-----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, QV45ji68RlaGjh8Gue8jGh46dgpAAEkqsY7M6JcUIwR9LScJ4Sul8chm0uU11rbj BUGSL2EWd2GKgWNLLW9GFg== 0000950137-02-002170.txt : 20020416 0000950137-02-002170.hdr.sgml : 20020416 ACCESSION NUMBER: 0000950137-02-002170 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20020412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTIVE IQ TECHNOLOGIES INC CENTRAL INDEX KEY: 0000912875 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 412004369 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12401 FILM NUMBER: 02609361 BUSINESS ADDRESS: STREET 1: 601 CARLSON PARKWAY STREET 2: SUITE 1500 CITY: MINNETONKA STATE: MN ZIP: 55305 BUSINESS PHONE: 9524495000 MAIL ADDRESS: STREET 1: 601 CARLSON PARKWAY STREET 2: SUITE 1500 CITY: MINNETONKA STATE: MN ZIP: 55305 FORMER COMPANY: FORMER CONFORMED NAME: METEOR INDUSTRIES INC DATE OF NAME CHANGE: 19960313 10-Q/A 1 c67804a1e10-qa.txt AMENDMENT TO QUARTERLY REPORT U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 AMENDMENT NO. 1 TO QUARTERLY REPORT ON FORM 10-Q/A [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______ COMMISSION FILE NUMBER 0-27968 ACTIVE IQ TECHNOLOGIES, INC. (Exact Name of Registrant as specified in Its Charter) MINNESOTA 41-2004369 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 5720 SMETANA DRIVE, SUITE 101, MINNETONKA, MN 55343 (Address of Principal Executive Offices) (952) 345-6600 (Issuer's Telephone Number, Including Area Code) 601 CARLSON PARKWAY, SUITE 1550, MINNETONKA, MN 55305 (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of November 9, 2001, there were 10,826,412 shares of common stock, $.01 par value, outstanding. 1 FORWARD-LOOKING STATEMENTS Certain of the matters discussed in the following pages constitute "forward-looking statements" within the meaning of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended. Forward-looking statements involve a number of risks and uncertainties, and, in addition to the factors discussed in this Form 10-Q, other factors that could cause actual results to differ materially are the following: the economic conditions in the new markets into which the Company expands and the possible uncertainties in the customer base in these areas: competitive pressures from other providers of Internet eBusiness services; ability to raise additional capital required to support the Company's operations and enable the Company to pursue its business plan; government regulation of the Internet; business conditions, such as inflation or a recession, and growth in the general economy; changes in monetary and fiscal policies, other risks identified from time to time in the Company's SEC reports, registration statements and public announcements. 2 ACTIVE IQ TECHNOLOGIES, INC. FORM 10-Q INDEX SEPTEMBER 30, 2001
Page ---- PART I FINANCIAL INFORMATION Item 1. Financial Statements 4 Condensed Consolidated Balance Sheets - As of September 30, 2001 and December 31, 2000 4 Condensed Consolidated Statements of Operations - For the three months and nine months ended September 30, 2001 and September 30, 2000 5 Condensed Consolidated Statements of Cash Flows - For the nine months ended September 30, 2001 and September 30, 2000 6 Notes to the Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II OTHER INFORMATION 13 Item 2. Changes in Securities and Use of Proceeds 16 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17
3 ACTIVE IQ TECHNOLOGIES, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2001 2000 ------------ ----------- (unaudited) ASSETS CURRENT ASSETS Cash and equivalents $ 4,523,856 $ 1,349,457 Accounts receivable, net 144,907 -- Note receivable 507,500 -- Inventories 86,467 -- Prepaid expenses 65,380 57,285 ------------ ----------- Total current assets 5,328,110 1,406,742 PROPERTY and EQUIPMENT, net 540,863 549,116 ACQUIRED SOFTWARE DEVELOPMENT 1,018,268 -- PREPAID ROYALTIES -- 500,001 OTHER ASSETS, net 79,660 216,072 GOODWILL, net 6,506,285 -- OTHER INTANGIBLES 1,518,676 -- ------------ ----------- $ 14,991,862 $ 2,671,931 ============ =========== LIABILITIES and SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank line of credit $ 168,914 $ 97,529 Current portion notes payable - shareholders 1,656,837 -- Accounts payable 406,738 257,509 Deferred revenue 1,301,255 306,000 Accrued expenses 422,794 83,141 Current portion of capital lease obligations -- 19,058 ------------ ----------- Total current liabilities 3,956,538 763,237 LONG-TERM OBLIGATIONS, less current maturities 538,987 27,158 ------------ ----------- Total liabilities 4,495,525 790,395 ------------ ----------- COMMITMENTS and CONTINGENCIES SHAREHOLDERS' EQUITY Common stock, $.01 par value, 40,000,000 shares authorized; 10,576,412 and 3,835,911 shares issued and outstanding 105,764 38,359 Series B Convertible Preferred Stock, $1.00 par value, 365,000 shares authorized, issued and outstanding 365,000 -- Additional paid-in capital 20,111,600 5,633,040 Stock subscription receivable (200,000) (312,500) Deferred compensation (557,957) (172,813) Warrants 285,947 170,881 Accumulated deficit (9,614,017) (3,475,431) ------------ ----------- Total shareholders' equity 10,496,337 1,881,536 ------------ ----------- $ 14,991,862 $ 2,671,931 ============ ===========
