<PAGE>
As Filed with the Securities and Exchange Commission on March 17, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
IRVINE SENSORS CORPORATION
(Name of registrant as specified in its charter)
Delaware 33-0280334
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or jurisdiction)
3001 Redhill Avenue
Costa Mesa, California 92626
(714) 549-8211
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
James D. Evert, Chief Executive Officer
Irvine Sensors Corporation
3001 Redhill Avenue, Building III
Costa Mesa, California 92626
(714) 549-8211
(Name, address, including zip code, and telephone number,
including area code, of agent for service of process)
--------------------
With Copy To:
Debra K. Weiner
Grover T. Wickersham, P.C.
430 Cambridge Avenue, Suite 100
Palo Alto, California 94306
--------------------
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If any securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Maximum Proposed
Offering Maximum Amount of
Title of Each Class of Amount to be Price Per Aggregate Registration
Securities to be Registered Registered Share(1) Offering Price(1) Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 4,331,644(2) $9.00 $38,984,796 $10,292
=====================================================================================================================
</TABLE>
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(c) and equal to the closing price of the Common Stock on The
Nasdaq SmallCap MarketSM on March 15, 2000.
(2) Registered for resale by certain Selling Stockholders.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Exchange Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such State.
<PAGE>
Subject to Completion Dated March 17, 2000
4,331,644 Shares
IRVINE SENSORS CORPORATION
Common Stock
This prospectus covers a total of 4,331,644 shares of our common stock.
Certain of our stockholders, whom we refer to in this prospectus as the selling
stockholders, have shares of our common stock that they may reoffer for resale
from time to time in the public market. This prospectus may also be used by the
selling stockholders' pledgees, donees, transferees or other successors in
interest. Sometimes we refer to the selling stockholders and their pledgees,
donees, transferees or other successors in interest as the sellers. See "Selling
Stockholders" for a list of the selling stockholders. Of the shares offered by
this prospectus, (1) 3,391,151 shares of common stock were sold in private
placements conducted in December 1999 and March 2000, (2) 377,095 shares are
issuable upon exercise of outstanding warrants issued to investors and as
incentives to third parties other than our selling agents and (3) 563,398 are
issuable upon exercise of warrants issued to our selling agents in the December
1999 and March 2000 private placements.
The sellers may offer the shares of common stock from time to time in
brokerage transactions, which may include block transactions, in the over-the-
counter market or negotiated transactions at prices and terms prevailing at the
times of such sales, at prices related to such market prices or at negotiated
prices. The sellers may sell the shares directly to purchasers, through broker-
dealers acting as agents for the Sellers or to broker-dealers who may purchase
the sellers' shares as principals and then sell the shares from time to time in
the over-the-counter market, in negotiated transactions or otherwise, or by a
combination of these methods. Broker-dealers who effect these transactions may
receive compensation in the form of discounts or commissions from the sellers or
from the purchasers of the shares for whom the broker-dealers may act as an
agent or to whom them may sell as a principal, or both. See "Plan of
Distribution."
We will not receive any part of the proceeds from the resale of the shares
by the selling stockholders. The selling stockholders and broker-dealers, if
any, acting in connection with such sales, might be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, and any commission
received by them and any profit on the resale of such securities might be deemed
to be underwriting discounts and commissions under the Securities Act.
Our common stock is traded on The Nasdaq SmallCap MarketSM under the symbol
"IRSN" and on the Boston Stock Exchange under the symbol "ISC." On March 15,
2000, the closing sale price of our common stock on Nasdaq was $9 per share.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 10.
__________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is , 2000.
<PAGE>
Neither we nor the selling stockholders have authorized any dealer, salesman or
other person to give any information or to make any representation other than
those contained or incorporated by reference in this prospectus. You must not
rely upon any information or representation not contained or incorporated by
reference in this prospectus as if we had authorized it. This prospectus does
not constitute an offer to sell or the solicitation of an offer to buy any
securities other than the registered securities to which it relates, nor does
this prospectus constitute an offer to sell or the solicitation of an offer to
buy securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction. The information contained in
this prospectus is accurate as of the date on the cover. When we or a selling
stockholder deliver this prospectus or make a sale pursuant to this prospectus,
we are not implying that the information is current as of the date of the
delivery or sale.
_________________
TABLE OF CONTENTS
__________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
About this Prospectus................................................................... 3
Where You Can Find More Information..................................................... 4
Information Incorporated by Reference................................................... 5
Forward Looking Statements.............................................................. 6
Prospectus Summary...................................................................... 7
Recent Developments..................................................................... 10
Risk Factors............................................................................ 10
Use of Proceeds......................................................................... 20
Selling Stockholders.................................................................... 21
Plan of Distribution.................................................................... 24
Experts................................................................................. 26
Legal Matters........................................................................... 26
</TABLE>
2
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration process. Under this shelf registration process,
the selling stockholders may sell up to 4,331,644 shares of our common stock
described in this prospectus in one or more offerings.
The selling stockholders received or will receive these shares of common
stock in several different ways:
. The holders of a total of 3,391,151 shares purchased their stock, plus
warrants to purchase an additional 337,095 shares, in private placements
conducted in December 1999 and March 2000;
. The selling agents in the December 1999 and March 2000 private
placements may acquire up to 563,398 shares by exercising selling
agents' warrants; and
. The holders of other warrants are entitled to exercise those warrants to
purchase a total of 40,000 shares.
You should carefully read this prospectus together with additional
information described under the next heading, "Where You Can Find More
Information."
As used in this prospectus, unless the context requires otherwise, "we,"
"us," "Irvine Sensors," "ISC" or the "Company" means Irvine Sensors Corporation,
a Delaware corporation and its predecessor California corporation and
consolidated subsidiaries.
3
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can inspect and copy these reports, proxy
statements and other information at the public reference facilities of the SEC,
in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade
Center, Suite 1300, New York, New York 10048; and Suite 1400, Citicorp Center,
500 W. Madison Street, Chicago, Illinois 60661-2511. You can also obtain copies
of these materials from the public reference section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. The SEC
also maintains a web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC (http://www.sec.gov). You can also inspect reports and other
information we file with the Nasdaq SmallCap Market at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
We have filed a registration statement and related exhibits with the SEC
under the Securities Act of 1933, as amended. We refer to that act throughout
this prospectus as the Securities Act. The registration statement contains
additional information about us and the common stock. You may inspect the
registration statement and exhibits without charge at the office of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and you may obtain copies from
the SEC at prescribed rates.
You may also request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Corporate Secretary
Irvine Sensors Corporation
3001 Redhill Avenue, Building 3
Costa Mesa, CA 92626
Telephone: (714) 549-8211
You should rely only on the information provided in this prospectus and any
supplement. We have not authorized anyone else to provide you with different
information.
Simply because this prospectus has been delivered or a sale has been made
pursuant to this prospectus, you should not assume that such delivery or sale
created an implication that all of the facts in the prospectus have remained
unchanged. The statements made in this prospectus are made as of the respective
dates indicated.
4
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
We are incorporating the following documents previously filed with the SEC
into this prospectus:
(i) Our Annual Report on Form 10-K for the fiscal year ended October
3, 1999, filed pursuant to Section 13 of the Exchange Act;
(ii) Our Quarterly Report on Form 10-Q for the fiscal quarter ended
January 2, 2000, filed pursuant to Section 13 of the Exchange
Act;
(iii) Our Definitive Proxy Statement for the February 29, 2000 Annual
Meeting of Stockholders;
(iv) All reports filed by us with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this prospectus and prior to the termination of this offering;
and
(v) The description of our Common Stock contained in Form 8-A, filed
pursuant to Section 12(b) of the Exchange Act.
