<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number: 000-28112
MOTORVAC TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
STATE OF DELAWARE 33-0522018
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1431 S. VILLAGE WAY
SANTA ANA, CALIFORNIA 92705
(Address of Principal Executive Offices)
(714) 558-4822
(Issuer's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
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 [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
<TABLE>
<CAPTION>
Title Date Outstanding
<S> <C> <C>
Common Stock, $.01 par value September 30, 1998 4,514,918
</TABLE>
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOTORVAC TECHNOLOGIES, INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,649,515 $ 1,665,120
Accounts Receivable, net of allowance for doubtful accounts
of $87,619 (September 30, 1998) and $43,542 (December 31, 1997) 1,340,730 1,763,212
Inventories, net of reserve of $129,007 (September 30, 1998)
and $69,610 (December 31, 1997) 1,665,708 1,197,544
Other Current Assets - (including deposits with vendors of
$136,283 at September 30, 1998 and $133,585 at December 31, 1997) 366,976 394,100
------------ ------------
Total Current Assets 5,022,929 5,019,976
PROPERTY AND EQUIPMENT, net 241,898 231,928
INTANGIBLE ASSETS, net of accumulated amortization
of $1,105,632 (September 30, 1998) and
$867,064 (December 31, 1997) 718,812 957,379
OTHER ASSETS 17,227 17,227
------------ ------------
$ 6,000,866 $ 6,226,510
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
CURRENT LIABILITIES:
Accounts Payable and Other Current Liabilities $ 1,089,946 $ 1,105,243
Short-term note payable to bank 650,000 250,000
------------ ------------
Total Current Liabilities 1,739,946 1,355,243
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 10,000,000 shares authorized;
4,514,918 issued and outstanding 45,149 45,149
Additional paid-in capital 16,523,553 16,523,553
Employee Stock Loans (86,029) (35,161)
Accumulated Deficit (12,221,753) (11,662,274)
------------ ------------
Total Stockholders' Equity 4,260,920 4,871,267
------------ ------------
$ 6,000,866 $ 6,226,510
============ ============
</TABLE>
(See Accompanying Notes to Financial Statements)
<PAGE> 3
MOTORVAC TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ------------------------------
SEPT 30 SEPT 30 SEPT 30 SEPT 30
1998 1997 1998 1997
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
NET SALES $ 1,854,218 $ 2,489,045 $ 7,432,297 $ 7,206,952
COST OF SALES 1,142,629 1,517,457 4,263,622 4,087,145
------------ ----------- ------------ -----------
GROSS PROFIT 711,589 971,588 3,168,675 3,119,807
OPERATING EXPENSES 1,074,483 1,040,308 3,762,212 2,859,624
------------ ----------- ------------ -----------
(LOSS) INCOME FROM OPERATIONS (362,894) (68,720) (593,537) 260,183
INTEREST (INCOME) EXPENSE NET (8,468) (10,284) (39,708) (21,818)
------------ ----------- ------------ -----------
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES (354,426) (58,436) (553,829) 282,001
PROVISION FOR INCOME TAXES -- -- 5,650 395
------------ ----------- ------------ -----------
NET (LOSS) INCOME $ (354,426) $ (58,436) $ (559,479) $ 281,606
============ =========== ============ ===========
BASIC NET (LOSS) INCOME PER SHARE $ (0.08) $ (0.01) $ (0.12) $ 0.06
============ =========== ============ ===========
WEIGHTED AVERAGE SHARES USED TO CALCULATE BASIC
NET (LOSS) INCOME PER SHARE 4,514,918 4,514,918 4,514,918 4,514,918
============ =========== ============ ===========
DILUTED NET (LOSS) INCOME PER SHARE $ (0.08) $ (0.01) $ (0.12) $ 0.06
============ =========== ============ ===========
WEIGHTED AVERAGE SHARES USED TO CALCULATE DILUTED
NET (LOSS) INCOME PER SHARE 4,514,918 4,514,918 4,514,918 4,514,918
============ =========== ============ ===========
</TABLE>
(See Accompanying Notes to Financial Statements)
<PAGE> 4
MOTORVAC TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- --------------------------
SEPT 30 SEPT 30 SEPT 30 SEPT 30
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $ (354,426) $ (58,436) $ (559,479) $ 281,606
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization 101,434 118,336 310,465 358,329
Net change in operating assets and liabilities:
Accounts receivable (77,975) 384,355 422,482 (154,428)
Inventories 75,443 97,902 (468,164) 46,159
Other 27,598 39,006 27,124 109,387
Accounts payable and other current liabilities (91,695) (190,535) (15,297) (85,867)
