SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Amendment No. 1
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
[ ] Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-21201
iMall, Inc.
------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 59-2544687B
- --------------------------- --------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
4400 Coldwater Canyon Boulevard, Suite 200, Studio City, California 91604
- --------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(818) 509-3600
------------------------------------
(Issuer's telephone number including area code)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------------- ------------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of August 12, 1997, the Issuer had outstanding an aggregate of
60,515,296 common shares, par value $0.001.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
---------------------
The unaudited condensed consolidated financial statements of iMall,
Inc. and subsidiaries (the "Company") as of June 30, 1997 and for the three
month and six month periods ended June 30, 1997 and 1996 are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
----------------------------------------------------------
The following discussion and analysis of the Company's financial
condition as of June 30, 1997 and the Company's results of operations for the
three month and six month periods ended June 30, 1997 and 1996 should be read
in conjunction with the Company's unaudited condensed consolidated financial
statements and notes thereto included elsewhere in this Form 10-QSB. These
results are not necessarily indicative of the results that may be achieved by
the Company for the entire year ended December 31, 1997.
Results of Operations
- ---------------------
The Company acquired various entities which became part of the
consolidated group during the prior calendar year. Results of prior periods
do not reflect the current mix of the Company's operations and therefore
comparisons of historical results of operations may therefore not be
meaningful.
Comparison of Three-Month Periods Ended June 30, 1997 and 1996
- --------------------------------------------------------------
Revenues. Revenues for the three months ended June 30, 1997 were
$5,109,603 compared to $4,469,192 for the three months ended June 30, 1996.
The 14% increase was primarily due to increases in telemarketing sales of
Website and other Internet products. The Company's Internet training division
provided approximately 61% of total revenues for the three months ended June
30, 1997 compared to 78% for the three months ended June 30, 1996. The
decrease in the percentage of the Company's revenues derived from the Internet
training division was due to the introduction of telemarketing sales.
Cost of Revenues. Total direct cost of revenues for the three
months ended June 30, 1997 were $3,892,886, compared to $2,316,139 for the
three months ended June 30, 1996, an increase of 68%. This increase was due
primarily to an increase in advertising expense. The Company's marketing
efforts were expanded to include the airing of infomercials on television and
direct mail marketing in an attempt to increase attendance at the Company's
educational workshops. The 68% increase in cost of revenues compared to the
14% increase in revenues over the same period was primarily due to the fact
that the Company's increased marketing efforts did not produce increased
revenues to the same extent as the Company's expenditures. Management
believes its strategy of increasing advertising efforts in its early stages.
The Company intends to continue advertising expenditures at higher levels, and
believes that over time, these increased expenditures will lead to an increase
in revenues.
General and Administrative Expenses. General and administrative
expenses for the three months ended June 30, 1997 were $1,859,981, compared to
$1,640,460 for the three months ended June 30, 1996. This 13% increase was
due primarily to the net effect of dissolving the Company's technology
division formerly located in Woodland Hills, California and relocating the
Company's technology division to Provo, Utah. The Company also hired several
individuals for key management positions subsequent to June 30, 1996.
Other Income, net. The Company sells mailing lists to outside
vendors. This activity is considered to be peripheral to its operations. Net
other income for the three months ended June 30, 1997 was $33,467 compared to
$44,979 for the three months ended June 30, 1996. The decrease was due mainly
to the decreased sales of mailing lists.
Comparison of Six-Month Periods Ended June 30, 1997 and 1996
- ------------------------------------------------------------
Revenues. Revenues for the six months ended June 30, 1997 were
$9,188,037 compared to $8,569,343 for the six months ended June 30, 1996.
This 7% increase in revenues was primarily due to increased telemarketing
revenues. The Company's Internet training division provided approximately 68%
of total revenues for the six months ended June 30, 1997 compared to 75% for
the six months ended June 30, 1996. The decrease in the percentage of the
Company's revenues derived from the Internet training division was due to the
introduction of telemarketing sales.
