-----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, WjqPcvSrC2mfVv5acmjGRyCffat5o6yzKWHNNy4XAkXZdo8kWvmcgmaQ/j01se5h BmEnAYAM+41Xf8Uto3SBeQ== 0000950137-02-001319.txt : 20020415 0000950137-02-001319.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950137-02-001319 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20020318 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: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-68088 FILM NUMBER: 02577044 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 S-3/A 1 c64205a2s-3a.txt AMENDMENT TO REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MARCH 15, 2002 REGISTRATION NO. 333-68088 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 2 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ACTIVE IQ TECHNOLOGIES, INC. (Exact name of registrant as specified in charter) MINNESOTA 41-2004369 (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification number) 5720 SMETANA DRIVE, SUITE 100 MINNETONKA, MINNESOTA 55343 (952) 345-6600
(Address, including zip code, and telephone number, including area code, of registrants' principal executive offices) COPIES TO: MR. D. BRADLY OLAH WILLIAM M. MOWER, ESQ. CHIEF EXECUTIVE OFFICER CHRISTOPHER J. MELSHA, ESQ. ACTIVE IQ TECHNOLOGIES, INC. MASLON EDELMAN BORMAN & BRAND, LLP 5720 SMETANA DRIVE, SUITE 100 3300 WELLS FARGO CENTER MINNETONKA, MINNESOTA 55343 MINNEAPOLIS, MINNESOTA 55402-4140 TELEPHONE: (952) 345-6600 TELEPHONE: (612) 672-8200 FACSIMILE: (952) 345-6601 FACSIMILE: (612) 672-8397
APPROXIMATE DATE OF THE COMMENCEMENT OF PROPOSED DISTRIBUTION: From time to time after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION TO BE REGISTERED REGISTERED PER SHARE PRICE FEE (4) ---------------------- ------------ ---------------- ------------------ ------------ CLASS B REDEEMABLE WARRANTS (1) 5,209,979 $5.50 $28,654,885 $2,623.25 COMMON STOCK, PAR VALUE $.01 PER SHARE (2) 5,155,979 n/a n/a n/a COMMON STOCK, PAR VALUE $.01 PER SHARE (3) 9,276,220 $2.23 $20,685,971 $1,903.11 TOTAL $49,340,855 $4,539.36
(1) Fee based on warrant exercise price of $5.50 in accordance with Rule 457(g). (2) Represents the shares issuable upon exercise of the Class B Redeemable Warrants, for which no additional fee is required pursuant to Rule 457 (3) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457 of the Securities Act based upon the per share average of high and low prices of the Registrant's common stock on the Nasdaq Small Cap Market on March 12, 2002. (4) Fees in the amount of $17,394.34 were paid with the original filing of Form S-3 on August 21, 2001. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. OFFERING PROSPECTUS ACTIVE IQ TECHNOLOGIES, INC. 5,209,979 CLASS B REDEEMABLE WARRANTS 9,276,220 SHARES OF COMMON STOCK The selling security holders identified on pages 30-42 of this prospectus are offering the following securities on a resale basis: - 5,209,979 Class B Redeemable Warrants, each of which entitles the holder thereof to purchase, at any time until April 30, 2006, one share of our common stock at a price of $5.50 per share, subject to adjustment. The warrants are redeemable for $.01 per warrant, upon 30 days' notice, any time after April 30, 2002 following a period of 14 consecutive days in which the average closing bid price of our common stock exceeds $7.50 per share, subject to adjustment; and - 9,276,220 shares of our common stock, including 5,209,979 shares issuable upon the exercise of our Class B Redeemable Warrants. We are also offering 5,209,979 shares of our common stock issuable upon exercise of the Class B Redeemable Warrants by persons (and their assigns) who purchase those warrants from the selling security holders identified in this prospectus. Our common stock is listed on the Nasdaq Small Cap Market under the symbol "AIQT." On March 13, 2002, the last sale price for our common stock as reported on the Nasdaq Small Cap Market was $2.17. We have applied for listing of our Class B Redeemable Warrants on the Nasdaq Small Cap Market under the symbol "AIQTZ." THE SECURITIES OFFERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. A REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is _______, 2002. TABLE OF CONTENTS
PAGE ---- Prospectus Summary .................................................................. 3 Risk Factors ........................................................................ 7 Note Regarding Forward-Looking Statements ........................................... 14 Business ............................................................................ 15 Management .......................................................................... 19 Certain Relationships and Related Transactions ...................................... 23 Selected Financial Data ............................................................. 24 Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Selected Quarterly Financial Data ................................................... 28 Use of Proceeds ..................................................................... 29 Selling Security Holders ............................................................ 29 Plan of Distribution ................................................................ 45 Description of Common Stock ......................................................... 48 Description of Class B Redeemable Warrants .......................................... 48 Disclosure of Commission Position On Indemnification For Securities Act Liabilities .................................................. 50 About this Prospectus ............................................................... 50 Where You Can Find More Information ................................................. 50 Legal Matters ....................................................................... 52 Experts ............................................................................. 52
2 PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus or incorporated by reference in this prospectus. Because it is a summary, it may not contain all of the information that is important to you. Accordingly, you are urged to carefully review this prospectus and the documents incorporated in this prospectus by reference in their entirety. OUR COMPANY We are engaged in the design, development, marketing and support of accounting software and eBusiness services to the small to medium-sized business market, known as the "SME market." We offer traditional accounting software solutions through Red Wing Business Systems, Inc., Champion Business Systems, Inc. and FMS Marketing, Inc. (which does business as FMS/Harvest), our recently-acquired and wholly-owned subsidiaries. We also offer eBusiness applications and solutions that we call our "Epoxy Network." Our accounting software solutions include:
Red Wing Business Systems Champion Business Systems FMS/Harvest - ------------------------- ------------------------- ----------- - - TurningPoint Accounting - PROFIT GOLD - Perception Accounting - - Software - PROFIT - - Windows Accounting Series - PROFIT in the Classroom - - DOS Accounting Series - Controller - - AgCHEK Accounting - - Payroll
We offer our Epoxy Network to customers on a monthly subscription basis. Through our Epoxy Network, we offer Epoxy Accounting Management and Epoxy Storefront applications. We were originally incorporated in Colorado in December 1992 under the name Meteor Industries, Inc. On April 30, 2001, immediately prior to the effective time of the reverse merger transaction between activeIQ Technologies Inc. and Meteor Industries, we reincorporated under Minnesota law and changed our name to Active IQ Technologies, Inc. Our executive offices are located at 601 Carlson Parkway, Suite 1550, Minnetonka, Minnesota 55305 and our telephone number is (952) 449-5000. Our web site is www.activeiq.com. RECENT DEVELOPMENTS On April 30, 2001, Meteor Industries, Inc. (our predecessor), activeIQ Technologies Inc. and AIQ, Inc., a wholly-owned subsidiary of Meteor Industries, closed on a triangular merger transaction whereby activeIQ Technologies ("Old AIQ") merged with and into AIQ, Inc. Immediately prior to the merger, Meteor Industries sold all of its assets relating to its former business, having only the cash and a note receivable from that sale as its only asset at the time of the merger with Old AIQ. In the merger, the shareholders of Old AIQ received one share of Meteor Industries common stock for each share of common stock in Old AIQ held, plus two Class B Redeemable Warrants for every three shares of Old AIQ common stock held by such shareholder. (For a complete description of the terms of the warrants, see "Description of Class B Redeemable Warrants.") Immediately following the merger, the Old AIQ shareholders held approximately 50 percent of our outstanding common stock. Since Meteor Industries had only monetary assets and no operations at the effective time of the merger, the transaction was accounted for as the issuance of stock by Old AIQ in exchange for the monetary assets of Meteor Industries. Since its inception in April 1996 through the fiscal year ended December 31, 2000, Old AIQ 3 was a development stage company. Because Old AIQ was treated as the acquiring company in the merger for accounting purposes, when we discuss or refer to business and financial information in this prospectus relating to dates prior to the merger, we are referring to Old AIQ's business and financial information, unless otherwise stated. As mentioned above, immediately prior to the merger with Old AIQ, Meteor Industries sold all of its assets relating to its gas and oil distribution business to Capco Energy, Inc., one of our significant shareholders. In consideration for these assets, Capco Energy delivered to Meteor Industries approximately $4.6 million in cash, a promissory note in the amount of $500,000, and 100,833 shares of our common stock, which were immediately canceled. As a result of the sale of its assets to Capco Energy, Meteor Industries discontinued all of its operations in the petroleum and gas distribution business and adopted the business plan of Old AIQ. The primary reason for Meteor's decision to exit the oil and gas distribution business was because Meteor's operations were no longer able to generate the cash flow necessary to conduct its business. Meteor had generally grown its business through acquisitions, which were paid for in either cash or stock. However, as Meteor's business operations demanded more working capital in order to offset the increased price of petroleum products, it had less working capital to use toward acquisitions. Moreover, Meteor was never able to generate sufficient interest in its stock to be able to use it as attractive consideration in acquisitions. Since Meteor believed that it no longer had a ready means by which to fund the acquisitions that were central to its business development, its board of directors believed it was prudent to sell its business operations. In June 2001, we acquired all of the outstanding capital stock of Red Wing Business Systems, Inc., a Minnesota corporation, which is now our wholly-owned subsidiary. Red Wing Business Systems develops, markets and distributes accounting software applications to the SME market, and particularly to users in the agricultural industry. In exchange for all of the shares of Red Wing Business Systems, we issued an aggregate of 400,000 shares of our common stock and paid at closing a total of $400,000 to the company's former shareholders. We are also obligated to make three more payments of $400,000 each to such shareholders, payable on December 6, 2001, June 6, 2002 and December 6, 2002, respectively. We further agreed to register the resale of the 400,000 shares issued to the former shareholders of Red Wing Business Systems. However, the former shareholders entered into a lock-up agreement in which 75 percent of the shares cannot be sold or otherwise transferred (subject to limited exceptions), except that every 3 months following the effective date of the registration statement covering the resale of the shares, 12.5 percent of such shares would no longer be subject to any restriction on transfer. Effective September 18, 2001, we completed our merger acquisition of Champion Business Systems, Inc., a Denver, Colorado-based accounting software company. Following the acquisition, Champion Business Systems operates as wholly-owned subsidiary of our company. As consideration for the merger, we paid an aggregate of approximately $512,000 in cash to the shareholders of Champion Business Systems, plus we issued an aggregate of 299,185 shares of our common stock and promissory notes for an aggregate principal amount of approximately $1 million. The promissory notes are payable in equal installments on the 4, 8, 12 and 16-month anniversaries of the effective date of the merger. Champion Business Systems develops, integrates and supports accounting and business management software, primarily focusing on small and growing businesses. On October 10, 2001, we acquired all of the outstanding capital stock of FMS Marketing, Inc., a New Lenox, Illinois-based software company doing business as FMS/Harvest. FMS Marketing is a provider of accounting software for use in the farming and agriculture industry. As consideration for FMS Marketing's stock, we paid $300,000 in cash, issued 6-month promissory notes in the amount of $300,000 and an aggregate of 250,000 shares of our common stock. Effective as of December 31, 2001, we merged FMS Marketing into Red Wing Business Systems. Effective November 20, 2001, our board of directors appointed Wayne W. Mills as a director. Mr. Mills, our company's largest shareholder, is the president and owner of Blake Capital Partners, LLC, 4 an investment and consulting company providing seed capital and services to early stage businesses. Prior to forming Blake Capital Partners in 1999, Mr. Mills was an investment banker and stock broker for more than 18 years at R.J. Steichen & Company (now known as Miller Johnson Steichen Kinnard, Inc.). Steven A. Weiss, Steven Levine and Ken Kaufman resigned from our Board of Directors effective as of November 29, 2001, December 13, 2001 and January 11, 2002, respectively. Pursuant to an agreement dated November 27, 2001, Kenneth W. Brimmer, our Chairman, Chief Executive Officer and Chief Financial Officer, resigned from his positions as CEO and CFO, although he will remain our Chairman. The resignation was effective December 1, 2001. Our company also agreed to pay to an entity wholly-owned by Mr. Brimmer the sum of $250,000, which represents the bonus Mr. Brimmer has earned for raising at least $12 million in equity capital, as provided for in his employment agreement. In exchange for this payment, Mr. Brimmer waived his right to receive any severance or other payments that may be due him in accordance with his employment agreement. We also agreed to vest the remaining unvested portions of options held by Mr. Brimmer, which represents the right to purchase 260,000 shares of our common stock, in addition to the 190,000 shares that were already vested under Mr. Brimmer's option grants. RISK FACTORS For a discussion of some of the risks you should consider before purchasing our Class B Redeemable Warrants or our common stock, you are urged to carefully review and consider the section entitled "Risk Factors" beginning on page 7 of this prospectus. THE OFFERING The selling security holders identified on pages 30-35 of this prospectus are offering a total of 5,209,979 Class B Redeemable Warrants on a resale basis, of which 2,935,979 warrants were issued in connection with our acquisition of activeIQ Technologies Inc. Also included are 300,000 warrants issued to two investors in a private placement of units of our securities; 370,000 warrants issued in connection with a January 2001 private placement; 100,000 warrants issued as fees for services provided by consultants to Meteor Industries, Inc., our predecessor; 1,000,000 warrants issued to financial advisors in connection with our recent merger with activeIQ Technologies Inc., and 54,000 warrants issued upon exercise of an underwriter's warrant, all of which were later exchanged for Class B Warrants, and 450,000 warrants issued as consideration to a consultant retained by us. Each Class B Redeemable Warrant entitles the holder thereof to purchase one share of our common stock at a price of $5.50 per share, subject to adjustment. The warrants expire on April 30, 2006 and may be redeemed by us at a price of $.01 per warrant any time after April 30, 2002 following a period of 14 consecutive days in which the average closing bid price of our common stock exceeds $7.50 per share. The selling security holders identified on pages 36-45 of this prospectus are offering a total of 9,276,220 shares of our common stock on a resale basis as follows: - 5,209,979 shares of our common stock issuable upon the exercise (by the selling security holders) of our Class B Redeemable Warrants; - 400,000 shares, 299,185 shares and 250,000 shares of our common stock all of which were issued in private placements in connection with our recent acquisitions of Red Wing Business Systems, Inc., Champion Business Systems, Inc. and FMS Marketing, Inc., respectively; - 500,000 shares of our common stock issued to investors in a private placement of units of our securities; - 365,000 shares of our common stock issued in January 2002 upon conversion of our Series B Convertible Preferred Stock; - 1,083,810 shares of our common stock held by certain of our other shareholders; and 5 - An aggregate of 1,168,246 shares of our common stock issuable upon the exercise of the following warrants: - 500,000 shares issuable upon the exercise of warrants issued to financial advisors in connection with our recent merger with activeIQ Technologies Inc. (at an exercise price of $3.00 per share); - 365,000 shares issuable upon the exercise (at a price of $2.50 per share) of warrants issued upon the conversion of our Series B Convertible Preferred Stock. - 250,000 shares issuable upon the exercise (at a price of $7.50 per share) of a warrant issued as consideration to a consultant retained by us; - 33,246 shares issuable upon the exercise (at a price of $2.75 per share) of warrants issued to selling a gents in connection with a 2000 private placement; and - 20,000 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued in connection with an August 2000 bridge financing. In addition, by this prospectus we are also offering 5,155,979 shares of our common stock issuable upon exercise of the Class B Warrants by persons (and their assigns) who purchase those warrants from the selling security holders identified in this prospectus. For a complete description of the terms and conditions of our Class B Redeemable Warrants, as well as our common stock, you are referred to the sections in this prospectus entitled "Description of Class B Redeemable Warrants" and "Description of Capital Stock." Class B Redeemable Warrants offered .......................... 5,209,979 warrants Common stock offered ......................................... 9,276,220 shares Common stock outstanding before the offering(1) .............. 11,592,345 shares Common stock outstanding after the offering(2) ............... 18,024,570 shares Common Stock Nasdaq symbol ................................... AIQT Class B Redeemable Warrant Nasdaq symbol(3) .................. AIQT Z
