<PAGE>
REGISTRATION NO. 333-92555
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICA'S SHOPPING MALL, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 5961 13-4045313
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
<TABLE>
<S> <C>
SHERBROOK OFFICE CENTER I SHERBROOK OFFICE CENTER I
600 EAST CRESCENT AVENUE 600 EAST CRESCENT AVENUE
UPPER SADDLE RIVER, NEW JERSEY 07458 UPPER SADDLE RIVER, NEW JERSEY 07458
(201) 934-2100 (ADDRESS OF PRINCIPAL PLACE OF BUSINESS
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) OR INTENDED PRINCIPAL PLACE OF BUSINESS)
</TABLE>
------------------------
<TABLE>
<S> <C>
With a copy to:
IRWIN SCHNEIDMILL PETER B. TISHE
SHERBROOK OFFICE CENTER I EMMET, MARVIN & MARTIN, LLP
600 EAST CRESCENT AVENUE 120 BROADWAY
UPPER SADDLE RIVER, NEW JERSEY 07458 NEW YORK, NEW YORK 10271
(201) 934-2100 (212) 238-3000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
</TABLE>
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
NUMBER OF MAXIMUM OFFERING PROPOSED
TITLE OF EACH CLASS UNITS TO PRICE PER MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED BE REGISTERED UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per share........... 2,839,129(2) $ 5.00(3) $14,195,645 $ 3,747.65
Common Stock, par value $0.001 per share........... 1,239,000(4) $ 3.50(5) $ 4,336,500 $ 1,144.84
Common Stock, par value $0.001 per share........... 1,100,000(6) $ 4.50(7) $ 4,950,000 $ 1,306.80
Common Stock, par value $0.001 per share........... 500,000(8) $ 6.00(5) $ 3,000,000 $ 792.00
Totals............................................. $ $ 6,991.29
Paid with original filing.................................................................................. $ 3,839.66
Paid herewith.............................................................................................. $ 3,151.63
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Shares of common stock issued and outstanding.
(3) Based on the average of the bid and asked prices of the common stock during
the period from July 19, 1999 through July 30, 1999.
(4) Issuable upon conversion of 10,325 shares of Series A senior convertible
preferred stock.
(5) Based on the conversion price per share.
(6) Issuable upon exercise of 1,100,000 warrants.
(7) Based on the maximum exercise price per share.
(8) Issuable upon conversion of $3,000,000 principal amount of convertible
debentures.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 19, 2000
PROSPECTUS
5,678,129 SHARES
AMERICA'S SHOPPING MALL, INC.
COMMON STOCK
------------------------
This prospectus may be delivered by holders of our common stock in
connection with offers and sales of their shares. At the date of this
prospectus, 2,839,129 shares of our common stock were outstanding and 2,839,000
shares were reserved for issuance upon exercise of warrants or upon conversion
of certain convertible securities held by these shareholders. We are not
offering any shares for sale and we will not receive any proceeds from the sale
of any of our shares by our shareholders.
We have applied to have our shares approved for listing on the OTC Bulletin
Board with the symbol "AMMA."
------------------------
We have not been advised by our shareholders of any plans that they may
have to offer or sell any of the shares covered by this prospectus. We
anticipate that our shareholders may sell their shares from time to time
primarily in transactions (which may include block transactions) in the
over-the-counter market at the market price then prevailing. However,
shareholders may also make sales in negotiated transactions or otherwise.
INVESTING IN OUR SHARES INVOLVES RISKS. CONSIDER CAREFULLY THE "RISK
FACTORS" BEGINNING ON PAGE 2.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
PROSPECTUS DATED , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary......................................................................................... 1
Risk Factors............................................................................................... 2
Because we only recently acquired four businesses, we may not be able to successfully integrate them..... 2
We have a history of operating losses and we expect these losses to continue at least for the near
future................................................................................................ 2
Because of our product lines, our business is more seasonal than most catalog and
internet retailers.................................................................................... 2
We face substantial competition which could result in pricing pressures, increased marketing expenditures
and loss of market share.............................................................................. 2
Increases in costs of paper and postage may adversely impact our operating margins....................... 2
Any significant increase in our rate of merchandise returns will have a material effect on
our results........................................................................................... 2
We may lose customers if our third-party shippers fail to deliver our products in a timely manner........ 2
Because we are dependent on computer systems, a systems failure could cause a significant disruption to
our business.......................................................................................... 2
Our use of certain internet processes and technologies may subject us to claims for royalties or suits
for patent infringement............................................................................... 2
Our common stock is traded in an illiquid market, which substantially increases your risk of loss........ 3
A few shareholders control a majority of our voting stock, which could lead to
conflicts of interest................................................................................. 3
Forward Looking Statements................................................................................. 3
Use of Proceeds............................................................................................ 3
Dividend Policy............................................................................................ 3
Market for Common Stock.................................................................................... 5
Summary Financial Information.............................................................................. 6
Management's Discussion and Analysis....................................................................... 7
Business................................................................................................... 9
Management................................................................................................. 17
Indemnification of Directors and Officers.................................................................. 18
Executive Compensation..................................................................................... 20
Security Ownership of Certain Beneficial Owners and Management............................................. 20
Certain Relationships and Related Transactions............................................................. 23
Description of Capital Stock............................................................................... 25
Sales by Shareholders...................................................................................... 28
Legal Matters.............................................................................................. 30
Experts.................................................................................................... 30
Where You Can Find Additional Information.................................................................. 30
Index to Financial Statements.............................................................................. F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information from this document. For a more
complete description of the offering and America's Shopping Mall, you should
carefully read this entire document, including the "Risk Factors" and the
financial statements.
AMERICA'S SHOPPING MALL
We are primarily a specialty catalog and online retailer and direct
marketer of men's and women's leather clothing, footwear and accessories,
household goods, jewelry and gift items and specialty office products. We also
conduct a specialty advertising and promotional products business. We sell goods
through three distinct print and internet catalogs.
Two of our catalogs have been in business for decades. Our Deerskin catalog
operation has been supplying fine leather goods and apparel since 1944. Joan
Cook, our gifts, jewelry and houseware catalog was founded in 1956. Our third
catalog, Remarkable Office Products, was founded in 1982 as a supplier of
specialized office products featuring time management and organizational tools.
All three of these catalogs now have an on-line store on the internet.
Our three internet catalog stores can be found at our "virtual" shopping
mall, www.americasshoppingmall.com. This web site links together the three
catalog web sites in a single convenient location in order to expand our
customers' options and enhance their convenience of purchasing.
Our principal executive offices are located at 600 East Crescent Avenue,
Upper Saddle River, New Jersey 07458. Our telephone number there is
(201) 934-2100.
The Deerskin and Joan Cook names and logos are trademarks of America's
Shopping Mall, Inc.
Unless this prospectus states otherwise, all information concerning our
common stock reflects a 30-to-one reverse split in July 1999.
SHARES COVERED
Various of our shareholders may offer for sale up to 5,678,129 shares of
our common stock which either have been previously issued or are issuable upon
the exercise of warrants or upon conversion of convertible debentures or
convertible preferred stock also previously issued by us. The selling
shareholders may sell all or part of their shares pursuant to this prospectus.
We will not receive any proceeds from any sales of shares by our shareholders.
We may, however, receive between $4,400,000 and $4,950,000 in the event that all
the warrants held by certain shareholders are exercised.
1
<PAGE>
RISK FACTORS
BECAUSE WE ONLY RECENTLY ACQUIRED FOUR BUSINESSES, WE MAY NOT BE ABLE TO
SUCCESSFULLY INTEGRATE THEM.
Our predecessor company, Advanced Medical Sciences, was dormant between
1995 and May 1999. In May 1999 we acquired three operating catalog businesses
and an advertising specialty company. Our efforts to integrate the operations of
these businesses are straining our management and financial resources.
WE HAVE A HISTORY OF OPERATING LOSSES AND WE EXPECT THESE LOSSES TO CONTINUE AT
LEAST FOR THE NEAR FUTURE.
We have incurred a net loss of $2,026,620 (including losses of $573,652
from securities trading) for the nine months ended January 31, 2000. As of
January 31, 2000, our accumulated deficit was approximately $7.6 million. We
expect our costs to increase as we continue the process of moving and
consolidating our various facilities and personnel. If we do not become
profitable, we may not be able to meet our debt service or working capital
requirements.
BECAUSE OF OUR PRODUCT LINES, OUR BUSINESS IS MORE SEASONAL THAN MOST CATALOG
AND INTERNET RETAILERS.
Our Deerskin catalog, which accounts for approximately three-quarters of
our revenues, specializes in leather coats, jackets, gloves and hats. These
items are sold principally during the fall and early winter. Our Remarkable
Products catalog specializes in calendars and planners, which are sold mainly
toward the end of the calendar year and before the beginning of the school year.
The highly seasonal nature of our products, coupled with the seasonal nature of
the catalog retail industry, creates a larger than usual seasonal effect on our
quarterly results of sales and earnings.
WE FACE SUBSTANTIAL COMPETITION, WHICH COULD RESULT IN PRICING PRESSURES,
INCREASED MARKETING EXPENDITURES AND LOSS OF MARKET SHARE.
Our competitors include large retail stores, including some with catalog
operations, other catalog and direct marketing companies and internet retailers.
Many of our competitors are larger and have more resources than we have.
INCREASES IN COSTS OF PAPER AND POSTAGE MAY ADVERSELY IMPACT OUR OPERATING
MARGINS.
Paper and postage are significant components of our operating costs. Paper
prices historically have been volatile, while postage rates have increased
periodically in recent years. We cannot assure you that we will be able to pass
on our increased costs to our customers.
ANY SIGNIFICANT INCREASE IN OUR RATE OF MERCHANDISE RETURNS WILL HAVE A MATERIAL
EFFECT ON OUR RESULTS.
We have established an allowance for merchandise returns based on
historical return rates. We cannot assure you that our merchandise returns will
not exceed our reserves.
WE MAY LOSE CUSTOMERS IF OUR THIRD-PARTY SHIPPERS FAIL TO DELIVER OUR PRODUCTS
IN A TIMELY MANNER.
Our product distribution relies on third-party delivery services, primarily
the United States Postal Service and to a lesser extent Federal Express and
United Parcel Service. Strikes and other interruptions may delay the timely
delivery of customer orders, and customers may refuse to purchase our products
or demand refunds for merchandise ordered because of our inability to deliver
goods promptly.
BECAUSE WE ARE DEPENDENT ON COMPUTER SYSTEMS, A SYSTEMS FAILURE COULD CAUSE A
SIGNIFICANT DISRUPTION TO OUR BUSINESS.
Our business depends on the efficient and uninterrupted operation of our
computer and communications systems. Any systems interruptions that cause
malfunctions or result in slower response times could result in losses of data
and customer orders. We do not presently have a formal disaster recovery plan
and our insurance may not be sufficient to cover losses from these events.
OUR USE OF CERTAIN INTERNET PROCESSES AND TECHNOLOGIES MAY SUBJECT US TO CLAIMS
FOR ROYALTIES OR SUITS FOR PATENT INFRINGEMENT.
Our internet web site is designed to permit customers to select products
from all three of our on line stores and purchase and pay for their selections
in a single transaction. Many persons are now asserting intellectual property
rights in various internet commerce processes and technologies. We have not
received any notice of any claim of infringement. However, if an infringement
claim were made against us, it could adversely affect our business.
2
<PAGE>
OUR COMMON STOCK IS TRADED IN AN ILLIQUID MARKET, WHICH SUBSTANTIALLY INCREASES
YOUR RISK OF LOSS.
Our stock prices are reported on the OTC Bulletin Board. Trading in our
stock frequently is sporadic and the volume of shares traded often is light.
Because of the limited trading market for our common stock, and because of the
possible price volatility, you may not be able to sell your shares of common
stock when you desire to do so.
A FEW SHAREHOLDERS CONTROL A MAJORITY OF OUR VOTING STOCK, WHICH COULD LEAD TO
CONFLICTS OF INTEREST.
Our current chief executive officer owns approximately 18% of our
outstanding common stock and several other shareholders own or have voting
control over a substantial majority of our outstanding shares of common stock.
Accordingly, these individuals have the ability to control the election of our
directors. This concentration of ownership may also have the effect of delaying,
deterring or preventing a change in control.
FORWARD LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of
section 27A of the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934. We intend the forward-looking statement to be covered by
the safe harbor provisions for forward-looking statements in these sections. All
statements regarding our expected financial position and operating results, our
business strategy, our financing plans, our future capital requirements,
forecasted trends relating to our industry, our ability to integrate our recent
business acquisitions and to realize anticipated cost savings and other benefits
from these acquisitions, and similar matters are forward-looking statements.
These statements are subject to known and unknown risks, uncertainties and other
factors that could cause our actual results to differ materially from the
statements in this prospectus. The forward-looking information is based on
various factors and was derived using numerous assumptions. In some cases, you
can identify these statements by our use of forward-looking words such as "may,"
"will," "should," "anticipate," "estimate," "expect," "plan," "believe,"
"predict," "potential," "project" or "intend." You should be aware that these
statements only reflect our expectations of future events, based on the
information we had available to us when this prospectus was published. Actual
events or results may be materially different than our predictions. Important
factors that could cause our actual results to be materially different from our
expectations include those discussed in this prospectus under the caption "Risk
Factors." We do not undertake to update or revise publicly any forward-looking
statements contained in this prospectus to reflect new information or future
events.
USE OF PROCEEDS
We are not offering any shares of our common stock for sale, and we will
not receive any proceeds from the sale of shares of our common stock by our
shareholders. We may, however, receive between $4,400,000 and $4,950,000 in the
event that all the warrants held by certain shareholders are exercised. Should
the warrant holder exercise its warrants, we expect to use those proceeds for
working capital.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
intend to retain any earnings for use in the operation and expansion of our
business. This policy, and the other restrictions described below, make it
highly unlikely that we will pay any cash dividends in the foreseeable future.
We have outstanding preferred stock that requires us to declare and pay
dividends of approximately $84,000 every quarter. The holders of our outstanding
preferred stock are entitled to receive all accrued unpaid dividends before we
can pay any dividends on our common stock. In addition to the terms of our
outstanding preferred stock, it is anticipated that the terms of future debt
3
<PAGE>
and/or equity financings may further restrict the payment of cash dividends.
We paid all accrued dividends that accrued on our preferred stock through
December 31, 1999 in cash. However, at March 31, 2000 we did not have funds
available under Nevada law for the payment of cash dividends on our preferred
stock. As permitted by Nevada law and the terms of our preferred stock, we paid
the dividend due on March 31, 2000 by issuing 325 additional shares of Series A
Senior Convertible Preferred Stock to Pioneer Ventures Associates Limited
Partnership, the holder of all of the preferred stock. See "Description of
Capital Stock" for more information concerning the terms applicable to the
issuance of these shares in place of cash dividends.
4
<PAGE>
MARKET FOR COMMON STOCK
The following table lists the high and low closing bid and asked prices for
our common stock for the periods indicated, as reported by the National
Quotation Bureau LLC. Such quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not necessarily represent
actual transactions.
