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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q

|(Mark One)                                        |                                                                                         
|------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                 | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended September 30, 2002
|OR                                               
|o                                                 | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from
 to               

Commission File No. 000-23221

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CENTIV, INC.(Exact name of Registrant as specified in its charter)

|Delaware(State or other jurisdiction of incorporation or organization)                                           |  | 58-2033795(IRS Employer Identification Number)
|---------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|998 Forest Edge Drive, Vernon Hills, Illinois 60061
(Address of Principal Executive Offices, including Zip Code)
|(847) 876-8300(Registrant's telephone number, including area code)                                              

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Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 ý    No o

The
number of shares outstanding of the Registrant's common stock, par value $.001, as of November 13, 2002 the latest practicable date, was 4,994,035 shares.

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CENTIV, INC.  TABLE OF CONTENTS

|ITEM                         |  |                                                                                                 |  | PAGE
|---------------------------- |  | ----------------------------------------------------------------------------------------------- |  | ----
|PART I FINANCIAL INFORMATION |  |                                                                                                
|Item 1.                      |  | Financial Statements (unaudited):                                                               |  |     
|                             |  | Balance Sheets as of September 30, 2002 and December 31, 2001                                   |  | 3   
|                             |  | Statements of Operations for the three months and nine months ended September 30, 2002 and 2001 |  | 4   
|                             |  | Statements of Cash Flows for the nine months ended September 30, 2002 and 2001                  |  | 5   
|                             |  | Notes to Financial Statements                                                                   |  | 6   
|Item 2.                      |  | Management's Discussion and Analysis of Financial Condition and Results of Operations           |  | 12  
|Item 3.                      |  | Quantitative and Qualitative Disclosures about Market Risks                                     |  | 17  
|Item 4.                      |  | Controls and Procedures                                                                         |  | 17  
|PART II OTHER INFORMATION    |  |                                                                                                
|Item 1.                      |  | Legal Proceedings                                                                               |  | 18  
|Item 2.                      |  | Changes in Securities and Use of Proceeds                                                       |  | 18  
|Item 3.                      |  | Defaults upon Senior Securities                                                                 |  | 20  
|Item 4.                      |  | Submission of Matters to a Vote of Security Holders                                             |  | 20  
|Item 5.                      |  | Other Information                                                                               |  | 20  
|Item 6.                      |  | Exhibits and Reports on Form 8-K                                                                |  | 20  
|Signatures                   |  | 22                                                                                             

2

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PART IFINANCIAL INFORMATION

CENTIV, INC.    BALANCE SHEETS    ($ in thousands)

|                                                                                                                                                                                                                              |                                                                                                                                    | September 30,
2002                         |         | December 31,
2001 |      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------------- | -----
|
|ASSETS                                                                                                                                                                                                                        |                                                                                                                                    |                                            |         |                   |      
|Current assets:                                                                                                                                                                                                               |                                                                                                                                    |                                            |         |                   |      
|                                                                                                                                                                                                                              | Cash and cash equivalents                                                                                                          |                                            | $       | 417               |      
|                                                                                                                                                                                                                              | Accounts receivable, less allowance for doubtful accounts of $20 and $43 at September 30, 2002 and December 31, 2001, respectively |                                            |         | 2,579             |      
|                                                                                                                                                                                                                              | Inventories, net                                                                                                                   |                                            |         | 797               |      
|                                                                                                                                                                                                                              | Prepaid expenses and other assets                                                                                                  |                                            |         | 504               |      
|                                                                                                                                                                                                                              | Income taxes receivable                                                                                                            |                                            |         | 43                |      
|                                                                                                                                                                                                                              | Deferred income taxescurrent                                                                                                      |                                            |         | 205               |      
|                                                                                                                                                                                                                              | Net current assets, discontinued operations                                                                                        |                                            |         | 0                 |      
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      
|                                                                                                                                                                                                                              |                                                                                                                                    | Total current assets                       |         |                   | 4,545
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      
|Property and equipment, net                                                                                                                                                                                                   |                                                                                                                                    |                                            | 1,903   |                   |      
|Other assets                                                                                                                                                                                                                  |                                                                                                                                    |                                            | 249     |                   |      
|Net other assets, discontinued operations                                                                                                                                                                                     |                                                                                                                                    |                                            | 0       |                   |      
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      
|                                                                                                                                                                                                                              |                                                                                                                                    | Total assets                               |         | $                 | 6,697
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      
|LIABILITIES                                                                                                                                                                                                                   |                                                                                                                                    |                                            |         |                   |      
|Current liabilities:                                                                                                                                                                                                          |                                                                                                                                    |                                            |         |                   |      
|                                                                                                                                                                                                                              | Current debt                                                                                                                       |                                            | $       | 0                 |      
|                                                                                                                                                                                                                              | Accounts payable                                                                                                                   |                                            |         | 2,911             |      
|                                                                                                                                                                                                                              | Accrued expenses                                                                                                                   |                                            |         | 574               |      
|                                                                                                                                                                                                                              | Contract obligation and deferred income                                                                                            |                                            |         | 58                |      
|                                                                                                                                                                                                                              | Net current liabilities, discontinued operations                                                                                   |                                            |         | 0                 |      
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      
|                                                                                                                                                                                                                              |                                                                                                                                    | Total current liabilities                  |         |                   | 3,543
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      
|Deferred income taxes                                                                                                                                                                                                         |                                                                                                                                    |                                            | 157     |                   |      
|Convertible Subordinated Debt                                                                                                                                                                                                 |                                                                                                                                    |                                            | 988     |                   |      
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      
|                                                                                                                                                                                                                              |                                                                                                                                    | Total liabilities                          |         |                   | 4,688
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      
|STOCKHOLDERS' EQUITY                                                                                                                                                                                                          |                                                                                                                                    |                                            |         |                   |      
|Class A Common Stock $.001 par value, 35,000,000 shares authorized; 4,994,035 shares and 4,956,535 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively                                    |                                                                                                                                    |                                            | 5       |                   |      
|Preferred Stock, $.001 par value, 5,000,000 shares authorized; 216,000 and no shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively (liquidation value of $2,160,000 at September 30,
2002) |                                                                                                                                    |                                            | 0       |                   |      
|Due from stockholders                                                                                                                                                                                                         |                                                                                                                                    |                                            | (2,495  | )                 |      
|Additional paid-in capital                                                                                                                                                                                                    |                                                                                                                                    |                                            | 22,487  |                   |      
|Accumulated deficit                                                                                                                                                                                                           |                                                                                                                                    |                                            | (17,988 | )                 |      
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      
|                                                                                                                                                                                                                              |                                                                                                                                    | Total stockholders' equity                 |         |                   | 2,009
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      
|                                                                                                                                                                                                                              |                                                                                                                                    | Total liabilities and stockholders' equity |         | $                 | 6,697
|                                                                                                                                                                                                                              |                                                                                                                                    |                                            |         |                   |      

The accompanying notes are an integral part of these consolidated financial statements.

