-----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, QuJyrSRmjvoTNxfi7V1QClhcaJy7LHAzkwpi6MUW45jfFku0uH/QlalMt3XHFFPP Mu9ZdjES3tE25txc8yxBqw== 0000950137-02-002256.txt : 20020417 0000950137-02-002256.hdr.sgml : 20020417 ACCESSION NUMBER: 0000950137-02-002256 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010430 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Changes in registrant's certifying accountant ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTIVE IQ TECHNOLOGIES INC CENTRAL INDEX KEY: 0000912875 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 412004369 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12401 FILM NUMBER: 02613768 BUSINESS ADDRESS: STREET 1: 601 CARLSON PARKWAY STREET 2: SUITE 1500 CITY: MINNETONKA STATE: MN ZIP: 55305 BUSINESS PHONE: 9524495000 MAIL ADDRESS: STREET 1: 601 CARLSON PARKWAY STREET 2: SUITE 1500 CITY: MINNETONKA STATE: MN ZIP: 55305 FORMER COMPANY: FORMER CONFORMED NAME: METEOR INDUSTRIES INC DATE OF NAME CHANGE: 19960313 8-K/A 1 c66349ae8-ka.txt AMENDMENT TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 8-K/A AMENDMENT TO CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 30, 2001 ACTIVE IQ TECHNOLOGIES, INC. (Exact Name of Registrant as Specified in Charter) Minnesota 0-27968 41-2004369 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 5720 Smetana Drive, Suite 101 Minnetonka, Minnesota 55343 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (952) 449-5000 (Former Name or Former Address, if Changed Since Last Report) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. (a) Merger Transactions 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. (the "Registrant"), activeIQ Technologies Inc., a Minnesota corporation ("AIQ") and MI Merger, Inc., Minnesota corporation and a wholly-owned subsidiary of the Registrant ("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 the Merger Agreement, the Registrant 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. The Registrant's shareholders approved both the Merger and the Reincorporation Merger on March 27, 2001, and both transactions became effective on April 30, 2001. Pursuant to the Merger Agreement, in exchange for shares of AIQ common stock, each shareholder of AIQ common stock is entitled to receive one share of the Registrant'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 the Registrant, which were cancelled upon the effective time of the Merger. In addition to receiving shares of the Registrant's common stock, each of the former AIQ shareholders is entitled to receive a warrant to purchase two shares of the Registrant'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 per share. The Registrant may redeem the warrants at a price of $.01 per warrant share upon notice to the holders thereof after the closing price of the Registrant's common stock (as quoted on the Nasdaq Small Cap Market) has averaged $7.50 for 14 consecutive days. (b) Disposition of Substantially All of Registrant's Assets. The Merger Agreement further provided that prior to the closing, the Registrant was required to dispose of all of its assets relating to its petroleum distribution business. Accordingly, concurrent with the Merger, the Registrant sold to Capco Energy, Inc. ("Capco") all of its shares of capital stock of Meteor Enterprises, Inc., its wholly-owned subsidiary, which owned, directly or indirectly, all of the Registrant's petroleum-related assets (the "Asset Sale") for a purchase price of $5,500,000 (the "Asset Sale"). The purchase price was paid to Registrant by delivery of (i) cash in the amount of $4,697,501, (ii) a 9-month promissory note in the principal amount of $500,000 (which note is secured by 1,500,000 shares of Capco common stock beneficially held by a Capco affiliate), and (iii) 100,833 shares of the Registrant's common stock held by Capco, which the parties valued at $3.00 per share. Capco is a significant shareholder of the Registrant and 3 members of the Registrant's board of directors (as it existed prior to the Asset Sale and Merger) were also directors of Capco. Business Valuation Services delivered a fairness opinion to the Registrant that the consideration paid by Capco for the Registrant's assets was fair. The Registrant's shareholders approved of the Asset Sale on March 27, 2001. 1 ITEM 5. OTHER EVENTS. (a) As described in the Registrant's Form 8-K filed on May 14, 2001, effective April 30, 2001, MI Merger, Inc., the Registrant's wholly-owned subsidiary, was merged with and into activeIQ Technologies Inc., a Minnesota corporation ("AIQ"), with AIQ as the surviving corporation and a wholly-owned subsidiary of the Registrant. Concurrent with the AIQ merger transaction, the Registrant sold its wholly-owned subsidiary, Meteor Enterprises, Inc., a Colorado corporation, which held, directly or indirectly, substantially all of the Registrant's operating assets. Set forth below in this Item 5(a) are the financial statements and accompanying notes of AIQ for the quarter ended March 31, 2001. ACTIVEIQ TECHNOLOGIES INC. CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 2001 2000 ----------- ----------- (UNAUDITED) ASSETS Current Assets Cash and equivalents $ 1,132,084 $ 1,349,457 Accounts receivable-trade 7,134 -- Prepaid expenses 73,193 57,285 ----------- ----------- Total current assets 1,212,411 1,406,742 Property and equipment, net 582,274 549,116 Prepaid royalties 500,001 500,001 Other assets, net 233,001 216,072 Goodwill and other intangibles, net 1,166,752 -- ----------- ----------- $ 3,694,439 $ 2,671,931 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Bank line of credit $ 95,350 $ 97,529 Accounts payable 320,616 257,509 Accrued expense 62,596 83,141 Current portion of capital lease obligations 24,154 19,058 ----------- ----------- Total current liabilities 502,716 457,237 Deferred revenue 306,000 306,000 Capital lease obligations, net of current portion 54,822 27,158 ----------- ----------- Total liabilities 863,538 790,395 Stockholders' Equity Common stock, $.01 par value, 6,666,666 shares authorized, 45,609 38,359 4,560,911 and 3,835,911 common shares issued and outstanding Additional paid in capital 7,658,989 5,633,040 Stock subscription receivable (312,500) (312,500) Deferred compensation (140,913) (172,813) Warrants 170,881 170,881 Accumulated deficit (4,591,165) (3,475,431) ----------- ----------- Total stockholders' equity 2,830,901 1,881,536 ----------- ----------- $ 3,694,439 $ 2,671,931 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements 2 ACTIVEIQ TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, ------------------------------ 2001 2000 ----------- ----------- (unaudited) (unaudited) Revenues $ 35,311 $ -- ----------- ----------- Operating expenses: Selling, general and administrative 782,311 287,843 Depreciation and amortization 188,984 -- Product development 198,195 86,385 ----------- ----------- Total operating expenses 1,169,490 374,228 ----------- ----------- Loss from operations (1,134,179) (374,228) Other income (expense): Interest income 23,858 22 Interest expense (5,413) (4,844) ----------- ----------- Total income or (expense) 18,445 (4,822) ----------- ----------- Net loss $(1,115,734) $ (379,050) =========== =========== Basic and diluted net loss per common share $ (0.25) $ (1.01) =========== =========== Basic and diluted weighted average outstanding shares 4,472,300 375,190 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements 3 ACTIVEIQ TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, --------------------------------- 2001 2000 --------------- -------------- (unaudited) (unaudited) OPERATING ACTIVITIES: Net loss $ (1,115,734) $ (379,050) Adjustments to reconcile net loss to cash flows from operating activities: Depreciation and amortization 188,984 - Deferred compensation expense 31,900 - Changes in operating assets and liabilities: Accounts receivable (7,134) - Prepaid expenses (15,908) - Accounts payable 45,451 (35,208) Accrued expenses (20,545) (507) Other assets (68,293) - --------------- -------------- Net cash used in operating activities (961,279) (414,765) --------------- -------------- INVESTING ACTIVITIES: Acquisition of Edge Technologies (308,016) - Purchases of property and equipment (45,899) (111,246) --------------- -------------- Net cash used in investing activities (353,915) (111,246) --------------- -------------- FINANCING ACTIVITIES: Net decrease in bank line of credit (2,179) - Cash proceeds from sale of common stock 1,100,000 201,000 --------------- -------------- Net cash provided by financing activities 1,097,821 201,000 --------------- -------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (217,373) (325,011) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,349,457 409,917 --------------- -------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,132,084 $ 84,906 =============== ============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 5,414 $ 4,844 Non-cash financing and investing activities: Common stock issued in acquisitions $ 933,199 $ - Capital lease obligations $ 45,460 $ -
