<PAGE>
As Filed with the Securities and Exchange Commission on August 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)
<TABLE>
<S> <C>
Delaware 33-0280334
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or jurisdiction)
</TABLE>
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)
Robert G. Richards, Chief Executive Officer
Irvine Sensors Corporation
3001 Redhill Avenue, Building IV
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]
If this Form is filed to register additional securities for an 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. [_]
<PAGE>
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 6,900,602 (2) $3-5/16 $22,858,245 $6,034.58
===============================================================================================================
</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 Market (SM) on August 16, 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.
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this preliminary prospectus is not complete and may be +
+ changed. These securities may not be sold until the registration statement +
+ filed with the Securities and Exchange Commission is effective. This +
+ preliminary prospectus is not an offer to sell nor does it seek an offer to +
+ buy these securities in any jurisdiction where the offer or sale is not +
+ permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion Dated August 17, 2000
6,900,602 Shares
IRVINE SENSORS CORPORATION
Common Stock
This prospectus covers a total of 6,900,602 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) 3,963,999 shares of common stock were sold in private
placements conducted in July and August 2000, (2) 1,982,002 shares of common
stock are issuable upon exercise of warrants the investors purchased as part of
the private placements, (3) 594,601 shares are issuable upon exercise of
warrants we issued to the placement agents in the private placements, including
the warrants underlying the agents' warrants; (4) 300,000 shares are issuable
upon exercise of outstanding warrants issued under an investment banking
relationship; and (5) 60,000 shares were issued for services rendered.
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 August 16,
2000, the closing sale price of our common stock on Nasdaq was $3-5/16 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
Risk Factors............................................... 10
Use of Proceeds............................................ 21
Selling Stockholders....................................... 22
Plan of Distribution....................................... 25
Experts.................................................... 27
Legal Matters.............................................. 27
</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 6,900,602 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 3,963,999 shares purchased their stock,
plus warrants to purchase an additional 1,982,002 shares, in
private placements conducted in July and August 2000;
. The selling agents in the July and August 2000 private placements
may acquire up to 594,601 shares by exercising selling agents'
warrants and the warrants underlying the selling agents'
warrants;
. The holder of warrants to purchase up to 300,000 shares received
those warrants in connection with entering into an investment
banking relationship; and
. The holders of a total of 60,000 shares were issued stock in
consideration for consulting services performed for our company.
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 IV
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 39-week period ended
July 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 IV, 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
Irvine Sensors Corporation
We are the developer of proprietary technologies to produce extremely
compact packages of solid state microcircuitry, which we believe 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 diverse fields ranging from
image processing to optical switches.
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 potentially realizable from our technologies 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,
Silicon Film Technologies, Inc. (SFT), formerly Imagek, Inc., to commercially
exploit our technologies for miniaturized digital cameras and imaging devices.
In March 2000, we formed a subsidiary, RedHawk Vision, Inc., to exploit our
software technology for enhancing and extracting photographs from video. All of
these subsidiaries are presently consolidated. With respect to our ownership in
RedHawk Vision, we are seeking financing, but do not currently have any specific
agreements or arrangements committed. We do anticipate that future funding of
RedHawk could eventually decrease our ownership interest in this subsidiary
below the consolidation level, although there is no assurance that this will
happen. We currently own almost all of the stock of MicroSensors and about 95%
of the outstanding stock of Novalog, while we have diluted our ownership of
Silicon Film Technologies to approximately 53% in order to finance its
developmental activities to date. The business plans of each of these
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.
