Annual Report • Apr 14, 2014
Annual Report
Open in ViewerOpens in native device viewer
Apptix Annual Report 2013 will only be issued in English. The report is available on www.apptix.com/investor and on www.oslobors.no/app
| Shareholder's Letter | Page 3 |
|---|---|
| Directors' Report |
Page 7 |
| Report on Corporate Governance | Page 13 |
| Executive Management Remuneration | Page 19 |
| Consolidated Financial Statements | Page 21 |
| Financial Statements Apptix ASA | Page 53 |
| Auditors Report | Page 65 |
We have just completed the most successful sales performance in Apptix's history, driving record user and revenue bookings while continuing to expand and enhance our channel partner program. We are energized by this success as it provides great momentum as we forge ahead in 2014 towards our final goal of returning the Company to top line revenue growth.
As an organization, we challenged ourselves with a goal of reaching the historic milestone of 500 000 users under contract by the end of the 2013 – a dramatic increase from 384 000 users at the end of 2012.
This was a planned strategic surge to grab market share at a critical market moment. Our research indicates the Hosted Exchange market is entering an accelerating growth phase. We believe market barriers will prevent competitors from challenging or replicating our surge.
At this crucial opportunity, many of our competitors are caught in a cross fire of unprecedented challenges and struggling just to remain competitive or even survive. They are facing market demands for costly network upgrades and improvements while margin pressure from Microsoft and Google are depleting their resources.
We have faced and overcome many of these challenges as we saved, turned around, and repositioned Apptix for growth. This process created a nimble, flexible, and motivated organization that has continually demonstrated the ability to adapt and reinvent itself to remain competitive and pursue enduring market success.
With a unifying goal and our resources aligned behind our growth strategy, we challenged our team to accelerate our efforts.
The team responded, igniting an effort that delivered a 33% year over year increase in user bookings, driving us past our half million user goal to finish the year with nearly 510 000 users under contract. The annualized revenue value of this record performance was USD 7,4 million; a 24% year over year upsurge.
Completing the alignment of operational resources behind our channel first strategy fueled this rapid accumulation of users. Channels accounted for over 60% of orders booked in 2013 – doubling each previous year from 30% in 2012 and 15% in 2011.
Throughout the year, we selectively grew not only the quantity but also the quality of our direct and indirect partner base to 20 national, regional, or vertical dominant leaders. Our top priority in 2013 was the addition of partners with existing Hosted Exchange user bases. These partner wins accounted for the majority of our 2013 bookings.
A concerted channel account management effort began to generate run rate bookings production from our existing, but less experienced partners; an important trend for the long term success of the channel program and Apptix's growth.
Our account management team also completed the strategic renewal and expansion of our agreement with Apptix's largest customer and one of the nation's leading healthcare systems (referenced as Speedway in past announcements). This agreement is worth an estimated USD 30 to 32 million over a four year period including the addition of a new 40 000 user facility that will begin onboarding in late 2014.
While the Company has continued to manage churn at a relatively low (to industry norms) 10 to 11% annual rate, we have struggled in prior years to drive our new business bookings values to levels that measurably exceed the value of our churn. For the first time in the Company's history, the value of new business bookings significantly outpaced the value of our user churn. However, the process to onboard partners' users generally requires six months to plan, prepare, and complete partner integration and user migration due to the size, complexity, and competition for partner and customer IT resources. As a result, we've built an implementation backlog of 107 000 users heading into 2014.
These backlogged bookings have been contracted, but are not billable until migrated onto our platform – meaning the majority of bookings did not produce "in year" revenue gains in 2013. Consequently, and in spite of the record booking numbers, revenue dipped 3% year over year to USD 41,8 million with revenue trailing bookings primarily due to the backlog. However, due to careful financial management, we maintained profitability, recording our twelfth consecutive quarter of positive net income and eighth straight quarter of positive operating cash flow.
With this backlog and continued progress in the development of our channel partner network, Apptix has reached a critical inflection point and is poised to return to top-line revenue growth.
We will continue to align resources behind our channel first strategy and the tactics that drove our success in 2013, while continually innovating, improving, and adjusting to drive greater market success.
Our top priority is to onboard the current customers in backlog, converting those bookings into revenue as quickly as possible. We are examining every phase of the implementation cycle, adapting, and adjusting to accelerate onboarding time and improve the user experience.
We are once again asking our channel team to step up to attract strategic partners to replenish the backlog for additional growth and market share. Our continued emphasis will be partners with existing Hosted Exchange users that, once onboarded, accelerate revenue contribution. In addition, we anticipate these partners will more rapidly upsell our additional services into their existing customer base due to their Cloud Services experience.
For sustained expansion from the channel, we recognize that we must continue to add partners new to the Cloud that have struggled to adapt to this new sales environment. However, we will seek partners with the commitment and resources to more rapidly adapt and succeed within the Cloud market.
Ultimately, we must develop consistent run rate production from these new and legacy partners. We have renewed our channel account management efforts to work closely with our partners to share industry guidance, proven best practices, and support to drive strong bookings and diversified revenue – the ultimate validation of our strategy.
Recent feedback from our direct customer base indicates growing interest and demand for our expanded service offering. Clearly there is an opportunity gap that we will seek to capitalize on in 2014. We have launched new initiatives to overcome past struggles converting customer interest into buying behavior.
We are proud of our accomplishments in 2013 and are excited by how well positioned we are entering 2014. However, we recognize this is still a competitive market and we have more work to do. We are committed to seizing this opportunity to grow Apptix's diversified Cloud Services market leadership ensuring ongoing growth and success.
Johan Lindqvist David E. Ehrhardt
Chairman of the Board President & Chief Executive Officer
Oslo, Norway/Herndon, Virginia, USA 31 March, 2014
2013 was a critical year for Apptix, delivering record new business bookings and entering the new year with its largest ever backlog. This positions Apptix for a return to revenue growth in 2014 and ongoing market leadership.
Apptix captured a record USD 7,4 million in annualized bookings in 2013; a 24% year over year increase. Users under contract grew 33% year over year to approximately 510 000; up from 384 000 in 2012. Apptix's channel program was the dominant driver of the booking growth, accounting for 61% of orders booked in 2013 – doubling each of the last two years from 30% in 2012 and 15% in 2011.
Apptix also renewed and expanded its agreement with the Company's largest customer and one of the nation's leading healthcare systems (referenced as Speedway in past announcements). This agreement is worth an estimated USD 30 to 32 million over a four year period and includes the addition of a new 40 000 user facility.
This solid bookings growth has developed a backlog of 107 000 users worth an annualized value of USD 4,2 million (or 57% of bookings) that has been contracted, but is not billable until migrated onto Apptix's platform – meaning the majority of bookings did not produce "in year" revenue gains in 2013. Onboarding the current backlog is anticipated to be completed in the first six to nine months of 2014.
With revenue trailing bookings primarily due to this backlog and churn inherent within our recurring revenue model, revenue dipped 3% year over year to USD 41,8 million. EBIT for the year was USD 2,1 million, down USD 382 000 from 2012. Net Income was USD 781 000 compared to USD 1,3 million in 2012. Strong financial control reduced operating expenses to USD 28,0 million; a 2% year over year decrease. As a result, Apptix achieved its twelfth consecutive quarter of positive net income and eighth straight quarter of positive operating cash flow.
Fluctuations in EBIT and Net Income during the fiscal year were primarily driven by lower revenues resulting from user and pricing churn that is occurring ahead of revenues yet to be onboarded from the Company's existing backlog mentioned above. Cash generated by operating activities, including the impact of changes in currency rates, totaled USD 4,8 million, compared to prior year levels of USD 5,8 million. Cash flow fluctuations follow these EBIT and Net Income fluctuations. The Company finished the year with USD 3,1 million in cash.
As of December 31, 2013 and 2012, the Company had USD 4,7 million outstanding on its working capital facility and USD 1,0 million of borrowing capacity at the end of 2013. Borrowings under the working capital facility are subject to the bank's prime interest rates plus 2.25%. Any amounts under the revolving line of credit may be repaid and re-borrowed at any time prior to the maturity date. The working capital facility is secured by a first priority position in all of the assets of the Company except for those assets financed via capital leases.
As of December 31, 2013 the Company's interest-bearing short term debt totaled USD 2,7 million which consisted of equipment financed via capital leases.
In January 2013, the Company entered into a Sixth Loan Modification Agreement related to its working capital revolving credit facility with its financial institution to increase the overall working capital facility threshold to USD 7 million. However, the amounts available under the working capital facility are subjected to a borrowing base formula of 200% of the Company's Monthly Recurring Revenue. The term of the new working capital facility is extended for two years.
Throughout the year, on average, Apptix continued to meet or exceed its average Service Level objectives. As of December 31, 2013, the Company had in excess of 400 000 billable users as compared to 380 000 users as of December 31, 2012.
At the end of 2013, Apptix was comprised of two legal entities: Apptix ASA and Apptix, Inc. The Company's operational activities are performed in the United States of America.
Apptix ASA revenues totaled NOK 117 thousand in 2013, down 10% from NOK 130 thousand in 2012. The decline in revenues was due to a decrease in royalties received by Apptix ASA as customers continued to migrate off legacy platforms. Operating expenses increased from NOK 2 532 thousand in 2012 to NOK 2 567 thousand, or 1%, as a result of increased administrative fees incurred. The net loss (including intercompany interest and goodwill amortization) for 2013 was NOK 12 225 thousand, up from NOK 10 178 thousand, as a result of the decreased earnings from subsidiary.
Nearly 510 000 users under contract, a 33% year over year increase worth an annualized USD 7,4 million.
A backlog with an annualized value of USD 4,2 million has been developed to overcome extended implementation cycles.
Apptix's channel program accounted for over 60% of bookings, versus 30% in 2012 and 15% in 2011, while expanding its partner base to 20 national, regional, or vertical dominant leaders.
with Largest Customer Apptix renewed and expanded its agreement with its largest customer; the agreement is worth an estimated USD 30 to 32 million over a four year period.
The Company completed its twelfth consecutive quarter of positive net income and an eighth straight quarter of positive cash flow from operating activities.
As it completes a record bookings year, continues to enhance its channel partner program, and expands into additional market segments, Apptix is well positioned and poised to continue to gain market share and drive revenue growth in multiple segments of the expanding Cloud Services market.
Gartner projects the worldwide market for public Cloud services (encompassing six segments including Cloud Application Services or SaaS, Cloud Management and Security Services, Cloud System
Infrastructure Services or IaaS, Cloud Business Process Services or BPaaS, Cloud Application Infrastructure Services or PaaS, and Cloud Advertising) to grow by 17.4% CAGR from USD 112 billion to USD 250 billion from 2012 to 2017.1 Apptix's primary market region, the North American (encompassing the United States and Canada) market for public Cloud services, is projected to grow 17.6% CARG from USD 63 billion to USD 147 billion from 2012 to 2017.2
All three of the Cloud market segments Apptix competes within – Cloud Application Services (Software as a Service), Cloud Management and Security Services, Cloud System Infrastructure Services (Infrastructure as a Service) – are projected to continue to experience strong growth over the next five years.
The North American market for Cloud Application Services (SaaS) is projected to grow from USD 11,8 billion to USD 29,2 billion or nearly 20% CAGR from 2012 to 2017.3 Apptix offers a variety of services within this segment including Exchange and mobile email, SharePoint, VoIP, Lync Secure IM and Web Conferencing, and Unified Communications. According to Gartner, Apptix's primary offering, enterprise email is still in an early stage with only 10% enterprise adoption projected at the end of 2013 but ramping quickly to 65% by the end of 2020.4
The North American market for Cloud Management and Security Services, while a smaller market, is projected to experience strong growth of over 20% CAGR from USD 1,4 billion to USD 4,0 billion from 2012 to 2017.5 Apptix has experienced significant uptake of its email encryption and email archiving services within this market. The Company anticipates growing adoption of the remainder of its offerings in this segment including Desktop Backup and Server Backup as well as its Enterprise Backup and Mobile Device Management offerings which were launched in 2013.
1 Gartner, Forecast: Public Cloud Services, Worldwide, 2011-2017, 4Q13 Update, December 2013
2 Gartner, Forecast: Public Cloud Services, Worldwide, 2011-2017, 4Q13 Update, December 2013
3 Gartner, Forecast: Public Cloud Services, Worldwide, 2011-2017, 4Q13 Update, December 2013
4 Gartner, Hype Cycle for Software as a Service, 2013, July 2013
5 Gartner, Forecast: Public Cloud Services, Worldwide, 2011-2017, 4Q13 Update, December 2013
Gartner further projects that the North American market for Cloud System Infrastructure Services (IaaS) will grow explosively by over 40% CAGR from USD 3,2 billion USD 20 billion from 2012 to 2017.6 Apptix entered and gained experience in this market in 2009 with a Virtual Private Server (VPS) offering. The Company replaced the VPS offering with a more robust Servers on Demand solution in response to growing interest from its customers.
Leveraging its experience and offering an expanded portfolio of enterprise-class services to an extended customer base around the world, paired with the sales, marketing, and customer support resources of its growing partner base, Apptix is well positioned to gain a share of the growing Cloud services market and return to top line revenue growth.
Mr. Lindqvist was appointed Chairman of the Board of Apptix in 2007. He is also Chairman of the Board for Serverhuset AB, Nipsoft AB, Advance AB, and Softcenter AB. From 2004 to 2006, Mr. Lindqvist was the CEO for TeleComputing ASA. He served as the managing director of TeleComputing Sweden AB from 2001 to 2004. Since 1996, Mr. Lindqvist held various positions in Alfaskop AB, including serving as the CEO from 1999 to 2001. He holds a degree in Civil Engineering (Industrial Economy) from the Technical University in Linkøping, Sweden.
Mr. Rogne was appointed as a Director of Apptix in 2007. He is currently Chairman of the Board for Nokas AS and Vice Chairman of the Board for Nordic Semiconductor ASA and Dolphin Interconnect ASA and a Director of Unified Messaging Systems AS. From 1994 to 2004, he served as the CFO for Tandberg ASA. From 2004 through 2007, he then served as the Head of Operations and Investor Relations. Prior to Tandberg, he was head of Finance with Kvaerner AS. Mr. Rogne has an MBA from University of San Diego and a Bachelor of Business Degree from the Oslo School of Business Administration.
Mrs. Fåhraeus was appointed Director of Apptix in 2008. She is Chairman of Genovis AB, Acousort and Good Old; Director of Simris Alg and Connect Skåne and, Chief Communications Officer and Director of Business Development at the private equity company Aqilles Invest AB in Sweden. From 2001 to 2010 she served at Anoto AB, acting as Vice President of Sales and Marketing from 2006-2010. She has previously worked in various leadership positions at Raufoss ASA, Cederroth AB, SCA, Johnson & Johnson, and Kreab Group. She has a degree in Business Administration from Stockholm School of Economics.
Apptix has a stimulating and positive work environment with a highly qualified and motivated staff. No accidents have occurred during 2013. There were no significant absenses due to illness in 2013 or 2012. Employment decisions at Apptix are based on merit, qualifications, and abilities. Apptix is an equal opportunity employer, and does not discriminate based on race, religion, color, sex, age, national origin, citizenship, marital status, disability, veteran's status, sexual orientation, or any other characteristic protected by law. This policy applies to all decisions regarding terms, conditions, and privileges of employment. As of December 31, 2013,
6 Gartner, Forecast: Public Cloud Services, Worldwide, 2011-2017, 4Q13 Update, December 2013
the members of the senior management team consisted of five males while the Board of Directors consisted of two males and one female. The Company's operations do not pollute the environment.
Companies are increasingly aware of their obligation to act responsibly in social matters like human rights, employee rights, environmental concerns and anti-corruption. The Board of Directors and Management of Apptix fully support these initiatives.
Apptix is committed to ensure that both basic human rights and employee rights are respected and fully complied with. In its operations, Apptix strives to ensure that all employees, consultants, contractors and customers adhere to basic human rights. Further, Apptix acknowledges and complies with employee rights and other applicable social issues in all its dealings as an employer.
Apptix is committed to protect the environment and has taken various steps to ensure that the business operations has limited negative impact on the environment. Corruption represents a potential problem for developing fair trade. Due to the nature of the Company's business and geographic presence, corruption is not regarded as a real threat to its operations.
While Corporate Social Responsibility is covered in various company internal documents, the company has not seen the need to develop a separate policy document to this effect.
The Company's goals and strategies associated with the management of financial risks include evaluating the effects of market, credit and liquidity risks related to the Company's assets, liabilities, financial position and operating results.
Market Risk: The Company's principal operating market is the United States with its functional currency being the US Dollar. The Company has limited operating expense outside of the United States. The Company has limited transactional currency exposure, which results from transactions in a currency other than its functional currency.
Credit Risk: The Company transacts with a wide variety of customers from the Global 1 000 to companies with fewer than five employees. A large percentage of small business customers pay via credit card, significantly reducing the Company's credit risk with respect to these customers. To ensure that credit risk is managed appropriately, the Company monitors its receivables balance regularly and ceases providing service when customer accounts become significantly overdue.
Liquidity Risk: The Company has an ongoing process of ensuring that it has sufficient cash resources to maintain its operations and is currently generating positive cash flow. The Board is fully committed to ensure that the Company's financial position is satisfactory.
Overall, the Company's financial risk is primarily limited to the above referenced areas. The Company's believes it is taking the steps necessary to mitigate exposure and to hedge potential areas of risk.
Corporate social responsibility – I will forward a example of text in a single mail.
The Company will continue to leverage the strong operational foundation that has been established and focus on the two key components of its strategic plan; the expansion of its channel partner program and the expansion and uptake of services to diversify our revenue streams. As a result of the Company's efforts in these two areas during 2013, the Company significantly increased the rate of contracted user growth and scored record levels of new business bookings, the value of which significantly outpaced the value of the Company's user churn ending the year with a record level of contracted backlog to be implemented. With this backlog and continued progress in the development of our channel partner network, the Board believes Apptix has reached a critical inflection point and is poised to return to top-line revenue growth in 2014.
However, all predictions of future growth prospects are subject to a variety of uncertainties. Further, for sustained revenue growth under the Company's channel first go-to-market strategy, we must ultimately develop consistent run rate production from our new and legacy channel partners. Accordingly, we have renewed our channel account management efforts to work closely with our partners to share industry guidance, proven best practices, and support to drive bookings and diversified revenue.
According to the Norwegian Accounting Act, the Board confirms that the requirements for going concern are present, and the accounts are presented under this assumption. Financial forecasts for 2014 and the Group's equity and liquidity position provides the basis for this assessment.
The results of the holding company, Apptix ASA, were a net loss of NOK 12,2 million. The Board recommends that the net loss be transferred from other equity. Apptix ASA has no distributable equity at year end.
Chairman of the Board Director Director President & Chief Executive
31 December, 2013 / 31 March, 2014 Officer
Apptix Corporate Governance policy is intended to ensure appropriate division of roles and responsibilities between the shareholders, the Board of Directors, and the Executive Management. Apptix emphasizes the importance of adhering to corporate governance principles consistent with the principles set out in the Norwegian Code of Practice for Corporate Governance as amended October 23, 2012, and include the equitable and equal treatment of all shareholders; the importance of having independent and qualified people in the Company's governing bodies; ensuring that all financial accounts are audited by qualified, independent auditors; and that information provided by the Company provides a timely and accurate representation of the underlying business activities and results.
The Corporate Governance report is included by reference in the Directors' Report as part of the Company's Annual Report.
The Company has developed ethical guidelines as well as guidelines for corporate social responsibility.
The Company's business objective, as defined in the Articles of Association, is to market, rent, and sell hosted business communications solutions and related services to businesses of all sizes.
The Annual Report includes the Company's objectives and business strategy.
On December 31, 2013, Apptix had a cash reserve of USD 3,1 million, approximately USD 1 million available and unused pursuant to its working capital facility and an equity ratio of 58.3%. The Company believes it has, or will have through the use of future debt or equity facilities, sufficient capital to meet its objectives, strategy, and risk profile. The Board will aim to achieve the Company's overall objective to increase shareholder value through increased share price and, when appropriate, through dividends in accordance with a transparent dividend policy. However, as the Company has not historically earned net profits, the Board has established a policy not to pay dividends. Once profitability has consistently been achieved, the Board will re-evaluate this policy.
The registered share capital on December 31, 2013 was NOK 27 116 249 divided into 81 430 178 shares. There is only one class of shares in the Company, and all shares are freely transferable without any Company-imposed restrictions. The Company strives to provide accurate and sufficiently detailed information each quarter related to the Financial and Operational performance of the Company.
It is the Board's policy that authorizations from shareholders to increase the Company's share capital will be limited to defined purposes. If proposed increases in the Company's share capital cover multiple purposes, then each authorization will be considered separately in the shareholder meeting. Authorizations to the Board will be limited in time to no later than the next annual shareholder meeting.
The current valid authorization grants the Board the power to increase the share capital of the Company by up to NOK 350 000. The authorization is valid until June 30, 2014. The authorization shall only be used when issuing shares pursuant to option agreements.
The Company has only one class of shares and each share entitles the holder to one vote at the General Meetings. All transactions in the Company's shares will be carried out through the Oslo Stock Exchange or at prevailing Stock Exchange prices.
Shareholders pre-emptive rights will only be waived when this is appropriate and considered to be in the best interest of the Company and its shareholders. The Company will in such situations explain the justification for waiving the pre-emptive rights in the stock exchange announcement in connection with the increase in share capital.
The Board is committed to treat all shareholders equally. All transactions between the Company and shareholders, members of the Board, members of the Executive Management, or close associates of any such party will only be completed if all conditions in the Public Companies Act are fulfilled. This includes a written independent valuation report and the performance of a proper investigation to ensure whether any conflict of interest could exist. Members of the Board and Executive Management are obliged to report if they have a material, direct or indirect, interest in any transaction entered into by the Company.
The shares in the Company are freely tradable, and there are no restrictions to the shares' negotiability in the Company's Articles of Association.
The Company encourages shareholders to participate in shareholders' meetings. Calling notices with agenda, proposed resolutions, and attendance notice are sent to all shareholders no later than two weeks prior to the meeting. There is no formal deadline for the shareholders to confirm attendance to the shareholder meetings. All shareholders have the right to vote through proxies at shareholder meetings. A proxy form is distributed to all shareholders together with the Calling Notice where each agenda item is listed separately. The proxy form will include information about the procedure for shareholders to be represented through a proxy, including the named person that is available as representative for the shareholders under the proxy. To the extent possible, Board members, the Company's auditor, and members of the Nomination Committee will be present. The Board will ensure that the shareholder meetings will be chaired by an independent chairman.
All information relating to General Meetings, including proxy form, are posted on the Company's Website (www.apptix.com) as early as possible in advance of a General Meeting and no later than 21 days prior to the meeting.
Election of nominated candidates for the Board will be made separately for each candidate.
The Nomination Committee is described in the Company's Articles of Association and consists of three members. The members of the current Nomination Committee were elected for a 2 year term at the ordinary Shareholder meeting on May 9, 2013. The members of the Nomination Committee are independent of the Board and the Executive Management team. None of the Nomination Committee members are members of the Board or the Executive Management team.
The Nomination Committee's tasks are to nominate candidates to the Board and to propose fees for Board members. All recommendations from the Nomination Committee will be justified in writing and associated information will be provided to shareholders at least 21 days prior to the relevant Shareholder meeting.
The Company's General Meeting will stipulate guidelines for the duties of the Nomination Committee.
The Company does not have an elected corporate assembly. Given the Company's structure with all operations in a subsidiary in USA, this is not considered necessary or required.
The composition of the Board is designed to ensure that Board members represent the common interest of all shareholders, and represent required and useful expertise in various fields. The composition of the Board ensures independence from main shareholders and that the Board can operate independently of any special interests. The Chairman of the Board Johan Lindqvist is the Company's second largest shareholder through his company Windchange AS. None of the Board members are related to or dependent upon large shareholders or members of the executive management.
Neither the Chief Executive Officer nor any other executive personnel are a member of the Board of Directors.
The Chairman of the Board is elected at the General Meeting and the term of all elected Board members is two years, with possibilities for re-election. The Company's Annual Report provides information on each of the Board members, including qualifications and relevant experience.
None of the members of the Board has stock options in the Company.
Members of the Board are encouraged to hold shares in the Company.
The Board meets regularly both in closed sessions and in face to face meetings with the CEO, CFO and other members of the Executive team present as the Board deem fits.
The Board has established Corporate Governance, Audit, and Remuneration and Compensation Committees. The Company has established clearly defined roles, responsibilities and tasks for the Board and management. Further, the Board produces an annual plan detailing its role in developing the Company's strategy as well as the specific objectives for each year. The Board evaluates its work and its competence on an annual basis.
The Board is responsible for ensuring that management establishes and maintains adequate internal control over financial reporting. Apptix's internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting, and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and valid as of December 31, 2013.
Apptix internal control over financial reporting includes those policies and procedures that:
There are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and the circumvention or overriding of controls. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of the changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. The internal reporting will also include reporting in line with the Company's ethical guidelines and the guidelines for corporate social responsibility.
Apptix's Board believes Apptix's system of internal control provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
Compensation for Board members is resolved by the shareholders in the General Meeting and reflects the responsibility, competence, time commitment, and the complexity of the Company's business. In addition, the Chairman has a consulting agreement with the Company where he receives NOK 400 000 per year for extra services above and beyond his duties as Chairman of the Board. The agreement is approved by the General shareholder meeting. Given the Company's situation, the competence and contribution of the Chairman is required at this current stage.
The Annual Report includes information on all remuneration paid to the Board members, and any remuneration in addition to the normal Director's fee is detailed.
As of December 31, 2013, the Executive Management team of the Company consisted of five persons. The compensation of the Company's Chief Executive Officer is set by the Compensation Committee of the Board. No member of the Compensation Committee is an employee of the Company. Additionally, the Chief Executive Officer sets the compensation of the remaining members of the Executive Management team in accordance with guidelines established by, and upon consultation with, the Compensation Committee and the Board. The Company's executive compensation policies are intended to provide competitive levels of compensation that reflect the Company's annual and long-term performance goals, reward superior corporate performance, and assist the Company in attracting and retaining qualified executives. Total compensation for each of the Executive Management team is comprised of three principal components: base salary, annual incentive compensation, and stock-based awards. Performance-related compensation is linked to value creation for the Company's shareholders. The total performance-related remuneration to each of the Executive Management team will not exceed 50% of base salary.
The Board of Apptix has established guidelines for the Company's reporting of financial and other information to ensure that all shareholders, and the investor market as a whole, are treated equally. Further, the Company has internal guidelines covering market communication through OSE releases. In addition, all financial information is available on Apptix's Website at www.apptix.com.
In the event of a take-over bid, the Board will ensure that all shareholders are treated equally and given sufficient information and time to form a view of the offer. The Board would normally not seek to prevent, hinder, or obstruct take-over bids. Further, the Board will, in relevant situations, ensure compliance with the provisions in Chapter 14 of Corporate Governance Guidelines.
The auditor participates in Board meetings that deal with annual accounts. In addition, separate meetings are arranged between the Audit Committee and the auditor when required, and at least once a year where neither the CEO nor other employees are present. The specified remuneration to the auditor is presented for resolution at the Annual meeting.
Board of Directors Apptix ASA 31 March, 2014
Total compensation for each of the Executive Officers, as well as other senior executives, is comprised of three principal components: base salary; annual incentive compensation; and stockbased awards.
The base salaries are fixed at levels which the Compensation Committee believes are comparable to those of executives of similar status in the Company's industry, and are targeted to be competitive in the marketplace. In addition to base salary, each executive officer is eligible to receive an annual bonus tied to the Company's success in achieving certain annual performance measures, as well as individual performance. The Board and the Compensation Committee also believe that longer-term incentives are appropriate to motivate and retain key personnel, and that stock ownership by management is beneficial in aligning management's and shareholders' interests in the enhancement of shareholder value. Accordingly, the Compensation Committee has a policy of considering annual grants of stock-based awards to executive officers. Historically, such grants have been in the form of stock options.
Each year, the Chief Executive Officer recommends to the Compensation Committee a base salary level for each of the other executive officers. In formulating such recommendations, the Chief Executive Officer considers industry, peer group and national surveys, and performance judgments as to the past and expected future contributions of the individual senior executives. The Compensation Committee then reviews the recommendations and fixes the base salaries of each of the executive officers and of the Chief Executive Officer based on both available competitive compensation data and the Compensation Committee's assessment of each officer's past performance and its expectation as to future contributions.
The Compensation Committee administers the Bonus Plan, which is designed to compensate key management personnel for extraordinary efforts reaching certain performance milestones and to aid the Company in attracting, retaining, and motivating personnel required for the Company's continued growth. The size of the pool of funds available to be paid to eligible participants under the Bonus Plan is set by the Compensation Committee, subject to approval by the Board, either as a fixed amount or as a percentage of the combined annual salaries of eligible participants. Bonuses are generally paid to eligible participants during the first and third quarter of each year based upon annual corporate performance measures for the second half of the previous year and first half of the current year, respectively, as well as individual performance.
The Company generally makes periodic grants in the form of Stock Options. Stock Options are granted with a strike price representing at least the fair market value of the Company's common stock at the time of the grants. Stock Options vest over varying terms as determined by the Compensation Committee, at the time of grant, but generally 4 years. Individual option grants are made by the Compensation Committee based upon recommendations of the Chief Executive Officer and the Compensation Committee's own deliberations as to the individual's contribution to the Company and overall level.
The Company has agreements with each of its senior executives which provide for, among other things, the payment of severance and the continuation of medical and dental benefits for periods up to twelve months in the event the senior executive is properly terminated by the Company without Cause, due to Change of Control or by the executive for Good Reasons as defined by the agreements.
The Company offers a 401(k) pension plan (a U.S. tax law based pension scheme) which allows for all employees to make voluntary contributions on a pre-tax basis. During 2013, the Company provided an employer match of 50% of employee contributions up to 6% of the employee's salary.
Board of Directors Apptix ASA 31 March, 2014
| Apptix Group | ||||||
|---|---|---|---|---|---|---|
| (Amounts in USD 1 000) | ||||||
| Year Ended December 31, | ||||||
| Note | 2013 | 2012 | ||||
| OPERATING REVENUE | ||||||
| Recurring Revenue | 40 955 | 41 941 | ||||
| Non Recurring Revenue | 840 | 939 | ||||
| Operating Revenue | 41 795 | 42 880 | ||||
| OPERATING EXPENSES | ||||||
| Cost of Sales | 4 | 11 778 | 11 788 | |||
| Employee Compensation and Benefits | 5 | 14 987 | 14 730 | |||
| Other Operational and Administrative Costs | 6 | 8 575 | 10 141 | |||
| Depreciation and Amortization | 9,11 | 4 393 | 3 776 | |||
| Total Operating Expenses | 39 733 | 40 435 | ||||
| Operating Income | 2 062 | 2 445 | ||||
| FINANCIAL INCOME AND EXPENSES | ||||||
| Interest Expense | 7 | (1 116) | ( 997) | |||
| Net Financial Expenses | (1 116) | ( 997) | ||||
| Income Before Taxes | 946 | 1 448 | ||||
| TAXES | ||||||
| Income Tax Expense | 19 | ( 165) | ( 183) | |||
| Net Incomefor the Period | 8 | 781 | 1 265 | |||
| Attributable to: | ||||||
| Equity Holders of Parent | 781 | 1 265 | ||||
| Earnings per share: | 8 | |||||
| * Basic, profit for the year attributable to ordinary | 0,01 | 0,02 | ||||
| equity holders of the parent | ||||||
| * Diluted, profit for the year attributable to ordinary | 0,01 | 0,02 | ||||
| equity holders of the parent | ||||||
| Weighted Average Common Shares Outstanding | 8 | 81 468 | 81 780 |
| Apptix Group (Amounts in USD 1 000) Year Ended December 31, |
|||
|---|---|---|---|
| 2013 | 2012 | ||
| Income for the Period | 781 | 1 265 | |
| Exchange Rate Differences on Translation of Foreign Operations | 26 | ( 29) | |
| Items that may be Reclassified Subsequently to Income Statement Items that will not be Reclassified to Income Statement |
26 - |
( 29) - |
|
| Total Other Comprehensive Income/(Loss) for the Period | 26 | ( 29) | |
| Total Comprehensive Income for the Period | 807 | 1 236 | |
| Attributed to Equity Holders of Parent | 807 | 1 236 |
| Apptix Group | |||||
|---|---|---|---|---|---|
| (Amounts in USD 1 000) | |||||
| Year Ended December 31, | |||||
| Note | 2013 | 2012 | |||
| ASSETS | |||||
| Non-current Assets | |||||
| Intangible Assets | |||||
| Goodwill | 9,10 | 21 648 | 21 648 | ||
| Software and Licenses | 9 | 598 | 962 | ||
| Total Intangible Assets | 22 246 | 22 610 | |||
| Property and Equipment | |||||
| Computer Equipment | 11,16,17 | 8 335 | 10 035 | ||
| Furniture and Fixtures | 1 1 |
173 | 234 | ||
| Leasehold Improvements | 1 1 |
26 | 42 | ||
| Total Property and Equipment | 8 534 | 10 311 | |||
| Total Non-Current Assets | 30 780 | 32 921 | |||
| Current Assets | |||||
| Accounts Receivable | 1 3 |
1 799 | 1 645 | ||
| Other Current Assets | 1 4 |
245 | 267 | ||
| Prepaid Expenses | 937 | 886 | |||
| Cash and Cash Equivalents | 1 5 |
3 124 | 2 358 | ||
| Total Current Assets | 6 105 | 5 156 | |||
| TOTAL ASSETS | 36 885 | 38 077 | |||
| EQUITY AND LIABILITIES | |||||
| Equity | |||||
| Share Capital | 21,22 | 4 666 | 4 666 | ||
| Share Premium | 21,22 | 73 437 | 73 437 | ||
| Other Paid-in Capital | 21,22 | 6 107 | 5 978 | ||
| Translation Reserve | 21,22 | 3 927 | 3 927 | ||
| Retained Earnings | 21,22 | (66 631) | (67 438) | ||
| Total Equity | 21 506 | 20 570 | |||
| Long Term Debt | |||||
| Interest-Bearing Long Term Debt | 16,17,25 | 7 582 | 8 803 | ||
| Total Long Term Debt | 7 582 | 8 803 | |||
| Current Liabilities | |||||
| Trade Accounts Payable | 2 5 |
1 145 | 1 306 | ||
| Interest-Bearing Short Term Debt | 16,17 | 2 740 | 3 313 | ||
| Other Current Liabilities | 1 8 |
3 912 | 4 085 | ||
| Total Current Liabilities | 7 797 | 8 704 | |||
| TOTAL EQUITY AND LIABILITIES | 36 885 | 38 077 |
31 December, 2013 / 31 March, 2014
Chairman of the Board Director Director President & Chief Executive Officer
| Apptix Group | |||||
|---|---|---|---|---|---|
| (Amounts in USD 1 000) | |||||
| Year Ended December 31, | |||||
| Note | 2013 | 2012 | |||
| Cash flows from Operating Activities | |||||
| Income before tax from continuing operations | 781 | 1 447 | |||
| Share-based Employee Compensation Expense | 20,21 | 129 | 229 | ||
| Depreciation and Amortization | 9,11 | 4 388 | 3 776 | ||
| Change in Accounts Receivable | ( 154) | ( 5) | |||
| Change in Trade Accounts Payable | ( 161) | ( 119) | |||
| Change in Other Assets and Liabilities | 1 071 | 1 612 | |||
| Cash Flows Provided by Operating Activities | 6 054 | 6 940 | |||
| Interest received | - | 1 | |||
| Interest paid | (1 116) | ( 998) | |||
| Income tax paid | ( 157) | ( 160) | |||
| Net Cash Flows Provided by Operating Activities | 4 781 | 5 783 | |||
| Cash Flows from Investing Activities | |||||
| Purchases of Property and Equipment, net | 11 | ( 500) | ( 512) | ||
| Net Cash Flows Used in Investing Activities |
( 500) | ( 512) | |||
| Cash Flows from Financing Activities | |||||
| Payments on Interest-Bearing Debt | 16,17 | (3 544) | (3 683) | ||
| Net Cash flows Used in Financing Activities |
(3 544) | (3 683) | |||
| Effect of Exchange Rates on Cash and Cash Equivalents | 29 - |
2 - |
|||
| Net Increase/(Decrease) in Cash | 766 | 1 590 | |||
| Cash at Beginning of Period | 15 | 2 358 | 768 | ||
| Cash at End of Period | 3 124 | 2 358 |
| Apptix Group | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Amounts in USD 1 000) | Note | Share Capital |
Share Premium Reserve |
Other Paid in Capital |
Foreign Currency Translation Reserves |
Retained Earnings |
Total Equity | |
| Equity December 31, 2011 | 4 666 | 73 437 | 5 749 | 3 927 | (68 674) | 19 105 | ||
| Net Income for the Period | - | - | - | - | 1 265 | 1 265 | ||
| Other Comprehensive Income | - | - | - | - | ( 29) | ( 29) | ||
| Total Comprehensive Income | - | - | - | - | 1 236 | 1 236 | ||
| Equity Element of Expensed Options | 20 | - | - | 229 | - | - | 229 | |
| Equity December 31, 2012 | 4 666 | 73 437 | 5 978 | 3 927 | (67 438) | 20 570 | ||
| Net Income for the Period | - | - | - | - | 781 | 781 | ||
| Other Comprehensive Income | - | - | - | - | 26 | 26 | ||
| Total Comprehensive Income | - | - | - | - | 807 | 807 | ||
| Equity Element of Expensed Options | 20 | - | - | 129 | - | - | 129 | |
| Equity December 31, 2013 | 4 666 | 73 437 | 6 107 | 3 927 | (66 631) | 21 506 |
Apptix ASA ("Apptix", the "Company" or the "Group") is a public Company registered in Norway and traded on the Oslo Stock Exchange. The Company's head office is located at 13461 Sunrise Valley Drive, Suite 300, Herndon, Virginia (USA) and its registered business address is Nesoyveien 4, Billingstad, Norway. Apptix is the premier provider of hosted business communication, collaboration, and infrastructure solutions to businesses of all sizes – from small entrepreneurial business to Fortune 500 enterprises – and blue chip channel partners including Sprint Nextel Corporation, Fujitsu America, MegaPath Corporation, U.S. TelePacific Corporation, and Web.com. A pioneer in the hosted services space, Apptix has over 500 000 users under contract around the world; with more than one-third of users in highly regulated industries.
Apptix's comprehensive portfolio of Cloud solutions includes Microsoft® Exchange, SharePoint®, and Lync®, as well as hosted VoIP, encryption, archiving, and mobile device management. Apptix hosted services are delivered across an advanced network infrastructure and built upon best-in-class hardware and software housed in Tier IV, SSAE 16 SOC 1 Type II certified, geographically dispersed interconnected data centers to ensure the highest level of availability and reliability. 24/7 customer service and support is provided by a fully U.S.-based, industry recognized support department.
The financial statements were approved by the Board of Directors for publication on 31 March, 2014.
The consolidated financial statements of Apptix ASA have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), as adopted by the EU.
The consolidated financial statements of Apptix ASA have been prepared on a historical cost basis. The consolidated financial statements are presented in USD and all values are rounded to the nearest thousand except when otherwise indicated.
The accounting principles used in 2013 are the same as in 2012. The Group has adopted the following new and amended IFRS and IFRIC interpretations during the year, along with the annual improvements. Adoption of these revised standards and interpretations did not have any effect on the financial performance or position of the Group.
IFRS 7 – New disclosures for derecognition of financial instruments
The consolidated financial statements are comprised of the financial statements of Apptix ASA and entities in which Apptix ASA has a controlling interest. A controlling interest is normally attained when the Company owns, either directly or indirectly, more than 50% of the shares in the entity, and is capable of exercising control over the entity. Subsidiaries are fully consolidated from the date of acquisition – the date on which the Group gains control – and continues to be consolidated to the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting year as the parent Company, using consistent accounting policies. Inter-Company transactions and balances, including internal profits and unrealized gains and losses are eliminated in full as part of the consolidation process. As a result of rounding differences, numbers or percentages included within may not add up to the total.
Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. A change in ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.
In comparison to the above mentioned requirements, the following differences are applied: Business combinations were accounted for using the purchase method. Transaction costs directly attributable to the acquisition were considered part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportionate share of the acquiree's identifiable net assets.
Current assets and liabilities include balances typically due within one year. All other balances are classified as non-current assets and other long-term debt.
Apptix ASA has a single subsidiary whose primary economic environment is in the United States. The functional currency of this subsidiary is USD. Apptix ASA Group presents its financial statements and notes to the consolidated financial statements in USD, except where a transaction was specifically denominated in NOK. The functional currency of Apptix ASA is NOK and the Company presents its income statement, balance sheet, cash flow and notes in NOK only. The translation principles are as follows: (a) balance sheet figures for companies with a functional currency other than the presentation currency have been translated to the
presentation currency at the rate applicable at the balance sheet date (b) income statement figures for companies with a functional currency other than the presentation currency have been translated to the presentation currency at the average exchange rate for the month in which the transaction occurred and (c) exchange rate differences are recognized as part of the other comprehensive income.
Operating revenues are recognized when persuasive evidence of an agreement exists, the service has been delivered, fees are reliably measurable, collections are probable, and when other significant obligations have been fulfilled. Recurring revenue is earned under monthly subscription license agreements. Annual subscription licenses are amortized into revenue on a monthly basis as the services are delivered. As such, revenue is recognized during the period for which the service was delivered and it has been determined that collection of the related subscription fee is probable. Consulting revenue is recognized on a time and materials basis as the service is provided. In the event that a consulting project is of a fixed price nature, revenue is recognized on a percentage of completion basis at a rate equal to the actual hours incurred to date relative to total estimated hours required to complete the project. Non-recurring revenue represents one-time fees for specific work performed that is not included in the monthly subscription license agreement. Non-recurring revenue is recognized once the service has been performed and collection of the associated fee is probable.
The tax expense in the income statement includes taxes payable on the ordinary results for the period as well as the change in deferred tax. Deferred tax is calculated with a nominal tax rate on the temporary differences between the recorded values and tax values, as well as on any tax loss carry-forwards at the balance sheet date. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to offset current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. Any temporary differences, increasing or reducing taxes that will or may reverse in the same period, are netted. The net deferred tax benefit is recorded as an asset if it is regarded as probable that the Group will be able to realize the benefit through future earnings or realistic tax efficient planning.
Generally, intangible assets are recognized in the balance sheet if it is probable that there are future economic benefits that can be attributed to the asset which is owned by the Company, and the asset's cost can be reasonably estimated. Intangible assets are recorded at cost. Intangible assets with indefinite useful lives are not amortized, but impairment losses are recognized if the recoverable amount is less than the current carrying value. The recoverable amount is calculated each year or if there are any indications of a decrease of value. Intangible assets with a finite useful life are amortized over the useful life and the need for any impairment losses to be recognized is considered quarterly. Amortization is carried out using the straight-line method over the estimated useful life. The amortization estimate and method is subject to an annual assessment based on the future economic benefits.
Expenditures related to the purchase of software are recognized in the balance sheet as an intangible asset provided these expenditures do not form part of hardware acquisition costs. Software is amortized using the straight-line method over 3 years. Expenses incurred as a result of maintaining or upholding the future usefulness of software, are expensed as incurred unless the changes in the software increase the future economic benefits.
Research costs are expensed as incurred. An intangible asset arising from a development expenditure on an individual project is recognized only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available to the Group for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the asset and the ability to measure reliably the expenditure during the development. The capitalized expenses include direct remuneration costs. The asset is stated at cost less accumulated amortization. The software is amortized using the straight-line method over the estimated time of use of the asset.
Acquisitions are accounted for by eliminating the cost price of the shares in the parent Company against equity in the subsidiary at the time of acquisition. The cost of the acquisition is allocated to the assets acquired and the liabilities assumed according to their estimated fair market values at the time of acquisition. The amount allocated to goodwill represents the excess purchase price paid over the fair value of the assets acquired and the liabilities assumedIn the event that the accounting for the business combination is incomplete by the end of the reporting period where the business combination occurs, the provisional amounts recognized at the acquisition date will be adjusted to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognised as of that date. The period where the provisional amounts can be adjusted ends as soon as the necessary information is obtained to complete the purchase price allocation, and will in any case not exceed one year from the acquisition date.ANAL
Goodwill is not amortized; however an assessment is made both quarterly, and when there is an indication the carrying amount cannot be justified by future cash flows. If there is any indication that an impairment loss needs to be recognized, an assessment will be made to determine whether or not the discounted cash flow exceeds the carrying amount of goodwill. If the discounted cash flow is less than the carrying amount, goodwill will be written down to its fair value.
Property and equipment are stated at cost less accumulated depreciation and impairment losses. When assets are sold or disposed of, the gross carrying amount and accumulated depreciation are eliminated, and any gain or loss on the sale or disposal is recognized in the income statement. Depreciation is computed for owned assets using the straight-line method over useful life and is recognized in the income statement. The useful life is equal to the estimated useful economic life since the Company uses the assets until they have no remaining residual value. The depreciation period and method are assessed each year to ensure that the method and period used synchronize with the financial realities of the non-current asset. The same methodology applies to the residual value.
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date as to whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Capitalized finance leases are expensed on a straight-line basis over the estimated period of use. The estimated period of use corresponds to the estimated useful life of the assets, since the Company uses the assets until they have no remaining value. If it is not certain that the Company will take over the asset when the lease expires, the asset is depreciated over the lease's term or the depreciation period for equivalent assets owned by the Group, whichever is the shorter. Total lease payments, less estimated interest, are recorded as long-term debt at the inception of the lease. The liability is reduced by the lease payments less the estimated interest expense.
Leases for which substantially all the risks and benefits incidental to ownership of the leased item are not transferred to the Group are classified as operating leases. Lease payments are classified as operating costs and recognized in the income statement during the contract period.
Cash includes cash on hand and at the bank. Cash equivalents are short-term liquid investments that can be converted into cash within three months to a known amount, and which contain insignificant risk elements.
Financial instruments are reviewed at each balance sheet date to determine if there has been any decrease in value. Financial assets, which are valued at amortized cost, are written down when it is probable that the Company will not recover the full amount of the asset. The amount of the impairment loss is recognized in the income statement. A previous impairment loss may be reversed if the circumstances warrant such a reversal. A reversal of an impairment loss is presented as income. The carrying amount is only recognized to the extent that it does not exceed what the amortized cost would have been had the impairment loss not been recognized.
The Company utilizes valuation allowance accounts where appropriate for its financial instruments. The Company will directly reduce the carrying value of a financial asset when the impairment has occurred within a current reporting period. The Company will reduce the carrying value of a financial asset by way of increasing its valuation allowance when the impairment occurred outside of the current reporting period.
An assessment of impairment losses on other assets is made when there is an indication that the recoverable amount of an asset has fallen below its carrying amount. If an asset's carrying amount is higher than the asset's recoverable amount, an impairment loss will be recognized in the income statement. With the exception of goodwill (see Note 10), impairment losses recognized in the income statements for previous periods are reversed when there is information that the impairment loss no longer exists or the carrying value of the impairment loss should be reduced. The reversal is recognized as revenue or an increase in other reserves. However, no reversal takes place if the reversal leads to the carrying amount exceeding what the carrying amount would have been if appropriate depreciation had occurred.
The recoverable amount is the greater of the fair value of the asset less the net selling costs, or the discounted cash flow from continued use. "Value in use" is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. For assets that do not generate cash inflows, and which are largely independent of those from other assets or groups of assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Financial instruments are classified as liabilities or equity depending on the underlying financial circumstances. Interest, dividends, gains and losses relating to a financial instrument classified as a liability will be presented as an expense or revenue.
Direct transaction costs relating to an equity offering are recognized against equity after deducting tax expenses. No other costs are directly recognized against equity.
Exchange differences arise in connection with currency differences when foreign entities are consolidated. Currency differences relating to monetary items (liabilities or receivables), which are in reality part of the Company's net investment in a foreign entity, are treated as an exchange difference. When a foreign operation is sold, the accumulated exchange differences linked to the entity are reversed and recognized in the income statement in the same period as the gain or loss on the sale is recognized.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit or loss.
The Company provides severance pay in situations where employment contracts are terminated as a result of reorganization. The costs related to severance pay are provided for once management has decided on a plan that will lead to reductions in the workforce and the work of restructuring has started or the reduction in the workforce has been communicated to affected employees.
The employees and management of the Company receive compensation in the form of equitysettled share-based payments. The cost of equity-settled transactions is determined by the fair value of the options at the time of the grant. The fair value is determined using an appropriate pricing model. Additional information is provided in Note 20. The expense associated with equity-settled transactions is recognized, together with a corresponding increase in equity, during the period over which the service conditions and/or performance conditions are satisfied and the employee is fully entitled to the award (vesting date).
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
New information on the Company's positions at the balance sheet date is taken into account in the annual financial statements. Events occurring after the balance sheet date that do not affect the Company's position at the balance sheet date, but which will affect the Company's position in the future, are stated, if significant.
The cash flow statement is prepared in accordance with the indirect method. Included in cash and cash equivalents are bank deposits and cash on hand. Cash and cash equivalents are presented at the market value on the balance sheet date.
The preparation of the Group's consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
The most significant uncertainty in the Company's judgment relates to impairment testing of goodwill. The Company reviews whether or not goodwill has been impaired on a quarterly basis. Estimating the value in use requires the Company to estimate the expected cash flows from the cash-generating unit as well as a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at December 31, 2013 was USD 21,6 million. Additional information related to goodwill appears in Note 10. Other significant areas of judgment and estimates include determining expense associated with the issuance of stock options and the establishment of allowances for doubtful accounts.
In the financial statements for 2014 and beyond, the following standards, amendments and interpretations will be effective, along with annual improvements. While early adoption is permitted, the Group has chosen not to adopt these changes prior to 2014.
The Group does not expect these standards, revisions and interpretations to have a material impact on the financial position or performance of the Group.
The standards and interpretations are summarized below:
IFRS 10 – Consolidated Financial Statements
IFRS 11 – Joint Arrangements
IFRS 12 – Disclosure of Interests in Other Entities
IAS 27 Revised – Separate Financial Statements
IAS 28 Revised – Investments in Associates and Joint Ventures
IAS 32 Amendment – Offsetting Financial Assets and Financial Liabilities
The Company has assessed its internal organizational structure, internal reporting system and geographical business units, and concluded that it does not have any reportable segments that should be reported separately. The Company only delivers services that are exposed to the same risk and return (business segment), and the business of the Company is not engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of components operating in other economic environments (geographical segment).
The following table summarizes the components of the Company's Cost of Sales:
| Year Ended | |||||
|---|---|---|---|---|---|
| December 31, | |||||
| (Amounts in USD 1 000) | 2013 | 2012 | |||
| License Fees | 7 891 | 8 170 | |||
| Communications | 18 | 18 | |||
| Data Center Facilities | 3 228 | 2 855 | |||
| Commissions and Referrals | 545 | 526 | |||
| Total Cost of Sales - Recurring Revenues | 11 682 | 11 569 | |||
| Hardware & Software | 96 | 219 | |||
| Total Cost of Sales - Other | 96 | 219 | |||
| Total Cost of Sales | 11 778 | 11 788 |
The following table summarizes the components of the Company's Compensation and Benefits:
| Year Ended | |||||
|---|---|---|---|---|---|
| December 31, | |||||
| (Amounts in USD 1 000) | 2013 | 2012 | |||
| Salaries | 11 907 | 11 441 | |||
| Share-based Compensation | 129 | 229 | |||
| Social Security Tax | 907 | 901 | |||
| Pension expense | 286 | 123 | |||
| Other Compensation | 1 758 | 2 036 | |||
| Total Employee Compensation and Benefits | 14 987 | 14 730 | |||
| Average Number of Employees | 129 | 133 |
The tables below set forth the compensation summary for the Executive Team and Board of Directors for the years ended December 31, 2013 and 2012.
| 2013 Compensation | ||||||
|---|---|---|---|---|---|---|
| (Amounts in USD 1 000) | Board | Value of | Total | |||
| Executive Team and Board Members | Salary | Bonus | Other | Fees | Options | Remuneration |
| David Ehrhardt (CEO) | 330 | - | 8 | - | 16 | 354 |
| Chris Mack (CFO) | 240 | - | 7 | - | 34 | 281 |
| Donnie Hughes (SVP Customer Management) | 182 | - | 4 | - | 12 | 198 |
| Shane Smith (SVP Technology) | 200 | - | 3 | - | 13 | 216 |
| Aubrey Smoot (SVP Business Development) | 224 | - | 6 | - | 15 | 245 |
| Joy Nemitz (Former CMO) | 169 | - | 3 | - | 18 | 190 |
| Johan Lindqvist (Chairman) | - | - | - | 69 | - | 69 |
| Ebba Fahraeus (Board Member) | - | - | - | 34 | - | 34 |
| Terje Rogne (Board Member) | - | - | - | 34 | - | 34 |
| Total | 1 345 | - | 31 | 137 | 108 | 1 621 |
| 2012 Compensation | ||||||
|---|---|---|---|---|---|---|
| (Amounts in USD 1 000) | Board | Value of | Total | |||
| Executive Team and Board Members | Salary | Bonus | Other | Fees | Options | Remuneration |
| David Ehrhardt (CEO) | 330 | 56 | 4 | - | 42 | 432 |
| Chris Mack (CFO) | 240 | 41 | 4 | - | 58 | 343 |
| Donnie Hughes (SVP Customer Management) | 178 | 25 | 2 | - | 16 | 221 |
| Shane Smith (SVP Technology) | 196 | 27 | - | - | 16 | 239 |
| Aubrey Smoot (SVP Business Development) | 200 | 20 | 3 | - | 22 | 245 |
| Joy Nemitz (Former CMO) | 210 | 29 | 2 | - | 27 | 268 |
| Johan Lindqvist (Chairman) | - | - | - | 69 | - | 69 |
| Ebba Fahraeus (Board Member) | - | - | - | 34 | - | 34 |
| Terje Rogne (Board Member) | - | - | - | 34 | - | 34 |
| Total | 1 354 | 198 | 15 | 137 | 181 | 1 885 |
The Company offers a 401(k) pension plan which allows for all employees to make voluntary contributions on a pre-tax basis. The Company has an employer match of 50% of employee contributions up to 6% of the employee's salary.
The value of options included in the above tables represents the cost amortized during 2013 and 2012, respectively. Other compensation consists of matching 401(k) contributions made by the Company during 2013 and 2012.
The Company's Chairman, Johan Lindqvist is entitled to a fee of NOK 400 thousand per annum of which NOK 100 thousand was outstanding as of December 31, 2013. Mr. Lindqvist is also entitled to a fee of NOK 400 thousand for consulting services as approved by the shareholders in May 2012, all of which was paid as of December 31, 2013. Terje Rogne and Ebba Fahraeus are paid a Directors fee of NOK 200 thousand per year of which NOK 50 thousand was outstanding to each as of December 31, 2013. All outstanding board fees were paid in February 2014.
Members of the Executive Team are eligible for annual performance bonuses, as approved by the Company's Board of Directors, based on a percentage of the respective executive's base compensation. The bonus percentages range from 30% to 50%.
The Company has agreements with each of its senior executives which provide for, among other things, the payment of severance and the continuation of medical and dental benefits for periods up to twelve months in the event the senior executive is properly terminated by the Company without cause, due to change of control or by the Executive Team for good reasons.
The tables below sets forth the stock option summary for the Executive Team and Board of Directors as of December 31, 2013 and 2012. See Note 20 in connection with valuation.
| Options | |||||||
|---|---|---|---|---|---|---|---|
| Options - | Options | Options | Expired/ | Options - | Avg | ||
| Dec. 31, | Granted | Exercised | Forfeited in | Dec. 31, | Exercise | Maturity | |
| Executive Team | 2012 | 2013 | in 2013 | 2013 | 2013 | Price | Period |
| David Ehrhardt (CEO) | 1 715 000 | - | - | - | 1 715 000 | 2,70 | 1,35 |
| Chris Mack (CFO) | 900 000 | 25 000 | - | - | 925 000 | 2,80 | 2,71 |
| Donnie Hughes (SVP Customer Management) | 225 000 | 25 000 | - | - | 250 000 | 2,82 | 2,71 |
| Shane Smith (SVP Technology) | 225 000 | 25 000 | - | - | 250 000 | 2,72 | 2,81 |
| Aubrey Smoot (SVP Business Development) | 350 000 | 25 000 | - | - | 375 000 | 2,82 | 2,71 |
| Joy Nemitz (Former CMO) | 275 000 | 25 000 | - | (180 000) 120 000 | 3,22 | 0,04 | |
| Total | 3 690 000 | 125 000 | - | (180 000) 3 635 000 | 2,76 | 1,99 |
| Options | |||||||
|---|---|---|---|---|---|---|---|
| Options - | Options | Options | Expired/ | Options - | Avg | ||
| Dec. 31, | Granted | Exercised | Forfeited in | Dec. 31, | Exercise | Maturity | |
| Executive Team | 2011 | 2012 | in 2012 | 2012 | 2012 | Price | Period |
| David Ehrhardt (CEO) | 1 715 000 | - | - | - | 1 715 000 | 2,70 | 2,35 |
| Chris Mack (CFO) | 900 000 | - | - | - | 900 000 | 2,80 | 3,21 |
| Donnie Hughes (SVP Customer Management) | 225 000 | - | - | - | 225 000 | 2,81 | 3,21 |
| Shane Smith (SVP Technology) | 225 000 | - | - | - | 225 000 | 2,70 | 3,11 |
| Aubrey Smoot (SVP Business Development) | 350 000 | - | - | - | 350 000 | 2,82 | 3,21 |
| Joy Nemitz (Former CMO) | 275 000 | - | - | - | 275 000 | 3,18 | 3,53 |
| John Kersse (Former CTO) | 225 000 | - | - | (225 000) | - | - | - |
| Total | 3 915 000 | - | - | (225 000) 3 690 000 | 2,78 | 2,60 |
There were no options exercised during 2013 or 2012.
The Director's have elected to waive any rights to stock-based compensation.
Total compensation for each of the Executive Team members as well as the other senior executives is comprised of three principal components: base salary, annual incentive compensation and stock-based awards. The base salaries are fixed at levels which the Compensation Committee believes are comparable to those of executives of similar status in the Company's industry and are targeted to be competitive in the marketplace. In addition to base salary, each Executive Team member is eligible to receive an annual bonus tied to the Company's success in achieving certain annual performance measures, as well as individual performance. The Board and the Compensation Committee also believe that longer-term incentives are appropriate to motivate and retain key personnel and that stock ownership by management is beneficial in aligning management's and stockholders' interests in the enhancement of stockholder value. Accordingly, the Compensation Committee has a policy of considering periodic grants of stock-based awards to Executive Team members. Historically, such grants have been in the form of stock options.
The table below summarizes the components of the Company's audit related fees:
| (Amounts in USD 1 000) | Year Ended | |
|---|---|---|
| December 31, | ||
| 2013 | 2012 | |
| Audit Services | 88 | 98 |
| Other Attestation Services | 1 | 1 |
| Tax Services | 5 | 2 |
| Other Non-audit services | 9 | 10 |
| Total Audit Fees | 103 | 111 |
The following table summarizes the components of the Company's Other Operational and Administrative Costs:
| Year Ended December 31, |
||||
|---|---|---|---|---|
| (Amounts in USD 1 000) | 2013 | 2012 | ||
| Marketing | 859 | 1 377 | ||
| Travel & Entertainment | 452 | 577 | ||
| Rent | 921 | 826 | ||
| Professional Fees | 933 | 1 094 | ||
| Communications | 694 | 635 | ||
| Maintenance and Support | 1 482 | 1 595 | ||
| Utilities and Maintenance Costs | 536 | 516 | ||
| Computer Equipment and Software | 1 600 | 2 206 | ||
| Other SG&A | 1 098 | 1 315 | ||
| Total Other Operating Expenses | 8 575 | 10 141 |
The following table summarizes the components of the Company's Financial Income and Expense:
| Year Ended | |||
|---|---|---|---|
| December 31, | |||
| (Amounts in USD 1 000) | 2013 | 2012 | |
| Interest on Bank Deposits | - | 1 | |
| Interest Expense | (1 116) | ( 998) | |
| Interest, Net | (1 116) ( 997) |
The basic and diluted earnings per share is calculated as the ratio of the net income for the year that is due to the ordinary shareholders. The net income of USD 781 thousand is divided by the weighted average number of ordinary shares outstanding of 81 468 000 resulting in earnings per share of USD 0,01.
The following table presents the earnings per share:
| Year Ended | ||
|---|---|---|
| December 31, | ||
| (Amounts in USD 1 000 Except for Share Data) | 2013 | 2012 |
| Income for the Year | 781 | 1 265 |
| Total Income for the Year to Holders of Ordinary Shares | 781 | 1 265 |
| Weighted average number of ordinary shares for basic earnings per | ||
| share | 81 430 | 81 430 |
| Effect of dilution: | ||
| Share options | 38 | 350 |
| Weighted average number of ordinary shares adjusted for | ||
| the effect of dilution | 81 468 | 81 780 |
| Basic and Diluted Earnings Per Share From Continuing Operations | 0,01 | 0,02 |
| Basic and Diluted Earnings Per Share for the Year | 0,01 | 0,02 |
The following table summarizes the activity of the Company's Intangible Assets:
| Internally | Total | |||
|---|---|---|---|---|
| Software | Developed | Software | ||
| (Amounts in USD 1 000) | Goodwill | Licenses | Software | Licenses |
| Cost December 31, 2011 | 29 648 | 6 875 | 1 144 | 8 019 |
| Additions | - | 608 | - | 608 |
| Cost December 31, 2012 | 29 648 | 7 483 | 1 144 | 8 627 |
| Additions | - | 671 | - | 671 |
| Cost December 31, 2013 | 29 648 | 8 154 | 1 144 | 9 298 |
| Accumulated Depreciation/ | ||||
| Impairment - December 31, 2011 | 8 000 | 5 595 | 1 141 | 6 736 |
| Depreciation Charges | - | 926 | 3 | 929 |
| Accumulated Depreciation/ | ||||
| Impairment - December 31, 2012 | 8 000 | 6 521 | 1 144 | 7 665 |
| Depreciation Charges | - | 1 035 | - | 1 035 |
| Accumulated Depreciation/ | ||||
| Impairment - December 31, 2013 | 8 000 | 7 556 | 1 144 | 8 700 |
| Net Book Value: | ||||
| Balance December 31, 2012 | 21 648 | 1 280 | - | 962 |
| Balance December 31, 2013 | 21 648 | 598 | - | 598 |
Software and Licenses are amortized on a straight-line basis over a three-year period. This is the Company's best estimate of the life of such assets.
The Company evaluates its goodwill on a consolidated basis as a single cash generating unit. The recoverable amount for the cash generating unit has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by senior management covering a five-year period. The discount rate applied to cash flow projections was 12% (pre-tax) and assumed a constant growth rate of 3% (nominal) beyond year five.
Key assumptions used in value in use calculations for the Company for December 31, 2013 and December 31, 2012
The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:
Budgeted Revenue - The basis for determining the value assigned to budgeted revenue growth is a combination of the average percentage change in revenue in the year immediately prior to the budgeted year and management's estimates for the next five years.
Budgeted Gross Margins - The basis for determining the value assigned to budgeted gross margins is the average gross margins achieved in the year immediately prior to the budgeted year and management's estimates for the next five years.
Operating Expenses - The basis for determining the value assigned to operating expenses is the forecasted operating expenses based on the revenue projections, using historical costs adjusted for inflation.
Pre-Tax Discount Rates – Pre-tax discount rates reflect management's estimates of the risk specific to the business as a whole. This benchmark is used by management to assess operating performance and to evaluate future investment proposals.
As part of the Company's annual review process it assesses whether or not acquired goodwill or other intangible assets have been impaired. The estimate reflects the Company's assessment of the value of the cash-generating unit to which the goodwill is allocated or the intangible asset is associated. Calculating the value in use requires the Company to estimate the expected cash flows from the cash-generating unit (if available) and also to choose a suitable discount rate in order to calculate the present value of cash flow.
With regard to the assessment of value of intangible assets in use, management has evaluated the impact of potential changes in key assumptions on future carrying values of the intangible assets. Depending upon future growth rates, acceptance of the Company's product and services in the markets it serves, operating costs as well as cost of capital, a material change in any of these key assumptions could have an impact on the carrying value of the Company's intangible assets in future periods. The primary factor impacting future carrying value is the Company's future revenue growth rates. If the Company experiences an unfavorable change in revenue growth or cost assumptions by more than 5% this could result in an impact on consolidated carrying values of the intangible assets for the Company. Additionally, an increase in the Company's discount rate by more than 2% could also result in an unfavorable impact on the consolidated carrying values of the intangible assets for the Company.
The following table summarizes the Company's Goodwill balances:
| Year Ended | |||
|---|---|---|---|
| (Amounts in USD 1 000) | December 31, | ||
| 2013 | 2012 | ||
| ASP-One | 4 907 | 4 907 | |
| MailStreet | 7 077 | 7 077 | |
| Mi8 | 9 664 | 9 664 | |
| Total Goodwill | 21 648 21 648 |
The following table summarizes the activity of the Company's Property and Equipment:
| Computer | Furniture | Leasehold | ||
|---|---|---|---|---|
| (Amounts in USD 1 000) | Equipment | & Fixtures | Improvements | Total |
| Cost December 31, 2011 | 19 504 | 435 | 157 | 20 096 |
| Additions | 6 402 | 5 | - | 6 407 |
| Disposals | (1 670) | - | - | (1 670) |
| Cost December 31, 2012 | 24 236 | 440 | 157 | 24 833 |
| Additions | 1 581 | - | - | 1 581 |
| Disposals | - | - | - | - |
| Cost December 31, 2013 | 25 817 | 440 | 157 | 26 414 |
| Accumulated Depreciation - December 31, 2011 | 13 102 | 143 | 98 | 13 343 2 847 |
| (1 668) | ||||
| Accumulated Depreciation - December 31, 2012 | 14 201 | 206 | 115 | 14 522 |
| Depreciation Charges For The Year | 3 281 | 61 | 16 | 3 358 |
| Disposals | - | - | - | - |
| Accumulated Depreciation - December 31, 2013 | 17 482 | 267 | 131 | 17 880 |
| Net Book Value: | ||||
| Balance December 31, 2012 | 10 035 | 234 | 42 | 10 311 |
| Balance December 31, 2013 | 8 335 | 173 | 26 | 8 534 |
| Depreciation Charges For The Year Disposals |
2 767 (1 668) |
63 - |
17 - |
Computer equipment and furniture and fixtures are depreciated on a straight-line basis over three to seven years, respectively. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful life of the improvement or the remainder of the lease term, generally five years.
Finance leases accounted for USD 1 750 thousand and USD 6 503 thousand of the property, equipment and intangible assets acquired in 2013 and 2012, respectively. Assets acquired utilizing finance leases are pledged as security by the Company to the Lessor until the finance lease obligation is satisfied.
The net carrying value of property and equipment acquired via finance leases was USD 7 573 thousand and USD 9 923 thousand at December 31, 2013 and 2012, respectively.
| Note 12 - Shares in Subsidiary Companies | ||||||
|---|---|---|---|---|---|---|
| The following table summarizes the Company's subsidiaries: | ||||||
| Incorporation/ | Office | Ownership Interest | ||||
| Companies | Acquisition | Location | & Voting Shares |
Apptix, Inc. is 100% owned by Apptix ASA.
The table below sets forth the Company's trade receivables, net of the allowance provision as of December 31, 2013 and 2012:
| December 31, 2013 and 2012: |
Neither Past Nor |
Past Due, Not Impaired | |||
|---|---|---|---|---|---|
| (Amounts in USD 1 000) | Total | Impaired | 30-60 Days | 60-90 Days | >90 Days |
| 2013 | 1 799 | 1 345 | 428 | 26 | - |
| 2012 | 1 645 | 1 327 | 292 | 26 | - |
The Company evaluates its provision for trade receivables on a regular basis. Key factors that are considered when determining whether a provision is required due to potential impairment include the age of the trade receivable, the amount past due and the payment history of the customer. The table below sets forth the movement in the Company's trade receivable provision for 2012 and 2013:
| December 31, 2011 | 91 |
|---|---|
| Charge for the Period | 290 |
| Increase in Reserve | 160 |
| Amounts Utilized | ( 528) |
| December 31, 2012 | 13 |
| Charge for the Period | 215 |
| Increase in Reserve | 170 |
| Amounts Utilized | ( 394) |
| December 31, 2013 | 4 |
Included in the Company's income statement are losses on trade receivables totaling USD 215 thousand and USD 290 thousand, respectively. Additionally, the Company reduced current year revenues by USD 170 thousand related to potential future revenue disputes.
The following table summarizes the Company's Other Current Assets. The components contained within are non-interest bearing items.
| (Amounts in USD 1 000) | Year Ended | ||
|---|---|---|---|
| December 31, | |||
| 2013 | 2012 | ||
| Security Deposit | 240 | 262 | |
| VAT Receivable/Other | 5 | 5 | |
| Total Other Current Assets | 245 267 |
The following table summarizes the Company's Cash and Cash Equivalents. Cash balances held by the Company's bank earns interest at a floating rate based on average daily balances:
| Year Ended | |||
|---|---|---|---|
| (Amounts in USD 1 000) | December 31, | ||
| 2013 | 2012 | ||
| Cash at the Bank | 3 102 | 2 334 | |
| Restricted Cash | 22 | 24 | |
| Total Cash and Cash Equivalents | 3 124 2 358 |
The following table summarizes the Company's Interest-Bearing Debt:
| Year Ended | ||||
|---|---|---|---|---|
| (Amounts in USD 1 000) | December 31, | |||
| Effective Interest | ||||
| Current | Rate | Maturity | 2013 | 2012 |
| Obligations Under Finance Leases | 14.05% | 2014 | 2 740 | 3 313 |
| Total Current Obligations | 2 740 | 3 313 | ||
| Long Term | ||||
| Obligations Under Finance Leases | 10.38% | 2015-2016 | 2 882 | 4 103 |
| Revolving Line of Credit | 6.40% | 2015 | 4 700 | 4 700 |
| Total Long Term Obligations | 7 582 | 8 803 |
The Company utilizes finance leases to fund purchases of its property and equipment needs. All such finance leases have either a USD 1 buyout option or a percentage of fair market value bargain purchase option.
The Company maintains a revolving credit facility with its bank with a borrowing limit of USD 7 million, as amended from the previous limit of USD 6 million. The term of the working capital facility was due to expire on January 31, 2013, however it has been extended to January 31, 2015. Amounts available under the amended working capital facility are subject to a borrowing base formula equal to 200% monthly recurring revenue. This was modified from the previous borrowing base formula of 75% of the Company's trailing two and one half months cash collections. The current interest rate to which borrowings under the facility are subject is the bank's prime interest rate plus up to two and one quarter additional percentage points, with a minimum rate of five and one half percent. The previous rate was the bank's prime interest rate plus up to two additional percentage points. No other material terms were modified. Any amounts under the revolving credit facility may be repaid and re-borrowed at any time prior to the maturity date. This facility is secured by a first priority position in all of the assets of the Company except for those assets financed via capital leases.
At December 31, 2013 and 2012, the Company had outstanding USD 4 700 thousand under the Working Capital Line of Credit "WCLC". During 2013 and 2012, the Company complied with all required financial covenants.
The Company has funded investments in property and equipment and office space through various lease agreements. The following information summarizes the Company's operating and finance lease obligations:
The following table summarizes the Company's future operating lease commitments at December 31, 2013:
| Year Ended | |
|---|---|
| (Amounts in USD 1 000) | December 31, |
| Operating Leases | 2013 |
| Payable in 2014 | 807 |
| Payable in 2015 | 784 |
| Payable in 2016 | 804 |
| Payable in 2017 | 39 |
| Thereafter | - |
| Total Minimum Lease Payments | 2 434 |
The Company's current lease agreement for its Herndon, Virginia office space expires in December 2016. The Company's lease agreement for its Davie, Florida location expires in February 2017.
The Company has finance leases that are 3-year capital leases with a USD 1 buyout. The Company has one capital lease with a term of 7 years with a USD 1 buyout option. Additionally, the Company has capital leases with terms ranging from two to four years and bargain purchase options based on a percentage of fair market value. The capitalized lease amount is included in the net property and equipment balances summarized in Note 11.
Equipment funded under finance leases are pledged as collateral in support of the amounts borrowed.
The following table summarizes the Company's Finance Lease commitments:
| Year Ended | ||||
|---|---|---|---|---|
| December 31, | ||||
| (Amounts in USD 1 000) | 2013 2012 |
|||
| Minimum | Present | Minimum | Present | |
| Finance Leases | Payments | Value | Payments | Value |
| Payable Within One Year | 3 446 | 2 740 | 4 047 | 3 313 |
| Payable After One Year, But Not More Than Five Years | 3 133 | 2 882 | 4 739 | 4 103 |
| Total Minimum Lease Payments | 6 579 | 5 622 | 8 786 | 7 416 |
| Less Amounts Representing Finance Charges | ( 957) | - | (1 370) | - |
| Present Value of Minimum Lease Payments | 5 622 | 5 622 | 7 416 | 7 416 |
The following table summarizes the Company's Other Current Liabilities:
| Year Ended | |||
|---|---|---|---|
| (Amounts in USD 1 000) | December 31, | ||
| 2013 | 2012 | ||
| Accrued Expenses | 3 036 | 3 055 | |
| Deferred Revenue | 876 | 1 030 | |
| Total Other Current Liabilities | 3 912 4 085 |
The Norwegian Company is taxed at the statutory tax rate of 28%, and the U.S. Company is taxed at statutory rates of 15% to 39% applied to marginal income levels.
| (Amounts in USD 1 000) | ||
|---|---|---|
| Income tax expense | 2013 | 2012 |
| Tax payable | 165 | 183 |
| Changes in deferred tax | - | |
| Income tax expense | 165 | 183 |
| Reconciliation of tax expense | 2 013 | 2 012 |
| Profit before tax | 946 | 1 448 |
| Tax assessed | 829 | 423 |
| Permanent differences | 70 | 847 |
| Change of unrecognized deferred tax asset | ( 303) | (1 209) |
| Translation adjustment | ( 432) | ( 244) |
| Income tax expense | 164 | ( 183) |
Income tax expense relates solely to certain state income tax payments made in the US.
| (Amounts in USD 1 000) | Balance Sheet | |
|---|---|---|
| Deferred tax and tax advantage | 2 013 | 2 012 |
| Deferred tax assets | ||
| Non-current assets | (1 778) | (1 363) |
| Current assets | 4 835 | 4 266 |
| Loss carry forward | 51 875 | 54 150 |
| Tax advantage - gross | 54 932 | 57 053 |
| Deferred tax liabilities | ||
| Non-current assets | - | - |
| Current assets | - | - |
| Other | - | - |
| Deferred tax liabilities - gross | - | - |
| - | - | |
| Net deferred tax asset | 54 932 | 57 053 |
In the US, there is approximately USD 121 million of federal loss carry forwards at December 31, 2013, which expire in future years starting in 2018 through 2032.
The Company has a Stock Option Plan ("Plan"), which is administered by the Company's Board of Directors. The Plan provides for the granting of options to purchase shares of Common Stock
to eligible employees. Typically, option grants vest over a 4 year period and the option term does not exceed five years. The Company has adopted the Black-Scholes model for the purpose of calculating fair value of options under IFRS. There were 125 000 options granted in 2013. A volatility percentage of 74% was used for the options granted in 2013. There were no options granted in 2012. For the Company's 2013 stock option grants, the Company used a risk-free interest rate of 1.39%. The Company also assumed an estimated life of 365 days once the option becomes vested. In 2013, the Company recognized a total of USD 129 thousand in stock option expense and USD 229 thousand in stock option expense for 2012.
The share options granted could lead to a dilutive effect on the Company shareholders. As of December 31, 2013 and 2012, the effects of the share options were dilutive.
A summary of the Company's stock option activity, and related information for the year ended December 31, 2013 and 2012 follows:
| 2013 | 2012 | |||
|---|---|---|---|---|
| Weighted Avg | Weighted Avg | |||
| Exercise | Exercise | |||
| Shares | Price | Shares | Price | |
| Outstanding at Beginning of Period | 4 035 000 | 2,81 | 4 311 582 | 2,84 |
| Granted | 125 000 | 2,86 | - | - |
| Exercised | - | - | - | - |
| Forfeited | (215 000) | 3,05 | (270 943) | (2,83) |
| Canceled | - | - | - | - |
| Expired | (20 000) | 10,00 | (5 639) | (22,40) |
| Outstanding at End of Period | 3 925 000 | 2,76 | 4 035 000 | 2,81 |
| Exercisable at End of Period | 3 064 000 | 2,75 | 2 252 500 | 2,80 |
The following table summarizes the Company's stock options at December 31, 2013:
| Outstanding Stock Options | Exercisable Stock Options | ||||
|---|---|---|---|---|---|
| Weighted Avg Weighted Avg |
Weighted Avg | ||||
| Remaining | Exercise | Exercise | |||
| Exercise Price | Shares | Contractual Life | Price | Shares | Price |
| NOK 0 - 2,99 | 3 650 000 | 1,68 | 2,73 | 2 841 500 | 2,72 |
| NOK 3,00 - 3,28 | 275 000 | 2,26 | 3,11 | 222 500 | 3,13 |
| Total | 3 925 000 | 1,72 | 2,76 | 3 064 000 | 2,75 |
There were no share issuances during 2013 and 2012. There were also no options exercised during 2013 and 2012.
At December 31, 2013, the Company had only one class of shares with a par value of NOK 0,333. Each share has one vote. There are no trade limitations on the Company's shares. The shares are registered in the Norwegian Registry of Securities. Total outstanding and issued shares at December 31, 2013 were 81 430 178.
| Number of | Percentage of | |
|---|---|---|
| Shareholder | Shares Owned | Shares Owned |
| BNP PARIBAS SECS SERVICES PARIS | 25 997 923 | 31.9% |
| UBS AG ZURICK | 10 414 320 | 12.8% |
| WINDCHANGE AS | 9 120 000 | 11.2% |
| SPENCER TRADING INC | 3 619 896 | 4.4% |
| HAADEM INVEST AS | 3 046 127 | 3.7% |
| SKANDINAVISKA ENSKILDA BANKEN AB | 2 836 220 | 3.5% |
| TTC INVEST AS | 2 200 000 | 2.7% |
| ENGER AS FRANS | 1 963 383 | 2.4% |
| PARETO BANK ASA | 1 300 000 | 1.6% |
| CARNEGIE INVESTMENT BANK AB NUF | 1 261 400 | 1.5% |
| AVANZA BANK AS | 1 121 444 | 1.4% |
| NORDNET BANK AB | 1 079 676 | 1.3% |
| HÜBERT LEIF | 958 080 | 1.2% |
| SØGNE SHIPPING AS | 882 701 | 1.1% |
| LOLIGO AS | 878 567 | 1.1% |
| NORDGAARD | 780 167 | 1.0% |
| ADMANIHA AS | 642 694 | 0.8% |
| HAADEM | 636 266 | 0.8% |
| SVEEN KJERSTI | 513 477 | 0.6% |
| LAIKA INVEST AS | 458 562 | 0.6% |
| Total Largest 20 Shareholders | 69 710 903 | 85.6% |
| Other Shareholders | 11 719 275 | 14.4% |
| Total Shares Outstanding | 81 430 178 | 100.0% |
BNP PARIBAS SECS Services is the nominee for the Celox SA holdings. Celox SA owns approximately 32% of the total outstanding shares of the Company.
Windchange AS is an entity 100% owned by the Company's chairman. The total ownership reflected above does not include 35 059 shares held directly by the Company's chairman. Admaniha AS is an entity 100% owned by Terje Rogne, one of the Company's directors. Additionally, Mr. Rogne has ownership of the 1 300 000 shares held by Pareto Bank ASA.
Shares owned (both directly and indirectly) by the Board of Directors and the CEO at December 31, 2013:
| Average | ||||
|---|---|---|---|---|
| Name | Position | Shares | Options | Exercise Price |
| David Ehrhardt | CEO | 58 949 | 1 715 000 | 2,70 |
| Johan Lindqvist | Chairman | 9 155 059 | - | - |
| Terje Rogne | Board member | 1 942 694 | - | - |
| Ebba Fahraeus | Board member | 240 053 | - | - |
| Total | 11 396 755 | 1 715 000 | 2,70 |
At December 31, 2013, Jon Schultz, the Company's legal counsel, owned directly and indirectly 458 670 shares of Apptix ASA.
The Company has entered into a consulting agreement with its Chairman, Johan Lindqvist, whereby the Company pays Mr. Lindqvist NOK 400 thousand per year for consulting services as approved by the shareholders in May 2012.
The Company contracts with Jon Schultz, a former Board member, to provide legal services. The Company paid Mr. Schultz's legal firm NOK 420 thousand in 2013 for professional legal services. The Company believes the remuneration paid to Mr. Schultz's legal firm during 2013 was equivalent to prevailing market rates.
Mr. Schultz along with shareholders Richard Urbanski and Fredrik Stenmo are members of the Company's nominating committee. In 2013, the members received no compensation for their services. Mr. Urbanski represents TCT Invest AS and Mr. Stenmo represents the Company's largest shareholder, Celox SA.
The Company does not have any other transactions with related parties except for compensation to key management and Board of Directors as summarized in Note 5 and the equity related transactions as summarized in Notes 20, 21 and 22.
None.
The Company's principal financial instruments include operating leases, finance leases, and cash. The primary purpose of these financial instruments is to finance the Company's operations and strategic acquisition plans. The Company has various other financial assets and liabilities such as trade receivables and trade payables, which are a direct result of the Company's operations.
It is the Company's policy not to engage in trading of financial instruments.
The primary risks arising from the Company's financial instruments are foreign currency risk, credit risk, interest risk and liquidity risk. The Company evaluates its risk exposure in order to determine the potential affect on its business operations by reviewing the products and services provided to the markets the Company serves and the countries in which it conducts business. The Company believes it does not have any significant single concentration of risk.
The policies are summarized below.
The Company's principal operating market is the United States with its functional currency being the US Dollar. The Company has limited operating expense outside of the United States. The Company has limited transactional currency exposure, which results from transactions in a currency other than its functional currency.
The Company transacts with a wide variety of customers from the Global 1 000 to companies with fewer than five employees. The majority of small business customers pay via credit card, dramatically reducing the Company's credit risk with respect to these customers. To ensure that credit risk is managed appropriately, the Company monitors its receivables balance regularly and ceases providing service when customer accounts become significantly overdue. At December 31, 2013, the Company's maximum credit risk is the carrying value of its trade accounts receivable of 1 799 thousand. The Company believes it does not have any material credit risk associated with trade accounts receivables that are neither past due nor impaired.
The Company's exposure to the risk of interest rate fluctuations relates primarily to the Company's need to obtain equipment financing for computer hardware and equipment and the Company's WCLC, as required to support the business. The Company's lease agreements are primarily fixed rate agreements and not subject to fluctuation while the Company's WCLC is subject to changes in its financial institution's prime interest rate. Interest rate fluctuation related to the WCLC is limited to a maximum increase of two percent above the prime interest rate.
The following table demonstrates the sensitivity to a reasonably possible change in US interest rates (full % points), with all other variables held constant, of the Company's loss before tax. There is no impact on the Company's equity.
| Increase / Decrease |
Effect on Profit Before |
|
|---|---|---|
| In Interest Rates | Taxes | |
| 2013 | 3% | - |
| -3% | - | |
| 2012 | 3% | (141) |
| -3% | 141 |
The Company's objective is to maintain a balance between continuity of funding and flexibility through the use of operating leases and finance leases.
The table below summarizes the maturity profile of the Company's financial liabilities as of December 31, 2013 and 2012 based on contractual undiscounted payments:
| (Amounts in USD 1 000) | Due within | Due within | |
|---|---|---|---|
| Year Ended December 31, 2013 | 12 Months | 1 to 5 Years | Total |
| Trade Accounts Payable | 1 145 | - | 1 145 |
| Other Current Liabilities | 6 652 | - | 6 652 |
| Other Long Term Debt | - | 7 582 | 7 582 |
| Total | 7 797 | 7 582 | 15 379 |
| Due within | Due within | ||
|---|---|---|---|
| Year Ended December 31, 2012 | 12 Months | 1 to 5 Years | Total |
| Trade Accounts Payable | 1 306 | - | 1 306 |
| Other Current Liabilities | 7 398 | - | 7 398 |
| Other Long Term Debt | - | 8 803 | 8 803 |
| Total | 8 704 | 8 803 | 17 507 |
The table below sets forth the carrying amounts and fair values of the Company's financial instruments:
| Carrying Amount | Fair Value | |||
|---|---|---|---|---|
| (Amounts in USD 1 000) | 2013 | 2012 | 2013 | 2012 |
| Cash and Cash Equivalents | 3 124 | 2 358 | 3 124 | 2 358 |
| Accounts Receivable | 1 799 | 1 645 | 1 799 | 1 645 |
| Interest-bearing loans and borrowings: | ||||
| Bank Equipment Loans & Line of Credit Facility | 4 700 | 4 700 | 4 700 | 4 700 |
| Obligations under Finance Lease | 5 622 | 7 416 | 5 622 | 7 416 |
The market interest rates associated with the fair value of the loans and finance leases are consistent with the effective rates of the carrying amounts for such loans and finance leases. Therefore, there is not a difference in the carrying amounts and fair value for such financial liabilities.
The Company's working capital facility is secured by a first priority position in all of the assets of the Company except for those assets financed via capital leases. The term of the working capital facility has been extended through January 31, 2015 and requires the Company to maintain certain financial covenants such as tangible net worth and liquidity ratio (as defined by the financial institution). At December 31, 2013, the Company had USD 4 700 thousand outstanding under its revolving line of credit agreement.
The primary objective of the Company's capital management is to ensure it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Company considers both equity and debt financing (i.e. subordinated or convertible debt) as part of the capital resources that it actively manages.
Given the Company's operating losses, the Company has historically relied on debt and equity financings, equipment financings and working capital loans to meet its on-going working capital needs. The Company monitors earnings before interest, taxes, depreciation and amortization (EBITDA) both in absolute currency and as a percentage of net revenues in order to determine whether or not the Company has sufficient capital resources to satisfy its contractual debt obligations and business plan for the next twelve months. When evaluating the Company's current business plan, the Company will assess the likelihood of securing the financing needed to satisfy its capital resources for the upcoming year. The Company will also assess the cost and risk associated with the various financing options and when appropriate, modify its business plan to correspond with an acceptable cost of capital.
External reporting requirements related to securing capital are likely to include EBITDA, tangible net worth and minimum cash balances. The table below sets forth the Company's EBITDA from continuing operations for 2013 and 2012:
| (Amounts in USD 1 000) | EBITDA |
|---|---|
| 2013 | 6 450 |
| 2012 | 6 213 |
Working Capital Line of Credit
The Company maintains a working capital facility with its financial institution. The asset-based debt facility provided for working capital advances up to a maximum of USD 7 000 thousand (as amended in January 2013). At December 31, 2013, the Company had USD 4 700 thousand outstanding under the WCLC. For additional information, refer to Note 16.
| (Amounts in NOK 1 000) | Year Ended December 31, | ||
|---|---|---|---|
| Note | 2013 | 2012 | |
| OPERATING REVENUE | |||
| Other Revenue | 9 | 117 | 130 |
| Operating Revenue | 117 | 130 | |
| OPERATING EXPENSES | |||
| Employee Benefits | 4 | 913 | 913 |
| Other Operational and Administrative Costs | 1 654 | 1 619 | |
| Total Operating Expenses | 2 567 | 2 532 | |
| Operating Loss | (2 450) | (2 402) | |
| FINANCIAL INCOME AND EXPENSES | |||
| Income/(Loss) From Investment in Subsidiaries | 5 | (22 672) | (16 165) |
| Interest, Net | 9 | 12 897 | 8 389 |
| Net Financial Expenses | (9 775) | (7 776) | |
| Loss Before Taxes | (12 225) | (10 178) | |
| TAXES | |||
| Income Tax Expenses | 6 | - | - |
| Net Loss | (12 225) | (10 178) | |
| Allocated as follows | |||
| Transferred to share premium | 12 225 | 10 178 | |
| Total allocations | 12 225 | 10 178 | |
| Loss Per Share: | |||
| Basic and Diluted Loss Per Share | (0,15) | (0,12) | |
| Common Shares Outstanding | 81 430 | 81 430 |
| (Amounts in NOK 1 000) | Year Ended December 31, | ||
|---|---|---|---|
| Note | 2013 | 2012 | |
| ASSETS | |||
| Financial Non-current Assets | |||
| Investment in Subsidiaries | 5 | 30 763 | 40 221 |
| Total Financial Non-current Assets | 30 763 | 40 221 | |
| Total Non-current Assets | 30 763 | 40 221 | |
| Current Assets | |||
| Other Current Assets | 95 | 86 | |
| Cash and Cash Equivalents | 3 | 270 | 318 |
| Total Current Assets | 365 | 404 | |
| TOTAL ASSETS | 31 128 | 40 625 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share Capital | 8 | 27 116 | 27 116 |
| Share Premium | 8 | 1 620 | 11 115 |
| Other Paid-in Capital | 8 | - | - |
| Total Equity | 28 736 | 38 231 | |
| Total Long Term Debt | - | - | |
| Current Liabilities | |||
| Trade Accounts Payable | 5 | 7 | |
| Other Current Liabilities | 2 387 | 2 387 | |
| Total Current Liabilities | 2 392 | 2 394 | |
| TOTAL EQUITY AND LIABILITIES | 31 128 | 40 625 |
Chairman of the Board Director Director President & Chief Executive Officer
31 December, 2013 / 31 March, 2014
| (Amounts in NOK 1 000) | Year Ended December 31, | |||
|---|---|---|---|---|
| Note | 2013 | 2012 | ||
| Cash Flows From Operating Activities | ||||
| Loss Before Tax | (12 225) | (10 178) | ||
| Loss From Investment in Subsidiaries | 5 | 22 672 | 16 165 | |
| Change in Trade Accounts Payable | ( 2) | ( 33) | ||
| Change in Other Assets and Liabilities | ( 9) | 30 | ||
| Cash Flows Provided by Operating Activities | 10 436 | 5 984 | ||
| Cash Flows From Investing Activities Intercompany Receivables |
(10 484) | (5 845) | ||
| Cash Flows Used in Investing Activities | (10 484) | (5 845) | ||
| Cash Flows From Financing Activities | ||||
| Payments on Convertible Debt | 7 | - | - | |
| Proceeds From Share Offerings | 8 | - | - | |
| Cash Flows Used in Financing Activities | - | - | ||
| Net (Decrease) Increase in Cash and Cash Equivalents | ( 48) | 139 | ||
| Cash and Cash Equivalents at Beginning of Period | 318 | 179 | ||
| Cash and Cash Equivalents at End of Period | 270 | 318 |
Apptix ASA is a public Company registered in Norway. The Company's registered business address is located at Nesoyveien 4, 1396 Billingstad, Norway.
The financial statements of Apptix ASA are prepared in accordance with the Norwegian Accounting Act of 1998 and Norwegian Generally Accepted Accounting Principles.
The Company's functional currency and presentation currency is NOK.
Investment in subsidiaries is accounted for in accordance with the equity method in the financial statement of the parent Company. The companies located outside of Norway use their local currency as their functional currency (primarily USD). The assets and liabilities are translated into NOK using the rate of exchange as of the balance sheet date. The income statement is translated using the average exchange rate for the month in which the transaction occurred. Translation gains and losses are charged directly to equity.
Revenue is recognized when it is earned.
Current assets and liabilities include balances typically due within one year. All other balances are classified as non-current assets and other long-term debt. Current assets are valued at the lower of cost or net realizable value. Short-term debt is stated at the historical nominal value. Fixed assets are valued at cost, but written down to realizable value if the decline in value is expected to be permanent. Long-term debt is disclosed at the historical nominal value.
Other debtors are stated at face value, and reduced by a provision for anticipated losses. The provision is made on the basis of individual evaluations of each customer.
Monetary items denominated in foreign currencies are translated at the exchange rate applicable on the balance sheet date.
Software is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over estimated useful lives of the assets.
The tax expense in the income statement includes taxes payable on the ordinary result for the period as well as the change in deferred tax. Deferred tax is calculated with a nominal tax rate on the temporary differences between the recorded values and tax values, as well as on any tax loss carry-forwards at the balance sheet date. Any temporary differences increasing or reducing taxes that will or may reverse in the same period are netted. The net deferred tax benefit is recorded as an asset if it is regarded as likely that the Company will be able to realize the benefit through future earnings or realistic tax efficient planning.
The cash flow statement is prepared in accordance with the indirect method. Included in cash and cash equivalents are bank deposits and cash on hand. Cash and cash equivalents are carried at the market value on the balance sheet date.
The following table summarizes the Company's Cash and Cash Equivalents:
| (Amounts in NOK 1 000) | Year Ended December 31, | |
|---|---|---|
| 2013 | 2012 | |
| Cash at the Bank | 135 | 135 |
| Restricted Cash | 135 | 183 |
| Total Cash and Cash Equivalents | 270 | 318 |
The following table summarizes the Compensation and Employee Benefits:
| (Amounts in NOK 1 000) | Year Ended December 31, | ||
|---|---|---|---|
| 2013 | 2012 | ||
| Board of Director Fees | 800 | 800 | |
| Social Security Tax | 113 | 113 | |
| Total Employee Benefits | 913 | 913 | |
| Average Number of Employees | - | - |
As of December 31, 2013 and 2012, Apptix ASA did not have any employees.
For further information regarding compensation, refer to Note 5 in the Apptix Group consolidated financial statements. For further information regarding share based compensation, refer to Note 20 in the Apptix Group consolidated financial statements. For further information regarding share ownership in Apptix ASA by the management team and members of the Board, refer to Note 22 in the Apptix Group consolidated financial statements.
The table below summarizes the components of the Company's audit related fees:
| Year Ended December 31, | ||
|---|---|---|
| (Amounts in NOK 1 000) | 2013 | 2012 |
| Audit Services | 100 | 100 |
| Tax Sevices | 10 | 10 |
| Other Non-audit Services | 57 | 36 |
| Total Audit Fees | 167 | 146 |
All amounts are stated less Value Added Tax (VAT).
Investment in subsidiaries is accounted for in accordance with the equity method in the financial statement of the parent Company (Apptix ASA). The companies located outside of Norway use their local currency as their functional currency (primarily USD). The assets and liabilities are translated into NOK using the rate of exchange as of the balance sheet date. Translation gains and losses are charged directly to equity. Transactions in foreign currencies are translated by using the exchange rate at the transaction date.
The following table summarizes the Company's subsidiaries:
| Incorporation/ | Office | Ownership Interest | |
|---|---|---|---|
| Companies | Acquisition | Location | & Voting Shares |
| Apptix, Inc. | 1999 | Virginia, USA | 100% |
Apptix, Inc. is 100% owned by Apptix ASA.
The table below reflects the changes in Apptix ASA's investment in Apptix, Inc.:
| (Amounts in NOK 1 000) | |
|---|---|
| Investment in Subsidiaries at December 31, 2011 | 53 508 |
| Net Loss for 2011 from Investments in Subsidiaries | (16 165) |
| Increase/(Decrease) of Net Equity and Intercompany in Subsidiaries | 5 845 |
| Translation Adjustment | (2 967) |
| Investment in Subsidiaries at December 31, 2012 | 40 221 |
| Net Loss for 2012 from Investments in Subsidiaries | (22 672) |
| Increase/(Decrease) of Net Equity and Intercompany in Subsidiaries | 10 484 |
| Translation Adjustment | 2 730 |
| Investment in Subsidiaries at December 31, 2013 | 30 763 |
The Norwegian Company is taxed at the statutory tax rate of 28%.
| Income tax expense | 2013 | 2012 |
|---|---|---|
| Tax payable | - | - |
| Changes in deferred tax | - | - |
| Income tax expense | - | - |
| The basis for tax payable | 2013 | 2012 |
| Loss before tax | (12 225) | (10 178) |
| Permanent differences | - | |
| Net Loss from investing in subsidiary | 22 672 | 16 165 |
| Change in deferred tax asset | ( 612) | ( 879) |
| Loss carry forward used | (9 835) | (5 108) |
| Total basis for tax payable | - | - |
| Deferred tax asset | 2013 | 2012 |
| Loss carry forward | 217 892 | 227 727 |
| Fixed assets | 1 378 | 1 990 |
| Tax advantage - gross | 219 270 | 229 717 |
| Net deferred tax asset | 59 203 | 64 321 |
| Net recognized deferred tax asset | - | - |
| Unrecognized tax asset | 59 203 | 64 321 |
There were no options exercised or share issuances during 2013 and 2012.
| Paid in | Other | |||
|---|---|---|---|---|
| Common | Premium | Paid-in | Total | |
| (Amounts in NOK 1 000) | Stock | Reserve | Capital | Equity |
| Shareholders' Equity December 31, 2011 | 27 116 | 24 260 | - | 51 376 |
| Net Loss 2012 | - | (10 178) | - | (10 178) |
| Translation Adjustment | - | (2 967) | - | (2 967) |
| Shareholders' Equity December 31, 2012 | 27 116 | 11 115 | - | 38 231 |
| Net Loss 2013 | - | (12 225) | - | (12 225) |
| Translation Adjustment | - | 2 730 | - | 2 730 |
| Shareholders' Equity December 31, 2013 | 27 116 | 1 620 | - | 28 736 |
The following table summarizes the net change in the Company's shareholder equity:
At December 31, 2013, the Company had only one class of shares with a par value of NOK 0,333. Each share has one vote. There are no trade limitations on the Company's shares. The shares are registered in the Norwegian Registry of Securities. Total outstanding and issued shares at December 31, 2013 were 81 430 178.
| Number of | Percentage of | |
|---|---|---|
| Shareholder | Shares Owned | Shares Owned |
| BNP PARIBAS SECS SERVICES PARIS | 25 997 923 | 31.9% |
| UBS AG ZURICK | 10 414 320 | 12.8% |
| WINDCHANGE AS | 9 120 000 | 11.2% |
| SPENCER TRADING INC | 3 619 896 | 4.4% |
| HAADEM INVEST AS | 3 046 127 | 3.7% |
| SKANDINAVISKA ENSKILDA BANKEN AB | 2 836 220 | 3.5% |
| TTC INVEST AS | 2 200 000 | 2.7% |
| ENGER AS FRANS | 1 963 383 | 2.4% |
| PARETO BANK ASA | 1 300 000 | 1.6% |
| CARNEGIE INVESTMENT BANK AB NUF | 1 261 400 | 1.5% |
| AVANZA BANK AS | 1 121 444 | 1.4% |
| NORDNET BANK AB | 1 079 676 | 1.3% |
| HÜBERT LEIF | 958 080 | 1.2% |
| SØGNE SHIPPING AS | 882 701 | 1.1% |
| LOLIGO AS | 878 567 | 1.1% |
| NORDGAARD | 780 167 | 1.0% |
| ADMANIHA AS | 642 694 | 0.8% |
| HAADEM | 636 266 | 0.8% |
| SVEEN KJERSTI | 513 477 | 0.6% |
| LAIKA INVEST AS | 458 562 | 0.6% |
| Total Largest 20 Shareholders | 69 710 903 | 85.6% |
| Other Shareholders | 11 719 275 | 14.4% |
| Total Shares Outstanding | 81 430 178 | 100.0% |
BNP PARIBAS SECS Services is the nominee for the Celox SA holdings. Celox SA owns approximately 32% of the total outstanding shares of the Company.
Windchange AS is an entity 100% owned by the Company's chairman. The total ownership reflected above does not include 35 059 shares held directly by the Company's chairman. Admaniha AS is an entity 100% owned by Terje Rogne, one of the Company's directors. Additionally, Mr. Rogne has ownership of the 1 300 000 shares held by Pareto Bank ASA.
Shares owned (both directly and indirectly) by the Board of Directors and the CEO at December 31, 2013:
| Average | ||||
|---|---|---|---|---|
| Name | Position | Shares | Options | Exercise Price |
| David Ehrhardt | CEO | 58 949 | 1 715 000 | 2,70 |
| Johan Lindqvist | Chairman | 9 155 059 | - | - |
| Terje Rogne | Board member | 1 942 694 | - | - |
| Ebba Asly Fahraeus | Board member | 240 053 | - | - |
| Total | 11 396 755 | 1 715 000 | 2,70 |
The revenue generated and interest earned by Apptix ASA is related to it's wholly owned subsidiary, Apptix, Inc. The table below summarizes the Company's revenue and interest income:
| (Amounts in NOK 1 000) | Year Ended December 31, | ||
|---|---|---|---|
| 2013 | 2012 | ||
| Other Revenue | 117 | 130 | |
| Intercompany Interest | 12 897 | 8 386 |
We confirm, to the best of our knowledge that the financial statements for the period 1 January to 31 December 2013 have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the entity and the group taken as a whole. We also confirm that the management report includes a true and fair review of the development and performance of the business and the position of the entity and the group, together with a description of the principal risks and uncertainties facing the entity and the group.
31 December, 2013 / 31 March, 2014
Chairman of the Board Director Director President & Chief Executive Officer
Board of Directors Operator of the Share Register Account Johan Lindqvist - Chairman Nordea Bank Norge ASA Chairman of the Board, Serverhuset AB, Nipsoft AB, Securities Services Advance AB and Softcenter AB Verdipapirseksjonen
Ebba Fahraeus - Director 0107 Oslo Chief Communications Officer and Director of Norway Business Development, Aqilles Invest AB Phone: +47 22 48 50 00 Chariman of the Board, Genovis AB, Acousort, Good Old Fax: +47 22 48 44 44 Director, Simris Alg, Connect Skåne www. nordea.com
Terje Rogne - Director Corporate Headquarters Chairman of the Board, Nokas AS 13461 Sunrise Valley Drive Vice Chairman of the Board, Nordic Semiconductor Suite 300 ASA and Dolphin Interconnect ASA; Director, Unified Herndon, Virginia 20171 USA Messaging Systems AS Phone: +1 703 890 2800
Corporate Officers www. apptix.com David E. Ehrhardt President & Chief Executive Officer Stock Information
Christopher E. Mack OSE Symbol: APP Chief Financial Officer www. ose.no
Management Team Independent Accountants David E. Ehrhardt Ernst & Young AS President & Chief Executive Officer Nedre Storgt. 42
Christopher E. Mack N-3002 Drammen Chief Financial Officer Norway
Donnie Hughes Fax: +47 32 83 86 25 Senior Vice President, Customer Management www. ey.no
Shane Smith Investor Services
Aubrey Smoot contact: Senior Vice President, Business Development
Postboks 1166 Sentrum
Fax: +1 703 890 2801
Stock traded on the Oslo Stock Exchange
Postboks 560 Brakeroya Phone: +47 32 83 88 90
Senior Vice President, Technology To request additional information about the Company, its finances, operations and services,
Chairman of the Board, Apptix Sweden Phone: +46 733 550935 Fax: +46 60 668007 johan.lindqvist @windchange.se
Chief Financial Officer, Apptix 13461 Sunrise Valley Drive, Suite 300
The Company encourages all shareholders to register for electronic Herndon, Virginia 20171 USA delivery of documents through the VPS system. A shareholder Phone: +1 703 890 2800 can register for electronic delivery via your log-on page in the Fax: +1 703 890 2801 VPS account or by contacting your VPS bank. chris.mack @apptix.com
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.