The accompanying notes are an integral part of these condensed consolidated financial statements 4 ACTIVEIQ TECHNOLOGIES INC. Notes to condensed consolidated financial statements NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed consolidated financial statements have been prepared by activeIQ Technologies Inc. ("the Company" or "ActiveIQ"), 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 Registrant's Form 8-K filed on May 14, 2001. 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 quarter ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year as a whole. Nature of Business The Company 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). The Company was formed to develop and provide Internet eBusiness application software and services for the small to mid-sized accounting software customers. Since its inception, the Company's efforts have been devoted to the development of its principal product and raising capital. The Company is in the early stages of introducing its products to the market. 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 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. 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. 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, software development costs are expensed during the preliminary project stage. For the three months ended March 31, 2000 and 2001, the Company expensed all software or other development costs as research and development since such costs were incurred during the preliminary project stage. NOTE B - BUSINESS COMBINATION 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. 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 5 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. The additional consideration will be recorded in the quarter ending June 30, 2001. With closing costs, the total consideration plus the fair value of the net liabilities assumed, after the payment of the earnout on May 2, 2001 discussed above, will be approximately $2,264,000, consisting primarily of goodwill and other intangibles. As of March 31, 2001, $1,302,422 of goodwill had been recorded less $135,670 in amortization expense. The Company is amortizing the acquired goodwill and other intangibles on a straight-line basis over a two-year period. The accompanying unaudited pro forma condensed results of operations for the three months ended March 31, 2001 and 2000, give effect to the acquisition of Edge, as if such transaction had occurred at the beginning of the period. 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 Three Months Ended March 31 -------------------------------- 2001 2000 ---------- --------- Revenues $ 42,247 $ 13,738 Loss from operations 1,160,377 543,265 Net loss 1,141,932 548,087 Basic and diluted net loss per common share $ 0.26 $ 0.78
NOTE C - BANK LINE OF CREDIT The Company had a $200,000 revolving line of credit with a bank which expired May 2000. Outstanding borrowings were $200,000 at December 31, 1999. In June 2000, the Company paid down a portion of the revolving line of credit and refinanced the balance of $100,000 under a term note with the same bank which is due June 2001. The term note requires monthly principal and interest payments of $1,358. Borrowings under the term note accrue interest at prime plus 1 percent (10.00 percent at March 31, 2000) and are personally guaranteed by one of the Company's stockholders. Borrowings totaling $95,350 were outstanding at March 31, 2000. In May 2001, the Company paid off the line of credit. NOTE D - NONRECOURSE NOTE RECEIVABLE In October 1999, a director of the Company purchased 8,333 shares of the Company's common stock at $37.50 per share in exchange for a nonrecourse note totaling $312,500. The note is due and payable in full 90 days following the date the individual ceases to be a director of the Company and is recorded as stock subscription receivable on the accompanying balance sheet. In the event that the director ceases to be a member of the Company's board of directors through October 2001, the Company shall have the option to repurchase up to 3,333 shares of the common stock held by the director for $37.50 per share. In March 2001, the director resigned from the board. In June 2001, the Company redeemed 8,333 shares and cancelled the note. NOTE E - SUBSEQUENT EVENTS Mergers 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. (the "Registrant"), activeIQ Technologies Inc., a Minnesota corporation ("AIQ") and MI Merger, Inc., Minnesota corporation and a wholly-owned subsidiary of the Registrant ("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 the Merger Agreement, the Registrant 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. The Registrant's shareholders approved both the Merger and the Reincorporation Merger on March 27, 2001, and both transactions became effective on April 30, 2001. Since the Registrant had only monetary assets and no operations, the merger will be accounted for as the issuance of stock by AIQ in exchange for monetary assets of the 6 Registrant. Pursuant to the Merger Agreement, in exchange for shares of AIQ common stock, each stockholder of AIQ common stock is entitled to receive one share of the Registrant'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 the Registrant, which were cancelled upon the effective time of the Merger. In addition to receiving shares of the Registrant's common stock, each of the former AIQ stockholders is entitled to receive a warrant to purchase two shares of the Registrant's common stock for every three shares of AIQ common stock held by such stockholder. The warrants, which expire on April 30, 2006, are exercisable at a price of $5.50 per share. The Registrant may redeem the warrants at a price of $.01 per warrant share upon notice to the holders thereof after the closing price of the Registrant's common stock (as quoted on the Nasdaq Small Cap Market) has averaged $7.50 for 14 consecutive days. On June 6, 2001, the Company completed its acquisition of Red Wing Business Systems, Inc. ("Red Wing"), a Minnesota corporation. Red Wing, which will operate as a wholly-owned subsidiary of the Company, produces and sells accounting and financial management software for small to mid-sized businesses, with an emphasis on 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. License Agreement In December 2000, the Company modified its software licensing agreement with one of its stockholders and entered into a reseller arrangement which allows the Company to resell the third party's software. In conjunction with the agreement, the Company paid $150,000 in cash and issued 127,273 shares of common stock valued at $2.75 per share as consideration for a nonrefundable, prepaid minimum royalty. This total amount of $500,001 is recorded as other assets in the accompanying balance sheet. Royalties payable under the reseller agreement will be applied to this balance. Also in December 2000, the Company signed an agreement with this same stockholder to exchange the Company's $300,000 promissory note and $6,000 of accrued interest for an advance on fees payable upon the resale of the Company's products. Accordingly, such amounts have been recorded as deferred revenue in the accompanying balance sheet. In April 2001, the Company sold the full right, title and interest in and to the intellectual property of its Content Categorizer to the stockholder for the consideration of $400,000 cash and the satisfaction of the deferred revenue liability. 7 Item 5(b) As indicated in Note B of the Financial Statements in Item 5(a), AIQ acquired Edge Technologies Incorporated ("Edge") on January 16, 2001. Set forth below in this Item 5(b) are the audited financial statements of Edge for fiscal years ended December 31, 1998, December 31, 1999, and December 31, 2000. Proforma financial information reflecting the acquisition is set forth under Item 7(b) of this Form 8-K/A. EDGE TECHNOLOGIES INCORPORATED FINANCIAL STATEMENTS DECEMBER 31, 1998, 1999 AND 2000 8 INDEX TO FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants 10 Financial Statements: Balance Sheets 11 Statements of Operations 12 Statements of Stockholders' Deficit 13 Statements of Cash Flows 14 Notes to Financial Statements 15-17
9 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Edge Technologies Incorporated: We have audited the accompanying balance sheets of Edge Technologies Incorporated as of December 31, 1999 and 2000, and the related statements of operations, stockholders' deficit and cash flows for the years ended December 31, 1998, 1999 and 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Edge Technologies Incorporated as of December 31, 1999 and 2000, and the results of its operations and its cash flows for the years ended December 31, 1998, 1999 and 2000, in conformity with accounting principles generally accepted in the United States of America. /s/Virchow, Krause & Company, LLP Minneapolis, Minnesota March 20, 2002 10 EDGE TECHNOLOGIES INCORPORATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31, 1999 2000 ------------- ------------- ASSETS CURRENT ASSETS: Cash $ 4,978 $ 46,193 Accounts receivable 11,655 3,266 Prepaid expenses 0 17,000 ------------- ------------- Total current assets 16,633 66,459 PROPERTY AND EQUIPMENT, NET 9,947 5,251 DEPOSIT 196 196 ------------- ------------- $ 26,776 $ 71,906 ============= ============= LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Current portion of long-term debt $ 2,836 $ 2,040 Accounts payable 26,396 66,025 Due to stockholders 22,600 20,000 Accrued interest 3,511 5,002 ------------- ------------- Total current liabilities 55,343 93,067 LONG-TERM DEBT, NET OF CURRENT PORTION 1,793 0 ------------- ------------- Total liabilities 57,136 93,067 ------------- ------------- STOCKHOLDERS' DEFICIT: Capital stock, no par value, 2,500 shares authorized, 211.64 common shares issued and outstanding 37,616 37,616 Accumulated deficit (67,976) (58,777) ------------- ------------- Total stockholders' deficit (30,360) (21,161) ------------- ------------- $ 26,776 $ 71,906 ============= =============
See accompanying notes to financial statements. 11 EDGE TECHNOLOGIES INCORPORATED STATEMENTS OF OPERATIONS
