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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
AMENDMENT NO. 1
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-22689
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SCM MICROSYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 77-0444317
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
160 KNOWLES DRIVE, LOS GATOS, CALIFORNIA 95032
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(408) 370-4888
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of April 25, 2000 there were 14,429,491 shares of the Registrant's
Common Stock outstanding, and the aggregate market value of such shares held by
non-affiliates of the Registrant was $1,131,223,000. Shares of Common Stock held
by each executive officer and director and by each entity affiliated with such
persons have been excluded from such calculation in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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EXPLANATORY NOTE
This Annual Report on Form 10-K/A ("Form 10-K/A") is being filed as
Amendment No. 1 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 filed with the Securities Exchange Commission (the
"Commission") solely for the purpose of supplementing the following items.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors, and their ages as of December 31,
1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Steven Humphreys......... 38 Chairman of the Board
Robert Schneider......... 51 Chief Executive Officer and Director
Bernd Meier.............. 50 President, Chief Operations Officer and Director
Andrew Warner............ 36 Vice President, Finance and Chief Financial Officer
Friedrich Bornikoel(1)... 50 Director
Oystein Larsen(2)........ 39 Director
Ng Poh Chuan(2).......... 38 Director
Andrew Vought(1)(2)...... 45 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Steven Humphreys joined SCM in July 1996 as President and Chairman of the
Board. Mr. Humphreys became Chief Executive Officer in January 1997 and served
as President and Chief Executive Officer until July 1999. Mr. Humphreys
currently serves as Chairman of the Board. From April 1994 until February 1996,
Mr. Humphreys was President of Caere Corporation, an optical character
recognition software and systems company. From November 1990 until March 1994,
he was Vice President of General Electric Information Services, an electronic
commerce services provider. Mr. Humphreys holds a B.S. degree from Yale
University and a M.S. degree and a M.B.A. degree from Stanford University.
Robert Schneider founded SCM in May 1990 as President, Chief Executive
Officer, General Manager and Chairman of the Board. Mr. Schneider has served as
Chief Executive Officer since July 1999 and as Director since May 1990. Mr.
Schneider also serves as a Managing Director of our German subsidiary. Mr.
Schneider holds a degree in engineering from HTBL Salzburg and a B.A. degree
from the Akademie for Business Administration in Ueberlingen.
Bernd Meier joined SCM in January 1992 as General Manager and as a
Director. Mr. Meier has served as President since July 1999 and as Chief
Operations Officer since July 1996. Mr. Meier is also a Director of the Company
and a Managing Director of our German subsidiary. Mr. Meier holds a degree in
engineering from Fachhochschule Dieburg.
Andrew Warner joined SCM in June 1999 as Vice President, Finance and Chief
Financial Officer. From October 1997 until June 1999, Mr. Warner was Vice
President, Finance and Chief Financial Officer of Dazzle Multimedia, a private
desktop video publishing company. From January 1993 until October 1997, he held
various senior finance positions including Director of Corporate Planning and
Analysis and Director of Finance for the Americas at Madge Networks, a provider
of global networking solutions. Mr. Warner holds a B.A. degree in Business
Studies from Humberside University in the United Kingdom and is an Associate
Member of the Chartered Institute of Management Accountants.
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Friedrich Bornikoel has served as a Director of SCM since September 1992.
Mr. Bornikoel joined TVM Techno Venture Management GmbH, a venture capital firm,
in July 1987 and has been a Partner since 1990. Mr. Bornikoel is a director of
several privately held companies. Mr. Bornikoel holds a Masters degree in
Physics from the Technical University of Munich.
Oystein Larsen has served as a Director of SCM since October 1998. Mr.
Larsen is currently Chief Executive Officer of Telenor Conax AS, a company based
in Norway engaged in the development and marketing of smart card-based systems
for digital pay-TV, telecommunications and security, and has served in this role
since 1994. Prior to that, Mr. Larsen was Director, Development Division of
Telenor CTV, a provider of cable TV services based in Norway. Mr. Larsen is a
director of a privately held electronic payment company in Norway. He holds an
advanced engineering degree from the Institute Nationale Polytechnique in
Grenoble.
Ng Poh Chuan has served as a Director of SCM since June 1995. Mr. Ng is
currently a Managing Director and Chairman of the Board of Global Team
Technology Pte. Ltd., a manufacturer's representative for computer products.
