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 June 27, 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 | 33-0280334 | |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
3001 Red Hill 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 August 2, 2004, there were 17,781,262 shares of common stock outstanding.
IRVINE SENSORS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL PERIOD ENDED JUNE 27, 2004
| 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 | 28 | |||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 37 | ||
| Item 4. |
Controls and Procedures | 38 | ||
| PART II | OTHER INFORMATION | |||
| Item 1. |
Legal Proceedings | 38 | ||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 39 | ||
| Item 3. |
Defaults Upon Senior Securities | 39 | ||
| Item 4. |
Submission of Matters to a Vote of Security Holders | 39 | ||
| Item 5. |
Other Information | 39 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 39 | ||
| Signatures. | 41 | |||
PART I - FINANCIAL INFORMATION
| Item 1. | Financial Statements |
IRVINE SENSORS CORPORATION
CONSOLIDATED BALANCE SHEETS
| June 27, 2004 |
September 28, 2003 |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,271,800 | $ | 1,166,800 | ||||
| Restricted cash |
35,200 | 54,200 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $10,000 and $57,700, respectively |
685,600 | 443,500 | ||||||
| Unbilled revenues on uncompleted contracts |
1,345,300 | 598,100 | ||||||
| Inventory, net |
1,178,800 | 932,100 | ||||||
| Other current assets |
69,900 | 48,500 | ||||||
| Total current assets |
6,586,600 | 3,243,200 | ||||||
| Equipment, furniture and fixtures, net |
4,499,900 | 4,417,600 | ||||||
| Patents and trademarks, net |
729,300 | 707,400 | ||||||
| Deposits |
87,600 | 87,400 | ||||||
| Total assets |
$ | 11,903,400 | $ | 8,455,600 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,401,300 | $ | 1,620,600 | ||||
| Accrued expenses |
886,600 | 806,100 | ||||||
| Accrued loss on contracts |
40,600 | 358,500 | ||||||
| Advance billings on uncompleted contracts |
40,700 | 437,000 | ||||||
| Deferred revenue |
28,100 | 251,700 | ||||||
| Capital lease obligations – current portion |
93,700 | 30,700 | ||||||
| Total current liabilities |
2,491,000 | 3,504,600 | ||||||
| Capital lease obligations, less current portion |
165,200 | 34,700 | ||||||
| Minority interest in consolidated subsidiaries |
424,300 | 431,500 | ||||||
| Total liabilities |
3,080,500 | 3,970,800 | ||||||
| Commitments and contingencies |
— | — | ||||||
| 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; 17,644,500 and 12,947,700 shares issued and outstanding |
176,400 | 129,500 | ||||||
| Common stock warrants; 1,508,100 and 2,065,600 warrants outstanding |
— | — | ||||||
| Unamortized employee stock bonus plan contribution |
(109,400 | ) | — | |||||
| Common stock held by Rabbi Trust |
(250,000 | ) | (250,000 | ) | ||||
| Deferred compensation liability |
250,000 | 250,000 | ||||||
| Paid-in capital |
117,945,500 | 110,315,500 | ||||||
| Accumulated deficit |
(109,189,600 | ) | (105,960,200 | ) | ||||
| Total stockholders’ equity |
8,822,900 | 4,484,800 | ||||||
| $ | 11,903,400 | $ | 8,455,600 | |||||
See Accompanying Condensed Notes to Consolidated Financial Statements.
