U.S. Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-QSB

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to________

Commission file number: 0-26998

ALCOHOL SENSORS INTERNATIONAL, LTD.
(Exact name of small business issuer as specified in its charter)

New York 11-3104480
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)

11 Oval Drive, Islandia, New York 11722
(Address of principal executive offices)

(516) 342-1515
(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 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: Common Stock, par value $.001
per share - 9,951,011 shares outstanding as of November 16, 1998.

Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]

PART I. FINANCIAL INFORMATION

Item Page

Item 1. Condensed Consolidated Financial Statements (Unaudited):

Condensed Consolidated Balance Sheets as of September
30, 1998 and December 31, 1997 . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for
the Three and Nine Months Ended September 30,
1998 and 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Comprehensive
Income for the Nine Months Ended September 30,
1998 and 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1998 and 1997. . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements. . . . . . . . . . . . . 7

Item 2. Management's Discussion and Analysis. . . . . . . . . . . . . . . .10

ALCOHOL SENSORS INTERNATIONAL, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 1998 December 31, 1997
------------------ -----------------
(Unaudited)
ASSETS
Current assets:

Cash and cash equivalents (includes
restricted cash of $500,000 at
December 31, 1997) . . . . $ 1,134 $ 1,882,994
Accounts receivable . . . . . . . . . . 6,245 --
Inventory . . . . . . . . . . . . . . . 885,565 693,561
Prepaid expenses. . . . . . . . . . . . 20,488 55,103
Other current assets. . . . . . . . . . 13,870 37,636
------------- -------------
Total current assets. . . . . . . . 927,302 2,669,294

Fixed assets - at cost (less accumulated
depreciation of $210,069 at September 30,
1998, and $174,069 at December 31, 1997) 26,170 232,170
Other assets . . . . . . . . . . . . . . 14,166 14,166
------------- -------------
$ 967,638 $ 2,915,630
============= =============

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable. . . . . . . . . . . . $ 478,486 $ 428,087
Accrued expenses. . . . . . . . . . . . 37,244 208,242
Accrued officers salaries . . . . . . . 64,495 83,662
Due to related party. . . . . . . . . . 64,000 118,315
Loans payable and accrued interest to
shareholders . . . . . . . . . . . . . 115,329 145,716
Loan payable and accrued interest to
preferred shareholder. . . . . . . . . 169,169 --
Note payable . . . . . . . . . . . . . -- 500,000
Dividends payable . . . . . . . . . . . 278,544 295,208
------------- -------------
Total current liabilities . . . . . 1,207,267 1,779,230

Accrued litigation settlement cost. . . . 64,810 82,977
------------- -------------
Total liabilities . . . . . . . . . 1,272,077 1,862,207
------------- -------------

Commitments, contingencies and other matters

Shareholders' equity (deficit):
Preferred stock:
Series A, 9% cumulative: 833,333 shares
authorized, 833,333 shares issued and
outstanding at September 30, 1998 and
December 31, 1997 (liquidation value:
$2,556,250 at September 30, 1998 and
$2,731,875 at December 31, 1997). . . . 2,500,000 2,500,000
Series B, 8% cumulative: 600 shares
authorized, 274 shares issued and
outstanding at September 30, 1998
and 300 shares issued and outstanding
at December 31, 1997 (liquidation value:
$3,222,294 at September 30, 1998 and
$3,063,333 at December 31, 1997) . . . 2,563,778 2,658,750
Common stock, $.001 par value; 25,000,000
shares authorized, 9,537,450 shares issued
at September 30, 1998 and 8,849,096
shares issued at December 31, 1997. . . 9,537 8,849
Additional paid-in capital . . . . . . . 13,999,653 13,508,950
Accumulated deficit. . . . . . . . . . . (19,152,270) (17,391,177)
Accumulated foreign currency
translation adjustment. . . . . . . . . (2,449) (9,261)
------------- -------------
(81,751) 1,276,111
Less treasury stock, at cost, 55,672
shares of common stock at September
30, 1998 and December 31, 1997. . . . . (222,688) (222,688)
------------- -------------
Total shareholders' equity (deficit) (304,439) 1,053,423
------------- -------------
$ 967,638 $ 2,915,630
============= =============

See notes to condensed consolidated financial statements.

ALCOHOL SENSORS INTERNATIONAL, LTD. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ----------------------------
1998 1997 1998 1997

Net sales. . . . . . . . . . . . $ 42,710 $ 31,454 $ 64,249 $ 65,417
Cost of goods sold . . . . . . . 29,470 15,560 44,332 33,893
---------- ---------- ------------ ------------
Gross profit . . . . . . . . . . 13,240 15,894 19,917 31,524

Costs and expenses:
Research and development. . . . 39,104 76,273 147,251 229,069
Selling, general and
administrative . . . . . . . . 408,658 761,865 1,240,767 1,845,469
Litigation settlement . . . . . -- 59,895 -- 59,895
---------- ---------- ------------ ------------
(Loss) from operations . . . . (434,522) (882,139) (1,368,101) (2,102,909)

Interest and other income. . . . 45 12,021 10,762 54,953
Interest expense . . . . . . . . (6,335) (12,632) (25,449) (30,085)
---------- ---------- ------------ ------------
Net (loss) . . . . . . . . . . $(440,812) $(882,750) $(1,382,788) $(2,078,041)
========== ========== ============ ============

Preferred stock dividend
requirement . . . . . . . . . . $ 111,050 $ 56,250 $ 334,916 $ 168,750
Accretion of difference between
carrying amount and face amount
of preferred stock . . . . . . . 44,525 -- 135,453 --
------------ ----------- ------------ ------------
Net loss attributable to common
shareholders . . . . . . . . . . $ (596,387) $ (939,000) $(1,853,157) $(2,246,791)
============ =========== ============ ============

Basic and diluted loss per share $ (.06) $ (.11) $ (.20) $ (.26)
============ =========== ============ ============

Weighted average common shares
outstanding - basic and diluted 9,460,496 8,741,857 9,281,643 8,740,190
============ =========== ============ ============

See notes to condensed consolidated financial statements.

