U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-SB
AMENDMENT NO. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
iMALL, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 59-2544687B
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1185 South Mike Jense Circle, Provo, Utah 84601
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(Address of principal executive offices) (Zip Code)
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4400 Coldwater Canyon Boulevard, Suite 200,
Studio City, California 91604
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(Address of principal executive offices) (Zip Code)
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Registrants telephone number, including area code:(801)373-1717
Registrants telephone number, including area code: (818) 509-3600
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock $.001 par value
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(Title of class)
Not Applicable
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(Title of Class)
PART I
Item 1. DESCRIPTION OF BUSINESS
Overview of the Company's Business
<R/>iMall, Inc., a Nevada corporation (the "Company"), is an
Internet commerce and services company that maintains an Internet web site
called the iMall. The iMall offers goods and services for sale from a variety
of merchants, each of which has a web site within the iMall, and also through
iMall-posted advertisements from merchants and other service providers. In
1996, which was the Company's first year of business as it is presently
constituted, the Company concentrated its efforts on Internet commerce
seminars, workshops and other consulting services with the objective of
increasing its base of iMall merchants and advertisers.
<R/>
iMALL,
Inc., a Nevada corporation (the "Company"), is an Internet commerce and
services company that maintains an Internet destination called iMALL, located
at www.imall.com. The iMALL Web site offers goods and services for sale from
a variety of merchants, either through a Web site or classified advertisements
within iMALL. iMALL is currently one of the most popular on line shopping
sites on the Internet, with an Internet consumer reach three times greater
than wal-mart.com, and almost equal to iQVC, according to the Internet
Retailing Report published by Morgan Stanley on May 28, 1997.
In 1996, which was the Company's first year of business as it is
presently constituted, the Company concentrated its efforts on the sale of Web
sites through Internet marketing and education seminars, workshops and other
consulting services with the objective of increasing its base of iMALL
merchants and advertisers. Consequently, the Company has to date derived
most of its revenue from these activities. In the event that the number
of iMall merchants and advertisers continues to increase, the Company expects
a larger share of its revenues to derive from sales of advertisements, sales
of iMall web sites, rental and maintenance fees from iMall merchants, web site
design, and other Internet technology related services. The Company is also
seeking to develop within the iMall a number of professional and business
services sites, such as career planning services, and other professional and
business information sites. The Company believes that by combining
professional and business services and information with a wide variety of high
quality retail goods and services, the iMall will become one of the primary
sites for Internet commerce. In the event that the number of iMALL
merchants and advertisers continues to increase, the Company expects a larger
share of its revenues to derive from sales of advertisements, sales of iMALL
Web sites, rental and maintenance fees from iMALL merchants, receiving
commissions on sales made by merchants on iMALL, Web site design, and other
Internet technology related services.<R/>
The Company has developed within iMALL a number of professional
and business services sites referred to as Centers. These Centers include
AT&T Market Square Deals, the American Express Travel Center, the Steve Young
Sports Center, and Career, Financial, Entertainment and International Centers.
The Company will populate the International Center with merchants from around
the world through license and services agreements with third parties with
expertise in particular countries to license the iMALL trademark and Internet
educational and marketing systems. The Company believes that by combining
professional and business services and information with a wide variety of
quality retail goods and services from around the world, iMALL will remain a
viable site for Internet commerce.
Forward-Looking Information
This registration statement contains certain forward-looking
statements and information relating to the Company that are based on the
beliefs of the Company's management as well as assumptions made by and
information currently available to the Company's management. When used in
this registration statement, the words anticipate, believe, estimate, expect
and similar expressions, as they relate to the Company or the Company's
management, are intended to identify forward-looking statements. Such
statements reflect the current view of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated or expected.
The Company does not intend to update these forward-looking statements. See
Description of Business -- Industry and Competitive Considerations, and
Managements Discussion and Analysis or Plan of Operations.
Internet Commerce
The Internet is a world wide series of interconnected electronic
and/or computer networks. Individuals and companies have recently recognized
that the technological capabilities of the Internet provide a medium for not
only the promotion and communication of ideas and concepts, but also for the
presentation and sale of information, goods and services. An estimated
38.7 million people now use the Internet in the United States at least
occasionally according to a survey conducted in the third quarter of 1996 by
Find/SVP in conjunction with Jupiter Communications. This survey concluded
that approximately nine million adult Americans logged onto the Internets
World Wide Web daily, while approximately twenty million logged on every week.
Further, an Odyssey survey indicated that the Internet continues to enjoy a
growth rate of 20% per month. According to the Internet Retailing
Report, published by Morgan Stanley in May 1997, there are currently 35
million users of the Internet, and the number of users is expected to grow to
150 million by the year 2000.
Historically, the Internet has been accessible through personal
computers. Recently, several companies have announced Web TV products
designed for attachment to television sets for the purpose of allowing access
to the Internet without the need for a personal computer. Although these
products do not permit the full range of functions provided by personal
computers, they do permit many of the features of the Internet to be viewed on
television sets. While no assurance can be given, these new Web TV products
are expected to increase the number of people who access the Internet.
The term Internet commerce encompasses the use of the
Internet for marketing, advertising and selling goods and services. The
ability to use the Internet for marketing and advertising results from the
power to communicate information through the Internet to a large number of
individuals, businesses and other entities. The ability to use the Internet
to consummate sales and other commercial transactions results from the power
to conduct through the Internet two-way communication, from merchant to buyer
and from buyer to merchant.
The cost of marketing goods and services on the Internet is
significantly lower than traditional methods of marketing, such as catalog
sales, direct mail or television advertising. Marketing on the Internet can
be especially advantageous for smaller companies because it removes several
physical and capital barriers to entry and serves to level the competitive
playing field, by allowing smaller companies to effectively compete with
larger companies.
How Commerce is Tracked
There are three different methods to measure Internet
activity for a particular web site. The term Internet commerce
encompasses the use of the Internet for selling goods and services. The use
of the Internet as a marketing and advertising tool is due to the ability to
communicate information through the Internet to a large number of individuals,
businesses and other entities.
Because of the virtual nature of electronic commerce, a
merchants on-line presence eliminates the costs of maintaining a physical
retail facility. On-line merchants can also achieve significant savings by
eliminating traditional product packaging, print advertising and other point
of purchase materials. Marketing on the Internet can be especially
advantageous for smaller companies because it removes many physical and
capital barriers to entry and serves to level the competitive playing field,
by allowing smaller companies to effectively compete with larger
companies.
How Activity is Tracked
There are three different methods to measure Internet activity
for a particular Web site. The first method is to count the number of
hits on the site. Hits refers to the total number of files retrieved from a
web page. These files can either be text documents, executable files
(i.e. downloaded programs), or graphic images. These files can
either be text documents, executable files (i.e., downloaded programs), or
graphic images. A file is deemed retrieved whether it is simply accessed,
or actually downloaded. Depending on how much activity is generated, a
single visitor to a site could add hundreds of hits to a given web
site.
A second method of measuring activity is to count the number
of visitors to a web site. Visitors (or accesses to a site) are the total
number of unique people coming to a particular web site. The degree of
difficulty in using this method to track commerce on a web site increases with
the number of entry points into the site.
The third method of measuring activity on a web site is to
count impressions. Impressions usually refer to the total number of banners
or pages (pieces of information) imposed into a users line of site.
Depending on how much activity is generated, a single visitor to iMALL could
result in hundreds of hits.
A second method of measuring activity is to count the number of
visitors to a Web site. Visitors (or accesses to a site) are the total number
of unique people coming to a particular Web site. The degree of difficulty in
using this method to track commerce on a Web site increases with the number of
entry points into the site.
The third method of measuring activity on a Web site is to count
impressions. Impressions usually refer to the total number of banners or
pages imposed into a users line of site. Because items creating
impressions may change while a viewer is still viewing a single page, more
impressions than visitors may be generated by a web page.
Internet Security
Currently, one of the largest barriers to a potential customers
willingness to conduct commerce over the Internet is the perceived ability of
unauthorized persons to access and use personal information about the user,
such as credit card account numbers, social security number and bank account
information. Concerns about the security of the Internet include
concerns over the authenticity of the user (ie, is the user who they say they
are), verification and certification methods of who these users are, and
privacy protection for access to private information transmitted over the
Internet. However, recent advances in this area have greatly reduced the
possibility of any such unauthorized access or use. For a discussion of the
methods of security employed by the Company, see -- iMall Security.
Concerns about the security of the Internet include concerns over the
authenticity of the user (i.e., is the user accurately identified),
verification and certification methods of who these users are, and privacy
protection for access to private information transmitted over the Internet.
However, recent advances in this area have greatly reduced the possibility of
such unauthorized access or use. For a discussion of the methods of security
employed by the Company, see -- iMALL Security.
The iMall iMALL
The Company maintains an Internet web site called the iMall.
Upon accessing the iMall site, an Internet user is shown the iMall home page.
This home page displays several of the key merchants and sponsors of the iMall
and provides users with access to each of iMall's approximately 750
storefronts, 9,000 advertisements, and the iMall directory. The iMall's key
merchants currently include Checker Auto, Leggs, Hanes, Big Dog Sportswear,
Breath Assure, Circus Circus, MGM Grand, and Amazing Discoveries. The iMall
currently is receiving over ten million hits per month.
The iMall directory lists sites by product or service
categories and allows users to perform global searches of the entire iMall.
Users may also use a power shopping function to narrow their search to a
specific area of the iMall, a specific product, or even merchants or products
from a particular region of the country. A viewer who wishes to purchase
items offered on the iMall can do so simply by submitting an order online and
entering a credit card number.
In addition to the traditional search options, the iMall
offers a special function called the Deals of the Day. This service is
updated daily and alerts iMall users to special manufacturer discounts on
first quality name brand merchandise. The Company maintains an
Internet Web site called iMALL. Upon accessing the iMALL Web site, an
Internet user is shown the iMALL Home Page. This home page provides users
with access to the iMALL Guide Page, each of iMall's approximately 1,600
storefronts, 6,000 classified advertisements, and the iMALL directory. The
iMALL Guide Page allows the visitor to explore the iMALL Centers or other
areas. iMall's key merchants currently include Hanes, Dr. Laura, MGM Grand
merchandise, Circus Circus casinos, Breath Assure, Big Dog Sportswear, Checker
Auto, and Amazing Discoveries. From January 1996, to June 1997, iMall's hits
have increased from approximately one million per month to over 16 million per
month.
The iMALL directory lists sites by product or service categories
and allows users to perform global searches of the entire iMALL. Users may
also use the power shopping function to narrow their search to a specific area
of iMALL, a specific product, or even merchants or products from a particular
region of the country or the world. A viewer who wishes to purchase items
offered on iMALL can do so simply by submitting an order online and entering a
credit card number.
In addition to the traditional search options, iMALL offers a
special function called Deals of the Day. This service is updated daily and
alerts iMALL users to special manufacturer discounts on quality name brand
merchandise.
The iMall is also currently hosting a $250,000 sweepstakes
sponsored by AT&T. Contestants may visit the iMall to enter and to see if
they are the winner of a daily prize. This sponsorship has helped increase
the number of hits to the iMall site by over 30%. The Company and
AT&T WorldNet Service(sm) recently opened AT&T Market Square Deals on iMALL.
AT&T Market Square Deals offers name brand merchandise for sale at significant
discounts from retail. This site features a wide range of products and
includes a link to the iMALL's "Deals of the Day".
In addition to well known merchandisers, several radio
stations including KABC talk radio and KMPC radio (each a Los Angeles based
radio station) maintain sites on the iMall. Maintaining sites on the iMall
allows these stations greater exposure due to the high volume of traffic on
the iMall. These stations post sports information, texts of interviews on
their stations, traffic and other information, as well as sell promotional
products.
iMall Security
The Company's current electronic commerce service includes
the use of CyberCashs Secure Internet Payment Service. This service
incorporates an RSA encryption method between a shopper on the iMall and a
CyberCash enabled merchant on the iMall wherein the iMall shopper is prompted
by their personal wallet which they have established on their personal
computer. The Company recently opened an international commerce
center (located at international.imall.com) on iMALL. The Company anticipates
that this International Center will contain Web sites from merchants
throughout the world, allowing for global Internet commerce.
iMALL Security
The Company's current electronic commerce service includes the
use of secure sockets layer (SSL) protocol. SSL supports a fully DES
encrypted session (up to 128-bit, depending on the browser) between the Web
browser and the Web server. Additional security is provided by CyberCashs
Secure Internet Payment Service. This service incorporates an RSA encryption
method between a shopper on iMALL and a CyberCash enabled merchant on iMALL
wherein the iMALL shopper is prompted by a personal wallet which has been
established on the users personal computer. This personal wallet then
negotiates with the merchants bank through CyberCash for authorization.
The transaction between the iMall shopper and the Company is also
secured by a customized Apache server. Upon shipment of the purchased
product, the merchant then negotiates with their bank through CyberCash for a
capture of funds. These security methods provide a high level of encryption
protection for users credit card numbers, bank account numbers, and other
personal information.
iMall Products and Services
The Company derives substantially all of its revenue from
the following sources:
Educational Seminars
The principal marketing methods employed by the Company
today are its preview and workshop seminars. These seminars target individuals
and businesses interested in marketing their products and services on the
Internet, or simply learning about business opportunities relating to the
Internet. Upon shipment of the purchased product, the merchant then
negotiates with its bank through CyberCash for a capture of funds. These
security methods provide a high level of encryption protection for users
credit card numbers, bank account numbers, and other personal information. To
the Company's knowledge, the Company has never experienced any significant
problems with security. However, there can be no assurance that the Company
will never experience such a problem.
iMALL Products and Services
In the past, the Company derived substantially all of its
revenue from Web site sales and maintenance fees, and Internet education and
marketing services. In the future, the Company anticipates deriving the
majority of its revenue from Web site sales and maintenance fees, commissions
from online sales, banner advertisements, and licensing the Company's
trademark and Internet educational and marketing systems to third parties in
foreign countries.
Web Site Sales and Advertising
A Web site is a business online presence or electronic store and
has two fundamental roles. First, it is an advertising medium. Second, it is
a medium for engaging in Internet commerce. The Company sells a large
percentage of its Web sites in conjunction with its educational and marketing
seminars described below. The Company also receives revenue in the form of
fees for setting up a Web site and from monthly maintenance fees. iMALL
currently hosts approximately 1,600 online merchants, and is adding
approximately 200 per month.
The Company charges most of its stores a monthly maintenance fee
for maintaining their site on iMALL. The basic fee is $59 per month. This fee
pays for space on iMALL servers and technical support from the Company.
During 1997 the Company plans to expand its maintenance fee offerings to
include more advanced maintenance services including technology updates,
periodic design updates and data gathering services. The Company
uses infomercials, 60 second radio advertising, directed mailings to targeted
audiences, as well as print advertisements to attract attendees to its preview
seminars. The preview seminars are conducted free of charge for attendees and
are designed to showcase the value of the Internet workshop.
The Company also conducts Internet workshops at a cost of
$2,995.00 per person. These seminars include extensive instruction about the
Internet and are taught by various instructors who have experience in areas
such as direct marketing, business development, Internet commerce, and web
site design.
In Addition to the Internet instruction, seminar
participants receive two web sites, each consisting of up to five web pages,
and ten classified advertisements on the iMall, all designed by the
Company.
The Company also offers information home study products
priced at $1,495 and $995 for those who are interested in learning about the
Internet but choose not to attend the workshop.
The Company has also created a program whereby a few
independent companies have been allowed to offer their clients the Company's
home study products directly. The most significant reseller is National
Direct Corporation, which is currently selling between two and four thousand
of these home study products per month. These sales currently account for a
net return to the Company of approximately $200,000 per month.
Site Fees
The Company charges most of its stores a monthly maintenance
fee for maintaining their site on the iMall. The basic fee is $59.00 per
month. This fee pays for space on the iMall servers and technical support
from the Company. The Company plans to expand its maintenance fee offerings
to include more advanced maintenance services including technology updates,
periodic design updates and data gathering services during 1997.
However, there can be no assurance that the Company will be successful with
this program.
Custom Web Site Development and Maintenance Services
The Company has a technology staff that performs billable
services such as design and development work for current iMall web sites, as
well as full corporate site development.
The Company's Internet publishing service employs the
Company's proprietary web site development tool which is called iStore.
iStore facilitates the development of basic web sites, enhanced web sites, and
fully customized web sites. iStore also supports basic electronic commerce
components which merchants may employ on their iMall sites. Basic web sites
contain text of various fonts and font sizes as well as simple images.
Enhanced sites contain more advanced text, images, forms and tables that are
generated through the use of Java applets, JavaScripting and similar tools.
iStore provides several stylized templates for basic web site designs and a
more limited number for enhanced web site designs. Fully customized web sites
contain features similar to those contained in enhanced web sites but require
several sophisticated design and programming resources that are not currently
provided in iStore. The cost to the Company to maintain Web sites
for a twelve month period and provide the classified advertisements is
approximately $260. All of the Company's Web site initiation and maintenance
fee revenue is deferred and recognized on a straight-line basis over the
twelve month contract period.
The Company's technology staff also performs billable services
such as design and development work for current iMALL Web sites and full
corporate site development. Fees for these services are billed by the hour or
by the project.
The Company's Internet publishing service employs the Company's
proprietary Web site development tool which is called iStore. iStore
facilitates the development of basic Web sites, the enhancing of Web sites,
and creating fully customized Web sites. iStore also supports basic
electronic commerce components which merchants may employ on their iMALL
sites. Basic Web sites contain text of various fonts and font sizes as well
as simple images. Enhanced sites contain more advanced text, images, forms
and tables that are generated through the use of Java applets (a small
computer application written in the Java language that is downloaded to a
browser), JavaScripting (an HTML language that is interpreted by Web browsers
and used to enhance HTML content that is downloaded to a browser), and similar
tools. iStore provides several stylized templates for basic Web site designs
and a more limited number for enhanced Web site designs. Fully customized web
sites contain features similar to those contained in enhanced Web sites but
require several sophisticated design and programming resources that are not
currently provided in iStore. The Company anticipates that as demand
grows for the more sophisticated features found in enhanced and fully
customized sites, the Company will integrate the tools for creating these
features into iStore. There can be no assurance, however, that the Company
will be successful in expanding and upgrading iStore.
