<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(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 29, 1998
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 (IRS Employer
incorporation or organization) Identification No.)
3001 Redhill Avenue, Costa Mesa, California
(Address of principal executive offices)
92626
(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 X No
--- ---
As of March 29, 1998 there were 23,171,100 shares of Common Stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
IRVINE SENSORS CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 29, September 29,
1998 1997
------------------ ------------------
<S> <C> <C><C> <C><C>
Assets
------
Current assets:
Cash and cash equivalents $ 753,500 $ 1,639,300
Accounts receivable, net of allowances of $10,000 2,785,600 1,237,700
Inventory 2,695,500 2,577,300
Prepaid expenses 388,100 1,182,900
------------------ ------------------
Total current assets 6,622,700 6,637,200
------------------ ------------------
Equipment, furniture and fixtures, net 2,231,100 2,775,800
Other assets 32,100 36,300
------------------ ------------------
$ 8,885,900 $ 9,449,300
================== ==================
Liabilities and shareholders' equity (deficit)
----------------------------------------------
Current liabilities:
Accounts payable $ 1,373,900 $ 4,370,800
Accrued expenses 538,500 684,700
Deferred revenues - 106,100
Notes payable and current portion of long-term debt 506,600 2,234,000
------------------ ------------------
Total current liabilities 2,419,000 7,395,600
------------------ ------------------
Long-term debt - 593,200
------------------ ------------------
Deferred and subordinated royalties payable - affiliated
company 626,200 613,800
------------------ ------------------
8% Convertible subordinated debentures - 250,000
------------------ ------------------
Minority interest in consolidated subsidiary 3,252,100 3,418,100
------------------ ------------------
Preferred stock of consolidated subsidiary 118,500 118,500
------------------ ------------------
Shareholders' equity (deficit):
Preferred stock, $0.01 par value, 500,000 shares
authorized;
8,785 shares Series B Convertible Cumulative
Preferred issued and outstanding; aggregate liquidation
preference of $238,500 50 50
4,974 shares Series C Convertible Cumulative
Preferred issued and outstanding; aggregate liquidation
preference of $264,100 50 50
37,750 and no shares Series D Convertible Preferred
issued and outstanding 400 -
Common stock, $0.01 par value, 40,000,000 shares
authorized;
23,171,100 and 21,541,300 shares issued and outstanding 231,700 215,400
Common stock warrants and unit warrants; 118,000 and - -
340,000 outstanding
Paid-in capital 51,620,000 46,424,100
Accumulated deficit (49,382,100) (49,579,500)
------------------ ------------------
Total shareholders' equity (deficit) 2,470,100 (2,939,900)
------------------ ------------------
$ 8,885,900 $ 9,449,300
================== ==================
</TABLE>
See Accompanying Condensed Notes to Consolidated Financial Statements.
2
<PAGE>
IRVINE SENSORS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
------------------------------------- -------------------------------------
March 29, March 30, March 29, March 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Contract research & development $ 1,996,700 $ 650,300 $ 3,446,200 $ 3,261,400
Product sales 536,600 2,604,000 1,255,000 3,668,000
-------------- -------------- -------------- --------------
Total revenues 2,533,300 3,254,300 4,701,200 6,929,400
Cost and expenses:
Cost of contract revenues 1,659,200 682,300 3,047,100 2,480,400
Cost of product sales 236,700 3,930,000 1,178,200 5,969,700
General & administrative 651,200 880,600 1,344,000 1,733,500
Research and development 63,400 480,200 202,100 911,900
2,610,500 5,973,100 5,771,400 11,095,500
-------------- -------------- -------------- --------------
Loss from operations (77,200) (2,718,800) (1,070,200) (4,166,100)
Interest expense (23,900) (98,500) (99,000) (225,400)
Interest income 3,300 13,400 9,000 16,300
-------------- -------------- -------------- --------------
Loss before minority interest
and income taxes (97,800) (2,803,900) (1,160,200) (4,375,200)
Minority interest in loss of subsidiary (114,200) (72,900) (214,100) (123,300)
Provision for income taxes 2,400 1,600 2,600 1,800
-------------- -------------- -------------- --------------
Income (loss) before extraordinary item 14,000 (2,732,600) (948,700) (4,253,700)
Extraordinary item - debt extinguishment - - 1,146,100 -
-------------- -------------- -------------- --------------
Net income (loss) $ 14,000 $ (2,732,600) $ 197,400 $ (4,253,700)
============== ============== ============== ==============
Basic and Diluted Earnings Per Share :
Loss before extraordinary item $ (0.02) $ (0.13) $ (0.06) $ (0.21)
-------------- -------------- -------------- --------------
Extraordinary item $ - $ - $ 0.05 $ -
-------------- -------------- -------------- --------------
Net loss $ (0.02) $ (0.13) $ (0.01) $ (0.21)
============== ============== ============== ==============
Weighted average number
of shares outstanding 22,935,300 20,506,700 22,417,700 19,916,700
============== ============== ============== ==============
</TABLE>
See Accompanying Condensed Notes to Consolidated Financial Statements.