Cost of Revenues. Total direct cost of revenues for the six months
ended June 30, 1997 were $6,451,837 compared to $4,673,355 for the six months
ended June 30, 1996. The 38% increase was due primarily to increased
advertising costs. The Company's marketing efforts were expanded to include
the airing of infomercials on television and direct mail marketing. The 38%
increase in cost of revenues compared to the 7% increase in revenues over the
same period was primarily due to the fact that the Company's increased
marketing efforts did not produce increased revenues to the same extent as the
Company's expenditures. Management believes its strategy of increasing
advertising efforts is in its early stages. The Company intends to continue
advertising expenditures at higher levels, and believes that over time, these
increased expenditures will lead to an increase in revenues.
General and Administrative Expenses. General and administrative
expenses for the six months ended June 30, 1997 were $4,067,579 compared to
$2,783,699 for the six months ended June 30, 1996. This 46% increase was due
primarily to the net effect of dissolving the Company's technology division
formerly located in Woodland Hills, California and relocating the Company's
technology division to Provo, Utah. The Company also hired several
individuals for key management positions subsequent to June 30, 1996.
Other Income, net. The Company sells mailing lists to outside
vendors. This activity is considered to be peripheral to its operations. Net
other income for the six months ended June 30, 1997 was $39,376 compared to
$82,885 for the six months ended June 30, 1996. The decrease was due to the
decreased sales of mailing lists, and the interest expense associated with a
loan from a stockholder.
Liquidity and Capital Resources
- -------------------------------
The Company has a working capital deficit of $1,608,477 as of June
30, 1997. Because the Company has insufficient cash and working capital, the
continuation of the Company's operations as presently constituted and the
implementation of its business plan depend substantially on its ability to
raise additional debt or equity capital. No assurance can be given that the
Company will be successful in raising sufficient capital.
The Company issued 1,230,769 shares of common stock on August 12,
1997 to certain principals of the Company's financial advisors, Geller &
Friend, in an unregistered offering exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act")
in exchange for cash in the amount of $500,000. No placement agent was
involved in the transaction and no commissions were paid.
The Company is currently generating cash receipts (exclusive of
financing activities) of approximately $1,400,000 per month, and incurring
cash expenses in the amount of approximately $1,800,000 per month, of which
fixed costs account for approximately $500,000. The Company anticipates
capital expenditures will be approximately $1,200,000 for the remainder of the
current fiscal year.
The Company is collecting $10,000 per month on a note receivable in
the original amount of $250,000, which bears interest at an annual rate of
10%. The amount outstanding on this note receivable is approximately $192,250
as of June 30, 1997.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
The Securities and Exchange Commission (the "SEC") informed the
Company in June 1996 that it was conducting an informal investigation of the
Company. The focus of the 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
---------------------
The Company issued 1,230,769 shares of common stock on August 12,
1997 to certain principals of the Company's financial advisors, Geller &
Friend, in an unregistered offering exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act")
in exchange for cash in the amount of $500,000. No placement agent was
involved in this transaction and no commissions were paid.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
On March 1, 1997, the Company defaulted on a loan from a
stockholder, which was secured by certain assets of the Company. Upon
default, all outstanding principal and interest became immediately due. Any
outstanding principal balance subsequent to March 1, 1997 bears interest at 13
percent.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
---------------------------------
(a) The following exhibits are attached hereto and incorporated
herewith.
Exhibit # Description
- --------- -----------
27 Financial Data Schedule
(b) The Company filed reports on Form 8-K on June 20, 1997, and
July 14, 1997.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED as of this 6th day of February, 1998.
iMALL, INC.
