<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 3, 1998
SCM MICROSYSTEMS, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-22689 77-0444317
- ------------------------------- ------------------------ -------------------
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
160 KNOWLES DRIVE
LOS GATOS, CALIFORNIA 95032
-------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE, OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(408) 370-4888
NOT APPLICABLE
- --------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
===============================================================================
1
<PAGE> 2
The undersigned Registrant hereby amends the following items, financial
statements, exhibits, or other portions of its Current Report on Form 8-K,
originally filed with the Securities and Exchange Commission on November 18,
1998 ("the Form 8-K") as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits.
The following financial statements of the business acquired are filed as
part of this report, where indicated.
<TABLE>
<CAPTION>
(a) Financial Statements of Business Acquired:
Page
----
<S> <C>
Index Page 3
Report of the Auditors 4
Consolidated Profit and Loss Accounts 5
Combined Reconciliation of Movements in Shareholders' Funds and
Statements of Movements on Reserves 6
Consolidated Balance Sheet 7
Cash Flow Statements 8
Notes to the Accounts 9
Unaudited Condensed Consolidated Balance Sheet as of September 30, 1998 24
Unaudited Condensed Consolidated Statements of Operations for the
nine-month periods ended September 30, 1998 and 1997 25
Unaudited Condensed Consolidated Statements of Cash Flows for the
nine-month periods ended September 30, 1998 and 1997 26
Note to Unaudited Condensed Consolidated Financial Statements 27
(b) Pro forma Financial Information:
Page
----
Unaudited Pro Forma Combined Condensed Balance Sheet
as of September 30, 1998 29
Unaudited Pro Forma Combined Condensed Statement of Operations
for the nine-month period ended September 30, 1998 30
Unaudited Pro Forma Combined Condensed Statement of Operations
for the nine-month period ended September 30, 1997 31
Unaudited Pro Forma Combined Condensed Statement of Operations
for the year ended December 31, 1997 32
Unaudited Pro Forma Combined Condensed Statement of Operations
for the year ended December 31, 1996 33
Unaudited Pro Forma Combined Condensed Statement of Operations
for the year ended December 31, 1995 34
Notes to Pro Forma Combined Condensed Financial Information 35
</TABLE>
2
<PAGE> 3
SHUTTLE TECHNOLOGY GROUP LTD
JUNE 30, 1998 CONSOLIDATED FINANCIAL STATEMENTS
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of the Auditors...................................................... 4
Consolidated Profit and Loss Accounts....................................... 5
Combined Reconciliation of Movements in Shareholders' Funds and
Statements of Movements on Reserves...................................... 6
Consolidated Balance Sheet.................................................. 7
Cash Flow Statements........................................................ 8
Notes to the Accounts....................................................... 9
</TABLE>
3
<PAGE> 4
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
SHUTTLE TECHNOLOGY GROUP LIMITED
We have examined the accompanying audited consolidated balance sheets of Shuttle
Technology Group Limited (a United Kingdom corporation) as of 30 June 1997 and
1998, and the related consolidated profit and loss accounts, reconciliation of
movements in shareholders' funds and cash flows for each of the three periods in
the period ended 30 June 1998 set out on pages 5 to 23. These financial
statements are the responsibility of Shuttle Technology Group Limited's
management. Our responsibility is to express an opinion on these financial
statements based on audits performed.
The audits were conducted in accordance with generally accepted auditing
guidelines in the United Kingdom, which are substantially the same as auditing
standards generally accepted in the United States. Those standards require that
audits are planned and performed to obtain all reasonable assurance about
whether financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that the
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Shuttle Technology
Group Limited and subsidiaries as of 30 June 1997 and 1998, and the results of
their operations and their cash flows for each of the three periods in the
period ended 30 June 1998 in conformity with generally accepted accounting
principles in the United Kingdom.
DELOITTE & TOUCHE
Chartered Accountants
Bristol
England
18 January 1999
4
<PAGE> 5
SHUTTLE TECHNOLOGY GROUP LIMITED
1. CONSOLIDATED PROFIT AND LOSS ACCOUNT
The following table summarises the consolidated profit and loss accounts of
Shuttle Technology Group Limited for the three periods ended 30 June 1998, 1997
and 30 April 1996.
<TABLE>
<CAPTION>
1998 1997 1996
NOTE 12 MONTHS 14 MONTHS 12 MONTHS
L. L. L.
<S> <C> <C> <C> <C>
TURNOVER - continuing operations 4 15,744,547 6,184,612 4,030,914
Cost of sales (9,918,773) (4,450,625) (2,546,613)
---------- --------- ---------
GROSS PROFIT 5,825,744 1,733,987 1,484,301
Administrative expenses (4,320,299) (1,637,112) (1,225,071)
---------- --------- ---------
OPERATING PROFIT - continuing operations 1,505,475 96,875 259,230
Interest receivable 3,580 4,634 671
Interest payable and similar charges 6 (48,676) (15,233) (21,029)
---------- --------- ---------
PROFIT ON ORDINARY ACTIVITIES BEFORE
TAXATION 7 1,460,379 86,276 238,872
Tax on profit on ordinary activities 8 (474,553) (27,932) (47,105)
---------- --------- ---------
PROFIT ON ORDINARY ACTIVITIES AFTER
TAXATION TRANSFERRED TO RESERVES 985,826 58,344 191,767
========== ========= =========
</TABLE>
There are no recognised gains and losses other than the profit for the financial
year. Accordingly, no statement of total recognised gains and losses has been
prepared.
5
<PAGE> 6
SHUTTLE TECHNOLOGY GROUP LIMITED
2. COMBINED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS AND
STATEMENTS OF MOVEMENTS ON RESERVES
<TABLE>
<CAPTION>
CAPITAL
ALLOTTED SHARE REDEMPTION MERGER OTHER PROFIT AND
CAPITAL RESERVE RESERVE RESERVES LOSS ACCOUNT TOTAL
L. L. L. L. L. L.
<S> <C> <C> <C> <C> <C> <C>
At 1 May 1995 200,000 -- -- -- (106,043) 93,957
Profit for the financial year -- -- -- -- 191,767 191,767
------- ----- ------- ------- --------- ---------
At 1 May 1996 200,000 -- -- -- 85,724 285,724
Profit for the financial year -- -- -- -- 58,344 58,344
Foreign exchange translation
differences -- -- -- (232) -- (232)
------- ----- ------- ------- --------- ---------
At 1 July 1997 200,000 -- -- (232) 144,068 343,836
Profit for the financial year -- -- -- -- 985,826 985,826
Foreign exchange translation
differences -- -- -- (11,513) -- (11,513)
Issue of new shares 85,716 -- 206,989 -- -- 292,705
Cancellation of shares (2,906) 2,906 -- -- -- --
------- ----- ------- ------- --------- ---------
At 30 June 1998 282,810 2,906 206,989 (11,745) 1,129,894 1,610,854
======= ===== ======= ======= ========= =========
</TABLE>
6
<PAGE> 7
SHUTTLE TECHNOLOGY GROUP LIMITED
3. CONSOLIDATED BALANCE SHEET
The following table sets out the consolidated balance sheets of Shuttle
Technology Group Limited at 30 June 1998 and 1997.