3
<PAGE>
IRVINE SENSORS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
26 Weeks Ended
-------------------------------------------------------------------
<S> <C> <C> <C>
March 29, 1998 March 30, 1997
-------------- --------------
Cash flows from operating activities:
Cash received from customers $ 3,153,300 $ 7,490,600
Cash paid to suppliers and employees (5,967,900) (8,311,500)
Interest received 9,000 16,300
Interest paid (99,000) (261,200)
Income taxes paid (2,600) (1,800)
-------------- --------------
Net cash used in operating activities $ (2,907,200) $ (1,067,600)
Cash flows from investing activities:
Equipment disposal 37,800 -
Capital facilities and equipment expenditures (158,400) (761,800)
-------------- --------------
Net cash used in investing activities (120,600) (761,800)
Cash flows from financing activities:
Proceeds from issuance of preferred shares 4,200,900 -
Common stock issued for services 261,700 -
Principal payments under notes payable
and capital lease obligations (2,320,600) (40,700)
Proceeds from issuance of minority
interest in subsidiary - 1,482,600
-------------- --------------
Net cash provided by financing activities 2,142,000 1,441,900
-------------- --------------
Net decrease in cash and cash equivalents (885,800) (387,500)
Cash and cash equivalents at beginning of period 1,639,300 1,954,000
-------------- --------------
Cash and cash equivalents at end of period $ 753,500 $ 1,566,500
============== ==============
Reconciliation of net income (loss) to net cash used in operating
activities:
Net income (loss) $ 197,400 $ (4,253,700)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization $ 665,300 $ 1,558,800
Common stock issued to employee retirement plan 500,000 219,000
Minority interest in loss of subsidiary (166,000) (123,300)
(Increase) decrease in accounts receivable (1,547,900) 561,200
(Increase) in inventory (118,200) (384,300)
Decrease in prepaid expenses and other assets 799,000 127,300
Increase (decrease) in accounts payable
and accrued expenses (3,143,100) 1,009,300
(Decrease) increase in deferred revenues (106,100) 278,100
(Decrease) in accrued rent - (183,300)
Increase in royalties accrued - affiliated company 12,400 123,300
-------------- --------------
Total adjustments (3,104,600) 3,186,100
-------------- --------------
Net cash used in operating activities $ (2,907,200) $ (1,067,600)
============== ==============
Noncash investing and financing activities:
Principal payment of note payable by
issuance of common stock $ 500,000 $ -
============== ==============
Conversion of debentures to common stock $ 250,000 $ 2,850,000
============== ==============
</TABLE>
See Accompanying Condensed Notes to Consolidated Financial Statements.
4
<PAGE>
IRVINE SENSORS CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General
The information contained in the following Condensed Notes to Consolidated
Financial Statements is condensed from that which would appear in the annual
consolidated financial statements; accordingly, the consolidated financial
statements included herein should be reviewed in conjunction with the
consolidated financial statements and related notes thereto contained in the
1997 Annual Report to Shareholders of Irvine Sensors Corporation (the
"Company"). It should be understood that accounting measurements at interim
dates inherently involve greater reliance on estimates than at year end. The
results of operations for the interim periods presented are not necessarily
indicative of the results expected for the entire year.
The consolidated financial information as of March 29, 1998 and March 30,
1997 included herein is unaudited but includes all normal recurring adjustments
which, in the opinion of management of the Company, are necessary to present
fairly the consolidated financial position of the Company at March 29, 1998, the
results of its operations for the 26 week periods ended March 29, 1998 and March
30, 1997 and its cash flows for the 26 week periods ended March 29, 1998 and
March 30, 1997. Certain reclassifications have been made to prior year's
financial statements to conform to the current year presentation.
The consolidated financial statements include the accounts of Irvine
Sensors Corporation and its subsidiaries, Carson Alexiou Corporation ("CAC"),
Novalog, Inc. ("Novalog"), MicroSensors, Inc. ("MSI"), 3D Microelectronics, Inc.
and 3D Microsystems, Inc. All significant intercompany transactions and balances
have been eliminated in consolidation.
