handheld units.
• Research and development expense for the quarter ended September 30, 2012 was $1,337,000 as compared with $819,000 for the comparable prior year period, an increase of $518,000 or 63.2%, due primarily to stock-based compensation recorded on the September 2012 officer and director option grants, increased payroll and related fringe benefit costs, partially offset by decreased contracted engineering.
• Selling, general and administrative expenses for the quarter ended September 30, 2012 were $10,131,000 as compared with $1,813,000 for the comparable prior year period, an increase of $8,318,000, or 458.8%, due primarily to stock-based compensation recorded on the September 2012 officer and director option grants, increased legal fees, increased payroll, related fringe benefits costs and travel expense resulting from the addition of sales personnel, partially offset by lower consulting fees due to the issuance of our common stock to certain consultants in the comparable prior year period.
• For the quarter ended September 30, 2012, other expense, net was $1,241,000 as compared with other expense, net of $839,000, for the comparable prior year period, an increase of $402,000, due primarily to a $401,000 increase in interest expense on higher borrowings under our credit facility with DMRJ.
• Our net loss for the quarter ended September 30, 2012 was $12,748,000 as compared with a net loss of $3,072,000 for the comparable prior year period, an increase of $9,676,000, or 315.0%. The increase in the net loss is primarily due to stock-based compensation recorded on the September 2012 officer and director option grants, increased operating expenses and increased interest expense.

Additional information on the financial condition and results of operations can be found in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2012, filed with the Securities and Exchange Commission.

Company Conference Call

Management will host a webcast and conference call on Thursday, November 15, 2012 at 4:15 PM Eastern time to review the Company's first quarter ended September 30, 2012 financial results and operations. Following the Company's prepared remarks there will be a Q&A session. The call can be accessed by interested parties by dialing: 866-831-6243 within the U.S. or 617-213-8855 outside the U.S. and entering passcode 37799295. 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 two hours after the call for one month by dialing: 888-286-8010 within the U.S. or 617-801-6888 outside the U.S. and entering passcode 64693774. The conference call will also be available live over the Internet at the investor relations section of Implant Sciences' website at www.implantsciences.com. A replay of the webcast will be available for one month after the call.

About Implant Sciences

Implant Sciences develops, manufactures, and sells sophisticated sensors and systems for Security, Safety, and Defense (SS&D) markets. The Company has developed proprietary technologies used in its commercial explosives and narcotics trace detection systems, which ship to a growing number of locations domestically and internationally. Implant Sciences' QS-H150 handheld explosives trace detector has received Qualified Anti-Terrorism Technology Designation and the Company's QS-B220 benchtop explosives and narcotics detector has received a Development Testing and Evaluation (DT&E) Designation by the U.S. Department of Homeland Security under the Support Anti-terrorism by Fostering Effective Technology Act of 2002 (the SAFETY Act). For further details on the Company and its products, please visit the Company's website at www.implantsciences.com.

Safe Harbor Statement

This press release may contain certain "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and are subject to risks and uncertainties 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 all of our indebtedness to our secured lender, DMRJ Group, by March 31, 2013; if we are unable to satisfy our obligations to DMRJ and to raise additional capital to fund operations, DMRJ 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; our explosives detection products and technologies (including any new products we may develop) may not be accepted by the TSA or by other U.S. government and law enforcement agencies or commercial consumers of security products; 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; economic, political and other risks associated with international sales and operations could adversely affect our sales; our business is subject to intense competition and rapid technological change; our business could be harmed if our contract manufacturer is unable or unwilling to meet our volume and quality requirements; we may not be able to retain our management and key employees or to identify, hire and retain additional personnel as needed; the delisting of our common stock by the NYSE Amex has limited our stock's liquidity and has impaired our ability to raise capital; and other risks and uncertainties described in our filings with the Securities and Exchange Commission, including its most recent Forms 10-K, 10-Q and 8-K. Such statements are based on management's current expectations and assumptions which could differ materially from the forward-looking statements.

For further information, you are encouraged to review Implant Sciences' filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended June 30, 2012 and its Quarterly Report on Form 10-Q for the period ended September 30, 2012. The Company assumes no obligation to update the information contained in this press release.

