-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RQDlO9zOk1kddC7Idj56bpbs0bGjbIQIWTst6Kn/XqkymVhDUFkDRoIy6PT2oWyV LvHVPUXKgR0Or4KVfghNAg== 0000950134-03-007621.txt : 20030513 0000950134-03-007621.hdr.sgml : 20030513 20030512174643 ACCESSION NUMBER: 0000950134-03-007621 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTIVE IQ TECHNOLOGIES INC CENTRAL INDEX KEY: 0000912875 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 412004369 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12401 FILM NUMBER: 03693638 BUSINESS ADDRESS: STREET 1: 601 CARLSON PARKWAY STREET 2: SUITE 1500 CITY: MINNETONKA STATE: MN ZIP: 55305 BUSINESS PHONE: 9524495000 MAIL ADDRESS: STREET 1: 601 CARLSON PARKWAY STREET 2: SUITE 1500 CITY: MINNETONKA STATE: MN ZIP: 55305 FORMER COMPANY: FORMER CONFORMED NAME: METEOR INDUSTRIES INC DATE OF NAME CHANGE: 19960313 10-Q 1 c77037e10vq.txt FORM 10-Q U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______ COMMISSION FILE NUMBER 1-12401 - -------------------------------------------------------------------------------- ACTIVE IQ TECHNOLOGIES, INC. (Exact Name of Registrant as specified in Its Charter) MINNESOTA 41-2004369 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 800 NICOLLET MALL, SUITE 2690, MINNEAPOLIS, MN 55402 (Address of Principal Executive Offices) 612.664.0570 (Issuer's Telephone Number, Including Area Code) 5720 SMETANA DRIVE, SUITE 101, MINNETONKA, MN 55343 (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] As of May 9, 2003, there were 13,057,181 shares of common stock, $.01 par value, outstanding. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Form 10-Q contains forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended) and information relating to us that is based on the current beliefs of our management as well as assumptions made by and information currently available to management, including statements related to the markets for our products, general trends in our operations or financial results, plans, expectations, estimates and beliefs. In addition, when used in this Form 10-Q, the words "may," "could," "should," "anticipate," "believe," "estimate," "expect," "intend," "plan," "predict" and similar expressions and their variants, as they relate to us or our management, may identify forward-looking statements. These statements reflect our judgment as of the date of this Form 10-Q with respect to future events, the outcome of which is subject to risks, which may have a significant impact on our business, operating results or financial condition. Readers are cautioned that these forward-looking statements are inherently uncertain. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein. We undertake no obligation to update forward-looking statements. The risks identified in the section of Item 2 entitled "RISK FACTORS," among others, may impact forward-looking statements contained in this Form 10-Q. 2 ACTIVE IQ TECHNOLOGIES, INC. FORM 10-Q INDEX MARCH 31, 2003
Page ---- PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements 4 Condensed Consolidated Balance Sheets - As of March 31, 2003 and December 31, 2002 4 Condensed Consolidated Statements of Operations - For the three months ended March 31, 2003 and March 31, 2002 5 Condensed Consolidated Statements of Cash Flows - For the three months ended March 31, 2003 and March 31, 2002 6 Notes to the Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 Item 4. Controls and Procedures 15 PART II OTHER INFORMATION Item 1. Legal Proceedings 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18 Certifications 19
3 ACTIVE IQ TECHNOLOGIES, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) March 31, 2003 December 31, 2002 --------------- ----------------- ASSETS CURRENT ASSETS Cash and equivalents $ 738,929 $ 13,211 Accounts receivable, net 70,121 35,107 Prepaid expenses 11,640 35,542 --------------- --------------- Total current assets 820,690 83,860 PROPERTY and EQUIPMENT, net 2,996 123,505 PREPAID ROYALTIES -- 975,000 --------------- --------------- $ 823,686 $ 1,182,365 =============== =============== LIABILITIES and SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 257,749 $ 304,526 Net liabilities of operations of discontinued accounting software business 93,962 93,078 Accrued expenses 26,289 195,628 --------------- --------------- Total current liabilities 378,000 593,232 COMMITMENTS and CONTINGENCIES SHAREHOLDERS' EQUITY Common stock, $.01 par value, 150,000,000 shares authorized; 13,057,181 and 13,264,681 shares issued and outstanding 130,572 132,647 Additional paid-in capital 20,675,437 22,616,833 Stock subscriptions receivable -- (2,000,000) Deferred compensation (20,676) (182,213) Warrants 2,602,860 2,602,860 Accumulated deficit (22,942,507) (22,580,994) --------------- --------------- Total shareholders' equity 445,686 589,133 --------------- --------------- $ 823,686 $ 1,182,365 =============== ===============
See accompanying notes to condensed consolidated financial statements 4 ACTIVE IQ TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended March 31, 2003 2002 --------------- --------------- REVENUES $ 132,455 $ 103,788 --------------- --------------- OPERATING EXPENSES: Cost of goods 35,354 78,015 Selling, general and administrative 330,183 822,930 Depreciation and amortization 8,719 338,701 Loss (gain) on disposal of assets (749) 25,480 --------------- --------------- Total operating expenses 373,507 1,265,126 --------------- --------------- LOSS FROM OPERATIONS (241,052) (1,161,338) --------------- --------------- OTHER INCOME (EXPENSE): Interest and dividend income 23,544 41,313 Other income 150,000 20,000 Loss on sale of prepaid royalties (434,895) -- --------------- --------------- Total other income (expense) (261,351) 61,313 --------------- --------------- LOSS FROM CONTINUING OPERATIONS $ (502,403) $ (1,100,025) --------------- --------------- DISCONTINUED OPERATIONS (SEE NOTE 4) Gain (loss) from operations of discontinued accounting software business 140,890 (238,801) --------------- --------------- NET LOSS $ (361,513) $ (1,338,826) =============== =============== BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE: Continuing operations $ (0.04) $ (0.10) Discontinued operations 0.01 (0.02) --------------- --------------- NET LOSS $ (0.03) $ (0.12) =============== =============== BASIC AND DILUTED WEIGHTED AVERAGE OUTSTANDING SHARES 12,905,264 11,377,023 =============== ===============
See accompanying notes to condensed consolidated financial statements 5 ACTIVE IQ TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended March 31, 2003 2002 --------------- --------------- OPERATING ACTIVITIES: Net loss $ (361,513) $ (1,337,826) Adjustments to reconcile net loss to cash flows from operating activities: Depreciation and amortization 16,160 344,150 Deferred compensation expense 161,537 31,929 Loss (gain) on disposal of assets (749) 71,145 Warrants issued to non-employee -- 61,020 Amortization of debt discount -- 31,272 Amortization of acquired software developed 53,884 78,660 Exchange of assets for services 2,644 -- Loss on sale of prepaid royalties 434,895 -- Changes in operating assets and liabilities: Accounts receivable, net 38,957 242,968 Inventories 4,983 5,550 Prepaid expenses 31,749 (11,549) Prepaid royalties -- 1,403 Other assets (2,890) 26,742 Accounts payable (59,197) (103,387) Deferred revenue (71,568) 111,304 Accrued expenses 14,593 (299,373) --------------- --------------- Net cash provided by (used in) operating activities 263,485 (745,992) --------------- --------------- INVESTING ACTIVITIES: Proceeds from sale of property and equipment 109,895 -- Proceeds from sale of prepaid royalties 540,105 -- Purchases of property and equipment (3,880) (20,025) --------------- --------------- Net cash provided by (used in) investing activities 646,120 (20,025) --------------- --------------- FINANCING ACTIVITIES: Payments on short-term notes payable (83,685) (1,197,740) Common stock repurchased and retired -- (63,035) Cash proceeds from exercise of options and warrants -- 142,500 Cash proceeds from short-term notes payable and warrants -- 450,000 --------------- --------------- Net cash used in financing activities (83,486) (668,275) --------------- --------------- CHANGE IN CASH AND EQUIVALENTS OF DISCONTINUED ACCOUNTING SOFTWARE BUSINESS (100,401) 189,076 --------------- --------------- INCREASE (DECREASE) IN CASH and EQUIVALENTS 725,718 (1,245,216) CASH AND EQUIVALENTS, beginning of period 13,211 1,377,315 --------------- --------------- CASH AND EQUIVALENTS, end of period $ 738,929 $ 132,099 =============== =============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Non-cash financing and investing activities: Common stock issued in exchange for stock subscription receivable $ -- $ 2,000,000 Conversion of preferred stock into common stock $ -- $ 365,000 Cancellation of stock subscription receivable $ 2,000,000 $ -- Conversion of accrued wages into common stock $ 56,529 $ --
See accompanying notes to condensed consolidated financial statements 6 ACTIVE IQ TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2003 (UNAUDITED) NOTE 1 - NATURE OF BUSINESS Active IQ Technologies, Inc. ("we," "us," "our" or the "Company") provided industry-specific solutions for managing, sharing and collaborating on business information via the Web though our Hosted Solutions Business until March 2003, and accounting software through our Accounting Software Business. In December 2002, our Board of Directors authorized a plan to sell the Accounting Software Business and as a result of the formal plan, the results of operations have been reported as discontinued operations (the "Discontinued Operations") and previously reported condensed consolidated financial statements have been restated for the quarter ended March 31, 2002. See Notes No. 4 and 6 for further discussions regarding the Discontinued Operations of Accounting Software Business. During the first quarter of 2003, we came to the conclusion that due to current market conditions for capital funding, it would be extremely unlikely for us to secure the financing necessary to fund our Hosted Solutions Business beyond the near term and thereby provide assurance to future customers of our long-term viability. On March 14, 2003, we sold all of our assets related to the Hosted Solutions Business. See Note No. 3 for a further discussion regarding the Hosted Solutions Business. We were originally incorporated under Colorado law in December 1992 under the name Meteor Industries, Inc. In April 2001, in conjunction with our merger with activeIQ Technologies, Inc., we reincorporated under Minnesota law. Our principal office is located at 800 Nicollet Mall, Suite 2690, Minneapolis, Minnesota 55402. Our telephone number is (612) 664-0570 and our Internet address is www.activeiq.com. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Statement Presentation The accompanying unaudited condensed consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America ("US GAAP"), for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Form 10-K filed March 31, 2003. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year as a whole. Revenue Recognition and Deferred Revenue The Company did derive revenues from customers of the online document management service for monthly access to the service and initial service configuration/implementation. Customers were invoiced at the beginning of each month for access service and revenue was recognized when invoiced. Configuration/implementation revenue was invoiced the month after the services were performed and recognized in the month invoiced. 7 The Company recognizes the revenues derived from the accounting software business sales after all of the following criteria have been met: there is an executed license agreement, software has been delivered to the customer, the license fee is fixed and payable within twelve months, collection is deemed probable and product returns are reasonably estimable. Revenues related to multiple element arrangements are allocated to each element of the arrangement based on the fair values of elements such as license fees, maintenance, and professional services. Fair value is determined based on vendor specific objective evidence. Service revenue is recognized ratably over the term of the agreement, which is typically one year. All service revenue invoiced in excess of revenue recognized is recorded as deferred revenue. At March 31, 2003 and 2002, deferred revenue was $1,702,923 and $1,774,491, respectively. See Note 4 - Discontinued Operations of Accounting Software Business. Net Loss per Common Share Basic and diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the periods presented. The impact of common stock equivalents has been excluded from the computation of weighted average common shares outstanding, as the net effect would be antidilutive. Use of Estimates Preparing financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes We account for income taxes using the liability method to recognize deferred income tax assets and liabilities. Deferred income taxes are provided for differences between the financial reporting and tax bases of our assets and liabilities at currently enacted tax rates. We have recorded a full valuation allowance against the net deferred tax asset due to the uncertainty of realizing the related benefits. Software Development Costs Effective January 1, 1999, we implemented Statement of Position ("SOP") 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Pursuant to SOP 98-1, expenditures for internal use software are expensed during the preliminary project stage. Stock Based Compensation In accordance with Accounting Principles Board ("APB") Opinion No. 25, the Company uses the intrinsic value-based method for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of the quoted market price of the Company's common stock at the grant date over the amount the employee must pay for the stock. The Company's general policy is to grant stock options and warrants at fair value at the date of grant. The Company has adopted the disclosure only provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." The Company recorded compensation expense pursuant to APB Opinion No. 25 and related interpretations on options granted and due to modifications of options of $161,537 and $31,929, for the quarters ended March 31, 2003 and 2002, respectively. The Company recorded expense related to stock based compensation issued to non-employees in accordance with SFAS No. 123. Had compensation costs for employees been recognized based upon the fair value of options at the grant date consistent with the provisions of SFAS No. 123, the Company's results would have been as follows for the quarters ended March 31: 8
2003 2002 --------------- --------------- Net loss: As reported $ (361,513) $ (1,338,826) Pro forma (703,244) (1,729,484) Basic and diluted net loss per share: As reported $ (0.03) $ (0.12) Pro forma $ (0.06) $ (0.15) Stock-based compensation As reported $ 161,537 $ 31,929 Pro forma $ 341,731 $ 390,658
In determining the compensation cost of the options granted during the quarters ended March 31, 2003 and 2002, as specified by SFAS No. 123, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes option pricing model and the weighted average assumptions used in these calculations are summarized below for the quarters ended March 31:
2003 2002 ---------- ---------- Risk free interest rate 4.5% 5% Expected life of options granted 10 years 10 years Expected volatility range 234.5% 128.8% Expected dividend yield 0% 0%
NOTE 3 - HOSTED BUSINESS SOLUTIONS AND PREPAID ROYALTIES In 2001, through a licensing agreement, we acquired the rights to develop and market, on a hosted basis, the online document management solutions of Stellent, Inc. This application service provider (ASP) software license agreement was the basis for our Hosted Solutions Business model ("HSB"), in which we were required to make advanced royalty payments and certain minimum royalty fee payments to Stellent. The balance of our prepaid royalties at December 31, 2002 was $975,000. During the quarter ended March 31, 2003, we recorded $54,776 against the prepaid. On March 14, 2003, we sold all of the assets relating to our HSB to Stellent, Inc. for $650,000 cash plus the reimbursement of transaction-related expenses incurred by us in the amount of $150,000 and the assumption of certain obligations, liabilities and employees of the Company. The transaction was not subject to shareholder approval. With the completion of this sale, the Company no longer operates in the online document management business and will seek alternative business opportunities. During the quarter ended March 31, 2003, our HSB generated revenue of $132,455. During the same quarter of 2002, our revenues were derived from our E-commerce business model. The remaining balance of the prepaid royalties was expensed and netted together with the assets and liabilities of the HSB sold in the transaction. NOTE 4 - DISCONTINUED OPERATIONS In December 2002, the Company's Board of Directors authorized a plan to sell the Company's Accounting Software Business ("ASB") to key employees of that division. The ASB publishes traditional accounting and financial management software for small and medium sized businesses, farms and ranches throughout North America. The 9 Company formed (through three mergers/acquisitions) the ASB during the year ended December 31, 2001 for the purpose of utilizing the businesses' customer base to market other of the Company's E-commerce products and services. The ASB consists of two accounting software applications companies: Red Wing Business Systems, Inc. and Champion Business Systems, Inc., collectively referred to as Red Wing. Also during 2002, the Company determined to abandon its E-commerce business after acquiring the rights to develop and market hosted online document solution products. Therefore, since the Company abandoned the E-commerce business model to focus on the hosted solutions business, the accounting software business no longer fit within the Company's business plan. In February 2003, the Company entered into a definitive purchase agreement to sell substantially all the assets of the ASB. See Note No. 6 for a further discussion regarding the sale of the ASB, which was completed April 30, 2003. The following are condensed consolidated statements of discontinued operations for the quarters ended March 31,
2003 2002 --------------- --------------- Revenues $ 1,186,729 $ 1,120,526 --------------- --------------- Operating expenses Costs of goods sold 309,801 419,250 Selling, general and administrative 463,009 778,614 Depreciation and amortization 61,325 84,108 Product development 165,348 44,869 --------------- --------------- Total operating expenses 999,483 1,326,841 --------------- --------------- Income (loss) from discontinued operations 187,246 (206,315) Other expense (46,356) (32,486) --------------- --------------- Net income (loss) from discontinued operations $ 140,890 $ (238,801) =============== ===============
Assets and liabilities of the ASB consisted of the following at:
March 31, 2003 December 31, 2002 --------------- ----------------- Cash $ 626,848 $ 526,447 Accounts receivable, net 102,399 173,370 Inventories 41,455 46,438 Property and equipment, net 116,000 119,561 Acquired software developed, net 438,286 492,170 Goodwill, net 1,318,260 1,318,260 Other intangibles, net 869,927 869,927 Other assets 35,610 40,568 --------------- --------------- Total assets $ 3,548,784 $ 3,589,741 --------------- --------------- Accounts payable 68,644 81,064 Accrued expenses 307,845 244,360 Deferred revenue 1,702,923 1,774,491 Notes payable 1,563,334 1,582,904 --------------- --------------- Total liabilities $ 3,642,746 $ 3,682,819 --------------- --------------- Net liabilities of operations of discontinued accounting software business $ (93,962) $ (93,078) =============== ===============
10 NOTE 5 - SHAREHOLDERS' EQUITY Stock Subscription Receivable On January 6, 2003 the Company entered into a severance agreement with D. Bradly Olah, its Chief Executive Officer, effective December 31, 2002. In addition, the Company exercised its right to a non-cash repurchase of 500,000 shares of common shares issued to Mr. Olah on January 7, 2002 in exchange for the cancellation of his stock subscription receivable to the Company. Deferred Compensation In conjunction with the severance agreement discussed above, we recognized the remaining amount associated with options granted to Mr. Olah, due to his resignation in January 2003. NOTE 6 - SUBSEQUENT EVENTS On April 30, 2003, we completed the sale of substantially all of the assets of the ASB to key employees of that division (the "Purchaser"). The ASB consists of two accounting software applications companies: Red Wing Business Systems, Inc. and Champion Business Systems, Inc., collectively referred to as Red Wing. The assets sold consisted primarily of all intellectual property rights, cash, accounts receivable, inventories, property and equipment, and customer contracts. The Purchaser assumed substantially all the liabilities of the ASB incurred in the ordinary course of the business consisting of trade payables, accrued expenses, debt and liabilities arising from contractual obligations related to the ongoing operations. In addition, the Purchaser paid the Company cash sufficient to discharge outstanding debt that was incurred during 2001 to acquire the ASB. The shareholders of Active IQ approved the sale at a special meeting on April 29, 2003. With the completion of this sale, we have no operating business assets, no debt and net assets of approximately $450,000. The Company is actively reviewing business opportunities for acquisition. Recently, we received a letter from an attorney representing Jack A. Johnson, who served as our President and CEO until leaving the Company to accept employment from Stellent, Inc. following our sale of the hosted solutions business. Notwithstanding that he accepted a full-time employment position with Stellent, Mr. Johnson claims to be entitled to a lump sum severance payment from us in an amount exceeding $200,000 (including a $25,000 bonus) pursuant to the terms of an alleged employment agreement with the Company. As we have informed Mr. Johnson, it is our position that he does not have an enforceable employment agreement with us (other than an October 23, 2002 letter agreement) and that he is not entitled to any severance or other payments from us, except for the $25,000 bonus payment. By letter dated May 5, 2003, we were given notice of a claim on behalf of Carroll Oil Company and Mr. Timothy L. White that we are obligated to pay $98,776 pursuant to an April 1999 agreement entered into with Meteor Industries, Inc., our predecessor. We are investigating this matter and do not currently have sufficient information to determine whether we are subject to liability to Carroll Oil Company or Mr. White. 11 ACTIVE IQ TECHNOLOGIES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the Company's Form 10-K for the fiscal year ended December 31, 2002. OVERVIEW Active IQ Technologies, Inc. ("we," "us," "our" or the "Company") provided industry-specific solutions for managing, sharing and collaborating on business information via the Web though our Hosted Solutions Business ("HSB") until March 2003, and accounting software through our Accounting Software Business ("ASB"). In 2002, through a licensing agreement, we acquired the rights to develop and market, on a hosted basis, the online document management solutions of Stellent, Inc. This application service provider software license agreement was the basis for our HSB model. The ASB publishes traditional accounting and financial management software for small and medium sized businesses, farms and ranches throughout North America. The Company formed (through three mergers/acquisitions) the ASB during the year ended December 31, 2001 for the purpose of utilizing the businesses' customer base to market other of the Company's E-commerce products and services. The ASB consists of two accounting software applications companies: Red Wing Business Systems, Inc. and Champion Business Systems, Inc., collectively referred to as Red Wing. In December 2002, our Board of Directors authorized a plan to sell the ASB and as a result of the formal plan, the results of operations have been reported as discontinued operations (the "Discontinued Operations") and previously reported condensed consolidated financial statements have been restated for the quarter ended March 31, 2002. See Notes 4 and 6, included elsewhere in this quarterly report, for details of said financial statements. During the first quarter of 2003, we came to the conclusion that due to current market conditions for capital funding, it would be extremely unlikely for us to secure the financing necessary to fund our HSB beyond the near term and thereby provide assurance to future customers of our long-term viability. On March 14, 2003, we sold all of our assets related to the HSB. See Note No. 3 for a further discussion regarding the sale of our HSB. We were originally incorporated under Colorado law in December 1992 under the name Meteor Industries, Inc. In April 2001, in conjunction with our merger with activeIQ Technologies, Inc., we reincorporated under Minnesota law. Our principal office is located at 800 Nicollet Mall, Suite 2690, Minneapolis, Minnesota 55402. Our telephone number is (612) 664-0570 and our Internet address is www.activeiq.com. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2003 COMPARED TO MARCH 31, 2002. Revenues Revenues for the quarter ended March 31, 2003 were $132,455 compared to $103,788 for the same period in 2002. The revenues we reported for 2003 were generated through our HSB and the revenues for 2002 were generated through our E-commerce business model. We sold our rights to the E-commerce model in 2002. 12 With the subsequent sale of our ASB in April 2003, we have no operating business assets in which we can generate revenue. Our ability to continue is predicated on our ability to acquire new businesses or technologies, successfully implement the new business model and secure additional financing. Operating Expenses Cost of goods sold for the quarter ended March 31, 2003 were $35,354 compared to $78,015 for the same period in 2002. These costs include hosting fees and royalty payments due under our license agreement of the HSB. Selling, general and administrative expenses for the quarter ended March 31, 2003 were $330,183 compared to $822,930 for the same period in 2002. The $492,747 decrease is primarily due to the reduction of employee head count within each department of the Company. Depreciation expense for the quarter ended March 31, 2003 was $8,719 compared to depreciation and amortization expense of $338,701 for the same period in 2002. Depreciation and amortization expense of property, equipment and other intangibles was $44,045 and other acquisition related intangible amortization expense was $294,656 for the quarter ended March 31, 2002. The intangible amortization expense is related to the acquisition of our E-commerce business model. For the quarter ended March 31, 2003, we had a gain of $749 on the exchange of assets for services rendered. During the quarter ended March 31, 2002, we closed our E-commerce business office located in Las Vegas, Nevada. With this closure, we recorded a loss on disposal of assets located within this leased facility of $24,879. Other Income and Expenses Our other income and expense consists of interest and dividend income, other income and other expense. Interest income for the quarter ended March 31, 2003 was $23,544 compared to $41,313 for the same period in 2002. The interest income we reported for 2003 was earned from a Federal Income Tax refund filed with the IRS. The interest and dividend income we reported for 2002 was related equally to portfolio interest and the interest accrued on stock subscription receivables. For the quarter ended March 31, 2003, we recorded $150,000 of other income for referral fees for our sales efforts in connection with customers that were not candidates for our online document management hosted solution. We recorded $20,000 of other income for the quarter ended March 31, 2002, when we granted the non-exclusive rights to use and distribute our E-commerce business to an unrelated third party. For the quarter ended March 31, 2003, we recorded $434,895 of other expense related to the sale of our HSB to Stellent, Inc. in March 2003. The remaining balance of the prepaid royalties ($920,224) was expensed and netted together with the assets and liabilities of the HSB sold in the transaction. Discontinued Operations As a result of the discontinuation of the ASB, we recorded income from discontinued operations of $140,890 for the quarter ended March 31, 2003 as compared to a loss from discontinued operations of $238,801 for the same period in 2002. Liquidity and Capital Resources We have funded our operations and satisfied our capital requirements primarily through the sale of our business assets. Net cash provided by operating activities was $263,485 for the quarter ended March 31, 2003, compared to net cash used by operating activities of $745,992 for the same period in 2002. 13 We had working capital of $442,690 at March 31, 2003, compared to working capital deficit of $509,372 at December 31, 2002. Cash and equivalents were $738,929 at March 31, 2003, representing an increase of $725,718 from the cash and equivalents of $13,211 at December 31, 2002. On March 14, 2003, we sold all of the assets relating to our HSB to Stellent, Inc. for $650,000 cash plus the reimbursement of transaction-related expenses incurred by us in the amount of $150,000 and the assumption of certain obligations, liabilities and employees of the Company. The transaction was not subject to shareholder approval. With the completion of this sale, the Company no longer operates in the online document management business and will seek alternative business opportunities. We anticipate that the existing sources of liquidity will not provide cash to fund operations for the next twelve months. We will continue our attempt to raise additional capital. Some of the possibilities available to us are through private equity transactions, to develop a credit facility with a lender or the exercise of options and warrants. There can be no assurance that additional capital will be available on terms acceptable to us or on any terms whatsoever. In the event that we are unable to obtain additional capital, we would be forced to reduce operating expenditures and/or cease operations altogether. RISKS FACTORS OUR COMMON STOCK HAS BEEN DELISTED FROM THE NASDAQ SMALL CAP MARKET. One of Nasdaq's continued listing rules required us to maintain a minimum closing bid price of $1 for our common stock. We were notified in August 2002 that, since the minimum bid price of our common stock was less than $1, we had until February 10, 2003 in order to achieve compliance. On March 18, 2003, we received further notification from Nasdaq on this matter. Nasdaq has informed us that since we had not regained compliance with the minimum $1 closing bid price per common share and we also were not eligible for an additional 180 calendar day grace period since we did not meet the initial inclusion requirements as specified by The Nasdaq SmallCap Market under Marketplace Rule 4310(c)(2)(A) (the "Rule"), our common stock was delisted effective with the opening of business on March 27, 2003. Specifically, for initial inclusion, the Rule requires meeting one of following requirements: a $5,000,000 shareholders' equity; a $50,000,000 market value of our listed securities; or $750,000 net income from continuing operations for certain fiscal years. We did not meet any of these requirements. Since our common stock has been delisted from the Nasdaq SmallCap Market, trading, if any, in our common stock will be conducted in the over-the-counter markets in the so-called "pink sheets" or the "OTC Bulletin Board." Consequently, the liquidity of our common stock is impaired, not only in the number of shares which could be bought and sold, but also through delays in the timing of the transactions, reduction in the coverage of our securities by security analysts and the news media, and lower prices for our securities than might otherwise prevail. In addition, our common stock has become subject to certain rules of the Securities and Exchange Commission relating to "penny stocks." These rules require broker-dealers to make special suitability determinations for purchasers other than established customers and certain institutional investors and to receive the purchasers' prior written consent for a purchase transaction prior to sale. Consequently, these "penny stock rules" may adversely affect the ability of broker-dealers to sell our common stock and may adversely affect your ability to sell shares of our common stock in the secondary market. WE HAVE SOLD OUR ONLY CONTINUING OPERATIONS REVENUE SOURCE AND SUBSTANTIALLY ALL OF OUR ASSETS On March 14, 2003, we executed a definitive purchase agreement with Stellent, Inc. and completed the sale of the Hosted Solutions Business, which was our only continuing operations revenue source. We received $650,000 in cash 14 for the assets used in the Hosted Solutions Business, plus we were reimbursed $150,000 for expenses we incurred as a result of the transaction. On April 30, 2003, we completed the sale of substantially all of the assets of the Accounting Software Business to key employees of that division. Our original reason for acquiring these companies was to be able to utilize the businesses' customer base in order to market to those customers our E-commerce products and services. We concluded that these customers would not be prospects for any type of Web-based, hosted solution products or services. Therefore, since we had already sold the E-commerce to focus on the Hosted Solutions Business, the Accounting Software Business no longer fit our business plan. Furthermore, the results of operations have been reported as discontinued operations, providing no future benefit to our ongoing business plan. Accordingly, we no longer have any ongoing business operations and no significant means of generating any revenue. WE ANTICIPATE INCURRING LOSSES FOR THE FORESEEABLE FUTURE. For the quarter ended March 31, 2003, we had a net loss of $361,513, and since our inception as activeIQ Technologies, Inc., in April 1996 through March 31, 2003, we have incurred an aggregate net loss of $22,942,507. As of March 31, 2003, we had total assets of $823,686. We expect operating losses to continue for the foreseeable future and there can be no assurance that we will ever be able to operate profitably. WE WILL REQUIRE FUTURE FINANCING. Further financing will be needed in order to potentially acquire other businesses or technologies. And there is no precise way to predict when further financing will be needed or how much will be needed. Moreover, we cannot guarantee that the additional financing will be available when needed. If it is not available, your investment in our securities may be lost. If the financing is available only at a low valuation of our Company, your investment may be substantially diluted. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk Sensitivity We do not enter into contracts for speculative purposes, nor are we a party to any leveraged instruments. There has been no material change in our market risks associated with debt obligations during the quarter ended March 31, 2003. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. Pursuant to Rule 13a-14(c) of the Securities Exchange Act of 1934, within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"), the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's Chief Executive 15 Officer and Chief Financial Officer. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. Disclosure controls and procedures are controls and other procedures of the Company that are designed to ensure that information required to be disclosed in the reports that the Company files or submits to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files to the SEC is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. (b) Changes in internal controls. There were no significant changes in the Company's internal controls or in other factors that could significantly affect the Company's internal controls subsequent to the Evaluation Date, including any corrective actions with regard to significant deficiencies and material weaknesses. 16 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Recently, we received a letter from an attorney representing Jack A. Johnson, who served as our President and CEO until leaving the Company to accept employment from Stellent, Inc. following our sale of the hosted solutions business. Notwithstanding that he accepted a full-time employment position with Stellent, Mr. Johnson claims to be entitled to a lump sum severance payment from us in an amount exceeding $200,000 (including a $25,000 bonus) pursuant to the terms of an alleged employment agreement with the Company. As we have informed Mr. Johnson, it is our position that he does not have an enforceable employment agreement with us (other than an October 23, 2002 letter agreement) and that he is not entitled to any severance or other payments from us, except for the $25,000 bonus payment. By letter dated May 5, 2003, we were given notice of a claim on behalf of Carroll Oil Company and Mr. Timothy L. White that we are obligated to pay $98,776 pursuant to an April 1999 agreement entered into with Meteor Industries, Inc., our predecessor. We are investigating this matter and do not currently have sufficient information to determine whether we are subject to liability to Carroll Oil Company or Mr. White. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 99.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K On February 25, 2003, the Company filed a Current Report on Form 8-K dated February 24, 2003, under item 5 to disclose that the Company had entered into an asset purchase agreement to sell all or substantially all of the assets relating to our Accounting Software business. On March 21, 2003, the Company filed a Current Report on Form 8-K dated March 14, 2003, under items 2, 5 and 7 to disclose: (1) that on March 14, 2003, the Company sold all or substantially all of the assets relating to our Hosted Solutions Business to Stellent, Inc. for $650,000 in cash, plus the reimbursement of $150,000 of expenses; (2) that following the sale of Hosted Solutions Business, the Company agreed to terms with Jeffery M. Traynor regarding his separation from the Company as its Chief Financial Officer and Secretary; (3) the resignation of a member of our board of directors; and (4) that pro forma financial information concerning the sale of our Hosted Solutions Business will be filed by amendment on or before May 28, 2003. 17 SIGNATURES In accordance with the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ACTIVE IQ TECHNOLOGIES, INC. By: /s/ Kenneth W. Brimmer Kenneth W. Brimmer Chief Executive Officer By: /s/ Mark D. Dacko Mark D. Dacko Chief Financial Officer Date: May 9, 2003 18 CERTIFICATIONS I, Kenneth W. Brimmer, Chairman and Chief Executive Officer of Active IQ Technologies, Inc. (the "Registrant"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of the Registrant; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of the Registrant's board of directors: a) All significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Active IQ Technologies, Inc. Dated: May 9, 2003 By /s/ Kenneth W. Brimmer ---------------------- Kenneth W. Brimmer Chairman and Chief Executive Officer 19 CERTIFICATIONS I, Mark D. Dacko, Chief Financial Officer of Active IQ Technologies, Inc. (the "Registrant"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of the Registrant; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of the Registrant's board of directors: a) All significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Active IQ Technologies, Inc. Dated: May 9, 2003 By /s/ Mark D. Dacko ----------------- Mark D. Dacko Chief Financial Officer 20 EX-99.1 3 c77037exv99w1.txt CERTIFICATION PURSUANT TO 18 USC SECTION 1350 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Active IQ Technologies, Inc. (the "Company") on Form 10-Q for the quarter ending March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kenneth W. Brimmer the Chief Executive Officer of the Company, certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Active IQ Technologies, Inc. Dated: May 9, 2003 By /s/ Kenneth W. Brimmer ---------------------- Kenneth W. Brimmer Chairman and Chief Executive Officer EX-99.2 4 c77037exv99w2.txt CERTIFICATION PURSUANT TO 18 USC SECTION 1350 EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Active IQ Technologies, Inc. (the "Company") on Form 10-Q for the quarter ending March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark D. Dacko the Chief Financial Officer of the Company, certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Active IQ Technologies, Inc. Dated: May 9, 2003 By /s/ Mark D. Dacko ----------------- Mark D. Dacko Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----