Note 2 - Convertible Subordinated Debentures
In fiscal 1998, the Company forced conversion of the remaining $250,000 of
outstanding 8% Convertible Subordinated Debentures into 100,000 shares of the
Company's common stock. In May 1996, the Company had registered 2,997,000
shares which the Company then believed would be sufficient to cover the
conversion of all $11.1 million of the 8% Convertible Subordinated Debentures,
which had been issued in February and March 1996. However, due to the decline
in the price of the Company's common stock, the number of shares issued upon
conversion of all the Debentures, including the aforementioned 100,000 shares,
exceeded the number of shares previously registered. In January 1998, the
Company filed a registration statement which included the resale of 1,114,810
unregistered shares issued upon conversion of the 1996 Debentures. This
registration was declared effective by the Securities and Exchange Commission in
April 1998.
Note 3 - Notes Payable
During the three month period ended December 28, 1997, the Company entered
into a Forbearance Agreement with the Company's lending Bank to redefine the
repayment terms of the note payable, following the sale of the related
collateral. Under the new terms of the loan, the Company paid $1,229,900 of the
principal balance, and an additional $500,000 was satisfied by issuing 550,000
shares of common stock to the lender; and under the terms of the agreement,
dependent on the market price of the shares when sold, the Company will receive
a refund if the proceeds from the sale exceeds $500,000. These shares have been
included in the April 1998 registration statement referred to in Note 2.
Note 4 - Related Party Transactions
In April 1980, the Company entered into an agreement with R&D Leasing Ltd.,
(RDL), a limited partnership in which the Company's Chairman and a Senior Vice
President are general partners with beneficial interests, to design an
electronic circuit, to develop certain fabrication processes and to build
equipment for testing electronic integrated circuits. In connection with the
development of the electronic test equipment under the RDL agreement, certain
other proprietary fabrication processes were developed to which RDL retained
ownership. Upon the occurrence of certain specified events, such as the use of
patented fabrication processes in connection with contracts, the agreement with
RDL provides that the Company will pay RDL a royalty fee based on a percentage
of revenues from sales of the basic devices using the processes created during
the development of this equipment. As of March 29, 1998 the Company had accrued
$626,200 in deferred royalties payable to RDL.
5
<PAGE>
Note 5 - Issuance of Common and Preferred Stock
As referred to in the Company's Annual Report on Form 10-K for fiscal 1997
(see "Management's Discussion of Liquidity, Capital Resources and Impact of
Changing Prices"), the Company began the sale of Series D Convertible Preferred
Stock Units in a private placement to certain accredited investors in December
1997 and continued to accept subscriptions thereto through January 2, 1998, at
which time, the Company sold an additional 24,750 Units. The Company has issued
an aggregate of 37,750 Units at a price of $100.00 per Unit and the net proceeds
of $3,284,100 from the sale of these securities have been added to the Company's
general funds.
The Series D Convertible Preferred Stock Units consist of one share of
Convertible Preferred Stock, plus one five-year Warrant to purchase one share of
common stock of Novalog, Inc., a subsidiary of the Company and, one five-year
Warrant to purchase one share of common stock of Microsensors Inc., a wholly-
owned subsidiary of the Company. Each share of Convertible Preferred Stock is
convertible into common stock of the Company at the rate of 100 shares of Common
for each share of Preferred D, subject to adjustment for stock splits, reverse
stock splits and other similar recapitalization events. The Preferred D shares
have no voting rights, except as required by law, and bear no dividends. (See
Note 7 for calculation of beneficial conversion and imputed dividend resulting
from issuance of Series D Convertible Preferred Stock.) The common shares
underlying the Preferred D shares have been included in the April 1998
registration statement referred to in Note 2.
In January 1998, a warrantholder exercised outstanding warrants to purchase
222,000 shares of Common Stock at a price of $1.00 per share. The proceeds from
this warrant exercise have been added to the Company's general funds. These
shares have been included in the April 1998 registration statement referred to
in Note 2.
In January 1998, the Company sold 125,000 Common Stock Units to investors
in a private placement. Each Unit consists of one share of Common Stock of the
Company, plus one five-year Warrant to purchase one share of common stock of
Novalog, Inc., a subsidiary of the Company and one five-year Warrant to purchase
one share of common stock of Microsensors Inc., a wholly-owned subsidiary of the
Company. The proceeds of $125,000 from these transactions were added to the
Company's general funds. These shares have been included in the April 1998
registration statement referred to in Note 2.
