SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
[ ] Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-21201
iMall, Inc.
--------------
(Exact name of small business issuer as specified in its charter)
Nevada 59-2544687B
- -------------------------------- --------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
4400 Coldwater Canyon Boulevard, Suite 200, Studio City, California 91604
- -------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(818) 509-3600
------------------------------------------------
(Issuer's telephone number including area code)
Indicate by check mark whether the issuer (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 XX No
------------------ -----------------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of August 12, 1997, the Issuer had issued and outstanding an
aggregate of 59,284,527 common voting shares, par value $0.001.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------
The unaudited condensed consolidated financial statements of iMall,
Inc. and subsidiaries (the "Company") as of June 30, 1997 and for the three
month and six month periods then ended are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
-----------------------------------------------------------
The following discussion and analysis of the Company's financial
condition as of June 30, 1997 and the Company's results of operations for the
three month and six month periods ended June 30, 1997 and 1996 should be read
in conjunction with the Company's unaudited condensed consolidated financial
statements and notes thereto included elsewhere in this Form 10-QSB. These
results are not necessarily indicative of the results that may be achieved by
the Company for the entire year ending December 31, 1997.
Comparison of Three-Month Periods Ended June 30, 1997 and 1996
- --------------------------------------------------------------
Revenues. Revenues for the three months ended June 30, 1997 were
$5,109,603 compared to $4,663,347 for the three months ended June 30, 1996.
The 10% increase was due primarily to increases in telemarketing sales of
Internet products. Operations were fairly consistent between the two periods,
with the Company's seminar division providing nearly 61% of total revenues for
the three month period ended June 30, 1997 compared to 78% for the three month
period ended June 30, 1996.
Cost of Revenues. Total direct cost of revenues for the three
months ended June 30, 1997 were $3,893,026, compared to $2,316,139 for the
three months ended June 30, 1996, an increase of 68%. This increase was due
primarily to an increase in advertising expense. The Company's marketing
efforts were expanded to include the airing of infomercials on television and
direct mail marketing in an attempt to increase attendance at the Company's
educational workshops. The 68% increase in Cost of Revenues compared to the
10% increase in revenues over the same period was primarily due to revenues
generated by television advertising being less than expected.
General and Administrative Expenses. General and administrative
expenses for the three months ended June 30, 1997 were $1,611,715, compared to
$1,563,316 for the three months ended June 30, 1996. This 3% increase was
due primarily to an increase in the cost of legal and accounting services
associated with the Company's filing of its Form-10SB with the Securities and
Exchange Commission.
Comparison of Six-Month Periods Ended June 30, 1997 and 1996
- ------------------------------------------------------------
Revenues. Revenues for the six months ended June 30, 1997 were
$9,188,036 compared to $8,842,497 for the six months ended June 30, 1996.
This 4% increase in year to date revenues was primarily due to increased
telemarketing revenues. Operations were fairly consistent between the two
periods, with the Company's seminar division providing nearly 67.5% of total
revenues for the six months ended June 30, 1997 and 75% for the six months
ended June 30, 1996.
Cost of Revenues. Total direct cost of revenues for the six months
ended June 30, 1997 were $6,451,977 compared to $4,673,355 for the six months
ended June 30, 1996. The 38% increase was due primarily to increased
advertising costs. The Company's marketing efforts were expanded to include
the airing of infomercials on television and direct mail marketing. The 38%
increase in Cost of Revenues compared to the 4% increase in revenues over the
same period was primarily due to revenues generated by television advertising
being less than expected.
General and Administrative Expenses. General and administrative
expenses for the six months ended June 30, 1997 were $3,568,198 compared to
$2,655,686 for the six months ended June 30, 1996. The 34% increase was due
to several factors. The Company acquired two companies in the first six
months of 1996 which has increased the Company's overall general and
administrative expenses including increased wages and rent. The Company also
hired several individuals for key management positions subsequent to the first
six months of 1996.
Liquidity and Capital Resources
- -------------------------------
The Company has funded its cash requirements primarily through cash
flows from its operating activities and borrowing $500,000 from an affiliated
party, which amount is due upon demand, and bears interest at an annual rate
of 13%. The Company has a working capital deficit of $1,355,782 as of June
30, 1997. Because the Company has no cash reserves, the continuation of the
Company's operations as presently constituted and the implementation of its
business plan depend substantially on its ability to raise sufficient capital.
No assurance can be given that the Company will be successful in raising
sufficient capital. The Company has engaged Geller & Friend Capital Partners
as its financial advisors.
On August 12, 1997, the Company received $500,000 in equity
financing from certain principals of Geller & Friend Capital Partners, the
Company's financial advisor. The Company and its financial advisors are
currently seeking additional equity financing from third parties.
The Company is currently incurring cash expenses in the amount of
approximately $1,000,000 per month, of which fixed costs account for
approximately $500,000. The Company anticipates capital expenditures will be
approximately $1,200,000 for the remainder of the current fiscal year. Cash
revenues are currently averaging approximately $1,400,000 per month.
