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 March 31, 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 No X
------------------ -------------
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 outstanding an aggregate of 59,284,527
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 March 31, 1997 and for the three month
periods ended March 31, 1997 and 1996 are attached hereto.
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 condensed consolidated financial statements and notes
thereto included elsewhere in this Form 10-QSB. These results are not
necessarily indicative of the results that may be achieved by the Company for
the entire year ending December 31, 1997.
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 March 31, 1997 and 1996
- ---------------------------------------------------------------
Revenues. Revenues for the three months ended March 31, 1997 were
$4,078,434 compared to $4,100,151 for the three months ended March 31, 1996.
Operations were relatively consistent between the two years, with the
Company's seminar division providing nearly 75% of total revenues each year.
Cost of Revenues. Total direct cost of revenues for the three
months ended March 31, 1997 were $2,558,951, compared to $2,357,216 for the
three months ended March 31, 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 three months ended March 31, 1997 were $2,207,598, compared
to $1,143,239 for the three months ended March 31, 1996. This 93% 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 management positions, including
Chief Executive Officer, Vice President of Marketing and Vice President of
Technology.
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 March 31, 1997 was $5,909 compared to
$37,906 for the three months ended March 31, 1996. The decrease was due
mainly to the decreased sales of mailing lists.
Liquidity and Capital Resources
- ---------------------------------
On January 2, 1997, a stockholder 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.
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 believes its
existing cash, along with cash expected to be provided by ongoing operating
activities and other funding options currently being pursued, including
private placement of its common stock, will be sufficient to finance its cash
requirements for at least the next twelve months.
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 amount outstanding on this note receivable is
approximately $217,500 as of March 31, 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
---------------------
None.
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) 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 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 AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
Assets
------
As of March 31,1997
-------------------
(Unaudited)
Current Assets:
Cash $ 287,289
Accounts receivable- trade, net 192,751
Current portion of note receivable 127,500
Income tax receivable 276,940
Inventory 108,848
Prepaid expenses 238,851
Deferred income tax asset 163,715
--------------
Total Current Assets 1,395,894
--------------
Property and Equipment, Net 927,501
---------------
Other Assets:
Goodwill, net 167,781
Note receivable, net of current portion 90,000
Deposits 28,331
Organization costs, net 1,282
---------------
Total Other Assets 287,394
---------------
Total Assets $ 2,610,789
===============
Liabilities and Stockholders' Equity
--------------------------------------
Current Liabilities:
Current portion of notes payable to
related parties $ 105,082
Current portion of capitalized lease obligations 38,396
Note payable to stockholder 500,000
Accounts payable 827,082
Accrued payroll 244,892
Accrued royalties 96,030
Accrued interest payable to related party 27,509
Other accrued liabilities 277,957
Deferred revenue 398,552
---------------
Total Current Liabilities 2,515,500
---------------
Notes Payable to Related Parties, net of current portion 40,000
---------------
Capitalized Lease Obligations, net of current portion 23,549
---------------
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
Accumulated Deficit (637,919)
----------------
Total Stockholders' Equity 31,740
----------------
Total Liabilities and Stockholders'
Equity $ 2,610,789
================
See notes to condensed consolidated financial statements.
iMALL, INC. AND SUBSIDIARIES.
Condensed Consolidated Statements of Operations
For the Three Months Ended
--------------------------------
March 31, 1997 March 31, 1996
--------------- ---------------
(Unaudited) (Unaudited)
REVENUES $ 4,078,434 $ 4,100,151
COST OF REVENUES 2,558,951 2,357,216
--------------- ---------------
GROSS MARGINS 1,519,483 1,742,935
GENERAL AND ADMINISTRATIVE EXPENSES 2,207,598 1,143,239
--------------- ----------------
Operating Income(Loss) (688,115) 599,696
--------------- ---------------
OTHER INCOME AND EXPENSES:
Other Income, net 17,608 40,170
Interest Income (Expense), net (11,699) (2,264)
--------------- ----------------
Total Other Income, net 5,909 37,906
--------------- ----------------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES (682,206) 637,602
PROVISION FOR INCOME TAXES - 235,366
--------------- ---------------
NET INCOME (LOSS) $ (682,206) $ 402,236
=============== ================
NET INCOME (LOSS) PER COMMON SHARE $ (0.01) $ 0.01
=============== ================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 59,284,527 54,572,704
=============== ================
See notes to condensed consolidated financial statements.
