Form: 8-K/A

Current report

August 12, 1998

8-K/A: Current report

Published on August 12, 1998


================================================================================

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): JUNE 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.)

131 ALBRIGHT WAY
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

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 June 3, 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.

(a) Financial Statements of Business Acquired:



Page

Index Page 3
Report of the Directors 4
Statement by Directors 7
Report of the Auditors 7
Balance Sheets as of 31 December 1997 and 1996 8
Profit and Loss Accounts for the years ended 31 December 1997 and 1996 9
Statements of Cash Flows for the years ended 31 December 1997 and 1996 10
Notes to the Accounts 11
Unaudited Balance Sheet as of 31 March 1998 17
Unaudited Profit and Loss Accounts for the quarters ended 31 March 1998 and 1997 18
Unaudited Statements of Cash Flows for the quarters ended 31 March 1998 and 1997 19
Note to Unaudited Financial Statements 20



(b) Pro forma Financial Information:


Page

Unaudited Pro Forma Combined Condensed Balance Sheet
as of March 31, 1998 21
Unaudited Pro Forma Combined Condensed Statement of Operations
for the year ended December 31, 1997 and the three months ended
March 31, 1998 22
Notes to Pro Forma Combined Condensed Financial Information 23




2

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)



FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 1997



INDEX




Page

Report of the Directors .................................................. 4
Statement by Directors ................................................... 7
Report of the Auditors ................................................... 7
Balance Sheets as of 31 December 1997 and 1996 ........................... 8
Profit and Loss Accounts for the years ended 31 December 1997 and 1996 ... 9
Statements of Cash Flows for the years ended 31 December 1997 and 1996 ... 10
Notes to the Accounts .................................................... 11




3


INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)

REPORT OF THE DIRECTORS


The directors present their report to the members together with the audited
accounts of the company for the financial year ended 31 December 1997.

DIRECTORS
The directors in office at the date of this report are:

NGIAM MIA JE PATRICK
TAN THYE SENG
TAN TAI CHEW
GOH BOON HUAT
NGIAM MIA KIAT BENJAMIN (Alternate to NGIAM MIA JE PATRICK)
LIOW VOON KHEONG (Alternate to TAN THYE SENG)
LIM KIM LARK (Alternate to GOH BOON HUAT)

PRINCIPAL ACTIVITIES
The principal activities of the company are that of development, manufacture and
repair of PCMCIA peripherals and related subassemblies.

There have been no significant changes in the nature of these activities during
the financial year under review.

ACQUISITION AND DISPOSAL OF SUBSIDIARIES
There was no acquisition or disposal of any subsidiary during the financial
year.

FINANCIAL RESULTS


$ Sing.
--------

Profit after taxation 263,826

Accumulated loss brought forward (192,339)
--------

Retained profits carried forward 71,487
========


RESERVES AND PROVISION MOVEMENTS
There were no material transfers to or from reserves and provision except for
normal amounts set aside for such items as depreciation of fixed assets,
provisions for doubtful debts and income tax if any as disclosed in the
accounts.

ISSUE OF SHARES AND DEBENTURES
There were no shares or debentures issued by the company during the financial
year.

ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES
During and at the end of the financial year, the company was not a party to any
arrangement whose object is to enable the directors to acquire benefits through
the acquisition of shares in or debentures of the company or any other body
corporate.



4

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)

REPORT OF THE DIRECTORS (CONTINUED)


DIRECTORS' INTEREST IN SHARES OR DEBENTURES
The following directors who held office at the end of the financial year had an
interest in shares of the company, according to the register of directors'
shareholdings kept by the company under Section 164 of the Companies Act, Cap.
50:-



Ordinary Shares of $1.00 each
-----------------------------
Name of Director At 1.1.97 At 31.12.97
--------- -----------

GOH BOON HUAT 500,000 500,000

TAN TAI CHEW 1,040,000 1,040,000

LIM KIM LARK 300,000 300,000


DIVIDENDS
The directors do not recommend that a final dividend be paid for the financial
year. No dividends have been paid or declared since the end of the previous
financial year.