From September 1994 through May 1997, Mr. Ng served as Director, Business
Development at ICS, a contract manufacturing company and developer of
communications products. Prior to joining ICS, Mr. Ng was a product engineering
manager for Compaq Computer Corp. Mr. Ng is a director of several privately held
companies. Mr. Ng holds a B.S.E. degree from the National University of
Singapore.
Andrew Vought has served as a Director of SCM since March 1996. Mr. Vought
is currently a Senior Vice President and Chief Financial Officer of Virata
Corporation, a developer and supplier of integrated software-on-silicon
solutions for the delivery of fast Internet access to the home and office. From
January 1995 through May 1996, Mr. Vought was a Partner of Cheyenne Capital
Corporation. Prior to joining Cheyenne Capital Corporation, Mr. Vought was Vice
President, Chief Financial Officer and Secretary of MicroPower Systems, Inc., an
analog and mixed signal semiconductor company, from May 1990 until April 1994.
Mr. Vought is a director of several privately held companies. Mr. Vought holds a
B.S. degree and a B.A. degree from the University of Pennsylvania and an M.B.A.
degree from Harvard University.
TERM OF OFFICE OF DIRECTORS
The Board of Directors is divided into three classes, Class I, Class II and
Class III, with three directors serving in Class I, two directors serving in
Class II, and two directors serving in Class III. Class I directors consist of
Messrs. Humphreys, Larsen and Ng, and the term of office of Class I directors
expires at our 2002 Annual Meeting of Stockholders; Class II directors consist
of Messrs. Meier and Vought, and the term of office of Class II directors will
expire at our 2000 Annual Meeting of Stockholders; and Class III directors
consist of Messrs. Bornikoel and Schneider, and the term of office of Class III
directors will expire at our 2001 Annual Meeting of Stockholders.
BOARD COMMITTEES
In March 1997, the Board established an Audit Committee and a Compensation
Committee. The Audit Committee, currently comprised of directors Ng, Vought and
Larsen, recommends to the Board of Directors the engagement of SCM's independent
accountants and reviews with the accountants the plan, scope and results of
their examination of the consolidated financial statements. The Compensation
Committee, currently comprised of directors Bornikoel and Vought, reviews and
makes recommendations to the Board of Directors regarding all forms of
compensation to be provided to the executive officers, directors and consultants
to SCM.
DIRECTOR COMPENSATION
Each nonemployee member of SCM's Board of Directors receives an annual fee
of $10,000 plus $1,000 for each board meeting attended in person for his
services as director. Prior to April 1997, directors did not receive
compensation for services as directors.
Under SCM's 1997 Director Option Plan ("The Director Plan"), a total of
50,000 shares of Common Stock have been reserved for issuance. The Director Plan
provides that an annual increase will be made in the number of our Common Stock
reserved for issuance thereunder on each anniversary date of adoption of the
Director Plan, in amounts equal to the number of shares underlying options
granted in the immediately
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preceding year or a lesser amount determined by the Board. Each outside director
was granted an initial option to purchase 5,000 shares of Common Stock upon the
effective date of the Director Plan and each person who becomes an outside
director after that date will automatically be granted an initial option to
purchase 10,000 shares of Common Stock. In addition, each outside director will
automatically be granted a subsequent annual option to purchase an additional
5,000 shares of Common Stock under the Director Plan on the date of each Annual
Meeting of Stockholders. All such options have an exercise price equal to the
fair market value of the Common Stock at the date of grant, have a term of ten
years and vest monthly over one year from the date of grant. Options granted
under the Director Plan are not transferable unless approved by the Board of
Directors. SCM's Director Plan will terminate in 2007.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between SCM's Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our executive officers and directors, and persons who own more than ten percent
of a registered class of our equity securities, or 10% stockholders, to file
certain reports of ownership with the Securities and Exchange Commission and
with the National Association of Securities Dealers. Such officers, directors
and 10% stockholders are also required by the Commission's rules and regulations
to provide us with copies of all forms that they file under Section 16(a) of the
