-----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, EK/c8zqSmRGd5IKXyj8hL9ETj730zzfDHXpvADoCzBAt08W5n9gutJqT/6SIIAGN rF7f1QcocHp01Avpigzz1w== 0000950137-01-504549.txt : 20020410 0000950137-01-504549.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950137-01-504549 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010918 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011113 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12401 FILM NUMBER: 1783072 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 8-K/A 1 c66044ae8-ka.txt AMENDMENT TO CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 18, 2001 ACTIVE IQ TECHNOLOGIES, INC. (Exact Name of Registrant as Specified in Charter) Minnesota 0-27968 41-2004369 - ---------------------------- ------------ ------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 601 Carlson Parkway, Suite 1550 Minnetonka, Minnesota 55305 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (952) 449-5000 (Former Name or Former Address, if Changed Since Last Report) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS Pursuant to an Agreement and Plan of Merger dated August 30, 2001 (the "Merger Agreement"), by and among the Registrant; CBS Acquisition, Inc., a Minnesota corporation and a wholly owned subsidiary of Registrant ("Merger Sub"); and Champion Business Systems, Inc., a Colorado corporation, ("Champion"), Merger Sub merged with and into Champion, and Champion became a wholly owned subsidiary of the Registrant. The merger became effective September 18, 2001 (the "Effective Date"). Prior to the date of the Agreement, there was no relationship between Champion or its shareholders and the Registrant or its affiliates, officers and directors or any of their respective associates. Champion develops and markets small business desktop accounting software. Pursuant to the Merger Agreement, as of the Effective Date, all of the common stock of Champion, issued and outstanding immediately prior to the Effective Date ("Champion's Shares") was converted into the right to receive an aggregate of $3,000,000 in the form of: (i) such number of shares of Common Stock of Registrant (the "Common Shares"), up to the number of shares equal to a market value of no more than One Million Five Hundred Thousand Dollars ($1,500,000), determined by the average of the closing bid and ask prices during the 10 trading days preceding the Effective Date, as reported on the Nasdaq SmallCap Market System, and (ii) the remaining amount (the "Cash") payable as follows: (i) One-third (1/3) of the Cash paid immediately, and (ii) the remaining two-thirds (2/3) payable four equal installments, each due on the 4, 8, 12 and 16-month anniversaries of the Effective Date, as evidenced by promissory notes, secured by Registrant's shares in Champion. The Company filed a current report on Form 8-K on September 18, 2001 to announce the Agreement and Plan of Merger. The Company is filing this amendment No. 1 on Form 8-K/A to Form 8-K to include financial statements and pro forma financial information required by Item 7 of Form 8-K. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Business Acquired Report of Independent Public Accountants F-1 1. Balance Sheets as of December 31, 2000 and 1999 F-2 2. Statements of Operations for the years ended December 31, 2000 and 1999 F-3 3. Statements of Stockholders' Deficit for the years ended December 31, 2000 and 1999 F-4 4. Statements of Cash Flows for the years ended December 31, 2000 and 1999 F-5 5. Notes to Financial Statements F-6 to F-12 6. Balance Sheet as of June 30, 2001 (unaudited) F-13 7. Statements of Operations for the six months ended June 30, 2001 and 2000 (unaudited) F-14 8. Statement of Stockholders' Deficit for the six months ended June 30, 2001 (unaudited) F-15 9. Statements of Cash Flows for the six months ended June 30, 2001 and 2000 (unaudited) F-16 10. Notes to Financial Statements (unaudited) F-17 and F-18 (b) Pro Forma Financial Information 1. Unaudited Pro Forma Combined Financial Information F-19 2. Unaudited Pro Forma Combined Balance Sheet as of June 30, 2001 F-20 3. Unaudited Pro Forma Combined Statements of Operations For the year ended December 31, 2000 F-21 For the six months ended June 30, 2001 F-22 4. Notes to Unaudited Pro Forma Combined Financial Information F-23 and F-24 (c) Exhibits 23.1 Consent of Virchow, Krause & Company, LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Champion Business Systems, Inc.: We have audited the accompanying balance sheets of Champion Business Systems, Inc. as of December 31, 2000 and 1999, and the related statements of operations, stockholders' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Champion Business Systems, Inc. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. S/ VIRCHOW, KRAUSE & COMPANY, LLP Minneapolis, Minnesota October 12, 2001 F-1 CHAMPION BUSINESS SYSTEMS, INC. BALANCE SHEETS DECEMBER 31, 2000 AND 1999