BAD AND DOUBTFUL DEBTS
Before the accounts of the company were made out, the directors took reasonable
steps to ascertain that proper action had been taken in relation to the writing
off of bad debts and the making of provision for doubtful debts and have
satisfied themselves that all known bad debts if any had been written off and
that where necessary adequate provision had been made for doubtful debts.

At the date of this report, the directors are not aware of any circumstances
which would render any amounts written off for bad debts or provided for
doubtful debts inadequate to any substantial extent.

CURRENT ASSETS
Before the accounts of the company were made out, the directors took reasonable
steps to ensure that any current assets which were unlikely to realise their
book values in the ordinary course of business have been written down to their
estimated realisable values.

At the date of this report, the directors are not aware of any circumstances
which would render the values attributed to the current assets in the accounts
misleading.

CHARGES AND CONTINGENT LIABILITIES
At the date of this report:-

(a) there are no charges on the assets of the company which have arisen
since the end of the financial year which secure the liabilities of any
other person; and

(b) there are no contingent liabilities of the company which have arisen
since the end of the financial year other than in the normal course of
business.


ABILITY TO MEET OBLIGATIONS
No contingent or other liability has become enforceable or is likely to become
enforceable within twelve months after the end of the financial year which, in
the opinion of the directors, will or may substantially affect the ability of
the company to meet their obligations as and when they fall due.



5

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)

REPORT OF THE DIRECTORS (CONTINUED)


OTHER CIRCUMSTANCES AFFECTING ACCOUNTS
At the date of this report, the directors are not aware of any circumstances not
otherwise dealt with in the report or the accounts which would render any amount
stated in the accounts of the company misleading.

UNUSUAL ITEMS
In the opinion of the directors, the results of the operations of the company
during the financial year have not been substantially affected by any item,
transaction or event of a material and unusual nature.

UNUSUAL ITEMS AFTER THE FINANCIAL YEAR
In the opinion of the directors, no item, transaction or event of a material and
unusual nature has arisen in the interval between the end of the financial year
and the date of this report which would affect substantially the results of the
operations of the company for the financial year in which this report is made.

DIRECTORS' CONTRACTUAL BENEFITS
Since the end of the previous financial year, no director has received or become
entitled to receive a benefit (other than as disclosed in the accounts) which is
required to be disclosed by Section 201(8) of the Companies Act, Cap. 50 by
reason of a contract made by the company with the director or with a firm of
which he is a member or with a company in which he has a substantial financial
interest.

OPTIONS GRANTED
During the financial year, no option to take up unissued shares of the company
was granted.

OPTIONS EXERCISED
During the financial year, there were no shares of the company that were issued
by virtue of the exercise of an option to take up unissued shares.

OPTIONS OUTSTANDING
At the end of the financial year, there were no unissued shares of the company
under option.

AUDITORS
The auditors, Richard Chan & Company, Certified Public Accountants, have
expressed their willingness to accept re-appointment.


On behalf of the Board,


/s/ TAN TAI CHEW /s/ LIM KIM LARK
- ---------------------- ----------------------
TAN TAI CHEW LIM KIM LARK
Director Director


Singapore: 16 March 1998



6

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)

STATEMENT BY DIRECTORS

We state that, in the opinion of the directors:-

(a) the balance sheet, profit and loss account and statement of cash flows
together with the notes thereon, set out on pages 7 to 15 are drawn up
so as to give a true and fair view of the state of affairs of the
company as at 31 December 1997, and the results of the business of the
company for the year ended on that date;

(b) at the date of this statement, there are reasonable grounds to believe
that the company will be able to pay its debts as and when they fall
due.

