8-K/A: Current report
Published on January 19, 1999
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 3, 1998
SCM MICROSYSTEMS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-22689 77-0444317
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(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
160 KNOWLES DRIVE
LOS GATOS, CALIFORNIA 95032
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(ADDRESS, INCLUDING ZIP CODE, OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(408) 370-4888
NOT APPLICABLE
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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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 November 18,
1998 ("the Form 8-K") as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits.
The following financial statements of the business acquired are filed as
part of this report, where indicated.
2
SHUTTLE TECHNOLOGY GROUP LTD
JUNE 30, 1998 CONSOLIDATED FINANCIAL STATEMENTS
INDEX
3
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
SHUTTLE TECHNOLOGY GROUP LIMITED
We have examined the accompanying audited consolidated balance sheets of Shuttle
Technology Group Limited (a United Kingdom corporation) as of 30 June 1997 and
1998, and the related consolidated profit and loss accounts, reconciliation of
movements in shareholders' funds and cash flows for each of the three periods in
the period ended 30 June 1998 set out on pages 5 to 23. These financial
statements are the responsibility of Shuttle Technology Group Limited's
management. Our responsibility is to express an opinion on these financial
statements based on audits performed.
The audits were conducted in accordance with generally accepted auditing
guidelines in the United Kingdom, which are substantially the same as auditing
standards generally accepted in the United States. Those standards require that
audits are planned and performed to obtain all reasonable assurance about
whether financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that the
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Shuttle Technology
Group Limited and subsidiaries as of 30 June 1997 and 1998, and the results of
their operations and their cash flows for each of the three periods in the
period ended 30 June 1998 in conformity with generally accepted accounting
principles in the United Kingdom.
DELOITTE & TOUCHE
Chartered Accountants
Bristol
England
18 January 1999
4
SHUTTLE TECHNOLOGY GROUP LIMITED
1. CONSOLIDATED PROFIT AND LOSS ACCOUNT
The following table summarises the consolidated profit and loss accounts of
Shuttle Technology Group Limited for the three periods ended 30 June 1998, 1997
and 30 April 1996.
There are no recognised gains and losses other than the profit for the financial
year. Accordingly, no statement of total recognised gains and losses has been
prepared.
5
SHUTTLE TECHNOLOGY GROUP LIMITED
2. COMBINED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS AND
STATEMENTS OF MOVEMENTS ON RESERVES
6
SHUTTLE TECHNOLOGY GROUP LIMITED
3. CONSOLIDATED BALANCE SHEET
The following table sets out the consolidated balance sheets of Shuttle
Technology Group Limited at 30 June 1998 and 1997.
7
SHUTTLE TECHNOLOGY GROUP LIMITED
4. CASH FLOW STATEMENTS
The following table sets out the consolidated cash flow statements of Shuttle
Technology Group Limited for the financial periods ended 30 June 1998, 1997 and
30 April 1996.
Further details are set out in note 15.
8
SHUTTLE TECHNOLOGY GROUP LIMITED
5. NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
The financial statements are prepared in accordance with applicable
accounting standards. The particular accounting policies adopted are
described below.
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost
convention.
INVESTMENTS
Investments held as fixed assets are stated at cost less provision for any
permanent diminution in value.
CONSOLIDATION
The consolidated accounts include the company and its subsidiary
companies. Intragroup sales and profits are eliminated on consolidation
and all sales and profit figures relate to external transactions only.
ACQUISITIONS
Where a new company or business has been accounted for using the
principles of acquisition accounting, fair values are attributed to the
group's share of separable net assets acquired. Where the cost of
acquisition exceeds the values attributable to such net assets, the
difference is recognised as goodwill. Goodwill is written off against
reserves in the year of acquisition.
TANGIBLE FIXED ASSETS
Depreciation is provided on cost in equal annual instalments over the
estimated lives of the assets. The rates of depreciation are as follows:
Motor vehicles 33.33% per annum
Fixtures and fittings 10% per annum
Computer and office equipment 33.33% per annum
STOCKS
Stocks are stated at the lower of cost and net realisable value. Cost
represents direct materials and labour and production overheads.
FOREIGN EXCHANGE
Transactions denominated in foreign currencies are translated into
sterling at the rates ruling at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the balance
sheet date are translated at the rates ruling at that date. These
translation differences are dealt with in the profit and loss account.
