-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Roi3C046f/BkqKbRZGyyGVr/ZCyqBrJFD/5adjbk2qyeqVkejfpEZJMfwptlG3Gr 0i9HkrDSyCfbcqTYjdyDnw== 0000914190-95-000017.txt : 19950814 0000914190-95-000017.hdr.sgml : 19950814 ACCESSION NUMBER: 0000914190-95-000017 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATAKEY INC CENTRAL INDEX KEY: 0000704914 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 411291472 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11447 FILM NUMBER: 95561479 BUSINESS ADDRESS: STREET 1: 407 W TRAVELERS TRAIL CITY: BURNSVILLE STATE: MN ZIP: 55337 BUSINESS PHONE: 6128906850 MAIL ADDRESS: STREET 1: 407 WEST TRAVELERS TRAIL CITY: BURNSVILLE STATE: MN ZIP: 55337 10QSB 1 FORM 10-QSB FOR QUARTER ENDED 7/1/95 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 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS DATAKEY, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
July 1, December 31 1995 1994 (UNAUDITED) 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
See Notes to Consolidated Financial Statements DATAKEY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended July 1, July 2, July 1, July 2, 1995 1994 1995 1994 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
See Notes to Consolidated Financial Statements DATAKEY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended Six Months Ended July 1, July 2, July 1, July 2, 1995 1994 1995 1994 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
See Notes to Consolidated Financial Statements 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. 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. 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 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) 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 EX-10 2 EXHIBIT 10 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. 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. 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. 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. 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 EX-11 3 EXHIBIT 11 EXHIBIT 11 DATAKEY, INC. AND SUBSDIDIARY COMPUTATION RE: EARNINGS PER SHARE (UNAUDITED)
Three Months Ended Six Months Ended July 1, July 2, July 1, July 2, 1995 1994 1995 1994 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)
EX-27 4 FDS FOR 2ND QTR 10-QSB
5 1 U.S. Dollars 6-MOS DEC-31-1995 JAN-01-1995 JUL-01-1995 1 1,306,721 5,273,379 1,027,752 31,986 1,261,007 9,071,429 3,817,350 2,173,344 10,961,131 745,314 0 141,479 0 375,000 9,598,338 10,114,817 3,604,374 3,614,651 2,397,216 2,397,216 1,253,068 0 0 151,792 52,400 99,392 0 0 0 99,392 .03 .03
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