On behalf of the Board,


/s/ TAN TAI CHEW /s/ LIM KIM LARK
- ---------------------- ----------------------
TAN TAI CHEW LIM KIM LARK
Director Director


Singapore: 16 March 1998

- --------------------------------------------------------------------------------

REPORT OF THE AUDITORS
TO THE MEMBERS OF INTELLICARD SYSTEMS PTE LTD

We have audited the accompanying balance sheet as at 31 December 1997 and the
profit and loss account and cash flow statement for the year then ended. These
financial statements are the responsibility of the Company's directors. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with Singapore Standards on Auditing, which
standards are substantially equivalent to the auditing standards generally
accepted in the United States. Those Standards require that we plan and perform
the audit to obtain reasonable assurance about whether the 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 the directors, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion:-

(a) the financial statements are properly drawn up in accordance with the
provisions of the Companies Act, Cap. 50 and Statements of Accounting
Standard and so as to give a true and fair view of:-

(i) the state of affairs of the company as at 31 December 1997 and of
the results and cash flows of the company for the year then ended on
that date, and

(ii) the other matters required by Section 201 of the Act to be dealt
with in the accounts;

(b) the accounting and other records and the registers required by the Act to
be kept by the company have been properly kept in accordance with the
provisions of the Act.


/S/ RICHARD CHAN & COMPANY
------------------------------
RICHARD CHAN & COMPANY
Certified Public Accountants

Singapore: 16 March 1998



7

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)


BALANCE SHEET AS AT 31 DECEMBER 1997
(Singapore $)




Note 1997 1996
---- ----------- -----------
$ $

SHARE CAPITAL 3 4,000,000 4,000,000

PROFIT AND LOSS ACCOUNT 71,487 (192,339)
----------- -----------

4,071,487 3,807,661
=========== ===========
Represented by:-

FIXED ASSETS 4 704,113 1,056,723

INVESTMENTS 5 1,230,584 971,384

EXPENDITURE CARRIED FORWARD
Preliminary and pre-operation expenses -- 31,458

----------- -----------
CURRENT ASSETS
Inventories 6 686,041 618,881
Trade debtors 3,072,226 1,047,503
Other debtors, deposits and prepayments 7 42,434 24,300
Fixed deposits with bank 8 636,500 800,000
Bank and cash balances 121,560 387,908
----------- -----------

4,558,761 2,878,592
----------- -----------
LESS: CURRENT LIABILITIES
Trade creditors 1,991,571 409,188
Other creditors and accruals 9 134,296 88,506
Hire purchase creditor 10 296,104 336,698
----------- -----------

2,421,971 834,392
----------- -----------

NET CURRENT ASSETS 2,136,790 2,044,200
----------- -----------

4,071,487 4,103,765
LESS: NON-CURRENT LIABILITY
Hire purchase creditor 10 -- 296,104
----------- -----------

4,071,487 3,807,661
=========== ===========




The annexed notes form an integral part of the accounts.



8

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 1997
(Singapore $)




Note 1997 1996
---- --------- ---------
$ $

TURNOVER 1 9,101,947 6,746,588
---------- ----------


Net profit for the year 263,826 36,314



After charging:-

Auditors' remuneration 6,000 5,000
Bad debts written off 97,172 --
Hire purchase interest 16,414 28,193
Interest on bank overdraft 2,839 --
Preliminary and pre-operation
expenses written off 31,458 31,457
Fees for professional services paid to a firm
in which a director is a member 6,555 --
Provision for inventory obsolescence 250,000 --
Provision for warranty 20,000 --
Depreciation of fixed assets 380,382 376,456

And after crediting:-

Interest income 21,426 29,721
Director's fees -- 18,800



Taxation 11 -- --
---------- ----------

Profit after taxation 263,826 36,314

Accumulated loss brought forward (192,339) (228,653)
---------- ----------

Accumulated profit/(loss) carried forward 71,487 (192,339)
========== ==========




The annexed notes form an integral part of the accounts.