YEAR ENDED ---------------------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, 1998 1999 2000 ------------ ------------- ------------ REVENUES: Consulting $ 19,955 $ 53,402 $ 41,550 Account wizard 0 6,329 88,386 ----------- ------------ ----------- Total revenues 19,955 59,731 129,936 ----------- ------------ ----------- OPERATING EXPENSES: Advertising 0 0 220 Automobile 1,816 1,072 2,569 Automobile lease 8,308 7,309 6,699 Bank and credit card charges 723 1,176 2,388 Consulting 6,450 495 50 Depreciation 2,853 3,953 4,696 Dues and subscriptions 185 371 824 Hosting fees 0 0 10,921 Insurance 7,208 7,729 7,118 Internet and cable fees 2,851 4,633 4,702 Meals and entertainment 1,419 1,237 1,742 Office 10,456 8,241 7,042 Postage and delivery 1,698 2,043 1,193 Professional fees 1,244 715 23,902 Rent 18,000 17,000 20,400 Repairs and maintenance 3,725 1,199 1,233 Research and development 5,363 454 726 Telephone 4,094 6,812 8,970 Travel and related 2,534 2,504 4,790 Utilities 1,655 1,920 2,385 Miscellaneous 728 35 1,423 ----------- ------------ ----------- Total operating expenses 81,310 68,898 113,993 ----------- ------------ ----------- INCOME (LOSS) FROM OPERATIONS (61,355) (9,167) 15,943 ----------- ------------ ----------- OTHER INCOME (EXPENSE): Interest expense (2,887) (8,068) (6,744) ----------- ------------ ----------- Total other income (expense) (2,887) (8,068) (6,744) ----------- ------------ ----------- NET INCOME (LOSS) $ (64,242) $ (17,235) $ 9,199 =========== ============ ===========
See accompanying notes to financial statements. 12 EDGE TECHNOLOGIES INCORPORATED STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
COMMON STOCK ---------------------- ACCUMULATED SHARES AMOUNT DEFICIT TOTAL --------- ----------- ------------ ------------ BALANCE - DECEMBER 31, 1997 200.00 $ 1,000 $ 13,501 $ 14,501 Issuance of common stock for cash 7.41 20,000 -- 20,000 Net loss -- -- (64,242) (64,242) --------- ----------- ----------- ------------ BALANCE - DECEMBER 31, 1998 207.41 21,000 (50,741) (29,741) Issuance of common stock for cash 3.17 5,000 -- 5,000 Conversion of note payable and accrued interest to common stock 1.06 11,616 -- 11,616 Net loss -- -- (17,235) (17,235) --------- ----------- ----------- ------------ BALANCE - DECEMBER 31, 1999 211.64 37,616 (67,976) (30,360) Net income -- -- 9,199 9,199 --------- ----------- ----------- ------------ BALANCE - DECEMBER 31, 2000 211.64 $ 37,616 $ (58,777) $ (21,161) ========= =========== =========== ============
See accompanying notes to financial statements. 13 EDGE TECHNOLOGIES INCORPORATED STATEMENTS OF CASH FLOWS
YEAR ENDED ------------------------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, 1998 1999 2000 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (64,242) $ (17,235) $ 9,199 Adjustments to reconcile net income (loss) to cash flows from operating activities: Depreciation 2,853 3,953 4,696 Changes in operating assets and liabilities: Accounts receivable 1,739 (10,871) 8,389 Prepaid expenses 0 0 (17,000) Accounts payable 12,101 9,896 39,629 Accrued expenses and interest 1,246 3,548 1,491 Customer deposits (15,000) 0 0 ---------- ---------- ----------- Cash flows from operating activities (61,303) (10,709) 46,404 ---------- ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (8,220) 0 0 ---------- ---------- ----------- Cash flows from investing activities (8,220) 0 0 ---------- ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 10,000 0 0 Net increase (decrease) in due to stockholders 29,589 (10,000) (2,600) Proceeds from long-term debt 8,221 0 0 Payments on long-term debt (1,031) (2,561) (2,589) Proceeds from sale of common stock 20,000 5,000 0 ---------- ---------- ----------- Cash flows from financing activities 66,779 (7,561) (5,189) ---------- ---------- ----------- INCREASE (DECREASE) IN CASH (2,744) (18,270) 41,215 CASH, BEGINNING OF PERIOD 25,992 23,248 4,978 ---------- ---------- ----------- CASH, END OF PERIOD $ 23,248 $ 4,978 $ 46,193 ========== ========== =========== SUPPLEMENTAL CASH FLOWS INFORMATION: Cash paid for interest $ 1,641 $ 6,136 $ 5,253 Noncash investing and financing activities: Conversion of note payable to common stock $ 0 $ 10,000 $ 0 Conversion of accrued interest to common stock $ 0 $ 1,616 $ 0
See accompanying notes to financial statements. 14 EDGE TECHNOLOGIES INCORPORATED NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, 1999 AND 2000 (1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS - Edge Technologies Incorporated (the Company) was incorporated in Nevada on July 18, 1995. The Company provides internet commerce application software and services. The Company sells its products worldwide. ACCOUNTS RECEIVABLE - The Company considers all accounts receivable to be fully collectible, accordingly, no allowance for uncollectible accounts has been established. If accounts become uncollectible, they are charged to operations when that determination is made. The Company extends unsecured credit to customers in the normal course of business. PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost. Depreciation is provided for using the straight-line method over estimated useful lives of three to seven years. Maintenance, repairs and minor renewals are expensed when incurred. SOFTWARE DEVELOPMENT COSTS - Statement of Financial Accounting Standards (SFAS) No. 86 "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed" requires software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of recoverability of these costs requires considerable judgment by management with respect to certain external factors and hardware technologies. The Company has expensed all software development costs to date as research and development expenses since such costs as determined by management were incurred before technological feasibility of the software. REVENUE RECOGNITION - Revenue is recognized when earned. INCOME TAXES - The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an S corporation. In lieu of corporate income taxes, the stockholders of an S corporation are taxed on their proportionate share of the Company's taxable income (loss). Therefore, no provision or liability for federal or state income taxes has been included in the financial statements. ADVERTISING - Advertising costs are charged to expense as incurred. MANAGEMENT'S USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of 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. 15 EDGE TECHNOLOGIES INCORPORATED NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1998, 1999 AND 2000 (2) PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31:
1999 2000 ---------------- ----------------- Office furniture and equipment $ 24,544 $ 24,544 Less: accumulated depreciation (14,597) (19,293) ---------------- ----------------- Property and equipment, net $ 9,947 $ 5,251 ================ =================
(3) NOTE PAYABLE In 1998, the Company received a short-term note from an individual of $10,000. In 1999, the short-term note including accrued interest was converted to common stock. (4) DUE TO STOCKHOLDERS Two Company stockholders, who are also officers of the Company, have advanced funds to the Company. These advances are due upon demand and accrue interest at 7%. Advances outstanding at December 31, 1999 and 2000 were $22,600 and $20,000 respectively. Interest expense on the advances for the years ended December 31, 1998, 1999 and 2000 was $1,246, $1,932 and $1,491, respectively. (5) LONG-TERM DEBT Long-term debt consisted of the following at December 31:
1999 2000 ---------------- ----------------- American Express CapitaFinance LLC - monthly installments of $265 $ 4,629 $ 2,040 including interest at 10.7%, due July 2001, secured by equipment. Less: current portion (2,836) (2,040) ---------------- ----------------- Long-term debt, net $ 1,793 $ 0 ================ =================
(6) RELATED PARTY TRANSACTIONS OPERATING LEASES - The Company leases office space for its research and development activities from two of its stockholders on a month to month basis. Monthly base rent is $1,500. Rent expense was $18,000, $17,000 and $20,400 for the years ended December 31, 1998, 1999 and 2000, respectively. 16 EDGE TECHNOLOGIES INCORPORATED NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1998, 1999 AND 2000 (7) COMMITMENTS AND CONTINGENCIES SIGNIFICANT CUSTOMERS - The Company had sales to one customer representing approximately 75% of total revenues for the year ended December 31, 1998. The Company had sales to one customer representing approximately 73% of total revenues for the year ended December 31, 1999. Accounts receivable from the same customer represented 100% of total accounts receivable at December 31, 1999. The Company had sales to one customer (Active IQ Technologies, Inc) representing approximately 27% of total revenues for the year ended December 31, 2000. The Company had accounts receivable from two customers representing approximately 100% of total accounts receivable at December 31, 2000. (8) SUBSEQUENT EVENT The Company completed a merger with and into a wholly-owned subsidiary of ActiveIQ Technologies, Inc on January 16, 2001. 17 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Business Acquired. ACTIVEIQ TECHNOLOGIES INC. (A DEVELOPMENT STAGE COMPANY) Financial statements as of December 31, 1999 and 2000 together with report of independent public accountants REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To activeIQ Technologies Inc.: We have audited the accompanying balance sheets of activeIQ Technologies Inc. (a Minnesota corporation in the development stage) as of December 31, 1999 and 2000, and the related statements of operations, stockholders' equity (deficit) 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. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of activeIQ Technologies Inc. as of December 31, 1999 and 2000, and the results of its operations and its 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, in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company is a development stage enterprise with no significant operating results to date. The factors discussed in Note 1 to the financial statements raise a substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Arthur Andersen LLP Minneapolis, Minnesota, March 23, 2001 18 ACTIVEIQ TECHNOLOGIES INC. (A DEVELOPMENT STAGE COMPANY) Balance sheets
