Item 1. Security and Issuer.
This statement relates to the shares of common stock, $0.01 par value (the “Common Stock”), of Irvine Sensors Corporation (the “Company”), which has its principal executive offices at 3001 Red Hill Avenue, Building 4, Suite 108, Costa Mesa, California 92626-4526.
Item 2. Identity and Background.
This statement is filed on behalf of (1) Costa Brava Partnership III L.P. (“Costa Brava”), a Delaware limited partnership; (2) Roark, Rearden and Hamot, LLC, a Delaware limited liability company; and (3) Seth W. Hamot, a United States citizen. Each of the parties listed in the immediately preceding sentence is referred to herein individually as a “Filer” or a “Reporting Person” and collectively as the “Filers” or the “Reporting Persons.”
Seth W. Hamot is the president of Roark, Rearden & Hamot, LLC, which is the general partner of Costa Brava Partnership III L.P. The principal business of Costa Brava Partnership III L.P. is to make investments in, buy, sell, hold, pledge and assign securities. The principal business of Roark, Rearden and Hamot, LLC is to act as general partner of Costa Brava Partnership III L.P. The principal business address of each of the Filers is 222 Berkeley Street, 17th Floor, Boston, MA 02116.
None of Filers has, during the past five years, been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors). None of the Filers has, during the past five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
As of January 3, 2011, the Filers have accumulated 41,400,260 shares of Common Stock, representing 43.4% of the outstanding shares. All of these shares are held by Costa Brava and were acquired with working capital set aside for the general purpose of investing.
Item 4. Purpose of Transaction.
The Filers acquired the shares of Common Stock of the Company for general investment purposes.
The Filers may take such actions with respect to their investment in the Issuer as they deem appropriate, including without limitation: (i) purchasing additional shares of Common Stock in the open market or otherwise or (ii) participate in discussions with potential purchasers of their shares of Common Stock, sell some or all of their shares of Common Stock in the open market or through privately negotiated transactions, or change their intention with respect to any and all of the matters referred to above.
Pursuant to the Purchase Agreement and the Voting Agreement (as defined in Item 6), Costa Brava shall be entitled to designate three individuals for nomination to the Company’s Board of Directors and the other parties to the Purchase Agreement and the Voting Agreement agree to vote for such individuals.
The Filers reserve their rights to make alternative plans or proposals in the future or take any other steps to enhance the value of their investment. The Filers further reserve the right to increase, decrease or eliminate their investment in the Company or take any other action relative thereto.
Item 5. Interest in Securities of the Issuer.
(a) As of January 3, 2011, the Filers are deemed to be the beneficial owners of 41,400,260 shares of Common Stock or 43.4% of the outstanding shares.
(b) The Filers have the sole power to vote and sole power to dispose of such shares to which this Statement relates.
(c) During the past sixty (60) days, the Filers have acquired the shares of Common Stock of the Company set forth on Exhibit B hereto. The transaction date, number of shares bought, price per share and type of transaction for each purchase during that period are set forth on Exhibit B hereto.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to the Securities of the Issuer.
On December 23, 2010, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Costa Brava and The Griffin Fund LP (“Griffin”), pursuant to which the Company issued and sold to Costa Brava and Griffin, in an initial closing on December 23, 2010, 12% Subordinated Secured Convertible Notes due December 23, 2015 (the “Notes”) in the aggregate principal amount of $7,774,800 and an aggregate of 51,788,571 shares of Common Stock of the Company for $3,625,199.90, or $0.07 per share, and agreed to issue and sell in a subsequent closing not later than April 30, 2011 (subject to the amendment of the Company’s Certificate of Incorporation to increase the Company’s authorized Common Stock and provided that there has not been a material adverse change in the Company’s relationship with Optics 1, Inc.) additional 12% Subordinated Secured Convertible Notes (the “Milestone Notes”) to Costa Brava and Griffin for an aggregate purchase price of $1.2 million (collectively, the “Financing”). The Notes and the Milestone Notes will be secured by substantially all of the assets of the Company pursuant to a Security Agreement dated December 23, 2010 between the Company and Costa Brava as representative of the Note holders
The Notes bear interest at a rate of 12% per annum, due and payable quarterly within 10 business days of the end of each calendar quarter, calculated on the simple interest basis of a 365-day year for the actual number of days elapsed. The principal and accrued but unpaid interest under the Notes is convertible at the option of the holder, any time after amendment of the Company’s Certificate of Incorporation to increase the Company’s authorized Common Stock, into shares of the Company’s Common Stock at an initial conversion price of $0.07 per share, subject to adjustment.
The Company also entered into a Stockholders Agreement on December 23, 2010 with Costa Brava and Griffin in connection with the Financing. Pursuant to the Stockholders Agreement, subject to existing rights held by other parties, Costa Brava and Griffin have the right to participate in certain future issuances of securities by the Company on a pro rata basis with their initial investment. Traditional bank financings and stock issued in connection with strategic partnerships and investments, qualified public offerings, employee or director equity incentive plans and other customary transactions are excluded from this right of participation. Pursuant to the Stockholders Agreement, Costa Brava and Griffin also have customary demand and piggyback registration rights, and customary information and inspection rights. In connection with the Financing, the Company also agreed, among other things, to: (i) appoint to the Board three directors designated by Costa Brava and two directors designated by Griffin, and reimburse them for costs and expenses for attending board meetings; and (ii) hold a meeting of the Company’s stockholders, no later than April 30, 2011, to vote on a proposal to approve an amendment of the Company’s Certificate of Incorporation to increase the number of shares of authorized Common Stock of the Company from 150,000,000 shares to 500,000,000 shares.
The information set forth above is qualified in its entirety by reference to the actual terms of the Purchase Agreement, Note, Security Agreement, Stockholders Agreement and Voting Agreement which are incorporated herein by reference.
Item 7. Material to be Filed as Exhibits.
| Exhibit A – | Agreement Regarding the Joint Filing of Schedule 13D. |
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| Exhibit B – | Information Concerning the Filers’ transactions in the Common Stock of the Issuer in the last sixty (60) days. |
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| Exhibit C – | Securities Purchase Agreement dated December 23, 2010 between the Company and Costa Brava and Griffin.* |
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| Exhibit D – | Form of 12% Subordinated Secured Convertible Note issued by the Company to Costa Brava and Griffin on December 23, 2010.* |
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| Exhibit E – | Security Agreement dated December 23, 2010 between the Company and Costa Brava as representative of the Note holders.* |
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| Exhibit F – | Stockholders Agreement dated December 23, 2010 between the Company and Costa Brava and Griffin.* |
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| Exhibit G – | Voting Agreement dated December 23, 2010 among the Company, the Irvine Sensors Corporation Cash or Deferred & Stock Bonus Plan, Costa Brava and Griffin.* |
| * | Incorporated by reference to Exhibits 10.1-10.5 of the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 29, 2010. |