2000 1999 ---- ---- ASSETS Current assets: Cash and cash equivalents $ 8,088 $ 53,057 Accounts receivable, net 41,509 93,435 Inventories 44,208 31,576 Other current assets 23,229 34,247 ----------- --------- Total current assets 117,034 212,315 ----------- --------- PROPERTY AND EQUIPMENT, NET 31,219 13,397 ----------- --------- OTHER ASSETS: Software development costs, net 544,113 567,191 Deposits 10,980 10,980 ----------- --------- Total other assets 555,093 578,171 ----------- --------- $ 703,346 $ 803,883 =========== ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Line of credit - bank $ 20,000 $ 55,000 Current portion of long-term debt 77,527 102,640 Accounts payable 91,918 98,278 Accrued payroll and related withholdings 65,718 43,866 Deferred revenue 528,750 590,892 Other current liabilities 13,877 33,336 ----------- --------- Total current liabilities 797,790 924,012 LONG-TERM DEBT, NET OF CURRENT PORTION 0 50,298 ----------- --------- Total liabilities 797,790 974,310 ----------- --------- STOCKHOLDERS' DEFICIT: Convertible Preferred Stock, $.0001 par value, 600,000 shares authorized, 0 and 572,700 shares issued and outstanding 0 57 Common stock, $.0001 par value, 50,000,000 shares authorized, 6,383,849 and 3,183,849 shares issued and outstanding 638 318 Additional paid in capital 1,501,417 801,680 Accumulated deficit (1,596,499) (972,482) ----------- --------- Total stockholders' deficit (94,444) (170,427) ----------- --------- $ 703,346 $ 803,883 =========== =========
See accompanying notes to financial statements. F-2 CHAMPION BUSINESS SYSTEMS, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999 ---- ---- Amount Percent Amount Percent ------ ------- ------ ------- REVENUES: Software and license fees $ 509,455 29.8 $ 857,236 39.4 Maintenance and other 1,197,615 70.2 1,316,985 60.6 ----------- ----- ---------- ---- Total revenues 1,707,070 100.0 2,174,221 100.0 ----------- ----- ---------- ---- OPERATING EXPENSES: Selling, general and administrative 1,663,049 97.3 1,530,397 70.4 Research and development 12,843 0.8 96,211 4.4 Amortization of software development costs 327,694 19.2 247,010 11.4 Depreciation and amortization 7,910 0.5 6,566 0.3 Write-down of software due to impairment 304,184 17.8 0 0.0 ----------- ----- ---------- ---- Total operating expenses 2,315,680 135.6 1,880,184 86.5 ----------- ----- ---------- ---- INCOME (LOSS) FROM OPERATIONS (608,610) (35.6) 294,037 13.5 INTEREST EXPENSE (15,407) (0.9) (21,521) (1.0) ----------- ----- ---------- ---- INCOME (LOSS) BEFORE INCOME TAXES (624,017) (36.5) 272,516 12.5 PROVISION FOR INCOME TAXES 0 0.0 0 0.0 ----------- ----- ---------- ---- NET INCOME (LOSS) $ (624,017) (36.5) $ 272,516 12.5 =========== ===== ========== ====
See accompanying notes to financial statements. F-3 CHAMPION BUSINESS SYSTEMS, INC. STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
Convertible Preferred Stock Common Stock Additional Accumulated Treasury Stock Shares Amount Shares Amount Paid in Capital Deficit Shares Amount Total ------ ------ ------ ------ --------------- ------- ------ ------ ----- BALANCE - DECEMBER 31, 1998 572,700 $ 57 3,715,825 $371 $ 806,947 $(1,244,998) (531,976) $(5,320) $(442,943) Retirement of treasury shares (531,976) (53) (5,267) 531,976 5,320 0 Net income -- -- -- -- 272,516 -- -- 272,516 -------- ---- --------- ---- ---------- ----------- -------- ------ --------- BALANCE - DECEMBER 31, 1999 572,700 57 3,183,849 318 801,680 (972,482) 0 0 (170,427) Conversion of preferred stock (572,700) (57) 1,000,000 100 (43) 0 Sales of common stock 2,200,000 220 699,780 700,000 Net loss -- -- -- -- (624,017) -- -- (624,017) -------- ---- --------- ---- ---------- ----------- -------- ------ --------- BALANCE - DECEMBER 31, 2000 0 $ 0 6,383,849 $638 $1,501,417 $(1,596,499) 0 $ 0 $ (94,444) ======== ==== ========= ==== ========== =========== ======== ====== =========
See accompanying notes to financial statements. F-4 CHAMPION BUSINESS SYSTEMS, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(624,017) $ 272,516 Adjustments to reconcile net income (loss) to cash flows from operating activities: Amortization of software development costs 327,694 247,010 Depreciation and amortization 7,910 6,566 Write-down of software due to impairment 304,184 0 Reduction of long-term debt for revenues earned (11,860) (29,903) Changes in operating assets and liabilities: Accounts receivable, net 51,926 9,614 Inventories (12,632) 2,886 Other current assets 11,018 (34,247) Accounts payable (6,360) (102,911) Accrued payroll and related withholdings 21,852 7,766 Deferred revenue (62,142) (17,495) Other current liabilities (19,459) (4,437) --------- --------- Cash flows from operating activities (11,886) 357,365 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (25,732) (9,654) Payments for software development costs (608,800) (406,108) --------- --------- Cash flows from investing activities (634,532) (415,762) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net advances (repayments) on line of credit - bank (35,000) 55,000 Payments on long-term debt (63,551) (80,898) Proceeds from sales of common stock 700,000 0 --------- --------- Cash flows from financing activities 601,449 (25,898) --------- --------- DECREASE IN CASH AND CASH EQUIVALENTS (44,969) (84,295) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 53,057 137,352 --------- --------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 8,088 $ 53,057 ========= ========= SUPPLEMENTAL CASH FLOWS INFORMATION: Cash paid for interest $ 15,407 $ 21,521 Cash paid for income taxes $ 0 $ 0
