SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1995
Commission File Number 0-11447
DATAKEY, INC.
(Exact name of small business issuer as specified in its charter)
MINNESOTA 41-1291472
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
407 WEST TRAVELERS TRAIL, BURNSVILLE, MN 55337
Issuer's telephone number: (612) 890-6850
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's common equity, as of
August 11, 1995, is 2,829,570.
Transitional Small Business Disclosure Format (check one):
Yes No x
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
DATAKEY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 1, December 31
1995 1994
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,306,721 $ 255,039
Investment in held-to-maturity securities 5,273,379 6,110,576
Trade receivables, less allowance for
doubtful accounts of $31,986 and $53,700 995,766 1,190,893
Inventories 1,261,007 1,348,985
Prepaid and other 68,556 26,242
Deferred tax assets 166,000 166,000
Refundable income taxes 0 101,680
Total current assets 9,071,429 9,199,415
INTANGIBLES
Patent and license at cost, less amortization
of $127,065 and $101,811 163,196 153,491
Non-compete agreement, less amortization
of $82,500 and $41,250 82,500 123,750
245,696 277,241
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost
Production tools 1,081,089 1,027,206
Equipment 2,312,827 2,211,216
Furniture and fixtures 211,822 211,822
Leasehold improvements 211,612 210,562
3,817,350 3,660,806
Less accumulated depreciation (2,173,344) (1,936,935)
1,644,006 1,723,871
$ 10,961,131 $ 11,200,527
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 429,306 $ 773,636
Accrued expenses 244,761 177,966
Non-compete obligation 0 82,500
Income taxes payable 42,097 0
Warranty costs 29,150 50,000
Total current liabilities 745,314 1,084,102
DEFFERRED TAX LIABILITY 101,000 101,000
SHAREHOLDERS' EQUITY
Convertible preferred stock, voting, stated value
$2.50 per share; authorized 400,000 shares;
issued and outstanding 150,000 375,000 375,000
Common stock, par value $.05 per share;
authorized 10,000,000 shares;
outstanding 2,829,570 141,479 141,479
Additional paid-in capital 3,865,631 3,865,631
Retained earnings 5,732,707 5,633,315
10,114,817 10,015,425
$ 10,961,131 $ 11,200,527
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
DATAKEY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $ 1,696,136 $ 1,085,510 $ 3,604,374 $ 2,458,984
Cost of goods sold 1,124,898 803,833 2,397,216 1,773,175
Gross Profit 571,238 281,677 1,207,158 685,809
Other operating revenue 5,927 14,814 10,277 33,705
Total gross profit and
other operating revenue 577,165 296,491 1,217,435 719,514
Operating expenses:
Research, development
and engineering 169,865 188,536 340,062 421,746
Selling 301,084 241,239 583,398 463,719
General and administrative 174,742 156,626 329,608 320,489
Total operating expenses 645,691 586,401 1,253,068 1,205,954
Operating income (loss) (68,526) (289,910) (35,633) (486,440)
Nonoperating income(expense):
Interest income 95,953 50,416 187,499 110,862
Other income (expense) (264) 4 (74) (821)
95,689 50,420 187,425 110,041
Income (loss) before
income taxes 27,163 (239,490) 151,792 (376,399)
Income tax expense (benefit) 9,400 (81,000) 52,400 (126,000)
Net income (loss) $ 17,763 ($ 158,490) $ 99,392 ($ 250,399)
Net income (loss) per common and
common equivalent share (Primary
and fully diluted) $ 0.01 ($ 0.06) $ 0.03 ($ 0.09)
Weighted average number of
common and common
equivalent shares
outstanding 2,982,314 2,829,070 2,980,630 2,829,070
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
DATAKEY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income (loss) $ 17,763 ($ 158,490) $ 99,392 ($ 250,399)
Adjustments to reconcile net income
(loss) to net cash provided by(used in)
operating activities:
Depreciation 118,058 88,980 236,409 176,626
Amortization 35,789 9,734 66,504 18,927
Change in assets and liabilites
(Increase) decrease:
Trade receivables (48,570) 377,851 195,127 797,013
Inventories 138,441 (4,746) 87,978 (256,603)
Prepaid expenses and other 1,732 (6,947) (42,314) (24,333)
Refundable income taxes 59,702 56,273 101,680 11,023
Increase (decrease) in:
Accounts payable (34,241) (149,234) (329,570) (375,397)
Accrued expenses 13,966 (78,643) 52,035 (209,684)
Accrued warranty costs (24,516) 3,594 (20,850) 66
Income taxes payable 42,097 0 42,097 0
Net cash provided by (used in)
operating activities 320,221 138,372 488,488 (112,761)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of tooling and equipment (92,437) (64,757) (156,544) (207,573)
Purchase of held-to-maturity
securities (1,270,456) (5,052,804) (2,462,803) (5,052,804)
Proceeds from maturity of
held-to-maturity securities 2,280,000 2,517,486 3,300,000 4,410,702
Patent and license costs (28,032) (13,512) (34,959) (46,725)
Net cash provided by (used in)
investing activities 889,075 (2,613,587) 645,694 (896,400)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on non-compete
obligation (41,250) 0 (82,500) 0
Net proceeds from sale of
common stock 0 0 0 0
Net cash (used in) financing activities (41,250) 0 (82,500) 0
Increase (decrease) in cash
and cash equivalents 1,168,046 (2,475,215) 1,051,682 (1,009,161)
CASH AND CASH EQUIVALENTS
Beginning 138,675 4,293,854 255,039 2,827,800
Ending $ 1,306,721 $ 1,818,639 $ 1,306,721 $ 1,818,639
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
DATAKEY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly Datakey's financial position
as of July 1, 1995 and December 31, 1994 and results of its operations and cash
flows for the three-month and six-month periods ended July 1, 1995 and July 2,
1994. The adjustments that have been made are of a normal recurring nature.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's financial statements in the 1994 Datakey, Inc. Annual Report and in
Form 10-KSB for the year ended December 31, 1994.
INVESTMENT IN HELD-TO-MATURITY SECURITIES
The Company held marketable debt securities with an amortized cost of $5,273,379
as of July 1, 1995. As it is the intention of the Company to hold these
securities to maturity, they are accounted for as "Held-to-Maturity Securities"
as defined in FASB Statement No. 115. The market value of these U.S. Treasury
Bill securities is $5,285,066. The unrealized gain, therefore, is $11,687.
All of the Securities have a maturity date of less than twelve months. The
Company has no marketable debt securities which are classified as
Available-For-Sale Securities or Trading Securities.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
DATAKEY, INC. AND SUBSIDIARY
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
REVENUE - Net sales for the three-month and six-month periods ended
July 1, 1995, increased by $610,626 and $1,145,390, or 56% and 47% respectively.
The increase in sales in both periods was driven by a significant increase in
commercial sales offset in part by a decline in government sales. Commercial
sales increased by $417,974, or 42%, in the three-month period, and $1,389,930,
or 79%, in the six-month period ended July 1, 1995, as compared to the same
periods in 1994. Commercial sales were 80% and 87% of total sales for the
three-month and six-month periods ended July 1, 1995, as compared to 87% and 71%
in the comparable 1994 periods. The Company anticipates that government sales
will remain stable for the balance of 1995 and that commercial sales in 1995
will continue to exceed the commercial sales in the comparable 1994 quarters.
While the Company anticipates improved sales in 1995 compared to 1994, there is
no assurance that revenues in the remaining quarters of 1995 will reflect
significant improvement over the first two quarters of 1995. Because of the
continuing uncertainty of its OEM business, quarterly revenues may fluctuate.
GROSS PROFIT MARGINS - Gross profit as a percentage of net sales
increased to 34% and 33% in the three-month period and six-month periods ended
July 1, 1995, from 26% and 28% in the comparable 1994 periods. The increased
gross profit margin, in dollars as well as percentage of net sales, is primarily
due to absorption of fixed and semi-fixed manufacturing costs over a higher
level of sales. Gross profits for the balance of 1995 are expected to exceed the
levels attained in 1994 but will likely remain below 35% as a percentage of net
sales.
