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UNITED STATES

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 March 28, 2004

 

OR

 

¨ 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 1-8402

 

IRVINE SENSORS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

(State or Other Jurisdiction of Incorporation or Organization)

  

33-0280334

(I.R.S. Employer Identification No.)

 

3001 Redhill Avenue,

Costa Mesa, California 92626

(Address of Principal Executive Offices) (Zip Code)

 

(714) 549-8211

(Registrant’s Telephone Number, Including Area Code)

 

Indicate by check mark 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  þ    No  ¨

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2.)    Yes  ¨    No  þ

 

As of May 5, 2004, there were 16,021,557 shares of common stock outstanding.

 

Table of Contents

IRVINE SENSORS CORPORATION

 

QUARTERLY REPORT ON FORM 10-Q

FOR THE FISCAL PERIOD ENDED MARCH 28, 2004

 

TABLE OF CONTENTS

 

          PAGE
PART I    FINANCIAL INFORMATION     
Item 1.    Financial Statements    3
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations    17
     Risk Factors    26
Item 3.    Quantitative and Qualitative Disclosures About Market Risk    36
Item 4.    Controls and Procedures    36
PART II    OTHER INFORMATION     
Item 1.    Legal Proceedings    37
Item 2.    Changes in Securities and Use of Proceeds    37
Item 4.    Submission of Matters to a Vote of Security Holders    38
Item 6.    Exhibits and Reports on Form 8-K    39
Signatures    40

 

2

Table of Contents

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

IRVINE SENSORS CORPORATION

 

CONSOLIDATED BALANCE SHEETS

 

     March 28,     September 28,  
     2004
     2003
  
     (Unaudited)        

Assets

                 

Current assets:

                 

Cash and cash equivalents

    $ 521,200     $ 1,166,800  

Restricted cash

      35,200       54,200  

Accounts receivable, net of allowance for doubtful accounts of $10,000 and $57,700, respectively

      778,900       443,500  

Unbilled revenues on uncompleted contracts

      1,119,100       598,100  

Inventory, net

      864,600       932,100  

Other current assets

      97,200       48,500  
    
 

Total current assets

      3,416,200       3,243,200  

Equipment, furniture and fixtures, net

      4,364,800       4,417,600  

Patents and trademarks, net

      742,100       707,400  

Deposits

      87,600       87,400  
    
 

Total assets

    $ 8,610,700     $ 8,455,600  

Liabilities and Stockholders’ Equity

                 

Current liabilities:

                 

Accounts payable

    $ 1,161,100     $ 1,620,600  

Accrued expenses

      810,200       806,100  

Accrued loss on contracts

      48,200       358,500  

Advance billings on uncompleted contracts

      63,300       437,000  

Deferred revenue

      25,000       251,700  

Capital lease obligations – current portion

      30,100       30,700  
    
 

Total current liabilities

      2,137,900       3,504,600  

Capital lease obligations, less current portion

      65,900       34,700  

Minority interest in consolidated subsidiaries

      425,700       431,500  
    
 

Total liabilities

      2,629,500       3,970,800  
    
 

Commitments and contingencies (Note 8)

      —         —    

Stockholders’ Equity:

                 

Preferred stock, $0.01 par value, 500,000 shares authorized;

                 

Series E convertible preferred stock, 0 and 2,083 shares outstanding

      —         —    

Common stock, $0.01 par value, 80,000,000 shares authorized; 15,848,500 and 12,947,700 shares issued and outstanding

      158,500       129,500  

Common stock warrants; 1,574,700 and 2,065,600 warrants outstanding

      —         —    

Unamortized employee stock bonus plan contribution

      (294,200 )     —    

Common stock held by Rabbi Trust

      (250,000 )     (250,000 )

Deferred compensation liability

      250,000       250,000  

Paid-in capital

      114,586,500       110,315,500  

Accumulated deficit

      (108,469,600 )     (105,960,200 )
    
 

Total stockholders’ equity

      5,981,200       4,484,800  
    
 
     $ 8,610,700     $ 8,455,600  
    
 

 

See Accompanying Condensed Notes to Consolidated Financial Statements.