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 4, 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
<TABLE>
<S> <C>
Common Stock Offered by the Selling Stockholders....... 6,900,602 shares
Common Stock Outstanding............................... 46,527,399 shares as of August 17, 2000. This
number does not include (1) up to 1,374,379
shares we may issue upon exercise of
outstanding options granted pursuant to our
stock option plans; (2) up to 3,552,282
shares issuable upon exercise of outstanding
warrants; and (4) up to 335,000 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 SmallCap Symbol................................. IRSN
Boston Stock Exchange Symbol........................... ISC
</TABLE>
8
<PAGE>
Summary Financial Data
Consolidated Statements of Operations Data:
<TABLE>
<CAPTION>
Year Ended 39 Weeks Ended
-------------------------------------------------------------------------- -------------------------
October 1, September 29, September 28, September 27, October 3, June 27, July 2,
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues $ 8,041,400 $ 12,024,200 $ 13,693,200 $ 9,314,500 $11,100,200 $ 7,697,700 $ 8,572,000
Loss from
operations (3,071,500) (11,154,700) (14,809,200) (5,798,200) (9,785,700) (6,689,300) (9,565,100)
Net loss (4,137,500) (15,914,700) (14,875,600) (4,243,500) (9,115,700) (6,361,100) (8,959,700)
Basic and diluted net
loss per common
and common
equivalent shares $ (0.28) $ (0.94) $ (0.73) $ (0.19) $ (0.29) $ (0.18) $ (0.23)
Weighted average
number of shares
outstanding 14,966,500 16,874,300 20,475,100 24,597,700 31,244,300 38,684,300 34,910,900
</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>
<CAPTION>
October 1, September 29, September 28, September 27, October 3, July 2,
1995 1996 1997 1998 1999 2000
----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 9,927,500 $ 9,648,200 $ 6,637,200 $4,802,700 $ 6,640,850 $ 9,129,300
Current liabilities 3,545,400 5,787,100 7,395,600 2,296,000 5,375,300 3,074,300
Working capital 6,382,100 3,861,100 (758,400) 2,506,700 1,265,550 6,055,000
Total assets 15,609,200 21,742,200 9,449,300 7,064,700 10,510,350 14,354,400
Long-term debt 2,451,200 6,565,600 1,457,000 933,700 433,200 300,400
Stockholders' equity
(deficit) 9,494,100 8,312,700 (2,939,900) 2,347,000 2,212,650 3,018,400
</TABLE>
9
<PAGE>
RISK FACTORS
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.
Our Current Fiscal Year Losses are Likely to be Much Greater than Those of
Fiscal 1999
Our net losses through the 39-week period ended July 2, 2000 were nearly $9
million with over $3.5 million of that loss being incurred in the 13-week period
ended July 2, 2000. The net loss for the 39-week period was approximately
$2,600,000 (40%) greater than the comparable period in the previous fiscal year,
although the net loss in the 13-week period ended July 2, 2000 was approximately
$400,000 less than the comparable 1999 period. See our Quarterly Report on Form
10-Q for the Period Ended July 2, 2000. Since our MicroSensors and Silicon Film
subsidiaries are continuing to incur significant development expenses without
offsetting revenues, operating losses of this magnitude are continuing in the
current fiscal period. Accordingly, we expect our consolidated revenues to be
less than our earlier expectations and our losses through our fiscal year ending
October 1, 2000 to be much greater than losses as of July 2, 2000 and as
compared to last fiscal year. Furthermore, accounting measurements at interim
dates, such as July 2, 2000, inherently rely on greater estimates than those
that will be reflected in the audited year-end financial statements as of
October 1, 2000, which could result in adjustments to prior periods of the
current year that could further worsen our results.
We have a History of Losses and a Substantial Accumulated Deficit
Since our inception, we have incurred substantial losses in every operating
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 consolidated net loss of $8,959,700 for the 39 weeks ended July
2, 2000. As of July 2, 2000, we had an accumulated deficit of $71,898,400. We
cannot promise you that we or any of our subsidiaries or divisions will become
profitable in the foreseeable future, if at all, or that any of our subsidiaries
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 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;
10
<PAGE>
. 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;
. Expanding and improving our financial and operational infrastructure;
and
. Broadening our customer support capabilities.
