<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20634
INFORMATION RESOURCE ENGINEERING, INC.
(Exact name of registrant 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
--------------
(Registrant's telephone number)
Indicate by a check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 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 August 11,
1997 was 5,462,727.
<PAGE> 2
INFORMATION RESOURCE ENGINEERING, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL INFORMATION
Consolidated Balance Sheets as of December 31, 1996 and June 30, 3
1997
Consolidated Statements of Operations for the three months and
six months ended June 30, 1996 and 1997 4
Consolidated Statements of Stockholders' Equity for the six
months ended June 30, 1996 and 1997 5
Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
PART II. OTHER INFORMATION 11
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 11
</TABLE>
2
<PAGE> 3
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
----------------- ------------
Assets (Note) Unaudited
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $11,916,991 $ 2,279,997
Short-term investments 2,311,980 7,520,589
Accounts receivable 1,564,381 3,417,119
Inventories 3,543,995 3,598,084
Prepaid expenses 101,843 269,232
----------- -----------
Total current assets 19,439,190 17,085,021
Equipment and leasehold improvements, net of accumulated
depreciation of $847,747 and $1,085,777 1,842,725 1,728,542
Computer software development costs, net of accumulated
amortization of $336,525 and $467,932 1,142,352 1,273,003
Goodwill, net of accumulated amortization of $142,662 and $203,824 1,080,568 1,019,406
Prepaid license fee 1,000,000 992,500
Other assets 148,406 117,961
----------- -----------
$24,653,241 $22,216,433
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current maturities of long-term debt $ 18,480 $ 19,322
Accounts payable 1,288,929 1,313,327
Accrued expenses 1,317,389 1,407,307
Deferred revenue on maintenance contracts 150,498 189,788
----------- -----------
Total current liabilities 2,775,296 2,929,744
Long-term debt, less current maturities 16,710 6,833
----------- -----------
Total liabilities 2,792,006 2,936,577
----------- -----------
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 5,458,127
shares in 1996 and 5,462,127 in 1997 54,581 54,621
Additional paid-in capital 30,917,584 30,928,503
Deficit (8,597,003) (10,939,151)
Cumulative foreign currency adjustment (513,927) (764,117)
----------- -----------
Net stockholders' equity 21,861,235 19,279,856
----------- -----------
$24,653,241 $22,216,433
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived
from the audited financial statements at that date.
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 Six Months Ended
June 30, June 30,
--------------------------------- ----------------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $5,071,583 $ 3,736,613 $8,396,235 $6,886,729
Cost of revenues 2,848,000 1,589,850 4,809,013 3,051,041
----------- ------------ ------------ ------------
Gross profit 2,223,583 2,146,763 3,587,222 3,835,688
Operating expenses
Research and development expenses 869,120 957,773 1,784,759 1,894,328
Sales and marketing expenses 996,952 1,633,898 1,845,923 3,283,110
General and administrative expenses 632,087 579,245 1,070,339 1,215,012
Amortization of acquired intangible assets 183,163 30,581 366,324 61,162
----------- ------------ ------------ ------------
2,681,322 3,201,497 5,067,345 6,453,612
----------- ------------ ------------ ------------
Operating loss (457,739) (1,054,734) (1,480,123) (2,617,924)
Interest income, net 231,996 136,731 330,934 275,776
----------- ------------ ------------ ------------
Loss before income taxes (225,743) (918,003) (1,149,189) (2,342,148)
Income taxes -- -- -- --
----------- ------------ ------------ ------------
Net loss $ (225,743) $ (918,003) $(1,149,189) $(2,342,148)
=========== ============ ============ ============
Loss per common share $ (.04) $ (.17) $ (.22) $ (.43)
=========== ============ ============ ============
Weighted average number of shares outstanding 5,417,329 5,461,949 5,164,362 5,460,595
=========== ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(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>
Six Months Ended June 30, 1996
Balance at beginning
of period 4,244,829 $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 21,036,276 -- -- 21,048,001
Net loss -- -- -- (1,149,189) -- (1,149,189)
Foreign currency
translation
adjustment -- -- -- -- (256,795) (256,795)
--------- ------- ----------- ------------ ------------ ------------
Balance at end of
period 5,417,329 $54,173 $30,749,053 $(2,661,642) $ (283,105) $27,858,479
========= ======= =========== ============ ============ ============
</TABLE>
<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>
Six Months Ended June 30, 1997
Balance at beginning
of period 5,458,127 $54,581 $30,917,584 $(8,597,003) $ (513,927) $21,861,235
Stock options
exercised 4,000 40 10,919 -- -- 10,959
Net loss -- -- -- (2,342,148) -- (2,342,148)
Foreign currency
translation
adjustment -- -- -- -- (250,190) (250,190)
--------- ------- ----------- ------------ ------------ ------------
Balance at end of
period 5,462,127 $54,621 $30,928,503 $(10,939,151) $ (764,117) $19,279,856