The Company is collecting $10,000 per month on a note receivable in
the original amount of $250,000, which bears interest at an annual rate of
10%. The amount outstanding on this note receivable is approximately $192,250
as of June 30, 1997.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
The Securities and Exchange Commission (the "SEC") informed the
Company in June 1996 that it was conducting an informal investigation of the
Company. The focus of that investigation appears to the Company to be: (i)
the removal of restrictive legends from shares of the Company's stock prior to
the transactions which brought the current management into the Company; (ii)
the sale of shares by prior affiliates of the Company; (iii) the purchase and
sale of shares by persons that bought stock prior to the transactions which
brought the current management into the Company; and (iv) the trading activity
in the Company's stock in the first and second quarters of 1996. The SEC has
requested and received copies of documents from the Company's transfer agent
and has interviewed special outside counsel for the Company in connection with
the investigation. The Company is not aware of the current status of the
investigation and has not had any formal or informal communication with the
SEC regarding these matters since August 1996.
ITEM 2. CHANGES IN SECURITIES
---------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
-----------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
---------------------------------
(a) The following exhibits are attached hereto and incorporated
herewith.
Exhibit # Description
- ---------- ------------
27 Financial Data Schedule
(b) The Company filed reports on Form 8-K on June 20, 1997, and
July 10, 1997.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED this 19th day of August, 1997.
iMALL, INC.
By:/s/ Craig R. Pickering
--------------------------
Craig R. Pickering
Chairman of the Board
By:/s/ Richard Rosenblatt
------------------------
Richard Rosenblatt
Chief Executive Officer, Director
By:/s/ Mark Comer
----------------
Mark R. Comer
President, Director
By:/s/ Craig Lewis
------------------
Craig Lewis
Chief Financial Officer,
Secretary/Treasurer
iMALL, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Assets
--------
As of June 30, 1997
(Unaudited)
--------------
Current Assets:
Accounts Receivable - trade $ 105,906
Note Receivable 192,250
Income tax receivable 276,940
Inventory 141,576
Deferred income tax asset 163,715
Prepaid expenses 276,026
Other current assets 12,700
--------------
Total Current Assets 1,169,113
--------------
Property and Equipment, Net 864,276
---------------
Other Assets:
Goodwill, net 157,373
Deposits 15,701
Organization costs, net 1,168
---------------
Total Other Assets 174,242
---------------
Total Assets $ 2,207,620
===============
Liabilities and Stockholder Deficit
--------------------------------------
Current Liabilities:
Bank overdraft $ 73,654
Notes payable 530,758
Accounts payable 857,371
Accrued payroll 232,124
Other accrued expenses 131,473
Deferred revenue 467,478
Other current liabilities 232,035
---------------
Total current liabilities 2,524,893
---------------
Notes Payable 40,000
---------------
Stockholder Deficit:
Common stock, par value $.001;
300,000,000 shares authorized,
59,284,527 shares outstanding 59,284
Additional paid-in capital 610,375
Accumulated Deficit (1,026,932)
----------------
Total Stockholder Deficit (357,273)
----------------
Total Liabilities and Stockholder Deficit $ 2,207,620
================
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
iMALL, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
------------------------------- ----------------------------
June 30, 1997 June 30,1996 June 30, 1997 June 30, 1996
--------------- -------------- -------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 5,109,603 $ 4,663,347 $ 9,188,036 $ 8,842,497
COST OF REVENUES 3,893,026 2,316,139 6,451,977 4,673,355
-------------- ------------- -------------- -------------
GROSS MARGIN 1,216,577 2,347,208 2,736,059 4,169,142
GENERAL AND ADMINISTRATIVE EXPENSES 1,749,519 1,614,590 3,845,418 2,757,829
-------------- ------------- -------------- -------------
Operating Income (Loss) (532,942) 732,618 (1,109,359) 1,411,313
--------------- ------------- -------------- -------------
OTHER INCOME AND EXPENSES
Other Income, net 51,063 47,221 67,435 87,391
Interest Expense, net (17,596) (2,242) (29,295) (4,506)
--------------- ------------- -------------- -------------
Net Other Income and Expenses 33,467 44,979 38,140 82,885
--------------- ------------- -------------- -------------
INCOME (LOSS) BEFORE FOR INCOME TAXES (499,475) 777,597 (1,071,219) 1,494,198
--------------- ------------- -------------- -------------
PROVISION FOR INCOME TAXES 0 293,610 0 570,733
--------------- ------------- -------------- -------------
NET INCOME (LOSS) $ (499,475) $ 483,987 $ (1,071,219) $ 923,465
=============== ============= ============== =============
NET INCOME (LOSS) PER COMMON SHARE $ (0.01) $ 0.01 $ (0.02) $ 0.02
=============== ============= ============== =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 59,284,527 59,760,817 59,284,527 57,181,086
=============== ============= ============== =============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
iMALL, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended
--------------------------------
June 30, 1997 June 30, 1996
