SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 2001.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
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Commission file number: I-9418
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AXIA GROUP INC.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0509512
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
268 West 400 South, Salt Lake City, Utah 84101
---------------------------------------------------------
(Address of principal executive office) (Zip Code)
(801) 575-8073
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes XX No
-- ----
The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of November 19, 2001 was 5,366,652.
1
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS.................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.................................4
PART II
ITEM 1. LEGAL PROCEEDINGS....................................................8
ITEM 5. OTHER INFORMATION....................................................9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................10
SIGNATURES...................................................................11
INDEX TO EXHIBITS............................................................12
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2
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Axia Group, Inc., a Nevada
corporation, and its subsidiaries and predecessors unless otherwise indicated.
Consolidated, unaudited, condensed interim financial statements including a
balance sheet for the Company as of the quarter ended September 30, 2001, and
statements of operations, and statements of cash flows for the interim period up
to the date of such balance sheet and the comparable period of the preceding
year are attached hereto as Pages F-1 through F-6 and are incorporated herein by
this reference.
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3
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE
Consolidated Unaudited Condensed Balance Sheet September 30, 2001 ...........F-2
Consolidated Unaudited Condensed Statements of Operations for the Three and
Nine Months Ended September 30, 2001 and 2000................................F-4
Consolidated Unaudited Condensed Statements of Cash Flows for the Nine
Months Ended September 30, 2001 and 2000.....................................F-5
Notes to Consolidated Unaudited Condensed Financial Statements
September 30, 2001...........................................................F-6
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F-1
AXIA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS
September 30, 2001
September 30,
2001
--------------
ASSETS
Current Assets
Cash $ 149,542
Accounts receivable - trade, net of allowance 426,914
Prepaid expenses 5,000
Notes receivable - current 89,500
Securities available for sale 1,944,448
Total Current Assets 2,615,404
Fixed Assets
Property and equipment, net 5,417,675
Land 1,804,902
--------------
Total Fixed Assets 7,222,577
Other Assets
Real property held for sale 333,397
Investment securities at cost 120,000
Notes receivable 255,000
Total Other Assets 708,397
TOTAL ASSETS $ 10,546,378
==============
See accompanying notes to financial statements
F-2
AXIA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS (Continued)
September 30, 2001
September 30,
2001
---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts payable $ 115,684
Accrued liabilities 82,844
Ernest money deposits 25,500
Current portion long-term debt 113,522
Total Current Liabilities 337,550
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Long-Term Liabilities
Notes and mortgages payable 5,417,468
IEPA liability 195,630
WVDEP liability 46,499
Less current portion (113,522)
Total Long-Term Liabilities 5,546,075
TOTAL LIABILITIES 5,883,625
MINORITY INTEREST 609,506
STOCKHOLDERS' EQUITY
Preferred stock - 20,000,000 shares authorized at $0.001 par, no shares
issued - Common stock - 200,000,000 shares authorized at $0.001 par;
5,366,652 shares issued and outstanding 5,366
Paid in capital 16,178,145
Treasury stock - 441,730 shares @ $1.50/share (662,595)
Accumulated deficit (9,936,473)
Unrealized gain on securities available for sale (1,531,196)
TOTAL STOCKHOLDERS' EQUITY 4,053,247
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,546,378
===============
See accompanying notes to financial statements
F-3
AXIA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2001 and 2000
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 2001 2000
------------- -------------- --------------- -------------
Revenue
Sale of property $ - $ 2,126,479 $ $ 2,126,479
Additional gain recognition - 30,000 - 92,235
Consulting revenue 396,916 545,074 898,950 1,703,526
Rental revenue 236,656 269,493 653,985 713,614
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Total Revenue 633,572 2,971,046 1,552,935 4,635,854
Costs of Revenue