3

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CENTIV, INC.    STATEMENTS OF OPERATIONS    ($ in thousands, except per share data)

|                                                            |                                     | Three Months Ending
September 30,   |       | Nine Months Ending
September 30, |          
|----------------------------------------------------------- | ----------------------------------- | ----------------------------------- | ----- | -------------------------------- | ---------
|
|
|Net sales                                                   |                                     | $                                   | 4,769 |                                  | $        
|Cost of goods sold                                          |                                     |                                     | 3,779 |                                  |          
|                                                            |                                     |                                     |       |                                  |          
|                                                            |                                     | Gross profit                        |       |                                  | 990      
|Operating expenses:                                         |                                     |                                     |       |                                  |          
|                                                            | Selling, general and administrative |                                     |       | 1,393                            |          
|                                                            | Depreciation                        |                                     |       | 146                              |          
|                                                            |                                     |                                     |       |                                  |          
|Loss from operations                                        |                                     |                                     | (549  | )                                |          
|Other Income (expense)                                      |                                     |                                     | 0     |                                  |          
|Interest income (expense)                                   |                                     |                                     | 41    |                                  |          
|                                                            |                                     |                                     |       |                                  |          
|Loss before income taxes from continuing operations         |                                     |                                     | (508  | )                                |          
|Benefit for income taxes from continuing operations         |                                     |                                     | 0     |                                  |          
|                                                            |                                     |                                     |       |                                  |          
|Loss from continuing operations                             |                                     |                                     | (508  | )                                |          
|Income (loss) from discontinued operations, net of tax      |                                     |                                     | 0     |                                  |          
|                                                            |                                     |                                     |       |                                  |          
|Net Loss                                                    |                                     | $                                   | (508  | )                                | $        
|                                                            |                                     |                                     |       |                                  |          
|Effect of beneficial conversion feature of preferred stock  |                                     |                                     | 0     |                                  |          
|                                                            |                                     |                                     |       |                                  |          
|Net Loss attributable to common shareholders                |                                     | $                                   | (508  | )                                | $        
|                                                            |                                     |                                     |       |                                  |          
|Basic and Diluted Income/(Loss) applicable to common shares |                                     |                                     |       |                                  |          
|                                                            |                                     | Weighted average shares outstanding |       |                                  | 4,982,766
|                                                            |                                     | Continuing operations per share     |       | $                                | (0.10    
|                                                            |                                     | Discontinued operations per share   |       | $                                | 0.00     
|                                                            |                                     |                                     |       |                                  |          
|                                                            |                                     | Net Loss per share                  |       | $                                | (0.10    
|                                                            |                                     |                                     |       |                                  |          

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The accompanying notes are an integral part of these consolidated financial statements.

4

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CENTIV, INC.    STATEMENTS OF CASH FLOWS    ($ in thousands)

|                                                                                          |                                                | Nine Months Ending
September 30,         |       
|----------------------------------------------------------------------------------------- | ---------------------------------------------- | ---------------------------------------- | ------
|
|
|Cash flows from operating activities:                                                     |                                                |                                          |       
|Net Loss                                                                                  |                                                | $                                        | (533  
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |                                                |                                          |       
|                                                                                          | Provision for doubtful accounts receivable     |                                          |       
|                                                                                          | Provision / write-down of inventory            |                                          |       
|                                                                                          | Depreciation                                   |                                          |       
|                                                                                          | Non-cash interest on note payable (receivable) |                                          |       
|                                                                                          | Non-cash compensation for stock options        |                                          |       
|                                                                                          | Gain on sale of CalGraph Business              |                                          |       
|                                                                                          | Deferred Taxes                                 |                                          |       
|                                                                                          | Changes in net assets and liabilities          |                                          |       
|                                                                                          |                                                | Accounts receivable                      |       
|                                                                                          |                                                | Inventories                              |       
|                                                                                          |                                                | Prepaid expenses and other assets        |       
|                                                                                          |                                                | Accounts payable and accrued expenses    |       
|                                                                                          |                                                | Contract obligations and deferred income |       
|                                                                                          |                                                | Income taxes                             |       
|                                                                                          |                                                | Net assets, discontinued operations      |       
|                                                                                          |                                                |                                          |       
|Total adjustments                                                                         |                                                |                                          | (2,493
|                                                                                          |                                                |                                          |       
|Net cash (used in) provided by operating activities                                       |                                                |                                          | (3,026
|                                                                                          |                                                |                                          |       
|Cash flows from investing activities:                                                     |                                                |                                          |       
|Purchase of property and equipmentcontinuing operations                                  |                                                |                                          | (246  
|Purchase of property and equipmentdiscontinuing operations                               |                                                |                                          | 0     
|Proceeds from Sale of CalGraph Business                                                   |                                                |                                          | 1,175 
|                                                                                          |                                                |                                          |       
|Net cash provided by (used in) investing activities                                       |                                                |                                          | 929   
|                                                                                          |                                                |                                          |       
|Cash flows from financing activities:                                                     |                                                |                                          |       
|Proceeds/(repayment), net, from credit facility                                           |                                                |                                          | (796  
|Proceeds/(repayment), net, from convertible subordinated debt                             |                                                |                                          | 1,000 
|Net Proceeds from private placement of securities                                         |                                                |                                          | 2,026 
|Proceeds/(repayment), net, from capital lease                                             |                                                |                                          | 39    
|Proceeds from stock options exercised                                                     |                                                |                                          | 17    
|Dissenters' settlement payments                                                           |                                                |                                          | 0     
|                                                                                          |                                                |                                          |       
|Net cash provided by (used in) financing activities                                       |                                                |                                          | 2,286 
|                                                                                          |                                                |                                          |       
|Increase (decrease) in cash and cash equivalents                                          |                                                |                                          | 189   
|Cash and cash equivalents, beginning of year                                              |                                                |                                          | 228   
|                                                                                          |                                                |                                          |       
|Cash and cash equivalents, as of September 30                                             |                                                | $                                        | 417   
|                                                                                          |                                                |                                          |       

The accompanying notes are an integral part of these financial statements.

5

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NOTES TO FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included. Operating results for the three months and the nine months ended September 30, 2002 are not necessarily indicative
of the results that may be expected for the full year ending December 31, 2002. For further information, refer to the consolidated financial statements and the footnotes included in the
Form 10-K for the year ended December 31, 2001.

2.    INVENTORIES

Inventories, net of reserves, at September 30, 2002 and December 31, 2001 consist of the following ($ in thousands):

September 30,
2002

December 31,
2001Supplies

797

978


3.    NET LOSS PER COMMON SHARE

Basic and diluted net income/(loss) per common share are computed by dividing net income (loss) by the weighted average number of common shares and common share
equivalents outstanding during the period. Since the Company has a net loss from continuing operations, there were no common share equivalents that were dilutive during any of the periods presented.
The changes in outstanding shares during the three months and nine months ended September 30, 2001 and 2002 are shown below:

|                                           |  | Three Months Ending
September 30, |  | Nine Months Ending
September 30, | 
|------------------------------------------ |  | --------------------------------- |  | -------------------------------- | 
|
|Common shares:                             |  |                                   |  |                                  | 
|Outstanding at beginning of period         |  | 4,976,535                         |  | 4,956,535                        | 
|Shares issued (redeemed) during the period |  | 17,500                            |  | 0                                | 
|                                           |  |                                   |  |                                  | 
|Outstanding at end of period               |  | 4,994,035                         |  | 4,956,535                        | 
|                                           |  |                                   |  |                                  | 
|Basic and Diluted weighted average shares  |  | 4,982,766                         |  | 4,956,535                        | 
|                                           |  |                                   |  |                                  | 

The
weighted average common shares exclude securities that would be anti-dilutive upon conversion. Accordingly, there are 1,320,962 stock options, 2,160,000 common shares
(216,000 preferred shares convertible at 10 common shares each), 2,100,000 warrants with an exercise price of $8.40 that expire in November 2002, 2,160,000 warrants (216,000 preferred warrants
convertible at 10 common shares each) with an exercise price of $1.50 per share that expire in March 2007, and 72,000 warrants with exercise prices between $1.00 and $1.15 per share that expire
in 2003, that are excluded from the weighted average shares outstanding.

