UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
-------------------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
EXCHANGE ACT OF 1934
For the transition period from _______________ to __________________
DIGITAL BIOMETRICS, INC. RETIREMENT PLAN
----------------------------------------
(Exact name of the plan)
Digital Biometrics, Inc.
------------------------
(Name of issuer.)
5600 Rowland Road, Minnetonka, Minnesota 55343
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
1
<PAGE>
UNAUDITED
FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
DIGITAL BIOMETRICS, INC. RETIREMENT PLAN
YEARS ENDED DECEMBER 31, 1999, AND 1998
TABLE OF CONTENTS
Page
----
Financial Statements
--------------------
Statements of Net Assets Available for Plan Benefits 3
Statements of Changes in Net Assets Available for Plan 4
Notes to Financial Statements 5
Supplemental Schedules
----------------------
Schedule of Assets Held for Investment Purposes, December 31, 1999 10
Schedule of Reportable 5% Transactions for the Year ended
December 31, 1999 11
2
<PAGE>
DIGITAL BIOMETRICS, INC. RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
<TABLE>
<CAPTION>
December 31,
-------------------------
ASSETS 1999 1998
---------- ----------
<S> <C> <C>
Investment in Digital Biometrics, Inc. common stock $ 802,167 $ 198,429
Other investments at market value 1,697,314 1,134,976
Loans to participants 96,413 54,331
Employee contributions receivable 404 13,118
Employer match receivable 152,367 118,453
Other receivables 850 850
---------- ----------
Net assets available for plan benefits $2,749,515 $1,520,157
========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
DIGITAL BIOMETRICS, INC. RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Additions to net assets:
Investment income:
Net appreciation in fair value of assets $ 697,492 $ 127,851
Interest and dividends 129,649 47,484
Loan interest income 6,620 6,479
---------- ----------
833,761 181,814
---------- ----------
Contributions:
Employer 154,774 120,860
Participants 537,228 335,342
---------- ----------
692,002 456,202
---------- ----------
Total additions 1,525,763 638,016
Deductions from net assets:
Benefits paid to participants 296,003 314,718
Administrative expenses 402 454
---------- ----------
Net increase in net assets available for plan benefits 1,229,358 322,844
Net assets available for plan benefits at beginning of year 1,520,157 1,197,313
---------- ----------
Net assets available for plan benefits at end of year $2,749,515 $1,520,157
========== ==========
</TABLE>
See accompanying notes.
4
<PAGE>
Digital Biometrics, Inc. Retirement Plan
Notes to Financial Statements
December 31, 1999
1. DESCRIPTION OF PLAN
The following brief description of the Digital Biometrics, Inc. Retirement Plan
("Plan") provides only general information. Participants should refer to the
Plan Document for more complete information. Copies of the Plan Document are
available from the Human Resources Benefits Office.
GENERAL
The Plan is a defined contribution plan incorporating the provisions of Section
401(k) of the Internal Revenue Code and covering substantially all employees of
Digital Biometrics, Inc. ("Employer" or "Company"). The Employer may make
matching contributions equal to a discretionary percentage, to be determined by
the Employer, of the participant's salary reductions. Contributions by and on
behalf of participants are invested in accordance with the participants'
investment designations in one or more investment options. Plan participants
have nine investment options in which they may choose to have their funds
invested. Employees of the Company or its wholly owned subsidiary may elect to
participate in the Plan upon becoming eligible, which is on the first day of the
month following one entire month from their hire date. Employees may also be
permitted to deposit distributions from other qualified plans into the Plan at
the discretion of the Plan administrator.
The Employer pays most of the Plan's administrative expenses. These expenses
include, but are not limited to, legal, accounting and recordkeeping fees. Loan
fees are paid by participants.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA").
CONTRIBUTIONS
Each participant can contribute from 1% to 20% of his or her compensation, in
whole percentages, on a pre-tax basis to the Plan up to an annual maximum
determined by the Internal Revenue Code, by means of regular payroll deductions.
Participants may change their contribution percentages on a monthly basis. In
addition, participants may cease making contributions at any time. During 1999
and 1998, the Company matched participant pre-tax contributions on a 50 percent
basis up to 5 percent of compensation, as defined by the Plan Agreement.
Matching contributions made by the Company are paid in common stock of Digital
Biometrics, Inc. and are immediately available for transfer to the other fund
options of the Plan subject to the Company's insider trading policy limitations.
5
<PAGE>
VESTING
Participants are immediately vested in their pre-tax contributions and Employer
matching contributions plus actual earnings thereon.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's and the employer's
contributions and an allocation of Plan's earnings. Allocations are based on the
balance of each investment type in the participant's account. The benefit to
which a participant is entitled is the benefit that can be provided from the
participant's account.