Costs of sales of property - 1,470,287 - 1,470,287
Costs assoc. with consulting revenue 126,030 342,505 501,916 1,209,884
Costs associated with rental revenue 181,882 48,793 666,960 415,659
Interest associated with rental revenue - 5,927 6,773 44,530
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Total Costs of Revenue 307,912 1,867,512 1,175,649 3,140,360
=========
Gross Profit 325,660 1,103,534 377,286 1,495,494
General & Administrative Expense 148,208 615,175 429,988 1,315,848
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Operating Profit (Loss) 177,452 488,359 (52,702) 179,646
Other Income (Expense)
Interest Income 773 94,343 50,594 359,928
Interest Expense (66,900) (102,479) (326,677) (294,793)
Gain (loss) on disposal of subs (38,718) - (38,718) -
Gain from sale of investment securities (375,218) 251,466 (681,948) 2,931,732
Impairment loss on long lived assets (117,946) - (117,946) -
Other income (expense) (254,591) (109,815) (262,339) 86,487
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Total Other Income (Expense) (852,600) 133,515 3,083,354
Income (Loss) Before Minority Interest (675,108) 621,874 (1,429,736) 3,263,000
Minority Interest in Loss - (61,202) - (269,103)
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Net Income (Loss) before income taxes $ (675,108) $ 560,672 $ (1,429,736) $ 2,993,897
Provision for income taxes - - - -
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Net Income (Loss) $ (675,108) $ 560,672 $ (1,429,736) $ 2,993,897
Income (Loss) Per Common Share
Income (loss) before minority interest $ (0.13) $ 0.21 $ (0.30) $ 1.06
Minority interest in gain - (0.02) - (0.09)
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Net income (loss) per weighted average
common share outstanding
$ (0.13) 0.19 (0.30) 0.97
Weighted average common shares
outstanding
5,392,000 2,992,000 4,939,000 2,796,000
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See accompanying notes to financial statements
F-4
AXIA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 2001 and 2000
Six Months Ended
September 30
2001 2000
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Cash Flows From Operating Activities
Net Income (Loss) $ (1,429,736) $ 2,993,897
Adjustments to reconcile net income (loss) to net cash:
(Gain) Loss from sale of investments 681,948 116,022
Minority interest in gain (loss) - 269,103
Depreciation & amortization 161,004 175,661
Loss on sale of subsidiary 38,718 -
Impairment loss on long lived assets 117,946 -
Issued stock for services 221,400 -
Decrease (increase) in assets:
Accounts & notes receivable (111,530) 1,140,354
Prepaid expenses (1,450) (7,407)
Securities - (3,093,068)
Increase (decrease) in liabilities
Accounts & notes payable 37,285 (410,792)
Accrued liabilities (98,375) (253,769)
Current portion of long term debt - (981,364)
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Net Cash Provided (Used) by Operating Activities $ (382,790) $ 94,923
Activites
Cash Flows From Investing Activities
Capital expenditures (65,779) (72,588)
Decrease (increase) in long-term notes - 46,299
Proceeds from sale of subsidiaries 200 -
Payment of dividends - (116,022)
Elimination of unrealized (gain) loss - (846,270)
Purchase of investments (293,297) (155,742)
Proceeds from sale of investments 326,886 4,080,943
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Net Cash Provided (Used) by Investing Activities $ (31,990) $ 2,936,620
Cash Flows from Financing Activities
Purchase of treasury stock - (663,027)
Sale of common stock for cash 301,614 73,440
Increase (reduction) in long-term debt 84,288 (2,087,757)
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Net Cash Provided (Used) by Financing Activities $ 385,902 $ (2,677,344)
Increase (Decrease) in Cash (28,878) 354,199
Cash at Beginning of Period 178,420 18,314
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Cash at End of Period $ 149,542 $ 372,513
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Supplemental Disclosures
Interest paid in cash 326,677 337,884
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See accompanying notes to financial statements
F-5
AXIA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2001
1. Basis of Presentation
The accompanying consolidated unaudited condensed financial statements have been
prepared by management in accordance with the instructions in Form 10-QSB and,
therefore, do not include all information and footnotes required by generally
accepted accounting principles and should, therefore, be read in conjunction
with the Company's Annual Report to Shareholders on Form 10-KSB for the fiscal
year ended December 31, 2000. These statements do include all normal recurring
adjustments which the Company believes necessary for a fair presentation of the
statements. The interim operations results are not necessarily indicative of the
results for the full year ended December 31, 2001.
