IRVINE SENSORS CORP/DE/ - 10-Q Quarterly Report

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	for the quarterly period ended December 29, 2002

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	for the transition period from ____________ to _____________

Commission File Number
001-08402

IRVINE SENSORS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware		33-0280334
(State or other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

3001 Redhill Avenue, Costa Mesa, California 92626
(Address of Principal Executive Offices)

(714) 549-8211
(Registrant’s Telephone Number, Including Area Code)

Indicate by check 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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2.)

Yes

As of January 31, 2003, there were 7,593,698 shares of common stock outstanding.

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

IRVINE SENSORS CORPORATION
CONSOLIDATED BALANCE SHEETS

				December 29, 2002			September 29, 2002

				(Unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	1,163,500		$	696,300
	Restricted cash				35,300			435,200
	Accounts receivable, net of allowances of $62,300 and $76,300, respectively				2,488,300			2,586,400
	Inventory, net				1,054,000			938,000
	Other current assets				70,300			100,600

			Total current assets		4,811,400			4,756,500
Equipment, furniture and fixtures, net					4,766,100			4,959,200
Patents and trademarks, net					608,100			580,600
Deposits					101,550			98,450

				$	10,287,150		$	10,394,750

Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable			$	3,857,100		$	3,880,100
	Accrued expenses				1,081,900			1,205,400
	Accrued loss on contracts				284,200			444,200
	Customer advances				173,900			43,100
	Line of credit				—			400,000
	Short term notes payable				—			150,000
	Capital lease obligations – current portion				89,200			116,900

			Total current liabilities		5,486,300			6,239,700
Capital lease obligations, less current portion					57,400			61,300
Minority interest in consolidated subsidiaries					461,000			467,200

			Total liabilities		6,004,700			6,768,200

Commitments and contingencies (Note 10)					—			—
Stockholders’ Equity:
	Preferred stock, $0.01 par value, 500,000 shares authorized;
		Series B Convertible Cumulative Preferred, 4,300 shares outstanding; aggregate liquidation preference of $64,500			25			25
		Series C Convertible Cumulative Preferred, 2,300 shares outstanding; aggregate liquidation preference of $33,000			25			25
		Series E Convertible Preferred, 10,000 shares outstanding; aggregate liquidation preference of $1,200,000			100			—
	Common stock, $0.01 par value, 80,000,000 shares authorized; 7,553,000 and 7,027,900 shares issued and outstanding				75,500			70,300
	Common stock warrants and unit warrants; 1,344,800 and 1,094,800 warrants outstanding				—			—
	Unamortized employee stock bonus plan contribution				(343,200	)		—
	Paid-in capital				104,688,600			102,158,200
	Accumulated deficit				(100,138,600	)		(98,602,000	)

			Total stockholders’ equity		4,282,450			3,626,550

				$	10,287,150		$	10,394,750

See Accompanying Condensed Notes to Consolidated Financial Statements.

IRVINE SENSORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		13 Weeks Ended

		December 29, 2002			December 30, 2001

Revenues:
	Contract research and development	$	4,580,600		$	1,621,200
	Product sales		599,300			876,300
	Other		17,100			—

Total revenues			5,197,000			2,497,500

Cost and expenses:
	Cost of contract revenues		3,621,300			1,261,200
	Cost of product sales		606,600			722,600
	General and administrative		1,511,400			2,008,500
	Research and development		95,100			736,400

Total costs and expenses			5,834,400			4,728,700

Loss from operations			(637,400	)		(2,231,200	)
	Interest expense		(51,500	)		(11,600	)
	Other expense		(5,800	)		—
	Interest and other income		4,700			3,000

Loss before minority interest and provision for income taxes			(690,000	)		(2,239,800	)
Minority interest in loss of subsidiaries			6,200			35,200
Provision for income taxes			(9,700	)		(4,800	)

Net loss			(693,700	)		(2,209,400	)

Basic and diluted net loss per common share (Note 5)		$	(0.22	)	$	(0.51	)

Weighted average number of shares outstanding			7,144,940			4,321,533

See Accompanying Condensed Notes to Consolidated Financial Statements.

IRVINE SENSORS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

				13 Weeks Ended

				December 29, 2002			December 30, 2001

Cash flows from operating activities:
	Net loss
	Adjustments to reconcile net loss to net cash used in operating activities:			$	(693,700	)	$	(2,209,400	)
			Depreciation and amortization		346,300			338,400
			Accrued interest on marketable securities		(100	)		(200	)
			Loss on disposal of equipment		6,100			—
			Amortization of employee retirement plan contribution		176,800			190,300
			Minority interest in net loss of subsidiaries		(6,200	)		(35,200	)
			Common stock issued to pay operating expenses		142,500			253,900
			Decrease in accounts receivable		98,100			1,250,300
			Decrease in employee advances		—			118,000
			(Increase) decrease in inventory		(116,000	)		307,500
			(Increase) decrease in other current assets		30,300			(1,200	)
			Increase in deposits		(3,100	)		(10,400	)
			Decrease in accounts payable and accrued expenses		(129,300	)		(672,800	)
			Decrease in accrued loss on contracts		(160,000	)		(108,900	)
			Increase (decrease) in customer advances		130,800			(25,000	)

			Total adjustments		516,200			1,604,700

		Net cash used in operating activities			(177,500	)		(604,700	)

Cash flows from investing activities:
	Capital facilities and equipment expenditures				(142,400	)		(100,100	)
	Acquisition of patents				(44,400	)		(41,600	)
	Proceeds from liquidation of certificate of deposit				400,000			—

		Net cash provided by (used in) investing activities			213,200			(141,700	)

Cash flows from financing activities:
	Net proceeds from issuance of common or preferred stock and common stock warrants				1,013,100			1,301,200
	Payments on line of credit				(400,000	)		(200,000	)
	Principal payments of notes payable				(150,000	)		—
	Principal payments of capital leases				(31,600	)		(68,200	)

		Net cash provided by financing activities			431,500			1,033,000

Net increase in cash and cash equivalents					467,200			286,600
Cash and cash equivalents at beginning of period					696,300			380,200