December 31, December 31, 1999 2000 ------------- ------------ ASSETS: Current assets- Cash and cash equivalents $ 409,917 $ 1,349,457 Prepaid expenses -- 57,285 ----------- ------------ Total current assets 409,917 1,406,742 Property and equipment, net 17,092 549,116 Prepaid royalties -- 500,001 Other assets, net 46,655 216,072 ----------- ------------ $ 473,664 $ 2,671,931 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities- Bank line of credit $ 200,000 $ 97,529 Accounts payable 88,592 257,509 Accrued expenses 713 83,141 Current portion of capital lease obligation -- 19,058 ----------- ------------ Total current liabilities 289,305 457,237 ----------- ------------ Deferred revenue -- 306,000 Capital lease obligation, net of current portion -- 27,158 Commitments and contingencies (Notes 1 and 6) Stockholders' equity- Capital stock, $.01 par value, 6,666,666 shares authorized, 373,626 and 3,835,911 common shares issued and outstanding 3,736 38,359 Additional paid-in capital 1,144,385 5,633,040 Stock subscription receivables (328,750) (312,500) Deferred compensation -- (172,813) Warrants -- 170,881 Deficit accumulated during the development stage (635,012) (3,475,431) ----------- ------------ Total stockholders' equity 184,359 1,881,536 ----------- ------------ $ 473,664 $ 2,671,931 =========== ============
The accompanying notes are an integral part of these balance sheets. 19 ACTIVEIQ TECHNOLOGIES INC. (A DEVELOPMENT STAGE COMPANY) Statements of operations
Period from inception Year ended (April 11, ----------------------------------------- 1996) to December 31, December 31, December 31, December 31, 1998 1999 2000 2000 ------------ ------------ ------------ ------------ REVENUES $ -- $ -- $ -- $ -- ---------- ---------- ------------ ------------ OPERATING EXPENSES: Selling, general and administrative 12,305 393,149 1,978,697 2,397,635 Depreciation and amortization -- 20,833 112,544 133,377 Product development -- -- 609,344 621,493 Loss on disposal of assets -- -- 105,360 105,360 ---------- ---------- ------------ ------------ Total operating expenses 12,305 413,982 2,805,945 3,257,865 ---------- ---------- ------------ ------------ Loss from operations (12,305) (413,982) (2,805,945) (3,257,865) ---------- ---------- ------------ ------------ OTHER INCOME (EXPENSE): Other income 86,613 -- 7,500 95,910 Interest expense (33,076) (24,445) (41,974) (117,782) Loss on available-for-sale securities (185,724) (23,554) -- (195,694) ---------- ---------- ------------ ------------ Total other expense (132,187) (47,999) (34,474) (217,566) ---------- ---------- ------------ ------------ Net loss $(144,492) $(461,981) $(2,840,419) $(3,475,431) ========== ========== ============ ============ BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.79) $ (1.92) $ (1.65) ========== ========== ============ BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 183,667 240,394 1,717,731 ========== ========== ============
The accompanying notes are an integral part of these financial statements. 20 ACTIVEIQ TECHNOLOGIES INC. (A DEVELOPMENT STAGE COMPANY) Statements of stockholders' equity (deficit)
Deficit accumulated Common Additional Stock Deferred during the stock paid-in subscription compen- development shares Amount capital receivable sation Warrants stage --------- --------- ----------- ------------ ---------- --------- ------------ ISSUANCE OF COMMON STOCK IN APRIL 1996 FOR CASH AT $.01 PER SHARE 228,000 $ 2,280 $ 720 $ -- $ -- $ -- $ -- Net loss -- -- -- -- -- -- (36,706) --------- --------- ----------- ---------- ---------- --------- ------------ BALANCE, December 31, 1996 228,000 2,280 720 -- -- -- (36,706) Unrealized loss on available-for- sale securities -- -- -- -- -- -- -- Net income -- -- -- -- -- -- 8,167 Comprehensive loss -- -- -- -- -- -- -- --------- --------- ----------- ---------- ---------- --------- ------------ BALANCE, December 31, 1997 228,000 2,280 720 -- -- -- (28,539) Repurchase of shares from shareholder in May 1998 at $.01 per share (76,000) (760) 760 -- -- -- -- Unrealized gain on available-for- sale securities -- -- -- -- -- -- -- Net loss -- -- -- -- -- -- (144,492) Comprehensive loss -- -- -- -- -- -- -- --------- --------- ----------- ---------- ---------- --------- ------------ BALANCE, December 31, 1998 152,000 1,520 1,480 -- -- -- (173,031) Issuance of common stock in May 1999 at $.75 per share in exchange for intellectual property 83,333 833 61,667 -- -- -- -- Capital contribution from shareholders in August 1999 -- -- 47,180 -- -- -- -- Issuance of common stock in August through September 1999 at $1.50 per share 88,266 883 131,517 -- -- -- -- Issuance of common stock in October 1999 for services at $1.50 per share 27,027 270 40,271 -- -- -- -- Issuance of common stock in October and November 1999 at $37.50 per share 23,000 230 862,270 (328,750) -- -- -- Unrealized loss on available-for- sale securities -- -- -- -- -- -- -- Net loss -- -- -- -- -- -- (461,981) Comprehensive loss -- -- -- -- -- -- -- --------- --------- ----------- ---------- ---------- --------- ------------ BALANCE, December 31, 1999 373,626 3,736 1,144,385 (328,750) -- -- (635,012) Issuance of common stock in March 2000 at $37.50 per share 4,667 47 174,953 -- -- -- -- Issuance of warrants to purchase common stock at $1.00 per share in June 2000 in payment of legal fees -- -- -- -- -- 22,682 -- Issuance of common stock in June 2000 at $.38 per share (net of offering costs of $10,000) 1,856,634 18,567 677,545 -- -- -- -- Repayment of stock subscription receivable -- -- -- 16,250 -- -- -- Conversion of accounts payable to common stock in June 2000 at $.38 per share 216,216 2,162 78,919 -- -- -- -- Issuance of options to purchase 60,000 shares at an exercise price of $1.00 as part of severance in June 2000 -- -- 25,800 -- -- -- -- Issuance of common stock in July 2000 for assets at $2.50 per share 151,200 1,512 376,488 -- -- -- -- Issuance of common stock in August through December 2000 at $2.75 per share (net of offering costs of $408,578) 956,780 9,568 2,079,050 -- -- 133,949 -- Issuance of common stock in September 2000 at $2.75 per share to director 100,000 1,000 274,000 -- -- -- -- Issuance of warrants to purchase 20,000 shares at $2.75 per share in August 2000 in conjunction with stockholder note payable -- -- -- -- -- 14,250 -- Conversion of notes payable to common stock in September 2000 at $2.75 per share 20,000 200 54,800 -- -- -- -- Deferred compensation related to September and November 2000 option grants -- -- 227,500 -- (227,500) -- -- Issuance of options to consultant exercisable at $1.00 per share in October 2000 -- -- 90,000 -- -- -- -- Issuance of common stock at $2.75 per share in December 2000 in payment of accounts payable 29,515 295 80,871 -- -- -- -- Issuance of common stock in December 2000 for assets at $2.75 per share 127,273 1,272 348,729 -- -- -- -- Deferred compensation expense -- -- -- -- 54,687 -- -- Net loss -- -- -- -- -- (2,840,419) --------- --------- ----------- ---------- ---------- --------- ------------ BALANCE, December 31, 2000 3,835,911 $ 38,359 $5,633,040 $(312,500) $(172,813) $170,881 $(3,475,431) --------- --------- ----------- ---------- ---------- --------- ------------
Accumulated other Compre- comprehensive hensive income (loss) Total loss ------------- ------------ ---------- ISSUANCE OF COMMON STOCK IN APRIL 1996 FOR CASH AT $.01 PER SHARE $ -- $ 3,000 Net loss -- (36,706) --------- ------------ BALANCE, December 31, 1996 -- (33,706) Unrealized loss on available-for- sale securities (28,135) (28,135) $ (28,135) Net income -- 8,167 8,167 ---------- Comprehensive loss -- -- $ (19,968) --------- ------------ ---------- BALANCE, December 31, 1997 (28,135) (53,674) Repurchase of shares from shareholder in May 1998 -- -- Unrealized gain on available-for- sale securities 28,353 28,353 $ 28,353 Net loss -- (144,492) (144,492) ---------- Comprehensive loss -- -- $(116,139) --------- ------------ ---------- BALANCE, December 31, 1998 218 (169,813) Issuance of common stock in May 1999 in exchange for intellectual property -- 62,500 Capital contribution from shareholders in August 1999 -- 47,180 Issuance of common stock in August through September 1999 at $1.50 per share -- 132,400 Issuance of common stock in October 1999 for services at $1.50 per share -- 40,541 Issuance of common stock in October and November 1999 at $37.50 per share -- 533,750 Unrealized loss on available-for- sale securities (218) (218) $ (218) Net loss -- (461,981) (461,981) ---------- Comprehensive loss -- -- $(462,199) --------- ------------ ---------- BALANCE, December 31, 1999 -- 184,359 Issuance of common stock in March 2000 at $37.50 per share -- 175,000 Issuance of warrants in June 2000 in payment of legal fees -- 22,682 Issuance of common stock in June 2000 at $.38 per share (net of offering costs of $10,000) -- 696,112 Repayment of stock subscription receivable -- 16,250 Conversion of accounts payable to common stock in June 2000 at $.38 per share -- 81,081 Issuance of options as part of severance in June 2000 -- 25,800 Issuance of common stock in July 2000 for assets at $2.50 per share -- 378,000 Issuance of common stock in August through December 2000 at $2.75 per share (net of offering costs of $408,578) -- 2,222,567 Issuance of common stock in September 2000 at $2.75 per share to director -- 275,000 Issuance of warrants in August 2000 in conjunction with stockholder note payable -- 14,250 Conversion of notes payable to common stock in September 2000 at $2.75 per share -- 55,000 Deferred compensation related to September and November 2000 option grants -- -- Issuance of options to consultant in October 2000 -- 90,000 Issuance of common stock in December 2000 in payment of accounts payable -- 81,166 Issuance of common stock in December 2000 for assets at $2.75 per share -- 350,001 Deferred compensation expense -- 54,687 Net loss -- (2,840,419) --------- ------------ BALANCE, December 31, 2000 $ -- $ 1,881,536 --------- ------------
