Implant Sciences Corporation (OTCMKTS:IMSC) Wants To Be A Hover Board Company

Implant Sciences Corporation (OTCMKTS:IMSC) announced yesterday that it had issued a letter of intent to acquire an entity called Zapata Industries. Zapata made headlines earlier this year when it published a video of what appeared to be someone testing a hover board, and has since attracted coverage from all the big name tech outlets – Wired, Digital Trends, Verge etc. Implant is down on the announcement, however, and will open up Friday's session at a 22% discount to its Thursday high. What's the deal with the sell off, and what's next?First up, it's worth mentioning that acquiring a hover board company is pretty left field for Implant – its current business model is the development of sensors that test for drugs, explosive material, that sort of thing. There's perhaps something in an argument that the tech has a military application, and that this would cross over with its explosive sensory tech, but that's a stretch. Anyway, regardless of the fit, it's already started to generate some press.Here's a headline from yesterday's Verge:

"A defense tech firm is buying the company behind the jet-powered hoverboard"

That’s not bad press, and these sorts of things would cost many thousands as part of a promotions campaign, so why is Implant down on the deal?Well, it might be something to do with the terms. It's a cash, equity and warrant split type deal:

"The company's agreement with Zapata, subject to shareholder approval, positions the company to emerge debt-free (pending the restructuring which could include a sale of the ETD business or a capital raise) with at least $20 million in cash for working capital on the balance sheet in exchange for $15 million, 60% equity and 50 million warrants exercisable at $1.50 per share."

So there's 50 million warrants exercisable at $1.50 – potentially dilutive, but not yet. There's a pending restructure – just what this will involve, nobody is certain. However, Implant has mentioned it might sell its explosive detection arm, or raise capital. The ETD sell off would represent a total pivot, as this side of the business is the primary revenue driver as things stand. If it carries forward with that option, then it's essentially becoming a hover board company. Not necessarily a bad thing, but plenty of risk and uncertainty. If it goes for the latter option, we're going to see a lot of dilution.So why would it want to become a hover board company? Well, as we've already mentioned, there's plenty of free press on offer. This is the sort of thing that grabs headlines, and headlines are the sort of thing that can drive double or treble digit gains in the OTC space. More fundamentally, there's quite a lot of applications for the sort of technology Zapata has developed, so long as it works as advertised.

"Zapata Industries can commercialize its breakthrough technology with products ranging from flying medical stretchers and Jetbikes to floating rescue stations, scaffoldings and unmanned heavy payload delivery drones."

Seems a little far fetched, but it’s the kind of thing that will attract an audience of investors.Financially, the company is in a bit of a mess, and that's where the risks lie right now. Specifically, it’s a debt problem. At March 31, Implant reported a little over $80 million current long term debt, and just $650K cash on hand. Quarterly revenues come in at around $10 million for the last two quarters, but with $2.5 million a quarter interest payments and COR at $7.6 million, Implant is losing $4 million a quarter.Of course if it sold of the ETD arm, it might be able to sort out its debt issue, and this looks like (from the statement made above) it might be what it has in mind.Bottom line here is that yesterday's selloff looks to be capital pulling out to avoid the uncertainty of an operational pivot. As markets get going today, we might see some of this dip correct on the back of mainstream attention to the company's tech related intentions.Exciting times. Stick with us for IMSC updates by subscribing to our newsletter below.Disclosure: We have no position in IMSC and have not been compensated for this article.