Royalties from Sales on the iMall
Merchants generally agree to having a site on the iMall for a
one year period. The Company is currently requiring all merchants who renew
their sites on the iMall to agree to pay the Company a negotiated royalty
based on sales through their iMall site. All merchants establishing new iMall
sites are required to agree to such an arrangement. Revenues from this
program have thus far been insignificant. This program was recently introduced
by the Company, and the Company has not to date encountered any resistance to
its implementation. However, the Company can make no assurance that
resistance from merchants will not arise in the future.
The Company recently implemented technology which will allow
it to closely meter all types of transactions on the iMall. This new
technology allows the Company to track a particular merchants sales, thereby
facilitating the Company's charging a percentage of sales.
Other forms of advertising on the Internet include banner
advertisements and sponsorships. Banner advertisements are horizontal
advertisements which circulate across Web pages and typically link to Web
sites. Banner advertisements are purchased based upon the number of
impressions they receive. Banner advertisements are typically traded for
advertising or promotional services with other Internet companies or sold at a
price of between 1.5 cents and 5 cents per impression. iMALL currently
generates over one million impressions per month, although the Company has not
yet been able to sell or trade all of its impressions. Because of the lack of
operating history with respect to banner advertisements, the Company cannot
predict future revenues which will be derived from banner advertisements.
The Company also anticipates selling sponsorships of different
iMALL Centers. An iMALL Center is simply a collection of Web pages with
category specific content. iMALL Centers include AT&T Market Square Deals,
the American Express Travel Center, the Steve Young Sports Center, a Career
Center, an Entertainment Center, a Financial Center, and an International
Center. The Company's management believes that these sponsorships can be sold
to high profile companies for premium prices. However, there can be no
assurances that the Company will be successful in generating any significant
revenue from the sale of sponsorships.
Internet Education and Consulting
The Company has found that an effective method of selling Web
sites is in conjunction with Internet education. Therefore, the Company
conducts Internet marketing and educational seminars in approximately four
cities per week. These preview seminars target individuals and businesses
interested in marketing their products and services on the Internet, or
simply learning about business opportunities relating to the Internet. The
Company uses infomercials, 60 second radio advertising, directed mailings to
targeted audiences, as well as print advertisements to attract attendees to
its preview seminars. The preview seminars are conducted free of charge for
attendees and are designed to showcase the value of the Internet workshop.
The Company's preview seminars and workshops are conducted by independent
contractors trained by the Company in the areas of Internet education and
marketing.
Attendees at the Company's Internet education and marketing
workshops currently pay a price of $2,995 per person (plus $500 per guest).
These Internet education and marketing workshops include extensive instruction
about the Internet and are taught by various instructors who have experience
in areas such as direct marketing, business development, Internet commerce,
and Web site design.
Prior to January 1, 1997, Internet workshop participants
received the right to receive up to two Web sites, each consisting of up to
five Web pages, and up to 25 classified advertisements on iMALL, all designed
by the Company. This right was available to workshop participants for twelve
months from the date of the workshop. If a participant chose to exercise the
right to receive the Web sites and classified advertisements, the participant
was required to purchase a Web Site Initiation and Maintenance Agreement. The
purchase price of the initiation (design and activation) and maintenance of
the Web sites and classified advertisements is $590 annually, if paid for up
front, or $59 per month if paid monthly.
Beginning on January 1, 1997, workshop participants actually
receive up to two Web sites and up to 25 classified advertisements in
connection with such workshop, rather than simply receiving a right to
purchase Web sites. If these new consultants choose to have the Company
maintain such sites, they must purchase a Web Site Initiation and Maintenance
Agreement.
The Company uses a mix of radio, television, print advertising,
as well as direct mailings, to advertise its Internet education and marketing
program in four cities in the United States each week. This advertising is
directed at entrepreneurs and business owners inviting them to learn more
about the Internet and how it can be a money-making and effective marketing
tool. The Company uses an eight to twelve week rotation of cities depending
on the population base and availability of direct mail names. Seven to ten
days following the free previews, the Company returns to the city for its full
day Internet education and marketing workshop.
The Company also offers information home study products priced
at $1,495 and $995 for those who are interested in learning about the Internet
but choose not to attend the workshop.
Commissions from Sales on iMALL
Merchants generally agree to having a site on iMALL for a one
year period. The Company is currently negotiating with merchants who renew
their sites on iMALL to agree to pay the Company a negotiated commission of
between 5 and 15% of gross sales made through their iMALL site. Beginning
August 1, 1997, all new merchants establishing new iMALL sites will be
required to agree to such an arrangement. Revenues from this program have
thus far been a small percentage of the Company's total revenues, but the
Company expects that such revenues will grow substantially in the future,
particularly through its AT&T Market Square Dealsand Park Avenue Collections.
This commission program was recently introduced by the Company, and the
Company has not to date encountered any resistance to its implementation.
However, the Company can offer no assurance that resistance from merchants
will not arise in the future.
The Company recently implemented technology which will allow it
to closely meter all types of transactions on iMALL. This new technology
allows the Company to track a particular merchants sales, thereby facilitating
the Company's charging a commission on sales. The Company expects that
this revenue stream will grow substantially in the future.
Banner Advertising
The Company currently is recording an average of over ten
million hits on its site each month. This rate continues to increase at an
average rate of 10% per month. As a result of this increasing activity, the
Company believes it will be able to command significant advertising rates from
advertisers on the iMall. The Company has completed a new system that will
generate consecutive banner advertisements at various points on the iMall site
based on the number of hits or impressions purchased by the advertiser. The
Company anticipates that such advertising revenue could represent up to ten
percent of the Company's anticipated revenues for 1997. Because of the lack
of operating history with respect to this revenue stream, it is very difficult
to predict what the actual future revenues will be.
Research and Data
The Company requires purchasers of goods and services to
complete a user profile form which the Company then stores in a database. The
Company plans to encourage each visitor to its site to complete such a form.
The Company believes that this information will be of value to businesses of
all types moving to the Internet. Therefore, the Company plans to develop
technology that will enable it to package and sell such information. However,
there can be no assurance that the Company will be successful in packaging and
selling this information.
Technical Infrastructure
The Company's World Wide Web servers include the latest
release Stronghold secure webservers produced by C2Net. These servers are
based on Apaches version 1.1.1 base server. The Company's World
Wide Web servers include the latest release Stronghold secure webserver
(version 2.0). These servers are based on Apaches version 1.2 base
server. Apache is run on over 40% of all the web servers in the world and
has been the most popular in the world for more than six months (based on the
November World Wide Web server site survey conducted by Netcraft).
The Company's Central Processing Unit server infrastructure includes
four high-end web servers, running BSD compliant UNIX operating systems. Load
(made up of traffic and the activities of the traffic) is distributed across
these machines through round-robin domain name service which maximizes the
capacity of the systems. Internet service to these machines consists of
multiple DS3 (45Mb/sec) backbone service providers including MCI, Sprint, and
UUNET/Alternet. The Company estimates that the current iMall system
has capacity to handle in excess of 1.5 million hits per day. The
Company estimates that the current iMALL system has capacity to handle in
excess of 1.5 million hits per day. The Company's management believes that
the Company can quickly and inexpensively upgrade this system as it becomes
necessary. File system backups are written across machines to protect
against a catastrophic system failure on any one given machine.
Sales and Marketing Resources
Several of the officers of the Company have been conducting seminars
and marketing informational products for the past five years. The
Company plans to continue its seminar marketing program but also plans to
market to the current or future business owner/operator more aggressively.
The Company plans to extend this program into select markets in professional
services and business and professional information. In each case the Company
plans to expand and focus its direct marketing and mail campaigns to select
demographic profiles.
The Company plans to undertake a public relations and print
advertising effort targeted at the business and consumer sectors to promote
the concept of electronic commerce on the Internet, and to enhance the name
recognition of the iMall. However, there can be no assurance that the Company
will be successful in expanding its sales and marketing efforts.
The Company plans to continue its current marketing program, but also plans to
reach a broader Internet market, from new users to Internet experts. The
Company plans to accomplish this through increased targeted direct mail
campaigns in select business and consumer periodicals, targeted public
business-to-business seminars, and increased joint marketing campaigns with
its current and future partners.
Strategic Alliances
The Company's growth is also dependent upon the continued
development of strategic alliances and partnerships such as the Company's
alliance with AT&T. The AT&T relationship has not only increased the number
of users visiting the iMall, but, in the opinion of the Company's management,
it has also added significant credibility to the Company. The
Company's growth is dependent upon the continued development of strategic
alliances and partnerships such as the Company's alliance with AT&T WorldNet
Services(sm). The AT&T WorldNet Services(sm) relationship has not only
increased the number of users visiting the iMALL, but, in the opinion of the
Company's management, it has also added significant credibility to the
Company. Relationships such as this will be key to building the
acceptance and the revenue base of the Company. However, there can be no
assurance that the Company will be successful in developing additional
strategic alliances or maintaining existing strategic alliances in the future.
The Company, in partnership with Positive Response T.V., has
produced two thirty minute infomercials centered around the opportunity to
become an iMall consultant and Internet opportunities in general. The first
infomercial is entitled Super Highway to Riches and offers a basic information
package on the Internet in general for $89.85. These purchasers are then
offered opportunities to attend the Company's seminar and/or to purchase home
study products. This infomercial has recently completed running in certain
test markets and has exceeded the Company's expectations. The infomercial has
produced profits of approximately $100 per order for the Company. Positive
Response T.V. expects budgets for this infomercial to be approximately
$500,000 per month, all of which is paid for by Positive Response T.V.
The second infomercial is entitled The iMall Opportunity and
invites viewers to attend a free preview in their area. At the preview, the
attendee is offered the opportunity to attend the $2,995 seminar discussed
herein. Budgets for this infomercial are expected to be approximately
$10,000.
The Company has entered into a joint venture with Softbank
Interactive, to bring per inquiry to the Internet. Through Softbanks
representation of large Internet Web sites such as Commonwealth, Yahoo and
Lycos, this venture has secured, and is securing, millions of free banner
advertisements. The Company and AT&T WorldNet Services(sm) recently
opened AT&T Market Square Deals on iMALL. AT&T Market Square Deals offers
name brand merchandise for sale at significant discounts from retail. This
site features a wide range of products and includes a link to the iMall's
Deals of the Day. The Company receives 70% of the net profits generated by
AT&T Market Square Deals.
The Company, in an alliance with Positive Response T.V. and its
parent company National Media, Inc. ("National Media"), has produced two
thirty minute infomercials centered around the opportunity to become an iMALL
consultant and Internet opportunities in general. The first infomercial
offers a basic information package on the Internet in general for $89.85.
These purchasers are then offered opportunities to attend the Company's
preview seminar and/or to purchase home study products. National Media
generally spends approximately $200,000 per month to purchase air time for
this infomercial, all of which is paid for up front by National Media.
However, the actual amount of money spent to purchase air time for this
infomercial varies significantly on a seasonal basis. These up front costs
are reimbursed to Positive Response T.V. from revenues derived from the
infomercials, if any. After such reimbursement, Positive Response T.V. and the
Company each share one-half of all revenues.
The second infomercial invites viewers to attend a free preview
in their area. At the preview, the attendee is offered the opportunity to
attend the $2,995 Internet education and marketing workshop discussed herein.
National Media spends approximately $30,000 per week on the purchase of air
time for this infomercial. However, it is expected that such expenditures
will fluctuate seasonally. After National Media is reimbursed for its
expenditures for production and media purchases, National Media and the
Company share the revenues 25%, and 75%, respectively. The Company has no
responsibility to compensate National Media should either infomercial fails to
recoup its production costs, however, the Company is required to reimburse
National Media for its purchases of media time for the second infomercial.
The Company has entered into an alliance with Softbank
Interactive to bring per inquiry banner advertisements to the Internet.
Through Softbanks representation of large Internet Web sites, this venture has
secured, and is securing, millions of free banner advertisements. These
banners will be used to offer impulse buy products. A share of the revenue
produced by such banners will be paid to the banner provider for each product
sold. The remainder, minus expenses, will then be distributed through
the joint venture. This joint venture has already received commitments for
over ten million banners per month. The remainder, net of expenses,
will then be distributed through the alliance. Softbank has represented to
the Company that this alliance has already received commitments for over ten
million banners per month.
The Company is currently in discussions to license its name,
trademark and proprietary information in additional foreign countries. The
Company intends that future agreements will require up front fees for
training, provide for the Company to receive a percentage of gross proceeds
generated by the activities in the foreign countries and require minimum
annual payments to the Company in order to maintain exclusivity.
None of the Company's strategic alliances involve the creation
of distinct legal enterprises.
Industry and Competitive Considerations
Nature of Market. There is a lack of proven business models with
respect to the generation of revenues from the sale of commercial or
informational sites on the Internet. It is impossible to predict
whether the Company will be successful in establishing itself as a viable
sales outlet, or that consumers will purchase products from sites on the iMall
in sufficient quantities for the Company to maintain a positive cash
flow. It is impossible to predict whether the Company will be
successful in establishing itself as a viable sales outlet, or that consumers
will purchase products from sites on iMALL in sufficient quantities for the
Company to generate positive cash flow. In addition, Internet are faced with
a multitude of options while online which involve shopping and other
activities. There can be no assurance that a significant number of Internet
users will become comfortable in engaging in online commerce.
Changing Technology. Internet advertising and commerce is a new,
intensely competitive, rapidly evolving industry which is subject to rapid
technological change. The success of the Company will depend, in part, upon
the ability of the Company to keep abreast of technological changes that are
evolving with the Internet and electronic commerce in general.
Other Internet Malls. There are currently several hundred
malls on the Internet, ranging from simple link sites to independently
developed mall sites similar to the iMall. Other Internet Malls and
Sites. There are currently several hundred malls on the Internet, ranging
from simple link sites to independently developed mall sites similar to
iMALL. Fewer than five of these malls are currently considered
substantial and significant from a competitive perspective by the Company.
However, some of the Company's competitors may have greater financial and
marketing resources than the Company, and may in the future offer additional
services to its customers at rates equal to or more favorable than those
offered by the Company. In addition, there are many shopping sites on
the Internet which do not involve the mall concept. Many of the proprietors
of these sites have greater financial resources than the Company.
The Company's Competitive Advantages
Seminar Education System. The Company's management believes
that the Company currently is one of only three Internet malls that have
established a seminar education system. Brand Identity. According
to the Internet Retailing Report of Morgan Stanley in May 1997, iMall's brand
reach is three times that of wal-mart.com, and almost equal to iQVC.
Traffic. The Internet Retailing Report listed iMALL as the
second most visited online shopping mall on the Internet, and the 13th most
visited shopping site on the Internet overall, each as of February 1997. The
Company has had an independent audit completed by Crouch, Bierwolf & Chisholm,
an independent accounting firm, which verifies the number of hits iMALL
receives.
Internet Education and Marketing Seminars. Based on the
Company's internal research, the Company's management believes that the
Company is one of only three Internet malls that have established an Internet
education system. Not only is this an effective marketing and sales tool,
it is also a very effective customer service tool. Furthermore, the
flexibility inherent in this program permits the Company to tailor the
approach to myriad markets and vertical niches. Furthermore, the
flexibility inherent in this program permits the Company to tailor the
approach to various markets and vertical niches.
Consultant Program. Through the Company's seminars and home
study products, the Company has amassed a network of independent consultants,
each of whom may purchase the Company's products and services at wholesale
prices for themselves or for resale. Through the Company's seminars
and home study products, the Company has a network of independent consultants,
each of whom may purchase the Company's products and services at wholesale
prices for themselves or for resale.
Number of Storefronts. The Company believes that the iMall
has the largest number of independent storefronts of any Internet mall.
Based on its internal research, the Company believes that iMALL has the
largest number of independent storefronts of any Internet mall. Although
there are other malls that claim more storefronts than the Company, those
storefronts are actually only links, rather than independent storefronts
maintained on a closed site. An independent survey conducted by
Jupiter Communications found that the average mall on the Internet contained
only 19 stores. The iMall currently is home to over 750 storefronts.
Amortization of Web Site Building Costs. The Company's
proprietary web site development tools and process allow it to amortize the
cost of building and enhancing the web sites on the iMall. This amortization
allows for the development of additional development tools. A link
is a hyper-text based command which redirects a user to another address on the
Internet when activated. Thus, a mall comprised only of links is one that in
reality serves only as a directory of stores, and does not allow for a
consistency in feel and functionality throughout the mall, nor does it allow
for the charging of commissions from sales. iMALL currently is home to over
1600 storefronts.
Web Site Building Costs. In the opinion of the Company's
management, the Company's proprietary Web site development tools and process
allow it to build Web sites at lower costs than its competitors. These cost
savings assist in the funding of the development of additional development
tools.
Reselling Data. The Company's independent storefront
approach and its sophisticated database allow it to capture and assimilate
demographic data, shopping and navigation habits and other very pertinent
marketing information from the users that visit the iMall. This data can be
provided to the iMall merchants and information providers, as well as packaged
and sold to companies interested in marketing on the Internet. The
Company's independent storefront approach and its sophisticated database allow
it to capture and assimilate demographic data, shopping and navigation habits
and other very pertinent marketing information from the users that visit the
iMALL. The Company expects that by the end of 1997, it will have completed
development on a program which will allow for this demographic data to be
provided to iMALL merchants and information providers, as well as packaged and
sold to companies interested in marketing on the Internet.