The accompanying notes are an integral part of these financial statements 21 ACTIVEIQ TECHNOLOGIES INC. (A DEVELOPMENT STAGE COMPANY) Statements of cash flows
Period from inception Year ended (April 11, ------------------------------------------ 1996) to December 31, December 31, December 31, December 31, 1998 1999 2000 2000 ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (144,492) $ (461,981) $(2,840,419) $(3,475,431) Adjustments to reconcile net loss to cash flows from operating activities- Depreciation and amortization -- 20,833 112,544 133,377 Realized loss on sale of available-for-sale securities 185,724 23,554 -- 195,694 Loss on disposal of asset -- -- 105,360 105,360 Common stock and options issued for services -- 40,541 320,000 360,541 Issuance of options as part of severance -- -- 25,800 25,800 Deferred compensation expense -- -- 54,687 54,687 Amortization of original issue discount -- -- 14,250 14,250 Changes in operating assets and liabilities- -- Prepaid expenses -- -- 20,715 20,715 Accounts payable -- 88,592 272,767 361,359 Accrued expenses -- 713 88,428 89,141 Prepaid royalties -- -- (150,000) (150,000) Other assets -- (4,988) (261,028) (266,016) ------------ ------------ ------------ ------------ Cash flows provided by (used in) operating activities 41,232 (292,736) (2,236,896) (2,530,523) ------------ ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment -- (17,092) (267,103) (284,195) Proceeds from sale of available-for-sale securities 132,253 1,750 -- 366,286 Purchases of available-for-sale securities (20,875) -- -- (370,963) ------------ ------------ ------------ ------------ Cash flows provided by (used in) investing activities 111,378 (15,342) (267,103) (288,872) ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in bank line of credit (182,501) (41,827) (102,471) 97,529 Proceeds from stockholder note payable -- 55,000 355,000 211,163 Proceeds from sale of common stock -- 666,150 3,191,010 3,860,160 ------------ ------------ ------------ ------------ Cash flows provided by (used in) financing activities (182,501) 679,323 3,443,539 4,168,852 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (29,891) 371,245 939,540 1,349,457 CASH AND CASH EQUIVALENTS, beginning of period 68,563 38,672 409,917 -- ------------ ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 38,672 $ 409,917 $ 1,349,457 $ 1,349,457 ============ ============ ============ ============ SUPPLEMENTAL CASH FLOWS INFORMATION: Cash paid for interest $ 33,076 $ 24,445 $ 37,517 $ 113,325 NONCASH INVESTING AND FINANCING ACTIVITIES: Issuance of warrants in payment of legal fees -- -- 22,682 22,682 Issuance of stock in payment of accounts payable -- -- 162,247 162,247 Conversion of notes payable to common stock -- -- 55,000 55,000 Issuance of common stock for equipment -- -- 378,000 378,000 Issuance of common stock for license fees -- -- 350,001 350,001 Conversion of notes payable on advance on product purchases -- -- 306,000 306,000 Issuance of common stock in exchange for intellectual property -- 62,500 -- 62,500 Receipt of available-for-sale securities for payment on stockholder notes 142,180 -- -- 142,180 Issuance of common stock to director -- -- 225,000 225,000 Purchase of common stock with nonrecourse note receivable -- 312,500 -- 312,500
The accompanying notes are an integral part of these financial statements. 22 ACTIVEIQ TECHNOLOGIES INC. (A DEVELOPMENT STAGE COMPANY) Notes to financial statements 1 NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS activeIQ Technologies Inc. (the Company) was incorporated in Minnesota on April 11, 1996, and is considered a development stage company. The Company was formed to develop and provide Internet commerce application software and services. Since its inception, the Company's efforts have been devoted to the development of its principal product and raising capital. The Company is in the development stage and has yet to generate any significant revenues. Substantial time may pass before the Company realizes significant revenue, if any. Further, 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 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. The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred $3,475,431 in cumulative losses since inception. This factor creates an uncertainty about the Company's ability to continue as a going concern. Management plans to raise additional capital through the issuance of capital stock. Such capital may not be available or, if available, may not be available on terms acceptable to the Company. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. CASH AND CASH EQUIVALENTS The Company includes as cash equivalents certificates of deposit and all other investments with maturities of three months or less when purchased which are readily convertible into known amounts of cash. The Company maintains its cash in high-quality financial institutions. The balances, at times, may exceed federally insured limits. AVAILABLE-FOR-SALE SECURITIES During the years ended December 31, 1998 and 1999, the Company sold certain available-for-sale securities, which consisted of publicly-traded equity securities. For purpose of determining gross realized gains, the cost of available-for-sale securities is based on specific identification. Proceeds from the sale of these securities totaled $132,253, $1,750, and $0 for the years ended December 31, 1998, 1999 and 2000, respectively. Gross realized losses were $185,724, $23,554 and $0 for the years ended December 31, 1998, 1999 and 2000, respectively. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation is provided for using the straight-line method over periods ranging from 3 to 10 years. Maintenance, repairs and minor renewals are expensed when incurred. Property and equipment consists of the following:
December 31, December 31, 1999 2000 ------------ ------------ Computer equipment $ 7,293 $ 158,928 Furniture and equipment 9,799 82,741 Software -- 383,128 Leasehold improvements -- 4,427 Less- Accumulated depreciation -- (80,108) ------------ ------------ Net property and equipment $ 17,092 $ 549,116 ============ ============
23 The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net cash flows expected to be generated by the assets. If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. In 2000, the Company determined that a license agreement with a related party was impaired due to the discontinuation of the agreement. The Company recorded an impairment charge of $100,000 for the balance of the asset, during 2000. INTERNAL 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, software development costs are expensed during the preliminary project stage. For the years ended December 31, 1998, 1999 and 2000, the Company expensed all software or other development costs as research and development since such costs were incurred during the preliminary project stage. PRODUCT DEVELOPMENT Expenditures for software research and development are expensed as incurred. Such costs are required to be expensed to the point that technological feasibility of the software is established. Technological feasibility is determined after a working model has been completed. The Company's software research and development costs primarily relate to software development during the period prior to technological feasibility and are charged to operations as incurred. INCOME TAXES The Company accounts for income taxes using the asset and liability approach, which requires the recognition of deferred tax assets and liabilities for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Deferred tax assets are reduced by a valuation allowance to the extent that realization is not assured. NET LOSS PER COMMON SHARE Basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Basic and diluted loss per share is the same as the Company recorded a net loss in all periods presented. Options and warrants totaling 46,664 and 1,428,027 for the years ended December 31, 1999 and 2000, were excluded from the computation of diluted loss per share as their effect is antidilutive. COMPREHENSIVE INCOME Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income consists of the Company's net income (loss) and net unrealized gain on available-for-sale securities and is presented in the statement of stockholders' equity (deficit). The following table reconciles the unrealized gain or loss for each period as reported in comprehensive income on the accompanying statement of shareholders equity (deficit). No income tax expense (benefit) was recorded on any of the unrealized gains or losses as the Company does not record a tax provision (benefit) due to the uncertainty of future taxable income.
