Irvine Sensors Releases Fiscal 2010 First Half Results

IRVINE SENSORS CORPORATION

CONSOLIDATED BALANCE SHEETS

March 28, 2010

(Unaudited)

September 27, 2009

Assets

Current assets:

  Cash and cash equivalents

$      110,600

$      125,700

  Accounts receivable, net of allowance for doubtful accounts of $15,000 and $15,000, respectively

1,059,400

1,396,300

  Unbilled revenues on uncompleted contracts

765,900

885,300

  Inventory, net

928,500

441,100

  Prepaid expenses and other current assets

365,700

53,200

     Total current assets

3,230,100

2,901,600

Property and equipment, net

2,364,800

2,845,200

Intangible assets, net

50,500

67,300

Deferred financing costs

501,900

-

Deposits

37,400

37,500

     Total assets

$  6,184,700

$  5,851,600

Liabilities and Stockholders' Deficit

Current liabilities:

  Accounts payable

$    3,723,900

$    3,427,100

  Accrued expenses

3,707,800

3,730,800

  Accrued estimated loss on contracts

15,000

-

  Advance billings on uncompleted contracts

323,700

249,600

  Advances against accounts receivable

329,100

985,800

  Deferred revenue

12,400

180,000

  Restructured debt, net of debt discounts

163,100

188,400

  Promissory note payable – related party

-

400,000

  Debentures, net of debt discounts

1,398,500

-

  Capital lease obligations

2,000

11,200

     Total current liabilities

9,675,500

9,172,900

Secured promissory note

2,500,000

-

Executive Salary Continuation Plan liability

935,900

1,057,600

     Total liabilities

13,111,400

10,230,500

Commitments and contingencies

Stockholders' deficit:

  Preferred stock, $0.01 par value, 1,000,000 and 1,000,000 shares authorized, respectively;

500

1,200

     Series A-1 – 20,800 (unaudited) and 99,900 shares issued and outstanding, respectively (1); liquidation preference of $670,800 (unaudited) and $3,586,200, respectively;

     Series A-2 – 22,500 (unaudited) and 25,000 shares issued and outstanding, respectively (1); liquidation preference of $908,700 (unaudited) and $1,043,500, respectively;

     Series B -3,500 (unaudited) and 0 shares issued and outstanding, respectively (1); liquidation preference of $3,490,000 (unaudited) and $0, respectively

  Common stock, $0.01 par value, 150,000,000 and 150,000,000 shares authorized, respectively; 15,874,100 and 9,694,500 shares issued and outstanding, respectively (1)

158,700

96,900

  Common stock held by Rabbi Trust

(1,169,600)

(1,169,600)

  Deferred compensation liability

1,169,600

1,169,600

  Paid-in capital

162,365,600

162,497,700

  Accumulated deficit

(169,775,900)

(167,299,100)

     Irvine Sensors Corporation stockholders' deficit

(7,251,100)

(4,703,300)

Noncontrolling interest

324,400

324,400

     Total stockholders' deficit

(6,926,700)

(4,378,900)

     Total liabilities and stockholders' deficit

$  6,184,700

$  5,851,600

(1) The number of shares of preferred stock and common stock issued and outstanding have been rounded to nearest one hundred (100).

IRVINE SENSORS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

13 Weeks Ended

26 Weeks Ended

March 28,

2010

March 29,

2009

March 28,

2010

March 29,

2009

Revenues:

     Contract research and development revenue

$  2,014,300

$  2,295,300

$  4,773,700

$  4,738,500

     Product sales

700,400

545,900

1,147,400

836,700

     Other revenue

6,700

-

10,500

9,500

  Total revenues

2,721,400

2,841,200

5,931,600

5,584,700

Cost and expenses:

     Cost of contract research and development revenue

1,468,700

2,008,500

3,504,900

3,945,900

     Cost of product sales

704,500

409,800

1,107,300

787,800

     General and administrative expense

1,476,600

2,258,900

3,128,000

4,119,700

     Research and development expense

601,000

436,300

1,356,200

786,700

  Total costs and expenses

4,250,800

5,113,500

9,096,400

9,640,100

  Gain on sale or disposal of assets

-

8,632,800

12,500

8,632,800

Income (loss) from operations

(1,529,400)

6,360,500

(3,152,300)

4,577,400

     Interest expense

(131,200)

(830,600)

(246,100)

(1,239,700)

     Provision for litigation judgment

-

-

(20,200)

-

     Litigation settlement expense

(1,820,700)

-

(1,820,700)

-

     Change in fair value of derivative instrument

14,500

-

60,000

-

Interest and other income (expense)

700

15,100

(300)

46,700

Income (loss) from continuing operations before provision for income taxes

(3,466,100)

5,545,000

(5,179,600)

3,384,400

Benefit (provision) for income taxes

46,500

(410,100)

43,300

(429,000)

Income (loss) from continuing operations

(3,419,600)

5,134,900

(5,136,300)

2,955,400

Discontinued operations:

   Income (loss) from discontinued operations

-

(6,900)

-

58,400

Net income (loss)

(3,419,600)

5,128,000

(5,136,300)

3,013,800

Add net income attributable to noncontrolling interests in subsidiary

-

-

-

100

Net income (loss) attributable to Company

$ (3,419,600)

$ 5,128,000

$ (5,136,300)

$  3,013,900

Basic and diluted net income (loss) per common share information:

     From continuing operations attributable to Company

$         (0.24)

$          0.87

$         (0.54)

$           0.50

     From discontinued operations attributable to Company

-

-

-

0.01

Basic and diluted net income (loss) attributable to Company per common share

$         (0.24)

$          0.87

$         (0.54)

$           0.51

Weighted average number of common shares outstanding, basic and diluted

14,351,900

5,790,500

12,246,700

5,544,700