2. Non-Cash Disclosures
During the nine months ended September 30, 2001, the Company:
a. Recorded unrealized holding losses on securities of $240,757
b. Sold 2 wholly owned subsidiaries with land, property and equipment
of $317,048, and accounts and notes payable of $278,130 for $200,
thus recognizing a loss on the sale of $38,718.
3. Additional Footnotes Included by Reference
Except as indicated in the Notes above, there have been no other material
changes in the information disclosed in the notes to the financial statements
included in the Company's Annual Report on Form 10- KSB for the year ended
December 31, 2000. Therefore those footnotes are included herein by reference.
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F-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company operates in two primary areas of business: the Company acquires,
leases and sells real estate; and, the Company provide financial consulting
services. The following discussion examines the Company's financial condition as
a result of operations for the third quarter and year-to-date, September 30,
2001, and compares those results with comparable periods from last year.
Real Estate Operations
The Company's objective, with respect to real estate operations, is to acquire,
through subsidiaries, properties which management believes to be undervalued and
which the Company is able to acquire with limited cash outlays. The Company will
consider properties within the continental United States. The Company attempts
to acquire such properties by assuming existing favorable financing and paying
the balance of the purchase price with nominal cash payments or through the
issuance of shares of common stock. Once such properties are acquired, the
Company leases them to primarily commercial tenants. The Company also makes
limited investments to improve the properties with the objective of increasing
occupancy and cash flows. Management believes that, with limited improvements
and effective management, properties can be sold at a profit within a relatively
short period of time.
The Company recorded rental revenues of $236,656 for the quarter ended September
30, 2001, as compared to $269,493 for the same quarter, 2000. This decline in
rental revenues was due to declines in occupancy.
Currently, the Company has positive cash flows from real estate operations of
$54,774 for the quarter ended September 30, 2001, compared to a positive cash
flow of $214,773 for the same quarter, 2000. This is attributable to commissions
paid upon refinancing properties, fees associated with purchases of properties,
and a decrease in occupancy rates in conjunction with an increase in repair
costs associated with the commercial spaces.
The Company will continue efforts to improve profitability and cash flow by
working to increase occupancy and rental income from those properties which have
a high vacancy rate as well as focusing on properties with the highest per
square foot rental rates. The Company also intends to continue to purchase real
estate primarily for appreciation purposes. Accordingly, the Company hopes to
not only minimize any real estate cash flow deficit, but also generate
sufficient cash to record a substantial profit upon property disposition.
Consulting Operations
The Company, through its majority owned Hudson Consulting Group, Inc., provides
a variety of financial consulting services to a wide range of clients. The
primary service performed by the Company involves assisting clients in
structuring mergers and acquisitions. This includes locating entities suitable
to be merged with or acquired by the Company's clients, as well as providing
general advice related to the structuring of mergers or acquisitions. The
Company also assists clients in restructuring their capital formation, advises
with respect to general corporate problem solving and provides shareholder
relations services designed to expose its clients to the investment community.
The Company's consulting subsidiary generates revenues through consulting fees
payable in the client's equity securities, cash, other assets or some
combination of the three. The primary form of compensation
4
received is the equity securities of clients. When payment is made in the form
of equity, the number of shares to be paid is usually dependent upon the price
of the client's common stock (if such price is available) and the extent of
consulting services to be provided. The typical value used to determine the
number of shares to be paid is one-half or less of the stock's bid price, which
accounts for the fact that most of the equity received as payment by the Company
is restricted as to resale. The Company accepts equity with the expectation that
its services will assist in the stock's appreciation, thus allowing the Company
to be compensated and to make a return on the payments for its services.
