-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QL/7uSc0jsCgE/3Sn/rZvfhRqN8EyHF6+P+gT60XO+NrJ0W1qRUIzM6nTEN6AE9+ yNkJ9DM9Uj37/gmJyTKfcg== 0000950131-97-004229.txt : 19970718 0000950131-97-004229.hdr.sgml : 19970718 ACCESSION NUMBER: 0000950131-97-004229 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970630 DATE AS OF CHANGE: 19970717 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: APERTUS TECHNOLOGIES INC CENTRAL INDEX KEY: 0000351139 STANDARD INDUSTRIAL CLASSIFICATION: 3576 IRS NUMBER: 411349953 STATE OF INCORPORATION: MN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12378 FILM NUMBER: 97633547 BUSINESS ADDRESS: STREET 1: 7275 FLYING CLOUD DR CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6128280300 MAIL ADDRESS: STREET 1: 7275 FLYING CLOUD DRIVE CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 FORMER COMPANY: FORMER CONFORMED NAME: LEE DATA CORP DATE OF NAME CHANGE: 19900815 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 30, 1997, or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the period from ______________ to ______________. Commission file number: 0-12378 ------- APERTUS TECHNOLOGIES INCORPORATED --------------------------------- (Exact name of registrant as specified in its charter) Minnesota 41-1349953 ------------- -------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7275 Flying Cloud Drive Eden Prairie, Minnesota 55344 - - --------------------------- ----------- (Address of principal executive (ZIP Code) offices) Registrant's telephone number, including area code: (612) 828-0300 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.05 per share Common Stock purchase rights Indicate by checkmark 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 _____ The aggregate market value of voting stock held by non-affiliates of the registrant as of June 9, 1997 was approximately $26,547,000 (based on the last sale price of such stock as reported by The NASDAQ Stock Market National Market System). As of June 9, 1997, 14,158,623 shares of the registrant's Common Stock, par value $.05 per share, were issued and outstanding. Documents Incorporated by Reference: Part II of this Form 10-K incorporates by reference information from the Annual Report to Shareholders for the fiscal year ended March 30, 1997 (the "Annual Report to Shareholders"). Part III of this Form 10-K incorporates by reference information from the Proxy Statement dated June 18, 1997 for the 1997 Annual Meeting of Shareholders (the "Proxy Statement"). Indicate by checkmark 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. [ ] -1- Part I Item 1. Business Apertus Technologies Incorporated develops, markets and sells software tools and products that enable customers to integrate diverse networks, data, and applications. The Company provides data integration software tools for managing the content of data, server-based software tools that integrate historical applications with the World Wide Web, and other client/server systems, and gateway products that facilitate interoperability between Internet/intranets and traditional, large-scale mainframe systems. During the fourth quarter of 1997 the Company announced a series of actions designed to increase its business focus and accelerate its return to profitability. On January 10, 1997, the Company sold its MQView product line to Candle Corporation, a California corporation ("Candle"). As a result of the sale, Candle paid $7.4 million in cash for assets, including technology, intellectual property, hardware, software and goodwill, related to the Company's MQView product, a standards-based system management software product for centralized installation, configuration and monitoring of IBM's MQSeries messaging software in a distributed computing environment. The Company, at the same time, announced its intention to focus its business going forward around a new generation of products (Enterprise/Connect, Enterprise/Access, and Enterprise/Integrator(TM)) directed at data and application integration called the Enterprise Series. Additionally, in March, 1997, the Company announced its intention to reduce its expense base consistent with its near term revenue outlook, and write off certain assets associated with mature product lines. Charges associated with these business changes were reflected in its fiscal 1997 financial statements. The Company has two product groups. The Company's Internet products (Enterprise/Connect and Enterprise/Access) link Internet/intranets with IBM mainframe computing systems. The Company's Data Integration Products (Enterprise/Integrator) integrate and cleanse data from diverse sources for new business applications, such as data warehousing and systems migration. The Company, a Minnesota corporation, was incorporated in March 1979. As used herein, the "Company" and "Apertus" refer to Apertus Technologies Incorporated together with its wholly owned subsidiaries. Market Background The computer industry continues to undergo profound change driven by radical innovation in networking and exploding distributed computing power. The Internet/intranet phenomena is the latest wave of change and is creating unprecedented new opportunities to distribute information over vast computer networks. Common to this change is the continuing need by large organizations to integrate existing data and applications with each new wave of technology. Today more than ever organizations are working to integrate vast amounts of data and a huge historical application base with new technologies like the World Wide Web and data warehousing. Apertus addresses this market opportunity with a family of server based software products for integrating and bridging these evolving environments. Target Market Apertus' product lines are horizontal in nature. As a result, its products are marketed to a broad spectrum of industries, including the telecommunications, retailing, manufacturing, finance and banking and healthcare industries. Apertus' target customer base consists of the Global 2000 organizations in the commercial marketplace, government agencies, original equipment manufacturers ("OEMs"), value added resellers ("VARs") and systems integrators. The Company's products are sold in the United States and internationally. -2- Historically, the Company has been successful in marketing its products to the Regional Bell Operating Companies, which require significant communication capabilities for sharing data across large, complex databases contained in multiple mainframes. In the last several years, Apertus has broadened its target market to include commercial customers outside the telecommunications industry. In part because of the Company's acquisition of Systems Strategies, Inc. ("SSI") in 1993, the Company has been able to broaden its market to include a large number of Fortune 1000 corporations. Currently, the Company has agreements with a number of prominent OEMs that market the Company's products internationally. Products Internet Products With the appearance of the Internet, there is fast-growing demand in large corporations, driven internally and from business partners and customers, for more useful information available at any time. Much of this mission-critical information is located in corporate data centers which are dominated by IBM proprietary computing environments. The challenge to these corporations is to find a way to integrate the IBM legacy environments with open systems environments, like the Internet. Apertus addressed this need for integration with its Enterprise/Connect and Enterprise/Access product lines, sold directly to end user organizations, system integrators and VARS. Enterprise/Connect. The Enterprise/Connect product line, provides communication links between open system network environments and IBM mainframe and midrange host computers. Enterprise/Connect is a high-performance, channel- attached server system that assists corporations in solving a variety of problems relating to the integration of IBM large-scale systems technology with open systems, multi-protocol network computing environments. Enterprise/Connect is available as a turn-key solution or on various UNIX operation systems. The product satisfies a wide range of performance and capacity levels for end-users to customize Enterprise/Connect to meet their unique networking requirements. Enterprise/Connect provides a variety of services: TN Server allows users of TCP/IP networks to transparently access IBM SNA hosts, Host Print Server allows IBM mainframe print jobs to be sent to TCP/IP LAN-attached printers, File Transfer Server allows files to be moved between TCP/IP LAN systems and IBM mainframe applications, Availability Server provides users with a "virtual" gateway complex across multiple Enterprise/Connect systems. During fiscal 1997, the Company introduced Enterprise/Connect, the integration of two earlier products, the DataStar, an off-load TCP/IP gateway, and EXPRESS, a suite of communications software products that link computers using the UNIX operating system with various IBM platforms. This integration allowed for the enhancement of the product set evidenced by a graphical user administration, Java-based utilities, and increased performance and capacity. Enterprise/Connect: QX. QX is a comprehensive Java-based emulator introduced in Fiscal 1997 that provides terminal and printer emulation for PC- to-IBM mainframe and AS/400 connectivity. Enterprise/Connect: QX provides full IBM 3270 and 5250 terminal emulation downloadable from a Web server to a Web browser, helping large corporations reduce software distribution and administration costs. Enterprise/Access. Enterprise/Access is a software development tool for rapidly developing and deploying transparent interfaces for existing applications in a variety of environments without requiring any changes to the applications, data or environment. Based on open systems and object-oriented technologies, Enterprise/Access provides a solution for integrating a corporation's front-end applications and networks with their back-end existing corporate applications and data. -3- Enterprise/Access provides a variety of services: Enterprise/Access allows secure, real-time Internet access from any Web browser to existing systems, Enterprise/Access with MQ support allows access to systems that currently are not IBM MQ Series-enabled for integration into messaging networks, Enterprise/Access client/server support allows access from traditional client/server environments, using standard development tools such as Microsoft VisualBasic, Oracle Forms and Sybase. Vital Signs VisionNet. Vital Signs VisionNet is an advanced performance management system for large enterprise networks. VisionNet provides a single view of a corporation's entire network's performance, avoiding piecemeal analysis of data, redundant work, and unnecessary costs. It retains both current and historical performance information in one central data repository for capacity planning and proactive problem solving. Data Integration Products Increasingly large organizations are merging data from multiple disparate systems to create a new integrated set of data used to populate data warehouses and perform systems conversions. The company's Enterprise/Integrator product line provides a comprehensive solution for the transformation, cleansing and integration of data from multiple disparate systems. The product line has been adopted by several large organizations worldwide as a key enabling technology for building data warehouses to support their internal operations and external marketing. Enterprise/Integrator. Enterprise/Integrator is a software development tool that promotes the rapid development, extension and maintenance of software programs that integrate data from multiple disparate sources. Enterprise/ Integrator provides a graphical user interface that enables the user to specify data transformation, validation, cleansing and integration requirements and generates programs to perform these functions. Marketing and Customers The Company is organized around two business units, the Internet Solutions Division and the Data Integration Division. This organization reflects the need for dedicated resources to focus on the distinct and fast paced market needs associated with its two major product lines. Both divisions market and sell their products through direct sales forces to end users as well as channel marketing partners. During Fiscal 1997 the company increased its efforts in working with systems integrators, software tool vendors and hardware platform providers in order to leverage their existing distribution channels with complementary products from Apertus. During the last quarter of Fiscal 1997, the Company consolidated its Holland and German operations into its London operation to achieve lower costs and better marketing execution. The Company believes with its increased emphasis on marketing partners it can provide better sales and service support from a central location in the European community. The Company continues to rely on selective distributors to help build its Pacific Rim markets. Backlog The Company attempts to ship orders to end-user customers within 30 days. Because of this short delivery cycle, the Company does not believe backlog is a meaningful indicator of future revenues. Customer Service The Company works with customers on a direct service basis out of Minneapolis, New York, and London to