Very good question. I was just reading the lastest 10q from March and it is very tough going trying to determine the conversion share count if all converts are exercised.
Item 13 on pages 13-18 deals with "Debt and Credit Arrangements". It is extremely confusing. However, in Item 12 they have a chart that lists the "common stock equivalents excluded from the earnings per share calculation for the three and nine months ended March 31, 2012 and 2011" and as of March 31, 2012 it looks like there are an ADDITIONAL 63,003,131 shares(additional to the 34,474,665 shares outstanding as of the end of March 31, 2012).
From what I can tell that means any valuation of IMSC needs to add the 63 million shares to the 34 million shares to get 97 million shares outstanding, after all dilution - which is surely coming regardless of how successful they are in selling sniffers.
I would welcome corrections to this if I have it wrong.