<TABLE>
<CAPTION>
NOTE 1998 1997
L. L.
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 9 406,098 180,177
CURRENT ASSETS
Stocks 10 911,337 438,421
Debtors 11 1,832,760 714,119
Cash at bank and in hand 81,020 27,045
--------- ---------
2,825,117 1,179,585
--------- ---------
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR
Bank loans and overdrafts 134,628 335,879
Obligations under finance leases and
hire purchase contracts 6,266 16,032
Directors' loans - 11,130
Trade creditors 676,761 431,248
Other creditors including taxation and
social security 12 454,799 53,609
Accruals and deferred income 347,907 104,528
--------- ---------
(1,620,361) (952,426)
--------- ---------
NET CURRENT ASSETS 1,204,756 227,159
--------- ---------
TOTAL ASSETS LESS CURRENT
LIABILITIES 1,610,854 407,336
PROVISIONS FOR LIABILITIES
AND CHARGES 13 - (63,500)
--------- ---------
NET ASSETS 1,610,854 343,836
========= =========
CAPITAL AND RESERVES
Called up share capital 14 282,810 200,000
Merger reserve 206,989 -
Other reserves (11,745) (232)
Capital redemption reserve 2,906 -
Profit and loss account 1,129,894 144,068
--------- ---------
TOTAL EQUITY SHAREHOLDERS' FUNDS 1,610,854 343,836
========= =========
</TABLE>
7
<PAGE> 8
SHUTTLE TECHNOLOGY GROUP LIMITED
4. CASH FLOW STATEMENTS
The following table sets out the consolidated cash flow statements of Shuttle
Technology Group Limited for the financial periods ended 30 June 1998, 1997 and
30 April 1996.
<TABLE>
<CAPTION>
1998 1997 1996
12 MONTHS 14 MONTHS 12 MONTHS
L. L. L.
<S> <C> <C> <C>
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 951,394 (38,247) 149,746
-------- -------- --------
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received 3,580 4,634 671
Interest paid (46,841) (11,239) (21,029)
Interest element of finance lease payments made (1,835) (3,994) --
-------- -------- --------
Net cash outflow from returns on investments and
servicing of finance (45,096) (10,599) (20,358)
-------- -------- --------
TAXATION
Corporation tax paid (34,895) (47,721) --
-------- -------- --------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (241,001) (150,579) (76,181)
Sale of tangible fixed assets 5,800 15,775 2,000
-------- -------- --------
Net cash outflow for capital expenditure and
financial investment (235,201) (134,804) (74,181)
-------- -------- --------
ACQUISITIONS AND DISPOSALS
Net overdraft acquired with subsidiary (371,210) -- --
EQUITY DIVIDENDS PAID -- -- --
FINANCING
Capital element of finance lease payments made (9,766) (9,056) --
-------- -------- --------
Increase/(decrease) in cash in the period 255,226 (240,427) 55,207
======== ======== ========
</TABLE>
Further details are set out in note 15.
8
<PAGE> 9
SHUTTLE TECHNOLOGY GROUP LIMITED
5. NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
The financial statements are prepared in accordance with applicable
accounting standards. The particular accounting policies adopted are
described below.
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost
convention.
INVESTMENTS
Investments held as fixed assets are stated at cost less provision for any
permanent diminution in value.
CONSOLIDATION
The consolidated accounts include the company and its subsidiary
companies. Intragroup sales and profits are eliminated on consolidation
and all sales and profit figures relate to external transactions only.
ACQUISITIONS
Where a new company or business has been accounted for using the
principles of acquisition accounting, fair values are attributed to the
group's share of separable net assets acquired. Where the cost of
acquisition exceeds the values attributable to such net assets, the
difference is recognised as goodwill. Goodwill is written off against
reserves in the year of acquisition.
TANGIBLE FIXED ASSETS
Depreciation is provided on cost in equal annual instalments over the
estimated lives of the assets. The rates of depreciation are as follows:
Motor vehicles 33.33% per annum
Fixtures and fittings 10% per annum
Computer and office equipment 33.33% per annum
STOCKS
Stocks are stated at the lower of cost and net realisable value. Cost
represents direct materials and labour and production overheads.
FOREIGN EXCHANGE
Transactions denominated in foreign currencies are translated into
sterling at the rates ruling at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the balance
sheet date are translated at the rates ruling at that date. These
translation differences are dealt with in the profit and loss account.
The financial statements of foreign subsidiaries are translated into
sterling at the closing rates of exchange and the difference arising from
the translation of the net investment in subsidiaries at the closing rate
and matched foreign currency borrowings are taken direct to reserves.
9
<PAGE> 10
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES (CONTINUED)
LEASING AND HIRE PURCHASE COMMITMENTS
Assets held under finance leases and hire purchase contracts are
capitalised at their fair value on the inception of the leases and
depreciated over their estimated useful lives. The finance charges are
allocated over the period of the lease in proportion to the capital amount
outstanding.
Rental costs under operating leases are charged to profit and loss account
in equal annual amounts over the period of the leases.
DEFERRED TAXATION
Deferred taxation is provided at the anticipated tax rates on differences
arising from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included in
the financial statements to the extent that it is probable that a
liability or asset will crystallise in the future.
WARRANTY COSTS
Provision is made for the costs estimated to arise over the warranty
period of repairs to, or replacement of, goods sold under warranty up to
the year end.
RESEARCH AND DEVELOPMENT
Research and development expenditure is written off in the year in which
it is incurred.
PENSION COSTS
The company operates a defined contribution pension scheme. All
contributions are written off to the profit and loss account in the year
the contributions are made.
GOVERNMENT GRANTS
Income from grants is recognised in the profit and loss account to the
extent of the completion of the project concerned and is matched to the
related expenditure incurred.
2. ACQUISITIONS AND CONSOLIDATION
ACQUISITIONS
The issued share capital of Memory Technology Limited was acquired on 31
December 1997. This acquisition has been accounted for by the acquisition
method of accounting. The consideration was a share for share exchange for
8,493 ordinary shares of L.1 each and 77,223 'B' ordinary shares of L.1
each.
10
<PAGE> 11
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
2. ACQUISITIONS AND CONSOLIDATION (CONTINUED)
ACQUISITIONS (CONTINUED)
The following table explains the adjustments made to the book value of the
majority category of assets and liabilities acquired to arrive at the fair
values in the consolidated financial statements at the date of
acquisition.