The market price information given below is presented to comply with SEC
disclosure requirements. However, quotations for periods before May 1999 reflect
limited and sporadic trading in the stock of our predecessor company during a
period when it was dormant and had no operating business or revenues. Stock
price quotations published for dates following the acquisitions of our new
businesses in May 1999 and the subsequent reincorporation and reverse stock
split described in this prospectus have appeared without the benefit of any
publicly available information concerning America's Shopping Mall. Consequently,
the prices shown in the following table are not a meaningful record of the past
market value of our common stock or a reliable indication of prices to be
expected in the future.
The quotations given in the table are composites which give effect to the
following events:
o For periods up to July 16, 1999, the quotations relate to the common
stock of our predecessor, Advanced Medical Sciences, which was listed on
the OTC Bulletin Board operated by NASDAQ under the trading symbol
"AMDS."
o Effective July 19, 1999, the trading symbol of our common stock was
changed to "AMMA" due to the merger of Advanced Medical Sciences into
America's Shopping Mall. The merger resulted in each shareholder of
Advanced Medical Sciences receiving one one-thirtieth (1/30) of a share
of America's Shopping Mall common stock for every one share of Advanced
Medical Sciences common stock held by the shareholder on the date of the
merger. All quotations for periods before July 16, 1999, have been
adjusted to reflect this 30-to-one reverse split.
o On August 3, 1999, our common stock was delisted from the OTC Bulletin
Board. Quotations for the period from August 2, 1999 through October 29,
1999 have appeared in the "pink sheets" published by the National
Quotation Bureau.
We expect that after the date of this prospectus our common stock will
again be quoted on the OTC Bulletin Board under the trading symbol "AMMA."
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASKED
----------------- -----------------
PERIOD HIGH LOW HIGH LOW
- ------------------------------------------------------------------------ ------- ------ ------- ------
<S> <C> <C> <C> <C>
Fiscal Year Ended April 30, 1998:
First Quarter......................................................... $2.40 $1.875 $3.75 $3.30
Second Quarter........................................................ 1.875 1.875 3.30 2.25
Third Quarter......................................................... 1.875 1.875 2.40 2.25
Fourth Quarter........................................................ 1.875 1.875 2.40 2.40
Fiscal Year Ended April 30, 1999:
First Quarter......................................................... 1.50 1.20 1.80 1.50
Second Quarter........................................................ 1.20 1.20 1.80 1.80
Third Quarter......................................................... 1.20 1.20 1.80 1.80
Fourth Quarter........................................................ 6.90 1.20 8.40 1.80
Fiscal Year Ending April 30, 2000:
May 3, 1999--Jul. 16, 1999............................................ 6.5625 3.750 6.5625 5.10
Jul. 19, 1999--Jul. 30, 1999.......................................... 5.00 3.625 6.00 5.375
Aug. 2, 1999--Oct. 29, 1999........................................... 5.00 4.00 7.00 5.00
Nov. 1, 1999--Jan. 31, 2000........................................... 6.00 3.75 8.00 4.50
Feb. 1, 2000--Mar. 31, 2000........................................... 6.00 6.00 8.00 8.00
</TABLE>
5
<PAGE>
At April 30, 2000, there were approximately 96 holders of record of our
common stock. Based on information furnished by brokers and other nominees, we
estimate that there are approximately 59 additional beneficial owners of our
common stock.
SUMMARY FINANCIAL INFORMATION
The following table presents, for the periods and dates indicated, summary
historical and pro forma financial data and other data of America's Shopping
Mall. The pro forma statement of operations and balance sheet for the year ended
April 30, 1999 gives effect to the acquisition of Creadis Promotions, Inc.
Dynamic Products Corp. and Subsidiary and the Deerskin and Joan Cook catalog
businesses (all of which were consummated in May 1999) as if they had been
consolidated at May 1, 1998.
The pro forma adjustments also give effect to the purchase by Pioneer
Ventures Associates Limited Partnership of 10,000 preferred shares of America's
Shopping Mall for $4,200,000.
This information should be read in conjunction with "Management's
Discussion and Analysis" the Pro Forma Unaudited Condensed Financial Statements
and the notes thereto, and the other financial statements and notes thereto
included elsewhere herein.
The pro forma data set forth below is not necessarily indicative of what
the actual results of operations or balance sheet would have been had the
transactions occurred at the dates referred to above, nor do they purport to
indicate the results of future operations.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------------ NINE
MONTHS
HISTORICAL PRO FORMA ENDED
--------------------- ----------- JANUARY 31,
1998 1999 1999 2000
-------- --------- ----------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue........................................... $ -- $ -- $12,050,155 $10,908,415
Cost of merchandise sold................................ -- -- 4,811,660 5,198,824
-------- --------- ----------- -----------
Selling, general and administrative expenses............ (7,714) (118,040) 8,731,336 5,709,591
Operating loss.......................................... (7,714) (118,040) (1,492,841) (1,100,679)
Interest expense........................................ -- -- 550,730 396,582
Net loss before other loss.............................. (7,714) (118,040) (2,043,571) (1,497,261)
Other loss, net......................................... -- -- -- (529,359)
-------- --------- ----------- -----------
Net loss................................................ $ (7,714) $(118,040) $(2,043,571) $(2,026,620)
======== ========= =========== ===========
Net loss per share...................................... $ (.01) $ (.14) $ (.88) $ (.88)
======== ========= =========== ===========
Weighted average number of common stock outstanding..... 822,573 836,751 2,320,906 2,292,797
</TABLE>
<TABLE>
<CAPTION>
APRIL 30,
------------------------------------
HISTORICAL PRO FORMA
--------------------- ----------- JANUARY 31,
1998 1999 1999 2000
-------- --------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................ -- -- $ 1,590,223 $ 685,777
Working capital.......................................... -- $ 122,978 3,412,930 978,515
Total assets............................................. -- 206,509 6,867,424 5,965,112
Short-term borrowings.................................... -- -- 420,690 296,940
Total long-term debt, including current maturities....... -- -- 5,619,598 5,104,119
Total stockholders' equity (deficit)..................... -- 179,487 377,536 (1,649,397)
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the financial
information included elsewhere in this prospectus. It contains forward-looking
statements that involve numerous assumptions and uncertainties and may be
affected unforeseen and events, including changes in business and economic
conditions. Our actual results may differ materially from the results
contemplated in this discussion as a result of many factors, including those
discussed below and elsewhere in this prospectus
BACKGROUND
America's Shopping Mall has been in business in its present form only since
May 1999. We are the successor by merger to Advanced Medical Sciences, Inc. At
one time, Advanced Medical Sciences was engaged in the health care and
pharmaceutical business. During 1995 and 1996, it abandoned its health care and
pharmaceutical business and effectively ceased operations. Between 1996 and
April 1999, Advanced Medical Sciences remained dormant.
In May 1999, with $4,200,000 of financing that we raised by selling 10,000
shares of our Series A Senior Preferred Stock to a venture capital fund, we
purchased the assets related to the Deerskin and Joan Cook catalog businesses
and Creadis Promotions, Inc. The next month, in June 1999, we purchased the
Remarkable Products catalog business. In connection with those purchases we also
issued or assumed $5,500,000 of debt securities maturing in 2003 and 2004.
Finally, in July 1999, Advanced Medical Sciences changed its name and its
state of incorporation by merging itself into America's Shopping Mall. We are
the combined company that resulted from the merger.
NINE MONTHS ENDED JANUARY 31, 2000 AS COMPARED TO THE YEAR ENDED APRIL 30, 1999
ON A PRO FORMA BASIS
We have included audited financial statements of the businesses acquired
earlier this year in this prospectus. The unaudited pro forma information
included in Summary Financial Information and elsewhere in this prospectus gives
effect to those acquisitions as if they had occurred as of the beginning of our
last fiscal year. However, the pro forma financial statements do not necessarily
indicate what the combined results of those businesses would have been under our
management, nor are they indicative of the results to be expected in the future.
The financial statements reflect the financial condition and results of
operations of those businesses under different management when each of them was
operating as a separate entity. In view of our limited operating history as a
combined company, we believe that a comparison of our nine month operating
results to our pro forma results for the preceding fiscal year should not be
relied on as an indication of future performance. We are making changes to our
operations that are not fully reflected in the nine months' results.
Total Revenues. Total revenues consist of sales of products and services,
net of allowances for product returns and refunds. We recognize revenues when
products are shipped. Total revenue for the nine months ended January 31, 2000
were $10,908,415 as compared to $12,050,155 for the year ended April 30, 1999 on
a pro forma basis. While we expect total revenues for the year ending April 30,
2000 to be generally consistent with the prior year pro forma revenues, due to
certain changes in our quality control and customer service, returns and refunds
for the nine months ended January 31, 2000 have been reduced to 16% and 7% for
Deerskin and Joan Cook, respectively. Returns and refunds during the fiscal year
ended April 30, 1999 were approximately 18% of gross sales from the Deerskin
catalog and approximately 9% of sales from the Joan Cook catalog.
Cost of Merchandise Sold. Cost of merchandise sold consists primarily of
the costs of merchandise sold to customers. We value our inventories at the
lower of cost (determined on a first-in, first-out basis) or market. The cost of
merchandise sold was approximately 39.9% of our net sales in the fiscal year
ended April 30, 1999 (on a pro forma basis) and approximately 47.7% of our net
sales during the nine months of this fiscal year. The increase in cost of goods
sold as a percentage of net sales was attributable in part to the close out of
merchandise in the Danvers store at prices below cost. As of January 31, 2000 we
have disposed of most of the obsolete inventory. We expect the cost of
merchandise sold as a percentage of sales to remain relatively constant in the
future.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist of advertising and promotional expenditures)
including catalog design, production and mailing expenses), customer service,
distribution expenses (including order processing and fulfillment charges and
net shipping costs), equipment and supplies, payroll and related expenses for
employees engaged in these activities,
7
<PAGE>
as well as executive and administrative personnel; and rental and related
expenses.
Selling, general and administrative expenses for the nine months ended
January 31, 2000 were 62.4% of total revenues, as compared to 72.5% of total
revenues for the year ended April 30, 1999 on a pro forma basis. We have
achieved some savings in personnel expenses as a result of the consolidation of
our operations and the elimination of redundant job functions. However, cost
savings achieve during the first three fiscal quarters from consolidating our
operations have been partially offset by increased rental and related expenses
for new office and warehouse space. These increased expenses are in addition to
continuing rental expenses associated with closed facilities.
Interest Expense. Interest expense consists principally of interest on
$2,000,000 of 8% subordinated debentures that we assumed, and $3,500,000 of 8%
convertible debentures that we issued, in connection with the acquisitions of
our new businesses. Interest expense for the nine months ended January 31, 2000
was $396,582 as compared to $550,730 for the year ended April 30, 1999 on a pro
forma basis. Thus on an annualized basis, interest expense was relatively
constant over the two periods. We expect our annual interest expense will be
reduced by approximately $200,000 due to the repayment of $400,000 of the
convertible debentures in December 1999, conversion of $100,000 of convertible
debentures in January 2000 and the conversion of $2,000,000 of subordinated
debentures in April 2000.
Net Loss. We incurred a net loss of $2,043,571 on a pro forma basis for
our fiscal year ended April 30, 1999 and a net loss of $1,497,261 (before other
income or loss) on our operations for the nine months ended January 31, 2000. We
expect that we will continue to experience losses for the foreseeable future,
and that the costs of the relocations of our operations will continue to
negatively affect our earnings during the next three to four fiscal quarters.
Other Loss, Net. Other loss, net, includes losses of $573,652 from
securities trading activities. In June 1999, we opened an account with a
brokerage firm and transferred to the new account $1,000,000 of the proceeds
from our sale in the previous month of 10,000 shares of Series A Senior
Convertible Preferred Stock to Pioneer Ventures Associates Limited Partnership.
We then commenced to actively purchase and sell shares of common stock and put
and call options on common stock in this account. This activity violated our
investment agreement with Pioneer Ventures Associates, which prohibited the use
of the net proceeds from the sale of the preferred stock to purchase or carry
shares classified as margin stock under Regulation U of the Board of Governors
of the Federal Reserve System. Between June 8, 1999 and January 31, 2000, we
effected approximately 630 purchases and sales of securities in our brokerage
account.
Since January 2000, we have reduced our trading activity, but we continue
to trade securities in our brokerage account. On March 2, 2000, we received a
letter from Pioneer Ventures Associates waiving the restrictions in the
investment agreement relating to investments in margin stocks.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased approximately 57% from $1,590,223 as of
April 30, 1999 on a pro forma basis to $685,777 as of January 31, 2000,
principally due to securities trading losses. At January 31, 2000 we had working
capital of $978,515 as compared to working capital of $3,412,930 as of
April 30, 1999 on a pro forma basis. Our merchandise inventory on January 31,
2000 was $2,041,984, as compared to $2,072,517 on a pro forma basis at
April 30, 1999. Our inventories typically reach their highest level during the
first quarter of our fiscal year. Most of our overseas inventory is received by
July 31st and is sold through the holiday season. Working capital decreased
primarily because of the operating loss, the securities trading losses and the
repayment of $400,000 principal amount of convertible debentures.
The total costs of moving and consolidating our facilities are expected to
be in excess of $500,000, most of which will be capitalized. These costs consist
primarily of the costs associated with leasing new office and warehouse space;
purchasing and leasing new furniture, fixtures and equipment; the costs of
moving records, furniture, equipment, inventory and personnel to the new
facilities; and continuing rental expense associated with closed facilities.
Available cash flow and cash and marketable securities on hand should
permit us to sustain our business at the present level and finance the costs of
our consolidation for at least the next several fiscal quarters. We expect,
however, to require additional outside financing during our next fiscal year.
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BUSINESS
GENERAL
We are primarily a specialty catalog and online retailer and direct
marketer of men's and women's leather apparel and small leather goods, household
goods, jewelry and gift items and specialty office products. We also conduct a
specialty advertising and promotional products business.
We sell consumer and business products at retail through three distinct
print and internet catalogs:
o The "Deerskin" catalog, founded in 1944 as Deerskin Trading Post, sells
men's and women's leather outerwear, footwear, other leather apparel and
leather accessories.
o The "Joan Cook" catalog has sold a wide assortment of houseware, jewelry
and gift items since 1956.
o The "Remarkable Products" catalog since 1982 has sold specialized office
products featuring a full line of erasable time management and
organizational planners.
We also operate an advertising specialty and promotional products business
under the trade name "Creadis Promotions." It furnishes marketing and
promotional campaign consulting services, provides supplies for sales meetings
and conventions, and designs and sells business promotional gifts, premiums and
give-aways.
BACKGROUND AND RECENT ACQUISITION AND FINANCING TRANSACTIONS
America's Shopping Mall has been in business in its present form only since
May 1999. We are the successor by merger to the business formerly conducted by
Advanced Medical Sciences, Inc., a Virginia corporation formed more than ten
years ago. At one time, Advanced Medical Sciences was engaged in the health care
and pharmaceutical business. However, during 1995 and 1996, it abandoned its
health care and pharmaceutical business and effectively ceased operations.
