<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 March 31, 1999
[ ] 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)
--------------------
Delaware 52-1287752
-------- ----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
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 May 6, 1999
was 5,380,524.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Information
Consolidated Balance Sheets as of March 31, 1999 (unaudited) and December 31, 1998 3
Consolidated Statements of Operations for the three months ended March 31, 1999 and 1998 (unaudited) 4
Consolidated Statements of Stockholders' Equity for the three months ended March 31, 1999 and 1998
(unaudited) 5
Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and 1998 (unaudited) 6
Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 1999 and
1998 (unaudited) 7
Notes to Consolidated Financial Statements (unaudited) 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- -------------
(unaudited)
Assets
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,436 $ 5,866
Accounts receivable, net of allowance for doubtful accounts
of $84 and $87 4,137 4,919
Inventories 3,484 3,533
Prepaid expenses 647 304
------------- -------------
Total current assets 14,704 14,622
Equipment and leasehold improvements, net of accumulated
depreciation of $1,886 and $1,822 1,567 1,556
Computer software development costs, net of accumulated
amortization of $835 and $748 1,584 1,527
Goodwill, net of accumulated amortization of $410 and $387 609 632
Prepaid license fees and other assets 610 604
------------- -------------
$ 19,074 $ 18,941
============= =============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 1,476 $ 1,493
Accrued expenses 1,366 1,733
Advance payments and deferred revenue 627 315
------------- -------------
Total liabilities 3,469 3,541
------------- -------------
Stockholders' equity:
Preferred stock, $.01 par value per share.
Authorized 500,000 shares, none issued and outstanding - -
Common stock, $.01 par value per share.
Authorized 15,000,000 shares, issued 5,466,527 shares 55 55
Additional paid-in capital 31,336 31,042
Accumulated deficit (14,433) (14,621)
Accumulated other comprehensive income (loss) (915) (380)
Treasury stock, at cost, 109,569 shares and 174,000 shares (438) (696)
------------- -------------
Net stockholders' equity 15,605 15,400
------------- -------------
$ 19,074 $ 18,941
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues $ 6,005 $ 4,886
Cost of revenues 2,270 2,257
---------- ----------
Gross profit 3,735 2,629
---------- ----------
Research and development expenses 1,113 881
Sales and marketing expenses 1,822 1,816
General and administrative expense 573 509
Amortization of acquired intangible assets 23 31
---------- ----------
Total operating expenses 3,531 3,237
---------- ----------
Operating income (loss) 204 (608)
Interest income, net 20 99
---------- ----------
Income (loss) before income taxes 224 (509)
Income tax expense 36 -
---------- ----------
Net income (loss) $ 188 $ (509)
========== ==========
Income (loss) per common share - basic and diluted
Basic $ 0.04 $ (0.09)
========== ==========
Diluted $ 0.03 $ (0.09)
========== ==========
Weighted average number of common shares outstanding:
Basic 5,292 5,463
Diluted 5,872 5,463
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited - in thousands)
<TABLE>
<CAPTION>
Common stock Additional
------------------- paid-in Accumulated
Shares Amount capital deficit
-------- -------- ------------ -------------
Three months ended March 31, 1999
- ---------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of
period 5,467 $ 55 $ 31,042 $ (14,621)
Stock options exercised - - 254 -
Stock option compensation - - 35 -
Net income - - - 188
Foreign currency
translation adjustment - - - -
Other - - 5
-------- -------- ------------ -------------
Balance at end of period 5,467 $ 55 $ 31,336 $ (14,433)
======== ======== ============ =============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
other Treasury stock Net
comprehensive -------------------- stockholders'
income (loss) Shares Amount equity
--------------- -------- ---------- -------------
Three months ended March 31, 1999
- ---------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of
period $ (380) 174 $ (696) $ 15,574
Stock options exercised - (64) 258 448
Stock option compensation - - 35
Net income - - 188
Foreign currency
translation adjustment (535) - (535)
Other - - 5
--------------- -------- --------- -------------
Balance at end of period $ (915) 110 $ (438) $ 15,715
=============== ======== ========= =============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 188 $ (509)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 212 207
Amortization of acquired intangible assets 23 31
Stock option compensation 35 -
Changes in operating assets and liabilities
Decrease in accounts receivable 641 176
(Increase) decrease in inventories 70 (183)
(Increase) decrease in prepaid expenses (355) 48
Increase in accounts payable 93 663
Decrease in accrued expenses (500) (391)
Increase (decrease) in deferred revenues 322 (430)
Other (10) 16
---------- ----------
Net cash provided by (used in) operating activities 719 (372)
---------- ----------
Cash flows from investing activities:
Purchase of short-term investments - (500)
Sales of short-term investments - 2,839
Equipment expenditures (146) (54)
Additions to computer software development costs (144) (149)
---------- ----------
Net cash provided by (used in) investing activities (290) 2,136
---------- ----------
Cash flows from financing activities:
Proceeds from exercise of stock options 512 1
Other 5 -
Payments of long-term debt - (5)
---------- ----------
Net cash provided by (used in) financing activities 517 (4)
---------- ----------
Effect of exchange rate changes on cash (376) (95)
---------- ----------
Net increase in cash and cash equivalents 570 1,665
Cash and cash equivalents at beginning of period 5,866 7,222
---------- ----------
Cash and cash equivalents at end of period $ 6,436 $ 8,887
========== ==========
Cash paid for:
Interest expense $ - $ -
========== ==========
Income taxes $ - $ -
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited - in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1999 1998
-------- ---------
<S> <C> <C>
Net income (loss) $ 188 $ (509)
Other comprehensive income (loss):
Foreign currency translation adjustments (535) (129)
-------- ---------
Comprehensive income (loss) $ (347) $ (638)
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
7
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\
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 are included.