ASSETS ACQUIRED
<TABLE>
<CAPTION>
FAIR VALUE
BOOK AMOUNT REVALUATION TO THE GROUP
L. L. L.
<S> <C> <C> <C>
Tangible fixed assets 106,219 -- 106,219
Current assets 1,217,700 -- 1,217,700
Creditors and provisions (1,022,209) -- (1,022,209)
Taxation creditor (35,150) -- (35,150)
Corporation tax recoverable -- 26,145 26,145
---------- ------- ----------
266,560 26,145 292,705
========== ======= ==========
</TABLE>
The (loss)/profit after taxation of Memory Technology Limited is as
follows:
<TABLE>
<CAPTION>
PERIOD 1 JULY 1997 YEAR ENDED
TO 31 DECEMBER 30 JUNE
1997 1997
L. L.
<S> <C> <C>
(120,780) 85,214
======== ======
</TABLE>
The acquired trade and business of Memory Technology Limited has been
merged with that of Shuttle Technology Limited and separate ledgers are no
longer maintained. As a result, it is not practicable to determine the
post acquisition results of this acquired operation.
3. PROFIT OF PARENT COMPANY
As permitted by Section 230 of the Companies Act 1985, the profit and loss
account for the parent company is not presented as part of these accounts.
The parent company's profit for the financial year amounted to L.3,255
(1997: L.nil, 1996: L.nil).
4. TURNOVER
Turnover represents the total amounts receivable for goods and services
invoiced in relation to the activities of the group, and is exclusive of
value added tax.
In the opinion of the directors, the disclosure of turnover attributable
to each geographical market of the group's business would be seriously
prejudicial to the group's interests, due to the highly competitive nature
of the business in which the company operates.
11
<PAGE> 12
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
5. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
<TABLE>
<CAPTION>
1998 1997 1996
12 MONTHS 14 MONTHS 12 MONTHS
L. L. L.
<S> <C> <C> <C>
Directors' emoluments (paid by subsidiary company):
Fees 305,030 138,857 156,862
Contributions in respect of defined contribution
pension scheme 13,200 7,000 6,000
--------- --------- ---------
318,230 145,857 162,862
--------- --------- ---------
NO. NO. NO.
The number of directors who were members of a defined
contribution pension scheme 1 1 1
--------- --------- ---------
L. L. L.
The emoluments of the highest paid directors were 172,472 67,847 111,842
--------- --------- ---------
L. L. L.
Contributions payable to defined contribution pension
scheme in respect of highest paid director 13,200 7,000 6,000
--------- --------- ---------
Employee costs during the year: L. L. L.
Wages and salaries 1,392,809 732,445 507,583
Social security costs 126,706 56,816 51,973
Pensions 17,263 7,000 6,000
--------- --------- ---------
1,536,778 796,261 565,556
========= ========= =========
Average number of persons employed: NO. NO. NO.
Production 1 -- --
Sales and distribution 6 11 4
Administration 19 6 11
Technical 20 11 3
--------- --------- ---------
46 28 18
========= ========= =========
</TABLE>
12
<PAGE> 13
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
6. INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1998 1997 1996
12 MONTHS 14 MONTHS 12 MONTHS
L. L. L.
<S> <C> <C> <C>
Bank loans, overdrafts and other loans repayable within
five years 46,841 11,059 21,029
Hire purchase interest 1,835 3,994 --
Interest on late payment of tax -- 180 --
-------- -------- --------
48,676 15,233 21,029
======== ======== ========
</TABLE>
7. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
1998 1997 1996
12 MONTHS 14 MONTHS 12 MONTHS
L. L. L.
<S> <C> <C> <C>
Profit on ordinary activities before taxation
is after charging/(crediting):
Rentals under operating leases: other operating leases 160,552 72,717 51,892
Depreciation and other amounts written off tangible
fixed assets:
- own assets 104,882 66,141 14,836
- leased assets 4,546 829 570
Research and development 683,000 441,627 342,022
Auditors' remuneration 16,000 7,000 7,000
(Profit)/loss on disposal of fixed assets (702) 360 3,479
Gain on exchange difference (27,815) (126,311) (100,204)
Grant release (9,032) (64,737) --
======== ======== ========
</TABLE>
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1998 1997 1996
12 MONTHS 14 MONTHS 12 MONTHS
L. L. L.
<S> <C> <C> <C>
United Kingdom corporation tax at 31% (1997:
33%, 1996: 25%) 427,463 26,900 42,200
Deferred taxation (416) 416 --
Prior years (1,010) 616 --
Overseas taxation 48,516 -- 4,905
-------- -------- --------
474,553 27,932 47,105
======== ======== ========
</TABLE>
13
<PAGE> 14
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
9. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FIXTURES COMPUTER
LEASEHOLD MOTOR AND AND OFFICE
BUILDINGS VEHICLES FITTINGS EQUIPMENT TOTAL
L. L. L. L. L.
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
COST
At 1 July 1997 -- 55,159 54,962 162,154 272,275
Foreign exchange translation
differences -- (2,148) (1,160) (2,655) (5,963)
Reclassifications -- -- (15,912) 15,912 --
Additions 3,627 12,279 36,081 189,014 241,001
Disposals -- (13,175) -- -- (13,175)
Subsidiary acquired 3,541 36,035 92,510 163,834 295,920
-------- -------- -------- -------- --------
At 30 June 1998 7,168 88,150 166,481 528,259 790,058
-------- -------- -------- -------- --------
ACCUMULATED DEPRECIATION
At 1 July 1997 -- 16,132 15,993 59,973 92,098
Foreign exchange translation
differences (42) (674) (173) (1,327) (2,216)
Reclassifications -- -- (5,509) 5,509 --
Provisions 1,154 20,249 11,902 76,123 109,428
Disposals -- (8,077) -- -- (8,077)
Subsidiary acquired 3,541 25,857 46,378 116,951 192,727
-------- -------- -------- -------- --------
At 30 June 1998 4,653 53,487 68,591 257,229 383,960
-------- -------- -------- -------- --------
NET BOOK VALUE
AT 30 JUNE 1998 2,515 34,663 97,890 271,030 406,098
======== ======== ======== ======== ========
At 30 June 1997 -- 39,027 38,969 102,181 180,177
======== ======== ======== ======== ========
</TABLE>
The net book value of assets under finance leases and hire purchase
contracts is L.7,606 (1997: L.13,821). Obligations under finance leases
and hire purchase contracts are secured by the related assets.
10. STOCKS
<TABLE>
<CAPTION>
1998 1997
L. L.
<S> <C> <C>
Raw materials and consumables 667,504 255,480
Finished goods and goods for resale 243,833 182,941
------- -------
911,337 438,421
======= =======
</TABLE>
There is no material difference between the replacement cost of stocks and
their balance sheet value.
14
<PAGE> 15
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
11. DEBTORS
<TABLE>
<CAPTION>
1998 1997
L. L.
<S> <C> <C>
Trade debtors 1,664,206 621,764
Corporation tax recoverable 26,145 --
Other debtors 22,418 13,689
Prepayments and accrued income 119,991 78,666
---------- ----------
1,832,760 714,119
========== ==========
</TABLE>
The bank overdraft is secured by a fixed charge over certain of the above
book debts.