The accompanying notes are an integral part of these condensed consolidated financial statements 4 ACTIVE IQ TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended Nine months ended Sept. 30, 2001 Sept. 30, 2000 Sept. 30, 2001 Sept. 30, 2000 -------------- -------------- -------------- -------------- REVENUES $ 645,182 $ -- $ 1,053,443 $ -- OPERATING EXPENSES: Selling, general and administrative 2,785,237 670,559 5,041,713 1,498,271 Depreciation and amortization 902,377 8,000 1,605,947 57,188 Product development 172,498 256,770 562,762 430,023 Loss on disposal of assets 10,538 -- 68,216 -- ------------ ----------- ----------- ----------- Total operating expenses 3,870,650 935,329 7,278,638 1,985,482 ------------ ----------- ----------- ----------- LOSS FROM OPERATIONS (3,225,468) (935,329) (6,225,195) (1,985,482) OTHER INCOME (EXPENSE): Interest income 77,451 860 126,305 790 Interest expense (30,419) (32,360) (39,696) (36,262) ------------ ----------- ----------- ----------- Total other income (expense) 47,032 (31,500) 86,609 (35,472) ------------ ----------- ----------- ----------- NET LOSS $ (3,178,436) $ (966,829) $(6,138,586) $(2,020,954) ============ =========== =========== =========== BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.31) $ (0.37) $ (0.83) $ (1.77) ============ =========== =========== =========== BASIC AND DILUTED WEIGHTED AVERAGE OUTSTANDING SHARES 10,110,564 2,629,939 7,381,392 1,140,790 ========== ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements 5 ACTIVE IQ TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended Sept. 30, 2001 Sept. 30, 2000 --------------- ------------ OPERATING ACTIVITIES: Net loss $(6,138,586) $(2,020,954) Adjustments to reconcile net loss to cash flows from operating activities: Depreciation and amortization 1,605,947 57,188 Deferred compensation expense 246,939 43,750 Loss on disposal of assets 68,216 -- Issuance of warrants, options and common stock for services 112,916 225,000 Issuance of options in lieu of severance -- 25,800 Amortization of original issue discount -- 7,125 Changes in operating assets and liabilities: Accounts receivable (33,797) -- Inventories 9,153 -- Prepaid expense 488,816 (15,000) Accounts payable 2,693 179,715 Accrued expenses (88,036) 99,287 Other assets 108,964 -- Deferred revenue (393,146) -- ----------- ----------- Net cash used in operating activities (4,009,921) (1,398,089) ----------- ----------- INVESTING ACTIVITIES: Acquisition of Edge Technologies (308,016) -- Acquisition of Red Wing Business Systems (211,883) -- Acquisition of Champion Business Systems (502,374) -- Payments for software development costs (83,616) -- Purchases of property and equipment (93,401) (188,763) ----------- ----------- Net cash used in investing activities (1,199,290) (188,763) ----------- ----------- FINANCING ACTIVITIES: Payments on bank line of credit (17,529) (101,404) Payments on obligations under capital leases (78,976) -- Payments on short-term notes payable (2,133) -- Payments on long-term debt (166,114) -- Cash proceeds from issuance of common stock 6,642,501 2,613,069 Cash proceeds from exercise of options 2,005,861 -- Cash proceeds from short-term notes payable -- 355,000 ----------- ----------- Net cash provided by financing activities 8,383,610 2,866,665 ----------- ----------- INCREASE IN CASH and EQUIVALENTS 3,174,399 1,279,813 CASH AND EQUIVALENTS, Beginning of period 1,349,457 409,917 ----------- ----------- CASH AND EQUIVALENTS, end of period $ 4,523,856 $ 1,689,730 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest $ 13,533 $ 33,698 Non-cash financing and investing activities: Common stock issued in acquisitions $ 4,753,515 $ -- Issuance of Common Stock for equipment $ -- $ 378,000
The accompanying notes are an integral part of these condensed consolidated financial statements 6 ACTIVE IQ TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2001 (UNAUDITED) NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed consolidated financial statements have been prepared by Active IQ Technologies Inc. (the "Company" or "Active IQ"), in accordance with accounting principles generally accepted in the United States of America ("US GAAP"), for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Form 8-K (filed May 14, 2001 under Meteor Industries, Inc., "METR"). In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months and nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year as a whole. Nature of Business The Company was originally incorporated in Colorado in December 1992 under the name Meteor Industries, Inc. On April 30, 2001, the Company, activeIQ Technologies Inc. ("Old AIQ") and a wholly-owned subsidiary of the Company closed a triangular reverse merger transaction whereby Old AIQ merged with and into the Company subsidiary. Immediately prior to the merger, the Company (i) sold all of its assets relating to its petroleum and gas distribution business, (ii) was reincorporated under Minnesota law, and (iii) changed its name to Active IQ Technologies, Inc. As a result of the sale of the Company's petroleum and gas distribution assets, it discontinued all operations in the petroleum and gas distribution business and has adopted the business plan of Old AIQ. Because Old AIQ was treated as the acquiring company in the merger, all financial and business information contained herein relating to periods prior to the merger is the business and financial information of Old AIQ. Old AIQ was incorporated in Minnesota on April 11, 1996, and was considered a development stage company until January 2001, when it began to recognize revenues as a result of an acquisition (see Note B - Business Combinations). Old AIQ was formed to develop and provide eBusiness application software and services for small-to-medium sized accounting software customers. Since its inception and up through the merger, Old AIQ's efforts have been devoted to the development of its principal product and raising capital. The Company also develops and markets accounting and financial management software for small-to-medium sized businesses through its subsidiaries, Red Wing Business Systems, Inc. and Champion Business Systems, Inc., (see Note B - Business Combinations and Note G - Subsequent Events). The Company currently, through its Epoxy Network, offers both an Internet merchandising system called "Storefront" and a tool for managing customer information named "Account Management". Also, the