ALCOHOL SENSORS INTERNATIONAL, LTD. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ----------------------------
1998 1997 1998 1997

Net (loss) . . . . . . . . . . . $ (440,812) $ (882,750) $(1,368,101) $(2,078,041)
Other comprehensive income/(loss) -
Currency translation adjustment (3,064) (1,441) (6,812) (308)
------------ ----------- ------------ ------------
Comprehensive (loss) . . . . . . $ (443,876) $ (884,191) $(1,374,913) $(2,078,349)
============ =========== ============ ============

See notes to condensed consolidated financial statements.

ALCOHOL SENSORS INTERNATIONAL, LTD. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended September 30,
1998 1997
Cash flows from operating activities:
------------- -------------

Net (loss) . . . . . . . . . . . . . . . $ (1,382,788) $(2,078,041)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Depreciation and amortization . . . . . 54,000 63,000
Loss on sale and abandonment of
fixed assets . . . . . . . . . . . . . 132,000
Issuance of option for services . . . . -- 235,000
Changes in operating assets and liabilities:
(Increase) in accounts receivable . . . (6,245) (40,515)
(Increase) in inventory . . . . . . . . (192,004) (332,421)
Decrease (increase) in prepaid
expenses and other current assets. . . 58,391 (29,452)
(Decrease) in amounts due to related
party. . . . . . . . . . . . . . . . . (54,315) (66,845)
Increase (decrease) in accounts
payable and accrued expenses . . . . . (125,488) (393,361)
(Decrease) increase in accrued interest
to officers. . . . . . . . . . . . . . 2,006 7,275
(Decrease) increase in accrued litigation
settlement . . . . . . . . . . . . . . (18,167) 59,895
Increase in amounts due officers. . . . -- 56,000
Decrease in other assets. . . . . . . . -- 8,918
Other . . . . . . . . . . . . . . . . . (1,697) 307
------------- -------------
Net cash (used in) operating
activities . . . . . . . . . . (1,534,307) (2,510,240)
------------- -------------
Cash flows from investing activities:
Acquisition of fixed assets. . . . . . . -- (64,618)
Proceeds from sale of fixed assets . . . 20,000
------------- -------------
Net cash provided by (used in)
investing activities . . . . . 20,000 (64,618)
------------- -------------
Cash flows from financing activities:
Proceeds from sale of Series B Preferred
Stock, net of expenses. . . . . . . . . -- 2,685,000
Proceeds from sale of common stock . . . -- 52,500
(Decrease) in loans payable to officers. (32,553) --
Payment of note payable. . . . . . . . . (500,000) --
Proceeds from loan payable - preferred
shareholder . . . . . . . . . . . . . . 165,000 --
------------- -------------
Net cash (used in) provided by
financing activities . . . . . (367,553) 2,737,500
------------- -------------
Net (decrease) increase in cash
and cash equivalents. . . . . . . . . . (1,881,860) 162,642
Cash and cash equivalents -
Beginning of period . . . . . . . . . . 1,882,994 3,042,051
------------- -------------
Cash and cash equivalents -
End of period . . . . . . . . . . . . . $ 1,134 $ 3,204,693
============= =============

Supplemental disclosure of non-cash financing activities:
In March 1997, certain officers and members of management contributed
315,000 shares of Common Stock to the Company in connection with the settlement
of litigation that had been accrued in the amount of $1,143,844.
In June 1997, certain officers exchanged $230,000 of liabilities for
options to purchase 115,000 shares of Common Stock.
In February 1998, the holder of the Series B 8% Convertible Preferred Stock
converted 26 shares into 457,493 shares of Common Stock.
In August 1998, the Company issued an aggregate of 230,861 shares of Common
Stock in payment of $344,375 of accrued dividend on the Series A Preferred
Stock.
As of September 30, 1998, the Company had $56,250 and $166,166 in accrued
dividends on the Company's outstanding Series A Cumulative Non-Redeemable 9%
Convertible Preferred Stock and Series B 8% Convertible Preferred Stock,
respectively. In 1997, the Company had $168,750 in accrued dividends on the
Series A Preferred Stock.
As of September 30, 1998, the accompanying financial statements reflect an
adjustment on the Series B Preferred Stock in the amount of $135,453 for the
accretion towards the face value of the outstanding Series B Preferred Stock.
Supplemental disclosure of cash flow information:

Interest paid during the period. . . . . $ 13,794 $ 13,143
============= =============

See notes to condensed consolidated financial statements.

ALCOHOL SENSORS INTERNATIONAL, LTD. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation.

The accompanying unaudited condensed consolidated financial statements have
been prepared by Alcohol Sensors International, Ltd. (the "Company"), without
audit, in accordance with generally accepted accounting principles for interim
financial information and pursuant to the Rules and Regulations of the
Securities and Exchange Commission (the "Commission"). Accordingly, they do not
include all of the information and footnote disclosures required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included. These financial
statements should be read in conjunction with the audited financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1997, filed with the Commission on October 28, 1998
(Commission File No.: 0-26998).

Operating results for the three and nine month periods ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998.

2. Significant Accounting Policies.

Loss Per Share of Common Stock

Basic loss per share is computed based upon the weighted average number of
common shares outstanding during each period, dividends accumulated on the
preferred stock for the period and accretion of the difference between the
carrying amount and face amount of preferred stock for the period are added to
the net loss for the period. Stock options, warrants and convertible preferred
stock did not have an effect on the computation of diluted earnings per share
for the three and nine months ended September 30, 1998 and 1997 since they were
anti-dilutive.

Recently Issued Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and displaying comprehensive income and its
components in financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. The adoption of
SFAS No. 130 has had no impact on the Company's consolidated results of
operations, financial position or cash flows.

In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to stockholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. Financial statement disclosures for prior
periods are required to be restated. The Company is in the process of evaluating
the disclosure requirements. The adoption of SFAS No. 131 is expected to have no
impact on the Company's consolidated results of operations, financial position
or cash flows.