provide prompt and reliable support for products installed at end-user facilities. Company employees provide software product maintenance worldwide. Hardware maintenance is available as either self- maintenance programs (where the customers' personnel provide first-line repair) or direct service programs (where the Company or third-party vendors provide first-line repair). In either case, more -4- advanced technical support is provided by the Company's field specialists and technical support groups located in Minneapolis, New York, and London. Product Development Because of rapidly changing technology in the communications software market, the Company is committed to ongoing research and development. The Company spent approximately $5.4 million (15% of revenues), $9.5 million (19.3% of revenues) and $6.0 million (10.9% of revenues) during fiscal years 1997, 1996 and 1995, respectively, on research and development, all of which was sponsored by the Company. Due to the expanding range of products and features available in the communications software marketplace, management recognizes the increasing significance of the capability to interface the Company's products with other available or installed products. During Fiscal 1997, the Company introduced Enterprise/Connect and Enterprise/Connect: QX as well as adding major enhancements to the Enterprise/ Access product and its earlier generation products, DataStar, EXPRESS and VisionNet. Software research and development for Enterprise/Connect, Enterprise/Connect: QX and Enterprise/Access included moving to technologies such as Java and other Web-based development tools. Also during Fiscal 1997, the Company made significant improvements with respect to performance, ease of use and features for Enterprise/Integrator and repositioned the product into the data warehousing market. The Company believes that copyright protection is important to its business. Accordingly, the Company copyrights software source code modules. The Company also relies on trade secrets, proprietary know-how and continuing product innovation to maintain its competitive position. Competition The Company's product lines each have their own distinct significant competitors: Enterprise/Connect: The DataStar products primarily compete with mainframe- dependent products manufactured by IBM and Cisco, and off-load products manufactured by OpenConnect, Novell, Microsoft and CNT. Enterprise/Connect: QX: QX primarily competes with emulation products manufactured by Open Connect and IBM, and desktop emulation products manufactured by WRQ, Attachmate, NetManage and Wall Data. Enterprise/Access: Enterprise/Access competes with less scaleable, less manageable products available on operating systems other than UNIX. These include Open Connect, Attachmate and Simware. When the existing data can be accessed directly via an available interface, Enterprise/Access competes with a large number of vendors and public-domain software. Enterprise/Integrator: Enterprise/Integrator competes with vendors who provide varying degrees of data extraction, transformation and cleansing. These include a small number of established tool vendors with a traditional focus on data extraction for large-scale data warehousing (e.g. Prism and Evolutionary Technologies), as well as recent entrants more focused on development of departmental data marts (e.g. Constellar, Informatica, VMark). Service and Maintenance The Company offers service and maintenance programs for all its products and generally customers choose to take advantage of those programs to provide coverage for software support, upgrades to new releases of software, and support for hardware. The Company's products support industry standard network management standards (SNMP, NetView) and have extensive remote -5- diagnostic capabilities. Manufacturing and Supply For its data and application integration software products, the Company has a central production facility (at its headquarters in Minneapolis) that adheres to uniform software duplication policies and procedures. For the DataStar and Enterprise/Connect products, the Company performs final assembly and final test, with the majority of components (including the printed circuit boards) purchased from suppliers. Emphasis is placed on ensuring a quality product through such mean as Statistical Process Control, Cellular Management, Just In Time concepts and a suppliers' certification program. A computerized system is used to manage purchasing, production scheduling, order entry, and inventory management functions. Most of the components used in the Company's products are available from a number of suppliers. For older generation products, a number of parts, including certain integrated circuits and printed circuit assemblies, are generally available only from single sources of supply. In some cases, if the Company were to be deprived of those single-source items, the Company would be required to obtain an alternative supplier, manufacture the items itself or redesign certain products, any of which could cause delays in product shipments. The Company, however, has never experienced significant production delays because of the failure of a supplier to provide component parts and assemblies. Employees As of June 1, 1997, the Company employed 190 persons, including 48 in product development, 22 in manufacturing, 73 in marketing, 25 in customer service and 22 in finance and administration. None of the Company's employees is covered by a collective bargaining agreement, and the Company believes that it maintains good relations with its employees. Executive Officers of the Registrant The following sets forth certain information regarding the executive officers of the Company:
Name Age Position - - --------------------- --- -------- Robert D. Gordon..... 48 Chairman of the Board, Chief Executive Officer and President Julie Cummins Brady.. 38 Corporate Vice President, General Counsel and Corporate Secretary Martin G. Hahn....... 39 Corporate Vice President, Internet Solutions Division Sue A. Hogue......... 41 Corporate Vice President, Chief Financial Officer and Chief Administrative Officer
Robert D. Gordon has been Chairman of the Board and Chief Executive Officer of the Company since April 1990 and president of the Company since December 1988. Mr. Gordon was first employed by the Company as Senior Vice President in July 1987 and subsequently served as Chief Financial Officer from August 1987 to May 1988, Secretary from January 1988 to September 1988, and Group Vice President, Sales and Marketing from April 1988 to December 1988. From April 1984 to July 1987, Mr. Gordon was Executive Vice President of First Bank System, Inc. Mr. Gordon has been a director of the Company since August 1987. Julie Cummins Brady has held the position of Corporate Vice President, General Counsel and Corporate Secretary since April 1990. Prior to joining the Company, Ms. Brady held legal positions with various divisions of Control Data Corporation, most recently as Corporate Counsel for Imprimus Technology Incorporated. -6- Martin G. Hahn has served as the Company's Corporate Vice President, Internet Solutions Division, since 1996. Prior to his current position, Mr. Hahn held the positions of General Manager, Network Integration Group from January 1994 to 1996 and Vice President of Marketing for the Internetworking Solutions Group from 1991 to 1993. Mr. Hahn has been employed by the Company since July 1987. Sue A. Hogue has held the position of Corporate Vice President and Chief Financial Officer of the Company since August 1993, and Chief Administrative Officer since March 1997. Prior to her current position, Ms. Hogue served as Corporate Controller of the Company for three years. Ms. Hogue has been employed by the Company since August 1989. Cautionary Statement For Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may cause the Company's actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, the following: decreased demand for the Company's products; heightened competition; market acceptance risk; risk of lengthening sales cycles with key customers; risk of technological obsolescence of the Company's products; inability to manage the Company's cost structure; risks associated with sales of products outside the United States; increased expenses; failure to obtain new customers or retain existing customers; inability to carry out marketing and sales plans; loss or retirement of key executives; risks associated with the company's dependence on proprietary technology, including those related to adequacy of copyright, trademark and trade secret protection; risks associated with single sources of supply for certain components used in the Company's products; and changes in interest rates. The forward-looking statements herein are qualified in their entirety by the cautions and risk factors set forth under "Cautionary Statement" filed as Exhibit 99.1 to this Annual Report on Form 10-K. Item 2. Properties In July 1990, the Company moved its principal office and manufacturing facility to 60,000 square feet of leased space in a building located in Eden Prairie, Minnesota. In February 1996, Apertus signed a Second Amendment to the Lease for the Eden Prairie office which extends the terms of the original lease an additional six years commencing on August 1, 1996 and requires total lease payments of approximately $3.7 million over the term of the lease. Apertus assumed the remaining space in the Eden Prairie facility, expanding from 60,000 square feet to 76,492 square feet. The Company also maintains its offices in New York, New York. On November 1, 1995, Apertus entered into an eight year lease from September 1995 to January 2003 for 21,095 square feet of office space on the sixth floor of Two Penn Plaza. Total required base rental on the Two Penn Plaza location is approximately $3.3 million for the term of the lease. Through the acquisition of SSI in 1993, the Company leases 11,729 square feet of space at One Penn Plaza in New York, whose lease term expires October 2001. This space has been sublet and the resulting annual lease payments are approximately $43,000, net of sublease rental receipts. On June 12, 1996, Apertus received the final balloon payment from the purchaser of its previous 262,000 square foot headquarters facility in Eden Prairie and retired the debt to The Prudential Insurance Company of America. Item 3. Legal Proceedings The Company has no pending legal proceedings which the Company believes are material. Item 4. Submissions of Matters to a Vote of Security Holders None. -7- Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The information contained under the heading "Dividend Policy and Price Range of Common Stock" on page 20 of the portions of the Annual Report to Shareholders is incorporated herein by reference. Item 6. Selected Financial Data The information contained under the heading "Selected Historical Financial Data" on page 19 of the portions of the Annual Report to Shareholders is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information contained under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 3 and 4 of the portions of the Annual Report to Shareholders is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The independent auditors' report, consolidated financial statements and notes to consolidated financial statements on pages 5 through 17 of the portions of the Annual Report to Shareholders is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Part III Item 10. Directors and Executive Officers of the Registrant The information contained under the heading "Election of Directors" on pages 2 and 3 of the Proxy Statement is incorporated herein by reference. The information contained under the heading "Executive Officers of the Registrant" in Part I hereof is also incorporated herein by reference. Item 11. Executive Compensation The information contained under the heading "Executive Compensation" on pages 4 through 11 of the Proxy Statement is incorporated herein by reference, except that the information set forth under the captions "Report of Compensation Committee on Annual Compensation" and the "Comparative Stock Performance" graph are not incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information contained under the heading "Security Ownership of Certain Beneficial Owners and Management" on page 12 of the Proxy Statement is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions None. -8- Part IV Item 14. Exhibits, Financial Statements, Financial Statement Schedules, and Reports on Form 8-K (a) Exhibits, Financial Statements, Financial Statement Schedules
1. Financial Statements Page Reference in Exhibit 13 to this Form 10-K Annual Report ------------------ Consolidated Statements of Operations for the Fiscal Years Ended March 30, 1997, March 31, 1996 and April 2, 1995............. 5 Consolidated Balance Sheets as at March 30, 1997 and March 31, 1996.. 6-7 Consolidated Statements of Cash Flows for the Fiscal Years Ended March 30, 1997, March 31, 1996 and April 2, 1995............. 8 Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended March 30, 1997, March 31, 1996 and April 2, 1995....... 9 Notes to Consolidated Financial Statements........................... 10 - 16 Report of Independent Auditors....................................... 17
The financial statements listed above are included in Exhibit 13 and are hereby incorporated by reference.