The financial statements of foreign subsidiaries are translated into
sterling at the closing rates of exchange and the difference arising from
the translation of the net investment in subsidiaries at the closing rate
and matched foreign currency borrowings are taken direct to reserves.
9
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES (CONTINUED)
LEASING AND HIRE PURCHASE COMMITMENTS
Assets held under finance leases and hire purchase contracts are
capitalised at their fair value on the inception of the leases and
depreciated over their estimated useful lives. The finance charges are
allocated over the period of the lease in proportion to the capital amount
outstanding.
Rental costs under operating leases are charged to profit and loss account
in equal annual amounts over the period of the leases.
DEFERRED TAXATION
Deferred taxation is provided at the anticipated tax rates on differences
arising from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included in
the financial statements to the extent that it is probable that a
liability or asset will crystallise in the future.
WARRANTY COSTS
Provision is made for the costs estimated to arise over the warranty
period of repairs to, or replacement of, goods sold under warranty up to
the year end.
RESEARCH AND DEVELOPMENT
Research and development expenditure is written off in the year in which
it is incurred.
PENSION COSTS
The company operates a defined contribution pension scheme. All
contributions are written off to the profit and loss account in the year
the contributions are made.
GOVERNMENT GRANTS
Income from grants is recognised in the profit and loss account to the
extent of the completion of the project concerned and is matched to the
related expenditure incurred.
2. ACQUISITIONS AND CONSOLIDATION
ACQUISITIONS
The issued share capital of Memory Technology Limited was acquired on 31
December 1997. This acquisition has been accounted for by the acquisition
method of accounting. The consideration was a share for share exchange for
8,493 ordinary shares of L.1 each and 77,223 'B' ordinary shares of L.1
each.
10
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
2. ACQUISITIONS AND CONSOLIDATION (CONTINUED)
ACQUISITIONS (CONTINUED)
The following table explains the adjustments made to the book value of the
majority category of assets and liabilities acquired to arrive at the fair
values in the consolidated financial statements at the date of
acquisition.
ASSETS ACQUIRED
The (loss)/profit after taxation of Memory Technology Limited is as
follows:
The acquired trade and business of Memory Technology Limited has been
merged with that of Shuttle Technology Limited and separate ledgers are no
longer maintained. As a result, it is not practicable to determine the
post acquisition results of this acquired operation.
3. PROFIT OF PARENT COMPANY
As permitted by Section 230 of the Companies Act 1985, the profit and loss
account for the parent company is not presented as part of these accounts.
The parent company's profit for the financial year amounted to L.3,255
(1997: L.nil, 1996: L.nil).
4. TURNOVER
Turnover represents the total amounts receivable for goods and services
invoiced in relation to the activities of the group, and is exclusive of
value added tax.
In the opinion of the directors, the disclosure of turnover attributable
to each geographical market of the group's business would be seriously
prejudicial to the group's interests, due to the highly competitive nature
of the business in which the company operates.
11
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
5. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
12
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
6. INTEREST PAYABLE AND SIMILAR CHARGES
7. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
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SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
9. TANGIBLE FIXED ASSETS
The net book value of assets under finance leases and hire purchase
contracts is L.7,606 (1997: L.13,821). Obligations under finance leases
and hire purchase contracts are secured by the related assets.
10. STOCKS
There is no material difference between the replacement cost of stocks and
their balance sheet value.
14
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
11. DEBTORS
The bank overdraft is secured by a fixed charge over certain of the above
book debts.
12. OTHER CREDITORS INCLUDING TAXATION AND SOCIAL SECURITY
13. PROVISIONS FOR LIABILITIES AND CHARGES
There are no unprovided amounts of deferred tax.
15
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
14. SHARE CAPITAL
8,493 ordinary shares of L.1 each and 77,223 `B' ordinary shares of L.1
each were issued during the year as consideration for the investment in
Memory Technology Limited.
2,906 ordinary shares of L.1 each were cancelled on 3 December 1997.
RIGHTS ATTACHED TO SHARES
The `B' ordinary shares carry no rights to vote at general meetings of the
company save until the time immediately preceding whichever shall first
occur of a decision taken by the company to approve an outright trade sale
of the entire business or a sale to an institutional investor of all the
`B' ordinary shares then in issue of the listing of the company's shares
on a recognised stock exchange or secondary market in the UK or abroad. In
other respects, such `B' ordinary shares rank pari passu with the existing
shares of the company.