3. Loan Payable - Preferred Shareholder

In June 1998, Milbright Estates, Ltd., the holder of the outstanding Series
B Preferred Stock ("Milbright"), loaned the Company $100,000 (the "June 1998
Loan"), bearing interest at 11.5% per annum and maturing on July 31, 1998. In
August 1998, Milbright loaned the Company (the "August 1998 Loan") an additional
$40,000, bearing interest at 11.5% per annum and maturing on August 31, 1998. In
September 1998, Milbright loaned (the "September 1998 Loan") the Company an
additional $25,000, bearing interest at 11.5% per annum and maturing on October
31, 1998. Repayment of the June 1998 Loan, August 1998 Loan and September 1998
Loan are past due, although Milbright has not made any attempt to require such
repayment.

4. Legal Proceedings.

The Company and certain of its former officers were named as defendants in
an action commenced in July 1997 in the New York State Supreme Court, New York
County. Plaintiff alleges that, in July 1989, he entered into an agreement with
the individual defendants and a company named "International Beverage Machine"
pursuant to which plaintiff claims to have made certain payments which the
individual defendants promised would be used to purchase stock in "Alcohol
Sensors, Inc." which, in turn, plaintiff claims to be the predecessor to the
Company. Plaintiff alleges damages of $13,500,000. The Company believes that the
complaint fails to state a claim against the Company and that plaintiff has not
been damaged by the Company, and, accordingly, intends to vigorously defend
itself in this action. The ultimate outcome of this action is unknown at this
time and the Company has not made any provision in the accompanying financial
statements.

The Company and certain of its former officers were named as defendants in
an action commenced in September 1997 in the New York State Supreme Court,
County of Nassau. Plaintiff alleges that, in February 1990, plaintiff entered
into an exclusive "Distributor Agreement" with "Alcohol Sensors, Inc." wherein
plaintiff was granted a regional license to market, distribute and install an
"automotive alcohol sensor" device to which "AS Inc." owned the patent rights.
Plaintiff alleges damages of $1,000,000. The Company believes that it has no
affiliation with "Alcohol Sensors, Inc.," or "AS Inc.," that the Company has no
obligations under the "Distributor Agreement" referred to in the complaint and
that plaintiff has not been damaged in any amount by the Company and,
accordingly, intends to vigorously defend itself in the action. This action is
currently in the discovery stage. The ultimate outcome of this action is unknown
at this time and the Company has not made any provision in the accompanying
financial statements.

In 1993, the Company received correspondence from Intoximeters Inc.
claiming that the Company's name infringes upon the name of a product of such
entity, "Alco-Sensor." The Company believes that the Company's name does not
infringe upon such other entity's product name and that the name SENS-O-LOCK
does not and will not cause a confusion in the marketplace between the Company's
product and the product of Intoximeters Inc. However, no assurance can be given
that such entity or others would be successful on a claim that the Company's
name and/or product names infringe upon a copyright or trademark of such entity
or others.

The Company was served with a Demand to Arbitrate and a Statement of Claim
by an individual who had performed engineering services for the Company on a
consulting basis. Claimant was seeking $650,000 and 114,449 shares of stock in
damages. The Company settled this matter in an Arbitration Conference and has
agreed to transfer to Claimant 27,500 shares of stock in full satisfaction of
all claims in this action. This matter was settled in April 1997 and the Company
accrued $65,000 as of December 31, 1996. In 1998, the Company was served with a
Demand to Arbitrate by an individual based upon an alleged failure by the
Company to comply with the settlement terms of the aforemention arbitration. At
this time, it is too early to determine the outcome of this action and
therefore, the Company has not made any additional provision in the accompanying
financial statements.

In February 1998, an action was commenced in the High Court of Justice,
Queens Bench Division, in Oxford, United Kingdom, under the caption "Scarico
(UK) Limited v. Alcohol Sensors Europe plc." Scarico (UK) Limited is an entity
which the Company believes is (a) not presently affiliated with any current
supplier to the Company and (b) owned by Michael G. Ghazarian. Mr. Ghazarian is
a former director and officer of the Company. Alcohol Sensors Europe plc.
("ASE") is an English corporation which, at the time of commencement of this
action, was 80% owned by

the Company and 20% owned by Mr. Ghazarian. In the complaint, Scarico (UK)
Limited claimed that BP68,321.93 (approximately $113,000, as of September 30,
1998) and $10,445 were due on invoices for services rendered to ASE between 1992
and 1997. ASE denied that any amounts were due Scarico (UK) Limited and that
certain claimed services were actually performed by third parties, including a
current supplier to the Company, and that ASE and the Company had paid such
third parties directly. On August 11, 1998, the Company and ASE entered into a
settlement arrangement with Scarico (UK) Limited, Digital Vehicle Security
Systems ("Digital") and Mr. Ghazarian pursuant to which Scarico (UK) Limited,
Digital and Mr. Ghazarian released to the Company all intellectual property,
contract and other rights they may have in the technology and know-how related
to the Sens-O-Lock and all claims to Sens-O-Lock units, parts and raw materials
in their possession, as well as the assignment to the Company of Mr. Ghazarian's
20% interest in ASE, Mr. Ghazarian surrendered an option to purchase 22,500
shares of Common Stock exercisable at $2.00 per share and expiring in June 2001
and the Company (a) paid Scarico (UK) Limited, Digital and Mr. Ghazarian an
aggregate of approximately $90,000, (b) confirmed an option granted to Mr.
Ghazarian in 1996 to purchase 100,000 shares of Common Stock exercisable at
$3.00 per share and expiring in September 2001 and (c) deleted a provision
requiring that Mr. Ghazarian be an employee of the Company in order to exercise
an option to purchase 200,000 shares of Common Stock exercisable at $2.00 per
share and expiring in September 2002. The parties also exchanged general
releases in connection with this settlement arrangement.

5. Dividend Payments of Common Stock on Series A Preferred Stock.

Pursuant to a letter agreement, dated August 14, 1998, between the Company
and AIIC, AIIC, as the holder of the 833,333 outstanding shares of Series A
Preferred Stock, agreed to accept (a) 230,861 shares of Common Stock as payment
in full for all accrued and unpaid dividends on said 833,333 shares of Series A
Preferred Stock for the prior dividend payment dates of June 30, 1997, December
31, 1997 and June 30, 1998 (i.e., $344,375) and (b) agreed to accept shares of
Common Stock in lieu of payment of dividends on said 833,333 shares of Series A
Preferred Stock due on the dividend payment dates of December 31, 1998, June 30,
1999 and December 31, 1999, such shares of Common Stock to be valued at
approximately $1.487 per share (subject to adjustment).