2. Financial Statement Schedules Page Number in This Form 10-K Annual Report -------------- Independent Auditor's Report on Supplemental Financial Schedule................................... Exhibit 23.1 Schedule II Valuation and Qualifying Accounts and Reserve for the Years Ended March 30, 1997, March 31, 1996 and April 2, 1995.. 13
All other schedules are omitted since the required information is not represented or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto. -9- 3. Exhibits -------- Exhibit Number Description - - ------ ----------- 2.1 Letter Agreement between the Company and Candle Corporation, dated as of December 27, 1996 (1) 2.2 Amendment No. 1 to Letter Agreement between the Company and Candle Corporation, dated as of January 10, 1997 (1) 3.1 Restated Articles of Incorporation, as amended (2) 3.2 Bylaws, as amended (2) 4 Shareholders Rights Plan (3) 10.1 *Amended 1990 Long Term Incentive Plan (4) 10.2(a) Office Warehouse Lease, dated May 10, 1990, between the Company and Real Estate Income Partners III, a Limited Partnership (5) 10.2(b) Second Amendment to Lease, dated February 18, 1996, between the Company and Real Estate Income Partners III, Limited Partnership (6) 10.3 Promissory Note, dated June 12, 1986, from the Company to The Prudential Insurance Company of America ("Prudential") (3) 10.4(a) *1996 Management Bonus Plan description (7) 10.4(b) *1997 Management Bonus Plan description (6) 10.4(c) *1998 Management Bonus Plan description 10.5(a) *Stock Acquisition Loan Assistance Program (2) 10.5(b) *1993 Stock Acquisition Loan Assistance Program (4) 10.6 Agreement of Lease, dated November 1, 1995, between the Company and Two Penn Plaza Associates (6) 10.7 *1995 Employee Stock Purchase Plan (6) 10.8 *Form of Deferred Compensation Agreement (6) 10.9 *Transition Agreement and Release, dated March 3, 1997, between the Company and Lizabeth Converse Wilson 13 Portions of Annual Report to Shareholders for the fiscal year ended March 30, 1997 21 Subsidiaries of the Registrant 23.1 Consent of Ernst & Young LLP 24 Powers of Attorney 27 Financial Data Schedule -10- 99.1 Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 ___________________ * Denotes management contracts and compensatory plans, contracts, and arrangements. (1) Incorporated by reference to the Company's Report on Form 8-K filed January 24, 1997 (SEC file number 0-12378). (2) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended March 28, 1993 (SEC file number 0-12378). (3) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended March 29, 1992 (SEC file number 0-12378). (4) Incorporated by reference to the Company's Registration Statement on Form S- 8 filed March 31, 1994 (SEC file number 33-77176). (5) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended April 1, 1990 (SEC file number 0-12378). (6) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996 (SEC file number 0-12378). (7) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 1995 (SEC file number 0-12378). (8) Incorporated by reference to the Company's Report on Form 8-K/A filed March 15, 1994 (SEC file number 0-12378). (9) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended April 3, 1994 (SEC file number 0-12378). (b) Reports on Form 8-K. ------------------- In connection with the Company's sale of the MQView product line to Candle Corporation, the Company filed a report on Form 8-K dated January 24, 1997. Item #2 - Acquisition or disposition of Assets Exhibit 2.1 and Exhibit 2.2 to Form 8-K, dated January 24, 1997 Item #7 - Financial Statements and Exhibits Pro Forma Condensed Balance sheet as of March 31, 1996 (Unaudited) Pro Forma Condensed Statement of Operations for the Year Ended March 31, 1996 (Unaudited) Pro Forma Condensed Balance Sheet as of September 29, 1996 (Unaudited) Pro Forma Condensed Statement of Operations for the Year Ended September 29, 1996 (Unaudited) Notes to Pro Forma Condensed Financial Statements (Unaudited) -11- Signature Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: June 30, 1997 APERTUS TECHNOLOGIES INCORPORATED
By: /s/ Robert D. Gordon ------------------------- Robert D. Gordon Chairman of the Board, Chief Executive Officer and President Robert D. Gordon* Chairman of the Board, ) Chief Executive Officer, ) President and Director ) (principal executive officer) ) ) ) Sue A. Hogue* Chief Financial Officer ) (principal financial officer and ) By: __/s/ Robert D. Gordon principal accounting officer ) -------------------------- ] Robert D. Gordon ] Pro Se and Attorney-in-Fact ) Nicholas J. Covatta, Jr.* Director ) ) Date: June 30, 1997 ) Robert W. Fischer* Director ) ) George E. Hubman* Director ) ) Arch J. McGill* Director ) ) Clarence W. Spangle* Director )
________________________ * Executed on behalf of the indicated persons by Robert D. Gordon pursuant to the Power of Attorney included as Exhibit 24 to this annual report. -12- Apertus Technologies Incorporated Schedule II -- Valuation and Qualifying Accounts and Reserve for the Years Ended March 30, 1997, March 31, 1996 and April 2, 1995 (Dollars in Thousands) Allowance for Doubtful Accounts: (A)
Column A Column B Column C Column D Column E Balance at Charged to Balance at Description Beginning of Period Costs and Expenses Deductions (B) End of Period - - ---------------------------------------------------------------------------------------------- March 30, 1997 $1,839 $2,681(C) $ 914 $3,606 March 31, 1996 $ 865 $1,137(D) $ 163 $1,839(E) April 2, 1995 $ 931 $1,288(F) $1,354(G) $ 865
- - ---------------- (A) The allowance has been netted against accounts receivable as of the respective balance sheet dates. (B) Write-offs net of recoveries. (C) Includes $250 of allowance allocated to installment receivables at March 30, 1997. (D) Includes approximately $150 of allowance for doubtful accounts acquired in the BlueLine Software, Inc. acquisition. (E) Includes $300 of allowance allocated to installment receivables at March 31, 1996. (F) Includes approximately $1.1 million of NYNEX settlement. This settlement released NYNEX of any liability connected with the collection of outstanding receivables guaranteed by NYNEX under the original contract. (G) Includes approximately $1.3 million of receivables written off against the NYNEX settlement discussed in footnote (F) as well as $511 of allowances for doubtful accounts acquired in the Systems Strategies, Inc. acquisition. -13- Apertus Technologies Incorporated Index of Exhibits Annual Report on Form 10-K For the Year Ended March 30, 1997
Exhibit Page Number Description Number 10.4(c) * 1998 Management Bonus Plan description Electronically Filed 10.9 * Transition Agreement and Release, dated March 3, Electronically Filed 1997, between the Company and Lizabeth Converse Wilson 13 Portions of Annual Report to Shareholders for the Electronically Filed fiscal year ended March 30, 1997 21 Subsidiaries of the Registrant Electronically Filed 23.1 Consent of Ernst & Young LLP Electronically Filed 24 Powers of Attorney Electronically Filed 27 Financial Data Schedule Electronically Filed 99.1 Cautionary Statement for Purposes of the "Safe Harbor" Electronically Filed Provisions of the Private Securities Litigation Reform Act of 1995
EX-10.4(C) 2 1998 MANAGEMENT BONUS PLAN DESCRIPTION Exhibit 10.4(c) --------------- 1998 Management Bonus Plan Under the 1998 Management Bonus Plan, key employees of the Company (including executive officers of the Company) may be entitled to receive amounts ranging from 5% to 70% of their base pay, in the form of cash bonuses. Payment of bonuses will depend upon achievement of annual incentive plan operating targets relating to corporate and divisional revenue and profitability goals. EX-10.9 3 TRANSITION AGREEMENT AND RELEASE EXHIBIT 10.9 APERTUS - C O N F I D E N T I A L - MEMORANDUM - - ---------- TO: Lizabeth Converse Wilson - - --- ------------------------ FROM: Robert Gordon SUBJ: Resignation DATE: March 3, 1997 This memo confirms receipt and acceptance of your resignation from Apertus on January 10, 1997. In consideration of your many years of service with the Company, hard work and dedication, the Company agrees to pay you the following transition pay in exchange for your assistance in making this a successful transition. TRANSITION PAY - - -------------- Apertus will pay you one month of base salary as transition pay regardless of your continued service. Additionally, if you continue to provide services to the Company on a full time basis after February 7, 1997, for each week of full time service thereafter, you shall receive an additional week of base salary as transition pay. The transition consideration will be paid within seven days following your last day of employment. This transition pay will be available up to May 30, 1997. Either party may terminate this transition pay arrangement upon two weeks written notice. COMMISSION PLAN ADJUSTMENT - - -------------------------- In further consideration for your transition assistance, Apertus will adjust commissions paid to you as follows: 1. Q2 New Product Bonus: The threshold for payment of a new product bonus will be lowered from $2.5M to $2.2M. Based on $2,255,200 in Q2 new product revenue, an additional commission payment of $5,638.00 ($2,255,200 x .25%) will be paid. 2. Bell South Deal: The Bell South deal will be reclassified from license to maintenance revenue. This reclassification will result in an additional $2,730.91 of commission to be paid to you. 3. These commission adjustments will be paid within seven (7) days following your last day of employment. STOCK OPTIONS - - ------------- The Board of Directors has approved a six month extension of time in which you may exercise your currently vested stock options. Such six month period will commence upon your final day of employment. EMPLOYEE BENEFITS - - ----------------- All other employee benefit plans in which you are a participant will terminate according to such plans upon your last day of employment. Page 2 NON-DISCLOSURE - - -------------- You agree that you will not use, publish, or otherwise disclose after your termination, any unpublished or proprietary or confidential information or secrets relating to the corporation or its business, products or services. You also will not publish, or otherwise disclose proprietary or confidential information to others of which you have access or obtained in the course of your employment with Apertus. Upon the effective date of your termination, you agree to return to Apertus any records in any form which relate to the above-described confidential information. Nothing contained in this paragraph is intended to prohibit you from emerging in other business activities, provided, however, that you do not violate the provisions of your non-disclosure and confidentiality to Apertus as provided in this paragraph. NON-RECRUITMENT - - --------------- In consideration of Apertus' obligation to you under this Agreement, you agree that for a period of one year following the effective date of your termination of employment with Apertus, you will not recruit or solicit any key Apertus employee(s) as determined solely at