- -------------- (1) Based on the number of shares outstanding as of March 1, 2002, not including (a) 7,779,456 shares issuable upon exercise of certain warrants, including the Class B Warrants; or (b) 4,158,624 shares reserved for issuance under various stock option agreements, including those issued under our stock option plans. (2) Assumes the issuance of all shares offered hereby that are issuable upon the exercise of warrants. (3) We have applied for listing of the Class B Redeemable Warrants on the Nasdaq Small Cap Market, but have not yet obtained approval. 6 RISK FACTORS AN INVESTMENT IN OUR COMMON STOCK IS VERY RISKY. YOU MAY LOSE THE ENTIRE AMOUNT OF YOUR INVESTMENT. PRIOR TO MAKING AN INVESTMENT DECISION, YOU SHOULD CAREFULLY REVIEW THIS ENTIRE PROSPECTUS AND CONSIDER THE FOLLOWING RISK FACTORS: RISKS RELATING TO THIS OFFERING AN ACTIVE TRADING MARKET MAY NEVER DEVELOP FOR OUR CLASS B REDEEMABLE WARRANTS AND TRADING PRICES ARE UNCERTAIN. There is presently no public market for our Class B Redeemable Warrants and there can be no assurance that one will ever develop, or, if developed, that it can be maintained. We have filed a registration statement with the Securities and Exchange Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 and an initial listing application with the Nasdaq Stock Market in order to have the warrants listed on the Nasdaq Small Cap Market. Even if the listing application were approved and our Class B Redeemable Warrants were quoted on the Small Cap Market, the prices at which the warrants trade may fluctuate significantly. Prices for our Class B Redeemable Warrants will be determined in the marketplace and may be influenced by many factors, including, without limitation, (1) the depth and liquidity for the Class B Redeemable Warrants, (2) investors' perceptions of our Class B Redeemable Warrants and our company, in general, and (3) general economic and market conditions. THE CLASS B REDEEMABLE WARRANTS MAY NEVER BE LISTED ON THE NASDAQ SMALL CAP MARKET. Although we have applied for listing of our Class B Redeemable Warrants on the Nasdaq Stock Market's Small Cap Market System, there can be no assurance that listing will be approved or, if approved, that an active public market will develop or be sustained. If we fail to satisfy Nasdaq's requirements to maintain listing on Nasdaq in the future, our Class B Redeemable Warrants will likely trade in the over-the-counter market in either the OTC Bulletin Board or in the so-called "pink sheets." Consequently, it will be more difficult for an investor to trade the warrants. In addition, if we are unable to satisfy Nasdaq's requirements for continued listing, our Class B Redeemable Warrants would become subject to the rules promulgated under the Securities Exchange Act of 1934 relating to "penny stocks." These rules require brokers who sell securities subject to such rules to persons other than established customers and "institutional accredited investors" to complete certain documentation, making suitability inquiries of investors and provide investors with certain information concerning the risks of trading in the security. Accordingly, these rules may restrict the ability of brokers to sell the securities and may affect the ability of participants in this offering to sell their securities in the secondary market. WE MAY REDEEM THE CLASS B REDEEMABLE WARRANTS AT A NOMINAL PRICE UPON CERTAIN CONDITIONS. We may redeem our Class B Redeemable Warrants at a price of $.01 per warrant at any time after April 30, 2002 following a 14-day period in which the average closing bid price of our common stock exceeds $7.50 per share. We must provide 30 days' written notice to the holders of the Class B Warrants prior to redemption and the shares of common stock issuable upon exercise of the warrants must have been registered under the Securities Act of 1933 or must otherwise be freely tradable. If we redeem the Class B Redeemable Warrants, the holders of the warrants will lose their right to exercise the warrants, except during the 30-day redemption period. Redemption of the Class B Redeemable Warrants could force the holders to exercise the warrants at a time when it may be disadvantageous for the holders to do so or to sell the warrants at the then-prevailing market price or accept the redemption price, which would likely be substantially less then the market price of the warrants at the time of redemption. 7 A SIGNIFICANT NUMBER OF SHARES ARE OR WILL BECOME AVAILABLE FOR SALE AND THEIR SALE COULD DEPRESS THE PRICE OF OUR COMMON STOCK. Sales of a substantial number of shares of our common stock in the public market after this offering could adversely affect the market price for our common stock and make it more difficult for you to sell our shares at times and prices that you feel are appropriate. IF WE DO NOT USE THE PROCEEDS FROM THE EXERCISE OF THE CLASS B WARRANTS IN THE MOST EFFICIENT MANNER, OUR BUSINESS MAY SUFFER. Assuming the exercise of all 5,155,979 outstanding Class B Redeemable Warrants at the exercise price of $5.50, we will receive proceeds of approximately $28.2 million before expenses. Our management will have broad discretion over the application of such proceeds, however, we cannot guarantee that we will make the best or most efficient use of this money. The failure of our management to apply these funds effectively could have a material adverse effect on our business, results of operations and financial condition. RISKS RELATING TO OUR BUSINESS WE HAVE NO MEANINGFUL OPERATING HISTORY ON WHICH TO EVALUATE OUR BUSINESS OR PROSPECTS. We were a development stage company until January 2001 when we acquired Edge Technologies. Accordingly, we do not have a significant operating history on which you can base an evaluation of our business and prospects. Our business prospects must therefore be considered in the light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies in new and rapidly evolving markets, such as online commerce, using new and unproven business models. These risks include our: - substantial dependence on products with only limited market acceptance; - need to create sales and support organizations; - competition; - need to manage changing operations; - customer concentration; - reliance on strategic relationships; and - dependence on key personnel. We also depend heavily on the growing use of the Internet for commerce and communication and on general economic conditions. Our management cannot be certain that our business strategy will be successful or that it will successfully address these risks. WE ANTICIPATE INCURRING LOSSES FOR THE FORESEEABLE FUTURE. For the 9 months ended September 30, 2001, we had a net loss of $6,138,586, and since our inception as Old AIQ in April 1996 through September 30, 2001, we have incurred an aggregate net loss of $9,614,017. As of September 30, 2001, we had total assets of $14,991,862. 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. Furthermore, to the extent our business strategy is successful, we must manage the 8 transition to higher volume operations, which will require us to control overhead expenses and add necessary personnel. OUR SUCCESS DEPENDS, IN PART, ON OUR ABILITY TO SUCCESSFULLY INTEGRATE OUR RECENT ACQUISITIONS WITH OUR BUSINESS PLAN AND TO SIGNIFICANTLY GROW EACH OF THESE BUSINESSES AS A PART OF OUR BUSINESS. From June 2001 to October 2001, we acquired Red Wing Business Systems, Inc., Champion Business Systems, Inc. and FMS Marketing, Inc. and we are currently integrating those businesses and products with ours. We may incur unanticipated costs in the course of integrating these businesses. In addition, the integration of Red Wing Business Systems, Champion Business Systems and FMS Marketing with our operations involves the following risks: - failure to develop complementary product offerings and marketing strategies; - failure to maintain the customer relationships of the acquired businesses; - failure to retain the key employees of the acquired businesses; - failure to effectively coordinate product development efforts; - diversion of our management's time and attention from other aspects of our business; and - failure to successfully manage operations that are geographically diverse. We cannot be sure that we will be successful in integrating and growing the businesses and products of Red Wing Business Systems, Champion Business Systems and FMS Marketing as part of our core business and products. If we are not, our business, operating results and financial condition may be materially adversely affected. BECAUSE WE ARE DEPENDENT UPON THIRD-PARTY SYSTEMS AND STRATEGIC RELATIONSHIPS, OUR BUSINESS MAY BE HARMED IF WE DO NOT MAINTAIN THOSE RELATIONSHIPS. We license key elements of our services from third parties, including Stellent, Inc. (f/k/a IntraNet Solutions, Inc.) from which we license, among other things, its Content Management solution. Termination of these licenses would adversely affect our business. We believe that our success in penetrating our target markets depends in part on our ability to develop and maintain strategic relationships with key software vendors, distribution partners and customers. We believe these relationships are important in order to validate our technology, facilitate broad market acceptance of our products, and enhance our sales, marketing and distribution capabilities. If we are unable to develop key relationships or maintain and enhance existing relationships, we may have difficulty selling our products and services. WE WILL REQUIRE FUTURE FINANCINGS IN ORDER TO COMPLETE THE DEVELOPMENT OF OUR PRODUCTS AND SERVICES AND TO IMPLEMENT OUR BUSINESS PLAN. THERE IS NO ASSURANCE THAT SUCH FINANCINGS WILL BE AVAILABLE ON ACCEPTABLE TERMS OR EVEN AT ALL. We anticipate that further financing will be needed in approximately 12 months in order to complete development of our products, to develop our brand and services and to otherwise implement our business plan. Product development, brand development and other aspects of Internet-related businesses are extremely expensive, 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, we may be forced to discontinue our business, and your investment in 9 our securities may be lost. If the financing is available only at a low valuation of our company, your investment may be substantially diluted. The continued health of the market for Internet-related securities and other factors beyond our control will have a major impact on the valuation of our company when we raise capital in the future. POTENTIAL FLUCTUATIONS IN OUR OPERATING RESULTS AND DIFFICULTY IN PREDICTING OUR OPERATING RESULTS MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR SECURITIES. We expect our anticipated revenues and operating results to vary significantly from quarter to quarter. As a result, quarter-to-quarter comparisons of our revenues and operating results may not be meaningful. In addition, due to the fact that we have little or no operating history with our new and unproven technology, we may be unable to predict our future revenues or results of operations accurately. Our current and future expense levels are based largely on our investment plans and estimates of future revenues and are, to a large extent, fixed. Accordingly, we may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall, and any significant shortfall in revenues relative to its planned expenditures could have an immediate adverse effect on our business and results of operations. Lack of operating history and rapid growth makes it difficult for us to assess the effect of seasonality and other factors outside our control. Nevertheless, we expect our business to be subject to fluctuations, reflecting a combination of various Internet-related factors. OUR MARKETS ARE HIGHLY COMPETITIVE AND WE MAY NOT BE ABLE TO EFFECTIVELY COMPETE. We compete in markets that are new, intensely competitive, highly fragmented and rapidly changing. We face competition in the overall Internet, Corporate Intranet and Extranet infrastructure market, as well as the Internet search segments of this market. We will experience increased competition from current and potential competitors, many of which have significantly greater financial, technical, marketing and other resources. We compete with a number of companies to provide intelligent software-based solutions, many of which have operated services in the market for a longer period, have greater financial resources, have established marketing relationships with leading online software vendors, and have secured greater presence in distribution channels. Our business does not depend on significant amounts of proprietary rights and, therefore, our technology does not pose a significant entry barrier to potential competitors. Additionally, our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements than we can. In addition, our current and potential competitors may bundle their products with other software or hardware, including operating systems and browsers, in a manner that may discourage users from purchasing services and products offered by us. Also, current and potential competitors have greater name recognition, more extensive customer bases that could be leveraged, and access to proprietary content. Increased competition could result in price reductions, fewer customer orders, fewer search queries served, reduced gross margins and loss of market share. BECAUSE THE MARKETS IN WHICH WE COMPETE ARE RAPIDLY CHANGING AND HIGHLY COMPETITIVE, OUR BUSINESS WILL BE HARMED IF WE ARE UNABLE TO DEVELOP AND INTRODUCE SUCCESSFUL NEW APPLICATIONS AND SERVICES IN A TIMELY MANNER. The Internet, Corporate Intranet and Extranet infrastructure market is characterized by rapid technological change, frequent new product introductions, changes in customer requirements and evolving industry standards. The introduction of products embodying new technologies and the 10 emergence of new industry standards could render our existing products obsolete. Our future success will depend upon our ability to develop and introduce a variety of new products and product enhancements to address the increasingly sophisticated needs of our customers. We may be unable to develop any products on a timely basis, or at all, and we may experience delays in releasing new products and product enhancements. Material delays in introducing new products and enhancements may cause our customers to forego purchases of our products and purchase those of our competitors. IF WE ARE UNABLE TO DEVELOP AND GROW OUR SALES AND SUPPORT ORGANIZATIONS, OUR BUSINESS WILL NOT BE SUCCESSFUL. We will need to create and substantially grow our direct and indirect sales operations, both domestically and internationally, in order to create and increase market awareness and sales. Our products and services will require a sophisticated sales effort targeted at several people within our prospective customers. Competition for qualified sales personnel is intense, and we might not be able to hire the kind and number of sales personnel we are targeting. In addition, we believe that our future success is dependent upon establishing successful relationships with a variety of distribution partners, including value added resellers. We cannot be certain that we will be able to reach agreement with additional distribution partners on a timely basis or at all, or that these distribution partners will devote adequate resources to selling our products. There is also no assurance that the pricing model relating to our Epoxy product will be accepted by our customers. Similarly, the anticipated complexity of our products and services and the difficulty of customizing them require highly trained customer service and support personnel. We will need to hire staff for our customer service and support organization. Hiring customer service and support personnel is very competitive in our industry due to the limited number of people available with the necessary technical skills and understanding of the Internet. PURSUANT TO ITS AUTHORITY TO DESIGNATE AND ISSUE SHARES OF OUR STOCK AS IT DEEMS APPROPRIATE, OUR BOARD OF DIRECTORS MAY ASSIGN RIGHTS AND PRIVILEGES TO CURRENTLY UNDESIGNATED SHARES WHICH COULD ADVERSELY AFFECT YOUR RIGHTS AS A COMMON SHAREHOLDER. Our authorized capital consists of 39,635,000 shares of capital stock. Our Board of Directors, without any action by the shareholders, may designate and issue shares in such classes or series (including classes or series of preferred stock) as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. As of February 28, 2002, we had 11,592,345 shares of common stock outstanding and a further 13,139,724 shares of common stock have been reserved as follows: - 5,297,935 shares for issuance under our stock option plans, of which options relating to 4,150,291 shares are currently outstanding; - 5,209,979 shares issuable upon the exercise of outstanding Class B Redeemable Warrants; - 690,000 shares issuable upon the exercise of outstanding warrants issued in connection with our initial public offering, which expire on March 1, 2002; and - 1,941,810 shares issuable upon the exercise of certain other outstanding privately-issued warrants and options to purchase shares of our common stock. The rights of holders of preferred stock and other classes of common stock that may be issued could be superior to the rights of our common shareholders. Our board of directors' ability to designate and issue such undesignated shares could impede or deter an unsolicited tender offer or takeover proposal. 11 Further, the issuance of additional shares having preferential rights could adversely affect the voting power and other rights of our common shareholders. IF WE ARE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH, WE MAY EXPERIENCE OPERATING INEFFICIENCIES AND HAVE DIFFICULTY MEETING THE DEMAND FOR OUR PRODUCTS. Our ability to successfully offer products and services and implement our business plan in a rapidly evolving market requires an effective planning and management process. Rapid growth will place a significant strain on our management systems and resources. We expect that we will need to continually improve our financial and managerial controls and reporting systems and procedures, and will need to continue to expand, train and manage our work force. Furthermore, we expect that we will be required to manage multiple relationships with various customers and other third parties. POTENTIAL ACQUISITIONS MAY CONSUME SIGNIFICANT RESOURCES. We may continue to acquire businesses that we feel will complement or further our business plan. Acquisitions entail numerous risks, including difficulties in the assimilation of acquired operations and products, diversion of management's attention to other business concerns, amortization of acquired intangible assets and potential loss of key employees of acquired businesses. No assurance can be given as to our ability to consummate any acquisitions or integrate successfully any operations, personnel, services or products that might be acquired in the future, and our failure to do so could have a material adverse effect on our business, financial condition and operating results. OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN AND RECRUIT KEY PERSONNEL. Our products and technologies are complex and we are substantially dependent upon the continued service of its existing engineering personnel. We are also highly dependent on D. Bradly Olah, our President and Chief Executive Officer, and Jeffrey Seabloom, our Senior Vice President of Sales and President of our Enterprise Solutions Division. We also expect to continue to add other important personnel in the near future. The loss of any of those individuals may have a material adverse impact on our business. We intend to hire a significant number of sales, support, marketing, and research and development personnel in calendar 2001 and beyond. Competition for these individuals is intense, and we may not be able to attract, assimilate or retain additional highly qualified personnel in the future. Further, some of these individuals may be either unable to begin or continue working for us because they may be subject to non-competition agreements with their former employers. OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGY. If we are unable to protect our intellectual property, or incur significant expense in doing so, our business, operating results and financial condition may be materially adversely affected. Any steps we take to protect our intellectual property may be inadequate, time consuming and expensive. We currently have no patents, registered trademarks or service marks, or pending patent, trademark or service mark applications. Without significant patent, trademark, service mark or copyright protection, we may be vulnerable to competitors who develop functionally equivalent products and services. We may also be subject to claims that our products infringe on the intellectual property rights of others. Any such claim may have a material adverse effect on our business, operating results and financial condition. Our success and ability to compete are substantially dependent upon our internally developed products and services, which we intend to protect through a combination of patent, copyright, trade secret and trademark law. We generally enter into confidentiality or license agreements with our employees, consultants and corporate partners, and generally control access to and distribution of our software, documentation and other proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. As 12 with any knowledge-based product, we anticipate that policing unauthorized use of our products will be difficult, and we cannot be certain that the steps we intend to take to prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States, will be successful. Other businesses may also independently develop substantially equivalent information. OUR TECHNOLOGY MAY INFRINGE ON THE PROPRIETARY RIGHTS OF OTHERS. We anticipate that software product developers will be increasingly subject to infringement claims due to growth in the number of products and competitors in our industry, and the overlap in functionality of products in different industries. We also believe that many of our competitors in the intelligent applications business have filed or intend to file patent applications covering aspects of their technology that they may claim our technology infringes. We cannot be certain that these competitors or other third parties will not make a claim of infringement against us with respect to our products and technology. Any infringement claim, regardless of its merit, could be time-consuming, expensive to defend, or require us to enter into royalty or licensing agreements. Such royalty and licensing agreements may not be available on commercially favorable terms, or at all. We are not currently involved in any intellectual property litigation. Our products and services operate in part by making copies of material available on the Internet and other networks and making this material available to end users. This creates the potential for claims to be made against us (either directly or through contractual indemnification provisions with customers) for defamation, negligence, copyright or trademark infringement, personal injury, invasion of privacy or other legal theories based on the nature, content or copying of these materials. These claims have been brought, and sometimes successfully pressed, against online service providers in the past. Although we carry general liability insurance, that insurance may not cover potential claims of this type or may not be adequate to protect us from all liability that may be imposed. GOVERNMENT REGULATION OF E-COMMERCE IS INCREASING AND THERE ARE MANY UNCERTAINTIES RELATING TO THE LAWS OF THE INTERNET. Laws and regulations directly applicable to communications or commerce over the Internet are becoming more prevalent. Recent sessions of the United States Congress have resulted in Internet laws regarding children's privacy, copyrights, taxation and the transmission of sexually explicit material. The European Union recently enacted its own privacy regulations. The law of the Internet, however, remains largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, libel and taxation apply to the Internet. In addition, the growth and development of the market for online commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business online. The adoption or modification of laws or regulations relating to the Internet could adversely affect our business. 13 NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained in this prospectus and in the documents incorporated by reference in this prospectus are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as "believes," "anticipates," "expects," "estimates," "may," "will" or similar terms. Forward-looking statements also include projections of financial performance, statements regarding management's plans and objectives and statements concerning any assumption relating to the foregoing. Important factors regarding our business, operations and competitive environment which may cause actual results to vary materially from these forward-looking statements are discussed under the caption "Risk Factors." 