12. OTHER CREDITORS INCLUDING TAXATION AND SOCIAL SECURITY
<TABLE>
<CAPTION>
1998 1997
L. L.
<S> <C> <C>
This heading includes:
Taxation and social security 454,799 53,609
========== ==========
</TABLE>
13. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
1998 1997
L. L.
<S> <C> <C>
Warranty provision -- 63,084
Deferred taxation -- 416
---------- ----------
-- 63,500
========== ==========
WARRANTY PROVISION
L.
Movement in the year:
Balance at 1 July 1997 63,084
Applied in the year (63,084)
----------
BALANCE AT 30 JUNE 1998 --
==========
DEFERRED TAX 1998 1997
L. L.
The amount of deferred taxation provided is:
Capital allowances in excess of depreciation -- 416
========== ==========
</TABLE>
There are no unprovided amounts of deferred tax.
15
<PAGE> 16
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
14. SHARE CAPITAL
<TABLE>
<CAPTION>
1998 1997
L. L.
---------- ----------
<S> <C> <C>
AUTHORISED
Ordinary shares of L.1 each 300,000 200,000
`B' ordinary shares of L.1 each 100,000 --
========== ==========
CALLED UP AND FULLY PAID
Ordinary shares of L.1 each 205,587 200,000
`B' ordinary shares of L.1 each 77,223 --
---------- ----------
282,810 200,000
========== ==========
</TABLE>
8,493 ordinary shares of L.1 each and 77,223 `B' ordinary shares of L.1
each were issued during the year as consideration for the investment in
Memory Technology Limited.
2,906 ordinary shares of L.1 each were cancelled on 3 December 1997.
RIGHTS ATTACHED TO SHARES
The `B' ordinary shares carry no rights to vote at general meetings of the
company save until the time immediately preceding whichever shall first
occur of a decision taken by the company to approve an outright trade sale
of the entire business or a sale to an institutional investor of all the
`B' ordinary shares then in issue of the listing of the company's shares
on a recognised stock exchange or secondary market in the UK or abroad. In
other respects, such `B' ordinary shares rank pari passu with the existing
shares of the company.
15. CASH FLOW STATEMENTS
(A) RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1998 1997 1996
12 MONTHS 14 MONTHS 12 MONTHS
L. L. L.
<S> <C> <C> <C>
Operating profit 1,505,475 96,875 259,230
Depreciation charges 109,428 66,970 15,406
Increase in stock (44,322) (168,219) (155,322)
Increase in debtors (317,100) (211,259) (52,561)
(Decrease)/increase in creditors (243,576) 159,426 54,363
(Decrease)/increase in provisions (63,500) 23,190 25,543
Other non cash items 4,989 (5,230) 3,087
---------- ---------- ----------
Net cash inflow/(outflow) from operating
activities 951,394 (38,247) 149,746
========== ========== ==========
</TABLE>
16
<PAGE> 17
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
15. CASH FLOW STATEMENTS (CONTINUED)
(B) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
<TABLE>
<CAPTION>
1998 1997 1996
12 MONTHS 14 MONTHS 12 MONTHS
L. L. L.
<S> <C> <C> <C>
Increase/(decrease) in cash in period 255,226 (240,427) 55,207
Cash to reduce debt 9,766 9,056 --
-------- -------- --------
Change in net debt resulting from cash flows 264,992 (231,371) 55,207
New finance leases -- -- (25,088)
-------- -------- --------
Movement in net debt in period 264,992 (231,371) 30,119
Net debt at beginning of year (324,866) (93,495) (123,614)
-------- -------- --------
Net debt at end of year (59,874) (324,866) (93,495)
======== ======== ========
</TABLE>
(C) ANALYSIS OF NET DEBT
<TABLE>
<CAPTION>
AT OTHER NON- AT
1 MAY 1995 CASH FLOWS CASH CHANGES 30 APRIL 1996
L. L. L. L.
<S> <C> <C> <C> <C>
Cash in hand, at bank 17,007 6,336 -- 23,343
Overdrafts (140,621) 48,871 -- (91,750)
New finance leases -- -- (25,088) (25,088)
-------- -------- -------- --------
(123,614) 55,207 (25,088) (93,495)
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT OTHER NON- AT
1 MAY 1995 CASH FLOWS CASH CHANGES 30 JUNE 1997
L. L. L. L.
<S> <C> <C> <C> <C>
Cash in hand, at bank 23,343 3,702 -- 27,045
Overdrafts (91,750) (244,129) -- (335,879)
Finance leases (25,088) 9,056 -- (16,032)
-------- -------- -------- --------
(93,495) (231,371) -- (324,866)
======== ======== ======== ========
</TABLE>
[CAPTION]
<TABLE>
AT OTHER NON- AT
1 JULY 1997 CASH FLOWS CASH CHANGES 30 JUNE 1998
L. L. L. L.
<S> <C> <C> <C> <C>
Cash in hand, at bank 27,045 53,975 -- 81,020
Overdrafts (335,879) 201,251 -- (134,628)
Finance leases (16,032) 9,766 -- (6,266)
-------- -------- -------- --------
(324,866) 264,992 -- (59,874)
======== ======== ======== ========
</TABLE>
17
<PAGE> 18
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
16. LEASING COMMITMENTS
Outstanding commitments during the next year under operating leases are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
LAND AND BUILDINGS 1998 1997
L. L.
Leases which expire - within one year 26,299 6,600
- within two to five years 30,766 49,000
------ ------
57,065 55,600
====== ======
</TABLE>
On 7 September 1998, the company entered into an 18 year lease to rent
premises at an annual rental of L.115,000.
17. TRANSACTIONS WITH RELATED PARTIES
For the year ended 30 June 1998 Shuttle Technology Group Limited has taken
advantage of the exemption to disclose related party transactions within
the group.
In the fourteen months ended 30 June 1997 the company purchased goods of
L.5,810 from Memory Technology Limited, a related party by virtue of
certain common directors and shareholders. Included in creditors is an
amount of L.34,580 in respect of these recharges. In addition,
expenses of L.332,829 were incurred by Memory Technology Limited on behalf
of Shuttle Technology Limited, and the company sold goods of L.558,203 to
Memory Technology Limited. An amount of L.24,325 is included in debtors in
respect of these goods.
The loan of L.11,130 as at 30 June 1997 due from one of the directors of
Shuttle Research Private Limited was repaid during the year.
On 31 December 1997 Shuttle Technology Group Limited acquired the whole of
the share capital of Memory Technology Limited through a share for share
exchange whereby the shareholders of Memory Technology Limited received
8,493 ordinary shares of L.1 each and 77,223 'B' ordinary shares of L.1
each in Shuttle Technology Group Limited. Memory Technology Limited is a
related party by virtue of certain common directors and shareholders.