6. Sale and Abandonment of Fixed Assets.

In connection with the Company's relocation to smaller offices within the
building in which the Company was previously located, the Company sold certain
fixed assets and abandoned improvements made to such prior location. The Company
recognized a loss of approximately $132,000 in connection with such sale and
abandonment of fixed assets.

7. Subsequent Events.

In October 1998, a third party loaned (the "October 1998 Loan") the Company
$30,000 with interest at 11.5% per annum and due on November 30, 1998. In
November 1998, this third party loaned (the "November 1998 Loan") the Company an
additional $35,000, with interest at 11.5% per annum and due on December 10,
1998. The October 1998 Loan and November 1998 Loan are secured by certain
Sens-O-Lock units held in the Company's inventory.

In October 1998, the Company received two $20,000 loans from the party
negotiating a distribution agreement with the Company. These loans bear interest
at 8.5% and are due on March 31, 1999 and April 6, 1999.

Item 2. Management's Discussions and Analysis.

Statements contained in this Quarterly Report on Form 10-QSB that are not
based upon historical fact are "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. Forward-looking statements included
in this Form 10-QSB involve known and unknown risks, uncertainties and other
factors which could cause actual results, performance (financial or operating)
or achievements expressed or implied by such forward looking statements not to
occur or be realized. Such forward looking statements generally are based upon
the best estimates by the Company of future results, performance or achievement,
based upon current conditions and the most recent results of operations. Forward
looking statements may be identified by the use of forward looking terminology
such as "may," "will," "expect," "believe," "estimate," "anticipate,"
"continue," or similar terms, variations of those terms or the negative of those
terms.

Potential risks and uncertainties include, among other things, such factors
as the adequacy and reliability of parts and methods used in manufacturing the
Company's Sens-O-Lock(R) devices, adequacy of the Company's dealer and
distribution network, the market acceptance of the Company's current ("second
generation") Sens-O-Lock devices, the extent of the establishment, if any, of
insurance programs providing discounts to customers installing products such as
the Company's Sens-O-Lock devices, the impact of competitive products and
pricing, the Company's ability to raise additional capital, the availability of
funding to purchase raw materials and manufacture finished products, the success
of the Company's research and development efforts in creating additional
improvements to the Sens-O-Lock product line and other products for the Company,
the establishment and extent of enforcement of laws with respect to the
operation of motor vehicles by alcohol impaired drivers, societal views towards
individuals operating motor vehicles while impaired through the consumption of
alcohol and the other factors and information disclosed or discussed in this
"Item 2. Management's Discussion and Analysis" and in other sections of this
Form 10-QSB. Readers of this Form 10-QSB should carefully consider such risks,
uncertainties and other information, disclosures and discussions which contain
cautionary statements identifying important factors that could cause actual
results to differ materially from those provided in the forward looking
statements.

General

The Company designs, markets and sells electronic motor vehicle
after-market safety products, including a patent-pending line of breath alcohol
ignition interlock devices (each, a "BAIID") under the Sens-O-Lock brand name.
The Company's Sens-O-Lock BAIID equipment is designed to detect, evaluate and
assist in the prevention of an alcohol impaired driver operating a vehicle. The
Company also markets and sells, under the WeatherEye brand name, a line of
modular products designed to automatically engage and adjust the headlights and
taillights of automobiles depending upon weather and sunlight conditions.

After the Company's initial sale of approximately 700 original ("first
generation") Sens-O-Lock units, the Company became aware in late Spring 1996 of
inconsistencies in certain integral components manufactured for the Company and
other manufacturing, design and quality control problems. As a result, in the
second quarter of 1996, the Company discontinued manufacturing the first
generation Sens-O-Lock product, recalled the first generation Sens-O- Lock units
which had been sold, temporarily ceased marketing efforts and wrote down the
Company's inventory by approximately $556,000. From that time through September
1997, the Company devoted substantially all of its resources to the research and
development of new technology for and design of the second generation
Sens-O-Lock product line, development of new relationships with existing and
other component suppliers and manufacturers, improvement of the Company's
component and manufacturing quality control procedures, enhancement of the
Sens-O- Lock operating software and development of the Company's network of
distributors and dealers. The Company completed final parts procurement and
ordered the initial production of second generation Sens-O-Lock units during
September and October 1997.

In late February 1998, the Company received confirmation from an
independent testing laboratory that the second generation Sens-O-Lock
successfully completed testing under the National Highway Traffic Safety
Administration ("NHTSA") Model Specifications for Breath Alcohol Ignition
Interlock Devices (the "Model Specifications") for the battery of required tests
for the 37-day calibration stability challenge protocol. The Model
Specifications are utilized by the various states in their individual
certification processes for use in legislative and

judicial programs for supervision of persons convicted of alcohol-related
motor vehicle infractions, violations and crimes ("Mandatory Programs"). The
various states have differing certification processes. Some states merely
require compliance with the Model Specifications while other states have much
higher standards and/or a complex certification procedure. Through November 10,
1998, the Sens-O-Lock has been certified in six states. The Company anticipates
seeking additional state certifications of the second generation Sens-O-Lock on
state-by-state basis, with priority based, among other factors, upon the
location of the Company's distributors and dealers. The Company anticipates
publicizing the Model Specification testing success and applicable state
certifications in promoting the Sens-O-Lock devices for markets other than for
Mandatory Programs (the "Mandatory Market"), such as (a) the voluntary market,
which includes parents of teenage drivers (the "Voluntary Market"), and (b) the
commercial market, comprising truck, bus and taxi fleets (the "Commercial
Market"). The Company believes that, for the U.S. Voluntary Market and
Commercial Market, no Model Specifications testing success or applicable state
certification are required, although the Company further believes that a
significant portion of the Voluntary Market and Commercial Market will not
purchase a BAIID without a minimum of a 37-day calibration success under the
Model Specifications and applicable state certification. However, there can be
no assurance given that the Model Specifications testing success or state
certifications will result in any revenues to the Company or the commercial
success of the second generation Sens-O-Lock product.

