<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY OR TRANSITIONAL REPORT
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-20634
INFORMATION RESOURCE ENGINEERING, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<S> <C>
DELAWARE 52-1287752
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
</TABLE>
8029 Corporate Drive, Baltimore, Md. 21236
------------------------------------------
(Address of principal executive offices)
(410) 931-7500
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past twelve months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
-- --
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's Common Stock as of November 8,
1996 was 5,456,927.
Transitional Small Business Disclosure Format (check one): Yes No X.
-- --
<PAGE> 2
INFORMATION RESOURCE ENGINEERING, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Part I Financial Information
Item 1. Consolidated Balance Sheet as of September 30, 1996 3
Consolidated Statements of Operations for the three months and
nine months ended September 30, 1995 and 1996 4
Consolidated Statement of Stockholders' Equity for the nine
months ended September 30, 1996 5
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1995 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 9
Part II. Other information 12
Signatures 12
</TABLE>
2
<PAGE> 3
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Assets
------
Current assets:
Cash and cash equivalents $16,899,645
Accounts receivable 2,122,133
Inventories 3,810,677
Recoverable income taxes 32,369
Prepaid expenses 115,038
-----------
Total current assets 22,979,862
Equipment and leasehold improvements, net of accumulated depreciation of $744,910 1,443,992
Computer software development costs, net of accumulated amortization of $1,251,372 2,704,452
Goodwill, net of accumulated amortization of $298,788 1,898,398
Prepaid license fee 1,000,000
Other assets 208,812
-----------
$30,235,516
===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current maturities of long-term debt $ 18,072
Accounts payable 2,276,338
Accrued expenses 1,437,025
Deferred revenue on maintenance contracts 137,308
-----------
Total current liabilities 3,868,743
Long-term debt, less current maturities 21,486
-----------
Total liabilities 3,890,229
-----------
Stockholders' equity:
Preferred stock, $.01 par value per share.
Authorized 500,000 shares, issued and outstanding, none --
Common stock, $.01 par value per share.
Authorized 15,000,000 shares, issued and outstanding 5,450,727 shares 54,507
Additional paid-in capital 30,847,037
Deficit (4,247,849)
Cumulative foreign currency adjustment (308,408)
-----------
Total stockholders' equity 26,345,287
-----------
$30,235,516
===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ----------------------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $1,162,280 $2,673,524 $3,813,626 $11,069,759
Cost of revenues 527,025 1,157,641 1,513,456 5,966,654
---------- ---------- ---------- -----------
Gross profit 635,255 1,515,883 2,300,170 5,103,105
Selling, general and administrative expenses 950,049 3,132,158 2,658,434 7,833,179
Amortization of acquired intangible assets 152,580 183,162 457,740 549,486
---------- ---------- ---------- -----------
Operating loss (467,374) (1,799,437) (816,004) (3,279,560)
Interest income (expense), net (4,439) 213,230 (28,409) 544,164
---------- ---------- ---------- -----------
Loss before income taxes (471,813) (1,586,207) (844,413) (2,735,396)
Income tax expense (benefit) 12,700 -- (13,000) --
---------- ---------- ---------- -----------
Net loss (484,513) (1,586,207) (831,413) (2,735,396)
Preferred stock dividends 14,219 -- 72,159 --
---------- ----------- ---------- -----------
Net loss attributable to common stock $ (498,732) $(1,586,207) $ (903,572) $(2,735,396)
---------- ----------- ---------- -----------
Loss per common share $ (.13) $ (.29) $ (.24) $ (.52)
========== ========== ========== ===========
Weighted average number of shares outstanding 3,879,742 5,434,616 3,737,453 5,254,445
========== ========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Common stock Additional Cumulative Net
------------ paid-in foreign currency stockholders'
Shares Amount capital Deficit adjustment equity
------ ------ ------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of period 4,244,827 $42,448 $ 9,712,777 $(1,512,453) $ (26,310) $ 8,216,462
Sale of common
stock, net of
