UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _________________
Commission file number: 0-20995
AXTIVE CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 13-3778895
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1445 ROSS AVENUE, SUITE 4500, DALLAS, TEXAS 75202
(Address of principal executive offices)
(214) 397-0200
(Issuer's telephone number)
EDGE TECHNOLOGY GROUP, INC.
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the issuer was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
As of November 14, 2002, the issuer had 19,039,622 shares of
Common Stock outstanding.
AXTIVE CORPORATION
TABLE OF CONTENTS
Page No.
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PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of December 31, 2001
and September 30, 2002 (unaudited).................. 3
Unaudited Consolidated Statements of Operations for
the Three and Nine Months Ended September 30, 2001
and 2002............................................. 4
Unaudited Consolidated Statements of Comprehensive
Income for the Three and Nine Months Ended
September 30, 2001 and 2002.......................... 4
Unaudited Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 2001 and 2002.... 5
Notes to Unaudited Consolidated Financial Statements. 6
ITEM 2. Management's Discussion and Analysis or Plan
of Operation.................................. 11
ITEM 3. Controls and Procedures....................... 15
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings............................ 16
ITEM 2. Changes in Securities and Use of Proceeds.... 16
ITEM 3. Defaults Upon Senior Securities.............. 16
ITEM 4. Submission of Matters to a Vote of Security
Holders...................................... 16
ITEM 5. Other Information............................ 17
ITEM 6. Exhibits and Reports on Form 8-K............. 17
SIGNATURE................................................... 18
-2-
AXTIVE CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2001 2002
------------ ------------
(unaudited)
<s> <c> <c>
CURRENT ASSETS
Cash and cash equivalents $ 82,567 $ 989,086
Marketable securities - 46,362
Accounts receivable - 379,706
Other current assets 20,339 92,311
------------ -----------
Total current assets 102,906 1,507,465
NON-CURRENT ASSETS
Fixed assets, net 35,385 305,904
Goodwill - 3,026,884
Intangible assets - 154,627
Other assets - 7,162
------------ ------------
TOTAL ASSETS $ 138,291 $ 5,002,042
============ ============
CURRENT LIABILITIES
Accounts payable $ 451,993 $ 737,500
Accrued expenses 239,489 292,410
Other current liabilities - 1,443,356
------------ ------------
Total current liabilities 691,482 2,473,266
Notes payable - related parties 1,639,000 -
Other liabilities - 43,596
------------ ------------
Total non-current liabilities 1,639,000 43,596
------------ ------------
TOTAL LIABILITIES 2,330,482 2,516,862
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY / (DEFICIT)
Series A convertible preferred stock, $.01 par value, 5,000,000
shares authorized, none issued and outstanding at December 31, 2001
and 4,440 issued and outstanding at September 30, 2002, net of
discount; liquidation preference of $4,440,000 - 3,833,088
Common stock, $.01 par value, 100,000,000 shares authorized,
16,488,139 issued and outstanding at December 31, 2001 and
19,039,622 issued and outstanding at September 30, 2002 164,881 190,396
Additional paid in capital 40,048,615 42,209,178
Accumulated deficit (42,405,687) (43,718,101)
Accumulated other comprehensive income (loss) - (29,381)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY / (DEFICIT) (2,192,191) 2,485,180
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY / (DEFICIT) $ 138,291 $ 5,002,042
============ ============
The accompanying notes are an integral
part of these financial statements.
-3-
AXTIVE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2001 2002 2001 2002
------------ ------------ ------------ ------------
<s> <c> <c> <c> <c>
Sales $ - $ 1,008,998 $ - $ 1,520,099
Cost of sales - 498,518 - 838,558
------------ ------------ ------------ ------------
Gross profit - 510,480 - 681,541
Operating expenses
General and administrative 717,213 1,033,405 833,560 2,069,156
Marketing - 46,673 - 80,858
Recovery of bad debt - (982,500) - (1,037,500)
Depreciation and amortization - 29,110 - 41,278
Impairment of assets - 600,000 2,495,954 600,000
------------ ------------ ------------ ------------
Total operating expenses 717,213 726,688 3,329,514 1,753,792
------------ ------------ ------------ ------------
Operating loss (717,213) (216,208) (3,329,514) (1,072,251)
Other income (expense)
Interest income 793 1,262 1,774 5,651
Interest expense (24,780) (15,917) (62,130) (53,176)
Taxes - other - - - (8,365)
Amortization of deferred financing fees (2,519) - (8,224) -
Other - 3,979 - 3,822
------------ ------------ ------------ ------------
Total other income (expense) (26,506) (10,676) (68,580) (52,068)
------------ ------------ ------------ ------------
Loss from continuing operations (743,719) (226,884) (3,398,094) (1,124,319)
Loss from discontinued operations (583,871) - (1,250,958) -
------------ ------------ ------------ ------------
Net loss (1,327,590) (226,884) (4,649,052) (1,124,319)
Provision for preferred stock dividends - (89,066) - (171,915)
Amortization of discount on preferred stock - (95,595) - (188,095)
------------ ------------ ------------ ------------
Net loss attributed to common stockholders $ (1,327,590) $ (411,545) $ (4,649,052) $ (1,484,329)
============ ============ ============ ============
Basic and diluted loss per share
From continuing operations $ (0.04) $ (0.02) $ (0.21) $ (0.08)
From discontinued operations (0.04) - (0.08) -
------------ ------------ ------------ ------------
Net loss per share attributed to common
stockholders, basic and diluted $ (0.08) $ (0.02) $ (0.29) $ (0.08)
============ ============ ============ ============
Weighted average common shares outstanding,
basic and diluted 16,385,143 18,984,677 16,200,739 17,755,760
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Net loss $ (1,327,590) $ (226,884) $ (4,649,052) $ (1,124,319)
Unrealized loss on available for sale securities (29,381) (29,381)
------------ ------------ ------------ ------------
Comprehensive loss $ (1,327,590) $ (256,265) $ (4,649,052) $ (1,153,700)
============ ============ ============ ============
The accompanying notes are an integral
part of these financial statements.