The Company continues to evaluate other sensing technologies currently
utilized by competitors within the industry, as well as sensing technologies
under development by others for use in different alcohol sensing applications.
The Company intends to continue to utilize its research and development efforts
to provide the Company with other alternative technical options for different
specified target markets, as well as to improve and enhance the Company's
products.

The Company intends to seek insurance discounts to help drive the Voluntary
Market and Commercial Market, and to assist in the lobbying for stricter federal
and state laws requiring drivers convicted of alcohol-related motor vehicle
infractions, violations or crimes to install BAIID equipment in their vehicles.
The Company is evaluating strategies, marketing plans and programs which the
Company expects will enable the Company to work jointly with insurance companies
to enhance their respective markets. However, there can be no assurance that the
Company and such insurance companies will agree upon a strategy, plan or program
or that any such strategy, plan or program, if adopted, or the Company's
independent lobbying efforts, will result in revenues to the Company or the
commercial success of its products.

Recent Events

The Company had limited sales of Sens-O-Lock units in 1997, primarily in
the United Kingdom and elsewhere in Europe. During the second quarter of 1998,
the Company sold 61 second generation Sens-O-Lock units and an additional 136
units were sold in the third quarter of 1998. There have been minimal revenues
generated by the WeatherEye product line. The Company has been dependent upon
loans and equity investments from the Company's officers, directors and
shareholders and others to fund the Company's operations in absence of any
material sales through the third quarter of 1998. The Company anticipates that
it will require additional loans and/or equity investments in order to continue
operations and until such time as sufficient revenues from sales of Sens-O-Lock
units are generated.

Management believes that the Company currently does not have sufficient
working capital to continue its operations over the long-term and that cash
generated from operations for the next several months will not be sufficient to
meet the Company's currently anticipated liquidity and capital expenditure
requirements in order to successfully market the second generation Sens-O-Lock
product line and/or for the Company to continue operations. The Company has
entered into discussions with third parties with respect to granting
distribution/licensing rights to the Company's Sens-O-Lock and WeatherEye
product lines, which is anticipated to entail the pre-payment to the Company of
certain royalties, as well as debt and/or equity financing for the Company.
Further, the Company has continued to have discussions with one of the Company's
preferred shareholders with respect to additional equity and/or debt financing.
There can be no assurance, however, that the Company will enter into a formal
distribution/licensing arrangement or receive additional financing from such
third party, such preferred shareholder or any other party, that royalties from
any such distribution/licensing arrangement and/or financing proceeds, if any,
will be on terms favorable to the Company or that the Company will be successful
in attaining its sales goals, nor that attaining such sales goals will have the

desired effect on the Company's cash resources. The failure to receive
sufficient distribution/licensing royalties and/or other equity or debt
financing, as well as any failure to obtain a sufficient level of sales, may
result in the Company seeking protection under the Federal Bankruptcy Laws
and/or terminating operations.

On October 1, 1998, the Company executed a Consent and Undertaking,
pursuant to which the Company admitted to the failure to timely file with the
Securities and Exchange Commission (the "SEC") the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997 and Quarterly Reports on
Form 10-QSB for the quarters ended March 31, 1998 and June 30, 1998, and
Notifications of Late Filing on Form 12b-25 with respect to such Forms 10-QSB,
and consented to the entry of an order (the "Order") by the Federal District
Court for the District of Columbia directing the Company to file with the SEC
such Form 10-KSB by October 30, 1998 and Forms 10-QSB by November 13, 1998. The
Company filed its Form 10-KSB for the fiscal year ended December 31, 1997 on
October 28, 1998, and its Forms 10-QSB for the quarters ended March 31, and June
30, 1998 on November 13, 1998. Accordingly, the Company believes that it has
satisfied the outstanding filings requirements of the Order.

Results of Operations

Three Months Ended September 30, 1998 Compared to Three Months Ended
September 30, 1997

Net Sales. The Company had net sales of approximately $43,000 for the three
months ended September 30, 1998, an increase of 35.8% from net sales of $31,000
for the three months ended September 30, 1997. Net sales in the 1998 period were
attributable to sales of second generation Sens-O-Lock units, all of which were
made to the domestic United States market. In the 1997 period, the Company's net
sales were attributable to sales of WeatherEye units. After initially launching
the marketing of the second generation Sens-O-Lock in the United Kingdom in late
1997, the Company has refocused its marketing plans to the domestic United
States market, which has resulted in sales of Sens-O- Lock units commencing in
the second quarter of 1998.

Cost of Goods Sold. The Company had cost of goods sold of approximately
$29,000 in the three months ended September 30, 1998, an increase of 29.6%
compared to cost of goods sold for the three-month period ended September 30,
1997 of $16,000. Cost of goods sold in the 1998 period were attributable to the
Sens-O-Lock product line, while costs of goods sold in the 1997 period were
attributable to the Company's Weather Eye products. Cost of goods sold
represented 69.0% and 49.5% of net sales in the 1998 and 1997 periods,
respectively. The Company anticipates that costs of goods sold, as a percentage
of net sales, would be lowered upon an increase in production, although no
assurance can be given that sales will increase or that any efficiencies of
scale will result. Cost of goods sold consists primarily of product costs,
freight charges, royalties and inventory allowances for damaged and obsolete
products.

Costs and Expenses. Research and development expenses for the three-month
period ended September 30, 1998 were approximately $39,000, a decrease of 48.7%
from $76,000 for the three months ended September 30, 1997, primarily as a
result of the Company focusing on addressing specific areas related to the new
design and technology incorporated into the second generation Sens-O-Lock
product in the 1998 period, as compared to more general research and development
expenses on the Sens-O-Lock product line during the 1997 period. Research and
development expenses represented 91.6% and 242.5% of net sales in the 1998 and
1997 periods, respectively.