By:/s/ Richard M. Rosenblatt
-----------------------------
Richard Rosenblatt
Chairman of the Board, Chief Executive
Officer
By:/s/ Mark R. Comer
-------------------------------
Mark R. Comer
President, Director
By:/s/ Anthony P. Mazzarella
--------------------------------
Anthony P. Mazzarella
Executive Vice President, Chief Financial
Officer, Secretary/Treasurer, Director
iMALL, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
Assets
--------
As of June 30, 1997
(Unaudited)
--------------
Current Assets:
Accounts receivable - trade, net $ 105,906
Current portion of note receivable 141,167
Income tax receivable 276,940
Inventory 214,516
Prepaid expenses 203,086
Deferred income tax asset 163,715
Other current assets 12,700
--------------
Total Current Assets 1,118,030
--------------
Property and Equipment, Net 864,265
---------------
Other Assets:
Goodwill, net 157,373
Note receivable, net of current portion 51,083
Deposits 15,701
Organization costs, net 1,168
---------------
Total Other Assets 225,325
---------------
Total Assets $ 2,207,620
===============
Liabilities and Stockholders' Deficit
--------------------------------------
Current Liabilities:
Bank overdraft $ 73,654
Current portion of notes payable to related parties 105,082
Current portion of capitalized lease obligations 32,795
Note payable 500,000
Accounts payable 857,227
Accrued payroll 232,124
Accrued royalties 96,030
Accrued interest payable to related party 48,017
Other accrued liabilities 314,100
Deferred revenue 467,478
---------------
Total Current Liabilities 2,726,507
---------------
Notes Payable to Related Parties, net of current portion 40,000
---------------
Capitalized Lease Obligations, net of current portion 19,170
---------------
Stockholders' Deficit:
Common stock, par value $.001; 300,000,000
shares authorized, 59,284,527 shares outstanding 59,284
Additional paid-in capital 610,375
Accumulated deficit (1,247,716)
----------------
Total Stockholders' Deficit (578,057)
----------------
Total Liabilities and Stockholders' Deficit $ 2,207,620
================
See notes to condensed consolidated financial statements.
IMALL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
------------------------------- ----------------------------
June 30, 1997 June 30,1996 June 30, 1997 June 30, 1996
--------------- -------------- -------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 5,109,603 $ 4,469,192 $ 9,188,037 $ 8,569,343
COST OF REVENUES 3,892,886 2,316,139 6,451,837 4,673,355
-------------- ------------- -------------- -------------
GROSS MARGIN 1,216,717 2,153,053 2,736,200 3,895,988
GENERAL AND ADMINISTRATIVE EXPENSES 1,859,981 1,640,460 4,067,579 2,783,699
-------------- ------------- -------------- -------------
Operating Income (Loss) (643,264) 512,593 (1,331,379) 1,112,289
--------------- ------------- -------------- -------------
OTHER INCOME AND EXPENSES
Other Income, net 51,063 47,221 68,671 87,391
Interest Expense, net (17,596) (2,242) (29,295) (4,506)
--------------- ------------- -------------- -------------
Total Other Income, net 33,467 44,979 39,376 82,885
--------------- ------------- -------------- -------------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (609,797) 557,572 (1,292,003) 1,195,174
--------------- ------------- -------------- -------------
PROVISION FOR INCOME TAXES - 205,825 - 441,191
--------------- ------------- -------------- -------------
NET INCOME (LOSS) $ (609,797) $ 351,747 $ (1,292,003) $ 753,983
=============== ============= ============== =============
NET INCOME (LOSS) PER COMMON SHARE $ (0.01) $ 0.01 $ (0.02) $ 0.01
=============== ============= ============== =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 59,284,527 59,760,817 59,284,527 57,181,086
=============== ============= ============== =============
</TABLE>
See notes to condensed consolidated financial statements
iMALL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended
June 30, 1997 June 30, 1996
--------------- ----------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (1,292,003) $ 753,983
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 258,601 89,334
Non-cash expense related to issuance of
share of common stock for services - 28,000
Provision for losses on accounts
receivable 18,621 28,835
Loss on disposal of property and
equipment 1,236 -
Deferred income taxes - (91,838)
Changes in assets and liabilities,
net of effects from purchases of subsidiaries:
Increase in accounts receivable (24,025) (559,478)
Decrease in related party receivable 85,521 -
Decrease in employee receivable 14,536 -
Increase in inventory (159,239) (78,987)
Increase in prepaid expenses (73,126) (22,067)
Increase in other current assets (12,700) -
Decrease in deposits 7,125 2,530
Increase in accounts payable 189,801 180,636
Increase in accrued liabilities 299,581 143,544
Increase in interest payable to related
party 35,258 2,418
(Decrease)Increase in income tax payable (41,068) 256,216