YEAR ENDED ------------------------------------------------------------ 1997 1998 1999 2000 -------------- -------------- -------------- -------------- Holding gains (losses) recognized during the period on available for sale securities $ (60,469) $ (157,371) $ (23,772) $ -- Less: reclassification adjustments for gains (losses) included in net income 32,334 (185,724) (23,554) -- -------------- -------------- -------------- -------------- Net unrealized gains (losses) on available for sale $ (28,135) $ 28,353 $ (218) $ -- securities
USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Ultimate results could differ from those estimates. DERIVATIVES On January 1, 1999, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded on the balance sheet at fair value. As the Company does not currently engage or plan to engage in derivative or hedging activities, the adoption of SFAS No. 133 had no impact to the Company's results of operations, financial position or cash flows. 2 BANK LINE OF CREDIT The Company had a $200,000 revolving line of credit with a bank which expired May 2000. Outstanding borrowings were $200,000 at December 31, 1999. In June 2000, the Company paid down a portion of the revolving line of credit and refinanced the balance of $100,000 under a term note with the same bank which is due June 2001. The term note requires monthly principal and interest payments of $1,358. Borrowings under the term note accrue interest at prime plus 1 percent (10.50 percent at December 31, 2000) and are personally guaranteed by one of the Company's stockholders. Borrowings totaling $97,529 were outstanding at December 31, 2000. 24 3 STOCKHOLDER NOTE PAYABLE In August 2000, one of the Company's stockholders advanced the Company $300,000 under a promissory note which was scheduled to mature on October 31, 2001. The note called for interest at 8 percent. In conjunction with the promissory note, the stockholder was granted a warrant to purchase 20,000 shares of the Company's common stock at $2.75 per share. The Company recorded original issue discount of $14,250, which was amortized to interest expense in 2000. In December 2000, the Company signed an agreement with the shareholder, as discussed further in Note 6, to convert the outstanding balance of this note to an advance on fees payable upon the resale of the Company's products which is recorded as deferred revenue in the accompanying balance sheet. 4 INCOME TAXES Through December 31, 2000, the Company generated a net operating loss for tax reporting purposes of approximately $3,200,000, which, if not used, will begin to expire in 2019. Future changes in the ownership of the Company may place limitations on the use of this net operating loss carryforward. The Company has recorded a full valuation allowance against its deferred tax asset, which consists primarily of operating loss carryforwards, due to the uncertainty of realizing the related benefit. 5 STOCKHOLDERS' EQUITY STOCK SPLITS In May 1999, the Company declared a 1,140-for-1 stock split. In June 2000, the Company declared a 1-for-15 reverse stock split. The stock splits have been retroactively reflected in the accompanying financial statements. COMMON STOCK SALES In May 1999, the Company issued 83,333 shares of common stock valued at $.75 per share in exchange for intellectual property. The intellectual property is recorded in other assets in the accompanying balance sheet and is being amortized over 24 months. In September 2000, the Company issued 100,000 shares of common stock at a price of $1.00 per share to a director as consideration for joining the board of directors. The fair value of the Company's common stock at the time of the issuance was $2.75 per share. As a result, the Company recorded expense of $225,000 in 2000 associated with this issuance. During August through September 1999, the Company sold 88,266 shares of common stock through a private placement, resulting in $132,400 of net proceeds. During November 1999 and March 2000, the Company sold an additional 14,667 and 4,667 shares of common stock, resulting in net proceeds of $533,750 and $175,000, respectively. In October 1999, the Company issued 27,027 shares of common stock to a contractor in exchange for amounts due them for services. The valuation of $40,541 was based upon the September 1999 private placement of $1.50 per share. In June 2000, the Company conducted a rights offering whereby existing shareholders purchased 1,856,634 shares of common stock for net proceeds of $712,362. In June 2000, the Company issued 216,216 shares of common stock to a contractor in exchange for amounts due them for services rendered under a licensing agreement. The valuation of $81,081 was based upon the value of the Company's common stock using the price the common stock was sold for in the rights offering in June 2000. In June 2000, the Company issued options to purchase 60,000 shares of common stock at $1.00 per share to a former employee for consulting services. The Company recorded expense equal to the value of the options issued. The value of the options of $25,800 was derived using the Black Scholes option pricing model. Key assumptions used in the calculation include interest rate of 5.5%, expected time to exercise of 5 years, volatility of 40%. In July 2000, the Company issued 151,200 shares of common stock in exchange for a license agreement. The share price of $2.50 was based upon the negotiated fair value of the license agreement (see note 6). In September 2000, the Company issued 20,000 shares of common stock to certain shareholders in payment of outstanding notes payable. The common stock was valued at $2.75 per share based upon the most recent private placement financing. In October 2000, the Company issued 45,000 options to purchase common stock at $1.00 per share in exchange for consulting services. The Black Scholes pricing model was used to determine the fair value of $2.00 per share for the options granted, of which one half was expensed in 2000, representing the portion that has been earned by the consultant. The remaining $45,000 has been recorded as a prepaid asset will be recorded as expense when earned, along with any additional variable charges based upon the fair value of the options on the date earned. Key assumptions used in the calculation of the Black Scholes pricing model include interest rate of 6%, expected time to exercise of 5 years, volatility of 40%. In December 2000, the Company issued 29,515 shares of common stock valued at $2.75 per share to a contractor in payment of accounts payable. The shares of common stock were valued based upon the Company's most recent financing. In December 2000, the Company issued 127,273 shares of common stock in exchange for a prepaid right to resell the third party's software product (see note 6). The fair value of the common stock issued was based upon the Company's most recent financing. During August through December 2000, the Company sold 956,780 shares of common stock in a private placement for net proceeds of $2,222,567. NONRECOURSE NOTE RECEIVABLE In October 1999, a director of the Company purchased 8,333 shares of the Company's common stock at $37.50 per share in exchange for a nonrecourse note totaling $312,500. The note is due and payable in full 90 days following the date the individual ceases to be a director of the Company and is recorded as stock subscription receivable on the accompanying balance sheet. In the event that the director ceases to be a member of the Company's board of directors through October 2001, the Company shall have the option to repurchase up to 3,333 shares of the common stock held by the director for $37.50 per share. WARRANTS For warrants issued to non-employees in exchange for services, the Company accounts for such warrants in accordance with Emerging Issue Task Force (EITF) Issue No. 96-18. The Company values the fair value of the equity instrument using the Black-Scholes pricing model unless the value of the services are more reliably measurable. The following assumptions were used to value the fair value of options and warrants given for which the fair value of the services were not more reliably measurable: dividend yield of 0%, risk-free interest rate of 4 to 6%, expected life equal to the contractual life of five years and volatility of 20 to 50%. Information regarding the Company's warrants is summarized below:
WEIGHTED AVG. RANGE OF NUMBER EXERCISE PRICE EXERCISE PRICE ---------------- ----------------- ----------------- Outstanding at December 31, 1998 Granted 10,000 $60.00 $60.00 Cancelled or expired 0 0.00 0.00 Exercised 0 0.00 0.00 ------------ ----------- ------------- Outstanding at December 31, 1999 10,000 60.00 60.00 Granted 140,694 3.04 1.00-37.50 Cancelled or expired 0 0.00 0.00 Exercised 0 0.00 0.00 ------------ ----------- ------------- Outstanding at December 31, 2000 150,694 $3.24 $1.00-$60.00 ============ =========== ============= Warrants exercisable at December 31, 2000 150,694 $3.24 $1.00-$60.00 ============ =========== =============
The weighted average fair value of warrants granted was $0 in 1999 as the warrants' exercise price significantly exceeded fair value and $1.21 in 2000. In June 2000, the Company issued 22,682 warrants to purchase common stock at $1.00 per share for payment of legal fees to the law firm discussed in Note 6. The warrants were valued at $1.00 per warrant. The value of the services rendered was $22,682, which amount was used as the basis for the valuation. In addition to the warrants discussed above and in Note 3, the Company has issued warrants through December 31, 2000 to purchase 108,012 shares of common stock at exercise prices ranging from $2.75 to $60.00 per share primarily in conjunction with certain financings. The fair value of these warrants has been recorded as a separate caption in stockholders' equity. The warrants expire through July 2007. 25 STOCK OPTION PLAN The Company has a 1999 Stock Option Plan and 2000 Director Stock Option Plan (the Plans), pursuant to which options to acquire an aggregate of 1,550,000 shares of the Company's common stock may be granted as determined by the board of directors. Stock options, stock appreciation rights, restricted stock and other stock and cash awards may be granted under the Plans. In general, options vest over a period of approximately 3 years and expire 10 years from the date of grant. Information regarding the Company's stock options is summarized below:
Weighted Range of average option exercise Shares exercise price price ---------- -------------- --------------- Outstanding at December 31, 1998 - $ - $ - Granted 46,997 29.52 15.00-37.50 Canceled or expired - - - Exercised - - - ---------- ------ ------------ Outstanding at December 31, 1999 46,997 29.52 15.00-37.50 Granted 1,277,000 1.34 1.00-2 .75 Canceled or expired (55,000) 14.27 1.00-37.50 Exercised - - - ---------- ------ ------------ Outstanding at December 31, 2000 1,268,997 $ 2.07 $ 1.00-37.50 ========== ====== ============ Options exercisable at December 31, 2000 500,253 $ 2.26 $ 1.00-37.50 ========== ====== ============
Options outstanding at December 31, 1999 have a weighted average remaining contractual life of 3.39 years. Options outstanding at December 31, 2000 have a weighted average remaining contractual life of 6.19 years. The following table summarizes information related to stock options outstanding at December 31, 2000:
WEIGHTED NUMBER OF AVERAGE LIFE OPTIONS EXERCISE PRICE OUTSTANDING REMAINING EXERCISABLE ------------------- ---------------- ----------------- ---------------- 1.00 904,997 8.27 390,000 2.00 200,000 9.58 50,000 2.75 137,000 9.84 37,918 15.00 16,667 3.50 13,335 37.50 10,333 3.80 9,000 ---------- ----------- ---------- ---------- 1.83 1,268,997 8.55 500,253 ========== =========== ========== ==========
The Company recorded deferred compensation for the difference between the exercise price and the deemed fair value of the Company's common stock on options to purchase 130,000 shares at exercise prices of $1.00 in September and December 2000. The Company has recorded a deferred compensation charge of $227,500 related to such options, which will be amortized over a three-year vesting period. The Company recognized $54,687 of deferred compensation expense during the year ended December 30, 2000. The Company has adopted the disclosure only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, the Company accounts for its stock option plan in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." Under APB Opinion No. 25, no compensation expense is recognized if the exercise price of the employee stock option or warrant equals the market price on the grant date. Had compensation costs been recognized based upon the fair value of options at the grant date consistent with the provisions of SFAS No. 123, the Company's results would have been as follows:
December 31 ----------------------------------------- 1998 1999 2000 ---------- ----------- ------------ Net loss: As reported $(144,492) $(461,981) $(2,840,419) Pro forma (144,492) (475,480) (2,968,959) Basic and diluted net loss per share: As reported (0.79) (1.92) (1.65) Pro forma (0.79) (1.98) (1.73)
The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 6.1 percent, expected life of five years, expected dividend yield of 0 percent and expected volatility of 0 percent. The weighted average fair value of options granted during 1999 was $1.15 per share. The weighted average fair value of the 130,000 options for which the Company recorded deferred compensation in 2000 was $2.00 per share. The weighted average fair value of all remaining options granted in 2000 was $0.31 per share. 26 6 COMMITMENTS AND CONTINGENCIES OPERATING LEASES The Company leases space for its activities under a lease which expired in December 2000. The lease is renewable for an additional one-year term as defined in the lease. Monthly base rent including utilities is $4,988. Rent expense was $55,913 for the year ended December 31, 2000. The Company entered a lease for its administrative office under a sublease which expires in February 2001. Monthly base rent is $5,000 and the Company is required to pay the sublandlord its pro rata share of operating expenses. Rent expense was $18,500 for the year ended December 31, 2000. CAPITAL LEASES The Company leases certain office equipment and furniture under capital lease obligations which expire through January 2004. Payments are $3,068 per month. Amounts included in property and equipment totaled $84,225. EMPLOYMENT AGREEMENTS The Company has entered into employment agreements with two of its officers. One agreement requires salary of $100,000 commencing upon the completion of a private placement offering of at least $2,500,000 and a payment of $250,000 upon completion of an initial public offering of at least $10,000,000. The other agreement requires annual compensation of $100,000 upon the completion of a private placement offering of at least $2,500,000. The Company completed a $2,600,000 offering in December 2000 which will cause the compensation element of the officers' salaries to commence. RELATED-PARTY TRANSACTIONS The law firm of one of the Company's stockholders provides legal services to the Company. Total cost incurred was $0, $48,580 and $225,922 for the years ended December 31, 1998, 1999 and 2000, respectively. Accounts payable to the same stockholder was $35,049 and $62,362 at December 31, 1999 and 2000, respectively. The Company's $300,000 promissory note discussed in Note 3 was borrowed from a stockholder of the Company. In addition, in July 2000 the Company purchased software and related maintenance from this stockholder in exchange for the issuance of 151,200 shares of the Company's common stock valued at $2.50 per share. LICENSING AGREEMENT In December 2000, the Company modified its software licensing agreement with one of its shareholders and entered into a three-year reseller arrangement, which allows the Company to grant access rights to the third party's software as a part of its product offerings. The Company is required to pay the shareholder a royalty of 15% of net receipts each time access rights are granted to the shareholders software product. Additionally, the Company agrees to obtain maintenance and support services for the first twelve months of the agreement. Thereafter, maintenance fees are 10% of the original royalty fee, payable quarterly. In conjunction with the agreement, the Company paid $150,000 in cash and issued 127,273 shares of common stock valued at $2.75 per share as consideration for a nonrefundable, prepaid royalty. This amount is recoded as other assets in the accompanying balance sheet. Royalties payable under the reseller agreement will be applied to this balance and recorded as royalty expense until such amount is exhausted. Royalty fees in excess of the prepaid amount are then payable quarterly. Also in December 2000, the Company signed an agreement with this same shareholder to exchange the Company's $300,000 promissory note and $6,000 of accrued interest for an advance on fees payable upon the resale of the Company's products. Accordingly, such amounts have been recorded as deferred revenue in the accompanying balance sheet. 