Selling, general and administrative expenses for the three-month period
ended September 30, 1998 were approximately $409,000, a decrease of 46.4% from
$762,000 for the three months ended September 30, 1997, primarily as a result of
reduced staff in the 1998 period as the Company sought to lower costs to bring
expenses more in line with an anticipated lack of short-term revenues as the
Company refocused marketing efforts on the domestic U.S. market. Selling,
general and administrative expenses represented 956.8% and 2,422.2% of net sales
in the 1998 and 1997 periods, respectively.

In the 1997 period, the Company incurred a litigation settlement expense of
approximately $60,000. There was no similar expense in the 1998 period.

Interest and Other Income. Interest and other income for the three-month
period ended September 30, 1998 was under $1,000, a decrease of 99.6% from
approximately $12,000 for the three months ended September 30, 1997, primarily
as a result of higher average cash balances during the 1997 period.

Interest Expense. Interest expense for the three-month period ended
September 30, 1998 was approximately $6,000, a decrease of 49.8% from $13,000
for the three months ended September 30, 1997, primarily as a result of lower
debt balances in the 1998 period arising from the repayment of a $500,000
principal amount note payable.

Net Loss. As a result of the foregoing, the net loss for the 1998 period
was approximately $441,000, a decrease of approximately 50.1% from $883,000 for
the 1997 period. The net loss per share for the 1998 period of $.06 compared to
$.11 for the 1997 period, was calculated to include the effect of the cumulative
dividends on the Series A Preferred Stock and the Company's Series B 8%
Convertible Preferred Stock (the "Series B Preferred Stock") for the 1998
period. The Series B Preferred Stock was outstanding for only four days during
the 1997 period.

Nine Months Ended September 30, 1998 Compared to Nine Months Ended
September 30, 1997

Net Sales. The Company had net sales of approximately $62,000 for the nine
months ended September 30, 1998, a decrease of 1.8% from net sales of $65,000
for the nine months ended September 30, 1997. Net sales in the 1998 period were
attributable to sales of second generation Sens-O-Lock units, all of which were
made to the domestic United States market. In the 1997 period, the Company's net
sales were attributable to sales of WeatherEye units. After initially launching
the marketing of the second generation Sens-O-Lock in the United Kingdom in late
1997, the Company has refocused its marketing plans to the domestic United
States market, which has resulted in sales of Sens-O- Lock units commencing in
the second quarter of 1998.

Cost of Goods Sold. The Company had cost of goods sold of approximately
$44,000 in the nine months ended September 30, 1998, an increase of 30.8%
compared to cost of goods sold for the nine-month period ended September 30,
1997 of $34,000. Costs of goods sold in the 1998 period were attributable to the
Sens-O-Lock product line, while costs of goods sold in the 1997 period were
attributable to the Company's Weather Eye products. The Company anticipates that
costs of goods sold would be lowered, as a percentage of net sales, upon an
increase in production, although no assurance can be given that sales will
increase or that any efficiencies of scale will result. Costs of goods sold
represented 69.0% and 51.8% of net sales in the 1998 and 1997 periods,
respectively.

Costs and Expenses. Research and development expenses for the nine-month
period ended September 30, 1998 were approximately $147,000, a decrease of 35.7%
from $229,000 for the nine months ended September 30, 1997, primarily as a
result of the Company focusing on addressing specific areas related to the new
design and technology incorporated into the second generation Sens-O-Lock
product in the 1998 period, as compared to more general research and development
expenses on the Sens-O-Lock product line during the 1997 period. Research and
development expenses represented 229.2% and 350.2% of net sales in the 1998 and
1997 periods, respectively.

Selling, general and administrative expenses for the nine-month period
ended September 30, 1998 were approximately $1,241,000, a decrease of 32.8% from
$1,845,000 for the nine months ended September 30, 1997, primarily as a result
of reduced staff in the 1998 period as the Company sought to lower costs to
bring expenses more in line with an anticipated lack of short-term revenues as
the Company refocused marketing efforts for the domestic U.S. market. Selling,
general and administrative expenses represented 1,931.2% and 2,821.1% of net
sales in the 1998 and 1997 periods, respectively.

In the 1997 period, the Company incurred a litigation settlement expense of
approximately $60,000. There was no similar expense in the 1998 period.

Interest and Other Income. Interest and other income for the nine-month
period ended September 30, 1998 was approximately $11,000, a decrease of 80.4%
from $55,000 for the six months ended September 30, 1997, primarily as a result
of higher average cash balances during the 1997 period.

Interest Expense. Interest expense for the nine-month period ended
September 30, 1998 was approximately $25,000, a decrease of 15.4% from $30,000
for the nine months ended September 30, 1997, primarily as a result of lower
debt balances in the 1998 period arising from the repayment of a $500,000
principal amount note payable.

Net Loss. As a result of the foregoing, the net loss for the 1998 period
was approximately $1,853,000, a decrease of approximately 17.5% from $2,078,000
for the 1997 period. The net loss per share for the 1998 period of $.20,
compared to $.26 for the 1997 period, was calculated to include the effect of
the cumulative dividends on the Series A Preferred Stock and Series B Preferred
Stock for the 1998 period. The Series B Preferred Stock was outstanding for only
four days during the 1997 period.

Liquidity and Capital Resources

At September 30, 1998, the Company had a working capital deficit of
approximately $280,000, as compared to working capital of $890,000 at December
31, 1997. This decrease in working capital of $1,170,000 is primarily due to the
net loss for the nine months ended September 30, 1998, new loans payable to the
holder of the Series B Preferred Stock and others and increases in dividends
payable on the Series A Preferred Stock and Series B Preferred Stock, which more
than offset an increase in inventory, reductions in accrued expenses and amounts
due officers, a related party, and shareholders and repayment of a note payable.