See accompanying notes to financial statements. F-5 CHAMPION BUSINESS SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS - Champion Business Systems, Inc. (the Company) was incorporated in Colorado in June 1981. The Company develops and services accounting and financial management software for small business customers throughout the United States. CASH AND CASH EQUIVALENTS - The Company includes as cash equivalents certificates of deposit and all other investments with maturities of three months or less when purchased which are readily convertible into known amounts of cash. The Company maintains its cash in high quality financial institutions. The balances, at times, may exceed federally insured limits. ACCOUNTS RECEIVABLE - Accounts receivable have been reduced by an allowance for uncollectible accounts of $5,000 at December 31, 2000 and 1999. The Company considers all accounts receivable in excess of the allowance to be fully collectible. If accounts receivable in excess of the provided allowance are determined uncollectible, they are charged to operations in the year that determination is made. The Company extends unsecured credit to customers in the normal course of business. INVENTORIES - Inventories consist principally of manuals for the various software modules, stocked software and shipping supplies. Inventory is recorded at the lower of cost (first-in, first-out) or market. DEPRECIATION - Property and equipment are recorded at cost. Depreciation is provided for using the straight-line method over estimated useful lives of five years. Leasehold improvements are amortized over the shorter of the lease life or the estimated useful life. Maintenance, repairs and minor renewals are expensed when incurred. REVENUE RECOGNITION - Product revenues are recognized upon shipment of the software product only if no significant Company obligations remain, the fee is fixed or determinable and collection of the resulting receivable is deemed probable. Revenue from services is recognized when the service is provided. Maintenance revenue is recognized ratably over the contract period. Deferred revenue represents payment received for maintenance contracts. Provisions are recorded for returns. SOFTWARE DEVELOPMENT COSTS - Statement of Financial Accounting Standards (SFAS) No. 86 "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed" requires software development costs to be expensed as incurred until technological feasibility is established. Software development costs incurred subsequent to establishing technological feasibility are capitalized and amortized over their estimated useful lives. The establishment of technological feasibility and the F-6 CHAMPION BUSINESS SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2000 AND 1999 ongoing assessment of the recoverability of these costs requires considerable judgment by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. The Company capitalized $608,800 and $406,108 of software development costs during the years ended December 31, 2000 and 1999. In addition, the Company expensed certain software and development costs as research and development since such costs were incurred during the preliminary project stage. Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the years ended December 31, 2000 and 1999, the Company recorded charges of $304,184 and $0, related to impairment of long-lived assets. RESEARCH AND DEVELOPMENT COSTS - Research and development costs are expensed as incurred. ADVERTISING COSTS - Advertising costs are charged to expense as incurred. Advertising expense for the years ended December 31, 2000 and 1999 was $11,037 and $1,966. STOCK-BASED COMPENSATION - The Company uses the intrinsic value-based method prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for employee stock options. Under the intrinsic value method, compensation expense is recorded only to the extent that the market price of the common stock exceeds the exercise price of the stock option on the date of grant. INCOME TAXES - The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized at the enacted rates for the future tax consequences attributable to differences between the financial statement carrying amounts of existing tax assets and liabilities and their respective tax basis. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. MANAGEMENT'S USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of F-7 CHAMPION BUSINESS SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2000 AND 1999 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. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, is effective for years beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge criteria are met. Special accounting for qualifying hedges allows a derivative's gains or losses to offset related results on the hedged item in the statement of operations and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. The adoption of SFAS No. 133 will not have a material effect on the Company's financial position or results or operations. In June 2001, the FASB issued SFAS No. 141 "Business Combinations." SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. In addition, SFAS 141 further clarifies the criteria to recognize intangible assets separately from goodwill. The requirements of Statement 141 are effective for any business combination accounted for by the purchase method that is completed after June 30, 2001. The adoption of SFAS No. 141 will not have a material effect on the Company's financial position or results or operations. In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives (but with no maximum life). The amortization provisions of SFAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. The adoption of SFAS No. 142 will not have a material effect on the Company's financial position or results of operations. (2) PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31: F-8 CHAMPION BUSINESS SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2000 AND 1999
2000 1999 ---- ---- Computer equipment $ 217,127 $ 199,810 Office equipment 186,330 177,915 Furniture and fixtures 30,114 30,114 Leasehold improvements 4,509 4,509 --------- --------- Total 438,080 412,348 Less: accumulated depreciation and amortization (406,861) (398,951) --------- --------- Property and equipment, net $ 31,219 $ 13,397 ========= =========
(3) LINE OF CREDIT - BANK The Company has a $100,000 revolving line of credit with KeyBank National Association, which expires April 2001. Borrowings under the revolving line of credit bear interest at prime plus 1% (10.5% at December 31, 2000) and are secured by substantially all of the assets of the Company and the personal guarantee of stockholders of the Company. The revolving line of credit contains certain covenants the Company must maintain. Outstanding borrowings were $20,000 and $55,000 at December 31, 2000 and 1999. The revolving line of credit agreement was renewed subsequent to December 31, 2000 and has a current maturity date of May 2002. (4) LONG-TERM DEBT The Company has a note payable with Great Plains Software, Inc. (Great Plains) from the purchase of a software product in 1997. The note bears interest at 9%, is secured by the software acquired, subordinated to the revolving line of credit and is due June 2001. The Company is restricted from selling or transferring the software product until the loan is repaid in full. The outstanding balances of the note payable were $77,527 and $152,938 at December 31, 2000 and 1999. The Company has a separate agreement with Great Plains whereby they earn revenues for migrating customers to Great Plain's software products. The Company and Great Plains have verbally agreed to suspend payments on the note payable with revenues earned under the migration contract. (5) STOCKHOLDERS' DEFICIT CONVERSION OF PREFERRED STOCK - During the year ended December 31, 2000, the holders of the Company's outstanding convertible preferred stock converted their 572,700 shares into 1,000,000 shares of the Company's common stock. SALES OF COMMON STOCK - During the year ended December 31, 2000, the Company sold a total of 2,200,000 shares of common stock during the year. The Company realized proceeds of $700,000 from these sales. F-9 CHAMPION BUSINESS SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2000 AND 1999 STOCK OPTION PLAN - During 2000, the Company established the Champion Business Systems, Inc. 2000 Stock Option Plan (the Plan), pursuant to which awards to acquire an aggregate of 1,000,000 shares of the Company's common stock may be granted. Stock options and stock awards may be granted under the Plan. The options are exercisable for a period of five years from the date of grant and vest over various periods. The Company applies APB Opinion 25 "Accounting for Stock Issued to Employees" and related Interpretations in accounting for its stock options. Accordingly, no compensation cost has been recognized for stock options issued. Had compensation cost for the Company's stock options been determined based on the fair value at the grant dates consistent with the method of SFAS No. 123 "Accounting for Stock-Based Compensation", the Company's pro forma net loss for the year ended December 31, 2000 would have been $624,967. The fair value of each option granted was estimated on the date of grant using the following assumptions: risk-free interest rate of 6%, expected life of 5 years, and expected dividend yield of 0%. The Company's stock option activity for year ended December 31, 2000 is summarized as follows:
Weighted Range of Average Option Options Exercise Price Exercise Price ------- -------------- -------------- Granted 380,000 $.03 $.03 Canceled or expired 0 - - Exercised 0 - - ------- ---- ---- Options outstanding - December 31, 2000 380,000 $.03 $.03 ======= ==== ==== Options exercisable - December 31, 2000 95,000 $.03 $.03 ======= ==== ==== Weighted average fair value of options granted during the year ended December 31, 2000 $.01 ----
Options outstanding at December 31, 2000 have a weighted average remaining contractual life of 4.01 years. (6) INCOME TAXES The Company has incurred cumulative net operating losses for both financial statement and income tax reporting purposes. At December 31, 2000, the Company had net operating loss carryforwards of approximately $1.5 million and research and development credit carryforwards of approximately $425,000. Future changes in the ownership of the Company may place limitations on the use of these net operating loss and credit carryforwards. Following is a schedule by of year of when the net operating losses and research and development credits will expire: F-10 CHAMPION BUSINESS SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2000 AND 1999
Research and Net Operating Development For the years ending December 31, Loss Credit ---- ------ 2002 $ 0 $ 15,000 2003 0 35,000 2004 0 34,000 2005 109,000 33,000 2006 0 27,000 2007 656,000 40,000 2008 0 33,000 2009 0 43,000 2010 0 20,000 2011 0 19,000 2012 1,000 15,000 2018 75,000 31,000 2019 12,000 37,000 2020 682,000 43,000 ---------- -------- Total carryforwards $1,535,000 $425,000 ========== ========
The Company has recorded a full valuation allowance against the net deferred tax asset of $960,000 and $680,000 at December 31, 2000 and 1999. (7) RETIREMENT PLAN The Company has a defined contribution plan under the provisions of Section 401(k) of the Internal Revenue Code, which covers employees meeting certain eligibility requirements. The Plan allows the Company to make discretionary contributions to the Plan. The Company did not make any contributions during the years ended December 31, 2000 and 1999. (8) COMMITMENTS AND CONTINGENCIES OPERATING LEASE - The Company leases space for its office facility under a lease expiring February 2003. Monthly base rents range between $11,247 and $17,115. In addition to base rents, the Company is required to pay its prorata share of operating expenses. Total rent expense was $172,929 and $136,780 for the years ended December 31, 2000 and 1999. Future minimum rental payments are as follows for the years ending December 31: F-11 CHAMPION BUSINESS SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2000 AND 1999 2001 $188,754 2002 204,402 2003 34,230 -------- Total $427,386 ========
(9) SUBSEQUENT EVENT On September 18, 2001, the Company merged with and into Active IQ Technologies, Inc. F-12 CHAMPION BUSINESS SYSTEMS, INC. BALANCE SHEET
JUNE 30, 2001 ---- (unaudited) ASSETS Current assets: Cash $ 161,428 Accounts receivable, net 55,736 Inventories 35,780 Other current assets 17,017 ----------- Total current assets 269,961 ----------- PROPERTY AND EQUIPMENT, NET 26,749 ----------- OTHER ASSETS: Software development costs, net 499,344 Other assets 10,980 ----------- Total other assets 510,324 ----------- $ 807,034 =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current portion of long-term debt $ 68,131 Accounts payable 36,218 Deferred revenue 774,876 Other current liabilities 50,296 ----------- Total current liabilities 929,521 ----------- STOCKHOLDERS' DEFICIT: Common stock, $.0001 par value, 50,000,000 shares authorized, 6,633,849 shares issued and outstanding 663 Additional paid in capital 1,508,892 Accumulated deficit (1,632,042) ----------- Total stockholders' deficit (122,487) ----------- $ 807,034 ===========
See accompanying notes to condensed financial statements. F-13 CHAMPION BUSINESS SYSTEMS, INC. STATEMENTS OF OPERATIONS
SIX MONTHS ENDED ---------------- JUNE 30, JUNE 30, 2001 2000 ---- ---- (UNAUDITED) (UNAUDITED) REVENUES: Software and license fees, net $645,230 $ 701,635 Maintenance, consulting and other 51,595 70,576 -------- ---------- Total revenues 696,825 772,211 -------- ---------- OPERATING EXPENSES: Selling, general and administrative 543,921 680,984 Product development 103,736 188,077 Amortization of software development costs 80,571 144,005 Depreciation 4,470 3,546 Total operating expenses 732,698 1,016,612 -------- ---------- LOSS FROM OPERATIONS (35,873) (244,401) -------- ---------- OTHER INCOME (EXPENSE): Interest income 330 2,425 -------- ---------- Total other income (expense) 330 2,425 -------- ---------- LOSS BEFORE INCOME TAXES (35,543) (241,976) PROVISION FOR INCOME TAXES 0 0 -------- ---------- NET LOSS $(35,543) $ (241,976) ======== ==========
See accompanying notes to condensed financial statements. F-14 CHAMPION BUSINESS SYSTEMS, INC. STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE SIX MONTHS ENDED JUNE 30, 2001
Common Stock Additional paid in Accumulated Shares Amount capital Deficit Total ------ ------ ------- ------- ----- BALANCE - DECEMBER 31, 2000 6,383,849 $638 $ 1,501,417 $(1,596,499) $ (94,444) Issuance of common stock (unaudited) 250,000 25 7,475 -- 7,500 Net loss (unaudited) -- -- (35,543) (35,543) --------- ---- ----------- ----------- --------- BALANCE - JUNE 30, 2001 (UNAUDITED) 6,633,849 $663 $ 1,508,892 $(1,632,042) $(122,487) ========= ==== =========== =========== =========