Any statements that we make in this prospectus or in any subsequent filings
with the SEC modify or supersede any statements in documents incorporated or
deemed to be incorporated by reference in this prospectus. If a statement in a
document incorporated by reference has been modified by the prospectus or
subsequent filings, that statement is no longer deemed to be incorporated by
reference except as modified by the prospectus or subsequent filings.
Upon request, we will furnish without charge to each person, including any
beneficial owner, to whom this prospectus is delivered, a copy of any documents
described above, other than certain exhibits to such documents. You should
address requests for such copies to: Irvine Sensors Corporation, 3001 Redhill
Avenue, Building III, Costa Mesa, California 92626, Attention: Secretary,
telephone (714) 549-8211.
5
<PAGE>
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking
statements which involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
read statements that contain these or similar words carefully because they (1)
discuss our expectations about our future performance; (2) contain projections
of our future operating results or of our future financial condition; (3) state
other "forward-looking" information. We believe it is important to communicate
our expectations to our investors. There may be events in the future, however,
that we are not accurately able to predict or over which we have no control. The
risk factors discussed in "Risk Factors" later in this prospectus, as well as
any cautionary language in this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. You will
find additional risks described from time to time in our filings with the SEC.
Before you invest in our common stock, you should be aware that the occurrence
of any of the events described in the risk factors and elsewhere in this
prospectus could have a material and adverse effect on our business, results of
operations and financial condition and that upon the occurrence of any of these
events, the trading price of our common stock could decline, and you could lose
all or part of your investment.
6
<PAGE>
PROSPECTUS SUMMARY
The Company
We are the developer of proprietary technologies to produce extremely
compact packages of solid state microcircuitry, which offer volume, power,
weight and operational advantages versus less miniaturized alternatives. These
advantages result from our ability to assemble microelectronic chips in a three-
dimensional "stack" instead of alongside each other on a flat surface, as is the
case with more conventional methods. These stacking technologies have also led
to our development of collateral technologies for the design of low power and
low noise chips, thinning of chips and various specialized applications of chips
and stacked chip assemblies in fields ranging from image processing to digital
photography.
Our core chip-stacking technology was originally conceived and
developed as a means of addressing the demands of space-based surveillance.
However, the degree of miniaturization which could be realized from our
technologies historically attracted research and development sponsorship from
various U.S. government funding agencies for a wide variety of potential
military and space applications. Since inception, we have derived most of our
consolidated revenues from government-funded research and development. However,
since the early 1990s, we have sought to commercially exploit our technologies,
and we have received an increasing share of our consolidated revenues from the
sale of commercial products.
In October 1995, we formed a subsidiary, Novalog, Inc. (Novalog), to
commercially exploit our low power chip technology in the field of wireless
infrared data communication. In April 1997, we formed a subsidiary,
MicroSensors, Inc. (MSI), to commercially exploit our technologies for low noise
readout electronics and miniaturized inertial sensors as applied to the field of
microelectromechanical systems or "MEMS." In June 1998, we formed a subsidiary,
SFT Technologies, Inc. (SFT), formerly Imagek, Inc., to commercially exploit our
technologies for miniaturized digital cameras and imaging devices. All three of
these subsidiaries are consolidated subsidiaries. We have sold a minority
interest in each entity to outside investors. The business plans of each of
these consolidated subsidiaries require substantial additional capital. We have
not yet identified the sources for this needed funding. Therefore, we cannot
promise you that any of the subsidiaries will be able to secure the financing
they need or that the financing will be available on acceptable terms. This
offering will not permit us to finance the long-term business plans of our
consolidated subsidiaries.
We were originally incorporated in California in December 1974. We changed
our state of incorporation to Delaware by incorporating a new corporation in
January 1988 and merging the original California corporation into the new
corporation in May 1988. Our principal executive offices are located at 3001
Redhill Avenue, Building. 3, Costa Mesa, California 92626, and our telephone
number is (714) 549-8211. Our Web site is located at www.irvine-sensors.com. The
information contained on our Web site is not part of this prospectus.
7
<PAGE>
The Offering
Common Stock Offered by
the Selling Stockholders.... 4,331,644 shares
Common Stock Outstanding.... 40,175,574 shares as of March 15, 2000. This number
does not include (1) up to 1,404,081 shares we may
issue upon exercise of outstanding options granted
pursuant to our stock option plans; (2) up to
1,000,000 shares we may issue upon exercise of an
outstanding put option to retire royalty
obligations held by a related party; (3) up to
1,129,993 shares issuable upon exercise of
outstanding warrants; and (4) up to 869,950 shares
we may issue upon conversion of outstanding shares
of our convertible preferred stock. See
"Description of Capital Stock."
Risk Factors................ An investment in our common stock involves a high
degree of risk and purchase of the shares should
not be considered by any persons who cannot afford
to lose their entire investment. See "Risk
Factors."
Use of Proceeds............. We will receive no proceeds from the sale of the
shares by the selling stockholders.
Nasdaq Symbol............... IRSN
Boston Stock Exchange Symbol ISC
8
<PAGE>
Summary Financial Data
Consolidated Statements of Operations Data:
<TABLE>
<CAPTION>
Year Ended 13 Weeks Ended
------------------------------------------------------------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 1, September 29, September 28, September 27, October 3, December 27, January 2,
1995 1996 1997 1998 1999 1998 2000
---------- ------------ ------------ ----------- ----------- ----------- -----------
Total revenues $ 8,041,400 $ 12,024,200 $ 13,693,200 $ 9,314,500 $11,100,200 $ 2,747,900 $ 3,283,100
Loss from
operations (3,071,500) (11,154,700) (14,809,200) (5,798,200) (9,785,700) (1,440,900) (2,672,000)
Net loss (4,137,500) (15,914,700) (14,875,600) (4,243,500) (9,115,700) (1,363,500) (2,498,100)
Basic and diluted net
loss per common
and common
equivalent shares
$ (0.28) $ (0.94) $ (0.73) $ (0.19) $ (0.29) $ (0.05) $ (0.07)
Weighted average
number of shares
outstanding 14,966,500 16,874,300 20,475,100 24,597,700 31,244,300 28,697,300 35,947,100
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
We have not paid cash dividends on any class of our stock since our
formation. Under Delaware law there are certain restrictions which currently
limit our ability to pay cash dividends. We do not anticipate paying cash
dividends at any time in the foreseeable future and we may never declare cash
dividends.
Loss per common and common equivalent shares includes, where applicable,
cumulative dividends on Preferred Stock which have not been declared or paid.