offering expenses 1,172,500 11,725 21,023,045 -- -- 21,034,770
Stock options
exercised 33,400 334 111,215 111,549
Net loss -- -- -- (2,735,396) -- (2,735,396)
Foreign currency
translation
adjustment -- -- -- -- (282,098) (282,098)
--------- -------- ------------ ------------ --------- -----------
Balance at end of
period 5,450,727 $54,507 $30,847,037 $(4,247,849) $(308,408) $26,345,287
========== ======== ============ ============ ========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(831,413) $(2,735,396)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation of equipment 187,734 292,921
Amortization 102,745 120,732
Amortization of acquired intangible assets 457,740 549,486
Deferred income taxes 21,300 --
Changes in operating assets and liabilities:
Decrease in accounts receivable 81,612 2,099,042
Decrease in costs and estimated earnings in excess of
billing on uncompleted contracts 121,468 --
Increase in recoverable income taxes (34,300) --
(Increase) decrease in inventories 91,263 (1,603,847)
Increase in accounts payable 12,471 899,042
Increase in accrued expenses 75,927 13,932
Decrease in billings in excess of costs and estimated
earnings on uncompleted contracts (199,225) --
Increase (decrease) in deferred revenue on maintenance 109,188 (54,480)
contracts
Other 22,225 (205,777)
--------- -----------
Net cash provided by (used in) operating activities 218,735 (624,345)
--------- -----------
Cash flows from investing activities:
Sale of short-term investments 399,409 --
Purchase of short-term investments (902) --
Equipment expenditures (83,632) (682,338)
Additions to computer software development costs (390,720) (346,530)
Prepaid license fee - (1,000,000)
--------- -----------
Net cash used in investing activities (75,845) (2,028,868)
--------- -----------
Cash flows from financing activities:
Proceeds from notes payable 589,000 --
Payments of notes payable (863,132) (4,053,416)
Proceeds from issuance of common stock, net of offering expense 300,224 21,103,294
Redemption of preferred stock (5,766) --
Payments of preferred stock cash dividends (102,788) --
Payments of long-term debt (50,379) (76,611)
--------- ------------
Net cash provided by (used in) financing activities (132,841) 16,973,267
---------- ------------
Effect of exchange rate changes on cash -- (76,903)
---------- -----------
Net increase in cash and cash equivalents 10,049 14,243,151
Cash and cash equivalents at beginning of period 291,363 2,656,494
---------- ----------
Cash and cash equivalents at end of period $ 301,412 $16,899,645
========== ===========
Cash paid for:
Interest expense $ 41,691 $ 154,052
========== ============
Income taxes $ - $ -
========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
reporting and instructions to Form 10-QSB. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation have been included.
(2) REVENUES
Revenues from the United States Government were 37% of revenues in the nine
month period ended September 30, 1995. In 1996, revenues from the United
States Government were less than 10% of revenues. Revenues from one commercial
client, MCI Telecommunications Corporation, accounted for 34% of revenues in
the nine month period ended September 30, 1996. In 1995, no commercial client
accounted for greater than 10% of revenues.
Revenues from foreign clients were 12% and 43% in the nine month periods ended
September 30, 1995 and 1996, respectively. The majority of these revenues in
1996 were derived from sales to unaffiliated customers of the Company by the
Company's Swiss subsidiary.
(3) INVENTORIES
Inventories consists of the following at September 30, 1996:
<TABLE>
<S> <C>
Raw materials $1,857,634
Finished goods 1,953,043
----------
Total $3,810,677
==========
</TABLE>
(4) ACCRUED EXPENSES
Accrued expenses consists of the following at September 30, 1996:
<TABLE>
<S> <C>
Accrued salaries and commissions $ 876,420
Other 560,605
----------
Total $1,437,025
==========
</TABLE>
(5) INCOME TAXES
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of the deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which temporary differences become deductible and net operating
losses are allowable. Based on consideration of the above factors, management
determined a valuation allowance of $952,500 was required at September 30,
1996. This represents an increase of $580,000 and $783,000 for the three month
and nine month periods ended September 30, 1996, respectively.