15. CASH FLOW STATEMENTS
(A) RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM
OPERATING ACTIVITIES
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SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
15. CASH FLOW STATEMENTS (CONTINUED)
(B) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
(C) ANALYSIS OF NET DEBT
[CAPTION]
17
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
16. LEASING COMMITMENTS
Outstanding commitments during the next year under operating leases are as
follows:
On 7 September 1998, the company entered into an 18 year lease to rent
premises at an annual rental of L.115,000.
17. TRANSACTIONS WITH RELATED PARTIES
For the year ended 30 June 1998 Shuttle Technology Group Limited has taken
advantage of the exemption to disclose related party transactions within
the group.
In the fourteen months ended 30 June 1997 the company purchased goods of
L.5,810 from Memory Technology Limited, a related party by virtue of
certain common directors and shareholders. Included in creditors is an
amount of L.34,580 in respect of these recharges. In addition,
expenses of L.332,829 were incurred by Memory Technology Limited on behalf
of Shuttle Technology Limited, and the company sold goods of L.558,203 to
Memory Technology Limited. An amount of L.24,325 is included in debtors in
respect of these goods.
The loan of L.11,130 as at 30 June 1997 due from one of the directors of
Shuttle Research Private Limited was repaid during the year.
On 31 December 1997 Shuttle Technology Group Limited acquired the whole of
the share capital of Memory Technology Limited through a share for share
exchange whereby the shareholders of Memory Technology Limited received
8,493 ordinary shares of L.1 each and 77,223 'B' ordinary shares of L.1
each in Shuttle Technology Group Limited. Memory Technology Limited is a
related party by virtue of certain common directors and shareholders.
18. CONTINGENT LIABILITIES
During 1997/98, a US corporation called Microsolutions initiated legal
action for infringement of two of its patents against three of Shuttle's
US customers and it issued a threat against two other Shuttle customers
where so far no legal action has been taken. Shuttle is assisting its
customers with their defence against the charge of infringement since the
charges are based on our customers' use of Shuttle's parallel port
technology. Shuttle has issued a patent indemnity in favour of one of the
defendants and it has also issued an indemnity in favour of one of the
other two customers who are being threatened but who have not yet been
sued. Shuttle has obtained a legal opinion from its US patent attorneys
which support Shuttle's contention that Microsolutions patents are
invalid. The directors view therefore, is that no material liability will
arise in respect of this item.
18
SHUTTLE TECHNOLOGY GROUP LIMITED
NOTES TO THE ACCOUNTS
19. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
RECONCILIATION OF NET INCOME TO US GAAP FOR THE PERIODS ENDED 30 JUNE 1998, 1997
AND 30 APRIL 1996
(A) Represents the amortisation of acquisition goodwill in accordance with
US generally accepted accounting principles. Goodwill was not required
to be recognised under generally accepted accounting principles in the
United Kingdom. The goodwill relates to the acquisition of Memory
Technology Limited which was acquired in a share for share exchange with
the difference between the nominal value of shares issued and the fair
values of the net assets acquired being credited to a merger reserve.
(B) Represents the recognition of a deferred tax asset. This was not
recognised under generally accepted accounting principles in the United
Kingdom.
(C) Represents the cost of granting share options in accordance with US
generally accepted accounting principles. The cost is calculated as the
difference between the option price and the market value at the time the
option was granted. There is no such requirement in the United Kingdom.
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SHUTTLE TECHNOLOGY GROUP LIMITED
RECONCILIATION OF BALANCE SHEET ITEMS TO US GAAP
30 JUNE 1998
20
SHUTTLE TECHNOLOGY GROUP LIMITED
RECONCILIATION OF BALANCE SHEET ITEMS TO US GAAP (CONTINUED)
30 JUNE 1998
(A) Represents the adjustment to capitalise acquisition goodwill in
accordance with US generally accepted accounting principles. Goodwill
was not required to be recognised under generally accepted accounting
principles in the United Kingdom. The goodwill relates to the
acquisition of Memory Technology Limited which was acquired in a share
for share exchange with the difference between the nominal value of
shares issued and the fair values of the net assets acquired being
credited to a merger reserve.
