UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                   FORM 10-QSB

[X]  Quarterly  report  pursuant  to  section  13  or 15(d) of the Securities
     Exchange Act of 1934. FOR THE QUARTERLY PERIOD ENDING MARCH 31, 2002.

     or

[ ]  Transition  report  pursuant  to Section 13 or 15(d) of the Securities
     Exchange Act of 1934. For the transition period from _____to_____.

                          Commission file number  000-25839


                          IMPLANT SCIENCES CORPORATION
                          ----------------------------
             (Exact name of registrant as specified in its charter)


MASSACHUSETTS                                     04-2837126
------------------------------------              -----------------------
(State or other jurisdiction                      (IRS Employer
of incorporation or organization)                 Identification number)


107 Audubon Road, #5                              Wakefield, MA 01880
------------------------------------              -----------------------


                                  781-246-0700
                           (Issuers telephone number)

                                 NOT APPLICABLE
                                 --------------
    (Former name, former address and former fiscal year, if changed since last
                                    report.)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports)  and  (2)  has  been  subject  to such filing
requirements  for  the  past  90  days.
                            YES  X      NO
                                ---        ---

Indicate  the  number  of  shares outstanding of each of the issuer's classes of
common  equity,  as  of  the  latest  practicable  date:

            Class                             Outstanding at April 30, 2002
 Common Stock, $.10 par value                         6,198,569

           Transitional small business disclosure format (check one):
                              YES       NO  X
                                  ---      ---


<PAGE>
<TABLE>
<CAPTION>
                                          IMPLANT SCIENCES CORPORATION

                                                     INDEX


                                                                                                      Page No.
                                          PART I. FINANCIAL INFORMATION
<S>                                                                                                   <C>
ITEM 1.  Financial Statements:

            Condensed Balance Sheets as of March 31, 2002 and June 30, 2001 (unaudited)                   2

            Condensed Statement of Operations for the Three and Nine Months Ended March 31, 2002
            and 2001 (unaudited)                                                                          3

            Condensed Statement of Cash Flows for the Nine Months Ended March 31, 2002 and
            2001 (unaudited)                                                                              4


            Notes to Condensed Financial Statements (including data applicable to unaudited periods)      5

Item 2.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                                                     9

                                          PART II. OTHER INFORMATION


Item 1.  Legal Proceedings                                                                               17

Item 2.  Changes in Securities and Use of Proceeds                                                       17

Item 3.  Defaults Upon Senior Securities                                                                 17

Item 4.  Submission of Matters to a Vote of Security-Holders                                             17

Item 5.  Other Information                                                                               17

Item 6.  Exhibits and Reports on Form 8-K                                                                17

         Signatures                                                                                      18
</TABLE>


                                        1
<PAGE>
<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                               IMPLANT SCIENCES CORPORATION
                                 CONDENSED BALANCE SHEETS
                                        (UNAUDITED)


                                                                  MARCH 31,     JUNE 30,
                                                                    2002          2001
                                                                ------------  ------------
<S>                                                             <C>           <C>
ASSETS
Current Assets:
 Cash and cash equivalents, including $167,000 of
   restricted cash                                              $ 1,645,000   $ 1,232,000
 Accounts receivable, net                                           858,000       706,000
 Inventories                                                        534,000       349,000
 Investments - available for sale securities                         77,000             -
 Prepaid and other current assets                                   103,000        98,000
                                                                ------------  ------------
   Total Current Assets                                           3,217,000     2,385,000

Property and equipment, net                                       3,728,000     3,514,000
Other non-current assets                                            176,000       183,000
                                                                ------------  ------------
Total Assets                                                    $ 7,121,000   $ 6,082,000
                                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                             $   512,000   $   322,000
   Accrued expenses                                                 796,000       786,000
   Due to shareholders                                              638,000             -
   Current portion of long-term debt                                176,000       176,000
   Obligations under capital leases                                  11,000         6,000
                                                                ------------  ------------
      Total Current Liabilities                                   2,133,000     1,290,000
                                                                ------------  ------------
Long-term Liabilities:
   Long-term debt, net of current portion                           103,000       236,000
   Obligations under capital lease                                   18,000         5,000
   Deferred income taxes                                             29,000        29,000
                                                                ------------  ------------
                                                                    150,000       270,000
                                                                ------------  ------------
                                                                  2,283,000     1,560,000
                                                                ------------  ------------

Stockholders' equity:
 Common stock, $0.10 par value; 20,000,000 shares authorized;
   6,196,237 and 5,912,770 shares issued; and 6,196,237 and
   5,889,770 shares outstanding as of March 31, 2002
   and June 30, 2001, respectively                                  613,000       591,000
 Additional paid-in capital                                      13,069,000    10,930,000
 Accumulated deficit                                             (8,723,000)   (6,604,000)
 Accumulated other comprehensive income                              17,000             -
 Notes receivable from employees                                   (138,000)     (188,000)
                                                                ------------  ------------
                                                                  4,838,000     4,729,000
Less: treasury stock of 23,000 shares at cost at June 30, 2001            -      (207,000)
                                                                ------------  ------------
Total Stockholders' Equity                                        4,838,000     4,522,000
                                                                ------------  ------------
Total Liabilities and Stockholders' Equity                      $ 7,121,000   $ 6,082,000
                                                                ============  ============
</TABLE>


    The accompanying notes are an integral part of these condensed financial
                                  statements.


                                        2
<PAGE>
<TABLE>
<CAPTION>
                                       IMPLANT SCIENCES CORPORATION
                                    CONDENSED STATEMENTS OF OPERATIONS
                                               (UNAUDITED)

                                                       THREE MONTHS ENDED          NINE MONTHS ENDED
                                                    -------------------------  --------------------------
                                                             MARCH 31,                  MARCH 31,
                                                    -------------------------  --------------------------
                                                        2002         2001          2002          2001
                                                    ------------  -----------  ------------  ------------
<S>                                                 <C>           <C>          <C>           <C>
Revenues:
   Product and contract research:
      Medical                                       $ 1,552,000   $1,053,000   $ 4,016,000   $ 2,642,000
      Semiconductor                                     243,000      239,000       716,000       506,000
                                                    ------------  -----------  ------------  ------------
         Total revenues                               1,795,000    1,292,000     4,732,000     3,148,000
                                                    ------------  -----------  ------------  ------------

Costs and expenses:
   Cost of product and contract research revenues     1,717,000    1,280,000     3,691,000     3,002,000
   Research and development                             329,000      143,000       878,000       960,000
   Selling, general and administrative (includes
      $196,000 noncash charge for stock based
      compensation for the three and nine month
      period ended March 31, 2002)                      739,000      599,000     1,742,000     1,725,000
                                                    ------------  -----------  ------------  ------------
      Total costs and expenses                        2,785,000    2,022,000     6,311,000     5,687,000
                                                    ------------  -----------  ------------  ------------

Loss from operations                                   (990,000)    (730,000)   (1,579,000)   (2,539,000)
                                                    ------------  -----------  ------------  ------------

Other income (expense)
   Interest income                                       10,000       29,000        23,000       148,000
   Interest expense                                     (18,000)     (11,000)      (36,000)      (37,000)
   Other expense                                         (2,000)      (1,000)        3,000        (2,000)
                                                    ------------  -----------  ------------  ------------
                                                        (10,000)      17,000       (10,000)      109,000
                                                    ------------  -----------  ------------  ------------

Loss before provision for income taxes               (1,000,000)    (713,000)   (1,589,000)   (2,430,000)
Provision for income taxes                                    -        6,000             -         6,000
                                                    ------------  -----------  ------------  ------------

Net loss                                            $(1,000,000)  $ (719,000)  $(1,589,000)  $(2,436,000)

Preferred distribution                                 (530,000)           -      (530,000)            -
                                                    ------------  -----------  ------------  ------------

Net loss applicable to common shares                $(1,530,000)  $ (719,000)  $(2,119,000)  $(2,436,000)
                                                    ============  ===========  ============  ============

Net loss per share:
  Per share - basic:
    Net loss                                        $     (0.16)  $    (0.12)  $     (0.26)  $     (0.42)
    Preferred distribution                                (0.09)           -         (0.09)            -
                                                    ------------  -----------  ------------  ------------
    Net loss per share applicable to common shares  $     (0.25)  $    (0.12)  $     (0.35)  $     (0.42)
                                                    ============  ===========  ============  ============

 Per share - diluted:
    Net loss                                        $     (0.16)  $    (0.12)  $     (0.26)  $     (0.42)
    Preferred distribution                                (0.09)           -         (0.09)            -
                                                    ------------  -----------  ------------  ------------
    Net loss per share applicable to common shares  $     (0.25)  $    (0.12)  $     (0.35)  $     (0.42)
                                                    ============  ===========  ============  ============

Weighted average common shares outstanding
   used for basic earnings per share                  6,190,237    5,807,140     6,044,711     5,795,681
                                                    ============  ===========  ============  ============

Weighted average common shares outstanding
   used for diluted earnings per share                6,190,237    5,807,140     6,044,711     5,795,681
                                                    ============  ===========  ============  ============
</TABLE>


    The accompanying notes are an integral part of these condensed financial
                                  statements.