Accordingly, for 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 our Annual Report on Form 10-K for the fiscal year ended
October 3, 1999 and our Quarterly Report on Form 10-Q for the period ended July
2, 2000, and in particular, the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" as well as the
consolidated financial statements included in these reports.
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, Silicon Film
Technology and RedHawk Vision 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, Silicon Film Technology is qualifying its initial planned
product, and RedHawk Vision is developing its initial planned product.
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.
11
<PAGE>
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;
. 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. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Form 10-K and Form 10-Qs
for a more detailed analysis of our period-to-period results.
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 balances of approximately
$12,700,000 as of August 17, 2000 and cash flows from operations will be
adequate to fund our operations for at least the next 12 months. Nevertheless,
we may 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:
12
<PAGE>
. 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 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.
Third-Party Financing of Our Subsidiaries Will Reduce Our Control, Increase Our
Risks and Could Reduce Our Potential Return
The financing of our Novalog and Silicon Film subsidiaries to date have
involved significant sales of minority equity interests, reducing our ownership
at one point to under 70% of each. We have repurchased some of the minority
equity interests of Novalog, increasing our ownership to about 95%, before the
effect of outstanding options and warrants. However, absent receipt of a
significant amount of proceeds from future financings, we will not 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. With respect to our ownership in RedHawk
Vision, we are seeking financing, but do not currently have any specific
agreements or arrangements committed. We do anticipate that future funding of
RedHawk could eventually decrease our ownership interest in this subsidiary
below the consolidation level, although there is no assurance that this will
happen. Our subsidiaries are all 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. In the current fiscal year,
Silicon Film closed a third party convertible preferred stock financing
involving such features plus additional investor protections. The fully diluted
effect of this financing has reduced our voting power to slightly above 50% as
of July 2000 and would fall to slightly below 40% after the future effect of
warrant and option exercises. We could
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<PAGE>
experience additional dilution due to default or price anti-dilution provisions
of Silicon Film's most recent private 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 transaction 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.
We have Recently Made a Material Management Change and are Searching for a New
Chief Executive Officer
On June 22, 2000, we announced that James Evert, who was our President and
Chief Executive Officer beginning in February 1997, had resigned his positions
with the Company and its subsidiaries (other than RedHawk Vision, Inc.) in order
to devote his time to RedHawk Vision, Inc., our newest operating subsidiary.
Robert G. Richards, retired President of Aerojet Electronic Systems Division and
a member of our Scientific Advisory Board since early 1999, was appointed Chief
Executive Officer on an interim basis to serve while we search for a permanent
replacement for Mr. Evert. Competition for highly qualified chief executive
officers in high technology companies is intense, and there is no assurance that
we will be able to find and hire an acceptable person on terms that the Board of
Directors deems appropriate. In addition, any new chief executive officer, when
hired, will want to advance his or her own vision of the Company's goals and
direction, and therefore we cannot predict whether there will be significant
changes to our current business plan in the future.
You are Facing a Substantial Investment Risk by Purchasing Our Securities
Your investment in our securities must be considered an investment risk 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) under
capitalization 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.
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<PAGE>
We Remain Partially 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
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 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:
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<PAGE>
. 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.
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 July 2,
2000, we own 45 U.S. patents and eight 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 maybe 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. If patents do not issue from our patent
applications because third parties already claim patent protection, our use of
certain of our
16
<PAGE>
technologies and products would be restricted unless we entered into
arrangements with the third-party owners, which might not be possible on
reasonable terms.
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 there have not been any claims of these types in the
past, any claims or litigation, if they occur, could subject us to 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 that we have developed under government contracts, including
portions of our stacked circuitry technology. We are free to commercially
exploit such
17
<PAGE>
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 extensively 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 identified needs. However, we have
experienced intermittent delays from such sources and are likely to continue to
do so until we can develop multiple sources of supply. Moreover, 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.
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 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. See "We have
Recently Made a Material Management Change and are Searching for a New Chief
Executive Officer," above.