Company is in the early stages of development of other eBusiness solutions, of which some solutions will be released to the market during the 4th quarter of 2001. Revenue Recognition The Company currently derives revenues from monthly subscribers of the Epoxy Network and through sales of accounting and financial management software and services of its subsidiaries. Epoxy Network subscription revenue is recognized monthly after the customer accepts the license agreement and the Company verifies that the customer has a version of software it interfaces with. After the initial period of set up and configuration, customers are invoiced at the beginning of each month for all services subscribed to. The Company, through its subsidiaries of Red Wing Business Systems and Champion Business Systems, recognizes the revenues derived from software sales after the product has been shipped and accepted by the customer. Service revenue consists mainly of support and maintenance agreements. Service revenue is recognized ratably over the term of the agreement, which is typically one year. All service revenue invoiced in excess of revenue recognized is recorded as deferred revenue. At September 30, 2001, deferred revenue was $666,785 for Red Wing Business Systems and $634,470 for Champion Business Systems. Net Loss Per Common Share Basic and diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the periods presented. The impact of common stock equivalents has been excluded from the computation of weighted average common shares outstanding, as the net effect would be antidilutive. Use of Estimates 7 Preparing financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes The Company accounts for income taxes using the liability method to recognize deferred income tax assets and liabilities. Deferred income taxes are provided for differences between the financial reporting and tax bases of the Company's assets and liabilities at currently enacted tax rates. As of September 30, 2001, the Company had approximately $4,200,000 in net operating loss carryforwards for federal tax purposes. The Company has recorded a full valuation allowance against the net deferred tax asset due to the uncertainty of realizing the related benefits. Software Development Costs Effective January 1, 1999, the Company implemented Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Pursuant to SOP 98-1, expenditures for internal use software are expensed during the preliminary project stage. For the nine months ended September 30, 2001 and 2000, the Company expensed all initial software costs since they were projects in the application stage. The Company did capitalize certain software development related to new product development, which was acquired as part of the Red Wing Business, Inc. and the Champion Business Systems, Inc. acquisitions. The Company has capitalized an additional $498,814 related to new project development during the quarter for certain developed software that has reached technological feasibility. NOTE B - BUSINESS COMBINATIONS Acquisitions Prior to June 30, 2001 Edge Technologies, Inc. On January 16, 2001, the Company completed its merger with privately held Edge Technologies, Incorporated ("Edge"), the creator of a fully integrated eBusiness website service called Account Wizard, which has been subsequently branded as part of the Epoxy Network. The merger was accounted for under the purchase method of accounting with the operations of Edge included in the Company's consolidation as of that date. The former stockholders of Edge received $300,000 in cash and 325,000 shares of the Company's 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 received the final consideration as specified in the merger agreement of 225,000 shares of the Company's common stock on April 30, 2001, and $400,000 in cash on May 2, 2001, in settlement of the earnout provisions. With closing costs, the total consideration plus the fair value of the net liabilities assumed was approximately $2,264,000, consisting primarily of goodwill and other intangibles. Other intangibles acquired consisted primarily of customer relationships. The Company is amortizing the acquired goodwill and other intangibles on a straight-line basis over a two-year period. Meteor Industries, Inc. On April 30, 2001, the Company completed its merger with Meteor Industries, Inc. Pursuant to an Agreement and Plan of Merger dated as of January 11, 2001, as amended April 27, 2001 (the "Merger Agreement"), by and among Meteor Industries, Inc. ("Meteor"), activeIQ Technologies Inc., a Minnesota corporation ("AIQ") and MI Merger, Inc., Minnesota corporation and a wholly-owned subsidiary of Meteor ("Merger Sub"), AIQ merged with and into Merger Sub (the "Merger"). The surviving corporation in the Merger was renamed AIQ, Inc. In addition, pursuant to 8 the Merger Agreement, Meteor was reincorporated under Minnesota law by merging with and into AIQ Acquisition Corp., a Minnesota corporation (the "Reincorporation Merger"). The surviving corporation in the Reincorporation Merger was renamed Active IQ Technologies, Inc., a Minnesota corporation. Meteor's shareholders approved both the Merger and the Reincorporation Merger on March 27, 2001, and both transactions became effective on April 30, 2001. Since Meteor had only monetary assets and no operations, the merger was accounted for as the issuance of stock by AIQ in exchange for monetary assets of Meteor. Pursuant to the Merger Agreement, in exchange for shares of AIQ common stock, each shareholder of AIQ common stock was entitled to receive one share of Meteor's common stock (after giving effect to the reincorporation Merger). At the time of the Merger there were 4,385,911 shares of common stock of AIQ outstanding, excluding 400,000 shares held by Meteor, which were cancelled upon the effective time