Irvine Sensors Releases 1st Quarter Results

COSTA MESA, Calif., Feb. 20  /PRNewswire-FirstCall/ -- Irvine Sensors Corporation (Nasdaq: IRSN; Boston Stock Exchange: ISC) today reported operating results for its first quarter of fiscal 2007, the 13 weeks ended December 31, 2006.  The current period included consolidation of Optex Systems, Inc., Irvine Sensors' subsidiary acquired December 30, 2005.

Total revenues were $8,119,500, up approximately 70% from $4,781,000 for the prior year's first fiscal quarter, the 13 weeks ended January 1, 2006. The current period revenue increase reflected the Optex consolidation, which did not impact revenues in the first quarter of fiscal 2006 since the Optex acquisition did not occur until the end of that quarter.  Net loss for the current quarter was $6,427,500, a 471% increase from $1,125,100 net loss of the fiscal 2006 first quarter.  The increase in net loss in the current period was largely the result of approximately $4.4 million of non-recurring debt extinguishment loss, most of which was non-cash, which was incurred as a result of Irvine Sensors' restructuring of its bank debt and subordinated convertible notes on December 29, 2006.  Absent the debt service and debt restructuring expenses, the loss from operations in the current period was $1,196,500, approximately comparable to the $1,112,600 loss from operations in the prior year's first quarter.  The debt restructuring was the primary contributor to an increase in stockholders' equity at December 31, 2006, most of which is a timing effect derived from the valuation of warrants and a beneficial conversion feature in the Company's convertible notes.

Irvine Sensors' CEO John Carson and CFO John Stuart will host a web cast conference call to discuss the fiscal 2007 first quarter results on Monday, February 26, 2007 at 8:30 AM Pacific Time.  The call will be broadcast live over the Internet and can be listened to by all interested parties via a link on Irvine Sensors' homepage at http://www.irvine-sensors.com/, which should be accessed at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software.  For those unable to monitor the live broadcast, a conference call replay will be available shortly after the conclusion of the call, and remain archived on the Irvine Sensors site through Friday, March 9, 2007.

Irvine Sensors Corporation, headquartered in Costa Mesa, California, is a vision systems company engaged in the development and sale of miniaturized infrared and electro-optical cameras, image processors and stacked chip assemblies, the manufacture and sale of optical systems and equipment for military applications through its Optex subsidiary and research and development related to high density electronics, miniaturized sensors, optical interconnection technology, high speed network security, image processing and low-power analog and mixed-signal integrated circuits for diverse systems applications.

                        IRVINE SENSORS CORPORATION
                       CONSOLIDATED BALANCE SHEETS
                               (Unaudited)

                                               December 31,     October 1,
                                                   2006            2006
  Assets
  Current assets:
    Cash and cash equivalents                   $1,278,000       $582,800
    Restricted cash                                 39,500         42,800
    Accounts receivable, net of allowance for
     doubtful accounts of $131,000 and
     $131,000, respectively                      3,545,700      4,102,100
    Unbilled revenues on uncompleted contracts   1,106,100      1,908,500
    Inventory, net                               8,686,100      6,735,100
    Other current assets                           318,000        120,900
      Total current assets                      14,973,400     13,492,200
  Property and equipment, net                    5,320,700      5,537,900
  Intangible assets, net                         3,672,800      2,948,800
  Goodwill                                      12,119,200      9,103,600
  Deferred costs                                   930,800        295,500
  Deposits                                         117,800        117,800
      Total assets                             $37,134,700    $31,495,800

  Liabilities and Stockholders' Equity
  Current liabilities:
    Accounts payable                            $5,338,100     $5,269,700
    Accrued expenses                             2,624,400      1,806,000
    Success fee payable to related party           500,000        500,000
    Accrued estimated loss on contracts             98,600         68,300
    Advance billings on uncompleted contracts      200,400        181,600
    Deferred revenue                                55,800        144,100
    Settlement fee payable                              --      1,250,000
    Income taxes payable                           124,600        205,800
    Net deferred tax liabilities                   501,400        485,800
     Capital lease obligations - current
      portion                                       65,400         70,000
       Total current liabilities                 9,508,700      9,981,300
  Note payable - senior term, net of discounts   6,730,000      6,031,600
  Notes payable - convertible, net of discounts         --      8,998,800
  Promissory note - related party                  400,000             --
  Capital lease obligations, less current
   portion                                          35,100         49,100
  Minority interest in consolidated
   subsidiaries                                    409,600      2,105,100
       Total liabilities                        17,083,400     27,165,900

  Stockholders' equity:
    Common stock, $0.01 par value, 80,000,000
     shares authorized; 24,726,000 and
     19,965,900 shares issued and outstanding,
     respectively                                  247,300        199,700
    Common stock warrants; 5,444,900 and
     2,227,100 warrants outstanding,
     respectively                                       --             --
    Deferred stock-based compensation           (1,067,100)            --
    Common stock held by Rabbi Trust            (1,144,000)      (939,000)
    Deferred compensation liability              1,144,000        939,000
    Paid-in capital                            147,704,200    124,535,800
    Accumulated deficit                       (126,833,100)  (120,405,600)
      Total stockholders' equity                20,051,300      4,329,900
                                               $37,134,700    $31,495,800



                        IRVINE SENSORS CORPORATION
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                               (Unaudited)

                                                    13 Weeks Ended
                                               December 31,     January 1,
                                                   2006           2006
  Revenues:
    Contract research and development revenue   $4,004,200     $4,256,700
    Product sales                                4,111,400        508,700
    Other revenue                                    3,900         15,600
  Total revenues                                 8,119,500      4,781,000

  Cost and expenses:
    Cost of contract research and development
     revenue                                     3,358,000      3,371,000
    Cost of product sales                        3,296,600        382,200
    General and administrative expense           2,530,000      2,071,000
    Research and development expense               131,400         69,400
  Total costs and expenses                       9,316,000      5,893,600

  Loss from operations                         (1,196,500)    (1,112,600)

    Interest expense                             (910,200)        (8,300)
    Loss on extinguishment of debt             (4,398,000)            --
    Interest and other income                         400          1,600
  Loss before minority interest and provision
   for income taxes                            (6,504,300)    (1,119,300)
  Minority interest in loss of subsidiaries        84,700            300
  Provision for income taxes                       (7,900)        (6,100)

  Net loss                                    $(6,427,500)   $(1,125,100)

  Basic and diluted net loss per common
   share                                           $(0.32)        $(0.06)

  Weighted average number of common
   shares outstanding                          20,123,500     19,194,300


DATASOURCE: Irvine Sensors Corporation



CONTACT:  Investor Relations, Irvine Sensors Corporation,

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Web site:  http://www.irvine-sensors.com/ 

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