The Company generates cash flow, in part, by liquidating non-cash assets (equity
securities) received as fees for consulting services. As most fees are paid in
the form of equity, the revenues and cash flows realized by the Company are
somewhat tied to the price of its clients' securities and the Company's ability
to sell such securities. A decline in the market price of a client's stock can
affect the total asset value of the Company's balance sheet and can result in
the Company incurring substantial losses on its income statement. The Company
generally books securities that it accepts as payment at a 50% to 95% discount
of the current market value at the time the Company accepts the securities due
to illiquidity of the securities and because of restrictions on resale.
The Company's portfolio consists primarily of restricted and unrestricted shares
of common stock in micro to small cap publicly traded companies. This portfolio
currently consists of shares of common stock in over 60 different companies
whose operations range from that of high-tech Internet operations to oil and gas
companies. The Company believes that the diversity of its current holdings is
such that the overall volatility of its portfolio is significantly less than in
prior years of operation. Nonetheless, the Company's portfolio is considered
extremely volatile.
Revenues from the Company's financial consulting operations decreased for the
quarter ended September 30, 2001, as compared to the same quarter in 2000. The
Company recorded $396,916 in revenues for the quarter ended September 30, 2001,
from its financial consulting operations as compared to $545,074 for the same
period of 2000. This decrease was due to a slow down in consulting activities,
due in part to adverse conditions in the marketplace. The Company anticipates
that revenues in this area will rebound as market conditions improve.
During the quarter ended September 30, 2001, the Company sold investment
securities owned by the Company and its subsidiaries. The bulk of the securities
sold were securities that the Company and its majority owned subsidiaries
acquired in past years for services rendered to clients by the Company's
consulting subsidiaries. During the quarter ended September 30, 2001, the
Company and its subsidiaries sold $61,286 in investment securities. The
Company's basis in the securities was approximately $517,869. The company
continued to liquidate securities it felt would not rebound to prevent future
losses and to provide needed working capital.
Company Operations as a Whole
Revenues
Gross revenues for the three month periods ended September 30, 2001 were
$633,572, as compared to $2,971,046 for the same period in 2000. The decrease in
revenues is due to a lack of sale of property revenue of $2,126,479, a lack of
additional gain recognition of $30,000, a $148,158 decrease in consulting
revenues, and a $32,837 decrease in rental revenues.
5
Gross revenues for the nine month periods ended September 30, 2001 were
$1,552,935, as compared to $4,635,854 for the same period in 2000. The decrease
in revenues is due to a lack of $2,126,479 in the sale of property, a lack of
$92,235 in additional gain recognition, a $804,576 decrease in consulting
revenues, and a $56,629 decrease in rental revenues.
Profits
The Company recorded an operating profit of $177,452 for the three months ended
September 30, 2001, compared to $488,359 for the comparable period in the year
2000. The Company recorded a net loss of $675,108 for the three months ended
September 30, 2001, compared to a net profit of $560,672 for the comparable
period in 2000. The Company's decrease in net profitability for the three month
period ended September 30, 2001, as compared to the same period in 2000, was due
largely to the lack of revenues from the sale of property and gains on the sale
of securities.
The Company's operating loss of $52,702 for the nine months ended September 30,
2001, is unfavorable when compared to the operating profit of $179,646 for the
comparable period in the year 2000. However, a major factor in that difference
was the $2,126,479 in revenue from the sale of property in 2000. When that
transactions is removed, the net operating loss for 2000 would have been
$476,546. The Company recorded a net loss of $1,429,736 for the nine months
ended September 30, 2001, compared to a net profit of $2,993,387 for the
comparable period in 2000. The Company's decrease in net profitability for the
nine month period ended September 30, 2001, as compared to the same period in
2000, was due to the lack of gains from the sale of property as well as net
losses on the sale of securities of $681,948.