of the Merger. In addition to receiving shares of Meteor's common stock, each of the former AIQ shareholders was entitled to receive a warrant to purchase two shares of Meteor's common stock for every three shares of AIQ common stock held by such shareholder. The warrants, which expire on April 30, 2006, are exercisable at a price of $5.50 share upon notice to the holders thereof after the closing price of Meteor's common stock (as quoted on the Nasdaq Small Cap Market) has averaged $7.50 for 14 consecutive days. Red Wing Business Systems, Inc. On June 6, 2001, the Company completed its acquisition of Red Wing Business Systems, Inc. ("Red Wing"), a Minnesota corporation. Red Wing, which operates as a wholly-owned subsidiary of the Company, produces and sells accounting and financial management software for small and 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, the 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 the Company's obligations to make the first two future cash payments of $400,000 each, the Company granted a security interest in the newly-acquired shares of Red Wing to the Sellers pursuant to a pledge agreement by and among the Company and the Sellers dated as of June 6, 2001. With closing costs, the total consideration plus the fair value of the net liabilities assumed is approximately $4,214,000, consisting primarily of goodwill and other intangibles. The other intangibles acquired consisted of acquired software development and customer relationships. The Company is amortizing the acquired goodwill and other intangibles on a straight-line basis over a two-year period. Acquisitions After June 30, 2001 Champion Business Systems, Inc. On September 18, 2001, the Company completed its merger with privately held Champion Business Systems, Inc. ("Champion"), a Colorado corporation. Champion, which operates as a wholly-owned subsidiary of the 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 the Company's consolidation as of that date. The primary reason for the acquisition of Champion was to expand the Company's software and service support customer base and business. The factors contributing to goodwill were principally based on the Company's belief that synergies would be generated through the combining of the Company's other software and service support with Champion's accounting packages. The total purchase price including the issuance of 299,185 shares of common stock, was approximately $3,072,000, plus an allocation from software development costs to acquired software developed of approximately $499,000. Common stock was valued at $4.89 per share, the average of the closing bid and ask price for the Company's common stock 10 trading days before September 18, 2001 (the effective date of the acquisition of Champion). The Company did not issue any options or warrants in conjunction with the Champion acquisition. 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 the Company's 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. The Company 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. With closing costs, the total consideration plus the fair value of the net liabilities assumed is approximately $3,072,000, consisting primarily of goodwill and other intangibles. 9 The Company recorded approximately $1,090,000 as goodwill, and approximately $1,982,000 as other intangibles being allocated to customer relationships, non-compete agreements and capitalized software. Other intangibles are being amortized on a straight-line basis over a two-year period and goodwill related to this acquisition is not being amortized (See Note F). The accompanying unaudited pro forma condensed results of operations for the nine months ended September 30, 2001 and 2000, give effect to the acquisitions of Edge, Red Wing and Champion, as if such transactions had occurred on January 1, 2000. The unaudited pro forma information does not purport to represent what the Company's results of operations would actually have been if such transactions in fact had occurred at such date or to project the Company's results of future operations:
Pro Forma for the Nine Months Ended September 30, 2001 2000 Revenues $ 3,253,191 $ 2,767,170 Loss from operations (5,786,202) (3,405,286) ----------- ----------- Net loss (5,755,670) (3,420,678) =========== =========== Basic and diluted net loss per common share $ (0.57) $ (0.45) =========== ===========
NOTE C - DEBT Bank Line of Credit The Company has a $275,000 revolving line of credit with a bank of the subsidiary Red Wing. Outstanding borrowings were $168,914 as of September 30, 2001. The line of credit was paid in full in November 2001. Notes Payable Notes payable consist of the following:
September 30, 2001 December 31, 2001 Notes Payable - former Red Wing shareholders (a) $ 1,116,717 $ -- Notes Payable (b) 132,361 -- Notes Payable - former Champion shareholders (c) 946,745 -- ----------- ------ $ 2,195,824 $ -- =========== ======
(a) Pursuant to a Stock Purchase Agreement dated June 6, 2001, the Company purchased all of the outstanding capital stock from the shareholders of Red Wing. Under the Agreement, the 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. The balance of the note is presented net of debt discount of 7%. (b) Two investors in Red Wing receive monthly principal and interest payments. The investors are current employees at Red Wing. Note balances as of September 30,2001 were $13,737 and $54,948. Additionally, Champion has a note payable for software purchased from a vendor. (c) Pursuant to the terms of the merger agreement dated August 30, 2001, the Company is obligated to pay the remaining $1,000,000 of cash in four future payments of $250,000 due on the 4, 8, 12 and 16-month anniversaries of the closing date. The balance of the note is presented net of debt discount of 7%. NOTE D - DEFERRED REVENUE