                                        3
<PAGE>
<TABLE>
<CAPTION>
                          IMPLANT SCIENCES CORPORATION
                        CONDENSED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)


                                                           NINE MONTHS ENDED
                                                      --------------------------
                                                               MARCH 31,
                                                      --------------------------
                                                          2002          2001
                                                      ------------  ------------
<S>                                                   <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                             $(1,589,000)  $(2,436,000)
 Adjustments to reconcile net loss to net cash
   used by operating activities:
   Depreciation and amortization                          579,000       499,000
   Stock based compensation                               196,000
   Amortization of deferred compensation                        -        46,000
   Equity in loss in Epsilon Medical                        2,000         2,000
   Write-off of loan financing fees                             -         3,000
   Changes in assets and liabilities:
     Accounts receivable                                 (152,000)       94,000
     Inventories                                         (185,000)     (186,000)
     Prepaid and other current assets                      (5,000)      (50,000)
     Notes receivable                                      50,000             -
     Accounts payable                                     190,000      (278,000)
     Accrued expenses                                      10,000      (270,000)
                                                      ------------  ------------
        Net cash used by operating activities            (904,000)   (2,576,000)
                                                      ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
 Purchase of property and equipment                      (753,000)     (867,000)
 Investment - available for sale securities               (60,000)            -
 Other non-current assets                                 (35,000)      (74,000)
                                                      ------------  ------------
       Net cash used by investing activities             (848,000)     (941,000)
                                                      ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES
 Proceeds from common stock, net of discount
   of $300,000                                          2,280,000       196,000
 Repayments of long-term debt                            (115,000)     (136,000)
                                                      ------------  ------------
       Net cash provided by financing activities        2,165,000        60,000
                                                      ------------  ------------

Net increase (decrease) in cash and cash equivalents      413,000    (3,457,000)
Cash and cash equivalents, beginning                    1,065,000     4,838,000
                                                      ------------  ------------
Cash and cash equivalents, ending                     $ 1,478,000   $ 1,381,000
                                                      ============  ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Interest paid                                      $    26,000   $    38,000
   Obligations under capital lease                         35,000        13,000
</TABLE>


    The accompanying notes are an integral part of these condensed financial
                                  statements.


                                        4
<PAGE>
                          IMPLANT SCIENCES CORPORATION
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                 MARCH 31, 2002
                                   (UNAUDITED)

1.   DESCRIPTION  OF  BUSINESS

     Implant  Sciences  Corporation  (the  Company)  develops  products  for the
medical device and explosives detection industry using ion implantation and thin
film  coatings  of  radioactive  and  non-radioactive materials. The Company has
received  Food  and  Drug  Administration 510(k) clearance to market its I-Plant
Iodine-125  radioactive  seed  for the treatment of prostate cancer. The Company
also  has  under  development  interventional  cardiology  devices and temporary
coronary  brachytherapy  systems  for the prevention of restenosis (reclosure of
the  artery  after  balloon  angioplasty). In addition, the Company modifies the
surface characteristics of orthopedic joint implants to reduce polyethylene wear
and  thereby increasing the life of the implant and provides ion implantation of
electronic  dopants for the semiconductor industry. Additionally, the Company is
developing  an  explosives detection device to be used in the detection of trace
residues  of  explosives.

2.   INTERIM  FINANCIAL  STATEMENTS

     The  financial  information  for the three and nine months ending March 31,
2002  is  unaudited  but  includes  all  adjustments  (consisting only of normal
recurring  adjustments)  which  the  Company  considers  necessary  for  a  fair
presentation of the financial position at such date and of the operating results
and  cash  flows for these periods. The results of operations and cash flows for
the three and nine months ended March 31, 2002 are not necessarily indicative of
results  that  may be expected for the entire year. The information contained in
this  Form  10-QSB  should  be  read  in  conjunction with the Company's audited
financial statements, included in its Form 10-KSB/A No. 3 as of and for the year
ending  June  30,  2001  filed  with  the  Securities  and  Exchange Commission.

3.   NEW  ACCOUNTING  STANDARDS

     In  July  2001, the FASB issued Statement of Financial Accounting Standards
("SFAS")  No. 141, Business Combinations. SFAS No. 141 improves the transparency
of  the accounting and reporting for business combinations by requiring that all
business  combinations  are  accounted  for  under a single method, the purchase
method.  This  statement  is  effective  for all business combinations initiated
after  June  30,  2001.

     In  July  2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets.  This  statement applies to intangibles and goodwill acquired after June
30,  2001,  as  well as goodwill and intangibles previously acquired. Under this
statement  goodwill  as well as other intangibles determined to have an infinite
life  will  no  longer  be amortized; however, these assets will be reviewed for
impairment  on a periodic basis. This statement is effective for the Company for
its  first  quarter  of its 2003 fiscal year. Management is currently evaluating
the  impact that this statement will have on the Company's financial statements.

     In  August  2001,  the  FASB  issued  SFAS  No.  143,  Accounting for Asset
Retirement  Obligations.  SFAS  No.  143  addresses  financial  accounting  and
reporting  obligations  associated  with  the  retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to (a) all entities
and  (b)  legal  obligations associated with the retirement of long-lived assets
that  result  from  the acquisition, construction, development and/or the normal
operation of a long-lived asset, except for certain obligations of lessees. SFAS
No.  143 is effective for financial statements issued for fiscal years beginning
after  June  15, 2002. The Company does not anticipate that the adoption of SFAS
No.  143  will  have  a  material  impact  on  its  financial  statements.

     In  October  2001,  the  FASB  issued  SFAS  No.  144,  Accounting  for the
Impairment  or  Disposal  of  Long-Lived  Assets.  SFAS  No.  144  addresses the
financial  accounting and reporting for the impairment or disposal of long-lived
assets.  SFAS  No. 144 supersedes SFAS No. 121, Accounting for the Impairment of
Long-Lived  Assets and for Long-Lived Assets to be Disposed Of, but retains SFAS
No.  121's  fundamental provisions for (a) recognition/measurement of impairment
of  long-lived  assets  to  be  held  and used and (b) measurement of long-lived
assets  to  be  disposed  of  by  sale.  SFAS  No.  144  also  supersedes  the
accounting/reporting provisions of Accounting Principles Board (APB) Opinion No.
30, Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment  of  a  Business  and  Extraordinary, Unusual and Infrequently Occurring
Events  and  Transactions,  for  segments  of  a  business to be disposed of but


                                        5
<PAGE>
retains  APB  No.  30's requirement to report discontinued operations separately
from  continuing  operations  and  extends  that  reporting to a component of an
entity  that either has been disposed of or is classified as held for sale. SFAS
No.  144  is  effective  for fiscal years beginning after December 15, 2001, and
interim  periods within those fiscal years. The Company does not anticipate that
the  adoption  of  SFAS  No.  144  will  have a material impact on its financial
statements.

4.   EARNINGS  PER  SHARE

     Basic  earnings  per  share  is computed based only on the weighted average
number  of  common  shares  outstanding  during the period. Diluted earnings per
share  is  computed  by  using  the  weighted  average  number  of common shares
outstanding  during  the  period,  plus  the dilutive effects of shares issuable
through  the  exercise  of stock options (common stock equivalents) unless their
inclusion  would be antidilutive. In calculating diluted earnings per share, the
dilutive  effect of stock options is computed using the average market price for
the  period.