6

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Earnings
(loss) per share is computed as follows:

|                                             |                                                                        | Three Months Ending
September 30, |       | Nine Months Ending
September 30, |      
|-------------------------------------------- | ---------------------------------------------------------------------- | --------------------------------- | ----- | -------------------------------- | -----
|
|Income Available to common shareholders:     |                                                                        |                                   |       |                                  |      
|                                             | Loss from continuing operations                                        |                                   | (508  | )                                | (686 
|                                             | Effect of Beneficial Conversion Feature of convertible preferred stock |                                   | 0     |                                  | 0    
|                                             |                                                                        |                                   |       |                                  |      
|                                             | Loss from continuing operations attributable to common shareholders    |                                   | (508  | )                                | (686 
|                                             |                                                                        |                                   |       |                                  |      
|                                             | Income (Loss) from discontinued operations                             |                                   | 0     |                                  | (253 
|                                             |                                                                        |                                   |       |                                  |      
|                                             | Net loss attributable to common shareholders                           |                                   | (508  | )                                | (939 
|                                             |                                                                        |                                   |       |                                  |      
|Earnings (loss) per shareBasic and Diluted: |                                                                        |                                   |       |                                  |      
|                                             | Continuing Operations                                                  |                                   | (0.10 | )                                | (0.14
|                                             | Discontinued Operations                                                |                                   | 0.00  |                                  | (0.05
|                                             |                                                                        |                                   |       |                                  |      
|                                             | Net Loss                                                               |                                   | (0.10 | )                                | (0.19
|                                             |                                                                        |                                   |       |                                  |      

4.    INCOME TAXES

The Company's effective tax rate was 0% and 26% for the three months ended September 30, 2002 and 2001, respectively. The Company's effective tax rate was
0% and 32% for the nine months ended September 30, 2002 and 2001, respectively. The tax rate was 0% for the three months and nine months ended September 30, 2002 as the Company's tax
provision/(benefit) was offset by a corresponding reduction/(increase) in the valuation allowance for deferred income taxes that was established in 2001.

5.    CURRENT DEBT

In June 2002, the Company entered into a Loan and Security Agreement (the "Agreement"), with Cole Taylor Bank, which expires on June 30, 2004, that
provides for a revolving credit facility initially for $750,000 with the possibility of increases up to $2.0 million. The availability under the credit facility will be increased to
$2.0 million if the Company achieves earnings before interest, taxes, depreciation and amortization of at least $50,000 for three (3) consecutive months. Outstanding advances under the
Agreement bear interest at prime plus 1.00%. Pursuant to the terms of the Agreement, the Company has pledged accounts receivables, inventory and equipment as collateral.

In
accordance with the Agreement, the Company is required to maintain certain financial covenants, which specifically include tangible net worth, a debt to equity ratio and a debt
service coverage ratio. At September 30, 2002, the Company was in compliance with the financial covenants.

In
September 2002, the Company entered into a supplemental credit facility with Cole Taylor Bank. The supplemental credit facility provides up to $5,012,800 in purchase order
financing. This facility will be used to finance the short-term inventory requirements for a large-scale equipment upgrade by a current Centiv customer. The maturity date for this
financing is February 15, 2003 and bears interest at prime plus 1.00%.

7

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6.    ESCROW SHARES

The number of outstanding common shares does not include 228,266 shares held in escrow in connection with an acquisition by the Company pursuant to a Pledge,
Security and Escrow Agreement dated June 2, 1997. All of the interest in and title to these 228,266 shares was transferred to Anita Ltd. and then subsequently transferred to the Company
as part of a Settlement Agreement and Mutual Releases dated as of December 21, 2000. These shares will ultimately be released from the escrow to the Company and will be cancelled. Therefore,
the Company has, for accounting purposes, treated these shares as cancelled effective as of December 21, 2000.

7.    PATENT APPLICATION

On March 20, 2002, the Company filed a patent application with the United States Patent and Trademark Office for a "Method and System for Point of Purchase
Sign Creation and Delivery." In addition, the Company filed an international patent application for the same invention to protect patent rights in foreign countries. The Company expects that after
examination, it will be awarded a patent to protect its valuable intellectual property. Centiv has developed this system which allows a user access to an information database for selecting sign
templates, inputting data for the sign templates and selecting and ordering signage products for production of the sign templates having the data input.

8.    RESTRUCTURING CHARGES

During the fourth quarter of 2000, the Company consolidated and centralized its operations and, therefore, recorded a restructuring charge of $541,000 for
employee severance and leased premises no longer necessary. The restructuring charges were recorded in discontinued operations for the year ended December 31, 2000.

The
following table provides a roll forward of the liabilities incurred in connection with the 2000 business restructuring.

|Category             |       | December 31, 2001
Balance |    | 1st Qtr 2002 Restructuring Expenditures |   | 2nd Qtr 2002 Restructuring Expenditures |     | 3rd Qtr 2002 Restructuring Expenditures |     | September 30, 2002
Balance
|-------------------- | ----- | ------------------------- | -- | --------------------------------------- | - | --------------------------------------- | --- | --------------------------------------- | --- | --------------------------
|
|Employee Separations |       | $                         | 11 |                                         | $ | (11                                     | )   | $                                       | 0   |                           
|Facility Closings    |       |                           | 84 |                                         |   | (34                                     | )   |                                         | (34 | )                         
|                     |       |                           |    |                                         |   |                                         |     |                                         |     |                           
|                     | Total |                           | $  | 95                                      |   | $                                       | (45 | )                                       | $   | (34                       
|                     |       |                           |    |                                         |   |                                         |     |                                         |     |                           

A
total of $95,000 was charged to the restructuring reserve during the nine months ended September 30, 2002 with $45,000 charged in the first quarter of 2002 and $34,000 charged
in the second quarter of 2002, and $16,000 charged in the third quarter of 2002. Employee separations of $11,000 and facility closings of $84,000 were charged against the restructuring reserve for the
nine months ended September 30, 2002. As of September 30, 2002, all restructuring payments have been paid.

8

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9.    SEGMENT DISCLOSURES

Centiv offers web services for consumer brand companies to manage their in-store and on-premise point-of-purchase
(POP) process. The final product is high quality digitally produced signage that is mass customized for the unique requirements of each retail location.