-4-
AXTIVE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months
Ended September 30,
2001 2002
------------ ------------
<s> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities $ (1,030,381) $ (656,564)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (80,331) (81,734)
Acquisition of subsidiaries - (1,640,168)
Proceeds from the sale of fixed assets 14,694 -
Proceeds from the sale of other assets 300,000 -
Loan to related party (75,000) -
------------ ------------
Net cash provided by (used in) investing activities 159,363 (1,721,902)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of preferred stock and warrants - 2,874,869
Borrowings on short-term notes payable 400,000 -
Repayment of short-term notes payable - (48,000)
Contributed capital 400,000 200,000
------------ ------------
Net cash provided by financing activities 800,000 3,026,869
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (71,018) 648,403
Cash and cash equivalents, beginning of period 169,846 340,683
------------ ------------
Cash and cash equivalents, end of period $ 98,828 $ 989,086
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 275 $ 17,758
Cash paid for taxes $ - $ 8,615
The accompanying notes are an integral
part of these financial statements.
-5-
AXTIVE CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In this Quarterly Report on Form 10-QSB, we will refer to Axtive
Corporation, a Delaware corporation, as "Axtive," "Company,"
"we," "us" and "our." Prior to October 28, 2002, the Company was
known as Edge Technology Group, Inc. Throughout this Quarterly
Report where prior reports included a reference to "Edge" in a
historical context, the reference to Edge has been changed to
"Axtive." Our new trading symbol is AXTV.
1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been
prepared by us without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and
regulations. Additionally, certain amounts reported in prior
periods have been reclassified to conform to the current period's
presentation.
In the opinion of management, the accompanying unaudited
consolidated financial statements include all necessary
adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows of the Company. The results of
operations and cash flows for the nine months ended September 30,
2002, are not necessarily indicative of the results of operations
or cash flows that may be reported for the year ended
December 31, 2002. The unaudited consolidated financial
statements included herein should be read in conjunction with the
audited financial statements and the notes thereto included in
the Company's Form 10-KSB for the year ended December 31, 2001,
and those audited and unaudited financial statements contained in
the Company's Form 8-K/A filed with the Securities and Exchange
Commission on June 24, 2002.
2. DISCONTINUED OPERATIONS - SALE OF "ONE-ON-ONE" ASSETS
On September 10, 2001, we closed the previously announced sale of
assets related to our One-on-One business to a newly formed,
unrelated entity, Visual Edge, Inc. Accordingly, results of this
operation have been classified as discontinued and prior periods
have been restated.
The operating results of the discontinued operation for the three
and nine months ended September 30, 2001, included sales of
$139,229 and $403,526, respectively, and a net loss, including
the loss on the sale of assets of $570,287, of $583,903 and
$1,250,957, respectively.
3. UNCERTAINTY OF PROPOSED PLAN OF OPERATION
The Company has suffered recurring losses from operations and has
an accumulated deficit of approximately $43.7 million at
September 30, 2002. Of this, approximately $33.5 million had
accumulated through March 31, 2001, and is attributable to the
Company's former One-on-One golf video business. Another
approximately $6.2 million reflects impairment charges and bad
debts stemming from investments and loans made prior to the
Company's creation of its current business plan.
The Company's recent change in focus to acquiring Information
Technology ("IT") Professional Services, Business Application
Software and Application Services and Management is a new
business concept for the Company, and we cannot predict the
nature and extent of demand for our anticipated products and
services.
In order to continue the implementation of our new business plan,
it will be necessary to secure additional financing. There can
be no assurance that any additional financing will be available
on acceptable terms. Should we be unable to obtain additional
financing, we would be unable to acquire additional technology
companies or continue operations.
-6-
4. BUSINESS COMBINATIONS
Acquisition of Media Resolutions, Inc.
- --------------------------------------
On April 11, 2002, we closed the previously announced acquisition
of Media Resolutions, Inc., an Application Service Provider
("ASP") and website hosting company located in Dallas, Texas. We
paid $330,000 in cash and notes (See note 12. "Other Current
Liabilities") and 500,000 restricted shares of our $.01 par value
common stock ("Common Stock") valued at $306,250 in exchange for
all the outstanding shares of Media Resolutions. The acquisition
was accounted for using the purchase method of accounting. As
such, the assets and liabilities of Media Resolutions were
recorded at their estimated fair value and the results of
operations are included in our consolidated results of operations
from the date of acquisition. Media Resolutions has five
employees and generated revenues of approximately $283,000 and
break even operating results in 2001. For more information about
this acquisition, please see the Company's Form 8-K/A filed
June 24, 2002, with the Securities and Exchange Commission.
Acquisition of The Visionary Group, Inc.
- ----------------------------------------
On April 8, 2002, we acquired The Visionary Group, Inc., a
professional services firm providing IT Professional Services
related to Oracle applications software. Headquartered in
Dallas, Texas, The Visionary Group has operations in Dallas and
Austin, Texas. We paid $910,000 in cash and notes (See note 12.
"Other Current Liabilities") and paid approximately $70,000 of
existing debt in exchange for all the outstanding shares of The
Visionary Group. The acquisition was accounted for using the
purchase method of accounting. As such, the assets and
liabilities of The Visionary Group were recorded at their
estimated fair value and the results of operations are included
in our consolidated results of operations from the date of
acquisition. The Visionary Group had 14 employees at the time of
acquisition and generated revenues of $3.4 million and break even
operating results in 2001. The Company filed a Form 8-K/A on
June 24, 2002, with the Securities and Exchange Commission that
provides further information about this acquisition.
Following its acquisition, the gross revenues for The Visionary
Group fell below acceptable levels, and we expect near-term
revenue to be significantly below historical levels. Sales for
the three months ended September 30, 2002, total approximately
$10,000. We believe the decline in gross revenue has resulted
from an overall decline in the market and the delay of several
significant projects resulting from general economic conditions.
Management has aggressively taken steps to address the business
and operational issues at The Visionary Group. The Visionary
Group has eliminated all non-billable consultants and certain
administrative positions, has curtailed occupancy costs, replaced
prior management and transferred assets to a newly formed
subsidiary. No assurances can be given that these steps will
prove adequate to restore the historical revenues of The
Visionary Group.