18. CONTINGENT LIABILITIES
During 1997/98, a US corporation called Microsolutions initiated legal
action for infringement of two of its patents against three of Shuttle's
US customers and it issued a threat against two other Shuttle customers
where so far no legal action has been taken. Shuttle is assisting its
customers with their defence against the charge of infringement since the
charges are based on our customers' use of Shuttle's parallel port
technology. Shuttle has issued a patent indemnity in favour of one of the
defendants and it has also issued an indemnity in favour of one of the
other two customers who are being threatened but who have not yet been
sued. Shuttle has obtained a legal opinion from its US patent attorneys
which support Shuttle's contention that Microsolutions patents are
invalid. The directors view therefore, is that no material liability will
arise in respect of this item.
18
<PAGE> 19
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
19. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
RECONCILIATION OF NET INCOME TO US GAAP FOR THE PERIODS ENDED 30 JUNE 1998, 1997
AND 30 APRIL 1996
<TABLE>
<CAPTION>
1998 1997 1996
L. L. L.
<S> <C> <C> <C>
Net income as shown in the financial statements 985,826 58,344 191,767
Description of items having the effect of decreasing
reported income:
- - amortisation of goodwill(A) (112,000) -- --
- - deferred tax credit(B) 44,000 -- --
- - granting of share options(C) -- (106,000) --
-------- -------- --------
Net income according to generally accepted accounting
principles in the United States 917,826 (47,656) 191,767
======== ======== ========
</TABLE>
(A) Represents the amortisation of acquisition goodwill in accordance with
US generally accepted accounting principles. Goodwill was not required
to be recognised under generally accepted accounting principles in the
United Kingdom. The goodwill relates to the acquisition of Memory
Technology Limited which was acquired in a share for share exchange with
the difference between the nominal value of shares issued and the fair
values of the net assets acquired being credited to a merger reserve.
(B) Represents the recognition of a deferred tax asset. This was not
recognised under generally accepted accounting principles in the United
Kingdom.
(C) Represents the cost of granting share options in accordance with US
generally accepted accounting principles. The cost is calculated as the
difference between the option price and the market value at the time the
option was granted. There is no such requirement in the United Kingdom.
19
<PAGE> 20
SHUTTLE TECHNOLOGY GROUP LIMITED
RECONCILIATION OF BALANCE SHEET ITEMS TO US GAAP
30 JUNE 1998
<TABLE>
<CAPTION>
AUDITED ADJUSTED
1998 ADJUSTMENTS TO US GAAP
L. L. L.
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 406,098 406,098
Intangible assets(A) -- 561,295 561,295
CURRENT ASSETS
Stocks 911,337 911,337
Debtors(B) 1,832,760 44,000 1,876,760
Cash at bank and in hand 81,020 81,020
--------- ----------
2,825,117 2,869,117
--------- ----------
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR
Bank loans and overdrafts 134,628 134,628
Obligations under finance leases and
hire purchase contracts 6,266 6,266
Directors' loans -- --
Trade creditors 676,761 676,761
Other creditors including taxation and
social security 454,799 454,799
Accruals and deferred income 347,907 347,907
--------- ----------
(1,620,361) (1,620,361)
--------- ----------
NET CURRENT ASSETS 1,204,756 1,248,756
--------- ----------
TOTAL ASSETS LESS CURRENT
LIABILITIES 1,610,854 2,216,149
PROVISIONS FOR LIABILITIES
AND CHARGES -- --
--------- ---------- ----------
NET ASSETS 1,610,854 605,295 2,216,149
========= ========== ==========
CAPITAL AND RESERVES
Called up share capital 282,810 -- 282,810
Share premium account(A) -- 880,284 880,284
Merger reserve(A) 206,989 (206,989) --
Shares to be issued(C) -- 106,000 106,000
Other reserves (11,745) -- (11,745)
Capital redemption reserve 2,906 -- 2,906
Profit and loss account 1,129,894 (174,000) 955,894
--------- ---------- ----------
TOTAL EQUITY SHAREHOLDERS' FUNDS 1,610,854 605,295 2,216,149
========= ========== ==========
</TABLE>
20
<PAGE> 21
SHUTTLE TECHNOLOGY GROUP LIMITED
RECONCILIATION OF BALANCE SHEET ITEMS TO US GAAP (CONTINUED)
30 JUNE 1998
(A) Represents the adjustment to capitalise acquisition goodwill in
accordance with US generally accepted accounting principles. Goodwill
was not required to be recognised under generally accepted accounting
principles in the United Kingdom. The goodwill relates to the
acquisition of Memory Technology Limited which was acquired in a share
for share exchange with the difference between the nominal value of
shares issued and the fair values of the net assets acquired being
credited to a merger reserve.
(B) Represents the recognition of a deferred tax asset. This was not
recognised under generally accepted accounting principles in the United
Kingdom.
(C) Represents the setting up of an amount within shareholders' funds for
the difference between the share option price and the market value at
the time share options were granted in accordance with US generally
accepted accounting principles.
21
<PAGE> 22
SHUTTLE TECHNOLOGY GROUP LIMITED
RECONCILIATION OF BALANCE SHEET ITEMS TO US GAAP
30 JUNE 1997
<TABLE>
<CAPTION>
AUDITED ADJUSTED
1997 ADJUSTMENTS TO US GAAP
L. L. L.
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 180,177 180,177
CURRENT ASSETS
Stocks 438,421 438,421
Debtors(B) 714,119 714,119
Cash at bank and in hand 27,045 27,045
--------- ----------
1,179,585 1,179,585
--------- ----------
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR
Bank loans and overdrafts 335,879 335,879
Obligations under finance leases and hire purchase
contracts 16,032 16,032
Directors' loans 11,130 11,130
Trade creditors 431,248 431,248
Other creditors including taxation and social security 53,609 53,609
Accruals and deferred income 104,528 104,528
--------- ----------
(952,426) (952,426)
--------- ----------
NET CURRENT ASSETS 227,159 227,159
--------- ----------
TOTAL ASSETS LESS CURRENT LIABILITIES 407,336 407,336
PROVISIONS FOR LIABILITIES
AND CHARGES (63,500) (63,500)
--------- ----------
NET ASSETS 343,836 343,836
========= ==========
CAPITAL AND RESERVES
Called up share capital 200,000 -- 200,000
Shares to be issued(A) -- 106,000 106,000
Other reserves (232) -- (232)
Profit and loss account 144,068 (106,000) 38,068
--------- -------- ----------
TOTAL EQUITY SHAREHOLDERS' FUNDS 343,836 -- 343,836
========= ======== ==========
</TABLE>
(A) Represents the setting up of an amount within shareholders' funds for
the difference between the share option price and the market value at
the time share options were granted in accordance with US generally
accepted auditing standards.