Red Wing and Champion have software maintenance programs, which collect yearly fees in advance from its customers. These fees are amortized over the periods which service and support is provided to the customer, generally one year. The deferred revenue balance for Red Wing was $666,785 and $634,470 for Champion at September 30, 10 2001. In December 2000, the Company entered into an agreement with Intranet Solutions, Inc. (n/k/a Stellent, Inc.) ("Stellent") whereby Stellent cancelled a promissory note and accrued interest in the amounts of $300,000 and $6,000 (total $306,000), respectively, in exchange for an advance on fees payable upon the resale of the Company's Content Categorizer product. Stellent was to pay the Company 30% of sales generated by the Content Categorizer on a quarterly basis. The amount converted of $306,000 was reflected as deferred revenue in the consolidated balance sheet as of December 31, 2000. Also in December 2000, the Company entered in a nonexclusive reseller agreement that allows the Company to resell Stellent's Xpedio software on a worldwide basis. The Company was to pay Stellent 15% of net receipts of Xpedio. In connection with the agreement, the Company paid $150,000 cash and issued 127,273 shares of common stock valued at $2.75 per share for a nonrefundable prepaid royalty. This total of $500,000 was recorded as other assets on the Company's consolidated balance sheet as of December 31, 2000. In April 2001, the Company sold its Content Categorizer to Stellent for $400,000 cash and the satisfaction of the advance on fees payable of $306,000, a total of $706,000. In connection with this agreement the Company netted the prepaid royalty against the sales transaction since the Company's management decided to terminate all selling efforts of the Xpedio software. The $500,000 asset write off was recorded as a reduction of revenue since both transactions occurred simultaneously and were with a related party. NOTE E - SHAREHOLDERS' EQUITY Series B Convertible Preferred Stock Part of the monetary assets acquired with Meteor, were 365,000 shares of convertible preferred stock. Meteor issued these share in June 2000. Each share is: (1) not entitled to dividends, (2) entitled to a liquidation preference of $2.00, (3) entitled to one vote, (4) not redeemable, and (5) convertible. Holders of the Series B Convertible Preferred Stock have the right to convert all or a portion of their shares into units, each unit consisting of one share of Common Stock and one warrant to purchase Common Stock. The warrants to be issued as part of the units upon conversion shall be in a form determined by the Board of Directors and shall be exercisable until May 15, 2005, at an exercise price of $2.50 per share. Stock Subscription Receivable In December 2000, the Company entered into a subscription receivable for the purchase of 100,000 shares of common stock at a price of $2.75 per share with a director of the Company. On July 30, 2001, the director delivered to the Company 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 of 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. EQUITY ISSUANCES During the nine month period ended September 30, 2001 the Company issued the following equity securities: Meteor transaction As part of the merger with Meteor Industries, Inc., the Company issued 3,874,511 shares of common stock and 365,000 shares of $1.00 Series B Convertible Preferred stock as well as 365,000 Series B Preferred warrants exercisable at $2.50 per share. There were also 4,483,101 Class B warrants issued at an exercise price of $5.50 per share as part of the transaction. Additionally, the Company carried over 2,047,935 options to purchase common stock exercisable at $2.50 to $5.25 per share from Meteor as well as 690,000 warrants exercisable at $7.15 per share. Other common stock issuances During January 2001, the Company sold 400,000 shares of common stock at $2.75 per share to Meteor Industries, Inc. for $2.75 per share. The Company issued 550,000 shares of common stock in January and April 2001 to the former shareholders of Edge as part of the completion of the merger (see Note B). In June 2001, the Company issued 400,000 shares of common stock valued at $4.45 per share as part of the purchase of Red Wing Business Systems, Inc. (See Note B) In June 2001, the Company sold 500,000 shares of its common stock at $3.00 per share in a private placement of its common stock. The private placement resulted in proceeds of $1.5 million. In September 2001, the Company issued 299,185 shares of common stock valued at $4.89 per share as part of the purchase of Champion Business Systems, Inc. (See Note B) During the nine month period ended September 30, 2001 the Company issued 608,472 shares of common stock pursuant to option and warrant exercises. Proceeds of $2,852,000 were received from the exercise of options. Other option grants During the nine months ended September 30, 2001, the Company granted 1,918,000 options to purchase common stock at prices ranging from $1.00 to $5.20 per share in addition to those options carried over from the Meteor merger. All options were granted with exercise prices equal to the fair market value of the Company's common stock on the date of grant with the exception of the following grants for which compensation was recorded: In March 2001, an employee was granted options to purchase 25,000 shares of common stock at $1.00 per share at a time when the fair value of the Company's common stock was $2.75 per share. Deferred compensation of $43,750 was established and is being expensed over the vesting period of the options. In April 2001, one employee was granted options to purchase 40,000 options to purchase common stock at $1.00 per share and another was granted options to purchase 100,000 options at $2.00 per share at a time when the