Between 1996 and April 1999, Advanced Medical Sciences remained dormant while
its management investigated potential acquisitions of new businesses.
By May 1999, Advanced Medical Sciences' management had completed its
acquisition plan. It incorporated a new subsidiary named America's Shopping
Mall, Inc. in the State of Nevada. On May 21, 1999 America's Shopping Mall
purchased the assets related to the Deerskin and Joan Cook catalog businesses,
including the inventory, pre-paid advertising, pre-paid expenses, fixed assets,
accounts receivable, security deposits, material agreements, customer lists,
catalog production materials, computer software, intellectual property rights,
and unshipped orders, books of account and records, from Deerskin Trading Post,
Inc. a subsidiary of Initio, Inc.
At the same time that it acquired the Joan Cook and Deerskin businesses,
America's Shopping Mall purchased all of the outstanding stock of Creadis
Promotions, Inc. from Irwin Schneidmill and Kathleen N. Patten. Mr. Schneidmill
was the chief executive officer and a director of Advanced Medical Sciences (the
same offices that he holds in America's Shopping Mall). Mrs. Patten was a
substantial holder of stock in Advanced Medical Sciences and is the beneficial
owner, together with her husband, of over 56% of the outstanding common stock of
the present company.
In June 1999, America's Shopping Mall purchased all of the issued and
outstanding common stock of Dynamic Products Corp. from its shareholders.
Dynamic, through a wholly-owned subsidiary, Remarkable Office Products, Inc.,
operated the Remarkable Products catalog business. Dynamic Products Corp. and
Remarkable Office Products, Inc. were subsequently merged into our subsidiary,
The Remarkable Group, Inc. Irwin Schneidmill, Kathleen Patten, and various other
members of the Patten family, were the largest shareholders of Dynamic and
received additional shares of common stock of Advanced Medical Sciences in
connection with that acquisition.
Finally, in July 1999, Advanced Medical Sciences changed its name and its
state of incorporation by merging itself into America's Shopping Mall, Inc. We
are the surviving company that resulted from the merger.
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In connection with our purchase of the assets of the Deerskin and the Joan
Cook catalog businesses, we assumed a $2,000,000 8% subordinated debenture due
May 1, 2003 of Initio, Inc. held by Pioneer Ventures Associates. We also issued
$3,400,000 of our 8% convertible debentures due June 1, 2004 to Deerskin Trading
Post, Inc. and an additional $100,000 of convertible debentures to another
person as a finder's fee. The $2,000,000 subordinated debenture is senior to the
convertible debentures but is subordinate to all senior indebtedness (as
defined). Interest on both classes of debentures is payable quarterly. The
convertible debentures may be redeemed in whole or in part at our option after
June 1, 2001 at stated redemption prices. The convertible debentures initially
were convertible into shares of our common stock at a price of $5.50 per share.
In December 1999, we repaid $400,000 principal amount of the convertible
debentures held by Deerskin Trading Post and it agreed to increase the
conversion price of the remaining $3,000,000 principal amount held by it to
$6.00 per share. The remaining $100,000 of convertible debentures were converted
into common stock at a price of $5.50 per share in January 2000. The convertible
debentures are secured by a security interest in certain of our intangible
assets, including customer lists, mail order software, artwork, trademarks and
copyrights.
On May 21, 1999, America's Shopping Mall sold 10,000 shares of its Series A
Senior Convertible Preferred Stock to a venture capital fund, Pioneer Ventures
Associates Limited Partnership, for a total price of $4,200,000.
The investment agreement between Pioneer Ventures Associates and America's
Shopping Mall provided that the $4,020,000 of net proceeds to be received by
America's Shopping Mall after payment of legal and other expenses, would be used
for the acquisitions of Creadis Promotions and Remarkable Products, described
above, and that the remainder would be used for working capital.
See "Certain Relationships and Related Transactions" and the Notes to
Financial Statements of America's Shopping Mall, Inc. for additional information
concerning these acquisitions and financing transactions. Information concerning
the share ownership of certain persons who participated in these transactions
can be found under "Security Ownership of Certain Beneficial Owners and
Management" below.
CATALOGS AND PRODUCTS
We currently operate three distinct catalog sales operations. Two of these
catalogs have individual consumers as their target customers. The third catalog
is directed at business customers, municipalities and other governmental units,
and educational institutions.
Leather Products:
Our Deerskin catalog is distinctive in its focus on leather apparel and
small leather goods. Through this catalog we sell a wide selection of men's and
women's leather coats, jackets, suits, shirts, pants, hats, gloves and other
clothing items, as well as leather shoes, boots and slippers. Deerskin catalog
offerings also include leather handbags, business bags, belts, wallets and other
leather accessory items, and range in price from as low as $9 to as much as
$1,195. Most of these items are manufactured to our designs and specifications.
Household Goods, Gifts and Novelties:
The Joan Cook catalog offers a wide variety of inexpensive to moderately
priced products including bed, bath and kitchen products, home furnishings,
health and beauty products, seasonal merchandise, electronics, houseware,
jewelry, novelties, apparel and accessories, most of which are priced under
$100.
Specialized Office Products:
Our Remarkable Products catalog is directed to businesses, municipalities
and other governmental units, and educational institutions, and offers
specialized office products, including large desk and erasable laminated wall
planning calendars, dry erase boards and wall maps, workplace posters on
motivational topics, health topics (smoke-free and drug-free), legal topics
(sexual harassment, labor law, etc.), and safety topics, employee training books
and first aid kits.
Return policies for goods purchased from our three catalogs vary. All
products purchased from the Deerskin catalog may be returned at any time within
one year of the date of shipment, as long as they are unused and unaltered, for
replacement or exchange, or for a full refund of the price (excluding shipping
and handling charges). Merchandise purchased from the Joan Cook catalog, except
personalized items, may be returned within 60 days of the date of shipment for a
full
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refund (excluding shipping and handling charges). Although personalized items
from the Joan Cook catalog cannot be returned, we exchange items damaged in
shipping. All Remarkable Products merchandise is sold under a 30-day "no
questions asked" money-back guarantee. We refund the full price (excluding
shipping and handling charges) of any merchandise purchased from the Remarkable
Products catalog and returned within 30 days of shipment.
Returns of merchandise and refunds have represented a significant
percentage of Deerskin and Joan Cook catalog sales. Returns and refunds during
the fiscal year ended April 30, 1999 and the nine months ended January 31, 2000
were approximately 18% and 16% of sales, respectively, from the Deerskin catalog
and approximately 9% and 7% of sales, respectively, from the Joan Cook catalog.
Returns and refunds generally represent an insignificant percentage of sales
from the Remarkable Products catalog.
INTERNET SALES
In September 1999 we launched our new combined America's Shopping Mall
internet web site at http://www.americasshoppingmall.com. This site is
undergoing further development, but is fully functional. Our new site, like a
conventional shopping mall, is a location where each of our businesses maintains
a "storefront"--a home page from which the viewer can navigate to a separate web
site for that business.
Our Deerskin web site was launched in September 1998, our Joan Cook web
site in January 1999, and our Remarkable web site in September 1999,
respectively. Each of these web sites permits customers to view and order all of
the items in each of our print catalogs. Customers can select products from any
or all of the three catalog web sites and combine them in a single order for
purchase, without having to re-enter address and credit card information at each
catalog web site. These electronic stores provide us with a lower-cost way to
offer customers with internet access detailed product information and the
convenience of on line purchasing. In January 2000, we added a Creadis
Promotions web site, where customers can obtain information concerning our
promotional products and services.
We operate the America's Shopping Mall, the Joan Cook, the Remarkable
Products and the Creadis Promotions web sites with our in-house staff. The
Deerskin web site is operated for us by an unaffiliated specialty direct
marketer under a site development and hosting agreement.
To date, sales of products through our web mall stores have not been
significant. Web sales accounted for approximately 1.7% of revenues during the
nine months ended January 31, 2000. While we believe that printed catalogs and
print advertisements will continue to remain an important means of marketing our
various product lines, we expect that internet sales will become increasingly
important in future years.
Our internet strategy is to provide one convenient location where customers
can shop electronically for a wide range of products. By bringing our separate
catalog operations together and providing the convenience of one-stop shopping,
we attempt to encourage impulse buying and translate sales from one catalog into
additional sales from our affiliated catalogs. To that end, we plan to add more
"storefronts" to the America's Shopping Mall web site as we acquire or develop
additional mail order catalog or other related businesses. We shortly will add a
close-out web store for excess inventory to replace a close-out store in
Massachusetts that we closed at the end of 1999. We also are investigating the
feasibility of generating fee income by adding storefronts operated by
unaffiliated catalog merchants to the America's Shopping Mall site.
MARKETING
We employ multiple marketing approaches to reach existing and prospective
customers, including catalogs, internet advertising and print media advertising.
We believe our ability to segment, test and analyze mailing lists, and to
select appropriate recipients for a particular mailing, are a significant factor
in our business. In general, we seek to mail catalogs only to those segments of
our mailing lists, and at times and frequencies, that are expected to maximize
sales responses. We maintain proprietary customer data bases for our catalogs
which are used for catalog mailing lists and for statistical modeling purposes.
We employ special computer programs to search the mailing lists for each of our
catalogs for prospects for our other catalogs based on various statistical
criteria. In addition, we rent lists from and exchange lists with other direct
marketers in an attempt to gain new customers.
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Our catalogs are produced by an in-house art department in our New Jersey
facility. Each catalog contains full-color photographs and detailed product
descriptions. Sample products are photographed in our studios, and graphic
artists then use Macintosh desktop publishing equipment to edit images, insert
textual copy, and prepare catalog and media layouts and individual mailing
pieces. Independent photographers and models are engaged on a contract basis as
needed. The in-house preparation of most portions of the catalog and other
advertising material expedites the production process, providing for greater
flexibility and creativity in catalog production. It allows for last-minute
changes in pricing and format and results in significant cost savings.
After completion of the design, transparencies, mechanicals and electronic
data are sent out to a commercial printer for production of the catalogs. A
mailing list service provider takes our proprietary data bases, as well as any
rented mailing lists, and merges the lists, purges duplicate names and
addresses, and produces a mailing list on magnetic tape for each edition of a
particular catalog. The mailing list tapes are delivered to the catalog printer,
which ink jets addresses on the catalogs and the included order form and
delivers the catalogs, palletized and sorted by zip code according to bulk mail
regulations, to the U.S. Postal Service for mailing.
We vary the quantity of our catalogs mailed based on the selling season and
the anticipated response rates. During the nine months ended January 31, 2000,
we produced three different editions of our Deerskin catalog and made eight
mailings totaling approximately 3.8 million catalogs. Each Deerskin catalog
consists of between 60 and 88 pages and offers between 300 and 400 items. In the
same period, we produced four editions of our Joan Cook catalog, and made ten
mailings totaling approximately 3.1 million catalogs. These Joan Cook catalogs
consisted of 60 pages each and offered between 275 and 350 items.
In recent periods, we have not produced complete catalogs for Remarkable
Products, but have relied on smaller specialized fliers mailed to existing and
prospective customers. In April or May we make a mailing featuring July to June
reusable calendars which are used by academic professionals, school districts
and municipalities. In September, October and November, we make solo mailings
which feature Remarkable Products' main reusable January to December calendars.
Solo mailings for law posters are event-driven and are made in response to
changes in laws and regulations affecting employers. To make these solo mailings
distinctive, they are packaged to look like a bank check, making the consumer
more likely to open the mailing. During the nine months ended January 31, 2000,
we mailed approximately 301,000 seasonal mailing pieces for Remarkable Products
in two separate mailings.
PRODUCTION AND DISTRIBUTION COSTS
We expend significant amounts on paper, ink, printing and postage to
produce and distribute our catalogs. We also use substantial amounts of packing
supplies and corrugated paper for boxes in which we ship our products. The price
of paper and ink depends on supply and demand in the marketplace and can be
subject to material increases or decreases within a relatively short period of
time. In recent years, the U.S. Postal Service has increased its rates for both
catalogs and packages. The latest rate increase, in January 1999, averaged
approximately 3%. We do not anticipate a postal rate increase during the
remainder of our current fiscal year, but we can give no assurance that postal
rates will not continue to increase in the future.
Our catalog production and mailing costs in the fiscal year ended April 30,
1999 on a pro forma basis and the nine months ended January 31, 2000 totaled
approximately $3,772,000 and $3,570,000, respectively. While we cannot estimate
the magnitude of future paper and postage increases or decreases, such changes
may have a material effect on our future earnings.
We are working to improve our marketing efforts by updating the look of our
catalogs with new models and improved photographs, and by refreshing the graphic
design of the catalogs and rewriting product descriptions and other copy. At the
same time we are increasing the circulation of our catalogs by making wider
mailings to present and former customers and purchasing mailing lists. We have
increased the number of Joan Cook catalogs mailed during recent months by
approximately 30% over the same period last year.
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ORDER FULFILLMENT AND SHIPMENT
In May 2000, we transferred our customer order processing, data processing
and most customer services operations from a facility in Carson City, Nevada to
a new facility in Pompano Beach, Florida. We offer nationwide toll-free
telephone numbers for customers to use in placing orders from our catalogs.
Calls are received by trained order entry representatives who utilize on-line
terminals to enter customer orders into a computerized order processing system.
The order entry representatives also may use their terminals to access
information about products, pricing and promotions in order to provide better
service and answer customer questions. We employ approximately eight people on a
permanent basis in the call center and may employ up to 30 people during the
peak order season. Mail orders are opened by other employees, compared to
payments, and, together with facsimile and internet orders, are entered into the
computer system. All credit card charges are pre-authorized prior to shipping
the order. Credit authorization is obtained automatically via electronic
communications links during order processing.
After data entry and credit authorization or payment verification, orders
are transmitted electronically to our warehouses for fulfillment. Distribution
and warehousing activities for our Deerskin and Joan Cook catalogs are conducted
in our Pompano Beach, Florida facility. Orders from our Remarkable Products
catalog are batch processed and transmitted daily by an electronic data link to
our facility in Upper Saddle River, New Jersey. We plan to consolidate our
warehousing, receiving and shipping and order fulfillment operations in Pompano
Beach in the near future. See "Property" below.
Orders are filled at packing stations where a packer chooses the
merchandise corresponding to the customer order displayed on a computer terminal
or a printed packing slip. The packer uses a bar code scanner which scans the
information on a picking ticket attached to the piece of merchandise into the
computer system. The computer compares the information on the picking tickets to
the customer order to ensure that the merchandise being packed to fulfill the
order is correct and complete. Once the computer verifies that an order is
correct and complete, the merchandise is packed with a bar coded shipping label
attached. The package is then delivered by a conveyor to a shipping station
where the information on the shipping label is scanned to verify that the order
is valid and has not been previously shipped, and to record the method of
shipment and create the shipping manifest. While most orders are shipped via the
U.S. Postal Service, we also offer express service to customers for an
additional fee. Most orders of in-stock merchandise are shipped within one
business day after receipt.
