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Irvine Sensors Releases Third Quarter Results
Aug 17, 2011 (04:08 PM EDT)


Change in Derivative Liability Contributes to ~$4.5M Quarterly Profit

COSTA MESA, Calif., Aug. 17, 2011 /PRNewswire/ -- Irvine Sensors Corporation (OTCBB: IRSN) today reported operating results for its third quarter and first three quarters of fiscal 2011, the 13 and 39 weeks ended July 3, 2011.  

Total revenues for the 13 weeks ended July 3, 2011 were $2,974,200, an approximate 17% decrease from $3,576,100 in the 13 weeks ended June 27, 2010.  Total revenues in the fiscal 2011 39-week period were $10,645,500, up 12% from $9,507,700 in the first three quarters of fiscal 2010.  The revenue increase in the fiscal 2011 39-week period was primarily due to increased sales of Irvine Sensors' thermal imaging cores.  

Net income attributable to the Company of $4,499,600 was recorded in the current fiscal year third quarter as compared to a net loss attributable to the Company of $2,625,400 in the third quarter of fiscal 2010, largely as a result of a nearly $7.7 million non-cash gain in the 13-week period ended July 3, 2011 from change in fair value of derivative liability related to debt instruments issued by the Company in the current fiscal year.  The accrued derivative liability is subject to elimination if the convertible debt instruments are ultimately converted to common stock pursuant to their terms.  There can be no assurance, however, that the convertible debt instruments will be converted to common stock or that the resulting accrued derivative liability will be eliminated.  Net loss attributable to the Company increased to $13,883,200 in the 39-week period ended July 3, 2011, from $7,761,700 in the 39-week period ended June 27, 2010, with approximately $5.4 million of the increase due to increased interest expense of which approximately $3.9 million was non-cash.  

Working capital, which improved substantially in the first quarter and second quarters of fiscal 2011 as a result of equity and debt financings, continued to improve in the third quarter of fiscal 2011 as Irvine Sensors issued an additional $4.25 million of long-term debt.   During the 13-week period ended July 3, 2011, the Company paid in full short-term debt of approximately $1.5 million when due.

Excluding non-cash charges for changes in fair value of derivative liability, non-cash interest expense, stock-based compensation and depreciation and amortization, non-GAAP net loss was $2,124,100 in the 13-week period ended July 3, 2011 compared to non-GAAP net loss of $1,975,600 in the 13-week period ended June 27, 2010.  Similarly, non-GAAP net loss was $7,541,900 in the 39-week period ended July 3, 2011 compared to non-GAAP net loss of $6,421,000 in the 39-week period ended June 27, 2010.  See "Use of Non-GAAP Financial Information" below for important information regarding the Company's use of non-GAAP financial measures.

Use of Non-GAAP Financial InformationIrvine Sensors reports net income (loss) in accordance with accounting principles generally accepted in the United States ("GAAP") and supplementally on a non-GAAP basis.  The Company's presentation of non-GAAP net income (loss) attributable to the Company in this press release excludes the impact of changes in fair value of derivative liability, non-cash interest expense, stock-based compensation and depreciation and amortization expense.  Stock-based compensation expense primarily includes the impact of stock options issued by the Company.  A reconciliation of these GAAP and non-GAAP financial measures for all periods presented is found in the attached "Unaudited Reconciliation of Non-GAAP Adjustments."

Irvine Sensors believes that the presentation of non-GAAP net income (loss) provides useful supplemental information to management and investors regarding financial and business trends related to the Company's financial condition and results of operations.  The Company also believes that examination of non-GAAP net income (loss) can facilitate consistency and comparability among and between prior periods, as well as comparison with other companies that present similar non-GAAP financial measures.  However, the Company's presentation of non-GAAP information is not necessarily equivalent to non-GAAP measures presented by other reporting companies and should be considered in that context. The Company's management generally uses non-GAAP income (loss) to evaluate the Company's operating performance because management believes that the exclusion of the non-cash items described above, including the changes in the fair value of derivative instruments, provides insight into the Company's core ongoing operating results, particularly from a cash generation or use perspective, and underlying business trends affecting the Company's performance.  Irvine Sensors has chosen to provide this non-GAAP information to investors to enable them to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluate the Company's ongoing core operations.  The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.  

