COSTA MESA, Calif., Feb. 15, 2012 /PRNewswire/ -- ISC8 Inc. (formerly known as Irvine Sensors Corporation) - (OTCBB: IRSN) today reported operating results for its first quarter of fiscal 2012, the 13 weeks ended January 1, 2012, and announced the consummation of the thermal imaging sale on January 31, 2012.

Results of Operations for Fiscal Quarter ended January 1, 2012

Total revenues for the fiscal 2012 first quarter were $3,279,200, down 24% from $4,300,900 for the first quarter of fiscal 2011. The revenue decrease was primarily due to decreased sales of ISC8's thermal imaging cores. On January 31, 2012, the Company consummated the sale of its thermal imaging assets for approximately $10,650,000, as further described below (the "Thermal Imaging Asset Sale"). Subsequently, the Company will no longer sell thermal imaging cores and other thermal imaging products. The current period net loss decreased from $10,832,200 in the 13-week period ended January 2, 2011 to $8,249,400 in the current 13-week period ended January 1, 2012, attributable to the decrease in change of fair value of derivative liability relating to our debt instruments with embedded derivatives, a non-cash item. Since this factor does not relate to our basic operations, we do not believe that the decrease in net loss in the first quarter of Fiscal 2012 as compared to the first quarter of fiscal 2011 is indicative of an underlying continuing operational trend. Cash and cash equivalents in the 13-week period ended January 1, 2012 was approximately $2.1 million compared to approximately $2.7 million in the 13-week period ended January 2, 2011. Cash and cash equivalents as of January 31, 2012 was approximately $10.2 million inclusive of the proceeds from the Thermal Imaging Asset Sale and adjustments net of $1.5 million funds held in escrow for future disbursement to ISC8.

Consummation of Thermal Imaging Asset Sale

Effective January 31, 2012, pursuant to the terms of the Asset Purchase Agreement dated October 17, 2011 (the "Asset Purchase Agreement") between ISC8 and Vectronix Inc. ("Vectronix"), Vectronix acquired substantially all of the Company's assets used or held for use in connection with, necessary for or relating to the Company's thermal imaging business. These assets include the equipment and some limited intellectual property that is used by the thermal imaging division to manufacture its products.

At the closing of this asset purchase, Vectronix paid $9,148,839 in cash to the Company and $1,500,000 into escrow, and agreed to forgive the Company's $340,250 liability payable to Optics 1, Inc., an affiliate of Vectronix. Subject to the satisfaction of certain thresholds, Vectronix is also obligated over the five year period following the closing to pay commissions to the Company for core engines and certain existing products of the Business sold by Vectronix or its commercial business units.

Seth W. Hamot, Chairman of the Company's Board of Directors, said "The Board is excited to focus ISC8's future efforts on our core stacking technologies and the opportunities available in cyber security. The sale of our thermal imaging business represents a great opportunity for both ISC8 and Vectronix to move forward separately, while providing ISC8 the capital necessary to initially fund our new business strategy."

About ISC8 Inc.

ISC8 is actively engaged in the development and sale of intelligent cyber security solutions for information technology (IT) designed for commercial and government environments worldwide. ISC8 provides hardware, software and cloud-based product and service offerings that enable Enterprise Threat Management leveraging anti-tamper, 3D stacked chip assemblies, high-speed processors, and miniaturized sensors - all technologies it has developed. ISC8 was founded in 1974 and is headquartered in Costa Mesa, California.

ISC8 Inc. Statement Under the Private Securities Litigation Reform Act

The release contains information about future expectations, plans and prospects of ISC8's management that constitute forward looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, competitive forces, general economic, market or business conditions, the effects of any attempts to intentionally disrupt our services or network by hackers or others, changes in ISC8's technologies such that they are no longer inter-operable, failure of customers to adopt, or delays in their adoption of, ISC8 products or services discussed above, and other factors, most of which are beyond ISC8's control, as well as those discussed in the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

ISC8 INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	13 Weeks Ended
	January 1,	January 2,
	2012	2011
Total revenues	$ 3,279,200	$ 4,300,900
Cost and expenses
Cost of revenues	2,771,000	4,039,200
General and administrative expense	2,592,600	1,914,400
Research and development expense	2,184,300	533,900
Total costs and expenses	7,547,900	6,487,500
Loss from operations	(4,268,700)	(2,186,600)
Interest expense	(1,668,700)	(2,156,300)
Change in fair value of derivative liability	(2,310,000)	(6,482,700)
Other income (expense)	1,200	(6,600)
Loss from operations before provision for income taxes	(8,246,200)	(10,832,200)
Provision for income taxes	(3,200)	-
Net loss	(8,249,400)	(10,832,200)
Less net loss attributable to non-controlling interests in subsidiary	-	-
Net loss attributable to ISC8 Inc.	$ 8,249,400)	$ (10,832,200)
Basic and diluted net loss attributable to ISC8 Inc. per common share	$ (0.07)	$ (0.26)
Weighted average number of common shares outstanding, basic and diluted	113,715,600	41,612,200

ISC8 INC. UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS The following non-GAAP adjustments are based upon the Company's unaudited 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.

	13-weeks ended
	January 1, 2012	January 2, 2011
GAAP net loss attributable to ISC8 Inc.	$ (8,249,400)	$(10,832,200)
Plus:
Change in fair value of derivative instrument	2,310,000	6,482,700
Non-cash interest expense	1,464,700	2,156,300
Stock-based compensation, including employee retirement plan contributions	1,021,200	650,900
Depreciation and amortization	248,600	273,600
Non-GAAP net loss attributable to ISC8 Inc.	$ (3,304,900)	$ (1,268,700)

ISC8 INC. CONDENSED CONSOLIDATED BALANCE SHEETS
	January 1, 2012	October 2, 2011
Assets
Current assets	$ 5,410,600	$ 6,775,400
Property and equipment, net	2,390,700	2,550,100
Other Assets	1,314,500	1,259,300
Total assets	$ 9,115,800	$ 10,584,800


Liabilities and Stockholders' Deficit
Current liabilities	$ 13,072,000	$ 10,895,200
Non-current Liabilities	5,824,700	5,048,300
Derivative liability	15,912,800	13,352,800
Total liabilities	34,809,500	29,296,300
Total stockholders' deficit	(25,693,700)	(18,711,500)
Total liabilities and stockholders' deficit	$ 9,115,800	$ 10,584,800

SOURCE ISC8 Inc.

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ISC8 Announces 1st Fiscal Quarter Results amp;; Consummation of Thermal Division Sale

ISC8 Announces 1st Fiscal Quarter Results & Consummation of Thermal Division Sale