PURCHASING
Deerskin catalog products are obtained principally from numerous foreign
suppliers and manufacturers. Many of the items are manufactured for us in
accordance with our designs and specifications and are exclusive to the Deerskin
catalog. In excess of 90% of the imported merchandise sold through the Deerskin
catalog is manufactured in the Peoples Republic of China and India. Other items
are purchased from suppliers in Pakistan, Korea, Colombia and Chile. No one
manufacturer is material to our operations. Numerous other manufacturers of
leather goods in these countries and elsewhere are available. There is only a
minimal risk that we would not be able to obtain an alternate source of supply
if the manufacturer of any of our Deerskin products were to experience a
prolonged work stoppage or economic difficulties. However, because of our use of
foreign suppliers, we are subject to the risks of doing business abroad,
including changes in United States trade n policies, economic events and changes
in the value of the U.S. dollar relative to foreign currencies. Our foreign
exchange risk, however, is mitigated by the fact that the price of leather, the
principal cost component of our Deerskin products, typically is set in U.S.
dollars throughout the world. To date, the recent Asian economic downturn has
not materially affected our ability to acquire products in that region.
Products offered in our Joan Cook catalogs are manufactured by hundreds of
manufacturers. Unlike the Deerskin catalog products, less than 10% of the
merchandise sold through the Joan Cook catalogs is purchased outside the United
States. No one supplier accounted for more than 10% of our purchases for the
Joan Cook catalog during the fiscal year ended April 30, 1999 and the nine
months ended January 31, 2000. We believe ample alternate sources of supply
exist, should any present supplier relationship be disrupted for any reason.
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The main products in our Remarkable Products catalog, the various reusable
calendars and our federal law posters, are manufactured specifically for us. Our
in-house art department does the layout and graphics for each calendar or
poster. We then order the appropriate paper from an independent paper vendor,
and the paper and camera ready art work produced by our graphic designers are
sent to one of two printing firms that we employ. Once the artwork is printed on
the paper, the printed sheets are sent to a laminator which applies a plastic
coating and creates the finished product. There are many vendors of the
materials and services required to produce our reusable calendars and poster
products throughout the country. We believe we could easily replace any of our
current vendors and that the loss of any of them would not cause a serious
interruption of our business or have a material adverse effect on it. Other
products which we sell through the Remarkable Products catalog, such as the
markers, erasers and cleaning fluids for the reusable calendars are purchased
from a variety of vendors, none of which are individually significant. There are
adequate alternative sources of supply for most, if not all, of our Remarkable
Products catalog items.
Our inventory management strategy is designed to maintain inventory levels
that provide optimum in-stock positions while maximizing inventory turnover
rates and minimizing the amount of unsold merchandise at the end of each season.
We manage inventory levels by monitoring sales and fashion and product trends,
making purchasing adjustments as necessary, and by promotional sales.
ADVERTISING SPECIALTY AND PROMOTIONAL PRODUCTS
Our Creadis Promotions subsidiary conducts an advertising specialty and
promotional products business. Creadis provides marketing consulting and
promotional campaign recommendations, as well as product proposals and supplies
for sales meetings and conventions, sales incentives and awards, business and
promotional gifts, and other types of business programs and activities. In
addition, it provides design services, including layouts, text, photography and
printing for leaflets, mailings, packaging, point of purchase displays and
business cards and stationery. Creadis also provides order fulfillment and
warehousing services from our warehouse facility in Monsey, New York, for
clients who purchase promotional products from it. To date, Creadis Promotions
has derived approximately 65% of its business from the pharmaceutical industry.
Design work for Creadis Promotions is performed primarily by the same
in-house graphic artist staff that we employ for our catalog design and
production, but we also employ independent graphic designers on a contract basis
as required. The promotional products, gifts and supplies furnished by Creadis
to customers generally are purchased from importers and distributors of such
products to fill specific client orders. The variety of promotional products
supplied by Creadis and the relatively small number of items required to fill
each order makes it uneconomical for Creadis to carry products in inventory. The
types of products and supplies furnished by Creadis to its customers are
available from numerous suppliers.
TRADEMARKS, ETC.
We own federally registered trademarks for "Deerskin" and "Joan Cook." We
believe that these trademarks have significant value because of their market
recognition as a result of many years of use and the significant quantity of
catalogs circulated. We also own other intellectual property rights such as
copyrights and service marks on designs of our products, none of which
individually is material to our business.
SEASONALITY
Our business is seasonal. Historically, a substantial portion of the
revenues and net income of our catalog businesses have been realized during the
period September through February. Revenues and net income have been
substantially lower during the period March through August. Although seasonality
is a general pattern associated with mail order businesses, our seasonality is
considerably greater than the industry norm due to the nature of our Deerskin
leather products line which sells principally during the fall and early winter.
We are attempting to reduce the seasonality of our business and the
disproportionate contribution to revenues of our third fiscal quarter by adding
products to our catalogs that have less seasonal appeal. We recently added a
line of perfumes and colognes to both our Joan Cook and Deerskin catalogs and
are adding non-leather apparel to our Deerskin catalog, such as short sleeve
shirts and khaki pants.
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GOVERNMENT REGULATION
The direct response business is subject to the Mail and Telephone Order
Merchandise Rule and 1996 Telemarketing Sales Rule and related regulations
promulgated by the Federal Trade Commission and comparable regulation by state
agencies. In addition, U.S. and foreign laws regulate certain users of customer
information and the development and sale of mailing lists. We believe we are in
compliance with all rules and regulations governing our marketing practices and
have implemented programs and systems to assure ongoing compliance. However, new
restrictions may arise in this area that could have an adverse effect on our
business.
Due to the increasing popularity and use of the internet and other
commercial online services, it is possible that additional laws and regulations
may be adopted with respect to electronic commerce. These laws may cover issues
such as user privacy, pricing, content, copyrights, distribution and
characteristics and quality of products and services. The applicability to the
internet and other commercial online services of existing laws in various
jurisdictions governing issues such as property ownership, sales and other
taxes, libel and personal privacy is uncertain and may take years to resolve.
Any new legislation or regulation, or the application of existing laws and
regulations to the internet, could have the effect of decreasing the growth of
electronic commerce or increasing our cost of doing business on the internet.
At present, we collect state sales tax only on sales of products to
residents of New Jersey, New York, Massachusetts and Nevada. Various states have
tried to require direct marketers to collect state sales taxes on the sale of
products shipped to their residents. In 1992, the United States Supreme Court
reaffirmed its 1967 decision in National Bellas Hess v. Department of Revenue,
which held that it is unconstitutional for a state to impose sales tax
collection obligations on an out-of-state mail order company whose only contacts
with the state are the distribution of catalogs and other advertising materials
through the mail and subsequent delivery of purchased goods by parcel post and
interstate common carriers. It is possible, however, that legislation may be
passed to overturn the Court's decision. It currently is uncertain whether
internet sales activities will be subject to state sales tax. The imposition of
new state sales tax collection obligations would increase our administrative
expenses and might decrease our ability to compete effectively on the basis of
price.
PROPERTY
Our business is conducted in the following facilities:
<TABLE>
<CAPTION>
LOCATION USE
- --------------------------------- ---------------------------------------------------------------------
<S> <C>
Upper Saddle River, Principal executive and administrative offices, merchandising,
New Jersey purchasing and catalog production
Pompano Beach, Florida Order entry, data processing, distribution and warehousing;
administrative offices
</TABLE>
Commencing in January 2000, we consolidated our corporate headquarters,
principal executive and administrative offices, our merchandising, purchasing
and catalog production operations and our advertising and specialty products
business in approximately 10,300 square feet of leased office space in a
building located in Upper Saddle River, New Jersey. The annualized rent for this
facility is $195,054. We also are required to pay up to $20,676 per year for
electrical service and our proportional share of real estate taxes and various
other expenses. The lease expires in February 2005, with an option to renew for
an additional five years.
In February 2000, we entered into a lease for approximately 70,000 square
feet of space in a building in Pompano Beach, Florida. The lease provides for
rental payments, including estimated common area charges, taxes and insurance,
of approximately $609,000 per year. The lease is for a ten-year term, with an
option to renew for an additional five years. We are in the process of moving
the order entry and data processing and distribution and warehousing functions
for our Deerskin, Joan Cook, Remarkable Products and Creadis Promotions
businesses to the Pompano Beach facility. The facility became operational in May
2000.
Certain of the operations that have been consolidated in our Upper Saddle
River, New Jersey and Pompano Beach, Florida facilities were formerly located in
leased facilities in Teeterboro, New Jersey, Monsey, New York and Carson City,
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Nevada. executive and administrative offices and our merchandising, purchasing
and catalog production departments were located in 6,300 square feet of leased
space in a building in Teeterboro, New Jersey under a lease expiring in March
2004. This lease provided for annual rental payments of $57,000, excluding
utilities, repairs and future increases in taxes. Administrative offices and
distribution and warehousing facilities for the Remarkable Products catalog were
located in 10,000 square feet of leased space in Monsey, New York. A lease
covering 5,200 square feet of the space expired in March 2000; another lease
covering 2,400 square feet of space expires on June 30, 2000; and the lease
covering the remaining 2,400 square feet expires on December 30, 2002. In Carson
City, Nevada, we leased an approximately 81,000 square foot building under a net
lease that expired on April 30, 2000 and provided for annual rent of $336,000.
We recently negotiated a release of our liabilities under the lease of the
Teterboro, New Jersey facility. The agreement with the landlord provides for us
to pay approximately $80,000 over four years in settlement. We are continuing to
negotiate with the landlord of the Monsey, New York facility for releases of our
obligations under those leases and expect that those releases will cost between
$10,000 and $15,000. We accrued $50,000 of our anticipated lease termination
costs as an expense for the nine months ended January 31, 2000.
In December 1999, we closed a retail close-out store for catalog
merchandise located in Danvers, Massachusetts. The lease for this store required
annual rent of $12,600 plus real estate taxes and expired on April 30, 2000.
We consider that, in general, our physical properties are well maintained,
in good operating condition, and are suitable and adequate for our present
purposes. We believe that our properties are adequately covered by insurance.
LEGAL PROCEEDINGS
From time to time we may be a party to routine litigation and proceedings
in the ordinary course of our business. No litigation or other proceedings are
pending or, as far as we know, threatened that would have a material adverse
effect on our business, results of operations or financial condition.
EMPLOYEES
As of March 31, 2000, we employed approximately 45 people on a full-time
basis. We also employ additional people on a part-time or seasonal basis as
required to meet unusual and seasonal increases in our business. None of our
employees are covered by collective bargaining agreements. We consider our
employee relations to be satisfactory.
16
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our Board of Directors are elected at the annual meeting of the
shareholders and hold office for one year or until their successors are elected
and qualify. The officers serve at the pleasure of the Board of Directors. The
following table sets forth certain information with respect to each of our
directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- --- -----------------------
<S> <C> <C>
Irwin Schneidmill...... 46 Director and Chief
Executive Officer
Dennis J. McNany....... 50 Director and Chief
Financial Officer
Debra Solan............ 45 Senior Vice President
of Purchasing and
Merchandising, The
Deerskin Companies,
Inc.
Michael A.
DeVarti ........ ...... 35 Vice President, Chief
Information Officer,
The Deerskin
Companies, Inc.
Robert W. Trause....... 57 Director and Secretary
Chase A. Caro.......... 41 Director
Richard Truzzolino..... 60 Director
John Ferraro........... 65 Director
</TABLE>
Irwin Schneidmill was president and a director of Advanced Medical Sciences
from July 29, 1998 until its merger into America's Shopping Mall. Since we were
incorporated, Mr. Schneidmill has served as our chief executive officer and as a
director. Mr. Schneidmill joined Remarkable Office Products, Inc., a New Jersey
corporation and direct-mail catalog retailer which is now owned by America's
Shopping Mall, in October 1995. See "Certain Relationships and Related
Transactions." Prior to joining Remarkable Office Products, Inc.,
Mr. Schneidmill had been the sole stockholder from July 1993 through October
1994 of Irwin Schneidmill, P.C., a public accounting firm. Mr. Schneidmill also
currently serves as president, chief executive officer and a director of
Celestial Ventures Corporation, a reporting company.
Dennis J. McNany was a director of Advanced Medical Sciences from December
1998 until its merger into America's Shopping Mall. Since we were incorporated,
Mr. McNany has served as our chief financial officer and as a director. From
1992 until joining us, Mr. McNany served as a financial consultant for an
independent venture capitalist and for First Occupational Center of New Jersey,
a large non-profit entity serving the disabled and disadvantaged population.
Debra Solan is the Senior Vice President of Purchasing and Merchandising
for our wholly-owned subsidiary, The Deerskin Companies, Inc., and has been
working with the Deerskin and Joan Cook catalog businesses since 1977. She is
responsible for overseeing the buying and merchandising activities for the
catalogs. Furthermore, she manages all aspects of the creative process involved
in developing the catalogs. This includes overseeing the artwork, presentation,
printing and production of the catalogs. She is also responsible for developing
the marketing plan and projecting sales for the Deerskin catalog.
Michael A. DeVarti is the Vice President and Chief Information Officer for
our wholly-owned subsidiary, The Deerskin Companies, Inc. and has been working
for the Deerskin and Joan Cook catalog businesses since 1991. He is responsible
for evaluating, managing, and implementing technology in support of all facets
of the two catalog businesses. He oversees systems designs, programming,
telecommunications, networking, data processing, customer service, internet,
marketing and fulfillment for America's Shopping Mall.
Robert W. Trause was secretary and a director of Advanced Medical Sciences
since July 29, 1998 until its merger into America's Shopping Mall. Since our
incorporation, Mr. Trause has served as our secretary and as a director.
Mr. Trause is a professional insurance broker and has significant experience in
property and casualty insurance as well as business life insurance and estate
planning. From 1991 through 1997, Mr. Trause was a commercial lines account
executive for Professional Insurance Associates, Inc. and since 1997 has been a
senior commercial account specialist for that firm. Mr. Trause also serves as a
director of Celestial Ventures Corporation, a reporting company.
Chase A. Caro has been a director of America's Shopping Mall since May
1999. Mr. Caro is an attorney practicing in the areas of corporate law,
commercial and securities litigation and arbitration. From September 1994
through December 1997, Mr. Caro was the managing partner of the law firm Caro &
Graifman, P.C. From January 1998 through the present time he has been the
managing partner of the law firm Caro &
17
<PAGE>
Associates P.C. During the period from August 1998 through February 1999 he also
was a partner in Robinson Brog Leinwand Greene Genovese & Gluck, P.C.
Richard Truzzolino has been a director of America's Shopping Mall since May
1999. For the last 20 years, Mr. Truzzolino has owned and managed a sandwich
shop and for the last 10 years has also managed a real estate partnership.