9

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)


STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 1997
(Singapore $)




1997 1996
---------- ----------

$ $

CASH FLOWS FROM OPERATING ACTIVITIES:

Profit before taxation 263,826 36,314

Adjustments for:
Depreciation of fixed assets 380,382 376,456
Preliminary and pre-operation expenses written off 31,458 31,457
---------- ----------

OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 675,666 444,227

(Increase)/decrease in inventories (67,160) 471,408
(Increase)/decrease in trade debtors (2,024,723) 465,856
Increase in other debtors, deposits and prepayments (18,134) (6,922)
Increase/(decrease) in trade creditors 1,582,383 (397,715)
Increase/(decrease) in other creditors and accruals 45,790 (32,182)
---------- ----------

NET CASH PROVIDED BY OPERATING ACTIVITIES 193,822 944,672
---------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment (259,200) --
Purchase of fixed assets (27,772) (45,564)
---------- ----------

NET CASH USED IN INVESTING ACTIVITIES (286,972) (45,564)
---------- ----------

CASH FLOWS FROM FINANCING ACTIVITY:
Payment of hire purchase liability (336,698) (324,919)
---------- ----------

NET CASH USED IN FINANCING ACTIVITY (336,698) (324,919)
---------- ----------

Net (decrease)/increase in cash and cash equivalents (429,848) 574,189
Cash and cash equivalents at beginning of year 1,187,908 613,719
---------- ----------

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 13) 758,060 1,187,908
========== ==========




The annexed notes form an integral part of the accounts.



10

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)

NOTES TO THE ACCOUNTS - 31 DECEMBER 1997

These notes form an integral part of and
should be read in conjunction with the accompanying accounts.


1. PRINCIPAL ACTIVITIES AND TURNOVER

The principal activities of the company are that of development,
manufacture and repair of PCMCIA peripherals and related subassemblies.

Turnover represents the invoiced value of goods sold and services
rendered, net of goods and services tax.


2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Accounting

The accounts expressed in Singapore dollars are prepared in
accordance with the historical cost convention.

(b) Depreciation of Fixed Assets

Depreciation is calculated on the straight line method to
write off the cost of the assets over their estimated useful
lives as follows:

Manufacturing equipment - 5 years
Test and other equipment - 5 years
Leasehold improvements - 3 years
Computer - 5 years
Furniture and fittings - 5 years
Office equipment - 5 years

(c) Investments

Quoted and unquoted equity investments are stated at cost less
provision for any permanent diminution in value of the
investment.

(d) Preliminary and pre-operation expenses

Preliminary expenses incurred on the incorporation of the
company and pre-operation expenses for the period from July to
September 1994 are written off to the profit and loss account
over a three-year period.



11

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)

NOTES TO THE ACCOUNTS - 31 DECEMBER 1997 (CONTINUED)


(e) Inventories

Inventories are stated at the lower of cost and net realisable
value. Cost is determined principally on a first-in, first-out
basis. Provision is made, where necessary for obsolete and
slow-moving inventories.

Cost of finished goods and work-in-progress include direct
material, labour and an appropriate portion of production
overheads. Work-in-progress is stated at standard cost up to
stage of completion incurred to balance sheet date.

(f) Foreign Currencies

Assets and liabilities in foreign currencies are translated
into Singapore dollars at rates of exchange closely
approximating those ruling at balance sheet date. Transactions
in foreign currencies are converted at rates closely
approximating those ruling at the transaction dates. All
exchange differences are taken to the profit and loss account.

(g) Debtors

Bad debts are written off and specific provisions are made for
those debts considered to be doubtful. General provisions are
made on the balance of trade debtors to cover potential losses
which have not been specifically identified.