Acquisition of Universal Data Technology, Inc.
- ----------------------------------------------
On May 31, 2002, our newly created and wholly owned subsidiary,
UDT Consulting, Inc., acquired the assets of Universal Data
Technology, Inc., an IT Professional Services practice
headquartered in Dallas, Texas with additional operations in
Arkansas and Florida. Our total purchase price for substantially
all of Universal Data Technology's assets will be the sum of
$1,127,750 ("Minimum Purchase Price") and the product of
multiplying two times UDT Consulting's earnings before interest,
taxes, depreciation and amortization (EBITDA) for the twelve
months immediately following the closing date of the acquisition
(the "Measurement Period"). The calculation of the purchase
price is subject to certain deductions and offset provisions. An
initial payment of $227,750 and the forgiveness of a $150,000
promissory note from Universal Data Technology to Axtive were
applied toward the purchase price as of the date of the closing.
The remainder of the purchase price will be paid monthly pursuant
to an earn-out schedule, with any remaining payments to be
delivered after the end of the Measurement Period. Amounts due
attributable to the Minimum Purchase Price are included in Other
Current Liabilities (See note 12). Payments on the earn-out
schedule through September 30, 2002, applying to the Minimum
Purchase Price have totaled $48,000.
The assets acquired from Universal Data Technology were recorded
at their estimated fair value and the results of operations are
included in our consolidated results of operations from the date
of acquisition. For the year ended December 31, 2001, Universal
Data Technology generated revenues of approximately $5.6 million
with a net loss of approximately $390,000. As of September 30,
2002, UDT Consulting employs approximately 25 full-time
consultants and support staff. The Company filed a Form 8-K/A on
June 24, 2002, with the Securities and Exchange Commission that
provides further information about this acquisition.
-7-
Acquisition of Virtually There, Inc.
- ------------------------------------
On May 30, 2002, we acquired Virtually There, Inc., an ASP and
website hosting company located in Fort Worth, Texas. In
exchange for the outstanding shares of Virtually There, Inc., we
paid $120,000 in notes, (See note 12. "Other Current
Liabilities") issued 1,153,846 shares of our restricted Common
Stock valued at $450,000 to the shareholders of Virtually There,
and assumed approximately $185,000 of Virtually There's existing
liabilities as of the date of closing. Virtually There currently
has eight employee and generated revenues of approximately $1.0
million with a net loss of approximately $79,000 for the year
ended December 31, 2001. The acquisition was accounted for using
the purchase method of accounting. As such, the assets and
liabilities of Virtually There were recorded at their estimated
fair value and the results of operations are included in our
consolidated results of operations from the date of acquisition.
The Company filed a Form 8-K/A on June 24, 2002, with the
Securities and Exchange Commission that provides further
information about this acquisition.
The excess purchase price over the fair value of the tangible net
assets acquired in the above transactions combined totaled
approximately $3.6 million and was allocated to goodwill.
Pro forma Results
The following unaudited pro forma consolidated results of
operations have been prepared as if the acquisitions had occurred
at the beginning of 2001 and 2002, respectively.
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2001 2002 2001 2002
------------ ------------ ------------ -------------
<s> <c> <c> <c> <c>
Sales $ 2,922,300 $ 1,008,998 $ 8,196,300 $ 3,596,194
Net loss attributed to
common stockholders $ (851,548) $ (411,545) $ (3,944,369) $ (2,041,610)
Net loss per share attributed
to common stockholders,
basic and diluted $ (0.05) $ (0.02) $ (0.22) $ (0.11)
5. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
Company and its wholly owned subsidiaries. All intercompany
balances and intercompany transactions have been eliminated in
consolidation.
6. REVENUE RECOGNITION
Revenue from the sale of products or provision of services is
recognized when the product is delivered or when the service is
provided and collectability of the receivable is reasonably
assured. Deposits received from customers in advance of the
delivery of product or provision of service are included in other
current liabilities in the accompanying balance sheets.
7. GOODWILL
Goodwill of approximately $3.6 million was recorded as a result
of the acquisitions. In accordance with SFAS No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets," goodwill is assumed to have an indefinite life and will
not be subject to amortization. The Company will evaluate its
goodwill at least annually (and also whenever events or
circumstances indicate an impairment may exist) and will test for
impairment by applying a fair value based test.
On July 8, 2002, Axtive filed a Form 8-K stating that the
operating results of its subsidiary, The Visionary Group, were
below acceptable levels. Despite aggressive action to rebuild
the revenues of this business, losses and negative cash flows
continue. As a result, the Company has tested the goodwill and
other assets for impairment and recognized an impairment charge
related to the goodwill in an amount of $600,000 in the current
period. It is possible that future operating results will change
our estimate of the reporting unit's fair value. Accordingly,
additional write-downs are possible.
8. INTANGIBLE ASSETS - Related Party Transaction
On June 21, 2002, the Company acquired the name "Axtive
Corporation" and its related logo and trademark (collectively,
"intangible assets") and certain tangible assets including
furniture and fixtures, signage and office supplies from Axtive
Software Corporation, as represented by it sole shareholder,
Graham C. "Scooter" Beachum III, Axtive's Vice President and
General Manager. The assets were acquired in exchange for an
initial grant of 400,000 restricted shares of Axtive Common Stock
valued at approximately $168,000. Such amount was allocated
between tangible ($15,000) and intangible assets ($153,000) based
upon their relative fair values.
-8-
The intangible assets are assumed to have an indefinite life and
will not be subject to amortization.
If our stock does not trade for at least $.75 per share at any
time during the next 12 months, Mr. Beachum will receive up to an
additional 297,674 shares to bring the total shares given in
exchange for the assets to a value not exceeding $300,000 based
upon the market price on the date the assets were acquired. The
issuance of additional shares, if any, will not affect the
recorded value of the assets acquired.
9. LOSS PER SHARE
Basic loss per share is calculated by dividing loss attributable
to common stockholders by the weighted average number of shares
of common stock outstanding during each period.