 

3

Table of Contents

IRVINE SENSORS CORPORATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     13 Weeks Ended
     26 Weeks Ended
  
     March 28,     March 30,     March 28,     March 30,  
     2004
     2003
     2004
     2003
  

Revenues:

                                 

Contract research and development revenue

    $ 2,295,900     $ 1,620,300     $ 4,770,000     $ 6,200,900  

Product sales

      115,100       848,200       1,054,800       1,447,500  

Other revenue

      14,800       19,000       41,300       36,100  
    
 
 
 

Total revenues

      2,425,800       2,487,500       5,866,100       7,684,500  
    
 
 
 

Cost and expenses:

                                 

Cost of contract research and development revenue

      1,767,000       1,506,700       3,160,600       5,128,000  

Cost of product sales

      214,600       753,800       1,280,800       1,360,400  

General and administrative expense

      1,485,000       1,535,700       2,778,400       3,047,100  

Research and development expense

      547,500       644,100       1,097,300       739,200  
    
 
 
 

Total costs and expenses

      4,014,100       4,440,300       8,317,100       10,274,700  
    
 
 
 

Loss from operations

      (1,588,300 )     (1,952,800 )     (2,451,000 )     (2,590,200 )

Interest expense

      (11,900 )     (66,400 )     (45,000 )     (117,900 )

Loss on disposal of assets

      (6,800 )     —         (6,800 )     (5,800 )

Interest and other income

      400       —         400       4,700  
    
 
 
 

Loss before minority interest and provision for income taxes

      (1,606,600 )     (2,019,200 )     (2,502,400 )     (2,709,200 )

Minority interest in income (loss) of subsidiaries

      1,800       (4,300 )     5,800       1,900  

Provision for income taxes

      (6,800 )     (4,200 )     (12,800 )     (14,100 )
    
 
 
 

Net loss

      (1,611,600 )     (2,027,700 )     (2,509,400 )     (2,721,400 )
    
 
 
 

Imputed dividend on Series E stock issued

      —         (77,400 )     —         (920,300 )

Net loss applicable to common stockholders

    $ (1,611,600 )   $ (2,105,100 )   $ (2,509,400 )   $ (3,641,700 )
    
 
 
 

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

    $ (0.11 )   $ (0.28 )   $ (0.17 )   $ (0.49 )
    
 
 
 

Weighted average number of shares outstanding

      15,265,500       7,614,700       14,557,700       7,410,600  
    
 
 
 

 

 

See Accompanying Condensed Notes to Consolidated Financial Statements.

 

4

Table of Contents

IRVINE SENSORS CORPORATION

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     26 Weeks Ended
  
     March 28,
2004
     March 30,
2003
  

Cash flows from operating activities:

                 

Net loss

    $ (2,509,400 )   $ (2,721,400 )

Adjustments to reconcile net loss to net cash used in operating activities:

                 

Depreciation and amortization

      764,700       693,400  

Provision for obsolete inventory

      42,900       —    

Non-cash compensation

      —         56,200  

Accrued interest on marketable securities

      —         (200 )

Loss on disposal of assets

      6,800       6,100  

Noncash employee retirement plan contribution

      355,800       336,500  

Minority interest in net loss of subsidiaries

      (5,800 )     (1,900 )

Common stock issued to pay operating expenses

      —         189,700  

(Increase) decrease in accounts receivable

      (335,400 )     1,098,800  

(Increase) decrease in unbilled revenues on uncompleted contracts

      (521,000 )     128,000  

(Increase) decrease in inventory

      24,600       (117,900 )

(Increase) decrease in other current assets

      (48,700 )     16,600  

Increase in deposits

      (200 )     (3,100 )

Decrease in accounts payable and accrued expenses

      (455,400 )     (550,100 )

Decrease in accrued loss on contracts

      (310,300 )     (180,400 )

Decrease in advance billings on uncompleted contracts

      (373,700 )     (70,000 )

Increase (decrease) in deferred revenue

      (226,700 )     13,300  
    
 

Total adjustments

      (1,082,400 )     1,615,000  
    
 

Net cash used in operating activities

      (3,591,800 )     (1,106,400 )
    
 

Cash flows from investing activities:

                 

Capital facilities and equipment expenditures

      (610,000 )     (458,900 )

Acquisition of patents

      (91,200 )     (112,300 )

Decrease in restricted cash

      19,000       —    

Proceeds from liquidation of certificate of deposit

      —         400,000  
    
 

Net cash used in investing activities

      (682,200 )     (171,200 )
    
 

Cash flows from financing activities: