<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 28, 1997
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________________to ______________
Commission file number 012378
------
APERTUS TECHNOLOGIES INCORPORATED
---------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1349953
--------- ----------
(State or other jurisdiction of (I. R. S. Employer Identification Number)
incorporation or organization)
7275 FLYING CLOUD DRIVE, EDEN PRAIRIE, MINNESOTA 55344
------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 828-0300
---------------
Indicate by check mark 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
-------------------------- -----------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.05 par value 16,452,455
- ---------------------------- ---------------------------------------
Class Shares outstanding on December 28, 1997
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
-------------------------------
Consolidated Statements of Operations - Three and Nine Months
Ended December 28, 1997 and December 29, 1996....................... 1
Consolidated Balance Sheets - December 28, 1997 and
March 30, 1997...................................................... 2
Consolidated Statements of Cash Flows - Nine Months Ended
December 28, 1997 and December 29, 1996............................. 3
Notes to Financial Statements........................................ 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
Condition and Results of Operations
-----------------------------------
Financial Condition.................................................. 5
Results of Operations................................................ 6
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.......................................... 7
-----------------
ITEM 2. CHANGES IN SECURITIES...................................... 7
---------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................ 7
-------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
----------------------------------
SECURITY HOLDERS........................................... 7
----------------
ITEM 5. OTHER INFORMATION.......................................... 7
-----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................... 7
--------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ ---------------------
Dec 28, Dec 29, Dec 28, Dec 29,
1997 1996 1997 1996
------------------ ---------------------
<S> <C> <C> <C> <C>
Revenues
Sales $587 $1,263 $1,211 $2,034
Service 183 72 374 143
------------------ ---------------------
Total 770 1,335 1,585 2,177
Costs and Expenses
Cost of revenues 652 358 1,509 813
Research, development and engineering 585 285 1,566 542
Selling, general and administrative 1,559 1,118 3,467 3,345
Other charges 10,379 10,379
------------------ ---------------------
Total 13,175 1,761 16,921 4,700
------------------ ---------------------
Loss from operations (12,405) (426) (15,336) (2,523)
Investment income 167 78 403 248
Interest expense (12) (21) (46) (59)
------------------ ---------------------
Loss from continuing operations before income taxes (12,250) (369) (14,979) (2,334)
Income taxes 5 5 10 15
------------------ ---------------------
Net loss from continuing operations (12,255) (374) (14,989) (2,349)
Discontinued operations:
Income (loss) from operations of discontinued
Internet Solutions Division (622) (2,373) 606 (2,212)
Gain on disposal of Internet Solutions Division 4,162 4,162
------------------ ---------------------
3,540 (2,373) 4,768 (2,212)
------------------ ---------------------
Net Loss ($8,715) ($2,747) ($10,221) ($4,561)
================== =====================
Income (Loss) per Share:
Continuing Operations ($0.77) ($0.03) ($1.01) ($0.17)
Discontinued Operations 0.22 (0.16) 0.32 (0.15)
------------------ ---------------------
Total ($0.55) ($0.19) ($0.69) ($0.32)
================== =====================
Weighted Average Shares Outstanding 15,824 14,120 14,737 14,083
================== =====================
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
December 28, March 30,
1997 1997
-------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $14,838 $13,865
Cash in escrow 1,008 802
Accounts receivable - net 1,496 9,437
Inventories 0 923
Current portion of installment receivables - net 0 420
Other 232 413
-------------------------
Total cuurent assets 17,574 25,860
Property and equipment 4,564 15,632
Accumulated depreciation (3,199) (11,917)
-------------------------
Property and equipment - net 1,365 3,715
Other Assets
Capitalized software - net 0 1,373
Installment receivables - net of current portion 0 539
Goodwill - net 0 390
-------------------------
Total other asssets 0 2,302
-------------------------
$18,939 $31,877
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $822 $7,603
Accrued expenses 5,034 4,281
Deferred revenue 873 3,733
Note payable 1,000 1,000
-------------------------
Total current liabilities 7,729 16,617
Long-term Notes Payable 576 0
Shareholders' Equity
Common stock - authorized, 30,000,000 shares
at $.05 par value; issued and outstanding at
December 28, 1997 - 16,452,455 shares
March 30, 1997 - 14,158,623 shares 823 708
Additional paid-in capital 62,757 57,373
Retained deficit (52,936) (42,715)
Unearned compensation (10) (106)
-------------------------
Total shareholders' equity 10,634 15,260