Participants can choose to invest their contributions in Digital Biometrics,
Inc. common stock, Great Hall Money Market Fund and various mutual funds
including Oppenheimer Main Street Growth & Income Fund, Oppenheimer Global Fund,
Oppenheimer Quest Opportunity Value Fund, Fidelity Advisor Growth Opportunities
Fund, Seligman Communications & Information Fund, MFS Emerging Growth Fund and
Alliance Bond Fund. Participants can allocate their investment among Digital
Biometrics, Inc. common stock, subject to the Company's insider trading policy,
or any of the funds at their discretion. Investment options are selected by the
trustees of the Plan and may be changed at any time.
PARTICIPANT LOANS
The Plan also includes, among other things, a loan feature (see Note 7). Under
specified guidelines, a participant may request the Trustee to disburse a
portion of the participant's fund balance as a loan to the participant.
Repayment of principal and interest is generally made by payroll deduction and
the loans are fully secured by the participant's account balance. Loans are made
at the prime rate of interest at the time of loan approval.
HARDSHIP DISTRIBUTIONS
The Plan allows for hardship distributions as permitted by the Internal Revenue
Code.
PAYMENT OF BENEFITS
Upon termination of service, a participant may generally elect to receive the
value of his or her account in a lump-sum amount or they may leave their funds
in the Plan. Benefits become payable to participants upon their termination of
employment with the Employer or in the event of elective withdrawal as permitted
by the Plan.
PLAN TERMINATION
The Employer has the right under the Plan to terminate the Plan subject to the
provisions set forth in ERISA. Should the Plan terminate, or should
contributions be discontinued at some future time, the rights of each
6
<PAGE>
affected participant to the entire amount credited to his or her account on the
date of such termination or discontinuance shall be non-forfeitable and fully
vested. Payment of such amounts to each participant or beneficiary, upon the
termination of the Plan or upon the complete discontinuance of contributions
under the Plan, shall be made by the Plan administrator at such time and in such
manner as the Plan administrator shall state, provided, however, that all
participants and beneficiaries similarly situated shall be treated in a
nondiscriminatory manner.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The Plan's financial statements are prepared on the accrual basis of accounting.
Participant benefit payments are recorded when paid.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires the Plan to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
VALUATION OF INVESTMENTS
Investments are reported at fair value, using quoted market prices at December
31, 1999 and 1998. Participant loans are reported at amounts owed by the
participants.
The Company's common stock is traded on The Nasdaq National Market. The Plan's
investment in the Company's common stock is stated at quoted market value. At
December 31, 1999 and 1998, the quoted market value of the Company's common
stock was $3.375 and $1.375 per share, respectively.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
3. INVESTMENTS
The Plan's investments are invested in Digital Biometrics, Inc. common stock,
one money market fund and seven mutual funds. The Plan is administered by the
Company, which also acts as trustee for the Plan. Tax sheltered Compensation,
Inc. provides third-party administration services, including recordkeeping and
Dain Rauscher Investment Services provides brokerage services for the Plan.
7
<PAGE>
The following table presents the Plan's investments at fair market value:
December 31
--------------------------
1999 1998
---------- ----------
Digital Biometrics, Inc. common stock $ 956,750 * $ 322,829 *
Oppenheimer Main Street Growth & Income Fund 346,888 * 270,600 *
Oppenheimer Global Fund 258,867 * 140,769 *
Oppenheimer Quest Opportunity Value Fund 41,731 30,719
Fidelity Advisor Growth Opportunities Fund 307,618 * 264,520 *
Seligman Communications & Information Fund 297,500 * 166,636 *
MFS Emerging Growth Fund 259,347 * 146,814 *
Alliance Bond Fund 140,837 * 95,926 *
Great Hall Money Market Fund 43,564 27,013
Loan Account 96,413 54,331
---------- ----------
$2,749,515 $1,520,157
========== ==========
* Represents 5% or more of the fair value of net assets available for
benefits.
Investment interest and dividend income was $129,649 for 1999 and $47,484 for
1998.
4. NET APPRECIATION (DEPRECIATION) IN FAIR VALUE OF INVESTMENTS
During the years ended December 31, 1999 and 1998, the Plan's investments
(including investments bought, sold, as well as held during the period)
appreciated in value by $697,492 and $127,851, respectively, as follows:
1999 1998
---------- ----------
Digital Biometrics, Inc. common stock $ 469,070 $ (27,996)
Mutual funds 228,422 155,847
---------- ----------
$ 697,492 $ 127,851
========== ==========
5. INCOME TAX STATUS
The Internal Revenue Service issued a determination letter dated May 8, 1996
stating that the Plan qualifies, in form, under Sections 401(a) and 401(k) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the underlying
trust is, therefore, exempt from federal income taxes under Section 501(a) of
the Code. The Plan is required to operate in accordance with the Code to
maintain its tax qualified status. The Plan administrator is not aware of any
course of actions or series of events that have occurred which might adversely
affect the Plan's qualified status.