                        Implant Sciences Corporation
                   Condensed Consolidated Balance Sheets


                                               September 30,     June 30,
                                                    2012           2012
                                                (Unaudited)     (Audited)
                                               -------------  -------------
ASSETS
Current assets:
  Cash and cash equivalents                    $       2,000  $      84,000
  Restricted cash and investments                  1,294,000      1,274,000
  Accounts receivable-trade, net of allowances
   of $20,000                                        167,000        182,000
  Inventories, net                                 3,527,000      3,193,000
  Prepaid expenses and other current assets          917,000        809,000
                                               -------------  -------------
    Total current assets                           5,907,000      5,542,000
Property and equipment, net                          234,000        220,000
Restricted cash and investments                      312,000        312,000
Other non-current assets                             126,000        162,000
                                               -------------  -------------
      Total assets                             $   6,579,000  $   6,236,000
                                               =============  =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Senior secured convertible promissory note   $   3,184,000  $   3,224,000
  Second senior secured convertible promissory
   note                                           12,000,000              -
  Senior secured promissory note                   1,000,000      1,000,000
  Line of credit                                  17,245,000     26,231,000
  Current maturities of obligations under
   capital lease                                      24,000         24,000
  Payable to Med-Tec                                  28,000         30,000
  Accrued expenses                                 4,988,000      4,360,000
  Accounts payable                                 2,634,000      2,654,000
  Deferred revenue                                 1,046,000      1,081,000
                                               -------------  -------------
    Total current liabilities                     42,149,000     38,604,000
Long-term liabilities:
  Long-term obligations under capital lease,
   net of current maturities                          33,000         33,000
                                               -------------  -------------
    Total long-term liabilities                       33,000         33,000
                                               -------------  -------------
      Total liabilities                           42,182,000     38,637,000
                                               -------------  -------------
Commitments and contingencies:
Stockholders' deficit:
  Common stock; $0.10 par value; 50,000,000
   shares authorized; 42,278,540 and
   42,267,995 at September 30, 2012 and
   39,163,540 and 39,152,995 at June 30, 2012
   shares issued and outstanding, respectively     4,228,000      3,916,000
  Preferred stock; no stated value; 5,000,000
   shares authorized Series G Convertible
   Preferred Stock, no stated value; 650,000
   shares authorized, 142,667 shares issued
   and outstanding at September 30, 2012 and
   164,667 shares issued and outstanding at
   June 30, 2012, respectively (liquidation
   value $1,141,000 and $1,317,000,
   respectively)                                     237,000        274,000
  Additional paid-in capital                      92,590,000     83,436,000
  Accumulated deficit                           (132,270,000)  (119,522,000)
  Deferred compensation                             (315,000)      (432,000)
  Treasury stock, 10,545 common shares, at
   cost                                              (73,000)       (73,000)
                                               -------------  -------------
    Total stockholders' deficit                  (35,603,000)   (32,401,000)
                                               -------------  -------------
      Total liabilities and stockholders'
       deficit                                 $   6,579,000  $   6,236,000
                                               =============  =============



                        Implant Sciences Corporation
              Condensed Consolidated Statements of Operations
                                (Unaudited)


                                                For the Three Months Ended
                                                       September 30
                                               ----------------------------
                                                    2012           2011
                                               -------------  -------------
Revenues                                       $   1,415,000  $   1,036,000
Cost of revenues                                   1,454,000        637,000
                                               -------------  -------------
  Gross (loss) margin                                (39,000)       399,000
                                               -------------  -------------
Operating expenses:
  Research and development                         1,337,000        819,000
  Selling, general and administrative             10,131,000      1,813,000
                                               -------------  -------------
    Total operating expenses                      11,468,000      2,632,000
                                               -------------  -------------
Loss from operations                             (11,507,000)    (2,233,000)
                                               -------------  -------------
Other income (expense), net:
  Interest income                                          -          1,000
  Interest expense                                (1,241,000)      (840,000)
                                               -------------  -------------
Total other income (expense), net                 (1,241,000)      (839,000)
                                               -------------  -------------
Net loss                                       $ (12,748,000) $  (3,072,000)
                                               =============  =============


Net loss per share, basic and diluted          $       (0.31) $       (0.10)
                                               =============  =============
Weighted average shares used in computing net
 loss per common share, basic and diluted         40,980,218     31,950,218
                                               =============  =============

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