-------------------------
Total $18,939 $31,877
=========================
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
Dec 28, Dec 29,
1997 1996
----------------------
<S> <C> <C>
Operating Activities:
Net loss ($10,221) ($4,561)
Adjustments to reconcile net loss to net cash used in operations:
Gain on disposal of Internet Solutions Division (4,162)
Other charges 10,379
Depreciation and amortization 1,400 3,524
Accounts receivable 1,458 (1,223)
Installment receivables 170 824
Inventory (128) 425
Other assets 7 824
Accounts payable, accrued expenses, deferred income and
income taxes (6,046) (648)
----------------------
Net cash flows used in operating activities (7,143) (835)
Investing Activities:
Maturities of marketable securities 4,318
Purchases of property and equipment (114) (589)
Capitalized software (2,361)
Note receivable 8,700
Change in cash held in escrow (8) 746
Cash from acquired company (net) 68
Cash from disposal of Internet Solutions Division (net) 10,712
----------------------
Net cash flows from (used in) investing activities 10,658 10,814
Financing Activities:
Repayments of debt (2,750) (8,976)
Stock options/restricted stock activity (net) 208 255
----------------------
Net cash flows from (used in) financing activities (2,542) (8,721)
----------------------
Net increase in cash and cash equivalents 973 1,258
Beginning cash and cash equivalents 13,865 5,455
----------------------
Ending cash and cash equivalents $14,838 $6,713
======================
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. MANAGEMENT REPRESENTATION
The accompanying unaudited interim financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations for any interim
period are not necessarily indicative of results for the year. These statements
should be read in conjunction with the financial statements and related notes
included in the Company's Annual Report on form 10-K for the year ended March
30, 1997.
2. DISCONTINUED OPERATIONS
The Company closed an Asset Purchase Agreement with Computer Network Technology
Corporation (CNTC) on October 31, 1997 providing for the sale of the Company's
Internet Solutions Division as previously noted in the Form 10-Q for the quarter
ended September 28, 1997. The terms of the Agreement provided for CNTC to pay
the Company $11.4 million in cash and to assume certain liabilities. The
interim statements of operations for the three and nine months ended December
28, 1997 and December 29, 1997, have been prepared to show the operations of the
Internet Solutions Division as discontinued and the gain has been recorded in
the current quarter.
3. ACQUISITION OF CARLETON CORPORATION
The Company closed an Agreement and Plan of Merger with Carleton Corporation on
October 31, 1997. Under the terms of the Agreement, the Company acquired the
stock of Carleton Corporation through purchase in cash of Carleton shares held
by people owning less than 20,000 shares and the exchange of approximately
2,161,000 shares of Apertus common stock and issuance of notes with an initial
face value of $2.0 million (that are subject to certain offsets and further
adjustment based upon revenue performance of the Company and the market price of
the Company's common stock) for the Carleton shares held by people owning more
than 20,000 shares. In addition, the Company rolled over any outstanding
options and warrants for Carleton stock and converted them into options and
warrants for Apertus common stock. The transaction was accounted for under the
purchase method of accounting and the portion of the purchased price allocated
to purchased research and development has been expensed in the current period.
Pro forma consolidated results of continuing operations (excluding other
charges) for the nine months ended December 28, 1997 and December 29, 1996 as if
Carleton had been acquired at the beginning of fiscal 1997 are:
December 28, December 29,
1997 1996
------------ ------------
Revenues $ 2,574 $ 4,051
Net loss (6,222) (3,055)
Net loss per share (.38) (.19)
<PAGE>
4. OTHER CHARGES
During the current quarter, the Company recorded other charges of $10,379.
These charges relate to recognizing the purchased research and development from
the Carleton acquisition as expense in the current period and writing off the
unamortized balance of the capitalized software.
5. NET LOSS PER SHARE
Net loss per share is computed using the weighted average nuymber of common
stock shares outstanding during the applicable period. There is no impact to
the Company's calculation of the net loss per share resulting from adoption of
Financial Accounting Standards Board Statement No. 128, "Earnings Per Share."
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF CONTINUING OPERATIONS
CAUTIONARY STATEMENT
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements contain works or phrases such as "will likely
result," "are expected to," "will continue to," "is anticipated," "estimate,"
"project," or similar expressions. 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: inability to integrate the operations and products of Carleton
Corporation; 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; and risks
associated with single sources of supply for certain components used in the
Company's products. 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 Quarterly Report on Form 10-Q.