The Company is uncertain as to whether it will operate at a profit through
fiscal 2001. Since the Company's activities are closely tied to the securities
markets, future profitability or its revenue growth tends to follow changes in
the market place. The downturn in the markets due to the events of September 11,
2001, have severely hampered the Company's efforts to improve profitability by
selling securities in the marketplace. There can be no guarantee that
profitability or revenue growth can be realized in the future.
Expenses
General and administrative expenses for the three months ended September 30,
2001, were $148,208 compared to $615,175 for the same period in 2000. General
and administrative expenses for the nine months ended September 30, 2001, were
$429,988 compared to $1,315,848 for the same period in 2000. The reason for the
decrease is continued efforts to streamline operations and to eliminate
non-performing assets and their associated administrative expenses.
Depreciation and amortization expenses for the nine months ended September 30,
2001, and September 30, 2000, were $136,054 and $175,661, respectively. The
decrease was due to a disposition of assets during 2000 as well as some assets
being fully depreciated and not yet replaced.
Capital Resources and Liquidity
On September 30, 2001, the Company had current assets of $2,615,404 and
$10,656,878 in total assets compared to $2,918,238 of current assets and
$11,467,275 in total assets at the year ended December 31, 2000. The Company had
net working capital of $2,277,854 on September 30, 2001, compared to net working
capital of $1,684,645 on December 31, 2000. The decrease in total assets is
attributable to unrealized losses on securities available for sale for the
quarter. The major contributing factor to the change in working capital is the
receipt of securities for consulting services which fluctuate in value from
quarter to quarter.
6
Total stockholders' equity in the Company was $4,053,247 as of September 30,
2001, compared to $4,719,212 as of December 31, 2000. This decrease is also
attributable to the receipt of securities and their respective decrease in value
mentioned above.
Net Cash flow used in operating activities was $382790 for the nine months ended
September 30, 2001, compared to cash flow provided by operating activities of
$94,923 for the nine months ended September 30, 2000. Cash flows used in
operating activities for the nine months ended September 30, 2001, are primarily
attributable to loss on the sale of investments and changes in net current
assets and liabilities.
Cash flow used by investing activities was $31,990 for the nine months ended
September 30, 2001, compared to cash flow provided by investing activities of
$2,936,620 for the same period in 2000. The decrease is largely due to the
purchase of investment securities coupled with a large reduction in the proceeds
from the sale of investment securities.
Cash flow provided by financing activities was $385,902 for the nine months
ended September 30, 2001, compared to cash flows used in financing activities of
$2,677,344 for the nine months ended September 30, 2000. The decrease was
largely due to financing through sale of common stock rather than financing
through debt issuances.
Due to the Company's debt service on real estate holdings, willingness to
acquire properties with negative cash flow shortages and acceptance of non-cash
assets for consulting services, the Company may experience occasional cash flow
shortages.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past three years. The Company believes that it can offset inflationary
increases in the cost of materials and labor by increasing sales and improving
operating efficiencies.
Known Trends, Events, or Uncertainties
General Real Estate Investment Risks
The Company's investments are subject to varying degrees of risk generally
incident to the ownership of real property. Real estate values and income from
the Company's current properties may be adversely affected by changes in
national or local economic conditions and neighborhood characteristics, changes
in interest rates and in the availability, cost and terms of mortgage funds, the
impact of present or future environmental legislation and compliance with
environmental laws, the ongoing need for capital improvements, changes in
governmental rules and fiscal policies, civil unrest, acts of God, including
earthquakes and other natural disasters which may result in uninsured losses,
acts of war, adverse changes in zoning laws and other factors which are beyond
the control of the Company.
Value and Illiquidity of Real Estate
Real estate investments are relatively illiquid. The ability of the Company to
vary its ownership of real estate property in response to changes in economic
and other conditions is limited. If the Company must sell an investment, there
can be no assurance that the Company will be able to dispose of it in the time
period it desires or that the sales price of any investment will recoup the
amount of the Company's investment.