Irvine Sensors Corporation (www.irvine-sensors.com), headquartered in Costa Mesa, California, is a technology company engaged in the design, development, manufacture and sale of security products, software, vision systems and miniaturized electronic products and higher level systems incorporating such products for defense, information technology and physical security for government and commercial applications.  Irvine Sensors also conducts research and development related to high density electronics, miniaturized sensors, optical interconnection technology, high speed network security, image processing and low-power analog and mixed-signal integrated circuits for diverse systems applications.  

IRVINE SENSORS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



13 Weeks Ended


39 Weeks Ended


July 3,

2011


June 27,

2010


July 3,

2011


June 27,

2010

Total revenues

$    2,974,200


$   3,576,100


$    10,645,500


$   9,507,700

Cost and expenses








Cost of revenues

2,360,100


2,900,800


9,484,500


7,513,000

General and administrative expense

1,951,800


1,565,100


6,009,700


4,693,100

Research and development expense

809,200


655,200


2,047,300


2,011,400

Total costs and expenses

5,121,100


5,121,100


17,541,500


14,217,500

Gain on sale or disposal of assets

-


100


-


12,600

Loss from operations

(2,146,900)


(1,544,900)


(6,896,000)


(4,697,200)

Interest expense

(1,054,200)


(636,500)


(6,236,800)


(882,600)

Provision for litigation judgment

-


-


-


(20,200)

Litigation settlement expense

-


(450,000)


-


(2,270,700)

Change in fair value of derivative liability

7,697,800


7,000


(742,700)


67,000

Other income (expense)

6,200


(1,000)


(4,400)


(1,300)

Income (loss) from operations before








provision for income taxes

4,502,900


(2,625,400)


(13,879,900)


(7,805,000)

Benefit (provision) for income taxes

(3,300)


-


(3,300)


43,300

Net income (loss)

4,499,600


(2,625,400)


(13,883,200)


(7,761,700)

Less net income (loss) attributable to noncontrolling

   interests in subsidiary

-


-


-


-

Net income (loss) attributable to

   Irvine Sensors Corporation

$ 4,499,600


$ (2,625,400)


$(13,883,200)


$ (7,761,700)

Basic net income (loss) attributable to

   Irvine Sensors Corporation

   per common share

$          0.04


$         (0.15)


$          (0.17)


$         (0.66)

Weighted average number of common shares

   outstanding, basic

107,504,800


17,302,800


83,105,800


13,932,100

Diluted net income (loss) attributable to

   Irvine Sensors Corporation

   per common share

$          0.02


$         (0.15)


$          (0.17)


$         (0.66)

Weighted average number of common shares

   and common share equivalents outstanding, diluted

260,723,100


17,302,800


83,105,800


13,932,100




IRVINE SENSORS CORPORATION

UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS


The following non-GAAP adjustments are based upon the Company's unaudited consolidated statements of operations for the periods shown.  These adjustments are not in accordance with or an alternative for GAAP.  The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.  Irvine Sensors intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance, and may change its reporting of such non-GAAP results in the future as a result of such assessment.