5.   COMPREHENSIVE  INCOME

     The  Company  has accumulated other comprehensive income resulting from the
unrealized  gain  on an investment in marketable equity securities of CardioTech
International  Inc.  (Note  10)  which  is  recorded in the stockholders' equity
section  of  the  balance  sheet.  Comprehensive  income  is  summarized  below:

<TABLE>
<CAPTION>
                               THREE MONTHS ENDED          NINE MONTHS ENDED
                                    MARCH 31,                  MARCH 31,
                            ------------------------  --------------------------
                                2002         2001         2002          2001
                            ------------  ----------  ------------  ------------
<S>                         <C>           <C>         <C>           <C>
Net loss                    $(1,000,000)  $(719,000)  $(1,589,000)  $(2,436,000)
Other comprehensive income       17,000           -        17,000             -
                            ------------  ----------  ------------  ------------

Comprehensive loss          $  (983,000)  $(719,000)  $(1,572,000)  $(2,436,000)
                            ============  ==========  ============  ============
</TABLE>

6.   ACCOUNTS  RECEIVABLE

     Contract  revenue under cost sharing research and development agreements is
recognized  as  eligible  expenses  are  incurred.  Invoicing  of  research  and
development  contracts  occurs  in  accordance  with  the terms of the contract.
Revenue  recognized but unbilled is recorded as unbilled accounts receivable. At
March  31,  2002  unbilled  accounts receivable represented approximately 11% of
total  accounts  receivable.  Generally, there are no prerequisites necessary to
bill.

7.   CREDIT  ARRANGEMENT

     The  Company had a Revolving Credit Facility ("Credit Facility") and has an
Equipment  Term  Loan  ("Term Loan") pursuant to a Loan Agreement with its bank.
The  Revolving  Credit  Facility  was  unsecured  and the Equipment Term Loan is
cross-collateralized and cross-defaulted. The Loan Agreement has a first lien on
substantially  all  of  the  Company's  assets.

     On  September  30, 2000, the Company's Credit Facility expired. The Company
chose  not to renew the Credit Facility and the Company has no further borrowing
rights  or availability. Additionally, the Company has no borrowings outstanding
with  respect  to  the  expired  Credit  Facility  as  of  March  31,  2002.

     The  Company's Term Loan provided a facility of $1,500,000, of which it had
utilized  $750,000. Interest is payable monthly at 1% above the bank's base rate
commencing  February  1998.  As  of  March 31, 2002, the balance outstanding was
approximately $280,000 and no further borrowings are permitted on the Term Loan.


     The  Company's  Loan  Agreement  requires  compliance  with  two  financial
covenants including minimum levels of net worth and net loss limits. At June 30,
2001,  the  Company's net loss covenant was greater than the required amount. On
September 28, 2001, the Company and Stephen N. Bunker, a director and officer of
the  Company,  (collectively, the "Pledgors") fully collateralized the Term Loan


                                        6
<PAGE>
with  $167,000  and  $200,000  of  cash  (the  "Collateral"),  respectively, and
executed pledge agreements with respect to the collateral. As of March 31, 2002,
the  Collateral  was  $367,000.  The  Pledgors deposited the Collateral with the
Company's  bank. The Collateral must remain with the Company's bank in an amount
that  is  sufficient  to  collateralize only the balance outstanding on the Term
Loan  at  any  point  in  time  until such Term Loan is paid in full. The pledge
agreements  allow  the  Company's  bank  to  use  the  Collateral to fulfill the
obligations of the Term Loan in the event of a default by the Company in payment
of the principal or interest of the Term Loan. The Company's bank has waived its
rights  under the Loan Agreement with respect to this financial covenant at June
30,  2001  through  and  including  June  30,  2002.

     On  October  10,  2001,  the Company entered into a $500,000 Line of Credit
Facility  ("Line of Credit") with CardioTech International, Inc. ("CardioTech"),
a  related  party  (See Note 10). The Line of Credit provides for funding at the
discretion of the Company, is subject to a security agreement providing a second
lien  on  substantially  all of the Company's assets, and provides for a $15,000
commitment  fee  which  was  paid  during the three month period ended March 31,
2002. The Company and CardioTech mutually agreed to terminate the Line of Credit
on  March  29,  2002.  There  were  no  borrowings  on  this Line of Credit from
inception through its termination on March 29, 2002. As of March 31, 2002, there
were no borrowings outstanding or other obligations due CardioTech in respect of
the  Line  of  Credit.

8.   PRIVATE  PLACEMENT

     The Company received $1,500,000 in a private placement with an investor and
issued  145,349  Units, each consisting of one share of its common stock and one
common stock purchase warrant. Two warrants are exercisable for one share of its
common  stock  at  an  exercise  price  of $12.90 per share. Total consideration
received  was  $1,500,000,  which  reflected  a  discount of 20% from the market
price.  This  discount  reflects  the best terms available to the Company in the
private  placement  market  during  the  second  quarter  of  fiscal  2002.

     In  connection with the transaction, the Company issued additional warrants
to the investor's general counsel to purchase 10,000 shares at an exercise price
of  $12.90  per share and a document preparation fee of $5,000. The Company also
engaged  two  placement agents who received warrants to purchase an aggregate of
12,000  shares  of the Company's common stock at an exercise price of $12.90 per
share  and  the  placement  agents  collectively  received  a  placement  fee of
$105,000.  All warrants pursuant to this transaction are exercisable at any time
prior  to  December  12,  2006. Mr. Pasquale Ruggieri, a member of the Company's
Board of Directors, also serves as an investment banker for one of the placement
agents  in  connection  with  this  transaction.

     The  Company  has  recorded the proceeds from the private placement, net of
the  discount  of  $300,000  and  offering  costs  of  $272,000 paid in cash and
warrants  having  a  fair  value  of  $55,000,  as  a  capital  contribution.

9.   WARRANT  EXERCISE

     Between  December 18, 2001 and January 3, 2002, warrants to purchase 70,900
shares  of  the  Company's  common  stock were exercised at an exercise price of
$9.00  per  share  and  the  Company  received  gross  proceeds of approximately
$638,000.  Although warrant exercises such as this were registered in connection
with  the  Company's  initial  public offering, the Company's prospectus had not
been updated to include developments in the Company's business since the initial
public  offering.  To  the  extent that purchasers of these shares were damaged,
the  Company  could  be exposed to liability, including, possibly, liability for
rescission  of their purchases.  Until the prospectus is declared effective, the
Company  has  recognized  a liability of $638,000 as amounts due to shareholders
and segregated the related proceeds to reflect the potential amount necessary to
rescind  the  exercise of the warrants.  During the period in which the warrants
were  exercised,  the  Company's  stock  price  ranged from $11.00 to $14.07 per
share;  however,  at  this date the Company is unable to determine whether or at
what  price each of the purchasers may have disposed of the shares they acquired
by  exercising  the  warrants  and  if  any  of  the  purchasers  were  damaged.

     In  addition, the Securities and Exchange Commission may have the authority
to  impose  a variety of remedies, including, possibly, fines. The Company is in
the  process  of  evaluating the impact of the aforementioned exercise, but does
not  believe that its liability, if any, to such purchasers would be material to
its  financial  condition  or  results  of  operations.


                                        7
<PAGE>
10.  EQUITY  TRANSACTION

     On  March  28, 2002, the Company extended the expiration date from June 23,
2002  to  June  30,  2003,  of  1,000,000  warrants  issued  on June 23, 1999 in
conjunction  with  the  Company's  initial public offering.  The Company did not
receive  any  consideration  from  the holders of the warrants.  The Company has
recognized this transaction as a preferred distribution based upon the estimated
fair  value  of  the  extension  of  approximately $530,000.  The effect of this
transaction had no overall effect on stockholders' equity or cash, but increased
net  loss  per  share  applicable  to  common  shareholders  by $0.09 per share.

     During  the  third  quarter  of 2002, the Company granted 30,000 options to
purchase  common  stock  to  consultants  in  exchange for services. The Company
accounts for stock-based compensation issued to non-employees in accordance with
the  provisions  of  SFAS No. 123, "Accounting for Stock-Based Compensation" and
Emerging  Issues  Task  Force No. 96-18, "Accounting for Equity Instruments That
Are  Issued  to  Other  Than  Employees  for  Acquiring,  or in conjunction with
Selling,  Goods  or  Services."  The  Company recorded approximately $196,000 in
expense  associated  with  the  issuance  of options to consultants. The Company
estimated  the  fair  value  of the common stock options using the Black-Scholes
option-pricing  model. The Company estimated the fair value of the options using
the  following  input  assumptions:


          Volatility                           48%
          Dividend yield                        0%
          Risk-free interest rate           4.57-5.04%
          Expected lives                     10 years

11.  RELATED  PARTY  TRANSACTIONS

     Statement  of  Financial  Accounting  Standards  No.  57,  "Related  Party
Disclosures,"  specifies  the  nature of information that should be disclosed in
financial statements regarding related party transactions.  CardioTech, a public
company,  is  a  related  party  with  the  Company by virtue of its significant
business  relationships.