OPERATING EXPENSES - Operating expenses increased by $59,290 and
$47,115, or 10% and 4%, in the three-month and six-month periods ended July 1,
1995, as compared to the same periods in 1994. The increased expenses in 1995
are primarily the result of costs related to personnel added during 1995 and
increases in sales and marketing expenses necessary to support the higher level
of sales. Operating expenses as a percentage of net sales are 38% and 35% in the
1995 three- and six-month periods respectively, compared to 54% and 49% in the
comparable 1994 periods. The Company expects 1995 operating expenses to trend
upward throughout the remainder of the year and exceed the quarterly expenses
for the comparable 1994 periods. As a result of a higher level of anticipated
sales, however operating expenses as a percentage of sales should be lower than
the percentage in 1994.
<PAGE>
NONOPERATING INCOME - Nonoperating income during the three-month and
six-month periods ended July 1, 1995 increased $45,269 and $77,384, or 90% and
70%, from the comparable periods in 1994. The higher level of non-operating
income is primarily the result of an increase in the interest rate on earnings
from the interest-bearing cash, cash equivalents and held-to-maturity securities
and a slightly higher average balance of these securities.
FINANCIAL CONDITION - During the six-month period ended July 1, 1995,
the Company had a net increase in cash and cash equivalents of $1,051,682,
compared to a net decrease of $1,009,161 in the comparable 1994 period. The
increase in cash and equivalents during the six-month period ended July 1, 1995
was offset by a $837,197 decreased investment in marketable debt securities.
Cash, cash equivalents and investment in held-tomaturity securities were
$6,580,100 at July 1, 1995.
The Company anticipates that its current working capital position of $8,326,115
and internally generated cash flow will be sufficient to fund its planned
operations for the foreseeable future.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
DATAKEY, INC. AND SUBSIDIARY
The Company held its Annual Meeting on Wednesday, June 7, 1995.
Proxies for the Annual Meeting were solicited pursuant to Regulation 14 under
the Securities Exchange Act of 1934. There was no solicitation in opposition to
management's nominees as listed in the Company's proxy statement, and all
nominees were elected.
By a vote of 2,628,260 shares in favor, with 16,940 shares opposed and 7,325
shares abstaining, the shareholders set the number of directors to be elected at
three (3).
The following persons were elected to serve as directors of the Company, by the
votes indicated, until the next annual meeting of shareholders:
NUMBER OF NUMBER OF
NOMINEE VOTES FOR VOTES WITHHELD
John H. Underwood 2,632,101 20,424
Terrence W. Glarner 2,635,601 16,924
Thomas R. King 2,635,601 16,924
<PAGE>
At the Annual Meeting, the shareholders also ratified the appointment of
McGladrey & Pullen, LLP, as independent auditors for the Company for the fiscal
year ending December 31, 1995, by a vote of 2,637,125 shares in favor, 4,850
shares opposing and 10,550 shares abstaining.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
DATAKEY, INC. AND SUBSIDIARY
(A) Exhibits
Exhibit 10 Employment Agreement dated January 1, 1995
with Alan G. Shuler*
Exhibit 11 Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule (only filed with
electronic copy)
(b) The Company was not required to and did not file a Form 8-K
during the quarter ended July 1, 1995.
* Indicates management contract
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated August 11, 1995 DATAKEY, INC.
BY: /s/ John H. Underwood
John H. Underwood
Chairman & Chief Executive Officer
(Principal Executive Officer)
BY: /s/ Alan G. Shuler
Alan G. Shuler
Vice President & Chief
Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
DATAKEY, INC.
EXHIBIT INDEX TO FORM 10-QSB
FOR QUARTER ENDED JULY 1, 1995
EXHIBIT NO. DESCRIPTION
10 Employment agreement dated January 1, 1995,
with Alan G. Shuler
11 Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement made and entered into effective as of the
first day of January 1995, by and between Datakey, Inc., a Minnesota corporation
(the "Company" or "Datakey") and Alan G. Shuler ("Executive").