13 Weeks Ended


39 Weeks Ended


July 3,

2011


June 27,

2010


July 3,

2011


June 27,

2010

GAAP net income (loss) attributable to

   Irvine Sensors Corporation

$  4,499,600


$ (2,625,400)


$ (13,883,200)


$ (7,761,700)

Plus:








Change in fair value of derivative liability

(7,697,800)


(7,000)


742,700


(67,000)

Non-cash interest expense

538,400


328,100


3,937,400


343,900

Stock-based compensation

261,100


14,200


838,600


60,900

Depreciation and amortization

274,600


314,500


822,600


1,002,900

Non-GAAP Net loss attributable to

   Irvine Sensors Corporation

$ (2,124,100)


$ (1,975,600)


$ (7,541,900)


$ (6,421,000)




IRVINE SENSORS CORPORATION

CONSOLIDATED BALANCE SHEETS




July 3, 2011

(Unaudited)




October 3, 2010


Assets





Current assets:





Cash and cash equivalents


$     2,983,900


$      281,600

Accounts receivable, net of allowance for doubtful accounts of $13,600 and $15,000, respectively


1,170,800


382,100

Proceeds receivable, subordinated secured convertible promissory notes financing


2,000,000


-

Unbilled revenues on uncompleted contracts


609,800


630,300

Inventory, net


1,179,400


1,715,800

Prepaid expenses and other current assets


192,100


182,300

Total current assets


8,136,000


3,192,100

Property and equipment, net (including construction in process of $716,100 and $35,000, respectively)


2,735,700


2,730,000

Intangible assets, net


10,900


12,400

Deferred financing costs


1,101,100


302,900

Deposits


184,000


87,400

Total assets


$   12,167,700


$  6,324,800

Liabilities and Stockholders' Deficit





Current liabilities:





Accounts payable


$       891,700


$    4,724,100

Accrued expenses


1,406,400


4,097,700

Accrued estimated loss on contracts


-


29,000

Advance billings on uncompleted contracts


387,800


321,800

Advances against accounts receivable


-


99,700

Deferred revenue


690,300


1,515,400

Restructured debt, net of debt discounts


-


163,100

Secured promissory note, current portion


1,878,300


402,500

Debentures, net of debt discounts


-


1,935,200

  Settlement agreements obligations, current portion


827,200


-

  Capital lease obligations, current portion


13,400


-

Total current liabilities


6,095,100


13,288,500

Secured promissory note, less current portion


460,800


2,097,500

Senior subordinated secured promissory notes


4,133,900


-

Subordinated secured convertible promissory notes, net of discounts


3,986,500


-

Settlement agreement obligations, less current portion


21,500


-

Derivative liability


13,745,000


4,000

Executive Salary Continuation Plan liability


968,000


1,030,700

Capital lease obligations, less current portion


83,700


-

Total liabilities


29,494,500


16,420,700

Commitments and contingencies





Stockholders' deficit:





Convertible preferred stock, $0.01 par value, 1,000,000 and 1,000,000 shares authorized, respectively;


-


500

  Series A-2 – 0 and 8,300 shares issued and outstanding, respectively (1);





     liquidation preference of $0 and $333,300, respectively;





  Series B – 1,800 and 1,900 shares issued and outstanding, respectively (1);





     liquidation preference of $1,785,600 and $1,892,700, respectively





  Series C –0 and 37,500 shares issued and outstanding, respectively (1);





     liquidation preference of $0 and $1,125,000, respectively





Common stock, $0.01 par value, 500,000,000 and 150,000,000 shares authorized, respectively;





113,542,500 and 33,535,400 shares issued and outstanding, respectively (1)


1,135,400


335,400

Prepaid stock-based compensation


(114,200)


-

Common stock held by Rabbi Trust


(1,020,700)


(1,169,600)

Deferred compensation liability


1,020,700


1,169,600

Paid-in capital


171,006,200


165,039,200

Accumulated deficit


(189,678,600)


(175,795,400)

Irvine Sensors Corporation stockholders' deficit


(17,651,200)


(10,420,300)

Noncontrolling interest


324,400


324,400

Total stockholders' deficit


(17,326,800)


(10,095,900)

Total liabilities and stockholders' deficit


$   12,167,700


$  6,324,800


(1) The numbers of shares of preferred stock and common stock issued and outstanding have been rounded to the nearest one hundred (100).



SOURCE Irvine Sensors Corporation