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


                               FORM 10-QSB/A No. 1


(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, 1997

[   ]     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 - 8,757,268 shares outstanding as of November 14, 1997.

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


<PAGE>


                          PART I. FINANCIAL INFORMATION



Item                                                                       Page

Item 1.   Condensed Consolidated Financial Statements (Unaudited):

     Condensed Consolidated Balance Sheets as of September 30, 1997
     and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . .  3
     Condensed Consolidated Statements of Operations for the Three and 
     Nine Months Ended September 30, 1997 and 1996 . . . . . . . . . . . . .  4
     Condensed Consolidated Statements of Cash Flows for the Nine Months 
     Ended September 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . .  5
     Notes to Condensed Consolidated Financial Statements. . . . . . . . . .  6


Item 2.   Management's Discussion and Analysis or Plan of Operation. . . . . 10

<PAGE>


               ALCOHOL SENSORS INTERNATIONAL, LTD. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                  September  30,       December 31,
                                                       1997                 1996
                                                    (Unaudited)            (Note)
                              ASSETS
Current assets:
<S>                                              <C>                   <C>        
 Cash and cash equivalents . . . . . . . . . . . $ 3,204,693           $ 3,042,051
 Accounts receivable, net. . . . . . . . . . . .      56,907                16,392
 Inventory . . . . . . . . . . . . . . . . . . .     619,883               287,462
 Prepaid expenses. . . . . . . . . . . . . . . .     167,747               138,295
                                                 ------------          ------------
      Total current assets . . . . . . . . . . .   4,049,230             3,484,200

Fixed assets, net. . . . . . . . . . . . . . . .     369,236               367,618
Other assets . . . . . . . . . . . . . . . . . .      14,166                23,084
                                                 ------------          ------------
                                                 $ 4,432,632           $ 3,874,902
                                                 ------------          ------------
</TABLE>

<TABLE>
<CAPTION>
            LIABILITIES AND SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY)
Current liabilities:
<S>                                              <C>                   <C>        
 Accounts payable. . . . . . . . . . . . . . . . $   332,903           $   703,955
 Accrued expenses. . . . . . . . . . . . . . . .     193,493               215,802
 Due to related party. . . . . . . . . . . . . .      86,668               153,513
 Loans payable and accrued interest to officers/
    shareholders . . . . . . . . . . . . . . . .     346,155               282,880
 Note payable. . . . . . . . . . . . . . . . . .     500,000               500,000
 Accrued and unpaid dividends. . . . . . . . . .     175,625                    --
 Deposits. . . . . . . . . . . . . . . . . . . .      10,000                10,000
                                                 ------------          ------------
   Total current liabilities . . . . . . . . . .   1,644,844             1,866,150
                                                 ------------          ------------

Accrued litigation settlement cost . . . . . . .     124,864             1,208,813
                                                 ------------          ------------

Series B 8% redeemable convertible preferred
 stock: 600 shares authorized; 300 shares 
 issued and outstanding at September 30,
 1997 (liquidation value: $3,003,333). . . . . .   2,685,000                    --
                                                 ------------          ------------

Shareholders' equity (capital deficiency):
 Series A non-redeemable 9% cumulative
 preferred stock:
   833,333 shares authorized; 833,333 issued and
   outstanding (liquidation value: $2,675,625
   and $2,506,875, at September 30, 1997 and 
   December 31, 1996, respectively) . . . . . .    2,500,000             2,500,000
 Common stock, par value $.001 per share: 
   25,000,000 authorized; 8,811,690 and 
   8,776,690 shares issued and outstanding as 
   of September 30, 1997 and December 31, 1996,
   respectively . . . . . . . . . . . . . . . .        8,811                 8,777
 Additional paid-in capital . . . . . . . . . .   12,767,417            11,419,483
 Accumulated deficit. . . . . . . . . . . . . .  (15,070,291)          (12,900,000)
 Accumulated foreign currency translation 
   adjustment . . . . . . . . . . . . . . . . .       (5,325)               (5,633)
                                                 ------------          ------------
                                                     200,612             1,022,627
 Less treasury stock, at cost: 55,672 
   shares of common stock . . . . . . . . . . .     (222,688)             (222,688)
                                                 ------------          ------------
   Total shareholders' equity 
     (capital deficiency) . . . . . . . . . . .      (22,076)              799,939
                                                 ------------          ------------
   Total liabilities and shareholders' equity 
     (capital deficiency) . . . . . . . . . . .  $ 4,432,632           $ 3,874,902
                                                 ------------          ------------
<FN>

Note:  The balance sheet at December 31, 1996 has been derived from the audited
       financial statements at that date  but  does  not include   all  of  the
       information and footnotes  required  by  generally  accepted  accounting
       principles for complete financial statements.

</FN>
</TABLE>

            See notes to condensed consolidated financial statements.
<PAGE>


               ALCOHOL SENSORS INTERNATIONAL, LTD. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                         Three Months Ended             Nine Months Ended
                                            September 30,                 September 30,
                                         1997          1996             1997         1996

<S>                                 <C>           <C>            <C>          <C>         
Net sales. . . . . . . . . . . . .  $   31,454    $  19,372      $    65,417  $     19,372
Cost of goods sold . . . . . . . .      15,560        6,911           33,893         6,911
                                    ------------  ------------    ------------   ------------
Gross profit . . . . . . . . . . .      15,894       12,461           31,524        12,461

Costs and expenses:
   Cost of merchandise shipped -
     subsequently recalled . . . .         --           --               --         556,809
   Research and development. . . . .   76,273       192,366          229,069        368,094
   Selling, general and 
     administrative. . . . . . . . .  761,865       734,139        1,845,469      2,009,279
   Litigation settlement . . . . . .   59,895            --           59,895        382,683
                                    ------------  ------------   ------------   ------------
     (Loss) from operations. . . . . (882,139)     (914,044)      (2,102,909) $  (3,304,404)