Exchange Act. Based solely on our review of copies of such forms received by us,
or on written representations from certain reporting persons, we believe that,
during the period from January 1, 1999 to December 31, 1999, our executive
officers, directors and 10% stockholders filed all required reports under
Section 16(a) of the Exchange Act on a timely basis.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth all compensation
awarded to, earned by, or paid for services rendered to SCM in all capacities
during the years ended December 31, 1997, 1998 and 1999 for SCM's Chief
Executive Officer and SCM's most highly compensated other executive officers
whose salary and bonus for 1999 exceeded $100,000 (collectively, the "Named
Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION SECURITIES ALL OTHER
--------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)
--------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Steven Humphreys(1)..................... 1999 210,000 25,000 10,000 240(2)
Chairman of the Board 1998 190,000 60,000 30,000 --
1997 190,000 75,000 -- --
Robert Schneider(3)..................... 1999 210,000 45,000 30,000 1,763(2)
Chief Executive Officer and Managing 1998 190,000 60,000 30,000 1,935(2)
Director of German subsidiary 1997 190,000 75,000 120,000 1,935(2)
Bernd Meier(4).......................... 1999 210,000 -- 30,000 1,500(2)
President, Chief Operations Officer 1998 190,000 75,000 30,000 1,935(2)
and
Managing Director of German 1997 190,000 75,000 120,000 1,935(2)
subsidiary
Andrew Warner(5)........................ 1999 75,000 15,000 50,000 179(2)
Vice President, Finance and Chief
Financial Officer
</TABLE>
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(1) Mr. Humphreys served as our President and Chief Executive Officer until July
1999, when he was appointed Chairman of the Board.
(2) Represents payments of life insurance premiums.
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(3) Mr. Schneider was appointed Chief Executive Officer in July 1999.
(4) Mr. Meier was appointed President in July 1999.
(5) Mr. Warner began working at SCM in June 1999.
Option Grants During 1999. The following table sets forth for each of the
Named Executive Officers certain information concerning stock options granted
during 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------------- ANNUAL RATES OF
PERCENT OF STOCK PRICE
TOTAL OPTIONS APPRECIATION FOR
NUMBER OF GRANTED TO OPTION TERM(2)
SECURITIES UNDERLYING EMPLOYEES EXERCISE PRICE EXPIRATION ---------------------
NAME OPTIONS GRANTED IN 1999 PER SHARE DATE(1) 5%($) 10%($)
---- --------------------- ------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Steven Humphreys..... 10,000 0.9% $45.5625 7/21/2009 742,165 1,181,774
Robert Schneider..... 30,000 2.6 45.5625 7/21/2009 2,226,495 3,545,322
Bernd Meier.......... 30,000 2.6 45.5625 7/21/2009 2,226,495 3,545,322
Andrew Warner........ 50,000 4.3 45.5625 7/21/2009 3,710,826 5,908,870
</TABLE>
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(1) The option grants presented above vest as to 100% of the shares four years
from the date of grant. Options may generally be exercised ahead of vesting,
subject to a right of SCM to repurchase the unvested portion of the shares
if the optionee's status as an employee or consultant is terminated or upon
the optionee's death or disability prior to the shares vesting.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent SCM's estimate or projection of SCM's future Common Stock prices.
The actual value realized may be greater or less than the potential
realizable values set forth in the table.
Year-End Option Values. The following table sets forth, for each of the
Named Executive Officers, the year-end value of unexercised options as of
December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE(1) OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR-END(#): OPTIONS AT YEAR-END($):
NAME EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(2)
---- ---------------------------- ----------------------------
<S> <C> <C>
Steven Humphreys..... 0/ 80,333 0/6,330,141
Robert Schneider..... 71,458/108,542 3,920,638/4,230,237
Bernd Meier.......... 71,458/108,542 3,920,638/4,230,237
Andrew Warner........ 5,208/ 44,792 95,703/ 823,047
</TABLE>
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(1) Options are generally exercisable by the optionee ahead of vesting. Unvested
shares purchased on exercise of an option are subject to a repurchase right
of SCM, and may not be sold by an optionee until the shares vest. Options
indicated as "Exercisable" are those options which were both vested and
exercisable as of December 31, 1999. All other options are indicated as
"Unexercisable."
(2) Market value of underlying securities at year-end minus the exercise price.