8
<PAGE>
6. PLAN AMENDMENTS
Under the terms and conditions of the Plan, the Company is authorized to amend
the Plan. Since the adoption of the Plan, the Company has periodically amended
the Plan to comply with the requirements of the Internal Revenue code as well as
to implement certain design changes.
No amendments were made to the Plan during 1999. The Plan was amended in 1998 to
include employees of affiliated employers.
7. LOANS TO PARTICIPANTS
The Plan has a loan feature available to all Plan participants. All loans are
treated as directed investments. Loans are made from the participant's account,
reducing the investment balance and creating a receivable in the Loan Account.
Loans are secured by the participant's vested account balance. Loans are
generally repaid through payroll deduction including principal and interest. The
principal portion reduces the receivable from participants and both principal
and interest are transferred to the participant's investment account as
repayments are received.
Participants may obtain loans based on the vested value of their accounts. New
loans cannot exceed 50 percent of the participant's account value or a maximum
of $50,000 to comply with the Department of Labor's regulations on loans to
participants. Loans bear a rate of interest equal to the prime rate and are
repaid over a period not to exceed five years unless used to purchase the
participant's primary residence, in which case the loan must be repaid over a
reasonable period.
9
<PAGE>
Digital Biometrics, Inc. Retirement Plan
EIN: 41-1545069 Plan: 001
Schedule of Assets Held for Investment Purposes
December 31, 1999
<TABLE>
<CAPTION>
Description of Investment, Including
Identity of Issue, Borrower, Lessor Maturity Date, Rate of Interest, Par or Fair
or Similar Party Maturity Value Market Value
-------------------------------------------- --------------------------------------- ------------
<S> <C> <C>
Digital Biometrics, Inc. common stock(1) 237,679 Shares $ 956,750
Oppenheimer Main Street Growth & Income Fund 8,259 Mutual Fund Shares 346,888
Oppenheimer Global Fund 4,126 Mutual Fund Shares 258,867
Oppenheimer Quest Opportunity Value Fund 1,211 Mutual Fund Shares 41,731
Fidelity Advisor Growth Opportunities Fund 6,586 Mutual Fund Shares 307,618
Seligman Communications & Information Fund 6,281 Mutual Fund Shares 297,500
MFS Emerging Growth Fund 3,892 Mutual Fund Shares 259,347
Alliance Bond Fund 11,394 Mutual Fund Shares 140,837
Great Hall Money Market Fund Money Market Fund 43,564
Participant Loans(1) Interest rates between 8.75% and 9.50% 96,413
----------
$2,749,515
==========
</TABLE>
(1) Party-in-interest to the Plan.
10
<PAGE>
Digital Biometrics, Inc. Retirement Plan
Item 27d
Schedule of Reportable 5% Transactions
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Current
Purchase Selling Cost of Value of Net Gain
Identity of Party Involved Description of Asset Price Price Asset Asset or (Loss)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Category (iii) - Series of transactions in excess of 5% of
Plan assets
Purchases
---------
Digital Biometrics, Inc. Common stock - 36 transactions $ 77,948 -- $ 77,948 $ 77,948 $ --
Fidelity Advisor
Growth Opportunities Fund Mutual fund - 42 transactions 151,324 -- 151,324 151,324 --
MFS Emerging Growth Fund Mutual fund - 34 transactions 82,538 -- 82,538 82,538 --
Oppenheimer Global Fund Mutual fund - 48 transactions 80,297 -- 80,297 80,297 --
Oppenheimer Main Street
Growth & Income Fund Mutual fund - 46 transactions 144,340 -- 144,340 144,340 --
Sales
-----
Fidelity Advisor Growth
Opportunities Fund Mutual fund - 45 transactions $ -- $88,364 $ 56,362 $ 88,364 $32,002
Oppenheimer Main Street
Growth & Income Fund Mutual fund - 55 transactions -- 81,015 53,788 81,015 27,227
</TABLE>
There were no category (i), (ii), or (iv) reportable transactions during the
year ended December 31, 1999.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Digital Biometrics, Inc. Retirement Plan
Date: July 12, 2000
By: /s/ John J. Metil
------------------------
John J. Metil
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
Digital Biometrics, Inc.
12