7
Property Taxes
The Company's real property is subject to real property taxes. The real property
taxes on this property may increase or decrease as property tax rates change and
as the property is assessed or reassessed by taxing authorities. If property
taxes increase, the Company's operations could be adversely affected.
Forward Looking Statements
The information herein contains certain forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward looking statements involve risks and uncertainty, including, without
limitation, the ability of the Company to continue its expansion strategy,
changes in the real estate markets, labor and employee benefits, as well as
general market conditions, competition, and pricing. Although the Company
believes that the assumptions underlying the forward looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward looking statements
included in the Form 10QSB will prove to be accurate. In view of the significant
uncertainties inherent in the forward looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved
PART II
ITEM 1. LEGAL PROCEEDINGS
During the second quarter of 2001, with the exception of information provided
below no material developments occurred regarding the Company's legal
proceedings. For more information please see the Company's Form 10-KSB for the
year ended December 31, 2000
CyberAmerica Corporation vs. MJMC, Inc., Lanco International, Inc. and
Mi-Jack Products, Inc. - Suit was filed on January 10, 1997 in the Circuit Court
of Cook County, Law Division as file no. 97L 000369 seeking recovery of damages
suffered by Canton Tire Recycling Corporation based upon the company's belief
that tire shredding equipment did not perform according to warranties and
representations made by defendants. The company has filed a Third Amended
Complaint in the case. The Defendant has filed a counterclaim for damages,
seeking recovery of lease payments for the tire shredding equipment. The Company
has stated that the total damages for which it seeks recovery is in an amount of
not less than $1 million. Settlement discussions are ongoing pending additional
hearings before the court on the Defendants motion to dismiss the Company's
causes of action.
Canton Financial Service Corporation v. Network Systems International,
Inc. - CFSC's claim was pending before the Circuit Court for the Thirteenth
judicial Circuit, in and for Hillsborough County, State of Florida, Civil
Division, Case Number 98-657-A. The complaint seeks payment of consulting fees
and the delivery of shares, an obligation created in the merger of a third party
with an existing corporation and the services of CFSC in bringing that event to
pass. Cash in the amount of $15,000 was sought plus delivery of 355,029 shares
of the common stock of Network Systems International, Inc. This matter was
settled by agreement of all parties, Canton Financial will receive a total of
350,000 shares of Network's common stock which must be divided with counsel and
consultants, additionally options for an equal number of shares of common stock
are also to be delivered to Hudson by January 1, 2002.
8
Hudson Consulting Group, Inc. v. Chequemate International, Inc., dba
C-3D Digital, Inc.. Suit was filed on November 16, 2000 in the Third Judicial
District Court, for Salt Lake County, State of Utah, Civil No. 000909325. The
Company seeks recovery of its damages as a result of the failure of Chequemate
to deliver 75,000 shares of its common stock as provided for in an Advisory
Agreement between the parties dated July 29, 1999. Damages are sought for the
highest value of these shares during the period that delivery was not made, in
late July of 2000 the shares traded at approximately $2.68 per share. Partial
delivery of shares due under the agreement have been received by Hudson in June
of 2000 leaving 75,000 shares due and owing. No dispute or basis for the failure
to deliver the shares has ever been received by Hudson. Service of process was
completed recently and contacts with Chequemate have been made to discuss
settlement of this litigation.
American Registrar & Transfer Company v. YP.Net, Inc. f/k/a Rigl
Corporation, Bruce M. Pritchett, Hudson Consulting Group, Inc., Montana Capital
International, Ltd. and Moore & Elrod, Inc.. American Registrar & Transfer
Company on or about March 20, 2000, filed an interpleader action in the Third
Judicial District Court, Salt Lake County, State of Utah, Civil No. 000902312.
It filed suit claiming that there was a dispute as to 732,667 shares of the
common stock of YP.Net held in the name of Hudson. Hudson accepted service of
the complaint and filed an answer, a counter claim and a cross claim. In the
counter claim Hudson asserted that American Registrar had no right to deny the
transfer of the subject shares. In the cross claim Hudson seeks damages against
YP.Net for its failure to deliver 542,667 shares of common stock due to Hudson.