fair value of the Company's common stock was $2.75 per share. Deferred compensation of $145,000 was established and is being expensed over the vesting period of the options. In July 2001, 550,000 options were granted to two of the Company's executives with an exercise price of $5.00 per share when the fair market value of common stock was $5.87. Deferred compensation of $478,500 was established and is being expensed over the vesting period of the options. Deferred compensation was reversed by $35,000 in the nine months ending September 30, 2001 for prior deferred compensation established related to employees that left the Company had their options cancelled prior to exercise. The total amount compensation expense recorded for the nine months ending September 30, 2001 was $247,000. Following is a roll forward of the deferred compensation account since December 31, 2001: Balance at December 31, 2000 $172,813 Additions 667,250 Correlations (35,000) Compensation expense (247,106) -------- Balance at September 30, 2001 $557,957 ========
Other Warrant Grants During June 2001 the Company issued 300,000 warrants to purchase common stock at $5.50 per share in conjunction with the private placement of our common stock. Our stock was sold in units of 50,000 shares with attached warrants to purchase 30,000 shares of common stock. The Company assigned $114,000 of the purchase price to warrants using the Black Scholes pricing model. In addition the warrants issued with as part of the units sold, we also issued warrants totaling 450,000 with an exercise price of $5.50 per share and 250,000 with an exercise price of $7.50 per share for fundraising services. No value was assigned to these warrant issuances as they were for fundraising services and do not impact our results of operations. The Company also issued 7,636 warrants to purchase common stock at $2.75 to a vendor in exchange for services completed. The warrants were valued at $23,748 using the Black Scholes pricing model with the following assumptions, interest rate of 4.6%, expected time to exercise of 5 years, and volatility of 37%. NOTE F - IMPACT OF NEW ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment test in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. Since the Champion Business Systems acquisition occurred after July 1, 2001, goodwill resulting from that acquisition is not amortized and instead is subject to an annual impairment test. Goodwill resulting from our other acquisitions will cease amortization on January 1, 2002. NOTE G - SUBSEQUENT EVENTS FMS Marketing, Inc. In October 2001, the Company completed its acquisition of FMS Marketing, Inc. ("FMS/Harvest"), an Illinois corporation. FMS/Harvest, which operates as a wholly-owned subsidiary of the Company, produces and sells accounting and financial management software for small and medium-sized farm and agricultural producers. Pursuant to a Stock Purchase Agreement (the "Agreement") dated October 10, 2001, the Company purchased all of the outstanding capital stock from the shareholders of FMS/Harvest (the "FMS Sellers"). The FMS Sellers received an aggregate of 250,000 shares of the Company's common stock and cash in the aggregate of $600,000, of which $300,000 was delivered at the closing. Under the Agreement, the Company is obligated to pay the remaining $300,000 of cash in six months of the closing date. As security for the Company's obligations to make the remaining cash payment, the Company agreed to grant a security interest in the assets of FMS/Harvest to the FMS Sellers. 11 ACTIVE IQ TECHNOLOGIES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report, the audited financial statements and notes thereto included in the Company's Form 8-K (filed May 14, 2001 under Meteor Industries, Inc., "METR") for the fiscal year ended December 31, 2000, and the unaudited condensed consolidated financial statements and notes thereto included in the Company's Form 8-K (filed June 15, 2001 under Meteor Industries, Inc., "METR") for the quarter ended March 31, 2001 and Form 10-Q for the quarter ended June 30, 2001. OVERVIEW The Company was originally incorporated in Colorado in December 1992 under the name Meteor Industries, Inc. On April 30, 2001, the Company, activeIQ Technologies Inc. ("Old AIQ") and a wholly-owned subsidiary of the Company closed a triangular reverse merger transaction whereby Old AIQ merged with and into the Company subsidiary. Immediately prior to the merger, the Company (i) sold all of its assets relating to its petroleum and gas distribution business, (ii) was reincorporated under Minnesota law, and (iii) changed its name to Active IQ Technologies, Inc. As a result of the sale of the Company's petroleum and gas distribution assets, it discontinued all operations in the petroleum and gas distribution business and has adopted the business plan of Old AIQ. Because Old AIQ was treated as the acquiring company in the merger, all financial and business information contained herein relating to periods prior to the merger is the business and financial information of Old AIQ. Old AIQ was incorporated in Minnesota on April 11, 1996, and was considered a development stage company until January 2001, when it began to recognize revenues as a result of an acquisition (see Note B - Business Combinations). Old AIQ was formed to develop and provide eBusiness application software and services for small-to-medium sized accounting software customers. Since its inception and up through the merger, Old AIQ's efforts have been devoted to the development of its principal product and raising capital. The Company also develops and markets accounting and financial management software for small-to-medium sized businesses through its subsidiaries: Red Wing Business Systems, Inc., Champion Business Systems, Inc., and FMS Marketing, Inc., acquired in October 