RECITALS
Alan G. Shuler has been the Chief Financial Officer ("CFO") of the
Company since June 1992. The Company and the Executive are desirous that the
Executive continue to serve the Company in these capacities under the following
terms and conditions.
AGREEMENT
1. Employment
a. Datakey agrees to continue to employ Executive on a full-time basis
as the CFO of Datakey.
b. Executive agrees that he will, at all times, faithfully,
industriously, and, to the best of his abilities, experience and talents,
continue to perform all the duties and responsibilities that may be required of
him as an officer of Datakey.
2. Term of Employment
a. Subject to the terms and conditions hereof, Executive shall be
employed for a term ("Employment Term") commencing on January 1, 1995, and
terminating on December 31, 1995, unless extended as set forth in Subsection 2b
below.
b. This Agreement will be renewed automatically after December 31,
1995, for additional one-year periods unless either party gives the other party
written notice 30 days before December 31, 1995 or 30 days before the end of any
one-year period thereafter of his or its intention to terminate the Agreement.
3. Base Monthly Compensation
As compensation for his services to Datakey, Executive shall be paid a
monthly salary of $8,016, payable in accordance with Datakey's periodic payment
periods.
4. Other Benefits
a. Vacation. Executive will receive four weeks of vacation for every
twelve months of employment. Unused vacation may not be carried over from one
year to the next.
<PAGE>
b. Automobile Allowance. During the term of this Agreement, Datakey
will pay Executive $400 per month to be applied toward his automobile expenses.
c. Miscellaneous. During the term of this Agreement, Executive will be
eligible to receive the other benefits described in the attached Exhibit A,
subject to such changes as Datakey may adopt from time to time for salaried
employees generally.
5. Termination
a. Notwithstanding Section 2 above, the Employment Term or any
extension thereof shall terminate upon the happening of any of the following
events:
(i) Mutual written agreement between the Board of Directors of
Datakey and Executive to terminate his employment.
(ii) Executive's death.
(iii) Executive's disability defined as physically or mentally
unable to perform as CFO for a period of six consecutive
months, or
(iv) For cause (as defined below) upon written notice from the
Board of Directors specifying the nature of the cause.
b. For purposes of this Agreement, "cause" shall include commission of
any felony, misdemeanor, any act of fraud or dishonesty in connection with the
affairs of Datakey.
6. Payment Upon Termination of Employment for Cause or Voluntary Resignation
If Executive is terminated for cause or voluntarily resigns, Executive
shall not be eligible to receive any severance benefits. The date of termination
under this Section 6 shall be on the day the notice of termination for cause is
given or 30 days from the date the notice of resignation is given. Executive
shall be entitled to no additional compensation past the date of a notice of
termination for cause or after 30 days from the notice of resignation.
7. Payment Upon Termination of Employment Without Cause
a. If during the term of this Agreement Executive is terminated without
cause, and without cause shall include death, disability or mutual agreement,
Executive shall not be entitled to receive his agreed compensation for the
balance of the term of this Agreement but shall instead receive a severance
payment equal to his base monthly compensation payable for six months in
accordance with Datakey's payment periods beginning on the 10th of the first
month following the last month of his employment term.
b. Base compensation shall be deemed to be no less than $8,016 per
month.
<PAGE>
c. The payments provided for under this Section 7 shall, in the event
of Executive's death, continue and shall be payable to his wife if she survives
or, if not, to his estate.
d. The Company will continue to provide medical and health coverage,
under its plans as they currently exist or may hereafter be amended, at Company
subsidized rates during the six-month severance pay period. Thereafter,
Executive and his covered dependents will be entitled to elect to continue
coverage under COBRA to the extent it is available. Coverage by the Company or
under COBRA will end on the earlier of Executive's obtaining new employment,
which gives him the ability to provide medical and health insurance coverage for
himself and his family through his new employer, or the failure to pay any
premium when due.
