U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

(Amendment No. 1)

|                                                       |  |                                                     
|------------------------------------------------------ |  | ----------------------------------------------------
|(Mark One)                                             |  |                                                     
|x                                                      |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|                                                       |  | SECURITIES EXCHANGE ACT OF 1934                     
|For the fiscal year ended June 30, 2013               
|o                                                      |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE  
|                                                       |  | SECURITIES EXCHANGE ACT OF 1934                     
|For the transition period from                      to



Commission File No. 001-14949

Implant Sciences Corporation

(Name of small business issuer in its charter)

|                                                                                   |                                                
|---------------------------------------------------------------------------------- | -----------------------------------------------
|Massachusetts (State or other jurisdiction of incorporation or organization)       | 04-2837126 (I.R.S. Employer Identification No.)
|500 Research Drive, Unit 3 Wilmington, MA (Address of principal executive offices) | 01887 (Zip Code)                               



Issuers telephone number (978) 752-1700

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.                    Yes q  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.                      Yes q  No x

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 q

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes x  No q

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Act (Check one):

qLarge Accelerated Filer

qAccelerated Filer

qNon-accelerated Filer (do not check if a smaller reporting company)

xSmaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                      Yes q  No x

As of October 21, 2013, 59,279,595 shares of the registrants Common Stock were outstanding.  As of December 31, 2012, the last business day of the registrants most recent completed second quarter, the aggregate market value of the registrants Common Stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) was $47,107,000 based on the last sale price the Over-The-Counter-Bulletin-Board on such date.



{M0464298.4 }



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EXPLANATORY PARAGRAPH

This Amendment No. 1 on Form 10-K/A (this Amendment) amends our Annual Report on Form 10-K for the fiscal year ended June 30, 2013, originally filed on September 30, 2013 (the Original Filing).  We are filing this Amendment to include the information required by Part III and not included in the Original Filing as we will not file our definitive proxy statement within 120 days of our fiscal year ended June 30, 2013.  In addition, in connection with the filing of this Amendment and pursuant to Rules 12b-15 and 13a-14 under the Exchange Act, we are including with this Amendment currently dated certifications of our Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1 and 32.2).

Except as described above, Amendment No.1 restates only Part III of the Original Filing and includes the exhibits as set forth in Item 15 herein; no other changes have been made to the Original Filing.  This Amendment No.1 continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing.





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PART III



Item 10.

Directors, Executive Officers and Corporate Governance

In May 2009, our Board of Directors increased the size of the board from five directors to seven directors.  Our Board of Directors is currently comprised of six directors.  The directors and named executive officers, their ages and positions, as well as certain biographical information of these individuals, are set forth below.  The ages of the individuals are provided as of September 30, 2013.

There are no family relationships between any director, named executive officer, or person nominated or chosen to become a director or executive officer.

|                                 |  |     |  |                                                              | 
|-------------------------------- |  | --- |  | ------------------------------------------------------------ | 
|Executive Officers and Directors |  | Age |  | Position                                                     | 
|Glenn D. Bolduc                  |  | 61  |  | Chairman of the Board, President and Chief Executive Officer | 
|Brenda L. Baron                  |  | 51  |  | Vice President, Manufacturing and Technical Services         | 
|Roger P. Deschenes               |  | 55  |  | Vice President, Finance and Chief Financial Officer          | 
|Dr. Darryl K. Jones              |  | 55  |  | Vice President, Sales and Marketing                          | 
|Dr. William J. McGann            |  | 55  |  | Chief Operation Officer, Director                            | 
|Todd A. Silvestri                |  | 47  |  | Vice President, Advanced Technology and Product Development  | 
|John A. Keating                  |  | 60  |  | Director                                                     | 
|Robert P. Liscouski              |  | 59  |  | Director                                                     | 
|Howard Safir                     |  | 72  |  | Director                                                     | 
|Michael C. Turmelle              |  | 54  |  | Director                                                     | 

Glenn D. Bolduc has served as Chairman of the Board since May 2009 and as President and Chief Executive Officer since January 2009, having joined us as Chief Financial Officer in July 2008. Prior to joining the Company, Mr. Bolduc served as acting CEO and CFO of Horizons Edge Casino Cruises, LLC.  From January 2001 through January 2006 Mr. Bolduc was the principal of Radius Ventures LLC, a strategic advisory firm.  Prior to Radius Ventures, Mr. Bolduc has held executive management and financial positions, including CEO and CFO, with several venture-backed and publicly-held companies in various technology industries.  From 1996 to 1999, Mr. Bolduc served as President and Chief Executive Officer of Vialog Corporation, a publicly-held provider of teleconferencing and other group communications services. Mr. Bolduc received his undergraduate degree in accounting from Fairleigh Dickinson University and began his accounting career with PricewaterhouseCoopers.

Our Board of Directors has concluded that Mr. Bolduc is uniquely qualified to serve as a director and Chairman of our Board based on his past and current leadership and executive roles, financial skills and business judgment.

Brenda L. Baron has served as our Vice President, Manufacturing and Technical Services since February, 2009, having joined the company in April 2004.  Ms. Baron developed the Security Division's manufacturing operations, as well as manufacturing, test, and documentation control. Prior to joining the Company, Ms. Baron served as Documentation Engineer with the instrumentation division of Milipore Corporation, from 2002 to 2004, and was employed at Ion Track Instruments, an explosives trace detector manufacturer as Configuration Manager, from 1998 to 2001, where she played a key role in bringing handheld, bench top, and portal trace detectors into production.

Roger P. Deschenesjoined us in June 2008 as Controller, was promoted to Vice President, Finance in January 2009 and to Chief Financial Officer in July 2010. Mr. Deschenes has more than 25 years of accounting and financial leadership experience with publicly traded and private companies. Prior to joining Implant Sciences, Mr. Deschenes served as Vice President, Finance with Beacon Roofing Supply, Inc. from 2006 to 2007. From 1990 to 2006, Mr. Deschenes served in several senior accounting and financial capacities at Saucony, Inc. including: Vice President, Controller, Chief Accounting Officer and Assistant Treasurer.  Mr. Deschenes received a B.S. in Business Administration from Salem State University and is a Certified Management Accountant.



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Dr. Darryl K. Jones joined us in May 2012 as Vice President, Sales and Marketing. From 2009 until he joined the Company, Dr. Jones served as Vice President, Global Product Management at Morpho Detection, Inc., a business unit of the Safran Group. From 2006 through 2009, Dr. Jones served as General Manager, Global Security Sales at GE Security and served as Global Business Manager at GE Healthcare from 2003 through 2006. Dr. Jones holds a Ph.D. in Optical Science and Engineering from the University of Alabama in Huntsville, a Masters of Arts in Physics and Bachelor of Arts from Fisk University.

Dr. William J. McGann joined us in April 2012 as Chief Operating Officer. Dr. McGann was also appointed as a director of the Company. Dr. McGann had served as a strategic advisor to Glenn D. Bolduc, Chief Executive Officer of the Company, since April 2011. Prior to his appointment as Chief Operating Officer of the Company, from March 2010 to the present, Dr. McGann served as Vice President, Engineering, Global Fire Products, UTC Fire and Security, a business unit of United Technologies Corporation. From January 2005 through March 2010, Dr. McGann served as Vice-President, Research and Development at GE Ion Track and was promoted to Chief Technology Officer of GE Security. From January 1991 through January 2005, Dr. McGann served as Vice President, Research and Development and was one of the founders of Ion Track Instruments, where he played a key role in creating an industry around explosives trace detection (ETD) science and technology. Ion Track was sold to General Electric in 2005. Dr. McGann holds a Ph.D. in Physical Chemistry from the University of Connecticut, where his doctoral work was in the area of Magnetic Resonance and Laser Spectroscopy.

Our Board of Directors has concluded that Dr. McGann is uniquely qualified to serve as a director based on his experience and leadership as an executive of a public company and his deep knowledge of the security industry and specific expertise in explosives trace detection.

Todd A. Silvestri joined us in September 2008 and is directly responsible for the design and commercialization of the Companys advanced explosive trace detection solutions. Previously, Mr. Silvestri was Senior Vice President of Century Capital Partners, assisting his clients in defining optimal exiting strategies, securing capital, and expanding into foreign markets. Prior to that, he led New Product Development for Environmental Systems Products (ESP), where he was responsible for expanding the companys traditional business-to-government services into new frontiers by commercializing products and services for private business clients and consumers. In 2003, Mr. Silvestri founded APAC Global LLC providing consulting in the areas of company establishment, localization/relocation of operations, supply chain management, and organizational design primarily focused with small to medium sized companies expanding to, or within, the Asia Pacific Region. Mr. Silvestri holds an M.B.A. from the Kellogg School of Management at Northwestern University, as well as a B.S. in Chemical Engineering from Clarkson University.

John A. Keatinghas served on our board of directors since May 2009.  Mr. Keating has been an independent consultant since April 2012, prior to which time he served as the Vice President of Global Customer Fulfillment for the Timberland Company, a premium global footwear brand with sales in excess of $1.2 billion in 2011. Mr. Keating was responsible for all transportation, distribution, customs, and order management. In addition, Mr. Keating oversaw North American customer service and apparel sourcing operations.  Mr. Keating holds a B.A. degree from Bridgewater State University and an M.B.A. from Suffolk University. He is a recognized expert in supply chain and supply chain systems.

Our Board of Directors has concluded that Mr. Keating is uniquely qualified to serve as a director based on his experience and leadership roles as an executive of a public company and his knowledge of transportation and distribution operations.



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Robert P. Liscouski has served on our board of directors since May 2009.  From July 2009 until November 2013, Mr. Liscouski served as a partner at Secure Strategy Group, a homeland security-focused banking and strategic advisory firm that had been retained by us to assist with our efforts to acquire additional capital. Mr. Liscouski also serves as a senior partner at Edge360, a leading security technology and situational awareness solutions provider to the homeland security marketplace that has been retained by us. Mr. Liscouski was the first Assistant Secretary for Infrastructure Protection for the Department of Homeland Security, serving from March 2003 to February 2005.  Mr. Liscouskis private sector experience includes serving as the CEO of Content Analyst, a software company that automates the analysis and categorization of large volumes unstructured text and data, as Director of Information Assurance for The Coca-Cola Company and Vice President, Law Enforcement Division, for ORION Scientific Systems.  Mr. Liscouskis government experience includes 11 years as a Special Agent with the Diplomatic Security Service of the U.S. Department of State with assignments including being the State Department representative to INTERPOL, Mobile Training Team Leader, Beirut and Rome, and five years with the Bergen County, NJ, Prosecutors Office as an undercover and homicide investigator.  Mr. Liscouski is a Senior Fellow at the Center of Strategic and International Studies in Washington, D.C. and served for 12 years as an advisor to the U.S. government on technology matters.  Mr. Liscouski holds a B.S. degree in Criminal Justice from John Jay College of Criminal Justice and a Masters of Public Administration from the Kennedy School of Government, Harvard University.

Our Board of Directors has concluded that Mr. Liscouski is uniquely qualified to serve as a director based on his experience and leadership roles in public safety and security as a senior official with the Department of Homeland Security and based on his experience and leadership roles in the private sector.

Howard Safir has served on our board of directors since May 2009.  Mr. Safir has served as Chief Executive Officer of the security consulting and investigations unit of GlobalOptions Group, Inc., since May 2006 and as Chairman, Chief Executive Officer and Principal of the November Group a company that provides strategic advisory and customer acquisition services to companies in the security, law enforcement, intelligence and defense industries. Mr. Safir was the founder, Chairman and Chief Executive Officer of SafirRosetti, LLC, a premier security consulting company, from December 2001 until its acquisition in May 2006 by GlobalOptions Group, Inc. Prior to that time, Mr. Safir was Vice Chairman of IPSA International, a provider of investigative and security consulting services. In 1996, Mr. Safir was appointed the 39th Police Commissioner of the City of New York by Mayor Rudolph W. Giuliani, after serving as New York Citys 29th Fire Commissioner for the prior two years, making him the only individual in the history of New York City to serve as both police and fire commissioner. Previously, he was the Assistant Director of the Drug Enforcement Agency and also served as Chief of the Witness Security Division, U.S. Marshals Service. Mr. Safir currently serves as a director of Verint Systems, Inc., a publicly traded company, and LexisNexis Special Services, Inc., a private company.  From February 2004 to October 2006, Mr. Safir served as Chairman of the Board of Directors of GVI Security Solutions, Inc., a provider of video surveillance and security solutions products and from June 2005 to July 2006 served as a director of Blastgard International, Inc., a developer and designer of proprietary blast mitigation materials, both of which are public companies.  Mr. Safir also served as a Chairman of the Board of Directors of National Security Solutions Inc., from March 2008 to April 2010, a private company organized for the purpose of effecting a business combination, including with entities involved in the security and homeland defense industries. Mr. Safir received his B.A. in History and Political Science from Hofstra University in 1963. He attended Harvard University's John F. Kennedy School of Government, receiving certificates in the programs for Senior Managers in Government in 1988 and for National and International Security in 1989.  Mr. Safir is a member of the Board of Trustees of Hofstra University and a director of the foundation of the International Association of Chiefs of Police.

Our Board of Directors has concluded that Mr. Safir is uniquely qualified to serve as a director based on his experience and leadership roles in public safety and security and his extensive service as a director and board chairman of public companies involved in the security and homeland defense industries.



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Michael C. Turmelle has served on our board of directors since December 2005.  Since November 2007, Mr. Turmelle has served as the Principle of SFTT Consulting, assisting companies in the renewable energy, medical devices and security markets with financial, strategic, and operational issues.  From 1987 until October 2007, Mr. Turmelle worked for SatCon Technology Corporation, holding several positions including Chief Financial Officer from 1991 until 2000 and Chief Operating Officer from 2000 to 2005.  Mr. Turmelle holds a B.A. degree in Economics from Amherst College and a Financial Management Program certificate from General Electric.

Our Board of Directors has concluded that Mr. Turmelle is uniquely qualified to serve as a director based on his past and current leadership and executive roles, financial and operational skills, business judgment and knowledge of corporate governance matters.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our securities to file reports of ownership and changes in ownership with the SEC.  Based solely on a review of copies of such forms submitted to the Company, we believe that all persons subject to the requirements of Section 16(a) filed such reports on a timely basis in fiscal 2013.

Code of Conduct and Ethics

We have adopted a code of ethics that applies to our chief executive officer, chief operating officer and chief financial officer.  The code of ethics is posted on our website at www.implantsciences.com.We intend to include on our website any amendments to, or waivers from, a provision of our code of ethics that applies to our chief executive officer, chief operating officer and chief financial officer that relates to any element of the code of ethics definition enumerated in Item 406 of Regulation S-K.

Stockholder Communications with the Board of Directors

Pursuant to procedures set forth in our by-laws, our Nominating/Corporate Governance Committee will consider stockholder nominations for directors if we receive timely written notice, in proper form, of the intent to make a nomination at a meeting of stockholders.  To be timely, the notice must be received within the time frame identified in our by-laws, discussed below.  To be in proper form, the notice must, among other matters, include each nominees written consent to serve as a director if elected, a description of all arrangements or understandings between the nominating stockholder and each nominee and information about the nominating stockholder and each nominee.  These requirements are detailed in our amended and restated by-laws, which were attached as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2007.  A copy of our by-laws will be provided upon written request.

We have not yet selected the date for our next Annual Meeting of Stockholders. We will notify stockholders of the date of our next Annual Meeting of Stockholders, and the deadline for submitting stockholder proposals for inclusion in our proxy materials for that Meeting pursuant to Rule 14a-8 under the Exchange Act, in a subsequent Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

Our by-laws require advance notice of any proposal by a stockholder intended to be presented at an annual meeting that is not included in our notice of annual meeting and proxy statement because it was not timely submitted under the preceding paragraph, or made by or at the direction of any member of the board of directors, including any proposal for the nomination for election as a director.

The Board will give appropriate attention to written communications that are submitted by stockholders, and will respond if and as appropriate.  Stockholders who wish to send communications on any topic to the Board should address such communications to Board of Directors c/o Chief Executive Officer, Implant Sciences Corporation, 500 Research Drive, Unit 3, Wilmington, MA 01887.



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Board Attendance

The Board of Directors met three times and held nine meetings by telephone conference call during the fiscal year ended June 30, 2013.  Each director attended at least 75% of the total number of meetings of the Board of Directors and of the committees on which he served during fiscal 2013.

The Board of Directors has four standing committees; Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee, and Risk Management Committee.  The Committees of the Board are primarily responsible for considering and overseeing risks within their particular areas of concern. The membership of each, as of September 30, 2013, is indicated in the table below:

|                    |  |          |  |                       |  |                                   |  |                
|------------------- |  | -------- |  | --------------------- |  | --------------------------------- |  | ---------------
|Director            |  | Audit    |  | Compensation Director |  | Nominating / Corporate Governance |  | Risk Management
|John A. Keating     |  |          |  |                       |  |                                   |  |                
|Robert P. Liscouski |  |          |  | X                     |  | X                                 |  | Chairman       
|Howard Safir        |  | X        |  | X                     |  |                                   |  |                
|Michael C. Turmelle |  | Chairman |  | Chairman              |  | Chairman                          |  |                

Nominating/Corporate Governance Committee

Effective as of September 30, 2013, the Nominating/Corporate Governance Committee consists of Messrs. Liscouski and Turmelle. Mr. Turmelle serves as chairman of the Nominating/Corporate Governance Committee.  The Nominating/Corporate Governance Committee leads the Boards effort at ensuring we have qualified directors by: (i) identifying individuals qualified to become Board members consistent with criteria approved by the Board and recommending to the Board a group of director nominees for each annual meeting of stockholders; (ii) recommending nominees to fill any vacancies which may occur during the year; (iii) considering candidates for nominees as directors of the Company who are recommended by stockholders entitled to do so under our By-laws; and (iv) ensuring that the Audit, Compensation and Nominating/Corporate Governance Committees of the Board have qualified and experienced independent directors.  The Board has adopted a written charter for the Nominating/Corporate Governance Committee which is posted on our website at www.implantsciences.com.

In the event that the Nominating/Corporate Governance Committee or the Board identifies the need to fill a vacancy or to add a new member to fill a newly created position on the Board with specific criteria, the Nominating/Corporate Governance Committee initiates a search process and keeps the Board apprised of its progress. The Nominating/Corporate Governance Committee may seek input from members of the Board, the Chief Executive Officer and other management and, if necessary, hire a search firm. In addition, as a matter of policy, the Nominating/Corporate Governance Committee will consider candidates for Board membership properly recommended by stockholders. The initial candidate or candidates, including anyone recommended by a stockholder, who satisfy the specific criteria for Board membership and otherwise qualify for membership on the Board are reviewed and evaluated by the Nominating/Corporate Governance Committee. The evaluation process for candidates recommended by stockholders is the same as the process used to evaluate candidates recommended by any other source.



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Audit Committee

The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act.  Effective as of September 30, 2013, the Audit Committee consists of Messrs. Turmelle and Safir. The primary functions of the Audit Committee are to represent and assist the Board of Directors with the oversight of:

·

appointing, approving the compensation of, and assessing the independence of our independent auditors;

·

overseeing the work of our independent auditors, including through the receipt and consideration of certain reports from the independent auditors;

·

reviewing and discussing with management and the independent auditors our annual and quarterly financial statements and related disclosures;

·

coordinating the Board of Directors oversight of our internal control over financial reporting, disclosure controls and procedures and code of conduct and ethics;

·

establishing procedures for the receipt and retention of accounting related complaints and concerns;

·

meeting independently with our independent auditors and management; and

·

preparing the audit committee report required by SEC rules.

The Board of Directors has determined that Mr. Turmelle, who serves as the Chairman of the Audit Committee, is an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.

During the fiscal year ended June 30, 2013, the Audit Committee met five times.  The responsibilities of the Audit Committee are set forth in its written charter, which is posted on our website at www.implantsciences.com.

Compensation Committee

Effective as of September 30, 2013, the Compensation Committee consists of Messrs. Liscouski, Turmelle and Safir.  Mr. Turmelle serves as chairman of the Compensation Committee.  The Compensation Committee is responsible for implementing our compensation philosophies and objectives, establishing remuneration levels for our executive officers and implementing our incentive programs, including our equity compensation plans.    During the fiscal year ended June 30, 2013, the Compensation Committee met three times.  The responsibilities of the Compensation Committee are set forth in its written charter, which is posted on our website at www.implantsciences.com.

Compensation is paid to our executive officers in both fixed and discretionary amounts which are established by the Board of Directors based on existing contractual agreements and the determinations of the Compensation Committee after recommendations by our Chief Executive Officer (other than with respect to himself).  Pursuant to its charter, the responsibilities of the Compensation Committee are (i) to assist the Board of Directors in discharging its responsibilities in respect of compensation of our senior executive officers; (ii) review and analyze the appropriateness and adequacy of our annual, periodic or long-term incentive compensation programs and other benefit plans and administer those compensation programs and benefit plans; and (iii) review and recommend compensation for directors, consultants and advisors.  Except for the delegation of authority to the Chief Executive Officer to grant certain de minimus equity compensation awards to our non-executive employees, the Compensation Committee has not delegated any of its responsibilities to any other person.



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In August 2012, the Compensation Committee, acting on behalf of the Board of Directors, retained CFS Consulting, Inc., an independent compensation consulting firm, to review the Committees proposals to define a target level of stock ownership for each of the Companys officers as a percentage of total shares outstanding, and a corresponding ownership percentage for members of the Board of Directors, and to adopt a Change of Control Payment Plan. CFS Consulting was instructed to review the reasonableness of these proposals, and the estimated total compensation that would be payable to the Companys officers and directors under those proposals, in light of prevailing market conditions and in comparison to compensation paid to similarly situated officers and directors of other publicly traded companies. Following this review, in September 2012, the Board of Directors approved the stock option grants and the compensation plan described below under the caption Amendment to the 2004 Stock Option Plan; Adoption of the Change of Control Payment Plan.

In February 2013, the Committee, acting on behalf of the Board of Directors, again retained CFS Consulting, Inc., to analyze the Companys then-current base salary levels for its officers, establish typical market annual cash incentive award values, and provide recommendations regarding base salary ranges and annual bonus values.CFS Consulting alsoperformed a market review of total compensation for non-management directors. Consistent with CFS Consultings recommendations, in June 2013, the Board of Directors approved an amended and restated employment agreement for Mr. Bolduc and, in August 2013, the Board of Directors approved bonuses for the Companys officers with respect to fiscal 2013, the payment of which is contingent upon the achievement of certain performance milestones, base salary adjustments with respect to the Companys officers with respect to fiscal 2014, and additional option grants to the Companys officers.

Compensation Committee Interlocks and Insider Participation

The Board of Directors has determined that, as of June 30, 2013, each of the members of the Compensation Committee is an independent director within the meaning of the NYSE Amex (formerly, American Stock Exchange) listing standards and meets the independence requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended, with the exception of Mr. Liscouski, who currently serves as a member of our Compensation Committee and Nominating / Corporate Governance Committee. Based on this determination, the Board of Directors intends to appoint an additional independent director and change the composition of our committees to meet the requirements of the NYSE Amex listing standards.  The Board of Directors further determined that it is in the best interests of the Company and our shareholders for Mr. Liscouski to remain a member of the Compensation Committee and Nominating / Corporate Governance Committee in the interim because the Board believes that that Mr. Liscouski acts independently even though he does not meet the technical standard of an independent director. Please refer to Certain Relationships and Related Transactions, and Director Independence, below,for a discussion of certain transactions between the Company and Mr. Liscouski.

Risk Oversight; Risk Management Committee

The Board of Directors is responsible for oversight of our risk management process. Mr. Liscouski serves as a committee of one, focusing on risk management issues. Our senior management is responsible for risk management on a day-to-day basis, including identifying risks, managing risks, and reporting and communicating risks to the Board of Directors. The Board of Directors, including the Risk Management Committee and other committees comprised solely of independent directors, reviews various areas of significant risk to the Company, and advises management on policies, strategic initiatives, annual reports on internal controls and other actions. Specific examples of risks primarily overseen by the full Board of Directors include competition risks, industry risks, economic risks, business operations and employee compensation risks and risks related to acquisitions and dispositions.



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Item 11.

Executive Compensation

Summary Compensation Table

The following table provides information concerning compensation earned in the last two fiscal years ended June 30, 2013 and 2012 by our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and other most highly compensated executive officers whose total compensation exceeded $100,000 for the fiscal years ended June 30, 2013 and 2012:

|                                    |  |             |  |  |   |            |  |  |   |               |  |   |  |                       |  |  |   |                                |  |  |  |  |  |   |          
|----------------------------------- |  | ----------- |  |  | - | ---------- |  |  | - | ------------- |  | - |  | --------------------- |  |  | - | ------------------------------ |  |  |  |  |  | - | ---------
|Name and Principal Position         |  | Fiscal Year |  |  |   | Salary ($) |  |  |   | Bonus ($) (1) |  |   |  | Option Awards ($) (2) |  |  |   | All Other Compensation ($) (5) |  |  |  |  |  |   | Total ($)
|Named Executive Officers            |  |             |  |  |   |            |  |  |   |               |  |   |  |                       |  |  |   |                                |  |  |  |  |  |   |          
|Glenn D. Bolduc                     |  | 2013        |  |  | $ | 400,000    |  |  | $ | -             |  | $ |  | 5,823,552             |  |  | $ | 34,366                         |  |  |  |  |  | $ | 6,257,918
|Chairman, President and             |  | 2012        |  |  | $ | 375,000    |  |  | $ | 162,500       |  | $ |  | 17,467                |  |  | $ | 16,493                         |  |  |  |  |  | $ | 571,460  
|Chief Executive Officer             |  |             |  |  |   |            |  |  |   |               |  |   |  |                       |  |  |   |                                |  |  |  |  |  |   |          
|                                    |  |             |  |  |   |            |  |  |   |               |  |   |  |                       |  |  |   |                                |  |  |  |  |  |   |          
|Roger P. Deschenes                  |  | 2013        |  |  | $ | 220,000    |  |  | $ | -             |  | $ |  | 1,132,610             |  |  | $ | 1,428                          |  |  |  |  |  | $ | 1,354,037
|Vice President, Finance and         |  | 2013        |  |  | $ | 200,000    |  |  | $ | 85,000        |  | $ |  | 4,592                 |  |  | $ | 1,428                          |  |  |  |  |  | $ | 291,020  
|Chief Financial Officer             |  |             |  |  |   |            |  |  |   |               |  |   |  |                       |  |  |   |                                |  |  |  |  |  |   |          
|                                    |  |             |  |  |   |            |  |  |   |               |  |   |  |                       |  |  |   |                                |  |  |  |  |  |   |          
|Dr. William J. McGann (3)           |  | 2013        |  |  | $ | 250,000    |  |  | $ | -             |  | $ |  | 1,069,281             |  |  | $ | 1,502                          |  |  |  |  |  | $ | 1,320,783
|Chief Operating Officer             |  | 2012        |  |  | $ | 62,500     |  |  | $ | -             |  | $ |  | -                     |  |  | $ | 15,376                         |  |  |  |  |  | $ | 77,876   
|                                    |  |             |  |  |   |            |  |  |   |               |  |   |  |                       |  |  |   |                                |  |  |  |  |  |   |          
|Dr. Darryl K. Jones (4)             |  | 2013        |  |  | $ | 235,000    |  |  | $ | -             |  | $ |  | 897,741               |  |  | $ | 1,465                          |  |  |  |  |  | $ | 1,134,205
|Vice President, Sales and Marketing |  | 2012        |  |  | $ | 36,154     |  |  | $ | -             |  | $ |  | -                     |  |  | $ | 244                            |  |  |  |  |  | $ | 36,398   
|                                    |  |             |  |  |   |            |  |  |   |               |  |   |  |                       |  |  |   |                                |  |  |  |  |  |   |          
|Todd A. Silvestri                   |  | 2013        |  |  | $ | 190,000    |  |  | $ | -             |  | $ |  | 782,131               |  |  | $ | 1,353                          |  |  |  |  |  | $ | 973,484  
|Vice President, Advanced            |  | 2012        |  |  | $ | 180,000    |  |  | $ | 30,000        |  | $ |  | 2,501                 |  |  | $ | 1,353                          |  |  |  |  |  | $ | 213,854  
|Technology and Product              |  |             |  |  |   |            |  |  |   |               |  |   |  |                       |  |  |   |                                |  |  |  |  |  |   |          
|Development                         |  |             |  |  |   |            |  |  |   |               |  |   |  |                       |  |  |   |                                |  |  |  |  |  |   |          



(1)

No bonus compensation has been paid to the Named Executive Officers with respect to fiscal 2013. In August 2013, the Board of Directors approved the payment of bonuses to the Named Executive Officers in the amounts set forth below:

|                        |                      
|----------------------- | ---------------------
|Named Executive Officer | Contingent 2013 Bonus
|Glenn D. Bolduc         | $50,000              
|Roger P. Deschenes      | $27,500              
|Dr. William J. McGann   | $31,250              
|Dr. Darryl K. Jones     | $29,375              
|Todd A. Silvestri       | $23,750              

The payment of these bonuses is contingent on the Companys receipt of certain governmental approvals for its QS-B220 benchtop explosives and narcotics detector by December 31, 2013 and the execution of a procurement contract with a specific agency of the United States government on or before February 1, 2014. As of October 28, 2013, one or more of these milestones had not been met and no such bonuses are payable. The Board of Directors will determine whether any such bonuses will be payable on or immediately following February 1, 2014.

(2)

The amount reported in this column for the Named Executive Officer represents the dollar amount recognized for financial statement reporting purposes in fiscal 2013 and 2012, with respect to options granted to the Named Executive Officers, determined in accordance with Accounting Standards Codification 718-11-25 Compensation  Stock Compensation.  See Note 2 of Notes to Consolidated Financial Statements set forth in our Annual Report on Form 10-K for the assumptions used in determining the value of such awards. For the fiscal year ended June 30, 2012, no option awards were granted to the Chief Executive Officer or the named executives,

(3)

Dr. McGann joined the Company on April 2, 2012.



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(4)

Dr. Jones joined the Company on May 7, 2012.

(5)

All other compensation includes, but is not limited to, vehicle allowances, legal fees, key man life insurance premiums, consulting fees and premiums paid by us for disability and group term life insurance for the chief executive officer and all named executive officers, are set forth in the following table:

|                         |   |                 |  |   |  |                                                   |  |  |   |                   |  |   |  |            |  |  |   |                        |  |  |  |  |  |   |       
|------------------------ | - | --------------- |  | - |  | ------------------------------------------------- |  |  | - | ----------------- |  | - |  | ---------- |  |  | - | ---------------------- |  |  |  |  |  | - | ------
|Fiscal Year 2013         |   | Consulting Fees |  |   |  | Disability and Group Term Life Insurance Premiums |  |  |   | Vehicle Allowance |  |   |  | Legal Fees |  |  |   | Key Man Life Insurance |  |  |  |  |  |   | Total 
|Named Executive Officers |   |                 |  |   |  |                                                   |  |  |   |                   |  |   |  |            |  |  |   |                        |  |  |  |  |  |   |       
|Glenn D. Bolduc          | $ | -               |  | $ |  | 1,428                                             |  |  | $ | 16,200            |  | $ |  | 8,873      |  |  | $ | 7,865                  |  |  |  |  |  | $ | 34,366
|Roger P. Deschenes       | $ | -               |  | $ |  | 1,428                                             |  |  | $ | -                 |  | $ |  | -          |  |  | $ | -                      |  |  |  |  |  | $ | 1,428 
|Dr. William J. McGann    | $ | -               |  | $ |  | 1,502                                             |  |  | $ | -                 |  | $ |  | -          |  |  | $ | -                      |  |  |  |  |  | $ | 1,502 
|Dr. Darryl K. Jones      | $ | -               |  | $ |  | 1,465                                             |  |  | $ | -                 |  | $ |  | -          |  |  | $ | -                      |  |  |  |  |  | $ | 1,465 
|Todd A. Silvestri        | $ | -               |  | $ |  | 1,353                                             |  |  | $ | -                 |  | $ |  | -          |  |  | $ | -                      |  |  |  |  |  | $ | 1,353 
|                         |   |                 |  |   |  |                                                   |  |  |   |                   |  |   |  |            |  |  |   |                        |  |  |  |  |  |   |       
|Fiscal Year 2012         |   |                 |  |   |  |                                                   |  |  |   |                   |  |   |  |            |  |  |   |                        |  |  |  |  |  |   |       
|Named Executive Officers |   |                 |  |   |  |                                                   |  |  |   |                   |  |   |  |            |  |  |   |                        |  |  |  |  |  |   |       
|Glenn D. Bolduc          | $ | -               |  | $ |  | 1,428                                             |  |  | $ | 7,200             |  | $ |  | -          |  |  | $ | 7,865                  |  |  |  |  |  | $ | 16,493
|Roger P. Deschenes       | $ | -               |  | $ |  | 1,428                                             |  |  | $ | -                 |  | $ |  | -          |  |  | $ | -                      |  |  |  |  |  | $ | 1,428 
|Dr. William J. McGann    | $ | 15,000          |  | $ |  | 376                                               |  |  | $ | -                 |  | $ |  | -          |  |  | $ | -                      |  |  |  |  |  | $ | 15,376
|Dr. Darryl K. Jones      | $ | -               |  | $ |  | 244                                               |  |  | $ | -                 |  | $ |  | -          |  |  | $ | -                      |  |  |  |  |  | $ | 244   
|Todd A. Silvestri        | $ | -               |  | $ |  | 1,353                                             |  |  | $ | -                 |  | $ |  | -          |  |  | $ | -                      |  |  |  |  |  | $ | 1,353 
|                         |   |                 |  |   |  |                                                   |  |  |   |                   |  |   |  |            |  |  |   |                        |  |  |  |  |  |   |       



(1)

Dr. McGann served as an adviser to the Company from April 1, 2010 until March 31, 2011.



Grants of Plan-Based Awards to Named Executive Officers

The following table sets forth the individual grants of plan-based awards to the Named Executive Officers in the fiscal year ended June 30, 2013. Please see the Outstanding Equity Awards at 2013 Fiscal Year-End for the outstanding stock option awards and unvested stock awards held by each of the Named Executive Officers as of June 30, 2013.

|                                        |  |            |  |                                                                 |   |                                                             |   |         |  |           |   |        |   |         |  |   |   |  |   |   |  |                                                                      |  |                                                |      |                                                  |   |          
|--------------------------------------- |  | ---------- |  | --------------------------------------------------------------- | - | ----------------------------------------------------------- | - | ------- |  | --------- | - | ------ | - | ------- |  | - | - |  | - | - |  | -------------------------------------------------------------------- |  | ---------------------------------------------- | ---- | ------------------------------------------------ | - | ---------
|Fiscal 2013 Grants of Plan-Based Awards
|                                        |  |            |  |                                                                 |   |                                                             |   |         |  |           |   |        |   |         |  |   |   |  |   |   |  | All Other Option Awards: Number of Securities Underlying Options (#) |  | Exercise or Base Price of Option Awards ($/sh) |      | Grant Date Fair Value of Stock and Option Awards
|                                        |  |            |  | Estimated Future Payouts Under Non-Equity Incentive Plan Awards |   | Estimated Future Payouts Under Equity Incentive Plan Awards |   |         | 
|Named Executive Officers                |  | Grant Date |  | Threshold                                                       |   | Target                                                      |   | Maximum |  | Threshold |   | Target |   | Maximum |  |   |  
|Glenn D. Bolduc (1)                     |  | 9/7/2012   |  | $                                                               | - |                                                             | $ | -       |  | $         | - |        | $ | -       |  | $ | - |  | $ | - |  | 5,442,490                                                            |  | $                                              | 1.40 |                                                  | $ | 6,748,688
|Roger P. Deschenes (1)                  |  | 9/7/2012   |  | $                                                               | - |                                                             | $ | -       |  | $         | - |        | $ | -       |  | $ | - |  | $ | - |  | 1,058,498                                                            |  | $                                              | 1.40 |                                                  | $ | 1,312,538
|Dr. William J. McGann (2)               |  | 9/7/2012   |  | $                                                               | - |                                                             | $ | -       |  | $         | - |        | $ | -       |  | $ | - |  | $ | - |  | 1,498,972                                                            |  | $                                              | 1.40 |                                                  | $ | 1,858,725
|Dr. Darryl K. Jones (2)                 |  | 9/7/2012   |  | $                                                               | - |                                                             | $ | -       |  | $         | - |        | $ | -       |  | $ | - |  | $ | - |  | 1,258,498                                                            |  | $                                              | 1.40 |                                                  | $ | 1,560,538
|Todd A. Silvestri (1)                   |  | 9/7/2012   |  | $                                                               | - |                                                             | $ | -       |  | $         | - |        | $ | -       |  | $ | - |  | $ | - |  | 730,949                                                              |  | $                                              | 1.40 |                                                  | $ | 906,377  



(1)

Exercisable in two equal annual installments commencing on September 7, 2012.

(2)

Exercisable in three equal annual installments commencing on September 7, 2012.





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Employment Agreements; Change in Control and Severance Provisions

Terms of Employment Agreement with Named Executive Officers

In February 2009, we entered into a three-year employment agreement with Mr. Glenn D. Bolduc our President and Chief Executive Officer, pursuant to which Mr. Bolduc initially received a base salary of $275,000 per year, commencing on January 1, 2009.  After the third year, the agreement will automatically renewed for additional one-year periods. The agreement also provided for Mr. Bolduc to be eligible to receive incentive compensation in an amount of up to 50% of his based salary, upon the achievement of certain performance milestones established by the Board of Directors and a car allowance.  Incentive compensation, if any, for subsequent fiscal years was based on performance milestones to be established by mutual agreement between us and Mr. Bolduc.

On June 25, 2013, we amended and restated the employment agreement with Mr. Bolduc. The new agreement will remain in effect through June 30, 2016, after which, the agreement will automatically renew for additional one-year periods unless notice of non-renewal is given by either party.

The agreement establishes Mr. Bolducs base salary at the rate of $400,000 per year, which amount is equal to Mr. Bolducs annualized base salary immediately prior to the agreement. Mr. Bolducs base salary is subject to annual review, and any increases will be made in the discretion of the Board of Directors upon the recommendation of the Compensation Committee.

The new agreement also provides that Mr. Bolduc is eligible to receive cash bonuses of up to 50% of his annualized base salary for the fiscal year ended June 30, 2013 and for subsequent fiscal years. The amount of the bonus payable with respect to any fiscal year, if any, will be determined by the Board, in its sole discretion, provided that that no bonus will be payable unless we achieve certain revenue and adjusted earnings before interest, taxes, depreciation and amortization targets established by the Board for the respective fiscal year .  We did not achieve these targets and no bonus was payable to Mr. Bolduc for the fiscal year ended June 30, 2013. In August 2013, however, the Board agreed to pay Mr. Bolduc a bonus of $50.000 with respect to the fiscal year ended June 30, 2013 if the company receives certain governmental approvals for its QS-B220 benchtop explosives and narcotics detector by December 31, 2013 and enters into a procurement contract with a specific agency of the United States government on or before February 1, 2014 (the Bonus Milestones).

Mr. Bolduc received no additional long-term and/or equity incentive compensation in connection with the agreement. He will be eligible to receive such additional compensation as the Board may, in its sole discretion, award from time to time. In addition, Mr. Bolduc may participate in our employee fringe benefit programs or programs readily available to employees of comparable status and position.

We may terminate the agreement at any time without cause, on 30 days prior written notice. The agreement provides, however, for the payment of 18 months salary and a pro rata portion of any bonus compensation earned during the year of termination, as well as the continuation of certain benefits for 12 months, as separation payments in the event that Mr. Bolducs employment is terminated by us without cause or Mr. Bolduc resigns for good reason (as those terms are defined in the agreement). The agreement also provides that, if Mr. Bolduc resigns for good reason, all stock options and shares of restricted stock then held by Mr. Bolduc will become fully vested and exercisable as of the date of such resignation.

In the event that, within 12 months after a change of control (as that term is defined in the Companys Change of Control Plan, as adopted by the Board on September 7, 2012), Mr. Bolducs employment is terminated without cause, or Mr. Bolduc resigns for good reason, the agreement provides (i) for the payment of 36 months salary and a pro rata portion of any bonus compensation earned during the year of termination, and (ii) that all stock options and shares of restricted stock then held by Mr. Bolduc will become fully vested and exercisable as of the date of such termination or resignation.

We will not be required to continue to pay any amounts to Mr. Bolduc or to continue to provide certain benefits following termination of the agreement unless Mr. Bolduc executes a general release in favor of us substantially in the form annexed to the agreement and the period during which Mr. Bolduc may revoke the release has expired without any such revocation.

The agreement includes certain restrictions against competition and solicitation of our employees and customers for a period of one year after Mr. Bolducs resignation or termination.



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In March 2012, we entered into a three-year employment agreement with Dr. William J. McGann, our Chief Operating Officer, pursuant to which Dr. McGann receives a base salary of $250,000 per year, commencing on April 2, 2012. After the third year, the agreement will automatically continue unless notice of termination is given by either party.  We may terminate the agreement at any time without cause, on 30 days written notice.  The agreement, however, provides for payment of twelve months salary and a pro rata portion of any bonus compensation earned during the year of termination, as well as the continuation of certain benefits, as separation payments in the event that Dr. McGann employment is terminated by us without cause or Dr. McGann resigns for good reason (as those terms are defined in the agreement).  Dr. McCanns base salary is subject to annual review, and any increases will be made in the discretion of the Board of Directors upon the recommendation of the Compensation Committee.

The agreement provides for Dr. McGann to be eligible to receive incentive compensation in an amount of up to $125,000 for the fiscal year ended June 30, 2013 and for subsequent fiscal years upon the achievement of certain performance milestones to be established by the Board of Directors.  We did not achieve these milestones and no bonus was payable to Dr. McGann for the fiscal year ended June 30, 2013. In August 2013, however, the Board agreed to pay Dr. McGann a bonus of $41,250 with respect to the fiscal year ended June 30, 2013 if the company achieves the Bonus Milestones described above. Incentive compensation, if any, for subsequent fiscal years will be based on performance milestones to be established by mutual agreement between the Company and Dr. McGann within 60 days after commencement of each such fiscal year.

In May, 2012, we entered into a three-year employment agreement with Dr. Darryl Jones, our Vice President of Sales and Marketing, pursuant to which Dr. Jones will receive a base annual salary of $235,000 per year, commencing on May 7, 2012.  After the third year, the agreement will automatically continue unless notice of termination is given by either party. We may terminate the agreement at any time without cause, on 30 days written notice.  The agreement, however, provides for payment of twelve months salary and a pro rata portion of any bonus compensation earned during the year of termination, as well as the continuation of certain benefits, as separation payments in the event that Dr. Jones employment is terminated by us without cause or Dr. Jones resigns for good reason (as those terms are defined in the agreement).  Dr. Joness base salary is subject to annual review, and any increases will be made in the discretion of the Board of Directors upon the recommendation of the Compensation Committee.

The agreement provides for Dr. Jones to be eligible to receive incentive compensation in an amount of up to $117,500 for the fiscal year ended June 30, 2013 and for subsequent fiscal years upon the achievement of certain performance milestones to be established by the Board of Directors. We did not achieve these milestones and no bonus was payable to Dr. Jones for the fiscal year ended June 30, 2013.  In August 2013, however, the Board agreed to pay Dr. Jones a bonus of $29,375 with respect to the fiscal year ended June 30, 2013 if the company achieves the Bonus Milestones described above. Incentive compensation, if any, for subsequent fiscal years will be based on performance milestones to be established by mutual agreement between the Company and Dr. Jones within 60 days after commencement of each such fiscal year.



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Potential Payments Upon Termination or Change in Control

The following table describes the estimated incremental compensation upon (i) termination by the Company of the Mr. Bolduc without cause, or (ii) termination by Mr. Bolduc for good reason, including certain changes in control involving the Company.  The estimated incremental compensation assumes the triggering event had occurred on June 30, 2013.  Benefits generally available to all employees are not included in the table.  The actual amount of compensation can only be determined at the time of termination or change in control.

|                      |   |                              |   |                    |   |                         |   |      
|--------------------- | - | ---------------------------- | - | ------------------ | - | ----------------------- | - | -----
|                      |   | Base Salary Continuation (1) |   | COBRA Premiums (2) |   | Life Insurance Premiums |   | Other
|Glenn D. Bolduc       | $ | 600,000                      | $ | 20,384             | $ | 1,428                   | $ | -    
|Dr. William J. McGann | $ | 270,000                      | $ | 20,384             | $ | 1,428                   | $ | -    
|Dr. Darryl K. Jones   | $ | 245,000                      | $ | 20,384             | $ | 1,465                   | $ | -    



(1)

We are required to continue to pay Mr. Bolduc annual base salary then in effect for 18 months (36 months if Mr. Bolducs employment is terminated without cause or he resigns for good reason within 12 months following a change in control) on a regular payroll basis and Messrs. Jones and McGanns annual base salary then in effect for 12 months on a regular payroll basis.

(2)

Represents estimated out-of-pocket COBRA health insurance premium expenses to be paid by us on behalf of Messrs. Bolduc, Jones and McGann after termination.  Estimated out-of-pocket COBRA health insurance premium incurred by Messrs. Bolduc, Jones and McGann over the 12-month period following termination to be reimbursed by us.  Currently, Messrs. Bolduc and Jones do not subscribe to health benefits provided by us.

(3)

Represents estimated life insurance premiums to be paid by us on behalf of Messrs. Bolduc, Jones and McGann after termination.  We are required to continue in full force and effect, at our expense, the life insurance benefits provided in in these officers employment agreements for a period of 12 months after termination of the respective officers employment or until such officer becomes employed, whichever occurs first.

Amendment to the 2004 Stock Option Plan; Adoption of the Change of Control Payment Plan

In September 2012, our Board of Directors adopted an amendment to our 2004 Stock Option increasing the total number of shares of our common stock issuable thereunder from 4,000,000 shares to 20,000,000 shares and approved the following grants of options under the amended plan:

|                               |  |                | 
|------------------------------ |  | -------------- | 
|Named Executives and Directors |  | Shares Granted | 
|Glenn D. Bolduc                |  | 5,442,490      | 
|Dr. William J. McGann          |  | 1,498,972      | 
|Roger P. Deschenes             |  | 1,058,498      | 
|Dr. Darryl K. Jones            |  | 1,258,498      | 
|Michael C. Turmelle            |  | 640,949        | 
|Howard Safir                   |  | 303,399        | 
|Robert P. Liscouski            |  | 806,798        | 
|John A. Keating                |  | 303,399        | 
|Todd A. Silvestri              |  | 730,949        | 
|Brenda L. Baron                |  | 730,949        | 
|Estate of Joseph E. Levangie   |  | 525,099        | 
|                               |  | 13,300,000     | 





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Each of the options has an exercise price of $1.40 per share. One-half of options granted to each of Messrs. Bolduc, Deschenes, Silvestri and Ms. Baron were immediately exercisable and the other one-half became exercisable on September 7, 2013. One-third of the new options granted to each of Dr. McGann and Dr. Jones were immediately exercisable, one-third became exercisable on September 7, 2013, and the remaining one-third will become exercisable on September 7, 2014, subject to acceleration of vesting upon a Change in Control. Options granted to Messrs. Turmelle, Safir, Liscouski, Keating and the Estate of Mr. Levangie were immediately exercisable in full. All of the options will expire on September 6, 2022, subject to earlier expiration with respect to Messrs. Bolduc, McGann, Deschenes, Jones, Silvestri and Ms. Baron in connection with the termination or cessation of their respective employment with the company.

On September 7, 2012, the Board of Directors adopted the Implant Sciences Corporation Change of Control Payment Plan, the purpose of which is to reward management for the increases in shareholder value generated between January 2009 and the present.

On January 2, 2009, the closing price of our common stock on the NYSE Amex LLC was $.18 per share. On the date the plan was adopted, the closing price of the common stock on the OTC Markets Groups OTCPK tier was $1.40. Our Board of Directors believes that this increase in shareholder value is directly attributable to the dedication and hard work of our management team, employees and directors. The Board also believes, however, that our management and directors own significantly less equity in the company than do the officers and directors of most publicly traded early-stage (i.e., turn-around) businesses. Accordingly, our management and directors have not significantly benefitted from the increase in shareholder value between January 2009 and the present, and the plan is intended to provide value to our management and directors equivalent to the value they would have earned had they owned a more significant portion of our equity.

Pursuant to the plan, the Board established a target level of stock ownership for each officer as a percentage of our fully diluted capitalization, and a corresponding ownership percentage for directors. To reflect the increase in shareholder value between January 2009 and the adoption of the plan, the Board determined that each officer and director should be allocated a Change of Control Payment equal to the product of (x) the closing price of our common stock on September 7, 2012 (i.e., $1.40) less a floor price, multiplied by (y) the number of additional stock options granted to each participant on the same date. The floor price applicable to directors and officers who served us at the beginning of the turn-around is $.20, i.e., slightly above the closing price of the common stock on January 2, 2009. The floor prices for Dr. McGann and Dr. Jones are $.51 and $.67, respectively, reflecting the closing prices of the common stock on the dates those officers joined us. The benefits under the plan are payable upon, and only upon, a Change of Control, as defined in the plan, involving the company.  Accordingly, the payment of the benefits allocated under the plan will be further deferred until such time that all shareholders receive payments for or in respect of their common stock in a transaction constituting a Change of Control.

The following is a summary of the material terms of the Change of Control Plan. This summary is qualified in its entirety by reference to the complete plan, a copy of which was filed as Exhibit 10.2 to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 13, 2012.

Participants.  The Board has designated each of our officers and directors, including the estate of Mr.  Joseph E. Levangie, a former member of the Board of Directors, as eligible to receive benefits under the Change of Control Plan upon the effective time of a Change of Control (as defined in the plan). The termination of employment of any such officer or the termination of membership on the Board of any such director prior to a Change of Control will not affect the eligibility of any such participant or his or her beneficiary to receive benefits under the Plan.



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Plan Benefits.  The Change of Control Plan provides for a lump sum, calculated as described above, to be paid to each participant, in cash (the Plan Benefits), upon a Change of Control. The Plan Benefits payable to all participants in the plan are as follows:

|                             |   |             
|---------------------------- | - | ------------
|Name of Participant          |   | Plan Benefit
|Glenn D. Bolduc              | $ | 6,530,988   
|Dr. William J. McGann        |   | 1,334,085   
|Roger P. Deschenes           |   | 1,270,198   
|Dr. Darryl K. Jones          |   | 918,704     
|Brenda L Baron               |   | 877,139     
|Todd A. Silvestri            |   | 877,139     
|Michael C. Turmelle          |   | 769,139     
|Howard Safir                 |   | 364,079     
|Robert P. Liscouski          |   | 968,158     
|John A. Keating              |   | 364,079     
|Estate of Joseph E. Levangie |   | 630,119     
|Total Plan Benefits          | $ | 14,903,827  

The Change of Control Plan is unfunded and all Plan Benefits will be paid only from our general assets.

Form and Timing of Payments. The Plan Benefits will be payable to participants, or their respective beneficiaries, in cash, within 30 days after the date of the Change in Control. Accordingly, the payment of benefits allocated under the plan will be deferred until such time as all shareholders receive payments for or in respect of their common stock in a transaction constituting a Change of Control.

We are not currently in discussions with any third parties concerning any transaction that would constitute a Change of Control, we are not aware of any efforts of any third parties to engage in any such transaction, and the Board of Directors has no current intention of seeking offers to engage in any such transaction.

Definition of Change of Control. As defined in the Change of Control Plan, the term Change of Control means the occurrence of an event or series of events which qualify as a change in control event for purposes of Section 409A of the Internal Revenue Code, as amended, and Treas. Reg. §1.409A-3(i)(5), including:



(i)

A change in the ownership of the Company, which occurs on the date that any person or persons acting as a group (a Group), other than certain Excluded Persons (as defined below) acquires ownership of our stock that, together with the stock then held by such person or Group, constitutes more than 50% of the total fair market value or total voting power of our stock. However, if any one person or Group is considered to own more than 50% of the total fair market value or total voting power of our stock, the acquisition of additional stock by the same person or Group will not be considered to cause a Change of Control.



(ii)

A change in the effective control of the Company, which will be deemed to occur on the date that:



(1)

Any one person or Group, other than certain Excluded Persons, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or Group) ownership of our stock possessing 30% or more of the total voting power of our stock. However, if any one person or Group is considered to own more than 30% of the total voting power of our stock, the acquisition of additional voting stock by the same person or Group will not be considered to cause a Change of Control; or



(2)

A majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.



(iii)

A change in the ownership of a substantial portion of our assets, which occurs on the date that any one person or Group, other than certain Excluded Persons, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group) our assets that have a total Gross Fair Market Value (as defined below) equal to more than 40% of the total Gross Fair Market Value of all our assets immediately prior to such acquisition, other than in certain Excluded Transactions (as defined below).



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For purposes of the definition of Change of Control:



(i)

Gross Fair Market Value means the value of our assets, or the value of the assets being disposed of, as applicable, determined without regard to any liabilities associated with such assets.



(ii)

Persons will not be considered to be acting as a Group solely because they purchase or our stock at the same time, or as a result of the same public offering, or solely because they purchase our assets at the same time, or as a result of the same public offering, as the case may be.  However, persons will be considered to be acting as a Group if they are owners of an entity that enters into a merger, consolidation, purchase or acquisition of assets or similar business transaction with us.



(iii)

Excluded Transaction means any transaction in which assets are transferred to: (A) a shareholder of the Company (determined immediately before the asset transfer) in exchange for or with respect to its stock; (B) an entity 50% or more of the total value or voting power of which is owned, directly or indirectly, by us (determined after the asset transfer); (C) a person or Group that owns, directly or indirectly, 50% or more of the total value or voting power of all our outstanding stock (determined after the asset transfer); or (D) an entity at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in the preceding clause (C) (determined after the asset transfer).



(iv)

Excluded Person(s) means (A) the Company or any Related Entity (as defined below); (B) a trustee or other fiduciary holding securities under an employee benefit plan of ours or any Related Entity; (C) an underwriter temporarily holding securities pursuant to an offering of such securities; or (D) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of the our stock.



(v)

Related Entity means the Company, its affiliates and any other entities that, along with the Company, are considered a single employer pursuant to Section 414(b) or (c) of the Code and the Treasury regulations promulgated thereunder, determined by applying the phrase at least 50 percent in place of the phrase at least 80 percent each place it appears in such Treasury regulations or Section 1563(a) of the Code.

Obligations of the Participants. No participant will be eligible to receive Plan Benefits unless such participant has executed an Agreement Related to Nondisclosure, Noncompetition and Other Matters, in the form attached as Exhibit B to the Change of Control Plan. Such agreement provides, generally, that (i) all confidential information concerning our business or financial affairs in the participants possession is the Companys exclusive property; (ii) the participant must disclose to us ideas and inventions conceived of by the participant during his service to the Company or within one year afterward and, with certain exceptions, assign all rights in such ideas and inventions to us; and (iii) during his service to the Company and for a period of one year afterward, the participant may not, directly or indirectly, compete with us, induce any of our employees to terminate their relationships with us or contact or solicit the business of any of our customers or prospective customers.

In addition, in order to ensure a smooth transition after a Change of Control, a successor entity to the Company may require, as a condition to the payment of any Plan Benefit, that a participant who is an employee of the Company or one of its affiliates on the date of the Change of Control continue to provide services to, and remain employed by, the successor entity for up to 30 days following the Change of Control, provided that during such 30-day period the participant must continue to receive at least the same base salary that was in effect immediately prior to the Change of Control.



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Taxation of Plan Benefits.

Withholding Taxes. We may withhold from Plan Benefits amounts which it determines are necessary to satisfy its obligation to withhold federal, state and local income taxes or other taxes or amounts required to be withheld.

Section 4999 Gross-Up Payments. In the event that the compensation payable to or for the benefit of a participant upon a Change of Control (whether pursuant to the Change of Control Plan or otherwise) (the Parachute Payments) would subject the participant to the excise tax levied on certain excess parachute payments under Section 4999 of the Code, we must make an additional payment to the participant in an amount such that, after reduction for all taxes, the remaining amount equals the excise tax described in Section 4999 of the Code and all related interest and penalties due with respect to such participant's Parachute Payments.

409A Gross-Up Payments.In the event that any payments under the Change of Control Plan (the Payments) are determined to be subject to the interest charges and taxes imposed by Section 409A(a)(1)(B) of the Code, or any state, local, employment or foreign taxes of a similar nature, or any interest charges or penalties with respect to such taxes (Section 409A Tax), then we must pay the participant, if requested, an additional amount such that the net amount retained by the participant after deduction of the Section 409A Tax (but not any federal, state, or local income tax or employment tax) and any federal, state, or local income tax, or employment tax upon the gross-up described in this paragraph will be equal to the Payments.

Amendment; Termination. The Board or the Compensation Committee (or another committee designated by the Board) may terminate the Change of Control Plan effective on at least 30 days prior notice to each participant. Any such termination or amendment, however, that imposes additional obligations on, or impairs the rights of, a participant under the Plan will not be effective without the participants written consent.

Outstanding Equity Awards at 2013 Fiscal Year-End

The following table provides information regarding outstanding stock options held by each Named Executive Officer as of June 30, 2013.

|                         |     |                                                                 |  |  |  |                                                                   |  |  |  |  |  |   |                                     |  |  |  |                        | 
|------------------------ | --- | --------------------------------------------------------------- |  |  |  | ----------------------------------------------------------------- |  |  |  |  |  | - | ----------------------------------- |  |  |  | ---------------------- | 
|Named Executive Officers |     | Number of Securities Underlying Unexercised Options Exercisable |  |  |  | Number of Securities Underlying Unexercised Options Unexercisable |  |  |  |  |  |   | Option Exercise Price ($ per Share) |  |  |  | Option Expiration Date | 
|                         |     |                                                                 |  |  |  |                                                                   |  |  |  |  |  |   |                                     |  |  |  |                        | 
|Glenn D. Bolduc          | (1) | 286,400                                                         |  |  |  | -                                                                 |  |  |  |  |  | $ | 0.17                                |  |  |  | 12/31/2019             | 
|                         | (2) | 2,721,245                                                       |  |  |  | 2,721,245                                                         |  |  |  |  |  | $ | 1.40                                |  |  |  | 09/06/2022             | 
|                         |     | 3,007,645                                                       |  |  |  | 2,721,245                                                         |  |  |  |  |  |   |                                     |  |  |  |                        | 
|                         |     |                                                                 |  |  |  |                                                                   |  |  |  |  |  |   |                                     |  |  |  |                        | 
|Roger P. Deschenes       | (2) | 529,249                                                         |  |  |  | 529,429                                                           |  |  |  |  |  | $ | 1.40                                |  |  |  | 09/06/2022             | 
|                         |     |                                                                 |  |  |  |                                                                   |  |  |  |  |  |   |                                     |  |  |  |                        | 
|Dr. William J. McGann    | (3) | 200,000                                                         |  |  |  | -                                                                 |  |  |  |  |  | $ | 0.54                                |  |  |  | 03/31/2021             | 
|                         | (4) | 499,657                                                         |  |  |  | 999,315                                                           |  |  |  |  |  | $ | 1.40                                |  |  |  | 09/06/2022             | 
|                         |     | 699,657                                                         |  |  |  | 999,315                                                           |  |  |  |  |  |   |                                     |  |  |  |                        | 
|                         |     |                                                                 |  |  |  |                                                                   |  |  |  |  |  |   |                                     |  |  |  |                        | 
|Dr. Darryl K. Jones      | (4) | 419,499                                                         |  |  |  | 839,999                                                           |  |  |  |  |  | $ | 1.40                                |  |  |  | 09/06/2022             | 
|                         |     |                                                                 |  |  |  |                                                                   |  |  |  |  |  |   |                                     |  |  |  |                        | 
|Todd A. Silvestri        | (2) | 364,475                                                         |  |  |  | 364,474                                                           |  |  |  |  |  | $ | 1.40                                |  |  |  | 09/06/2022             | 
|                         |     | 5,021,525                                                       |  |  |  | 5,454,282                                                         |  |  |  |  |  |   |                                     |  |  |  |                        | 
|                         |     |                                                                 |  |  |  |                                                                   |  |  |  |  |  |   |                                     |  |  |  |                        | 



(1)

Exercisable in three equal annual installments commencing January 1, 2010.

(2)

Exercisable in two equal annual installments commencing on September 7, 2012.

(3)

Exercisable on April 1, 2012.

(4)

Exercisable in three equal annual installments commencing on September 7, 2012.



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2013 Option Exercises and Stock Vested

The following table provides information regarding the exercise of option awards by any of the Named Executive Officers, during the fiscal year ended June 30, 2013:

|                      |  |                                       |   |                           
|--------------------- |  | ------------------------------------- | - | --------------------------
|                      |  | Number of Shares Acquired on Exercise |   | Value Realized on Exercise
|Glenn D. Bolduc       |  | 563,600                               | $ | 558,675                   
|Roger P. Deschenes    |  | 200,000                               | $ | 214,250                   
|Dr. William J. McGann |  | -                                     | $ | -                         
|Dr. Darryl K. Jones   |  | -                                     | $ | -                         
|Todd A. Silvestri     |  | 150,000                               | $ | 199,250                   

Directors Compensation

The following table sets forth the annual compensation of our non-employee directors for fiscal 2013, which consisted of annual cash retainers, board and committee meeting fees and equity awards in the form of options pursuant to the 2004 Stock Option Plan.  Employee directors do not receive any separate compensation for their service on the Board.

|                    |  |   |                                 |  |   |                       |  |   |                                |  |   |          
|------------------- |  | - | ------------------------------- |  | - | --------------------- |  | - | ------------------------------ |  | - | ---------
|Director            |  |   | Fees Earned or Paid in Cash ($) |  |   | Option Awards ($) (1) |  |   | All Other Compensation ($) (2) |  |   | Total ($)
|John A. Keating     |  | $ | 38,300                          |  | $ | 356,454               |  | $ | -                              |  | $ | 394,754  
|Robert P. Liscouski |  |   | 39,750                          |  |   | 950,409               |  |   | 180,000                        |  |   | 1,170,159
|Howard Safir        |  |   | 41,500                          |  |   | 356,454               |  |   | -                              |  |   | 397,954  
|Michael C. Turmelle |  |   | 47,300                          |  |   | 755,038               |  |   | -                              |  |   | 802,338  





(1)

The amount reported in this column for the non-employee director represents the dollar amount recognized for financial statement reporting purposes in fiscal 2013, with respect to options granted to non-employee directors, determined in accordance with Statement of Accounting Standards Codification 718-10-25 Compensation  Stock Compensation. See Note 2 of Notes to Consolidated Financial Statements set forth in this Annual Report on Form 10-K for the assumptions used in determining the value of such awards.  For the fiscal years ended June 30, 2013 and 2012.



(2)

Mr. Liscouski received $180,000 of other compensation for consulting services provided to us, including attendance at meetings with agencies of the U.S. government.In addition, as described under Item 13 below, Mr. Liscouski had served as a partner at Secure Strategy Group, a firm that had been retained by us to assist with our efforts to acquire additional capital.  Mr. Liscouski had received compensation from Secure Strategy Group for services that firm provides to us.



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Grants of Plan-Based Awards to Non-Employee Directors

The following table sets forth the individual grants of plan-based awards to our non-employee directors in fiscal year ended June 30, 2013.

|                                        |  |            |  |                                                                 |   |                                                             |   |         |  |           |   |        |   |         |  |   |   |  |   |   |  |                                                                      |  |                                                |      |                                                  |   |        
|--------------------------------------- |  | ---------- |  | --------------------------------------------------------------- | - | ----------------------------------------------------------- | - | ------- |  | --------- | - | ------ | - | ------- |  | - | - |  | - | - |  | -------------------------------------------------------------------- |  | ---------------------------------------------- | ---- | ------------------------------------------------ | - | -------
|Fiscal 2013 Grants of Plan-Based Awards
|                                        |  |            |  |                                                                 |   |                                                             |   |         |  |           |   |        |   |         |  |   |   |  |   |   |  | All Other Option Awards: Number of Securities Underlying Options (#) |  | Exercise or Base Price of Option Awards ($/sh) |      | Grant Date Fair Value of Stock and Option Awards
|                                        |  |            |  | Estimated Future Payouts Under Non-Equity Incentive Plan Awards |   | Estimated Future Payouts Under Equity Incentive Plan Awards |   |         | 
|Named Executive Officers                |  | Grant Date |  | Threshold                                                       |   | Target                                                      |   | Maximum |  | Threshold |   | Target |   | Maximum |  |   |  
|John A. Keating (1)                     |  | 9/7/2012   |  | $                                                               | - |                                                             | $ | -       |  | $         | - |        | $ | -       |  | $ | - |  | $ | - |  | 303,399                                                              |  | $                                              | 1.40 |                                                  | $ | 356,454
|Robert P. Liscouski (1)                 |  | 9/7/2012   |  | $                                                               | - |                                                             | $ | -       |  | $         | - |        | $ | -       |  | $ | - |  | $ | - |  | 806,798                                                              |  | $                                              | 1.40 |                                                  | $ | 950,409
|Howard Safir (1)                        |  | 9/7/2012   |  | $                                                               | - |                                                             | $ | -       |  | $         | - |        | $ | -       |  | $ | - |  | $ | - |  | 303,399                                                              |  | $                                              | 1.40 |                                                  | $ | 356,454
|Michael C. Turmelle (1)                 |  | 9/7/2012   |  | $                                                               | - |                                                             | $ | -       |  | $         | - |        | $ | -       |  | $ | - |  | $ | - |  | 640,949                                                              |  | $                                              | 1.40 |                                                  | $ | 755,038





(1)

Exercisable on grant date.

Additional Information to Understand the Director Compensation Table

Fees paid to our non-employee directors in connection with their service as directors are as follows: $30,000 annual retainer to each director; $1,000 for each Board of Directors meeting attended; $750 for each committee meeting attended; and $500 for each Board of Directors meeting or committee meeting in which the director participates by telephone conference call.





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Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information related to securities authorized for issuance under equity compensation plans as of the end of fiscal 2013 is included in Item 5 of Part II of our Annual Report on Form 10-K for the year ended June 30, 2013.

The following table sets forth the beneficial ownership of shares of our common stock, as of September 30, 2013, of (i) each person known by us to beneficially own 5% or more of such shares; (ii) each of our directors and executive officers named in the Summary Compensation Table; and (iii) all of our current executive officers, directors, and significant employees as a group.  Except as otherwise indicated, all shares are beneficially owned, and the persons named as owners hold investment and voting power.

Beneficial ownership has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934.  Under this rule, certain shares may be deemed to be beneficially owned by more than one person, if, for example, persons share the power to vote or the power to dispose of the shares.  In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares, for example, upon exercise of an option or warrant, within 60 days of September 30, 2013.  In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person, and only such person, by reason of such acquisition rights.  As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the persons actual voting power at any particular date.

|                                                                  |  |  |                                           |  |  |                         |  | 
|----------------------------------------------------------------- |  |  | ----------------------------------------- |  |  | ----------------------- |  | 
|Name and Address of Beneficial Owner (1)                          |  |  | Amount and Nature of Beneficial Ownership |  |  | Percentage of Class (2) |  | 
|Executive Officers and Directors                                  |  |  |                                           |  |  |                         |  | 
|Brenda L. Baron (3)                                               |  |  | 808,449                                   |  |  | 1.3%                    |  | 
|Glenn D. Bolduc (4)                                               |  |  | 6,148,890                                 |  |  | 9.5%                    |  | 
|Roger P. Deschenes (5)                                            |  |  | 1,258,498                                 |  |  | 2.1%                    |  | 
|Dr. Darryl K. Jones (6)                                           |  |  | 838,999                                   |  |  | 1.4%                    |  | 
|Dr. William J. McGann (7)                                         |  |  | 1,199,314                                 |  |  | 2.0%                    |  | 
|Todd A. Silvestri (8)                                             |  |  | 730,949                                   |  |  | 1.2%                    |  | 
|John A. Keating (9)                                               |  |  | 503,399                                   |  |  | 0.8%                    |  | 
|Robert P. Liscouski (10)                                          |  |  | 1,066,798                                 |  |  | 1.8%                    |  | 
|Howard Safir (11)                                                 |  |  | 503,399                                   |  |  | 0.8%                    |  | 
|Michael C. Turmelle (12)                                          |  |  | 1,558,949                                 |  |  | 2.6%                    |  | 
|                                                                  |  |  |                                           |  |  |                         |  | 
|All Executive Officers and Directors as a group (10 persons) (13) |  |  | 14,617,643                                |  |  | 20.2%                   |  | 



(1)

Unless otherwise indicated, the business address of the stockholders named in the table above is Implant Sciences Corporation, 500 Research Drive, Unit 3, Wilmington, MA 01887.

(2)

Based on 59,279,595 outstanding shares as of September 30, 2013.

(3)

Includes 808,449 shares of common stock, which may be purchased within 60 days of September 30, 2013 upon the exercise of stock options.

(4)

Includes 5,728,890 shares of common stock, which may be purchased within 60 days of September 30, 2013 upon the exercise of stock options.

(5)

Includes 1,058,498 shares of common stock, which may be purchased within 60 days of September 30, 2013 upon the exercise of stock options.

(6)

Includes 838,999 shares of common stock, which may be purchased within 60 days of September 30, 2013 upon the exercise of stock options.

(7)

Includes 1,199,314 shares of common stock, which may be purchased within 60 days of September 30, 2013 upon the exercise of stock options.



21





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(8)

Includes 730,949 shares of common stock, which may be purchased within 60 days of September 30, 2012 upon the exercise of stock options.

(9)

Includes  303,399 shares of common stock, which may be purchased within 60 days of September 30, 2013 upon the exercise of stock options.

(10)

Includes 1,006,798 shares of common stock, which may be purchased within 60 days of September 30, 2013 upon the exercise of stock options.

(11)

Includes 503,399 shares of common stock, which may be purchased within 60 days of September 30, 2013 upon the exercise of stock options.

(12)

Includes 838,999 shares of common stock, which may be purchased within 60 days of September 30, 2013 upon the exercise of stock options.

(13)

See footnotes (3) through (12).



Item 13.

Certain Relationships and Related Transactions, and Director Independence

Transactions with related parties, including, but not limited to, members of the Board of Directors, are reviewed and approved by all members of the Board of Directors.  In the event a transaction with a member of the Board is contemplated, the Director having a beneficial interest in the transaction is not allowed to participate in the decision-making and approval process.  The policies and procedures surrounding the review, approval or ratification of related party transactions are not in writing, nevertheless, such reviews, approvals and ratifications of related party transactions are documented in the minutes of the meetings of the Board of Directors and any such transactions are committed to writing between the related party and the Company in an executed engagement agreement.

Robert Liscouski, a member of our Board of Directors, had served as a partner at Secure Strategy Group, a homeland security-focused banking and strategic advisory firm that had been retained by us to assist with our efforts to acquire additional capital.  During the years ended June 30, 2013 and 2012, this advisory firm was paid $66,000 and $105,000, respectively. On March 31, 2013, we terminated this relationship and our obligation to the advisory firm was $118,000 at June 30, 2013.  In April 2011, we entered into an advisory and consulting agreement with Mr. Liscouski to assist our U.S. government sales and marketing team with our efforts to advance our interests with the U.S. government.  During the years ended June 30, 2013 and 2012, Mr. Liscouski was paid $180,000 and $195,000, respectively. As of June 30, 2013, we had no obligation to Mr. Liscouski. Mr. Liscouski also serves as a senior partner at Edge360, a leading security technology and situational awareness solutions provider to the homeland security marketplace that has been retained by us to advance our efforts with the U.S. government.  During the fiscal years ended June 30, 2013 and 2012, this advisory firm was paid $27,000 and $12,000, respectively.  As of June 30, 2013 our obligation to this advisory firm was $2,000.

On June 4, 2009, Michael Turmelle, a member of our Board of Directors loaned $100,000 to us. See Note 13 of Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended June 30, 2013.

Independence of the Board of Directors

The Board of Directors has adopted director independence guidelines that are consistent with the definitions of independence as set forth in Section 301 of the Sarbanes-Oxley Act of 2002 and Rule 10A-3 under the Securities Exchange Act.  In accordance with these guidelines, the Board of Directors has reviewed and considered facts and circumstances relevant to the independence of each of our directors and director nominees and has determined that, each of the Companys non-management directors, other than Mr. Liscouski, qualifies as independent.

Item 14.

Principal Accounting Fees and Services

The Audit Committee of our Board of Directors appointed Marcum LLP as our independent registered public accounting firm effective April 2010. The firm of Marcum acts as our principal independent registered public accounting firm.



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The following is a summary of the fees billed to us by Marcum for professional services rendered for the fiscal years ended June 30, 2013 and 2012.  The Audit Committee considered and discussed with Marcum the provision of non-audit services to us and the compatibility of providing such services with maintaining their independence as our auditors.

|                   |  |                      |         |  |   |        
|------------------ |  | -------------------- | ------- |  | - | -------
|                   |  | Years Ended June 30,
|Fee Category       |  |                      | 2013    |  |   | 2012   
|Audit fees         |  | $                    | 160,000 |  | $ | 160,000
|Audit-related fees |  |                      | -       |  |   | -      
|Tax fees           |  |                      | -       |  |   | -      
|All other fees     |  |                      | -       |  |   | -      
|Total              |  | $                    | 160,000 |  | $ | 160,000



Audit Fees.Consist of fees billed for professional services rendered for the audit of our annual financial statements and review of financial statements included in our quarterly reports and other professional services provided in connection with regulatory filings.

Audit-Related Fees. Consist of fees billed for assurance and related services that related to the performance of the audit or review of our financial statements and are not otherwise reported under Audit Fees.

Tax Fees. Consist of fees billed for professional services for tax compliance, tax advice and tax planning.  These services include assistance regarding federal and state tax compliance and acquisitions.

Pre-Approval Policies and Procedures.  The Audit Committee has the authority to approve all audit and non-audit services that are to be performed by the Companys independent registered public accounting firm.  Generally, the Company may not engage its independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee (or a properly delegated subcommittee thereof).  All Audit-related fees, Tax fees and All other fees were approved by the Audit Committee.

All Other Fees.  Consist of fees billed for professional services other than those fees described above.





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PART IV

Item 15.

Exhibits, Financial Statement Schedules

The following are filed as part of this Form 10-K/A:

(1)

Not applicable

(2)

Exhibits

|            |          |                                                                                                                                               
|----------- | -------- | ----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. | Ref. No. | Description                                                                                                                                   
|31.1        | *        | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                           
|31.2        | *        | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                       
|32.1        | **       | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2        | **       | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|            |          |                                                                                                                                               



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | *  | Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ** | In accordance with Item 601(b)(32)(ii) of Regulation S-K, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-K and will not be deemed to be filed for purposes of Section 18 of the Exchange Act.  Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.





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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                        |                              |                                                   
|----------------------- | ---------------------------- | --------------------------------------------------
|Dated: October 28, 2013 | Implant Sciences Corporation
|                        | By:                          | /s/ Glenn D. Bolduc                               
|                        |                              | Glenn D. Bolduc President, Chief Executive Officer



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                        |                                                                                                        |                                                                                                                                                              | 
|----------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|Dated: October 28, 2013 |                                                                                                        | /s/ Glenn D. Bolduc                                                                                                                                          | 
|                        | Glenn D. Bolduc President, Chief Executive Officer (Principal Executive Officer) Chairman of the Board |                                                                                                                                                             
|Dated: October 28, 2013 |                                                                                                        | /s/ William J. McGann William J. McGann Chief Operating Officer Director                                                                                     | 
|Dated: October 28, 2013 |                                                                                                        | /s/ Roger P. Deschenes Roger P. Deschenes Vice President, Finance and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | 
|Dated: October 28, 2013 |                                                                                                        | /s/ Michael C. Turmelle                                                                                                                                      | 
|                        | Michael C. Turmelle Director                                                                           |                                                                                                                                                             
|Dated: October 28, 2013 |                                                                                                        | /s/ Robert P. Liscouski                                                                                                                                      | 
|                        | Robert P. Liscouski Director                                                                           |                                                                                                                                                             
|Dated: October 28, 2013 |                                                                                                        | /s/ Howard Safir                                                                                                                                             | 
|                        | Howard Safir Director                                                                                  |                                                                                                                                                             
|Dated: October 28, 2013 |                                                                                                        | /s/ John A. Keating                                                                                                                                          | 
|                        | John A. Keating Director                                                                               |                                                                                                                                                             





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