<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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:
<TABLE>
<CAPTION>
Name Age Position
- - --------------------- --- --------
<S> <C> <C>
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
</TABLE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
Part IV
Item 14. Exhibits, Financial Statements, Financial Statement Schedules, and
Reports on Form 8-K
(a) Exhibits, Financial Statements, Financial Statement Schedules
<TABLE>
<CAPTION>
1. Financial Statements Page Reference in
Exhibit 13 to this
Form 10-K
Annual Report
------------------
<S> <C>
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
</TABLE>
The financial statements listed above are included in Exhibit 13 and are
hereby incorporated by reference.
<TABLE>
<CAPTION>
2. Financial Statement Schedules Page Number in
This Form 10-K
Annual Report
--------------
<S> <C>
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
</TABLE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
<TABLE>
<CAPTION>
By: /s/ Robert D. Gordon
-------------------------
Robert D. Gordon
Chairman of the Board,
Chief Executive Officer
and President
<S> <C> <C>
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 )
</TABLE>
________________________
* 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-
<PAGE>
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)
<TABLE>
<CAPTION>
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
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
- - ----------------
(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-
<PAGE>
Apertus Technologies Incorporated
Index of Exhibits
Annual Report on Form 10-K
For the Year Ended March 30, 1997
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
<S> <C> <C>
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
</TABLE>
<PAGE>
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.
<PAGE>
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>
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>
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
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
<CAPTION>
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
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
========================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
Apertus Technologies Incorporated
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 30, 1997 March 31, 1996
- - --------------------------------------------------------------------------------------
<S> <C> <C>
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
=====================================
</TABLE>
6
<PAGE>
Apertus Technologies Incorporated
CONSOLIDATED BALANCE SHEETS cont.
(dollars in thousands)
<TABLE>
<CAPTION>
March 30, 1997 March 31, 1996
- - --------------------------------------------------------------------------------------
<S> <C> <C>
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
====================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
7
<PAGE>
Apertus Technologies Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Fiscal Years Ended
---------------------------------------------------
March 30, 1997 March 31, 1996 April 2, 1995
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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 -
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
8
<PAGE>
Apertus Technologies Incorporated
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock
-----------------------
Number Amount Additional Accumulated Unearned
of Shares Paid in Capital Deficit Compensation
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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)
====================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
9
<PAGE>
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:
<TABLE>
March 30, March 31,
1997 1996
- - ------------------------------------------------------------------------
<S> <C> <C>
Raw material $390 $ 652
Work-in-process 455 1,542
Finished goods 78 1,687
- - ------------------------------------------------------------------------
Inventories $923 $3,881
- - ------------------------------------------------------------------------
</TABLE>
10
<PAGE>
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:
<TABLE>
March 30, March 31, Depreciable
1997 1996 Lives in Years
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- - --------------------------------------------------------------------------------
</TABLE>
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:
<TABLE>
Cash and Short
Cash Term
Equivalents Investments Total
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
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
- - -----------------------------------------------------------------------------
</TABLE>
At March 30, 1997 and March 31, 1996, the cost of marketable securities
approximated market value.
11
<PAGE>
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:
<TABLE>
<CAPTION>
Unaudited
----------------------------
Fiscal 1997 Fiscal 1996
- - ------------------------------------------------------------
<S> <C> <C>
Revenues $ 32,628 $47,012
Net loss $(22,530) $(7,003)
Net loss per share $ (1.60) $ (0.50)
</TABLE>
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:
<TABLE>
<CAPTION>
Unaudited
----------------------------
Fiscal 1996 Fiscal 1995
- - ------------------------------------------------------------
<S> <C> <C>
Revenues $ 51,284 $61,705
Net income (loss) $(10,477) $ 9,926
Net income (loss) per share $ (0.75) $ 0.69
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION> March 30, March 31,
1997 1996
- - ------------------------------------------------------------------------------
<S> <C> <C>
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
- - ------------------------------------------------------------------------------
</TABLE>
7) INSTALLMENT RECEIVABLES
Installment receivables are:
<TABLE>
<CAPTION> March 30, March 31,
1997 1996
- - ------------------------------------------------------------------------------
<S> <C> <C>
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
- - ------------------------------------------------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION> Fiscal Years Ended
----------------------
1997 1996 1995
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ -- $ -- $ --
Foreign 150 158 --
State 50 45 32
Alternative minimum tax -- -- 118
- - ------------------------------------------------------------------------------
Tax provision $200 $203 $150
- - ------------------------------------------------------------------------------
</TABLE>
The effective income tax expense differed from the federal statutory rates as
noted:
<TABLE>
<CAPTION> Fiscal Years Ended
----------------------
1997 1996 1995
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
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%
- - ------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
The components of deferred tax assets and liabilities are as noted:
<TABLE>
<CAPTION>
March 30, March 31,
1997 1996
- - --------------------------------------------------------------------
<S> <C> <C>
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 $ -- $ --
- - --------------------------------------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise
Available Options Price Per
for Grant Outstanding Share
- - --------------------------------------------------------------------
<S> <C> <C> <C>
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
- - --------------------------------------------------------------------
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
Fiscal Fiscal
1997 1996
- - ------------------------------------------
<S> <C> <C>
Net loss $(14,698) $(7,753)
Net loss per share: $ (1.04) $ (0.56)
</TABLE>
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:
<TABLE>
<CAPTION>
Weighted
Average
Grant
Shares Date Fair
Available for Shares Shares Value per
Grant Outstanding Vested Share
- - ----------------------------------------------------------------
<S> <C> <C> <C> <C>
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
- - ---------------------------------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
- - ----------------------------------------------------
<S> <C>
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
- - ----------------------------------------------------
</TABLE>
15
<PAGE>
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:
<TABLE>
<CAPTION>
Future Minimum
Fiscal Year Lease Payments
- - -------------------------------------------
<S> <C>
1998 $ 2,259
1999 2,269
2000 2,312
2001 2,321
2002 2,546
Thereafter 15,892
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
For the Year Ended March 30, 1997
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Fiscal Years Ended
---------------------------------------------------
1997 1996 1995 1994 1993
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- - ---------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
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
<PAGE>
Exhibit 21
----------
<TABLE>
<CAPTION>
Percentage of
State or County of Voting Securities
Incorporation or Directly or Indirectly
Organization Owned by the Registrant
<S> <C> <C>
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%
</TABLE>
<PAGE>
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
<PAGE>
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-30-1997
<CASH> 14,667
<SECURITIES> 0
<RECEIVABLES> 9,437
<ALLOWANCES> 3,606
<INVENTORY> 923
<CURRENT-ASSETS> 25,860
<PP&E> 3,715
<DEPRECIATION> 11,917
<TOTAL-ASSETS> 31,877
<CURRENT-LIABILITIES> 16,617
<BONDS> 1,000
0
0
<COMMON> 708
<OTHER-SE> 14,552
<TOTAL-LIABILITY-AND-EQUITY> 31,877
<SALES> 27,617
<TOTAL-REVENUES> 37,130
<CGS> 11,188
<TOTAL-COSTS> 51,845
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> (14,278)
<INCOME-TAX> 200
<INCOME-CONTINUING> (14,478)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,478)
<EPS-PRIMARY> (1.03)
<EPS-DILUTED> (1.03)
</TABLE>
<PAGE>
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.
<PAGE>
. 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.