22
<PAGE> 23
SHUTTLE TECHNOLOGY GROUP LIMITED
CASH FLOW STATEMENTS: BASIS OF PREPARATION
The consolidated cash flow statements are prepared in accordance with UK
Financial Reporting Standard No. 1 (FRS 1), the objective and principles of
which are similar to those set out in SFAS No. 95, "Statement of Cash Flows".
The principal difference between the standards relates to classification. Under
FRS 1, Shuttle Technology Group Limited presents its cash flows for (a)
operating activities; (b) returns on investments and servicing of finance; (c)
tax paid; (d) investing activities; and (e) financing. SFAS No. 95 requires only
three categories of cash flow activity being (a) operating; (b) investing; and
(c) financing.
Cash flows from returns on investments and servicing of finance and taxation
under FRS 1 would, with the exception of dividends paid, be included as
operating activities under SFAS No. 95; such distributions would be included as
a financing activity under SFAS No. 95. Under FRS 1, cash and cash equivalents
comprise cash, investments and short-term deposits which were within 3 months of
maturity when acquired and short-term borrowings repayable within 3 months from
the date of their advance. Under SFAS No. 95, short-term borrowings repayable
within 3 months of their advance would not be included within cash and cash
equivalents but movements on those borrowings would be included in financing
activities.
23
<PAGE> 24
SHUTTLE TECHNOLOGY GROUP LIMITED
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, 1998
------------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 295
Accounts receivable 3,304
Inventories 2,300
Prepaids and other current assets 267
------
Total current assets 6,166
Property, equipment and other assets, net 894
Goodwill 860
------
Total assets $7,920
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 824
Accounts payable 2,542
Accrued expenses 945
Income taxes payable 557
------
Total current liabilities 4,868
Stockholders' equity:
Capital stock 2,126
Accumulated deficit 860
Other cumulative comprehensive income
(loss) 66
------
Total stockholders' equity 3,052
------
$7,920
======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
24
<PAGE> 25
SHUTTLE TECHNOLOGY GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
--------- ---------
<S> <C> <C>
SALES $ 17,261 10,667
Cost of sales 11,736 7,198
--------- ---------
GROSS PROFIT 5,525 3,469
Operating expenses
Research and development 1,938 1,095
Sales and marketing 2,399 1,184
General and administrative 1,856 545
--------- ---------
TOTAL OPERATING EXPENSES 6,193 2,824
--------- ---------
INCOME (LOSS) FROM OPERATIONS (668) 645
Interest expense, net (57) (29)
Foreign currency transaction gains 21 170
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (704) 786
Provision for income taxes 75 (332)
--------- ---------
NET INCOME (LOSS) $ (629) 454
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
25
<PAGE> 26
SHUTTLE TECHNOLOGY GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
----- ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (629) $ 454
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
Depreciation and amortization 484 71
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable 1,246 (1,853)
Inventories (691) (742)
Prepaid expenses (18) (33)
Accounts payable 801 1,568
Accrued expenses (42) 287
Income taxes payable (448) 248
Other non cash movements (effects of foreign exchange on reserves) (34) (20)
----- ------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 669 (20)
----- ------
CASH FLOWS IN INVESTING ACTIVITIES
Capital expenditure (606) (138)
Proceeds from sale of assets 12 --
----- ------
NET CASH USED IN INVESTING ACTIVITIES (594) (138)
----- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from finance leases -- --
Repayment of finance leases (5) (29)
----- ------
NET CASH PROVIDED BY FINANCING ACTIVITIES (5) (29)
----- ------
Effect of exchange rates on cash 4 6
----- ------
NET (DECREASE) INCREASE IN CASH 74 (181)
CASH AT BEGINNING OF PERIOD (594) (183)
----- ------
CASH AT END OF PERIOD $ (520) $ (364)
===== ======
Supplemental disclosures of cash flow information
Cash paid during period - Interest $ 57 $ 22
===== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
26
<PAGE> 27
SHUTTLE TECHNOLOGY GROUP LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with U.S. generally accepted accounting
principles for interim financial information and with Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered for a fair
presentation have been included. Operating results for the nine-month period
ended September 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998.
2. CURRENCY TRANSLATION
The accompanying financial statements are denominated in U.S. dollars. The
functional currency of Shuttle Technology Group Limited is the sterling. The
accompanying condensed consolidated balance sheet has been translated to
U.S. dollars based on the exchange rate at the balance sheet data and the
accompanying condensed consolidated statements of operations and cash flows
have been translated based on the average exchange rate for the respective
periods.
3. SUBSEQUENT EVENT
On November 4, 1998, Shuttle and SCM Microsystems, Inc., a Delaware
corporation ("SCM") closed a business combination in which SCM issued
approximately 828,000 shares of its common stock to the shareholders of
Shuttle in exchange for all of the outstanding share capital of Shuttle. The
transaction is valued at approximately $32.4 million and will be accounted
for as a pooling of interests.
27
<PAGE> 28
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial
statements have been prepared to give effect to the acquisition by SCM
Microsystems, Inc. ("SCM" or the "Company") of Shuttle Technology Group Ltd.
("Shuttle"), in a business combination accounted for by the pooling of interests
method of accounting.
The unaudited pro forma combined condensed balance sheet assumes that
the acquisition occurred on September 30, 1998, and combines SCM's September 30,
1998 consolidated balance sheet with the consolidated balance sheet of Shuttle
as of September 30, 1998. The unaudited pro forma combined condensed statements
of operations combine SCM's consolidated results of operations for the
nine-month periods ended September 30, 1998 and 1997 and for each of the years
in the three-year period ended December 31, 1997 with Shuttle's results of
operations for the same periods, giving effect to the acquisition as if it had
occurred on January 1, 1995. The unaudited pro forma combined condensed
statements of operations for the year ended December 31, 1997 and the nine-month
period ended September 30, 1998 also gives effect to the June 3, 1998
acquisition of Intellicard Systems Pte. Ltd. ("ICS") as if such acquisition
occurred on January 1, 1997 (for further information, see Form 8-KA filed on
August 12, 1998). Certain reclassifications have been made to the historical
data to make classifications for similar items consistent between the companies
on a pro forma combined basis. The pro forma adjustments are based upon
available information and certain assumptions that management believes are
reasonable under the circumstances. In the opinion of management, all
adjustments have been made that are necessary to present fairly the pro forma
data. Final amounts could differ from those set forth below.
SCM and Shuttle estimate that they will incur direct transaction costs
of approximately $1,300,000 associated with the acquisition which will be
charged to operations during the quarter ended December 31, 1998.
The following unaudited pro forma combined condensed financial
statements are not necessarily indicative of the future results of operations of
the Company or the results of operations which would have resulted had the
Company, Shuttle and ICS been combined during the periods presented. In
addition, the pro forma results are not intended to be a projection of future
results. The unaudited pro forma combined condensed financial statements should
be read in conjunction with the audited consolidated financial statements of SCM
for the year ended December 31, 1997 included in the December 31, 1997 annual
report on Form 10-K, and the unaudited consolidated financial statements for the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 included in
the respective form 10-Q, and the consolidated financial statements of Shuttle
appearing elsewhere in this Form 8-K/A.