========= ======= =========== ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,149,189) $(2,342,148)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of equipment 190,404 261,949
Amortization 80,479 138,907
Amortization of acquired intangible assets 366,324 61,162
Changes in operating assets and liabilities
Increase in accounts receivable (596,151) (1,912,032)
Increase in inventories (327,157) (175,974)
Increase in prepaid expenses (103,128) (167,722)
Increase in accounts payable 1,300,646 70,626
Increase (decrease) in accrued expenses (196,091) 139,443
Increase (decrease) in deferred revenue on maintenance (28,945) 39,290
contracts
Other 26,942 30,445
----------- -----------
Net cash used in operating activities (435,866) (3,856,054)
----------- -----------
Cash flows from investing activities:
Purchase of short-term investments -- (6,511,609)
Sales of short-term investments -- 1,303,000
Equipment expenditures (245,718) (162,532)
Additions to computer software development costs (219,984) (262,058)
----------- -----------
Net cash used in investing activities (465,702) (5,633,199)
----------- -----------
Cash flows from financing activities:
Payments of notes payable (4,053,416) --
Proceeds from sale of common stock, net of offering expense 21,048,001 10,959
Payments of long-term debt (34,205) (9,035)
----------- -----------
Net cash provided by financing activities 16,960,380 1,924
----------- -----------
Effect of exchange rate changes on cash (41,972) (149,665)
----------- -----------
Net increase (decrease) in cash and cash equivalents 16,016,840 (9,636,994)
Cash and cash equivalents at beginning of period 2,656,494 11,916,991
----------- -----------
Cash and cash equivalents at end of period $18,673,334 $ 2,279,997
=========== ===========
Cash paid for
Interest expense $ 147,042 $ 1,619
=========== ===========
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-Q. 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.
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
(2) Revenues
One commercial client accounted for 13% of revenues in the six month period
ended June 30, 1997. A second commercial client accounted for 45% of revenues
in the six month period ended June 30, 1996.
Revenues from foreign clients were 34% and 46% in the six month periods ended
June 30, 1996 and 1997, respectively. The majority of these revenues were
derived from sales to unaffiliated customers of the Company by its Swiss
subsidiary.
(3) Inventories
Inventories consists of the following at June 30, 1997:
<TABLE>
<S> <C>
Raw materials $1,512,905
Finished goods 2,085,179
----------
Total $3,598,084
==========
</TABLE>
(4) Accrued Expenses
Accrued expenses consists of the following at June 30, 1997:
<TABLE>
<S> <C>
Accrued salaries and commissions $ 834,276
Other 573,031
-----------
Total $ 1,407,307
===========
</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 an increase in the valuation allowance of $203,000 and $871,000 was
required at June 30, 1996 and 1997, respectively. This is an increase of
$37,000 and $395,000 for the three months ended June 30, 1996 and 1997,
respectively. The cumulative valuation allowance at June 30, 1997 was
$2,815,000.
(6) Loss per Common Share
The loss per common share for the three month and six month periods ended June
30, 1996 and 1997 was computed by dividing the net loss 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,
arising from the assumed exercise of outstanding stock options and warrants
under the treasury stock method.
7
<PAGE> 8
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(UNAUDITED) (Continued)
(6) Continued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per
Share, was issued in February 1997 and, effective for financial statements
issued for periods ending after December 15, 1997, establishes standards for
computing and presenting earnings per share ("EPS"). SFAS No. 128 replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the consolidated
statement of operations and requires reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. Earlier application is not permitted, however,
adoption will not have a material effect on EPS.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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.
Overview
The Company designs, manufactures and markets enterprise network security
solutions 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, such as the Internet. In order to expand its product
offerings, the Company acquired GRETACODER Data Systems AG ("GDS") in October
1995. 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 GDS acquisition and new product offerings such as its
SafeNet/Enterprise(TM) products for the Internet and the SafeNet/Security
Center(TM), a high performance workstation which automatically manages
SafeNet/Enterprise(TM) 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, sales and marketing
activities to allow the Company to take advantage of this market opportunity
and to achieve long-term profitability thereby maximizing shareholder value.
Accordingly, the Company incurred additional personnel costs associated with
expansion of its sales, marketing and engineering staff in 1996 and 1997.
However, there can be no assurance that these strategies will be successful.