Consolidated Balance Sheet Data:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
October 1, September 29, September 28, September 27, October 3, January 2,
1995 1996 1997 1998 1999 2000
----------- ------------ ----------- ------------ ----------- -----------
Current assets $ 9,927,500 $ 9,648,200 $ 6,637,200 $4,802,700 $ 6,640,850 $ 9,800,650
Current liabilities 3,545,400 5,787,100 7,395,600 2,296,000 5,375,300 7,852,300
Working capital 6,382,100 3,861,100 (758,400) 2,506,700 1,265,550 1,948,350
Total assets 15,609,200 21,742,200 9,449,300 7,064,700 10,510,350 14,247,050
Long-term debt 201,200 6,565,600 1,457,000 933,700 433,200 1,462,900
Stockholders' equity
(deficit) 9,494,100 8,312,700 (2,939,900) 2,347,000 2,212,650 1,807,050
</TABLE>
9
<PAGE>
RECENT DEVELOPMENTS
Between January 3, 2000 and March 6, 2000, holders of outstanding options
exercised an aggregate of approximately 810,300 options. As a result of these
option exercises, we received an aggregate of approximately $1,077,500 in gross
proceeds. These proceeds have been added to working capital and are being used
for general corporate purposes. In March 2000, we sold approximately 249,000
shares of our common stock in private placements. Approximately $2,097,100 in
net proceeds were received from these offerings and have been added to our
working capital.
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus,
including our consolidated financial statements and the related notes, before
you purchase any shares of our common stock. Additional risks and uncertainties,
including those generally affecting the market in which we operate or that we
currently deem immaterial, may also impair our business.
We have a History of Losses and a Substantial Accumulated Deficit
Since our inception in December 1974, we have incurred substantial losses
in every fiscal year. Our net losses were $9,115,700 for the fiscal year ended
October 3, 1999, $4,243,500 for the fiscal year ended September 27, 1998 and
$14,875,600 for the fiscal year ended September 28, 1997. In our current fiscal
year, we have recorded a net loss of $2,498,100 for the 13 weeks ended January
2, 2000. As of January 2, 2000, we had an accumulated deficit of $65,436,800.
Although Novalog was profitable in the last fiscal year, we cannot promise you
that our other subsidiaries or divisions, or our company on a consolidated
basis, will become profitable in the foreseeable future, if at all, or that any
of our subsidiaries or our company on a consolidated basis will maintain
profitability, once achieved.
We anticipate that our expenses relating to developing, marketing and
supporting the commercial development of our technologies through our various
divisions and consolidated subsidiaries will increase substantially in the
future. In particular, we expect to spend significantly on the following
activities:
. Developing new market opportunities for our current and future
products and services;
. Funding more research and development to improve our current products
and to create new products and technologies;
. Expanding and improving our sales and marketing operations;
. Developing new channels for distributing our products and providing
our services;
10
<PAGE>
. Expanding and improving our financial and operational infrastructure;
and
. Broadening our customer support capabilities.
Accordingly, in the foreseeable future, we expect to experience additional
losses as our expenses for developing, marketing and supporting our current
technologies and products and developing new technologies and products exceed
our total revenues. These additional losses will increase our accumulated
deficit.
For more detailed information concerning our losses and other operating
results, please see the consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are incorporated by reference. See "Information Incorporated
by Reference" on page 5.
We have Shifted Our Business Focus
Since commencing operations, we have devoted most of our resources to
developing technologies for various defense-based applications, principally
under government research contracts. In 1992, we began a fundamental shift in
our business by broadening our focus to include commercial exploitation of our
technologies. Since 1992, we have implemented this movement toward
commercialization in a number of ways, including (1) the purchase and later shut
down of the IBM cubing line; (2) the creation of the Novalog, MSI and SFT
subsidiaries, each of which focuses on particular commercial applications of our
technologies; and (3) the development of various stacked-memory products
intended for military and aerospace markets. Novalog began selling its products
in October 1995; MSI received its first commercial contract in June 1998, and
SFT has recently raised a portion of the funds needed to continue the
development of its products. Therefore, while the changes noted above have made
possible new consolidated revenue sources, they have not yet produced
profitability on a consolidated company level. Because of this limited and not-
yet successful commercial history, we cannot promise you that we will be able to
make a successful shift from government research and development contract work
to being a company that has products the commercial marketplace will accept and
purchase.
Our Future Operating Results are Uncertain and are Likely to Fluctuate
Significantly
Our revenues, gross margins and other operating results may vary
significantly from quarter to quarter. The fluctuations may be due to a number
of factors, many of which are beyond our control. These factors include:
. Our or our competitors' introduction of new or enhanced products;
. Market acceptance of our or our customers' existing or planned
products;
11
<PAGE>
. Conflicting demands or other disruptions to our manufacturing sources
of supply;
. The time it takes for us to bring to market our products currently
under development; and
. Our or our competitors' price changes or changes in pricing models.
Due to all of the foregoing factors, we do not believe that period-to-
period comparisons of our historical results of operations are good predictors
of future performance. Furthermore, it is possible that in some future quarters
our results of operations may fall below the expectations of securities analysts
and investors. In such event, the trading price of our stock will likely be
materially and adversely affected.
We Expect to Need Additional Financing
If we cannot raise funds, when needed, on acceptable terms, we may not be
able to develop or enhance our products, take advantage of future opportunities
or respond to competitive pressures or unanticipated requirements, which could
materially and adversely affect our business and annual results of operations.
The failure to generate sufficient cash flows or to raise sufficient funds to
finance growth could require us to delay or abandon some or all of our plans or
forego new market opportunities, making it difficult for us to respond to
competitive pressures. We believe that our cash reserves and cash flows from
operations will be adequate to fund our operations for the next 12 months.
However, if we expect to pursue available growth opportunities, we will need
additional financing during the current fiscal year. We may also need to raise
more money within the next 12 months for unforeseen reasons. In addition, we are
likely to need to raise more money thereafter either because the product
development and market introduction costs of the products currently contemplated
in our business plan and those of our subsidiaries are not yet being fully
funded by internally-generated cash flows or because our plans have changed in
response to our market circumstances and opportunities. Our capital requirements
depend on many factors, including, but not limited to:
. The rate at which we develop and introduce our products and services;
. The market acceptance and competitive position of our products and
services;
. The level of promotion and advertising required to market our products
and services and attain a competitive position in the marketplace; and
. The response of competitors to our products and services.
At the time we require additional funding, such funding might not be
available on terms favorable to our stockholders or us or in sufficient amounts.
If additional funds are raised through the issuance of common stock, such stock
might be offered at a price lower than the fair market value of our common stock
at the time of the sale and would therefore reduce the value of the
12
<PAGE>
common stock of our then current stockholders. Even if the value of our common
stock does not decrease, the percentage ownership of our then current
stockholders will be reduced by the issuance of the new stock.
You are Facing a Substantial Investment Risk by Purchasing Our Stock
Your investment in our common stock must be considered highly speculative
due to the nature of our business, the industry in which we operate, the present
stage of our development, as well as the corresponding factors for our
subsidiaries. Our future and that of our subsidiaries is greatly dependent upon
the successful introduction of new products related to various emerging market
areas. The subsidiary operations are additionally subject to all of the risks
inherent in a new business enterprise, including (1) the absence of a
substantial operating history, (2) the shortage of cash, (3) undercapitalization
and (4) the substantial expense of new product development. We expect to
encounter various problems, expenses, complications and delays in connection
with the development of our products and business and those of our subsidiaries.
We cannot promise you that we or our subsidiaries will be able to overcome such
obstacles and achieve, and then sustain, profitable operations.
We Remain Dependent on Defense Contract Revenues which are Subject to Economic
and Other Risks Beyond Our Control
Although we have been shifting our focus to include commercial exploitation
of our technology, we expect to continue to be dependent upon research and
development contracts with federal agencies and their contractors for a
substantial, but diminishing portion of our consolidated revenues for the
foreseeable future. General political and economic conditions, which no one can
accurately predict, directly and indirectly affect the quantity and allocation
of expenditures by federal agencies. Even the timing of incremental funding
commitments to existing, but partially-funded contracts can be affected by such
factors. Therefore, cutbacks in the federal budget could have a material adverse
impact on our results of operations as long as research and development
contracts remain an important element of our business.