Interest and other income. . . . . .   12,021        24,458           54,953         73,436
Interest expense . . . . . . . . . .  (12,632)      (17,015)         (30,085)       (38,733)
                                    ------------  ------------   ------------   ------------
     Net (loss). . . . . . . . . . .$(882,750)    $(906,601)    $ (2,078,041) $  (3,269,701)
                                    ------------   ------------   ------------   ------------
Net (loss) per share . . . . . . .  $    (.11)    $    (.11)    $       (.26) $        (.39)
                                    ------------   ------------   ------------   ------------

Weighted average number of common
   shares outstanding. . . . . . .  8,741,857     8,545,757        8,740,190      8,349,093
                                    ------------   ------------   ------------   ------------
</TABLE>

            See notes to condensed consolidated financial statements.

<PAGE>


               ALCOHOL SENSORS INTERNATIONAL, LTD. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                 Nine Months Ended September 30,
                                                     1997               1996
Cash flows from operating activities:
<S>                                               <C>                <C>         
Net (loss) . . . . . . . . . . . . . . . . . .    $(2,078,041)       $(3,269,701)
Adjustments to reconcile net (loss) to net 
 cash (used in) operating activities:
   Depreciation and amortization . . . . . . .         63,000             45,000
   Issuance of option for services . . . . . .        235,000                 --
Changes in operating assets and liabilities:
   (Increase) in accounts receivable . . . . .        (40,515)          (104,607)
   (Increase) in inventory . . . . . . . . . .       (332,421)          (372,284)
   (Increase) decrease in prepaid expenses and
     other current assets. . . . . . . . . . .        (29,452)            71,456
   Decrease in restricted cash . . . . . . . .             --          1,017,317
   Decrease in other assets. . . . . . . . . .          8,918                 --
   (Decrease) in amounts due to related party.        (66,845)                --
   (Decrease) in deposit . . . . . . . . . . .             --            (14,922)
   Increase (decrease) in accounts payable and
     accrued expenses. . . . . . . . . . . . .       (393,361)           193,668
   Increase in accrued interest to officers. .          7,275                 --
   Increase in amounts due officers. . . . . .         56,000                 --
   Increase in accrued litigation settlement .         59,895                 --
   Increase in other assets. . . . . . . . . .            307                 --
                                                 -------------       ------------
      Net cash (used in) operating activities.     (2,510,240)        (2,434,073)
                                                 -------------       ------------

Cash flows from investing activities:
Sales of marketable securities . . . . . . . .             --          1,980,300
Acquisition of fixed assets. . . . . . . . . .        (64,618)           (47,823)
                                                 -------------       ------------
      Net cash provided by (used in) 
       investing activities. . . . . . . . . .        (64,618)         1,932,477

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            238,988
Proceeds from notes payable, convertible notes
     and warrants. . . . . . . . . . . . . . .             --            482,683
                                                 -------------       ------------
        Net cash provided by financing
        activities . . . . . . . . . . . . . .      2,737,500            721,671
                                                 -------------       ------------

NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS . . . . . . . . . . . . . . . .        162,642            220,075
Cash and cash equivalents - Beginning 
     of period . . . . . . . . . . . . . . . .      3,042,051            524,231
                                                 -------------       ------------
Cash and cash equivalents - End of period. . .   $  3,204,693        $   744,306
                                                 -------------       ------------
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 to settle 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.
  As of September 30, 1997, the Company had $175,625 in accrued dividends on the
Company's outstanding Series A Non-Redeemable 9% Cumulative Preferred Stock.

Supplemental disclosure of cash flow information:
Interest paid during the period. . . . . . . .   $     17,899        $    28,790
</TABLE>

            See notes to condensed consolidated financial statements.

<PAGE>


               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.  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. The balance sheet at December 31, 1996 has
been derived  from the audited  financial  statements  at that date but does not
include all the  information  and  footnote  disclosures  required by  generally
accepted  accounting  principles  for  complete  financial   statements.   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/A No. 1, filed on April 28, 1997 (Commission File No.: 0-26998).

     Operating  results for the three and nine month periods ended September 30,
1997 are not necessarily  indicative of the results that may be expected for the
year ending December 31, 1997.


2.   Significant Accounting Policies.

     Loss per share of common stock:

     Net loss per share of common stock is based on the weighted  average number
of shares outstanding during each period.

     Inventory:

     Inventory,  consisting of electronic components,  is stated at the lower of
cost (first in - first out basis) or market.  Inventory,  at September 30, 1997,
is comprised of finished goods, of $183,944, and components of $435,939.


3.   Product Recall.

     In the late spring of 1996, the Company became aware of  inconsistencies in
certain integral components of the Company's  Sens-O-Lock  product  manufactured
for the Company and other  manufacturing,  design and quality control  problems.
The Company discontinued manufacturing of the Sens-O-Lock units and recalled the
product.  During the second quarter of 1996, the Company determined to develop a
new  technology  for its  Sens-O-Lock  product line and wrote down  inventory by
approximately $556,000 in connection therewith.


4.   Note Payable.

     The Company has a line of credit of $500,000, bearing interest at the prime
rate,  which is  secured  by a  $500,000  certificate  of  deposit.  The  amount
outstanding  under this line of credit was  $500,000  at  December  31, 1996 and
September 30, 1997. The amount of the certificate of deposit is included in cash
and cash equivalents.