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.
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<PAGE>
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 following this offering, the market price of our common stock
could decline. Since April 1998, we have registered for resale by selling
stockholders approximately 25,400,000 shares of Common Stock, including the
6,900,602 shares of common stock covered by this prospectus, Although we believe
many of these shares have been resold pursuant to those registration statements,
it is likely that many have not. If our stockholders sell substantial amounts of
our common stock in the public market, the market price of our common stock
could decline.
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<PAGE>
You should not Rely on Press Releases, News Articles or Other Information not
Contained in the Public Documents and These Risk Factors
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 and our other documents filed with
the SEC 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 been extremely volatile in
recent months. Between February 1, 2000 and August 15, 2000, our stock has
closed at prices ranging from a high of $16-9/16 on March 6, 2000 to a low of
$2-13/16 on August 2, 2000. 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 another loss in investor
confidence as it did in April 2000, the market price of our common stock could
be materially and adversely affected for reasons unrelated to our specific
business or results of operations. 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.
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. Except as
required by the terms of our preferred stock, we currently intend to retain any
future earnings for funding growth and therefore, do not expect to pay any
dividends on our common stock 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
20
<PAGE>
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 redemption of such shares, together with a premium, prior to the redemption
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.
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<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 6,900,602 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 3,963,999 shares purchased their stock
in private placements conducted in July 2000 and August 2000 and
these holders also acquired warrants to purchase an aggregate of
1,982,002 additional shares of common stock in these placements;
. The selling agents in the July 2000 and August 2000 private
placements may acquire up to 594,601 shares by exercising selling
agents' warrants and the warrants underlying the agents'
warrants;
. The holder of other warrants is entitled to exercise those
warrants to purchase a total of 300,000 shares; and
. The holders of a total of 60,000 shares were issued stock in
payment for consulting services they performed for our company.
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
August 15, 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.
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<PAGE>
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.
<TABLE>
<CAPTION>
Number of Shares Beneficial Ownership
Beneficially Owned Shares Following Offering(1)
---------------------
Prior to the to be Number of Percent
Name Offering Sold Shares Owned
-------------------------------------- ------------------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Jeffrey Thorp, IRA Bear Stearns
Sec Corp Custodian(2) 1,500,000 (3) 700,001 (4) 0 0
Jeffrey Thorp, IRA Rollover Bear
Stearns SEC Corp Custodian(2) 1,500,000 (5) 799,999 (4) 0 0
Edward O. Thorp & Associates LP 300,000 (6) 300,000 0 0
Scout Capital Partners(7) 250,001 (8) 97,700 (4) 0 0
Scout Capital Fund, Ltd.(7) 250,001 (9) 152,301 (4) 0 0
Archer Fund, LP 100,000 (10) 100,000 0 0
Gryphon Partners 900,000 (11) 900,000 0 0
Dunnville Finance SA (12) 1,741,119 (13) 500,000 1,241,119 2.6
Terivian Enterprises (12) 2,117,691 (14) 750,000 1,367,691 2.9
Tocqueville N.V.(12) 50,000 (15) 50,000 0 0
Purling Holdings Limited (12) 156,481 (16) 125,000 31,481 *
Felcom Capital Corp. (12) 30,000 (17) 30,000 0 0
Bergmont Limited (12) 30,000 (17) 30,000 0 0
Anita Berkis 30,000 (17) 30,000 0 0
Concorde Bank Ltd. (12) 105,993 (15) 50,000 55,933 *
Sanctus Spiritus (Antilles) N.V.(12) 100,000 (10) 100,000 0 0
Crescent International Ltd. (12) 711,604 (18) 450,000 261,604 *
Oxcal Venture Fund LP (19) 91,000 (20) 50,000 41,000 *
Banque Privee Edmund de
Rothschild Luxembourg (12)(21) 246,001 (22) 125,001 121,000 *
Montaigne Fund, N.V.(12) 75,000 (23) 75,000 0 0
Paul Dutrieux 75,000 (23) 75,000 0 0
Jean Dumont 130,000 (24) 75,000 55,000 *
Myles T. Stott 104,500 (25) 49,500 55,000 *
Serge DuBois 60,000 (26) 24,000 44,000 *
Preston Assets Management (12) 300,000 (27) 150,000 150,000 *
Charles B. Krusen 15,000 15,000 0 0
Krusen Brothers Interests 15,000 15,000 0 0
Canadian Imperial Holdings, Inc.(12) 127,500 127,500 0 0
Marc Dumont (28)(29) 99,167 (30) 37,350 61,817 *
Stonegate Securities Inc.(29) 605,000 (31) 605,000 0 0
Bailey & Company Inc. (29) 252,250 (32) 252,250 0 0
Ingo v. Fischern 15,000 15,000 0 0
Christopher Freese 22,500 22,500 0 0
Wolfgang Seidel (28) 237,500 22,500 214,500 *
</TABLE>
____________
* Less than 1%.