See accompanying notes to condensed financial statements. F-15 CHAMPION BUSINESS SYSTEMS, INC. STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED ---------------- JUNE 30, JUNE 30, 2001 2000 ---- ---- (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (35,543) $(241,976) Adjustments to reconcile net loss to cash flows from operating activities: Amortization of software development costs 80,571 144,005 Depreciation 4,470 3,546 Changes in operating assets and liabilities: Accounts receivable, net (14,227) 33,994 Inventories 8,428 (17,876) Other current assets 6,212 2,259 Accounts payable (55,700) 564 Deferred revenue 246,126 288,047 Other current liabilities (29,299) (10,151) --------- --------- Cash flows from operating activities 211,038 202,412 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment 0 (11,011) Payments for software development costs (35,802) (386,007) --------- --------- Cash flows from investing activities (35,802) (397,018) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net repayments on line of credit - bank (20,000) (55,000) Payments on long-term debt (9,396) (50,804) Redemption of common stock 7,500 400,000 --------- --------- Cash flows from financing activities (21,896) 294,196 --------- --------- INCREASE (DECREASE) IN CASH 153,340 99,590 CASH, BEGINNING OF PERIOD 8,088 53,057 --------- --------- CASH, END OF PERIOD $ 161,428 $ 152,647 ========= =========
See accompanying notes to condensed financial statements. F-16 CHAMPION BUSINESS SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (1) BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been consolidated or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and results of operations. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or of the results for any future periods. In preparation of the Company's financial statements, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses. Actual results could differ from the estimates used by management. (2) REVENUE RECOGNITION Product revenues are recognized upon shipment of the software product only if no significant Company obligations remain, the fee is fixed or determinable and collection of the resulting receivable is deemed probable. Revenue from services is recognized when the service is provided. Maintenance revenue is recognized ratably over the contract period. Deferred revenue represents payment received for maintenance contracts. Provisions are recorded for returns. (3) SOFTWARE DEVELOPMENT COSTS Statement of Financial Accounting Standards (SFAS) No. 86 "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed" requires software development costs to be expensed as incurred until technological feasibility is established. Software development costs incurred subsequent to establishing technological feasibility are capitalized and amortized over their estimated useful lives. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs requires considerable judgment by management with F-17 CHAMPION BUSINESS SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2001 respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. The Company capitalized software development costs of $35,802 and $386,007 during the six months ended June 30, 2001 and 2000. (4) SUBSEQUENT EVENT MERGER - On September 18, 2001, the Company merged with and into Active IQ Technologies, Inc. F-18 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION Pursuant to an Agreement and Plan of Merger dated August 30, 2001 (the "Merger Agreement") by and among Active IQ Technologies, Inc. ("Active IQ" or the "Company"), CBS Acquisition, Inc., a wholly-owned subsidiary of the Company ("Merger Sub"), and Champion Business Systems, Inc. ("Champion"), Merger Sub merger with and into Champion with Champion remaining as the surviving corporation and a wholly-owned subsidiary of the Company. The Merger was effective September 18, 2001. As consideration for the Merger, the Company delivered to the former shareholders of Champion an aggregate of 299,185 shares of the Company's common stock, cash in the amount of $512,328 and promissory notes in the aggregate amount of $1,000,000. The promissory notes are payable in four equal installments each due on January 18, 2002, May 18, 2002, September 18, 2002 and January 18, 2003, respectively. The promissory notes are secured by the Company's shares of Champion stock. The pro forma adjustments reflecting the consummation of the Transaction are based upon the purchase method of accounting and upon the assumptions set forth in the notes hereto. This pro forma information should be read in conjunction with the audited and unaudited financial statements and notes that are included in this document. The pro forma adjustments do not reflect any operating efficiencies and cost savings which may be achievable with respect to the combined companies. These pro forma financial statements do not purport to present results, which would actually have been obtained if the Transaction had been in effect during the period covered, or any future results which may in fact be realized. F-19 ACTIVE IQ TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET JUNE 30, 2001