Our Future Success Depends on the Timely Completion and Market Acceptance of New
Products and Our Ability to Keep Up with Rapid Technological Change
Rapidly changing technology, evolving industry standards, frequent
announcements and introductions of new or enhanced products and services and
changing customer demands characterize the markets for our products. Both we and
our subsidiaries are focused on emerging markets that are potentially subject to
rapid growth. It is very difficult to predict market reaction to new products in
such circumstances. It is critical to our success that we move quickly to market
with new products before technological advances make them obsolete. We may not
be able to do so. We are also dependent upon our ability to adapt to rapidly
changing technologies, to adapt our products to meet evolving industry standards
and to continually improve the performance, features and reliability of our
products in response to both changing customer demands and competitive product
offerings. Moreover, we cannot promise you that customers in these emerging
markets will react favorably to ours or our subsidiaries' present or future
13
<PAGE>
products. It is important that we not only receive favorable market reaction
initially, in order to begin generating sales, but we must be able to sustain
the customers' level of interest in our products. In addition, because we have a
limited history of competing in the intensely competitive commercial electronics
industry, we cannot promise you that we will successfully be able to develop,
manufacture and market additional commercial product lines or that such product
lines will be accepted in the commercial marketplace. If we fail to successfully
and quickly adapt to changing technologies and customer requirements, our
business, results of operations and financial condition could be materially and
adversely affected.
Our Markets are Highly Competitive
The commercial electronics markets into which we and are subsidiaries have
entered or are entering are intensely competitive and rapidly evolving. We
expect competition to continue to increase both from existing competitors and
new market entrants. We believe that our ability to compete depends on many
factors both within and beyond our control, including:
. The performance, features, price and reliability of our products as
compared to those of our competitors;
. The timing and market acceptance of new products and enhancements to
existing products developed by us and our competitors;
. The quality of our customer service and support; and
. The effectiveness of our sales and marketing efforts.
Virtually all of our current and potential competitors have longer
operating histories in the commercial electronics market, and significantly
greater financial, technical, marketing and other resources than we do. As such,
they may be able to respond more quickly to new or changing opportunities,
technologies and customer requirements. Also, many of our current and potential
competitors have greater name recognition and more extensive customer bases.
These competitors may be able to undertake more extensive promotional
activities, adopt more aggressive pricing policies, or offer more attractive
terms to purchasers than we can.
Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any one of which could impair our
finances and business prospects. We cannot assure you that we will be able to
compete successfully against existing or potential competitors or that
competitive pressures will not materially impair our finances or business
prospects.
Forward-Looking Statements may Prove Inaccurate
We have made forward-looking statements in this prospectus that are subject
to risks and uncertainties. You should note that many factors, some of which are
discussed elsewhere in this
14
<PAGE>
prospectus, could affect future financial results and could cause those results
to differ materially from those expressed in our forward-looking statements
contained in this prospectus. See "Forward-Looking Statements" on page 6.
We may be Unable to Protect Our Proprietary Rights in Our Products and
Technology
Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we protect through a
combination of patent, copyright, trade secret and trademark laws. As of
February 29, 2000, we own 45 U.S. patents and 8 foreign patents, and we have
other patent applications pending before the U.S. Patent and Trademark Office as
well as various foreign jurisdictions. We cannot assure you that patents will
issue based on any of our patent applications. Even if patents do issue, our
existing and future patents and other intellectual property rights may be
successfully challenged by others or invalidated. We cannot promise you that any
existing or future patents will survive a challenge or will otherwise provide
meaningful protection from competition. Furthermore, we cannot assure you that
we or our subsidiaries will have the financial resources to provide vigorous
defense or enforcement of patents or other intellectual property rights. If our
proprietary rights are infringed by a third party, the value of our technology
and products could be diminished and additional competition might result from
the third party's use of those rights, which would materially and adversely
affect our business and results of operations.
We and our subsidiaries generally enter into confidentiality or license
agreements with our employees, consultants and corporate partners and control
access to and distribution of our technologies, documentation and other
proprietary information. Despite our efforts to protect our proprietary rights
from unauthorized use or disclosure, parties may attempt to disclose, obtain or
use our solutions or technologies. We cannot assure you that the steps we have
taken will prevent misappropriation of our products or technologies,
particularly in foreign countries where laws or law enforcement practices may
not protect our proprietary rights as fully as in the United States. There is
also the risk that third parties could independently develop products or
technology that are equivalent or superior to ours or that of our subsidiaries.
In such case, we would have no course of action against such third parties.
We have licensed, and we may license in the future, proprietary rights to
third parties. While we attempt to ensure that the quality of our brand is
maintained by the business partners to whom we grant non-exclusive licenses,
they may take actions that could materially and adversely affect the value of
our proprietary rights or our reputation. In addition, we cannot assure you that
these licensees will take the same steps we have taken to prevent
misappropriation of our solutions or technologies.
Third Parties May Assert Infringement Claims Against Us
Third parties may assert infringement claims against us. We do not believe
that our technological processes infringe the proprietary rights of others, but
we cannot assure you that third parties will not assert claims that we violate
their rights. Although we have not been subject to any claims of these types in
the past, any claims or litigation, if they occur, could subject us to
15
<PAGE>
significant liability for damages or could result in invalidation of our rights.
In addition, even if we were to prevail, litigation could be time-consuming and
expensive to defend and could result in diversion of our time and attention,
which could materially and adversely affect our business and results of
operations. Any claims or litigation from third parties might also result in
limitations on our ability to use the intellectual property subject to these
claims or litigation unless we entered into arrangements with the third parties
responsible for the claims or litigation, which might be unavailable on
reasonable terms, if at all.
Government Rights Limit Our Intellectual Property Rights
Whatever degree of protection, if any, is afforded to us or our
subsidiaries through our patents, proprietary information and other intellectual
property, this protection will not extend to government markets that use certain
segments of our technology. The government has the right to royalty-free use of
technologies which we have developed under government contracts, including
portions of our stacked circuitry technology. We are free to commercially
exploit such government-funded technologies and may assert our intellectual
property rights to seek to block other non-government users thereof, but we
cannot assure you we could successfully do so.
We are Highly Dependent on Our Third Party Suppliers
Since the closure of our manufacturing facilities for the stacked cubing
line in Vermont, we have had no significant manufacturing capabilities and have
no plans to directly conduct the manufacture of our products in the foreseeable
future. We and our subsidiaries exclusively use third party suppliers to
manufacture our products and prototypes of our future products. At the projected
level of operations, both we and our subsidiaries have identified sources that
are believed to be adequate to meet foreseeable needs. However, we cannot assure
you that we or our subsidiaries will be able to cover changing manufacturing
needs in the future. If we are unable to do so, that failure will have a
material adverse impact on our operations and that of our subsidiaries.
Moreover, since we do not have our own manufacturing capability, we may be less
able to respond to competitive changes in the marketplace than our competitors
who do have control of their own manufacturing facilities. That could give our
competitors a substantial advantage.
