SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 8-K


                 Current Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934



         Date of report (Date of earliest event reported): May 15, 1998



                                  Datakey, Inc.
             (Exact Name of Registrant as Specified in Its Charter)


                                    Minnesota
                 (State or Other Jurisdiction of Incorporation)


         000-11447                                           41-1291472
(Commission File Number)                 (I.R.S. Employer Identification Number)


                            407 West Travelers Trail
                           Burnsville, Minnesota 55337
               (Address of Principal Executive Offices) (Zip Code)


                                  612-890-6850
              (Registrant's Telephone Number, Including Area Code)


                                 Not Applicable
          (Former Name or Former Address, if Changed Since Last Report)






Item 5.  Other Events.

         On Friday,  May 15, 1998, the Company completed a $1,580,000  financing
with  accredited  investors in New York and  Minnesota.  In connection  with the
financing,  the Company issued 100,000 shares of Series A Convertible Cumulative
Preferred Stock (the "Preferred  Shares") and five-year  warrants to purchase an
aggregate of 188,095 shares of the Company's Common Stock with an exercise price
of $6.30 per share (the  "Warrants").  The Preferred Shares have dividend rights
at an annual rate of eight percent (8%) of their original  issuance price,  with
such dividends payable either in cash or in shares of the Company's Common Stock
upon conversion of the Preferred  Shares.  The Preferred  Shares are convertible
through May 15, 2000 at a conversion  rate equal to eighty  percent (80%) of the
market price  (defined to equal the average  closing bid price of the  Company's
Common Stock for the ten-day period prior to conversion), subject to the minimum
and maximum  conversion rates of $2.75 and $5.00,  respectively.  As part of the
financing,  the parties  also  entered  into a  Registration  Rights  Agreement,
pursuant to which the Company  agreed to file a  registration  statement on Form
S-1 or Form S-3 by June 14,  1998  covering  the  resale  of the  shares  of the
Company's Common Stock: (i) underlying the Preferred Shares;  (ii) issuable upon
exercise of the Warrants;  or (iii)  issuable in connection  with the payment of
any dividends on the Preferred  Shares.  The Company also paid a placement agent
$110,600 in commissions  plus accountable  expenses,  and issued to such agent a
warrant to purchase  37,890 shares of Company  Common Stock at an exercise price
of $6.60 per share.

Item 7.  Financial Statements and Exhibits.

         (a)      Financial statements:  None.

         (b)      Pro forma financial information:  None.

         (c)      Exhibits:  None.


                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Dated:  May 20, 1998

                                    DATAKEY, INC.



                                    By  /s/ Carl P. Boecher
                                         Carl P. Boecher
                                         President and Chief Executive Officer