ACTIVE IQ CHAMPION TECHNOLOGIES, BUSINESS INC. SYSTEMS, INC. HISTORICAL HISTORICAL PURCHASE PRO FORMA JUNE 30, 2001 JUNE 30, 2001 ADJUSTMENTS COMBINED ------------- ------------- ----------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 5,288,845 $ 161,428 $ (512,328) (A) $ 4,937,945 Accounts receivable - trade, net 85,603 55,736 141,339 Note receivable 500,000 0 500,000 Inventories 57,638 35,780 93,418 Other current assets 35,460 17,017 52,477 ----------- ----------- ----------- ----------- Total current assets 5,967,546 269,961 (512,328) 5,725,179 ----------- ----------- ----------- ----------- PROPERTY AND EQUIPMENT, NET 547,728 26,749 0 574,477 ----------- ----------- ----------- ----------- OTHER ASSETS: Software development costs, net 0 499,344 (499,344) (A) 0 Acquired software development 435,838 0 499,344 (A) 935,182 Other assets, net 74,745 10,980 85,725 Goodwill and other intangibles, net 5,879,998 0 2,969,655 (A) 8,972,140 122,487 (B) ----------- ----------- ----------- ----------- Total other assets 6,390,581 510,324 3,092,142 9,993,047 ----------- ----------- ----------- ----------- $12,905,855 $ 807,034 $ 2,579,814 $16,292,703 =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Line of credit - bank $ 35,998 $ 0 $ $ 35,998 Current portion of notes payable - stockholders 827,322 0 700,028 (A) 1,527,350 Current portion of long-term debt 0 68,131 68,131 Deferred revenue 0 774,876 774,876 Accounts payable 350,472 36,218 386,690 Other current liabilities 375,787 50,296 50,000 (A)&(C) 476,083 ----------- ----------- ----------- ----------- Total current liabilities 1,589,579 929,521 750,028 3,269,128 DEFERRED REVENUE 759,609 0 759,609 LONG-TERM DEBT, NET OF CURRENT PORTION 737,663 0 737,663 NOTE PAYABLE - CHAMPION BUSINESS SYSTEMS, INC. STOCKHOLDERS 0 0 244,284 (A) 244,284 ----------- ----------- ----------- ----------- Total liabilities 3,086,851 929,521 994,312 5,010,684 ----------- ----------- ----------- ----------- STOCKHOLDERS' EQUITY (DEFICIT): Common stock 97,500 663 (663) (B) 100,492 2,992 (A) Series B convertible preferred stock 365,000 0 365,000 Additional paid-in capital 15,799,738 1,508,892 (1,508,892) (B) 17,259,761 1,460,023 (A) Deferred compensation (269,852) 0 (269,852) Warrants 262,199 0 262,199 Accumulated deficit (6,435,581) (1,632,042) 1,632,042 (B) (6,435,581) ----------- ----------- ----------- ----------- Total stockholders' equity (deficit) 9,819,004 (122,487) 1,585,502 11,282,019 ----------- ----------- ----------- ----------- $12,905,855 $ 807,034 $ 2,579,814 $16,292,703 =========== =========== =========== ===========
See accompanying notes to combined pro forma financial statements. F-20 ACTIVE IQ TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000
ACTIVE IQ CHAMPION TECHNOLOGIES, BUSINESS INC. SYSTEMS, INC. PRO FORMA HISTORICAL HISTORICAL PURCHASE PRO FORMA DECEMBER 31, 2000 DECEMBER 31, 2000 ADJUSTMENTS COMBINED ----------------- ----------------- ----------- -------- REVENUES Software and license fees, net $ $ 509,455 $ 0 $ 509,455 Maintenance, consulting and other 0 1,197,615 0 1,197,615 ----------- ----------- ----------- ----------- Total revenues 0 1,707,070 0 1,707,070 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Selling, general and administrative 1,978,697 1,663,049 0 3,641,746 Depreciation and amortization 112,544 335,604 1,009,022 (D) 1,457,170 Product development 609,344 12,843 0 622,187 Loss on disposal of assets 105,360 0 0 105,360 Write-down of software due to impairment 0 304,184 304,184 ----------- ----------- ----------- ----------- Total operating expenses 2,805,945 2,315,680 1,009,022 6,130,647 ----------- ----------- ----------- ----------- LOSS FROM OPERATIONS (2,805,945) (608,610) (1,009,022) (4,423,577) ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE): Other income 7,500 0 0 7,500 Interest expense (41,974) (15,407) 0 (57,381) ----------- ----------- ----------- ----------- Total other expense (34,474) (15,407) 0 (49,881) ----------- ----------- ----------- ----------- LOSS BEFORE INCOME TAXES (2,840,419) (624,017) (1,009,022) (4,473,458) PROVISION FOR INCOME TAXES 0 0 0 0 ----------- ----------- ----------- ----------- NET LOSS $(2,840,419) $ (624,017) $(1,009,022) $(4,473,458) =========== =========== =========== =========== BASIC AND DILUTED LOSS PER COMMON SHARE $ (1.65) $ (2.22) =========== =========== BASIC AND DILUTED WEIGHTED AVERAGE OUTSTANDING SHARES 1,717,731 299,185 (E) 2,016,916 =========== ======= ===========
See accompanying notes to combined pro forma financial statements. F-21 ACTIVE IQ TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2001
ACTIVE IQ CHAMPION TECHNOLOGIES, BUSINESS INC. SYSTEMS, INC. PRO FORMA HISTORICAL HISTORICAL PURCHASE PRO FORMA JUNE 30, 2001 JUNE 30, 2001 ADJUSTMENTS COMBINED ------------- ------------- ----------- -------- REVENUES: Software and license fees, net $ 0 $ 645,230 $ 0 $ 645,230 Maintenance, consulting and other 408,261 51,595 0 459,856 ----------- ----------- ----------- ----------- Total revenues 408,261 696,825 0 1,105,086 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Selling, general and administrative 2,255,965 548,391 0 2,804,356 Depreciation and amortization 703,570 80,571 504,511 (D) 1,288,652 Product development 390,264 103,736 0 494,000 Loss on disposal of assets 57,678 0 57,678 ----------- ----------- ----------- ----------- Total operating expenses 3,407,477 732,698 504,511 4,587,008 ----------- ----------- ----------- ----------- LOSS FROM OPERATIONS (2,999,216) (35,873) (504,511) (3,481,922) ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE): Interest income 48,343 329 0 48,672 Interest expense (9,277) 0 0 (9,277) ----------- ----------- ----------- ----------- Total other income 39,066 329 0 39,395 ----------- ----------- ----------- ----------- LOSS BEFORE INCOME TAXES (2,960,150) (35,544) (504,511) (3,500,205) PROVISION FOR INCOME TAXES 0 0 0 0 ----------- ----------- ----------- ----------- NET LOSS $(2,960,150) $ (35,544) $ (504,511) $(3,500,205) =========== =========== =========== =========== BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.49) $ (0.56) =========== =========== BASIC AND DILUTED WEIGHTED AVERAGE OUTSTANDING SHARES 5,994,188 299,185 (E) 6,293,373 =========== =========== ===========
