ISC8 Releases Fiscal 2011 Results

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Dec 15, 2011, 01:25 ET

COSTA MESA, Calif., Dec. 15, 2011 /PRNewswire/ -- ISC8 (Irvine Sensors Corporation) (OTCBB: IRSN.OB), a provider of intelligent Cybersecurity solutions and supporting technologies, today reported audited operating results for its fiscal 2011, the 52 weeks ended October 2, 2011.

Total revenues for fiscal 2011 were $14,095,000, an approximate 20% increase over total revenues of $11,716,800 for fiscal 2010. Net loss in fiscal 2011 was $15,762,800, as compared to a net loss of $11,155,800 in the prior fiscal year. The increase in net loss includes the effect of approximately $7.5 million in interest expense in the current fiscal year, of which approximately $4.6 million was of a non-cash nature, mostly derived from features of the various debt financings closed by ISC8 in fiscal 2011. These financings facilitated ISC8's payment in full of short-tem debt of approximately $4.2 million when due in fiscal 2011.

Excluding non-cash charges for changes in fair value of derivative liability, non-cash interest expense, stock-based compensation and depreciation and amortization, non-GAAP net loss was approximately $9.6 million in fiscal 2011, compared to non-GAAP net loss of approximately $8.4 million in fiscal 2010. See "Use of Non-GAAP Financial Information" below for important information regarding the Company's use of non-GAAP financial measures.

Use of Non-GAAP Financial Information – ISC8 reports net loss in accordance with accounting principles generally accepted in the United States ("GAAP") and supplementally on a non-GAAP basis. The Company's presentation of non-GAAP net loss attributable to the Company in this press release excludes the impact of changes in fair value of derivative liability, non-cash interest expense, stock-based compensation and depreciation and amortization expense. Stock-based compensation expense primarily includes the impact of stock options issued by the Company and stock contributions to the employees' retirement plan. A reconciliation of these GAAP and non-GAAP financial measures for all periods presented is found in the attached "Unaudited Reconciliation of Non-GAAP Adjustments."

ISC8 believes that the presentation of non-GAAP net loss provides useful supplemental information to management and investors regarding financial and business trends related to the Company's financial condition and results of operations. The Company also believes that examination of non-GAAP net loss can facilitate consistency and comparability among and between prior periods, as well as comparison with other companies that present similar non-GAAP financial measures. However, the Company's presentation of non-GAAP information is not necessarily equivalent to non-GAAP measures presented by other reporting companies and should be considered in that context. The Company's management generally uses non-GAAP loss to evaluate the Company's operating performance because management believes that the exclusion of the non-cash items described above, in the changes in the fair value of derivative instruments, provides insight into the Company's core ongoing operating results, particularly from a cash generation or use perspective, and underlying business trends affecting the Company's performance. ISC8 has chosen to provide this non-GAAP information to investors to enable them to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluate the Company's ongoing core operations. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

For more information on ISC8 and its products, visit www.ISC8.com.

About ISC8
ISC8 is actively engaged in the development and sale of intelligent Cybersecurity solutions for information technology (IT) for commercial and government environments worldwide. ISC8 provides hardware, software and cloud-based product and service offerings that enable Enterprise Threat Management. It leverages anti-tamper, 3D stacked chip assemblies, high-speed processors, and miniaturized sensors – all technologies it has developed. The Company also manufactures and sells thermal imaging systems for current U.S. Military force platforms. ISC8 (Irvine Sensors Corporation) was founded in 1974 and is headquartered in Costa Mesa, California.

Irvine Sensors Corporation Consolidated Statements of Operations (Audited)
	Fiscal Years Ended
	October 2, 2011	October 3, 2010
Revenues
Product sales	$ 8,574,200	$ 8,526,200
Contract research and development revenue	5,520,800	3,177,800
Other revenue	-	12,800
Total revenues	14,095,000	11,716,800
Costs and expenses
Cost of product sales	6,469,500	3,150,900
Cost of contract research and development revenue	5,609,200	6,659,000
General and administrative expense	8,101,800	6,589,900
Research and development expense	3,679,300	2,639,000
Total costs and expenses	23,859,800	19,038,800
Gain on sale of assets	-	12,600
Loss from operations	(9,764,800)	(7,309,400)
Interest expense	(7,544,700)	(1,692,600)
Provision for litigation judgment	-	(20,200)
Litigation settlement expense	-	(2,270,700)
Change in fair value of derivative instrument	1,512,700	95,500
Other income (expense)	(3,400)	48,900
Loss from operations before benefit (provision) for income taxes	(15,800,200)	(11,148,500)
Benefit (provision) for income taxes	37,400	(7,300)
Net loss	(15,762,800)	(11,155,800)
Less net loss attributable to noncontrolling interests in subsidiary	-	-
Net loss attributable to Irvine Sensors Corporation	$ (15,762,800)	$ (11,155,800)
Basic and diluted net loss attributable to Irvine Sensors
Corporation per common share	$ (0.17)	$ (0.70)
Basic and diluted weighted average number of common shares outstanding	90,728,100	18,116,700

RVINE SENSORS CORPORATION
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS

The following non-GAAP adjustments are based upon the Company's audited consolidated statements of operations for the periods shown. These adjustments are not in accordance with or an alternative for GAAP. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. ISC8 intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance, and may change its reporting of such non-GAAP results in the future as a result of such assessment.


	Fiscal Years Ended
	October 2, 2011	October 3, 2010
GAAP net loss attributable to Irvine Sensors Corporation	(15,762,800)	(11,155,800)
Plus:
Change in fair value of derivative instrument	(1,512,700)	(95,500)
Non-cash interest expense	4,593,000	751,500
Stock-based compensation, including employee retirement plan contributions	2,019,300	853,200
Depreciation and amortization	1,112,900	1,280,300
Non-GAAP net loss attributable to Irvine Sensors Corporation	$ (9,550,300)	$ (8,366,300)




Irvine Sensors Corporation Consolidated Balance Sheets (Audited)
	October 2, 2011	October 3, 2010
Assets
Current assets:
Cash and cash equivalents	$ 2,734,600	$ 281,600
Accounts receivable, net of allowance for doubtful accounts of $13,800 and $15,000, respectively	1,928,500	382,100
Unbilled revenues on uncompleted contracts	557,200	630,300
Inventory, net	1,437,300	1,715,800
Prepaid expenses and other current assets	117,800	182,300
Total current assets	6,775,400	3,192,100
Property and equipment, net (including construction in process of $0 and $204,000, respectively)	2,550,100	2,730,000
Intangible assets, net	10,400	12,400
Deferred financing costs	1,052,300	302,900
Deposits	196,600	87,400
Total assets	$ 10,584,800	$ 6,324,800
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable	$ 1,535,600	$ 4,724,100
Accrued expenses	1,416,800	4,097,700
Accrued estimated loss on contracts	-	29,000
Advance billings on uncompleted contracts	397,200	321,800
Advances against accounts receivable	-	99,700
Deferred revenue	544,800	1,515,400
Restructured debt, net of debt discounts	-	163,100
Secured promissory note, current portion	2,097,200	402,500
Senior subordinated secured promissory notes	4,257,600	-
Debentures, net of debt discounts	-	1,935,200
Settlement agreements obligations, current portion	632,200	-
Capital lease obligations, current portion	13,800	-
Total current liabilities	10,895,200	13,288,500
Secured promissory note, less current portion	-	2,097,500
Subordinated secured convertible promissory notes, net of discounts	3,944,800	-
Settlement agreement obligations, less current portion	18,700	-
Derivative liability	13,352,800	4,000
Executive Salary Continuation Plan liability	1,005,400	1,030,700
Capital lease obligations, less current portion	79,400	-
Total liabilities	29,296,300	16,420,700
Commitments and contingencies
Stockholders' deficit:
Convertible preferred stock, $0.01 par value, 1,000,000 and 1,000,000 shares authorized, respectively;	-	500
Series A-2 – 0 and 8,300 shares issued and outstanding, respectively (1);
liquidation preference of $0 and $333,300, respectively;
Series B – 1,800 and 1,900 shares issued and outstanding, respectively (1);
liquidation preference of $1,785,600 and $1,892,700, respectively
Series C –0 and 37,500 shares issued and outstanding, respectively (1);
liquidation preference of $0 and $1,125,000, respectively
Common stock, $0.01 par value, 500,000,000 and 150,000,000 shares authorized, respectively;
113,695,800 and 33,535,400 shares issued and outstanding, respectively (1)	1,137,000	335,400
Common stock held by Rabbi Trust	(1,020,700)	(1,169,600)
Deferred compensation liability	1,020,700	1,169,600
Paid-in capital	171,385,300	165,039,200
Accumulated deficit	(191,558,200)	(175,795,400)
Irvine Sensors Corporation stockholders' deficit	(19,035,900)	(10,420,300)
Noncontrolling interest	324,400	324,400
Total stockholders' deficit	(18,711,500)	(10,095,900)
Total liabilities and stockholders' deficit	$ 10,584,800	$ 6,324,800
(1) The number of shares of preferred stock and common stock issued and outstanding have been rounded to the nearest one hundred (100)