     In March 2000, the Company entered into a $250,000 joint research agreement
with  CardioTech  to  develop a proprietary porous polymer biocompatible coating
technology as a platform for the Company's proprietary radioactive brachytherapy
technology.  Through  March  31,  2002,  the  Company  paid  CardioTech $115,000
pursuant  to  the  aforementioned  agreement. Additionally, the Company acquired
60,000 shares of the common stock of CardiTech at a price of $1.00 per share. As
of  March  31,  2002,  the  fair  market  value of the CardioTech shares held as
investment  is  $77,000.  CardioTech  is  a publicly traded company whose common
stock  trades  under  the  symbol  CTE  on  the  American  Stock  Exchange.

     Certain directors of the Company hold positions as directors of CardioTech.
The CEO and Chairman of the Board of Directors of the Company is also a director
of  CardioTech.  The CEO and Chairman of the Board of Directors of CardioTech is
also  a  director  of  the  Company.  The  acting Chief Financial Officer of the
Company  is  also  the acting Chief Financial Officer of CardioTech. As of March
31,  2002,  approximately  $21,000  was  due and payable to the Company's acting
Chief  Financial  Officer.

     On  October  10,  2001,  CardioTech provided the Company a $500,000 Line of
Credit  Facility, which was subsequently terminated by mutual agreement on March
29,  2002  (See  Note  7).

     Accounts  receivable from related parties as of December 31, 2001 consisted
of  a  loan of $138,000 to the Company's chief executive officer, which was used
to  exercise options for 50,000 shares of the Company's common stock on December
9,  1997. The loan is due and payable upon the disposal of the 50,000 shares and
the  loan  bears  interest  at  6% per annum. This transaction was reported as a
reduction  of  stockholders'  equity.

     In  January  2000,  the  Company  received  notice  of the award of a joint
research grant. Funding is provided through a $100,000 Phase I grant by the U.S.
Department  of Health and Human Services, National Heart, Lung & Blood Institute
to CardioTech and sub-grants to the Company and Stanford University. The Company
acted  as  a  subcontractor  to  CardioTech  and  received a total of $25,000 in
payments  through September 2000. There are no further amounts to be received by
the  Company  pursuant  to  this  grant.


                                        8
<PAGE>
ITEM 2.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL CONDITION  AND
          RESULTS  OF  OPERATIONS

     The  following  management  discussion  and  analysis  should  be  read  in
conjunction  with  the  financial  statements  and notes thereto as filed in the
Company's  Form 10-KSB/A No. 3 for the year ended June 30, 2001.  In addition to
historical  information,  this  Form 10-QSB contains forward-looking statements.
The  forward-looking  statements  are subject to certain risks and uncertainties
that  could  cause  actual  results to differ materially from those reflected in
such  forward-looking  statements.  Readers  are  cautioned  not  to place undue
reliance  on  these  forward-looking  statements,  which  reflect  management's
opinions  only  as  of the date hereof.  The Company undertakes no obligation to
revise  or publicly release the results of any revision to these forward-looking
statements.  Readers  should  carefully  review documents that the Company files
from  time  to  time  with the Securities and Exchange Commission, including the
Company's  Quarterly  Reports  and Annual Reports filed by the Company in fiscal
2001  and  2002.

RESULTS OF OPERATIONS

Comparison for the three months ended March 31, 2002 and 2001

     Revenues.  Total  revenues  for  the three months ended March 31, 2002 were
$1,795,000  as  compared  to $1,292,000 for the comparable prior year period, an
increase  of $503,000 or 39%.  The increase is attributable primarily to revenue
recognized from the I-PlantTM prostate seed, which the Company began shipping in
the first half of fiscal 2001.  I-Plant prostate seed sales for the three months
ended March 31, 2002 were approximately $833,000 as compared to $217,000 for the
comparable  prior  year period, an increase of $616,000 or 284%.  Over the three
month  period ended March 31, 2002, the I-PlantTM prostate seed sales have grown
at a compounded average rate of 13% per month.  Although management believes the
prostate seed business will maintain a trend of strong growth, management cannot
be  assured  that  a  13% monthly growth rate will be sustainable as the product
matures.  The  Company's  revenues  from  the I-PlantTM prostate seeds increased
primarily  because  of an increase in the number of customers and an increase in
the  volume  of the I-PlantTM prostate seeds shipped.  Revenues from medical and
industrial  coatings  for the three months ended March 31, 2002 were $567,000 as
compared to $624,000 for the comparable prior year period, a decrease of $57,000
or  9%.  The  decrease  in  revenues  from  medical  and  industrial coatings is
primarily  a  result  of  approximately  $203,000  recognized  in the prior year
quarter to develop a coating process, including certain related equipment, for a
customer.  The  Company  believes  that  the  development  of this process could
provide the Company with future revenues to perform industrial coating services,
however,  the  Company has not yet received any orders to perform such services.
This  decrease  in  medical  and  industrial  coatings  revenues was offset by a
$58,000  or  14% increase in the Company's orthopedic joint replacement coatings
revenues  in  the  three  month  period  ended March 31, 2002 as compared to the
comparable prior year period.  Revenues from semiconductors for the three months
ended  March  31,  2002 were $205,000 as compared to $239,000 for the comparable
prior  year  period,  a  decrease  of  $34,000  or  14%.  The  decrease  in  the
semiconductor  business  is a result of reduced sales to one customer during the
current  quarter.  The Company believes that slight fluctuations in sales in the
Company's semiconductor business from quarter-to-quarter are normal occurrences,
however  management  believes that moderate growth will continue to be achieved.
Contract  and  grant  revenue  for  the  three  months ended March 31, 2002 were
$190,000  as  compared  to  $213,000  for  the  comparable  prior year period, a
decrease of $23,000 or 11%.  The Company's government contract and grant revenue
accounted  for  10% and 17% of revenue for the three months ended March 31, 2002
and  2001,  respectively.  The  Company's  grant  revenues,  principally  Small
Business  Innovative  Research (SBIR) programs, fluctuate due to: (a) the desire
of  the  Company  to  obtain  external  funding for its research and development
efforts;  (b)  the availability of government funding; and (c) the time required
to  obtain  approval of a grant application.  The Company has been successful in
obtaining  SBIR grants in fiscal 2002 and 2001.  The Company expects to continue
to  seek  continuation  or replacement of its existing SBIR grants during fiscal
2002  and beyondLess than 5% of all revenues were derived from foreign sources.

     The  Company's  two  major  customers,  the Howmedica/Osteonics Division of
Stryker  Corporation  and  Biomet, Incorporated, combined, accounted for 25% and
31% of revenue for the three months ended March 31, 2002 and 2001, respectively.
The  Company's sales to these customers as a percentage of total sales decreased
as  a result of the increasing sales volume of I-PlantTM prostate seeds. MED-TEC
Iowa  Inc.  ("MED-TEC  Inc."),  the  Company's exclusive distributor of prostate
seeds,  accounted  for  46% and 17% of revenues for the three months ended March
31,  2002  and  2001,  respectively.


                                        9
<PAGE>
     Cost  of  Product  and  Contract  Research  Revenues.  Cost  of product and
contract  research  revenues  for  the  three  months  ended March 31, 2002 were
$1,717,000  as  compared  to $1,280,000 for the comparable prior year period, an
increase  of  $437,000  or  34%.  The  increase  in cost of product and contract
research  revenues  is  primarily  a  result of increases in the cost of product
sales  due  to:  (a)  overall increase in sales volume; and (b) additional costs
related  to  the  growth  of the radioactive prostate seed business, principally
personnel  costs  and  depreciation  expense  related  to  new  equipment.  As a
percentage  of  revenues,  the  cost  of  product and contract research revenues
decreased  to  96%  for the three months ended March 31, 2002 as compared to 99%
for  the  comparable prior year period. This decrease in cost as a percentage of
revenues  is  primarily  attributable  to  the  increased volume of sales of the
I-Plant  radioactive  prostate  seed. The cost of I-PlantTM radioactive prostate
seed  has a high fixed cost component and as the volume of sales of the prostate
seed increases management anticipates continued improvements in gross margins as
a percentage of revenues. During fiscal 2002 and 2001, the Company utilized SBIR
grants  as  a  significant  source  of  funding for its research and development
efforts. The Company will continue to use SBIR grants as a source of funding for
its  research  and  development efforts in fiscal 2002. The Company's obligation
with respect to these grants is to perform the research on a best-efforts basis.
Periodically,  the  Company  may  continue  its research and development efforts
related  to  these  projects at its own expense. The Company has classified such
costs  as cost of product and contract research revenues to permit comparability
between  periods.  This  cost  is  considered  company-funded  research  and
development.