3. SHARE CAPITAL



1997 1996
--------- ---------

$ $

Authorised:- 5,000,000 5,000,000
========= =========
5,000,000 ordinary shares of $1.00 each

Issued and fully paid:-
4,000,000 ordinary shares of $1.00 each 4,000,000 4,000,000
========= =========




12

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)

NOTES TO THE ACCOUNTS - 31 DECEMBER 1997 (CONTINUED)


4. FIXED ASSETS


Accumulated Net Book Depreciation
Cost Depreciation Value Charge
--------- ------------ --------- ---------
$ $ $ $

1997
Manufacturing equipment 1,604,446 1,004,572 599,874 320,476
Test and other equipment 76,131 38,634 37,497 14,139
Leasehold improvements 83,518 79,644 3,874 25,158
Computer 81,472 37,820 43,652 14,862
Furniture and fittings 6,272 3,868 2,404 1,255
Office equipment 29,275 12,463 16,812 4,492
------------------------------------------------------------

1,881,114 1,177,001 704,113 380,382
------------------------------------------------------------

1996

Manufacturing equipment 1,601,696 684,096 917,601 318,567
Test and other equipment 70,509 24,495 46,014 11,835
Leasehold improvements 83,518 54,486 29,032 27,839
Computer 70,449 22,958 47,491 12,781
Furniture and fittings 6,272 2,613 3,659 1,254
Office equipment 20,898 7,971 12,926 4,180
------------------------------------------------------------

1,853,342 796,619 1,056,723 376,456
------------------------------------------------------------


Fixed assets include the following item which is acquired under hire
purchase arrangement (Note 10).



Accumulated Net Book Depreciation
Cost Depreciation Value Charge
--------- ------------ --------- ------------
$ $ $ $

1997

Manufacturing equipment 1,533,977 969,461 564,516 306,795
------------------------------------------------------------

1996

Manufacturing equipment 1,533,977 662,666 871,311 306,795
------------------------------------------------------------




13

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)

NOTES TO THE ACCOUNTS - 31 DECEMBER 1997 (CONTINUED)


5. INVESTMENTS


1997 1996
--------- ---------

$ $

Quoted equity investment, at cost 971,384 --
Unquoted investment, at cost 259,200 971,384
--------- ---------

1,230,584 971,384
========= =========

Market value of quoted equity investment 6,947,811 --
========= =========



6. INVENTORIES


1997 1996
--------- ---------
$ $

Direct materials and inventory 357,535 270,279
Work-in-progress 251,100 148,002
Finished goods 327,406 200,600
--------- ---------

936,041 618,881
Less: Provision for obsolescence 250,000 --
--------- ---------
686,041 618,881
========= =========

Movements in the provision for obsolescence are as follows:

Balance, 1 January -- --
Provision for the year 250,000 --
--------- ---------
Balance, 31 December 250,000 --
========= =========



7. OTHER DEBTORS, DEPOSITS AND PREPAYMENTS

These comprise mainly utility deposits, prepayments and accrued
interest on fixed deposits arising in the normal course of business.


8. FIXED DEPOSITS WITH BANK

Fixed deposits are held by the bank as security against bank guarantee
issued.



14

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)

NOTES TO THE ACCOUNTS - 31 DECEMBER 1997 (CONTINUED)


9. OTHER CREDITORS AND ACCRUALS

These comprise mainly accruals for utilities, staff salaries and bonus.


10. HIRE PURCHASE CREDITOR
1997 1996


------- -------
$ $

Payable within one year 300,803 353,112
Less: Interest suspense 4,699 16,414
------- -------
296,104 336,698

------- -------
Payable after one year -- 300,803
Less: Interest suspense -- 4,699
------- -------
-- 296,104
------- -------

296,104 632,802
======= =======


11. TAXATION

The company has been granted a 7-year Pioneer Certificate subject to
certain conditions. This is effective from the Production Day of 1 May
1995.

No provision for taxation has been set up in the accounts as the
company had non-pioneer tax losses for the current year.


12. BANK OVERDRAFT

The bank overdraft facility is secured against fixed deposits of the
company and personal guarantee of two directors of the company.