FINANCIAL CONDITION
The consolidated balance sheet as of December 28, 1997, shows cash and cash
equivalents of $14,838. The Company currently anticipates minimal capital
expenditures in the near future. These expenditures will be primarily for
computers for any new hires. The Company believes the cash position will be
adequate to support its anticipated short-term operating losses, make capital
investments and fund working capital needs into fiscal 1999-2000.
RESULTS OF OPERATIONS
The consolidated statements of operations reflect the effects of the
discontinued operations (see Note 2 to the financial statements) by showing the
operations of the Internet Solutions Division as a single line item and also
showing the gain on disposal as a separate line item. The prior years
statements for the comparable periods have also been adjusted for these effects.
Note that the consolidated operating results for the three and nine month
periods ended December 28, 1997, include the results of the former Carleton
Corporation since the date of its acquisition by the Company (see Note 3 to the
financial statements).
<PAGE>
During the current quarter, the Company completed a major restructuring that
focuses the Company exclusively on the data warehousing market. This
restructuring included the purchase of Carleton Corporation and the sale of the
Internet Solutions Division to CNTC. The resulting Company is an early stage
company with unpredictable results and with the need for several quarters of
investment being required to realize its potential in the data warehousing
market.
The loss from continuing operations for the three months ended include other
charges of $10,379. Excluding these charges, the loss for the three months would
have been $1,876, or $.12 per share, and the loss for the nine months would have
been $4,610, or $.31 per share. The results for the quarter were below the
Company's expectations and reflect some of the difficulty experienced in
bringing the organization together. The Company did, however, manage to close
its first customer using both the former Carleton and Apertus products. The
Company hopes to be able to build upon that success in the future and grow its
revenue numbers. The costs and expenses for the quarter reflect a high
relationship between revenues and the cost associated with those revenues due
primarily to the higher professional service component of revenues and straight-
line amortization of capitalized software. The research, development and
engineering costs reflect the continued investment in the Company's products and
such investment will continue, and will most likely increase, in the near
future. The selling, general and administrative expenses reflect the additional
costs in adding the Carleton facility and also may reflect some differences in
how costs were allocated in the prior year.
The Company anticipates making some additional investment in research,
development and engineering in the near term in order to achieve full
commercialization of its products and to assist in building reference accounts.
In addition, the Company also expects to make some additional investment in
sales and marketing in order to improve its direct sales effectiveness, work
with channel partners, implement its marketing programs and increase market
image and awareness.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Separation Agreement and Mutual Release, each dated October 10, 1997,
between the Company and Julie Cummins Brady
10.2 Letter of Mutual Resignation Agreement dated January 12, 1998,between
the Company and Paul Fluckiger
99.1 Cautionary Statement
(b) A report on Form 8-K was filed on November 10, 1997 to report under
Item 2 the Company's acquisition of Carleton Corporation and the sale
of the Internet Solutions Division to CNTC, which report included the
required audited financial statements of Carleton Corporation. An
amendment to this 8-K was filed on January 9, 1998 to include the pro
forma financial information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APERTUS TECHNOLOGIES INCORPORATED
Date: February 11, 1998 By: /s/ Steve Thimjon
-----------------------------
Steve Thimjon
Vice President
Chief Financial Officer
<PAGE>
Exhibit 10.1
------------
SEPARATION AGREEMENT
--------------------
This Separation Agreement ("Agreement") is entered into by and between
Julie Cummins Brady ("Employee") and Apertus Technologies Incorporated
("Employer").
WHEREAS, Employee serves as Vice President and General Counsel of
Employer; and
WHEREAS, Employee and Employer desire to provide for the mutual
termination of Employee's employment as of the close of business on December 31,
1997 ("Termination Date") and to fully and finally settle all issues,
differences and actual and potential claims between them, including, but in no
way limited to, any claim that might arise out of Employee's employment with
Employer and the termination thereof.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, Employer and Employee agree as follows:
1. Employee's employment with Employer will terminate upon the close
of business on the Termination Date. Except as provided in paragraph 3,
Employee shall continue to perform her duties as a full time employee diligently
and to the best of her abilities through the Termination Date. On the the first
business day after the Termination Date, Employee shall receive a pay out for
accrued and unused vacation and for all deferred compensation.
