SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
Commission File Number 0-21201
iMall, Inc.
------------
(Exact name of small business issuer as specified in its charter)
Nevada 59-2544687B
------ -----------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
1185 South Mike Jense Circle, Provo, Utah 84601
-----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(801) 373-1717
--------------
(Issuer's telephone number including area code)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes No XX
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of May 15, 1997, the Issuer had issued and outstanding an aggregate of
60,489,827 common voting shares, par value $0.001.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements of iMall, Inc. ("the Company")
for the three month period ended March 31, 1997 are attached hereto and
incorporated by reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis of the Company's financial
condition as of March 31, 1997 and the Company's results of operations for the
three month periods ended March 31, 1997 and 1996 should be read in
conjunction with the Company's unaudited financial statements and notes
thereto included elsewhere in this Form 10-QSB. These results are not
necessarily indicative of the results that may be achieved by the Company for
the entire year ending December 31, 1997.
Results of Operations
The Company operates 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,
York, Inc. ("Madison") is the only predecessor of the Company, comparisons of
historical results of operations may therefore not be meaningful.
Comparison of Three-Month Periods Ended March 31, 1997 and 1996
Revenues. 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. The 2%
decrease was due primarily to the timing of revenue recognition with respect
to maintenance fee revenue.
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 Expenses. General and administrative
expenses for the first three months of 1997 were $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., Inc. and Inter-Active Marketing Group,
Inc. 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.
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 in 1997, and bears
interest at an annual rate of 10%. The Company believes its existing cash,
along with cash expected to be 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. The Company is currently
pursuing various options for funding, including private placements of shares
of its common stock.
The Company is currently collecting $10,000 per month on a note
receivable in the original amount of $250,000, which bears interest at an
annual rate of 10%. The current amount outstanding on such note receivable is
approximately $217,500.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Securities and Exchange Commission (the "SEC") informed the
Company in June, 1996 that it was conducting an informal investigation of the
Company. The focus of that investigation appears to the Company to be (i) the
removal of restrictive legends from shares of the Company's stock prior to the
transactions which brought the current management into the Company; (ii) the
sale of shares by prior affiliates of the Company; (iii) the purchase and sale
of shares by persons that bought stock prior to the transactions which brought
the current management into the Company; and (iv) the trading activity in the
Company's stock in the first and second quarters of 1996. The SEC has
requested and received copies of documents from the Company's transfer agent
and has interviewed special outside counsel for the Company in connection with
the investigation. The Company is not aware of the current status of the
investigation and has not had any formal or informal communication with the
SEC regarding these matters since August 1996.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are attached hereto and
incorporated herewith.
Exhibit # Description
27 Financial Data Schedule
(b) No Reports on Form 8-K were filed during the quarter ended
March 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DATED this 20th day of May, 1997.
iMALL, INC.
By: /s/ Craig R. Pickering
_________________________________
Craig R. Pickering
President and Chairman of the Board
<PAGE>
<PAGE>
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
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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 287,289
<SECURITIES> 0
<RECEIVABLES> 464,666
<ALLOWANCES> 0
<INVENTORY> 108,848
<CURRENT-ASSETS> 1,291,700
<PP&E> 1,229,072
<DEPRECIATION> 371,272
<TOTAL-ASSETS> 2,702,673
<CURRENT-LIABILITIES> 1,855,429
<BONDS> 61,945
0
0
<COMMON> 60,489
<OTHER-SE> 172,310
<TOTAL-LIABILITY-AND-EQUITY> 2,702,673
<SALES> 4,078,434
<TOTAL-REVENUES> 4,078,434
<CGS> 2,558,951
<TOTAL-COSTS> 2,103,359
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,342
<INCOME-PRETAX> (577,968)
<INCOME-TAX> 0
<INCOME-CONTINUING> (577,968)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (577,968)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