(footnotes continued on following page)
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<PAGE>
(continued from previous page)
___________
(1) Unless otherwise indicated, all of the shares beneficially owned by each of
the selling stockholders is registered for resale on the registration
statement in which this prospectus is a part or under other effective
registration statements we have previously filed to register their shares.
Accordingly, the shares and percentages following the offering may not tell
you the true number of shares owned by the selling stockholder because
sales could also be made under other prospectuses. These columns only
reflect the impact of sales under this prospectus. You should be aware that
all of the shares can be sold, except where expressly noted to the
contrary.
(2) Includes the shares of common stock and warrants registered to both Jeffrey
Thorp, IRA Bear Stearns SEC Corp Custodian and Jeffrey Thorp, IRA Rollover
Bear Stearns SEC Corp Custodian because Jeffrey Thorp is the beneficial
owner of both IRA accounts.
(3) Includes 233,334 shares of common stock issuable upon exercise of currently
exercisable warrants.
(4) Includes only the shares beneficially owned by the selling stockholder
being registered for resale and excludes those shares that are registered
to another stockholder but may be deemed to be beneficially owned by this
stockholder.
(5) Includes 266,666 shares of common stock issuable upon exercise of currently
exercisable warrants.
(6) Includes 100,000 shares of common stock issuable upon exercise of currently
exercisable warrants.
(7) Includes shares of common stock and warrants registered to both Scout
Capital Partners and Scout Capital Fund, Ltd., both of which are affiliated
entities under common control.
(8) Includes 32,567 shares of common stock issuable upon exercise of currently
exercisable warrants.
(9) Includes 50,767 shares of common stock issuable upon exercise of currently
exercisable warrants.
(10) Includes 33,333 shares of common stock issuable upon exercise of currently
exercisable warrants.
(11) Includes 300,000 shares of common stock issuable upon exercise of currently
exercisable warrants.
(12) 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.
(13) Includes 414,786 shares of common stock issuable upon exercise of currently
exercisable warrants.
(14) Includes 324,074 shares of common stock issuable upon exercise of currently
exercisable warrants.
(15) Includes 16,667 shares of common stock issuable upon exercise of currently
exercisable warrants.
(16) Includes 49,074 shares of common stock issuable upon exercise of currently
exercisable warrants.
(17) Includes 10,000 shares of common stock issuable upon exercise of currently
exercisable warrants.
(16) Includes 20,667 shares of common stock issuable upon exercise of currently
exercisable warrants.
(17) Includes 33,333 shares of common stock issuable upon exercise of currently
exercisable warrants.
(18) Includes 190,804 shares of common stock issuable upon exercise of currently
exercisable warrants.
(19) The selling stockholder is an investment limited partnership. Grover T.
Wickersham, a partner in the law firm of Grover T. Wickersham, P.C., one of
our company's law firms, 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.
