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December, generally a good month
for stocks, is shaping to be the worst December in 50 years. The Dow is
currently down 4.5% for the month, and the NASDAQ has dropped about 7.8%.
After the strong run up in November,
the market was entitled to a correction. The December drop is more than
a correction. The talking heads in the main stream media are dredging up
every reason imaginable for the poor showing- retail sales, deflation,
anemic recovery, etc.
There are only three reasons the
market is dropping: WAR, WAR, and WAR.
It's coming. There were two feature
articles on the front page of our local newspaper this past Wednesday:
"President
To Declare Violation By Iraquis", and "Opposition Groups Form Plan
to Share Power in Iraq".
In the meantime, oil is spiking and
gold- the place investors flee for a safe haven- is breaking out to multi
year highs. The uncertainty and unpredictability of the war is being priced
into the market today. This may be setting up for one of the greatest buying
opportunities of all time, i.e. the 25% gallup up in the S&P when Bush
Sr. ended the Iraqui invasion of Kuwait quickly in 1990.
When the current President Bush sits
down at his desk, he will have one file on his right, and one on his left.
The right hand file will be a list of weapons we believe Saddam Hussein
possesses. The list on his left will be a list of weapons the UN inspectors
have found. If they don't match, we will be going to War. It's just a question
of time. If it's going to happen, the sooner the better.
This could all lead the single best
outcome for the US economy in 2003- declining oil prices. This would be
much better for earnings and economic prosperity than a tax cut. Declining
oil prices benefit every facet of the economy and hurt almost no one.
If war with Iraq can end quickly
without interruption of oil flows from the Middle east, lower oil prices
are inevitable and rising stock prices in concert. It will be exciting
to watch it all unfold.
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Irvine Sensors (NASDAQ: IRSN)- Delivers
Holiday Present to Shareholders- Best Quarter in 20 Year Company History
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Irvine Sensors released fiscal
year end numbers yesterday. The September quarter, their last fiscal quarter,
proved to be the best top line quarter in the company's 20 year history
of being publicly traded.
Revenue growth over the past three
quarters now goes as follows:
-
$2.3 million March quarter
-
$3.9 million June quarter (up
70% over March)
-
$6.6 million September quarter (up
70% over June)
Aside from the best revenues in the
20 year history, the September quarter equals another 70% gain
over the June quarter. More importantly, losses for the quarter were a
mere $672,000. A good portion of those are probably non cash and one time,
suggesting the company is on the brink of turning cash flow positive. We
will learn more when the 10K is filed with the SEC.
The stock, which had been trading
in the $2.25 range when the news came out, dropped to a closing price of
$1.89. Why anyone would choose to sell after this news is inexplicable.
Perhaps investors were focused on the losses for the year, which were substantial
but considerably lower than the previous year.
Based on September's numbers, the
company is enjoying an annual revenue run rate of $26.4 million
with a market capitalization of only $13 million.
In light of the tremendous growth
of the past three quarters and the company nearly turning cash flow positive
from operations, we feel this stock is entitled to trade at least at one
times annual sales, which would give us a reasonable target price of about
$3.80,
100% above yesterday's closing price.
The Risk/Reward- Is The Foundation Laid For
Next Year?
Irvine Sensors has spent the
past twenty years living with the awesome burden of permanent potential.
While their chip stacking technology is revolutionary, the need for such
massive computing power in such a small space did not materialize as both
the company and investors hoped it would.
Originally designed for use in defensive
satellites, the end of the Cold War dashed their hopes to participate in
planned satellite upgrades.
Twenty years later we have turned
our attention back to defending ourselves, but against a different enemy.
Terrorism was not a consideration during the Cold War, but it is foremost
on everyone's mind today.
Technology will become our most powerful
weapon against the forces of terrorism. Smart and mobile technology requires
massive computing power in small spaces.
Irvine Sensors has managed
increasing revenues and decreasing losses over the past three quarters.
They just reported the best quarter in company history. Money is flowing
in from weapons and homeland defense related pilot programs which include
the Jigsaw Puzzle Technology, miniaturized night vision weapons sights,
sensors for small, drone aircraft, and heat activated video cameras.
If you want to own this stock now
is the time. The pull back after the news came out was on light volume.
Take advantage of someone else's weakness to position yourself for a profitable
new year. If you were thinking of investing now is the time.
If these pilot programs turn into
major commercial contracts next year, you will not own enough of this stock.
After twenty years- is Irvine Sensors a company who's time has come?
In view of recent corporate and worldwide events, it seems like a great
speculation.
This could be one of those stocks
people look at when it is $7 or $8, and ask themselves why
non one told them about it under $2. You've been told. Let's hope
the contracts break their way. If the technology is good, they will.
To read our original profile on this
company which was released last Tuesday- simply click
here.
Special Announcement:
This will be the last edition of the OTC Journal until next year
barring any major news. One final thought for microcap investors- Over
the next two weeks share prices in microcaps could drop as some investors
lock in tax losses and buyers are no where to be found. Price movements
could be exaggerated. Unless you need the tax loss, the next two weeks
are the worst time to sell. CALY and XMLG are both getting down to attractive
levels as year tax selling hits both stocks.