At September 30, 1998, the Company had cash and cash equivalents of
approximately $1,000, a net decrease in cash and cash equivalents of $1,882,000
from $1,883,000 at December 31, 1997. Cash used in operating activities for the
nine months ended September 30, 1998 was $1,534,000, a decrease of $976,000 as
compared to the nine months ended September 30, 1997. The major factors
contributing to this reduction include the smaller loss from operations,
decreased accounts payable and accrued expenses and inventory acquisitions in
the 1998 period as the Company focused upon matching expenses and purchasing
with an anticipated lack of short-term sales of the second generation Sens-O-
Lock in the 1998 period. Cash provided by investing activities for the 1998
period was $20,000, resulting from the sale of fixed assets in connection with
the Company's refocusing of sales efforts to the domestic U.S. market. The
Company's investing activities in the 1997 period were related to the
acquisition of fixed assets. Cash used in financing activities for the 1998
period was $368,000, primarily the result of the Company's repayment of a
$500,000 note, which more than offset new loans of $165,000, compared to cash
provided by financing activities in the 1997 period of $2,738,000, which
resulted from the sale of the Company's Series B Preferred Stock in September
1997 and the exercise of warrants sold in private placements conducted in 1993
through 1995.

On September 26, 1997, the Company sold a total of 300 shares of Series B
Preferred Stock at a price of $10,000 per share to Milbright Estates, Ltd.
("Milbright"). The net proceeds from the sale of the Series B Preferred Stock
was approximately $2,675,000. The rights, preferences and privileges of the
Series B Preferred Stock are set forth in amendments to the Company's
Certificate of Incorporation (the "Series B Provisions") filed with the New York
Secretary of State. The Series B Preferred Stock has a liquidation preference of
$10,000 per share and bears cumulative dividends at a rate of eight percent (8%)
per share per annum. Such dividends are payable only immediately prior to the
conversion of the Series B Preferred Stock into Common Stock. The Series B
Preferred Stock is currently convertible, in whole or part, at the option of the
holder, into shares of Common Stock at any time. Each share of Series B
Preferred Stock is convertible into that number of shares of Common Stock as is
determined by dividing (i) the sum of (a) $10,000 plus (b) the amount of all
accrued but unpaid or accumulated dividends on the share of Series B Preferred
Stock being so converted by (ii) the Conversion Price in effect at the time of
conversion. The "Conversion Price" of the Series B Preferred Stock is equal to
the lower of (x) $4.03125 or (y) 82.5% of the average closing bid price of the
Common Stock over the ten consecutive trading days immediately preceding the
date of the conversion notice delivered to the Company. If not sooner converted,
all outstanding shares of Series B Preferred Stock are subject to automatic
conversion on the earlier of (i) September 26, 1999 or (ii) immediately prior to
the consummation of the acquisition of the Company pursuant to a merger or
consolidation or the sale of substantially all of the assets of the Company.
Except in connection with such automatic conversion, in no event will a holder
of Series B Preferred Stock be entitled to convert any shares of Series B
Preferred Stock if such conversion would cause the sum of (i) the number of
shares of Common Stock beneficially owned by the holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Series B Preferred
Stock) and (ii)

the number of shares Common Stock issuable upon the conversion of such
shares of the Series B Preferred Stock, to result in beneficial ownership by the
holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock. As of February 9, 1998, Milbright converted 26 shares of Series B
Preferred Stock into 457,493 shares of Common Stock. Additionally, as of
November 5, 1998, Milbright converted an additional four shares of Series B
Preferred Stock into 469,233 shares of Common Stock. Based on the average of the
closing bid prices of the Common Stock for the ten consecutive trading days
preceding November 10, 1998, the currently outstanding 270 shares of Series B
Preferred Stock would, if convertible, be convertible into an aggregate of
34,132,290 shares of Common Stock (giving effect to accrued dividends).

Pursuant to a letter agreement, dated August 14, 1998, between the Company
and AIIC, AIIC, as the holder of the 833,333 outstanding shares of Series A
Preferred Stock, agreed to accept (a) 230,861 shares of Common Stock as payment
in full for all accrued and unpaid dividends on said 833,333 shares of Series A
Preferred Stock for the prior dividend payment dates of September 30, 1997,
December 31, 1997 and September 30, 1998 (i.e., $344,375) and (b) agreed to
accept shares of Common Stock in lieu of payment of dividends on said 833,333
shares of Series A Preferred Stock due on the dividend payment dates of December
31, 1998, September 30, 1999 and December 31, 1999, such shares of Common Stock
to be valued at approximately $1.487 per share (subject to adjustment).

In June 1998, Milbright loaned (the "June 1998 Loan") the Company $100,000,
bearing interest at 11.5% per annum and maturing on July 31, 1998. In August
1998, Milbright loaned the Company (the "August 1998 Loan") an additional
$40,000, bearing interest at 11.5% per annum and maturing on August 31, 1998. In
September 1998, Milbright loaned (the "September 1998 Loan") the Company an
additional $25,000, bearing interest at 11.5% per annum and maturing on October
31, 1998. Repayment of the June 1998 Loan, August 1998 Loan and September 1998
Loan are past due, although Milbright has not made any attempt to require such
repayment.

Management believes that the Company currently does not have sufficient
working capital to continue its operations over the long-term and that cash
generated from operations for the next several months will not be sufficient to
meet the Company's currently anticipated liquidity and capital expenditure
requirements in order to successfully market the second generation Sens-O-Lock
product line and/or for the Company to continue operations. The Company has
entered into discussions with a third party with respect to granting
distribution/licensing rights to the Company's Sens-O-Lock and WeatherEye
product lines, which is anticipated to entail the pre-payment to the Company of
certain royalties, as well as debt and/or equity financing for the Company.
Further, the Company has continued to have discussions with Milbright with
respect to additional equity and/or debt financing. There can be no assurance,
however, that the Company will enter into a formal distribution/licensing
arrangement or receive additional financing from such third party, Milbright or
any other party, that royalties from any such distribution/licensing arrangement
and/or financing proceeds, if any, will be on terms favorable to the Company or
that the Company will be successful in attaining its sales goals, nor that
attaining such sales goals will have the desired effect on the Company's cash
resources. The failure to receive sufficient distribution/licensing royalties
and/or other equity or debt financing, as well as any failure to obtain a
sufficient level of sales, may result in the Company seeking protection under
the Federal Bankruptcy Laws and/or terminating operations.