8. Payment Upon Termination of Agreement by the Company on December 31, 1995 or
at the End of Any One-Year Extension.
a. If the Company decides to terminate the Employment Agreement on
December 31, 1995 or as of the end of any one-year extension, Executive shall
receive his base monthly compensation for six (6) months beginning on the 10th
of the first month following the last month of the Employment Term in accordance
with Datakey's payment periods.
b. The payments provided for under this Section 8 shall, in the event
of Executive's death, continue and shall be payable to his wife if she survives
or, if not, to his estate.
c. The Company will continue to provide medical and health coverage,
under its plans as they currently exist or may hereafter be amended, at Company
subsidized rates during the six-month severance pay period. Thereafter,
Executive and his covered dependents will be entitled to elect to continue
coverage under COBRA to the extent it is available. Coverage by the Company or
under COBRA will end on the earlier of Executive's obtaining new employment,
which gives him the ability to provide medical and health insurance coverage for
himself and his family through his new employer, or the failure to pay any
premium when due.
9. Termination of Employment or Resignation Within Six Months of a Change in
Control.
a. If Employee's employment is terminated within six months of a Change
of Control, or if Employee resigns within six months of a Change of Control
because of a diminution of either position responsibilities or remuneration,
notwithstanding such termination or resignation, Employee shall receive his base
monthly compensation for a period of six months. The severance payments shall be
made in six monthly installments beginning on the 10th day of the first month
following Employee's termination or resignation in accordance with the Company's
payroll periods.
<PAGE>
b. A Change in Control shall be deemed to have occurred if: (a) any
person or entity becomes the beneficial owner of thirty-five percent (35%) or
more of the Company's outstanding securities other than any institution,
individual, individuals acting in concert, or entity owning thirty-five percent
(35%) or more of the Company's outstanding securities as of the date of this
Agreement; (b) the consummation of a merger or consolidation of the Company into
or with any other corporation; (c) the consummation of a plan of complete
liquidation of the Company; or (d) the consummation of the sale of substantially
all of the Company's assets.
c. The payments provided for under this Section 9 shall, in the event
of Employee's death, continue and be payable to his wife if she survives or, if
not, to his estate.
10. Nondisclosure
Except by written permission from Datakey, Executive shall never
disclose or use any trade secrets, sales projections, formulations, customer
lists or information, product specifications or information, credit information,
production know-how, research and development plans or other information not
generally known to the public ("Confidential Information") acquired or learned
by Executive during the course, and on account, of his employment, whether or
not developed by Executive, except as such disclosure or use may be required by
his duties to Datakey, and then only in strict accordance with his obligations
of service and loyalty thereto. Upon termination of employment, Executive agrees
to deliver to Datakey all Confidential Information.
11. Specific Performance
Executive acknowledges that a breach of this Employment Agreement would
cause Datakey irreparable injury and damage which could not be remedied or
adequately compensated by damages at law; therefore, Executive expressly agrees
that Datakey shall be entitled, in addition to any other remedies legally
available, to injunctive and/or other equitable relief to prevent a breach of
this Employment Agreement.
12. Noncompetition
a. For a period of six months from and after the end of the Employment
Term or any extension thereof or after termination of employment, Executive will
not, directly or indirectly, alone or in any capacity with another legal entity,
(i) engage in any activity that competes in any respect with Datakey, (ii)
contact or in any way interfere or attempt to interfere with the relationship of
Datakey with any current or potential customers of Datakey, or (iii) employ or
attempt to employ any employee of Datakey (other than a former employee thereof
after such employee has terminated employment with the Datakey), and
b. Executive acknowledges that Datakey markets products throughout the
United States and that Datakey would be harmed if Executive conducted any of the
activities described in this Section 11 anywhere in the United States.
Therefore, Executive agrees that the covenants contained in this Section 11
shall apply to all portions of, and throughout, the United States.
