SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-1
(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>
The registrant hereby amends Item 1 of Part I of its Form 10-QSB for the
quarter ended July 1, 1995 as set forth on the following pages.
<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 $ 758,876
Accrued expenses 244,761 192,726
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>
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 15, 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)
