§

We continued global distribution of our QS-H150 handheld with sales to Japan, Africa, Asia, the Middle East, Europe and to a U.S. Government agency.

§

We achieved growing sales of our QS-B220 to customers including the U.S. Government and several domestic and international freight forwarders.

§

During fiscal 2013, we filed three patent applications with and received two patents from the U.S. Patent and Trademark Office.

§

In June 2013, we opened American Implant Sciences Shanghai Representative Office, a marketing office in Shanghai, China, which better positions us to collaborate with our in-country distributors, identify new distributors and enhance our understanding of the Chinese market.

§

We extended the maturity of our credit agreements with DMRJ Group LLC through March 31, 2014, and negotiated the conversion of $24 million of the line of credit to convertible term notes, increasing availability under the $23 million line of credit.”

Mr. Bolduc concluded, “Our continued progress with the TSA, in achieving acceptance onto the air cargo screening technology list and independent validation testing for passenger checkpoint screening, along with achieving STAC certification, are very significant achievements which we believe establish our credibility as the next generation explosives technology in the competitive global trace explosives industry. The influx of industry talent that we have recruited over the past twelve months increases our ability to innovate new technologies, build new products, and grow our market share and revenues.  We remain excited about our future prospects.”

Details for the quarter and fiscal year ended June 30, 2013 follow below.

Quarter Ended June 30, 2013 vs. June 30, 2012

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Revenues for the quarter ended June 30, 2013 were $2,402,000 as compared with $552,000 for the comparable prior year period, an increase of $1,850,000, or 335.1%.  The increase in revenue is due primarily to increased shipments into, Africa, the Middle East, Mexico and China, resulting in a 130% increase in the number of QS-H150 handheld units sold, increased domestic and international sales of our QS-B220 desktop units, and increased sales of parts and supplies during the quarter ended June 30, 2013, as compared to the comparable prior year period, partially offset by a 2.2% decrease in average unit sell prices on sales of our QS-H150 handheld units.

Ø

Gross margin for the quarter ended June 30, 2013 was $697,000 or 29.0% of revenues as compared with gross margin of $53,000 or 9.6% of revenues for the comparable prior year period.  The increase in gross margin is primarily the result of increased unit sales of our QS-H150 and QS-B220, increased manufacturing overhead absorption, partially offset by increased manufacturing overhead spending due to stock-based compensation recorded on the September 2012 officer and director option grants, increased manufacturing personnel costs and increased warranty costs due to the increase in units sold, as compared to the comparable prior year period.

Ø

Research and development expense for the quarter ended June 30, 2013 was $1,233,000 as compared with $815,000 for the comparable prior year period, an increase of $418,000 or 51.3%.  The increase in research and development expense is due primarily to increased payroll and related benefit costs, stock-based compensation recorded on the September 2012 officer and director option grants, partially offset by decreased contracted engineering.

Ø

Selling, general and administrative expenses for the quarter ended June 30, 2013 were $3,515,000 as compared with $2,522,000 for the comparable prior year period, an increase of $993,000, or 39.4%.  The increase in selling, general and administrative expenses is due primarily a $1,325,000 increase in stock-based compensation recorded on the September 2012 officer and director option grants and warrants to purchase shares of our common stock, increased travel expense resulting from the addition of sales personnel, partially offset by decreased consulting fees due to the issuance of common stock to certain consultants in the comparable prior year period and decreased legal costs.

Ø

For the quarter ended June 30, 2013, other expense, net was $1,493,000 as compared with other expense, net of $1,100,000, for the comparable prior year period, an increase of $393,000. The increase was primarily due to increased interest expense on higher borrowings under our credit facility with DMRJ.

Ø

Our net loss for the quarter ended June 30, 2013 was $5,544,000 as compared with a net loss of $4,384,000 for the comparable prior year period, an increase of $1,160,000, or 26.5%.  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.

Year Ended June 30, 2013 vs. June 30, 2012

Ø

Revenues for the year ended June 30, 2013 were $12,017,000 as compared with $3,406,000 for the prior year, an increase of $8,611,000 or 252.8%.  The increase in revenue is due primarily to a 225% increase in the number of QS-H150 handheld units sold, due primarily to the shipment of the India Ministry of Defence order, $848,000 in sales to agencies of the U.S. Government, increased sales into Africa, the Middle East and Japan, increased domestic and international sales of our QS-B220 desktop units, which we began shipping commercially in the third quarter of fiscal 2012 and, increased sales of parts and supplies during the year ended June 30, 2013, as compared to the comparable prior year period, partially offset by an 4.9% decrease in average unit sell prices on sales of our QS-H150 handheld units.

Ø

Gross margin for the year ended June 30, 2013 was $3,429,000 or 28.5% of revenues as compared with gross margin of $999,000 or 29.3% of revenues for the prior year period.  The decrease in gross margin is primarily the result of increased manufacturing overhead spending due to stock-based compensation recorded on the September 2012 officer and director option grants, costs incurred to support the India Ministry of Defence order, increased warranty costs, increased manufacturing personnel costs, and by the decrease in the average unit sell prices on sales of our QS-H150 handheld units in the year ended June 30, 2013, as compared to the prior year period.