     Research  and  Development.  Research and development expense for the three
months  ended  March  31,  2002  was  $329,000  as  compared to $143,000 for the
comparable  prior year period, an increase of $186,000 or 130%. This increase is
primarily  a  result  of  management's  decision to expend internal funds in the
development  of  its  trace explosives detection device and polyurethane covered
drug eluting coronary stent. The Company did experience significant decreases in
research and development costs during the three months ended March 31, 2001 as a
result of the previous completion of development of its I-PlantTM prostate seed.

     Selling,  General  and  Administrative. Selling, general and administrative
expenses  for the three months ended March 31, 2002 were $739,000 as compared to
$599,000  for  the comparable prior year period, an increase of $140,000 or 23%.
Included in selling, general and administrative costs was approximately $196,000
related  to  stock  based  compensation for warrants and stock options issued to
certain consultants. Accordingly, selling, general and administrative costs, net
of the charges for stock based compensation, decreased to $543,000 for the three
months  ended  March  31,  2002,  a decrease of $56,000 or 9% as compared to the
comparable  prior year period. The decrease reflects the positive impact of cost
containment  efforts employed by management. These cost containment efforts were
initially  undertaken  in  the  second  half  of  fiscal  2001. Cost containment
measures  included,  but  were  not limited to, the elimination of discretionary
spending not essential to achieving critical business objectives, replacement of
certain members of senior staff and management with consultants experienced in a
manufacturing  environment  focused  on  operational  efficiencies, reduction of
legal  expenses associated with patent application preparation, and cancellation
of  the  Company's  previous  public  relations  firm's  contract.

     Other  Income,  Net.  For  the three month period ended March 31, 2002, the
Company  recorded other expense, net of $10,000 as compared to other income, net
of $17,000. The decrease is primarily a result of a lower available cash balance
upon  which  to  generate  interest  income.

     Net  Loss.  Net  loss  for  the three month period ended March 31, 2002 was
$1,000,000  as  compared  to  $719,000  for the comparable prior year period, an
increase  in  net  loss  of  $281,000 or 39%. Included in net loss for the three
month  period  ended March 31, 2002 is an approximate charge of $196,000 related
to  stock  based compensation. Accordingly, the net loss before giving effect to
the charge for stock based compensation is $804,000 or an increase of $85,000 or
12% as compared to the comparable prior year period. The increase in net loss is
primarily  attributable  to  increased  spending  in  research  and development,
specifically  to  further  progress  the  development  of  the  Company's  trace
explosives detection system and polyurethane coated drug-eluting coronary stent.
The  increase  in  net loss was offset by the marked increase in total revenues,
especially  the  growth  in  the  sale  of  the I-PlantTM prostate seed, and the
maintenance  of  stable  operating  expenses  pursuant  to  the  Company's  cost
containment  measures.  The  Company's  earnings  before  interest,  taxes,
depreciation,  amortization and stock based compensation ("Adjusted EBITDA") for
the  three  months  ended  March  31,  2002  were  a negative Adjusted EBITDA of
$597,000  as  compared  to  a  negative  Adjusted  EBITDA  of  $537,000  for the
comparable prior year period, an increase in negative Adjusted EBITDA of $60,000
or  11%.  The  Company  calculated  Adjusted  EBITDA  by  adding  depreciation,
amortization  and  stock based compensation of $393,000 and $193,000 to the loss
from  operations of $990,000 and $730,000 for the three month period ended March
31,  2002  and 2001, respectively. Adjusted EBITDA is not comparable to earnings
determined  in  accordance  with  generally  accepted  accounting  principles.
Accordingly,  Adjusted EBITDA as determined by the Company may not be comparable


                                       10
<PAGE>
to  similarly  titled measures reported by other companies. We believe that this
computation  is  useful  in  analyzing operating performance, but should be used
only  in conjunction with results reported in accordance with generally accepted
accounting  principles. This reduction in Adjusted EBITDA primarily reflects the
additional  investment  by  the  Company in its internal funding of research and
development  projects  as well as adjustments to the valuation of its inventory.
Adjusted EBITDA was positively affected, however, by the continued increasing in
the  sales  volume  of the I-Plant prostate seed. The basic and diluted net loss
per  share  for  the  three  months  ended March 31, 2002 was $0.16 per share as
compared to $0.12 per share for the comparable prior year period, an increase in
net  loss  of  $0.04  or  25%.

     On  March  28, 2002, the Company extended the expiration date from June 30,
2002  to  June  30,  2003,  of  1,000,000  warrants  issued  on June 23, 1999 in
conjunction  with  the  Company's  initial  public offering. The Company did not
receive  any  consideration  from  the  holders of the warrants. The Company has
recognized this transaction as a preferred distribution based upon the estimated
fair  value  of  the  extension  of  approximately  $530,000. The effect of this
transaction had no overall effect on stockholders' equity or cash, but increased
net  loss  per  share  applicable to common shareholders by $0.09 per share. The
basic  and  diluted net loss applicable to common shares per share for the three
months  ended  March 31, 2002 was $0.25 per share as compared to $0.12 per share
for  the  comparable  prior  year  period, an increase in net loss applicable to
common  shares  per  share  of  $0.13  or  108%.

Comparison for the nine months ended March 31, 2002 and 2001

     Revenues.  Total  revenues  for  the  nine months ended March 31, 2002 were
$4,732,000  as  compared  to $3,148,000 for the comparable prior year period, an
increase  of  $1,584,000  or  50%.  The  increase  is  attributable primarily to
revenue  recognized  from the I-PlantTM seed which the Company began shipping in
the  first  half  of  fiscal  2001.  I-PlantTM  prostate seed sales for the nine
months  ended  March  31,  2002  were  approximately  $2,021,000  as compared to
$350,000  for  the  comparable  prior  year period, an increase of $1,671,000 or
477%.  Over  the  nine month period ended March 31, 2002, the I-PlantTM prostate
seed  sales  have grown at a compounded average rate of 16% per month.  Although
management  believes  the prostate seed business will maintain a trend of strong
growth,  management  cannot  be  assured  that a 16% monthly growth rate will be
sustainable  as  the product matures.  The Company's revenues from the I-PlantTM
prostate  seeds  increased  primarily  because  of  an increase in the number of
customers and an increase in the volume of the I-PlantTM prostate seeds shipped.
Revenues  from  medical  and industrial coatings for the nine months ended March
31, 2002 were $1,553,000 as compared to $1,563,000 for the comparable prior year
period,  a decrease of $10,000 or 1%.  The decrease in revenues from medical and
industrial  coatings  is primarily a result of approximately $303,000 recognized
in the prior year period to develop a coating process, including certain related
equipment, for a customer.  The Company believes the development of this process
could  provide  the  Company  with future revenues to perform industrial coating
services,  however,  the Company has not yet received any orders to perform such
services.  This  decrease in medical and industrial coatings revenues was offset
by  a  $118,000  or  10%  increase in the Company's orthopedic joint replacement
coatings  revenues  in the nine month period ended March 31, 2002 as compared to
the  comparable  prior  year  period.  Revenues from semiconductors for the nine
months  ended  March  31,  2002  were  $647,000  as compared to $506,000 for the
comparable  prior  year period, an increase of $141,000 or 28%.  The increase in
the  semiconductor  business  is  a  result of the addition of new customers who
require  outsourced  ion  implantation  services  for  research  and development
activities.  Contract and grant revenue for the nine months ended March 31, 2002
were  $511,000  as  compared to $729,000 for the comparable prior year period, a
decrease  of  $218,000  or  30%.  The  Company's  government  contract and grant
revenue accounted for 11% and 19% of revenue for the nine months ended March 31,
2002  and  2001,  respectively.  The Company's grant revenues, principally Small
Business  Innovative  Research (SBIR) programs, fluctuate due to: (a) the desire
of  the  Company  to  obtain  external  funding for its research and development
efforts;  (b)  the availability of government funding; and (c) the time required
to  obtain  approval of a grant application.  The Company has been successful in
obtaining SBIR grants in 2002 and 2001.  The Company expects to continue to seek
continuation  or  replacement of its existing SBIR grants during fiscal 2002 and
beyond.  Less  than  5%  of  all  revenues  were  derived  from foreign sources.