During
2001, the Company decided to focus on and dedicate its resources to its POP business. To further that goal, in December 2001, the Company sold the Channels Business and,
effective January 31, 2002, sold Calgraph Technology Services, Inc. As a result of these divestitures, the Company currently operates as a single business unit.

10.  RECLASSIFICATIONS

Certain amounts in the September 30, 2001 financial statements have been reclassified to conform to the September 30, 2002 presentation.

11.  DISCONTINUED OPERATIONS



As of December 31, 2001, the Company sold the assets of its Channels Business to TK Acquisition Corporation, as successor by merger to SCB Acquisitions, in
exchange for a purchase price of $7,905,000 in cash, subject to a post-closing adjustment based upon fluctuations in working capital from June 30, 2001 and December 31, 2001.
The post closing adjustment was $1,598,573. Another adjustment to the purchase price is the net asset value adjustment, which is the amount by which the book value of the net assets (defined as
accounts receivable, inventory, prepaid expenses and other assets included in
the purchased assets excluding fixed assets less the liabilities and accrued expenses assumed by TK Acquisition) has increased or decreased from June 30, 2001 to the closing of the Channels
Business transaction of December 31, 2001. This net asset adjustment is estimated to be a further reduction in the purchase price of $54,000, bringing the net purchase price after adjustments
to $6,252,427 before transaction costs. The Company recorded $404,000 of transaction costs associated with financial advisor fees, legal and accounting fees.

The
Channels Business produced $48.4 million in revenue and had a pre-tax operating loss of $722,000 for the year ended December 31, 2001. The sale of the
Channels Business resulted in a pre-tax loss of $2,175,000, which is comprised of the difference between the purchase price and the book value of the net assets and transaction fees
associated with the sale of the business. The Company wrote off the deferred tax asset of $184,000 associated with the Channels Business.



Effective January 31, 2002, the Company sold the assets of the Calgraph Technology Services Business to Graphic Enterprises of Ohio, Inc. Centiv
received consideration for the sale of the Calgraph assets in the amount of $1,050,000 in cash plus a minimum royalty of $625,000 to be paid over a 25 month period beginning in May 2002.
Graphic Enterprises also assumed certain liabilities of Calgraph. The Company realized a pre-tax gain on the sale of $586,000, which is the cash received plus the present value of the
royalty payments less the book value of the net assets and less transaction fees associated with the sale of the business. In addition, the Company wrote off the deferred tax asset of $98,000 relating
to the Calgraph Technology Services Business. The pretax loss from operations for Calgraph Technology Services Business in January 2002 was $108,000.

9

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The Company's consolidated financial statements for 2001 have been reclassified to report separately the results of operations for the Channels Business and the Calgraph Technology
Services Business. The operating results (in thousands) for the three months and nine months ended September 30, 2001 consist of:

|                                                  |  | Three months ended September 30, 2001 |       
|------------------------------------------------- |  | ------------------------------------- | ------
|
|Net sales:                                        |  | $                                     | 11,545
|Income/(Loss) from operations before income taxes |  |                                       | (440  
|Provision/(Benefit) from income taxes             |  |                                       | (149  
|                                                  |  |                                       |       
|Income from discontinued operations               |  | $                                     | (291  
|                                                  |  |                                       |       

|                                                  |  | Nine months ended September 30, 2001 |       
|------------------------------------------------- |  | ------------------------------------ | ------
|
|Net sales:                                        |  | $                                    | 39,551
|Income/(Loss) from operations before income taxes |  |                                      | (134  
|Provision/(Benefit) from income taxes             |  |                                      | 11    
|                                                  |  |                                      |       
|Income from discontinued operations               |  | $                                    | (145  
|                                                  |  |                                      |       

12.  PRIVATE PLACEMENT OF SECURITIES

On March 28, 2002 and April 15, 2002, the Company sold, in two separate closings of one private placement, 191,000 and 25,000 units respectively,
each unit consisting of one share of convertible preferred stock and one warrant to purchase one additional share of convertible preferred stock. The purchase price for each unit was $10.00 per unit.
This sale of units was ratified by the Company's shareholders at the annual meeting of shareholders held on June 11, 2002. Because each share of convertible preferred stock is convertible,
initially, into ten shares of common stock, the effective purchase price was $1.00 for each share of common stock purchased. The warrant that is included in each unit gives the holder the right, until
five years after the issuance of the warrant, to purchase one share of convertible preferred stock at a purchase price of $15.00 per share (the equivalent of $1.50 per share of common stock). Neither
the convertible preferred stock nor the warrants have been registered under the Securities Act of 1933. Therefore, they may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements.

The
convertible preferred stock has a liquidation preference over common stock equal to the purchase price of the convertible preferred stock plus any accrued but unpaid dividends. If
not previously converted, the convertible preferred stock will begin to accrue dividends on March 31, 2003 at an annual rate equal to 8% of the purchase price of the convertible preferred
stock. In addition, if not previously converted into common stock, the convertible preferred stock is subject to redemption at the option of the Company on the fourth anniversary of the issuance of
the convertible preferred stock at a redemption price equal to the purchase price plus any accrued but unpaid dividends. If the Company
fails to redeem the convertible preferred stock on that date, the holders of the convertible preferred stock become entitled to elect a majority of the board of directors. Notwithstanding the
foregoing, directors elected by virtue of the voting rights of the convertible preferred stock would have to recuse themselves from any vote to redeem all or a portion of the convertible preferred
stock.

10

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The
convertible preferred stock is initially convertible into ten shares of common stock for each share of the convertible preferred stock. This conversion ratio, however, is subject to
anti-dilution adjustment for stock splits, combinations and other similar changes and if the Company issues, except in limited circumstances, any capital stock for a per share price less
than the then current conversion price.

The
convertible preferred stock will be automatically converted if (i) holders of 2/3 of the outstanding shares of such preferred stock agree to convert, (ii) the Company's
revenues exceed $5 million for any two consecutive quarters, or (iii) the Company recognizes $20 million in revenues for the 12-month period ending March 31,
2003.

The
Company filed, on April 26, 2002, a registration statement to cover the resale of the shares of common stock issuable upon conversion of the convertible preferred stock and
the shares of common stock issuable upon exercise of the warrants or upon conversion of the convertible preferred stock issuable upon exercise of the warrants. The Company will use its best efforts to
have the registration statement declared effective and will maintain the effectiveness of the registration statement until the earlier of (a) the later of (i) two years after all of the
warrants have been redeemed or exercised, or (ii) two years after all of the preferred stock has been converted, or (b) six years from the latest closing date. The Company has also
granted the purchasers of the convertible preferred stock piggy-back registration rights on any other Registration Statement filed by the Company (other than on Forms S-8 or
S-4). The Company will bear all expenses of each registration, including the costs of one special counsel to the holders of registrable securities.

Proceeds
to the Company from the sale of the convertible preferred stock were $2,160,000, of which $1,910,000 was received at the March 28, 2002 closing and the remaining $250,000
was received at the April 25, 2002 closing. Aggregate transaction costs of $136,000 representing legal, accounting and registration fees were incurred bringing the net proceeds to $2,024,000.
The net proceeds were used to pay off and cancel the Company's previous credit facility with Wachovia Bank, NA.