EMPLOYMENT CONTRACTS
SCM's German subsidiary has entered into substantially similar employment
agreements with each of Messrs. Schneider and Meier pursuant to which each
serves as a Managing Director of the subsidiary. Each agreement continues for an
indefinite term and each party may terminate the agreement at any time with six
months notice. Each executive receives an annual base salary of $210,000 and an
annual bonus of up to $75,000. Furthermore, each executive is subject to a
non-compete provision for a period of one year after the termination of
employment.
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REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and approves our compensation policies.
The following is the report of the Compensation Committee describing the
compensation policies applicable to the compensation of our executive officers
for their services to SCM during 1999.
Compensation Philosophy. Our philosophy in setting its compensation
policies for executive officers is to maximize shareholder value over time. The
primary goal of our executive compensation program is therefore to closely align
the interests of the executive officers with those of our stockholders. To
achieve this goal, we attempt to (i) offer compensation opportunities that
attract and retain executives whose abilities are critical to our long-term
success, motivate individuals to perform at their highest level and reward
outstanding achievement, (ii) maintain a portion of the executive total
compensation at risk, with payment of that portion tied to achievement of
financial, organizational and management performance goals, and (iii) encourage
executives to manage from the perspective of owners with an equity stake in SCM.
The Compensation Committee currently uses salary, incentive bonuses and stock
options to meet these goals.
Base Salary. The base salary component of total compensation is primarily
designed to attract, motivate, reward and retain highly skilled executives and
to compensate executives competitively within the industry and the marketplace.
The Compensation Committee reviewed and approved fiscal 1999 base salaries for
the Chief Executive Officer and other executive officers at the end of fiscal
1998. In establishing base salaries of executive officers, the Compensation
Committee evaluates each executive's salary history, scope of responsibility,
prior experience, past performance for us and recommendations from management.
The Compensation Committee also takes into account the salaries for similar
positions at comparable companies in our industry, based on each individual
Committee member's industry experience. In reviewing and setting base salaries
for executive officers, the Compensation Committee focused on each executive's
historical salary level, which in most instances was based upon the date on
which the executive was hired by us, the executive's prior performance with us
and expected contribution to our future success. In making its salary decisions,
the Compensation Committee exercised its discretion and judgment based upon
these factors. No specific formula was applied to determine the weight of each
factor.
Incentive Bonuses. Each executive officer's annual bonus is based on
qualitative and quantitative factors and is intended to motivate and reward
executive officers by directly linking the amount of the bonus to performance
targets. In addition, incentive bonuses for executive officers are intended to
reflect the Compensation Committee's belief that the compensation of each
executive officer should be contingent upon our overall performance. To carry
out this philosophy, our Board of Directors reviews and approves the financial
goals for the fiscal year. The Compensation Committee evaluates our overall
performance and approves performance bonuses based on the extent to which the
goals of the Board of Directors have been achieved.
Equity Incentives. The Compensation Committee views stock option grants as
an important component of its long-term, performance-based compensation
philosophy. The Company provides long-term incentives to its Chief Executive
Officer and its other executive officers through its 1997 Stock Plan (the "1997
Plan"). The purpose of the 1997 Plan is to attract and retain the best employee
talent available and to create a direct link between compensation and our
long-term performance. The Compensation Committee believes that stock options
directly motivate its executive officers to maximize long-term shareholder
value. The options also utilize vesting periods that encourage key executives to
continue in our employ. All options granted to executive officers to date have
been granted at the fair market value of our common stock on the date of grant.
The Board of Directors considers the grant of each option subjectively,
considering factors such as the individual performance of the executive officer
and the anticipated contribution of the executive officer to the attainment of
our long-term strategic performance goals.
CEO Compensation. The compensation of Mr. Humphreys, our Chief Executive
Officer until July 1999, and Mr. Schneider, our Chief Executive Officer from
July 1999, consists of base salary, an annual bonus and stock options. For 1999,
the Compensation Committee increased Mr. Humphreys' base salary to $210,000 from
$190,000 in 1998 based upon the Compensation Committee's knowledge of base
salary levels for similar positions in the industry. In May 1999, Mr. Humphreys
was awarded an incentive bonus of $25,000 based on
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the financial and operational performance of the Company during 1998. For 1999,
the Compensation Committee increased Mr. Schneider's base salary to $210,000
from $190,000 in 1998 based upon the Compensation Committee's knowledge of base
salary levels for similar positions in the industry. In May 1999, Mr. Schneider
was awarded an incentive bonus of $45,000 based on the financial and our
operational performance during 1998.