See accompanying notes to combined pro forma financial statements. F-22 ACTIVE IQ TECHNOLOGIES, INC. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION JUNE 30, 2001 (1) DESCRIPTION OF THE TRANSACTION Pursuant to an Agreement and Plan of Merger dated August 30, 2001 (the "Merger Agreement") by and among Active IQ Technologies, Inc. ("Active IQ" or the "Company"), CBS Acquisition, Inc., a wholly-owned subsidiary of the Company ("Merger Sub"), and Champion Business Systems, Inc. ("Champion"), Merger Sub merger with and into Champion with Champion remaining as the surviving corporation and a wholly-owned subsidiary of the Company. The Merger was effective September 18, 2001. As consideration for the Merger, the Company delivered to the former shareholders of Champion an aggregate of 299,185 shares of the Company's common stock, cash in the amount of $512,328 and promissory notes in the aggregate amount of $1,000,000. The promissory notes are payable in four equal installments each due on January 18, 2002, May 18, 2002, September 18, 2002 and January 18, 2003, respectively. The promissory notes are secured by the Company's shares of Champion stock. The following unaudited combined balance sheet as of June 30, 2001 gives effect to the Transaction as if it occurred on June 30, 2001. The unaudited pro forma statements of operations give effect to the Transaction as if it occurred on January 1, 2000. (2) DESCRIPTION OF PRO FORMA ADJUSTMENTS (A) The carrying value assigned to goodwill and other intangibles is based on the purchase price over the amounts assigned to the identifiable assets acquired and liabilities of Champion Business Systems, Inc. The allocation of the purchase price is as follows: Cash $ 512,328 Promissory Note Payable (1) 944,312 Common stock (2) 1,463,015 Add: estimated transaction costs 50,000 ---------- Total consideration $2,969,655 Less: Net tangible assets acquired (621,831) ---------- Goodwill and other intangibles $3,591,486 ==========
The allocation to goodwill and other intangibles is as follows: Customer relationships $1,318,700 Acquired software development 499,344 Non-compete agreements 200,000 Goodwill 1,573,442 ---------- Total $3,591,486 ==========
(1) The non-interest bearing Promissory Note Payable has been discounted by $55,688 for imputed interested at 7%. F-23 ACTIVE IQ TECHNOLOGIES, INC. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION-CONTINUED JUNE 30, 2001 (2) Pursuant to the terms of the merger agreement the 299,185 shares of common stock of Active IQ issued in connection with the Transaction is determined by the average of the closing bid and ask prices during the ten trading days preceding the Effective Date, as reported on the Nasdaq SmallCap Market System (the Effective Date was September 18, 2001) ($4.89 per share). Therefore, the allocation of the common stock issued of $1,463,015 is $2,992 to common stock for the par value of shares issued and the balance of $1,460,023 to additional paid-in capital. (B) Reflects the elimination of Champion Business Systems, Inc. common stock, additional paid in capital and accumulated deficit in the amount of ($663), ($1,508,892) and $1,632,042, respectively. The net deficit of $122,487 was included in the amount allocated to goodwill. (C) The other accrued expenses adjustment represents the accrued estimated transaction costs to be incurred as a result of the Transaction. The costs are primarily the Company's legal, accounting, printing and similar expenses. (D) Reflects acquired software, customer relationships and noncompete arising from the Transaction amortized on a straight-line basis over two years. Pursuant to Statement of Financial Accounting Standards No. 142, goodwill recorded in a business combination after June 20, 2001 is not amortized but is reviewed based upon an impairment analysis. Amortization of acquired software, customer relationships and noncompete agreements for the year ended December 31, 2000 and the six months ended June 30, 2001 is $1,009,022 and $504,511, respectively. (E) Reflects additional common shares issued to Champion Business Systems, Inc. stockholders. F-24 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ACTIVE IQ TECHNOLOGIES, INC. Date: November 13, 2001 By: /s/ Kenneth W. Brimmer ------------------------------------- Kenneth W. Brimmer Chairman, Chief Executive Officer and Chief Financial Officer EXHIBIT INDEX 23.1 Consent of Virchow, Krause & Company, LLP EX-23.1 3 c66044aex23-1.txt CONSENT OF VIRCHOW, KRAUSE & COMPANY, LLP Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-54584 and 333-54582) of ActiveIQ Technologies, Inc. (FKA: Meteor Industries, Inc.) of our report dated October 12, 2001 relating to the financial statements which appear in this Form 8-K/A. s/ Virchow, Krause & Company, LLP Minneapolis, Minnesota November 13, 2001 -----END PRIVACY-ENHANCED MESSAGE-----