The
Company has recorded a beneficial conversion feature on the convertible preferred stock and warrants based on the fair value of the common stock of $1.00 per share as of the date of
commitment. The warrants with an exercise price of $1.50 per share, were valued at $810,000 using the Black-Scholes valuation method. The beneficial conversion feature was calculated to be $810,000 at
the commitment date of March 28, 2002 and has been recorded as Additional Paid in Capital. As the preferred shares are convertible immediately, the entire amount of the beneficial conversion
feature has been accreted into the Accumulated Deficit at March 31, 2002.

13.  CONVERTIBLE SUBORDINATED DEBT

On September 30, 2002, the Company issued $1 million of Senior Subordinated Convertible Notes to private investors. These notes are convertible into
equity, at the lenders' option upon the closing of, and at the same terms as, the next equity financing in which the Company raises at least $1,000,000. The loan has a term that extends until the
earlier of July 1, 2004 or two business days following the closing of an equity financing described above and pays interest at a rate of 10% per year. In addition, the lenders received an
aggregate of 50,000 warrants granted at the closing of the loan and will receive an aggregate of an additional 20,000 warrants per month until such time as the loan is fully repaid or converted into
equity. The warrant is exercisable at $1.75 per share and is callable by the Company if the market price of the Compnay's common stock closes at or above $5.00 per share for 10 consecutive trading
days. The warrants were valued at $11,858 using the Black-Scholes valuation method creating an unamortized discount on the Senior Subordinated Convertible Notes. The unamortized discount will be
amortized to interest expense over the term of the note.

11

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The
proceeds of the Senior Subordinated Convertible Debt will be used for working capital requirements of the business and to support the large-scale equipment upgrade by a current
Centiv customer.

14.  RELATED PARTY TRANSACTIONS

On December 1, 1999, the Company entered into a Loan Agreement with William M. Rychel pursuant to which the Company loaned Mr. Rychel a total of
$1,775,000 to purchase from certain shareholders a total of 806,983 shares of our common stock. The original term of the loan was one year which the Company extended until December 1, 2001 and,
on December 1, 2001, the Company entered into another amendment with Mr. Rychel that extended the due date of the loan until December 1, 2002. In exchange for extending the loan,
Mr. Rychel agreed to a non-compete and a confidentiality and assignment of inventions agreement. The loan is measured for impairment based on the underlying collateral or other
assets available to repay the loan. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to
the contractual terms of the loan agreement. The Company's ability to collect amounts due according to the contractual terms of the Loan Agreement is largely dependent on the ultimate realization from
the sale of assets owned by Mr. Rychel, including his investment in common stock in the Company. When determining the fair value of investments in common stock, the Company considers both the
current market price and volatility in the stock price. Under the Sarbanes-Oxley Act of 2002, this loan can not be extended beyond its current maturity of December 1, 2002 or otherwise
materially modified.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the information contained in the Consolidated Financial Statements, including the related notes.

Overview

We are a developer and provider of Web-enabled point-of-purchase (POP) solutions used by consumer goods manufacturers and mass
retailers. The delivered product is high quality, digitally produced signage that is mass-customized for the unique requirements of each retail location. With our premier product, Instant
Impact, customers gain the ability to target important consumer segments at the point of purchase by allowing brand managers or retailers to order mass-customized, on-demand,
color POP materials and receive quantitative feedback on the success of their in-store or on-premise marketing campaigns.

Instant
Impact allows a marketing manager, brand manager or retailer to create, edit, schedule and arrange for delivery of POP materials via the Internet by using
pre-approved, field-editable sign templates. This Internet-based user interface is flexible, user-friendly and changeable to allow control of the message at a corporate or
local store level. The signage can either be printed in a Centiv print center, or an industry-standard print-formatted file can be delivered via the Internet to any print provider in the world. This
rapid delivery of signage results in a dramatic reduction in POP lead time and the costs associated with launching or changing in-store or on-premises messaging. For customers
who prefer to print signage locally, the Company also sells equipment and supplies used in producing POP signage.

The
roots of Instant Impact were formed in 1998 when the Company partnered with Anheuser-Busch to design, configure, deliver and implement POP signage systems to Anheuser-Busch wholesale
distributors in the United States and 16 foreign countries. Since the formal launch of the Internet-based Instant Impact in March 2001, the Company and DuPont Tyvek have formed a strategic
alliance and co-branding agreement that includes company-wide implementation of Instant Impact.

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During
2001, the Company decided to focus on and dedicate its resources to its POP business. To further that goal, in December 2001, the Company sold its Channels Business and,
effective January 31, 2002, sold the assets of its wholly-owned subsidiary Calgraph Technology Services, Inc. As a result of these divestitures, the Company currently operates as a
single business unit.

Three Months Ended September 30, 2002 Compared With Three Months Ended September 30, 2001

Net Sales from continuing operations.Total net sales from continuing operations increased 48% or
$1.6 million to $4.8 million for the three months ended September 30, 2002, compared to $3.2 million for the three months ending September 30, 2001. The increase is
attributable primarily to $1.5 million of revenue relating to the large-scale equipment upgrade for a current customer. The equipment is used to produce locally customized Point of Purchase
(POP) signage. Total orders relating to this upgrade are currently at $11.5 million, leaving a backlog of $10 million, which is expected to ship during the fourth quarter of 2002. The
remaining growth in revenue was attributable to the new web based services offered through the Instant Impact product launched in 2001.

Gross Profit from continuing operations.Gross profit from continuing operations increased 36% or
$263,000 for the three months ended September 30, 2002 to $990,000 as compared to $727,000 for the three months ended September 30, 2001. The gross profit as a percentage of sales
decreased 1.8 percentage points to 20.8% for the three months ended September 30, 2002 compared to 22.6% for the three months ended September 30, 2001. The margin decline is due
to the lower margin on the equipment revenue. Excluding the equipment margins of 8.7%, the overall margins were 26.4% for the three months ended September 30, 2002, which is an increase of
3.8 percentage points over prior year's gross profit margin. Excluding the equipment margin, the margin improvement is attributable to the web based sales as well as the technical support call
center that is now being handled directly by Centiv instead of outsourcing this activity to another entity.

SG&A Expenses from continuing operations.SG&A expenses from continuing operations increased $207,000
or 17% to $1.4 million for the three months ended September 30, 2002 compared to $1.2 million for the three months ended September 30, 2001. The increase in SG&A expenses
over the prior year is primarily from administrative costs that due to the divestitures of the other businesses are now being absorbed entirely by Centiv. In addition, the SG&A expenses included
$160,000 for the three months ended September 30, 2002 relating to legal expenses associated with the termination of the Encad supply agreement and costs associated with reincorporation of the
Company from Georgia to Delaware.

Depreciation Expense from continuing operations.Depreciation expense from continuing operations
increased $35,000, or 32%, to $146,000 for the three months ended September 30, 2002, as compared to $111,000 for the three months ended September 30, 2001. The increase in depreciation
expense relates to the Company's implementation of a new enterprise wide software package as well as the cost of the new online Instant Impact point-of-purchase system.

