-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C8X/XX8V0wwRC61xrkCL58SI/DvcwWH8ePxtbqN4b0+l3IZQEfyazynTQCRMgI/n 5D7GIxFTLsT05sTbyxpydA== 0000914190-95-000070.txt : 19951121 0000914190-95-000070.hdr.sgml : 19951121 ACCESSION NUMBER: 0000914190-95-000070 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 DATE AS OF CHANGE: 19951117 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATAKEY INC CENTRAL INDEX KEY: 0000704914 STANDARD INDUSTRIAL CLASSIFICATION: 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: 95594399 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 09/30/95 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 September 30, 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 of (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 November 13, 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
September 30, December 31, 1995 1994 (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents $441,768 $255,039 Investment in held-to-maturity securities 6,162,646 6,110,576 Trade receivables, less allowance for doubtful 1,215,602 1,190,893 accounts of $31,986 and $53,700 Inventories 1,365,283 1,348,985 Prepaid and other 46,407 26,242 Deferred tax assets 166,000 166,000 Refundable income taxes 0 101,680 - ------- Total current assets 9,397,706 9,199,415 --------- --------- INTANGIBLES Patent and license at cost, less amortization of 152,268 153,491 $149,200 and $101,811 Non-compete agreement, less amortization of 61,875 123,750 $103,125 and $41,250 ------ ------- 214,143 277,241 ------- ------- EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost Production tools 1,088,348 1,027,206 Equipment 2,339,146 2,211,216 Furniture and fixtures 211,822 211,822 Leasehold improvements 211,761 210,562 ------- ------- 3,851,077 3,660,806 Less accumulated depreciation (2,297,267) (1,936,935) ----------- ----------- 1,553,810 1,723,871 --------- --------- $11,165,659 $11,200,527 ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $558,894 $758,876 Accrued expenses 280,057 192,726 Non-compete obligation 0 82,500 Income taxes payable 53,727 0 Warranty costs 32,791 50,000 ------ ------ Total current liabilities 925,469 1,084,102 ------- --------- DEFERRED TAX LIABILITY 101,000 101,000 ------- ------- SHAREHOLDERS' EQUITY Convertible preferred stock, voting, stated value $2.50 per share; authorized 400,000 shares; issued 375,000 375,000 and outstanding 150,000 Common stock, par value $.05 per share; authorized 10,000,000 shares; issued and 141,479 141,479 outstanding 2,829,570 Additional paid-in capital 3,865,631 3,865,631 Retained earnings 5,757,080 5,633,315 --------- --------- 10,139,190 10,015,425 See Notes to Consolidated Financial Statements ---------- ---------- $11,165,659 $11,200,527 ----------- -----------
DATAKEY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, 1995 1994 1995 1994 ------- ------- ------- ------- Net Sales $1,771,510 $1,292,908 $5,375,884 $3,751,893 Cost of goods sold 1,209,219 934,773 3,606,435 2,707,948 Gross Profit 562,291 358,135 1,769,449 1,043,945 Other operating revenue 6,511 19,588 16,788 53,292 Total gross profit and 568,802 377,723 1,786,237 1,097,237 other operating revenue Operating expenses: Research, development and engineering 180,220 177,666 520,282 599,411 Selling 283,279 232,104 866,677 695,824 General and administrative 166,029 142,963 495,637 463,452 Total operating expenses 629,528 552,733 1,882,596 1,758,687 Operating income (loss) (60,726) (175,010) (96,359) (661,450) Nonoperating income: Interest income 96,786 91,101 284,285 201,962 Other income 313 1,132 239 312 97,099 92,233 284,524 202,274 Income (loss) before income taxes 36,373 (82,777) 188,165 (459,176) Income tax expense (benefit) 12,000 (28,000) 64,400 (154,000) Net income (loss) $24,373 ($54,777) $123,765 ($305,176) Net income (loss) per common and common $0.01 ($0.02) $0.04 ($0.11) equivalent share (Primary and fully diluted) Weighted average number of common and 2,986,690 2,829,237 2,981,516 2,829,126 common equivalent shares outstanding
See Notes to Consolidated Financial Statements. DATAKEY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, 1994 1994 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss) $24,373 ($54,777) $123,765 ($305,176) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 123,923 104,947 360,332 281,573 Amortization 42,760 30,875 109,264 49,802 Change in assets and liabilities (Increase) decrease: Trade receivables (219,836) (356,068) (24,709) 440,945 Inventories (104,276) (188,746) (16,298) (445,349) Prepaid expenses and other 22,149 35,915 (20,165) 11,582 Refundable income taxes 0 (28,210) 101,680 (17,187) Increase (decrease) in: Accounts payable 129,588 218,824 (199,982) (156,573) Accrued expenses 35,296 63,915 87,331 (145,769) Accrued warranty costs 3,641 4,405 (17,209) 4,471 Income taxes payable 11,630 0 53,727 0 ------ - ------ - Net cash provided by (used in) operating activities 69,248 (168,920) 557,736 (281,681) ------ --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of tooling and equipment (33,727) (296,474) (190,271) (504,047) Purchase of held-to-maturity securities (3,299,267) (2,303,245) (5,762,070) (7,356,049) Process from maturity of held-to-maturity securities 2,410,000 1,373,533 5,710,000 5,784,235 Patent and license costs (11,207) (5,777) (46,166) (52,502) -------- ------- -------- -------- Net cash (used in) investing activities (934,201) (1,231,963) (288,507) (2,128,363) --------- ----------- --------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Payments on non-compete obligation 0 (41,250) (82,500) (41,250) Net proceeds from sale of common stock 0 0 0 0 - - - - Net cash (used in) financing activities 0 (41,250) (82,500) (41,250) - -------- -------- -------- Increase (decrease) in cash and cash equivalents (864,953) (1,442,133) 186,729 (2,451,294) CASH AND CASH EQUIVALENTS Beginning 1,306,721 1,818,639 255,039 2,827,800 --------- --------- ------- --------- Ending $441,768 $376,506 $441,768 $376,506 -------- -------- -------- --------