We May be Unable to Maintain Our Listing on the Nasdaq(TM) SmallCap Market
Our common stock is publicly traded on the Nasdaq SmallCap Market. In 1998,
The Nasdaq Stock Market put into effect new and more restrictive standards for
companies wanting to maintain their listing on this market. Prior to the
implementation of these new regulations, we briefly dropped below the pending
standards due to the substantial loss associated with our Vermont plant closure.
In order to retain our listing, we had to demonstrate to the satisfaction of the
Nasdaq staff that we met the new standards and that we could stay in compliance
with those new standards for the foreseeable future. While we were able to meet
the new requirements at that time, we have at times since then been below one or
more of the maintenance requirements. At January 2, 2000, we met minimal
standards to maintain our Nasdaq listing, but were not in compliance with all of
the quantitative maintenance standards under which could achieve that
16
<PAGE>
result. As of the date of this prospectus, we are again in compliance with
multiple criteria to maintain our listing. However, we cannot promise you that
we will be able to stay in compliance with the SmallCap Market maintenance
requirements in the future. In particular, we expect that anticipated losses
from our MSI and SFT consolidated subsidiaries as they continue to develop their
products are likely to continue to erode our consolidated net worth until, and
if, such subsidiaries are able to generate material revenues from the sales of
their planned products. Accordingly, our continued compliance with the Nasdaq
listing requirements may be dependent on maintenance of a $35 million or greater
market capitalization, unless or until we successfully raise additional equity
financing. We cannot promise you that we will be able to do so. We do believe
that we have reduced the risk of being delisted since we were able to raise
funds in recent private placements of our equity securities and our current
market capitalization is substantially in excess of $35 million. However, this
capital infusion and current market capitalization only eliminates the risk of
delisting for the foreseeable future. It does not permanently eliminate the
risk.
Third-Party Financing of Our Subsidiaries Could Dilute Our Control and Potential
Return from Prior Investments
The financing of our Novalog and SFT subsidiaries to date have involved
significant sales of minority equity interests. We have repurchased a
substantial portion of the minority equity interests of Novalog, but we do not
now have sufficient discretionary capital to continue this practice with respect
to Novalog or any other subsidiary or to adequately finance the future business
plans of any of our subsidiaries. Our subsidiaries are seeking to sell
additional equity interests to finance at least some portion of their business
plans. Our ability to enjoy the benefits of any potential increase in value on
the part of our subsidiaries can be greatly reduced by third-party financings.
This is true both because of reduced equity interests in the subsidiaries and
because our control of our subsidiaries is lessened or eliminated. Significant
third-party investment in our subsidiaries will likely result in third-party
investors receiving subsidiary board representation and/or protective covenants
that could result in our losing voting control of our subsidiaries. SFT recently
closed a third-party financing involving such features plus additional investor
protections. This financing has reduced our ownership interest in SFT to
slightly above 50% as of February 2000 and to slightly below 40% after the
future effect of warrant and option exercises. We could experience additional
dilution due to default or price anti-dilution provisions of SFT's recent
financing or a subsequent IPO, if one were to occur. In certain circumstances,
it is possible that we or our subsidiaries could experience very substantial
transactions costs or "break-up" fees in connection with efforts to obtain
financing. Third-party financings of subsidiaries will inherently complicate our
fiduciary and contractual obligations and could leave us more vulnerable to
potential future litigation. The outcome of litigation is inherently
unpredictable, and even the costs of prosecution could have a materially adverse
effect on our results of operations.
Our Success Depends on Certain Key Employees
Our future success depends to a significant extent on the continued service
of our key technical, sales and senior management personnel and their ability to
execute our growth
17
<PAGE>
strategy. The loss of the services of any of our senior level management or
other key employees would likely have a material adverse effect on our business
and quarterly and annual results of operations.
Our future success also depends on our ability to attract, retain and
motivate highly skilled employees. Competition for employees in our industry is
extremely intense. We may be unable to retain our key employees or to attract,
assimilate and retain other highly qualified employees in the future. We expect
in the future to continue to experience difficulty in hiring and retaining
highly skilled employees with appropriate qualifications.
A Legal Dispute between Novalog and One of its Customers Could Adversely Impact
Our Consolidated Results of Operations
In September 1999, Novalog, one of our consolidated subsidiaries, had a
dispute with one of its customers regarding a supply contract. That customer
filed a lawsuit against Novalog seeking unspecified damages and the rights to
manufacture a certain model of an integrated circuit chip used to control
wireless infrared data transmission, which chip is proprietary to Novalog.
Subsequent to the filing of the lawsuit, Novalog and the customer conducted
settlement discussions that resulted in the customer withdrawing the lawsuit
without prejudice, and Novalog resuming shipment to the customer of the chip
that is the subject of the dispute. A renegotiation of the contract which
triggered that dispute is underway. However, if that dispute were to revive in
the future without successful contract renegotiation, we believe there is a
strong likelihood that the customer would promptly reinstate the lawsuit. The
outcome of any litigation is uncertain. An adverse judgment in this potential
litigation could have a materially adverse impact on Novalog which, in turn,
would also negatively impact ISC's consolidated results of operations.
Future Sales of Shares by Existing Stockholders Could Affect Our Stock Price
If our stockholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could decline. As of the
date of this prospectus, we have a total of approximately 3.4 million shares
that we have sold in non-public offerings and therefore are considered
"restricted stock" under Rule 144 promulgated under the Securities Act. We also
have approximately 940,500 additional shares issuable upon exercise of warrants
that are exercisable for restricted stock. We are registering all of these
shares for resale by the security holders on the registration statement of which
this prospectus is a part. In addition, as much as 7 million shares of
restricted stock registered under registration statements declared effective in
April 1998 and October 1999 may still be held by their original holders and are
eligible for sale pursuant to those earlier registration statements. If our
stockholders sell substantial amounts of our common stock in the public market,
the market price of our common stock could decline.
You Should not Rely on Press Releases, News Articles or Other Information not
Contained in this Prospectus
18
<PAGE>
From time to time, we issue press releases concerning our products and
services or other information about us or our subsidiaries. In addition,
traditional and electronic publications or discussion forums may present
information about us or our products and services. The information contained in
these press releases, publications or forums may not be accompanied by other
important information necessary for investors to fairly understand our business
and the risks associated with an investment in our stock due, in part, to the
practical limitations on the form and length of these channels of
communications. In addition, online message boards and other forms of online
communication among investors or other persons are not forums in which we have
provided the information. It is common that some of the information posted or
discussed in these forums is inaccurate. Therefore, you should not rely on any
information not contained in this prospectus in making a decision to buy or sell
our stock.
The Price of Our Common Stock is Likely to be Volatile
The market prices of the securities of technology companies have been
especially volatile. Our stock, in particular, has had historic periods of
significant price volatility, including the current calendar year. If our
revenues do not grow or grow more slowly than we anticipate, or if operating or
capital expenditures exceed our expectations or cannot be adjusted accordingly,
the market price of our common stock could be materially and adversely affected.
In addition, if the market for technology stocks or the stock market in general
experiences a loss in investor confidence, the market price of our common stock
could be materially and adversely affected for reasons unrelated to our business
or results of operations. The Nasdaq Stock Market experienced an approximate 9%
decline in the three day period between March 13, 2000 and March 15, 2000, so
the environment for the technology-heavy Nasdaq Market is currently highly
uncertain and subject to extreme volatility. General market price declines or
volatility in the future could adversely affect the price of our common stock.
Short-term trading strategies of certain investors can also have a significant
effect on the price of specific securities. Investors may be unable to resell
their shares of our common stock at or above the price they paid for it.