<PAGE>

5.   Legal Proceedings.

     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, captioned Guisepina Aucello v. Robert Whitney, John Ruocco and
Alcohol  Sensors  International,  Ltd. The  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 a certain "automotive alcohol sensor" device to which the
Defendant,  "AS Inc.," owned the patent  rights.  Plaintiff  alleges  damages of
$1,000,000.  The Company believes that Plaintiff's claims against the Company to
be without  merit and intends to  vigorously  defend  itself in the action.  The
Company is in the process of preparing  its answer in this action.  The ultimate
outcome of this action is unknown at this time.


6.   Computation of Loss per Share.

     The Company's  loss per share,  as reflected in the condensed  consolidated
financial statements, has been computed as follows:

<TABLE>
<CAPTION>
                                        Three Months Ended             Nine Months Ended
                                           September 30,                  September 30,
                                       1997             1996          1997            1996

<S>                                 <C>              <C>           <C>             <C>         
Net (loss) . . . . . . . . . . .    $ (882,750)      $ (906,601)   $(2,078,041)    $(3,269,701)
Cumulative dividend on Series A
 Preferred Stock . . . . . . . .       (56,250)              --       (168,750)             --
Cumulative dividend on Series B
 Preferred Stock . . . . . . . .        (3,333)              --         (3,333)             --
                                    -----------      -----------   ------------    ------------
Net (loss) attributable to common
 stock . . . . . . . . . . . . .    $ (942,333)      $ (906,601)   $(2,250,124)    $(3,269,701)
                                    -----------      -----------   ------------    ------------
Weighted average number of common
 shares outstanding. . . . . . .     8,741,857        8,545,757      8,740,190       8,349,093
                                    -----------      -----------   ------------    ------------
Net loss per share . . . . . . .    $     (.11)      $     (.11)   $      (.26)    $      (.39)
                                    -----------      -----------   ------------    ------------
</TABLE>

7.   Series B 8% Redeemable Convertible Preferred Stock.

     On  September  26, 1997,  the Company sold and issued to Milbright  Estates
Ltd.  (the  "Purchaser"),  (a) a total of 300 shares of 8% Series B  Convertible
Preferred  Stock  (the  "Series  B  Preferred  Stock")  and (b) a  Warrant  (the
"Warrant") to purchase  50,000  shares of the common stock,  par value $.001 per
share  (the  "Common  Stock"),  of the  Company,  for total  gross  proceeds  of
$3,000,000.  In connection  with the sale and issuance of the Series B Preferred
Stock and Warrant,  the Company issued warrants (the "Third Party  Warrants") to
purchase an aggregate  100,000  shares of Common Stock to third parties and paid
certain of such third parties an aggregate of $300,000.

     The Series B Preferred Stock is  convertible,  at the option of the holder,
into  shares  of  Common  Stock at any time  following  the  earlier  of (a) the
effectiveness  of a  registration  statement for the Common Stock into which the
Series B Preferred Stock is convertible  (the  "Registration  Statement") or (b)
120 days from the date of original issuance of the Series B Preferred Stock (the
"Original Issuance Date"). Notwithstanding the foregoing, the Series B Preferred
Stock is  convertible,  (a) with respect to 100 shares,  at any time on or after
November 24, 1997, (b) with respect to an additional 100 shares,  at any time on
or after December 24, 1997 and (c) with respect to any other shares, at any time
on or after  January 23, 1998.  Each share of Series B Preferred  Stock shall be
convertible  into that  number of shares  of Common  Stock as is  determined  by
dividing  (a) the sum of (i)  $10,000  plus (ii) the amount of all  accrued  but
unpaid or accumulated  dividends on the share of Series B Preferred  Stock being
so converted  by (b) the  Conversion  Price (as defined  below) in effect at the
time of conversion.  The "Conversion Price" of the Series B Preferred Stock will
be equal to the lower of (a)  $4.03125,  the  average of closing bid prices of a
share  of  Common  Stock  as  quoted  on The  Nasdaq  Stock  Market  for the ten

<PAGE>

consecutive trading days immediately preceding the Original Issuance Date or (b)
82.5% of the average  closing bid price of a share of Common  Stock as quoted on
The  Nasdaq  Stock  Market  for 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 shall be
subject to automatic conversion two years after the Original Issuance Date.

     Unless the  approval of the  Company's  shareholders  has  previously  been
obtained,  the Company is not required to issue any Common Stock upon conversion
of the Series B  Preferred  Stock to the extent  that (a) the  issuance  of such
Common Stock,  when taken together with all prior issuances of Common Stock upon
conversion  of Series B Preferred  Stock,  would  result in the  issuance by the
Company of a number of shares of Common  Stock  equal to or greater  than 20% of
the number of shares of Common Stock outstanding on the date of initial issuance
of the  Series B  Preferred  Stock  (a "20%  Issuance"),  and such 20%  Issuance
requires the prior approval of the  shareholders of the Company  pursuant to any
applicable rule,  regulation,  stated policy,  practice or interpretation of The
Nasdaq Stock Market or (b) the Board of Directors of the Company  determines  in
good faith that the  issuance of such Common Stock upon  conversion  (whether or
not  constituting a 20% Issuance)  otherwise  requires the prior approval of the
shareholders of the Company pursuant to any applicable rule, regulation,  stated
policy,  practice or  interpretation  of any stock  exchange or stock  market on
which the Common  Stock then  listed or admitted  to trading  (the  "Stockholder
Approval  Requirement").  Following  the first  conversion of Series B Preferred
Stock to which a 20% Issuance is applicable, the Company is required to (a) give
notice to all holders of the Series B Preferred Stock that the Company is unable
to issue any further Common Stock upon  conversion of Series B Preferred  Stock,
and that the Series B Preferred  Stock  cannot be converted  without  compliance
with the  Stockholder  Approval  Requirement,  and (b) take one of the following
actions, at its election,  within twenty days following the date of such notice:
(i) the Company  shall notify all such  holders of the Series B Preferred  Stock
that  the  Company  intends  to  seek  shareholder   approval  pursuant  to  the
Stockholder  Approval  Requirement,  in which event the Company shall thereafter
take all action  necessary to call a meeting of its  shareholders as promptly as
reasonably  practicable  to vote on such matter;  (ii) the Company  shall obtain
from the stock exchange or stock market on which the Common Stock is then listed
a waiver of the Stockholder  Approval Requirement and shall commence any mailing
to  stockholders  notifying them of such waiver that is required by the rules of
such stock exchange or stock market;  or (iii) the Company shall notify all such
holders of the Series B Preferred Stock that it is redeeming  Series B Preferred
Stock pursuant to the redemption  provisions of the Series B Preferred Stock. In
the  event  that the  Company  elects  to seek  stockholder  approval,  and such
stockholder  approval is not obtained  within 75 days  following the date of the
Company's  notice to the holders of the Series B Preferred Stock that it intends
to seek such stockholder approval,  the Company shall promptly following the end
of such 75 day period  notify all holders of the Series B  Preferred  Stock that
the Company is redeeming Series B Preferred  Stock. If the Stockholder  Approval
Requirement  is complied with or if a waiver of or exception to the  Stockholder
Approval  Requirement is obtained,  the conversion  rights of the holders of the
Series B Preferred Stock shall be reinstated.