In January 1998, the Board of Directors authorized a contribution to the
Employee Stock Bonus Plan, (the Company's ERISA-qualified Employee Retirement
Plan). The amount represents an annual contribution for fiscal year 1998 and
was made in 333,334 shares of the Company's common stock which have been issued
to the Plan.
Note 6 - Debt Extinguishment
On December 26, 1997, the Company made a $490,000 cash payment to
extinguish its remaining obligations under a Settlement Agreement with a vendor.
Accordingly, the Company recorded an extraordinary gain of $1,146,100 on the
extinguishment of debt and reduced accounts payable by the corresponding amount.
6
<PAGE>
Note 7 - Earnings Per Share
As the Company had net losses from continuing operations for the 13 and 26
week periods of fiscal 1998 and 1997, basic and diluted net loss per share are
the same.
In its original filing on Form 10-Q for the period ended March 29, 1998,
the Company did not calculate the effect of an imputed dividend associated with
the sale of the Series D Convertible Preferred Stock. Basic and diluted earnings
per share as shown herein applicable to common stockholders has been
recalculated and includes $465,300 for the non-cash imputed dividend related to
the beneficial conversion feature on 24,750 Units of the Series D Convertible
Preferred stock. (See Note 5.) The beneficial conversion feature is computed as
the difference between the quoted market price of a share of common stock on
date of issue and the conversion price times all shares of preferred stock sold
and under option. The imputed dividends are a non-cash, one-time charge based on
the immediate conversion feature.
Basic and diluted net loss per common share for the 13 and 26 week periods
of fiscal 1998 and 1997 were calculated as follows:
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
-------------------------------------- -------------------------------------
March 29, March 30, March 29, March 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net income (loss) $ 14,000 $ (2,732,600) $ 197,400 $ (4,253,700)
Preferred Stock imputed dividend (465,300) - (465,300) -
-------------------------------------------------------------------------------------
Net loss available to Common Stockholders $ (451,300) $ (2,732,600) $ (267,900) $ (4,253,700)
=====================================================================================
Basic & diluted earnings per share:
As previously reported
Loss before extraordinary item $ - $ (0.13) $ (0.04) $ (0.21)
Extraordinary item $ - $ - $ 0.05 $ -
-------------- -------------- -------------- --------------
Net income (loss) $ - $ (0.13) $ 0.01 $ (0.21)
============== ============== ============== ==============
Restated :
Loss before extraordinary item $ (0.02) $ (0.13) $ (0.06) $ (0.21)
Extraordinary item $ - $ - $ 0.05 $ -
-------------- -------------- -------------- --------------
Net loss $ (0.02) $ (0.13) $ (0.01) $ (0.21)
============== ============== ============== ==============
Weighted average number
of shares outstanding 22,935,300 20,506,700 22,417,700 19,916,700
============== ============== ============== ==============
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations.
- --------------
Except for historical information contained herein, this Report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The
forward-looking statements contained herein are subject to certain risks and
uncertainties, including such factors, among others, as the pace at which new
markets develop, the ability of the Company to introduce new products and ramp
up manufacturing in a timely manner while controlling its operating expenses and
the response of competitors, many of whom are bigger and better financed than
the Company. In addition, the scope of the Company's growth plan may introduce
unanticipated risks and financial requirements. The availability of external
financing for the Company's plan cannot be assured and is subject to numerous
factors including those unrelated to the Company's performance such as economic
and market conditions. Further, the Company's financial performance prior to
substantial growth in revenues may not permit additional equity financing and
may place at risk the continuation of its long-term debt financing because of
inability to achieve financial covenants. Accordingly, investors are advised to
assess forward-looking statements contained herein with caution. Additional
information on various risk and uncertainties potentially affecting the
Company's results are discussed below and are contained in publicly filed
disclosures available through the Securities and Exchange Commission EDGAR
database (http://www.sec.gov) or from the Company's Investor Relations
Department.
Results of Operations
Revenues
The Company achieved revenues of $2,533,300 in the second quarter of fiscal
1998 and $4,701,200 for the 26 week period ended March 29, 1998, compared to
$3,254,300 and $6,929,400 respectively, in the prior fiscal year. Second
quarter revenues this fiscal year reflect a threefold improvement in Contract
R&D revenues compared to the second quarter last fiscal year. The improvement of
$1,346,400 is primarily attributable to an improved funded backlog position and
revenues generated from delivery of intellectual property rights licensed to
Advanced Technology Products, LLC. which relates to the Company's E Film
products. The decline in product revenues of more than $2 million in both the
13 and 26 week periods this fiscal year compared to similar periods last year
are primarily attributable to reduced demand for memory cube products which were
produced at the now closed Vermont facility. The Company's Novalog, Inc.
subsidiary reported an increase in revenues of 50 percent over last year's 26
week period although still feeling the effects of the Asian market disruption.