We do not Expect to Pay Dividends
We have never paid any cash dividends on our common stock, and we do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain any future earnings for funding growth and therefore, do not
expect to pay any dividends in the foreseeable future.
Provisions of Our Corporate Charter Documents Could Delay or Prevent a Change of
Control
Our Certificate of Incorporation grants our board of directors the
authority to determine the relative rights and preferences of our preferred
stock and gives the board the authority to issue such shares, all without
further stockholder approval. As a result, our board of directors could
authorize the issuance of a series of preferred stock that would grant to
holders preferred rights to our company's assets upon liquidation, the right to
special voting privileges, the right to receive dividends before dividends would
be declared upon the common stock and the right to
19
<PAGE>
redemption of such shares, together with a premium, prior to any payments to
holders of common stock. Our existing common and preferred stockholders have no
redemption rights. The ability of the board to issue large blocks of preferred
stock could have a potential anti-takeover effect, and the issuance of preferred
stock in accordance with such authority may delay or prevent a change of control
of our company.
USE OF PROCEEDS
We will receive no part of the proceeds of any sales or transactions made
by the selling stockholders and/or their respective pledgees, donees,
transferees or other successors in interest hereunder. Nevertheless, we will pay
substantially all of the expenses incident to the offering of the shares, other
than any discounts, concessions or commissions payable to any underwriters,
dealers or agents, which expenses will be borne by each selling stockholders.
20
<PAGE>
SELLING STOCKHOLDERS
The selling stockholders, which term includes their transferees, pledgees,
donees or their successors, may from time to time offer and sell pursuant to
this prospectus any or all of the 4,331,644 shares of common stock. The selling
stockholders received these shares of common stock in one of the following
transactions:
. The holders of a total of 3,391,151 shares purchased their stock, plus
warrants to purchase an additional 337,095 shares, in private
placements conducted in December 1999 and March 2000;
. The selling agents in the December 1999 and March 2000 private
placements may acquire up to 563,398 shares by exercising selling
agents' warrants; and
. The holders of other warrants are entitled to exercise those warrants
to purchase a total of 40,000 shares.
The selling stockholders, or their pledgees, donees, transferees or other
successors in interests, may offer the shares of common stock owned by them for
sale as principals for their own accounts at any time and from time to time, on
the Nasdaq SmallCap Market or in the over-the-counter market or otherwise at
prices and terms then prevailing or related to the then current market price.
The selling stockholders, or their pledgees, donees, transferees or other
successors in interests, may also offer the shares in private sales at prices
they negotiate. We will not receive any of the proceeds from the sale of any of
the shares. Selling stockholders are not obligated to reimburse us for any
portion of the expenses we incur in connection with this offering.
Except as otherwise disclosed herein, to our knowledge and based on certain
representations made by the selling stockholders, none of the selling
stockholders has, or within the past three years has had, any position, office
or other material relationship with us or any of our predecessors or affiliates.
The following table sets forth the name of each such selling stockholder
and the shares of common stock beneficially owned by each such holder as of
March 16, 2000 and immediately after the offering (assuming the sale of all of
their shares offered hereby). Since the date on which they provided us with the
relevant information, the selling stockholders may have sold, transferred or
otherwise disposed of all or a portion of their shares of common stock.
Except as indicated below, the persons named in the table have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws, where
applicable.
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
Number of Shares Following Offering
Beneficially Owned Shares ---------------------------
Prior to the to be Number of Percent
Name Offering Sold Shares Owned
- ------------------------- ------------------ -------- ------------------ -------
<S> <C> <C> <C> <C> <C> <C>
Dunneville Finance SA (1) 1,544,115 (2) 1,544,115 (2) 0 --
Terivian Enterprises (1) 1,191,765 (3) 888,889 (3) 302,876 *
Crescent International (1) 448,884 (4) 448,844 (4) 0 --
Nutley Investments (1) 291,500 (5) 291,500 (5) 0 --
Vermes FR General (1) 121,000 (6) 121,000 (6) 0 --
Oxcal Venture Fund LP (7) 88,000 (8) 88,000 (8) 0 --
Purling Holdings Limited (1) 81,481 (9) 81,481 (9) 0 --
Jean Dumont 55,000 (10) 55,000 (10) 0 --
Myles Stott 55,000 (10) 55,000 (10) 0 --
Concorde Bank Ltd. (1) 44,000 (11) 44,000 (11) 0 --
Lawrence R. Turel & Lori R. Turel JT 44,000 (11) 44,000 (11) 0 --
Serge DuBois 44,000 (11) 44,000 (11) 0 --
Charles B. Krusen 51,810 (12) 51,810 (12) 0 --
Felcom Capital Corp. (1) 27,500 (13) 27,500 (13) 0 --
Bergmont Limited (1) 27,500 (13) 27,500 (13) 0 --
Strideco Holdings Inc. (1) 27,500 (13) 27,500 (13) 0 --
Anita Berkis 27,500 (13) 27,500 (13) 0 --
Grover T. Wickersham 12,500 (14) 12,500 (14) 0 --
Debra K. Weiner 12,500 (14) 12,500 (14) 0 --
UMB Bank, N.A. Ttee
FBO Latham & Watkins Master
Trust & FBO Marc Rappel(15) 23,100 (16) 23,100 (16) 0 --
Marc Gart 15,000 (17) 15,000 (17) 0 --
Stephen D. Blevit(16) 9,900 (18) 9,900 (18) 0 --
Marc Dumont(19) 61,817 (20) 16,317 (20) 45,500 *
Rohinron Aresh 10,100 10,100 0 --
Aresh Enterprises, Inc. 5,050 5,050 0 --
Huntington Humboldt, Ltd. 5,050 5,050 0 --
Michael Kraland 5,500 (21) 5,500 (21) 0 --
Bailey & Company Inc. 348,988 (22) 348,988 (22) 0 --
</TABLE>
____________
* Less than 1%.
(1) The Selling Stockholder is an offshore corporation or partnership that has
invested either as principal or on behalf of its clients. In the latter
circumstances, the laws of certain jurisdictions protect the identity of
such clients from public disclosure.
(2) Includes 248,119 shares issuable upon exercise of warrants.
(3) Includes 148,148 shares issuable upon exercise of warrants and 302,876
shares issuable upon conversion of convertible preferred shares.
(4) Includes 40,804 shares issuable upon exercise of warrants.
(5) Includes 26,500 shares issuable upon exercise of warrants.
(6) Includes 11,000 shares issuable upon exercise of warrants.
(7) Grover T. Wickersham, a partner in the law firm of Grover T. Wickersham,
P.C., legal counsel to ISC, may be deemed to be a beneficial owner of the
Selling Stockholder because of his investment control. He disclaims such
beneficial ownership of any such shares.
(8) Includes 8,000 shares issuable upon exercise of warrants.
<PAGE>
(Footnotes continue on following page.)
____________
(9) Includes 7,407 shares issuable upon exercise of warrants.
(10) Includes 5,000 shares issuable upon exercise of warrants.
(11) Includes 4,000 shares issuable upon exercise of warrants.
(12) Includes 4,710 shares issuable upon exercise of warrants.
(13) Includes 2,500 shares issuable upon exercise of warrants.
(14) Includes 12,500 shares issuable upon exercise of warrants. The selling
shareholders are members of the law firm of Grover T. Wickersham, P.C.,
which law firm serves as legal counsel to ISC.