Ø

Research and development expense for the year ended June 30, 2013 was $4,754,000 as compared with $3,180,000 for the prior year period, an increase of $1,574,000 or 49.5%.  The increase in research and development expense is due primarily to a $923,000 increase in stock-based compensation recorded on the September 2012 officer and director option grants and increased payroll and related benefit costs, partially offset by a decrease in contracted engineering.

Ø

Selling, general and administrative expenses for the year ended June 30, 2013 were $20,630,000 as compared with $8,575,000 for the prior year period, an increase of $12,055,000, or 140.6%.  The increase in selling, general and administrative expenses is due primarily to a $12,172,000 increase in stock-based compensation recorded on the September 2012 officer and director option grants and warrants to purchase shares of our common stock, an increase in payroll, related benefit costs and travel expense resulting from the addition of sales personnel and increased sales commissions, the imposition of liquidated damages of $298,000 under our contact with the India Ministry of Defence, due to delayed shipment, increased selling expenses due to the opening of our Shanghai representative office, increased participation at industry trade shows and an increase in demonstration units provided to our sales force,  increased in bank fees related to the extension of letters of credit issued under our agreement with the India Ministry of Defence, and increased in legal fees and costs incurred to increase our authorized shares, partially offset by decreased consulting fees due to the issuance of our common stock to certain consultants in the prior year period and the $295,000 benefit recognized as a result of the litigation settlement with Fulong.

Ø

For the year ended June 30, 2013, other expense, net was $5,399,000 as compared with other expense, net of $3,880,000, for the prior year period, an increase of $1,519,000. The increase was primarily due to increased interest expense on higher borrowings under our credit facility with DMRJ.

Ø

Our net loss for the year ended June 30, 2013 was $27,354,000 as compared with $14,636,000 for the prior year, an increase of $12,718,000, or 86.9%.  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 due to higher borrowings under our credit facility with DMRJ.

Company Conference Call

The Company will host a webcast and conference call on Monday, September 30, 2013 at 4:15 PM Eastern time to review the fourth quarter and fiscal year ended June 30, 2013 financial results. Following the Company’s prepared remarks there will be a Q&A session.  The call can be accessed by interested parties by dialing: 877-299-4454 within the U.S. or 617-597-5447 outside the U.S. and entering passcode 57378790.  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 one month by dialing: 888-286-8010 within the U.S. or 617-801-6888 outside the U.S. and entering passcode 26384817.  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 one month after the call.

About Implant Sciences

Implant Sciences is the leader in next generation Explosives Trace Detection (ETD) technology. In January 2013, the Company became only the fourth ETD manufacturer, and the sole American-owned company, to receive product approval from the US Transportation Security Administration. 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 portable explosives trace detector has received Qualified Anti-Terrorism Technology Designation and, in addition to receiving TSA approval for air cargo screening, the Company’s QS-B220 has also received a Developmental Testing & 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, 2014; 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 Transportation Security Administration or by other U.S. or foreign government and law enforcement agencies or commercial consumers of security products; economic, 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 success 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. 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 period ended June 30, 2013. The Company assumes no obligation to update the information contained in this press release.

For further information contact:

Implant Sciences Corporation

Glenn Bolduc, President and CEO

(978) 752-1700

gbolduc@implantsciences.com

or

Investor Contact:

Laurel Moody

646-810-0608

lmoody@corporateprofile.com

(1) Adjusted EBITDA is defined as net loss plus interest expense, net of interest income, income taxes, depreciation, stock-based compensation, fair value of warrants issued to non-employees and the fair value of common stock issued to consultants.  EBITDA is commonly used in the technology industry, and we present Adjusted EBITDA to enhance your understanding of our financial performance.  We use Adjusted EBITDA as an internal performance measurement and believe that it provides investors and analysts with a measure of operating results unaffected by differences in capital structures and capital investment among otherwise comparable companies and improves comparability of results of operations. Management uses this supplemental measure to evaluate performance over a period of time and to analyze underlying trends in the Company's business and to establish operational goals and forecast that are used in allocating resources.  We expect to compute our non-GAAP financial measure, using the same consistent method from quarter to quarter and year to year.            

While we believe that Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance with United States generally accepted accounting principles, or GAAP.  You should not consider Adjusted EBITDA in isolation or as a substitute for net income, cash flows from operations, or any other performance measures calculated in accordance with GAAP.  In addition, Adjusted EBITDA has inherent material limitations as a performance measure.  It does not include interest expense, but because we have borrowed money, interest expense is a necessary element of our costs.  In addition, Adjusted EBITDA does not include depreciation.  Since we have capital assets, depreciation expense is a necessary element of our costs.  Adjusted EBITDA does not include stock-based compensation, which is a necessary element of our costs since we issue stock awards to employees as an important incentive to maximize overall company performance and as a benefit of employment with the company.  Adjusted EBITDA does not include the fair value of warrants issued to non-employees, which is a necessary element of our costs since we have issued warrants to non-employees and as part of our financing strategy. Finally, Adjusted EBITDA does not include the fair value of common stock issued to consultants, which is a necessary element of our costs since we have issued shares of our common stock in lieu of cash payments to consultants we have retained. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.