(B) Represents the recognition of a deferred tax asset. This was not
recognised under generally accepted accounting principles in the United
Kingdom.
(C) Represents the setting up of an amount within shareholders' funds for
the difference between the share option price and the market value at
the time share options were granted in accordance with US generally
accepted accounting principles.
21
SHUTTLE TECHNOLOGY GROUP LIMITED
RECONCILIATION OF BALANCE SHEET ITEMS TO US GAAP
30 JUNE 1997
(A) Represents the setting up of an amount within shareholders' funds for
the difference between the share option price and the market value at
the time share options were granted in accordance with US generally
accepted auditing standards.
22
SHUTTLE TECHNOLOGY GROUP LIMITED
CASH FLOW STATEMENTS: BASIS OF PREPARATION
The consolidated cash flow statements are prepared in accordance with UK
Financial Reporting Standard No. 1 (FRS 1), the objective and principles of
which are similar to those set out in SFAS No. 95, "Statement of Cash Flows".
The principal difference between the standards relates to classification. Under
FRS 1, Shuttle Technology Group Limited presents its cash flows for (a)
operating activities; (b) returns on investments and servicing of finance; (c)
tax paid; (d) investing activities; and (e) financing. SFAS No. 95 requires only
three categories of cash flow activity being (a) operating; (b) investing; and
(c) financing.
Cash flows from returns on investments and servicing of finance and taxation
under FRS 1 would, with the exception of dividends paid, be included as
operating activities under SFAS No. 95; such distributions would be included as
a financing activity under SFAS No. 95. Under FRS 1, cash and cash equivalents
comprise cash, investments and short-term deposits which were within 3 months of
maturity when acquired and short-term borrowings repayable within 3 months from
the date of their advance. Under SFAS No. 95, short-term borrowings repayable
within 3 months of their advance would not be included within cash and cash
equivalents but movements on those borrowings would be included in financing
activities.
23
SHUTTLE TECHNOLOGY GROUP LIMITED
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED, IN THOUSANDS)
See accompanying notes to condensed consolidated financial statements.
24
SHUTTLE TECHNOLOGY GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS)
See accompanying notes to condensed consolidated financial statements.
25
SHUTTLE TECHNOLOGY GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED, IN THOUSANDS)
See accompanying notes to condensed consolidated financial statements.
26
SHUTTLE TECHNOLOGY GROUP LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with U.S. generally accepted accounting
principles for interim financial information and with Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered for a fair
presentation have been included. Operating results for the nine-month period
ended September 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998.
2. CURRENCY TRANSLATION
The accompanying financial statements are denominated in U.S. dollars. The
functional currency of Shuttle Technology Group Limited is the sterling. The
accompanying condensed consolidated balance sheet has been translated to
U.S. dollars based on the exchange rate at the balance sheet data and the
accompanying condensed consolidated statements of operations and cash flows
have been translated based on the average exchange rate for the respective
periods.
3. SUBSEQUENT EVENT
On November 4, 1998, Shuttle and SCM Microsystems, Inc., a Delaware
corporation ("SCM") closed a business combination in which SCM issued
approximately 828,000 shares of its common stock to the shareholders of
Shuttle in exchange for all of the outstanding share capital of Shuttle. The
transaction is valued at approximately $32.4 million and will be accounted
for as a pooling of interests.
27
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial
statements have been prepared to give effect to the acquisition by SCM
Microsystems, Inc. ("SCM" or the "Company") of Shuttle Technology Group Ltd.
("Shuttle"), in a business combination accounted for by the pooling of interests
method of accounting.
