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 April 3, 2005
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, as amended, (the “Exchange Act”) 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 2, 2005, there were 18,516,591 shares of common stock outstanding.
IRVINE SENSORS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL PERIOD ENDED APRIL 3, 2005
| 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 | 29 | |||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 38 | ||
| Item 4. |
Controls and Procedures | 38 | ||
| PART II | OTHER INFORMATION | |||
| Item 1. |
Legal Proceedings | 38 | ||
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 39 | ||
| Item 3. |
Defaults Upon Senior Securities | 39 | ||
| Item 4. |
Submission of Matters to a Vote of Security Holders | 39 | ||
| Item 5. |
Other Information | 40 | ||
| Item 6. |
Exhibits | 40 | ||
| Signatures | 41 | |||
2
PART I - FINANCIAL INFORMATION
| Item 1. | Financial Statements |
IRVINE SENSORS CORPORATION
CONSOLIDATED BALANCE SHEETS
| April 3, 2005 |
October 3, 2004 |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 976,400 | $ | 2,064,100 | ||||
| Restricted cash |
40,100 | 43,500 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $10,000 and $85,000, respectively |
1,893,800 | 1,327,000 | ||||||
| Unbilled revenues on uncompleted contracts |
1,737,300 | 930,600 | ||||||
| Inventory, net |
1,095,700 | 980,100 | ||||||
| Other current assets |
132,900 | 133,500 | ||||||
| Total current assets |
5,876,200 | 5,478,800 | ||||||
| Equipment, furniture and fixtures, net |
4,996,200 | 4,926,500 | ||||||
| Patents and trademarks, net |
756,100 | 748,300 | ||||||
| Deposits |
92,200 | 89,400 | ||||||
| Total assets |
$ | 11,720,700 | $ | 11,243,000 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,870,800 | $ | 1,320,000 | ||||
| Accrued expenses |
1,107,200 | 824,500 | ||||||
| Accrued loss on contracts |
91,700 | 34,600 | ||||||
| Advance billings on uncompleted contracts |
25,700 | 33,800 | ||||||
| Deferred revenue |
111,600 | — | ||||||
| Capital lease obligations – current portion |
146,100 | 118,300 | ||||||
| Total current liabilities |
3,353,100 | 2,331,200 | ||||||
| Capital lease obligations, less current portion |
141,200 | 156,700 | ||||||
| Minority interest in consolidated subsidiaries |
418,000 | 419,000 | ||||||
| Total liabilities |
3,912,300 | 2,906,900 | ||||||
| Commitments and contingencies (Note 7) |
— | — | ||||||
| Stockholders’ Equity: |
||||||||
| Common stock, $0.01 par value, 80,000,000 shares authorized; 18,505,800 and 17,806,300 shares issued and outstanding, respectively |
185,100 | 178,100 | ||||||
| Common stock warrants; 1,261,400 and 1,508,100 warrants outstanding, respectively |
— | — | ||||||
| Unamortized employee stock bonus plan contribution |
(380,800 | ) | — | |||||
| Unamortized deferred compensation |
(110,000 | ) | — | |||||
| Common stock held by Rabbi Trust |
(702,000 | ) | (482,000 | ) | ||||
| Deferred compensation liability |
702,000 | 482,000 | ||||||
| Paid-in capital |
119,551,300 | 118,285,100 | ||||||
| Accumulated deficit |
(111,437,200 | ) | (110,127,100 | ) | ||||
| Total stockholders’ equity |
7,808,400 | 8,336,100 | ||||||
| $ | 11,720,700 | $ | 11,243,000 | |||||
See Accompanying Condensed Notes to Consolidated Financial Statements.