13. CASH AND CASH EQUIVALENTS

Cash and cash equivalents included in the statement of cash flows
comprise the following balance sheet amounts:



1997 1996
--------- ---------

$ $

Fixed deposits 636,500 800,000
Bank and cash balances 121,560 387,908
--------- ---------

758,060 1,187,908
========= =========




15

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)

NOTES TO THE ACCOUNTS - 31 DECEMBER 1997 (CONTINUED)



14. CONTINGENT LIABILITIES


1997 1996
------- -------

$ $
There is contingent liability not provided for in
the accounts for:-

Bank guarantees (secured) 484,786 787,461
======= =======


15. RELATED PARTY TRANSACTIONS


1997 1996
------- -------

$ $

Significant related party transactions were:

Purchases from a related party 34,559 388,316

Sales to a related party 56,881 366,414

Rental and reimbursements received 8,789 --
------- -------




16


INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)


CONDENSED BALANCE SHEET AS OF 31 MARCH 1998
(Unaudited, Singapore $)




As of March 31,
ASSETS 1998
----------

Current assets:
Cash and cash equivalents $ 626,000
Accounts receivable, net 2,168,000
Inventories 738,000
Other receivables and deposits 157,000
----------
Total current assets 3,689,000
Property and equipment, net, and other assets 614,000
Investments 1,230,000
==========
$5,533,000
==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,073,000
Accrued expenses 128,000
Current portion of lease obligation 210,000
----------
Total current liabilities 1,411,000

Stockholders' equity:
Capital stock 4,000,000
Retained earnings 122,000
----------
Total stockholders' equity 4,122,000
----------
$5,533,000
==========




See note to unaudited condensed financial statements.



17

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)


PROFIT AND LOSS ACCOUNT FOR THE QUARTERS ENDED 31 MARCH 1998 AND 1997
(Unaudited, Singapore $)





Quarter Ended March 31,
1998 1997
----------- -----------

Net sales $ 2,265,000 $ 1,102,000
Cost of sales 1,698,000 1,065,000
----------- -----------
Gross profit 567,000 37,000
----------- -----------

Operating Expenses:
Research and development 105,000 78,000
Sales and marketing 199,000 117,000
General and administrative 127,000 111,000
----------- -----------
Total operating expenses 431,000 306,000
----------- -----------

Income (loss) from operations 136,000 (269,000)

Interest and other income (expense), net (86,000) 7,000
----------- -----------

Income (loss) before income taxes 50,000 (262,000)

Provision for income taxes -- --
----------- -----------

Net income (loss) $ 50,000 $ (262,000)
=========== ===========




See note to unaudited condensed financial statements.



18

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)


CONDENSED STATEMENT OF CASH FLOWS FOR THE QUARTERS ENDED 31 MARCH 1998 AND 1997
(Unaudited, Singapore $)





Quarter ended March 31,
-------------------------------
1998 1997
----------- -----------

Cash flows from operating activities:
Net income (loss) $ 50,000 $ (262,000)
Adjustment for depreciation of fixed assets 92,000 95,000
----------- -----------
Operating profit (loss) before working capital changes 142,000 (167,000)
Increase in inventories (52,000) (180,000)
Decrease in accounts receivable, net 904,000 322,000
Increase in other receivables and deposits (114,000) (46,000)
Decrease in accounts payable (918,000) 2,000
Decrease in accrued expenses (6,000) (11,000)
----------- -----------
Net cash used in operating activities (44,000) (84,000)
----------- -----------

Cash flows from investing activities:
Purchase of fixed assets (2,000) --
----------- -----------
Net cash used in investing activities (2,000) --
----------- -----------

Cash flows from financing activities:
Repayment of lease obligation (86,000) (83,000)
----------- -----------
Net cash used in financing activities (86,000) (83,000)
----------- -----------

Net decrease in cash and cash equivalents (132,000) (167,000)
Cash and cash equivalents at beginning of period 758,000 1,188,000
----------- -----------

Cash and cash equivalents at end of period $ 626,000 $ 1,021,000
=========== ===========




See note to unaudited condensed financial statements.



19

INTELLICARD SYSTEMS PTE LTD
(Incorporated in Singapore)


NOTE TO UNAUDITED CONDENSED FINANCIAL STATEMENTS


The accompanying unaudited condensed financial statements have been
prepared in accordance with the provisions of the Companies Act, Cap. 50 and
Statements of Accounting Standard in Singapore for interim financial
information. Accordingly, they do not include all of the information and
footnotes required 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
three-month period ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.