7 SUBSEQUENT EVENTS MERGERS On January 12, 2001, the Company completed its acquisition of Edge Technologies Incorporated by merging a wholly owned subsidiary of the Company with and into Edge Technologies Incorporated. In connection with this transaction, the Company issued 325,000 shares of its common stock and $300,000 of cash to the former shareholders of Edge Technologies Incorporated. The merger agreement further provides that if the Company merges with a publicly traded company within 120 days of the merger date, the former Edge Technologies Incorporated shareholders will receive shares of common stock in the publicly traded company valued at $893,750 and $400,000 in cash. If, however, the Company does not merge with a public company within 120 days of the closing of the proposed merger, then the former Edge Technologies Incorporated shareholders will be entitled to another 325,000 shares of the Company's common stock and $400,000 in cash. In October 2000, the Company also entered into a letter of intent to merge with and into a wholly owned subsidiary of Meteor Industries, Inc., a publicly traded company. The agreement is subject to approval of the shareholders and boards of directors of both companies, regulatory review and due diligence. Pending these approvals, the completion of the merger is expected in 2001. 27 (b) Pro Forma Financial Information. Set forth below is an unaudited pro forma statement of operations for the year ended December 31, 2000 giving effect to the acquisition of Edge Technologies, as described above in Item 5. ACTIVE IQ TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000
ACTIVE IQ EDGE TECHNOLOGIES, TECHNOLOGIES INC. INCORPORATED PRO FORMA HISTORICAL HISTORICAL PURCHASE PRO FORMA DECEMBER 31, 2000 DECEMBER 31, 2000 ADJUSTMENTS COMBINED ----------------- ----------------- ----------- -------- REVENUES $ $ 129,936 $ $ 129,936 -------------- -------------- -------------- --------------- OPERATING EXPENSES: Selling, general and administrative 1,978,697 109,297 0 2,087,994 Depreciation and amortization 112,544 4,696 1,132,000 (A) 1,249,240 Product development 609,344 0 0 609,344 Loss on disposal of assets 105,360 0 0 105,360 -------------- -------------- -------------- --------------- Total operating expenses 2,805,945 113,993 1,132,000 4,051,938 -------------- -------------- -------------- --------------- INCOME (LOSS) FROM OPERATIONS (2,805,945) 15,943 (1,132,000) (3,922,002) -------------- -------------- -------------- --------------- OTHER INCOME (EXPENSE): Other income 7,500 0 0 7,500 Interest expense (41,974) (6,744) 0 (48,718) -------------- -------------- -------------- --------------- Total other expense (34,474) (6,744) 0 (41,218) -------------- -------------- -------------- --------------- INCOME (LOSS) BEFORE INCOME TAXES (2,840,419) 9,199 (1,132,000) (3,963,220) PROVISION FOR INCOME TAXES 0 0 0 0 -------------- -------------- -------------- --------------- NET INCOME (LOSS) $ (2,840,419) $ 9,199 $ (1,132,000) $ (3,963,220) ============== ============== ============== =============== BASIC AND DILUTED LOSS PER COMMON SHARE $ (1.65) $ (1.75) ============== =============== BASIC AND DILUTED WEIGHTED AVERAGE OUTSTANDING SHARES 1,717,731 550,000 (B) 2,267,731 ============== ============== ===============
ACTIVE IQ TECHNOLOGIES, INC. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION DECEMBER 31, 2000 (1) DESCRIPTION OF THE TRANSACTION On January 16, 2001, Active IQ Technologies, Inc. (Active IQ or the Company) completed a merger with Edge Technologies, Incorporated (Edge). The aggregate consideration Active IQ paid for the common shares of Edge was 550,000 shares of common stock of Active IQ and cash of $700,000. Including estimated closing costs, the total consideration plus fair value of liabilities assumed is approximately $2,264,000, consisting principally of goodwill. The unaudited pro forma statements of operations give effect to the merger as if it occurred on January 1, 2000. Since Edge Technologies operated as a Subchapter S corporation, no income taxes were recorded for the year ended December 31, 2000. The proforma combined statement of operations for the year ended December 31, 2000 do not reflect a pro forma tax expense as the pro forma combined statements of operations reflect a net loss which deferred tax amount was reserved by a valuation allowance since realization is not assured. (2) DESCRIPTION OF PRO FORMA ADJUSTMENTS (A) Reflects amortization of goodwill recorded in the business combination using an estimated useful life of two years. (B) Reflects common shares issued to Edge shareholders pursuant to the merger. (c) Exhibits 2.1 Stock Purchase Agreement by and between Capco Energy, Inc. and Meteor Industries, Inc. dated as of January 30, 2001. (1) 2.2 First Amendment to Stock Purchase Agreement by and between Capco Energy, Inc. and Meteor Industries, Inc. dated April 27, 2001. (3) 2.3 Agreement and Plan of Merger by and among Meteor Industries, Inc., activeIQ Technologies, Inc. and MI Merger, Inc. dated January 11, 2001. (2) 2.4 First Amendment to Agreement and Plan of Merger by and among Meteor Industries, Inc., activeIQ Technologies, Inc. and MI Merger, Inc. dated April 27, 2001. (3) 2.5 Agreement and Plan of Merger by and between Meteor Industries, Inc. and AIQ Acquisition Corp. dated April 27, 2001. (3) 3.1 Articles of Incorporation of AIQ Acquisition Corp. (3) 3.2 Articles of Merger relating to the merger of Meteor Industries, Inc. with and into AIQ Acquisition Corp. (3) 10.1 Form of Merger Warrant issued to former shareholders of activeIQ Technologies, Inc. (3) 23.1 Consent of Virchow, Krause & Company, LLP 99.1 Press Release dated May 1, 2001. (3) - --------------- (1) Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K filed with the Commission on February 13, 2001. (2) Incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K filed with the Commission on February 13, 2001. (3) Previously filed as same exhibit number with Current Report on Form 8-K dated April 30, 2001 and filed on May 14, 2001. 28 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ACTIVE IQ TECHNOLOGIES, INC. Date: April 17, 2002 By: /s/ D. Bradly Olah --------------------------------------- D. Bradly Olah President, Chief Executive Officer and Chief Financial Officer 29 EXHIBIT INDEX 2.1 Stock Purchase Agreement by and between Capco Energy, Inc. and Meteor Industries, Inc. dated as of January 30, 2001. (1) 2.2 First Amendment to Stock Purchase Agreement by and between Capco Energy, Inc. and Meteor Industries, Inc. dated April 27, 2001. (3) 2.3 Agreement and Plan of Merger by and among Meteor Industries, Inc., activeIQ Technologies, Inc. and MI Merger, Inc. dated January 11, 2001. (2) 2.4 First Amendment to Agreement and Plan of Merger by and among Meteor Industries, Inc., activeIQ Technologies, Inc. and MI Merger, Inc. dated April 27, 2001. (3) 2.5 Agreement and Plan of Merger by and between Meteor Industries, Inc. and AIQ Acquisition Corp. dated April 27, 2001. (3) 3.1 Articles of Incorporation of AIQ Acquisition Corp. (3) 3.2 Articles of Merger relating to the merger of Meteor Industries, Inc. with and into AIQ Acquisition Corp. (3) 10.1 Form of Merger Warrant issued to former shareholders of activeIQ Technologies, Inc. (3) 23.1 Consent of Virchow, Krause & Company, LLP 99.1 Press Release dated May 1, 2001. (3) - --------------- (1) Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K filed with the Commission on February 13, 2001. (2) Incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K filed with the Commission on February 13, 2001. (3) Previously filed as same exhibit number with Current Report on Form 8-K dated April 30, 2001 and filed on May 14, 2001. 30 EX-23.1 3 c66349aex23-1.txt EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-54584 and 333-54582) of our report dated March 20, 2002 for Edge Technologies, Incorporated, included in Active IQ Technologies, Inc.'s Form 8-K/A filed herewith, and to all references to our firm included in these registration statements. /s/ Virchow, Krause & Company, LLP Minneapolis, Minnesota, April 17, 2002 -----END PRIVACY-ENHANCED MESSAGE-----