28
<PAGE> 29
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SCM/
Pro Forma Shuttle
SCM Shuttle Adjustments Combined
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 33,275 $ 295 $ -- $ 33,570
Short-term investments 98,107 -- -- 98,107
Accounts receivable 18,942 3,304 -- 22,246
Inventories 8,345 2,300 -- 10,645
Prepaids and other current assets 1,169 267 -- 1,436
--------- --------- ----------- ---------
Total current assets 159,838 6,166 -- 166,004
Property, equipment and other assets, net 2,664 894 -- 3,558
Goodwill 6,993 860 -- 7,853
--------- --------- ----------- ---------
Total assets $ 169,495 $ 7,920 $ -- $ 177,415
========= ========= =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ -- $ 824 $ -- $ 824
Accounts payable 7,819 2,542 -- 10,361
Accrued expenses 2,974 945 -- 3,919
Income taxes payable 2,325 557 -- 2,882
--------- --------- ----------- ---------
Total current liabilities 13,118 4,868 -- 17,986
Stockholders' equity:
Capital stock 13 2,126 (2,125)(a) 14
Additional paid-in capital 165,541 -- 2,125 (a) 167,666
Accumulated deficit (8,896) 860 -- (8,036)
Deferred compensation (83) -- -- (83)
Other cumulative comprehensive income (198) 66 -- (132)
(loss)
--------- --------- ----------- ---------
Total stockholders' equity 156,377 3,052 -- 159,429
--------- --------- ----------- ---------
$ 169,495 $ 7,920 $ -- $ 177,415
========= ========= =========== =========
</TABLE>
See accompanying notes to unaudited pro forma combined
condensed financial information.
29
<PAGE> 30
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SCM/ICS/
SCM/ICS Shuttle
Pro Forma Pro Forma Pro Forma Pro Forma
SCM ICS Adjust. Combined Shuttle Adjust. Combined
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 32,642 $ 2,266 $ (1,216)(c) $ 33,692 $ 17,261 -- $ 50,953
Cost of sales 19,677 1,973 (1,216)(c) 20,434 11,736 -- 32,170
-------- -------- -------- -------- -------- -------- --------
Gross profit 12,965 293 -- 13,258 5,525 -- 18,783
-------- -------- -------- -------- -------- -------- --------
Operating Expenses:
Research and development 2,526 97 -- 2,623 1,938 -- 4,561
Sales and marketing 3,774 189 -- 3,963 2,399 -- 6,362
General and
administrative 3,723 147 327(d) 4,197 1,856 -- 6,053
In process research
and development 5,941 -- -- 5,941 -- -- 5,941
Other acquisition
integration expenses 581 -- -- 581 -- -- 581
-------- -------- -------- -------- -------- -------- --------
Total operating
expenses 16,545 433 327 17,305 6,193 -- 23,498
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations (3,580) (140) (327) (4,047) (668) -- (4,715)
Interest and other
income (expense), net 4,258 10,352 84 (e) 4,402 (57) -- 4,345
(10,292)(g)
Foreign currency
transaction gains 160 -- -- 160 21 -- 181
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes 838 10,212 (10,535) 515 (704) -- (189)
Provision for income taxes 2,020 -- -- 2,020 (75) -- 1,945
-------- -------- -------- -------- -------- -------- --------
Net income (loss) $ (1,182) $ 10,212 $(10,535) $ (1,505) $ (629) -- $ (2,134)
======== ======== ======== ======== ======== ======== ========
Loss per share:
Basic $ (0.10) $ (0.12) $ (0.16)
======== ======== ========
Diluted $ (0.10) $ (0.12) $ (0.16)
======== ======== ========
Shares used in per share
computations:
Basic 12,166 34(f) 12,200 788(b) 12,988
======== ======== ======== ======== ========
Diluted 12,166 34(f) 12,200 788(b) 12,988
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined
condensed financial information.
30
<PAGE> 31
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SCM/ICS/
SCM/ICS Shuttle
Pro Forma Pro Forma Pro Forma Pro Forma
SCM ICS Adjust. Combined Shuttle Adjust. Combined
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 17,935 3,679 $ (1,813)(c) $ 19,801 $ 10,667 -- $ 30,468
Cost of sales 11,234 3,015 (1,813)(c) 12,436 7,198 -- 19,634
-------- -------- -------- -------- -------- -------- --------
Gross profit 6,701 664 -- 7,365 3,469 -- 10,834
-------- -------- -------- -------- -------- -------- --------
Operating Expenses:
Research and development 2,131 174 -- 2,305 1,027 -- 3,332
Sales and marketing 2,941 261 -- 3,202 1,111 -- 4,313
General and administrative 2,245 255 588(d) 3,088 511 -- 3,599
-------- -------- -------- -------- -------- -------- --------
Total operating expenses 7,317 690 588 8,595 2,649 -- 11,244
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations (616) (26) (588) (1,230) 820 -- (410)
Interest and other
income (expense), net 169 101 (151)(e) 119 (29) -- 90
Foreign currency
transaction gains 401 -- -- 401 170 -- 571
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes (46) 75 (739) (710) 961 -- 251
Provision for income taxes 30 -- -- 30 332 -- 362
-------- -------- -------- -------- -------- -------- --------
Net income (loss) (76) 75 (739) (740) 629 -- (111)
Preferred stock interest
accretion (802) -- -- (802) -- -- (802)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) applicable
to common stockholders $ (878) 75 $ (739) $ (1,542) $ 629 -- $ (913)
======== ======== ======== ======== ======== ======== ========
Loss per share:
Basic $ (0.50) $ (0.86) $ (0.39)
======== ======== ========
Diluted $ (0.50) $ (0.86) $ (0.39)
======== ======== ========
Shares used in per share
computations:
Basic 1,739 61(f) 1,800 557(b) 2,357
======== ======== ======== ======== ========
Diluted 1,739 61 1,800 557(b) 2,357
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined
condensed financial information.