For the periods ended September 30, 2001 and 2002, due to our net
losses, shares of our Common Stock issuable upon the exercise of
outstanding options and warrants have been excluded from the
computation of diluted loss per share in the accompanying
statements of operations as their impact would be antidilutive.
10. NOTE RECEIVABLE
On September 22, 2000, we made an unsecured loan of $1.4 million
to Hencie, Inc., a Texas-based IT Services business. The loan
was guaranteed by a related company, Hencie Consulting Services,
Inc. (collectively "Hencie") and personally guaranteed by
Hencie's CEO.
The loan to Hencie matured November 22, 2001, and went into
default. Due to the uncertainty surrounding collection of the
note, no interest was accrued in 2001 or 2002 and, during the
fourth quarter of 2001, the note was fully reserved to reflect
our estimate of its net realizable value.
On May 22, 2002, we entered into a Settlement Agreement and
Release with Hencie and the guarantors whereby we received an
agreed judgment in the amount of $1.65 million, subject to
reduction, and would receive monthly payments of principal and
interest through April 2004 totaling approximately $1.3 million.
The amounts due under the Settlement Agreement and Release were
guaranteed by Hencie's CEO and secured by shares of Alternate
Marketing Networks, Inc. (NASDAQ Small Cap: ALTM), the parent
company of Hencie. Because of uncertainties regarding collection
of amounts due under the agreement and the lack of liquidity in
the collateral, the Company did not record a gain on settlement.
Payments received were to be recorded as a recovery of the bad
debts previously written off.
On September 20, 2002, all rights and amounts due to Axtive under
the settlement with Hencie were sold without recourse to an
unrelated third-party in exchange for $802,500. Prior to its
sale, the company had received payments totaling $235,000. Such
payments, together with the sale proceeds, totaled $1,037,500 and
were recorded as a recovery of bad debts.
11. FINANCING TRANSACTIONS
2000 Infinity Loans
- -------------------
During 2000, Infinity Investors Limited ("Infinity"), a related
party, made certain loans to us for working capital purposes.
These loans totaled approximately $219,000 and bear interest at a
rate equal to 8.5% per annum. As part of the reorganization of
Axtive effective September 1, 2000, Infinity became entitled to
the repayment of these loans. The loan agreement was
renegotiated in April 2001 and again in January 2002 to extend
the due date to March 31, 2002.
Upon maturity, as of April 1, 2002, Infinity elected to convert
the outstanding principal and interest totaling $258,464 into
Axtive's Common Stock at $.65 per share resulting in 397,637
shares issued by us.
-9-
Sandera Loan (formerly "Catalyst Loan")
- ---------------------------------------
On December 13, 2000, we entered into a loan agreement with
Catalyst Master Fund, L.P. ("Catalyst"), a related party, to
borrow $620,000 (the "Catalyst Loan"). Catalyst was a
stockholder of ours and certain of our directors are officers of
an entity that manages Catalyst Master Fund L.P.
The Catalyst Loan was convertible at the option of the holder
into Common Stock at a conversion price of $1.50 per share. The
Catalyst Loan was also secured by a pledge of substantially all
of our assets. Effective April 16, 2001, we entered into an
amended loan agreement with Catalyst that increased the
borrowings available under the original loan agreement from
$620,000 to a total of $2,120,000. Under the amended loan
agreement, we could draw down amounts under the loan agreement as
we had a need for funds, subject to our being in compliance with
the covenants contained in that loan agreement. The amended loan
agreement bears interest at eight percent (8%) per annum and was
due March 31, 2002. The additional amount available under the
amended loan agreement was also convertible into Common Stock at
a conversion price of $1.50 per share and was secured by a pledge
of substantially all of our assets.
On December 28, 2001, Catalyst Master Fund, L. P. assigned the
Catalyst Loan, and its rights thereunder, to Sandera Partners, L.
P. ("Sandera") as part of a redemption of Sandera's limited
partnership interest in Catalyst. Certain of our directors are
officers of an entity that manages Sandera.
On April 1, 2002, Sandera converted all principal and interest
due under the note (total of $1,530,124) and contributed an
additional amount of approximately $470,000 in cash in exchange
for 2,000 shares of Series A Preferred Stock (see "2002 Series A
Convertible Preferred Stock" below).
Infinity Option
- ---------------
On May 31, 2001, we sold to Infinity an option in return for the
payment of $1.0 million payable in five payments of $200,000 each
commencing on May 31, 2001 ("Infinity Option"). Pursuant to the
Infinity Option, Infinity could elect on May 31, 2002, to
exercise its option by assigning its interest in a note
receivable of $10.0 million in exchange for 3,333,333 shares of
Common Stock.
In March 2002, Infinity and Axtive mutually agreed to terminate
the option.
2002 Series A Convertible Preferred Stock
- -----------------------------------------
On April 1, 2002, we issued 4,200 shares of Series A Convertible
Preferred Stock ("Series A Preferred") at $1,000 per share
providing proceeds to us of $2,669,876 calculated as $4,200,000,
less $1,530,124 of the pre-existing Sandera debt converted to
Series A Preferred. The Series A Preferred shares carry an 8%
cumulative dividend and are convertible, at the option of the
holder, into shares of Common Stock any time after one year at an
initial conversion price of $.75 per share. As discussed below,
the purchaser also received warrants to purchase Common Stock.
The preferred shares have voting rights pari pasu with the Common
Stock and as a separate class on certain matters. The shares
also have an antidilution provision whereby the price and number
of shares issuable upon conversion adjusts for stock splits,
stock dividends and future share issuances below the conversion
price of the Series A Preferred. The Series A Preferred have
demand registration rights after one year following closing of
the financing transaction and the right to elect one member to
our Board of Directors. The issuance of warrants resulted in a
beneficial conversion feature of the Series A Preferred valued at
$370,000. Such amount was reflected as a discount to the
Preferred Stock in the Consolidated Balance Sheet and is being
amortized to the date the shares first become convertible, April
1, 2003.