John Ferraro has been a director of America's Shopping Mall since May 21,
1999. Mr. Ferraro also serves as chief executive officer and chairman of the
board of Thermodynetics, Inc. Thermodynetics is engaged in the design,
manufacture and sale of enhanced surface metal tubing and related assemblies
used primarily for heat transfer applications. Mr. Ferraro is also a director of
Pioneer Ventures Management Partners LLC, the general partner of Pioneer
Ventures Associates Limited Partnership, and is the designee of Pioneer Ventures
Associates Limited Partnership on our Board. See "Security Ownership of Certain
Beneficial Owners and Management--Potential Change of Control" below.
Mr. Ferraro also serves as a director of American Interactive Media, Inc. Both
Thermodynetics and American Interactive Media are reporting companies.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has appointed a compensation committee consisting of
Irwin Schneidmill, John Ferraro and Chase Caro. It also has appointed an audit
committee consisting of Irwin Schneidmill, Dennis McNany and Robert Trause. The
compensation and audit committees both will serve until the next annual meeting
of the Board of Directors.
COMPENSATION OF DIRECTORS
We currently do not have a compensation or expense reimbursement policy for
our directors. Although we have not yet issued any options to purchase shares of
our common stock to any directors, we do anticipate that we may do so in the
future. Grant of such future options will be at the discretion of our Board of
Directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection 1 of Section 78.751 of the Nevada General Corporation Law
("NGCL") empowers us to indemnify any person who was or is a party or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (except in an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
America's Shopping Mall. We may indemnify this person against all reasonable
expenses, incurred by him in connection with such action, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to our best
interests. With respect to any criminal action or proceedings, he must have had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, does not create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to our best interests. With respect to any
criminal action or proceeding, he must have reasonable cause to believe his
action was unlawful.
Subsection 2 of Section 78.751 empowers us to indemnify any person against
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
acted in any of the capacities set forth above. No indemnification may be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged by a court of competent jurisdiction after exhaustion of all appeals
therefrom to be liable to us or for amounts paid in settlement to us unless and
only to the extent that the court in which such action or suit was brought or
other court of competent jurisdiction determines that, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
The NGCL also provides that to the extent that a director, officer,
employee or agent of America's Shopping Mall has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
subsections 1 and 2 of Section 78.751, or in the defense of any claim, therein,
he must be indemnified by us against all reasonable expenses, incurred by him in
connection with the defense. Furthermore, any indemnification under
subsection 1 and 2, unless ordered by a court or advanced pursuant to
subsection 5 of Section 78.751 described below, must be made only as authorized
in the specific case upon a determination that indemnification of the person is
18
<PAGE>
proper in the circumstances. The determination must be made by the stockholders,
by a majority vote of a quorum of the board of directors who were not parties to
the act, suit or proceeding, or in specified circumstances, by independent legal
counsel in a written opinion.
Subsection 5 of Section 78.751 states that the articles of incorporation,
bylaws or an agreement made by us may provide that the expenses of officers and
directors incurred in defending a civil or criminal action, must be paid by
America's Shopping Mall as they are incurred and in advance of the final
disposition of such action, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court that he is not entitled to be indemnified by the corporation.
The indemnification provided for by Section 78.751 of the NGCL is not
exclusive of any other rights to which the indemnified party may be entitled.
The scope of indemnification continues to those who have ceased to hold such
positions, and to their heirs, executors and administrators. If a final
adjudication establishes that an indemnified party's acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was material
to the cause of action they cannot be indemnified.
Our bylaws provide for indemnification of officers, directors and others to
the fullest extent permitted by Nevada law.
The Employment Agreement dated as of May 1, 1999, between America's
Shopping Mall and Irwin Schneidmill also provides that we shall, to the fullest
extent permitted by the laws of the State of Nevada, defend, indemnify and hold
Mr. Schneidmill harmless from and against any and all judgments, fines, amounts
paid in settlement, reasonable and necessary out of pocket expenses (including
reasonable attorneys' fees), liabilities, damages, costs and claims actually
incurred by or asserted against him. Such indemnifiable expenses may arise out
of, result from or relate to any threatened, pending or completed action, suit
or proceeding made by a party by reason of his being or having been a director
or officer of America's Shopping Mall. Mr. Schneidmill is also indemnified
against any threatened, pending or completed action, suit or proceeding
instituted by or in the right of America's Shopping Mall to procure a judgment
in its favor and to which Mr. Schneidmill is a party.
All expenses incurred by Mr. Schneidmill which are indemnifiable by us are
to be paid or reimbursed as and when statements therefor are rendered.
Section 78.752 of the NGCL empowers us to purchase and maintain insurance
on behalf of a director, officer, employee or agent of the corporation against
any liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
authority to indemnify him against such liabilities and expenses.
We have agreed in our employment agreement with Irwin Schneidmill to use
our best efforts to obtain and maintain in full force and effect during the term
of the agreement, directors' and officers' liability insurance policies
providing full and adequate protection to Mr. Schneidmill in his various
capacities. The Board of Directors, however, has no obligation to purchase such
insurance if, in its opinion, coverage is available only on unreasonable terms
that would have a materially adverse effect on our financial condition. To date,
we have not been able to obtain a directors' and officers' liability insurance
policy on terms that we consider reasonable and affordable.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
America's Shopping Mall pursuant to the foregoing provisions, or otherwise, we
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by us of expenses incurred or paid by a director,
officer or controlling person in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities covered by this prospectus, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of the issue.
19
<PAGE>
EXECUTIVE COMPENSATION
CASH AND OTHER COMPENSATION
The table which follows sets forth certain information concerning
compensation paid to, earned by or awarded to Irwin Schneidmill, our chief
executive officer, during the fiscal years ended April 30, 1997, 1998 and 1999.
During this time, Mr. Schneidmill served as chief executive officer of Advanced
Medical Sciences and as president of Remarkable Office Products. All information
presented below is shown on a consolidated basis. In June 1999, we acquired
Remarkable Office Products and in July 1999, Advanced Medical Sciences merged
into America's Shopping Mall.
No other executive officer's salary and bonus exceeded $100,000 for the
fiscal year ended April 30, 1999.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
FISCAL OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION
- ------------------------------------------------------------------------------- ------ -------- ------------
<S> <C> <C> <C>
Irwin Schneidmill ............................................................. 1999 $145,000 $ 60,000
Chief Executive Officer and President 1998 102,000 --
1997 100,500 --
</TABLE>
No options or stock appreciation rights have been granted or exercised. At
this time, no long-term incentive plans exist, although we do anticipate that we
may consider such a plan in the future. Any such plan will be adopted by the
compensation committee of the Board of Directors and approved by the Board of
Directors as a whole.
EMPLOYMENT CONTRACTS
Irwin Schneidmill Effective May 1, 1999, Mr. Schneidmill entered into an
employment agreement with America's Shopping Mall. Under his employment
agreement, Mr. Schneidmill will serve as president and chief executive officer
of America's Shopping Mall and each of our direct or indirect subsidiaries.
Furthermore, we shall, during the term of the employment agreement, ensure the
election and retention of Mr. Schneidmill as a director as well.
Mr. Schneidmill is required to devote substantially his full time and energies
during normal business hours to our affairs. Although Mr. Schneidmill may have
outside business interests from which he profits separately, these interests may
not interfere with the performance of his duties or conflict with our interests.
The employment agreement expires April 30, 2004. During the term of the
employment agreement, Mr. Schneidmill is to receive a base salary at the annual
rate of $250,000 plus any additional incentive compensation which shall be paid
at the discretion of the Board of Directors. Mr. Schneidmill may also
participate in any health, disability, profit sharing or insurance plan we adopt
as well as any stock option plan or similar arrangement for the benefit of
senior executive officers. We also lease an automobile for the exclusive use of
Mr. Schneidmill at a cost of $641 per month. The employment agreement also
contains covenants by Mr. Schneidmill not to compete with our business. A state
court may determine not to enforce, or partially enforce this covenant.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning those persons
(including any "group") who are known by us to be the beneficial owners of more
than five percent of any class of our voting securities. It also shows the
voting securities owned by our directors and executive officers individually,
and by all of our directors and executive officers as a group. Unless otherwise
indicated in the footnotes, each person named below has sole voting power and
investment power over the shares indicated.
All information is as of April 30, 2000. As of that date, 2,339,130 shares
of common stock were issued and outstanding.
20
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP OF CLASS
- ---------------------------------------------------------------------------- -------------- ---------- --------
<S> <C> <C> <C>
Pioneer Ventures Associates Limited Partnership (9) ........................ Preferred 10,325 100.0%
651 Day Hill Road, P.O. Box 40 Stock
Windsor, CT 06095
Pioneer Ventures Associates Limited Partnership (9) ........................ Common Stock 3,916,065(1) 83.7%
651 Day Hill Road, P.O. Box 40
Windsor, CT 06095
Deerskin Trading Post, Inc. (10) ........................................... Common Stock 500,000(2) 15.0%
2500 Arrowhead Drive
Carson City, NV 89706
Kathleen N. Patten(3) ...................................................... Common Stock 825,981(4) 29.1%
5 Saddle Hill Road
Far Hills, NJ 07931
John L. Patten(3) .......................................................... Common Stock 904,286(5) 27.1%
5 Saddle Hill Road
Far Hills, NJ 07931
Irwin Schneidmill .......................................................... Common Stock 510,000(6) 18.0%
10 Henry Street
Teterboro, NJ 07608
Dennis McNany .............................................................. Common Stock 10,000(7) 0.4%
10 Henry Street
Teterboro, NJ 07608
Robert Trause .............................................................. Common Stock 10,000(7) 0.4%
429 Hackensack Street
Carlstadt, NJ 07072
Richard Truzzolino ......................................................... Common Stock 27 <1%
84 Tanglewood Road
East Hanover, NJ 07936
Chase Caro ................................................................. -- -- --
300 Mamaroneck Avenue
White Plains, NY 10605
John Ferraro ............................................................... -- --(8) --
651 Day Hill Road, P.O. Box 40
Windsor, CT 06095
Debra Solan ................................................................ Common Stock 667 <1%
10 Henry Street
Teterboro, NJ 07608
All directors and executive officers as a group ............................ Common Stock 530,694 18.7%
</TABLE>
- ------------------
(1) Includes 500,000 shares held directly and beneficially and 1,239,000 shares
of common stock issuable upon conversion of 10,325 shares of Series A Senior
Convertible Preferred Stock held by Pioneer Ventures Associates Limited
Partnership and 600,000 shares of common stock issuable upon the exercise of
warrants to purchase common stock held by Pioneer Ventures Associates.
Pioneer Ventures Associates is entitled to cast a total of 1,739,000 votes
with respect to these shares (representing approximately 42.6% of the voting
power of all shareholders) for election of directors and on all other
matters. The shares beneficially owned by Pioneer Ventures Associates also
include a total of 1,577,065 shares of common stock held by Kathleen N.
Patten, Mary C. Patten, Sara E. Patten, Anne L. Patten, Irwin Schneidmill,
Dennis McNany, Robert Trause, and certain other shareholders of America's
Shopping Mall, with respect to which Pioneer has shared voting power under a
voting and shareholders agreement.
(Footnotes continued on next page)
21
<PAGE>
(Footnotes continued from previous page)
See "Potential Change in Control" and "Description of Capital Stock--Series
A Senior Convertible Preferred Stock" below.
(2) Consists of shares of common stock which are issuable upon conversion of
$3,000,000 of convertible debentures due June 1, 2004.
(3) John L. Patten and Kathleen N. Patten are husband and wife, and may be
deemed to be a "group" for purposes of section 13(d) of the Securities
Exchange Act of 1934.
(4) Includes 714,834 shares held by Mrs. Patten in her own name, with respect to
which she has sole investment power and shared voting power (see note 1
above), 64,147 shares held by Mrs. Patten as custodian for her daughter Mary
C. Patten, 24,000 shares held by Mrs. Patten as custodian for her daughter
Sara E. Patten, as to which she has sole investment power and shared voting
power, and 23,000 shares held by her daughter Anne L. Patten, with respect
to which Mrs. Patten may be deemed to have shared investment power and
shared voting power.
(5) Includes 354,463 shares held by Mr. Patten in his own name with sole
investment and voting power and 500,000 shares of common stock issuable upon
the exercise of warrants held by Suffern Hills Associates LLC, an entity
controlled by Mr. Patten. Mr. Patten may be deemed the beneficial owner of
29,809 shares held by Benchmark Capital LLC, 20,000 shares held by Patform
Development Corp. and 14 shares held by Adwell Inc. since he is president of
each of these companies and may be deemed to have sole investment and voting
power over the shares held by them.
(6) Includes 507,750 shares held by Mr. Schneidmill with sole investment power
and shared voting power (see note 1 above). Mr. Schneidmill may be deemed
the beneficial owner of 2,250 shares held by his wife Amy Schneidmill.
(7) Held with sole investment power and shared voting power (see note 1 above).
(8) Mr. Ferraro does not hold any shares of stock in his own name. However,
Mr. Ferraro is a director of the corporation that controls Pioneer Ventures
Associates Limited Partnership (see note 9 below) and its designee to the
Board of Directors of America's Shopping Mall pursuant to the terms of the
voting and shareholders agreement. See "Potential Change in Control" below.
Accordingly, Mr. Ferraro may be deemed to share investment power and voting
power over the shares beneficially owned by Pioneer Ventures Associates.
(9) The general partner of Pioneer Ventures Associates Limited Partnership is
Ventures Management Partners LLC, the managing member of which is Pioneer
Ventures Corp. The address of these entities is 651 Day Hill Road, Windsor,
CT 06095. The names and business addresses of the executive officers and
directors of Pioneer Ventures Corp. are [to be filed by amendment].
(10) Deerskin Trading Post, Inc. is a wholly-owned subsidiary of Initio, Inc.,
2500 Arrowhead Drive, Carson City, NV 89706. According to the definitive
proxy statement filed by Initio, Inc. with the Securities and Exchange
Commission on December 17, 1999, the names and addresses of the executive
officers and directors of Initio, Inc. are: Daniel A. DeStefano, chairman
of the board and director, with a business address at 2500 Arrowhead Drive,
Carson City, NV 89706; Martin Fox, president, secretary and director, with
a business address at 2500 Arrowhead Drive, Carson City, NV 89706; James J.
Holzinger, director, with an address at 7 Canterbury Way, Wayne, NJ 07470;
Dr. Paul Lerman, director, with an address at 1000 River Road, Teaneck, NJ
07666; and Robert A. Lerman, director, with a business address at 651 Day
Hill Road, Windsor, CT 06095.
POTENTIAL CHANGE IN CONTROL
Pioneer Ventures Associates Limited Partnership and certain principal
shareholders of America's Shopping Mall are parties to a Voting and Shareholders
Agreement, dated as of May 21, 1999. The agreement provides that so long as
(a) Pioneer owns any of our Series A Convertible Preferred Stock, or (b) common
stock obtained through the conversion of this preferred stock, or (c) any
amounts remain outstanding under a $2,000,000 subordinated debenture due May 1,
2003, then each party to the voting agreement shall vote all of their shares of
common stock to elect one person designated by Pioneer as a director at any
meeting of our shareholders at which such designee shall be nominated.