---------- ---------- ---------- ----------
Net cash (used in) provided by operating activities (319,621) 390,628 (282,869) 555,186
CASH FLOWS FROM INVESTING ACTIVITY -
Purchase of property and equipment (11,741) (31,782) (81,868) (64,298)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances to employees for stock purchases (20,865) -- (50,868) --
Proceeds from (repayment) issuance of notes
payable to bank 315,000 (600,000) 400,000 (1,310,000)
---------- ---------- ---------- -----------
Net cash (used in) provided by financing activities 294,135 (600,000) 349,132 (1,310,000)
NET (DECREASE) INCREASE IN CASH (37,227) (241,154) (15,605) (819,112)
CASH AND CASH EQUIVALENTS, beginning of period 1,686,742 1,982,031 1,665,120 2,559,989
========== ========== ========== ===========
CASH AND CASH EQUIVALENTS, end of period $1,649,515 $1,740,877 $1,649,515 $ 1,740,877
========== ========== ========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
Interest paid $ 2,431 $ 7,834 $ 13,110 $ 45,934
========== ========== ========== ===========
Income taxes paid $ 24 $ -- $ 7,224 $ 395
========== ========== ========== ===========
</TABLE>
(See Accompanying Notes to Financial Statements)
<PAGE> 5
Notes to Unaudited Consolidated Financial Statements
(for the Three and Nine-Month Periods Ended September 30, 1998):
1. Basis of Presentation
The information set forth in these consolidated financial statements as
of September 30, 1998 is unaudited and may be subject to normal year-end
adjustments. In the opinion of management, the unaudited financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of
MotorVac Technologies, Inc. (the "Company" or "MTI") for the period
indicated. Results of operations for the interim three and nine-month
periods ended September 30, 1998 are not necessarily indicative of the
results of operations for the full fiscal year.
Certain amounts in the prior years' Consolidated Financial Statements
have been reclassified to conform to the current fiscal year's
presentation.
Certain information normally included in footnote disclosures to the
financial statements has been condensed or omitted in accordance with
the rules and regulations of the Securities and Exchange Commission.
2. Inventories
Inventories, which include materials, supplies, labor and manufacturing
overhead, are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Materials and supplies $901,587 $755,079
Work in process 17,069 17,069
Finished product 876,059 495,006
Reserve (129,007) (69,610)
---------- ----------
$1,665,708 $1,197,544
========== ==========
</TABLE>
3. Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," applicable to entities with other comprehensive
income. This pronouncement is effective for the year beginning January
1, 1998. The Company had no items of other comprehensive income, as
defined, for the three and nine-month periods ended September 30, 1998
or 1997.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related
Information," which requires that the Company report certain information
about operating segments. This pronouncement is effective for the year
beginning January 1, 1998. The Company designs, assembles, markets and
sells products to the automotive after-market industry. This is
considered to be the Company's only reportable operating segment.
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
MotorVac Technologies, Inc. (the "Company") designs, develops,
assembles, markets and sells the MotorVac CarbonClean System for the diagnosis,
maintenance and repair of internal combustion engine fuel systems and the
TRANSTECH System for the replacement of automatic transmission fluid. The
Company's Automotive Solutions division markets and sells the Carbon Tune System
for the rapid cleaning of engine fuel systems, primarily for the automotive
after-market quick service industry. The Company markets and sells its fuel
system cleaning machines, transmission service machines and detergents through
various distribution channels, both in the United States and Canada ("Domestic")
under the trade names MotorVac, TRANSTECH and Carbon Tune, and outside the
United States and Canada ("International") under the trade name CarbonClean.
The following discussion and analysis addresses the results of the
Company's operations for the three and nine-month periods ended September 30,
1998, as compared to the Company's results of operations for the same periods
ended September 30, 1997.