Relationships with Merchants. The Company believes its independent
mall approach creates a more intimate relationship with the merchant, which,
the Company believes, translates into better service to the customer and
increased quality of product or service offering. This approach allows for
more detailed and accurate tracking of store visits and sales, resulting in
more revenue to the Company, and ensures better search and navigation
performance since the Company has complete control over its servers.
On the other hand, a linked mall exposes the end-user to the performance
problems and the inherent unpredictability of the Internet. A
linked mall exposes the end-user to the performance problems and the inherent
unpredictability of the Internet.
Employees
As of January 27, 1997, the Company and its subsidiaries had
a total of approximately 115 full-time employees. Sixty-five full-time
employees are located in Provo, Utah, 30 are located in Studio City,
California, and 25 are located in Woodland Hills, California. None of the
Company's employees are covered by an ongoing collective bargaining agreement
with the Company and the Company believes that its relationship with its
employees is very good. As of July 21, 1997, the Company and its
subsidiaries had a total of approximately 84 full-time employees. Twenty eight
full-time employees are located in Studio City, California, and 56 are located
in Provo, Utah. None of the Company's employees is covered by an ongoing
collective bargaining agreement with the Company and the Company believes that
its relationship with its employees is good.
History of the Company
The Company's predecessor for accounting purposes is
Madison, York, Inc., a Utah corporation ("Madison"), which was incorporated on
November 2, 1994. On January 16, 1996, Madison engaged in a share exchange
with iMall, Inc., a Nevada corporation, which had been the surviving company
in a merger with Natures Gift, Inc., a Utah corporation ("Natures Gift"), on
January 8, 1996. The Company's predecessor for accounting purposes
is Madison, York & Associates, Inc., a Utah corporation ("Madison"), which was
incorporated on November 2, 1994. On January 16, 1996, Madison engaged in a
share exchange with iMALL, Inc., a Nevada corporation, which had been the
surviving company in a change of domicile merger with Natures Gift, Inc., a
Utah corporation ("Natures Gift"), on January 8, 1996. Natures Gift was
incorporated under the laws of the State of Utah on February 9, 1984 as
Brickland, Corporation, and changed its name to Natures Gift, Inc. on May 23,
1991. Natures Gift did not transact any significant business from the
date of its inception until January, 1996. As a result of this share exchange
between Madison and iMall, Inc., Madison became a wholly owned subsidiary of
the Company. For accounting purposes this share exchange is considered a
reverse acquisition and Madison is considered the predecessor of the Company
because it had operations at the time of the share exchange. In this share
exchange, the shareholders of Madison received 16,400,000 shares of common
stock of the Company in exchange for all of the issued and outstanding shares
of common stock of Madison.
On January 16, 1996, the Company also entered into share
exchange agreements with Cabot, Richards & Reed, Inc., a Utah corporation
("Cabot") and R&R Advertising, Inc., a California corporation ("R&R") wherein
the shareholders of Cabot received 11,200,000 shares of common stock of the
Company in exchange for all of the outstanding shares of common stock of Cabot
and the shareholders of R&R received 4,800,000 shares of common stock of the
Company in exchange for all of the outstanding shares of common stock of R&R.
Each of Cabot and R&R became wholly owned subsidiaries of the Company. On
March 5, 1996, the Company entered into a share exchange agreement with
InterActive Marketing Group, Inc., a Utah corporation ("IMG") wherein the
shareholders of IMG received 420,500 shares of common stock of the Company in
exchange for all of the outstanding shares of common stock of IMG, and IMG
became a wholly owned subsidiary of the Company. Natures Gift did
not transact any significant business from the date of its inception until
January 1996. As a result of this share exchange between Madison and iMALL,
Inc., Madison became a wholly owned subsidiary of iMALL, Inc. This share
exchange was accounted for as a reverse acquisition and Madison is considered
the predecessor of the Company because it had operations at the time of the
share exchange. In this share exchange, the shareholders of Madison received
16,824,900 shares of common stock of iMALL, Inc. in exchange for all of the
issued and outstanding shares of common stock of Madison. The number of
shares listed in the Company's Statement of Stockholders Equity in connection
with this transaction consists of the 16,824,900 shares issued to the
shareholders of Madison, and 21,614,784 shares in connection with the
accounting reorganization of stockholders equity.
On January 16, 1996, the Company also entered into share
exchange agreements with Cabot, Richards & Reed, Inc., a Utah corporation
("Cabot"), and R&R Advertising, Inc., a California corporation ("R&R"),
wherein the shareholders of Cabot received 11,200,000 shares of common stock
of iMALL, Inc. in exchange for all of the outstanding shares of common stock
of Cabot and the shareholders of R&R received 4,800,000 shares of common stock
of iMALL, Inc. in exchange for all of the outstanding shares of common stock
of R&R. Each of Cabot and R&R became wholly owned subsidiaries of iMALL, Inc.
On March 5, 1996, the Company entered into a share exchange agreement with
Inter Active Marketing Group, Inc., a Utah corporation ("IMG"), wherein the
shareholders of IMG received 420,500 shares of common stock of the Company in
exchange for all of the outstanding shares of common stock of IMG, and IMG
became a wholly owned subsidiary of the Company. An additional 1,214,300
shares of the Company's common stock were placed in escrow subject to IMG
achieving certain earn-out provisions tied to revenues and income. On
April 26, 1996, the Company entered into a share exchange agreement with
e.m.a.N.a.t.e., Inc., a California corporation ("e.m.a.N.a.t.e.") wherein the
shareholders of e.m.a.N.a.t.e. received 1,600,000 shares of common stock of
the Company in exchange for all of the outstanding shares of common stock of
e.m.a.N.a.t.e., and e.m.a.N.a.t.e. became a wholly owned subsidiary of the
Company. Certain additional information concerning these transactions
is set forth in Section 7 hereof, Certain Relationships and Related
Transactions and in the consolidated financial statements of the Company --
Note 2, which are attached hereto. The amount of shares issued in
each of these share exchanges was determined by the percentage ownership
interest in the Company to which the Company's management determined the
acquired entity would be entitled through negotiation. Certain additional
information concerning these transactions is set forth in Item 7 hereof,
Certain Relationships and Related Transactions and in the notes to the
consolidated financial statements of the Company attached hereto.
Madison was incorporated in 1994 and commenced business in 1995
providing consulting services to Internet entrepreneurs. Madison developed
the Internet specific techniques used by the Company today in its educational
seminars. In September 1995, Madison had acquired all of the issued and
outstanding common stock of EMS, Inc., which owned the Internet site called
iMALL. Madison issued 158 shares of its common stock to the shareholders of
EMS, Inc., and accounted for this transaction as a purchase.
Cabot was incorporated in December 1992 and became a well known
educational seminar company. Cabot developed the marketing and training
techniques used by the Company today in its educational seminars.
R&R was formed in January 1991 in California. R&R was an
advertising agency that catered to small businesses. Services included
commercial and infomercial production, art and graphics design, as well as
print, television and radio advertising. The television department placed its
clients advertisements on hundreds of network, cable, and independent stations
throughout the United States. R&R has contributed to iMall Services,
Inc. ("iMall Services"), a wholly owned subsidiary of the Company, its
computer advertising expertise. R&R contributed its computer
advertising expertise to iMALL Services, Inc. ("iMALL Services"), a wholly
owned subsidiary of the Company.
IMG recently changed its name to Internet Yellow Pages, Inc.
IMG maintained an Internet yellow pages are similar to regular yellow pages
and also allow for different types of sponsorships which businesses can
purchase for greater exposure. IMG has changed its name to Internet
Yellow Pages, Inc. IMG maintains Internet yellow pages that are similar to
regular yellow pages and allow for different types of sponsorships which
businesses can purchase for greater exposure. IMG has not yet generated
any revenue for the Company.
e.m.a.N.a.t.e. was formed by three individuals who worked on
Department of Defense and NASA contracts using state-of-the-art computer and
Internet technology. The founders were involved with the Internet since its
infancy and recently began to focus on generating revenue from the Internet by
designing web sites. Thus, while e.m.a.N.a.t.e. currently has contracts with
or has recently completed projects for Lockheed-Martin, United Defense, and
NASA, most of the personnel are involved with creating Internet web pages and
programming advanced features such as Java, Shockwave and Virtual Reality
applications for customers.
On May 22, 1996, the Company effected a four for one forward
stock split. All references in this registration statement take such split
into effect when referring to the number of shares of the Company's common
stock or per share data.
Item 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In connection with the Company's acquisitions in January 1996, the Company
effected a 1 for 19 stock split on January 8, 1996. In addition, on May 22,
1996, the Company effected a 4 for 1 stock split. All references in this
registration statement take such split into effect when referring to the
number of shares of the Company's common stock or per share data.
The following discussion and analysis of the Company's and
the Company's predecessors financial condition as of September 30, 1996 and
December 31, 1995 and the Company's and the Company's predecessors results of
operations for the nine month periods ended September 30, 1996 and 1995 and
the years ended December 31, 1995 and 1994 should be read in conjunction with
the Company's financial statements and notes thereto included elsewhere in
this Registration Statement.
Item 2: MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
The following discussion and analysis of the Company's and the
Company's predecessors financial condition as of March 31, 1997 and December
31, 1996 and the Company's and the Company's predecessors results of
operations for the three month periods ended March 31, 1997 and 1996 and the
years ended December 31, 1996 and 1995 should be read in conjunction with the
Company's consolidated financial statements and notes thereto included
elsewhere in this Registration Statement.
Results of Operations
The Company's current operations consist of the operation of
various entities which only recently became part of the consolidated
group. The Company's current operations consist of the operation of
various entities which became part of the consolidated group within the last
calendar year. Results of prior periods do not reflect the current mix of
the Company's operations. Because Madison is the only predecessor of the
Company, comparisons of historical results of operations may therefore not be
meaningful.
Comparison of Nine-Month Periods Ended September 30, 1996 and 1995
Comparison of Three-Month Periods Ended March 31, 1997 and
1996
Revenues. Revenues for the first nine months of 1996 were
$12,601,116, compared to $258,561 for the first nine months of 1995. This
increase was due primarily to increased workshop attendance at the Company's
Internet seminars and acquisitions of new businesses. Revenues for
the first three months of 1997 were $4,078,434 compared to $4,179,150 for the
first three months of 1996. Operations were fairly consistent between the two
years, with the Company's seminar division providing nearly 75% of total
revenues each year.
Cost of Sales. Total direct cost of sales for the first
nine months of 1996 were $6,383,369, compared to $155,137 for the first nine
months of 1995. This increase was due primarily to increased workshop
attendance and higher sales volume.
General and Administrative Expenses. General and
administrative expense for the first nine months of 1996 were $4,520,875,
compared to $84,727 for the first nine months of 1995. This increase was due
primarily to a dramatic increase in the extent of the Company's
operations. Cost of Revenues. Total direct cost of revenues for
the first three months of 1997 were $2,558,951, compared to $2,357,216 for the
first three months of 1996. The increase of 9% was due to an increase in
advertising expense. The Company's marketing efforts were expanded to include
the airing of infomercials on television in an attempt to increase attendance
at the Company's educational workshops.
General and Administrative Expense. General and administrative
expense for the first three months of 1997 was $2,103,359, compared to
$1,143,239 for the first three months of 1996. This 84 % increase was due to
several factors. Subsequent to the first quarter of 1996, the Company
acquired two companies, e.m.a.N.a.t.e. and IMG. The general and
administrative expenses associated with these two companies increased the
Company's overall general and administrative expenses due to increased wages,
rent and occupancy expenses, and other typical overhead expenses. Also,
subsequent to the first quarter of 1996, the Company hired individuals to fill
several key, top management positions, including Chief Executive Officer, Vice
President of Marketing and Vice President of Technology.
Comparison of Fiscal 1996 and 1995
Given the consolidation of entities during fiscal 1996, some
comparisons made between fiscal 1996 and 1995 may be meaningless or
incongruent.
Revenues. Revenues for the fiscal year ended December 31, 1996,
were $16,046,933, compared to $1,003,965 for the fiscal year ended December
31, 1995. This increase is due to the fact that this comparison is being made
between all consolidated entities operating during fiscal 1996, and only
Madison as the predecessor company as of December 31, 1995.
Cost of Revenues. Direct cost of revenues for the fiscal year
ended December 31, 1996, were $8,593,455, compared to $437, 035 for the fiscal
year ended December 31, 1995. This increase was also due to the consolidation
of entities.
General and Administrative Expense. General and Administrative
expense for the fiscal year ended December 31, 1996, was $7,480,688, compared
to $591,373 for the fiscal year ended December 31, 1995.
Depreciation and Amortization Expenses. Depreciation and
amortization expenses for the fiscal year ended December 31, 1996, were
$307,246, compared to $2,919 for the fiscal year ended December 31, 1995.
This increase was due primarily to the acquisition of property and equipment
(primarily computers, Internet products, furniture and fixtures) during 1996.
Financing
The Company did not engage in any debt financing, but its
subsidiary, Cabot, did enter into a capital lease arrangement during the first
nine months of 1995. Consequently, no long-term debt was incurred or
reported. Growth was funded from internal cash flow within the entities and
through private placements.
Comparison of Fiscal 1995 and 1994
Because Madison did not engage in any operations prior to
1995, comparisons between 1995 and 1994 are relatively meaningless in their
relationship to the Company's current operations.
Revenues. Revenues for the fiscal year ended December 31,
1996 were $1,003,965, compared to $0 for the fiscal year ended December 31,
1995. This increase was due primarily to increased attendance at the
Company's Internet seminars.
Cost of Sales. Cost of sales for the fiscal year ended
December 31, 1996 were $437,035, compared to $0 for the fiscal year ended
December 31, 1995. This increase was due primarily to increased workshop
attendance and higher sales volume.
General and Administrative Expenses. General and
Administrative expenses for the fiscal year ended December 31, 1996 were
$588,454, compared to $0 for the fiscal year ended December 31, 1995. This
increase was due primarily to a dramatic expansion of the Company's businesses
and operations.
Depreciation and Amortization. Depreciation and
amortization costs for the fiscal year ended December 31, 1996 were $132,599,
compared to $2,919 for the fiscal year ended December 31, 1995. This increase
was due primarily to the acquisition of property and equipment in 1996.
Liquidity and Capital Resources
The Company has funded its cash requirements primarily through cash
flows from its operating activities. However, the Company has
borrowed $500,000 from an affiliated party, which amount is due and payable on
or before March 31, 1997, plus interest in the amount of $12,500. In
addition, the Company is seeking a line of credit in the amount of $500,000
from Zions First National Bank. The Company believes its current funds, along
with cash provided by ongoing operating activities will be sufficient to
finance its cash requirements for at least the next twelve months.
The Company is currently incurring cash expenses in the
amount of approximately $1,000,000 per month, of which fixed costs account for
approximately $450,000. The Company anticipates capital expenditures will be
approximately $600,000 for the current fiscal year. However, the
Company borrowed $500,000 from an entity controlled by John Clayton, a
consultant to the Company, which amount was due on March 1, 1997, and now
bears interest equal to 13% per annum and is due on demand. The Company is
currently operating with a working capital deficit. The continuation of the
Company's operations as presently constituted and the implementation of its
business plan depend to a substantial extent on its ability to raise
sufficient capital. No assurance can be given that the Company will be
successful in raising sufficient capital (See --Financing).
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 current fiscal year.
Financing
The Company has retained Geller & Friend Capital Partners, Inc.,
of Los Angeles, California, for the purposes of, among other things, assisting
the Company in its financing activities.
Item 3. DESCRIPTION OF PROPERTIES
The Company maintains offices in Provo, Utah, Studio City,
California, and Woodland Hills, California. The Company leases its executive
offices at 1185 South Mike Jense Circle, Provo, Utah 84601 on a month-to-month
basis for $9,076 per month from a related party. The Company
maintains offices in Studio City, California, and Provo, Utah. The Company
leases its executive offices at 4400 Coldwater Canyon Blvd., Studio City,
California 91604 for a total of $12,973 per month, which lease expires
partially in December 1997 and partially in November 1998. The Company also
leases office space at 1185 South Mike Jense Circle, Provo, Utah 84601 on a
month-to-month basis for $9,076 per month from a related party. See Item
7 Certain Relationships and Related Transactions. The Company leases
office space at 4400 Coldwater Canyon Blvd., Studio City, California 91604 for
a total of $12,973 per month, which lease expires partially in December 1997
and partially in November 1998. The Company also leases office space at 22020
Clarendon, Suite 200, Woodland Hills, California 91367 for $4,290 per month,
which lease expires in April 1999.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to
the Company as of January 30, 1997 with respect to the beneficial ownership of
the outstanding shares of the Common Stock by the Company's directors and
executive officers and the directors and executive officers of the Company as
a group. The following table sets forth certain information known
to the Company as of July 21, 1997 with respect to the beneficial ownership of
the outstanding shares of the Common Stock by the Company's directors and
executive officers and the directors and executive officers of the Company as
a group. The Company is aware of no shareholders other than certain
directors and executive officers of the Company who beneficially own more than
five percent of the outstanding shares of the Company's common stock. Each
person listed below has personal and sole beneficial ownership of the shares
of common stock listed with their name.