Income Taxes from continuing operations.The Company's effective tax rate for continuing operations
was 0% for the three months ended September 30, 2002 compared to a benefit of 26% for the three months ended September 30, 2001. The tax rate was 0% for the three months ended
September 30, 2002 as the
Company's tax benefit was offset by a corresponding increase in the valuation allowance for deferred income taxes that was established in 2001.

Net Income (Loss) from continuing operations.The Company had a net loss from continuing operations
of $508,000 for the three months ended September 30, 2002, a decrease in loss of $178,000 or 26%, as compared to the net loss of $686,000 for the three months ended September 30, 2001.
The decrease in the net loss is attributable primarily to the improvement in gross profit as well as a reduction in interest expense.

13

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Discontinued Operations:

The Company had net loss from discontinued operations for the three months ended September 30, 2001 of $253,000. See Note 11 of the Notes to
Consolidated Financial Statements for a description of the discontinued operations.

Nine Months Ended September 30, 2002 Compared With Nine Months Ended September 30, 2001

Net Sales from continuing operations.Total net sales from continuing operations increased 32% or
$2.9 million, to $12.1 million for the nine months ended September 30, 2002, compared to $9.2 million for the nine months ending September 30, 2001. Of the
$2.9 million net sales increase, $1.5 million is attributable to the large-scale equipment upgrade for a current customer. The equipment is used to produce locally customized Point of
Purchase (POP) signage. Total orders relating to this upgrade are currently at $11.5 million, leaving a backlog of $10 million, which is expected to ship during the fourth quarter of
2002. The remaining increase is attributable to the new web based services offered through the Instant Impact product launched in 2001 as well as growth in the supplies revenue for Point of Purchase
(POP) systems that are installed at customer sites.

Gross Profit from continuing operations.Gross profit from continuing operations increased 50% or
$1.0 million for the nine months ended September 30, 2002 to $2.9 million as compared to $1.9 million for the nine months ended September 30, 2001. The gross profit
as a percentage of sales increased 2.9 percentage points to 24.1% for the nine months ended September 30, 2002 compared to 21.2% for the nine months ended September 30, 2001. The
margin improvement is attributable primarily to higher margin web based sales. In addition, the margin improvement is due to the technical support call center now being handled directly by Centiv
instead of outsourcing this activity to another entity. Excluding the margins of 8.7% from the large-scale equipment upgrade, the overall margins were 26.3% for the
nine months ended September 30, 2002, which is an increase of 5.1 percentage points over prior year's gross profit margin.

SG&A Expenses from continuing operations.SG&A expenses from continuing operations increased $584,000
or 18% to $3.8 million for the nine months ended September 30, 2002 compared to $3.2 million for the nine months ended September 30, 2001. The increase in SG&A expenses
over the prior year is primarily from administrative costs that due to the divestitures of the other businesses are now being absorbed entirely by Centiv. In addition, the SG&A expenses included
$160,000 for the three months ended September 30, 2002 relating to legal expenses associated with the termination of the Encad supply agreement and costs associated with reincorporation of the
Company from Georgia to Delaware.

Depreciation Expense from continuing operations.Depreciation expense from continuing operations
increased $209,000, or 102%, to $413,000 for the nine months ended September 30, 2002, as compared to $204,000 for the nine months ended September 30, 2001. The increase in depreciation
expense relates to the Company implementing a new enterprise wide software package as well as the cost of the new online Instant Impact point-of-purchase system.

Other Income from continuing operations.Other Income of $283,000 represents the settlement of
outstanding liabilities associated with the termination of vendor contracts relating to the sale of the Channels Business.

Income Taxes from continuing operations.The Company's effective tax rate for continuing operations
was 0% for the nine months ended September 30, 2002 compared to a benefit of 32% for the nine months ended September 30, 2001. The tax rate was 0% for the nine months ended
September 30, 2002 as the Company's tax benefit was offset by a corresponding increase in the valuation allowance for deferred income taxes that was established in 2001.

14

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Net Income (Loss) from continuing operations.The Company had a net loss from continuing operations
of $913,000 for the nine months ended September 30, 2002, a decrease in loss of $624,000 or 41%, as compared to a net loss of $1.5 million for the nine months ended September 30,
2001. The decrease in the net loss is attributable primarily to the improvement in gross profit as well as the other income and reduced interest expense.

Discontinued Operations:

The Company had net income from discontinued operations of $380,000 for the nine months ended September 30, 2002 compared to a net loss of $13,000 for the
nine months ended September 30, 2001. See Note 11 of the Notes to Consolidated Financial Statements for a description of the discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

On September 30, 2002, the Company had a positive working capital of $1.0 million, an improvement of $0.6 million from June 30, 2002
and an improvement of $3.2 million form December 31, 2001 when the working capital was a negative $2.2 million. The improvement is a result of the sale of the Calgraph Business as
well as the private equity and convertible subordinated debt financings (see Notes 11, 12 and 13 to Consolidated Financial Statements).

The
Company used $3.0 million of cash from operations for the nine months ended September 30, 2002 compared to $6.3 million of cash generated from operations for the
nine months ended September 30, 2001. During the nine months ended September 30, 2002, cash was used to pay accounts payable and accrued expenses of $1.3 million relating to the
payment of transaction costs as well as other payments for vendor settlements associated with the sale of the Channels Business. In addition, cash was used to grow accounts receivables by
$1.6 million, primarily as a result of the large-scale equipment upgrade. We anticipate the majority of the accounts receivables to be collected during the fourth quarter relating to the
upgrade.

For
the nine months ended September 30, 2002, the Company generated cash of $929,000 from investing activities. The Company received cash of $1,175,000 from the sale of the
CalGraph Business (see Note 11 of the Notes to Consolidated Financial Statements), partially offset by cash used of $246,000 for the purchase of software licenses, computer hardware and
production equipment. Approximately $89,000 of the $246,000 of purchases related to one-time expenditures for splitting the software licenses and computer hardware due to the divestitures
of Channels and CalGraph business units. The cash used for the nine months ended September 30, 2001 of $1,240,000 relates to the Company's implementation of a new state of the art enterprise
wide software package as well as the cost of the new online Instant Impact point-of-purchase system.

For
the nine months ended September 30, 2002, the Company generated cash of $2,286,000 from financing activities. The Company received net proceeds of $2,026,000 from a private
equity offering (see Note 12 of the Notes to Consolidated Financial Statements). The net proceeds were used to pay off and cancel the Company's credit facility with the bank. In addition, the
Company received $1,000,000 from the issuance of convertible subordinated debt (see Note 13 of the Notes to Consolidated Financial Statements). During the three months ended
September 30, 2002, there were borrowings of $607,000 and repayments of $607,000 under the Company's bank facility. As of September 30, 2002 there was no amount outstanding under the
Bank Agreement.

In
September 2002, the Company entered into a supplemental credit facility with Cole Taylor Bank. The supplemental credit facility provides up to $5,012,800 in purchase order
financing. This facility will be used to finance the short-term inventory requirements for a large-scale equipment upgrade for Anhueser Busch and its wholesalers. The maturity date for
this financing is February 15,

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2003 and bears interest at prime plus 1.00%. The Company has no borrowings under this facility as of September 30, 2002.