8
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations of the Company
The following table sets forth certain Consolidated Statement of
Operations data of the Company as a percentage of revenues for the periods
indicated.
<TABLE>
<CAPTION>
Three Months Six Months Ended
Ended June 30, June 30,
----------------- -----------------
1996 1997 1996 1997
------ ------ ------ -----
<S> <C> <C> <C> <C>
Revenues 100% 100% 100% 100%
Cost of revenues 56 43 57 44
--- --- --- ---
Gross profit 44 57 43 56
Operating expenses
Research and development 17 25 21 27
Sales and marketing expenses 20 44 22 48
General and administrative expenses 12 15 13 18
Amortization of acquired intangible assets 4 1 5 1
--- ---- ---- ----
53 85 61 94
--- --- --- ---
Operating loss (9) (28) (18) (38)
Interest income, net 5 3 4 4
--- --- --- ---
Loss before income taxes (4) (25) (14) (34)
Income taxes -- -- -- --
--- --- --- ---
Net loss (4)% (25)% (14)% (34)%
== == == ==
</TABLE>
Six Months ended June 30, 1997 Compared to Six Months ended June 30, 1996
Revenues decreased 18% or $1,509,506 to $6,886,729 for the six months
ended June 30, 1997, from $8,396,235 for the same period in 1996. However, the
Company had a 19% increase in revenues during the second quarter of 1997 when
compared to the revenues of $3,150,116 for the first quarter of 1997. During
1997 the Company was able to generate revenues from new and existing clients
that partially offset the loss of revenue due to the termination of the product
agreement with MCI Telecommunications Corporation ("MCI"). Revenues from MCI
were $3,795,000 in 1996. While the Swiss franc revenues of GDS decreased 8%
(equivalent to $212,000), the exchange rate decline resulted in an additional
period to period decrease in revenues of $361,000.
Cost of revenues decreased to 44% for the six months ended June 30,
1997 compared to 57% for the same period in 1996. The 1996 cost of revenues
included $236,000 for amortization of a purchase accounting adjustment to the
carrying value of GDS inventory. Without this charge, the cost of revenues was
54% in 1996. During 1996, the Company realized a lower gross profit on the
SafeNet dial access products sold to MCI. SafeNet/Trusted Services
("Services"), a provider of virtual private network security management,
started generating revenue in 1997. On a pro forma basis with Services revenues
and cost of revenues removed, cost of revenues was 41% for the period. It is
anticipated that the gross margin will continue to improve in subsequent
periods due to the development of new products, changes in product sales mix,
improved sales and marketing activities and by increases in the net service
margins generated by Services.
Sales and marketing expenses increased by 78% or $1,437,187 to
$3,283,110 compared to $1,845,923 for the same period in 1996. The increase is
primarily related to increased personnel related costs associated with the
expansion of the sales and marketing staffs ($890,000) and with the increased
sales and marketing activities ($501,000).
General and administrative expenses increased by 14% or $144,673 to
$1,215,012 compared to $1,070,339 for the same period in 1996. The increase was
primarily related to increased use of professional services for general
corporate purposes ($98,000).
In the fourth quarter of 1996, the Company took a one-time charge
related to the write-off of the unamortized acquired intangible assets from the
acquisition of Connective Strategies, Inc. As a result, the amortization of
acquired intangible assets has now been reduced by $305,000.
The Company had no income tax benefit in either period. A valuation
allowance has been established since the Company's ability to use the net
operating loss is dependent upon future taxable income.
9
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company had a net loss of $2,342,148 for the six month ended June
30, 1997 compared to a net loss of $1,149,189 for the same period in 1996. The
loss per common share was $.43 in 1997 compared to $.22 in 1996.
Three Months ended June 30, 1997 Compared to Three Months ended June 30, 1996
Revenues decreased 26% or $1,334,970 to $3,736,613 for the three
months ended June 30, 1997, from $5,071,583 for the same period in 1996.
However, the Company had a 19% increase in revenues during the second quarter
of 1997 when compared to the $3,150,116 of revenues for the first quarter of
1997. During 1997 the Company was able to generate revenues from new and
existing clients that partially offset the loss of revenue due to the
termination of the product agreement with MCI. Revenues from MCI were
$2,399,000 in 1996. While the Swiss franc revenues of GDS decreased 14%
(equivalent to $218,000), the exchange rate decline resulted in an additional
period to period decrease in revenues of $175,000.
Cost of revenues decreased to 43% for the three months ended June 30,
1997 compared to 56% for the same period in 1996. During 1996, the Company
realized a lower gross profit on the SafeNet dial access products sold to MCI.
On a pro forma basis with Services revenues and cost of revenues removed, cost
of revenues was 39% for the quarter.