Name and Address of Number of Percentage (1)
Beneficial Owner Shares
Craig R. Pickering 13,200,000 21.8%
13,000,000 21.9%
1185 South Mike Jense Circle
Provo, Utah 84601
Tracy Scott 0 0.0%
1185 South Mike Jense Circle
Provo, Utah 84601
Richard Rosenblatt 13,200,000 21.8%
4400 Coldwater Canyon Blvd.
Suite 200
Studio City, California 91604
Mark R. Comer 13,200,000 21.8%
1185 South Mike Jense Circle
Provo, Utah 84601
Martin Rosenblatt 1,353,333 2.2%
22020 Clarendon, Suite 200
Woodland Hills, California
91367
Craig Lewis 14,000 0.1%
Richard Rosenblatt 13,000,000 21.9%
4400 Coldwater Canyon Blvd.
Suite 200
Studio City, California 91604
Mark R. Comer 13,000,000 21.9%
4400 Coldwater Canyon Blvd.
Suite 200
Studio City, California 91604
Stephen Fulling 0 0.0%
1185 South Mike Jense Circle
Provo, Utah 84601
Martin Rosenblatt 1,353,333 2.3%
4400 Coldwater Canyon Blvd.
Suite 200
Studio City, California 91604
Craig Lewis 15,500 0.1%
1185 South Mike Jense Circle
Provo, Utah 84601
David M. Rees 0 0.0%
215 South State Street
Suite 1100 Salt Lake City, Utah 84111
1185 South Mike Jense Circle
Provo, Utah 84601
Total of Directors 40,967,333 67.7%
Total of Directors 40,368,833 68.1%
and Executive
Officers as a group
Officers as a group
(7 persons)
(1) Based on 60,493,827 shares of common stock outstanding as of
January 30, 1997. (1) Based on 59,293,827 shares of common stock
outstanding as of June 30, 1997.
Item 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, ages and positions with
the Company as of the date of this Registration Statement of all of the
executive officers and directors of the Company. Also set forth below is
information as to the principal occupation and background for each named
person in the table.
Name Age Position
Craig R. Pickering 38 >President
Chairman of the Board of Directors
Tracy W. Scott 36 Chief Executive Officer; Director
Richard Rosenblatt 28 Executive Vice President; Director
Chief Executive Officer;
Director
Mark R. Comer 30 President; Director
Mark R. Comer 30 Executive Vice President; Director
Martin Rosenblatt 53 Vice President; Director
Craig Lewis 32 Secretary/Treasurer
David M. Rees 30 Director
Stephen Fulling 33 Vice President
Martin Rosenblatt 54 Vice President
Craig Lewis 32 Chief Financial Officer;
Secretary/Treasurer
David M. Rees 30 Vice President; Director
Craig R. Pickering. Mr. Pickering is the President and Chairman of
the Board of Directors of the Company. Mr. Pickering is the
Chairman of the Board of Directors of the Company.
Mr. Pickering has over
16 years of business experience including work in venture capital, sales,
mergers and acquisitions and as a seminar speaker for American Business
Seminars.
In 1992 he formed Cabot, and in 1994 he founded
Madison. In 1992 he formed Cabot, and in 1994 he co-founded
Madison. He has held his present position with the Company since January
1996.
Tracy W. Scott. Mr. Scott has been Chief Executive Officer and a
director of the Company since October 1996. From 1995 to October 1996 he
worked as Vice President of Electronic Information Strategy at Reed Elsevier,
Inc., a large British/Dutch publishing company. He was President of Folio
Corporation, a division of Reed Elsevier from 1993 to 1995. From 1992 to 1993
Mr. Scott was Senior Vice President, Account Management and Services at
Merkley, Neuman, Harty, an advertising company in New York City. Mr. Scott
received his Bachelor of Science and his Masters of Business Administration
degrees from Brigham Young University in 1985 and 1990, respectively.
Richard Rosenblatt. Mr. Rosenblatt is an Executive Vice President and
a director of the Company. Mr. Rosenblatt is the Chief Executive
Officer and a director of the Company. In 1991, Mr. Rosenblatt formed R&R
Advertising, Inc. which specialized in advertising for small
businesses, and founded Madison in 1994. which specialized in
advertising for small businesses, and co-founded Madison in 1994.
Mr. Rosenblatt is the son of Martin Rosenblatt. Mr. Rosenblatt has
held his present position with the Company since January 1996. Mr.
Rosenblatt has been an officer of the Company since January 1996, and has held
his present position with the Company since July 1997. Mr. Rosenblatt
received his Bachelor of Arts degree in political science from the University
of California at Los Angeles, where he graduated Magna Cum Laude and Phi Beta
Kappa in 1991. He received his Juris Doctorate from the University of
Southern California, where he graduated with honors in 1994.
Mark R. Comer. Mr. Comer is an Executive Vice President and a
director of the Company. Mr. Comer is the President and a director
of the Company. Mr. Comer has over seven years experience in marketing
and in the business seminar industry. In 1992 he formed Cabot and in
1994 he founded Madison. He has held his present position with the Company
since January 1996. Mr. Comer attended Brigham Young University in 1984 and
1985 as a business major. In 1992 he formed Cabot and in 1994 he
co-founded Madison. He has been an officer of the Company since January 1996,
and has held his present position with the Company since July 1997. Mr. Comer
attended Brigham Young University in 1984 and 1985 as a business major.
Stephen Fulling. Mr. Fulling is Vice President of Information--Technology
Services of the Company. Mr. Fulling served as Senior Network Research
Assistant for the College of Engineering at Oregon State University and
Network Operations Manager for the NERO project for Oregon Joint Graduate
Schools of Engineering, where he designed, built, and deployed state of the
art wide area networking systems. Mr. Fulling has a broad background in
Internet technologies and more than 15 years experience in the
telecommunications industry. He received his Bachelor of Science in Computer
Science from the University of California--Davis.
Martin Rosenblatt. Mr. Rosenblatt is a Vice President and a director of the
Company. Mr. Rosenblatt has successfully managed a group of 20 scientists in
developing and applying sophisticated physics based computer programs. He has
been using the Internet regularly since its infancy, as a communications tool
to reach and remotely operate the most advanced government computers in the
country. Mr. Rosenblatt worked for Titan Corporation as Vice President of the
Titan Research and Technology Division from 1985 to 1994. In 1994 Mr.
Rosenblatt founded e.m.a.N.a.t.e. In 1994, Mr. Rosenblatt founded
e.m.a.N.a.t.e. Mr. Rosenblatt is the father of Richard Rosenblatt. He
has held his present position with the Company since April 1996. Mr.
Rosenblatt received a Bachelor of Arts degree and a Masters of Science degree
from the University of California at Los Angeles in 1964 and 1966,
respectively.
Craig Lewis. Mr. Lewis is the Secretary/Treasurer of the
Company. Mr. Lewis is the Secretary/Treasurer and Chief Financial
Officer of the Company. Mr. Lewis worked for the accounting firm of
Deloitte & Touche in St. Louis from 1989 through 1991. He became the
Controller for AeroTrans Corporation in Salt Lake City in 1991 and in 1992
became the Controller and Corporate Secretary/Treasurer for Mountainland
Support Corporation in Provo, Utah. Mr. Lewis joined the Company in 1995 as
the Secretary/Treasurer. He has held his present position with the Company
since July 1996. Mr. Lewis received his Bachelor of Science degree in
accounting in 1988 and his Master of Accounting degree in 1989, each from
Brigham Young University.
David M. Rees. Mr. Rees is a director of the Company. From 1993
through 1995 he was an associate in the Mergers and Acquisitions and Corporate
Finance departments at the law firm of Skadden, Arps, Slate, Meagher & Flom in
New York. Mr. Rees is an attorney and performs various services as the
Company's regular outside counsel. Mr. Rees is Vice President --
Strategic Planning and a director of the Company. From 1993 through 1995, Mr.
Rees was an associate in the Mergers and Acquisitions and Corporate Finance
departments at the law firm of Skadden, Arps, Slate, Meagher & Flom in New
York City. Mr. Rees is an attorney and has performed various services as the
Company's regular outside counsel until becoming a Vice President of the
Company in July 1997. He has been a director of the Company since July
1996. Mr. Rees received his Bachelor of Arts degree in history from Weber
State University in 1990 and his Juris Doctorate from New York University in
1993.
Item 6. EXECUTIVE COMPENSATION
The following table sets forth certain information as to the
Company's Chief Executive Officer and each of the Company's officers who
received compensation in amounts equal to or exceeding $100,000 for the year
ended December 31, 1996. No person received any compensation from the Company
or its predecessor in any fiscal year prior to 1996. Figures listed below do
not include automobile and entertainment allowances for certain executive
officers of the Company which total, in the aggregate, $100,746 for the year
ended December 31, 1996.
Summary Compensation Table
--------------------------
Name of Individual Capacities in Which Served Cash Compensation
- ------------------ -------------------------- -----------------
Tracy W. Scott (1) Chief Executive Officer $37,019
Craig R. Pickering President $125,000
Richard R. Rosenblatt Executive Vice President $125,000
Mark R. Comer Executive Vice President $125,000
(1) Tracy W. Scott began working for the Company in October 1996, as Chief
Executive Officer.
Mr. Scott has not been an officer or director of the Company since
June 1997.
The Company pays no fees to members of the Company's Board of
Directors for the performance of their duties as directors. The Company has
not yet established committees of the Board of Directors, but is in the
process of establishing an Audit Committee and a Compensation Committee.
The Company entered into employment agreements with Craig
Pickering, Richard Rosenblatt, and Mark Comer in the first quarter of 1996.
These agreements call for salaries of $125,000 per year and certain allowances
in the amount of $2,800 per month for Messrs. Pickering and Comer, and $3,000
per month for Mr. Rosenblatt. These agreements expire in 2003.
The Company entered into an employment agreement with Martin
Rosenblatt in the second quarter of 1996, calling for a salary of $85,000 per
year and annual option grants not to be less than 50,000. This agreement
expires in 2003.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company pays certain related parties for advertising, rent and
computer graphic design. Sierra Advertising received $923,399 for
advertising expenses, all of which is distributed directly for advertising
costs, and is owned by officers of the Company. Sierra Advertising
received $2,116,607 for advertising expenses, all of which is distributed
directly for advertising costs, and is owned by officers of the Company.
The sole purpose for the existence of Sierra Advertising is to pass through
certain costs of advertising at reduced rates. No officers of the Company
receive any monetary compensation from the Company through Sierra Advertising.
Sierra Advertising makes no profit. All funds paid to Sierra Advertising are
used by Sierra Advertising for the purchase of air time for advertising.
The share exchanges described in Part I, Item 1 Description of
Business -- History of the Company involved certain executive officers of the
Company. At the time of the share exchanges described therein, the
shareholders of Madison were Craig Pickering, Richard Rosenblatt, Mark Comer,
JCH Trust, MJB Trust, CSW Trust, Ross Jardine, Phil Windley and Michael Beck;
the shareholders of Cabot were Craig Pickering, Mark Comer and JCH Trust; and
the sole shareholder of R&R was Richard Rosenblatt.
The Company's principal executive offices in Provo, Utah are
leased from RDR Properties, which is owned by certain executive officers of
the Company, for $9,076 per month.
e.m.a.N.a.t.e., which is a wholly owned subsidiary of the
Company, received $167,200 from the Company in 1995 for computer graphic
design work. The Company's offices in Provo, Utah are leased from
RDR Properties for $9,076 per month. Craig Pickering and Mark Comer each own
33.33% of RDR Properties.
e.m.a.N.a.t.e., which is now a wholly owned subsidiary of the
Company, received $167,200 from the Company in 1995 for computer graphic
design work.
The Company owes Martin Rosenblatt, Vice President of the Company,
$99,398, arising from the settlement of certain indebtedness owed to Mr.
Rosenblatt from e.m.a.N.a.t.e. prior to the Company's share exchange with
e.m.a.N.a.t.e. This amount bears interest at the rate of ten percent per
annum, and is unsecured.
On January 3, 1997, the Company borrowed $500,000 from an
affiliated party. This loan accrues interest at ten percent per annum, is
personally guaranteed by Craig Pickering, the Company's President, and Richard
Rosenblatt and Mark Comer, each an Executive Vice President of the Company.
This loan is due in full on March 31, 1997.
On May 22, 1996, the Company effected a four for one forward
stock split. All references in this registration statement take such split
into effect when referring to the number of shares of the Company's common
stock or per share data. On January 3, 1997, the Company borrowed
$500,000 from a company controlled by John Clayton, a former officer and
director of the Company who is currently a consultant to the Company. This
loan accrues interest at 13 percent per annum, is personally guaranteed by
Craig Pickering, Richard Rosenblatt, and Mark Comer, the Chairman, Chief
Executive Officer, and the President of the Company, respectively. This loan
was due in full on March 1, 1997, has yet to be repaid, and is due on
demand.
Item 8. DESCRIPTION OF SECURITIES
The Company's Articles of Incorporation, as amended,
authorize the issuance of 300,000,000 shares of common stock, $.001 par value
per share, of which 60,493,827 shares were outstanding as of January 30, 1997,
and held by 448 shareholders of record. As of January 30, the Company had
issued warrants to purchase 500,000 shares of common stock at exercise prices
of between $1.31 and $7.00 per share. These warrants are exercisable at
various dates from the present through the year 2001. The Company's
Articles of Incorporation, as amended, authorize the issuance of 300,000,000
shares of common stock, $.001 par value per share, of which 59,293,827 shares
were outstanding as of June 30, 1997, and held by 457 stockholders of record.
As of June 30, the Company had issued options to purchase 647,040 shares of
its common stock at $2.00 per share to employees of the Company under its
Employee Option Plan. Approximately one-third of these options vest each year
in each of the next three years. Holders of shares of the Company's
common stock are entitled to one vote for each share on all matters to be
voted on by the stockholders, including the election of members of the
Company's Board of Directors, who are each elected annually for one year
terms. There are no provisions in the Company's Articles of Incorporation, as
amended, or the Company's Bylaws, as amended, which would delay, defer or
prevent a change in control of the Company. Holders of the Company's common
stock have no cumulative voting rights. Holders of shares of the
Company's common stock are entitled to share ratably in dividends, if any, as
from funds legally available therefor. Holders of shares of the
Company's common stock are entitled to share ratably in dividends, if any,
from funds legally available therefor. In the event of a liquidation,
dissolution or winding up of the Company, the holders of shares of the
Company's common stock are entitled to share pro rata all assets remaining
after payment in full of all liabilities. Holders of the Company's common
stock have no preemptive rights to purchase the Company's common stock. There
are no conversion rights or redemption or sinking fund provisions with respect
to the Company's common stock. All of the outstanding shares of the Company's
common stock are fully paid and non-assessable.
PART II
Item 1. MARKET PRICE OF AND DIVIDENDS On THE REGISTRANTS COMMON
EQUITY AND OTHER STOCKHOLDER MATTERS MARKET PRICE OF AND DIVIDENDS
ON THE REGISTRANTS COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
The Company's common stock is traded on the OTC Bulletin Board under
the symbol IIML. The following table sets forth, on a per share basis, and
for the periods indicated, the high and low sales prices of the Company's
common stock as reported on the OTC Bulletin Board. No dividends have been
declared or paid on the Company's common stock, nor does the Company intend to
declare or pay any dividends on the Company's common stock in the near future.
All sales prices are set forth taking into effect all stock splits, exclusive
of commissions or discounts of any nature. As of January 30, 1997,
there were approximately 448 shareholders of record of the Company's common
stock. As of June 30, 1997, there were approximately 457
shareholders of record of the Company's common stock. The average daily
trading volume of the Company's common stock since January 1996 is
approximately 65,600 shares per day. The Company did not exist in its present
form prior to January 1996, therefore stock prices prior to that time are not
applicable.
Price Range
-----------
High Low
---- ---
1996:
First Quarter $ 3.25 $ 2.25
Second Quarter 14.00 2.19
Third Quarter 12.13 4.28
Fourth Quarter 5.88 2.00
1997:
First Quarter
(through January 30, 1997) 2.81 1.87
First Quarter 4.50 1.63
Second Quarter 3.00 1.06
Third Quarter (through July 28, 1997) 1.63 0.81
Item 2. 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 share exchange transactions that occurred in January 1996; (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 share exchange transactions
that occurred in January, 1996; and (iv) the trading activity in the Company's
stock in the first and second quarter of 1996. 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 share exchange
transactions that occurred in January 1996; (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 share exchange transactions that occurred in
January 1996; and (iv) the trading activity in the Company's stock in the
first and second quarter 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 does not know the current status of the investigation and has not
had any formal or informal communication with the SEC since August 1996.
The Company is involved in various other legal proceedings
in the ordinary course of business, but is aware of no other legal proceedings
which appear at this time as if the might have a material impact on its
business. The Company is a defendant in various other legal
proceedings in the ordinary course of business, but is aware of no legal
proceedings which appear at this time as if they might have a material impact
on its business.
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS On
ACCOUNTING AND FINANCIAL DISCLOSURE CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None. On December 10, 1996, the Company engaged
Arthur Andersen LLP as its independent auditor. The Company had no
disagreements with its prior independent auditor, Crouch, Bierwolf & Chisholm.
See the Company's Report on Form 8-K filed with the SEC on June 20, 1997.
Item 4. RECENT SALES OF UNREGISTERED SECURITIES
The following list shows all sales of unregistered securities consisting
of common stock of the Company in the past three years. All such
sales were of shares of the Company's common stock, and the information has
been adjusted to take into account all stock splits, including a one for
nineteen reverse split in January, 1996, and the four for one forward split in
May, 1996. All such sales were of shares of the Company's common
stock, and the information has been adjusted to take into account all stock
splits, including a 1 for 19 reverse split in January 1996, and the 4 for 1
forward split in May 1996. No underwriters were involved in any of the
transactions described below. All shares of common stock issued in these
transactions bear restrictive legends. The consideration given in each of the
share exchanges was all of the outstanding common stock of the other
constituent company. Each share exchange was exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"). The consideration in the International Marketing Associates private
placement was services in the nature of promotional work at industry
conventions. Each private placement was exempt from registration pursuant to
Regulation D of the Securities Act. No underwriters or agents were
involved in any of the share exchanges. Each share exchange was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), as issuances not involving a public offering. The
consideration in the International Marketing Associates private placement was
services in the nature of promotional work at industry conventions, and was
intended to approximate the value of the services they were to render for the
Company at such conventions. This private placement was exempt from
registration pursuant to Regulation D of the Securities Act as an issuance not
involving a public offering. No underwriter or agent was involved in this
private placement. All persons receiving shares in the transactions
described below were allowed access to the Company's books and records and
made representations to the Company that they were acquiring shares of the
Company's common stock for their own account and for investment purposes only.