In connection with the issuance of Series A Preferred, each
purchaser received warrants entitling the holder to purchase 20
shares of Common Stock for each 100 shares of Common Stock the
holder is entitled to receive upon conversion. The warrants
entitle the holder to purchase common shares at the price of
$1.15 per share. The warrants become exercisable on the second
anniversary of the issuance of the Series A Preferred and, unless
exercised earlier, will expire on the fourth anniversary of the
issuance. The warrants were valued at $370,000 using the Black-
Scholes option pricing model and such amount is reflected in
additional paid in capital in the Consolidated Balance Sheet. We
issued warrants exercisable for a total of 1,119,998 shares of
Common Stock in the offering.
We paid no commissions in connection with issuance of Series A
Preferred but did incur approximately $35,000 in other issuance
costs. Such amount is reflected as a reduction to additional
paid in capital in the Consolidated Balance Sheet. Proceeds from
the offering were used to acquire Media Resolutions, Inc., The
Visionary Group, Inc., Virtually There, Inc. and the assets of
Universal Data Technology, Inc. and for general corporate
purposes (See Note 4 "Business Combinations").
-10-
In July and August 2002, the Company raised additional funds
under the Series A Preferred offering by issuing 240 shares of
Series A Preferred Stock at $1,000 per share providing proceeds
to us of $240,000. The terms for the issuance of the Series A
Preferred were identical to those investors who had invested in
April 2002. In particular, we issued additional warrants
exercisable for a total of 64,000 shares of Common Stock in the
offering. The proceeds from the offering were used for general
corporate purposes. The Company paid no issuance costs in
connection with these subsequent issuances, and using the same
methodology described above, valued the warrants and the
conversion feature at $10,000 each. Such amounts were accounted
for as described above.
As of September 30, 2002, there had been no dividends declared on
the Series A Preferred stock. Undeclared but cumulative
dividends on the preferred shares as of that date totaled
$171,915 and are reflected in the consolidated statements of
operations.
Receivables Factoring
- ---------------------
One of the Company's subsidiaries, UDT Consulting, Inc., has
engaged with a third-party to factor certain of its receivables.
The receivables are purchased by the factor with recourse to UDT
Consulting, and amounts due under the Factoring and Security
Agreement are secured by a pledge of receivables and other assets
of UDT Consulting, and are guaranteed by Axtive. Under the
agreement, UDT Consulting receives approximately 80% of the face
amount of the receivable, pays interest at a rate of prime plus
2% and is subject to additional fees in certain circumstances.
At September 30, 2002, UDT Consulting had approximately $59,000
of receivables sold under the agreement. The related liability
to the factor is included in Other Current Liabilities in the
Consolidated Balance Sheet.
12. OTHER CURRENT LIABILITIES
Other current liabilities are primarily amounts due to the
sellers of the businesses Axtive has acquired. Such amounts
represent deferred payment of the purchase price and amounts
withheld at closing to ensure compliance with representations and
warranties made by the sellers. In general, such amounts are due
one year from the date of acquisition.
13. COMMON STOCK
On August 20, 2002, we issued 100,000 restricted shares of our
Common Stock (valued at $32,000) to an unrelated third party in
exchange for professional services advising us on raising capital
and evaluating mergers and acquisitions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
The following discussion and analysis should be read in
conjunction with the consolidated financial statements and notes
thereto included as Item 1 of this report. This document
contains "forward-looking statements" made under the "safe
harbor" provisions of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements are based on the
beliefs of our management as well as assumptions made by and
information currently available to our management. These
statements include without limitation, statements regarding our
future capital requirements and our ability to satisfy our
capital needs; statements regarding our recent acquisitions;
statements regarding our ability to implement our plans to
acquire additional companies; and other statements which speak to
projections of future conditions or our anticipated performance
which contain the words "anticipate", "believe," "expect" and
words or phrases of similar import, as they relate to us or our
management. You should be aware that these "forward-looking"
statements are subject to certain risks, uncertainties and
assumptions related to certain factors including, without
limitation, the ability to adopt and successfully execute a
revised business plan, respond to future business opportunities,
and overcome numerous other risks and difficulties generally
experienced by early stage business models, including, but not
limited to those factors set forth under the heading "RISK
FACTORS" in our annual report filed on Form 10-KSB for our fiscal
year ended December 31, 2001, and discussed in the Form 8-K/A
filed on June 24, 2002, as well as the Form 8-K filed on July 8,
2002.
Although we believe that the expectations reflected in such
forward-looking statements are reasonable, we can give no
assurance that such expectations will prove to have been correct.
Based upon changing conditions, should any one or more of these
risks or uncertainties materialize, or should any underlying
assumptions prove incorrect, actual results may vary materially
from those described herein. We expressly undertake no
obligation to update these forward-looking statements. Except as
required by federal securities laws, we undertake no obligation
to publicly update or revise any written or oral forward-looking
statements, whether as a result of new information, future
events, changed circumstances or any other reason after the date
of this report.
-11-
GENERAL
Prior to our emphasis on IT Professional Services, Business
Application Software and Application Services and Management, the
business consisted primarily of developing, marketing and selling
personalized videotape golf lessons featuring One-on-One golf
video instruction by leading professional golfer Greg Norman,
sold under the name "One-on-One with Greg Norman."
On September 10, 2001, we sold all the assets related to our One-
on-One business to Visual Edge, Inc., a newly created company
formed by certain members of our previous management. Visual
Edge, Inc. is not related to us.
The results of operations generated by the One-on-One business
have been presented as "discontinued operations" in the financial
statements because it represented a separate segment of our
business. During the three and nine months ended September 30,
2001, we had no operations other than those related to the
business sold in September 2001. As such, the basic financial
statements for the three and nine months ended September 30,
2001, include neither sales nor costs of sales.
OUR ONGOING PLAN
Our plan of operation for the upcoming months calls for the
following:
* Operating the businesses Axtive has acquired to date;
* Additional fundraising activities to continue our
acquisition strategy; and
* Additional acquisitions to fill in Axtive's end-to-end
("E2E") offering of business application software products
and professional services to meet the needs of middle market
companies.