For
the nine months ended September 30, 2001, the Company used cash of $5.2 million from financing activities to pay down the bank line of $3.7 million and to make
payments of $1.5 million on the note issued in connection with the settlement of the Dissenters' Lawsuit. During the nine months ended September 30, 2001 the Company had borrowings of
$49.6 million and repayments of $53.3 million with the outstanding bank loan.

The
Company believes that its available funds together with its credit facilities will be adequate to satisfy its current and planned operations, including restructuring accruals, for at
least the next 12 months

RECENT ACCOUNTING PRONOUNCEMENTS

On July 20, 2001, the Financial Accounting Standard Board (FASB) issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill
and Intangible Assets." SFAS No. 141 is effective for all business combinations completed after June 30, 2001. SFAS No. 142 is effective for fiscal years beginning after
December 15, 2001; however, certain provisions of this Statement apply to goodwill and other intangible assets acquired between July 1, 2001, and the effective date of SFAS No. 142.
Major provisions of the Statements and their effective dates for the Company are as follows:



At
December 31, 2001, the Company had no goodwill recorded.

In
August 2001, the FASB issued SFAS No. 144, "Accounting for the impairment or Disposal of Long-Lived Assets." SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001, and addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30. "Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," for the disposal of a segment of a business. The Company has adopted SFAS No. 144 at January 1, 2002, and has determined that adoption does not have a
material effect on its results of operations or financial position.

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This report contains "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. These statements appear in a number of places in this report and include all statements that are not historical facts. Some of the forward-looking
statements relate to the intent, belief or expectations of the Company and its management regarding the Company's strategies and plans for operations and growth. Other forward-looking statements
relate to trends affecting the Company's financial condition and results of operations, and the Company's anticipated capital needs and expenditures.

Investors
are cautioned that such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially
from those that are anticipated in the forward-looking statements as a result of the impact of competition and competitive
pricing, business conditions and growth in the industry, general and economic conditions, and other risks. Investors should review the more detailed description of these and other possible risks
contained in the Company's filings with the Securities and Exchange Commission, including the Company's Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of trade accounts receivable. Credit
risks with respect to trade receivables are limited due to the diversity of customers comprising the Company's customer base. The Company performs ongoing credit evaluations and charges uncollectible
amounts to operations when they are determined to be uncollectible.

ITEM 4. CONTROLS AND PROCEDURES

1.    Evaluation of disclosure controls and procedures.

Under
the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule 13a-14 (c) under the Exchange Act) as of a date (the "Evaluation Date") within 90 days prior to
the filing date of this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures
were effective in timely alerting them to the material information relating to us (or our consolidate subsidiaries) required to be included in our periodic SEC filings.

2.    Changes
in internal controls.

There
were no significant changes made in our internal controls during the period covered by this report or, to our knowledge, in other factors that could significantly affect these
controls subsequent to the date of their evaluation.

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PART II    OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On June 28, 2002, the Company filed a lawsuit in the Circuit Court of the Nineteenth Judicial Circuit, Lake County, Illinois Chancery Division against
Encad, Inc., a wholly owned subsidiary of Eastman Kodak Company, seeking to prevent Encad from terminating a multi-year supply agreement between the Company and Encad. On
July 1, 2002, Encad filed counterclaims against the Company seeking in excess of $10 million in alleged damages for past and future lost profits and expenses based upon claims that
Centiv breached the supply agreement and alleged fiduciary duties to Encad. Encad's counterclaims are based upon allegations that the Company did not fulfill obligations to recommend Encad's products
to certain of the Company's customers. At the initial hearing on the case, the parties agreed to a temporary court order ensuring that Centiv would have access to the products supplied by Encad
through an Encad reseller at non-wholesale prices.

On
August 6, 2002, the Company filed an amended complaint seeking, among other things, damages from Encad based upon allegations that Encad wrongfully terminated the supply
agreement. On August 6, 2002, the Company also filed a motion to dismiss some of Encad's counterclaims and an answer to the remaining counterclaims. In its answer, the Company denied the
allegations upon which Encad seeks damages.

Encad
thereafter filed a motion to dismiss portions of the Company's Amended Complaint and filed its answer to the remainder of the Amended Complaint. The Court entered a briefing
schedule on the parties' respective motions to dismiss and scheduled argument on the motions for November 14, 2002.

Effective
as of November 13, 2002, Centiv and Encad have agreed to resolve their disputes on mutually agreeable terms, and to keep the terms of that agreement confidential.

On
October 14, 2002, the Company announced it had filed a trademark infringement lawsuit in Federal District Court for the Northern District of Illinois against Incentive
Systems, Inc. of Bedford, Massachusetts, to block Incentive Systems, Inc.'s continued use of the trademark "Centiv." The suit was brought after Centiv's attempts to settle the matter
amicably were unsuccessful and alleges that Incentive Systems, Inc. began the use of "Centiv" as its new company name in July of this year, in violation of Centiv, Inc.'s trademark
rights. The suit seeks a motion for preliminary injunction barring Incentive Systems, Inc. from any future use of Centiv, Inc.'s trademark CENTIV. The Company intends to pursue these
claims vigorously.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Senior Subordinated Convertible Debt

On September 30, 2002, the Company issued $1 million of Senior Subordinated Convertible Notes to private investors. These notes are convertible into
equity, at the lenders' option upon the closing of, and at the same terms as, the next equity financing in which the Company raises at least $1,000,000. The loan has a term that extends until the
earlier of July 1, 2004 or two business days following the closing of an equity financing described above and pays interest at a rate of 10% per year. In addition, the lenders received an
aggregate of 50,000 warrants granted upon the closing of the loan and will receive an aggregate of an additional 20,000 warrants per month until such time as the loan is fully repaid or converted into
equity. The warrant is exercisable at $1.75 per share and is callable by the Company if the market price of the Company's common stock closes at or above $5.00 per share for 10 consecutive trading
days.

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The
proceeds of the Senior Subordinated Convertible Debt are used for working capital requirements of the business and to support the large-scale equipment upgrade by a current Centiv
customer.

Private Offering

On March 28, 2002 and April 15, 2002, the Company sold, in two separate closings of one private placement, 191,000 units and 25,000 units
respectively, each unit consisting of one share of convertible preferred stock and one warrant to purchase one additional share of convertible preferred stock. This offering was made pursuant to an
exemption from registration under Rule 506 of Regulation D under the Securities Act of 1933. The purchase price for each unit was $10.00 per unit. Because each share of convertible
preferred stock is convertible, initially, into ten shares of common stock, the effective
purchase price was $1.00 for each share of common stock purchased. The warrant that is included in each unit gives the holder the right, until five years after the issuance of the warrant, to purchase
one share of convertible preferred stock at a purchase price of $15.00 per share (the equivalent of $1.50 per share of common stock). Neither the convertible preferred stock nor the warrants have been
registered under the Securities Act of 1933. Therefore, they may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. In
connection with this offering the Company, pursuant to its Articles of Incorporation filed a Certificate of Designations, Rights and Preferences with the Secretary of State of the State of Georgia
defining the rights of the preferred stock.