3
IRVINE SENSORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| 13 Weeks Ended |
39 Weeks Ended |
|||||||||||||||
| June 27, 2004 |
June 29, 2003 |
June 27, 2004 |
June 29, 2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Contract research and development revenue |
$ | 3,257,000 | $ | 2,054,300 | $ | 8,027,000 | $ | 8,255,200 | ||||||||
| Product sales |
281,300 | 341,500 | 1,336,100 | 1,789,000 | ||||||||||||
| Other revenue |
4,300 | 900 | 45,600 | 37,000 | ||||||||||||
| Total revenues |
3,542,600 | 2,396,700 | 9,408,700 | 10,081,200 | ||||||||||||
| Costs and expenses: |
||||||||||||||||
| Cost of contract research and development revenue |
2,048,200 | 1,262,800 | 5,208,800 | 6,390,800 | ||||||||||||
| Cost of product sales |
280,900 | 448,000 | 1,561,700 | 1,808,400 | ||||||||||||
| General and administrative expense |
1,496,000 | 1,311,300 | 4,274,400 | 4,358,400 | ||||||||||||
| Research and development expense |
397,200 | 783,000 | 1,494,500 | 1,522,200 | ||||||||||||
| Total costs and expenses |
4,222,300 | 3,805,100 | 12,539,400 | 14,079,800 | ||||||||||||
| Loss from operations |
(679,700 | ) | (1,408,400 | ) | (3,130,700 | ) | (3,998,600 | ) | ||||||||
| Interest expense |
(30,700 | ) | (20,400 | ) | (75,700 | ) | (138,300 | ) | ||||||||
| Loss on disposal of assets |
(9,600 | ) | (233,000 | ) | (16,400 | ) | (238,800 | ) | ||||||||
| Interest and other income |
800 | 100 | 1,200 | 4,800 | ||||||||||||
| Loss before minority interest and provision for income taxes |
(719,200 | ) | (1,661,700 | ) | (3,221,600 | ) | (4,370,900 | ) | ||||||||
| Minority interest in loss of subsidiaries |
1,400 | 3,000 | 7,200 | 4,900 | ||||||||||||
| Provision for income taxes |
(2,200 | ) | (1,300 | ) | (15,000 | ) | (15,400 | ) | ||||||||
| Net loss |
(720,000 | ) | (1,660,000 | ) | (3,229,400 | ) | (4,381,400 | ) | ||||||||
| Imputed dividend on Series E stock issued |
— | (92,800 | ) | — | (1,013,100 | ) | ||||||||||
| Net loss applicable to common stockholders |
$ | (720,000 | ) | $ | (1,752,800 | ) | $ | (3,229,400 | ) | $ | (5,394,500 | ) | ||||
| Basic and diluted net loss per common share (Note 5) |
$ | (0.05 | ) | $ | (0.20 | ) | $ | (0.21 | ) | $ | (0.67 | ) | ||||
| Weighted average number of shares outstanding |
15,945,800 | 8,827,900 | 15,085,300 | 8,104,000 | ||||||||||||
See Accompanying Condensed Notes to Consolidated Financial Statements.
4
IRVINE SENSORS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 39 Weeks Ended |
||||||||
| June 27, 2004 |
June 29, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (3,229,400 | ) | $ | (4,381,400 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
1,240,500 | 1,038,700 | ||||||
| Provision for obsolete inventory |
42,900 | — | ||||||
| Non-cash compensation |
— | 111,100 | ||||||
| Accrued interest on marketable securities |
— | (200 | ) | |||||
| Loss on disposal of assets |
16,400 | 239,000 | ||||||
| Noncash employee retirement plan contribution |
540,600 | 491,300 | ||||||
| Minority interest in net loss of subsidiaries |
(7,200 | ) | (4,900 | ) | ||||
| Common stock issued to pay operating expenses |
— | 299,700 | ||||||
| (Increase) decrease in accounts receivable |
(242,100 | ) | 1,204,300 | |||||
| (Increase) decrease in unbilled revenues on uncompleted contracts |
(747,200 | ) | 342,600 | |||||
| Increase in inventory |
(289,600 | ) | (172,600 | ) | ||||
| (Increase) decrease in other current assets |
(21,400 | ) | 22,100 | |||||
| (Increase) decrease in deposits |
(200 | ) | 11,000 | |||||
| Decrease in accounts payable and accrued expenses |
(138,800 | ) | (1,882,200 | ) | ||||
| Decrease in accrued loss on contracts |
(317,900 | ) | (183,000 | ) | ||||
| Decrease in advance billings on uncompleted contracts |
(396,300 | ) | (20,400 | ) | ||||
| Increase (decrease) in deferred revenue |
(223,600 | ) | 266,000 | |||||
| Total adjustments |
(543,900 | ) | 1,762,500 | |||||
| Net cash used in operating activities |
(3,773,300 | ) | (2,618,900 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Capital facilities and equipment expenditures |
(1,028,500 | ) | (788,000 | ) | ||||
| Acquisition of patents |
(109,100 | ) | (145,200 | ) | ||||
| Decrease in restricted cash |
19,000 | — | ||||||
| Proceeds from liquidation of certificate of deposit |
— | 400,000 | ||||||
| Net cash used in investing activities |
(1,118,600 | ) | (533,200 | ) | ||||