2001, (see Note B - Business Combinations and Note G - Subsequent Events). The Company currently, through its Epoxy Network, offers both an Internet merchandising system called "Storefront" and a tool for managing customer information named "Account Management". Also, the Company is in the early stages of development of other eBusiness solutions, of which some solutions will be released to the market during the 4th quarter of 2001. During the period required to develop significant revenue, the Company may require additional funds that may not be available. The Company is subject to risks and uncertainties common to growing technology-based companies, including but not limited to: its limited operating history, the rapid technological changes of the Internet, acceptance of the products developed, dependence on its current personnel, the ability to form strategic relationships with third-party manufacturers, security and privacy issues. RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000. Net Revenues 12 Revenues for the three months ended September 30, 2001 were $645,182 compared to no revenue for the same period in 2000. Our net revenues are as follows: the Epoxy Network generated $60,163, $585,019 from Red Wing and Champion. The Champion merger closed on September 18, 2001. During 2000, our company was in the development stage and had not yet generated any revenue. The revenues for the nine months ended September 30, 2001 were $1,053,443 compared to no revenue for the same period in 2000. The revenues for the nine months ended September 30, 2001 were derived as follows: a net of $206,000 from our agreement with Stellent, Inc. (as described in the following paragraph); $147,571 from our Epoxy Network; and $699,872 from Red Wing and Champion, the latter of which we acquired on September 18, 2001. During fiscal 2000, our company was in the development stage and had not yet generated any revenues. In December 2000, we entered into an agreement with Stellent, Inc., formerly IntraNet Solutions, Inc. ("Stellent"), whereby Stellent cancelled a promissory note and accrued interest thereon in the amounts of $300,000 and $6,000, respectively, in exchange for an advance on fees payable upon the resale of our Content Categorizer product. Stellent was to pay to our company on a quarterly basis 30 percent of the revenue generated by sales of Content Categorizer. The amount converted of $306,000 was reflected as deferred revenue on our consolidated balance sheet as of December 31, 2000. Also in December 2000, we entered into a nonexclusive reseller agreement with Stellent that allowed us to resell Stellent's Xpedio software on a worldwide basis. We agreed to pay Stellent 15 percent of net receipts resulting from our sales of Xpedio. In connection with the agreement, we paid Stellent $500,000 as a nonrefundable prepaid royalty, of which $150,000 was paid in cash and the remaining $350,000 was paid by issuing to Stellent 127,273 shares of our common stock (valued at $2.75 per share). We recorded this $500,000 as "other assets" on our consolidated balance sheet as of December 31, 2000. In April 2001, we sold our Content Categorizer to Stellent for $400,000 in cash and the satisfaction of the advance on fees payable of $306,000, for a total of $706,000. In connection with this agreement, we netted the prepaid royalty against the sales transaction since our management decided to terminate all selling efforts of the Xpedio software. The $500,000 asset write-off was recorded as a reduction of revenue since both transactions occurred simultaneously and were with a related party. Our ability to continue our present operations and successfully implement our expansion plans is contingent upon our ability to increase our revenues and ultimately attain and sustain profitable operations. Without additional financing, the cash generated from our current operations may not be adequate to fund operations and service our indebtedness during the next four quarters of operations. Costs and Expenses Selling, general and administrative expenses for the three months ended September 30, 2001 were $2,785,237 compared to $670,559 for the same period in 2000. The $2,114,678 increase in selling, general and administrative expenses was primarily due to the increased corporate overhead structure for the development of our eBusiness software and services. 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. Again, 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. The Company expects to incur operating losses throughout 2001. Depreciation and amortization for the three months ended September 30, 2001 was $902,377 compared to $8,000 for the same period in 2000. Depreciation and amortization expenses of property, equipment and other intangibles were $79,076 and goodwill and other acquisition related intangible amortization expense was $823,301. Goodwill and other acquisition related intangible amortization represents the excess of the purchase price and related costs over the fair value of the net assets that the Company acquires through its mergers and acquisitions. The Company amortizes acquired goodwill and other intangibles on a straight-line basis over a two-year period. 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. Product development expenses for the three months ended September 30, 2001 were $172,498 compared to $256,770 for the same period in 2000. The $84,272 decrease in product development expenses was due to the establishment of a corporate location opened in Minnesota, thereby shifting emphasis from development activities, to the general and administrative activities required to implement future revenues. 