Compensation of Certain Other Executive Officers. The compensation of Mr.
Meier, our President, Chief Operations Officer and a Managing Director of our
German subsidiary, consists of base salary, an annual bonus and stock options.
For 1999, the Compensation Committee increased Mr. Meier's base salary to
$210,000 from $190,000 in 1998 based upon the Compensation Committee's knowledge
of base salary levels for similar positions in the industry. Mr. Meier was not
awarded an incentive bonus for 1998.
EMPLOYEE STOCK PLANS
1997 STOCK PLAN
SCM's 1997 Plan provides for the granting to employees of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Internal Revenue Code"), and for the granting to employees and
consultants of nonstatutory stock options and stock purchase rights ("SPRs").
The 1997 Plan was approved by the Board of Directors in March 1997, and by the
stockholders in April 1997. Unless terminated sooner, the 1997 Plan will
terminate automatically in March 2007. A total of 2,703,314 shares of Common
Stock are currently reserved for issuance and options to purchase 2,398,248
shares have been issued pursuant to the 1997 Plan. An annual increase will be
made to the 1997 Plan on each anniversary date of the adoption of the 1997 Plan,
in an amount equal to the lesser of 500,000 shares, three percent of the
outstanding shares on such date, or a lesser amount determined by the Board.
The 1997 Plan may be administered by the Board of Directors or a committee
of the Board (the "Committee"), which Committee shall, in the case of options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Internal Revenue Code, consist of two or more "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code.
The Committee has the power to amend, suspend or terminate the 1997 Plan
(provided that no such action may affect any share of Common Stock previously
issued and sold or any option or SPR previously granted under the 1997 Plan), to
determine the terms of the options and SPRs granted, including the exercise
price, the number of shares subject to each SPR or option, the exercisability
thereof, and the form of consideration payable upon such exercise. In addition,
the Committee has the authority to prescribe, amend and rescind rules and
regulations relating to the 1997 Plan. Pursuant to this authority, the Committee
has approved the 1997 Stock Option Plan for French Employees (the "French Plan")
in April 1997, pursuant to which stock options that qualify for preferential tax
treatment under French tax law may be granted. The French Plan was approved by a
vote of SCM's stockholders in July 1998.
Options and SPRs granted under the 1997 Plan are not generally transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee only by such optionee. Options granted under the 1997 Plan must
generally be exercised within three months of the end of optionee's status as an
employee or consultant of SCM, or within twelve months after such optionee's
termination by death or disability, but in no event later than the expiration of
the option's term. In case of SPRs, unless the Committee determines otherwise,
the Restricted Stock Purchase Agreement shall grant SCM a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with SCM for any reason (including death or disability). The purchase
price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement
shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to SCM. The repurchase option
shall lapse at a rate determined by the Committee. The exercise price of options
granted under the 1997 Plan is determined by the Committee, but with respect to
incentive stock options, and nonstatutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code, the exercise price must at least be equal to the fair
market value of the Common Stock on the date of grant. The term of options
granted under the 1997 Plan generally may not exceed ten years.
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The 1997 Plan provides that in the event of a merger of SCM with or into
another corporation, a sale of substantially all of SCM's assets or a like
transaction involving SCM, each option shall be assumed or an equivalent option
substituted by the successor corporation. If the outstanding options are not
assumed or substituted for as described in the preceding sentence, the Optionee
shall fully vest in and have the right to exercise the option or SPR as to all
of the optioned stock, including shares as to which it would not otherwise be
vested or exercisable. If the Administrator makes an option or SPR fully vested
and exercisable in the event of a merger or sale of assets, the Administrator
shall notify the optionee that the option or SPR shall be fully vested and
exercisable for a specified period from the date of such notice, and the option
or SPR will terminate upon the expiration of such period.
1997 EMPLOYEE STOCK PURCHASE PLAN
SCM's 1997 Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by the Board of Directors in March 1997 and by the stockholders in April 1997. A
total of 175,000 shares of Common Stock has been reserved for issuance under the
Purchase Plan. However, an annual increase will be made to the Purchase Plan on
each anniversary date of the adoption of the Purchase Plan, in an amount equal
to the lesser of 150,000 shares, one percent of the outstanding shares on such
date, or a lesser amount determined by the Board. The Purchase Plan, which is
intended to qualify under Section 423 of the Internal Revenue Code, is
implemented by consecutive overlapping twenty-four month offering periods
beginning on the first trading day on or after May 1 and November 1 each year,
except for the first such offering period which commenced on February 1, 1998
and ends on the last trading day on or after April 30, 1999. Each offering
period contains four purchase periods of approximately six months duration
during which a participant may accumulate payroll deductions and purchase Common
Stock. The Purchase Plan is administered by the Board of Directors or by a
committee appointed by the Board. Employees are eligible to participate if they
are customarily employed by SCM or any participating subsidiary for at least 20
hours per week and more than five months in any calendar year. The Purchase Plan
permits eligible employees to purchase Common Stock through payroll deductions
of up to 10% of an employee's compensation (including commissions, overtime and
other bonuses and incentive compensation), up to a maximum of $5,000 for each
purchase period. The price of stock purchased under the Purchase Plan is 85% of
the lower of the fair market value of the Common Stock at the beginning of the
offering period or the end of the applicable purchase period. Employees may end
their participation at any time during an offering period, and they will be paid
their payroll deductions to date. Participation ends automatically upon
termination of employment with SCM.
Rights granted under the Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the Purchase Plan. The Purchase Plan provides that, in
the event of a merger of SCM with or into another corporation or a sale of all
or substantially all of SCM's assets, each participant's right to purchase
Common Stock will be assumed or an equivalent right substituted by the successor
corporation. If the successor corporation refuses to undertake such an
assumption or substitution, the Board of Directors shall shorten the offering
period then in progress (so that employees' rights to purchase stock under the
Purchase Plan are exercised prior to the merger or sale of assets). The Purchase
Plan will terminate in 2007. The Board of Directors has the authority to amend
or terminate the Purchase Plan, except that no such action may adversely affect
any outstanding rights to purchase stock under the Purchase Plan. In 1999 and
1998, 16,700 and 6,982 shares, respectively, were purchased by participants
under the Purchase Plan and 151,518 shares were available under the Purchase
Plan as of December 31, 1999.
1997 EMPLOYEE STOCK PURCHASE PLAN FOR NON-U.S. EMPLOYEES
The 1997 Employee Stock Purchase Plan for Non-U.S. Employees (the
"International Purchase Plan") was adopted by the Board of Directors in April
1997. The number of shares reserved for issuance under the International
Purchase Plan equals the number of shares reserved for issuance under the
Purchase Plan, but not yet issued. The terms of the International Purchase Plan
are substantially similar to those of the Purchase Plan, except that employees
need not be customarily employed by SCM or a participating subsidiary for at
least 20 hours per week and more than five months per calendar year to
participate. The International Purchase Plan is not intended to qualify under
Section 423 of the Code.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of April 28, 2000 for: (a) each
person or entity who is known by us to beneficially own five percent or more of
our outstanding common stock; (b) each of our directors; (c) each of the Named
Executive Officers; and (d) all of our directors and executive officers as a
group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ --------- -------
<S> <C> <C>
Deutsche Bank A.G.(2)............................ 1,351,583 9.6
Taunusanlage 12, D-60325
Frankfurt am Main, Germany
Robert Schneider(3).............................. 551,069 3.8
c/o SCM Microsystems GmbH
Sperl-Ring 4 Hettenshausen
D-85276 Pfaffenhofen, Germany
Bernd Meier(4)................................... 280,304 1.9
c/o SCM Microsystems GmbH
Sperl-Ring 4 Hettenshausen
D-85276 Pfaffenhofen Germany
Steven Humphreys(5).............................. 41,500 *
Andrew Warner(6)................................. 11,458 *
Friedrich Bornikoel(7)........................... 42,500 *
Oystein Larsen(8)................................ 15,000 *
Ng Poh Chuan (9)................................. 10,000 *
Andrew Vought(10)................................ 6,000 *
All directors and executive officers as a group
(8 persons)(11)................................ 957,831 6.5
</TABLE>
- ---------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are
currently exercisable or exercisable but not necessarily vested within 60
days of April 28, 2000 are deemed outstanding. Such shares, however, are
not deemed outstanding for the purpose of computing the percentage
ownership of each other person. Except as indicated in the footnotes to
this table and pursuant to applicable community property laws, each
stockholder named in the table has sole voting and investment power with
respect to the shares set forth opposite such stockholder's name.