the discretion of Robert D. Gordon or his specifically designated representative, for employment with any business enterprise in which you may be engaged. CONFIDENTIALITY - - --------------- Both you and Apertus agree that this Agreement will remain confidential as between you and will not be disclosed except to your spouse, financial advisor and legal counsel, or, as may be required by law or by any legal proceeding, to enforce your rights hereunder. Should you violate the provisions of this confidentiality paragraph, Apertus expressly reserves the right to cancel this Agreement in its entirety. RELEASE - - ------- In consideration of Apertus' obligations hereunder, you hereby fully and completely release and waive any and all claims, complaints, causes of action or demands of whatever kind which you have or may have against Apertus and all its predecessors, successors, assigns, subsidiaries, officers, employees and agents arising out of any action, conduct, decisions, behavior or events occurring to the date of your signature of this Agreement, except as is set forth below, including, but not limited to, the terms, conditions and circumstances of your employment and the termination of your employment with Apertus. This Release extends to, but is not limited to, all claims, whether based on statutory or common law claims for age, disability, or other forms of employment discrimination, defamation, assault, battery, negligent or intentional infliction of emotional distress, breach of contract, promissory estoppel, fraud, wrongful discharge, impairment of economic opportunity, or any other theory, whether legal or equitable. Specifically, this Release relates to claims arising under or based upon the Minnesota Human Rights Act, Minn. Stat. 363.01 et seq; Title VII of the Civil Rights Act, 42 U.S. C.2000e et seq; and the Age Discrimination in Employment Act, 29 U.S. C.621 et seq; Apertus agrees that, by signing this Agreement you do not waive any claims arising after the execution of this Agreement. Nothing in the aforementioned waives your rights to any claims or complaints for events that occur after the date of your signature of this agreement, including but not limited to, defamation, slander or liable. You also acknowledge and agree that you have a right to rescind this Agreement as far as it extends to potential claims under Minn. Stat. 363.01 et seq by written notice to Apertus within fifteen (15) calendar days following your execution of this Agreement. To be effective, such written notice must either be delivered by hand or sent by certified mail, return receipt requested, addressed to: Apertus Technologies Incorporated, 7275 Flying Cloud Drive, Eden Prairie, Minnesota 55344, delivered or postmarked within such fifteen (15) day period. You understand that Apertus will have no obligations under this Agreement in the event such notice is timely delivered and any payments made as of that date by Apertus to you pursuant to this Agreement shall be immediately repaid by you. Page 3 You also acknowledge that you have the right to revoke this Agreement as far as it extends to potential claims under the Age Discrimination in Employment Act, 29 U.S.C. 621 et seq by informing Apertus of your intent to revoke this Agreement within seven (7) calendar days following your execution of this Agreement. This Agreement shall not become effective or enforceable until the seven (7) day period has expired. The terms of this Agreement shall be open for acceptance by you for a period of twenty-one (21) days during which time you may consider whether to accept this Agreement. SUCCESSORS AND ASSIGNS - - ---------------------- This Agreement shall be binding upon and inure to the benefit of the successors and assigns of Apertus, whether by way of merger, consolidation, operation of law, assignment, purchase or other acquisition. This Agreement shall not be assignable by you, except with the express written consent of Apertus, which consent shall not be unreasonably withheld. GOVERNING LAW - - ------------- This Agreement shall be governed and construed in accordance with the laws of the State of Minnesota. ENTIRE AGREEMENT - - ---------------- No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by both you and Apertus, and supersedes all prior discussion, representation, and negotiations with respect to the matters herein relating to your termination. By your signature below, you acknowledge that you fully understand and accept the terms of this Agreement and Release, and agree that your signature is freely, voluntarily and knowingly given. You further acknowledge that you have been provided a fully opportunity to review and knowingly given. You further acknowledge that you have been provided a fully opportunity to review and reflect on the terms of this Agreement and Release and have had the opportunity to obtain the advice of legal counsel of your choice with respect to the meaning and effect of the terms herein. You further understand that you have a right to rescind this Agreement and Release within fifteen (15) calendar days after the date of your signature below, subject to proper notice to Apertus as described above. If this Agreement accords with your understanding of our agreement, please sign both copies and return one to me. APERTUS TECHNOLOGIES INCORPORATED - - ------------------------------ Robert D. Gordon Chairman, CEO & President AGREED TO AND ACCEPTED BY: - - ------------------------------ Lizabeth Converse Wilson - - ------------------------------ Date EX-13 4 PORTIONS OF ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS Overview During fiscal 1997, the Company focused on its Enterprise Suite of products, which are data and application integration software tools. This focus included the creation of two new business divisions-Internet Solutions and Data Integration. These new divisions signal dedicated operational execution against significant and distinct growth markets. Internet Solutions focuses on marketing Enterprise/Connect and Enterprise/Access to large organizations, allowing easy extension of their existing business applications across the Internet/Intranet to trading partners, customers, and employees. Data Integration markets Enterprise/Integrator as an engine for accessing, transforming, cleansing, and integrating data involved in system conversion and data-warehousing applications. Another component of the shift in operational focus to the new generation of products was the sale of the MQView product line to Candle Corporation. The sale resulted in $7.4 million in cash. This continued to strengthen the Company's balance sheet as well as reduce operating expenses. During fiscal 1997 the Company experienced continued declining sales of its older generation products. This resulted in an expense adjustment of approximately $12 million relating primarily to write-offs of capitalized software, inventory, and facility exit costs. Additionally, expense control measures were implemented to lower the breakeven for fiscal 1998. Result of Operations: Fiscal Year 1997 Compared to Fiscal Year 1996 Fiscal 1997 operating revenues totaled $37.1 million. As compared with fiscal 1996, operating revenues decreased $12.2 million. This decrease is related to the continuing decline in the older generation network integration products which was first noted in fiscal 1996. This decline occurred both domestically and internationally. The cost of sales, while remaining relatively flat, increased to 41 percent of sales. This occurred as a result of the mix of products sold having a higher hardware component, increased amortization of capitalized software and the continued impact of lower sales volume as compared to the fixed component of the operational infrastructure. The cost of service was $4.2 million, a decrease of $1.2 million compared with the prior year, which partially reflects cost control adjustments in the fixed expense base associated with this revenue as well as reduced costs associated with the sale of the MQView product line. Research, development and engineering, while declining $3.6 million remained constant relative to fiscal 1996 at 26% of revenues. Fiscal 1997 remains at this level because of the decrease in the revenue base, while the 1996 relationship was influenced by costs inherited through the BlueLine acquisition. Selling, general and administrative expenses remained constant at $21.9 million, but increased to 59 percent of revenues as compared with 44 percent for the previous year, due to the largely fixed nature of these expenses. Interest income decreased to $520 thousand in fiscal 1997 as compared with $741 thousand in fiscal 1996. This decline corresponds with the decline in the average invested balances in 1997 from 1996. 3 Result of Operations: Fiscal Year 1996 Compared to Fiscal Year 1995 Fiscal 1996 operating revenues decreased approximately $5.3 million from fiscal 1995. This decrease was associated with the softening in the market for the Company's traditional network integration products and a lengthening sales cycle for certain key accounts. Growth in the international marketplace offset some of the decline in the domestic arena. In fiscal 1996, international revenue represented 31 percent of total revenues as compared with 14 percent in fiscal 1995. The cost of revenues as a percentage of revenues increased to 33 percent in fiscal 1996 from 30 percent in fiscal 1995. The trend toward a higher cost of revenue reflects the payment of international royalties associated with BlueLine revenue, international product pricing pressures, and the impact of lower sales volume as it relates to the fixed overhead base. Research, development and engineering costs, as a percentage of revenues, increased to 27 percent in fiscal 1996 from 20 percent in the prior year. This period-over-period increase was principally attributable to the additional development costs realized through the BlueLine acquisition, coupled with weakened sales in the connectivity marketplace. Selling, general and administrative costs as a percentage of revenues, increased to 44 percent of revenues as compared with 34 percent for Fiscal 1995. This increase was due principally to the acquisition of BlueLine, as well as increased investments in the selling and distribution channels. Interest income in Fiscal 1996 was $741 thousand compared with $712 thousand in Fiscal 1995. The increase was primarily due to a higher rate of return. Impact of Inflation The Company has not experienced any significant impact from inflation. Liquidity and Capital Resources The Company had working capital of $9 million and $14 million on March 30, 1997 and March 31, 1996, respectively. Cash, cash equivalents, and marketable securities were $14.7 million and $11.3 million at these two respective year-end dates. while the sale of the MQView product line, partially offset by the net operating loss incurred in the current year, creates the increase in the cash position, the decline in working capital is the result of a reduction in accounts receivable related to declining sales and write-offs of inventory related to older generation products. The Company believes that the current cash on-hand, in conjunction with cash to be generated from operations in the upcoming year, will be sufficient to cover the projected operating and capital cash needs in fiscal 1998. 4