31
<PAGE> 32
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SCM/ICS/
SCM/ICS Shuttle
Pro Forma Pro Forma Pro Forma Pro Forma
SCM ICS Adjust. Combined Shuttle Adjust. Combined
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 27,769 6,277 $ (3,326)(c) $ 30,720 $ 18,654 -- $ 49,374
Cost of sales 17,524 5,117 (3,326)(c) 19,315 12,689 -- 32,004
-------- -------- -------- -------- -------- -------- --------
Gross profit 10,245 1,160 -- 11,405 5,965 -- 17,370
-------- -------- -------- -------- -------- -------- --------
Operating Expenses:
Research and development 2,940 244 -- 3,184 1,561 -- 4,745
Sales and marketing 4,221 442 -- 4,663 1,702 -- 6,365
General and administrative 3,009 364 784(d) 4,157 863 -- 5,020
-------- -------- -------- -------- -------- -------- --------
Total operating expenses 10,170 1,050 784 12,004 4,126 -- 16,130
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations 75 110 (784) (599) 1,839 -- 1,240
Interest and other
income (expense), net 866 62 (201)(e) 727 (51) -- 676
Foreign currency
transaction gains 467 31 -- 498 221 -- 719
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes 1,408 203 (985) 626 2,009 -- 2,635
Provision for income taxes 305 -- -- 305 763 -- 1,068
-------- -------- -------- -------- -------- -------- --------
Net income (loss) 1,103 203 (985) 321 1,246 -- 1,567
Preferred stock interest
accretion (802) -- -- (802) -- -- (802)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)
applicable to common
stockholders $ 301 203 $ (985) $ (481) $ 1,246 -- $ 765
======== ======== ======== ======== ======== ======== ========
Earnings (loss) per share:
Basic $ 0.08 $ (0.12) $ 0.17
======== ======== ========
Diluted $ 0.06 $ (0.12) $ 0.13
======== ======== ========
Shares used in per share
computations:
Basic 3,819 61(f) 3,880 575(b) 4,455
======== ======== ======== ======== ========
Diluted 5,015 61 3,880 615(b) 5,691
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined
condensed financial information.
32
<PAGE> 33
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SCM/Shuttle
Pro Forma Pro Forma
SCM Shuttle Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 21,520 $ 8,632 -- $ 30,152
Cost of sales 14,880 6,150 -- 21,030
-------- -------- -------- --------
Gross profit 6,640 2,482 -- 9,122
-------- -------- -------- --------
Operating Expenses:
Research and development 2,386 810 -- 3,196
Sales and marketing 3,230 1,229 -- 4,459
General and administrative 2,004 371 -- 2,375
-------- -------- -------- --------
Total operating expenses 7,620 2,410 -- 10,030
-------- -------- -------- --------
Income (loss) from operations (980) 72 -- (908)
Interest expense, net (304) (5) -- (309)
Foreign currency transaction gains 174 114 -- 288
-------- -------- -------- --------
Income (loss) before income
taxes (1,110) 181 -- (929)
Provision for income taxes -- 19 -- 19
-------- -------- -------- --------
Net income (loss) (1,110) 162 -- (948)
Accretion on redeemable convertible
preferred stock (287) -- -- (287)
-------- -------- -------- --------
Net income (loss) applicable to
common stockholders $ (1,397) $ 162 -- $ (1,235)
======== ======== ======== ========
Loss per share:
Basic $ (1.09) $ (0.67)
======== ========
Diluted $ (1.09) $ (0.67)
======== ========
Shares used in per share computations:
Basic 1,280 557(b) 1,837
======== ======== ========
Diluted 1,280 557(b) 1,837
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined
condensed financial information.
33
<PAGE> 34
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SCM/Shuttle
Pro Forma Pro Forma
SCM Shuttle Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 18,066 $ 5,522 -- $ 23,588
Cost of sales 15,771 3,305 -- 19,076
-------- -------- -------- --------
Gross profit 2,295 2,217 -- 4,512
-------- -------- -------- --------
Operating Expenses:
Research and development 1,399 410 -- 1,809
Sales and marketing 2,057 1,071 -- 3,128
General and administrative 1,439 381 -- 1,820
-------- -------- -------- --------
Total operating expenses 4,895 1,862 -- 6,757
-------- -------- -------- --------
Income (loss) from operations (2,600) 355 -- (2,245)
Interest expense, net (337) (44) -- (381)
Foreign currency transaction gains 11 31 -- 42
-------- -------- -------- --------
Income (loss) before income
taxes (2,926) 342 -- (2,584)
Provision for income taxes -- 78 -- 78
-------- -------- -------- --------
Net income (loss) (2,926) 264 -- (2,662)
Accretion on redeemable convertible
preferred stock (139) -- -- (139)
-------- -------- -------- --------
Net income (loss) applicable to
common stockholders $ (3,065) $ 264 -- $ (2,801)
======== ======== ======== ========
Losss per share:
Basic $ (2.39) $ (1.52)
======== ========
Diluted $ (2.39) $ (1.52)
======== ========
Shares used in per share computations:
Basic 1,280 557(b) 1,837
======== ======== ========
Diluted 1,280 557(b) 1,837
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined
condensed financial information.
34
<PAGE> 35
SCM MICROSYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
On November 3, 1998, the Company acquired all of the issued and
outstanding capital stock of Shuttle Technology Group, Ltd., a private company
incorporated under the laws of England and Wales ("Shuttle"), from Shuttle's
shareholders in exchange for approximately 828,000 shares of the Company's
Common Stock which had a value of approximately $32,400,000. This business
combination will be accounted for as a pooling of interests.
On June 3, 1998, the Company acquired all of the issued and outstanding
capital stock (4,000,000 shares) of Intellicard Systems Pte. Ltd., a Singapore
Corporation (ICS), from ICS' stockholders in exchange for aggregate
consideration of $18,390,999, of which $14,890,999 was paid in cash and
$3,500,000 was paid upon the issuance of 61,185 shares of SCM common stock (the
"ICS Acquisition"). Approximately $11,400,000 of the cash portion of the
consideration was paid in exchange for cash held by ICS stockholders at the
closing of the transaction.
The following adjustments have been reflected in the unaudited pro forma
combined condensed financial statements:
(a) This adjustment represents the retirement of Shuttle's capital stock and
reclassification of Shuttle's additional paid-in capital.
(b) This adjustment represents the issuance of shares and options of the
Company's Common Stock to the former shareholders and optionholders of
Shuttle as the consideration paid.
(c) These adjustments represent the pro forma elimination of intercompany
revenue and costs relating to the sale of products by ICS to the Company
during the periods presented.
(d) These adjustments represent, for each period presented, the amortization
of goodwill over an estimated life of six years.
(e) These adjustments represent, for each period presented, the estimated
reduction of interest income that would have resulted had the cash
portion of the purchase price been paid at the beginning of each period.
(f) This adjustment represents the issuance of shares of the Company's
Common Stock to the former shareholders of ICS as part of the
consideration paid.
(g) This adjustment represents elimination of the pro forma effect of the
open market sale of 172,856 shares of the Company's Common Stock for an
average price of $65.90 per share held by ICS prior to consummation of
ICS' acquisition by the Company.
35
<PAGE> 36
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.
SCM MICROSYSTEMS, INC.
A Delaware Corporation
Dated: January 15, 1999 By: /s/ JOHN G. NIEDERMAIER
----------------------------
John G. Niedermaier
Vice President, Finance-Chief Financial Officer
(Principal Financial and Accounting Officer)
36