     If the Company is required to redeem Series B Preferred  Stock  pursuant to
the provisions thereof, the Company shall (a) issue the Maximum Number of Shares
of Common Stock (as defined below) to the holder of Series B Preferred Stock who
have  requested  conversion  and (b)  redeem,  out of  funds  legally  available
therefor,  all of the Series B Preferred Stock that remain after such conversion
at a price per share of Series B Preferred  Stock  equal to $12,200  (subject to
adjustment) plus an amount equal to all dividends, if any, accrued but unpaid on
such shares as of the earlier of the date fixed for  redemption  or the maturity
date.  For  purposes of the Series B Preferred  Stock,  the  "Maximum  Number of
Shares of Common Stock" shall mean the greatest number of shares of Common Stock
that may be issued upon conversion of shares of Series B Preferred Stock without
causing a 20% Issuance.

     On the Original  Issuance Date, the Company had 8,756,018  shares of Common
Stock outstanding and Nasdaq requires  approval of a 20% Issuance.  Accordingly,
the Maximum Number of Shares of Common Stock is 1,751,203 and the average of the
closing  bid  prices  of a share  of  Common  Stock  for the  ten  trading  days
immediately  preceding the giving of a conversion  notice with respect to all of
the Series B Preferred  Stock  would need to be lower than  $2.0765 in order for
the  Maximum  Number of Shares of Common  Stock to be  reached  and the  Company
required to redeem any of the Series B Preferred  Stock.  On September 30, 1997,
the  Conversion  Price was  $4.10625,  which would have resulted in an aggregate
886,344 shares of Common Stock being issued if the Series B Preferred  Stock was
fully converted as of such date. (On November 14, 1997, the Conversion Price was

<PAGE>

$2.2945312, which would have resulted in an aggregate 1,318,633 shares of Common
Stock being  issued if the Series B Preferred  Stock was fully  converted  as of
such date.)

     The Company intends to seek shareholder approval at the next annual meeting
of the shareholders of the Company,  regardless of whether the Maximum Number of
Shares  of Common  Stock has been  issued  or  whether  a  Stockholder  Approval
Requirement  is necessary as of the date of such annual  meeting.  The Company's
directors  and  executive  officers  have  indicated  their  intent  to vote for
approval  of the  issuance  of all shares of Common  Stock to be issued upon the
conversion  of the Series B Preferred  Stock in full,  including any issuance of
shares of Common Stock exceeding the Maximum Number of Shares of Common Stock.


<PAGE>


Item 2.   Management's Discussions and Analysis or Plan of Operations.

     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 or 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 results of the  Company's  research and  development  efforts  related to
technology  for the next  generation  Sens-O-Lock  product,  the  quality of the
components,  manufacturing, design and quality control of the current and future
generations of the  Sens-O-Lock  product,  the enactment and enforcement of laws
relating to the use of products  such as the  Company's  Sens-O-Lock  product in
connection with sentencing for alcohol-related crimes and violations,  the level
of insurance  industry  adoption of  discounts,  if any, for the use of products
such as the Company's  Sens-O-Lock product, the amount of sales of the Company's
products,  the competitive  environment within the industry in which the Company
competes,  the level and costs incurred in connection with the Company's product
development  efforts,  market  acceptance  of the  Company's  products,  certain
technological considerations, availability of parts and components, competition,
dependence on key personnel and the other factors  including those disclosed and
discussed  in this "Item 2.  Management's  Discussion  and  Analysis  or Plan of
Operation"  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  markets and sells  electronic  after-market  safety  products,
including  a  patent-pending  line  of  ignition  interlock  devices  under  the
Sens-O-Lock  brand name.  The  Company's  Sens-O-Lock  equipment  is designed to
detect, evaluate and assist in the prevention of an alcohol impaired driver from
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 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  of the Sens-O-Lock  product,  recalled the
Sens-O-Lock  units which had been sold,  ceased marketing efforts and wrote down
its  inventory  by  approximately  $556,000.  Since that time,  the  Company has
devoted substantial  resources to research and development of new technology for
and the  design of the next  ("second")  generation  Sens-O-Lock  product  line,
developing new relationships  with other component  suppliers and manufacturers,
improving the Company's component and manufacturing  quality control procedures,
enhancing  the  Sens-O-Lock  operating  software  to meet the  requirements  for
foreign markets and developing  marketing strategies for the Sens-O-Lock product
line.