Apertus Technologies Incorporated CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) For the Fiscal Years Ended -------------------------------------------------------- March 30, 1997 March 31, 1996 April 2, 1995 - - -------------------------------------------------------------------------------------------------------- REVENUES Sales $ 27,167 $37,666 $ 45,713 Services 9,963 11,653 8,913 -------------------------------------------------------- Total 37,130 49,319 54,626 COSTS AND EXPENSES Cost of sales 11,188 10,902 12,794 Cost of services 4,248 5,456 3,474 Research, development and engineering 9,631 13,205 10,674 Selling, general and administrative 21,906 21,937 18,407 Gain on sale of product line (5,783) - - Other charges 10,655 5,820 - -------------------------------------------------------- Total 51,845 57,320 45,349 -------------------------------------------------------- Income (Loss) (14,715) (8,001) 9,277 OTHER INCOME(EXPENSE) Interest expense (83) (27) - Investment income 520 741 712 -------------------------------------------------------- Total 437 714 712 Income (Loss) Before Income Taxes (14,278) (7,287) 9,989 Income Tax Expense (200) (203) (150) -------------------------------------------------------- Net Income (Loss) $(14,478) $(7,490) $ 9,839 -------------------------------------------------------- Income (Loss) per Common and Common Equivalent Share $ (1.03) $ (0.54) $0.69 -------------------------------------------------------- Weighted Average Number of Common and Common Equivalent Shares Outstanding 14,112,000 13,897,000 14,266,000 ========================================================
See Accompanying Notes to Consolidated Financial Statements 5 Apertus Technologies Incorporated CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
March 30, 1997 March 31, 1996 - - -------------------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $13,865 $ 5,455 Cash in escrow 802 1,539 Marketable securities - 4,318 Accounts receivable, less allowance for doubtful accounts of $3,356 in 1996 and $1,539 in 1996 9,437 14,216 Note receivable - 8,700 Inventories 923 3,881 Installment receivables - current portion, less allowance for doubtful accounts of $250 in 1997 and $300 in 1996 420 1,018 Other 413 388 ------------------------------------ Total current assets 25,860 39,515 Property and Equipment Property and equipment 15,632 15,686 Less accumulated depreciation 11,917 10,681 ------------------------------------ Net property and equipment 3,715 5,005 Other Assets Capitalized software 1,373 6,286 Installment receivables - net of current portion 539 1,310 Goodwill - net of accumulated amortization of $453 in 1996 and $204 in 1996 390 1,697 Other - 876 ------------------------------------ Total other assets 2,302 10,169 ------------------------------------ Total $31,877 $54,689 =====================================
6 Apertus Technologies Incorporated CONSOLIDATED BALANCE SHEETS cont. (dollars in thousands)
March 30, 1997 March 31, 1996 - - -------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 7,603 $ 5,100 Accrued expenses 4,281 6,029 Deferred revenue 3,733 4,255 Note payable 1,000 1,000 Current portion of long-term debt - 8,976 ------------------------------------ Total current liabilities $16,617 $25,360 Shareholders' Equity Common Stock -authorized 30,000,000 shares of $.05 par value, shares outstanding of 14,158,623 in 1997 and 14,028,455 in 1996 708 701 Additional paid-in capital 57,373 57,062 Retained deficit (42,715) (28,237) Unearned compensation (106) (197) ------------------------------------ Total shareholders' equity 15,260 29,329 ------------------------------------ Total $31,877 $54,689 ====================================
See Accompanying Notes to Consolidated Financial Statements 7 Apertus Technologies Incorporated CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
For the Fiscal Years Ended --------------------------------------------------- March 30, 1997 March 31, 1996 April 2, 1995 - - --------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $(14,478) $(7,490) $ 9,839 Adjustment to reconcile net income (loss) to net cash provided by/(used in) operating activities net of purchase of companies: Depreciation 1,619 1,369 1,100 Amortization 2,521 2,520 3,087 Compensation earned on restricted stock 67 57 60 Write-off of assets due to impairment 6,292 - - Loss on sale of property and equipment 301 - - Gain on sale of product line (5,783) - - Non-current portion of other charges - 5,820 - Accounts receivable 4,229 815 (3,132) Installments receivable 1,369 848 878 Inventory 2,890 (755) (34) Other assets 851 176 72 Accounts payable, accrued expenses, deferred income and income taxes (255) (1,147) 4,504 ----------------------------------------------- Net cash provided by (used in) operating activities (377) 2,213 16,374 INVESTING ACTIVITIES Cash received from sale of product line 7,400 - - Purchase of company (net of cash acquired) - (4,547) - Purchases of marketable securities - (8,383) (1,228) Sales and maturities of marketable securities 4,318 10,375 1,131 Payments received on note receivable 8,700 - - Purchases of property and equipment (1,029) (2,523) (1,785) Capitalized software (2,704) (3,412) (2,484) Change in cash held in escrow 736 (676) 92 ----------------------------------------------- Net cash provided by (used in) investing activities 17,421 (9,166) (4,274) FINANCING ACTIVITIES Debt transactions: Repayments (8,976) (150) (2,213) Capital transactions: Stock options exercised 342 612 1,213 Stock repurchased by company - (1,194) - ----------------------------------------------- Net cash used in financing activities (8,634) (732) (1,000) ----------------------------------------------- Net increase (decrease) in cash and equivalents 8,410 (7,685) 11,100 Beginning cash and equivalents 5,455 13,140 2,040 ----------------------------------------------- Ending cash and equivalents $ 13,865 $ 5,455 $13,140 =============================================== Supplemental disclosure of cash flow information: Cash paid for interest $ 74 $ 833 $ 828 Cash paid for income taxes 94 283 -
See Accompanying Notes to Consolidated Financial Statements 8 Apertus Technologies Incorporated CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in thousands)
Common Stock ----------------------- Number Amount Additional Accumulated Unearned of Shares Paid in Capital Deficit Compensation - - ---------------------------------------------------------------------------------------------------------- 1995 Balance, April 3, 1994 12,941,875 $647 $52,047 $(30,586) $(167) Options exercised 577,425 29 1,098 - - Net change in restricted stock 7,500 - 86 - (86) Compensation earned - - - - 60 Net income - - - 9,839 - -------------------------------------------------------------------- Balance, April 2, 1995 13,526,800 676 53,231 (20,747) (193) -------------------------------------------------------------------- 1996 Options exercised 191,403 10 603 - - Shares issued in connection with the BlueLine Software, Inc. acquisition 504,252 25 4,351 - - Net change in restricted stock 5,500 - 61 - (61) Compensation earned - - - - 57 Shares repurchased (199,500) (10) (1,184) - - Net loss - - - (7,490) - -------------------------------------------------------------------- Balance, March 31, 1996 14,028,455 701 57,062 (28,237) (197) -------------------------------------------------------------------- 1997 Options exercised 135,968 7 335 - - Net change in restricted stock (5,800) - (24) - 24 Compensation earned - - - - 67 Net loss - - - (14,478) - -------------------------------------------------------------------- Balance, March 30, 1997 14,158,623 $708 $57,373 $(42,715) $(106) ====================================================================
See Accompanying Notes to Consolidated Financial Statements 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 30, 1997 (Dollars in thousands, except per share amounts) 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidated The consolidated financial statements include the accounts of Apertus Technologies Incorporated and its wholly owned subsidiaries, Systems Strategies, Inc. and BlueLine Software, Inc. (together "the Company"). All inter-company accounts and transactions have been eliminated in consolidation. Description of Business The Company develops and markets software products for integrating diverse corporate applications, data and networks. Principle markets are North America, Europe, and the Pacific Rim. Fiscal Year The Company's fiscal year ends on the Sunday nearest March 31. Fiscal 1977, fiscal 1996, and fiscal 1995 were all 52-week years. Revenue Recognition Sales include direct sales to distributors and customers, sales-type lease contracts, and commitment contracts. Sales are generally recorded when the product is shipped, except that sales-type lease contracts are recorded as sales when the products are accepted by the customer. Under commitment contracts, the revenue attributable to the current fiscal year is recognized when the product is shipped to the distributor. Any related costs are accrued at that time. Equipment under all other lease contracts is accounted for under the operating method, and rental income is recognized during the period the equipment is on lease. Service revenues are recognized over the period covered by the service contract. Cash Equivalents Securities which are readily convertible to cash with original maturities of three months or less when purchased are considered cash equivalents. Marketable Securities Investments in marketable equity securities and debt securities are classified as available-for-sale. Available-for-sale securities are carried at fair value with the unrealized gains and losses, net of tax, reported as a separate component of shareholders' equity. Realized gains and losses and declines in value judged to be other than temporary are included in investment income along with interest and dividends. Capitalized Software The Company, in accordance with SFAS No. 86, capitalizes software development costs by project. These capitalized costs are amortized on a straight-line basis over a period of three years or the expected life of the product, whichever is less. Research and development costs are charged to expense as incurred. Major Customers Sales to certain customers have accounted for a significant percentage of total sales for the three year period ended March 30, 1997. Sales to GTE accounted for 10% and 26% of total sales for the fiscal years 1996 and 1995, respectively. Inventories Inventories are valued at the lower of cost or market with cost determined on a first-in, first-out basis. Inventories include: March 30, March 31, 1997 1996 - - ------------------------------------------------------------------------ Raw material $390 $ 652 Work-in-process 455 1,542 Finished goods 78 1,687 - - ------------------------------------------------------------------------ Inventories $923 $3,881 - - ------------------------------------------------------------------------