The voting agreement provides that if a default under, or breach of the
voting agreement occurs which Pioneer believes adversely affects it or its
rights under the voting agreement or the agreement relating to its investment in
America's Shopping Mall, the parties to the voting agreement will call a special
meeting of the shareholders and will vote their shares to elect a new Board of
Directors of
22
<PAGE>
which persons nominated by Pioneer shall constitute a majority of the members.
Pioneer designated directors will remain a majority of our Board for so long as
Pioneer, its partners or affiliates own the preferred stock or the common stock
obtained through the conversion of the preferred stock or there remains any
amount outstanding under their subordinated debenture.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 9, 1999, Advanced Medical Sciences issued the following people
shares of its common stock. These shares were later converted into shares of
America's Shopping Mall common stock as a result of the merger of Advanced
Medical Sciences into America's Shopping Mall:
o 14,500,000 shares were issued to John L. Patten in consideration for the
assumption by Mr. Patten in February 1997 of $290,000 of liabilities of
Advanced Medical Sciences which Mr. Patten subsequently paid. Mr. Patten
has since gifted these shares to various members of his immediate family.
These shares were converted into 483,334 shares of our common stock. See
"Security Ownership of Certain Beneficial Owners and Management" above.
o 3,750,000 shares were issued to John L. Patten as payment of $75,000
loaned to Advanced Medical Sciences. Mr. Patten has since gifted these
shares to various members of his immediate family. These shares were
converted into 125,000 shares of our common stock.
o 3,000,000 shares were issued to Irwin Schneidmill in consideration for
$60,000 of unpaid consulting fees due to him. These shares were later
converted into 100,000 shares of our common stock. See "Security
Ownership of Certain Beneficial Owners and Management" above.
On May 11, 1999, Advanced Medical Sciences issued 10,000,000 shares of its
common stock to Kathleen N. Patten as payment of $200,000 loaned to Advanced
Medical Sciences. These shares were converted into 333,334 shares of our common
stock as a result of the merger.
On May 20, 1999, America's Shopping Mall, through our wholly-owned
subsidiary, The Remarkable Group, Inc., purchased all of the outstanding stock
of Creadis Promotions Inc. The stock was purchased from Irwin Schneidmill and
from Kathleen N. Patten. Mr. Schneidmill and Mrs. Patten, together, were paid
cash totaling $400,000, and each received 350,000 shares of our common stock for
their interests in Creadis.
In December 1998, Creadis purchased all of the operating assets of Heyden
Corporation. The purchase price consisted of $75,000 in cash, an 8% secured
promissory note in the amount of $245,557 due in full on February 8, 1999, and
an 8% unsecured promissory note in the amount of $42,298 to be paid in sixty
equal monthly installments. Creadis simultaneously entered into a five-year
consulting agreement with McKenzie Consulting, Inc. requiring Creadis to pay
McKenzie Consulting an aggregate of $367,200 in sixty equal monthly payments.
The obligations under the two promissory notes and the consulting agreement were
secured by guarantees executed by Mr. Schneidmill and John L. Patten.
In connection with the Deerskin and Joan Cook asset purchase, in May 1999,
James T. Patten, the brother of John L. Patten, received a $100,000 unsecured 8%
convertible debenture due June 1, 2004 from America's Shopping Mall. The
debenture was converted into 18,181 shares of our common stock in January 2000.
On June 3, 1999, America's Shopping Mall, through its wholly-owned
subsidiary, The Remarkable Group, Inc., purchased all of the outstanding stock
of Dynamic Products Corp. We issued a total of 240,000 shares of our common
stock to Dynamic's shareholders for their interests. Dynamic's stock was held by
certain parties related to America's Shopping Mall. The following related
parties received shares of our common stock in exchange for their interests in
Dynamic:
o Irwin Schneidmill received 57,500 shares;
o Amy Schneidmill, the wife of Irwin Schneidmill, received 2,250 shares;
o Kathleen N. Patten received 31,500 shares; and
o Sara Patten, Mary Patten, and Ann Patten, Kathleen Patten's daughters,
each received 15,000 shares.
On March 2, 2000, Kathleen Patten transferred 25,000 shares of common stock
of a public company to our brokerage account. We recorded the receipt of these
shares as a loan from Ms. Patten in the amount of $368,748, the market value of
the shares on the date of transfer. We subsequently sold the shares for
approximately $394,000.
In April 2000, we entered into an agreement with Pioneer Venture Associates
Limited
23
<PAGE>
Partnership pursuant to which Pioneer exercised 500,000 of its 1,000,000
warrants to purchase common stock, at a reduced exercise price of $4.00 per
share. In payment of the exercise price of the warrants, Pioneer canceled the
$2,000,000 subordinated debenture that we assumed in connection with our
purchase of Deerskin and Joan Cook. Additionally, Pioneer assigned the remaining
500,000 warrants to Suffern Hills Associates LLC, an entity owned by John L.
Patten and Kathleen N. Patten. The warrants assigned to Suffern Hills Associates
have a reduced exercise price of $4.00 per share if exercised prior to July 31,
2000 and $4.50 per share if exercised thereafter. In order to induce Pioneer to
enter into this transaction, we issued Pioneer 600,000 additional warrants to
purchase common stock. These warrants have an exercise price of $4.00 per share
if exercised prior to July 31, 2000 and $4.50 per share if exercised thereafter.
The warrants expire on May 21, 2004.
Suffern Hills Associates has agreed to exercise its warrant prior to
June 30, 2000. Mr. and Mrs. Patten have informally agreed to cancel the
indebtedness of America's Shopping Mall to Mrs. Patten incurred in connection
with her transfer of stock to us, and to apply the $368,748 amount of the loan
against the purchase price payable upon exercise of the warrants.
24
<PAGE>
DESCRIPTION OF CAPITAL STOCK
America's Shopping Mall, Inc.'s amended articles of incorporation authorize
us to issue 20,000,000 shares of common stock, par value $0.001 per share, and
20,000 shares of preferred stock, par value $0.001 per share.
As of April 30, 2000 we had 2,839,129 shares of common stock and 10,325
shares of Series A Senior Convertible Preferred Stock issued and outstanding.
Another 2,839,000 shares of common stock are reserved for issuance upon the
exercise of warrants or upon conversion of certain convertible securities.
COMMON STOCK
Each holder of our common stock is entitled to one vote for each share
owned of record on all matters voted upon by stockholders, and a majority vote
of the outstanding shares present in person or by proxy at a stockholders'
meeting is required for most actions to be taken by stockholders. Our directors
are elected by a plurality of the votes cast. The holders of the common stock do
not have cumulative voting rights. Accordingly, the holders of a majority of the
voting power of the shares voting for the election of directors can elect all of
the directors if they choose to do so. The common stock bears no preemptive
rights, and is not subject to redemption, sinking fund or conversion provisions.
Holders of common stock are entitled to receive dividends if, as and when
declared by our Board of Directors out of funds legally available for dividends,
subject to the dividend and liquidation rights of our outstanding preferred
stock and any other series of preferred stock that we may issue in the future
and subject to any dividend restriction contained in any credit facility which
we may enter into in the future. Any dividends declared with respect to shares
of common stock will be paid pro rata in accordance with the number of shares of
common stock held by each stockholder. America's Shopping Mall does not,
however, anticipate paying any cash dividends in the foreseeable future.
In the event of our liquidation, dissolution or winding up, the holders of
our common stock are entitled to share equally and ratably in the assets, if
any, remaining after the payment of all of our debts and liabilities and payment
of the liquidation preference of the holders of the Preferred Stock. The
outstanding shares of common stock are, and the shares of common stock offered
by the selling shareholders hereby will be, fully paid and nonassessable.
See "Security Ownership of Certain Beneficial Owners and
Management--Potential Change in Control" above for additional information.
SERIES A SENIOR CONVERTIBLE PREFERRED STOCK
The Board of Directors has designated 20,000 shares of preferred stock as
Series A Senior Convertible Preferred Stock of which 10,325 shares are currently
issued and outstanding.
Each share of preferred stock is convertible at the option of Pioneer
Ventures Associates Limited Partnership, the holder of the preferred stock, at
any time into a number of shares of America's Shopping Mall common stock equal
to the "Stated Value" (currently $420.00 per share and subject to adjustment) of
the shares of preferred stock to be converted (plus accumulated dividends, if so
elected by the holder) divided by $3.50. Currently, the 10,325 shares of
preferred stock issued and outstanding may be converted into 1,239,000 shares of
common stock. The conversion price may be reset to a lower value in the future
should the average closing bid price of our common stock as reported on the OTC
Bulletin Board be below $3.50. The conversion price and the number of shares of
common stock issuable upon conversion of the preferred stock is also subject to
further adjustment in certain circumstances in order to protect against
dilution.
Pioneer is entitled an 8% cumulative annual cash dividend payable quarterly
($8.40 per share per quarter) in arrears on each March 31, June 30, September
30, and December 31 out of funds legally available for the payment of dividends
under Nevada law. We may, upon approval by a majority of our entire Board of
Directors, elect to pay dividends on the preferred stock, by issuing additional
shares of preferred stock with identical terms and provisions to the existing
preferred stock. If we elect to pay any dividend by issuing additional preferred
stock in lieu of a cash dividend, the amount of the dividend will be at the rate
of 13% per annum, or $13.65 per share per quarter. The failure to pay any
dividend when due is an event of default under the Certificate of Designation of
the preferred stock and results in
25
<PAGE>
additional dividend payments at the default rate. Furthermore, any event default
under the Certificate of Designation will trigger the change of control
provisions pursuant of the Voting and Shareholders Agreement, described above
under "Security Ownership of Certain Beneficial Owners and Management-Potential
Change of Control" on page 23.
Upon our liquidation, dissolution or winding-up, Pioneer is entitled to a
liquidation preference of $1,000 per share and an amount equal to any accrued
and unpaid dividends to the payment date. Pioneer is entitled to receive these
amounts before any payment or distribution is made to the holders of our common
stock or any other equity securities of America's Shopping Mall.
Pioneer is also entitled
o to purchase or subscribe for any capital stock, equity or debt securities
or any options, warrants, rights to purchase any such securities or
rights of America's Shopping Mall proposed to be issued by us; and
o provide any debt financing proposed to be obtained by America's Shopping
Mall.
This right of first refusal is subject to certain conditions and
exceptions.
The preferred stock has full voting rights and votes together with the
common stock as a single class. Each share of preferred stock entitles the
holder to cast the number of votes to which he would be entitled if the
preferred stock had been converted into shares of common stock on the
appropriate record date.
So long as an aggregate of at least 5% of the outstanding preferred stock
(including in the denominator any preferred stock which has been converted into
common stock) is held by Pioneer, America's Shopping Mall may not, without the
affirmative vote or consent of the holders of a majority of all outstanding
shares of the preferred stock voting separately as a class, do any of the
following:
o Amend, alter or repeal any provision of its Articles of Incorporation or
By-Laws so as to adversely affect the relative rights, preferences,
qualifications, limitations or restrictions of the preferred stock.
o Authorize or issue any additional equity securities of any subsidiaries
(with certain exceptions).
o Approve any merger, consolidation, compulsory share exchange or sale of
assets which we are a party.
o Repurchase or redeem any equity securities or pay dividends or other
distributions on any equity securities.
o Liquidate, dissolve, recapitalize or reorganize.
o Incur any indebtedness for borrowed money or guarantee indebtedness of
other persons, directly or indirectly, except indebtedness of any
wholly-owned subsidiaries.
o Effect any fundamental changes in the nature of our business, including
acquiring or investing in another business entity.
o Approve the sale or transfer of any material intangible or intellectual
property, other than the issuance of licenses.
We have the right to redeem any or all of the preferred stock on any
quarterly dividend payment date provided written notice is first given. The
redemption price for each share of preferred stock to be redeemed shall be paid
by in cash in an amount equal to the stated value of such share ($420.00), plus
an amount sufficient such that the holder thereof receives an annual rate of
return equal to 25%, for the period from the original issue to the redemption
date, on a compounded basis.
WARRANTS
As of April 30, 2000, warrants to purchase 1,100,000 shares of our common
stock were outstanding.
Exercise Price and Term. Each of the warrants entitles the holder thereof
to purchase at any time until May 21, 2004, one share of common stock at an
exercise price of $4.00 per share, if exercised prior to July 31, 2000 and $4.50
per share, if exercised thereafter, subject to adjustment. The holder of warrant
may exercise it by surrendering the warrant certificate to us, together with a
notice of exercise. The notice of exercise must be accompanied by payment in
full of the exercise price.
Adjustments. The exercise price and number of shares of common stock
purchasable upon the
26
<PAGE>
exercise are subject to adjustment upon the occurrence of certain events,
including stock dividends, stock splits, combinations and reclassification of
the common stock. Additionally, an adjustment would be made in the case of a
reclassification or exchange of the common stock, consolidation or merger of
America's Shopping Mall with another corporation (other than a consolidation or
merger in which we are the surviving corporation) or sale of all or
substantially all of our assets. These adjustment provisions are intended to
enable the warrant holder to acquire the kind and number of shares of stock or
other property receivable in a consolidation by the holder of the like number of
shares of common stock, that might otherwise have been purchased upon the
exercise. The warrants do not confer upon the holder any voting, dividend or
other rights as shareholders of America's Shopping Mall.
TRANSFER AGENT
The Transfer Agent for our common stock is Continental Stock Transfer &
Trust Company, New York, New York.
27
<PAGE>
SALES BY SHAREHOLDERS
We are registering the shares of common stock described in this prospectus
in order to provide our shareholders with freely tradable shares, but we do not
know whether any of them have specific plans to sell their shares. Our
shareholders may, without limitation and from time to time, sell all or a
portion of their shares of common stock covered by this prospectus in the
over-the-counter market at market prices prevailing at the time of sale, at
fixed prices or at negotiated prices. The common stock may, without limitation,
be sold by selling shareholders by one or more of the following methods:
o Ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o Block trades in which the broker-dealer engaged by the selling
shareholder will attempt to sell the common stock as agent for the
selling shareholder but may position and resell a portion of the block as
principal to facilitate the transaction;
o Purchases by a broker-dealer as principal and resale by such
broker-dealer for its account;
o Privately negotiated transactions;
o In accordance with Rule 144 promulgated under the Securities Act of 1933,
as amended, rather than pursuant to this prospectus;
o A combination of any such methods of sale; or
o Any other method permitted pursuant to applicable law.
Such transactions may or may not involve brokers or dealers. We will
deliver a copy of this prospectus without charge to any shareholder who is
required to deliver a prospectus in connection with any such transaction.
Selling shareholders may sell their shares directly to purchasers or to or
through broker-dealers, which may act as agents or principals. Such
broker-dealers may receive compensation in the form of discounts, concessions,
or commissions from the selling shareholders or the purchasers of the shares for
whom such broker-dealers may act as agents or to whom they sell as principal, or
both. Such compensation as to a particular broker-dealer might be in excess of
customary commissions.
Selling shareholders and any broker-dealers or agents that participate with
the selling shareholders in sales of shares may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended, in connection with
such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act of
1933, as amended.