iMALL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended
--------------------------------
March 31, 1997 March 31, 1996
-------------- ---------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (682,206) $ 402,236
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 131,131 11,908
Noncash expense related to issuance of
shares of common stock for services - 28,000
Provision for losses on accounts receivable 8,288 28,835
Loss on sale of equipment, furniture, fixtures 1,236 -
Deferred income taxes - (28,335)
Changes in assets and liabilities, net of
effects from purchase of subsidiaries:
Increase in accounts receivable (100,537) (597,382)
Decrease in related-party receivable 85,521 -
Decrease in employee receivable 14,536 -
(Increase) Decrease in prepaid expenses (108,891) 54,475
(Increase)in inventory (53,571) (29,883)
Increase in deposits (5,505) -
Increase (Decrease) in accounts payable 159,656 (151,674)
Increase in accrued liabilities 276,206 326,646
Increase in accrued interest payable to
related party 14,750 -
(Decrease) Increase in income
tax payable (41,068) 257,880
Increase in deferred revenues 62,377 53,827
--------------- --------------
Net Cash Provided by(Used in)
Operating Activities (238,077) 356,533
--------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received from acquisition of
subsidiaries - 78,387
Cash collections on notes receivable 24,500 -
Purchase of property and equipment (17,266) (103,110)
--------------- ----------------
Net Cash Provided by
Investing Activities 7,234 (24,723)
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes
payable to stockholder 500,000 -
Principal payment on notes payable (12,500) -
Principal payments on obligations under
capital leases (9,632) 6,833
--------------- ----------------
Net Cash Provided by Financing Activities 477,868 6,833
--------------- ----------------
INCREASE IN CASH 247,025 338,643
CASH AT BEGINNING OF PERIOD 40,264 41,696
--------------- ----------------
CASH AT END OF PERIOD $ 287,289 $ 380,339
=============== ==================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 17,342 $ 2,324
=============== ================
See notes to condensed consolidate financial statements
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 ended
March 31, 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. In accordance with Accounting
Principles Board No. 16, the contingent shares have not been accounted for in
the purchase accounting, but will be recorded if and when the contingency is
resolved. The acquisition resulted in the Company recording negative goodwill
of $(19,410). The Company is amortizing the resulting negative goodwill over
a five- year period.
(4) Prepaid Expenses.
-----------------
Prepaid expenses as of March 31, 1997 consisted of the following:
Prepaid mailing lists $ 48,609
Prepaid postage and related costs 71,127
Prepaid radio advertising 53,897
Prepaid trade shows 50,500
Prepaid other 14,718
--------
$ 238,851
(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 APB Opinion
No. 15 and replaces the presentations of Primary EPS and Fully Diluted EPS
with a presentation of Basic EPS and Diluted EPS.
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<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> 713,591
<ALLOWANCES> (26,400)
<INVENTORY> 108,848
<CURRENT-ASSETS> 1,395,894
<PP&E> 1,350,832
<DEPRECIATION> (423,331)
<TOTAL-ASSETS> 2,610,789
<CURRENT-LIABILITIES> 2,515,500
<BONDS> 0
0
0
<COMMON> 59,284
<OTHER-SE> (27,544)
<TOTAL-LIABILITY-AND-EQUITY> 2,610,789
<SALES> 4,078,434
<TOTAL-REVENUES> 4,078,434
<CGS> 2,558,951
<TOTAL-COSTS> 4,766,549
<OTHER-EXPENSES> (17,608)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,699
<INCOME-PRETAX> (682,206)
<INCOME-TAX> 0
<INCOME-CONTINUING> (682,206)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (682,206)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
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