(2) Based solely on information contained in a Schedule 13G filed on February
10, 2000.
(3) Includes (i) 13,510 shares held by Robert Schneider's wife, Ursula
Schneider; and (ii) options to purchase 86,458 shares and 1,167 shares of
common stock exercisable within 60 days of April 28, 2000 held by Robert
Schneider and Ursula Schneider, respectively. Mr. Schneider also holds
100,000 fully vested options in Dazzle Multimedia, a 51% owned subsidiary
of SCM Microsystems. These options represent less than 1% of the
outstanding capital stock of Dazzle Multimedia.
(4) Includes (i) 5,000 shares held by Bernd Meier's wife, Sonja Meier; (ii)
options to purchase 86,458 shares and 1,167 shares of common stock
exercisable within 60 days of April 28, 2000 held by Bernd Meier and Sonja
Meier, respectively, and (iii) 35,064 shares held in trust for Nicholas
Efthymiou. Mr. Meier also holds 66,667 common shares and 100,000 fully
vested options in Dazzle Multimedia, a 51% owned subsidiary of SCM
Microsystems. These shares and options represent less than 1% of the
outstanding capital stock of Dazzle Multimedia.
(5) Includes 5,762 shares of common stock which are subject to repurchase by
SCM until vested. Mr. Humphreys also holds 100,000 fully vested options in
Dazzle Multimedia, a 51% owned subsidiary
9
<PAGE> 10
of SCM Microsystems. These options represent less than 1% of the
outstanding capital stock of Dazzle Multimedia.
(6) Includes options to purchase 11,458 shares of common stock exercisable
within 60 days of April 28, 2000. Mr. Warner also holds 11,500 Preferred
Series A shares and a $15,000 convertible note, which is convertible at any
time by the holder into 7,500 Series B Preferred Shares in Dazzle
Multimedia, a 51% owned subsidiary of SCM Microsystems. These shares and
options represent less than 1% of the outstanding capital stock of Dazzle
Multimedia.
(7) Includes 35,000 shares held by TVM Techno Venture Management GmbH. Mr.
Bornikoel is a partner of TVM Techno Venture Management GmbH. Mr. Bornikoel
disclaims beneficial ownership of shares beneficially owned by such entity
except to the extent of his pecuniary interest therein. Also includes
options to purchase 7,500 shares of common stock exercisable within 60 days
of April 28, 2000.
(8) Includes options to purchase 15,000 shares of common stock exercisable
within 60 days of April 28, 2000.
(9) Includes options to purchase 10,000 shares of common stock exercisable
within 60 days of April 28, 2000.
(10) Includes options to purchase 6,000 shares of common stock exercisable
within 60 days of April 28, 2000.
(11) Includes shares and exercisable options which may be deemed to be
beneficially owned by certain directors and executive officers. See Notes
3, 4, 5, 6, 7, 8, 9 and 10 above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1999, SCM entered into a $2.1 million loan agreement with Spyrus,
Inc., an OEM customer which provides Internet identification and encryption
solutions for e-business. This loan was secured by Spyrus' assets. In October
and November of 1999, SCM loaned Spyrus an additional $1.45 million, which was
guaranteed by Spyrus' founders, individually. The loans earned interest at a
rate of prime plus 1% through December 31, 1999. In March 2000, Spyrus
consummated a $20,150,000 preferred stock financing. In this transaction, SCM
acquired 35,500,000 shares of Spyrus' Series B preferred stock at a price of
$0.10 per share through the conversion of the outstanding principal amount of
the Spyrus loans. This represents approximately 15.8% of Spyrus's outstanding
common stock on an as converted basis. In connection with this transaction,
Robert Schneider, SCM's Chief Executive Officer and a director, Bernd Meier,
SCM's President, Chief Operations Officer and director, and Ng Poh Chuan, an SCM
director, acquired $200,000, $500,000 and $100,000 worth of Spyrus Series B
preferred stock, respectively, on the same terms as SCM. Shares held by these
individuals represent approximately 3.6% of Spyrus' outstanding common stock on
an as converted basis. In conjunction with Spyrus' financing, SCM secured the
right to appoint a director to Spyrus' board of directors. Mr. Meier currently
serves as SCM's appointee.