Because certain selling shareholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, these selling
shareholders will be subject to the prospectus delivery requirements of the
Securities Act. We have informed such selling shareholders that the
anti-manipulative rules under the Securities Exchange Act, including
Regulation M, may apply to their sales in the market.
Upon our being notified by a selling shareholder that any material
arrangement has been entered into with a broker-dealer for the sale of such
selling shareholder's shares of common stock through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, we will, if required, file a supplement or an amendment to
this prospectus disclosing the name of each such selling shareholder and of the
participating broker-dealer(s), the number of shares involved, the price at
which such shares were sold, the commissions paid or discounts or concessions
allowed to such broker-dealer(s), and the other facts material to the
transaction.
Sales of a substantial number of shares of the common stock in the public
market by shareholders or even the potential of such sales could adversely
affect the market price for our common stock, which could have a direct impact
on the value of the shares being offered by the selling shareholder.
America's Shopping Mall will pay all fees and expenses incident to the
registration of our common stock pursuant to this prospectus, other than
underwriting discounts, selling commissions and brokerage fees, if any, which
will be borne by the selling shareholders.
28
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
America's Shopping Mall by Emmet, Marvin & Martin, LLP, New York, New York.
EXPERTS
The financial statements of America's Shopping Mall included in this
prospectus have been audited by Arthur Yorkes & Company, independent public
accountants, and Smallberg Sorkin & Company, LLP, independent public
accountants, as set forth in their reports, and have been so included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
ADDITIONAL INFORMATION
We have filed, with the Securities and Exchange Commission, Washington, DC,
a registration statement on Form SB-2 under the Securities Act with respect to
the common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement, the exhibits and schedules.
For further information, about our common stock and us, please refer to the
registration statement, exhibits and schedules. Statements made in this
prospectus as to the contents of any contract, agreement or other documents
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the registration statement,
reference is made to the exhibit for a more complete description of the matter
involved.
The registration statement, exhibits and schedules may be inspected without
charge and copied at the public reference facilities maintained by the SEC in
Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549, and at the SEC's
regional offices located at Citicorp Center, 500 West Madison, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material may be obtained at prescribed rates from such
offices upon the payment of the fees proscribed by the SEC. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330.
The SEC maintains a web site that contains registration statements,
reports, proxy and other information regarding registrants that file
electronically with the SEC. The address for the internet site is
http://www.sec.gov.
You should only rely on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The information contained in this prospectus is
accurate only as of the date of the prospectus, regardless of the time of
delivery of this prospectus or of any sale of common stock. Neither the delivery
of this prospectus nor any sales made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of America's
Shopping Mall, Inc. since the date hereof.
We intend to furnish shareholders with annual reports containing financial
statements audited by an independent public accounting firm and quarterly
reports containing unaudited financial information for the first three quarters
of each year.
29
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRO FORMA:
AMERICA'S SHOPPING MALL, INC. AND SUBSIDIARIES
Pro forma Unaudited Condensed Financial Statements......................................................... F-2
Pro forma Unaudited Condensed Balance Sheet................................................................ F-3
Pro forma Unaudited Condensed Statement of Operations...................................................... F-4
Notes to Pro forma Unaudited Condensed Financial Statements................................................ F-5
HISTORICAL:
AMERICA'S SHOPPING MALL, INC.
Independent Auditors' Report............................................................................... F-6
Balance Sheets............................................................................................. F-7
Statements of Operations................................................................................... F-8
Statements of Shareholders' Equity......................................................................... F-9
Statements of Cash Flows................................................................................... F-10
Notes to Financial Statements.............................................................................. F-11
DEERSKIN AND JOAN COOK CATALOG BUSINESSES
Independent Auditors' Report............................................................................... F-19
Statement of Assets Acquired Subject to Certain Liabilities................................................ F-20
Statements of Revenues and Direct Operating Expenses of Business Acquired.................................. F-21
Statements of Cash Flows................................................................................... F-22
Notes to Financial Statements.............................................................................. F-23
DYNAMIC PRODUCTS CORP. AND SUBSIDIARY
Independent Auditors' Report............................................................................... F-25
Independent Auditors' Report............................................................................... F-26
Consolidated Balance Sheet................................................................................. F-27
Consolidated Statements of Operations and Accumulated Deficit.............................................. F-28
Consolidated Statements of Cash Flows...................................................................... F-29
Notes to Financial Statements.............................................................................. F-30
CREADIS PROMOTIONS, INC.
Independent Auditors' Report............................................................................... F-33
Balance Sheet.............................................................................................. F-34
Statement of Operations.................................................................................... F-35
Statement of Cash Flows.................................................................................... F-36
Notes to Financial Statements.............................................................................. F-37
HEYDEN INCORPORATED
Independent Auditors' Report............................................................................... F-39
Statement of Assets Acquired Subject to Certain Liabilities................................................ F-40
Statements of Revenues and Direct Operating Expenses of Business Acquired.................................. F-41
Statements of Cash Flows................................................................................... F-42
Notes to Financial Statements.............................................................................. F-43
</TABLE>
F-1
<PAGE>
AMERICA'S SHOPPING MALL, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following entities which are included in these pro forma unaudited
financial statements are defined below:
<TABLE>
<S> <C> <C>
America's Shopping Mall, Inc. -- the "Company"
Advanced Medical Sciences, Inc. -- "Sciences"
Deerskin and Joan Cook Catalog Businesses -- "Deerskin"
Dynamic Products Corp. and Subsidiary -- "Dynamic"
Creadis Promotions, Inc. -- "Creadis"
Heyden Incorporated -- "Heyden"
The Remarkable Group, Inc. -- "Remarkable"
</TABLE>
The unaudited pro forma statement of operations of Creadis reflects the
operations of the predecessor company, Heyden, for the period May 1, 1998
through December 9, 1998 combined with the operation of Creadis from the date of
acquisition, December 10, 1998, through April 30, 1999.
With the exception of Dynamic, the pro forma unaudited financial statements
are as of April 30, 1999, and for the year then ended. The pro forma unaudited
financial statements of Dynamic are as of June 30, 1999, and for the year then
ended.
The following unaudited pro forma condensed balance sheet at April 30, 1999
and the unaudited pro forma condensed statement of operations for the year ended
April 30, 1999 of the Company and its wholly-owned subsidiaries, all of which
were acquired at various dates after April 30, 1999 reflect the following
transactions:
(A) The purchase by an investment group on May 21, 1999 of 10,000 shares of
convertible preferred stock of the Company for $4,200,000.
(B) The merger in July 1999 of Sciences into the Company and the conversion
of each common share of Sciences into 1/30th of a common share of the
Company.
(C) The purchase by Sciences in April 1999 of certain assets of Initio,
Inc., which are being operated by Deerskin, for $3,500,000 above book
value. The consideration of approximately $5,975,000 consisted of the
Company issuing $3,500,000 principal amount of 8% convertible
debentures due June 1, 2004, cash in the amount of $473,328, and the
assumption of a $2,000,000 8% subordinated debenture of the seller due
May 1, 2003.
(D) The purchase by Remarkable, a newly formed, wholly-owned subsidiary of
the Company, of all the shares of Dynamic for 240,000 common shares of
the Company.
(E) The purchase by Remarkable of all the outstanding shares of Creadis for
$400,000 and 700,000 common shares of the Company.
The unaudited pro forma condensed balance sheet assumes all of the above
transactions occurred as of April 30, 1999. The unaudited pro forma condensed
statement of operations assumes all of the above transactions had occurred on
May 1, 1998.
These pro forma condensed financial statements should be read in
conjunction with the Notes to Pro Forma Unaudited Condensed Financial
Statements, and the financial statements of the Company and the acquired
companies and the related notes thereto.
The pro forma condensed financial statements are not necessarily indicative
of what the actual financial position and results of operations would have been
had the transactions occurred on May 1, 1998 nor do they purport to represent
the future financial condition or future operations of the Company.
F-2
<PAGE>
AMERICA'S SHOPPING MALL, INC.
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
APRIL 30, 1999
<TABLE>
<CAPTION>
AMERICA'S SHOPPING DEERSKIN DYNAMIC
MALL, INC. AND JOAN COOK PRODUCTS CORP.
(FORMERLY ADVANCED CATALOG AND SUBSIDIARY
MEDICAL SCIENCES, INC.) BUSINESSES (JUNE 30, 1999)
----------------------- ----------------- ---------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ (4,522) $ 3,600 $ (17,232)
Accounts receivable, net of allowances..... 14,582 33,787
Inventory.................................. 1,934,969 101,778
Due from Creadis Promotions, Inc........... 5,000 16,869
Due from Deerskin.......................... 34,000 (34,000) 4,482
Due from Dynamic Products Corp. &
Subsidiary............................... 17,509
Subscriptions receivable................... 140,000
Prepaid and other current assets........... 10,000 377,099 3,741
----------- ----------- -----------
201,987 2,296,250 143,425
Property and equipment, net.................. 254,122 20,737
Intangible assets, net of amortization....... 1,234,298 733,333
Other assets:................................ 7,360
Rent deposit.................................
Investment in subsidiaries...................
----------- ----------- -----------
$ 201,987 $ 3,784,670 $ 904,855
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and
other current liabilities................ $ 22,500 $ 77,044 $ 182,504
Due to Advanced Medical Sciences, Inc...... 43,500
Due to seller.............................. 1,707,626
Loans payable..............................
Due to America's Shopping Mall, Inc........ 38,498
Current portion of long-term debt.......... 80,120
Due to Dynamic Products Corp...............
Due to shareholders........................ 420,690
----------- ----------- -----------
Total current liabilities.................... 22,500 1,784,670 765,312
Long-term debt:
Subordinated debenture payable............. 2,000,000
Convertible debenture payable..............
----------- ----------- -----------
2,000,000
----------- ----------- -----------
Total liabilities............................ 22,500 3,784,670 765,312
----------- ----------- -----------
Shareholders' equity:
Preferred stock............................
Additional paid-in capital--preferred
stock....................................
Common stock............................... 1,048 7,750
Additional paid-in capital--common stock... 1,472,542 1,415,750
Common stock subscribed.................... 200,000
Accumulated deficit........................ (1,494,103) (1,283,957)
----------- ----------- -----------
179,487 139,543
----------- ----------- -----------
$ 201,987 $ 3,784,670 $ 904,855
=========== =========== ===========
<CAPTION>
PRO FORMA
CREADIS ADJUSTMENTS
PROMOTIONS, INC. DB (CR) TOTAL
------------------------ ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 3,422 $ 4,200,000 (A) $1,590,223
(1,438,498) (D)
(400,000) (B)
(22,219) (G)
(473,328) (I)
(205,000) (J)
(56,000) (K)
Accounts receivable, net of allowances..... 154,427 202,796
Inventory.................................. 35,770 2,072,517
Due from Creadis Promotions, Inc........... (21,869) (H)
Due from Deerskin.......................... (4,482) (G)
Due from Dynamic Products Corp. &
Subsidiary............................... 38,498 (D)
26,701 (G)
(38,498) (F)
(44,210) (H)
Subscriptions receivable................... 140,000
Prepaid and other current assets........... 6,622 397,462
-------- ----------- ----------
200,241 1,561,095 4,402,998
Property and equipment, net.................. 26,966 301,825
Intangible assets, net of amortization....... 128,750 2,096,381
Other assets:................................ 2,860 10,220
Rent deposit................................. 56,000 (K) 56,000
(1,400,000) (F)
1,400,000 (D)
Investment in subsidiaries................... 400,000 (B)
1,260,000 (B)
(1,660,000) (E)
432,000 (B)
(432,000) (E)
-------- ----------- ----------
$358,817 $ 1,617,095 $6,867,424
======== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and
other current liabilities................ $167,732 $ 449,780
Due to Advanced Medical Sciences, Inc...... 5,000 48,500 (H)
Due to seller.............................. 1,707,626 (I)
Loans payable.............................. 39,478 39,478
Due to America's Shopping Mall, Inc........ 38,498 (F)
Current portion of long-term debt.......... 80,120
Due to Dynamic Products Corp............... 17,579 17,579 (H)
Due to shareholders........................ 420,690
-------- ----------- ----------
Total current liabilities.................... 229,789 1,812,203 990,068
Long-term debt:
Subordinated debenture payable............. 2,000,000
Convertible debenture payable.............. (3,500,000) (I) 3,500,000
-------- ----------- ----------
(3,500,000) 5,500,000
-------- ----------- ----------
Total liabilities............................ 229,789 (1,687,797) 6,490,068
-------- ----------- ----------
Shareholders' equity:
Preferred stock............................ (10) (A) 10
Additional paid-in capital--preferred
stock.................................... (4,199,990) (A) 3,994,990
205,000 (J)
7,752 (C)
Common stock............................... 2 (940) (B) 1,988
1,400,000 (F)
Additional paid-in capital--common stock... 249,998 (1,691,060) (B) 1,345,102
2,092,000 (E)
(7,752) (C)
Common stock subscribed.................... 200,000
Accumulated deficit........................ (120,972) 2,265,702 (I) (5,164,734)
-------- ----------- ----------
129,028 70,702 377,356
-------- ----------- ----------
$358,817 $(1,617,095) $6,867,424
======== =========== ==========
</TABLE>
See notes to pro forma unaudited condensed financial statements.
F-3
<PAGE>
AMERICA'S SHOPPING MALL, INC.
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1999
<TABLE>
<CAPTION>
AMERICA'S SHOPPING
MALL, INC. DEERSKIN
(FORMERLY AND JOAN COOK DYNAMIC PRODUCTS
ADVANCED MEDICAL CATALOG CORP. AND SUBSIDIARY CREADIS PRO FORMA
SCIENCES, INC.) BUSINESSES (JUNE 30, 1999) PROMOTIONS, INC. ADJUSTMENTS
------------------- --------------- -------------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues....................... $ -- $ 9,682,096 $ 937,683 $1,527,876 $ (97,500) (L)
Cost of goods sold................. -- 3,478,436 192,310 1,140,914 --
--------- ----------- ---------- ---------- -----------
Gross profit..................... -- 6,203,660 745,373 386,962 (97,500)
(205,000) (S)
250,000 (R)
57,710 (M)
97,525 (Q)
336,000 (O)
Selling, general and
administrative................... 118,040 6,686,989 924,654 562,918 (97,500) (L)
--------- ----------- ---------- ---------- -----------
Operating loss..................... (118,040) (483,329) (179,281) (175,956) 536,235
440,000 (P)
Interest expense................... -- -- 260,808 -- (150,078) (N)
--------- ----------- ---------- ---------- -----------
Net loss........................... $(118,040) $ (483,329) $ (440,089) $ (175,956) $ 826,157
========= =========== ========== ========== ===========
Net loss per share................. $ (0.14)
=========
Weighted average
shares outstanding............... 836,751
=========
<CAPTION>
TOTAL
-----------
<S> <C>
Net revenues....................... $12,050,155
Cost of goods sold................. 4,811,660
-----------
Gross profit..................... 7,238,495
Selling, general and
administrative................... 8,731,336
-----------
Operating loss..................... (1,492,841)
Interest expense................... 550,730
-----------
Net loss........................... $(2,043,571)
===========
Net loss per share................. $ (0.88)
===========
Weighted average
shares outstanding............... 2,320,906
===========
</TABLE>
See notes to pro forma unaudited condensed financial statements.