2. Employer agrees that as a severance payment, it shall continue to
pay to Executive her base salary through September 30, 1998, and shall continue
to provide health insurance benefits for Employee and her dependents through
September 30, 1998, subject to deductions for federal income tax, FICA and state
income tax. Employee shall make the same contribution for health insurance
benefits as she would if she continued as an employee of Employer, which shall
be a deduction from payments of base salary. Outstanding stock options held by
Employee shall fully vest as of the Termination Date, the exercise price thereof
shall have the benefit of the Company's repricing plan and such options shall
remain exercisable through September 30, 1998. Employee agrees that her rights
to all other benefits shall terminate effective at the close of business on the
Termination Date. The payments and benefits specified in this Agreement shall
discharge any obligations of Employer to Employee for compensation, unused or
accrued vacation or any other expectations of remuneration or benefit on the
part of Employee.
3. Beginning after November 28, 1997, Employer agrees that,
consistent with her overall duties, Employee may have reasonable time off for
job interviews related to new employment.
4. With respect to any statment about Employee's employment,
Employer shall only provide the dates of employment and position held, state
that separation from Employer's employment was due to the elimination of the
position as Employer became a smaller, more focused company and state that
Employee made a valuable contribution to Employer during the period of her
employment. With
<PAGE>
respect to any statement about Employee's employment, Employee shall only
provide the dates of employment and position held, state that separation from
Employer's employment was due to the elimination of the position as Employer
became a smaller, more focused company and state that Employer provided a
satisfying employment experience.
5. This Agreement shall not in any way be construed as an admission
by Employer that it has acted wrongfully with respect to Employee, and Employer
specifically disclaims any liability to or wrongful acts against Employee or any
other person, on the part of itself, or its employees.
6. The terms of this Agreement shall remain strictly confidential
between the parties hereto and shall not be disclosed to third persons unless
required by law.
7. Employee hereby affirms that her rights to payments or benefits
from Employer are specified exclusively and completely in this Agreement. Any
modification of, or addition to, this Agreement must be in writing signed by
Employee and by the authorized representative of Employer.
8. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Minnesota. Nothing contained in this
Agreement is intended to violate any applicable law. Should any part of this
Agreement be declared or be determined by any court to be illegal or invalid,
the validity of the remaining parts, terms, or provisions shall not be affected
thereby and the said illegal or invalid part, term, or provision shall be deemed
not to be a part of this Agreement.
9. Employee has read the foregoing Agreement and has consulted with
an attorney before executing this Agreement. Employee understands the meaning
of the terms of this Agreement and their effect and agrees that the provisions
set forth in the Agreement are written in understandable language to Employee.
Employee enters into this Agreement freely and voluntarily.
10. As an essential inducement to Employee to enter into this
Agreement, and as consideration for the foregoing promises of Employer, Employee
agrees that, by this Agreement, Employee and Employer intend to settle any and
all claims Employee has or may have against Employer as a result of its hiring
Employee, Employee's employment with Employer and the cessation of Employee's
employment with Employer. Concurrently herewith, Employer and Employee are
executing and delivering a Mutual Release. This Agreement shall become
effective 15 days from the date hereof provided that Employee does not rescind
the Mutual Release in accordance with its terms.
11. This Agreement shall inure to the benefit of Employee's heirs,
executors and assigns.
12, Any dispute under this Agreement shall be resolved fully and
finally by an arbitrator selected pursuant to, and in an arbitration governed
by, the Commercial Arbitration Rules of the American Arbitration Association.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by
their signature below.
Dated: October 10, 1997 /s/ Julie Cummins Brady
------------------------ ----------------------------------
Julie Cummins Brady
Dated: 10/10/97 APERTUS TECHNOLOGIES
--------------------- INCORPORATED
By: /s/ Robert D. Gordon
------------------------------
Its: CEO
------------------------
<PAGE>
MUTUAL RELEASE
--------------
Julie Cummins Brady ("Employee") and Apertus Technologies Incorporated
together with its predecessors, successors, subsidiaries and affiliates and all
officers, employees and agents of those persons and companies ("Employer")
hereby fully and completely release and waive any and all claims, complaints,
causes of action or demands of whatever kind which either has or may have
against the other, arising out of any actions, conduct, decisions, behavior or
events occurring to the date of each's respective execution of this Mutual
Release, except the Separation Agreement of even date herewith.
Each signatory to this Mutual Release understands and accepts that
this Release specifically covers but is not limited to any and all claims,
complaints, causes of action or demands which she/it has or may have against the
above-referenced released parties relating in any way to the terms, conditions
and circumstances of Employee's employment and the termination of her employment
with Employer, whether based on statutory or common law claims for employment
discrimination, wrongful discharge, breach of contract, breach of any express or
implied promise, misrepresentation, fraud, retaliation, breach of public policy,
infliction of emotional distress, defamation, promissory estoppel, invasion of
privacy, negligence, or any other theory, whether legal or equitable; provided,
however, that Employee does not release any right to indemnification arising
under the Minnesota Business Corporation Act she may have.