7
<PAGE> 8
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
(6) GRETACODER DATA SYSTEMS AG ("GDS")
In October 1995, the Company, acquired all the issued and outstanding capital
stock of GDS. The transaction was accounted for under the purchase accounting
method.
Unaudited pro forma results of operations of the Company for the nine period
ended September 30, 1995 as if the GDS acquisition had occurred on January 1,
1995 are as follows:
<TABLE>
<S> <C>
Revenues $ 8,198,000
===========
Loss before income tax $(1,116,000)
===========
Net loss $(1,116,000)
===========
Net loss attributable to common stock $(1,188,000)
===========
Loss per common share $ (.30)
======
</TABLE>
The unaudited pro forma results of operations do not purport to be indicative
of the results that actually would have been obtained had the operations been
consolidated for this period. The amounts primarily reflect adjustment for the
amortization of intangible assets acquired and for interest expense. The pro
forma net loss includes non-cash charges of $1,021,000 related to depreciation
and the amortization of acquired intangible assets.
(7) EARNINGS (LOSS) PER COMMON SHARE
The earnings (loss) per common share for the three month and nine month periods
ended September 30, 1995 and 1996 was computed by dividing the net earnings
(loss) attributable to common stock, which reflects the preferred stock
dividend requirement for 1995, by the weighted average number of shares of
common stock outstanding during each period and common stock equivalents, to
the extent they result in additional per share dilution. Earnings (loss) per
common share assuming full dilution is substantially the same as earnings
(loss) per common share as stated and, accordingly, is not shown separately.
8
<PAGE> 9
ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Except for historical information contained herein, the statements in
this Item are forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecasted results. Those risks include, among others, risks
associated with the receipt and timing of future customer orders, price
pressures and other competitive factors leading to a decrease in anticipated
revenues and gross profit margins. These and other risks are described in the
Company's filings with the Securities and Exchange Commission (SEC), copies of
which are available from the SEC or may be obtained upon request from the
Company.
OVERVIEW
The Company designs, manufactures and markets network security systems
and products using encryption technology. The Company's products are used in
electronic commerce applications by financial institutions, government agencies
and large corporations to secure data transmissions on private and public
computer networks. In order to expand its product offerings, the Company
acquired Connective Strategies, Inc. ("CSI") in October 1994 and GRETACODER
Data Systems AG ("GDS") in October 1995. CSI designs, manufactures and markets
communications equipment that enables data/voice connectivity via the
Integrated Services Digital Networks (ISDN). GDS designs, manufactures and
markets cryptographic equipment primarily in Switzerland and Europe.
The Company's historical operating results have been dependent on a
variety of factors including, but not limited to, the length of the sales
cycle, the timing of orders from and shipments to clients, product development
expenses and the timing of development and introduction of new products. The
Company's expense levels are based, in part, on expectations of future
revenues. The size and timing of the Company's historical revenues have varied
substantially from quarter to quarter and year to year. Accordingly, the
results of a particular period, or period to period comparisons of recorded
sales and profits may not be indicative of future operating results.
While management is committed to the long-term profitability of the
Company, the recent growth of the computer security industry has made it
important that market share be obtained. The Company has undertaken various
strategies in order to increase its revenues and improve its future operating
results, including the two recent acquisitions and new product offerings such
as its SafeNet products for the Internet and the SafeNet/Security Center, a
high performance workstation which automatically manages SafeNet products.
Management believes that growth in the market for products that provide secure
remote access to computer networks requires the Company to increase its
investment in development and marketing activities to allow the Company to take
advantage of this market opportunity and to achieve long-term profitability
thereby maximizing shareholder value.