20


SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

The following unaudited pro forma combined condensed financial
statements give effect to the acquisition by SCM Microsystems, Inc. ("SCM" or
the "Company") of all of the issued and outstanding capital stock of Intellicard
Systems Pte. Ltd. ("ICS") in a business combination accounted for by the
purchase method of accounting.

The unaudited pro forma combined condensed balance sheet gives effect
to the business combination as if it had occurred on March 31, 1998. The
unaudited pro forma combined condensed statements of operations give effect to
the business combination as if it had occurred at the beginning of the period
presented. 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. In the quarter ended June 30, 1998, the Company
recorded a charge of $700,000 representing the fair value of in process research
and development acquired from ICS. Such charge has not been included in the
unaudited pro forma combined condensed statements of operations.

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 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 quarter
ended March 31, 1998 included in the March 31, 1998 form 10-Q, and the financial
statements of ICS appearing elsewhere in this Form 8-K/A.

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET



The Company ICS Pro Forma Pro Forma
ASSETS Actual Actual Adjustments Combined
-------- -------- ----------- --------

Current assets:
Cash and cash equivalents $ 23,813 $ 569 $ 11,391(a)
(14,891)(c) $ 20,882
Short-term investments 34,715 -- 34,715
Accounts receivable, net 7,782 1,443 9,225
Inventories 3,441 473 (201)(b) 3,713
Prepaid expenses 777 -- 777
-------- -------- -------- --------
Total current assets 70,528 2,485 (3,701) 69,312
Property and equipment, net 1,639 382 2,021
Goodwill -- -- 4,704(c) 4,704
Other assets, net 14 11,391 (11,391)(a) 14
-------- -------- -------- --------
$ 72,181 $ 14,258 $(10,388) $ 76,051
======== ======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,431 $ 1,070 $ -- $ 3,501
Accrued expenses 1,387 -- -- 1,387
Income taxes payable 554 -- -- 554
-------- -------- -------- --------
Total current liabilities 4,372 1,070 -- 5,442
Commitments and contingencies
Stockholders' equity (deficit):
Common stock 12 2,483 (2,483)(c) 12
Additional paid-in capital 75,640 -- 3,500(c) 79,140
Deferred stock compensation (111) -- (111)
Retained earnings (deficit) (6,925) 10,705 (201)(b)
(11,204)(c) (7,625)
Cumulative translation adjustment (807) -- -- (807)
-------- -------- -------- --------
Total stockholders' equity (deficit) 67,809 13,188 (10,388) 70,609
-------- -------- -------- --------
$ 72,181 $ 14,258 $(10,388) $ 76,051
======== ======== ======== ========



See accompanying notes to unaudited pro forma combined condensed financial
information.



21

SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS



The Company ICS Pro Forma Pro Forma
YEAR ENDED DECEMBER 31, 1997: Actual Actual Adjustments Combined
-------- -------- ----------- --------

Net sales $ 27,769 $ 6,277 $ (3,326)(d) $ 30,721
Cost of sales 17,524 5,118 (3,326)(d) 19,316
-------- -------- ---------- --------
Gross profit 10,245 1,160 -- 11,405
-------- -------- ---------- --------
Operating Expenses:
Research and development 2,940 244 3,184
Sales and marketing 4,221 442 4,663
General and administrative 2,494 363 784(e) 3,641
Settlement of patent claim 515 -- 515
-------- -------- ---------- --------
Total operating expenses 10,170 1,050 784 12,004
-------- -------- ---------- --------
Income (loss) from operations 75 110 (784) (599)
Interest and other income (expense), net 866 62 (201)(f) 727
Foreign currency transaction gains 467 31 498
-------- -------- ---------- --------
Income (loss) before income taxes 1,408 203 (985) 626
Provision for income taxes 305 -- 305
-------- -------- ---------- --------
Net income (loss) 1,103 203 (985) 321
Preferred stock interest accretion (802) -- (802)
======== ======== ========== ========
Net income (loss) applicable to common stockholders $ 301 $ 203 $ (985) $ (481)
======== ======== ========== ========