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
the Company intends that such forward-looking statements be subject to the safe
harbors created thereby. The Company may experience significant fluctuations in
future operating results due to a number of factors, including, among other
things, the size and timing of customer orders, new or increased competition,
delays in new product enhancements and new product introductions, quality
control difficulties, changes in market demand, market acceptance of new
products, product returns, seasonality in product purchases by distributors and
end users, pricing trends in the automotive after-market industry in general and
in the specific markets in which the Company is active, as well as those
discussed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997, as filed with the Securities and Exchange Commission. Any of
these factors could cause operating results to vary significantly from prior
periods. Significant variability in orders during any period may have a material
adverse impact on the Company's cash flow or work flow, and any significant
decrease in orders could have a material adverse impact on the Company's results
of operations and financial condition. As a result, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as any indication of future
performance. Fluctuations in the Company's operating results could cause the
price of the Company's Common Stock to fluctuate substantially.
Assumptions relating to the foregoing involve judgments with respect to,
among other things, future economic, competitive and market conditions, all of
which are difficult or impossible to predict accurately, and many of which are
beyond the control of the Company. In addition, the business and operations of
the Company are subject to substantial risks which increase the uncertainty
inherent in the forward-looking statements. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 1998 and 1997
Net Sales. Net sales for the three months ended September 30, 1998
decreased $634,827 (approximately 26%) to $1,854,218 from $2,489,045 for the
three months ended September 30, 1997. This
<PAGE> 7
sales decrease was due primarily to a reduction of Domestic purchases of gas
units by the Company's largest customer.
For the three months ended September 30, 1998, Domestic sales were
$1,527,630 and International sales were $326,588. For the three months ended
September 30, 1997, Domestic sales were $1,981,175, and International sales were
$507,870. Domestic sales decreased primarily due to reduced purchases of
machines by the Company's largest customer. International sales declined due to
lower gas machine sales, reflecting reduced activity in international economies.
Cost of Sales. Cost of sales for the three months ended September 30,
1998 decreased by $374,828 (approximately 25%) to $1,142,629 from $1,517,457 for
the three months ended September 30, 1997. The primary reason for the decrease
was reduced costs related to the sales decline described above.
Gross Profit. Gross profit for the three months ended September 30, 1998
decreased by $259,999 to $711,589 from $971,588 for the three months ended
September 30, 1997. The primary reason for the decrease was the decline in
sales. Gross profit, as a percentage of sales, declined slightly to
approximately 38.4% from 39.0% for the quarter ended September 30, 1997. This
reflected higher warranty costs, partially offset by higher gross margin from a
larger portion of sales in the current quarter for detergents, which have higher
profit margins.
Operating Expenses. Operating expenses increased by $34,175
(approximately 3%) from $1,040,308 for the three months ended September 30,
1997, to $1,074,483 for the three months ended September 30, 1998. The increase
in expenses for the current quarter reflects primarily the benefit of a net
litigation reimbursement of $49,627 received during the three months ended
September 30, 1997.
Interest. Net interest income for the three months ended September 30,
1998 of $8,468 decreased by $1,816 from net interest income of $10,284 for the
three months ended September 30, 1997.
Comparison of Nine Months Ended September 30, 1998 and 1997
Net Sales. Net sales for the nine months ended September 30, 1998
increased $225,345 (approximately 3%) to $7,432,297 from $7,206,952 for the nine
months ended September 30, 1997. This increase is due to sales of TRANSTECH
Systems for approximately $1,865,000, which had no sales in 1997, and a 59%
increase in detergent sales to the Company's largest customer. Partially
offsetting these increases was a decrease in sales of Domestic gas and diesel
machines to the Company's largest customer of 37%.
Domestic sales for the nine months ended September 30, 1998 were
$5,626,972, and International sales for the same period were $1,805,325. For the
nine months ended September 30, 1997, Domestic sales were $5,345,636, and
International sales were $1,861,316. The reason for the increase in Domestic
sales was higher TRANSTECH and detergent sales. The decrease in International
sales was due to lower sales of fuel machines.
Cost of Sales. Cost of sales for the nine months ended September 30,
1998 increased $176,477 (approximately 4%) to $4,263,622 from $4,087,145 for the
nine months ended September 30, 1997. The primary reason for the increase was
the increase in sales.