RECENT DEVELOPMENTS
Amendment of Certificate of Incorporation
- -----------------------------------------
On October 28, 2002, our Certificate of Incorporation was amended
to change the company's name from Edge Technology Group, Inc. to
Axtive Corporation. The change was approved by the Board of
Directors on June 25, 2002, and approved by a written consent of
a majority of the outstanding shares of our Common Stock
effective June 25, 2002. For voting purposes, holders of our
Series A Convertible Preferred Stock participated in such a vote
on an as-converted basis, which means that, at the time of such
vote, each share of Series A Convertible Preferred Stock was the
equivalent of 1,333.33 shares of Common Stock.
Shares eligible to vote on the matter totaled 24,672,941
including 18,939,622 common shares outstanding and 5,733,319
equivalent shares of Common Stock represented by the Series A
Convertible Preferred Stock, as converted. The Board of
Directors received the consent to the action from stockholders
representing 17,621,488 shares.
Adoption of 2002 Stock Incentive Plan
- -------------------------------------
On June 25, 2002, our Board of Directors adopted, subject to
stockholder approval, the 2002 Stock Incentive Plan. The plan
was approved on July 15, 2002, through the written consent of a
majority of the outstanding shares of our Common Stock effective
July 15, 2002. For voting purposes holders of our Series A
Convertible Preferred Stock participated in such a vote on an as-
converted basis, which means that, at the time of such vote, each
share of Series A Convertible Preferred Stock is the equivalent
of 1,333.33 shares of Common Stock.
Shares eligible to vote on the matter totaled 24,752,941
including 18,939,622 common shares outstanding and 5,813,319
equivalent shares of Common Stock represented by the Series A
Convertible Preferred Stock, as converted. The Board received
the consent to the action from stockholders representing
17,354,822 shares.
-12-
RESULTS OF OPERATIONS
Three Months ended September 30, 2002 compared to three months
ended September 30, 2001
- --------------------------------------------------------------
Stemming from our recent acquisitions, sales from continuing
operations for the three months ended September 30, 2002, reached
$1,008,998. This represents the first period in which the
operations of all our subsidiaries were included for the full
period. Gross margins across all businesses averaged 51.2
percent and reflected month over month improvements throughout
the three month period. However, revenues remained below prior
year levels for each of the subsidiaries. The improvement in
gross margins reflects the Company's efforts to contain costs and
to reduce fixed costs in favor of variable costs.
General and administrative expenses for the three months ended
September 30, 2002, increased over the comparable period in the
prior year stemming from the recent acquisitions.
Marketing expense reflects primarily salaries of internal sales
and marketing personnel.
Recovery of bad debt reflects the recovery of amounts previously
written off from the Hencie matter. See Note 10 "Notes
Receivable" in the Notes to Unaudited Consolidated Financial
Statements included in Item 1 herein.
Impairment of assets reflects a partial write off of goodwill
recorded as part of the acquisition of The Visionary Group.
Interest expense for the three months ended September 30, 2002,
decreased $8,863 or 35.8% from the prior year. Interest in the
prior year was attributable to the Sandera (later assigned to
Catalyst) and Infinity loans that were converted into equity
April 1, 2002 (See Note 11 "2002 Series A Convertible Preferred
Stock" in the Notes to Unaudited Consolidated Financial
Statements under Item 1 herein for more information). Interest
expense in the three months ended September 30, 2002, reflects
primarily the cost of factoring receivables by our subsidiary,
UDT Consulting.
Loss from discontinued operations of $583,903 reflects the sale,
on September 10, 2001, of assets related to our One-on-One
business to a newly formed, unrelated entity, Visual Edge, Inc.
Included in that amount is a loss on the sale of assets of
approximately $570,000.
Nine months ended September 30, 2002 compared to the nine months
ended September 30, 2001
- ----------------------------------------------------------------
Stemming from our recent acquisitions, sales from continuing
operations for the nine months ended September 30, 2002, reached
$1,520,099. Results from operations of each subsidiary were
included only during the portion of the period that Axtive owned
that subsidiary. As a result, no revenues were recorded during
the first three months of the year. Gross margins across all
businesses averaged 43.2 percent and reflected month over month
improvements over the six month period in which the Company
recorded revenues.
General and administrative expenses for the nine months ended
September 30, 2002, increased over the comparable period in the
prior year stemming from the recent acquisitions.
Marketing expense reflects primarily salaries of internal sales
and marketing personnel.
Recovery of bad debt reflects the recovery of amounts previously
written off from the Hencie matter. See Note 10 "Notes
Receivable" in the Notes to Unaudited Consolidated Financial
Statements included in Item 1 herein.
Impairment of assets for the nine months ended September 30,
2001, reflects a partial write off in 2001 of our investment in
Purchase Pooling Solutions, Inc., a demand aggregator of capital
equipment for the public sector. Impairment of assets for the nine
months ended September 30, 2002, reflects a partial write off of
goodwill recorded as part of the acquisition of The Visionary
Group.
Interest expense for the nine months ended September 30, 2002,
decreased $8,954 or 14.4% from the prior year. Interest in the
prior year was attributable to the Sandera (later assigned to
Catalyst) and Infinity loans that were converted into equity
April 1, 2002 (See Note 11 "2002 Series A Convertible Preferred
Stock" in the Notes to Unaudited Consolidated Financial
Statements under Item 1 herein for more information). Interest
expense in the three months ended September 30, 2002, reflects
primarily the cost of factoring receivables by our subsidiary,
UDT Consulting.
-13-
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, we had cash and cash equivalents of
approximately $989,000 and a working capital deficit of
approximately $966,000 compared to cash and cash equivalents
of approximately $83,000 and a working capital deficit of
approximately $589,000 on December 31, 2001. During the nine
months ended September 30, 2002, net cash used in operating
activities was approximately $657,000 (net of collections on
the Hencie settlement of $1,037,500), net cash used in
investing activities was approximately $1.7 million and net
cash provided by financing activities, primarily the sale of
the Series A Preferred Stock, was approximately $3.0 million
for a total increase in cash and cash equivalents for the
period of approximately $648,000.