     The Company has conducted  various tests upon the  prototypes of its second
generation Sens-O-Lock product,  utilizing the results of the Company's research
and development  efforts.  These  pre-production  prototypes have been placed in
U.S. and European automobiles. The Company completed final parts procurement and
an initial  production of approximately 500 second generation  Sens-O-Lock units
during  September and October 1997. The second  generation  Sens-O-Lock  product
will be required to undergo  certification testing prior to actual United States
market  introduction  for the legislative  market,  pursuant to National Highway
Transportation Safety Administration  guidelines. The Company believes that, for
the U.S. voluntary and commercial markets, no such testing is required.


<PAGE>

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

     The Company  has  continued  its  development  of a network of  independent
representatives  and dealers  covering most of the continental  United States to
sell,  install and service  its  Sens-O-Lock  product.  The  Company's  business
strategy  will  concentrate  on  penetrating  three  markets:  (a) the voluntary
market,  which includes parents of teenage drivers;  (b) individuals  subject to
legislative or judicial  supervision (e.g., persons convicted of alcohol-related
or other crimes or violations);  and (c) the commercial market comprising truck,
bus and taxi fleets.  The Company  intends to seek  insurance  discounts to help
drive the market  for  Sens-O-Lock  product  and to assist in the  lobbying  for
stricter federal and state laws requiring drivers  convicted of  alcohol-related
or other  crimes or  violations  to install an ignition  interlock  device.  The
Company is evaluating strategies, marketing plans and programs which the Company
expects will enable it to work jointly with major insurance companies to enhance
their respective  markets.  However,  there can be no assurance that the Company
and such or other  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.

Results of Operations

Three  Months  Ended September 30, 1997 Compared to Three Months Ended September
30, 1996

     Net Sales.  The Company had net sales of $31,454 for the three months ended
September 30, 1997, an increase of 62.4% from net sales of $19,372 for the three
months ended  September  30, 1996.  In the 1997 period,  the Company's net sales
were   attributable  to  $8,912  in  initial  sales  of  the  second  generation
Sens-O-Lock product,  shipments of which commenced in September 1997, as well as
$22,542 of sales of  WeatherEye  units.  In 1996,  the  Company's net sales were
derived  solely from the  WeatherEye  product.  The Company  has  completed  the
manufacture  and assembly of  approximately  500 second  generation  Sens-O-Lock
devices  and,  in the  1997  fourth  quarter,  expects  to  complete  a  further
production  run of at least an  additional  500 units.  The Company has received
purchase orders for over 464 units from its dealer/distributor  network, but has
refrained from filling such purchase  orders so as to have available  sufficient
product to fill the needs of its insurance  market  customers,  which market the
Company believes would be more profitable and would provide better payment terms
than that obtainable from the Company's  dealer/distributor network; however, no
assurance can be given that sales to insurance  market  customers can or will be
effected or that such sales,  if any,  will be  profitable  to the Company or on
better payment terms.

     Cost of Goods Sold.  Cost of goods sold for the  three-month  period  ended
September  30, 1997 was  $15,560,  an increase of 125.1% from $6,911 in the 1996
period.  Costs of goods sold in the 1997 period were $12,173 attributable to the
Company's Weather Eye products and $3,387  attributable to the second generation
Sens-O-Lock  product.  Costs 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, 1997 were $76,273, a decrease of approximately  60.4%
from $192,366 for the three months ended  September  30, 1996,  primarily due to
the  focus of the  Company  in  addressing  specific  areas  related  to the new
technology incorporated into the current generation Sens-O-Lock product compared
to more general research and development expenses on this and other technologies
during the 1996 period.

     Selling,  general and  administration  expenses for the three-month  period
ended September 30, 1997 were $761,865,  an increase of approximately  3.8% from
$734,139 for the three months ended September 30, 1996, primarily as a result of
the settlement of contract  claims by certain  former  directors and officers of
the Company,  partially  offset by a reduction in the number of employees and an
approximate 70% deferral or reduction in the salaries of the Company's executive
officers and other employees.


<PAGE>

     Litigation  settlement costs for the three-month period ended September 30,
1997 were $59,895, relating to the settlement of an arbitration action involving
a  former  employee.  There  were no  litigation  settlement  costs  in the 1996
three-month period.

     Interest and Other  Income.  Interest and other income for the  three-month
period ended September 30, 1997 was $12,021,  a decrease of approximately  50.9%
from  $24,458 for the three  months ended  September  30,  1996,  primarily as a
result of higher average cash balances during the 1996 period.

     Interest  Expense.  Interest  expense  for  the  three-month  period  ended
September 30, 1997 was $12,632,  a decrease of approximately  25.8% from $17,015
for the  three  months  ended  June  30,  1996,  primarily  as a  result  of the
availability  of cash  resulting  from  the  sale of the  Company's  Series A 9%
Non-redeemable  Cumulative  Preferred Stock (the "Series A Preferred  Stock") in
December 1996.

     Net Loss.  As a result of the  foregoing,  the net loss for the 1997 period
was  $882,750,  a decrease  of  approximately  2.6% from  $906,601  for the 1996
period. The net loss per share for the 1997 period of $.11, compared to $.11 for
the 1996 period, was calculated to include the effect of the cumulative dividend
on the Series A Preferred Stock and Series B 8% Convertible Preferred Stock (the
"Series B Preferred Stock") for the 1997 period.  Neither the Series A Preferred
Stock or Series B Preferred Stock was outstanding during the 1996 period.

Nine  Months  Ended  September 30, 1997  Compared to Nine Months Ended September
30, 1996

     Net Sales.  The Company had net sales of $65,417 for the nine months  ended
September  30, 1997,  an increase of  approximately  237.7% from $19,372 for the
nine months ended  September 30, 1996,  after  adjustment  for the recall of the
Company's first generation Sens-O-Lock product. The Company's sales, in the 1996
period,  were solely of its  Weather-Eye  devices  compared to sales of both the
second generation  Sens-O-Lock ($8,912) and WeatherEye ($56,505) products in the
1997 period.