By their signature below, the parties signing below acknowledge that
they fully understand and accept the terms of this Mutual Release, and they
represent and agree that their signatures are freely, voluntarily and knowingly
given.
By her signature below, Employee further acknowledges that she has
been provided a full opportunity to review and reflect on the terms of this
Release and to seek the advice of legal counsel of her choice, which advice she
has been encouraged to obtain.
Employee understands that she may rescind this Mutual Release if she
does so in writing, delivered by registered mail to Employer within 15 days of
the date of her signature on this Mutual Release.
Dated: October 10, 1997 /s/ Julie Cummins Brady
----------------------- --------------------------------
Julie Cummins Brady
Dated: 10/10/97 APERTUS TECHNOLOGIES
--------------------- INCORPORATED
By: /s/ Robert D. Gordon
-----------------------------
Its: CEO
-----------------------------
<PAGE>
Exhibit 10.2
------------
[Letterhead of Apertus Carleton Corporation]
January 12, 1998
Mr. Paul Fluckiger
12 Lincoln Lane
Sudbury, Massachusetts 01776
Dear Paul,
This letter will confirm the mutual resignation agreement that effectively
concludes your position as Chief Operations Officer for Apertus Technologies
Incorporated (Apertus Carleton) as well as, concludes your position as Director
on the Apertus Technologies Incorporated (Apertus Carleton) Board of Directors
effective January 16, 1998. It is up to your discretion as to the time you
choose to spend in the office through January 16, 1998, and it will not be
necessary for you to attend the Board of Directors meeting on January 18, 1998.
The following terms and conditions are a reaffirmation of the prior terms and
conditions you and Apertus Technologies Incorporated (Apertus Carleton) mutually
agreed upon on October 30, 1997 and includes additional consideration not
previously stated in the original employment agreement.
As a result of the mutual agreement resignation between Apertus Technologies
Incorporated (Apertus Carleton) and yourself, the following will detail the
benefits and compensation relating to this action.
- - (Per your agreement dated October 30, 1997) Apertus Technologies
Incorporated (Apertus Carleton) will pay you twelve months of base salary
for the next twelve months through the company's bi-weekly payroll.
- - (Per your agreement dated October 30, 1997) You agree not to compete
directly or indirectly with Apertus or Carleton or its successor company
for period of two (2) years from the date of your resignation. In addition,
for two (2) years subsequent to any termination of this agreement, you
agree not to directly or indirectly solicit any employees of Apertus or
Carleton and/or their successor company.
- - Your Group Health and Life insurance coverage will end February 1, 1998.
However, you have the option to choose to continue your health insurance
coverage at group rates. If you choose to continue coverage, Apertus
Technologies Incorporated (Apertus Carleton) will pay your COBRA premiums
through January 1999. Regarding your basic Life Insurance continuation
coverage: Apertus Technologies Incorporated (Apertus Carleton) will pay the
associated COBRA life insurance premium payments for one year at a benefit
level of $400,000.00.
- - As your 401(K) balance exceeds $5,000.00, your account balance can remain
in the Apertus Technologies Savings and Investment Plan 401(K). However,
per ERISA regulations, as you are no longer a full-time employee, you will
not be able to make contributions to the Plan. There are no administrative
charges associated with 401(K) plan continuance that are the responsibility
of current or former employees.
- - Your loan balance of $4,547.96 will be forgiven and you will receive an
additional $5,000.00 for miscellaneous expenses that you may have incurred
as a result of relocation activity. Any future or current expense reports
that have not been paid will be processed per expense report policy after
C.E.O. approval.
<PAGE>
- - Your current office phone number will be available to you over the next 60
days and the existing Apertus Technologies Incorporated (Apertus Carleton)
personal computer that you are using in your home will become your
property. The personal computer in your office along with your office
furniture will be made available to you for personal use in your home. If
you elect to use these items in your home, they will become your personal
property.
In return for these extended considerations, you agree to the additional
following considerations:
- - Provide consulting services to the Company from time to time as
mutually agreed over the next (12) months.
- - Affirm your support of Apertus Carleton's direction, priorities and
organization to employees, customers/prospects and other organizations
influencing the data warehousing market.
- - Agree to keep confidential the terms and conditions of this agreement
and any corporate information that is proprietary.