RESULTS OF OPERATIONS OF THE COMPANY
The following table sets forth certain Consolidated Statements of
Operations data of the Company as a percentage of revenues for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------ ------------------
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C>
Revenues....................................................... 100 % 100 % 100 % 100 %
Cost of revenues............................................... 45 43 40 54
--- --- --- ---
Gross profit................................................. 55 57 60 46
Selling, general and administrative expenses................... 82 117 69 71
Amortization of acquired intangible assets..................... 13 7 12 5
--- --- --- ---
Operating loss............................................... (40) (67) (21) (30)
Interest income (expense), net................................. (1) 8 (1) 5
--- --- --- ---
Loss before income tax benefit............................... (41) (59) (22) (25)
Income tax expense (benefit)................................... 1 -- -- --
--- --- --- ---
Net loss....................................................... (42) % (59) % (22) % (25) %
== == == ==
</TABLE>
9
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
(continued)
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
Revenues increased 190%, or $7,256,133, to $11,069,759 for the nine
months ended September 30, 1996 from $3,813,626 for the same period in 1995. Of
the increase, $2,783,207 is attributable to network security systems and
products, mainly the Company's SafeNet dial access products for the Internet.
The remainder of the increase, $4,472,926, is attributable to the revenues of
GDS. Since GDS was acquired in October 1995, the nine months ended September
30, 1995 does not include any revenues from GDS. On a pro forma basis, which
includes GDS, revenues for the nine months ended September 30, 1995 were
$8,198,000.
Cost of revenues increased to 54% for the nine months ended September
30, 1996 from 40% in 1995. Cost of revenues for 1996 include $236,000 for
amortization of a purchase accounting adjustment to the carrying value of GDS
inventory. Without this charge, cost of revenues was 52% in 1996. On a pro
forma basis, the cost of revenues was 35% in 1995. The increase reflects higher
costs associated with the production of the SafeNet dial access products for
the Internet, changes in GDS product mix, and a favorable profit margin on a
large purchase order in the first quarter of 1995. The recent growth in
Internet security products has made market share very important. Accordingly,
the Company realized a lower gross profit on the SafeNet dial access products
sold to MCI Telecommunications Corporation ("MCI"), see discussion on page 12.
Since there were no shipments to MCI in the third quarter of 1996, the
quarterly cost of revenues was 43%. It is anticipated that the gross margin in
subsequent quarters will be improved by developing new products, by changing
the product sales mix, by improved sales and marketing activities and by the
net service revenues to be generated by the SafeNet/Security Center which is
projected to begin operations in 1997.
Selling, general and administrative expenses ("SG&A") totaled
$7,833,179 in the nine months ended September 30, 1996 compared to $2,658,434
in the same period of 1995. On a pro forma basis, SG&A totaled $5,847,000 in
1995. The increase in SG&A is primarily due to increased personnel related
costs associated with the expansion of the sales, marketing and engineering
staffs ($872,000), to increased sales and marketing activities ($381,000), to
expansion of client support function ($198,000) and to start up costs
associated with the establishment of the SafeNet/Security Center ($336,000).
The Company had no income tax expense for the nine months ended
September 30, 1996, compared with an income tax benefit of $13,000 in 1995. In
1995, the Company established a valuation allowance since its ability to fully
use the net operating loss is dependent upon future taxable income.
The Company had a net loss of $2,735,396 for the nine months ended
September 30, 1996 compared to $831,413 in 1995. The 1996 net loss includes the
charge for amortization of acquired intangible assets from the recent
acquisitions of CSI and GDS of $549,486 compared to $457,740 in 1995. Net
interest income totaled $544,164 in 1996, which is attributable to the
temporary investment of the proceeds from the Company's public offering of
common stock in February 1996 compared to net interest expense of $28,409 in
1995. The loss per common share was $.52 in the nine months ended September 30,
1996 compared to $.24 in 1995. On a pro forma basis, the net loss in 1995 was
$1,116,000 and the loss per common share was $.30.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
Revenues increased 130%, or $1,511,244, to $2,673,524 for the three
months ended September 30, 1996 from $1,162,280 for the same period in 1995.