The
convertible preferred stock has a liquidation preference over common stock equal to the purchase price of the convertible preferred stock plus any accrued but unpaid dividends. If
not previously converted, the convertible preferred stock will begin to accrue dividends on March 31, 2003 at an annual rate equal to 8% of the purchase price of the convertible preferred
stock. In addition, if not previously converted into common stock, the convertible preferred stock is subject to redemption at the option of the Company on the fourth anniversary of the issuance of
the convertible preferred stock at a redemption price equal to the purchase price plus any accrued but unpaid dividends. If the Company fails to redeem the convertible preferred stock on that date,
the holders of the convertible preferred stock become entitled to elect a majority of the board of directors. Notwithstanding the foregoing, directors elected by virtue of the voting rights of the
convertible preferred stock would have to recuse themselves from any vote to redeem all or a portion of the convertible preferred stock.

The
convertible preferred stock is initially convertible into ten shares of common stock for each share of the convertible preferred stock. This conversion ratio, however, is subject to
anti-dilution adjustment for stock splits, combinations and other similar changes and if the Company issues, except in limited circumstances, any capital stock for a per share price less
than the then current conversion price.

The
convertible preferred stock will be automatically converted if (i) holders of 2/3 of the outstanding shares of such preferred stock agree to convert, (ii) the Company's
revenues exceed $5 million for any two consecutive quarters, or (iii) the Company recognizes $20 million in revenues for the 12-month period ending March 31,
2003.

The
Company filed, on April 26, 2002, a registration statement to cover the resale of the shares of common stock issuable upon conversion of the convertible preferred stock and
the shares of common stock issuable upon exercise of the warrants or upon conversion of the convertible preferred stock issuable upon exercise of the warrants. The Company will use its best efforts to
have the registration statement declared effective and will maintain the effectiveness of the registration statement until the earlier of (a) the later of (i) two years after all of the
warrants have been redeemed or exercised, or (ii) two years after all of the preferred stock has been converted, or (b) six years from the closing date. The Company has also granted the
purchasers of the convertible preferred stock piggy-back registration

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rights on any other Registration Statement filed by the Company (other than on Forms S-8 or S-4). The Company will bear all expenses of each registration, including the costs
of one special counsel to the holders of registrable securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable

ITEM 5. OTHER INFORMATION

Effective as of November 1, 2002, the NASDAQ Smallcap Market amended its continued listing requirements to raise the minimum shareholders' equity value
from $2,000,000 to $2,500,000. With the implementation of this amendment, the Company is no longer in compliance with this new requirement. However, the Company has been informed that it is the intent
of the holders of the Company's Convertible Subordinated Debt, that those holders intend to convert that Convertible Subordinated Debt into equity which, when consummated, will result in the Company
being in compliance with the amended listing requirement.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits



2.1  Asset
Purchase Agreement dated October 29, 2001 by and between Tekgraf, Inc. and SCB Acquisitions, LLC (Filed as Appendix A to the Company's
Definitive Proxy Statement filed October 21, 2002 and incorporated herein by reference).

2.2  Asset
Purchase Agreement effective as of January 31, 2002 by and among CalGraph Technology Services, Inc., Centiv, Inc., the sole shareholder of
CalGraph and Graphic Enterprises of Ohio, Inc. (Filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed February 20, 2002 and incorporated
herein by reference).

2.3  Agreement
and Plan of Merger dated as of June 11, 2002 by Centiv, Inc., a Georgia corporation and Centiv, Inc., a Delaware corporation (Filed as
Exhibit 2.3 to the Company's Quarterly Report on Form 10-Q filed on August 12, 2002 and incorporated herein by reference).

3.1  Certificate
of Incorporation of Centiv, Inc. dated April 11, 2002 and related Certificate of Designations, Preferences and Rights filed May 21,
2002. (Filed as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed on August 12, 2002 and incorporated herein by reference).

3.2  Bylaws
of Centiv, Inc. (Filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q filed on August 12, 2002 and
incorporated herein by reference).

4.1  Form
of Securities Purchase Agreement dated March 28, 2002 by and among Centiv, Inc. and the purchasers identified on Exhibit A thereto (Filed as
Exhibit 4.1 to the Company's Annual Report on form 10-K filed on April 1, 2002 and incorporated herein by reference).

4.2  Form
of Investors Rights Agreement dated March 28, 2002 by and among Centiv, Inc. and the investors who are signatories thereto (Filed as
Exhibit 4.2 to the Company's Annual Report on form 10-K filed on April 1, 2002 and incorporated herein by reference).

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4.3  Form
of Warrant issued pursuant to Securities Purchase Agreement dated March 28, 2002 by and among Centiv, Inc. and the purchasers identified on
Exhibit A thereto (Filed as Exhibit 4.3 to the Company's Annual Report on form 10-K filed on April 1, 2002 and incorporated herein by reference).

10.1 Loan
Agreement dated June 12, 2002 between the Company and Cole Taylor Bank. (Filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q filed on August 12, 2002 and incorporated herein by reference).

10.2 Security
Agreement dated June 12, 2002 between the Company and Cole Taylor Bank. (Filed as Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q filed on August 12, 2002 and incorporated herein by reference).

11.1 Statements
of Computation of Earnings Per Share (Filed as Exhibit 11.1 to the Company's Annual Report on form 10-K filed on April 1,
2002 and incorporated herein by reference).

21.1 Subsidiaries
(Filed as Exhibit 21.1 to the Company's Annual Report on form 10-K filed on April 1, 2002 and incorporated herein by
reference).

99.1 Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Reports on Form 8-K

The following reports on Form 8-K have been filed during the three months ended September 30, 2002:

Current
Report on Form 8-K filed July 5, 2002, which included disclosure under Item 5 relating to the lawsuit filed by the Company against Encad, Inc.

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SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT ON FORM 10-Q TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED THIS 13th DAY OF November, 2002.

CENTIV, INC.

|    |  | SIGNATURE                             |  | Title                                                                                                             
|--- |  | ------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------
|    |  |                                       |  |                                                                                                                   
|By: |  | /s/WILLIAM M. RYCHELWilliam M. Rychel |  | Chief Executive Officer,
President and Director (principal executive officer)                                     
|By: |  | /s/THOMAS M. MASONThomas M. Mason     |  | Chief Financial Officer
(principal financial and accounting officer and duly authorized officer of the Registrant)

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CERTIFICATIONS

I, William M. Rychel, certify that:

1.    I
have reviewed this annual report on Form 10-Q of Centiv, Inc;

2.    Based
on my knowledge, this annual 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 have:



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 functions):



6.    The
registrant's other certifying officers and I have indicated in this quarterly report whether 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 13, 2002 |  | /s/ WILLIAM M. RYCHELWilliam M. Rychel
Chief Executive Officer
|----------------------- |  | --------------------------------------------------------------

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CERTIFICATIONS (continued)

I, Thomas M. Mason, certify that:

1.    I
have reviewed this annual report on Form 10-Q of Centiv, Inc;

2.    Based
on my knowledge, this annual 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 have:



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 functions):



6.    The
registrant's other certifying officers and I have indicated in this quarterly report whether 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 13, 2002 |  | /s/ THOMAS M. MASONThomas M. Mason
Chief Financial Officer
|----------------------- |  | ----------------------------------------------------------

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