(15) Marc Rappel, the beneficial owner of the shares held by UMB Bank, as
Trustee, is a member of Latham & Watkins, and Stephen D. Blevit is an
associate of Latham & Watkins, which law firm periodically serves as legal
counsel to ISC.
(16) Includes 2,100 shares issuable upon exercise of warrants.
(17) Includes 15,000 shares issuable upon exercise of warrants.
(18) Includes 900 shares issuable upon exercise of warrants.
(19) Mr. Dumont serves on the Board of Directors of ISC.
(20) Includes 16,317 shares issuable upon exercise of warrants.
(21) Includes 5,500 shares issuable upon exercise of warrants.
(22) Includes 347,888 shares issuable upon exercise of warrants.
<PAGE>
PLAN OF DISTRIBUTION
This prospectus covers the resale of the shares of common stock by the
selling stockholders, or their pledgees, donees, transferees or other successors
in interests. These persons are collectively referred to as the sellers.
The sellers may from time to time sell the shares of common stock offered
hereunder. They may make these sales on the Nasdaq SmallCap Market or in the
over-the-counter market or otherwise at prices and on terms then prevailing or
related to the then current market price, or in negotiated transactions. They
may sell the shares of common stock:
. to or through one or more broker-dealers, acting as agent or principal
in underwritten offerings;
. block trades;
. agency placements;
. exchange distributions;
. brokerage transactions;
. privately negotiated transactions;
. short sales; or
. in any combination of transactions.
Any or all of the sales or other transactions involving the common stock
described in this prospectus, whether effected by the sellers, any broker dealer
or others, may be made pursuant to this prospectus. In addition, sellers with
shares of common stock that qualify for sale pursuant to Rule 144 under the
Securities Act may sell those shares under Rule 144 rather than pursuant to this
prospectus.
To comply with the securities laws of certain states, the common stock may
be sold in such jurisdictions only through registered or licensed brokers or
dealers. In addition, shares of common stock may not be sold unless they have
been registered or qualified for sale or an exemption from registration or
qualification requirements is available and is complied with under applicable
state securities laws.
ISC and the selling stockholders have agreed, and later may further agree,
to indemnify each other and certain persons, including broker-dealers or others,
against certain liabilities in connection with any offering of the common stock,
including liabilities arising under the Securities Act.
<PAGE>
We will amend or supplement this prospectus in the following circumstances
and to the following extent: (1) if the securities are to be publicly sold at a
price other than the prevailing market price, to disclose such price; (2) if the
securities are to be sold in block transactions and the purchaser intends to
resell, to disclose the nature and extent of such arrangements; or (3) if the
compensation to be paid to broker-dealers is other than usual and customary
discounts, concessions or commissions, to disclose the terms of such broker-
dealer compensation. In the above-circumstances, the sellers may not make any
offers or sales until an effective amendment or prospectus supplement is
available.
In connection with any transaction involving our common stock, broker-
dealers or others may receive from the sellers, and may in turn pay to other
broker-dealers or others, compensation in the form of commissions, discounts or
concessions in amounts to be negotiated at the time. The sellers and any broker-
dealers acting in connection with such sales, might be deemed to be
"underwriters" within the meaning of section 2(11) of the Securities Act and any
commission received by them and any profit on the resale of such securities may
be deemed to be underwriting discounts and commissions under the Securities Act.
We will not receive any part of the proceeds from the sale of the shares of
common stock by the selling stockholders.
<PAGE>
EXPERTS
The consolidated financial statements of Irvine Sensors Corporation for the
fiscal years ended October 3, 1999 and September 27, 1998 have been included in
reliance on the report of Grant Thornton LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The consolidated financial statements for the year ended September 28, 1997
incorporated in this prospectus by reference to the Annual Report on Form 10-K
for the fiscal year ended October 3, 1999, have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The statements contained in the section entitled "Business - Patents,
Trademarks and Licenses" of the Annual Report on Form 10-K for the fiscal year
ended October 3, 1999, incorporated by reference in this prospectus, are
included in reliance upon the opinion of Thomas J. Plante, Esq., Irvine,
California, patent counsel for ISC, and upon his authority as an expert.
LEGAL MATTERS
Certain legal matters in connection with the sale of the shares of common
stock offered by this prospectus will be passed upon for us by Grover T.
Wickersham, P.C., Palo Alto, California. Attorneys in that law firm are the
owners of warrants to purchase 25,000 shares of Common Stock, and are selling
stockholders in this prospectus.
<PAGE>
4,331,644 Shares
IRVINE SENSORS CORPORATION
Common Stock
, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered are estimated to be as follows:
<TABLE>
<S> <C> <C>
SEC registration fee............... $10,292
Accounting fees and expenses....... 7,500 *
Legal fees and expenses............ 15,000 *
Blue sky legal fees and expenses... 1,000 *
Miscellaneous expenses............. 3,000 *
-----------
Total........................... $36,792 *
===========
</TABLE>
______________
* Estimated expenses
Item 15. Indemnification of Directors and Officers
The General Corporation Law of the State of Delaware (the "General
Corporation Law") provides for the indemnification of directors, officers,
employees and other agents of the corporation under certain circumstances as set
forth in section 145. Section 145 permits a corporation to indemnify its agents,
typically directors and officers, for expenses incurred or settlements or
judgments paid in connection with certain legal proceedings. Only those legal
proceedings arising out of such persons' actions as agents of the corporation
may be grounds for indemnification.
Whether or not indemnification may be paid in a particular case
depends upon whether the agent wins, loses or settles the suit and upon whether
a third party or the corporation itself is the plaintiff. The section provides
for mandatory indemnification, no matter who the plaintiff is, when an agent is
successful on the merits of a suit. In all other cases, indemnification is
permissive.
If the agent loses or settles a suit brought by a third party, he or
she may be indemnified for expenses incurred and settlements or judgments paid.
Such indemnification may be authorized upon a finding that the agent acted in
good faith and in a manner he or she reasonably believed to be in the best
interests of the corporation.
If the agent loses or settles a suit brought by or on behalf of the
corporation, his or her right to indemnification is more limited. If he or she
is adjudged liable to the corporation, the court in which such proceeding was
held must determine whether it would be fair and reasonable to indemnify him or
her for expenses which such court shall determine. If the agent settles such a
II-1
<PAGE>
suit with court approval, he or she may be indemnified for expenses incurred in
connection with the defense and settlement of the suit, upon a finding that the
agent acted in good faith and in a manner he or she reasonably believed to be in
the best interests of the corporation and its stockholders.
Under Section 145, the indemnification discussed above may be
authorized by a majority vote of the disinterested directors or stockholders
(the person to be indemnified is excluded from voting his or her shares) or the
court in which the proceeding was brought.
Under Section 145, a corporation may authorize, by by-law, agreement
or otherwise, the indemnification of its agents in excess of that expressly
permitted by Section 145. The Registrant's By-laws provide that indemnification
shall be mandatory in all cases where it is permitted by Section 145.
Section 102(b) of the General Corporation Law permits corporations to
eliminate or limit the personal liability of a director to the corporation or
its stockholders for monetary damages for breach of the fiduciary duty as a
director. The Registrant's Certificate of Incorporation provides for elimination
of personal liability of directors for breach of fiduciary duty as a director
except for the following: (i) for any breach of such director's duty of loyalty
to the Corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) under Section 174 of the General Corporation Law; or (iv) for any
transaction from which such director derived an improper personal benefit. The
Registrant's Certificate of Incorporation further provides that modification or
repeal of this provision may not affect the elimination of liability therein
provided with respect to a director's personal liability for any act or omission
that occurs prior to such modification or repeal.