The unaudited pro forma combined condensed balance sheet assumes that
the acquisition occurred on September 30, 1998, and combines SCM's September 30,
1998 consolidated balance sheet with the consolidated balance sheet of Shuttle
as of September 30, 1998. The unaudited pro forma combined condensed statements
of operations combine SCM's consolidated results of operations for the
nine-month periods ended September 30, 1998 and 1997 and for each of the years
in the three-year period ended December 31, 1997 with Shuttle's results of
operations for the same periods, giving effect to the acquisition as if it had
occurred on January 1, 1995. The unaudited pro forma combined condensed
statements of operations for the year ended December 31, 1997 and the nine-month
period ended September 30, 1998 also gives effect to the June 3, 1998
acquisition of Intellicard Systems Pte. Ltd. ("ICS") as if such acquisition
occurred on January 1, 1997 (for further information, see Form 8-KA filed on
August 12, 1998). Certain reclassifications have been made to the historical
data to make classifications for similar items consistent between the companies
on a pro forma combined basis. The pro forma adjustments are based upon
available information and certain assumptions that management believes are
reasonable under the circumstances. In the opinion of management, all
adjustments have been made that are necessary to present fairly the pro forma
data. Final amounts could differ from those set forth below.
SCM and Shuttle estimate that they will incur direct transaction costs
of approximately $1,300,000 associated with the acquisition which will be
charged to operations during the quarter ended December 31, 1998.
The following unaudited pro forma combined condensed financial
statements are not necessarily indicative of the future results of operations of
the Company or the results of operations which would have resulted had the
Company, Shuttle and ICS been combined during the periods presented. In
addition, the pro forma results are not intended to be a projection of future
results. The unaudited pro forma combined condensed financial statements should
be read in conjunction with the audited consolidated financial statements of SCM
for the year ended December 31, 1997 included in the December 31, 1997 annual
report on Form 10-K, and the unaudited consolidated financial statements for the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 included in
the respective form 10-Q, and the consolidated financial statements of Shuttle
appearing elsewhere in this Form 8-K/A.
28
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS)
See accompanying notes to unaudited pro forma combined
condensed financial information.
29
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
See accompanying notes to unaudited pro forma combined
condensed financial information.
30
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
See accompanying notes to unaudited pro forma combined
condensed financial information.
31
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
See accompanying notes to unaudited pro forma combined
condensed financial information.
32
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
See accompanying notes to unaudited pro forma combined
condensed financial information.
33
SCM MICROSYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
See accompanying notes to unaudited pro forma combined
condensed financial information.
34
SCM MICROSYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
On November 3, 1998, the Company acquired all of the issued and
outstanding capital stock of Shuttle Technology Group, Ltd., a private company
incorporated under the laws of England and Wales ("Shuttle"), from Shuttle's
shareholders in exchange for approximately 828,000 shares of the Company's
Common Stock which had a value of approximately $32,400,000. This business
combination will be accounted for as a pooling of interests.
On June 3, 1998, the Company acquired all of the issued and outstanding
capital stock (4,000,000 shares) of Intellicard Systems Pte. Ltd., a Singapore
Corporation (ICS), from ICS' stockholders in exchange for aggregate
consideration of $18,390,999, of which $14,890,999 was paid in cash and
$3,500,000 was paid upon the issuance of 61,185 shares of SCM common stock (the
"ICS Acquisition"). Approximately $11,400,000 of the cash portion of the
consideration was paid in exchange for cash held by ICS stockholders at the
closing of the transaction.
The following adjustments have been reflected in the unaudited pro forma
combined condensed financial statements:
(a) This adjustment represents the retirement of Shuttle's capital stock and
reclassification of Shuttle's additional paid-in capital.
(b) This adjustment represents the issuance of shares and options of the
Company's Common Stock to the former shareholders and optionholders of
Shuttle as the consideration paid.
(c) These adjustments represent the pro forma elimination of intercompany
revenue and costs relating to the sale of products by ICS to the Company
during the periods presented.
(d) These adjustments represent, for each period presented, the amortization
of goodwill over an estimated life of six years.
(e) These adjustments represent, for each period presented, the estimated
reduction of interest income that would have resulted had the cash
portion of the purchase price been paid at the beginning of each period.
(f) This adjustment represents the issuance of shares of the Company's
Common Stock to the former shareholders of ICS as part of the
consideration paid.
(g) This adjustment represents elimination of the pro forma effect of the
open market sale of 172,856 shares of the Company's Common Stock for an
average price of $65.90 per share held by ICS prior to consummation of
ICS' acquisition by the Company.
35
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SCM MICROSYSTEMS, INC.
A Delaware Corporation
Dated: January 15, 1999 By: /s/ JOHN G. NIEDERMAIER
----------------------------
John G. Niedermaier
Vice President, Finance-Chief Financial Officer
(Principal Financial and Accounting Officer)
36