We expect our liquidity to remain tight throughout the remainder
of 2002. The Company has advanced money to cover some of its
subsidiaries operating expenses while taking aggressive steps to
eliminate non-revenue generating overhead, reduce fixed costs in
favor of variable costs and generally reduce cash needs going
forward. Advancing funds to our operating subsidiaries has
further taxed our limited resources.
We have historically financed our operations primarily through
the sale of equity securities or instruments convertible into
equity securities. Although we recently completed the Series A
Preferred financing described in Note 11 "Series A Convertible
Preferred Stock" above, there can be no assurance that future
financings can be completed. In order to continue the
implementation of our new business plan, it will be necessary to
secure additional financing. There can be no assurance that any
additional financing will be available on acceptable terms.
Should we be unable to obtain additional financing, we would be
unable to acquire additional technology companies or continue
operations.
Ability to Continue as a Going Concern
- --------------------------------------
Our independent accountants have included an explanatory
paragraph in their report on our financial statements for the
year ended December 31, 2001, contained in our most recent Annual
Report on Form 10-KSB, that states that our financial statements
have been prepared assuming that we will continue as a going
concern, but that substantial doubt exists as to our ability to
do so.
SEASONALITY
Based upon our review of current companies and acquisition
candidates, the IT Professional Service businesses experience a
moderate level of seasonality. The first quarter revenue tends
to be the lowest, higher revenues are generally reflected in the
second and third quarters and revenues in the fourth quarter
decline from the mid-year levels. Revenues for Business
Application Software and Application Services and Management do
not reflect a discernable pattern of seasonality.
RISK FACTORS
In addition to the information contained herein, readers of this
report or any of our press releases should carefully consider the
risk factors contained in previous filings, in particular, our
Annual Report (Form 10-KSB), our 8-K/A filed June 24, 2002 and
our 8-K filed on July 8, 2002. Readers are cautioned that such
statements are only predictions and actual events or results may
differ substantially. In evaluating those statements, readers
should specifically consider the various factors identified in
this report which could cause actual results to differ
substantially from those indicated by those forward-looking
statements.
THIRD PARTY REPORTS AND PRESS RELEASES
We do not make financial forecasts or projections nor do we
endorse the financial forecasts or projections of third parties
or comment on the accuracy of third-party reports. We do not
participate in the preparation of the reports or the estimates
given by analysts. Analysts who issue financial reports are not
privy to non-public financial information. Any purchase of our
securities based on financial estimates provided by analysts or
third parties is done entirely at the risk of the purchaser. We
periodically issue press releases to update stockholders on new
developments at Axtive and our business. These releases may
contain certain statements of a forward-looking nature relating
to future events or our future financial performance within the
meaning of Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the Securities
Exchange Act of 1934, as amended, and which are intended to be
covered by the safe harbors created thereby.
-14-
Readers are cautioned that such statements are only predictions
and that actual events or results may materially differ with
those statements. In evaluating such statements, readers should
specifically consider the various risk factors identified which
could cause actual results to differ materially from those
indicated by such forward-looking statements.
SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
Revenue Recognition
- -------------------
Revenue from the sale of products or provision of services is
recognized when the product is delivered or when the service is
provided and collectability of the receivable is reasonably
assured. Deposits received from customers in advance of the
delivery of product or provision of service are included in Other
Current Liabilities in the Consolidated Balance Sheet.
Principles of Consolidation
- ---------------------------
The Company's consolidated financial statements include the
Company and its wholly owned subsidiaries. All intercompany
balances and intercompany transactions have been eliminated in
consolidation.
Goodwill
- --------
Goodwill is measured as the amount paid for an acquisition in
excess of the value determined for identifiable tangible and
intangible assets. In accordance with SFAS No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets," goodwill is assumed to have an indefinite life and will
not be subject to amortization. The Company will evaluate its
goodwill at least annually (and also whenever events or
circumstances indicate an impairment may exist) and will test for
impairment by applying a fair value based test.
On July 8, 2002, Axtive filed a Form 8-K stating that the
operating results of its subsidiary, The Visionary Group, were
below acceptable levels. Despite aggressive action to rebuild
the revenues of this business, losses and negative cash flows
continue. As a result, the Company tested the goodwill and other
assets acquired in the transaction for impairment and recognized
an impairment charge related to the goodwill in an amount of
$600,000 in the current period.
In determining the impairment charge, Axtive considered the
operating results for the periods since acquisition of The
Visionary Group and the other subsidiaries in the reporting unit,
and projected future cash flows based upon those results. The
results were then discounted to compute a present value of the
future cash flows. This present value was then compared to the
combined goodwill recorded for all subsidiaries in the reporting
unit, and the amount of goodwill in excess of the discounted
future cash flows was our measure of the impairment charge.
It is possible that future operating results will change our
estimate of the reporting unit's fair value. Accordingly,
additional write-downs are possible.
ITEM 3. CONTROLS AND PROCEDURES
Within the ninety days prior to the filing date of this Form 10-
QSB, the Company carried out an evaluation, under the supervision
and with the participation of the Company's management, including
the Company's Chief Executive Officer and Principal Accounting
Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as defined in Rule
13a-14 of the Securities Exchange Act of 1934. Based upon that
evaluation, the Chief Executive Officer and the Principal
Accounting Officer concluded that the Company's disclosure
controls and procedures are effective in timely alerting them to
material information relating to the Company (including its
consolidated subsidiaries) required to be included in this
Quarterly Report on Form 10-QSB. There have been no significant
changes in the Company's internal controls or in other factors
which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
-15-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Proceedings against The Visionary Group
On June 4, 2002, we were notified The Visionary Group and Axtive
had been sued in the District Court of Dallas County, Texas for
non-payment of approximately $110,000 due to former sub-
contractors. In order to limit our costs to defend the matter,
we have agreed to a partial summary judgment wherein we admitted
the liability of The Visionary Group but retained our defenses on
the issues against Axtive. A trial has been set for August 2003.
We do not expect a negative judgment would have a material
negative impact on our business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The financing transactions described below were deemed to be
exempt from registration under the Securities Act of 1933 in
reliance on Section 4(2) of such act as transactions by an issuer
not involving any public offering. The recipients of securities
in each such transaction represented their intentions to acquire
the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates issued in such
transactions.