     The  Company's  two  major  customers,  the Howmedica/Osteonics Division of
Stryker  Corporation  and  Biomet, Incorporated, combined, accounted for 27% and
39%  of revenue for the nine months ended March 31, 2002 and 2001, respectively.
The  Company's sales to these customers as a percentage of total sales decreased
as  a result of the increasing sales volume of I-PlantTM prostate seeds. MED-TEC
Inc.,  the  Company's exclusive distributor of prostate seeds, accounted for 42%
and  11%  of  revenues  for  the  nine  months  ended  March  31, 2002 and 2001,
respectively.


                                       11
<PAGE>
     Cost  of  Product  and  Contract  Research  Revenues.  Cost  of product and
contract  research  revenues  for  the  nine  months  ended  March 31, 2002 were
$3,691,000  as  compared  to $3,002,000 for the comparable prior year period, an
increase  of $689,000 or 23%. The increases in cost of product sales are due to:
(a)  overall  increase  in sales volume; and (b) additional costs related to the
growth  of  the  radioactive prostate seed business, principally personnel costs
and  depreciation expense related to new equipment. As a percentage of revenues,
the cost of product and contract research revenues decreased to 78% for the nine
months  ended  March  31,  2002 as compared to 95% for the comparable prior year
period.  This  decrease  in  cost  as  a  percentage  of  revenues  is primarily
attributable  to  the  increased  volume  of  sales of the I-PlantTM radioactive
prostate  seed. The cost of I-PlantTM radioactive prostate seed has a high fixed
cost  component  and  as  the  volume  of  sales  of the prostate seed increases
management  anticipates  continued improvements in gross margins as a percentage
of  revenues. During fiscal 2001 and 2000, the Company utilized SBIR grants as a
significant  source  of  funding  for  its research and development efforts. The
Company will continue to use SBIR grants as a source of funding for its research
and development efforts in fiscal 2002. The Company's obligation with respect to
these  grants  is to perform the research on a best-efforts basis. Periodically,
the  Company  may continue its research and development efforts related to these
projects  at  its  own expense. The Company has classified such costs as cost of
product  and contract research revenues to permit comparability between periods.
This  cost  is  considered  company-funded  research  and  development.

     Research  and  Development.  Research  and development expense for the nine
months  ended  March  31,  2002  was  $878,000  as  compared to $960,000 for the
comparable  prior  year  period,  a  decrease of $82,000 or 9%. This decrease is
primarily  a  result  of the completion of development costs associated with the
I-PlantTM  seed in connection with the commercial product introduction in fiscal
2001. However, this decrease has been offset by the Company's decision to expend
internal  funds  in  the  further  development of its trace explosives detection
device  and  polyurethane  covered  drug  eluting  coronary  stent.  The Company
anticipates  increases  in  future  expenditures resulting for these new product
development  plans.

     Selling,  General  and  Administrative. Selling, general and administrative
expenses for the nine months ended March 31, 2002 were $1,742,000 as compared to
$1,725,000  for  the comparable prior year period, an increase of $17,000 or 1%.
Included in selling, general and administrative costs was approximately $196,000
related  to  stock  based  compensation for warrants and stock options issued to
certain consultants. Accordingly, selling, general and administrative costs, net
of  charges  for  stock based compensation, decreased to $1,546,000 for the nine
months  ended  March  31, 2002, a decrease of $179,000 or 10% as compared to the
comparable  prior year period. The decrease reflects the positive impact of cost
containment efforts employed by management. Theses cost containment efforts were
initially  undertaken  in  the  second  half  of  fiscal  2001. Cost containment
measures  included,  but  were  not limited to, the elimination of discretionary
spending not essential to achieving critical business objectives, replacement of
certain members of senior staff and management with consultants experienced in a
manufacturing  environment  focused  on  operational  efficiencies, reduction of
legal  expenses associated with patent application preparation, and cancellation
of  the  Company's  previous  public  relations  firm's  contract.

     Other  Income,  Net.  For  the  nine  month period ended March 31, 2002 the
Company  recorded other expense, net of $10,000 as compared to other income, net
of  $109,000.  The  decrease  is  primarily  a  result of a lower available cash
balance  upon  which  to  generate  interest  income.

     Net  Loss.  Net  loss  for  the  nine month period ended March 31, 2002 was
$1,589,000  as  compared  to  $2,436,000 for the comparable prior year period, a
decrease in net loss of $847,000 or 35%. Included in net loss for the nine month
period  ended  March  31,  2002  is an approximate charge of $196,000 related to
stock  based compensation. Accordingly, the net loss before giving effect to the
charge for stock based compensation is $1,393,000 or a decrease of $1,043,000 or
43%  as compared to the comparable prior year period. This reduction in net loss
is  attributable,  in part, by the marked increase in total revenues, especially
the  growth  in  the sale of the I-PlantTM prostate seed, and the maintenance of
stable  operating  expenses pursuant to the Company's cost containment measures.
Offsetting  these  factors  that  contributed  to  a  decrease  in  net loss was
increased spending in research and development, specifically to further progress
the  development  of  the  Company's  trace  explosives  detection  system  and
polyurethane  coated  drug-eluting coronary stent. The Company's earnings before
interest,  taxes,  depreciation,  amortization  and  stock  based  compensation
("Adjusted  EBITDA")  for  the  nine months ended March 31, 2002 were a negative
Adjusted  EBITDA  of  $804,000  as  compared  to  a  negative Adjusted EBITDA of
$2,040,000  for  the  comparable  prior  year period, an improvement in Adjusted
EBITDA  of  $1,236,000  or 61%. The Company calculated Adjusted EBITDA by adding
depreciation, amortization and stock based compensation of $775,000 and $499,000
to  the  loss  from  operations  of $1,579,000 and $2,539,000 for the nine month


                                       12
<PAGE>
period  ended  March  31,  2002  and  2001, respectively. Adjusted EBITDA is not
comparable  to  earnings  determined  in  accordance  with  generally  accepted
accounting principles. Accordingly, Adjusted EBITDA as determined by the Company
may  not be comparable to similarly titled measures reported by other companies.
We  believe  that this computation is useful in analyzing operating performance,
but  should be used only in conjunction with results reported in accordance with
generally  accepted  accounting  principles. This improvement in Adjusted EBITDA
primarily  reflects  the  positive  impact of the increasing sales volume of the
I-Plant  prostate  seed  compared  to  the  Company's  manufacturing  fixed cost
structure.  The  basic  and diluted net loss per share for the nine months ended
March  31,  2002  was  $0.26  per  share  as compared to $0.42 per share for the
comparable  prior  year  period,  a  decrease  in  net  loss  of  $0.16  or 38%.

     On  March  28, 2002, the Company extended the expiration date from June 30,
2002  to  June  30,  2003,  of  1,000,000  warrants  issued  on June 23, 1999 in
conjunction  with  the  Company's  initial  public offering. The Company did not
receive  any  consideration  from  the  holders of the warrants. The Company has
recognized this transaction as a preferred distribution based upon the estimated
fair  value  of  the  extension  of  approximately  $530,000. The effect of this
transaction had no overall effect on stockholders' equity or cash, but increased
net  loss  per  share  applicable to common shareholders by $0.09 per share. The
basic  and  diluted  net loss applicable to common shares per share for the nine
months  ended  March 31, 2002 was $0.35 per share as compared to $0.42 per share
for  the  comparable  prior  year  period,  a decrease in net loss applicable to
common  shares  per  share  of  $0.07  or  17%.