The increase is attributable to the revenues of GDS ($1,805,051). Since GDS was
acquired in October 1995, the three months ended September 30, 1995 does not
included any revenues from GDS. On a pro forma basis, which includes GDS,
revenues for the three months ended September 30, 1995 were $2,795,000. Since
there were no shipments to MCI during the 1996 quarter, revenues from network
security systems and products declined by $293,807 compared to the 1995
quarter. This temporary decline was due to personnel changes and program
revisions in the Company's sales and marketing activities that were made in the
second and third quarters of 1996. It is anticipated that these improvements
will result in increased revenues in 1997.
10
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
(continued)
Cost of revenues declined to 43% for the three months ended September
30, 1996 from 45% in 1995. The improvement resulted from changes in GDS product
mix reduced by lower margins on network security systems and products due to a
lower sales volume available to absorb costs associated with production
activities. On a pro forma basis, the cost of revenues was 35% in 1995. As
noted on page 10, the increase reflects changes in the GDS product mix.
SG&A totaled $3,132,158 in the three months ended September 30, 1996
compared to $950,049 in the same period of 1995. On a pro forma basis, SG&A
totaled $1,987,000 in 1995. The increase in SG&A is primarily due to increased
personnel related costs associated with the expansion of the sales, marketing
and engineering staffs ($444,000), to increased sales and marketing activities
($294,000), to expansion of the client support function ($75,000) and to the
establishment of the SafeNet/Security Center ($251,000).
The Company had no income tax expense for the three months ended
September 30, 1996 compared with income tax expense of $12,700 in 1995. In
1995, the Company established a valuation allowance since its ability to fully
use the net operating loss is dependent upon future taxable income.
The Company had a net loss of $1,586,207 for the three months ended
September 30, 1996 compared to $484,513 in 1995. The 1996 net loss includes the
charge for amortization of acquired intangible assets from the acquisitions of
CSI and GDS of $183,162 compared to $152,580 in 1995. Net interest income
totaled $213,230 in 1996, which is attributable to the temporary investment of
the proceeds from the Company's public offering of 1,172,500 shares of common
stock in February 1996 compared to net interest expense of $4,439 in 1995. The
loss per common share was $.29 in the three months ended September 30, 1996
compared to $.13 in 1995. On a pro forma basis, the net loss in 1995 was
$453,000 and the loss per common share was $.11.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that its current cash resources, together with
the cash flows from operations, will be sufficient to meet its needs for the
immediate future.
In February 1996, the Company completed a public offering of 1,172,500
shares of common stock at a per share price of $20.00. The net proceeds to the
Company from the offering were $21,035,000 after deducting offering expenses.
The proceeds were used to pay promissory notes incurred in the GDS acquisition
($3,853,416) and for working capital and general corporate purposes, including
product development and expansion of the Company's sales and marketing efforts.
A portion of the proceeds designated for working capital purposes may also be
used for investment in, or acquisition of, related or complimentary businesses,
products, product development rights or technologies. However, at the present
time no discussions or arrangements are underway regarding possible investment
or acquisitions, and there can be no assurance that the Company can consummate
any acquisition or investment on acceptable terms.
As of September 30, 1996, the Company had cash and accounts receivable
totaling $19,022,000 and a backlog of $2,301,000.
In August 1996, the Company signed a Joint Development and Marketing
Agreement with CyberGuard Corporation. The companies have developed and intend
to market a product that combines the Company's SafeNet products and
CyberGuard's Firewall product. In connection therewith, the Company has prepaid
a refundable $1.0 million license fee to CyberGuard which will be recovered
through purchases of Firewall products. While the Company anticipates that
there will be sufficient demand for the new product, there is no assurance that
this product can be successfully marketed or that the Company will recover the
prepaid license fee.