10 Property and Equipment Property and equipment are recorded at cost and depreciated on a straight-line basis. Leasehold improvements are depreciated over the lesser of the lease life or the life of the improvement. Property and equipment consists of: March 30, March 31, Depreciable 1997 1996 Lives in Years - - -------------------------------------------------------------------------------- Machinery and equipment $12,898 $12,922 3-6 Furniture and fixtures 1,921 1,912 4-10 Leasehold improvements 813 852 4-5 - - -------------------------------------------------------------------------------- Property and equipment $15,632 $15,686 - - --------------------------------------------------------------------------------
Income (Loss) per Common and Common Equivalent Share Income (loss) per common and common equivalent share is based on the weighted average number of common shares outstanding plus common stock equivalents resulting from dilutive stock options where applicable. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Impairment of Long-Lived Assets The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Use of Estimates The preparation of financial statements in confirmity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported on the financial statements and in the accompanying notes. Actual results could differ from such estimates. Stock Issued for Employees The Company follows Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related interpretations in accounting for its employee stock options. Under APB 25, when the exercise price of employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized. In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation." The Company provides pro forma disclosures of net loss and related per share data as required under the provisions of SFAS 123. 2) CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES Cash, cash equivalents, and marketable securities at March 30, 1997, and March 31, 1996 consist of: Cash and Short Cash Term Equivalents Investments Total - - ----------------------------------------------------------------------------- March 30, 1997 Cash in escrow $ - $ 802 $ 802 Other 13,865 - 13,865 - - ----------------------------------------------------------------------------- Total $13,865 $ 802 $14,667 - - ----------------------------------------------------------------------------- March 31, 1996 Bonds $ - $ 551 $ 551 Commercial paper 1,078 3,768 4,846 Cash in escrow - 1,539 1,539 Other 4,377 - 4,377 - - ----------------------------------------------------------------------------- Total $ 5,455 $5,858 $11,313 - - -----------------------------------------------------------------------------
At March 30, 1997 and March 31, 1996, the cost of marketable securities approximated market value. 11 3) SALE OF PRODUCT LINE Effective the close of business January 10, 1997, the Company sold the MQView product line to Candle Corporation for $7,400. Related assets, net of amortization or depreciation, of $1,617 were removed from the balance sheet and charged against the gain on sale. The pro forma consolidated results of operations, as if the MQView sale had occurred at the beginning of the periods presented are:
Unaudited ---------------------------- Fiscal 1997 Fiscal 1996 - - ------------------------------------------------------------ Revenues $ 32,628 $47,012 Net loss $(22,530) $(7,003) Net loss per share $ (1.60) $ (0.50)
The pro forma results are not necessarily indicative of what actually would have occurred if the disposition had been in effect for the entire periods presented. 4) PURCHASE OF BLUELINE SOFTWARE, INC. Effective the close of business on June 30, 1995, the Company purchased the stock of BlueLine Software, Inc. (BlueLine). The total purchase price was $8,750, of which approximately 50% was paid in cash and 50% was issued in the Company's common stock. The acquisition was accounted for under the purchase method of accounting and, accordingly, the operating results of BlueLine have been included in the consolidated operating results since the date of acquisition. On acquisition, approximately $1,900 of goodwill was recorded. A portion of the unamortized balance amounting to $1,035 has been deemed to have no future value and has been written off. This amount is included in other charges for fiscal 1997. Additionally, the Company recorded approximately $738 of escrow cash to be used to offset any unrecorded liabilities that existed at the acquisition date. If no unrecorded liabilities are noted, the balance will be paid out to original BlueLine shareholders. Included in the assumed liabilities is an unsecured $1,000 note payable, which was due originally on October 24, 1996. The maturity date was extended to October 24, 1997. This balance carries an interest equal to LIBOR plus 1.75%. As of March 30, 1997 and March 31, 1996, this rate was 7.44% and 6.98% respectively. The carrying value of the note payable approximates fair value. A portion of the purchase price amounting to approximately $5,100 was allocated to purchased research and development. This was charged against earnings in the first quarter of fiscal 1996 and was included in other charges. Pro forma consolidated results of operations as if BlueLine had been acquired at the beginning of fiscal 1996 are:
Unaudited ---------------------------- Fiscal 1996 Fiscal 1995 - - ------------------------------------------------------------ Revenues $ 51,284 $61,705 Net income (loss) $(10,477) $ 9,926 Net income (loss) per share $ (0.75) $ 0.69
The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been in effect for the entire period presented. 5) SALE OF FORMER HEADQUARTERS On October 26, 1993, the Company sold its former headquarters property consisting of land and a building to Best Buy Co. (Best Buy,) a Minnesota corporation, for $8,700. Payment for the building was evidenced by a note receivable due on June 12, 1996 for the same amount. Additionally, the sales agreement required that Best Buy make interest payments of $287 on January 31, 1994 and $430 on the business day immediately preceding each of August 1, 1994, February 1, 1995 and August 1, 1995. On June 12, 1996, the note receivable and $745 in additional accrued interest were paid. The property was subject to a mortgage securing a loan to the Company from The Prudential Insurance Company of America ("Prudential.") This mortgage was paid in full upon the payment from Best Buy of the note receivable referred to above. The Company and Prudential had contracted with First Trust National Association ("First Trust") whereby First Trust would receive all amounts due from Best Buy under the sales agreement and make the required payments to Prudential under the Company's loan obligation. The Company had deposited $999 with First Trust to be held in escrow and used to cover the difference, if 12 any, between the payments due from Best Buy and the payments due from Prudential. In June 1996, $443 was returned out of escrow when the note and loan were repaid. The cash held in escrow at First Trust on March 30, 1997 and March 31, 1996 was $0 and $776, respectively. 6) CAPITALIZED SOFTWARE During fiscal 1997, capitalized software cost related to mature products was deemed to have no future value. The recorded amount was written off and is included in other charges. Capitalized software costs are:
March 30, March 31, 1997 1996 - - ------------------------------------------------------------------------------ Capitalized software costs beginning of year $ 6,286 $ 3,917 Capitalized software acquired through the acquisition of BlueLine -- Net -- 1,273 Software costs capitalized 2,704 3,412 Capitalized software costs disposed of in conjunction with the sale of the MQView product line (236) -- Software costs written off due to value impairment (5,132) -- Less amortization expense (2,249) (2,316) - - ------------------------------------------------------------------------------ Capitalized software costs end of year $ 1,373 $ 6,286 - - ------------------------------------------------------------------------------
7) INSTALLMENT RECEIVABLES Installment receivables are:
March 30, March 31, 1997 1996 - - ------------------------------------------------------------------------------ Payments to be received under sales-type leases $1,295 $ 2,824 Less: Unearned income (86) (196) Current portion (670) (1,318) - - ------------------------------------------------------------------------------ Installment receivables $ 539 $ 1,310 - - ------------------------------------------------------------------------------
8) INCOME TAXES On March 30, 1997, the Company has operating loss carryforwards of $55,793 which are available to offset taxable income through 2011. For financial reporting purposes, a valuation allowance has been recorded to offset deferred tax assets that may not be realized. The provision for federal, state, and foreign tax expense consisted of:
Fiscal Years Ended ---------------------- 1997 1996 1995 - - ------------------------------------------------------------------------------ Current Federal $ -- $ -- $ -- Foreign 150 158 -- State 50 45 32 Alternative minimum tax -- -- 118 - - ------------------------------------------------------------------------------ Tax provision $200 $203 $150 - - ------------------------------------------------------------------------------
The effective income tax expense differed from the federal statutory rates as noted:
Fiscal Years Ended ---------------------- 1997 1996 1995 - - ------------------------------------------------------------------------------ Taxes at statutory rate (34)% (34)% 34% State income taxes 1% 1% 1% Effect of foreign income tax rate 2% 2% 0% Alternative minimum tax -- -- 1% Impact of net operating loss carryforward -- -- (34)% Change in valuation allowance 34 34% 0% - - ------------------------------------------------------------------------------ Effective tax rate 3% 3% 2% - - ------------------------------------------------------------------------------
13 The components of deferred tax assets and liabilities are as noted:
March 30, March 31, 1997 1996 - - -------------------------------------------------------------------- Deferred tax assets Net operating loss carryforwards $ 22,317 $ 19,301 Research and development credit 1,081 1,081 Inventory reserve 1,140 866 Allowance for doubtful accounts 1,442 735 AMT carryforward 127 127 Other 1,701 1,654 - - -------------------------------------------------------------------- Total deferred tax assets $ 27,808 $ 23,764 - - -------------------------------------------------------------------- Deferred tax liabilities Capitalized software $ (549) $ (2,005) Depreciation and amortization (160) (342) - - -------------------------------------------------------------------- Total deferred tax liabilities $ (709) $ (2,347) - - -------------------------------------------------------------------- Net deferred tax assets $ 27,099 $ 21,417 Valuation allowance (27,099) (21,417) - - -------------------------------------------------------------------- Total net deferred tax assets $ -- $ -- - - --------------------------------------------------------------------