The Microsensors, Inc. subsidiary which began operations at the start of the
fiscal year, derived additional revenues in the second fiscal quarter from its
first development contract, and anticipates delivering its first products in the
second half of 1998.
Cost of Revenues
Cost of contract R&D revenues as a percentage of revenues decreased from
105 percent in the second quarter of fiscal 1997 to 83 percent in the second
quarter of fiscal 1998. For the 26 week periods, fiscal 1998 shows an increase
of 12 percentage points over the comparable fiscal 1997 period, due primarily to
the mix of contracts. Cost of product sales in the 26 week period at 94 percent
of product sales was 69 percentage points lower than the comparable period last
year. This substantial reduction is attributable primarily to the elimination of
the high production costs the Company had experienced in fiscal 1997 at the
Vermont location which is now closed.
General and Administrative
In the second quarter of fiscal 1998, General and Administrative expense
(G&A) was reduced by $229,400 and for the 26 week period, a reduction of
$389,500 was achieved compared to the respective period in the prior fiscal
year. These decreases reflect cost reductions first put in place in mid-fiscal
1997 and continuing into fiscal 1998 as management restructures the Company to
achieve maximum efficiency.
Research and Development
The Company has decreased its expenditure in research and development by
$709,800 during the 26 week period of fiscal 1998. Approximately one-third of
this reduction is attributable to the Vermont closing. There have been similar
reductions of research and development expenditures in Costa Mesa and the
subsidiaries operations. The Company has focused on obtaining
8
<PAGE>
customer funding for portions of these costs to the extent such arrangements
would not jeopardize the Company's patent potentials.
Interest Expense/Interest Income
Interest expense in the second quarter of fiscal 1998 decreased $74,600
from the corresponding period of last fiscal year resulting from the reduction
of the bank loan and conversion of the remaining 8% Convertible Preferred
Debentures.
Liquidity and Capital Resources
At March 29, 1998, the Company had cash and cash equivalents of $753,500,
working capital of $4,203,700 and a current ratio of 2.7 to 1. Of major
significance, in the six month period from September 29,1997 (Fiscal year end),
the Company has eliminated its Long Term Debt and has reduced the current notes
payable from over $2 million to only one-half million at March 29, 1998. During
the six month period the Company obtained additional equity funding and debt to
equity conversions aggregating approximately $4.4 million and anticipates,
although there can be no assurances, that the existing working capital and its
projected operating results will be sufficient to meet its cash requirements for
the immediate future and for the growth of its subsidiary businesses.
At March 29,1998, the Company's funded backlog was approximately $2.1
million compared to $6.6 million at March 30, 1997 which included approximately
$5.0 of product orders to be shipped from the Vermont facility.
In December 1997, the Company executed a Forbearance Agreement with its
lending bank whereby the Company agreed to accelerate repayment of the Note
Payable to the bank. The current portion of the debt was reduced by $1,026,900
received from the sale of the assets in October 1997. The Company also agreed,
among other requirements, to reduce the principal balance by payments of
$250,000 in each of the calendar quarters ending December 1997 and March 1998
and thereafter to reduce the remaining balance by a minimum of $200,000
quarterly. Execution of the Forbearance Agreement also resulted in a waiver of
the Company's financial covenants defaults and an amendment to the loan
agreement eliminating such financial covenants on a prospective basis. In
connection therewith the Company pledged as collateral one million shares of
Novalog, Inc. common stock held by the Company. The Company also paid down
$500,000 of the Note with 550,000 shares of its stock and under the terms of the
agreement, dependent on the market price of the shares when sold, the Company
could receive a refund if the proceeds from the sale exceeds $500,000.
The Year 2000
The Year 2000 Issue is the result of computer programs using two digits
rather than four to define the applicable year. The Company's programs that
have time-sensitive software may recognize a date using "00" as the calendar
year 1900 rather than the calendar year 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
As a result of an ongoing review of its internal computer systems to
identify the systems that could be affected by the Year 2000 issue the Company
presently believes that the only potential system that may be affected is a
licensed product which is covered by vendor support. The vendor has communicated
to all of its customers that they are working on this issue and will supply
appropriate modifications in a timely manner. The Company therefore believes
that the Year 2000 issue will have minimal or no impact on the Company.