14 BUSINESS OUR COMPANY Active IQ Technologies, Inc. (www.activeiq.com) provides accounting software and eBusiness services designed to meet the needs of small and medium-sized organizations. Through our Accounting Applications software division, we provide accounting solutions to address general business requirements and select vertical markets. Through our Enterprise Solutions division, we offer our Epoxy Network, a service-based solution that provides fully integrated eBusiness solutions to existing legacy applications. Our Company is headquartered in Minnetonka, Minnesota In June 2001, we acquired Red Wing Business Systems, Inc. ("Red Wing"), located in Red Wing, Minnesota. Since 1979, Red Wing Accounting Software has provided small and medium-sized organizations with accounting software solutions. Red Wing currently serves more the 10,000 businesses including more that 5,000 agricultural users. In September 2001, we acquired Champion Business Systems, also a provider of accounting software solutions to small and medium-sized organizations, serving over 8,000 businesses. Both Red Wing and Champion software solutions address the gap between inexpensive, ultra-simple "starter" accounting software and the significant cost and complexity of high-end software, offering a stable, secure and flexible base for growing small business users. In October 2001, we acquired FMS Marketing, Inc., a full service supplier of software to the agricultural industry. Together with Red Wing's AgCHEK(TM) product line, we now serve more than 10,000 farm users. Our acquisitions of Red Wing Business Systems and FMS Marketing presents us with an opportunity to take a leadership role in providing agricultural software solutions to small and medium-sized farm operations. Our accounting software customers represent a potential market for our eBusiness services delivered through the Epoxy Network. In January 2001, we acquired privately-held Edge Technologies, Incorporated ("Edge Technologies"), a Nevada company that offered fully integrated e-commerce website services for businesses. The Edge Technologies service offering allows users to build a dynamic, secure, interactive e-commerce websites offering the benefits of direct access to information maintained in a variety of existing legacy accounting systems. Our Edge Technologies subsidiary has developed connectivity to more than 40 separate accounting systems representing over 250,000 small business and currently provides integrated website services to approximately 225 customers. We have completed a re-branding of the former Edge product, which is now a part of the Epoxy Network. We were originally incorporated under Colorado law in December 1992 under the name Meteor Industries, Inc., which was engaged in the business of oil and gas distribution. On April 30, 2001, Meteor sold all of its operating assets, reincorporated under Minnesota law under the name Active IQ Technologies, Inc. and merged with activeIQ Technologies Inc., a Minnesota corporation ("Old AIQ"). For accounting purposes, the merger was treated as an issuance of stock by Old AIQ because the only assets held by Meteor were the cash and notes it received in the sale of its operating assets. Upon completion of the merger, our common stock commenced trading on the Nasdaq Small Cap Market under the symbol "AIQT." INDUSTRY BACKGROUND Businesses today are increasingly seeking to leverage existing infrastructures and to adopt new solutions to automate and improve fundamental business processes within an organization. Historically, these advanced solutions were available only to large enterprise-class software system users. The rapid growth of the Internet has leveled the playing field in many respects. In order to succeed in today's marketplace, small and medium-sized businesses need to extend the reach of their 15 existing systems to include customers, partners, suppliers and employees. The requirements of the marketplace are driving purchasers of accounting solutions that provide the functionality of an enterprise Internet-capable system in a cost-effective manner. OUR STRATEGY Our objective is to be a leading provider of accounting software and eBusiness solutions to small and medium-sized businesses. To achieve this objective, we intend to pursue the following strategies: - PROVIDE ADDITIONAL VALUE-ADDED PRODUCTS AND SERVICES TO OUR CUSTOMERS. We plan to enhance our core products to offer more value to existing and new customers by adding new business process applications and functionality. We believe there is a significant market opportunity for new and enhanced applications that can effectively automate and improve customer and supplier relationships. We expect to continue developing additional value-added products and services, principally by partnering with third parties. - PURSUE STRATEGIC ACQUISITIONS. We intend to pursue strategic acquisitions, concentrating on opportunities to grow our base of potential subscribers to the Epoxy Network and to leverage our strength in selected vertical markets. - LEVERAGING EXISTING SALES CHANNELS. Accounting software has traditionally been sold through a network of value-added resellers, or "VARs." As we access the existing sales channels through partnerships or acquisitions, an important part of our strategy is to train and support the channel to develop Epoxy customers and deliver vertical market solutions. INTELLECTUAL PROPERTY We regard certain aspects of our internal operations, software and documentation as proprietary, and rely on a combination of contract, copyright, trademark and trade secret laws and other measures, including confidentiality agreements, to protect our proprietary information. Existing copyright laws afford us only limited protection. We believe that, because of the rapid pace of technological change in the computer software industry, trade secret and copyright protection is less significant than other factors such as the knowledge, ability and experience of our employees, frequent software product enhancements and the timeliness and quality of support services. We cannot guarantee that these protections will be adequate or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology. In addition, when we license our products to customers, we provide source code for most of our products. We also permit customers to possibly obtain access to our other source code through a source code escrow arrangement. This access to our source code may increase the likelihood of misappropriation or other misuse of our intellectual property. In addition, the laws of certain countries in which our software products are or may be licensed do not protect our software products and intellectual property rights to the same extent as the laws of the United States. Our license agreements with our customers contain provisions designed to limit the exposure to potential product liability claims. It is possible, however, that the limitation of liability provisions contained in these license agreements may not be valid as a result of future federal, state or local laws or ordinances or unfavorable judicial decisions. Although we have not experienced any material product liability claims to date, the license and support of our software for use in mission critical applications creates the risk of a claim being successfully pursued against us. Damages or injunctive relieve resulting from such a successful claim could seriously harm our business. 16 OUR PRODUCTS We design, develop, market and support accounting software and eBusiness services that provide organizations with technically advanced business solutions. In addition to traditional accounting solutions offered through our Accounting Applications Division, we offer an eBusiness product suite for small and medium-sized businesses known as the "Epoxy Network." Many growing smaller businesses seek opportunities to leverage their existing infrastructure to compete for business against larger corporations, other mid-sized competitors and start-ups. They understand the need to remain close to their customers and to make the most effective use of relatively limited resources. Small and medium sized enterprises historically have been later adopters of new technologies and seek a rapid return on technology investments. Our solutions are affordable to acquire and extend the useful life and functionality of existing systems, enhancing productivity without requiring businesses to make significant changes to existing systems and procedures. We develop, sell and support accounting software products through our Accounting Applications division. These products address the "gap market" which is comprised of companies who have outgrown inexpensive, ultra-simple "starter" accounting software but do not require the significant complexity of high-end software. These products offer a stable, secure and flexible base for growing small business users. Our software products include: RED WING SOFTWARE - TurningPoint(TM) Accounting Software was specifically designed for growing small businesses that need ease of use, flexibility, and expandability. General Ledger, Accounts Payable, and Accounts Receivable modules were released in September 2001. Additional modules will be released throughout 2002. - AgCHEK Accounting is designed for production-oriented agricultural operations, especially those needing crop and livestock management information. - Red Wing Windows Accounting Series is modular-based accounting software. - Red Wing Payroll software is a stand-alone system designed for ease of use and comprehensive employee pay processing and reporting. - Red Wing DOS Accounting Series is a solid, historically successful software solution. CHAMPION SOFTWARE - PROFIT GOLD is designed for small and growing businesses needing solid bookkeeping and financial management. - PROFIT offers full-featured accounting functionality, multi-user support and ease of use - all at an affordable price. - PROFIT in the Classroom is an all-inclusive accounting software package that teaches students financial and managerial accounting principles and includes features for instructors as well. - Champion CONTROLLER is a DOS-based product that provides all of the features a small business needs to manage finances. 17 FMS/HARVEST SOFTWARE - Perception Accounting is a complete accounting software solution created especially for the unique needs of farmers. The Epoxy Network includes eCommerce, Account Management, customer service and support, and trading partner connectivity and is offered to customers through a monthly subscription revenue model. We make going online easy for small and medium sized enterprises. We integrate with the accounting software that is already in place to help get a customer online quickly by accessing information that already exists in their accounting system. Leveraging the power of the Internet, these applications allow an organization to extend beyond the traditional "four walls" of their enterprise to integrate their operations with their customers, suppliers and partners. The initial offering of the Epoxy Network is comprised of the following: - Epoxy Account Management provides critical customer information online 24-hours-a-day, 365 days a year via your Epoxy Web site. Customers can track their orders, retrieve invoice history, order information, and view their account balances whenever they want. - Epoxy Storefront leverages the Internet to link electronically a company's operations with its customers, suppliers and partners through an integrated electronic Storefront. - Epoxy eMarketing provides a seamless suite of services that drive qualified visitors to an Epoxy Web site. Customers pay for performance in that they are charged only for visitors to their site. RESEARCH AND DEVELOPMENT Since inception, we have made substantial investments in research and software product development. We believe that timely development of additional services and enhancements to existing software products and the acquisition of rights to sell or incorporate complementary technologies and products into our software product offerings are essential to maintain our competitive position in our market. The software services market is characterized by rapid technological change, frequent introductions of new products, changes in customer demands and rapidly evolving industry standards. Our total research and development expenses was approximately $750,000 in fiscal 2001. COMPETITION The markets for our products are intensely competitive. Many of the world's largest software companies, including Microsoft Great Plains Software, Sage Software and Intuit, have developed software solutions addressing our target market. These companies are all substantially larger than we are with greater financial and other resources. EMPLOYEES As of March 1, 2002, we employed 66 people, including employees of our Red Wing, Edge Technologies and Champion subsidiaries. None of our employees are represented by a labor union and we consider our employee relations to be good. 18 FACILITIES Our corporate headquarters are located at 601 Carlson Parkway, Suite 1550, Minnetonka, Minnesota 55305. We also lease office space in Red Wing, Minnesota (Red Wing Business Systems), Denver, Colorado (Champion Business Systems) and New Lenox, Illinois (FMS/Harvest). MANAGEMENT Our executive officers and directors are described below.
NAME AGE POSITIONS WITH THE COMPANY ---- --- -------------------------- Kenneth W. Brimmer ............................... 46 Chairman of the Board D. Bradly Olah ................................... 37 President, Chief Executive Officer, Chief Financial Officer and Director Philip C. Rickard ................................ 33 Vice President Ronald E. Eibensteiner ........................... 51 Director and Secretary Wayne W. Mills ................................... 47 Director
KENNETH W. BRIMMER currently serves as our Chairman of the Board. Until November 30, 2001 Mr. Brimmer was Chief Executive Officer and Chief Financial Officer. Having been appointed to the board of directors of Old AIQ in 1999, Mr. Brimmer served that company as its Chairman and Chief Executive Officer until its merger with our company on April 30, 2001. Mr. Brimmer was president of Rainforest Cafe, Inc. from April 1997 until April 2000 and was Treasurer from its inception in 1995. Mr. Brimmer is also Chairman of both Hypertension Diagnostics, Inc., and Sterion, Inc. (formerly known as Oxboro Medical, Inc.), both of which are NASDAQ listed companies. Since February 2002, Mr. Brimmer has served as a director of Metalclad Corporation (Nasdaq: MTLC). D. BRADLY OLAH, one of the co-founders of Old AIQ, is currently our President, Chief Executive Officer, Chief Financial Officer and a member of our board of directors. He formerly served Old AIQ as its Executive Vice President from November 1999 to March 2001 and as Chief Executive Officer from April 1996 to November 1999. Mr. Olah was also a member of Old AIQ's board of directors from its inception in April 1996 and has been actively involved in its business development. He was a director of Natural Resources Geophysical Corporation from 1996 until 1998, when it was sold to Eagle Geophysical of Houston, Texas. He was also the founder/Chairman and Chief Executive Officer and a director of Innovative Gaming Corporation of America from 1991 through February 1996 and also served as the Chief Financial Officer of that company from 1991 to 1993. PHILIP C. RICKARD has been Executive Vice President of our company since the merger with Old AIQ on April 30, 2001. Prior to that time, he served in the same position with Old AIQ from May 1999 until the Old AIQ merger. Prior to joining Old AIQ, Mr. Rickard served for five years as Director and VP of International Development for Ariobimo, an Asian-based group of companies. He initiated and directly managed the group's creation and development of various companies in Internet technologies, Internet service provision and wireless communications. RONALD E. EIBENSTEINER has been a director of our company since April 30, 2001, the effective date of our merger with Old AIQ and Secretary since December 1, 2001. He was initially appointed to the board of directors of Old AIQ in September 2000. Mr. Eibensteiner is the president of Wyncrest Capital, Inc. and has been a seed investor in several early stage technology companies. Since May 1996, Mr. Eibensteiner has been chairman of the board of directors of OneLink, Inc., a provider of Internet-delivered business intelligence services to the telecommunications industry. From March 1996 until 19 March 2001, he served as a director of IntraNet Solutions, Inc. (now known as Stellent, Inc.), a provider of Web-based document management solutions for corporate intranets. Mr. Eibensteiner co-founded of Diametrics Medical, Inc., a manufacturer of blood gas diagnostic systems, and was chairman of Prodea Software Corporation, a data warehousing software company, until its sale to Platinum technology, inc., in January 1996. WAYNE W. MILLS was appointed to our board of directors on November 20, 2001. Since February 2002, Mr. Mills has served as Chief Executive Officer and director of Metalclad Corporation. Mr. Mills is also the owner and president of Blake Capital Partners, LLC, a company that provides capital and consulting services to early stage businesses. Prior to forming Blake Capital Partners in 1999, Mr. Mills was employed for more than 18 years by R.J. Steichen & Co., where he was an investment banker and stock broker. EMPLOYMENT AGREEMENTS The terms and conditions of Mr. Brimmer's employment with us were set forth in a May 1, 2001 employment agreement. In addition to his annual salary of $125,000, Mr. Brimmer was entitled to an annual bonus of up to 75 percent of his salary upon the achievement of certain corporate objectives and a $250,000 bonus when our company raised an aggregate of $12 million in equity financings, which was reached in the fourth quarter of fiscal 2001. Approximately $12.7 million has been raised to date. Mr. Brimmer was also awarded an option to purchase up to 250,000 shares of our common stock at a price of $5.00 per share, which option vests in equal installments over four years. Pursuant to an agreement dated November 27, 2001, and in accordance with Mr. Brimmer's Employment Agreement, we agreed to pay $250,000 to Brimmer Company, LLC in satisfaction of the bonus owed to Mr. Brimmer for achieving equity financings of at least $12 million. Although Mr. Brimmer resigned from his positions as Chief Executive Officer and Chief Financial Officer as of December 1, 2001, he has agreed to remain as Chairman of the Board of Directors for the remainder of his term and to provide certain consulting services our company as requested. In connection with the termination, Mr. Brimmer agreed to waive any severance or any other payments under the remaining term of the Agreement. We also agreed to immediate vesting of his existing options and to permit exercise of those options until December 1, 2006. In connection with the $250,000 payment to Brimmer Company, we recorded an expense of such amount in the fourth quarter of fiscal 2001. We also recorded aggregate expenses of $280,941 in connection with our agreement to immediately vest Mr. Brimmer's options and permit the exercise of such options until December 1, 2006. Mr. Olah's employment with our company is also pursuant to a May 1, 2001 employment agreement. Pursuant to the terms of that agreement, Mr. Olah is entitled to an annual salary of $150,000 and is eligible for an annual bonus of up to 100 percent of his salary upon the achievement of certain corporate objectives. Mr. Olah was also awarded options to purchase up to 300,000 shares of our common stock at a price of $5.00 per share, which option vests in equal installments over four years. 20 EXECUTIVE COMPENSATION The following table sets forth information with respect to the compensation of our Chief Executive Officer and our other executives whose total compensation for fiscal 2001 will exceed $100,000.
SHARES UNDERLYING 2001 NAME AND PRINCIPAL POSITION 2001 SALARY OPTION AWARDS - --------------------------- ----------- ------------- Kenneth W. Brimmer (1)........................................... $125,000 250,000 Chairman of the Board D. Bradly Olah .................................................. 150,000 300,000 President, Chief Executive Officer and Chief Financial Officer Philip C. Rickard ................................................ 100,000 75,000 Vice President
(1) Under an Agreement dated November 27, 2001 and pursuant to Mr. Brimmer's Employment Agreement, the Company has agreed to pay $250,000 to Brimmer Company, LLC, an entity wholly-owned by Mr. Brimmer. In return, Mr. Brimmer agrees to provide our company with consulting services as requested from time to time. OPTION/SAR GRANTS IN FISCAL 2001 The following table sets forth information with respect to option grants made to executive officers of our company during fiscal 2001.
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM ---------------------------------------------------------------------------------- ----------------------------- NUMBER OF PERCENT OF SECURITIES TOTAL EXERCISE OR NAME UNDERLYING OPTIONS/ BASE PRICE EXPIRATION 5% ($) 10% ($) OPTIONS/ SARS ($/SH) DATE SARS GRANTED TO GRANTED (#) EMPLOYEES IN FISCAL YEAR - ------------------ ----------- ---------- ------------ ---------- ------ ------- Kenneth W. Brimmer 250,000 11.4 5.00 5/1/2011 625,000 1,250,000 D. Bradly Olah 300,000 13.6 5.00 5/1/2011 750,000 1,500,000 Philip C. Rickard 75,000 3.4 5.50 8/2/2011 259,500 519,000
21 OPTIONS HELD The following table provides information related to the number of options held by the above-named officers as of March 1, 2002, including the portion of options that are exercisable and the exercise prices.