(2) Inventories
Inventories consisted of the following at March 31, 1999:
<TABLE>
<S> <C>
Raw materials $ 1,699,000
Finished goods 1,785,000
-------------
Total $ 3,484,000
=============
</TABLE>
(3) Accrued Expenses
Accrued expenses consisted of the following at March 31, 1999:
<TABLE>
<S> <C>
Accrued salaries and commissions $ 901,000
Other 465,000
-------------
Total $ 1,366,000
=============
</TABLE>
(4) Income Taxes
The income tax expense for the three months ended March 31, 1999
represents current income taxes that will be paid by the Company's Swiss
subsidiary.
(5) Income (Loss) Per Common Share
Basic earning per share ("EPS") is calculated by dividing net income
(loss) by the weighted-average number of common shares outstanding for the
applicable period. Diluted EPS is calculated after adjusting the numerator and
the denominator of the basic EPS calculation for the effect of all dilutive
potential common shares outstanding during the period. Information related to
the calculation of basic and diluted EPS is summarized as follows:
<TABLE>
<CAPTION>
Three Months
(in thousands) Ended March 31,
-------------- --------------------
1999 1998
-------- ---------
<S> <C> <C>
Net income (loss) $ 188 $ (509)
======== =========
Weighted-average common shares outstanding - basic 5,292 5,463
Effect of dilutive securities-options 580 -
-------- ---------
Adjusted weighted avearage common shares
outstanding - diluted 5,872 5,463
======== =========
</TABLE>
8
<PAGE> 9
(6) Segments of the Company and Related Information
The Company has two reportable segments: network security products
designed and manufactured in the United States ("domestic operations") and
network security products designed and manufactured outside the United States
("European operations"). The reportable segments are strategic business units
that offer different products. The segments are managed separately because each
segment requires different technology and marketing strategies. The domestic
operations include some international sales mainly to South America and Asia.
Information presented below is as of and for the three months ended March 31,
1999 and 1998, respectively.
<TABLE>
<CAPTION>
(in thousands) 1999
-------------- -----------------------------------------------------
Domestic European
Operations Operations Consolidated
--------------- ---------------- ---------------
<S> <C> <C> <C>
Revenues from external customers $ 2,465 $ 3,610 $ 6,075
Intersegment revenues 70 - 70
--------------- ---------------- ---------------
Consolidated revenues $ 2,395 $ 3,610 $ 6,005
=============== ================ ===============
Operating income (loss) $ (1,512) $ 1,716 $ 204
Income (loss) before income taxes (1,497) 1,721 224
Depreciation and amortization 197 38 235
Segment assets 9,794 9,280 19,074
<CAPTION>
1998
-----------------------------------------------------
Domestic European
Operations Operations Consolidated
--------------- ---------------- ---------------
<S> <C> <C> <C>
Revenues from external customers $ 3,259 $ 1,627 $ 4,886
Intersegment revenues - - -
--------------- ---------------- ---------------
Consolidated revenues $ 3,259 $ 1,627 $ 4,886
=============== ================ ===============
Operating income (loss) $ (901) $ 293 $ (608)
Income (loss) before income taxes (804) 295 (509)
Depreciation and amortization 199 39 238
Segment assets 15,618 5,123 20,741
</TABLE>
<TABLE>
<CAPTION>
GEOGRAPHIC INFORMATION
Revenues Long-Lived Assets
------------------------------ ------------------------------
1999 1998 1999 1998
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
United States $ 2,222 $ 2,788 $ 2,976 $ 2,906
Switzerland 2,503 1,276 784 998
Other foreign countries 1,280 822 - -
------------- ------------- ------------- --------------
Total $ 6,005 $ 4,886 $ 3,760 $ 3,904
============= ============= ============= ==============
</TABLE>
In 1999, one commercial client of the European operations accounted for
21% of the Company's consolidated revenues. In 1998, three commercial clients of
the domestic operations and one commercial client of the European operations
accounted for 34% and 10%, respectively, of the Company's consolidated revenues.