--------------- ----------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (1,071,219) $ 923,465
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 258,599 73,308
Common stock issued for services - 28,000
Loss on disposal of property and
equipment 1,236 -
Provision for losses on accounts
receivable 18,621 28,835
Changes in assets and liabilities:
Decrease in accounts receivable 144,403 (561,283)
Increase in inventory (86,299) -
Increase in prepaid expenses (146,066) (22,095)
Increase in other current assets (12,700) (76,457)
Increase in accounts payable 189,945 79,706
Increase in accrued expenses 20,924 218,252
Increase in income tax payable - 299,505
Increase in deferred revenue 131,303 -
Decrease in other current liabilities (28,951) -
Decrease in deposits 7,125 -
--------------- ----------------
Net Cash Provided by(used in)
Operating Activities (573,079) 991,236
--------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received from acquisition of
subsidiaries - 152,046
Payments received on notes receivable 49,750 -
Purchase of property and equipment (70,978) (375,494)
--------------- ----------------
Net Cash Used by Investing Activities (21,228) (223,448)
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in basic overdraft 73,654 -
Note payable to affiliated party 500,000 -
Principal payments on obligations under
capital leases (19,611) (26,503)
--------------- ----------------
Net Cash Provided by (used in)
Financing Activities 554,043 (26,503)
--------------- ----------------
Increase (Decrease)in Cash (40,264) 741,285
CASH AT BEGINNING OF PERIOD 40,264 -
--------------- ----------------
CASH AT END OF PERIOD $ - $ 741,285
=============== ================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 39,822 $ -
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
iMall, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Interim Condensed Consolidated Financial Statements
---------------------------------------------------
The accompanying condensed consolidated financial statements have been
prepared by the Company without audit. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows as of the
dates and for the periods presented herein have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Form 10-SB, filed on August 4, 1997. The results of operations for the three
months and six months ended June 30, 1997, are not necessarily indicative of
the operating results that may result for the year ending December 31, 1997.
The accounting policies followed by the Company are set forth in the notes to
the Company's consolidated financial statements in its Form 10-SB.
(2) Net Income (Loss) Per Common Share
----------------------------------
Net income (loss) per common share is based on the weighted average
number of common shares outstanding for each period reported. Stock options
ad warrants prior to conversion are not included in the calculation of any
loss per common share because their inclusion would be antidilutive, thereby
reducing the net loss per common share (see Note 4).
(3) Goodwill
--------
On April 26, 1996, the Company acquired e.m.a.N.a.t.e., Inc.,
("e.m.a.N.a.t.e."), a company specializing in information systems, Internet
consulting and front-page creations for web sites on the Internet, in a
business combination accounted for as a purchase. The Company issued
1,600,000 shares of common stock at $.10 per share, which was the fair value
as determined by the Company's Board of Directors, for all of the outstanding
stock of e.m.a.N.a.t.e. The acquisition resulted in goodwill of $224,507.
The Company is amortizing the resulting goodwill over a five-year period.
On March 5, 1996, the Company acquired Inter-Active Marketing Group, Inc.
("IMG"), a company specializing in yellow page advertising on the Internet, in
a business combination accounted for as a purchase. The Company issued
1,634,800 shares of common stock at $.10 per share, which was the fair value
as determined by the Company's Board of Directors, for all of the outstanding
stock of IMG. The acquisition resulted in goodwill of $103,020. The Company
is amortizing the resulting goodwill over a five-year period.
(4) Recent Accounting Pronouncement
--------------------------------
In February 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"). This statement specifies the computation, presentation, and
disclosure requirements for earnings per share ("EPS") for financial
statements issued for all periods ending after December 15, 1997. SFAS 128
simplifies the standards for computing EPS in comparison to APB Opinion No. 15
and replaces the presentations of Primary EPS and Fully Diluted EPS with a
presentation of Basic EPS and Diluted EPS. The Company's basic and diluted
EPS under the rules of SFAS 128 would not have been different from reported
EPS for the three months or six months ended June 30, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 601,496
<ALLOWANCES> 26,400
<INVENTORY> 141,576
<CURRENT-ASSETS> 1,169,113
<PP&E> 1,387,316
<DEPRECIATION> 523,052
<TOTAL-ASSETS> 2,207,620
<CURRENT-LIABILITIES> 2,524,893
<BONDS> 0
0
0
<COMMON> 59,284
<OTHER-SE> (416,557)
<TOTAL-LIABILITY-AND-EQUITY> 2,207,620
<SALES> 9,188,036
<TOTAL-REVENUES> 9,188,036
<CGS> 6,451,977
<TOTAL-COSTS> 10,297,395
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,295
<INCOME-PRETAX> (1,071,219)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,071,219)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,071,219)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