NUMBER OF SHARES UNDERLYING UNEXERCISED OPTIONS AT FEB. 28, 2002 ------------------------------------ NAME EXERCISABLE UNEXERCISABLE EXERCISE PRICE - ---- ----------- ------------- -------------- Kenneth W. Brimmer .............................................. 250,000 0 $5.00 Chairman of the Board 200,000 0 1.00 D. Bradly Olah .................................................. 500,000(1) 0 4.00 President, Chief Executive Officer and Chief 60,000 240,000 5.00 Financial Officer 70,000 30,000 1.00 Philip C. Rickard ............................................... 75,000 0 1.00 Executive Vice President 75,000 0 5.50 0 150,000 4.00
(1) This award was granted pursuant to an option agreement dated January 7, 2002, which provided for vesting of the option in three (3) equal installments on an annual basis commencing on the first anniversary of the agreement. On January 14, 2002, Mr. Olah exercised his right to acquire all 500,000 shares subject to the option, though none had yet vested, by delivering a promissory note to us in the amount of $2,000,000 and pledging all 500,000 shares acquired as security for the repayment of the note, all in accordance with the terms of the option agreement. Mr. Olah cannot sell or otherwise transfer any of the shares acquired under this option agreement until such time as the shares would have vested in accordance with the vesting schedule provided in the option agreement and the note has been repaid. 22 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The following describes certain relationships and related transactions that we have with persons deemed to be affiliates of our Company. We believe that each of the transactions described below were on terms at least as favorable to our company as we would have expected to negotiate with unaffiliated third parties. TRANSACTIONS WITH STELLENT, INC. In July 2000, we acquired software and related maintenance from Stellent, Inc. (formerly IntraNet Solutions, Inc.), one of our significant shareholders, for which we issued 151,200 shares of our common stock, valued at $2.50 per share, as consideration. On August 25, 2000, we received $300,000 from Stellent in connection with a bridge loan transaction. In consideration for the loan, we delivered to Stellent a note in the principal amount of $300,000 with interest accruing at the rate of 8 percent per annum. We also issued a warrant to Stellent for the purchase of 20,000 shares of our common stock at a price of $2.75 per share. Although not yet a director of our company, Mr. Eibensteiner, one of our current directors, was a director of Stellent at the time of this transaction, as well at the time of the July 2000 transaction. In December 2000, we entered into a series of agreements with Stellent, including a reseller arrangement which allows us to sell Stellent's products. In connection with this transaction, we paid Stellent $150,000 in cash and issued 127,273 shares of common stock (valued at $2.75 per share) as consideration of a non-refundable, prepaid minimum royalty. Mr. Eibensteiner was a director of both our company and Stellent at the time this transaction took place. Pursuant to a intellectual property purchase agreement dated April 27, 2001 between our company and Stellent, we sold to Stellent our "Content Categorizer" product for $706,000. We received $400,000 in cash and the satisfaction of the $300,000 note (discussed above), plus $6,000 of accrued interest. Mr. Eibensteiner was no longer a director of Stellent at the time of this transaction. TRANSACTIONS IN CONNECTION WITH METEOR INDUSTRIES, INC. MERGER In connection with the consummation of the merger of Old AIQ and Meteor Industries on April 30, 2001, we paid Blake Capital Partners, LLC, an entity owned and controlled by Wayne W. Mills, one of our significant shareholders, an aggregate fee of $250,000 pursuant to financial advisory agreements. In addition, upon the completion of the merger, Blake Capital Partners received a warrant to purchase 500,000 shares of our common stock at a price of $3.00 per share. Also in connection with the Old AIQ-Meteor Industries merger, pursuant to an agreement between Meteor Industries and Gulfstream Financial Partners, LLC, an entity owned and controlled by Henry Fong, we were obligated to issue to Gulfstream Financial Partners a warrant to purchase 615,000 shares of our common stock at a price of $5.50 per share upon the consummation of the merger. Gulfstream Financial Partners is one of our significant shareholders. OTHER TRANSACTIONS In December 2000, Old AIQ entered into a subscription receivable for the purchase of 100,000 shares of common stock at a price of $2.75 per share with Mr. Eibensteiner, a director of our company. On July 30, Mr. Eibensteiner delivered to our company a cash payment in the amount of $75,000 and a 2-month promissory note in the principal amount of $200,000. No payments have been made in satisfaction of the note, which accrues interest at the rate of 6.75 percent per annum, the prime rate in effect on the date of the note. 23 SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with the financial statements and related notes included in our Current Report on Form 8-K filed with the SEC on May 14, 2001 and the discussions in this prospectus under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. The statement of operations data for the years ended December 31, 1998, 1999 and 2000, as well as the period from inception (April 11, 1996) to December 31, 2000, and the balance sheet data as of December 31, 1999 and 2000 are derived from our financial statements, which have been audited by Arthur Andersen LLP, independent public accountants. The statement of operations data for the years ended December 31, 1996 and 1997 and the nine months ended September 30, 2000 and September 30, 2001, and the balance sheet data as of December 31, 1996 and 1997, and as of September 30, 2001, are derived from our unaudited financial statements. We believe the unaudited financial statements include all normal recurring adjustments that we consider necessary for a fair presentation of our operating results. STATEMENT OF OPERATIONS DATA: (Dollars in thousands, except per share information)
PERIOD FROM FOR THE INCEPTION NINE FOR THE (APRIL 11, MONTHS NINE MONTHS 1996) TO ENDED ENDED FOR THE YEARS ENDED DECEMBER SEPTEMBER SEPTEMBER -------------------------------------------------------- 1996 1997 1998 1999 2000 31, 2000 30, 2000 30, 2001 ---- ---- ---- ---- ---- -------- -------- -------- Revenues $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 1,053 Operating expenses (18) (8) (12) (414) (2,806) (3,258) (1,986) (7,279) Other (expense) income (19) 16 (132) (48) (34) (217) (35) 87 Net (loss) income $ (37) $ 8 $ (144) $ (462) $(2,840) $(3,475) $(2,021) $(6,139) (Loss) earnings per share: Basic $ (0.16) $ 0.04 $ (0.79) $ (1.92) $ (1.65) $ (0.83) $ (0.83) Diluted $ (0.16) $ 0.04 $ (0.79) $ (1.92) $ (1.65) $ (0.83) $ (0.83) Weighted average number of common shares and common share equivalents: Basic 228 228 184 240 1,718 1,141 7,381 Diluted 228 228 184 240 1,718 1,141 7,381
BALANCE SHEET DATA:
AT AT DECEMBER 31, SEPTEMBER 1996 1997 1998 1999 2000 30, 2001 -------- -------- -------- -------- -------- ---------- Cash and cash equivalents $ 12 $ 63 $ 39 $ 410 $ 1,350 $ 4,524 Current assets 12 63 39 410 1,407 5,328 Property and equipment, net -- -- -- 17 549 541 Prepaid royalties -- -- -- -- 500 -- Goodwill -- -- -- -- -- 8,025 Other assets, net 250 381 33 47 216 1,098 Total assets 262 444 72 474 2,672 14,992 Working capital 12 63 39 121 950 1,372 Current liabilities -- -- -- 289 457 2,656 Deferred revenue -- -- -- -- 306 1,301 Capital lease obligations and long-term debt, net of current portion 296 471 242 -- 27 539 Accumulated deficit (37) (30) (173) (635) (3,475) (9,614) Stockholders' equity (deficit) (34) (54) (170) 185 1,882 10,496
There were no dividends declared per common share for any of the periods presented. 24 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Our company was considered a development stage company until January 2001, when we began to recognize revenues as result of our acquisition of Edge Technologies. We are in the business of developing and providing Internet eBusiness application software and services for small to mid-sized accounting software customers. Since our company's inception in April 1996, our efforts have been devoted to the development of its principal product and raising capital. Our future additional revenues and profits, if any, will depend upon various factors, including the ability to successfully expand, our ability to raise additional financing as required, and general economic conditions. Our company is in the early stages of introducing our products to the market. We may require additional funds that may not be available. We are subject to risks and uncertainties common to growing technology-based companies, including rapid technological change, growth and commercial acceptance of the Internet, dependence on suppliers and users for product, new product development, new product introductions and other activities of competitors, dependence on key personnel, security and privacy issues, dependence on strategic relationships and limited operating history. Components of selling, general and administrative expenses include all corporate and administrative functions that serve to support existing operations and provide an infrastructure to support future growth. Salaries, employee benefits, rent and marketing expenses are major items in this category. The following discussion and analysis of financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in our Reports on Forms 10-Q for the periods ended June 30, 2001 and September 30, 2001 (including amendments) and Forms 8-K dated June 15, 2001, and September 18, 2001 (including amendments thereto) all of which are incorporated by reference into this prospectus, as well as our audited financial statements and related notes for the years ended December 31, 2000 and December 31, 1999 included in our Report on Form 8-K dated April 30, 2001 (including amendments), which is also incorporated by reference into this prospectus. RESULTS OF OPERATIONS - SEPTEMBER 30, 2001 COMPARED TO SEPTEMBER 30, 2000 Revenues. Revenues for the nine months ended September 30, 2001 were $1,053,443 compared to no revenue for the same period in 2000. Our revenues were derived as follows: a net of $206,000 from our agreement with Stellent, $147,571 from our Epoxy Network, and $699,872 from our Red Wing and Champion subsidiaries, the latter of which we acquired on September 18, 2001. During 2000, our company was in the development stage and had not yet generated any revenue. Selling, General and Administrative Expenses. Selling, general and administrative expenses for the nine months ended September 30, 2001 were $5,041,713 compared to $1,498,271 for the same period in 2000. The $3,543,442 increase in selling, general and administrative expenses was primarily due to the increased corporate overhead structure for the development of our Internet eBusiness software and services. Depreciation and Amortization. Depreciation and amortization for the nine months ended September 30, 2001 was $1,605,947 compared to $57,188 for the same period in 2000. Depreciation and amortization expenses of property, equipment and other intangibles were $174,151 and goodwill and other acquisition related intangible amortization expense was $1,431,796. There was no goodwill amortization expense for the 2000 periods, as no acquisitions were completed prior to January 1, 2001. The Company amortizes acquired goodwill and other intangibles on a straight-line basis over a two-year period. 25 Product Development. Product development expenses for the nine months ended September 30, 2001 were $562,762 compared to $430,023 for the same period in 2000. The $132,739 increase in product development expenses was due to special projects that the Company invested in. Loss from Operations. Loss from operations totaled $6,225,195 for the nine months ended September 31, 2001, compared to $1,985,482 for the same period in 2000. The change in loss from operations from 2000 to 2001 is attributable to the changes in expenses as discussed previously. Other Income (Expense). The Company's other income and expense consists of interest income and interest expense. Interest income for the nine months ended September 30, 2001 was $126,305 compared to $790 for the same period in 2000. This income represents interest earned on our short-term investments. Interest expense for the nine months ended September 30, 2001 was $39,696 compared to $36,262 for the same period in 2000. This expense relates primarily to the amortization of the debt discount on the 7% notes payable to the old shareholders of Red Wing and Champion. Net Loss. For the nine months ended September 31, 2001, we had a net loss of $6,138,586, compared to a net loss of $2,020,954 for the same period in 2000. The net loss for 2001 is largely attributable to continued concept development as well as additional general and administrative expenses as we increased our corporate overhead structure. Basic and diluted net loss per common share for the nine months ended September 31, 2001 was $0.83 on 7,381,392 shares compared to $1.77 on 1,140,790 shares for the same period in 2000. 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. Financial Condition, Liquidity and Capital Resources. Our company has funded its operations and satisfied its capital expenditure requirements primarily through the sale of its common stock in private placements and the exercise of employee stock options of old Meteor Industries employees, in addition to the cash received from the merger and acquisition with Meteor. Net cash used by operating activities was $4,009,921 for the nine months ended September 30, 2001, compared to net cash used by operating activities of $1,398,089 for the nine months ended September 30, 2000. Our company had working capital of $1,371,572 at September 30, 2001, compared to working capital of $643,505 on December 31, 2000. Cash and equivalents were $4,523,856 at September 30, 2001, representing an increase of $3,174,399 from the cash and equivalents of $1,349,457 at December 31, 2000. The Company's principal commitment consists of payments to the former shareholders at Red Wing Business Systems and Champion Business Systems. The remaining notes payable to Red Wing of $1,200,000 (three payments of $400,000 each), are due December 2001, June 2002 and December 2002. The remaining notes payable to Champion of $1,000,000 (four payments of $250,000 each), are due January 2002, May 2002, September 2002 and January 2003.Although the Company has no material commitments for capital expenditures, it anticipates continued capital expenditures consistent with its anticipated growth in operations, infrastructure and personnel. In January 2001, we sold 400,000 shares of common stock for net proceeds of $1,100,000 as part of the Meteor merger. On January 16, 2001, we completed our merger with privately-held Edge Technologies Incorporated, the creator of a fully integrated eBusiness website service called Account Wizard. The merger was accounted for under the purchase method of accounting with the operations of Edge included in our company's financial statements as of that date. The former stockholders of Edge received $300,000 in cash and 325,000 shares of our common stock. Terms of the merger agreement required an additional cash payment and issuance of stock upon a capital raising event. With the completion of the Meteor Industries, Inc. merger on April 30, 2001, the former stockholders of Edge Technologies received 26 the final consideration as specified in the merger agreement of 225,000 shares of our common stock on April 30, 2001, and $400,000 in cash on May 2, 2001, in settlement of the earnout provisions. With the completion of the Meteor merger and acquisition on April 30, 2001, (less closing fees), the Company received approximately $3,967,500 in cash and a secured promissory note of $500,000 due January 30, 2002. The promissory note accrues interest at a rate of 10% per annum, compounded annually. The note is secured by a stock pledge agreement dated April 27, 2001, by SEDCO INC., pledging 1,500,000 shares of common stock of Capco Energy, Inc. On June 6, 2001, the Company completed its acquisition of Red Wing Business Systems. Red Wing, which operates as our wholly-owned subsidiary, produces and sells accounting and financial management software for small-to-medium sized businesses, farm and agricultural producers. Pursuant to a Stock Purchase Agreement (the "Agreement") dated June 6, 2001, the Company purchased all of the outstanding capital stock from the shareholders of Red Wing (the "Sellers"). The Sellers received an aggregate of 400,000 shares of the Company's common stock and cash in the aggregate of $1,600,000, of which $400,000 was delivered at the closing. Under the Agreement, our company is obligated to pay the remaining $1,200,000 of cash in three future payments of $400,000 due on the 6-, 12- and 18-month anniversaries of the closing date. As security for our obligations to make the first two future cash payments of $400,000 each, we granted a security interest in the newly-acquired shares of Red Wing to the Sellers pursuant to a pledge agreement by and among our company and the Sellers dated as of June 6, 2001. In June 2001, we raised cash proceeds of $1,500,000 from the private placement of 10 units of our securities at a purchase price of $150,000 per unit. Each unit consisted of 50,000 shares of our common stock and 30,000 Class B Redeemable Warrants. In December 2000, our company accepted a subscription receivable from one of our directors for the purchase of 100,000 shares of common stock at a price of $2.75 per share. On July 30, 2001, in satisfaction of the note receivable, the director delivered a cash payment in the amount of $75,000 and a two-month promissory note in the principal amount of $200,000. Interest accrues on the principal balance due under the note at the prime rate as of the date of the note. The note has been extended due to market conditions and, as of September 30, 2001, remains unpaid. On September 18, 2001, our Company completed its merger with privately-held Champion Business Systems. Champion, which operates as a wholly-owned subsidiary of our company, produces and sells accounting and financial management software for small and medium-sized businesses. The merger was accounted for under the purchase method of accounting with the operations of Champion included in our company's consolidation as of that date. The former shareholders of Champion are divided into two groups: "Minority Shareholders" and "Majority Shareholders." At closing, the Majority Shareholders received an aggregate of 299,185 shares of our common stock and all former Champion shareholders received their pro rata share of a $512,328 cash payment. Terms of the merger agreement required an additional cash payments of $1,000,000 payable in 4 equal installments, each due on the 4, 8, 12 and 16-month anniversaries. We granted a security interest in the newly-acquired shares of Champion to the former Champion shareholders pursuant to a pledge agreement dated as of September 14, 2001. MARKET RISK SENSITIVITY There has been no material change in our company's market risks associated with debt obligations. 27 SELECTED QUARTERLY FINANCIAL DATA The following table sets forth selected unaudited quarterly statement of operations data for each of the nine quarters ended September 30, 2001. This information has been prepared substantially on the same basis as our audited financial statements that have been included in our Current Report on Form 8-K filed on May 14, 2001, which has been incorporated by reference into this prospectus, and all necessary adjustments, consisting of normal recurring adjustments, have been included in the amounts stated below to present fairly the unaudited quarterly results of operations data. This quarterly data should be read in conjunction with our financial statements and related notes incorporated by reference into this prospectus. The operating results for any one quarter are not necessarily indicative of the operating results for any future period. STATEMENT OF OPERATIONS DATA: (Dollars in thousands, except per share information)
FOR THE QUARTER ENDED MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30, SEP. 30, DEC. 31, 1999 1999 1999 1999 2000 2000 2000 2000 -------- -------- -------- -------- -------- -------- -------- -------- Net sales $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- Gross profit (loss) -- -- -- -- -- -- -- -- Operating expenses -- (17) (39) (358) (661) (374) (836) (935) Loss from operations -- (17) (39) (358) (661) (374) (836) (935) Other (expense) income (2) (2) (42) (4) (6) (5) (131) 108 Net loss (2) (19) (81) (362) (667) (379) (967) (827) Income (loss) per share: Basic $ (0.01) $ (0.09) $ (0.31) $ (1.01) $ (1.78) $ (0.95) $ (0.37) $ (0.24) Diluted $ (0.01) $ (0.09) $ (0.31) $ (1.01) $ (1.78) $ (0.95) $ (0.37) $ (0.24) Weighted average number of common shares and common share equivalents: Basic 152 190 261 357 375 401 2,630 3,436 Diluted 152 190 261 357 375 401 2,630 3,436
FOR THE QUARTER ENDED MAR. 31, JUN. 30, SEP. 30, 2001 2001 2001 -------- -------- -------- Net sales $ 35 $ 373 $ 645 Gross profit (loss) 35 373 Operating expenses (1,169) (2,238) (3,871) Loss from operations (1,134) (1,865) (3,225) Other (expense) income 18 21 47 Net loss (1,116) (1,844) (3,178) Income (loss) per share: Basic $ (0.25) $ (0.25) $ (0.31) Diluted $ (0.25) $ (0.25) $ (0.31) Weighted average number of common shares and common share equivalents: Basic 4,472 7,499 10,111 Diluted 4,472 7,499 10,111
28 USE OF PROCEEDS We will not receive any proceeds from the resale of any of the shares or warrants offered by this prospectus by the selling security holders. We would receive gross proceeds in the approximate amount of $31,400,000 assuming the exercise of all the warrants and options with respect to which the underlying shares are being offered hereby. SELLING SECURITY HOLDERS CLASS B REDEEMABLE WARRANTS The following table sets forth the number of Class B Redeemable Warrants owned by the selling security holders listed below as of the date of this prospectus and after giving effect to this offering. Unless otherwise noted, all warrants offered by this prospectus were issued as consideration to the former shareholders of Old AIQ in connection with the merger transaction with Meteor Industries.
NUMBER OF PERCENTAGE WARRANTS PERCENTAGE WARRANTS BENEFICIAL BENEFICIALLY BENEFICIAL OFFERED BY OWNERSHIP OWNED BEFORE OWNERSHIP SELLING AFTER NAME OFFERING BEFORE OFFERING SHAREHOLDER OFFERING - ---- -------- --------------- ----------- -------- Andcor Companies, Inc. 43,919 * 43,919 * Avery Family Limited Partnership 26,667 * 26,667 * Christian L. Babo 800 * 800 * Paul F. Berg 3,334 * 3,334 * Gregory Bertagnoli 3,334 * 3,334 * Earle & Florence L. Bester, as JTWROS 6,667 * 6,667 * Barbara A. Blanco 13,334 * 13,334 * Boston Financial Partners, Inc. (a) 630,000(2) 12.2 180,000 8.7 Barbara Bowman, as custodian for Jennifer Lynn Mower under the MN UGTMA 1,112 * 1,112 * Barbara Bowman, as custodian for Rachel Hannah Mower under the MN UGTMA 1,112 * 1,112 * James W. Bowman 6,667 * 6,667 * James W. and Barbara A. Bowman, JTWROS 14,001 * 14,001 * Gregory Boyle 13,334 * 13,334 * Phil & Cindy Breckman, as JTWROS 3,334 * 3,334 * Kenneth W. Brimmer & Jaye M. Snyder, as JTWROS (b) 206,667 4.2 206,667 * Thomas Brazil (a) 630,000(2) 12.2 450,000 3.5 Brimstone Ltd. 120,000(1) 2.3 120,000 * Randy R. Brown 6,667 * 6,667 * Timothy E. & Patricia L. Buffham, as JTWROS 8,400 * 8,400 * Timothy E. & Patricia L. Buffham, as trustees of the Minnetonka Real Estate Services, Inc. Money Purchase Plan u/a dtd 12/30/96 10,000 * 10,000 * Jose R. & Pamela Jo Charles, as trustees of the Charles Family Revocable Trust u/a/d 6/17/98 8,000 * 8,000 * Dr. Charles F. Chesney 6,667 * 6,667 *
29
NUMBER OF PERCENTAGE WARRANTS PERCENTAGE WARRANTS BENEFICIAL BENEFICIALLY BENEFICIAL OFFERED BY OWNERSHIP OWNED BEFORE OWNERSHIP SELLING AFTER NAME OFFERING BEFORE OFFERING SHAREHOLDER OFFERING - ---- -------- --------------- ----------- -------- John M. Christopherson 8,000 * 8,000 * Jay N. Cohn, M.D 6,667 * 6,667 * James W. Cox, as trustee of the Ari M Lederman Irrevocable Trust u/a/d 6/15/99 445 * 445 * James W. Cox, as trustee of the Sara C Lederman Irrevocable Trust u/a/d 6/15/99 445 * 445 * Regis Dahl 50,000(3) 1.0 50,000 * Stephen R. Dahl 3,334 * 3,334 * Brion J. & Laura J. Demski, as JTWROS 3,334 * 3,334 * Richard J. & Carole E. Demski, as JTWROS 3,334 * 3,334 * Richard J. & Karen L. Demski, as JTWROS 3,334 * 3,334 * Gerald L. Dettinger 6,667 * 6,667 * Steven D. Dix and Debra J. Dix, JTWROS 1,000 * 1,000 * Jeff Dobbs 13,334 * 13,334 * Dan Dryer 3,334 * 3,334 * Stephen M. Duncan as Trustee of Stephen M. Duncan Revocable Trust u/a/d 2/25/98 6,667 * 6,667 * Joseph Eibensteiner 75,496 * 75,496 * Ronald E. Eibensteiner (c) 233,334(4) 4.5 100,000 2.6 Erla M. Fallenstein 3,334 * 3,334 * Leo Fong, ttee for the 1998 Leo Fong Irrevocable Trust 90,000(5) 1.7 90,000 * John T. Gianfagna 1,000 * 1,000 * Adele J. Goldberg (d) 50,000 1.0 50,000 * Scott Grams 2,000 * 2,000 * Wes Gugnet 2,000 * 2,000 * Gulfstream Financial Partners, LLC 615,000(6) 11.9 615,000 * Glen W. Gust 6,667 * 6,667 * Charles & Kim Hale, as JTWROS 445 * 445 * Frank & Kathy Hamel, as JTWROS 3,334 * 3,334 * Lamar & Judy Hamilton, as JTWROS 4,000 * 4,000 * Cory Hanscom 1,000 * 1,000 * Vernon J. Hanzlik (e) 33,334 * 33,334 * Steven J. Harmon 13,334 * 13,334 * Hiroyoshi Hashimoto (f) 27,778 * 27,778 * Takashi Hashimoto 1,112 * 1,112 * Yuriko Hashimoto 1,112 * 1,112 * John P. Hickey 6,667 * 6,667 * Michael L. & Janice M. Hildebrand, as JTWROS 2,667 * 2,667 * Barry Hollander 25,000(6) * 25,000 * Mark C. Hoonsbeen 6,667 * 6,667 * Chuck Howard 3,334 * 3,334 * Gordon Hulbert 11,222 * 11,222 * IntraNet Solutions, Inc. 307,648(4) 6.2 307,648 *
30
WARRANTS PERCENTAGE NUMBER OF PERCENTAGE BENEFICIALLY BENEFICIAL OWNERSHIP WARRANTS OFFERED BENEFICIAL OWNED BEFORE BEFORE OFFERING BY SELLING OWNERSHIP AFTER OFFERING SHAREHOLDER OFFERING - ------------------------------------------------- -------------- ---------------------- ---------------- ------------- Charles Jameson, Jr. 12,840 * 12,840 * Geri L. Jameson (g) 173,250 3.4 173,250 * Timothy G. Jameson (h) 173,250 3.4 173,250 * Samuel L. Kaplan 6,667 * 6,667 * Stephen R. Kellogg 6,667 * 6,667 * Key West Associates, LLC 210,000 (6) 4.1 210,000 * Husam Kinawi 24,445 * 24,445 * Gerald Klassen 5,134 * 5,134 * Robert & Carolyn K. Koemptgen, as JTWROS 6,667 * 6,667 * Mark Kroeger 50,000 (3) 1.0 50,000 * William J. Lambert (i) 8,889 * 8,889 * John D. Lane 54,000 * 54,000 * Alfred E. LaTour, Jr. 223 * 223 * Eric V. Lawrence 3,334 * 3,334 * Richard Lockwood 30,000 (5) * 30,000 * Dylan P. Lohonen 800 * 800 * Maslon Edelman Borman & Brand, LLP (j) 11,984 (7) * 11,984 * Kevin McHale 6,667 * 6,667 * Lawrence McMillan 1,837 * 1,837 * Michael & Mary Mesarchik, as JTWROS 13,334 * 13,334 * Wayne W. Mills 298,334 (8) 5.8 298,334 * Brian Mower 2,000 * 2,000 * Joan B. Mower 1,134 * 1,134 * William M. Mower (k) 220,958 4.3 220,958 * James Murphy 6,667 * 6,667 * Joshua Neren 6,000 * 6,000 * Steven Neren 79,445(9) 1.5 79,445 * R. Vito Nicastro, Jr. 22,812 * 22,812 * Dean L. & Kathleen Nicholson, as JTWROS 6,667 * 6,667 * Fred Nielsen 6,667 * 6,667 * Kevin W. Nielson 13,908 * 13,908 * Nikolai, Mersereau & Dietz, P.A. 134 * 134 * North American Capital LLC 3,334 * 3,334 * D. Bradly Olah (l) 203,334(10) 3.9 203,334 * D. Bradly Olah Irrevocable Trust 10,000 * 10,000 * Terri Olah 110,000(11) 2.1 110,000 * Robert E. Pasquarella 13,334 * 13,334 * Mark A. Payne 667 * 667 * Barry D. Pellecchia 6,667 * 6,667 * Mary Beckman Quinn 4,000 * 4,000 * Gary & Wendy Jo Raak, JTWROS 6,667 * 6,667 * RFL Asset Management, LLC 10,000 (5) * 10,000 * Linda J. Rickard 2,223 * 2,223 * Philip C. Rickard (m) 11,537 * 11,537 * Philip J. Rickard 20,000 * 20,000 * Kathleen R. Ricketson 6,667 * 6,667 * Pete & Susan Rockers, as JTWROS (n) 100,000 1.9 100,000 * Sean M. Rosser 8,000 * 8,000 *
31 Warrants Percentage Number of Percentage Beneficially Beneficial Warrants Beneficial Owned Ownership Offered by Ownership Before Before Selling After Name Offering Offering Shareholder Offering - ------------------------------------------------------------------------------------------------------------------------------- Frank & Susan Russell 10,000 * 10,000 * Daniel Ryan 2,162 * 2,162 * C. Gregory Sagan & Martha L. Walker, as JTWROS 6,667 * 6,667 * Andrew N. Salmen 3,334 * 3,334 * Michael Salmen 10,000 * 10,000 * Sandra A. Salmen 3,334 * 3,334 * T.J. Salmen and Associates, Inc. 3,334 * 3,334 * Tom P. Sampir 3,334 * 3,334 * Joseph M. Schaefer 6,667 * 6,667 * Paul Schaffer 6,667 * 6,667 * Barbara M. Schaper 25,000 (4) * 25,000 * Peter Schmit 3,334 * 3,334 * Stephen Schwalbach 6,667 * 6,667 * Joseph Schwartzbauer 10,000 * 10,000 * Ted & Ruth Warren Schwarzrock, as * * JTWROS 13,334 13,334 Robert Shuman 5,492 * 5,492 * Nicole Silverhus 8,000 * 8,000 * Sharon B. & M. Philip Snyder, as JTWROS 6,667 * 6,667 * John F. Stapleton 150,000 (5) 2.9 150,000 * William Stesin 1,334 * 1,334 * George K. Stewart 6,667 * 6,667 * William B. Stewart 6,667 * 6,667 * John M. Styrbicki 6,667 * 6,667 * Thomas M. Sullivan 6,667 * 6,667 * Tetsu Takashima 3,334 * 3,334 * Gary & Tamara Tesar, JTWROS 3,334 * 3,334 * John M. & Janice M. Tesar, JTWROS 3,334 * 3,334 * Mark W. Thomas 5,600 * 5,600 * U.S. Bank Trust N.A., as trustee FBO Michael Noble IRA 3,334 * 3,334 * U.S. Bank Trust N.A., as trustee FBO Paul Schaffer IRA 6,667 * 6,667 * US Bank Trust National Association, as Trustee for the James M. Farrell SEP IRA 3,334 * 3,334 * US Bank Trust National Association, as Trustee of the Cindy J. Bray IRA 6,667 * 6,667 * US Bank Trust National Association, as Trustee of the Kevin Berg IRA 3,334 * 3,334 * US Bank Trust National Association, as TTEE of the Paul K. Cavanor IRA 3,334 * 3,334 * Jeffrey I. Warbalowsky 50,000 (6) 1.0 50,000 * Tim & Sandy Warner, as JTWROS 4,000 * 4,000 * Carsten Weiss 10,000 * 10,000 * Malcolm H. & Sandra Weiss, as JTWROS 2,000 * 2,000 * Steven A. & Mary Sue K. Weiss, as JTWROS 8,000 * 8,000 *
32 Warrants Percentage Number of Percentage Beneficially Beneficial Warrants Beneficial Owned Ownership Offered by Ownership Before Before Selling After Name Offering Offering Shareholder Offering - ---------------------------------------------------------------------------------------------------------------------------------- Wendover I, LLP 8,000 * 8,000 * Joseph Hixon Whitney 10,000 * 10,000 * Michael J. Wier 6,667 * 6,667 * Thomas J. Williams 6,667 * 6,667 * Brian Wilson 2,667 * 2,667 * Wyncrest Capital, Inc. 233,334(4) 4.5 133,334 1.9 Jeffrey A. Zinnecker 4,000 * 4,000 *
*Less than 1%. (a) The president and principal owner of Boston Financial Partners, Inc. is Thomas Brazil. The warrants held by Mr. Brazil and which are included in this offering are not reflected in the number of warrants beneficially owned by Boston Financial Partners. (b) Mr. Brimmer is our Chairman of the Board. (c) Mr. Eibensteiner is a director of our company. (d) Ms. Goldberg was a director of Old AIQ until March 2001. (e) Mr. Hanzlik was a director of Old AIQ until March 2001. (f) Mr. Hashimoto was a director of Old AIQ until March 2001. (g) Ms. Jameson was formerly a vice-president of our Edge Technologies subsidiary. (h) Mr. Jameson was formerly a vice-president of our Edge Technologies subsidiary. (i) Mr. Lambert was the chief executive officer of Old AIQ until June 2000. (j) Maslon Edelman Borman & Brand, LLP provides legal services to our company and is expected to continue to provide such services in the future. (k) Mr. Mower, a partner in the law firm of Maslon Edelman Borman & Brand, LLP, is currently an assistant secretary of our company. He was also a director of Old AIQ until April 2001, its chief financial officer from May 6, 1999 until August 2000, and its secretary from May 6, 1999 to December 6, 2000. (l) Mr. Olah is Chief Executive Officer, President, Chief Financial Officer and Secretary, as well as a director of our company. (m) Mr. Rickard is an executive vice president of our company. (n) Mr. Rockers formerly served as the president and chief operating officer of Old AIQ from August 2000 until April 2001. (1) Represents warrants issued in connection with a June 2001 private placement. (2) Includes 450,000 warrants issued to Thomas Brazil in exchange for other warrants issued in connection with consulting services rendered to our company and 180,000 warrants issued to Boston Financial Partners, Inc. in connection with a June 2001 private placement. (3) Represents warrants issued by Meteor Industries, Inc. as consideration for consulting services, which warrants were then exchanged for Class B Redeemable Warrants. (4) Represents 13,334 warrants held by Wyncrest Capital, Inc., of which Mr. Eibensteiner is the president and sole owner, and 100,000 warrants held by Mr. Eibensteiner. (5) Represents warrants issued by Meteor Industries, Inc. in connection with a January 2001 private placement, which warrants were then exchanged for the same number of Class B Redeemable Warrants. (6) Represents warrants issued to financial advisors in connection with the Meteor Industries, Inc. - activeIQ Technologies Inc. merger, which were then exchanged for the same number of Class B Redeemable Warrants. (7) Represents warrants issued upon the exercise of a warrant issued by Old AIQ in consideration of legal services rendered. (8) Includes 90,000 warrants issued by Meteor Industries in connection with a January 2001 private placement, which warrants were then exchanged for Class B redeemable Warrants. (9) Includes 75,000 warrants issued to financial advisors in connection wit the Meteor Industries-activeIQ Technologies merger, which were then exchanged for Class B Redeemable Warrants. (10) Does not include 110,000 warrants held by Mr. Olah's spouse and 10,000 warrants held by the D. Bradly Olah Irrevocable Trust. (11) Does not include 203,334 warrant held by D. Bradly Olah, Ms. Olah's spouse, as well as 10,000 warrants held by the D. Bradly Olah Irrevocable Trust. 33 COMMON STOCK The following table sets forth the number of shares of the common stock owned by the selling security holders as of February 15, 2002, and after giving effect to this offering.