Increase in deferred revenue 131,303 247,982
--------------- ----------------
Net Cash Provided by(used in)
Operating Activities (560,578) 981,108
--------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received from acquisition of
subsidiaries - 110,350
Payments received on notes receivable 49,750 -
Purchase of property and equipment (70,978) (375,494)
--------------- ----------------
Net Cash Used in Investing Activities (21,228) (265,144)
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdraft 73,654 -
Proceeds from issuance of note payable 500,000 -
Principal payment on note payable (12,500) (12,500)
Principal payments on obligations
under capital leases (19,612) (3,875)
--------------- ----------------
Net Cash Provided by (Used In)
Financing Activities 541,542 (16,375)
--------------- ----------------
Increase (Decrease)in Cash (40,264) 699,589
CASH AT BEGINNING OF PERIOD 40,264 41,696
--------------- ----------------
CASH AT END OF PERIOD $ - $ 741,285
=============== ================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 39,822 $ 2,324
=============== ==============
iMALL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Interim Condensed Consolidated Financial Statements
----------------------------------------------------
The accompanying condensed consolidated financial statements have been
prepared by the Company without audit. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows as of the
dates and for the periods presented herein have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Form 10-SB, as amended. The results of operations for the three months and
six months ended June 30, 1997, are not necessarily indicative of the
operating results for the year ended December 31, 1997. The accounting
policies followed by the Company are set forth in the notes to the Company's
consolidated financial statements in its Form 10-SB, as amended.
(2) Net Income (Loss) Per Common Share
----------------------------------
Net income (loss) per common share is based on the weighted average
number of common shares outstanding for each period reported. Stock options
and warrants prior to conversion are not included in the calculation of any
loss per Common Share because their inclusion would be antidilutive, thereby
reducing the net loss per common share (see Note 5).
(3) Goodwill
---------
On April 26, 1996, the Company acquired e.m.a.N.a.t.e., Inc.
("e.m.a.N.a.t.e."), a company specializing in information systems, Internet
consulting and front-page creations for web sites on the Internet, in a
business combination accounted for as a purchase. The Company issued
1,600,000 shares of common stock at $.10 per share, which was the fair value
as determined by the Company's Board of Directors, for all of the outstanding
stock of e.m.a.N.a.t.e. The acquisition resulted in the Company recording
goodwill of $224,507. The Company is amortizing goodwill over a five-year
period.
On March 5, 1996, the Company acquired Inter-Active Marketing Group, Inc.
("IMG"), a company specializing in yellow page advertising on the Internet, in
a business combination accounted for as a purchase. The Company issued
1,634,800 shares of common stock (of which 1,214,300 shares were held in
escrow contingent on specified events occurring in the future, which shares
have subsequently been returned to treasury and retired) 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 the
Company recording negative goodwill of $(19,410). The Company is amortizing
negative goodwill over a five-year period.
(4) Prepaid Expenses
------------------
Prepaid expenses as of June 30, 1997 consisted of the following:
Prepaid mailing lists $ 47,941
Prepaid postage and related costs 65,275
Prepaid radio advertising 27,840
Prepaid trade shows 33,668
Prepaid other 28,362
---------
$ 203,086
(5) Recent Accounting Pronouncement
--------------------------------
In February 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS No.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 No.128
simplifies the standards for computing EPS in comparison to Accounting
Principles Board Opinion No. 15 and replaces the presentations of Primary EPS
and Fully Diluted EPS with a presentation of Basic EPS and Diluted EPS.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 601,496
<ALLOWANCES> (26,400)
<INVENTORY> 214,516
<CURRENT-ASSETS> 1,118,030
<PP&E> 1,387,317
<DEPRECIATION> (523,052)
<TOTAL-ASSETS> 2,207,620
<CURRENT-LIABILITIES> 2,726,507
<BONDS> 0
0
0
<COMMON> 59,284
<OTHER-SE> (637,341)
<TOTAL-LIABILITY-AND-EQUITY> 2,207,620
<SALES> 9,188,037
<TOTAL-REVENUES> 9,188,037
<CGS> 6,451,837
<TOTAL-COSTS> 10,519,416
<OTHER-EXPENSES> (68,671)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,295
<INCOME-PRETAX> (1,292,003)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,292,003)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,292,003)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