     Cost of Goods  Sold.  Cost of goods sold for the  nine-month  period  ended
September  30, 1997 was  $33,893,  an increase of 390.4% from $6,911 in the 1996
nine-month  period,  after  adjustment  for the  recall of the first  generation
Sens-O-Lock  product.  All costs of goods sold in the 1996  period  were for the
Company's Weather Eye products, which was released in September 1996.

     Costs and Expenses. For the nine-month period ended September 30, 1996, the
Company  incurred  costs of $556,026  with  respect to the  Sens-O-Lock  product
shipped during the first six months of 1996 which was subsequently  recalled. No
similar costs were incurred in the 1997 six-month period.

     Research and development expenses for the nine-month period ended September
30, 1997 were $229,069,  a decrease of approximately 37.8% from $368,094 for the
nine months ended  September  30, 1996,  primarily  due to the  narrowing of the
Company's  research and development needs as the second  generation  Sens-O-Lock
was more fully developed.

     Selling,  general and  administration  expenses for the  nine-month  period
ended September 30, 1997 were $1,845,469,  a decrease of approximately 8.2% from
$2,009,279 for the nine months ended  September 30, 1996,  primarily as a result
of a reduction in the number of  employees  and an  approximate  70% deferral or
reduction  in the  salaries  of  the  Company's  executive  officers  and  other
employees,  partially  offset by the  settlement  of contract  claims by certain
former directors and officers of the Company.

     Litigation  settlement costs for the nine-month  period ended September 30,
1997 were  $59,895,  a decrease of  approximately  84.3% from  $382,683 for nine
months ended September 30, 1996.

     Interest and Other  Income.  Interest  and other income for the  nine-month
period ended September 30, 1997 was $54,953,  a decrease of approximately  25.2%
from $73,436 for the nine months ended September 30, 1996, primarily as a result
of lower cash balances.


<PAGE>

     Interest  Expense.   Interest  expense  for  the  nine-month  period  ended
September 30, 1997 was $30,085,  a decrease of approximately  22.3% from $38,733
for the nine months  ended  September  30,  1996,  primarily  as a result of the
availability  of cash resulting from the sales of the Series A Stock in December
1996 and Series B Stock in September 1997.

     Net  Loss.  As a  result  of the  foregoing,  the net  loss  for  the  1997
nine-month  period  was  $2,078,041,  a  decrease  of  approximately  36.4% from
$3,269,701 for the 1996 nine-month  period.  The net loss per share for the 1997
nine-month period of $.26,  compared to $.39 for the 1996 period, was calculated
to include the effect of the cumulative dividend on the Series A Preferred Stock
and Series B Preferred Stock for the 1997 nine-month period.  Neither the Series
A Preferred Stock or Series B Preferred  Stock was  outstanding  during the 1996
period.

Liquidity and Capital Resources

     During the nine month period ended  September 30, 1997,  the Company's cash
and cash equivalents  increased by $162,642 from $3,042,051 at December 31, 1996
to $3,204,693 at September 30, 1997,  primarily as a result of the proceeds from
financing activities of $2,737,500,  offset by cash used in operating activities
of $2,510,240 and in investing activities of $64,618. At September 30, 1997, the
Company had working capital of $2,404,386,  an increase of $786,336 from working
capital of  $1,618,050  at December  31,  1996.  The Company  believes  that its
existing cash and cash equivalents and cash generated from  operations,  if any,
should be sufficient for existing operations for the next twelve months.

     On  September  26,  1997,  the  Company  sold and issued to the  Purchaser,
Milbright  Estates Ltd.,  (a) a total of 300 shares of Series B Preferred  Stock
and (b) a Warrant to purchase  50,000  shares of Common  Stock,  for total gross
proceeds of $3,000,000. In connection with the sale and issuance of the Series B
Preferred Stock and Warrant, the Company issued Third Party Warrants to purchase
an aggregate 100,000 shares of Common Stock to third parties and paid certain of
such  third  parties  an  aggregate  of  $300,000.  See Note 7 to the  Condensed
Consolidated Financial Statements.

     If the Company is required to redeem Series B Preferred  Stock  pursuant to
the provisions thereof, the Company shall (a) issue the Maximum Number of Shares
of Common  Stock to the holder of Series B  Preferred  Stock who have  requested
conversion and will (b) redeem, out of funds legally available therefor,  all of
the Series B Preferred  Stock that remain after such  conversion  at a price per
share of Series B Preferred Stock equal to $12,200  (subject to adjustment) plus
an amount equal to all dividends,  if any,  accrued but unpaid on such shares as
of the earlier of the date fixed for redemption or the maturity date.

     On the Original  Issuance Date, the Company had 8,756,018  shares of Common
Stock outstanding and Nasdaq requires  approval of a 20% Issuance.  Accordingly,
the Maximum Number of Shares of Common Stock is 1,751,203 and the average of the
closing  bid  prices  of a share  of  Common  Stock  for the  ten  trading  days
immediately  preceding the giving of a conversion  notice with respect to all of
the Series B Preferred  Stock  would need to be lower than  $2.0765 in order for
the  Maximum  Number of Shares of Common  Stock to be  reached  and the  Company
required to redeem any of the Series B Preferred  Stock.  On September 30, 1997,
the  Conversion  Price was  $4.10625,  which would have resulted in an aggregate
886,344 shares of Common Stock being issued if the Series B Preferred  Stock was
fully converted as of such date. (On November 14, 1997, the Conversion Price was
$2.2945312, which would have resulted in an aggregate 1,318,633 shares of Common
Stock being  issued if the Series B Preferred  Stock was fully  converted  as of
such date.)