Sales and marketing expenses increased by 64% or $636,946 to
$1,633,898 compared to $996,952 for the same period in 1996. The increase is
primarily related to increased personnel related costs associated with the
expansion of the sales and marketing staffs ($463,000) and with the increased
sales and marketing activities ($157,000).
As previously explained, the quarterly amortization of acquired
intangible assets has now been reduced by $152,500.
The Company had no income tax benefit in either period. A valuation
allowance has been established since the Company's ability to use the net
operating loss is dependent upon future taxable income.
The Company had a net loss of $918,003 for the three month ended June
30, 1997 compared to a net loss of $225,743 for the same period in 1996. The
loss per common share was $.17 in 1997 compared to $.04 in 1996.
This net loss is an improvement of 35% or $506,142 from the net loss
of $1,424,145 for the three months ended March 31, 1997. Increased revenues
combined with an improved gross margin and tight control of operating expenses
contributed to the lower loss. Total operating expenses were $3,201,497 for the
three months ended June 30, 1997 compared to $3,252,115 for the three months
ended March 31, 1997.
Liquidity and Financial Position of the Company
The Company believes that its current cash resources, together with
cash flows from operations, will be sufficient to meet its needs for the next
year. As of June 30, 1997, the Company had cash, short-term investments and
accounts receivable totaling $13,218,000 and a backlog of $3,231,000.
Significant uses of the Company's cash balances during the first six
months of 1997 included the purchase net of sales of short-term investments
($5,209,000) and the funding of operating activities ($3,856,000). Accounts
receivable increased by $1,912,000 due to a large volume of shipments in the
last month of the period.
In August 1996, the Company signed a Joint Development and Marketing
Agreement with CyberGuard Corporation ("CyberGuard"). The companies have
developed and are marketing a product that combines the Company's
SafeNet/Enterprise products and CyberGuard's Firewall product. In connection
therewith, the Company has prepaid a refundable $1.0 million license fee to
CyberGuard which it believes will be recovered through purchases of Firewall
products.
During 1996, the Company experienced a significant increase in its
finished goods inventory as a result of the cancellation of the MCI contract.
These Internet security products were produced in anticipation of being shipped
to MCI. While the Company believes that it will sell these products during
1997, there can be no assurance that they will be sold during the period.
10
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Inflation and Seasonality
The Company does not believe 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
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INFORMATION RESOURCE ENGINEERING, INC.
August 14, 1997
By:/s/Anthony A. Caputo
--------------------
ANTHONY A. CAPUTO,
Chairman, President and Chief Executive Officer
August 14, 1997
By:/s/Richard G. Tennant
---------------------
RICHARD G. TENNANT,
Senior Vice President,
Chief Financial Officer
11
<PAGE> 1
Exhibit 11
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------------------------------
1996 1997 1996 1997
---- ---- ---- ----
Primary
-------
<S> <C> <C> <C> <C>
Net loss $ (225,743) $ (918,003) $(1,149,189) $(2,342,148)
========== ========== ========== ==========
Average common shares outstanding 5,417,329 5,461,949 5,164,362 5,460,595
Dilutive effect of stock options and warrants -- -- -- --
---------- ---------- ---------- ----------
Weighted average number of common shares outstanding 5,417,329 5,461,949 5,164,362 5,460,595
========== ========== ========== ==========
Loss per common share $ (.04) $ (.17) $ (.22) $ (.43)
========== ========== ========== ==========
Assuming full dilution
----------------------
Net loss $ (225,743) $ (918,003) $(1,149,189) $(2,342,148)
========== ========== ========== ==========
Weighted average number of common shares outstanding 5,417,329 5,461,949 5,164,362 5,460,595
Additional dilutive effect of stock options and warrants -- -- -- --
---------- ---------- ---------- ----------
Weighted average number of common shares outstanding 5,471,329 5,461,949 5,164,362 5,460,595
========== ========== ========== ==========
Loss per common share assuming full dilution $ (.04) $ (.17) $ (.22) $ (.43)
========== ========== ========== ==========
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 FOR INFORMATION RESOURCE
ENGINEERING, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,279,997
<SECURITIES> 7,520,589
<RECEIVABLES> 3,417,119
<ALLOWANCES> 0
<INVENTORY> 3,598,084
<CURRENT-ASSETS> 17,085,021
<PP&E> 2,814,319
<DEPRECIATION> 1,085,777
<TOTAL-ASSETS> 22,216,433
<CURRENT-LIABILITIES> 2,929,744
<BONDS> 6,833
0
0
<COMMON> 54,621
<OTHER-SE> 19,225,235
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</TABLE>