APERTUS TECHNOLOGIES INCORPORATED (APERTUS CARLETON)
/s/ Robert D. Gordon
- ------------------------------------------
Robert D. Gordon
Chairman, C.E.O. & President
AGREED TO AND ACCEPTED BY:
/s/ Paul Fluckiger
- ---------------------------------------------
Paul Fluckiger
1/22/98
- -------------------------------------------------
Date
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> MAR-29-1998 MAR-29-1998
<PERIOD-START> SEP-29-1997 MAR-31-1997
<PERIOD-END> DEC-28-1997 DEC-28-1997
<CASH> 15,846 0
<SECURITIES> 0 0
<RECEIVABLES> 1,745 0
<ALLOWANCES> 249 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 17,574 0
<PP&E> 4,564 0
<DEPRECIATION> 3,199 0
<TOTAL-ASSETS> 18,939 0
<CURRENT-LIABILITIES> 6,729 0
<BONDS> 1,576 0
0 0
0 0
<COMMON> 63,580 0
<OTHER-SE> (52,946) 0
<TOTAL-LIABILITY-AND-EQUITY> 18,939 0
<SALES> 587 1,211
<TOTAL-REVENUES> 770 1,585
<CGS> 652 1,509
<TOTAL-COSTS> 2,796 6,542
<OTHER-EXPENSES> 10,379 10,379
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12 46
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<PAGE>
Exhibit 99.1
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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:
INTEGRATION OF OPERATIONS
If Apertus is to realize the anticipated benefits of the merger with
Carleton Corporation (the "Merger"), the operations of the two companies must be
integrated and combined efficiently. The process of rationalizing management
services, administrative organizations, facilities, management information
systems and other aspects of operations, while managing a larger and
geographically expanded entity, will present a significant challenge to the
management of the combined company, particularly at a time when Apertus only
recently divested its Internet Solutions Division ("ISD") business. There can be
no assurance that the integration process will be successful or that the
anticipated benefits of the Merger will be fully realized. The dedication of
management resources to such integration may detract attention from the day-to-
day business of Apertus. The difficulties of integration may be increased by the
necessity of coordinating geographically separated organizations, integrating
personnel with disparate business backgrounds and combining different corporate
cultures. There can be no assurance that there will not be substantial costs
associated with the integration process, that such activities will not result in
a decrease in revenues or that there will not be other material adverse effects
of these integration efforts. Such effects could materially reduce the short-
term earnings of the Company.
FLUCTUATIONS IN OPERATING RESULTS
Apertus has experienced significant fluctuations in its revenues and
operating results from quarter to quarter and anticipates that it will continue
to experience such quarterly fluctuations. The Company's revenues and
<PAGE>
operating results have generally been significantly higher in the fourth fiscal
quarter than in any preceding quarter of each fiscal year. Apertus believes that
fourth quarter revenues are positively impacted by year-end capital purchases by
some large corporate customers. Seasonal factors, which Apertus believes are
common in the computer software industry, are likely to increase as Apertus
focuses on larger corporate accounts. Accordingly, the Company's quarterly
results of operations are difficult to predict, and delays in product delivery
or in closings of sales near the end of the quarter could cause quarterly
revenues and, to a greater degree, net income to fall substantially short of
anticipated levels. Factors that may contribute to such fluctuations in addition
to seasonal factors include: the number of new orders and product shipments; the
size and timing of individual orders; the timing of shipment of hardware or
database software by third party vendors necessary in order for Apertus to
recognize revenues; the timing of introduction of products or product
enhancements by the Company, the Company's competitors or other providers of
hardware, software and components for the Company's markets; competition and
pricing in the software industry; market acceptance of new products; reduction
in demand for existing products and shortening of product life cycles as a
result of new product introductions by competitors; product quality problems;
customer order deferrals in anticipation of new products; changes in customer
budgets; changes in operating expenses; changes in strategy; personnel changes;
foreign currency exchange rates; mix of products sold; conditions or events in
the manufacturing industry; and general economic conditions.
In addition, the achievement of anticipated revenues is substantially
dependent on the ability of Apertus to attract, on a timely basis, and retain
skilled personnel, especially sales, service and implementation personnel. As a
result of these factors, revenues for any quarter are subject to significant
variation, and Apertus believes that period-to-period comparisons of its results
of operations are not necessarily meaningful and should not be relied upon as
indications of future performance. Fluctuations in operating results may also
result in volatility in the price of the Company's Common Stock.