Gross Profit. Gross profit for the nine months ended September 30, 1998
increased $48,868 (approximately 2%) to $3,168,675 from $3,119,807 for the nine
months ended September 30, 1997. The primary reason for this increase was the
sales increase discussed above. As a percentage of sales, gross profit decreased
to 42.6% from 43.3% for the nine months ended September 30, 1997. The primary
reason for the decrease was an increase in warranty expense, as a percentage of
sales which was partially offset by higher gross margin from a larger portion of
sales in 1998 for detergents, which have higher profit margins.
<PAGE> 8
Operating Expenses. Operating expenses for the nine months ended
September 30, 1998 of $3,762,212 increased by $902,588 (approximately 32%) from
$2,859,624 for the nine months ended September 30, 1997. This increase included
a net litigation reimbursement of approximately $235,000 realized in the
nine-month period ended September 30, 1997. Other major cost increases in the
nine months ended September 30, 1998, compared to the same period for 1997,
included approximately $170,000 for expanded advertising and related product
testing, and $146,000 of promotional expenses to stimulate sales of the new
Automotive Solutions product line for which there were no costs in the prior
year.
Interest. Net interest income for the nine months ended September 30,
1998 was $39,708, compared to net interest income of $21,818 for the nine months
ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
For the Three Months Ended September 30, 1998
The Company's cash balance at September 30, 1998 was $1,649,515. Cash of
$319,621 was used for operating activities for the quarter ended September 30,
1998. Cash flow provided by financing activities for the quarter was $294,135,
primarily reflecting draw down on a note payable to a bank. The net result was a
decrease in cash of $37,227 from the beginning of the quarter. Working capital
as of September 30, 1998, at $3,282,983, decreased by $285,598 from the
beginning of the period.
The Company maintains a $1,500,000 revolving line of credit expiring
June 30, 1999 at the bank's prime rate. The line is secured by a certificate of
deposit of $1,500,000 expiring December 28, 1998. At September 30, 1998,
$650,000 was outstanding under the line.
The Company presently expects that current cash resources and the
available capacity under the line of credit, together with cash generated from
operations, will be sufficient to meet its operating and capital requirements
for the next twelve months. There can be no assurances that additional capital
will be available to the Company on favorable terms or at all.
INFORMATION SYSTEMS AND THE YEAR 2000 ISSUE
The Company has made an initial assessment of the ability of its primary
information systems to properly utilize dates beyond year 1999. The results of
this review indicate these systems are year 2000 compliant, and that no material
system design or correction effort will be required.
The developer of the primary accounting and business software the
Company uses has stated that the subject system and software are year 2000
compliant. Notwithstanding this representation, the Company plans, by the end of
1998, to run appropriate testing to confirm compliance. Because the accounting
software system is so widely used, the Company, at this time, does not
anticipate any significant problems in being compliant with respect to its
systems, nor will it require significant expenditures to effect compliance.
The Company is in the process of contacting vendors and others on whom
it relies to assure that their systems are compliant, or will be. These
inquiries are expected to be completed by the end of 1998. There is no assurance
that any of these parties will not have compliance problems. The Company has one
customer that represents over 50% of its sales for the nine months ended
September 30, 1998, and has several key vendors whose source and supply may not
be easily replaced. A year 2000 compliance problem incurred by this customer or
key vendors could have a materially adverse effect on the Company's business.
In the Company's Form 10-KSB for its fiscal year ended December 31,
1997, it was reported, with respect to the year 2000 issue, that the Company
intended to replace its information and manufacturing computer software. In
recent months, the Company has decided not to replace such software, at least
for the
<PAGE> 9
next year. The system has been determined to be responsive to Management's
information requirements. Therefore, any significant expenditure in this regard
is no longer anticipated to be incurred in 1998, and no significant costs have
been incurred to date associated with the Company's Year 2000 assessment.
Failure by the Company and/or its vendors or customers to complete Year 2000
compliance work in a timely manner could have a material adverse effect on
certain of the Company's operations.