F-4
<PAGE>
AMERICA'S SHOPPING MALL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1999
The following transactions are reflected in the pro forma adjustments
column of the balance sheet:
(A) To record the sale of 10,000 shares of Series A Senior Convertible
Preferred Stock, par value $.001, of the Company in May 1999 for
$4,200,000.
(B) To record the purchase of all the common shares of Creadis and Dynamic
by Remarkable for $400,000 and 940,000 common shares of the Company
valued at $1.80 per share.
(C) To eliminate the common stock of Dynamic and Creadis upon the purchase
of their shares by Remarkable.
(D) To reflect the payments made by the Company to Dynamic in May and June
1999.
(E) To eliminate investments in Dynamic and Creadis.
(F) To eliminate the intercompany investments and loans in Dynamic.
(G) To record intercompany transactions with Dynamic for May and June 1999.
(H) To eliminate intercompany balances.
(I) To record the cash and debenture payable portion of the purchase price
of the Deerskin assets and the charge to equity for the excess paid
over historical cost of the acquired assets.
(J) To record payment of finance and professional fees of $205,000 in
connection with the sale of convertible preferred shares (See Note A).
(K) To record a security deposit paid to assume the lease of the warehouse
used by Deerskin.
The following transactions are reflected in the pro forma adjustments
column of the statement of operations:
(L) To eliminate intercompany management fees of $97,500 between Creadis
and Dynamic.
(M) To record additional amortization expense and consulting fees of
Creadis for the period May 1, 1998 through December 9, 1998 which are
not reflected in the statement of operations of Creadis.
(N) To record reductions of interest expense of Dynamic related to the
retirement of certain long-term debt which, at June 30, 1998, consisted
of a $725,000 loan, payable in 65 installments of principal plus
interest at 14% per annum, and a $300,000 loan, payable out of
available cash flow bearing interest at 9% per annum.
(O) To record annual rent expense of $336,000 under the lease for the
Deerskin warehouse entered into in May 1999.
(P) To record annual interest expense of $160,000 on the $2,000,000 8%
subordinated debenture due May 1, 2003 and $280,000 on the $3,500,000
8% convertible debenture due June 1, 2004, both of which were issued in
connection with the purchase of the Deerskin assets.
(Q) To record amortization of intangible assets of Deerskin over 15 years.
(R) To record officer compensation payable under an agreement entered into
in May 1999.
(S) To eliminate historical officer's compensation and consulting fees in
the amount of $205,000 recorded by Remarkable and Sciences. The new
annual compensation and consulting agreement entered into in May 1999
is recorded in pro forma adjustment R, above.
F-5
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
America's Shopping Mall, Inc.
Monsey, New York
We have audited the accompanying balance sheet of America's Shopping Mall, Inc.
(formerly Advanced Medical Sciences, Inc.) as at April 30, 1999 and the related
statements of operations, shareholders' equity (deficiency), and cash flows for
each of the two years 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 audits.
We conducted our audits 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 audits of the financial statements provide 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 America's Shopping Mall, Inc.
as at April 30, 1999 and the results of its operations and cash flows for each
of the two years then ended, in conformity with generally accepted accounting
principles.
ARTHUR YORKES & COMPANY
New York, New York
July 30, 1999
F-6
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
CONSOLIDATED
------------
APRIL 30, JANUARY 31,
1999 2000
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................................. $ -- $ 685,777
Accounts receivable, net of allowance for doubtful accounts of $12,009............ -- 369,875
Inventory......................................................................... -- 2,041,984
Prepaid advertising............................................................... -- 210,508
Other prepaid expenses............................................................ 10,000 260,207
Common stock subscribed........................................................... 140,000 --
----------- ------------
Total current assets........................................................... 150,000 3,568,351
Property and equipment, net of accumulated depreciation............................. -- 249,816
Intangible assets, net of accumulated amortization.................................. -- 1,973,096
Other assets........................................................................ 56,509 173,849
----------- ------------
$ 206,509 $ 5,965,112
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft.................................................................... $ 4,522 $ --
Accounts payable.................................................................. 22,500 1,601,421
Accrued expenses payable.......................................................... -- 572,202
Due to shareholders............................................................... -- 296,940
Notes payable, current portion.................................................... -- 79,446
Other liabilities................................................................. -- 39,827
----------- ------------
Total current liabilities...................................................... 27,022 2,589,836
----------- ------------
Long-term debt:
Debentures payable................................................................ -- 5,000,000
Long-term debt, net of current portion............................................ -- 24,673
----------- ------------
-- 5,024,673
----------- ------------
Commitments (Note 8)
Shareholders' equity:
Series A Senior Convertible Preferred Stock $.001 par value, authorized 20,000
shares: issued and outstanding 10,000 shares................................... -- 10
Paid-in-capital-preferred stock................................................... -- 3,994,990
Common stock, $.001 par value; authorized 20,000,000 shares:
1,047,573 shares and 2,339,129 shares issued and outstanding at
April 30, 1999 and January 31, 2000, respectively (as retroactively
adjusted for the 1-for-30 conversion in July 1999)............................. 1,048 2,339
Paid-in-capital-common stock...................................................... 1,472,542 1,969,001
Deficit........................................................................... (1,494,103) (7,615,737)
Common stock subscribed (333,334 shares).......................................... 200,000 --
----------- ------------
179,487 (1,649,397)
----------- ------------
$ 206,509 $ 5,965,112
=========== ============
</TABLE>
See notes to financial statements.
F-7
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CONSOLIDATED
------------
FOR THE YEARS ENDED FOR THE NINE
APRIL 30,
---------------------- JANUARY 31,
1998 1999 2000
--------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues................................................................ $ -- $ -- $ 10,908,415
Cost of sales........................................................... -- -- 5,198,824
--------- --------- ------------
Gross profit....................................................... -- -- 5,709,591
Selling, general and administrative expenses............................ 7,714 118,040 6,810,270
--------- --------- ------------
Operating loss.......................................................... (7,714) (118,040) (1,100,679)
Interest expense........................................................ -- -- 396,582
--------- --------- ------------
Net loss before other income (loss)..................................... (7,714) (118,040) (1,497,261)
--------- --------- ------------
Other income (loss):
Net loss on sale of securities (including $11,051 of unrealized
loss).............................................................. -- -- (573,652)
Dividend and interest income.......................................... -- -- 44,293
--------- --------- ------------
Total other loss................................................... -- -- (529,359)
--------- --------- ------------
Net loss................................................................ $ (7,714) $(118,040) $ (2,026,620)
========= ========= ============
Net loss per common share............................................... $ (.01) $ (.14) $ (.88)
========= ========= ============
Weighted average outstanding shares (retroactively adjusted for
1-for-30 conversion).................................................. 822,573 836,751 2,292,797
========= ========= ============
</TABLE>
See notes to financial statements.
F-8
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------ -----------------------------------
ADDITIONAL SHARES ADDITIONAL AMOUNT
PAR PAID-IN- SHARES SUBSCRIBED PAR PAID-IN- SUBSCRIBED
VALUE CAPITAL ISSUED FOR VALUE CAPITAL FOR
----- ---------- ---------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 1, 1997................... 10,177,200 14,500,000 $ 50,886 $ 997,704 $ 290,000
Net loss for the year ended
April 30, 1998..................... -- -- -- -- --
---------- ----------- -------- ----------- ----------
Balance, April 30, 1998................ 10,177,200 14,500,000 50,886 997,704 290,000
Common stock subscribed for.......... 10,000,000 -- -- 200,000
Common stock issued.................. 21,250,000 (14,500,000) 106,250 288,750 (290,000)
Net loss for the year ended
April 30, 1999..................... -- -- -- -- --
---------- ----------- -------- ----------- ----------
Balance, April 30, 1999................ 31,427,200 10,000,000 $157,136 $ 1,286,454 $ 200,000
========== =========== ======== =========== ==========
As retroactively adjusted for
1-for-30 conversion in July 1999... 1,047,614 333,334 $ 1,048 $ 1,442,542 $ 200,000
Common stock issued.................. -- -- 333,334 (333,334) 333 199,667 (200,000)
Common stock issued on acquisition of
subsidiaries....................... -- -- 940,000 -- 940 1,691,060 --
Accumulated deficits and paid-in-
capital of merged companies at
May 1, 1999........................ -- -- -- -- -- 627,750 --
Elimination of investment in merged
companies.......................... -- -- -- -- -- (2,092,000) --
Preferred stock issued............... $10 $4,199,990
Issue costs of preferred stock....... -- (205,000) -- -- -- -- --
Common stock issued on conversion of
debentures in January 2000......... -- -- 18,181 -- 18 99,982 --
Net loss for the nine months ended
January 31, 2000................... -- -- -- -- -- -- --
Elimination of investment in
intangible assets of merged
companies under common
control............................ -- -- -- -- -- -- --
Preferred dividends paid............. -- -- -- -- -- -- --
--- ---------- ---------- ----------- -------- ----------- ----------
Balance January 31, 2000 (unaudited)... $10 $3,994,990 2,339,129 -- $ 2,339 $ 1,969,001 $ --
=== ========== ========== =========== ======== =========== ==========
<CAPTION>
DEFICIT
-----------
<S> <C>
Balance, May 1, 1997................... $(1,368,349)
Net loss for the year ended
April 30, 1998..................... (7,714)
-----------
Balance, April 30, 1998................ (1,376,063)
Common stock subscribed for.......... --
Common stock issued.................. --
Net loss for the year ended
April 30, 1999..................... (118,040)
-----------
Balance, April 30, 1999................ $(1,494,103)
===========
As retroactively adjusted for
1-for-30 conversion in July 1999... $(1,494,103)
Common stock issued.................. --
Common stock issued on acquisition of
subsidiaries....................... --
Accumulated deficits and paid-in-
capital of merged companies at
May 1, 1999........................ (1,335,411)
Elimination of investment in merged
companies.......................... --
Preferred stock issued...............
Issue costs of preferred stock....... --
Common stock issued on conversion of
debentures in January 2000......... --
Net loss for the nine months ended
January 31, 2000................... (2,026,620)
Elimination of investment in
intangible assets of merged
companies under common
control............................ (2,555,203)
Preferred dividends paid............. (204,400)
-----------
Balance January 31, 2000 (unaudited)... $(7,615,737)
===========
</TABLE>
See notes to financial statements.
F-9
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
CONSOLIDATED
----------------
FOR THE YEAR FOR THE YEAR FOR THE NINE
ENDED ENDED MONTHS ENDED
APRIL 30, 1998 APRIL 30, 1999 JANUARY 31, 2000
-------------- -------------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
Cash used for operating activities:
Net loss.......................................................... $ (7,714) $ (118,040) $ (2,026,620)
-------- ---------- ------------
Adjustments to reconcile net loss to net cash
used in operating activities, net of acquisition:
Depreciation and amortization................................. -- -- 224,929
Write-off of organization fees................................ -- -- 41,006
(Increase) decrease in:
Accounts receivable........................................ -- -- (166,814)
Inventory.................................................. -- -- 28,568
Prepaid assets and other assets............................ -- -- (218,456)
Increase (decrease) in:
Advance to companies subsequently acquired................. -- (56,509) --
Prepaid expenses........................................... -- (10,000) --
Accounts payable and accrued expenses...................... 7,473 (14,973) 1,602,567
-------- ---------- ------------
Total adjustments........................................ 7,473 (81,482) 1,511,800
-------- ---------- ------------
Cash used in operating activities................................. (241) (199,522) (514,820)
-------- ---------- ------------
Cash provided by investing activities:
Purchase of equipment......................................... -- -- (36,245)
Acquisition of business....................................... -- -- (873,328)
-------- ---------- ------------
Net cash used in investing activities............................. -- -- (909,573)
-------- ---------- ------------
Cash provided by financing activities:
Payments received toward common stock subscribed.................. -- 195,000 140,000
Issuance of preferred stock....................................... -- -- 3,995,000
Preferred stock dividends paid.................................... -- -- (204,400)
Decrease in:
Due to shareholders............................................. -- -- (171,782)
Notes payable................................................... -- -- (1,204,648)
Loans payable................................................... -- -- (39,478)
Debentures payable.............................................. -- -- (400,000)
-------- ---------- ------------
Net cash provided by financing activities........................... -- 195,000 2,114,692
-------- ---------- ------------
Increase (decrease) in cash and cash equivalents.................... (241) (4,522) 690,299
Cash and cash equivalents beginning of period....................... 241 -- (4,522)
-------- ---------- ------------
Cash and cash equivalents end of period............................. $ -- $ (4,522) $ 685,777
======== ========== ============
Supplemental cash flows information:
Cash paid for interest............................................ $ -- $ -- $ 337,411
-------- ---------- ------------
Non-cash investing transaction:
18,181 common shares issued upon conversion of debentures......... $ -- $ -- $ 100,000
======== ========== ============
Details of acquisitions:
Assets acquired................................................... -- -- 5,125,750
Liabilities assumed............................................... -- -- 4,415,286
-------- ---------- ------------
-- -- 710,464
-------- ---------- ------------
Debentures given upon acquisitions................................ -- -- 3,500,000
Accumulated deficits and paid-in-capital
of merged companies............................................. -- -- (707,661)
Value of common stock issued in mergers........................... -- -- 1,692,000
Elimination of investment in intangibles under common control..... -- -- (2,555,203)
Elimination of investment in merged companies..................... -- -- (2,092,000)
-------- ---------- ------------
$ -- $ -- $ (162,864)
======== ========== ============
Cash paid for acquisition........................................... $ -- $ -- $ 873,328
======== ========== ============
</TABLE>
See notes to financial statements.
F-10
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JANUARY 31, 2000 AND THE
NINE MONTHS THEN ENDED IS UNAUDITED)
1. ORGANIZATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND HISTORICAL DATA:
Organization:
In July 1999 America's Shopping Mall, Inc. (the "Company"), which was
incorporated on May 4, 1999, merged with Advanced Medical Sciences, Inc.
("Sciences") (see Note 6A) and became the surviving company.
During 1995 and 1996, Sciences abandoned its health care and
pharmaceutical business and ceased operations.
At April 30, 1999, the Company's management had been seeking merger
possibilities with active companies (see Note 6).
Nature of operations:
The Company is engaged in mail order retail sale of consumer products
principally through mail order catalogs and the sale of customized products
used primarily in sales promotions. The Company also operated a close-out
retail store which was abandoned in December 1999 (see Note 12).
Principles of consolidation:
The unaudited consolidated financial statements as of January 31, 2000
and for the nine months then ended include the accounts of the Company and
its wholly-owned subsidiaries, The Remarkable Group, Inc. ("Remarkable")
and The Deerskin Companies, Inc. ("Deerskin"). