Nevertheless, they believe they have found a way to survive, and perhaps even thrive, with a laser-based technology that monitors drinking water for the presence of harmful microbes. "It represents the JMAR product that we believe has the greatest investor interest and the best revenue hope," said C. Neil Beer, who relinquished his role as JMAR's chairman in April to take over as chief executive.
Beer, a retired Air Force major general and longtime defense industry executive, contends that homeland security threats have created strong demand for new sensors to detect biological, chemical and radioactive agents.
"Right now, a water utility doesn't know if it's delivering contaminated water until they get a call from a hospital," Beer said.
JMAR's BioSentry system detects only microorganisms in water. But Beer said it provides a crucial advantage over existing technologies by continually monitoring water quality - and it can provide an almost immediate warning for potential pathogens. Existing technology requires testing for coliform bacteria by placing water samples in a petri dish with growth media and incubating the culture for at least 24 hours.
Such technology may represent a sign of our times, not only in terms of homeland security, but also because of rising concerns about global water supplies and water quality.
"Our water needs worldwide are enormous and growing," said Ronald A. Newcomb of the Center for Advanced Water Technologies at San Diego State University. "Every minute, four children die from bad water, from organisms in water, around the world."
In the Southwest, Newcombe said the burgeoning populations of Phoenix, Las Vegas and Southern California represent an increasing and inexorable demand on available water supplies. The eventual consequences of that demand has prompted a variety of solutions, including the development of new ways to detect contaminants, as well as new technologies for desalination and water purification. In Southern California, for example:
- Newcomb and several colleagues founded Aqua Genesis, a company that uses geothermal energy in a desalination process that could be cheaper and more efficient than reverse-osmosis membrane technology.
- Mirat Gurol, a professor of environmental engineering at San Diego State University, has developed a way to eliminate toxic perchlorates from ground water. Her approach uses a combination of metallic iron and ultraviolet light under oxygen-free conditions to eliminate perchlorate, which is used to make matches, flares, pyrotechnics, military ordnance and explosives.
- Assure BioAssay Control, a Carlsbad, Calif., startup, has been developing a water testing kit that uses bioluminescent plankton to test water samples for almost any type of chemical contaminant. Assure BioAssay's QwikLite test kit cannot detect microbes in water, CEO Bryan Bjorndal said, so the approach JMAR has taken with its BioSentry technology seemed appropriate for uses such as testing the water at the Super Bowl and other high-profile possible terrorist targets, Bjorndal said.
Yet Bjorndal doubted that homeland security and defense customers would provide sufficient business, and JMAR's Beer agreed. He sees many potential customers for JMAR's water quality monitoring system, including municipal and regional water utility systems, food and beverage industries, pharmaceutical companies and even semiconductor manufacturers.
Recently, for example, JMAR announced that Princess Cruise Lines had placed an order for one $40,000 BioSentry system. A few days earlier, the company said one of its units had successfully completed a 60-day trial of its water monitoring capabilities for the city of Anaheim, Calif. But JMAR's prospects are also constrained by the company's financial crisis, which is acute.
While JMAR had $5.4 million in available cash at the end of 2005, the company reported $2.7 million in losses from operating activities during the first three months of this year. While JMAR raised $1.3 million by selling additional shares of stock, the company probably will run out of cash in coming months, said Michael Willoughby, a professor of accounting at the University of California San Diego.
JMAR, which has 68 employees, reported almost $2.4 million in sales for the three months ended March 31, a 27 percent gain from the nearly $1.9 million posted for the first quarter of 2005. But Willoughby noted that JMAR's profits declined by 25 percent, and the company posted a nearly $2.3 million loss in the quarter.
"This is because (their) expenses are out of control," Willoughby said. He said the company is nearing bankruptcy, unless it can somehow raise additional capital.
"We recognize the situation," said Dennis E. Valentine, JMAR's chief financial officer. "It's the bane of being a small company for so many years."
JMAR acknowledged in its year-end financials that it has enough liquidity to operate through the end of 2006, Valentine said, "but we have to raise some more capital."
Compounding JMAR's troubles was a warning letter the company received from the Nasdaq stock market on May 12. The letter notified JMAR its stock could be delisted because the price had slipped below the minimum threshold of $1 a share. Nasdaq said the company has 180 days, or until Nov. 8, to regain compliance with the minimum $1 bid price requirement.
JMAR's shares closed recently at 51 cents, after climbing almost 2 cents in trading of 45,246 shares.
If Nasdaq delists a stock, trading in its shares would move to the over-the-counter market, which lacks the visibility of an organized stock exchange. Because the requirements for listing on the over-the-counter market are less stringent, the listed stocks have less credibility for some investors.
"I think everyone who was concerned about delisting is not a shareholder anymore," Beer said.
He also maintains the company is undergoing a reversal of fortunes.
Recently, JMAR retained Agile Entry, a New York investment bank, to evaluate its BioSentry technology for potential business partners.
"There are a lot of big corporations out there that are now focused on water purification, water quality, filtration and things like that," Beer said.
And he sees no shortage of opportunities.