3
IRVINE SENSORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| 13 Weeks Ended |
26 Weeks Ended |
|||||||||||||||
| April 3, 2005 |
March 28, 2004 |
April 3, 2005 |
March 28, 2004 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Contract research and development revenue |
$ | 5,324,400 | $ | 2,295,900 | $ | 8,949,800 | $ | 4,770,000 | ||||||||
| Product sales |
767,700 | 115,100 | 1,303,200 | 1,054,800 | ||||||||||||
| Other revenue |
3,000 | 14,800 | 42,300 | 41,300 | ||||||||||||
| Total revenues |
6,095,100 | 2,425,800 | 10,295,300 | 5,866,100 | ||||||||||||
| Cost and expenses: |
||||||||||||||||
| Cost of contract research and development revenue |
3,962,700 | 1,767,000 | 6,778,700 | 3,160,600 | ||||||||||||
| Cost of product sales |
566,700 | 214,600 | 1,109,400 | 1,280,800 | ||||||||||||
| General and administrative expense |
1,490,700 | 1,485,000 | 3,175,300 | 2,778,400 | ||||||||||||
| Research and development expense |
196,200 | 547,500 | 516,600 | 1,097,300 | ||||||||||||
| Total costs and expenses |
6,216,300 | 4,014,100 | 11,580,000 | 8,317,100 | ||||||||||||
| Loss from operations |
(121,200 | ) | (1,588,300 | ) | (1,284,700 | ) | (2,451,000 | ) | ||||||||
| Interest expense |
(9,700 | ) | (11,900 | ) | (19,100 | ) | (45,000 | ) | ||||||||
| Loss on disposal of assets |
(6,300 | ) | (6,800 | ) | (6,300 | ) | (6,800 | ) | ||||||||
| Interest and other income |
5,300 | 400 | 8,800 | 400 | ||||||||||||
| Loss before minority interest and provision for income taxes |
(131,900 | ) | (1,606,600 | ) | (1,301,300 | ) | (2,502,400 | ) | ||||||||
| Minority interest in loss of subsidiaries |
800 | 1,800 | 1,000 | 5,800 | ||||||||||||
| Provision for income taxes |
(2,900 | ) | (6,800 | ) | (9,800 | ) | (12,800 | ) | ||||||||
| Net loss |
$ | (134,000 | ) | $ | (1,611,600 | ) | $ | (1,310,100 | ) | $ | (2,509,400 | ) | ||||
| Basic and diluted net loss per common share (Note 4) |
$ | (0.01 | ) | $ | (0.11 | ) | $ | (0.07 | ) | $ | (0.17 | ) | ||||
| Weighted average number of shares outstanding |
18,431,900 | 15,265,500 | 18,222,900 | 14,557,700 | ||||||||||||
See Accompanying Condensed Notes to Consolidated Financial Statements.
4
IRVINE SENSORS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 26 Weeks Ended |
||||||||
| April 3, 2005 |
March 28, 2004 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (1,310,100 | ) | $ | (2,509,400 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
861,300 | 764,700 | ||||||
| Provision for obsolete inventory |
— | 42,900 | ||||||
| Loss on disposal of assets |
6,300 | 6,800 | ||||||
| Noncash employee retirement plan contributions |
529,200 | 355,800 | ||||||
| Minority interest in net loss of subsidiaries |
(1,000 | ) | (5,800 | ) | ||||
| Common stock issued to pay operating expenses |
2,900 | — | ||||||
| Increase in accounts receivable |
(565,800 | ) | (335,400 | ) | ||||
| Increase in unbilled revenues on uncompleted contracts |
(806,700 | ) | (521,000 | ) | ||||
| (Increase) decrease in inventory |
(115,600 | ) | 24,600 | |||||
| (Increase) decrease in other current assets |
600 | (48,700 | ) | |||||
| Increase in deposits |
(2,800 | ) | (200 | ) | ||||
| Increase (decrease) in accounts payable and accrued expenses |
860,400 | (455,400 | ) | |||||
| Increase (decrease) in accrued loss on contracts |
57,100 | (310,300 | ) | |||||
| Decrease in advance billings on uncompleted contracts |
(8,100 | ) | (373,700 | ) | ||||
| Increase (decrease) in deferred revenue |
111,600 | (226,700 | ) | |||||
| Total adjustments |
929,400 | (1,082,400 | ) | |||||
| Net cash used in operating activities |
(380,700 | ) | (3,591,800 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Capital facilities and equipment expenditures |
(806,400 | ) | (610,000 | ) | ||||
| Acquisition of patents |
(61,700 | ) | (91,200 | ) | ||||
| Decrease in restricted cash |
3,400 | 19,000 | ||||||
| Net cash used in investing activities |
(864,700 | ) | (682,200 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net proceeds from issuance of common stock and common stock warrants |
— | 1,690,500 | ||||||
| Proceeds from options and warrants exercised |
223,400 | 1,959,500 | ||||||
| Principal payments of capital leases |
(65,700 | ) | (21,600 | ) | ||||
| Net cash provided by financing activities |
157,700 | 3,628,400 | ||||||
| Net decrease in cash and cash equivalents |
(1,087,700 | ) | (645,600 | ) | ||||
| Cash and cash equivalents at beginning of period |
2,064,100 | 1,166,800 | ||||||
| Cash and cash equivalents at end of period |
$ | 976,400 | ||||||