Here is the complete
text of yesterday's Irvine Sensors news release:
| Press Release Source:
Irvine Sensors Corporation
Irvine Sensors Releases
Fiscal 2002 Results
Friday December 20,
2:35 pm ET
Revenues Set Annual
and Quarterly Record
COSTA MESA, Calif., Dec.
20 /PRNewswire/ -- Irvine Sensors Corporation (Nasdaq: IRSN - News; Boston:
ISC - News) today reported operating results for the company's 2002 fiscal
year ended September 29, 2002.
Fiscal 2002 total revenues
were a record $15,342,300, an approximate 44% increase from total revenues
of $10,657,300 in fiscal 2001. Total revenues for the 4th fiscal quarter
ended September 29, 2002 were $6,603,300, also a record. The annual revenue
increase was largely the result of a nearly $5.2 million, or 96%, increase
in funded contracts offset by an aggregate $622,900, or 12%, decline in
product sales. The consolidated net loss for fiscal 2002 was $6,037,500,
an $8.55 million, or 59%, reduction in the consolidated net loss of $14,587,500
in fiscal 2001. Excluding the effect of a discontinued subsidiary, the
loss from continuing operations in fiscal 2002 was $6,072,500 versus $15,525,500
in fiscal 2001, a $9,453,000, or 61% improvement. The loss from continuing
operations in the 4th fiscal quarter ended September 29, 2002 was $672,600
compared to $4,671,800 in the 4th fiscal quarter of 2001, a nearly $4 million
improvement.
Robert G. Richards, CEO,
said "Increases in our government contract revenues, particularly in the
fourth quarter, have combined with further reduction of investments in
our subsidiaries to produce the kind of improved results we had forecast
for fiscal 2002. It took us most of the year to reorganize our subsidiary
operations to reduce expenses. The full effect of these actions will be
more visible in fiscal 2003. We look forward to further improvement."
Irvine Sensors Corporation,
headquartered in Costa Mesa, California, is primarily engaged in research
and development related to high density electronics, miniaturized sensors
and cameras, optical interconnection technology, high speed routers, image
processing and low-power analog and mixed-signal integrated circuits for
diverse systems applications.
Safe Harbor Statement
under the Private Securities Litigation Reform Act of 1995: This release
may contain forward-looking statements based on our current expectations,
estimates and projections about our industry, management's beliefs, and
certain assumptions made by us. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates," "may," "will" and
variations of these words or similar expressions are intended to identify
forward-looking statements. These statements speak only as of the date
hereof and are subject to change. We undertake no obligation to revise
or update publicly any forward-looking statements for any reason. These
statements are not guarantees of future performance and are subject to
certain risks, uncertainties and assumptions that are difficult to predict.
Therefore, our actual results could differ materially and adversely from
those expressed in any forward-looking statements as a result of various
factors.
Important factors that
may cause such a difference include, but are not limited to, general economic
and political conditions and specific conditions in the markets we address,
including the economic slowdown in the technology sector and semiconductor
industry; our ability to control costs and expenses; our ability to compete
against firms with greater resources and successfully commercialize our
technologies, the volume of our product sales and pricing concessions on
volume sales; and the timing, rescheduling or cancellation of significant
customer orders. Further information on Irvine Sensors Corporation, including
additional risk factors that may affect our forward looking statements,
is contained in our Annual Report on Form 10-K, our Quarterly Reports on
Form 10-Q and our other SEC filings that are available through the SEC's
EDGAR database (www.sec.gov) or from the Company's Investors Relations.
Consolidated Statements of Operations
Fiscal Year Ended
September 29, September 30,
2002
2001
Revenues:
Contract research and development $10,561,500
$5,380,800
Product sales
4,641,700 5,264,600
Other
139,100 11,900
Total
revenues
15,342,300 10,657,300
Cost
and expenses:
Cost of contract revenues
7,752,100 4,364,200
Cost of product sales
4,048,800 5,697,000
General and administrative
7,476,600 10,770,400
Research and development
1,991,700 5,951,700
21,269,200 26,783,300
Loss
from operations
(5,926,900) (16,126,000)
Interest expense
(230,400) (141,500)
Interest income
10,100 136,400
Loss
from continuing operations before
minority interest and provision for
income taxes
(6,147,200) (16,131,100)
Minority
interest in loss of subsidiaries 112,200
609,600
Provision
for income taxes
(37,500) (4,000)
Loss
from continuing operations
(6,072,500) (15,525,500)
Discontinued
operations:
Loss from operations of
discontinued subsidiary
-- (4,658,400)
Gain on disposal of subsidiary
35,000 5,596,400
Gain
(loss) from discontinued operations 35,000
938,000
Net
loss
$(6,037,500) $(14,587,500)
Loss
per common share:
Basic
and diluted loss per share
Loss from continuing operations
$(1.07) $(6.09)
Gain (loss) from discontinued operations 0.01
0.37
Net loss
$(1.06) $(5.72)
Weighted
average number
of shares outstanding
5,694,800 2,549,500
--------------------------------------------------------------------------------
Source: Irvine Sensors
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