The parties reached a mutual agreement as to the settlement of this cause of
action during court ordered mediation, Hudson received a cash payment of $85,000
and returned all shares of YP.Net common stock that it had been holding.
Hudson Consulting Group, Inc. v. Technical Ventures, Inc.
Suit was filed by Hudson
-------------------------------------------------------------
Consulting Group, Inc. on October 10, 2001, against Technical Ventures, Inc. in
the Third Judicial District Court of Salt Lake County, State of Utah, and
assigned civil cause No. 010908909. Hudson has filed suit seeking recovery of
fees owed to it arising from an Advisory Agreement entered into in July of 1999.
The suit alleges that 575,000 shares of Technical Ventures, Inc. common stock
has not been delivered to Hudson as required by the agreement. The trial court
has authorized service on Technical Ventures, Inc. by certified mail to be
served by the clerk of the court, that process is pending as of the present.
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
On August 2, 2001, the Company issued 20,000 shares of restricted common stock
to Bob Welch for services rendered in debt restructuring and possible
refinancing of some properties, pursuant to section 4(2) of the Securities Act
of 1933 in an isolated private transaction by the Company which did not involve
a public offering. The Company made this offering based on the following
factors: (1) The issuance was an isolated private transaction by the Company
which did not involve a public offering; (2) there was only one offerree who was
issued stock for services; (3); there were no subsequent or contemporaneous
public offerings of the stock; (4) the stock was not broken down into smaller
denominations; and (5) the negotiations for the issuance of the stock took place
directly between the offeree and the Company.
ITEM 5. OTHER INFORMATION
On August 2, 2001, the Company divested itself of two subsidiaries, Nephi
Development Corporation and Taylors Landing, in a private transaction involving
the sale of 100% of the outstanding stock held by
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Diversified Holdings I, Inc. (a division of Axia Group, Inc.) in exchange for
$200 cash. Both of these companies owned property in Nephi, Utah which have been
vacant for some time and, in the Company's opinion, do not have the potential to
be rented any time soon. The acquiring company, USA Sunrise Beverages Inc.,
assumed all related liabilities and assets of both companies. This transaction
was undertaken as part of the Company's continuing effort to eliminate
non-performing assets and streamline operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits on page 13 of this Form 10-QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K. The Company filed three reports on Form 8-K during
the quarter for which this report is filed. They are as follows:
(1) On August 24, 2001, the Company filed a Form 8-K disclosing
the filing of a "Certificate of Determination of the Rights
and Preferences of Preferred Stock" for Axia Group Inc. for
5,000,000 shares out of the 20,000,000 authorized.
(2) September 17, 2001, the Company filed a Form 8-K disclosing
the resignation of Mantyla McReynolds as the Company's
independent auditors.
(3) On October 9, 2001, the Company filed a Form 8-K disclosing
the retention of Tanner and Company as the new independent
auditors for the Company.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized, this 19th day of November, 2001.
AXIA GROUP, INC.
/s/ Richard D. Surber
- ---------------------
Richard D. Surber November 19, 2001
President, Chief Executive Officer and Director
/s/ Ed Haidenthaller November 19, 2001
- ----------------------------
Ed Haidenthaller
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT PAGE DESCRIPTION
NO. NO.
3(i) * Articles of Incorporation of the Company (note that
these were amended by the Articles of Merger
constituting Exhibit 2 to this Form 10-KSB)
(incorporated herein by reference from Exhibit No.
3(i) to the Company's Form 10-KSB for the year ended
December 31, 1993).
3(ii) * Bylaws of the Company, as amended (incorporated
herein by reference from Exhibit 3(ii) of the
Company's Form 10 KSB for the year ended December 31,
1995).
* Previously filed as indicated and incorporated herein
by reference from the referenced filings previously
made by the Company.
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