To OTC Journal Members:
 

Irvine Sensors (NASDAQ: IRSN)- Management Bets On Itself

In the world of microcap investing you are always betting on the future, so you must look for subtle hints to tip the odds in your favor. One such hint came in the form of a news release issued by Irvine Sensors today just prior to the close of the market.

With regard to insider selling and buying- long term market followers know that insider selling is not necessarily bad. People need cash all the time for all kinds of reasons, and corporate management legitimately uses the market as a source of revenues as part of their compensation.

On the flip side, market followers know a standard rule of thumb: Insider Buying is Always Good. Insiders never put their own money into their own stock unless they believe their stock is undervalued or is on the verge of significant breakthroughs.

Insider buying is far more bullish than corporate stock buy back programs. Stock buy backs can be announced, approved by the board, and never implemented. There are also regulatory restrictions on stock buy backs limiting a company's ability to fully execute a buy back program.

Insider buying has no such restrictions. When insiders put their own money at risk this acts as a signal to shareholders that management believes in the company's future.
 

Irvine Sensors Announces Private Placement With President as Large Contributor

Irvine Sensors issued a press release today disclosing it had completed a private placement for $780,000. The company issued units priced at $2.20. Each unit contained two shares of fully restricted common stock and one three year warrant with an exercise price of $2.

Broken down, this means purchasers paid $1.10 per share for restricted stock (can't be sold into the public market for at least one year), and the $2 warrant will have no intrinsic value until the stock trades at least 62% higher than its current level. With the stock currently trading at $1.20, the discount to the prevailing market is minimal.

The press release also discloses that Irvine Sensors founder and current President John Carson was a major contributor to the private placement through his own retirement funds. He contributed $260,000, equating to one third of the total amount.
 

A Sign Long Awaited Defense Contracts Are Coming Soon?

Last May, shares of Irvine Sensors rocketed from $1.20 to $3.40 in about three trading days when the company disclosed it had been awarded a development contract worth about $9.6 million from DARPA (Defense Advanced Research Projects Agency). This is the Department of Defense's high tech development agency. Northrop Grumman and Sarong Crop were named a sub contractors under Irvine Sensors.

The contract called for Irvine Sensors to develop its "Jigsaw Puzzle Technology" for use in the field. This technology allows for aerial surveillance with infrared cameras. The captured data is then compiled using Irvine Sensors super computing power driven by its chip stacking technology. Once captured, the data is processed to allow the military to figuratively "see through" layers of trees and camouflage on the ground below in an attempt to identify military targets such as tanks and artillery.

Investors have been patiently waiting for this development contract to turn into a long term deployment contract with an ongoing revenue stream from the Department of Defense which is expected to have a $380 billion budget in fiscal 2004 not including the additional $80 billion for war with Iraq.

Many small defense related stocks are starting to show signs of life in the backdrop of world wide violence and crisis. Irvine Sensors, currently enjoying the highest revenues in its 20 history and trading at a 10 year low valuation, has the potential to be the beneficiary of major increases in defense and homeland security spending. 

One thing is certain; Irvine Sensors founder and President John Carson has demonstrated his belief by investing his own money in the company. 

The chart we have provided, showing support/resistance off the December highs, suggests the stock is entitled to trade back into the $1.80 range to achieve a 50% rebound from the recent weakness. We believe this is a good short term target for the stock if new contracts or contract extensions materialize.

Here is the complete text of today's press release for your review:
 

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MarketByte LLC has been paid a fee of $25,000 by Irvine Sensors for coverage through December 31, 2003. As part of the agreement, one of the prinicipals of MarketByte LLC has been awarded 75,000 options, with an exercise price of $1.35.

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