Earnings per share:
Basic $ 0.08 $ (0.12)
======== ========
Diluted $ 0.06 $ (0.09)
======== ========
Shares used in per share computations:
Basic 3,819 61(g) 3,880
======== ========== ========
Diluted 5,015 61 5,076
======== ========== ========

THREE MONTHS ENDED MARCH 31, 1998:
Net sales $ 7,815 $ 1,416 $ (777)(d) $ 8,454
Cost of sales 4,916 1,061 (777)(d) 5,200
-------- -------- ---------- --------
Gross profit 2,899 355 -- 3,254
-------- -------- ---------- --------
Operating Expenses:
Research and development 766 66 832
Sales and marketing 1,044 125 1,169
General and administrative 778 80 195(e) 1,053
-------- -------- ---------- --------
Total operating expenses 2,588 271 195 3,054
-------- -------- ---------- --------
Income (loss) from operations 311 84 (195) 260
Interest and other income (expense), net 728 (53) (50)(f) 625
-------- -------- ---------- --------
Income (loss) before income taxes 1,039 31 (245) 825
Provision for income taxes 250 -- 250
-------- -------- ---------- --------
Net income (loss) $ 789 $ 31 $ (245) $ 575
======== ======== ========== ========

Earnings per share:
Basic $ 0.07 $ 0.05
======== ========
Diluted $ 0.07 $ 0.05
======== ========
Shares used in per share computations:
Basic 11,544 61(g) 11,605
======== ========== ========
Diluted 12,068 61 12,129
======== ========== ========



See accompanying notes to unaudited pro forma combined condensed financial
information.



22

SCM MICROSYSTEMS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION


(1) UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

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.
Approximately $11.4 million of the cash portion of the consideration was paid in
exchange for cash held by ICS stockholders at the closing of the transaction.

The pro forma combined condensed balance sheet as of March 31, 1998,
gives effect to the business combination as if it had occurred on March 31,
1998.

The following adjustments have been reflected in the unaudited pro
forma combined condensed balance sheet:

(a) This adjustment represents 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.

(b) This adjustment represents the pro forma elimination of intercompany
profit in inventory as of March 31, 1998 relating to product purchased
by the Company from ICS.

(c) Under purchase accounting, the total purchase price will be allocated
to the Company's assets and liabilities based on their relative fair
values. Allocations are subject to valuations as of the date of the
purchase transaction. The amount and components of the estimated
purchase price along with the preliminary allocation of the estimated
purchase price to assets purchased are as follows (in thousands):



Cash ............................................................. $14,891
Common stock ..................................................... 3,500
-------

Total purchase price ........................... $18,391
=======


Book value of net assets of ICS after adjustments (a) and (b) .... $12,987
In-process research and development .............................. 700
Goodwill ......................................................... 4,704
-------
Net assets acquired............................. $18,391
=======



The actual allocation of the purchase price will depend upon the
composition of ICS's net assets on the closing date and the Company's
evaluation of the fair value of such net assets as of such date.
Consequently, the ultimate allocation of purchase price could differ
from that presented above.


(2) UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS

The Company recorded a charge of $700,000 for the fair value of
acquired in process research and development related to the net assets acquired.
Such charge has not been included in the unaudited pro forma combined condensed
statements of operations.

The following adjustments have been reflected in the unaudited pro
forma combined condensed statements of operations:

(d) 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.



23

SCM MICROSYSTEMS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(CONTINUED)


(e) These adjustments represent, for each period presented, the
amortization of goodwill over an estimated life of six years.

(f) 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.

(g) 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.



24

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: August 12, 1998 By: /s/ JOHN G. NIEDERMAIER
-----------------------------------------------
John G. Niedermaier
Vice President, Finance-Chief Financial Officer
(Principal Financial and Accounting Officer)



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