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 September 30, 1995 and December 31, 1994 and results of its operations and cash flows for the three-month and nine-month periods ended September 30, 1995 and October 1, 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 $6,162,646 as of September 30, 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 $6,164,325. The unrealized gain, therefore, is $1,679. 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 nine-month periods ended September 30, 1995, increased by $478,602 and $1,623,991, or 37% and 43%, respectively. The increase in sales in both periods was driven by a significant increase in commercial sales. Commercial sales increased by $426,473, or 38%, in the three-month period, and $1,804,095, or 62%, in the nine-month period ended September 30, 1995, as compared to the same periods in 1994. Commercial sales were 88% and 87% of total sales for the three-month and nine-month periods ended September 30, 1995, as compared to 87% and 71% in 1994. The Company anticipates that government sales will remain stable for the balance of 1995 and that commercial sales in 1995 will 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 fourth quarter of 1995 will reflect significant improvement over the first three quarters of 1995. GROSS PROFIT MARGINS - Gross profit as a percentage of net sales increased to 32% and 33% in the three-month period and nine-month periods ended September 30, 1995, respectively from 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. OPERATING EXPENSES - Operating expenses increased by $76,795 and $123,909, or 14% and 7%, in the three-month and nine-month periods ended September 30, 1995, respectively 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 develop the higher level of sales. Operating expenses as a percentage of net sales are 36% and 35% in the 1995 three- and nine-month periods, respectively, compared to 43% and 47% in the comparable 1994 periods. The Company expects 1995 operating expenses to continue trending upward through the remainder of 1995. NONOPERATING INCOME - Nonoperating income during the three-month and nine-month periods ended September 30, 1995, increased $4,866 and $82,250, respectively or 5% and 41%, 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 Company's interest-bearing cash, cash equivalents and held- to-maturity securities. FINANCIAL CONDITION - During the nine-month period ended September 30, 1995, the Company had a net increase in cash and cash equivalents of $186,729, compared to a net decrease of $2,451,294 in the comparable 1994 period. The 1994 decrease in cash and cash equivalents was principally due to an increased investment in held- to-maturity debt securities. The increase in cash and equivalents during the nine-month period ended September 30, 1995 was reduced by a $52,070 increased investment in marketable debt securities. Cash, cash equivalents and investment in held-to-maturity securities were $6,604,414 at September 30, 1995. The Company anticipates that its current working capital position of $8,472,237 and internally generated cash flow will be sufficient to fund its planned operations for the foreseeable future. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K DATAKEY, INC. AND SUBSIDIARY (a) Exhibits 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 September 30, 1995. 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 November 13, 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 Accounting Officer) DATAKEY, INC. EXHIBIT INDEX TO FORM 10-QSB FOR QUARTER ENDED SEPTEMBER 30, 1995 EXHIBIT NO. DESCRIPTION 11 Computation of Per Share Earnings 27 Financial Data Schedule EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 DATAKEY, INC. AND SUBSIDIARY COMPUTATION RE: EARNINGS PER SHARE (UNAUDITED)
Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, 1995 1994 1995 1994 Earnings Net Income (loss) $24,373 ($54,777) $123,765 ($305,176) ------- --------- -------- ---------- Primary Earnings (Loss) Per Share Shares: Weighted average number of common shares outstanding 2,829,570 2,829,237 2,829,570 2,829,126 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 7,120 0 1,946 0 ---------- --------- ---------- ---------- Weighted average number of common and common equivalent shares outstanding 2,986,690 2,829,237 2,981,516 2,829,126 --------- --------- --------- --------- Primary Earnings (Loss) Per share $0.01 ($0.02) $0.04 ($0.11) ----- ------- ----- ------- Fully Diluted Earnings (Loss) Per Share Shares: Weighted average number of common shares outstanding 2,829,570 2,829,237 2,829,570 2,829,126 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 the higher of the average market price or the ending market price 8,172 0 8,172 0 ---------- ----------- ----------- ----------- Weighted average number of common and common equivalent shares outstanding 2,987,742 2,829,237 2,987,742 2,829,126 --------- --------- --------- --------- Fully Diluted Earnings (Loss) Per Share $0.01 ($0.02) $0.04 ($0.11) ----- ------- ----- -------
EX-27 3 FDS FOR THIRD QUARTER 1995
5 1 U.S. Dollars 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1 441,768 6,162,646 1,247,588 31,986 1,365,283 9,397,206 3,851,077 2,297,267 11,165,659 925,469 0 141,479 0 375,000 9,622,711 11,165,659 5,375,884 5,392,672 3,606,435 3,606,435 1,882,596 0 0 188,165 64,400 123,765 0 0 0 123,765 .04 .04
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