Share Exchange with Madison York & Associates, Inc. January 15, 1996
January 16, 1996 Number of shares issued: 16,824,900
The number of shares listed in the Company's Statement of Stockholders
Equity in connection with this transaction consists of the 16,824,900 shares
issued to the shareholders of Madison, and 21,614,784 shares in connection
with the accounting reorganization of stockholders equity.
Share Exchange with Cabot Richards & Reed, Inc. January 15, 1996
January 16, 1996
Number of shares issued: 11,200,000
Share Exchange with R & R Advertising, Inc. January 15, 1996
January 16, 1996
Number of shares issued: 4,800,000
Share Exchange with Inter-Active Marketing Group, Inc.
Share Exchange with Inter Active Marketing Group, Inc. March 5, 1996
Amount of shares issued: 1,634,800 Amount of shares issued:
420,500
In addition, 1,214,300 shares were placed in escrow in accordance with
certain earn-out provisions in the Company's share exchange agreement with
IMG. The Company has since retired such shares with the consent of IMG
because it became clear that IMG had no chance of attaining the targets for
the earn-out provisions.
Share Exchange with e.m.a.N.a.t.e., Inc. April 26, 1996
Amount of shares issued: 1,600,000
International Marketing Associates Private Placement July 17, 1996
Amount of shares issued: 4,000
These shares of the Company's common stock were issued in exchange for
International Marketing Associates agreeing to perform certain services for
the Company including promotional services at trade shows. The
Company intends to cancel these shares due to lack of performance by
International Marketing Associates.
The Company has issued warrants to purchase an aggregate of
500,000 shares of common stock at various exercise prices which are
exercisable at various dates from the date hereof through the year 2001. All
of these warrants were issued for services rendered on behalf of the Company,
were not registered under the Securities Act and were exempt from any such
registration under Section 4(2) of the Securities Act.
As of June 30, 1997, the Company had issued options to purchase
647,040 shares of its common stock at $2.00 per share to employees of the
Company under its Employee Option Plan. Approximately one-third of these
options vest each year in each of the next three years.
Item 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 78.751 of the Nevada General Corporation
Law, the Company may indemnify its officers and directors against expenses
incurred by such persons in connection with any threatened, pending or
completed action, suit or proceedings, whether civil, criminal, administrative
or investigative, involving such persons in their capacities as officers and
directors, so long as such persons acted in good faith and in a manner which
they reasonably believed to be in the best interests of the Company. If the
legal proceeding, however, is by or in the right of the Company, the director
or officer may not be indemnified in respect of any claim, issue or matter as
to which he is adjudged to be liable for negligence or misconduct in the
performance of his duty to the Company unless a court determines otherwise.
Under Nevada law, corporations may also purchase and maintain
insurance or make other financial arrangements on behalf of any person who is
or was a director or officer (or is serving at the request of the corporation
as a director or officer of another corporation) for any liability asserted
against such person and any expenses incurred by him in his capacity as a
director or officer. These financial arrangements may include trust funds,
self insurance programs, guarantees and insurance policies.
Article 6.E of the Articles of Incorporation of the Company and
Article 5 of the Bylaws of the Company provide that, to the fullest extent
permitted by law, directors of the Company will not be liable for monetary
damages to the Company or its stockholders for breaches of their fiduciary
duties.
The Company maintains Director and Officer liability insurance with
an aggregate coverage amount of $1,000,000.
PART F/S FINANCIAL STATEMENTS
The following is a list of the financial statements filed herewith:
Unaudited Financial Statements of iMall, Inc. as of September 30, 1996
and for the nine month period then ended, Audited Financial Statements as of
June 30, 1996 and for the six month period then ended, and Audited Financial
Statements as of December 31, 1995 and for the twelve month period then
ended:
Balance Sheets
Statements of Operations
Statements of Stockholders Equity
Statements of Cash Flows
Audited Financial Statements of Madison, York & Associates, Inc. as of
December 31, 1995 and for the twelve month period then ended:
Balance Sheets
Statements of Operations
Statements of Stockholders Equity
Statements of Cash Flows
Audited Financial Statements of Cabot, Richards & Reed, Inc. as of
December 31, 1995 and 1994 and for the twelve month periods then
ended:
Balance Sheets
Statements of Operations
Statements of Stockholders Equity
Statements of Cash Flows
Audited Financial Statements of R & R Advertising, Inc. as of December
31, 1995, 1994 and 1993 and for the twelve month periods then ended:
Balance Sheets
Statements of Operations
Statements of Stockholders Equity
Statements of Cash Flows
Audited Financial Statements of Physicomp Corporation (d.b.a.
e.m.a.N.a.t.e.) as of December 31, 1995 and for the twelve month period then
ended, and as of April 30, 1996 and for the four month period then ended.
Balance Sheets
Statements of Operations
Statements of Stockholders Equity
Statements of Cash Flows
Unaudited, consolidated financial statements of iMALL, Inc. and
subsidiaries as of March 31, 1997, and for the quarters ended March 31, 1997
and 1996. Audited, consolidated financial statements as of December 31, 1996
and for the years ended December 31, 1996 and 1995, as follows:
Report of Independent Auditors -- Crouch,Bierwolf & Chisholm
Report of Independent Auditors -- Arthur Andersen LLP
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders Equity
Consolidated Statements of Cash Flows
iMall, Inc.
Balance Sheet
March 31,
1997
--------------
(Unaudited)
CURRENT ASSETS:
Cash $ 287,289
Accounts receivable, net 192,751
Income tax receivable 271,915
Prepaid expenses 238,851
Deferred income tax asset 163,715
Other current assets 137,179
--------------
Total Current Assets 1,291,700
--------------
EQUIPMENT, FURNITURE AND FIXTURES:
Equipment and fixtures, net of accumulated
depreciation 857,800
Capital leases, net of accumulated amortization 69,701
---------------
Total Equipment, Furniture and Fixtures 927,501
---------------
OTHER ASSETS:
Goodwill, net of accumulated amortization 264,690
Note receivable 217,500
Organization costs, net of accumulated amortization 1,282
---------------
Total Other Assets 483,472
---------------
Total Assets $ 2,702,673
===============
See accompanying notes to financial unaudited statements
<PAGE>
iMall, Inc.
Balance Sheet (Continued)
March 31,
1997
------------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 827,082
Accrued Payroll 244,892
Accrued expenses 186,019
Deferred revenues 398,552
Other current liabilities 198,884
---------------
Total current liabilities 1,855,429
---------------
LONG-TERM LIABILITIES:
Notes payable 552,500
Capitalized lease obligations 61,945
---------------
Total long-term liabilities 614,445
---------------
Total Liabilities 2,469,874
---------------
STOCKHOLDERS' EQUITY:
Common stock, par value $.001;
300,000,000 shares authorized,
60,489,827 shares outstanding 60,489
Additional paid-in capital 696,239
Accumulated Deficit (523,929)
----------------
Total stockholders' equity 232,798
----------------
Total Liabilities and Stockholders'
Equity $ 2,702,673
================
See accompanying notes to unaudited financial statements.
iMall, Inc.
Statements of Operations
For the Three Months Ended
March 31,
--------------------------------
1997 1996
--------------- ---------------
REVENUES $ 4,078,434 $ 4,179,150
COST OF REVENUES 2,558,951 2,357,216
--------------- ---------------
GROSS MARGINS 1,519,483 1,821,934
GENERAL AND ADMINISTRATIVE EXPENSES 2,103,359 1,143,239
--------------- ----------------
OPERATING INCOME (LOSS) (583,877) 678,695
--------------- ---------------
OTHER INCOME AND (EXPENSE):
Other income, net 17,608 40,170
Interest expense, net (11,699) (2,264)
--------------- ----------------
Net other income 5,909 37,906
--------------- ----------------
INCOME BEFORE PROVISION FOR INCOME TAXES (577,968) 716,601
PROVISION FOR INCOME TAXES 0 277,123
--------------- ---------------
NET INCOME (LOSS) $ (577,968) $ 439,478
=============== ================
NET INCOME (LOSS) PER COMMON SHARE $ (0.01) $ 0.03
=============== ================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 60,489,827 13,643,176
=============== ================
See accompanying notes to unaudited financial statements.
iMall, Inc.
Statements of Cash Flows
For the Three Months Ended
March 31,
--------------------------------
1997 1996
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (577,968) $ 439,478
Non-cash items:
Depreciation and amortization 137,352 22,034
Bad debt 8,288 28,835
Loss on disposal 1,236 -
Stock issued for services - 28,000
Changes in current assets and liabilities:
Accounts receivable 34,900 (597,382)
Prepaid expenses (108,942) 54,447
Other current assets (81,901) (29,853)
Accounts payable 159,656 (151,436)
Accrued liabilities 112,447 295,653
Deferred revenue 62,377 -
Other current liabilities 1,978 -
Tax liability - 276,883
--------------- ----------------
Net Cash Provided (Used) by
Operating Activities (250,577) 366,659
--------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received on acquisition of
subsidiaries - 117,389
Cash received on notes receivable 24,500 -
Purchase of property and equipment (17,266) (103,110)
--------------- ----------------
Net Cash Provided by
Investing Activities 7,234 14,279
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received from issuance of
long-term debt 500,000 -
Principal paid on long-term debt (9,632) (3,294)
--------------- ----------------
Net Cash Provided (Used) by
Financing Activities 490,368 (3,294)
--------------- ----------------
Increase in Cash 247,025 377,644
=============== =================
CASH AT BEGINNING OF PERIOD 40,264 0
--------------- ----------------
CASH AT END OF PERIOD $ 287,289 $ 377,644
=============== ==================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 17,342 $ 2,324
NON-CASH FINANCING TRANSACTIONS:
Purchase of equipment with lease
obligations - $ 10,126
See accompanying notes to unaudited financial statements
<PAGE>
iMall, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(1) Interim 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 February 3, 1997. The results of operations for the
three months ended March 31, 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 Note 1 to the
Company's consolidated financial statements in its Form 10-SB.
(2) Net Loss Per Common Share.
Net loss per common share is based on the weighted average number of
common shares outstanding. Stock options and warrants prior to conversion are
not included in the calculation because their inclusion would be antidilutive,
thereby reducing the net loss per common share (see Note 5).
(3) Revenue Recognition Policy.
During the course of the Company's year end audit for 1996, it was
determined that a certain portion of revenue generated by the seminar division
should be deferred and amortized. "Initiation and Maintenance Fee" revenue is
received at the time an attendee chooses to invoke their web site(s). The
agreement covers a twelve month period; thus, the revenue is amortized over
twelve months. This change is reflected in the Liability section of the
Company's Balance Sheet under "Deferred Revenues," and reflects the Company's
desire to reflect conservatism in its financial statement presentation.
(4) Goodwill.
On May 1, 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 amortized the resulting goodwill over a five year life.
On April 1, 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 $102,020. The Company
amortized the resulting goodwill over a five year life.
(5) 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 ended March 31, 1997 and 1996.
[Letterhead of Arthur Andersen LLP]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To iMALL, Inc.:
We have audited the accompanying consolidated balance sheet of iMALL, Inc., a
Nevada corporation (formerly Natures Gift, Inc.), and subsidiaries as of
December 31, 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of iMALL,
Inc. and subsidiaries as of December 31, 1996, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the
accompanying consolidated financial statements, the Company has generated
minimal earnings to date and has a working capital deficiency of $590,400 as
of December 31, 1996 that raise substantial doubt about its ability to
continue as a going concern. Subsequent to year-end, the Company has incurred
operating losses. Management's plans in regard to these matters are described
in Note 1. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that might
result from the outcome of this uncertainty.
/s/ Arthur Andersen LLP
Salt Lake City, Utah
June 13, 1997
<Letterhead appears here>
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Madison, York & Associates, Inc.:
We have audited the accompanying balance sheet of Madison, York & Associates,
Inc. as of December 1995, and the related statements of operations,
stockholders' equity and cash flows from inception of operations on September
through the four months ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates make by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Madison, York & Associates,
Inc. as of December 31, 1995 and the results of its operations and cash flows
from inception of operations on September 1, 1995 through December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
February 23, 1996
IMALL, INC. AND SUBSIDIARIES
----------------------------
CONSOLIDATED BALANCE SHEET
-------------------------
AS OF DECEMBER 31, 1996
-----------------------
ASSETS
--------
CURRENT ASSETS:
Cash $ 40,264
Accounts receivable, net of allowance for
doubtful accounts of $26,400 100,502
Related-party receivable 85,521
Current portion of note receivable 100,524
Income tax receivable 276,940
Employee receivables 14,536
Inventory 55,277
Prepaid expenses 129,960
Deferred income tax asset 163,715
-------------
Total current assets 967,239
-------------
EQUIPMENT, FURNITURE AND FIXTURES:
Computer equipment 793,852
Office equipment 365,221
Leased office equipment 121,760
Furniture and fixtures 109,353
Leasehold improvement 28,804
-------------
1,418,990
Less accumulated depreciation and amortization (386,604)
-------------
Net equipment, furniture and fixtures 1,032,386
-------------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $27,214 177,883
Note receivable, net of current portion 141,476
Deposits 22,826
Organization costs, net of accumulated
amortization of $891 1,396
-------------
343,581
-------------
$ 2,343,206
=============
The accompanying notes are an integral part of this
consolidated balance sheet.
IMALL, INC. AND SUBSIDIARIES
----------------------------
CONSOLIDATED BALANCE SHEET
-------------------------
AS OF DECEMBER 31, 1996
-----------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
CURRENT LIABILITIES:
Current portion of notes payable to related parties $ 105,082
Current portion of capitalized lease obligations 39,956
Note payable 12,500
Accounts payable 667,426
Accrued payroll 126,357
Accrued royalties 96,030
Accrued interest payable to related party 12,759
Other accrued liabilities 120,286
Income taxes payable 41,068
Deferred revenues 336,175
--------------
Total current liabilities 1,557,639
--------------
NOTES PAYABLE TO RELATED PARTIES, net of current portion 40,000
--------------
CAPITALIZED LEASE OBLIGATIONS, net of current portion 31,621
--------------
COMMITMENTS AND CONTINGENCIES (Notes 3, 5 and 8):
STOCKHOLDERS' EQUITY:
Common stock, par value $.001; 300,000,000 shares
authorized, 59,284,527 shares outstanding 59,284
Additional paid-in capital 610,375
Retained earnings 44,287
--------------
Total stockholders' equity 713,946
--------------
$ 2,343,206
==============
The accompanying notes are an integral
part of this consolidated balance sheet.
IMALL, INC. AND SUBSIDIARIES
----------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 1, 1995)
-----------------------------------------------------
TO DECEMBER 31, 1995
-------------------
1996 1995
--------------- ---------------
REVENUES $ 16,046,933 $ 1,003,965
COST OF REVENUES (including $2,116,607 and
$147,535 to a related party, respectively) 8,593,455 437,035
--------------- ---------------
Gross Margin 7,453,478 566,930
GENERAL AND ADMINISTRATIVE EXPENSES 7,480,688 591,373
--------------- ---------------
OPERATING LOSS (27,210) (24,443)
--------------- ---------------
OTHER INCOME AND (EXPENSE):
Other income, net 133,308 3,912
Interest expense, net (3,352) -
--------------- ---------------
Net other income 129,956 3,912
--------------- ---------------
INCOME BEFORE PROVISION FOR INCOME TAXES 102,746 (20,531)
PROVISION FOR INCOME TAXES (37,928) -
--------------- ---------------
NET INCOME (LOSS) $ 64,818 $ (20,531)
=============== ===============
NET INCOME (LOSS) PER COMMON SHARE $ .00 $ .00
=============== ===============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 58,020,669 38,396,766
=============== ===============
The accompanying notes are an integral part
of these consolidated statements.
IMALL, INC. AND SUBSIDIARIES
----------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------
AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 1, 1995)
-----------------------------------------------------
TO DECEMBER 31, 1995
-------------------
<TABLE>
<CAPTION>
Common Stock Additional Retained
------------------------- Paid-in Earnings
Shares Amount Capital (Deficit)
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Balance at inception,
September 1, 1995 - $ - $ - $ -
Shares issued at $3.17 pare share 631 1 1,999 -
Shares issued in acquisition of
EMS, Inc. 158 - 12,812 -
Shares issued in private placement
at $19.00 per share 13,158 13 249,987 -
Net loss - - - (20,531)
------------ ------------ ------------- ---------------
Balance at December 31, 1995 13,947 14 264,798 (20,531)
Adjustments due to fractional
shares in stock split 1,396 - - -
Reverse acquisition for
accounting purposes of Madison,
York & Associates, Inc. 38,439,684 38,440 (40,786) -
Shares issued for acquisition of
Cabot, Richards & Reed, Inc. 11,200,000 11,200 (131,216) -
Shares issued for acquisition of
R&R Advertising, Inc. 4,800,000 4,800 283,000 -
Shares issued for services 2,800,000 2,800 25,200 -
Shares issued for acquisition of
Physicomp, Inc. (EmanNate, Inc.) 1,600,000 1,600 158,400 -
Shares issued for acquisition of
Interactive Marketing Group, Inc. 420,500 421 41,629 -
Shares issued for services 9,000 9 34,350 -
Distribution of S-Corporation
earnings to stockholders - - (25,000) -
Net income - - - 64,818
-------------- ----------- ------------- ----------------
Balance at December 31, 1996 59,284,527 $ 59,284 $ 610,375 $ 44,287
============== =========== ============= ================
</TABLE>
The accompanying notes are an integral part
of these consolidated statements.