PERCENTAGE SHARES PERCENTAGE NUMBER OF BENEFICIAL BENEFICIALLY OWNED BENEFICIAL SHARES OFFERED BY OWNERSHIP AFTER BEFORE OWNERSHIP SELLING OFFERING NAME OFFERING BEFORE OFFERING SHAREHOLDER - --------------------------------------- ------------------- ---------------- ----------------- -------------- Carole Adams 6,071 * 6,071 * AG Edwards & Sons, Inc. as custodian for Robert Bauers 9,108 * 9,108 * Robert G. Allison 20,000 * 20,000 * Andcor Companies, Inc. 109,797 * 43,919(1) * Avery Family Limited Partnership 66,667 * 26,667(1) * Christian L. Babo 2,001 * 800(1) * BancBoston Capital, LLC 66,333 * 66,333 * Bauers Family LTD Partnership 20,546 * 20,546 * Bonnie Benda 1,676 * 1,676 * Mitchell F. Berg 16,667 * 6,667(1) * Paul F. Berg 8,334 * 3,334(1) * Constance Berman 2,000 * 2,000(3) * Gregory Bertagnoli 8,334 * 3,334(1) * Earle & Florence L. Bester, as JTWROS 16,667 * 6,667(1) * Blake Capital Partners, LLC 2,157,854(4) 17.3 500,000(5) 13.8 Barbara A. Blanco 33,334 * 13,334(1) * Boston Financial Partners, Inc. 1,180,000(6) 9.5 480,000(7) 5.8 Barbara Bowman, as custodian for Jennifer Lynn Mower under the MN UGTMA 2,779 * 1,112(1) * Barbara Bowman, as custodian for Rachel Hannah Mower under the MN UGTMA 2,779 * 1,112(1) * James W. Bowman 16,667 * 16,667(1) * James W. and Barbara A. Bowman, JTWROS 21,001 * 14,001(1) * Gregory Boyle 33,334 * 13,334(1) * Jon Braufman 315 * 315(8) * Miles Braufman 1,315 * 1,315(9) * Thomas Brazil 1,180,000(10) 9.5 700,000(11) 4.1 Phil & Cindy Breckman, as JTWROS 8,334 * 3,334(1) * Daniel Brimberry 1,369 * 1,369 *
34 Shares Percentage Number of Percentage Beneficially Beneficial Shares Offered Beneficial Owned Before Ownership by Selling Ownership Name Offering Before Offering Shareholder After Selling - ------------------------------------ -------- -------------- ----------- ------------ Kenneth W. Brimmer & Jaye M. Snyder, as JTWROS (a) 987,835(12) 8.1 206,667(1) 6.5 Brimstone Ltd. 320,000 2.7 320,000(13) * Randy R. Brown 16,667 * 6,667(1) * Norman Brownstein 1,119 * 1,119 * Timothy E. & Patricia L. Buffham, as JTWROS 21,000 * 8,400(1) * Timothy E. & Patricia L. Buffham, as trustees of the Minnetonka Real Estate Services, Inc. Money Purchase Plan u/a dtd 12/30/96 25,000 * 10,000(1) * Joseph Buska 2,189 * 2,189(14) * Wilbur Cant 1,214 * 1,214 Jose R. & Pamela Jo Charles, as trustees of the Charles Family Revocable Trust u/a/d 6/17/98 20,001 * 8,000(1) * Dr. Charles F. Chesney 16,667 * 6,667(1) * John M. Christopherson 20,000 * 8,000(1) * Jay N. Cohn, M.D. 16,667 * 6,667(1) * James W. Cox, as trustee of the Ari M. Lederman Irrevocable Trust u/a/d 6/15/99 1,112 * 445(1) * James W. Cox, as trustee of the Sara C. Lederman Irrevocable Trust u/a/d 6/15/99 1,112 * 445(1) * Tony Crawford 3,946 * 3,946 * Wes Cugnet 5,000 * 2,000(1) * Regis Dahl 184,600(15) 1.6 50,000(16a) 1.2 Stephen R. Dahl 8,334 * 3,334(1) * Brion J. & Laura J. Demski, as JTWROS 8,334 * 3,334(1) * Richard J. & Carole E. Demski, as * JTWROS 8,334 3,334(1) * Richard J. & Karen L. Demski, as * JTWROS 8,334 3,334(1) * Gerald L. Dettinger 16,667 * 6,667(1) * Carol Dicke 12,143 * 12,143 * Steven D. Dix and Debra J. Dix, JTWROS 2,500 * 1,000(1) * Jeff Dobbs 33,334 * 13,334(1) * Dan Dryer 8,334 * 3,334(1) *
35 Percentage Shares Percentage Number of Beneficial Beneficially Beneficial Shares Offered Ownership Owned Before Ownership by Selling After Name Offering Before Offering Shareholder Offering - --------------------------------------- -------- -------------- ----------- -------- Stephen M. Duncan, as Trustee of Stephen M. Duncan Revocable Trust u/a/d 2/25/98 16,667 * 6,667(1) * Joseph Eibensteiner 188,730(16b) 1.6 75,496(1) * Ronald E. Eibensteiner (b) 690,834(17) 5.8 300,000(18) 3.4 Ellis Family Limited Partnership 20,000 * 20,000 * Thomas Erdmann 12,446 * 12,446 * Erla M. Fallenstein 8,334 * 3,334(1) * Steven Farber 1,119 * 1,119 * John C. Feltl 3,786 * 3,786(19) * Robert Fiss 1,214 * 1,214 * Henry Fong 240,000 2.1 240,000(20a) * Leo Fong, ttee for the 1998 Leo Fong Irrevocable Trust 240,000 2.1 90,000(20b) * Christopher Francis 2,385 * 2,385(21) * Mark A. Fuller III 11,405 * 11,405 * Genesis Select Corporation 80,000 * 80,000(22) * John T. Gianfagna 2,500 * 1,000(1) * Adele J. Goldberg (c) 137,500(23) 1.2 50,000(1) * Dennis D. Gonyea 10,000 * 10,000 * Scott Grams 5,001 * 2,000(1) * Tom Guettler 486 * 486 * Gulfstream Financial Partners LLC 730,000(24) 6.0 615,000(25) * Glen W. Gust 16,667 * 6,667(1) * Charles & Kim Hale, as JTWROS 1,112 * 445(1) * Frank & Kathy Hamel, as JTWROS 8,334 * 3,334(1) * Lamar & Judy Hamilton, as JTWROS 10,000 * 4,000(1) * Cory Hanscom 2,500 * 1,000(1) * Vernon J. Hanzlik (d) 83,334 * 33,334(1) * Steven J. Harmon 33,333 * 13,334(1) * Hiroyoshi Hashimoto (e) 76,111(26) * 27,778(1) * Takashi Hashimoto 2,778 * 1,112(1) * Yuriko Hashimoto 2,778 * 1,112(1) * Angela Warrington Healy 12,143 * 12,143 * John P. Hickey 16,667 * 6,667(1) * Michael L. & Janice M. Hildebrand, as JTWROS 6,667 * 2,667(1) * Kenneth Hilton 62,500 * 62,500 * Kenneth Hofer 62,500 * 62,500 * Daniel Holland 15,967 * 15,967 * Barry Hollander 25,000 * 25,000(27) * Gladys Holst 1,821 * 1,821 *
36 Percentage Shares Percentage Number of Beneficial Beneficially Beneficial Shares Offered Ownership Owned Before Ownership by Selling After Name Offering Before Offering Shareholder Offering - ------------------------------------ -------- -------------- ----------- -------- Mark C. Hoonsbeen 16,667 * 6,667(1) * Chuck Howard 8,334 * 3,334(1) * Gordon Hulbert 28,055 * 11,222(1) * Jack N. Hyatt 1,119 * 1,119 * Industricorp & Co., Inc. FBO Twin City Carpenters Pension Plan 50,000 * 50,000 * IntraNet Solutions, Inc. (nka Stellent, Inc.) 952,453 8.0 327,648(28) 5.4 Jon Isackson 115,354 1.0 115,354 * Charles Jameson, Jr. 32,099 * 12,840(1) * Geri L. Jameson (f) 458,124(29) 3.9 173,250(1) 2.5 Timothy G. Jameson (g) 458,124(29) 3.9 173,250(1) 2.5 Raymond R. Johnson 10,000 * 10,000 * Samuel L. Kaplan 16,667 * 6,667(1) * Stephen R. Kellogg 16,667 * 6,667(1) * James and Barbara Kelm 16,393 * 16,393 * Amy Goggin Kemmerer 3,036 * 3,036 * Key West Associates, LLC 210,000 1.8 210,000(27) * LeRoy Kimmes 1,214 * 1,214 * Husam Kinawi 61,112 * 24,445(1) * Gerald Klassen 12,833 * 5,134(1) * Robert & Carolyn Koemptgen, as JTWROS 16,667 * 6,667(1) * Mark Kroeger 85,000(30) * 50,000(16) * William J. Lambert (h) 82,224(31a) * 8,889(1) * John D. Lane 108,000 * 108,000(31b) * David Lantz 1,200 * 1,200(32) * Alfred E. LaTour, Jr. 557 * 223(1) * Eric V. Lawrence 8,334 * 3,334(1) * Richard C. Lockwood 135,000 1.2 30,000(33) * Dylan P. Lohonen 2,001 * 800(1) * John O. Lohre 41,059 * 41,059 * Philip N. Lohre 4,562 * 4,562 * James C. Long 79,268 * 79,268 * Cherrie Lucerne-Martin 912 * 912 * Mark Machtemes 12,143 * 12,143 * Maslon Edelman Borman & Brand LLP 34,643 * 34,643(34) * Sandra Mayasich (fka Sandra A. Salmen) 8,334 * 3,334(1) * Kevin McHale 16,667 * 6,667(1) * Laurence McMillan 4,592 * 1,837(1) * Michael & Mary Mesarchik, as JTWROS 23,334 * 13,334(1) * Kathryn Middleton 4,562 * 4,562 * Marvin Miller 32,985 * 32,985 * Wayne W. Mills (i) 2,157,834(37) 17.3 498,334(38) 13.8
37
PERCENTAGE SHARES PERCENTAGE NUMBER OF BENEFICIAL BENEFICIALLY OWNED BENEFICIAL SHARES OFFERED BY OWNERSHIP AFTER BEFORE OWNERSHIP SELLING OFFERING NAME OFFERING BEFORE OFFERING SHAREHOLDER - --------------------------------------- ------------------- ---------------- ----------------- -------------- Richard Moore 62,500 * 62,500 * Brian Mower 5,001 * 2,000 (1) * Joan B. Mower 2,835 * 1,134 (1) * William M. Mower (j) 462,958 (39) 3.9 220,958 (1) 2.1 James Murphy 16,667 * 6,667 (1) * Joshua Neren 15,000 * 6,000 (1) * Steven Neren 86,112 * 79,445 (40) * R. Vito Nicastro, Jr. 57,208 * 22,812 (1) * Dean L. & Kathleen Nicholson, as * JTWROS 16,667 * 6,667 (1) Fred Nielsen 16,667 * 6,667 (1) * Kevin W. Nielson 34,770 * 13,908 (1) * Nikolai, Mersereau & Dietz, P.A. 334 * 134 (1) * North American Capital LLC 8,334 * 3,334 (1) * Jerry O'Brien 3,036 * 3,036 * Philip A. Odeen 13,686 * 13,686 * D. Bradly Olah (k) 1,430,334 (41) 11.8 203,334 (1) 10.3 D. Bradly Olah Irrevocable Trust 25,000 * 10,000 (1) * Terri Olah (l) 1,430,334 (42) 11.8 110,000 (1) 11.0 Robert E. Pasquarella 33,334 * 13,334 (1) * Mark A. Payne 1,667 * 667 (1) * Pegasus Investment Holdings Ltd. 50,000 * 50,000 (44) * Barry D. Pellecchia 16,667 * 6,667 (1) * Perkins Capital Management, Inc. Profit Sharing Plan & Trust U/A dtd 12/15/86 12,500 * 12,500 * Daniel S. and Patrice M. Perkins, JTWROS 25,000 * 25,000 * George Perkins 1,369 * 1,369 * Richard C. Perkins 25,000 * 25,000 * Charlie Pruitt 3,036 * 3,036 * Pyramid Partners, L.P. 100,000 * 100,000 * Mary Beckman Quinn 10,000 * 4,000 (1) * Gary & Wendy Jo Raak, JTWROS 16,667 * 6,667 (1) * Bruce Reichert 10,943 * 10,943 (45) * RFL Asset Management LLC 266,667 2.3 250,000 (46) * Linda J. Rickard 5,557 * 2,223 (1) * Philip C. Rickard (m) 88,842 (47) * 11,537 (1) * Philip J. Rickard 50,001 * 20,000 (1) * Kathleen R. Ricketson 16,667 * 6,667 (1) * Pete & Susan Rockers, JTWROS (n) 350,000 (48) 3.0 100,000 (1) 2.1
38
PERCENTAGE NUMBER OF PERCENTAGE SHARES BENEFICIAL SHARES OFFERED BY BENEFICIAL BENEFICIALLY OWNED OWNERSHIP SELLING OWNERSHIP AFTER NAME BEFORE OFFERING BEFORE OFFERING SHAREHOLDER OFFERING - --------------------------------------- ------------------- ----------------- ------------------- --------------- Nick Rolfes 4,553 * 4,553 * Sean M. Rosser 20,001 * 8,000 (1) * Rossi & Stone, P.C. 593 * 593 * Frank & Susan Russell, JTWROS 49,500 (49) * 10,000 (1) * Daniel Ryan 5,396 * 2,162 (1) * C. Gregory Sagan & Martha L. Walker, as JTWROS 16,667 * 6,667 (1) * Gale W. Saint 62,500 * 62,500 * Mike Salisbury 1,214 * 1,214 * Andrew N. Salmen 8,334 * 3,334 (1) * Michael Salmen 25,000 * 10,000 (1) * Tom P. Sampir 8,334 * 3,334 (1) * Joseph M. Schaefer 16,667 * 6,667 (1) * Paul Schaffer 16,667 * 6,667 (1) * Barbara M. Schaper 25,000 * 25,000 (27) * Peter Schmit 8,334 * 3,334 (1) * Stephen Schwalbach 16,667 * 6,667 (1) * Joseph Schwartzbauer 25,000 * 10,000 (1) * Ted & Ruth Warren Schwarzrock, as JTWROS 33,334 * 13,334 (1) * Robert Shuman 13,730 * 5,492 (1) * Nichole Silverhus 20,000 * 8,000 (1) * Sharon B. & M. Philip Snyder, as JTWROS 16,667 * 6,667 (1) * John F. Stapleton 400,000 3.4 400,000 (50) * William Stesin 3,334 * 1,334 (1) * George K. Stewart 16,667 * 6,667 (1) * William B. Stewart 16,667 * 6,667 (1) * John M. Styrbicki 16,667 * 6,667 (1) * Joletta Suchey 456 * 456 * Thomas M. Sullivan 16,667 * 6,667 (1) * Tetsu Takashima 8,666 (51) * 3,334 (1) * Gary & Tamara Tesar, JTWROS 8,334 * 3,334 (1) * John M. & Janice M. Tesar, JTWROS 8,334 * 3,334 (1) * Mark W. Thomas 14,000 * 5,600 (1) * Steve Thompson 30,356 * 30,356 * T.J. Salmen and Associates, Inc. 8,334 * 3,334 (1) * Richard L. Treat 13,227 * 13,227 * U.S. Bank Trust N.A., as trustee FBO Michael Noble IRA 8,334 * 3,334 (1) * U.S. Bank Trust N.A., as trustee FBO Paul Schaffer IRA 16,667 * 6,667 (1) *
39
PERCENTAGE NUMBER OF PERCENTAGE SHARES BENEFICIAL SHARES OFFERED BY BENEFICIAL BENEFICIALLY OWNERSHIP SELLING OWNERSHIP AFTER NAME BEFORE OFFERING BEFORE OFFERING SHAREHOLDER OFFERING - --------------------------------------- ----------------- ----------------- ------------------- --------------- US Bank Trust National Association, as Trustee for the James M. Farrell SEP IRA 8,334 * 3,334 (1) * US Bank Trust National Association, as Trustee of the Cindy J. Bray IRA 16,667 * 6,667 (1) * US Bank Trust National Association, as Trustee of the Kevin Berg IRA 8,334 * 3,334 (1) * US Bank Trust National Association, as TTEE of the Paul K. Cavanor IRA 8,334 * 3,334 (1) * USB Piper Jaffray as Custodian FBO Bradley A. Erickson IRA 15,000 * 15,000 * USB Piper Jaffray as Custodian FBO Dave H. Potter IRA 15,000 * 15,000 * USB Piper Jaffray as Custodian FBO James G. Peters IRA 10,000 * 10,000 * George Vogel 3,036 * 3,036 * Marjorie Vogel 2,428 * 2,428 * Kevin A. Wachter 11,405 * 11,405 * Gregg Waldon 16,667 * 6,667 (1) * Tim & Sandy Warner, as JTWROS 10,000 * 4,000 (1) * Larry Warrington 18,821 * 18,821 * Mark Warrington 486 * 486 * Mitzi Warrington 88,452 * 88,452 * Stuart Warrington, 10,297 * 10,297 * Bernard Weber 5,220 * 5,220 (52) * Martin Weber 4,711 * 4,711 (53) * Shawn P. Weinand 10,000 * 10,000 * Carsten Weiss 25,000 * 10,000 (1) * Malcolm H. & Sandra Weiss, as JTWROS 5,001 * 2,000 (1) * Steven A. & Mary Sue K. Weiss, as JTWROS 20,001 * 8,000 (1) * Wendover I, LLP 20,001 * 8,000 (1) * Jeffrey I. Werbalowsky 50,000 * 50,000 (27) * David M. Westrum, TTEE FBO David M. Westrum Revocable Living Trust u/a dtd 6-1-97 10,000 * 10,000 * Joseph Hixon Whitney 25,000 * 10,000 (1) * Michael J. Wier 16,667 * 6,667 (1) * Thomas J. Williams 16,667 * 6,667 (1) * Brian Wilson 6,667 * 2,667 (1) *
40 Shares Percentage Number of Percentage Beneficially Beneficial Shares Offered Beneficial Owned Before Ownership by Selling Ownership Name Offering Before Offering Shareholder Offering - ------------------------------------------------------------------------------------------------------------------------------------ Wyncrest Capital, Inc. 685,834 (54) 5.8 333,334 (55) 3.0 Jeffrey A. Zinnecker 10,000 * 4,000 (1) *
- ------------ * Less than 1%. (a) Mr. Brimmer is our Chairman of the Board. (b) Mr. Eibensteiner is a director of our company. (c) Ms. Goldberg was a director of Old AIQ until March 2001. (d) Mr. Hanzlik was a director of Old AIQ until March 2001. (e) Mr. Hashimoto was a director of Old AIQ until March 2001. (f) Ms. Jameson was formerly a vice-president of our Edge Technologies subsidiary. (g) Mr. Jameson was formerly a vice-president of our Edge Technologies subsidiary. (h) Mr. Lambert was the chief executive officer of Old AIQ until June 2000. (i) Mr. Mills is a director of our company. (j) Mr. Mower, a partner in the law firm of Maslon Edelman Borman & Brand, LLP, is currently an assistant secretary of our company. He was also a director of Old AIQ until April 2001, its chief financial officer from May 6, 1999 until August 2000, and its secretary from May 6, 1999 to December 6, 2000. (k) Mr. Olah is our Chief Executive Officer, President, Chief Financial Officer and Secretary of our company, as well as a member of our board of directors. (l) Ms. Olah is the spouse of D. Bradly Olah. (m) Mr. Rickard is an executive vice president of our company. (n) Mr. Rockers was president and chief operating officer of Old AIQ from August 2000 until April 2001. (1) Represents shares issuable upon the exercise of Class B Redeemable Warrants. (2) Includes 150,000 shares held by Robert F. Olson, the principal owner of Beartooth Capital, LLC, 60,000 shares of which are issuable upon the exercise of Class B Redeemable Warrants. (3) Represents 2,000 shares issuable upon the exercise (at a price of $2.75 per share) of warrants issued to selling agents in connection with a 2000 private placement. (4) Includes 500,000 shares issuable upon exercise (at a price of $3.00 per share) of warrants issued to financial advisors in connection with our merger with active IQ Technologies, Inc. Also includes 15,000 shares issuable upon exercise of publicly traded warrants. Also includes 30,000 shares owned by Sea Spray, Ltd., a foreign corporation of which Mr. Mills is the sole shareholder, 150,000 shares owned by Mr. Mills' spouse. Mr. Mills disclaims beneficial ownership of his spouse's shares. Also includes 997,000 shares owned by Wayne Mills (sole director of Blake Capital Partners, LLC) plus 100,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issued in connection with the Series B Preferred Stock; 90,000 shares issuable upon the exercise (at a price of $5.50 per share) of warrants issued in connection with a January 2001 private placement and exchanged for Class B Redeemable Warrants; and 208,334 shares issuable upon the exercise (at a price of $5.50 per share) of Class B Redeemable Warrants. (5) Represents 500,000 shares issuable upon exercise (at a price of $3.00 per share) of warrants issued to financial advisors in connection with our merger with active IQ Technologies, Inc. (6) Includes 700,000 shares issuable upon the exercise of warrants issued to Thomas Brazil, president of Boston Financial Partners, Inc., in connection with a financial advisory services agreement with our company. Of the 700,000 shares, all of which are also being offered hereby, 450,000 shares are exercisable at a price of $5.50 per share and 250,000 shares are exercisable at a price of $7.50 per share. (7) Includes 180,000 shares issuable upon the exercise of Class B Redeemable Warrants. (8) Represents 315 shares issuable upon the exercise (at a price of $2.75 per share) of warrants issued to selling agents in connection with a 2000 private placement. 41 (9) Represents 1,315 shares issuable upon the exercise (at a price of $2.75 per share) of warrants issued to selling agents in connection with a 2000 private placement. (10) Includes 480,000 shares held by Boston Financial Partners, Inc., of which 180,000 shares are issuable upon the exercise of Class B Warrants issued in connection with a private placement. Mr. Brazil is the president and principal owner of Boston Financial Partners, Inc. Also includes the shares described in note (11), below. (11) Includes 450,000 shares issuable upon the exercise of Class B Warrants and 250,000 shares issuable upon the exercise (at a price of $7.50 per share) of a warrant, all of which warrants were issued in connection in consideration for financial advisory services rendered to our company. (12) Includes (i) 200,000 shares issuable to Mr. Brimmer upon the exercise (at a price of $1.00 per share) of options, (ii) 250,000 shares issuable upon the exercise (at a price of $5.00 per share) of options, (iii) 1,167 shares issuable upon the exercise (at a price of $37.50 per share) of a warrant, and (iv) 206,667 shares issuable upon the exercise of Class B Redeemable Warrants. (13) Includes 120,000 shares issuable upon the exercise of Class B Redeemable Warrants issued in connection with a June 2001 private placement. (14) Represents 2,189 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement. (15) Includes (i) 122,900 shares issuable upon the exercise (at a price of $7.15 per share) of our currently outstanding public warrants, and (ii) 50,000 shares issuable upon the exercise (at a price of $5.50 per share) of a warrant issued as payment for consulting services rendered to Meteor Industries, Inc. (16a)Represents shares issuable upon the exercise of Class B Warrants issued in exchange for a warrant to purchase such number of shares (at a price of $5.50 per share) issued in January 2001 as payment for consulting services rendered to Meteor Industries, Inc. (16b)Includes 75,496 shares issuable upon exercise of the Class B Redeemable Warrants. (17) In addition to 200,000 shares held directly by Mr. Eibensteiner, which shares are being registered hereby, also includes (i) 50,000 shares issuable upon the exercise (at a price of $1.00 per share) of an option, (ii) 100,000 shares issuable upon the exercise of Class B Warrants, and (iii) 340,834 shares beneficially owned by Wyncrest Capital, Inc., of which Mr. Eibensteiner is the president and principal owner, including 133,334 shares issuable upon the exercise of Class B Redeemable Warrants, all of which are also offered hereby. (18) Includes 100,000 shares issuable upon the exercise of Class B Redeemable Warrants. (19) Represents 3,786 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement. (20a)Represents 120,000 shares that were issued upon the conversion of our Series B Convertible Preferred Stock and 120,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issued upon conversion of our Series B Convertible Preferred Stock. (20b)Represents 90,000 shares issuable upon exercise of Class B Redeemable Warrants, which were issued in exchange for a warrant to purchase 90,000 shares (at a price of $5.50 per share) issued in connection with a January 2001 private placement by Meteor Industries. (21) Represents 2,385 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement. (22) Represents shares issuable upon the exercise of an option issued as payment for consulting services rendered to Meteor Industries, Inc., of which 20,000 shares are purchasable at $3.95 per share, 20,000 shares are purchasable at $4.73 per share, 20,000 shares are purchasable at $5.52 and 20,000 shares are purchasable at $6.31 per share. (23) Includes 12,500 shares issuable upon the exercise (at a price of $1.00 per share) of an option and 50,000 shares issuable upon the exercise of Class B Redeemable Warrants. (24) Includes 615,000 shares issuable upon the exercise (at a price of $5.50 per share) of a warrant issued by Meteor Industries upon the merger with Old AIQ in consideration of financial advisory services rendered and exchanged for Class B Redeemable Warrants. (25) Represents 615,000 shares issuable upon the exercise Class B Warrants, which were issued in exchange (at a price of $5.50 per share) of a warrant issued by Meteor Industries upon the merger with Old AIQ in consideration of financial advisory services rendered. 42 (26) Includes 6,667 shares issuable upon the exercise (at a price of $15.00 per share) of an option and 27,778 shares issuable upon the exercise of Class B Redeemable Warrants. (27) Represents shares issuable upon the exercise of Class B Warrants issued in exchange for warrants to purchase (at a price of $5.50 per share) such number of shares (at a price of $5.50 per share) issued by Meteor Industries upon the merger with Old AIQ in consideration of financial advisory services rendered. (28) Represents (i) 307,648 shares issuable upon the exercise of Class B Redeemable Warrants and (ii) 20,000 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued in connection with an August 2000 financing. (29) Includes 25,000 shares issuable within 60 days upon the exercise (at a price of $2.75 per share) of options and 173,250 shares issuable upon exercise of Class B Redeemable Warrants. (30) Includes 35,000 shares issuable upon the exercise (at a price of $2.75 per share) of options issued in connection with consulting services rendered to Meteor Industries, Inc. (31a)Includes 60,000 shares issuable upon the exercise (at a price of $1.00 per share) of an option and 8,890 shares issuable upon the exercise of Class B Redeemable Warrants. (31b)Shareholder originally held an underwriter's warrant which was exercised into 54,000 shares of common stock and a Class B warrant to purchase 54,000 shares of common stock. (32) Represents 1,200 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement.. (33) Represents shares issuable upon the exercise (at a price of $5.50 per share) of a warrant issued in connection with a January 2001 Meteor Industries, Inc. private placement. (34) Represents 17,976 shares issued upon the exercise of a warrant, which was issued as payment for legal services rendered to our company, and 16,667 shares issued as payment for legal services rendered. (35) Represents 46,000 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 30,667 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. The selling shareholder is a registered broker-dealer. (36) Represents 16,432 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 10,955 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. The selling shareholder is a registered broker-dealer. (37) Includes 30,000 shares owned by Sea Spray, Ltd., a foreign corporation of which Mr. Mills is the sole shareholder, 150,000 shares owned by Mr. Mills' spouse. Mr. Mills disclaims beneficial ownership of his spouse's shares. Also includes 100,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issued in connection with the Series B Preferred Stock; 90,000 shares issuable upon the exercise (at a price of $5.50 per share) of warrants issued in connection with a January 2001 private placement and exchange for Class B Redeemable Warrants; and 208,334 shares issuable upon the exercise (at a price of $5.50 per share) of Class B Redeemable Warrants. Also includes 500,000 shares owned by Blake Capital Partners, LLC, a limited liability company whose sole director is Wayne Mills, issuable upon exercise (at a price of $3.00 per share) of warrants issued to financial advisors in connection with our merger with active IQ Technologies, Inc. Also includes 15,000 shares owned by Blake Capital and publicly traded warrants to purchase 15,000 shares (at an exercise price of $7.15 per share). (38) Includes 100,000 shares issued upon the conversion of Series B Convertible Preferred Stock; 100,000 shares issued upon the exercise (at a price of $2.50 per share) of a warrant issued upon the conversion of the Series B Preferred Stock; 90,000 shares issuable upon the exercise (at a price of $5.50 per share) of warrants issued in connection with a January 2001 private placement and exchanged for Class B Redeemable Warrants; and 208,334 shares issuable upon the exercise (at a price of $5.50 per share) of Class B Redeemable Warrants. Does not include any shares or warrants owned by Blake Capital Partners, LLC, a company of which Mr. Mills is sole shareholder, which is listed separately in this table. (39) Includes 30,000 shares issuable upon the exercise (at a price of $3.00 per share) of an option. (40) Represents 75,000 shares issuable upon the exercise (at a price of $5.50 per share) of a warrant issued by Meteor Industries upon the merger with Old AIQ in consideration of financial advisory services rendered and 4,445 shares issuable upon the exercise of Class B Redeemable Warrants. (41) Includes (i) 203,334 shares issuable upon the exercise of Class B Redeemable Warrants, (ii) 275,000 shares held by Mr. Olah's spouse, of which 110,000 shares are issuable upon the exercise of Class B Redeemable 43 Warrants, (iii) 25,000 shares held by the D. Bradly Olah Irrevocable Trust, of which 10,000 shares are issuable upon the exercise of Class B Redeemable Warrants, (iv) 90,000 shares issuable upon the exercise (at a price of $1.00 per share) of an option, (v) 3,333 shares issuable upon the exercise (at a price of $15.00 per share) of an option, and (vi) 120,000 shares issuable upon the exercise (at a price of $5.00 per share) of an option. (42) Includes shares held by Ms. Olah's spouse, D. Bradly Olah, as described in note (41). (43) Includes 66,667 shares held by Beartooth Capital, LLC, an entity owned and controlled by Mr. Olson, and 60,000 shares issuable upon the exercise of Class B Redeemable Warrants. (44) Represents 25,000 shares issuable upon the conversion of our Series B Convertible Preferred Stock and 25,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issued upon conversion of the Series B Convertible Preferred Stock. (45) Represents 10,943 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement. (46) Represents (i) 120,000 shares issued upon the conversion of our Series B Convertible Preferred Stock, (ii) 120,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issued upon conversion of the Series B Convertible Preferred Stock, and (iii) 10,000 shares issuable upon the exercise of Class B Warrants issued in exchange for a warrant to purchase 10,000 shares (at a price of $5.50 per share) issued in connection with a January 2001 Meteor Industries, Inc. private placement. (47) Includes (i) 60,000 shares issuable upon the exercise (at a price of $1.00 per share) of an employee option, (ii)11,537 shares issuable upon the exercise of Class B Redeemable Warrants. (48) Includes (i) 100,000 shares issuable upon the exercise (at a price of $2.00 per share) of an employee option and 100,000 shares issuable upon the exercise of Class B Redeemable Warrants. (49) Includes 24,500 shares issuable upon the exercise (at price of $2.00 per share) of an employee option and 10,000 shares issuable upon the exercise of our Class B Redeemable Warrants. (50) Includes 150,000 shares issuable upon the exercise (at a price of $5.50 per share) of a warrant issued in connection with a January 2001 Meteor Industries, Inc. private placement. (51) Includes 333 shares issuable upon the exercise (at a price of $37.50 per share) of a warrant. (52) Represents 5,220 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement. (53) Represents 4,711 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement. (54) Includes 133,334 shares issuable upon the exercise of Class B Redeemable Warrants. Also includes (i) 50,000 shares issuable upon the exercise (at a price of $1.00 per share) within 60 days of an option held by Ronald E. Eibensteiner, the president and sole owner of Wyncrest Capital, (ii) 100,000 shares issuable upon the exercise of Class B Warrants held by Ronald E. Eibensteiner, (iii) 200,000 shares held by Mr. Eibensteiner. (55) Includes 133,334 shares issuable upon the exercise of Class B Redeemable Warrants. 44 PLAN OF DISTRIBUTION We are registering the shares offered by this prospectus in part on behalf of the selling security holders. We agreed to file a registration statement under the Securities Act of 1933, as amended covering resale by the selling security holders and, with respect to some of the selling security holders, use our best efforts to cause the registration statement to be declared effective as soon as possible thereafter. As used in this prospectus, the term "selling security holders" means the persons identified in the tables in the section of this prospectus entitled "Selling Security Holders," and each of their respective donees, pledgees, transferees and other successors in interest selling securities received from a selling security holder after the date of this prospectus. We will pay all costs and expenses in connection with the preparation of this prospectus and the registration of the shares offered by it. Any brokerage commissions and similar selling expenses attributable to the sale of shares will be borne by the selling shareholders. Sales of our Class B Redeemable Warrants and common stock may be effected by the selling security holders at various times in one or more types of transactions (which may include block transactions) on the over-the-counter market, in negotiated transactions, through put or call options transactions relating to the shares, through short sales of shares, or a combination of such methods of sale at market prices prevailing at the time of sale or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling security holders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of the securities, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of securities by the selling security holders. In certain instances, we have agreed to indemnify the selling security holders and their officers, directors, employees and agents, and each person who controls any selling security holders, against certain liabilities, including liabilities arising under the Securities Act. Some of the selling security holders have agreed to indemnify us and our directors and officers in certain circumstances against certain liabilities, including liabilities arising under the Securities Act. The selling security holders and any broker-dealers that act in connection with the sale of securities might be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, and any commissions received by such broker-dealers and any profit on the resale of the securities sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. Because selling security holders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, the selling security holders will be subject to the prospectus delivery requirements of the Securities Act. We have informed the selling security holders that the anti-manipulative provisions of Regulation M promulgated under the Securities Exchange Act of 1934, as amended, may apply to their sales in the market. Selling security holders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet the criteria and conform to the requirements of that Rule. LOCK UP AGREEMENTS Certain of our shareholders have entered into agreements by which they agree not to sell their shares of our common stock for a period of time. Edward Names, a former officer and director of Meteor Industries, Inc. (our predecessor), and Capco Energy Inc., a large shareholder and a company whose president was a director of Meteor Industries, both signed agreements whereby they agreed that prior to April 30, 2002, they would not sell, offer to sell, transfer, hypothecate, contract to sell, grant any option to purchase, or otherwise dispose of 45 common stock including convertible preferred stock or the common shares after conversion, except by operation of law, by bona fide gift or by bona fide pledge, and except that Capco may sell or otherwise dispose of less than 1% of the total number of outstanding shares per month and Mr. Names may sell up to 20,000 shares per month commencing September 15, 2001. The remaining former directors of Meteor and the officers and directors of Old AIQ have entered into agreements whereby they agree not to sell, offer to sell, transfer, hypothecate, contract to sell, grant any option to purchase, or otherwise dispose of common stock issued or issuable upon the exercise of options held by such persons at the time of the Meteor Industries-Old AIQ merger, except by operation of law, by bona fide gift or by bona fide pledge, and except that they may sell or otherwise dispose of less than 10% of the total number of outstanding shares per month until April 30, 2002. In connection with the stock purchase agreement dated as of June 6, 2001 with Red Wing Business Systems, Inc. ("Red Wing"), the former shareholders of Red Wing agreed that, following the date that a registration statement registering the shares received in the transaction becomes effective, such shareholders will not sell, offer to sell, transfer, hypothecate, contract to sell, grant any option to purchase, or otherwise dispose of 75 percent of the aggregate number of shares of our common stock received in the transaction, except by operation of law, by bona fide gift or by bona fide pledge. Every three months following the effective date of a registration statement covering the resale of such shares, 12.5 percent of the aggregate number of shares issued to the former Red Wing shareholders become free of these restrictions. Pursuant to an agreement dated September 14, 2001, the former shareholders of Champion Business Systems agreed that, following the effective date of the registration statement that contains this prospectus, they will not sell, offer to sell, transfer, hypothecate, contract to sell, grant any option to purchase, or otherwise dispose of the aggregate of 299,185 shares of our common stock received in the transaction; provided, that the shareholders may sell up to 12.5 percent of the aggregate shares received in the merger every three months following the effective date of the registration statement containing this prospectus. In accordance with letter agreements dated October 10, 2001, the former shareholders of FMS Marketing, Inc., which we recently acquired, agreed not to sell, offer to sell, transfer, hypothecate, contract to sell, grant any option to purchase, or otherwise dispose of 150,000 of the aggregate of 250,000 shares of our common stock received in the transaction; provided, that following the effective date of the registration statement containing this prospectus, they may sell up to an aggregate of an additional 50,000 shares every three months following the effective date of the registration statement containing this prospectus. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering and assuming the issuance of all of the shares covered by this prospectus that are issuable upon the exercise or conversion of convertible securities, there will be 11,576,245 shares of our common stock issued and outstanding, not including the shares issuable upon exercise of the Class B Redeemable Warrants. The shares purchased in this offering will be freely tradable without registration or other restriction under the Securities Act, except for any shares purchased by an "affiliate" of our company (as defined in the Securities Act). Our currently outstanding shares that were issued in reliance upon the "private placement" exemptions provided by the Act are deemed "restricted securities" within the meaning of Rule 144. Restricted securities may not be sold unless they are registered under the Securities Act or are sold pursuant to an applicable exemption from registration, including an exemption under Rule 144 of the Securities Act. It is expected that the 4,385,931 restricted shares of our common stock that were issued in 46 connection with the merger with Old AIQ will become eligible for sale on April 30, 2002, assuming all of the other requirements of Rule 144 have been satisfied. In general, under Rule 144 as currently in effect, any person (or persons whose shares are aggregated) including persons deemed to be affiliates, whose restricted securities have been fully paid for and held for at least one year from the later of the date of issuance by us or acquisition from an affiliate, may sell such securities in broker's transactions or directly to market makers, provided that the number of shares sold in any three month period may not exceed the greater of 1 percent of the then-outstanding shares of our common stock or the average weekly trading volume of the shares of common stock in the over-the-counter market during the four calendar weeks preceding the sale. Sales under Rule 144 are also subject to certain notice requirements and the availability of current public information about our company. After two years have elapsed from the later of the issuance of restricted securities by us or their acquisition from an affiliate, such securities may be sold without limitation by persons who are not affiliates under the rule. Rule 701 promulgated under the Securities Act as currently in effect, allows for any employee, consultant or advisor of our company who purchases shares from us by exercising a stock option outstanding on the date of this prospectus is eligible to resell such shares 90 days after the date of this prospectus in reliance on Rule 144, but need not comply with certain restrictions contained in Rule 144, including the holding period requirement. In addition, the holders of options issued pursuant to plans maintained by Old AIQ and assumed by us following the merger with Meteor Industries may sell at any time the shares issued or issuable under such options pursuant to Rule 701. Subject to vesting requirements under the applicable option agreements, there are approximately 2,470,000 shares issuable upon the exercise of currently outstanding options granted under the Old AIQ plans. In addition, we have registered 250,000 shares of our common stock that are reserved for issuance under the 2000 Director Stock Option Plan. Shares issued upon exercise of outstanding options under the Director Stock Option Plan are generally eligible for immediate resale in the public market, subject to vesting under the applicable option agreements. Following the date of this prospectus, we cannot predict the effect, if any, that sales of our common stock or the availability of our common stock for sale will have on the market price prevailing from time to time. Nevertheless, sales by existing shareholders of substantial amounts of our common stock could adversely affect prevailing market prices for our stock. MINNESOTA ANTI-TAKEOVER LAW Through our articles of incorporation, we have elected not to be governed by the provisions of Sections 302A.671 and 302A.673 of the Minnesota Business Corporation Act. In general, Section 302A.671 provides that the shares of a corporation acquired in a "control share acquisition" have no voting rights unless voting rights are approved in a prescribed manner. A "control share acquisition" is an acquisition, directly or indirectly, of beneficial ownership of shares that would, when added to all other shares beneficially owned by the acquiring person, entitle the acquiring person to have voting power of 20% or more in the election of directors. In general, Section 302A.673 prohibits a publicly-held Minnesota corporation from engaging in a "business combination" with an "interested shareholder" for a period of four years after the date of transaction in which the person became an interested shareholder, unless the business combination is approved in a prescribed manner. "Business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested shareholder. An "interested shareholder" is a person who is the beneficial owner, directly or indirectly, or 10% or more of the corporation's voting stock or who is an affiliate or associate of the corporation and at any time within four years prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the corporation's voting stock. 47 DESCRIPTION OF COMMON STOCK Other than our common stock, we have no other class or series of capital stock authorized. The following description summarizes the material terms and provisions of our common stock, but is not complete. For the complete terms of our common stock, please refer to our articles of incorporation and our by-laws, which are included in or incorporated by reference into the registration statement that includes this prospectus. Our common stock is quoted on the Nasdaq Small Cap Market System under the symbol "AIQT." The Transfer Agent and Registrar of our common stock is Firstar Bank, N.A., Milwaukee, Wisconsin. As of February 28, 2002, there were 11,592,345 shares of our common stock outstanding, held by approximately 964 shareholders, of which approximately 670 hold their shares in "street name.". The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of our common stock are entitled to receive dividends out of the assets legally available at the time and in the amounts that our board of directors may determine from time to time. To date, however, no dividends have been paid to our shareholders and we do not anticipate paying any dividends for the foreseeable future. The common stock has no preemptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding-up of our company, the holder of our common stock are entitled to share all assets legally available for distribution to our shareholders after payment of all liabilities and the liquidation preferences of any outstanding preferred stock. Each outstanding share of our common stock is, and any shares of our common stock offered by this prospectus are, fully paid and nonassessable. DESCRIPTION OF CLASS B REDEEMABLE WARRANTS The following discussion of certain terms and provisions of our Class B Redeemable Warrants is qualified in its entirety by reference to the warrant agreement dated August 1, 2001 (the "Warrant Agreement") between us and Firstar Bank, N.A., Milwaukee, Wisconsin (the "Warrant Agent") and also the detailed provisions of the form of warrant certificate attached to the Warrant Agreement. The Warrant Agreement is an exhibit to the Registration Statement that includes this prospectus. Each of our Class B Redeemable Warrants entitles the holder to purchase, at a price of $5.50 subject to adjustment, one share of our common stock at any time until April 30, 2006. The Company may redeem the warrants at a price of $.01 per warrant upon 30 days' prior written notice any time after April 30, 2002 following a period of 14 consecutive days in which the average closing bid price of our common stock exceeds $7.50 per share. In addition to the foregoing conditions, the Class B redeemable Warrants may only be redeemed if the shares of common stock issuable upon exercise of the Class B Redeemable Warrants have been registered under the Securities Act or are otherwise freely transferable. Any holder of our Class B Redeemable Warrants who does not exercise prior to the redemption date, as set forth in our notice of redemption, will forfeit the right to purchase the shares of our common stock underlying the warrants and, after the redemption date, any outstanding Class B Redeemable Warrants will become void and be of no further force or effect. The Class B Redeemable Warrants have been issued pursuant to the Warrant Agreement between us and the Warrant Agent. The Company has authorized and reserved for issuance the shares of common stock issuable upon exercise of the Class B Redeemable Warrants. When delivered, all shares of common stock issued upon exercise of the Redeemable Warrants will be duly and validly authorized and issued, fully paid and nonassessable, and no preemptive rights or rights of first refusal will exist with respect thereto. 48 The Class B Redeemable Warrants may be exercised upon surrender of the warrant certificate on or prior to its expiration date (or earlier redemption date) at the offices of the Warrant Agent, with the Purchase Form on the reverse side of the Warrant certificate completed and executed as indicated, accompanied by payment of the full exercise price (by certified check or bank check payable to the order of the Company) for the number of shares with respect to which such Warrant is being exercised. The exercise price of the Redeemable Warrants and the number of shares to be obtained upon exercise of such Warrant are subject to adjustment in certain circumstances including a stock split of, or stock dividend on, or a subdivision, combination, or recapitalization of the Common Stock. In the event of liquidation, dissolution or winding up of our company, holders of the Class B Redeemable Warrants, unless exercised, will not be entitled to participate in the assets of our company. Holders of the Class B Redeemable Warrants will have no voting, preemptive, liquidation or other rights of a shareholder, and no dividends will be declared on the Class B Redeemable Warrants. 49 DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Minnesota Statutes Section 302A.521 provides that a corporation shall indemnify any person made or threatened to be made a party to any proceeding by reason of the former or present official capacity of such person against judgments, penalties, fines, including, without limitation, excise taxes assessed against such person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorney's fees and disbursements, incurred by such person in connection with the proceeding, if, with respect to the acts or omissions of such person complained of in the proceeding, such person has not been indemnified by another organization or employee benefit plan for the same expenses with respect to the same acts or omissions; acted in good faith; received no improper personal benefit and Section 302A.255, if applicable, has been satisfied; in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and in the case of acts or omissions by persons in their official capacity for the corporation, reasonably believed that the conduct was in the best interests of the corporation, or in the case of acts or omissions by persons in their capacity for other organizations, reasonably believed that the conduct was not opposed to the best interests of the corporation. Subdivision 4 of Section 302A.521 of the Minnesota Statutes provides that a corporation's articles of incorporation or by-laws may prohibit such indemnification or place limits upon the same. The Company's articles and by-laws do not include any such prohibition or limitation. As a result, the Company is bound by the indemnification provisions set forth in Section 302A.521 of the Minnesota Statutes. As permitted by Section 302A.251 of the Minnesota Statutes, the Articles of Incorporation of the Company provide that a director shall, to the fullest extent permitted by law, have no personal liability to the Company and its shareholders for breach of fiduciary duty as a director. To the extent that indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. ABOUT THIS PROSPECTUS This prospectus is not an offer or solicitation in respect to these securities in any jurisdiction in which such offer or solicitation would be unlawful. This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission. The registration statement that contains this prospectus (including the exhibits to the registration statement) contains additional information about our company and the securities offered under this prospectus. That registration statement can be read at the SEC web site or at the SEC's offices mentioned under the heading "Where You Can Find More Information." WHERE YOU CAN FIND MORE INFORMATION Federal securities law requires us to file information with the SEC concerning our business and operations. Accordingly, we file annual, quarterly, and special reports, proxy statements and other information with the SEC. You can inspect and copy this information at the Public Reference Facility maintained by the SEC at Judiciary Plaza, 450 5th Street, N.W., Room 1024, Washington, D.C. 20549. You can also do so at the following regional offices of the Commission: (1) New York Regional Office, 233 Broadway, New York, New York 10279. (2) Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. 50 You can receive additional information about the operation of the SEC's Public Reference Facilities by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding companies that, like us, file information electronically with the SEC. The SEC allows us to "incorporate by reference" information that has been filed with it, which means that we can disclose important information to you by referring you to the other information we have filed with the SEC. The information that we incorporate by reference is considered to be part of this prospectus, and related information that we file with the SEC will automatically update and supersede information we have included in this prospectus. We also incorporate by reference any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, until the selling security holders sell all of their securities or until the registration rights of the selling security holders expire. This prospectus is part of a registration statement that we filed with the SEC (Registration No. 333-68088). The following are specifically incorporated herein by reference: 1. Annual Report on Form 10-K for the fiscal year ended December 31, 2000; 2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001, June 30, 2001, and September 30, 2001, and Amendments to Quarterly Reports on Form 10-Q/A for the quarters ended June 30, 2001 and September 30, 2001; 3. Current Report on Form 8-K dated April 30, 2001 (filed on May 14, 2001); 4. Current Report on Form 8-K dated June 6, 2002 (filed on June 15, 2001) and Amendment on Form 8-K/A filed on August 13, 2001; 5. Current Report on Form 8-K dated September 18, 2001 (filed on September 21, 2001) and Amendment on Form 8-K/A filed November 13, 2001; 6. Current Report on Form 8-K dated October 10, 2001 (filed on October 18, 2001); 7. Current Report on Form 8-K dated December 20, 2001 (filed on December 27, 2001); and 8. Current Report on Form 8-K dated December 28, 2001 (filed January 4, 2002). You can request a free copy of the above filings or any filings subsequently incorporated by reference into this prospectus by writing or calling us at the following address: Active IQ Technologies, Inc. Attention: Mark Dacko, Controller 5720 Smetana Drive, Suite 100 Minnetonka, Minnesota 55343 (952) 345-6600 You should rely only on the information incorporated by reference or provided in this prospectus or any supplement or amendment to this prospectus. We have not authorized anyone else to provide you with different information or additional information. The selling security holders will not make an offer of our securities in any state where the offer is not permitted. You should not assume that the information in this prospectus, or any supplement or amendment to this prospectus, is accurate at any date other than the date indicated on the cover page of such documents. 51 LEGAL MATTERS Legal matters in connection with the validity of the securities offered by this prospectus will be passed upon by Maslon Edelman Borman & Brand, LLP, Minneapolis, Minnesota. EXPERTS The balance sheet of activeIQ Technologies Inc. ("Old AIQ") as of December 31, 2000 and 1999, and the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2000 and for the period from inception (April 11, 1996) to December 31, 2000 incorporated by reference in this prospectus and elsewhere in the registration statement to the extent and for the periods indicated in their report have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. Reference is made to said report, which includes an explanatory paragraph with respect to the uncertainty regarding the Company's ability to continue as a going concern as discussed in Note 1 to the financial statements. The financial statements of Red Wing Business Systems, Inc. as of and for the years ended December 31, 1999 and 2000 included in our Current Report on Form 8-K/A filed on August 13, 2001 and incorporated by reference into this prospectus have been audited by Virchow, Krause & Company, LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. The financial statements of Champion Business Systems, Inc. as of and for the years ended December 31, 1999 and 2000 included in our Current Report on Form 8-K/A filed on November 13, 2001 and incorporated by reference into this prospectus have been audited by Virchow, Krause & Company, LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. 52 5,209,979 CLASS B REDEEMABLE WARRANTS 9,276,220 SHARES OF COMMON STOCK ACTIVE IQ TECHNOLOGIES, INC. ---------------------- PROSPECTUS ---------------------- _______ ___, 2002 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The estimated expenses in connection with the issuance and distribution of the securities registered hereby are set forth in the following table: SEC registration fee ..................... $ 17,400 Legal fees and expenses .................. 60,000 Accounting fees and expenses ............. 35,000 Miscellaneous ............................ 25,000 --------------- Total ................................... $ 137,400 ===============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company is governed by Minnesota Statutes Chapter 302A. Minnesota Statutes Section 302A.521 provides that a corporation shall indemnify any person made or threatened to be made a party to any proceeding by reason of the former or present official capacity of such person against judgments, penalties, fines, including, without limitation, excise taxes assessed against such person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorney's fees and disbursements, incurred by such person in connection with the proceeding, if, with respect to the acts or omissions of such person complained of in the proceeding, such person has not been indemnified by another organization or employee benefit plan for the same expenses with respect to the same acts or omissions; acted in good faith; received no improper personal benefit and Section 302A.255, if applicable, has been satisfied; in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and in the case of acts or omissions by persons in their official capacity for the corporation, reasonably believed that the conduct was in the best interests of the corporation, or in the case of acts or omissions by persons in their capacity for other organizations, reasonably believed that the conduct was not opposed to the best interests of the corporation. Subdivision 4 of Section 302A.521 of the Minnesota Statutes provides that a company's articles of incorporation or by-laws may prohibit such indemnification or place limits upon the same. The Company's articles and by-laws do not include any such prohibition or Limitation. As a result, the Company is bound by the indemnification provisions set forth in Section 302A.521 of the Minnesota Statutes. As permitted by Section 302A.251 of the Minnesota Statutes, the Articles of Incorporation of the Company provide that a director shall have no personal liability to the Company and its shareholders for breach of his fiduciary duty as a director, to the fullest extent permitted by law. ITEM 16. EXHIBITS. The following exhibits are filed as part of this Registration Statement:
EXHIBIT DESCRIPTION OF DOCUMENT 4.1 Articles of Incorporation (1) 4.2 By-laws (2) 4.3 Warrant Agreement dated August 1, 2001 (2) 4.4 Form of Class B Redeemable Warrant Certificate (2) 5.1 Opinion of Maslon Edelman Borman & Brand, LLP 10.1 Employment agreement by and between Kenneth W. Brimmer and the Company dated as of May 1, 2001 (2) 10.2 Employment agreement by and between D. Bradly Olah and the Company dated as of May 1, 2001 (2)
II-1 10.3 Agreement dated November 27, 2001 by and between Kenneth W. Brimmer and the Company (3) 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Virchow, Krause & Company, LLP 23.3 Consent of Maslon Edelman Borman & Brand, LLP (included as a part of Exhibit 5.1) 24.1 Power of Attorney (included on signature page hereof)
(1) Incorporated by reference to Exhibit 3.1 of Registrant's Form 8-K filed on May 14, 2001. (2) Previously filed as same exhibit number with the Company's Registration Statement on Form S-3 filed on August 21, 2001 (File No. 333-68088). (3) Previously filed as same exhibit number with the Company's Amendment 1 to Registration Statement on Form S-3 filed on December 10, 2001 (File No. 333-68088). ITEM 17. UNDERTAKINGS. (a) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and (4) That, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minnetonka, State of Minnesota, on March 15, 2002. ACTIVE IQ TECHNOLOGIES, INC. By: /s/ D. Bradly Olah ------------------------------------------ D. Bradly Olah President, Chief Executive Officer and Chief Financial Officer POWER OF ATTORNEY Each person whose signature to this Registration Statement appears below hereby constitutes and appoints D. Bradly Olah and Mark Dacko as his or her true and lawful attorney-in-fact and agent, with full power of substitution, to sign on his or her behalf individually and in the capacity stated below and to perform any acts necessary to be done in order to file all amendments to this Registration Statement and any and all instruments or documents filed as part of or in connection with this Registration Statement or the amendments thereto and each of the undersigned does hereby ratify and confirm all that said attorney-in-fact and agent, or his substitutes, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1933, this Registration Statement has been signed as of the 15th day of March, 2002, by the following persons in the capacities indicated.
NAME TITLE /s/ D. Bradly Olah Chairman of the Board - --------------------------------------------- by: D. Bradly Olah as attorney-in-fact for Kenneth W. Brimmer /s/ D. Bradly Olah Chief Executive Officer, President, Chief Financial Officer and - --------------------------------------------- Secretary (Principal Executive Officer and Principal Financial D. Bradly Olah Officer) and Director /s/ Mark D. Dacko Controller (Principal Accounting Officer) - --------------------------------------------- Mark D. Dacko /s/ D. Bradly Olah Director - --------------------------------------------- by: D. Bradly Olah as attorney-in-fact for Ronald E. Eibensteiner /s/ Wayne W. Mills Director - --------------------------------------------- Wayne W. Mills
II-3 EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT 5.1 Opinion of Maslon Edelman Borman & Brand, LLP 10.3 Agreement dated November 27, 2001 by and between Kenneth W. Brimmer and the Company. 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Virchow, Krause & Company, LLP 23.3 Consent of Maslon Edelman Borman & Brand, LLP (included as a part of Exhibit 5.1) 24.1 Power of Attorney (included on signature page hereof)
II-4 EX-5.1 3 c64205a2ex5-1.txt OPINION OF MASLON EDELMAN BORMAN & BRAND, LLP EXHIBIT 5.1 March 15, 2002 Active IQ Technologies, Inc. 601 Carlson Parkway Suite 1550 Minnetonka, MN 55305-5224 RE: Amendment to Registration Statement on Form S-3 Gentlemen: We have acted as counsel to Active IQ Technologies, Inc., a Minnesota corporation (the "Company") in connection with the preparation of the second amendment to registration statement on Form S-3, SEC File 333-68088 (the "Registration Statement"), to be filed by the Company with the Securities and Exchange Commission on or about March 15, 2002 relating to the registration under the Securities Act of 1933, as amended (the "1933 Act"), of 9,276,220 shares of the Company's common stock, $.01 par value (the "Shares") and Class B Redeemable Warrants to purchase 5,209,979 shares of the Company's common stock (the "Warrants"). This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the 1933 Act. In connection with the rendering of this opinion, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of (i) the Registration Statement; (ii) the Articles of Incorporation and the Bylaws of the Company, as amended, each as currently in effect; (iii) certain resolutions adopted by the Board of Directors of the Company relating to the issuance of the Shares and Warrants, the preparation and filing of the Registration Statement and certain related matters; (iv) certain agreements, certificates of public officials, certificates of other officers or representatives of the Company or others; and (v) such other documents, certificates and records as we deemed necessary or appropriate as a basis for the opinions expressed herein. In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photo copies and the authenticity of the originals of such copies. As to any facts material to the opinions expressed herein which we have not independently established or verified, we have relied upon statements and representations of officers and other representatives of the Company and others. We are attorneys licensed to practice in the State of Minnesota and the opinions expressed herein are limited to the laws of the State of Minnesota and the federal securities laws of the United States. Based upon and subject to the limitations, qualifications, exceptions and assumptions set forth herein, it is our opinion that: 1. The Company is a validly existing corporation in good standing under the laws of the State of Minnesota. 2. The Shares (exclusive of the Warrant Shares (as hereinafter defined)) have been duly authorized and are validly issued, fully paid and nonassessable. 3. The Warrants have been duly authorized and are validly issued, fully paid and nonassessable. 4. The Shares issuable upon exercise of the Warrants (the "Warrant Shares") have been duly authorized and, when issued against payment of the requisite exercise price, will be validly issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. We also consent to the reference to our name under the caption "Legal Matters" in the prospectus filed as part of the Registration Statement. This opinion is furnished to you in connection with the filing of the Registration Statement and, except as provided in the immediately preceding paragraph, is not to be used, circulated, quoted for any other purpose or otherwise referred to or relied upon by any other person without the express written permission of this firm. Very truly yours, /s/ MASLON EDELMAN BORMAN & BRAND, LLP EX-23.1 4 c64205a2ex23-1.txt CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated March 23, 2001, included in Active IQ Technologies, Inc.'s Form 8-K filed May 14, 2001, and to all references to our firm included in this registration statement. /s/ Arthur Andersen LLP Minneapolis, Minnesota, March 14, 2002 EX-23.2 5 c64205a2ex23-2.txt CONSENT OF VIRCHOW, KRAUSE & COMPANY LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our reports dated July 26, 2001 and October 12, 2001 for Red Wing Business Systems, Inc. and Champion Business Systems, Inc., respectively, included in Active IQ Technologies, Inc.'s Form 8-K/A filed August 13, 2001 and November 13, 2001, and to all references to our firm included in this registration statement. /s/ Virchow, Krause & Company, LLP Minneapolis, Minnesota March 15, 2002 -----END PRIVACY-ENHANCED MESSAGE-----