STOCK REPURCHASE PROGRAM
On September 24, 1998, the Board of Directors announced approval of the
repurchase of up to 451,492 shares of its common stock, approximately 10% of its
outstanding shares. The repurchased stock will be used for a stock compensation
plan for participating directors for all of their fees, and for an employee
stock purchase plan for participating employees and officers of the Company.
Stock purchases under the repurchase program commenced October 2, 1998, and
through October 26, an aggregate of 35,000 shares have been repurchased for
aggregate consideration of $31,918.
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Net proceeds from the Company's Initial Public Offering effective as of
April 25, 1996 (File No.: 333-1866-LA) totaled $5,153,474. Through
September 30, 1998, such proceeds were used as follows:
<TABLE>
<CAPTION>
Direct or indirect payments to
directors, officers, general
partners of the issuer or their
associates; to persons owning Direct or
10% or more of any class of Indirect
equity securities of the issuer Payment to
and to affiliates of the issuer. Others
(X if estimate) (X if estimate) Total
------------------------------- --------------- ----------
<S> <C> <C> <C>
Repayment of
Indebtedness 123,572 1,250,000 1,373,572
Working Capital 1,293,959 1,293,959
Repayment of Interest
on Indebtedness 836,428 836,428
Investments:
Short Term CD's 1,500,000 1,500,000
Other Cash and
Cash Equivalents 149,515 149,515
---------
Total 5,153,474
=========
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Statement of Calculation of Basic and Diluted Net Income Per Share.
27.1 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended September 30,
1998.
<PAGE> 11
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.
MOTORVAC TECHNOLOGIES, INC.,
a Delaware corporation
By: s/ Lee W. Melody
--------------------------------
Lee W. Melody, President and
Chief Executive Officer
Date: November 13, 1998
By: s/ David P. Nelson
--------------------------------
David P. Nelson
Chief Accounting Officer
Date: November 13, 1998
<PAGE> 12
MOTORVAC TECHNOLOGIES, INC.
EXHIBIT INDEX
<TABLE>
<S> <C>
11.1 Statement of Calculation of Basic and Diluted Net Income Per Share.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 11.1
MOTORVAC TECHNOLOGIES,INC.
CALCULATION OF BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- -------------------------
SEPT 30 SEPT 30 SEPT 30 SEPT 30
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net (Loss) Income $ (354,426) $ (58,436) $ (559,479) $ 281,606
========== ========== ========== ==========
Basic Net Income (Loss) Per Share:
Weighted Average Outstanding Common Shares 4,514,918 4,514,918 4,514,918 4,514,918
========== ========== ========== ==========
Basic net income (loss) per share $ (0.08) $ (0.01) $ (0.12) $ 0.06
========== ========== ========== ==========
Diluted net income (loss) per share:
Weighted Average Outstanding Common Shares 4,514,918 4,514,918 4,514,918 4,514,918
Incremental shares, assuming exercise of options
grants outstanding at September 30, 1998 and
September 30, 1997
(eliminated if dilutive to EPS) -- -- -- --
Weighted Average Outstanding Common and
Common Equivalent Shares 4,514,918 4,514,918 4,514,918 4,514,918
========== ========== ========== ==========
Diluted net income (loss) per share $ (0.08) $ (0.01) $ (0.12) $ 0.06
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF MOTORVAC TECHNOLOGIES, INC. FOR THE PERIOD
ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,649,515
<SECURITIES> 0
<RECEIVABLES> 1,428,349
<ALLOWANCES> (87,619)
<INVENTORY> 1,665,708
<CURRENT-ASSETS> 5,022,929
<PP&E> 717,239
<DEPRECIATION> 475,341
<TOTAL-ASSETS> 6,000,866
<CURRENT-LIABILITIES> 1,739,946
<BONDS> 0
0
0
<COMMON> 45,149
<OTHER-SE> 4,215,771
<TOTAL-LIABILITY-AND-EQUITY> 6,000,866
<SALES> 1,854,218
<TOTAL-REVENUES> 1,854,218
<CGS> 1,142,629
<TOTAL-COSTS> 1,142,629
<OTHER-EXPENSES> 1,074,483
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8,468)
<INCOME-PRETAX> (354,426)
<INCOME-TAX> 0
<INCOME-CONTINUING> (354,426)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (354,426)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