(20) Includes 24,667 shares of common stock issuable upon exercise of currently
exercisable warrants.
(21) The beneficial owner of these securities is Vernes World Fund which 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. Only the securities beneficially owned by Vernes World Fund are
included in the holdings registered in the name Banque Privee Edmund de
Rothschild Luxembourg.
(22) Includes 52,667 shares of common stock issuable upon exercise of currently
exercisable warrants.
(23) Includes 25,000 shares of common stock issuable upon exercise of currently
exercisable warrants.
(24) Includes 30,000 shares of common stock issuable upon exercise of currently
exercisable warrants.
(25) Includes 21,500 shares of common stock issuable upon exercise of currently
exercisable warrants.
(26) Includes 12,000 shares of common stock issuable upon exercise of currently
exercisable warrants.
(27) Includes 50,000 shares of common stock issuable upon exercise of currently
exercisable warrants.
(28) Selling stockholder is a director of Irvine Sensors Corporation.
(29) Selling stockholder served as a selling agent or a subagent for one of the
private placements of certain of the securities we have registered on the
registration statement of which this prospectus is a part.
(30) Includes 37,350 shares of common stock issuable upon exercise of
currently exercisable warrants.
(31) Includes 605,000 shares of common stock issuable upon exercise of currently
exercisable warrants.
(32) Includes 252,250 shares of common stock issuable upon exercise of currently
exercisable warrants
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<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.
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<PAGE>
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.
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.
26
<PAGE>
EXPERTS
The consolidated financial statements of Irvine Sensors Corporation for the
fiscal years ended October 3, 1999 and September 27, 1998 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
Grant Thornton LLP, independent certified public 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 12,500 shares of common stock and warrants to purchase 12,500 shares
of Common Stock. In addition, an attorney in that firm may be deemed to be the
beneficial owner of an additional 58,000 shares of common stock owned by two
limited partnerships over which he has investment control. However, he disclaims
beneficial ownership of such shares.
27
<PAGE>
6,900,602 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:
SEC registration fee.............. $ 6,035
Accounting fees and expenses...... 7,500 *
Legal fees and expenses........... 20,000 *
Blue sky legal fees and expenses.. 1,000 *
Miscellaneous expenses............ 3,000 *
----------
Total.......................... $37,535 *
==========
______________
* 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
II-1
<PAGE>
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 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 certified public
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
II-4
<PAGE>
reference in the registration statement 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.
(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 August 17, 2000.
IRVINE SENSORS CORPORATION
By: /s/ Robert G. Richards
--------------------------------
Robert G. Richards
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert G. Richards 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:
<TABLE>
<S> <C> <C>
/s/ Robert G. Richards President, Chief Executive Officer August 17, 2000
--------------------------
Robert G. Richards (Principal Executive Officer)
/s/ John J. Stuart, Jr. Senior Vice President and August 17, 2000
-------------------------
John J. Stuart, Jr. Chief Financial Officer
(Principal Financial and
Accounting Officer)
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
/s/ James Alexiou Chairman of the Board August 17, 2000
-------------------
James Alexiou
/s/ John C. Carson Director August 17, 2000
--------------------
John C. Carson
/s/ Joanne S. Carson Director August 17, 2000
----------------------
Joanne S. Carson
/s/ Marc Dumont Director August 17, 2000
------------------
Marc Dumont
/s/ Walter E. Garrigan Director August 17, 2000
-----------------------
Walter E. Garrigan
/s/ Frank P. Ragano Director August 17, 2000
--------------------
Frank P. Ragano
/s/ Wolfgang Seidel Director August 17, 2000
--------------------
Wolfgang Seidel
/s/ Vincent F. Sollitto, Jr. Director August 17, 2000
---------------------------------
Vincent F. Sollitto, Jr.
</TABLE>
II-7
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC 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
August 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
August 15, 2000
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<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
August 16, 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-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.