IMALL, INC. AND SUBSIDIARIES
----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
-----------------------------------
AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 1, 1995)
-----------------------------------------------------
TO DECEMBER 31, 1995
-------------------
Increase (Decrease) in Cash
1996 1995
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 64,818 $ (20,531)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 306,480 2,919
Noncash expense related to issuance of
shares of common stock for services 62,359 -
Loss on sale of equipment, furniture
and fixtures 8,662 -
Loss on disposal of obsolete inventory 11,573 -
Provision for losses on accounts receivable 80,315 -
Changes in assets and liabilities, net of
effects from purchase of subsidiaries-
Decrease in accounts receivable 19,828 -
Increase in related-party receivable (85,521) (22,375)
Increase in income tax receivable (276,940) -
Increase in employee receivables (14,536) -
Decrease in inventory 24,013 -
Decrease (increase) in prepaid expenses 30,904 (81,952)
Increase in deferred income tax asset (163,715) -
Increase in accounts payable 371,799 65,290
Increase in accrued expenses 248,958 -
Increase in accrued interest payable to
related party 12,759 5,820
Increase in income tax payable 41,068 -
Increase in deferred revenues 311,003 -
Decrease in deposits 500 -
---------------- --------------
Net cash provided by (used in)
operating activities 1,054,327 (50,829)
---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received through acquisition of
subsidiaries 110,350 -
Purchase of equipment, furniture & fixtures (860,639) (49,275)
Proceeds from sale of equipment 6,304 -
Increase in other assets - (1,000)
Increase in notes receivable (250,000) (250,000)
Principal payments received on notes
receivable 8,000 88,380
----------------- --------------
Net cash used in investing
activities (985,985) (211,895)
----------------- ---------------
The accompanying notes are an integral part of these consolidated statements.
IMALL, INC. AND SUBSIDIARIES
----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 1, 1995)
-----------------------------------------------------
TO DECEMBER 31, 1995
-------------------
Increase (Decrease) in Cash
1996 1995
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution of S Corporation retained
earnings $ (25,000) $ -
Proceeds from stock issuance - 252,000
Proceeds from debt financing - 137,002
Principal payments on notes payable - (84,582)
Principal payments on obligations under
capital leases (26,774) -
Principal payments on notes payable to
related parties (18,000) -
---------------- ---------------
Net cash (used in) provided by
financing activities (69,774) 304,420
---------------- ---------------
INCREASE (DECREASE) IN CASH (1,432) 41,696
CASH AT BEGINNING OF THE PERIOD 41,696 -
---------------- ---------------
CASH AT END OF THE PERIOD $ 40,264 $ 41,696
================ ===============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 11,467 $ -
Cash paid for income taxes $ 437,516 $ -
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING TRANSACTIONS:
Stock issued for equipment $ - $ 12,812
Stock issued for services $ 62,359 -
The accompanying notes are an integral part of these
consolidated statements.
IMALL, INC. AND SUBSIDIARIES
----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 1, 1995)
-----------------------------------------------------
TO DECEMBER 31, 1995
-------------------
During 1996, the Company exchanged capital stock for all issued and
outstanding capital stock of Cabot, Richards & reed, Inc. ("Cabot"), R&R
Advertising, Inc. ("R&R"), Physicomp, Inc. ("Physicomp"), and Interactive
Marketing Group, Inc. ("IMG") (See Note 7). In conjunction with these
acquisitions, the assets and liabilities acquired and assumed were as follows:
Physicomp R&R Cabot IMG
----------- ----------- ----------- ----------
Fair value of non-cash
assets acquired $ 159,323 $ 304,198 $ 280,196 $ 58,766
Cash acquired 31,963 115,863 (40,170) 2,694
Liabilities assumed (255,793) (132,261) (360,042) -
Goodwill (negative goodwill) 224,507 - - (19,410)
----------- ----------- ----------- -----------
Equity recorded $ 160,000 $ 287,800 $ (120,016) $ 42,050
=========== =========== =========== ============
During 1996, the Company entered into capital lease obligations of $40,759 in
connection with its acquisition of new office equipment.
The accompanying notes are an integral part
of these consolidated statements.
IMALL, INC. AND SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
(1) ORGANIZATION AND NATURE OF OPERATIONS
-------------------------------------
The consolidated financial statements presented are those of iMALL, Inc. (a
Nevada corporation) and its wholly owned subsidiaries (collectively, the
"Company"). On January 16, 1996, iMALL, Inc., which had been the surviving
company in a change of domicile merger with Natures Gift, Inc. on January 8,
1996, engaged in a share exchange with Madison, York & Associates, Inc.
("Madison"). Natures Gift, Inc. was incorporated under the laws of the State
of Utah on February 9, 1984 as Brickland Corporation and changed its name to
Natures Gift, Inc. on May 23, 1991 (but remained inactive). The share
exchange with Madison, a Utah corporation, was accounted for as a reverse
acquisition. Due to accounting for the acquisition of Madison as a reverse
acquisition, the 1995 historical financial information presented herein is
that of Madison (the acquirer for accounting purposes) and stockholders'
equity was retroactively restated for the equivalent number of shares issued
after giving effect to the difference in par value. The shares were also
retroactively adjusted to reflect the reverse split of 1 for 19 shares and the
stock split of 4 for 1 shares (see Note 7). iMALL, Inc. then acquired Cabot,
Richards & Reed, Inc. ("Cabot"), a Utah corporation, and R&R Advertising, Inc.
("R&R"), a California corporation. iMALL, Inc. issued 38,439,684 common
shares for 100 percent of the outstanding stock of Madison, 4,800,000 common
shares for 100 percent of the outstanding stock of R&R and 11,200,000 common
shares for 100 percent of the outstanding stock of Cabot. The acquisitions of
R&R and Cabot were accounted for using the purchase method of accounting. At
the time of the share exchanges described above, there were certain common
shareholders among the Company, Madison, R&R and Cabot.
The companies acquired are in the seminar, advertising and internet
businesses. The Company's primary businesses are developing an electronic
shopping mall on the internet known as the "iMall" and providing seminars to
customers related to the internet. During the first quarter of 1996, iMALL,
Inc. changed the name of its subsidiary, Madison, to iMALL Consulting, Inc.
On January 17, 1996, iMALL, Inc. incorporated a Nevada subsidiary named iMALL
Services, Inc. Various assets of R&R were transferred to iMALL Services,
Inc., as well as the customer service function previously performed by iMALL
Consulting, Inc. The assets and operations of iMALL Services, Inc. are
consolidated with all other subsidiaries in these consolidated financial
statements.
iMALL, Inc. acquired two companies involved in internet technology during the
second quarter of 1996. On April 26, 1996, iMALL, Inc. acquired 100 percent
of the outstanding stock of Physicomp, Inc. (known as "EmaNate" or
"Physicomp"), a company specializing in information systems and internet
consulting, in a business combination accounted for as a purchase. On March 5,
1996, iMALL, Inc. acquired Interactive Marketing Group, Inc. ("IMG")
specializing in yellow-page advertising on the Internet, in a business
combination accounted for as a purchase. See further discussion of these
acquisitions at Note 7.
The Company's headquarters are located in Provo, Utah with additional offices
in Studio City, California and Woodland Hills, California.
(1) ORGANIZATION AND NATURE OF OPERATIONS (continued)
-------------------------------------------------
The Company has generated minimal earnings to date and has a working capital
deficiency of $590,400 as of December 31, 1996. The Company's continued
existence is dependent upon its ability to achieve its 1997 operating plan,
which includes cost reductions and obtaining additional funding from equity
financings. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result from the outcome of this
uncertainty.
(2) SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
Principles of Consolidation
- ----------------------------
The accompanying consolidated financial statements include the accounts of
iMALL, Inc., Cabot, R&R, iMALL Consulting, Inc., iMALL Services, Inc., EmaNate
and IMG. All material intercompany transactions and accounts have been
eliminated in consolidation.
Inventory
- ---------
Inventory consists of seminar literature which are materials used in
conjunction with seminar presentations and home study courses. Inventory is
stated at the lower of cost (using the first-in, first-out method) or market
value.
Equipment, Furniture and Fixtures
- ---------------------------------
Equipment, furniture and fixtures are recorded at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
related assets. The estimated useful lives of leasehold improvements are 10
years. The estimated useful lives of equipment, furniture and fixtures range
from 2 to 7 years. Major renewals and betterments are capitalized.
Maintenance, repairs and minor renewals are expensed as incurred.
Organization Costs
- ------------------
Organization costs have been capitalized and are being amortized over a five-
year period.
Goodwill
- --------
Goodwill was recorded in connection with the acquisitions of EmaNate and IMG
and is being amortized over a five-year period.
(2) SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Net Income (Loss) Per Common Share
- -----------------------------------
Net income (loss) per common share is calculated based upon the weighted
average number of common shares outstanding during the period. There were no
common stock equivalents in existence during the periods presented.
Income Taxes
- ------------
The Company recognizes a liability or asset for the deferred tax consequences
of temporary differences between the tax bases of assets or liabilities and
their reported amounts in the financial statements. These temporary
differences will result in taxable or deductible amounts in future years when
the reported amounts of the assets or liabilities are recovered or settled.
Pervasiveness of Estimates
- --------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Values of Financial Instruments
- ------------------------------------
The carrying amounts of the Company's financial instruments approximate their
fair values as of December 31, 1996. The estimated fair values have been
determined using appropriate market information and valuation methodologies.
Recognition of Revenue
- ----------------------
The Company generates revenue from five major sources within its seminar and
internet commerce businesses. The major sources of revenue and the timing of
revenue recognition are set forth below:
Seminar and workshop revenue - The Company presents seminars and
workshops to businesses and individuals introducing them to the Internet
and the iMall, a shopping mall on the Internet. The attendees pay a fee for
the seminar, usually in advance. Recognition of the revenue occurs at the
completion of the seminar. Any cash received in advance of the completion of
the seminar is accounted for as deferred revenue.
Home study revenue - The Company offers home study courses on the same
material discussed in its seminars. The customer pays the home study fee
before receiving the materials. Recognition of the revenue occurs when an
order is shipped. Cash received but not yet recognized for orders not shipped
totaled $22,500 as of December 31, 1996, and is included in deferred revenues
in the accompanying consolidated balance sheet.
(2) SIGNIFICANT ACCOUNTING POLICIES (continued)
- -------------------------------------------------
Maintenance fee revenue - The Company maintains web sites on an annual basis
for customers for a fee. The fee may be prepaid in full or paid monthly by
the customer. Recognition of revenue occurs as payments are received if the
fee is collected monthly. Revenue is recognized on a straight-line basis if
the annual fee is prepaid. Cash received but not yet recognized under
maintenance agreements totaled $313,675 as of December 31, 1996 and is
included in deferred revenues in the accompanying consolidated balance sheet.
Web site design revenue - The Company designs and upgrades web sites for
customers. The customer is provided with bids on the design and approves the
design prior to the Company beginning the work. Recognition of the revenue
occurs when the customer is billed for the design or upgrade.
Commissions from sales on the iMall - The Company participates in the commerce
generated by the businesses on the iMall. A percentage of certain revenue
generated is recognized as commissions when the sale is made to the buyer.
For 1996, this revenue made up less than one percent of the Company's total
revenues.
(3) CAPITALIZED LEASE OBLIGATIONS
------------------------------
Certain equipment is leased under capitalized lease obligations. The
following is a summary of assets held under capital lease agreements as of
December 31, 1996:
Equipment $ 123,472
Less accumulated amortization (45,222)
------------
$ 78,250
============
The following is a schedule by year of future minimum lease payments under
capitalized leases together with the present value of the minimum lease
payments at December 31, 1996:
Years Ending December 31,
----------------------------
1997 $ 46,910
1998 23,210
1999 10,907
------------
Total minimum lease payments 81,207
Less amount representing interest (9,450)
------------
Present value of minimum lease payments 71,577
Less current portion (39,956)
------------
$ 31,621
============
(4) NOTE PAYABLE AND NOTES PAYABLE TO RELATED PARTIES
--------------------------------------------------
Note Payable
- ------------
As of December 31, 1996, the Company had a note payable totaling $12,500 to a
corporation due June 1, 1997. The note is unsecured and bears interest at
seven percent.
Notes Payable to Related Parties
- --------------------------------
Notes payable to related parties are detailed in the following schedule as of
December 31, 1996.
Notes payable to stockholder, interest
at 10 percent, interest due monthly with
principal due upon demand, unsecured $ 50,000
Notes payable to stockholders, noninterest
bearing, principal due upon demand, unsecured 55,082
Note payable to stockholder, interest
at 10 percent, interest due monthly with
principal due May 1998, unsecured 15,000
Note payable to a stockholder, interest
at 10 percent, interest due monthly with
principal due August 1998, unsecured 25,000
-----------
Total notes payable to related parties 145,082
Less current portion (105,082)
-----------
$ 40,000
===========
Future minimum payments for notes payable to related parties are as follows:
Years Ending December 31,
- ------------------------------
1997 $ 105,082
1998 40,000
-----------
Total $ 145,082
===========
(5) COMMITMENTS AND CONTINGENCIES
-----------------------------
Operating Leases
- -----------------
The Company leases certain facilities used in its operations. The approximate
aggregate commitments under noncancelable operating leases in effect at
December 31, 1996, were as follows:
Years Ending December 31,
----------------------------
1997 $ 215,763
1998 199,162
1999 20,760
----------
$ 435,685
==========
The Company incurred rent expense of approximately $105,000 and $10,000 in
connection with operating leases during 1996 and 1995, respectively.
Legal Matters
- --------------
The Company is a defendant in various lawsuits which are incidental to the
Company's business. Management, after consultation with legal counsel, is of
the opinion that any liability resulting from these matters will not have a
material adverse effect on the Company's results of operations or financial
position.
Consulting Agreements
- ----------------------
The Company entered into a consulting agreement with an individual which
provides for the monthly payment of $5,000 by the Company for a minimum of
twenty hours of service per month by the consultant. The agreement does not
contain a termination date.
The Company entered into a consulting agreement in July 1996 with a
stockholder. The Company has agreed to pay $45,000 per year beginning July
1996 through June 2003 for consulting and legal services.
(6) INCOME TAXES
-------------
The provision (benefit) for income taxes consists of the following:
Period Ended December 31,
-------------------------
1996 1995
------------ ------------
Current Provision:
Federal $ 160,575 $ -
State 41,068 -
------------ -------------
201,643 -
------------ -------------
Deferred Benefit:
Federal (132,610) -
State (31,105) -
------------ -------------
(163,715) -
------------ -------------
Provision for income taxes $ 37,928 $ -
============ =============
The differences between the effective income tax rate and the Federal
statutory income tax rate consist of the following:
Period Ended December 31,
-------------------------
1996 1995
------------- ------------
Provision at the federal statutory
rate of 34 percent $ 34,933 $ (6,980)
State income taxes, net of federal benefit 5,425 -
Nondeductible items for tax purposes 13,218 -
Change in valuation allowance (6,980) 6,980
Other (8,668) -
------------- -------------
Total provision for income taxes $ 37,928 $ -
============= =============
The components of the Company's deferred income tax assets as of December 31,
1996 are as follows:
Revenue deferred for financial reporting purposes $ 132,050
Future deductible reserves and accruals 29,696
Future deductible depreciation 1,969
------------
Net deferred tax assets $ 163,715
============
(7) STOCK TRANSACTIONS
------------------
iMALL, Inc. entered into an agreement on September 27, 1995 with EMS, Inc. and
its principals to acquire 100 percent of the stock of EMS, Inc. Assets of
(7) STOCK TRANSACTIONS (continued)
------------------------------
EMS, Inc. consisted of computer equipment, software and a web site on the
Internet known as the iMall. The Company issued 158 shares of common stock in
exchange for 100% of the stock of EMS, Inc. The acquisition was valued at
$12,812 and was accounted for as a purchase.
On December 10, 1995, the Company's board of directors authorized the issuance
of 200,000 shares of common stock to qualified investors in a private
placement. At December 31, 1995, 13,158 shares were issued at a price per
share of $19. Proceeds of $250,000 were received by the Company. As of
December 31, 1996, the private placement was terminated.
On January 8, 1996, the Company effected a reverse split of 1 for 19 shares
and on May 22, 1996, the Company effected a stock split of 4 for 1. All share
and per share amounts have been retroactively restated to reflect the stock
splits. The Company increased its authorized common stock to 300,000,000
shares with a par value of $.001.
On January 16, 1996, the Company issued 4,800,000 common shares to R&R for all
of its outstanding stock. R&R's net book value of $287,800 was recorded as
the value of the acquisition. On January 16, 1996, 11,200,000 common shares
were issued to Cabot for all of its outstanding stock at the time of the
transaction, Cabot had a negative net book value of $(120,016). The fair
market value of the stock issued to Cabot at the time of the acquisition was
not determinable, therefore, no goodwill was recognized in the transaction.
The negative book value was netted against additional paid-in capital. On
January 16, 1996, 38,439,684 shares were issued to Madison for all of its
outstanding stock. The net book value of Madison of $244,281 was recorded as
the value of this acquisition. The Company issued 2,800,000 shares to an
investment banking firm for services valued at $28,000 which were rendered in
connection with the acquisition. No relationship existed between the Company
and the investment banking firm prior to the services performed.
The merger with Madison was treated as a reverse acquisition and
reorganization. The 1995 financial statement presentation is that of Madison.
The stockholders' equity was retroactively restated for the equivalent number
of shares issued in the merger after giving effect to the difference in par
value, plus the shares outstanding in Natures Gift, Inc. at the time of the
acquisition. As a result, the stockholders' equity at December 31, 1995 is
comparable with the stockholders' equity presentation at December 31, 1996.