9) STOCK OPTIONS AND RESTRICTED STOCK The Company has authorized the grant of up to 3,200,000 options under the Company's stock option plans. These options may be granted to certain officers, directors, and employees to purchase the Company's common stock at prices equal to the fair market value of the stock at the date of grant. A majority of the options granted have 10 year terms. A summary of stock options under these plans is:
Weighted Average Shares Exercise Available Options Price Per for Grant Outstanding Share - - -------------------------------------------------------------------- Balance April 3, 1994 102,916 1,974,425 $2.42 Shares reserved 1,200,000 -- -- Granted (75,000) 75,000 3.63 Exercised -- (577,425) 1.95 Cancelled 24,850 (24,850) 3.16 - - -------------------------------------------------------------------- Balance April 2, 1995 1,252,766 1,447,150 $2.65 Granted (257,500) 257,500 9.58 Exercised -- (167,400) 2.73 Cancelled 233,900 (233,900) 4.50 - - -------------------------------------------------------------------- Balance March 31, 1996 1,229,166 1,303,350 $3.64 Granted (523,700) 523,700 3.11 Exercised -- (52,500) 2.60 Cancelled 352,100 (352,100) 4.09 - - -------------------------------------------------------------------- Balance March 30, 1997 1,057,566 1,422,450 $3.06 - - --------------------------------------------------------------------
As of March 30, 1997 there were 1,013,700 options outstanding with exercise prices between $1.19 and $3.13; 338,750 options outstanding with exercise prices between $3.25 and $5.38; and 70,000 options outstanding with exercise prices between $8.88 and $12.00. At March 30, 1997 outstanding options had a weighted- average contractual life of 6.68 years. The number of options exercisable as of March 30, 1997 were 917,475 at a weighted average exercise price of $2.66. The weighted average fair value of options granted during fiscal 1997 and fiscal 1996 was $2.11 and $5.18, respectively. Pro forma information regarding net loss and related per share data is required by SFAS 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of the statement. The fair value for these options was estimated at the date of the grant using a Black-Scholes options pricing model with the following weighted average assumptions for fiscal 1997 and fiscal 1996; risk free interest rate ranging from 6.05% 14 to 6.72%; dividend yield of 0%; volatility factors of the expected market price of the Company's stock of .772 and .662 respectively; and a weighted average expected life of the options of 6 years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fiar value of its stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information is:
Fiscal Fiscal 1997 1996 - - ------------------------------------------ Net loss $(14,698) $(7,753) Net loss per share: $ (1.04) $ (0.56)
Note: The pro forma effect on net loss for fiscal 1997 and fiscal 1996 is not representative of the pro forma effect in future years because it does not take into consideration pro forma compensation expense related to grants made prior to fiscal 1996. The Company has authorized the issuance of up to 300,000 shares of restricted stock and entered into restricted stock agreements with various employees. The agreements call for issuance of the Company's common stock to these employees and provides for vesting generally over a 5-year employment period. A summary of stock issued under these agreements is:
Weighted Average Grant Shares Date Fair Available for Shares Shares Value per Grant Outstanding Vested Share - - ---------------------------------------------------------------- Balance April 3, 1994 116,833 183,167 106,267 $1.90 Granted (7,500) 7,500 - 11.38 Vested - - 32,400 - Cancelled - - - - - - ---------------------------------------------------------------- Balance April 2, 1995 109,333 190,667 138,667 $2.27 Granted (5,500) 5,500 - 12.00 Vested - - 16,900 - Cancelled - - - - - - --------------------------------------------------------------- Balance March 31, 1996 103,833 196,167 155,567 $2.54 Granted - - - - Vested - - 16,000 - Cancelled 5,800 (5,800) - 3.99 - - --------------------------------------------------------------- Balance March 30, 1997 109,633 190,367 171,567 $2.49 - - ---------------------------------------------------------------
The value of the stock at the time of grant is deferred and amortized over the term of the agreements. Compensation expense of $67, $57, and $60 was recognized in fiscal 1997, 1996, and 1995 respectively, related to these agreements. 10) OTHER CHARGES In the fourth quarter of fiscal 1997, the Company entered into an exit plan whereby certain activities related to older generation products have been optimized. Costs related to its exit plan have been recorded as a charge against income in the current period. These costs include:
- - ---------------------------------------------------- Continuing rent of un-subleased facilities $ 1,922 Moving and closing facilities 400 Write off of property and equipment related to these facilities 125 Write off of goodwill and capitalized software 6,167 Other 2,041 - - ---------------------------------------------------- Total exit costs $10,655 - - ----------------------------------------------------
15 In the first quarter of fiscal 1996, the Company recorded non-recurring charges of $5,820 related primarily to the purchase of BlueLine and the closing of a west coast location. (See note 4.) 11) COMMITMENTS AND CONTINGENCIES The Company has various operating lease agreements which expire through the year 2014 for its facilities principally located in Minnesota, New York, and Western Europe. The Company is responsible for real estate taxes, maintenance, and utilities. Future minimum lease payments as of March 30, 1997 are:
Future Minimum Fiscal Year Lease Payments - - ------------------------------------------- 1998 $ 2,259 1999 2,269 2000 2,312 2001 2,321 2002 2,546 Thereafter 15,892
Rental expense for property and equipment under operating leases for fiscal 1997, 1996, and 1995 was $2,402, $2,177, and $1,800 respectively. The Company is involved in various claims and proceedings that, in the opinion of management and counsel, do not involve amounts material to the financial position of the Company. 12) EMPLOYEE BENEFIT PLANS Since 1984, Apertus Technologies Incorporated has maintained a 401(k) Savings and Investment Plan for its eligible employees. Employees scheduled to work 1,000 hours in the first year may become participants in the before tax contributions feature of the Plan as of the first enrollment date after their date of hire and may become participants in the matching contribution feature of the plan as of the first enrollment date following six months of service. Employees' contributions can range from 1% to 15% of their compensation. Apertus currently matches 25% of he first 4% of employees' contributions. Company contributions were $118, $135, and $121 toward 401(k) employer contributions in fiscal years 1997, 1996, and 1995 respectively. 16 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders of Apertus Technologies Incorporated We have audited the accompanying consolidated balance sheets of Apertus Technologies Incorporated as of March 30, 1997 and March 31, 1996 and the related consolidated statements of operations, shareholders' equity, and cash flows for the years ended March 30, 1997, March 31, 1996 and April 2, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted audits in accordance with generally accepted auditing standards. 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 management, as well as evaluating the overall financial statement presentation. We believe that our 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 positions of Apertus Technologies Incorporated at March 30, 1997 and March 31, 1996, and the consolidated results of its operations and its cash flows for the years ended March 30, 1997, March 31, 1996 and April 2, 1995 in conformity with generally accepted accounting principles. Minneapolis, MN May 2, 1997 17 COMPANY REPORT ON FINANCIAL STATEMENTS To the Shareholders of Apertus Technologies Incorporated: The management of Apertus Technologies Incorporated has prepared, and is responsible for, all information and representations contained in the financial statements and other sections of this Annual Report. The Company's financial statements have been prepared in conformity with generally accepted accounting principles. Apertus maintains a system of internal accounting controls designed to provide reasonable assurance that transactions are executed in accordance with the proper authorizations, that all such transactions are properly recorded and summarized to produce reliable financial records and reports, that assets are safeguarded, and that the accountability for assets is maintained. The Company maintains high standards when selecting, training, and developing personnel, to insure that management's objectives of maintaining strong, effective internal controls and unbiased, uniform reporting standards are attained. Ernst & Young LLP, independent auditors, have audited the Company's financial statements in accordance with generally accepted auditing standards and their report is included herein. The Audit Committee of the Board of Directors, which is composed solely of directors who are not officers or employees, meets regularly and on special occasions, as needed, with corporate financial management and the independent auditors to review their activities. The independent auditors have access to the Audit Committee without management being present to discuss the results of their work, the adequacy of internal financial controls and the quality of financial reporting. May 2, 1997 18 SELECTED HISTORICAL FINANCIAL DATA For the Year Ended March 30, 1997 (Dollars in thousands, except per share amounts)