Year 2000 Compliance

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 twenty-first century dates
from twentieth century dates. As a result, in less than two years, computer
systems and software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. The Company is in the process of

implementing a review of issues related to the Company's Year 2000 compliance.
This review is intended to determine the affect of the turn of the century on
the operability of the Company's products, management information systems
("MIS"), non-MIS systems the Company utilizes to conducts its business and other
internal and external processes which may impact the Company's operations. In
connection with this evaluation, the Company also anticipates reviewing the
Company's vendors, distributors and suppliers for Year 2000 compliance and to
effect changes where necessary.

The Company anticipates that this review process will be conducted in three
phases: the first phase is anticipated to encompass a review of all of the
Company's products, internal and external systems/processes and vendors and
suppliers for Year 2000 compliance; the second phase is expected to correct all
items identified as non- compliant and essential to the operations of the
Company; and the third phase is contemplated to be a second review to ensure
Year 2000 compliance and interoperability of all systems/processes.

The Company anticipates conducting its review with its current resources,
but cannot assure that it has sufficient resources to complete the review
process in a timely manner. The Company has not determined at this time, what
total costs it will incur to conduct the review process and to implement any
necessary corrections. Although the Company believes that the software utilized
in the second generation Sens-O-Lock and the Company's MIS software are Year
2000 compliant and is working to ensure that the Company's products and internal
systems are Year 2000 compliant, there can be no assurance that such compliance
is or will be achieved. The failure to be Year 2000 compliant could have a
material adverse effect on the Company's business, operating results and
financial condition.

Inflation

The rate of inflation has had little impact on the Company's operations or
financial position in the past and inflation is not expected to have a
significant impact on the Company's operations or financial position during the
year ending December 31, 1998.

Currency Fluctuations

The Company anticipates marketing internationally, as well as in the United
States. To the extent the Company is able to market its products in foreign
countries, the Company will become subject to the risks associated with
international sales, including, but not limited to, regulatory controls imposed
by foreign governments, shipping delays, customs duties and export quotas and
other trade restrictions, increased collection risks and international
political, regulatory and economical developments, any one of which could have
an adverse effect on the Company's operating results. To the extent that
revenues are derived in currencies other than U.S. Dollars, the Company's
operating results may be affected adversely by fluctuations in currency exchange
rates. The Company has not engaged in currency- hedging transactions intended to
reduce the effect of fluctuations in currency exchange rates on the Company's
foreign business operations. Even if the Company were to determine that it was
in its best interests to enter into any such hedging transactions in the future,
there can be no assurance that the Company will be able to do so or that such
transactions, if entered into, will materially reduce the effect of fluctuations
in currency exchange rates on the Company's foreign business operations.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Reference is hereby made to Item 3 to the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997, filed on October 28, 1998
(Commission File No.: 0-26998), and to the references therein, for a discussion
of all material pending legal proceedings to which the Company or any of its
subsidiaries are parties.

Item 2. Changes in Securities and Use of Proceeds.

In August 1998, the Company issued an aggregate of 230,861 shares of Common
Stock to AIIC as payment in full of $344,375 of dividends due on the 833,333
shares of Series A Preferred Stock registered in the name of AIIC. This stock
issuance was a transaction not including any public offering which was exempt
from the registration requirements under the Securities Act pursuant to Section
4(2) thereof.

As of November 5, 1998, the Company issued 469,233 shares of Common Stock
to Milbright upon Milbright's conversion of four shares of Series B Preferred
Stock. This stock issuance was a transaction not including any public offering
which was exempt from the registration requirements under the Securities Act
pursuant to Section 4(6) thereof.

Item 3. Defaults upon Senior Securities.

Repayment of the June 1998 Loan, August 1998 Loan and September 1998 Loan
are past due, although Milbright has not made any attempt to require such
repayment.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits.

Set forth below are all exhibits to this Quarterly Report on Form 10-QSB.

Exhibit
Number Description

year ended December 31, 1997 (Commission File Number: 0-26998), filed
with the Commission on October 28, 1998.)
10.3 Promissory Note, dated August 13, 1998, of the Company, in the
principal amount of $25,000 payable to Milbright Estates Ltd.
(Incorporated by reference to Exhibit 10.25 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997 (Commission
File Number: 0- 26998), filed with the Commission on October 28,
1998.)
10.4 Promissory Note, dated September 4, 1998, of the Company, in the
principal amount of $40,000 payable to Milbright Estates Ltd.
(Incorporated by reference to Exhibit 10.27 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997 (Commission
File Number: 0-26998), filed with the Commission on October 28, 1998.)
27 Financial Data Schedule.

(b) Reports on Form 8-K.

None.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

ALCOHOL SENSORS INTERNATIONAL, LTD.

Dated: November 19, 1998 By:/s/Joseph M. Lively
Joseph M. Lively President
(Principal Executive and Accounting Officer)

ALCOHOL SENSORS INTERNATIONAL, LTD.
FORM 10-QSB - QUARTER ENDED SEPTEMBER 30, 1998

Exhibit Index

Exhibit
Number Description

10.1 Promissory Note, dated June 12, 1998, of the Company, in the
principal amount of $100,000 payable to Milbright Estates Ltd.
(Incorporated by reference to Exhibit 10.23 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997 (Commission
File Number: 0- 26998), filed with the Commission on October 28,
1998.)
10.2 Letter Agreement, dated August 14, 1998, between the Company and
American International Insurance Company. (Incorporated by reference
to Exhibit 10.24 to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1997 (Commission File Number: 0-26998), filed
with the Commission on October 28, 1998.)
10.3 Promissory Note, dated August 13, 1998, of the Company, in the
principal amount of $25,000 payable to Milbright Estates Ltd.
(Incorporated by reference to Exhibit 10.25 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997 (Commission
File Number: 0- 26998), filed with the Commission on October 28,
1998.)
10.4 Promissory Note, dated September 4, 1998, of the Company, in the
principal amount of $40,000 payable to Milbright Estates Ltd.
(Incorporated by reference to Exhibit 10.27 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997 (Commission
File Number: 0-26998), filed with the Commission on October 28, 1998.)
27 Financial Data Schedule.