11
<PAGE> 12
ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
The Company has concluded discussions with MCI to terminate a previous
product agreement under which MCI was obligated to purchase approximately $7.0
million of SafeNet products during the twelve month period ending in September
1997. Pursuant to a new Alliance and Joint Marketing Agreement between the
Company and MCI, the Company has become a member of the MCI Strategic Alliance
Program (the "Program") and has received an option to purchase the existing MCI
inventory of the Company's Safenet lan and dial access products at a
substantial discount. The Company believes that the Program will provide a
significant marketing opportunity for its Safenet products as the Program has
for its other current participants. There can be no assurances that the Program
will be successful for the Company or that the Program will generate sufficient
SafeNet product sales volume to enable the Company to benefit from the
discounts offered by MCI.
INFLATION AND SEASONALITY
The Company does not anticipate that inflation will significantly
impact its business. The Company does not believe its business is seasonal,
however, because the Company recognizes revenues upon shipment of finished
products, such recognition may be irregular and uneven, thereby disparately
impacting quarterly operating results and balance sheet comparisons.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-B.
11 Statement re computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K: None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INFORMATION RESOURCE ENGINEERING, INC.
November 12, 1996
By:/s/Anthony A. Caputo
--------------------
ANTHONY A. CAPUTO
Chairman, President
and Chief Executive Officer
November 12, 1996
By:/s/David A. Skalitzky
---------------------
DAVID A. SKALITZKY
Vice President, Finance
(Principal Financial and Accounting Officer)
12
<PAGE> 1
Exhibit 11
INFORMATION RESOURCE ENGINEERING, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ------------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
-------
Net earnings (loss) $ (484,513) $(1,586,207) $ (831,413) $(2,735,396)
Accrued dividend on preferred stock 14,219 -- 72,159 --
---------- ----------- ----------- -----------
Net earnings (loss) attributable to common stock $ (498,732) $(1,586,207) $ (903,572) $(2,735,396)
========== =========== =========== ===========
Weighted average number of common shares outstanding 3,879,742 5,434,616 3,737,453 5,254,445
Dilutive effect of stock options and warrants - - - -
---------- ----------- ----------- -----------
Weighted average number of common shares outstanding 3,879,742 5,434,616 3,737,453 5,254,445
========== =========== =========== ===========
Earnings (loss) per common share $ (.13) $ (.29) $ (.24) $ (.52)
========== =========== =========== ===========
Assuming full dilution
----------------------
Net earnings (loss) attributable to common stock $ (498,732) $(1,586,207) $ (903,572) $(2,735,396)
========== =========== =========== ===========
Weighted average number of common shares outstanding 3,879,742 5,434,616 3,737,453 5,254,445
Additional dilutive effect of stock options and warrants - - - -
--------- ---------- ---------- ----------
Weighted average number of common shares outstanding 3,879,742 5,434,616 3,737,453 5,254,445
========== =========== =========== ===========
Earnings (loss) per common share assuming full dilution $ (.13) $ (.29) $ (.24) $ (.52)
========== =========== =========== ===========
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1996 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 FOR INFORMATION
RESOURCE ENGINEERING INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 16,899,645
<SECURITIES> 0
<RECEIVABLES> 2,122,133
<ALLOWANCES> 0
<INVENTORY> 3,810,677
<CURRENT-ASSETS> 22,979,862
<PP&E> 2,188,902
<DEPRECIATION> 744,910
<TOTAL-ASSETS> 30,235,516
<CURRENT-LIABILITIES> 3,868,743
<BONDS> 21,486
0
0
<COMMON> 54,507
<OTHER-SE> 26,290,780
<TOTAL-LIABILITY-AND-EQUITY> 30,235,516
<SALES> 11,069,759
<TOTAL-REVENUES> 11,069,759
<CGS> 5,966,654
<TOTAL-COSTS> 5,966,654
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,635
<INCOME-PRETAX> (2,735,396)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,735,396)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,735,396)
<EPS-PRIMARY> (.52)
<EPS-DILUTED> (.52)
</TABLE>
