Although the level of investor skepticism has diminished, raygun maker Ionatron (NASDAQ:IOTN) remains one of the most heavily shorted stocks on the Nasdaq. Tomorrow morning, the company gets yet another chance to stun its detractors, when it reports its Q3 numbers.

What analysts say:

  • Buy, sell, or waffle? Exactly one analyst follows Ionatron, and rates it a buy.
  • Revenues & Earnings. Despite not having published a revenue estimate, he's somehow divined that Ionatron will report a $0.05-per-share loss tomorrow. (Then again, that's what he said last quarter, when the loss turned out to be 40% worse.)

What management says:
If actions speak louder than words, then listen up, investors: Two of Ionatron's executive vice presidents have filed with the SEC their intention to sell off as much as 600,000 shares of company stock apiece through the ends of June and August 2007, respectively. That's the bad news.

The good news, however, may hearten holders of this stock, which has lost 60% of its value over the last 52 weeks: The "10b5-1" plans for both Joseph Hayden and Stephen McCahon provide that no shares will be sold at a price less than $5, and even if fully executed, under both execs' plans, they would retain more than 90% of their current holdings.

In other news, the company has made yet another change at the top management ranks. Last quarter, the big news was Kenneth Wallace's move from the CFO's to the COO's chair. This quarter, the change was one step higher, as a new CEO was found: Dana Marshall, a General Dynamics (NYSE:GD) alum, whom Heidrick & Struggles (NASDAQ:HSII) helped to poach from a VP position at Zygo Corporation (NASDAQ:ZIGO).

What management does:
Ionatron's margins took a dive last quarter. As you can see below, each of the firm's rolling gross, operating, and net margins continue to deteriorate. But Marshall has been given strong incentive to turn things around: In addition to his take-home salary, he got a whopping 800,000 stock options as part of his pay package. The catch? He's got to get the stock price up to at least $6.30 to cash them in.

Margins %

3/05

6/05

9/05

12/05

3/06

6/06

Gross

7.4

6.9

8.1

5.9

5.9

5.4

Op.

(29.0)

(27.1)

(18.9)

(22.7)

(24.0)

(36.4)

Net

(30.2)

(28.3)

(20.1)

(19.2)

(25.3)

(44.1)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
In last quarter's Foolish Forecast, we pointed out how Ionatron's main challenge -- and now, Marshall's main challenge -- was controlling costs. That remains true today. Whereas the company saw its sales fall 50% last quarter, its cost of goods sold fell only 46%, while selling, general, and administrative costs continued to soar, up 64% year over year.

Likewise, as previously discussed, inventories and accounts receivable continued to grow, rising 117% and 7%, respectively. So let's add one more thing to Marshall's list of "to-dos" for tomorrow's news: Get the sales going, and move some of those dusty rayguns off the warehouse shelves and into the hands of Pentagon shoppers.

Competitors:
Ionatron's competitors in the "gee-whiz" weaponry space (or would that be space weaponry?) include:

  • TASER International (NASDAQ:TASR)
  • Mace Security (NASDAQ:MACE)
  • Law Enforcement Associates (AMEX:AID)

What did we expect to see out of Ionatron last quarter, and what did it produce? Find out in:

TASER is a Motley Fool Rule Breakers pick. See David Gardner's full list of promising prospects for the next ultimate growth stock with a free 30-day trial.

Fool contributor Rich Smith does not own shares of any company named above. The Fool has a space-age disclosure policy.