     The Company  intends to seek  shareholder  approval at a Special Meeting of
the  shareholders of the Company  scheduled for February 5, 1998,  regardless of
whether the Maximum  Number of Shares of Common Stock has been issued or whether
a Stockholder  Approval  Requirement  is necessary as of the date of such annual
meeting.  The Company's  directors and executive  officers have indicated  their
intent to vote for  approval of the issuance of all shares of Common Stock to be
issued upon the  conversion of the Series B Preferred  Stock in full,  including
the issuance of shares of Common Stock exceeding the Maximum Number of Shares of
Common Stock.


<PAGE>

     In the event that the  shareholders  of the Company approve the elimination
of the restriction  (i.e.,  the Maximum Number of Shares of Common Stock) on the
number of shares  of Common  Stock  issuable  upon  conversion  of the  Series B
Preferred  Stock,  the  Company's  shareholders'  equity  would be  increased by
$2,685,000.  The Company's shareholders will be asked to approve the elimination
of restriction on the number of shares of Common Stock issuable upon  conversion
of the Series B  Preferred  Stock at a Special  Meeting of  Shareholders  of the
Company  scheduled  for  February 5, 1998.  There can be no  assurance  that the
shareholders  of the Company will approve the  elimination of the restriction on
the number of shares of Common Stock  issuable  upon  conversion of the Series B
Preferred Stock.

     The Company's  operating  activities for the first nine months of 1997 used
cash of  $2,510,240,  primarily  as a result of the net loss of  $2,078,041,  an
increase in inventory of $332,421 as the Company prepared for the release of the
current generation  Sens-O-Lock  product, and a decrease in accounts payable and
accrued expenses of $393,361.

     The Company's net cash provided by financing activities for the nine months
ended September 30, 1997 was $2,737,500,  as the result of the sale in September
1997 of the Series B Stock for net  proceeds  of  $2,685,000  and  $52,500  from
exercise  of  certain  of the  warrants  sold in the  Company's  initial  public
offering.

     In  order to  conserve  cash,  commencing  in March  1997,  certain  of the
Company's  officers  deferred a portion of their salaries.  As of June 10, 1997,
the amount of deferred salary totaled $230,000. On June 10, 1997, those officers
agreed to the  cancellation  of $230,000 of such deferred salary in exchange for
the issuance of options to purchase an aggregate 115,000 shares of Common Stock.
These options are  exercisable  through June 9, 2002 at $2.00 per share. On June
10, 1997, the closing price of the Common Stock was $2-9/16 per share.

     The  Company  has  established  a plan of  operation  pursuant to which the
Company intends to purchase raw materials, components and manufacturing services
to  assemble  Sens-O-Lock  units which the  Company  anticipates  selling to the
Company's  developing  dealer network and to the insurance  market.  The Company
intends to fund  additional  research and  development,  including  engineering,
personnel costs, laboratory equipment,  purchases,  rental costs and independent
laboratory testing services, through its current cash and cash flow generated by
the anticipated sales of the second generation  Sens-O-Lock product,  along with
the Company's WeatherEye products. There can be no assurance,  however, that the
Company will be successful in attaining its sales goals, nor that attaining such
goals will have the  desired  effect on the  Company's  cash  resources.  If the
Company  does  not  attain  its  revenue  and  cash  collection  goals or if the
Company's  cash  resources  are not  sufficient,  it may be  necessary to obtain
additional  sources of financing.  There can be no assurance that such financing
will be available on terms  acceptable to the Company or on a timely basis or at
all.

     The Company has a line of credit of $500,000, bearing interest at the prime
rate,  which is  secured  by a  $500,000  certificate  of  deposit.  The  amount
outstanding  under this line of credit was  $500,000  at  December  31, 1996 and
September 30, 1997. The amount of the certificate of deposit is included in cash
and cash equivalents.

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.


<PAGE>

Inflation

     The Company believes that inflation has generally not had a material impact
on its operations.




<PAGE>


                   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/A  No. 1 for the fiscal year ended  December  31,  1996 (page 14),  filed
April 28,  1997  (Commission  File No.:  0-26998),  and Item 1 of Part II to the
Company's Annual Report on Form 10-QSB for the quarter ended June 30, 1997 (page
13), filed August 14, 1997, 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.

     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, captioned Guisepina Aucello v. Robert Whitney, John Ruocco and
Alcohol  Sensors  International,  Ltd. The  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 a certain "automotive alcohol sensor" device to which the
Defendant,  "AS Inc.," owned the patent  rights.  Plaintiff  alleges  damages of
$1,000,000.  The Company believes that Plaintiff's claims against the Company to
be without  merit and intends to  vigorously  defend  itself in the action.  The
Company is in the process of preparing  its answer in this action.  The ultimate
outcome of this action is unknown at this time.

Item 2.   Changes in Securities and Use of Proceeds.

     On September 26, 1997,  the Company  consummated  the sale of 300 shares of
Series B Preferred  Stock and warrant to purchase  50,000 shares of Common Stock
at  $4.265625  per  share  (subject  to  adjustment)  to a single  investor  for
aggregate  gross  proceeds of  $3,000,000  in private  transactions  exempt from
registration under Section 4(2) of the Securities Act and Rule 506 of Regulation
D  promulgated  thereunder.  In  connection  with such sale,  the  Company  paid
$300,000 and issued five year warrants to purchase an aggregate  100,000  shares
of Common Stock at an exercise  price of $4.265625 per share.  Reference is made
to the Company's Current Report on Form 8-K (Date of Report: September 26, 1997)
(Commission  File  No.:  0-26998),   filed  with  the  Securities  and  Exchange
Commission  (the  "Commission")  on October 7, 1997, and Note 7 to the Company's
condensed   consolidated   financial   statement  included  herein  for  further
disclosures with respect to such transaction, which disclosures are incorporated
herein by reference thereto.