For the Fiscal Years Ended --------------------------------------------------- 1997 1996 1995 1994 1993 - - --------------------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS DATA Revenues $37,130 $49,319 $54,626 $26,206 $27,718 - - --------------------------------------------------------------------------------------------- Income (loss) from continuing operation (14,715) (8,001) 9,839 (9,016) 2,485 - - --------------------------------------------------------------------------------------------- Net income (loss) (14,478) (7,490) 9,839 (9,016) 2,485 - - --------------------------------------------------------------------------------------------- Income (loss) per share - - --------------------------------------------------------------------------------------------- Net income (loss) (1.03) (0.54) 0.69 (0.70) 0.19 - - --------------------------------------------------------------------------------------------- BALANCE SHEET DATA Working capital 9,243 14,155 23,969 16,280 26,283 -------------------------------------------------------------------------------------------- Total assets 31,877 54,689 55,326 43,563 43,868 - - --------------------------------------------------------------------------------------------- Long-term debt/notes payable - - 8,976 12,882 9,270 - - --------------------------------------------------------------------------------------------- Shareholders' equity 15,260 29,329 32,967 21,941 30,527 - - --------------------------------------------------------------------------------------------- SELECTED QUARTERLY FINANCIAL DATA (Dollars in thousands, except per share amounts) - - --------------------------------------------------------------------------------------------- First Second Third Fourth Fiscal (Unaudited) Quarter Quarter Quarter Quarter Year 1997 - - --------------------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS DATA Revenues $10,477 $10,538 $9,030 $7,085 $37,130 - - --------------------------------------------------------------------------------------------- Net loss (1,129) (685) (2,747) (9,917) (14,478) - - --------------------------------------------------------------------------------------------- Net loss per share (0.08) (0.05) (0.19) (0.71) (1.03) - - --------------------------------------------------------------------------------------------- BALANCE SHEET DATA Working capital 13,471 13,773 11,375 9,243 9,243 - - --------------------------------------------------------------------------------------------- Total assets 44,110 43,538 40,817 31,877 31,877 - - --------------------------------------------------------------------------------------------- Lont-term debt/notes payable - - - - - - - --------------------------------------------------------------------------------------------- Shareholders' equity 28,287 27,808 25,081 15,260 15,260 - - ---------------------------------------------------------------------------------------------
19 DIVIDEND POLICY AND PRICE RANGE OF COMMON STOCK (UNAUDITED) The Company has not declared any cash dividends on its common stock, and the Board of Directors intends to retain all earnings for use in its business for the foreseeable future. At March 30, 1997, the Company had 1,396 shareholders of record. The Company's common stock is traded on NASDAQ under the symbol APTS. The following table sets forth the high and low, end-of-the-day prices for the common stock reported on NASDAQ for the period indicated. Fiscal 1997 High Low - - ----------------------------------------------------------- First Quarter 5 3 Second Quarter 3-11/16 2-5/8 Third Quarter 3-13/16 2-3/8 Fourth Quarter 2-7/8 1-7/16 Fiscal 1996 - - ----------------------------------------------------------- First Quarter 15 7-3/4 Second Quarter 10-1/2 6-3/4 Third Quarter 10-7/8 7 Fourth Quarter 7-3/4 2-3/4 Board of Directors Corporate Officers Robert D. Gordon Robert D. Gordon Chairman Executive officer, Chairman of the Board, President Chief Executive Officer, Apertus Technologies Incorporated President Nicholas J. Covalta Julie Cummins Brady Chairman of the Board Corporate Vice President, Atlantis Group, Inc. General Counsel and Corporate Secretary Robert W. Fischer President Sue Hogue Robert W. Fischer & Co., Inc. Corporate Vice President, Chief Financial Officer an Arch J. McGill Chief Administrative Officer President Chardonnay, Inc. Group Martin Hahn Corporate Vice President, Clarence W. Spangle Internet Solutions Division Independent Consultant George E. Hubman Auditors Independent Consultant Ernst & Young LLP Transfer Agent Norwest Bank Minnesota, N.A. Founded in 1979, Apertus Technologies Incorporated is headquartered in suburban Minneapolis, Minnesota, with major offices in New York, NY and London, England. The Company has sales and service offices throughout North America and Europe. A copy of the Company's annual report on Form 10-K (excluding exhibits) filed with the Securities and Exchange Commission may be obtained without charge to shareholders upon written request to: Don Mcllwain Vice President, Investor Relations Apertus Technologies Incorporated 7275 Flying Cloud Drive Eden Prairie, MN 5534 EX-21 5 SUBSIDIARIES OF THE REGISTRANT Exhibit 21 ----------
Percentage of State or County of Voting Securities Incorporation or Directly or Indirectly Organization Owned by the Registrant Registrant: Apertus Technologies Incorporated Minnesota Subsidiaries: BlueLine Software, Inc. Minnesota 100% Apertus Technologies Canada Inc. Canada 100% BlueLine B.V. Holland 100% Systems Strategies, Inc. New York 100% Systems Strategies Limited United Kingdom 100% Apertus Inc. GMBH Germany 100%
EX-23.1 6 CONSENT OF ERNST & YOUNG Exhibit 23.1 ------------ Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Apertus Technologies Incorporated of our report dated May 2, 1997, included in the 1997 Annual Report to Shareholders of Apertus Technologies Incorporated. Our audit also included the financial statement schedule of Apertus Technologies Incorporated listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statement (Form S-8, No. 2-91060) pertaining to the Lee Data Corporation Savings and Investment Plan, in the Registration Statement (Form S-8, No. 33-38924) pertaining to the Apertus Technologies Incorporated Long Term Investment Plan, in the Registration Statement (Form S-8, No. 33-50648) pertaining to the Apertus Technologies Incorporated Stock Acquisition Loan Assistance Program, in the Registration Statement (Form S-8, No. 33-88884) pertaining the amendments to the Apertus Technologies Incorporated 1990 Long-Term Incentive Plan, of our report dated May 2, 1997, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of Apertus Technologies Incorporated. Ernst & Young LLP Minneapolis, Minnesota June 26, 1997 EX-24 7 POWERS OF ATTORNEY Exhibit 24 ---------- Powers of Attorney KNOW ALL PERSONS BY THESE RESENTS, that each person whose signature appears below hereby constitutes and appoints Robert D. Gordon, Sue A. Hogue and Julie Cummins Brady and each of them, their true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for them and in their name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Apertus Technologies Incorporated for the fiscal year ended March 30, 1997 and all amendments to such Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of the, or their substitutes, may lawfully do or cause to be done by virtue hereof. Signature Date --------- ---- /s/ Robert D. Gordon June 28, 1997 - - -------------------------------------------- Robert D. Gordon, Chairman of the Board, Chief Executive Officer, President and Director (principal executive officer) /s/ Sue A. Hogue June 28, 1997 - - -------------------------------------------- Sue A. Hogue, Chief Financial Officer (principal financial officer and principal accounting officer) /s/ Nicholas J. Covatta June 28, 1997 - - -------------------------------------------- Nicholas J. Covatta Jr., Director /s/ Robert W. Fischer June 28, 1997 - - -------------------------------------------- Robert W. Fischer, Director /s/ George E. Hubman June 28, 1997 - - -------------------------------------------- George E. Hubman, Director /s/ Arch. J. McGill June 28, 1997 - - -------------------------------------------- Arch J. McGill, Director /s/ Clarence W. Spangle June 28, 1997 - - -------------------------------------------- Clarence W. Spangle, Director EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS MAR-30-1997 APR-01-1996 MAR-30-1997 14,667 0 9,437 3,606 923 25,860 3,715 11,917 31,877 16,617 1,000 0 0 708 14,552 31,877 27,617 37,130 11,188 51,845 0 0 83 (14,278) 200 (14,478) 0 0 0 (14,478) (1.03) (1.03)
EX-99.1 9 CAUTIONARY STATEMENT Exhibit 99.1 ------------ CAUTIONARY STATEMENT Apertus Technologies Incorporated ("Apertus" or the "Company"), or persons acting on behalf of the Company, or outside reviewers retained by the Company making statements on behalf of the Company, or underwriters, from time to time, may make, in writing or orally, "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995 (the "Act"). This Cautionary Statement is for the purpose of qualifying for the "safe harbor" provisions of the Act and is intended to be a readily available written document that contains factors which could cause results to differ materially from those projected in such forward-looking statements. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement. The following matters, among others, may have a material adverse effect on the business, financial condition, liquidity, results of operations or prospects, financial or otherwise, of the Company. Reference to this Cautionary Statement in the context of a forward-looking statement shall be deemed to be a statement that any one or more of the following factors may cause actual results to differ materially from those which might be projected, forecast, estimated or budgeted by the Company in such forward-looking statement or statements: . Decreased demand for the Company's products (particularly the Company's traditional Network Integration Products). . Heightened competition (particularly in the market for the Company's Network Integration Products), including more intense price competition; the introduction of new products by new and existing competitors; and the entry of new competitors. . Market acceptance risk associated with new product introductions (particularly the Company's new Data Integration Products and System Management Products). . Risk of lengthening sales cycles with key customers. . Risk of technological obsolescence of the Company's products. . Inability to manage the Company's cost structure to a level consistent with profitability as the Company aggressively funds new products while retaining its traditional products. . Risks associated with sales of products outside the United States, including those related to foreign regulatory requirements, exchange rate fluctuations and local political, social and economic factors. . Higher service, administrative or general expenses occasioned by the need for additional advertising, marketing, administrative or management information systems expenditures. . Failure to obtain new customers or retain existing customers. . Inability to carry out marketing and sales plans. . Loss or retirement of key executives. . Risks associated with the company's dependence on proprietary technology, including those related to adequacy of copyright, trademark and trade secret protection, independent development by competitors, infringement claims by third parties and the related potential for significant litigation expense. . Risks associated with single sources of supply for certain components used in the Company's products, including the potential for delays in product shipments, delays in production and increased supply costs. . Termination of supply contracts or renegotiation at less cost-effective rates or terms of payment. . Changes in interest rates causing a reduction of investment income or in the market value of interest rate sensitive investments. The foregoing review of factors pursuant to the Act should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by the Company prior to the effective date of the Act. -----END PRIVACY-ENHANCED MESSAGE-----