LIQUIDITY  AND  CAPITAL  RESOURCES

     As  of  March 31, 2002, the Company had approximately $1,645,000 in cash in
the  form  of  cash and short-term investments.  Included in cash is $167,000 of
restricted cash required to partially collateralize the Company's Equipment Term
Loan,  as  discussed  below.  During  the  nine  months  ended  March  31, 2002,
operating  activities  used  cash  of  approximately $904,000.  Net cash used by
operating  activities  primarily  reflects  the  $1,589,000 net loss, a $152,000
increase  in accounts receivable and a $185,000 increase in inventory; offset by
a  $190,000  increase in accounts payable, stock based compensation of $196,000,
and  depreciation  and  amortization  of $579,000.  During the nine months ended
March  31, 2002, investing activities used cash of approximately $848,000, which
was  primarily  attributable  to  $753,000 used in the purchases of property and
equipment  and  $60,000  for  the  purchase  of  60,000  shares  of  CardioTech
International  Inc.  common stock.  During the nine months ended March 31, 2002,
financing  activities  provided  approximately  $2,165,000  in  cash.  Net  cash
provided  by  financing activities primarily includes proceeds from the exercise
of stock options in the approximate amount of $153,000; the exercise of warrants
in  the approximate amount of $638,000, the sale of treasury stock in the amount
of  $253,000;  and  the issuance of $1,500,000 of common stock through a private
placement, net of $272,000 of transaction costs.  The proceeds from the issuance
of  equity  were  offset  by  payments  on  the Company's equipment term loan of
$115,000.

     The  Company had a Revolving Credit Facility ("Credit Facility") and has an
Equipment  Term  Loan  ("Term Loan") pursuant to a Loan Agreement with its bank.
The  Revolving  Credit  Facility  was  unsecured  and the Equipment Term Loan is
cross-collateralized and cross-defaulted. The Loan Agreement has a first lien on
substantially  all  of  the  Company's  assets.

     On  September  30, 2000, the Company's Credit Facility expired. The Company
chose  not to renew the Credit Facility and the Company has no further borrowing
rights  or availability. Additionally, the Company has no borrowings outstanding
with  respect  to  the  expired  Credit  Facility  as  of  March  31,  2002.

     The  Company's Term Loan provided a facility of $1,500,000, of which it had
utilized  $750,000. Interest is payable monthly at 1% above the bank's base rate
commencing  February  1998.  As  of  March 31, 2002, the balance outstanding was
$280,000  and  no  further  borrowings  are  permitted  on  the  Term  Loan.

     The  Company's  Loan  Agreement  requires  compliance  with  two  financial
covenants including minimum levels of net worth and net loss limits. At June 30,
2001,  the  Company's net loss covenant was greater than the required amount. On
September 28, 2001, the Company and Stephen N. Bunker, a director and officer of
the  Company,  (collectively, the "Pledgors") fully collateralized the Term Loan
with  $167,000  and  $200,000  of  cash  (the  "Collateral"),  respectively, and
executed pledge agreements with respect to the collateral. As of March 31, 2002,
the  Collateral  was  $367,000.  The  Pledgors deposited the Collateral with the
Company's  bank. The Collateral must remain with the Company's bank in an amount
that  is  sufficient  to  collateralize only the balance outstanding on the Term
Loan  at  any  point  in  time  until such Term Loan is paid in full. The pledge
agreement  allows  the  Company's  bank  to  use  the  Collateral to fulfill the
obligations of the Term Loan in the event of a default by the Company in payment
of the principal or interest of the Term Loan. The Company's bank has waived its
rights  under the Loan Agreement with respect to this financial covenant at June
30,  2001  through  and  including  June  30,  2002.


                                       13
<PAGE>
     On  October  10,  2001,  the Company entered into a $500,000 Line of Credit
Facility ("Line of Credit") with CardioTech, a related party. The Line of Credit
provides  for funding at the discretion of the Company, is subject to a security
agreement  providing a second lien on substantially all of the Company's assets,
and  provides for a $15,000 commitment fee which was paid during the three month
period  ended  March  31,  2002.  The  Company and Cardiotech mutually agreed to
terminate the Line of Credit on March 29, 2002. There were no borrowings on this
Line  of  Credit from inception through its termination on March 29, 2002. As of
March  31,  2002,  there were no borrowings outstanding or other obligations due
CardioTech  in  respect  of  the  Line  of  Credit.

     The Company received $1,500,000 in a private placement with an investor and
issued  145,349  Units, each consisting of one share of its common stock and one
redeemable  common  stock  purchase warrant. Two warrants are redeemable for one
share  of  its  common  stock  at  an  exercise price of $12.90 per share. Total
consideration  received  was  $1,500,000, which reflected a discount of 20% from
the market price. This discount reflects the best terms available to the Company
in  the  private  placement  market  during  its  second fiscal quarter of 2002.

     In  connection with the transaction, the Company issued additional warrants
to the investor's general counsel to purchase 10,000 shares at an exercise price
of  $12.90  per share and a document preparation fee of $5,000. The Company also
engaged  two  placement agents who received warrants to purchase an aggregate of
12,000  shares  of the Company's common stock at an exercise price of $12.90 per
share  and  the  placement  agents  collectively  received  a  placement  fee of
$105,000.  All warrants pursuant to this transaction are exercisable at any time
prior  to  December  12,  2006. Mr. Pasquale Ruggieri, a member of the Company's
Board of Directors, also serves as an investment banker for one of the placement
agents  in  connection  with  this  transaction.

     The  Company  has  recorded the proceeds from the private placement, net of
the  discount  of  $300,000  and  offering  costs  of  $272,000 paid in cash and
warrants  having  a  fair  value  of  $55,000,  as  a  capital  contribution.

     Between  December 18, 2001 and January 3, 2002, warrants to purchase 70,900
shares  of  the  Company's  common  stock were exercised at an exercise price of
$9.00  per  share  and  the  Company  received  gross  proceeds of approximately
$638,000.  Although warrant exercises such as this were registered in connection
with  the  Company's  initial  public offering, the Company's prospectus had not
been updated to include developments in the Company's business since the initial
public offering. To the extent that purchasers of these shares were damaged, the
Company  could  be  exposed  to  liability,  including,  possibly, liability for
rescission  of  their purchases. Until the prospectus is declared effective, the
Company  has  recognized  a liability of $638,000 as amounts due to shareholders
and segregated the related proceeds to reflect the potential amount necessary to
rescind  the  exercise  of the warrants. During the period in which the warrants
were  exercised,  the  Company's  stock  price  ranged from $11.00 to $14.07 per
share;  however,  at  this date the Company is unable to determine whether or at
what  price each of the purchasers may have disposed of the shares they acquired
by  exercising  the  warrants  and  if  any  of  the  purchasers  were  damaged.

     In  addition, the Securities and Exchange Commission may have the authority
to  impose  a variety of remedies, including, possibly, fines. The Company is in
the  process  of  evaluating the impact of the aforementioned exercise, but does
not  believe that its liability, if any, to such purchasers would be material to
its  financial  condition  or  results  of  operations.

     The Company is developing several explosive detection systems that could be
used  in  airports,  public  and  government  buildings,  and  sporting  event
facilities.  The  systems use our proprietary technology, which includes the use
of  laser beams in combination with ion mobility spectrometry, to electronically
detect  minute  quantities  of  explosive  vapor  molecules  in  the  air.

     This  project has been ongoing at the Company since approximately May 1999.
This  project  involved  a  certain  amount  of  one Company employee's time and
certain  outside  contractors. This project was undertaken by research personnel
within  the  Company  who  are  constantly researching new applications for this
technology.  The  development  of  new  applications is typically funded through
government grants or internal funding. Originally, the Company funded a research
and  development  program  for the electronic detection system to produce enough
data to write grant proposals for the Department of Defense to detect unexploded
bombs  and  mines.


                                       14
<PAGE>
     The  Department  of  Transportation  has  stated  that the U.S. could spend
between $1.9 billion and $2.5 billion on equipment for detection of bulk amounts
and  trace  amounts  of  explosives. However, the Company does not know how much
will  be  allocated to each of trace and bulk equipment or how much allocated to
equipment  for the detection of trace amounts of explosives will be allocated to
devices  like  the  Company's  devices.