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. Effective May 23, 2001, the Company closed its office located in Boston, Massachusetts. With this closure, for the three months ended September 30, 2001, the Company booked a final loss on disposal of assets of $10,538 relating to the Boston office. In order to facilitate an early release from our office lease, a mutual arrangement was agreed upon with the landlord regarding the furniture and fixtures located within our space. The Company's other income and expense consists of interest income and interest expense. Interest income for the three months ended September 30, 2001 was $77,451 compared to $860 for the same period in 2000. Interest income for the nine months ended September 30, 2001 was $126,305 compared to $790 for the same period 13 in 2000. This income represents interest earned on our short-term investments. The Company expects interest income to decrease in the future as cash is used to fund operations and for investments in infrastructure. Interest expense for the three months ended September 30, 2001 was $30,419 compared to $32,360 for the same period in 2000. 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. The Company expects interest expense to remain consistent over the remainder of the next quarter. Liquidity and Capital Resources The 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. The 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, the Company sold 400,000 shares of common stock for net proceeds of $1,100,000 as part of the Meteor merger. On January 16, 2001, the Company completed the 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 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, Inc. ("Red Wing"), a Minnesota corporation. Red Wing, which operates as a wholly-owned subsidiary of the Company, 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 14 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, the 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 the Company's obligations to make the first two future cash payments of $400,000 each, the Company granted a security interest in the newly-acquired shares of Red Wing to the Sellers pursuant to a pledge agreement by and among the Company and the Sellers dated as of June 6, 2001. In June 2001, the Company raised cash proceeds of $1,500,000 from the private placement of 10 Units at a purchase price of $150,000 per Unit. Each Unit consisted of 50,000 shares of the Company's common stock, par value $.01 per share, and one five-year warrant to purchase 30,000 shares of the Company's common stock with an exercise price of $5.50. In December 2000, the Company entered into a subscription receivable for the purchase of 100,000 shares of common stock at a price of $2.75 per share with a director of the Company. On July 30, 2001, the director delivered to the Company 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 of 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, the Company completed its merger with privately held Champion Business Systems, Inc. ("Champion"), a Colorado corporation. Champion, which operates as a wholly-owned subsidiary of the 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 the 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 the Company's 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. The Company 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. The Company anticipates that it will continue to experience growth in its operating expenses for the foreseeable future and that its operating expenses will be a material use of the Company's cash resources. The Company believes that the existing sources of liquidity and the results of its operations will provide cash to fund operations for at least the next twelve months, although the Company may seek to raise additional capital during that period. There can be no assurance that additional capital will be available on terms acceptable to the Company or on any terms whatsoever. 15 PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS In connection with the Company's acquisition of Champion Business Systems, Inc. ("Champion"), on September 18, 2001, the Company issued an aggregate of 299,185 shares of common stock to 21 former Champion shareholders. The issuance was exempt from registration based upon Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder. All of such former Champion shareholders represented to the Company that they met the definition of an "accredited investor" set forth in Rule 502; provided, however, that four such former Champion shareholders who were not accredited investors represented that they had utilized a representative and, together with such knowledge and experience that they were capable of evaluating the risks and merits of their investment in the Company's common stock. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS None (b) REPORTS ON FORM 8-K On August 13, 2001, the Company filed a Current Report on Form 8-K/A dated June 6, 2001, under Items 2 and 7. The Company filed a current report on Form 8-K on June 15, 2001 to announce the completion of the merger by and among the Company, Red Wing Business Systems, Inc. and the shareholders of Red Wing Business Systems, Inc. The Company filed this amendment to Form 8-K to include financial statements and pro forma financial information required by Item 7 of Form 8-K. On September 21, 2001, the Company filed a Current Report on Form 8-K dated September 18, 2001, under Items 2 and 7, announcing the completion of the merger by and among the Company, Champion Business Systems, Inc. and the shareholders of Champion Business Systems, Inc. and to announce that financial statements and pro forma financial information will be filed on or before December 3, 2001. 16 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ACTIVE IQ TECHNOLOGIES, INC. By: /s/ D. Bradly Olah ------------------------- D. Bradly Olah Chief Executive Officer and Chief Financial Officer Date: April 12, 2002 17 -----END PRIVACY-ENHANCED MESSAGE-----