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, achieving technical and product development milestones, the ability
to negotiate favorable strategic agreements with original equipment
manufactures, sufficient cash flow to support the Company's liquidity
requirements,
9
<PAGE> 10
and other competitive factors leading to a decrease in anticipated revenues and
gross profit margins, product development expenses and Year 2000 issues.
OVERVIEW
The Company designs, manufactures and markets enterprise network security
technology and systems that enable the deployment of secure Virtual Private
Network ("VPN") solutions over the Internet and other shared public networks.
The Company's technology and products are used in VPN and electronic commerce
applications by financial institutions, government agencies, large corporations,
telecommunication and Internet service providers to secure data transmissions on
private and public computer networks, such as the Internet. The Company's Swiss
subsidiary 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 new product offerings such as its SafeNet products for the
Internet and the SafeNet/Security Center(TM), a high performance workstation,
which automatically manages SafeNet products and the development of integrated
circuits for the original equipment manufacturer market. 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. However, there can be no assurance that
these strategies will be successful.
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
Ended March 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues 100 % 100 %
Cost of revenues 38 46
-------- --------
Gross profit 62 54
-------- --------
Research and development expenses 19 18
Sales and marketing expenses 30 37
General and administrative expenses 9 10
Amortization of acquired intangible assets - 1
-------- --------
Total operating expenses 58 66
-------- --------
Operating income (loss) 4 (12)
Interest income, net - 2
-------- --------
Income (loss) before income taxes 4 (10)
Income tax expense 1 -
-------- --------
Net income (loss) 3 % (10)%
======== ========
</TABLE>
The Company has two reportable segments: network security products
designed and manufactured in the United States ("domestic operations") and
network security products designed and manufactured outside the United States
("European operations"). The segments are strategic business units that offer
different products. The segments are managed
10
<PAGE> 11
separately because each segment requires different technology and marketing
strategies. The domestic operations include some international sales mainly to
South America and Asia.
Three Months ended March 31, 1999 compared to Three Months ended March 31, 1998
Revenues increased 23%, or $1,119,000, to $6,005,000 for the three months
ended March 31, 1999, from $4,886,000 in 1998. The European operations' revenues
increased $1,983,000 as a result of the delivery of large quantities of the
Company's products to several financial institutions in Europe. Revenues from
the domestic operations declined $794,000 due mainly to reduced product sales in
South America and Asia and a reduction in "legacy" product sales that was not
fully offset by SafeNet product sales.
Gross margin increased to 62% for the three months ended March 31, 1999,
from 54% in 1998. The improvement was due to higher margins on products in the
European operations as a result of changes in product mix. The gross profit
margin for the domestic operations decreased due to a decline in product
development margins.
Research and development expenses increased 26%, or $232,000, to
$1,113,000 for the three months ended March 31, 1999, from $881,000 in 1998. The
increase is primarily attributable to increased personnel related costs and
increased outside engineering expenses related to the Company's integrated
circuit development projects in the domestic operations. As a percentage of
revenues, the expenses were 19% and 18% in 1999 and 1998, respectively.
Sales and marketing expenses increased slightly to $1,822,000 for the
three months ended March 31, 1999, from $1,816,000 in 1998. As a percentage of
revenues, the expenses were 30% and 37% in 1999 and 1998, respectively.
General and administrative expenses increased 13%, or $64,000, to
$573,000 for the three months ended March 31, 1999, from $509,000 in 1998. The
increased use of consultants by the domestic operations caused the increase. As
a percentage of revenues, the expenses were 9% and 10% of revenues in 1999 and
1998, respectively.
The 1999 income tax expense of $36,000 was for estimated taxes on the
income of the European operations that had no income tax liability in 1998. The
Company had no United States income tax benefit in either period. A valuation
allowance for the full amount of the United States net deferred tax asset has
been established since the Company's ability to use the United States net
operating loss is dependent upon future taxable income.