     In  June  2000,  the  Company  developed  its first generation device which
demonstrated  sensitivity  to  the  explosive  TNT.  In  June  2001, the Company
developed  a  second  generation  prototype  with  increased  sensitivity  and
selectivity.  This  device  can  detect  and  specify  an  increasing  number of
compounds  within  various  explosive  materials.  The explosives that have been
tested  to  date are TNT, RDX, PETN, EGDN, and DNT. RDX is the primary component
of  C3 and C4 explosives, such as Datasheet and Semtex, as well as certain types
of  black powder explosives. The Company believes these explosives represent the
majority  of  the  explosives  presently used in terrorist activities. After the
attack on the World Trade Center occurred on September 11, 2001, management made
the  decision  to continue the internal funding of the project rather than await
funding  through  government  grants. In December 2001, the Company successfully
demonstrated  its working prototype electronic detection system to several third
parties.  The  Company's  electronic  detection  system  has  been  subjected to
controlled testing by third parties and successfully detected a sample of C4. As
a  result  of  the  successful  demonstration,  the  Company  believed  it  was
appropriate  to  further  pursue  the  commercial  development of its electronic
detection  system.  The  Company  is  developing  a  pre-production  electronic
detection  system  that  it  believes  will be completed prior to the end of the
fiscal  year  ending  June  30,  2002.  This pre-production electronic detection
system  will  form the basis of a commercial unit and will be submitted to third
parties  for  testing  and  evaluation.

     The electronic detection system detects microscopic quantities of explosive
molecules  in  the  air.  The  device does not use X-rays and does not produce a
danger to personnel operating the device or scanned by the device. The device is
a  sensor  that  receives  signals  that  are  already  in  the environment. Two
companies  market  trace  electronic detection systems (Ion Track Instruments, a
U.S. privately held company, and Smiths Plc, a U.K. publicly held company). Both
of  these  competitors use Ion Mobility Spectrometry in their respective devices
for  the detection and classification of explosive molecules. Additionally, both
of  these  competitors  use  Nickel-63,  a  radioactive  source,  to  ionize the
explosive  vapors.  The  Company's  electronic  detection  system  also uses Ion
Mobility  Spectrometry  technology  to detect and classify explosives molecules,
however,  the  Company's electronic detection system uses a laser beam to ionize
the explosive molecules. The laser yields greater sensitivity than Nickel-63 and
has the potential to detect explosives without physically rubbing or swiping the
outside  of  a  container  or luggage. Currently, the trace electronic detection
systems  require  the  operator  to  physically  rub or swipe the articles to be
tested.  The  swab or cloth is then placed into the electronic detection system,
heated  to  evaporate  some  of  the explosive particles, and then directs these
vapors  into  the  Ion  Mobility  Spectrometry  device. The Company's electronic
detection  system uses a sensor that does not require physical contact to screen
the  article  to detect trace residues and detects the explosives from the vapor
alone.  Since  the  Company's  device  does not use any X-ray source, management
believes  it  is safer than trace explosives residue detection systems currently
in  use.

     The  Company  believes  its  explosives  detection system is roughly 833 to
4,500 times more sensitive than an explosives-sniffing dog. This belief is based
on  the assumption that an explosives-sniffing dog is as sensitive to explosives
as  it  is  to  narcotics.

     The  Company  has  tested  for false positives and false negatives by using
numerous  non-explosive organic vapors. The electronic detection system properly
did  not  register  the  existence  of  non-explosives.  The  accepted  testing
methodology  for  false  positives  requires testing on a commercially available
electronic  detection  system  and  is  usually  performed  in  the context of a
specific  application,  such as baggage screening, personnel screening, locating
bombs in buildings, and cargo or auto screening. The official false positive and
false  negative  testing  must  be  done  by  an independent third party agency,
however,  such  independent  testing  has  not  yet  been  performed.

     Management believes the material competitive disadvantage of its electronic
detection  system  is the cost. The Company believes that its device will be 30%
to  40%  more  expensive than current Ion Mobility Spectrometry based electronic
detection  systems  ,  which  are  approximately  $40,000  to  $50,000 per unit.
However,  the  Company  believes that the efficiency of its electronic detection
system  and  the resultant improvement in throughput of the quantity of carry-on
articles  and  personnel that can be screened will provide a cost justification.

     Consistent  with  the  Company's  policy  to  protect  its  proprietary
technologies,  the  Company  plans  to  submit  at  least two preliminary patent
applications  to  the  United  States  Patent and Trademark Office. These patent
applications  will cover specific design configurations that are responsible for
the  Company's  improved  vapor  detection  sensitivity.


                                       15
<PAGE>
     The  Company  is  developing several versions of the systems to serve these
markets. The Company is developing a table-top unit, which can be used to screen
passengers  and  carry-on  baggage in airports. The Company is also developing a
portable  system,  which  can  be  used  to  replace bomb-sniffing dogs to clear
buildings,  aircrafts,  or  ships  where hidden bombs are believed to exist. The
Company  plans to first market these systems to U.S. government agencies for use
in  airports  and  government  buildings.

     The  electronic  detection  system  does  not  change the Company's current
operational  and  spending focus. The Company's operations and spending continue
to  focus  on  the  sales  of  its  current  semiconductor, medical coatings and
prostate seed products. Additionally, the Company continues to fund research and
development  through  government grants in accordance with the provisions of the
respective grant awards. The Company will require additional funding in order to
advance  the  commercial  development  of  the  electronic detection system. The
Company  will  attempt to obtain such financing by: (i) a government grant, (ii)
the  exercise of the redeemable common stock purchase warrants, or (iii) private
financing.  However,  there  can  be  no  assurance  that  the  Company  will be
successful  in  its  attempts  to  raise  such  additional  financing.

     The  Company  will  require  substantial  funds  for  further  research and
development,  future  pre-clinical  and  clinical  trials, regulatory approvals,
continued  expansion  of  commercial-scale  manufacturing  capabilities, and the
marketing of its products. The Company's capital requirements depend on numerous
factors,  including  but  not  limited  to,  the  progress  of  its research and
development  programs;  the  progress  of pre-clinical and clinical testing; the
time  and  costs involved in obtaining regulatory approvals; the cost of filing,
prosecuting, defending and enforcing any intellectual property rights; competing
technological  and  market developments; changes in the Company's development of
commercialization  activities  and  arrangements; and the purchase of additional
facilities  and  capital  equipment.

     As  of  March  31,  2002,  the  Company  was conducting its operations with
approximately  $1,645,000  in  cash  and cash equivalents (including $167,000 of
restricted  cash).  The  Company  estimates  such  amounts  combined  with  its
anticipated  cash  flow  from  operations will be sufficient to fund its working
capital  activities  in the next twelve months. Future expenditures for research
and  product  development,  especially  relating to outside testing and clinical
trials  and  commercialization  of  its  trace  explosive  detection system, are
discretionary and, accordingly, can be adjusted, as can certain selling, general
and  administrative  expenses,  based  on  the  availability  of  cash.


                                       16
<PAGE>
PART II:  OTHER INFORMATION

Item 1.   Legal Proceedings

          Not Applicable

Item 2.   Changes  in  Securities  and  Use  of  Proceeds

          None

Item 3.   Defaults  Upon  Senior  Securities

          Not Applicable

Item 4.   Submission  of  Matters  of  a  Vote  to  Security-Holders

          None

Item 5.   Other  Information

          Not Applicable

Item 6.   List  of  Exhibits  and  Reports  on  Form  8-K

          (a)  There are no exhibits, required by Item 601 of Regulation S-B, to
               be  filed  as  part  of  this  Quarterly  Report  on Form 10-QSB.

          (b)  The registrant filed the following reports on Form 8-K during the
               quarter  ended  March  31,  2002:

               January 23, 2002: Regulation FD Disclosure regarding presentation
               to  select  brokers  who either hold securities of the Company or
               may  be  interested  in  acquiring  securities  of  the  Company.

               April  12,  2002:  Press  release  dated April 2, 2002 regarding,
               "Implant  Sciences  Corporation Extends Warrant Expiration Date."

               April  30,  2002:  Report  of  the  Audit Committee and the Audit
               Committee  Charter  relating  to  the November 9, 2001 Definitive
               Proxy  Statement.


                                       17
<PAGE>
                                   SIGNATURES

     Pursuant  to  the  requirements of the Securities and Exchange Act of 1934,
the  registrant  has  duly  caused this report to be signed on its behalf by the
undersigned  thereunto  duly  authorized.

                                        Implant Sciences Corporation

Date:  May 16, 2002                     /s/  Anthony J. Armini
                                        ------------------------------
                                        Anthony  J.  Armini
                                        President and CEO

Date:  May 16, 2002                     /s/  David C. Volpe
                                        ------------------------------
                                        David C. Volpe
                                        Acting Chief Financial Officer
                                        (Principal Financial and
                                        Accounting Officer)


                                       18
<PAGE>