9
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities
---------------------
In January 1998, the Company issued in a private placement an aggregate of
24,750 Preferred Stock Units, each Unit consisting of one share of Convertible
Series D Preferred Stock of the Company, one Warrant to purchase one share of
Novalog, Inc. Common Stock and one Warrant to purchase one share of
Microsensors, Inc. Common Stock (the "units"). Each share of Series D Preferred
Stock is convertible into 100 shares of the Company's Common Stock, at any time,
at the option of the holder. Each of the Novalog and Microsensors Warrants are
exercisable for five years, at an exercise price of $1.00 per share.
The Units were sold at a price of $100 per Unit and were issued to 21
accredited investors, of which 13 are individuals or entities located outside
the United States. The investors are as follows:
Bronia Gmbh
Terivian Enterprises
Faisal Finance (Switzerland) S.A.
BFC Banque Financiere de la Cite
Nutley Investments
Cresta Limited
Felcom Capital Corporation
Xavier Roland
Bergmont Limited
Bruce Bailey
The Eide Family Trust
Claude Eyraud
Paddington Investments, Inc.
Tatkit Nominees
Lorenzo Delco
Meadowland Limited
Charles B. Krusen
Andrew Olear II
The Stuart Family Trust
The Alexiou Family Trust
The David & Madeleine Pinto Trust
The Units were sold pursuant to exemptions from the registration
requirements of the Securities Act of 1933, as amended, as set forth in Section
4(2) and/or Rule 506 of Regulation D promulgated thereunder. Each investor was
furnished with information on the offering and the Company and each had the
opportunity to verify the information supplied. Additionally, the Company
obtained a representation from each investor of such investor's intent to
acquire the securities for the purpose of investment only, and not with a view
toward the subsequent distribution thereof. The securities bear an appropriate
restrictive legend.
10
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's annual meeting of stockholders was held on February 27, 1998
pursuant to notice duly given to all stockholders on the record date of
December 29, 1997. Proxies for the meeting were solicited pursuant to
Regulation 14 of the Securities Exchange Act of 1934.
The stockholders approved an amendment to the Company's 1995 Stock Option
Plan to increase the number of shares of Common Stock subject to options under
the plan to an aggregate of 1,650,000 There were 16,779,626 votes in favor of
the proposal, 1,586,063 negative votes, 189,197 abstentions and 1,172,051 broker
non-votes.
The stockholders approved an amendment to the Company's 1995 Stock Option
Plan to give the Board discretion to increase the period during which non-
statutory options may be exercised following the optionee's termination for
reasons other than death or disability. There were 17,250,191 votes in favor of
the proposal, 1,470,565 negative votes, 406,854 abstentions and 599,327 broker
non-votes.
The stockholders also ratified a proposal appointing Price Waterhouse LLP
to continue as the Company's independent accountants for the fiscal year 1998.
There were 19,425,828 votes in favor of the proposal, 212,009 negative votes,
90,450 abstentions and no broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K.
None
11
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Irvine Sensors Corporation
------------------------------
(Registrant)
Date January 26, 1999 By: /s/ John J. Stuart, Jr.
------------------------------
John J. Stuart, Jr.
Chief Financial Officer
(Principal Accounting Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from second
quarter 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-27-1998
<PERIOD-START> SEP-29-1997
<PERIOD-END> MAR-29-1998
<CASH> 753,500
<SECURITIES> 0
<RECEIVABLES> 2,785,600
<ALLOWANCES> 10,000
<INVENTORY> 2,695,500
<CURRENT-ASSETS> 6,622,700
<PP&E> 9,016,400
<DEPRECIATION> 6,785,300
<TOTAL-ASSETS> 8,885,900
<CURRENT-LIABILITIES> 2,419,000
<BONDS> 0
500
0
<COMMON> 231,700
<OTHER-SE> 2,470,100
<TOTAL-LIABILITY-AND-EQUITY> 8,885,900
<SALES> 4,701,200
<TOTAL-REVENUES> 4,701,200
<CGS> 4,225,300
<TOTAL-COSTS> 5,569,300
<OTHER-EXPENSES> 202,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99,000
<INCOME-PRETAX> (1,160,200)
<INCOME-TAX> 2,600
<INCOME-CONTINUING> (948,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,146,100
<CHANGES> 0
<NET-INCOME> 197,400
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