COMPETITION
The computer software industry is intensely competitive, rapidly
changing and significantly affected by new product offerings and other market
activities. A number of companies offer products similar to the Company's
products. Many of the Company's existing competitors, as well as a number of
potential competitors, have more established and larger marketing and sales
organizations, significantly greater financial and technical resources and a
larger installed base of customers than the Company. The Company has no
proprietary barriers to entry which would limit competitors from developing
similar products or selling competing products in the Company's markets.
Accordingly, there can be no assurance that such competitors will not offer or
develop products that are superior to the Company's products or that achieve
greater market acceptance. In addition, Apertus will focus its marketing and
product development efforts toward the data integration market. Competition
(including price competition) is likely to increase substantially, which may
result in price reductions and loss of market share. Apertus may also face
resistance from potential customers which have a large installed base of legacy
systems, and, therefore, may be reluctant to commit the time and resources
necessary to convert to an open systems-based
<PAGE>
client/server software product. As the client/server computing market expands, a
large number of companies, some with significantly greater resources than
Apertus, may enter the market or increase their market share by acquiring or
entering into alliances with competitors of Apertus. There can be no assurance
that Apertus will be able to compete successfully against its competitors or
that the competitive pressures faced by Apertus will not adversely affect its
financial performance.
The Company's principal markets are highly fragmented and consist of a
few large multinational suppliers and a much larger number of small, regional
competitors. The Company believes that its industry will experience
consolidation as management information systems become more complex and as more
manufacturers adopt sophisticated management information systems, forcing
smaller companies in the industry to specialize or merge with their competitors.
In order to compete effectively in the broad markets which the Company presently
targets, the Company will need to continue to grow and attain sufficient size to
ensure that it can develop new products on a timely basis in response to
evolving technology and new customer demands and can sell such products on a
timely basis to a variety of manufacturing industries worldwide. No assurance
can be given that the Company will be able to grow sufficiently to enable it to
compete effectively.
In order to be successful in the future, Apertus must respond
effectively to customer needs and properly select and incorporate those
technologies and application functionalities that will meet the challenges posed
by competitors' innovations. To accomplish this critical objective, Apertus must
continue to invest in enhancing its current products and, when necessary,
introduce new products to remain competitive.
ABILITY TO RECRUIT SALES, SERVICE AND IMPLEMENTATION PERSONNEL
The ability to achieve anticipated revenues is substantially dependent
on the ability of Apertus to attract on a timely basis and retain skilled
personnel, especially sales, service and implementation personnel. In addition,
Apertus believes that its future success will depend in large part on its
ability to attract and retain highly skilled technical, managerial, marketing
and professional services personnel to ensure the quality of products and
services provided to its customers. Competition for such personnel, in
particular for product development, sales and implementation personnel, is
intense, and Apertus competes in the market for such personnel against numerous
companies, including larger, more established companies with significantly
greater financial resources than Apertus. There can be no assurance that Apertus
will be successful in attracting and retaining skilled personnel. The Company's
inability to attract and retain qualified employees could have a material
adverse effect on the Company's business and operations.
RECENT OPERATING LOSSES
Apertus has sustained operating losses in each of the past two fiscal
years. The losses were due to many factors. A primary reason was the
continuing decline in the older generation network integration products both
domestically and internationally. In addition, the mix of products sold
reflected a higher hardware component which resulted in an increased cost as a
percentage of sales. A final contributing factor was the fixed component of
<PAGE>
the operational infrastructure. The Company's ability to return to profitability
is dependent upon continued development and successful marketing of its
products.
DEPENDENCE ON KEY EMPLOYEES
Apertus is dependent upon the continued services and management
experience of Robert Gordon and other executive officers. If Mr. Gordon or any
of such other executive officers were to leave Apertus, the Company's operating
results could be adversely affected. In addition, the Company's continued growth
depends on its ability to attract and retain skilled employees and on the
ability of its officers and key employees to manage growth successfully. The
loss of certain key employees or the Company's inability to attract and retain
other qualified employees could have a material adverse effect on the Company's
business and operations.
DEPENDENCE ON PRINCIPAL PRODUCTS
Substantially all of the Company's revenue following the sale of its
ISD will be derived from the sale of data integration tools, primarily the
Passpont and Enterprise/Integrator products, and related support services.
Accordingly, any event that adversely affects fees derived from the sale of such
tools, such as competition from other products, significant flaws in the
Company's software products or incompatibility with third party hardware or
software products, negative publicity or evaluation, or obsolescence of the
hardware platforms or software environments in which the systems run, could have
a material adverse effect on the Company's business and operations. The
Company's future financial performance will depend, in substantial part, on the
continued development and introduction of new and enhanced versions of its
products, and customer acceptance of such new and enhanced products.
RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS
The market for the Company's software products is characterized by
rapid technological advances, evolving industry standards, changes in end-user
requirements and frequent new product introductions and enhancements. The
introduction of products embodying new technologies and the emergence of new
industry standards could render the Company's existing products and products
currently under development obsolete and unmarketable. Accordingly, the
Company's future success will depend upon their ability to enhance its current
products and develop and introduce new products that keep pace with
technological developments, satisfy varying end-user requirements and achieve
market acceptance. Any failure by the Company to anticipate or respond
adequately to technological developments or end-user requirements, or any
significant delays in product development or introduction, could damage the
Company's competitive position and have an adverse effect on revenues. There can
be no assurance that the Company will be successful in developing and marketing
new products or product enhancements on a timely basis or that the Company will
not experience significant delays in the future, which could have a material
adverse effect on the Company's business and operations. In addition, there can
be no assurance that new products or product enhancements developed by the
Company will achieve market acceptance. Apertus may need to increase the size of
its product development staff in the near term to meet
<PAGE>
these challenges. There can be no assurance that Apertus will be successful in
hiring and training adequate product development personnel to meet its needs.
Software programs as complex as those offered by the Company may
contain undetected errors or "bugs" when first introduced or as new versions are
released that, despite testing by the Company, are discovered only after a
product has been installed and used by customers. There can be no assurance that
errors will not be found in future releases of the Company's software, or that
any such errors will not impair the market acceptance of these products and
adversely affect operating results. Problems encountered by customers installing
and implementing new releases or with the performance of the Company's products
could have a material adverse effect on the Company's business and operations.
DEPENDENCE ON THIRD PARTY SUPPLIERS
Certain components of the Company's Enterprise/Integrator products are
currently available only from a single source. Delays in product shipments,
delays in production and increased supply costs could have a material adverse
effect on the Company's business and operations.
In addition, the Company's products incorporate and use software
products and computer hardware and equipment developed by other entities. There
can be no assurance that all of these entities will remain in business, that
such entities will continue to support these product lines, that their product
lines will remain viable or that these products will otherwise continue to be
available to the Company. If any of these entities ceases to do business or
abandons or fails to enhance a particular product line, the Company may need to
seek other suppliers. This could have a material adverse effect on the Company's
business and operations.
DEPENDENCE ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
Apertus relies on a combination of copyright, trademark and trade
secret laws, employee and third-party nondisclosure agreements and other
industry standard methods for protecting ownership of its proprietary software.
There can be no assurance, however, that, in spite of these precautions, an
unauthorized third party will not copy or reverse-engineer certain portions of
the Company's products or obtain and use information that the Company regards as
proprietary. Although the Company's licenses contain confidentiality and
nondisclosure provisions, there can be no assurance that such customers will
take adequate precautions to protect the Company's source codes or other
confidential information. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States. There can be no assurance that the mechanisms used by the
Company to protect its software will be adequate or that the Company's
competitors will not independently develop software products that are
substantially equivalent or superior to the Company's software products.
The Company may receive notices from third parties claiming that the
Company's products infringe third party proprietary rights. Apertus expects
that, as the number of software products in the industry increases and the
functionality of these products further overlaps, software products will
increasingly be subject to such claims. Any such claim, with or without merit,
<PAGE>
could result in costly litigation and require Apertus to enter into royalty or
licensing arrangements. Such royalty or license arrangements, if required, may
not be available on terms acceptable to Apertus or at all.
PRODUCT LIABILITY
Because Apertus markets and sells its software products on a turnkey
basis, which includes rendering professional consulting services, Apertus incurs
significant risks of professional and other liability. No assurance can be given
that the limitations of liability set forth in the Company's license agreements
or other contracts would be enforceable or would otherwise protect the Company
from liability for damages to a customer resulting from a defect in one of the
Company's products or arising as a result of professional services rendered by
the Company. Such a claim, if successful and of sufficient magnitude, could
have a material adverse effect on the Company's business and operations.
ADDITIONAL BUSINESS RISKS
The future success of the Company's business and operations are
subject to several additional business risks, including (i) risk of lengthening
sales cycles with key customers; (ii) 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; (iii) 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; (iv) higher service, administrative or
general expenses occasioned by the need for additional advertising, marketing,
administrative or management information systems expenditures; (v) failure to
obtain new customers or retain existing customers; (vi) termination of supply
contracts or renegotiation at less cost-effective rates or terms of payment;
(vii) inability to carry out marketing and sales plans; and (viii) 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.