<PAGE>
c. Executive acknowledges that if he fails to fulfill his obligations
under this Section 11, the damages to Datakey would be very difficult to
determine. Therefore, in addition to any other rights or remedies available to
Datakey at law, in equity, or by statute, Executive hereby consents to the
specific enforcement of the provisions of this Section 11 by Datakey through an
injunction or restraining order issued by the appropriate court.
d. To the extent any provision of this Section 11 shall be invalid or
unenforceable, it shall be considered deleted herefrom and the remainder of such
provision and this Section 11 shall be unaffected and shall continue in full
force and effect. In furtherance to and not in limitation of the foregoing,
should the duration or geographical extent of, or business activities covered
by, any provision of this Section 11 be in excess of that which is valid and
enforceable under applicable law, then such provision shall be construed to
cover only that duration, extent or activities which are validly and enforceably
covered. Executive acknowledges the uncertainty of the law in this respect and
expressly stipulates that this Section 11 be given the construction which
renders its provisions valid and enforceable to the maximum extent (not
exceeding its expressed terms) possible under applicable laws.
13. Miscellaneous
a. Waiver by Datakey of a breach of any provision of this Agreement by
Executive shall not operate or be construed as a waiver of any subsequent breach
by Executive.
b. This Agreement shall be binding upon and inure to the benefit of
Datakey, its successors and assigns, and as to Executive, his heirs, personal
representatives, estate, legatees, and assigns.
c. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements whether written or oral relating hereto.
d. This Agreement shall be governed by and construed under the laws of
the State of Minnesota.
IN WITNESS WHEREOF, the parties have hereto executed this Employment
Agreement effective as of the day and year first above written.
DATAKEY, INC.
By /s/ John H. Underwood
Its President
/s/ Alan G. Shuler
Alan G. Shuler, Executive
<PAGE>
EXHIBIT 11
DATAKEY, INC. AND SUBSDIDIARY
COMPUTATION RE: EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Earnings
Net Income(loss) $ 17,763 ($ 158,490) $ 99,392 ($ 250,399)
Primary Earnings(Loss) Per Share
Shares:
Weighted average number of common
shares outstanding 2,829,570 2,829,070 2,829,570 2,829,070
Assuming conversion of preferred stock 150,000 0 150,000 0
Assuming exercise of options and warrants
reduced by the number of shares which
could have been purchased with the
proceeds from exercise of such
options and warrants (treasury stock
method) using average market price 2,744 0 1,060 0
Weighted average number of
common and common equivalent
shares outstanding 2,982,314 2,829,070 2,980,630 2,829,070
Primary Earnings (Loss) Per share $ 0.01 ($ 0.06) $ 0.03 ($ 0.09)
Fully Diluted Earnings(Loss) Per Share
Shares:
Weighted average number of common
shares outstanding 2,829,570 2,829,070 2,829,570 2,829,070
Assuming conversion of preferred stock 150,000 0 150,000 0
Assuming exercise of options and warrants
reduced by the number of shares which
would have been purchased with the
proceeds from exercise of such
options and warrants (treasury stock
method) using the higher of the
average market price or the ending
market price or the ending market price 6,697 0 6,697 0
Weighted average number of
common and common equivalent
shares outstanding 2,986,267 2,829,070 2,986,267 2,829,070
Fully Diluted Earnings(Loss) Per Share $ 0.01 ($ 0.06) $ 0.03 ($ 0.09)
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUL-01-1995
<EXCHANGE-RATE> 1
<CASH> 1,306,721
<SECURITIES> 5,273,379
<RECEIVABLES> 1,027,752
<ALLOWANCES> 31,986
<INVENTORY> 1,261,007
<CURRENT-ASSETS> 9,071,429
<PP&E> 3,817,350
<DEPRECIATION> 2,173,344
<TOTAL-ASSETS> 10,961,131
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0
375,000
<OTHER-SE> 9,598,338
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<TOTAL-REVENUES> 3,614,651
<CGS> 2,397,216
<TOTAL-COSTS> 2,397,216
<OTHER-EXPENSES> 1,253,068
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 151,792
<INCOME-TAX> 52,400
<INCOME-CONTINUING> 99,392
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<NET-INCOME> 99,392
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