The Company had net income of $188,000 for the three months ended March
31, 1999 compared to a net loss of $509,000 for the same period in 1998. The
diluted income per common share was $0.03 in 1999 compared to a loss per common
share of $0.09 in 1998.
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.
At March 31, 1999, the Company had working capital of $11,235,000 including cash
and cash equivalents of $6,436,000.
Significant sources of cash for the Company in 1999 included $719,000
from operating activities and $512,000 from the exercise of stock options.
YEAR 2000
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, software and computer systems may need to be
upgraded or replaced in order to comply with such "Year 2000" requirements. The
Company believes that its products have been made Year 2000 compliant in the
ordinary course of business. In addition, the Company utilizes third-party
equipment and software in its operations that may not be Year 2000 compliant.
Failure of such third-party equipment or software to operate properly with
regard to the year 2000 and thereafter could require the Company to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business, financial condition, and results of
operations.
11
<PAGE> 12
The Company has formed a Year 2000 task force. The task force consists of
employees with expertise in areas the Company believes could be affected if not
Year 2000 compliant. It has undertaken a program to address the Year 2000 issue
with respect to the Company's information systems, non-information systems and
certain systems of its major customers and suppliers. The objective of this task
force is to assess the problem, to develop remedies, to test the remedies and to
prepare contingency plans.
The Company has reviewed its information systems and its non-information
systems, which include telephone and security systems, and believes that they
are substantially in compliance with Year 2000 requirements and that any
remedial efforts and incremental costs to complete this process will not have a
material impact on its operations or financial results. It is expected that the
Company will have any required remediation, testing, and contingency plans
completed by June 30, 1999.
As part of the program of the task force, communications have been
initiated with key suppliers and customers to determine the extent to which the
Company is vulnerable to such parties' failure to remediate Year 2000 issues.
Furthermore, the purchasing patterns of customers or potential customers may be
affected by Year 2000 issues as companies expend significant resources to
correct their current systems for Year 2000 compliance. These expenditures may
result in reduced funds available to implement the infrastructure needed to
conduct trusted and secure communications and commerce over information networks
or to purchase products and services such as those offered by the Company, which
could have a material adverse effect on the Company's business, operating
results, financial condition, and results of operations.
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.
CHANGE IN ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities at fair value. Adoption of SFAS No. 133 is required
for the fiscal year 2000 and is not expected to have a material impact on the
Company's financial position or results of operations.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's major market risk is to fluctuations in foreign currency
exchange rates, principally related to the Swiss Franc. As of March 31, 1999,
the Company's investment in its Swiss subsidiary was approximately $7,674,000. A
10% change in the average Swiss Franc exchange rate for the three months ended
March 31, 1999 would have changed the Company's reported earnings for the three
months by approximately $171,000. A 10% change in the March 31, 1999 Swiss Franc
exchange rate would have changed the Company's reported currency translation
adjustment for three months ended March 31, 1999 by approximately $824,000.
At March 31, 1999, the Company did not have any interest bearing
obligations. In addition, the Company does not hold any derivative instruments
and does not have any commodity risk.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
27 Financial Data Schedule
(b) Reports on Form 8-K: None
12
<PAGE> 13
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.
May 11, 1999 /s/ Anthony A. Caputo
----------------------
ANTHONY A. CAPUTO
Chairman, President and Chief Executive Officer
May 11, 1999 /s/ David A. Skalitzky
-----------------------
DAVID A. SKALITZKY
Secretary and Treasurer
(Principal Financial and Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED BALANCE SHEET AT MARCH 31, 1999 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 FOR INFORMATION RESOURCE
ENGINEERING, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,436
<SECURITIES> 0
<RECEIVABLES> 4,221
<ALLOWANCES> 84
<INVENTORY> 3,484
<CURRENT-ASSETS> 14,704
<PP&E> 3,453
<DEPRECIATION> 1,567
<TOTAL-ASSETS> 19,074
<CURRENT-LIABILITIES> 3,469
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 15,550
<TOTAL-LIABILITY-AND-EQUITY> 19,074
<SALES> 6,005
<TOTAL-REVENUES> 6,005
<CGS> 2,270
<TOTAL-COSTS> 2,270
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 224
<INCOME-TAX> 36
<INCOME-CONTINUING> 188
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188
<EPS-PRIMARY> .04
<EPS-DILUTED> .03
</TABLE>