In January 2000, each of Steven Humphreys, Robert Schneider and Bernd Meier
were granted vested options to acquire 100,000 shares of common stock of our 51%
owned subsidiary, Dazzle Multimedia. These options were granted in exchange for
their agreement to serve as directors of Dazzle and have an exercise price of
$0.30 per share, the fair market value of the Dazzle common stock on the grant
date. Two of the three other outside directors of Dazzle received similar option
grants. Messrs. Humphreys, Schneider and Meier have each agreed to transfer
25,000 of their Dazzle stock options to Andrew Warner, who in addition to being
our Chief Financial Officer has acted as the interim Dazzle Chief Financial
Officer since June 1999.
10
<PAGE> 11
PERFORMANCE GRAPH
The following Performance Graph compares the cumulative total return to
stockholders of our common stock since October 7, 1997, the date we first became
subject to the reporting requirements of the Exchange Act, to the cumulative
total return over such period of (i) the Standard & Poor's 500 Stock Index, and
(ii) the Hambrecht & Quist Technology Index, which is comprised of publicly
traded stocks of approximately 275 companies in the computer hardware, computer
software, communications, semiconductor and information services industries. The
Performance Graph assumes that $100 was invested on October 7, 1997 in our
common stock and in each of the comparative indices. The Performance Graph
further assumes that such amount was initially invested in our common stock at a
price of $13.00 per share, the price at which our stock was first offered to the
public by us on such date.
Our historic stock price performance is not necessarily indicative of
future stock price performance. The information contained in the Performance
Graph shall not be deemed to be "soliciting material" or to be "filed" with the
Commission, nor shall such information be incorporated by reference into any
existing or future filing by the Company under the Securities Act of 1933, as
amended, or the Exchange Act, except to the extent that we specifically
incorporate such information by reference into any such filing.
COMPARISON OF 27 MONTH CUMULATIVE TOTAL RETURN*
AMONG SCM MICROSYSTEMS, INC., THE S&P 500 INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
SCM MICROSYSTEMS, HAMBRECHT & QUIST
INC. S & P 500 TECHNOLOGY
----------------- --------- -----------------
<S> <C> <C> <C>
10/7/97 100 100 100
12/97 185 99 82
12/98 547 127 128
12/99 492 154 286
</TABLE>
*$100 INVESTED ON 10/7/97 IN STOCK OR INDEX INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
11
<PAGE> 12
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SCM HAMBRECHT & QUIST
(FISCAL YEAR COVERED) S&P 500 MICROSYSTEMS, INC. TECHNOLOGY
--------------------- ------- ------------------ -----------------
<S> <C> <C> <C>
10/7/97......................................... 100 100 100
Dec-97.......................................... 99 185 82
Dec-98.......................................... 127 547 128
Dec-99.......................................... 154 492 286
</TABLE>
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to
Form 10-K on Form 10-K/A to be signed on its behalf by the undersigned,
thereunto duly authorized on this 28th day of April, 2000.
SCM MICROSYSTEMS, INC.
By: /s/ STEVEN HUMPHREYS
------------------------------------
Steven Humphreys
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 1 to Form 10-K on Form 10-K/A has been signed below by the
following persons on April 28, 2000 on behalf of the Registrant and in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ STEVEN HUMPHREYS Chairman of the Board
- -----------------------------------------------------
Steven Humphreys
/s/ ROBERT SCHNEIDER Chief Executive Officer (Principal Executive Officer)
- -----------------------------------------------------
Robert Schneider
/s/ ANDREW WARNER Vice President, Finance and Chief Financial Officer
- ----------------------------------------------------- (Principal Financial and Accounting Officer)
Andrew Warner
/s/ BERND MEIER Chief Operations Officer and Director
- -----------------------------------------------------
Bernd Meier
/s/ FRIEDRICH BORNIKOEL Director
- -----------------------------------------------------
Friedrich Bornikoel
/s/ OYSTEIN LARSON Director
- -----------------------------------------------------
Oystein Larson
/s/ NG POH CHUAN Director
- -----------------------------------------------------
Ng Poh Chuan
/s/ ANDREW VOUGHT Director
- -----------------------------------------------------
Andrew Vought
By: /s/ STEVEN HUMPHREYS
-------------------------------------------------
Chairman of the Board
</TABLE>
13