     All net  proceeds  received by the Company in  connection  with its initial
public offering,  which commenced,  and the registration statement (Registration
No. 33-96752) for which was declared  effective,  on November 9, 1995, have been
utilized in full.


Item 3.   Defaults upon Senior Securities.

     None.


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

     None.



<PAGE>

Item 5.   Other Information.

Recent Developments:

     By letter dated September 26, 1997 (the "Nasdaq  Letter"),  Nasdaq notified
the  Company  that  Nasdaq  staff was  concerned  about  various  aspects of the
Company's  financial  and  operating  status.  The Nasdaq Letter went on to note
Nasdaq's  desire to "obtain a more  thorough  understanding  of the  [C]ompany's
business  strategy,  market  opportunities  and operations"  and, in furtherance
thereof, requested specified information and documents.

     Under the rules of Nasdaq,  which the  Company is  required  to comply with
pursuant to the Company's listing agreement with Nasdaq,  Nasdaq may request any
additional information or documentation deemed necessary to make a determination
regarding a security's initial or continued inclusion.  In addition,  the Nasdaq
rules grant Nasdaq "broad discretionary authority over the initial and continued
inclusion  of  securities  in Nasdaq in order to maintain the quality and public
confidence  in its market.  Under such broad  discretion . . . [Nasdaq] may deny
initial inclusion or apply additional or more stringent criteria for the initial
or continued  inclusion of  particular  securities  or suspend or terminate  the
inclusion  of  particular   securities  based  on  any  event,   condition,   or
circumstance which exists or occurs that makes initial or continued inclusion of
the securities in Nasdaq  inadvisable or unwarranted in the opinion of [Nasdaq],
even though the securities meet all enumerated criteria for initial or continued
inclusion in Nasdaq."

     The Company's  management  believes that the Company is in full  compliance
with all enumerated  criteria for continued  inclusion in Nasdaq. In fact, since
the date of the Nasdaq Letter,  the Company has introduced the second generation
Sens-O-Lock at the  Birmingham,  England Motor Show,  commenced  shipment of the
second generation  Sens-O-Lock  devices to customers and has obtained  financing
which,  management  believes,  will be  sufficient  for the  Company's  needs to
commence  marketing  and full  production of the second  generation  Sens-O-Lock
product line.  Such events have been  communicated  to Nasdaq in connection with
the Company's  formal response to the Nasdaq Inquiry.  However,  there can be no
assurance that the Company's  response to the Nasdaq Inquiry will allay Nasdaq's
concerns  regarding the status of the Company  and/or the  Company's  ability to
successfully launch the second generation Sens-O-Lock, that Nasdaq will not deny
the continued  inclusion thereon of the Company's  securities,  that Nasdaq will
not apply  additional or more  stringent  criteria for the  continued  inclusion
thereon of the  Company's  securities  or that the  Company  would be capable of
complying  with any  additional  or more  stringent  criteria for the  continued
inclusion on Nasdaq of the Company's  securities,  if imposed.  Any delisting of
the Company's  securities  from Nasdaq could cause a precipitous  decline in the
market value of the Company's  securities and adversely  affect the liquidity of
the Company's securities.


<PAGE>


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

10.1      Securities  Purchase  Agreement,  dated  September  24, 1997, by  and
          between  the  Company  and Milbright Estates, Ltd. (minus attachments
          and exhibits thereto).  (Incorporated by reference to Exhibit "10.1"
          to  the  Company's  Current  Report on  Form  8-K (Date  of  Report:
          September 26, 1997) (Commission  File No.: 0-26998),  filed  with  the
          Commission on October 7, 1997).
10.2      Registration  Rights  Agreement,  dated  September 24, 1997,  by  and
          between the Company and Milbright Estates, Ltd. (Incorporated by 
          reference to Exhibit "10.2" to the Company's Current Report on Form 
          8-K (Date of Report: September 26, 1997) (Commission File No.0-26998),
          filed with the Commission on October 7, 1997).
27        Financial Data Schedule.

     (b)  Reports on Form 8-K.

     On October 7, 1997, the Company filed a Current Report on Form 8-K (Date of
Report:  September  26,  1997)  with  the  Commission  reporting,  as an  Item 5
disclosure,  the  Company's  sale of 300 shares of Series B Preferred  Stock for
gross proceeds of  $3,000,000.  There were no financial  statements  included in
such Form 8-K.


<PAGE>


                                   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:  January 26, 1998                     By:/s/Steven A. Martello
                                             ----------------------------------
                                                  Steven A. Martello, President
                                                  (Principal Executive Officer)


<PAGE>


                       ALCOHOL SENSORS INTERNATIONAL, LTD.
                 FORM 10-QSB - QUARTER ENDED SEPTEMBER 30, 1997

                                  Exhibit Index

Exhibit
Number    Description

10.1      Securities  Purchase  Agreement,  dated  September  24, 1997, by  and
          between  the  Company  and Milbright Estates, Ltd. (minus attachments
          and exhibits thereto).  (Incorporated by reference to Exhibit "10.1"
          to  the  Company's  Current  Report  on  Form  8-K (Date  of  Report:
          September 26, 1997) (Commission  File No.: 0-26998),  filed  with  the
          Commission on October 7, 1997).
10.2      Registration  Rights  Agreement,  dated  September 24, 1997,  by  and
          between the Company and Milbright Estates, Ltd. (Incorporated by 
          reference to Exhibit "10.2" to the Company's Current Report on Form 
          8-K (Date of Report: September 26, 1997) (Commission File No.0-26998),
          filed with the Commission on October 7, 1997).
27        Financial Data Schedule.