On April 26, 1996, the Company acquired EmaNate, 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 results of operations of EmaNate are included in the accompanying
financial statements since the date of acquisition. The Company issued
1,600,000 shares of common stock with a fair value of $.10 per share, as
determined by the Board of Directors and a third-party investment banking
firm, for all of the outstanding stock of EmaNate. The acquisition resulted
in goodwill of $224,507. The Company is amortizing the resulting goodwill
over a five-year period.
(7) STOCK TRANSACTIONS (continued)
------------------------------
On March 5, 1996, the Company acquired Interactive Marketing Group, Inc.
("IMG"), a company specializing in yellow-page advertising on the Internet, in
a business combination accounted for as a purchase. The results of operations
of IMG are included in the accompanying financial statements since the date of
acquisition. The Company issued 1,634,800 shares of common stock (of which
1,214,300 shares are being held in escrow pending certain events taking place)
with a fair value of $.10 per share, as determined by the Board of Directors
and a third-party investment banking firm, for all of the outstanding stock of
IMG. The acquisition resulted in negative goodwill of $(19,410). The Company
is amortizing the resulting negative goodwill over a five-year period.
(8) RELATED-PARTY TRANSACTIONS
---------------------------
The Company paid various related parties for advertising, rent and computer
graphic design services. During 1996 and 1995, Sierra Advertising received
$2,116,607 and $147,535, respectively, for advertising expenses. Sierra
Advertising is owned by two officers of the Company. The advertising expenses
are included in cost of revenues.
The Company has a lease agreement for office space with RDR Properties
("RDR"), which is owned by two officers of the Company. The Company pays
$8,720 per month to RDR. The rent expense as of December 31, 1996 and 1995
was $104,640 and $0, respectively. In addition, RDR owes the Company $85,521
as of December 31, 1996 for certain leasehold improvements to the building,
owned by RDR, paid for by the Company.
Receivables of $14,536 are due from employees as of December 31, 1996.
The Company has notes payable to related parties which include amounts owing
certain directors, officers and stockholders of the Company totaling $145,082
as of December 31, 1996 (See Note 4).
(9) SUBSEQUENT EVENT
-----------------
Note Payable to Related Party
- -----------------------------
On January 2, 1997, a company loaned the Company $500,000. The note was due
March 1, 1997, bore interest at an annual rate of 10 percent and was secured
by certain property and inventory. Certain officers and directors have
personally guaranteed the note. On March 1, 1997, the Company defaulted on
the note. Upon default, all outstanding principal and interest became
immediately due. Any outstanding principal balance subsequent to March 1,
1997 bears interest at 13 percent.
PART III
Item 1: INDEX TO EXHIBITS
2.1 Share Exchange Agreement between the Company and
Madison, York & Associates, Inc.
2.2 Share Exchange Agreement between the Company and
Cabot, Richards & Reed, Inc.
2.3 Share Exchange Agreement between the Company and
R&R Advertising, Inc.
2.4 Share Exchange Agreement between the Company and
Physicomp Corporation (d.b.a. e.m.a.N.a.t.e.)
2.5 Share Exchange Agreement between the Company and
Interactive Marketing Group, Inc.
3.1 Articles of Incorporation, as amended
3.2 By-Laws, as amended
10.1 Software License and Distribution Agreement between
the Company and AT&T
10.2 Agreement with Positive Response T.V.
10.3 Memorandum of Understanding between the Company and
Softbank
21 Subsidiaries
27 Financial Data Schedule
21 Subsidiaries
27 Financial Data Schedule
2.1 Share Exchange Agreement between the Company and
Madison, York & Associates, Inc. *
2.2 Share Exchange Agreement between the Company and
Cabot, Richards & Reed, Inc.*
2.3 Share Exchange Agreement between the Company and
R&R Advertising, Inc.*
2.4 Share Exchange Agreement between the Company and
Physicomp Corporation (d.b.a. e.m.a.N.a.t.e.)*
2.5 Share Exchange Agreement between the Company and
Interactive Marketing Group, Inc.*
3.1 Articles of Incorporation, as amended *
3.2 By-Laws, as amended *
10.1 Software License and Distribution Agreement between
the Company and AT&T*
10.2 Agreement with Positive Response T.V.*
10.3 Memorandum of Understanding between the Company and
Softbank*
10.4 Employment Agreement with Craig Pickering
10.5 Employment Agreement with Richard Rosenblatt
10.6 Employment Agreement with Mark Comer
10.7 Employment Agreement with Martin Rosenblatt
21 Subsidiaries*
27 Financial Data Schedule
* Previously filed
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
iMALL, INC.
January 31, 1996
July 30, 1997
By: /s/ Craig R. Pickering
-----------------------
Craig R. Pickering
Chairman of the Board
and President
By: /s/ Tracy W. Scott
-----------------------
Tracy W. Scott
By: /s/ Richard Rosenblatt
------------------------
Richard Rosenblatt
Senior Vice President
Chief Executive Officer
Director
By: /s/ Mark R. Comer
---------------------
Mark R. Comer
Senior Vice President
President
Director
By: /s/ Craig Lewis
----------------
Craig Lewis
Secretary/Treasurer
Chief Financial Officer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into in the City
of Provo, State of Utah, this 1 day of April, 1996, by and between iMall,
Inc., (the "Company"), a corporation duly organized under the laws of the
State of Nevada, and Craig R. Pickering ("Employee").
WITNESSETH:
1. Employment. The Company hereby employs Employee and Employee
hereby agrees to work for the Company as President.
2. Term. The term of this Agreement shall be for seven (7) years
from the date hereof unless sooner terminated as hereinafter provided. The
Company may, at its option, renew this Agreement for an additional seven (7)
years.
3. Duties. Employee will devote his full time efforts to his duties
as President for the profit, benefit and advantage of the business of the
Company and will serve the Company to the best of his ability under the
direction of the Board of Directors of the Company. Employee agrees he shall
devote such of his time and energy as he, in his sole discretion, deems
necessary to timely complete the services and duties contemplated under this
Agreement. It is understood by the parties that the particular amount of time
may vary from day to day or week to week.
4. Compensation. The Company will pay Employee a base salary of One
Hundred Twenty Five Thousand Dollars ($125,000) per annum, payable in monthly
installments, for all of the services rendered by Employee hereunder and any
other duties related to his position that may be required of him by the Board
of Directors of the Company.
5. Employee Benefit Plan. Employee shall be entitled to participate in
any Internal Revenue Service qualified Profit-Sharing Plan, Employee Stock
Plan, Stock Bonus Plan and Pension Plan adopted and/or implemented by the
Company. The actual participation, employer contributions and restrictions of
each item shall be determined by the Board of Directors of the Company.
6. Health Care Insurance Benefits. The Company shall provide Employee
with health insurance coverage for Employee and his dependents. The Company
shall have the complete discretion in choosing the type of health insurance
plan provided Employee and in choosing the insurance carrier and extent of
insurance coverage, provided that any such health insurance plan include
hospital, maternity, major medical, and dental coverage for Employee and his
dependents. The benefits provided Employee under this section shall end at
the expiration of the term of this agreement or at the effective date of
termination as provided herein.
7. Stock Options. As additional incentive for the performance of his
duties hereunder, the Company shall grant to Employee an option to purchase up
to Two Hundred Thousand (200,000) shares of the common stock of the Company at
the conclusion of each fiscal year that this Agreement remains in effect in
accordance with the terms of the Company's Incentive Stock Option Plan,
attached hereto as Exhibit "A".
8. Expense Account. The Company will provide Employee with an expense
account of Two Thousand Dollars ($2,000) per month, for use in furtherance of
the business of the Company, including entertainment expenses. In addition,
the Company will provide Employee with an automobile expense account of Eight
Hundred Dollars ($800) per month.
9. Reimbursement of Expenses. The Company agrees to pay all expenses
incurred by Employee in furtherance of the business of the Company, including
travel and entertainment expenses in excess of the expense amounts set forth
in Section 8 hereof. The Company will reimburse Employee for any such
expenses paid by him upon submission by him of a statement itemizing such
expenses, provided that Employee present appropriate vouchers evidencing any
such expenses to the Company.
10. Absence. If Employee shall, during the term of his employment
under this Agreement, be absent from work because of illness or other cause
for a period or aggregate of periods in excess of twelve (12) months in any
two (2) years of the term of employment, the Company shall have the right to
terminate this Agreement on ninety (90) days notice to Employee. In that
event, the Company shall pay Employee his compensation to the date of
termination, including any compensation accrued pursuant to this Agreement,
and otherwise payable to the terms hereof at the time this Agreement is
terminated.
11. Company's Insurance of Employee. Employee acknowledges that the
Company may, from time to time, apply for and take out in its own name and at
the Company's expense, life, health, accident and other insurance upon
Employee that the Company may deem necessary or advisable to protect its
interest hereunder; and Employee will submit to any medical or other exam
necessary for such purpose and assist and cooperate with the Company on
procuring such insurance; and Employee acknowledges that he shall have no
right, title or interest in or to such insurance.
12. Employee Service as Director. Employee hereby consents to serve as
a director of the Company or any subsidiary, or corporation affiliated with
the Company, on condition that Employee receive, in addition to the
compensation to be paid to Employee hereunder, the same compensation paid to
other directors of any such company for their services as directors.
13. Indemnification of Employee. The Company shall indemnify
Employee to full extent permitted by law against all expenses, attorney's
fees, judgements, fines and amounts paid in settlement, actually and
reasonable incurred by Employee in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, incurred by Employee in connection with any act or omission
by Employee occasioned under this agreement, provided that he act in good
faith and in a manner he reasonably believed to be in or not opposed to
criminal action which he has no reasonable cause to believe his conduct was
unlawful.
14. Officer/Director Third-Party Contracts. The Company acknowledges
that the employment services and duties of Employee outlined in Section 3
hereof are of a full-time, Forty-hour per week nature, and nothing contained
herein shall prevent Employee from entering into any contract with any third-
party provided that any such contract shall not directly conflict with any
provision of Section 3 hereof. In the event Employee determines that a
contract between any such third-party business entity and the Company would be
mutually beneficial, Employee shall make full disclosure to the Company as to
the identity and nature of the business entity as the nature of Employee's
beneficial and/or monetary interest prior to any future negotiations between
the Company and any such third-party business entity in the event any such
contract is entered into between the Company and any such third-party business
entity, provided that Employee has made complete disclosure to the Board of
Directors of the Company.
15. Termination upon Death. If Employee should die during the term of
this Agreement, the Company will pay Employee's legal representative all sums
due and payable to Employee pursuant to the within terms and conditions as if
this Agreement has been terminated or otherwise expired by its terms.
16. Non-Competition During this Agreement. During the term of this
Agreement, Employee will not engage in any other commercial activity, whether
or not competitive with the business of the Company, nor be affiliated in any
other way as an officer, director, or major shareholder of another corporation
without the consent of the Board of Directors of the Company, except that he
may own any stock or other securities listed for trading on a recognized
securities exchange.
17. Non-Competition After Termination. For a period of five (5) years
after leaving the Company for any reason, Employee will not engage in any way,
directly or indirectly, in any business competitive with the business of the
Company.
18. Confidentiality. As an additional condition to Employee's employment
with the Company, Employee shall, concurrently with the execution of this
Agreement, execute a Confidentiality Agreement, the form of which is attached
hereto as Exhibit B.
19. Discontinuation. This Agreement shall cease and terminate if the
Company shall discontinue its business and all rights and liabilities
thereunder shall cease, except as provided in Section 18 hereof.
20. Assignment. The Company shall have the right to assign this
contract to its successors or
assigns and all covenants and agreements hereunder shall enure to the benefit
of and be enforceable by or against said successors or assigns. The terms
"successor" and "assigns" shall include any corporation or person that buys
all or substantially all of the Company's assets, or a
beneficial owner of no less than twenty-five percent (25%) of the Company's
merges or consolidates, the result of which would be a change in control of
the Company.
21. Waiver. Any waiver by either party of a breach of any provision of
this Agreement shall not operate or be constructed as a waiver of any
subsequent breach thereof.
22. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Utah.
23. Amendment. This Agreement may not be amended, except in writing
and executed by the parties hereto.
24. Successors. This Agreement shall enure to the benefit of each
party's successors and assigns.
IN WITNESS WHEREOF, the Company has hereunto signed its name by its
Secretary / Treasurer and Employee has signed his name, all as of the day and
year first written above.
iMALL, Inc. Craig R. Pickering
By: /s/ John Clayton /s/ Craig R. Pickering
------------------------- -------------------------
John Clayton
Secretary / Treasurer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into in the City
of Los Angeles, State of California this 1 day of April, 1996, by and between
iMall, Inc., (the "Company"), a corporation duly organized under the laws of
the State of Nevada, and Richard Rosenblatt ("Employee").
WITNESSETH:
1. Employment. The Company hereby employs Employee and Employee hereby
agrees to work for the Company as Vice President.
2. Term. The term of this Agreement shall be for seven (7) years from
the date hereof unless sooner terminated as hereinafter provided. The Company
may, at its option, renew this Agreement for an additional seven (7) years.
3. Duties. Employee will devote his full time efforts to his duties as
Vice President for the profit, benefit and advantage of the business of the
Company and will serve the Company to the best of his ability under the
direction of the Board of Directors of the Company. Employee agrees he shall
devote such of his time and energy as he, in his sole discretion, deems
necessary to timely complete the services and duties contemplated under this
Agreement. It is understood by the parties that the particular amount of time
may vary from day to day or week to week.
4. Compensation. The Company will pay Employee a base salary of One
Hundred Twenty Five Thousand Dollars ($125,000) per annum, payable in monthly
installments, for all of the services rendered by Employee hereunder and any
other duties related to his position that may be required of him by the Board
of Directors of the Company.
5. Employee Benefit Plan. Employee shall be entitled to participate in
any Internal Revenue Service qualified Profit-Sharing Plan, Employee Stock
Plan, Stock Bonus Plan and Pension Plan adopted and/or implemented by the
Company. The actual participation, employer contributions and restrictions of
each item shall be determined by the Board of Directors of the Company.
6. Health Care Insurance Benefits. The Company shall provide Employee
with health insurance coverage for Employee and his dependents. The Company
shall have the complete discretion in choosing the type of health insurance
plan provided Employee and in choosing the insurance carrier and extent of
insurance coverage, provided that any such health insurance plan include
hospital, maternity, major medical, and dental coverage for Employee and his
dependents. The benefits provided Employee under this section shall end at
the expiration of the term of this agreement or at the effective date of
termination as provided herein.
7. Stock Options. As additional incentive for the performance of his
duties hereunder, the Company shall grant to Employee an option to purchase up
to Two Hundred Thousand (200,000) shares of the common stock of the Company at
the conclusion of each fiscal year that this Agreement remains in effect in
accordance with the terms of the Company's Incentive Stock Option Plan,
attached hereto as Exhibit "A".
8. Expense Account. The Company will provide Employee with an expense
account of Two Thousand Dollars ($2,000) per month, for use in furtherance of
the business of the Company, including entertainment expenses. In addition,
the Company will provide Employee with an automobile expense account of One
Thousand Dollars ($1,000) per month.
9. Reimbursement of Expenses. The Company agrees to pay all expenses
incurred by Employee in furtherance of the business of the Company, including
travel and entertainment expenses in excess of the expense amounts set forth
in Section 8 hereof. The Company will reimburse Employee for any such
expenses paid by him upon submission by him of a statement itemizing such
expenses, provided that Employee present appropriate vouchers evidencing any
such expenses to the Company.
10. Absence. If Employee shall, during the term of his employment under
this Agreement, be absent from work because of illness or other cause for a
period or aggregate of periods in excess of twelve (12) months in any two (2)
years of the term of employment, the Company shall have the right to terminate
this Agreement on ninety (90) days notice to Employee. In that event, the
Company shall pay Employee his compensation to the date of termination,
including any compensation accrued pursuant to this Agreement, and otherwise
payable to the terms hereof at the time this Agreement is terminated.
11. Company's Insurance of Employee. Employee acknowledges that the
Company may, from time to time, apply for and take out in its own name and at
the Company's expense, life, health, accident and other insurance upon
Employee that the Company may deem necessary or advisable to protect its
interest hereunder; and Employee will submit to any medical or other exam
necessary for such purpose and assist and cooperate with the Company on
procuring such insurance; and Employee acknowledges that he shall have no
right, title or interest in or to such insurance.
12. Employee Service as Director. Employee hereby consents to serve as
a director of the Company or any subsidiary, or corporation affiliated with
the Company, on condition that Employee receive, in addition to the
compensation to be paid to Employee hereunder, the same compensation paid to
other directors of any such company for their services as directors.
13. Indemnification of Employee. The Company shall indemnify Employee
to full extent permitted by law against all expenses, attorney's fees,
judgements, fines and amounts paid in settlement, actually and reasonable
incurred by Employee in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, incurred by Employee in connection with any act or omission by
Employee occasioned under this agreement, provided that he act in good faith
and in a manner he reasonably believed to be in or not opposed to criminal
action which he has no reasonable cause to believe his conduct was unlawful.
14. Officer/Director Third-Party Contracts. The Company acknowledges
that the employment services and duties of Employee outlined in Section 3
hereof are of a full-time, Forty-hour per week nature, and nothing contained
herein shall prevent Employee from entering into any contract with any third-
party provided that any such contract shall not directly conflict with any
provision of Section 3 hereof. In the event Employee determines that a
contract between any such third-party business entity and the Company would be
mutually beneficial, Employee shall make full disclosure to the Company as to
the identity and nature of the business entity as the nature of Employee's
beneficial and/or monetary interest prior to any future negotiations between
the Company and any such third-party business entity in the event any such
contract is entered into between the Company and any such third-party business
entity, provided that Employee has made complete disclosure to the Board of
Directors of the Company.
15. Termination upon Death. If Employee should die during the term of
this Agreement, the Company will pay Employee's legal representative all sums
due and payable to Employee pursuant to the within terms and conditions as if
this Agreement has been terminated or otherwise expired by its terms.
16. Non-Competition During this Agreement. During the term of this
Agreement, Employee will not engage in any other commercial activity, whether
or not competitive with the business of the Company, nor be affiliated in any
other way as an officer, director, or major shareholder of another corporation
without the consent of the Board of Directors of the Company, except that he
may own any stock or other securities listed for trading on a recognized
securities exchange.
17. Non-Competition After Termination. For a period of five (5) years
after leaving the Company for any reason, Employee will not engage in any way,
directly or indirectly, in any business competitive with the business of the
Company.
18. Confidentiality. As an additional condition to Employee's employment
with the Company, Employee shall, concurrently with the execution of this
Agreement, execute a Confidentiality Agreement, the form of which is attached
hereto as Exhibit B.
19. Discontinuation. This Agreement shall cease and terminate if the
Company shall discontinue its business and all rights and liabilities
thereunder shall cease, except as provided in Section 18 hereof.
20. Assignment. The Company shall have the right to assign this contract
to its successors or assigns and all covenants and agreements hereunder shall
enure to the benefit of and be enforceable by or against said successors or
assigns. The terms "successor" and "assigns" shall include any corporation or
person that buys all or substantially all of the Company's assets, or a
beneficial owner of no less than twenty-five percent (25%) of the Company's
merges or consolidates, the result of which would be a change in control of
the Company.
21. Waiver. Any waiver by either party of a breach of any provision of
this Agreement shall not operate or be constructed as a waiver of any
subsequent breach thereof.
22. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Utah.
23. Amendment. This Agreement may not be amended, except in writing
and executed by the parties hereto.
24. Successors. This Agreement shall enure to the benefit of each
party's successors and assigns.
IN WITNESS WHEREOF, the Company has hereunto signed its name by its
Secretary / Treasurer and Employee has signed his name, all as of the day and
year first written above.
iMALL, Inc. Richard Rosenblatt
By: /s/ John Clayton /s/ Richard Rosenblatt
----------------------- -----------------------------
John Clayton
Secretary / Treasurer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into in the City
of Provo, State of Utah, this 1st day of April, 1996, by and between iMall,
Inc., (the "Company"), a corporation duly organized under the laws of the
State of Nevada, and Mark R. Comer ("Employee").
WITNESSETH:
1. Employment. The Company hereby employs Employee and Employee hereby
agrees to work for the Company as Vice President.
2. Term. The term of this Agreement shall be for seven (7) years from
the date hereof unless sooner terminated as hereinafter provided. The Company
may, at its option, renew this Agreement for an additional seven (7) years.
3. Duties. Employee will devote his full time efforts to his duties as
Vice President for the profit, benefit and advantage of the business of the
Company and will serve the Company to the best of his ability under the
direction of the Board of Directors of the Company. Employee agrees he shall
devote such of his time and energy as he, in his sole discretion, deems
necessary to timely complete the services and duties contemplated under this
Agreement. It is understood by the parties that the particular amount of time
may vary from day to day or week to week.
4. Compensation. The Company will pay Employee a base salary of One
Hundred Twenty Five Thousand Dollars ($125,000) per annum, payable in monthly
installments, for all of the services rendered by Employee hereunder and any
other duties related to his position that may be required of him by the Board
of Directors of the Company.
5. Employee Benefit Plan. Employee shall be entitled to participate in
any Internal Revenue Service qualified Profit-Sharing Plan, Employee Stock
Plan, Stock Bonus Plan and Pension Plan adopted and/or implemented by the
Company. The actual participation, employer contributions and restrictions of
each item shall be determined by the Board of Directors of the Company.
6. Health Care Insurance Benefits. The Company shall provide Employee
with health insurance coverage for Employee and his dependents. The Company
shall have the complete discretion in choosing the type of health insurance
plan provided Employee and in choosing the insurance carrier and extent of
insurance coverage, provided that any such health insurance plan include
hospital, maternity, major medical, and dental coverage for Employee and his
dependents. The benefits provided Employee under this section shall end at
the expiration of the term of this agreement or at the effective date of
termination as provided herein.
7. Stock Options. As additional incentive for the performance of his
duties hereunder, the Company shall grant to Employee an option to purchase up
to Two Hundred Thousand (200,000) shares of the common stock of the Company at
the conclusion of each fiscal year that this Agreement remains in effect in
accordance with the terms of the Company's Incentive Stock Option Plan,
attached hereto as Exhibit "A".
8. Expense Account. The Company will provide Employee with an expense
account of Two Thousand Dollars ($2,000) per month, for use in furtherance of
the business of the Company, including entertainment expenses. In addition,
the Company will provide Employee with an automobile expense account of Eight
Hundred Dollars ($800) per month.
9. Reimbursement of Expenses. The Company agrees to pay all expenses
incurred by Employee in furtherance of the business of the Company, including
travel and entertainment expenses in excess of the expense amounts set forth
in Section 8 hereof. The Company will reimburse Employee for any such
expenses paid by him upon submission by him of a statement itemizing such
expenses, provided that Employee present appropriate vouchers evidencing any
such expenses to the Company.
10. Absence. If Employee shall, during the term of his employment under
this Agreement, be absent from work because of illness or other cause for a
period or aggregate of periods in excess of twelve (12) months in any two (2)
years of the term of employment, the Company shall have the right to terminate
this Agreement on ninety (90) days notice to Employee. In that event, the
Company shall pay Employee his compensation to the date of termination,
including any compensation accrued pursuant to this Agreement, and otherwise
payable to the terms hereof at the time this Agreement is terminated.
11. Company's Insurance of Employee. Employee acknowledges that the
Company may, from time to time, apply for and take out in its own name and at
the Company's expense, life, health, accident and other insurance upon
Employee that the Company may deem necessary or advisable to protect its
interest hereunder; and Employee will submit to any medical or other exam
necessary for such purpose and assist and cooperate with the Company on
procuring such insurance; and Employee acknowledges that he shall have no
right, title or interest in or to such insurance.
12. Employee Service as Director. Employee hereby consents to serve as
a director of the Company or any subsidiary, or corporation affiliated with
the Company, on condition that Employee receive, in addition to the
compensation to be paid to Employee hereunder, the same compensation paid to
other directors of any such company for their services as directors.
13. Indemnification of Employee. The Company shall indemnify Employee
to full extent permitted by law against all expenses, attorney's fees,
judgements, fines and amounts paid in settlement, actually and reasonable
incurred by Employee in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, incurred by Employee in connection with any act or omission by
Employee occasioned under this agreement, provided that he act in good faith
and in a manner he reasonably believed to be in or not opposed to criminal
action which he has no reasonable cause to believe his conduct was unlawful.
14. Officer/Director Third-Party Contracts. The Company acknowledges
that the employment services and duties of Employee outlined in Section 3
hereof are of a full-time, Forty-hour per week nature, and nothing contained
herein shall prevent Employee from entering into any contract with any third-
party provided that any such contract shall not directly conflict with any
provision of Section 3 hereof. In the event Employee determines that a
contract between any such third-party business entity and the Company would be
mutually beneficial, Employee shall make full disclosure to the Company as to
the identity and nature of the business entity as the nature of Employee's
beneficial and/or monetary interest prior to any future negotiations between
the Company and any such third-party business entity in the event any such
contract is entered into between the Company and any such third-party business
entity, provided that Employee has made complete disclosure to the Board of
Directors of the Company.
15. Termination upon Death. If Employee should die during the term of
this Agreement, the Company will pay Employee's legal representative all sums
due and payable to Employee pursuant to the within terms and conditions as if
this Agreement has been terminated or otherwise expired by its terms.
16. Non-Competition During this Agreement. During the term of this
Agreement, Employee will not engage in any other commercial activity, whether
or not competitive with the business of the Company, nor be affiliated in any
other way as an officer, director, or major shareholder of another corporation
without the consent of the Board of Directors of the Company, except that he
may own any stock or other securities listed for trading on a recognized
securities exchange.
17. Non-Competition After Termination. For a period of five (5) years
after leaving the Company for any reason, Employee will not engage in any way,
directly or indirectly, in any business competitive with the business of the
Company.
18. Confidentiality. As an additional condition to Employee's employment
with the Company, Employee shall, concurrently with the execution of this
Agreement, execute a Confidentiality Agreement, the form of which is attached
hereto as Exhibit B.
19. Discontinuation. This Agreement shall cease and terminate if the
Company shall discontinue its business and all rights and liabilities
thereunder shall cease, except as provided in Section 18 hereof.
20. Assignment. The Company shall have the right to assign this contract
to its successors or assigns and all covenants and agreements hereunder shall
enure to the benefit of and be enforceable by or against said successors or
assigns. The terms "successor" and "assigns" shall include any corporation or
person that buys all or substantially all of the Company's assets, or a
beneficial owner of no less than twenty-five percent (25%) of the Company's
merges or consolidates, the result of which would be a change in control of
the Company.
21. Waiver. Any waiver by either party of a breach of any provision of
this Agreement shall not operate or be constructed as a waiver of any
subsequent breach thereof.
22. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Utah.
23. Amendment. This Agreement may not be amended, except in writing
and executed by the parties hereto.
24. Successors. This Agreement shall enure to the benefit of each
party's successors and assigns.
IN WITNESS WHEREOF, the Company has hereunto signed its name by its
Secretary / Treasurer and Employee has signed his name, all as of the day and
year first written above.
iMALL, Inc. Mark R. Comer
By: /s/ John Clayton /s/ Mark R. Comer
--------------------- ----------------------------
John Clayton
Secretary / Treasurer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into in the City
of Los Angeles, State of California, this 26th day of April 1996, by and
between iMall, Inc., (the "Company"), a corporation duly organized under the
laws of the State of Nevada, and Martin Rosenblatt ("Employee").
WITNESSETH:
1. Employment. The Company hereby employs Employee and Employee hereby
agrees to work for the Company as Vice President-Technology.
2. Term. The term of this Agreement shall be for seven (7) years from
the date hereof unless sooner terminated as hereinafter provided. The Company
may, at its option, renew this Agreement for an additional seven (7) years.
3. Duties. Employee will devote his full time efforts to his duties as
Vice President-Technology for the profit, benefit and advantage of the
business of the Company and will serve the Company to the best of his ability
under the direction of the Board of Directors of the Company. Employee agrees
he shall devote such of his time and energy as he, in his sole discretion,
deems necessary to timely complete the services and duties contemplated under
this Agreement. It is understood by the parties that the particular amount
of time may vary from day to day or week to week.
4. Compensation. The Company will pay Employee a base salary of Eighty-
Five Thousand Dollars ($85,000) per annum, payable in semi-monthly
installments, for all of the services rendered by Employee hereunder and any
other duties related to his position that may be required of him by the Board
of Directors of the Company. Employee shall also receive payments from the
Company in order for Employee to receive an amount equal to that amount
received by Douglas Hatfield or Paul Hassig for that portion of their
ownership percentage in World Wide Radio Corporation attributable to their
initial capital contributions to World Wide Radio Corporation as soon as
possible after any liquidating event relating to World Wide Radio Corporation.
In addition, Employee's compensation hereunder shall be reviewed on an annual
basis by the Board of Directors of the Company.
5. Employee Benefit Plan. Employee shall be entitled to participate in
any Internal Revenue Service qualified Profit-Sharing Plan, Employee Stock
Plan, Stock Bonus Plan and Pension Plan adopted and/or implemented by the
Company. The actual participation, employer contributions and restrictions of
each item shall be determined by the Board of Directors of the Company.
6. Health Care Insurance Benefits. The Company shall provide Employee
with health insurance coverage for Employee and his dependents. The Company
shall have the complete discretion in choosing the type of health insurance
plan provided Employee and in choosing the insurance carrier and extent of
insurance coverage, provided that any such health insurance plan include
hospital, maternity, major medical, and dental coverage for Employee and his
dependents. The benefits provided Employee under this section shall end at
the expiration of the term of this agreement or at the effective date of
termination as provided herein.
7. Stock Options. As additional incentive for the performance of his
duties hereunder, the Company shall grant to Employee an option to purchase a
minimum of Fifty Thousand (50,000) shares of the common stock of the Company
at the conclusion of each fiscal year that this Agreement remains in effect in
accordance with the terms of the Company's Incentive Stock Option Plan
attached hereto as Exhibit A (the "Option Plan").
8. Reimbursement of Expenses. The Company agrees to pay all expenses
incurred by Employee in furtherance of the business of the Company, including
travel and entertainment expenses. The Company will reimburse Employee for
any such expenses paid by him upon submission by him of a statement itemizing
such expenses, provided that Employee present appropriate vouchers evidencing
any such expenses to the Company.
9. Absence. If Employee shall, during the term of his employment under
this Agreement, be absent from work because of illness or other cause for a
period or aggregate of periods in excess of six (6) months in any one (1) year
of the term of employment, the Company shall have the right to terminate this
Agreement on ninety (90) days notice to Employee. In that event, the Company
shall pay Employee his compensation to the date of termination, including any
compensation accrued pursuant to this Agreement, and otherwise payable to the
terms hereof at the time this Agreement is terminated.
10. Company's Insurance of Employee. Employee acknowledges that the
Company may, from time to time, apply for and take out in its own name and at
the Company's expense, life, health, accident and other insurance upon
Employee that the Company may deem necessary or advisable to protect its
interest hereunder; and Employee will submit to any medical or other exam
necessary for such purpose and assist and cooperate with the Company on
procuring such insurance; and Employee acknowledges that he shall have no
right, title or interest in or to such insurance.
11. Employee Service as Director. Employee hereby consents to serve as
a director of the Company or any subsidiary, or corporation affiliated with
the Company, on condition that Employee receive, in addition to the
compensation to be paid to Employee by the Company hereunder, the same
compensation paid to other directors of any such company for their services as
directors.
12. Indemnification of Employee. The Company shall indemnify Employee to
the full extent permitted by law against all expenses, attorney's fees,
judgements, fines and amounts paid in settlement, actually and reasonable
incurred by Employee in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, incurred by Employee in connection with any act or omission by
Employee occasioned under this agreement, provided that he act in good faith
and in a manner he reasonably believed to be in or not opposed to criminal
action which he has no reasonable cause to believe his conduct was unlawful.
In addition, Employee shall be released from and indemnified against any
claims made against him in connection with his present duties as an officer
and director of Physicomp Corporation prior to the closing of the share
exchange between the Company and Physicomp Corporation.
13. Officer/Director Third-Party Contracts. The Company acknowledges
that the employment services and duties of Employee outlined in Section 3
hereof are of a full-time, Forty-hour per week nature, and nothing contained
herein shall prevent Employee from entering into any contract with any third-
party provided that any such contract shall not directly conflict with any
provision of Section 3 hereof. In the event Employee determines that a
contract between any such third-party business entity and the Company would be
mutually beneficial, Employee shall make full disclosure to the Company as to
the identity and nature of the business entity as the nature of Employee's
beneficial and/or monetary interest prior to any future negotiations between
the Company and any such third-party business entity in the event any such
contract is entered into between the Company and any such third-party business
entity, provided that Employee has made complete disclosure to the Board of
Directors of the Company.
14. Termination upon Death. If Employee should die during the term of
this Agreement, the Company will pay Employee's legal representative all sums
due and payable to Employee pursuant to the within terms and conditions as if
this Agreement has been terminated or otherwise expired by its terms.
15. Confidentiality. As an additional condition to Employee's employment
with the Company, Employee shall, concurrently with the execution of this
Agreement, execute a Confidentiality Agreement, the form of which is attached
hereto as Exhibit B.
16. Discontinuation. This Agreement shall cease and terminate if the
Company shall discontinue its business and all rights and liabilities
thereunder shall cease, except as provided in Section 15 hereof.
17. Assignment. The Company shall have the right to assign this contract
to its successors or assigns and all covenants and agreements hereunder shall
enure to the benefit of and be enforceable by or against said successors or
assigns. The terms "successor" and "assigns" shall include any corporation or
person that buys all or substantially all of the Company's assets, or a
beneficial owner of no less than twenty-five percent (25%) of the Company's
merges or consolidates, the result of which would be a change in control of
the Company.
18. Waiver. Any waiver by either party of a breach of any provision of
this Agreement shall not operate or be constructed as a waiver of any
subsequent breach thereof.
19. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of California. Any litigation arising out of this
Agreement shall be conducted in applicable courts in Los Angeles, California,
and the parties expressly agree upon and consent to such jurisdiction and
venue.
20. Amendment. This Agreement may not be amended, except in writing
and executed by the parties hereto.
21. Successors. This Agreement shall enure to the benefit of each
party's successors and assigns.
IN WITNESS WHEREOF, the Company has hereunto signed its name by its
President, and Employee has signed his name, all as of the day and year first
written above.
iMALL, Inc. Martin Rosenblatt
By: /s/ Craig Pickering /s/ Martin Rosenblatt
------------------------- ---------------------------
Craig R. Pickering
President
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<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 40,264 287,289
<SECURITIES> 0 0
<RECEIVABLES> 745,899 464,666
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<INVENTORY> 55,277 108,848
<CURRENT-ASSETS> 967,239 1,291,700
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<DEPRECIATION> 386,604 371,272
<TOTAL-ASSETS> 2,343,206 2,702,673
<CURRENT-LIABILITIES> 1,557,639 1,855,429
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0 0
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<CGS> 8,593,455 2,558,951
<TOTAL-COSTS> 16,074,143 2,103,359
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,352 17,342
<INCOME-PRETAX> 102,746 (577,968)
<INCOME-TAX> 37,928 0
<INCOME-CONTINUING> 64,818 (577,968)
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