Finally, a corporation has the power to purchase indemnity insurance
for its agents, even if it would not have the power to indemnify them. The
Registrant has purchased such insurance.
Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "Act") may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the Registrant
has been informed that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
II-2
<PAGE>
Item 16. Exhibits
4.1 Form of specimen Common Stock certificate(1)
5.1 Opinion of Grover T. Wickersham, P.C. re legality
23.1 Consent of Grant Thornton LLP, independent accountants (see page II-8
of the Registration Statement)
23.2 Consent of PricewaterhouseCoopers LLP, independent accounts (see page
II-9 of the Registration Statement)
23.3 Consent of Thomas J. Plante, Esq. (see page II-10 of the Registration
Statement)
23.4 Consent of Grover T. Wickersham, P.C. (included in Exhibit 5.1, above)
25.1 Power of Attorney (included on page II-6 of the Registration
Statement)
_________
(1) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the fiscal year ended September 29, 1991.
II-3
<PAGE>
Item 17. Undertakings
(a) Rule 415 Offering
-----------------
The Registrant hereby undertakes:
(1) To file during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the " Securities Act");
(ii) Reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
(iii) Include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
- -----------------
registration statement is on Form S-8, and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the registration
statement.
(2) That for purposes of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by
----------------------------------------------------------
Reference
- ---------
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934, as amended (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934, as amended) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration
II-4
<PAGE>
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Request for Acceleration of Effective Date or filing of
-------------------------------------------------------
Registration Statement on Form S-8
----------------------------------
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
///
///
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Costa Mesa, California, on March 16, 2000.
IRVINE SENSORS CORPORATION
By: /s/ James D. Evert
-----------------------------
James D. Evert
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James D. Evert and John J. Stuart, Jr.,
and each of them, his attorneys-in-fact and agents, each with full power of
substitution, for him/her and in his/her name, place and stead, in any and all
capacities, to sign any or all amendments to this Registration Statement on Form
S-3, and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
with this Registration Statement, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that any of
said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
/s/ James D. Evert President, Chief Executive March 16, 2000
- ---------------------------- Officer and Director
James D. Evert (Principal Executive
Officer)
/s/ John J. Stuart, Jr. Senior Vice President and March 16, 2000
- ---------------------------- Chief Financial Officer
John J. Stuart, Jr. (Principal Financial and
Accounting Officer)
II-6
<PAGE>
/s/ James Alexiou Chairman of the Board March 16, 2000
- ----------------------------
James Alexiou
/s/ John C. Carson Director March 16, 2000
- ----------------------------
John C. Carson
/s/ Joanne S. Carson Director March 16, 2000
- ----------------------------
Joanne S. Carson
/s/ Marc Dumont Director March 16, 2000
- ----------------------------
Marc Dumont
/s/ Walter E. Garrigan Director March 16, 2000
- ----------------------------
Walter E. Garrigan
/s/ Frank P. Ragano Director March 16, 2000
- ----------------------------
Frank P. Ragano
/s/ Wolfgang Seidel Director March 16, 2000
- ----------------------------
Wolfgang Seidel
/s/ Vincent F. Sollitto, Jr. Director March 16, 2000
- ----------------------------
Vincent F. Sollitto, Jr.
II-7
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We have issued our reports dated December 21, 1999, accompanying the
consolidated financial statements of Irvine Sensors Corporation and subsidiaries
appearing in the 1999 Annual Report to Shareholders and accompanying the
schedules included in the Annual Report on Form 10-K for the fiscal year ended
October 3, 1999, which are incorporated by reference in this Registration
Statement. We consent to the incorporation by reference of said reports in this
Registration Statement of Irvine Sensors Corporation on Form S-3 and to the use
of our name as it appears under the caption "Experts."
Grant Thornton LLP
Irvine, California
March 15, 2000
II-8
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated December 16, 1997 relating to the
financial statements, which appears in the 1999 Annual Report to Shareholders of
Irvine Sensors Corporation, which is incorporated by reference in Irvine Sensors
Corporation's Annual Report on Form 10-K for the fiscal year ended October 3,
1999. We also consent to the incorporation by reference of our report dated
December 16, 1997 relating to the financial statement schedules, which appears
in such Annual Report on Form 10-K. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Costa Mesa, California
March 16, 2000
II-9
<PAGE>
Exhibit 23.3
CONSENT OF PATENT COUNSEL
I hereby consent to the reference to me in the section of the
prospectus entitled, "Experts," contained in the Registration Statement on Form
S-3 of Irvine Sensors Corporation of which this Consent is a part.
/s/ Thomas Plante
-----------------
Thomas J. Plante
March 15, 2000
Irvine, California
II-10
<PAGE>
EXHIBIT INDEX
4.1 Form of specimen Common Stock certificate(1)
5.1 Opinion of Grover T. Wickersham, P.C. re legality
23.1 Consent of Grant Thornton LLP, independent accountants (see page II-8 of
the Registration Statement)
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants (see page
II-9 of the Registration Statement)
23.3 Consent of Thomas J. Plante, Esq. (see page II-9 of the Registration
Statement)
23.4 Consent of Grover T. Wickersham, P.C. (included in Exhibit 5.1, above)
25.1 Power of Attorney (included on page II-6 of the Registration Statement)
_________
(1) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the fiscal year ended September 29, 1991.
<PAGE>
Exhibit 5.1
GROVER T. WICKERSHAM
A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
430 CAMBRIDGE AVENUE, SUITE 100
PALO ALTO, CALIFORNIA 94306
GROVER T. WICKERSHAM TELEPHONE: (650) 323-6400
DEBRA K. WEINER FAX: (650) 323-1108 E-Mail Address: [email protected]
March 17, 2000
Irvine Sensors Corporation
3001 Redhill Avenue, Building III
Costa Mesa, CA 92626
Gentlemen:
We refer to the Registration Statement on Form S-3 (the "Registration
Statement") of Irvine Sensors Corporation, a Delaware corporation (the
"Company"), filed with the Securities and Exchange Commission (the
"Commission"), filed on or about March 17, 2000, covering the registration under
the Securities Act of 1933, as amended (the "Act") of an aggregate of 4,331,644
shares of common stock, $0.01 par value, of the Company (the "Shares") for
resale by certain selling stockholders of the Company (the "Selling
Stockholders").
We have examined the Registration Statement, the Certificate of
Incorporation and By-laws of the Company and such records, certificates and
other documents as we have considered necessary or appropriate for the purposes
of this opinion.
Based on the foregoing, it is our opinion that:
1. The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware; and
2. The Shares issued to the Selling Stockholders or issuable
upon exercise of the outstanding warrants or options as described in the
Registration Statement are duly authorized and are (or will be, when issued in
accordance with the terms of the respective instruments) validly issued, fully
paid and nonassessable.
We hereby consent to the use of our name in the Registration Statement
under the caption "Legal Matters," as counsel who will pass upon the legality of
the Shares for the Company and to the filing of this opinion as an exhibit to
the Registration Statement. In giving this consent, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the Act
or the Rules and Regulations promulgated thereunder.
Very truly yours,
/s/ Grover T. Wickersham, P.C.
Grover T. Wickersham, P.C.