2002 Series A Convertible Preferred Stock
- -----------------------------------------
In April 2002, we issued 4,200 shares of Series A Preferred as
described in Note 11 "Financing Transactions" in Notes to
Unaudited Consolidated Financial Statements included in Item 1
herein. Each share of our Series A Preferred was issued at a
purchase price of $1,000 per share, carries an 8% cumulative
dividend and is convertible into shares of our Common Stock at an
initial conversion price of $.75 per share. For each 100 shares
of Common Stock received upon conversion of the Series A
Preferred we issued warrants to purchase 20 shares of our Common
Stock at a purchase price of $1.15 per share. See our 10-KSB
filed April 16, 2002, for additional detail on the April 2002
issuance.
In July and August 2002, we issued an additional 240 shares of
Series A Convertible Preferred Stock with identical terms to the
earlier issue described above. As part of this subsequent
issuance of Series A Preferred, 64,000 warrants were issued.
Proceeds from the July and August issuances totaled $240,000 and
were used to repay short term notes of $48,000 and for general
corporate purposes.
Issuance of Restricted Common Stock
- -----------------------------------
On August 20, 2002, we issued 100,000 restricted shares of our
Common Stock (valued at $32,000) to an unrelated third party in
exchange for professional services advising us on raising capital
and evaluating mergers and acquisitions.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Amendment to our Certificate of Incorporation
- ---------------------------------------------
Our Board of Directors unanimously adopted an amendment to our
Certificate of Incorporation to change the name of our
corporation from "Edge Technology Group, Inc." to "Axtive
Corporation". Because of the many references in general commerce
to "edge" as both a company name (or part thereof) and a brand
name, we believed it was desirable to create a unique name that
better portrays the proper image and provides a foundation for
future marketing efforts. In addition, within the State of Texas
and elsewhere, we became aware of other companies whose names
could lead to confusion with Edge Technology Group.
-16-
Under Delaware General Corporation Law, the affirmative vote of
the holders of a majority of the outstanding shares of common
stock was required to amend and restate our Certificate of
Incorporation. Through the written consent of a majority of the
outstanding shares of our Common Stock and our Series A Preferred
Stock, the Company obtained the necessary votes to approve the
amendment effective June 25, 2002. For voting purposes holders
of our Series A Preferred Stock participate in such a vote on an
as-converted basis, which means that, at the time of such vote,
each share of Series A Preferred Stock was the equivalent of
1,333.33 shares of Common Stock. Since our board had obtained
the required approval for the amendment to our Certificate of
Incorporation by means of this written consent, a meeting to
approve the Amendment to Certificate of Incorporation was
unnecessary, and our board decided to forego the expense of
holding a meeting to approve this matter.
Shares eligible to vote on the matter totaled 24,672,941,
including 18,939,622 Common shares outstanding and 5,733,319
equivalent shares of Common stock represented by the Series A
Convertible Preferred Stock, as converted. The Board of
Directors received the consent to the action from stockholders
representing 17,621,488 shares.
The amendment to our Certificate of Incorporation was effective
on October 28, 2002, upon the filing of the Amendment to
Certificate of Incorporation with the Secretary of State of
Delaware.
Adoption of 2002 Stock Incentive Plan
- -------------------------------------
Our Board of Directors unanimously adopted the 2002 Stock
Incentive Plan.
Under the terms of the 2002 Plan, the affirmative vote of the
holders of a majority of the outstanding shares of common stock
was necessary in order to approve the 2002 Plan within twelve
months of the adoption by the Board of Directors. Any grants
made under the 2002 Plan prior to this stockholder approval were
subject to obtaining such approval. Through the written consent
of a majority of the outstanding shares of our Common Stock and
our Series A Preferred Stock, the Company obtained the necessary
votes to approve the amendment. For voting purposes holders of
our Series A Preferred Stock participate in such a vote on an as-
converted basis, which means that, at the time of such vote, each
share of Series A Preferred Stock was the equivalent of 1,333.33
shares of Common Stock. Since our board had obtained the
required approval for the 2002 Plan by means of this written
consent, a meeting to approve the 2002 Plan was unnecessary, and
our Board decided to forego the expense of holding a meeting to
approve this matter.
Shares eligible to vote on the matter totaled 24,752,941,
including 18,939,622 Common shares outstanding and 5,813,319
equivalent shares of Common stock represented by the Series A
Convertible Preferred Stock, as converted. The Board received
the consent to the action from stockholders representing
17,354,822 shares.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibits are filed as part of this Report as
required by Item 601 of Regulation S-B.
EXHIBIT
NUMBER DESCRIPTION
- ------- --------------------------------------------------------
3.3 Certificate of Amendment to Amended and Restated
Certificate of Incorporation changing the name of the
Company from Edge Technology Group to Axtive Corporation
99.1 Certifications Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
(b) Reports on Form 8-K
On July 8, 2002, Axtive filed a Form 8-K stating that the
operating results of its subsidiary, The Visionary Group, were
below acceptable levels.
-17-
SIGNATURE
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AXTIVE CORPORATION
By: /s/ David N. Pilotte
---------------------------
David N. Pilotte
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
November 14, 2002
-18-
FORM OF CERTIFICATION
---------------------
For Form 10-QSB
Provided in SEC Release 33-1824
CERTIFICATIONS
--------------
I, Graham C. Beachum II, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Axtive Corporation;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period covered
by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 14, 2002
/s/ Graham C. Beachum II
- -------------------------
Graham C. Beachum II
President and Chief Executive Officer
-19-
FORM OF CERTIFICATION
---------------------
For Form 10-QSB
Provided in SEC Release 33-1824
CERTIFICATIONS
--------------
I, David N. Pilotte, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Axtive Corporation;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period covered
by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 14, 2002
/s/ David N. Pilotte
- ---------------------
David N. Pilotte
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------------- --------------------------------------------------
3.3 Certificate of Amendment to Amended and Restated
Certificate of Incorporation changing the name of
the Company from Edge Technology Group to Axtive
Corporation
99.1 Section 906 Certifications Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
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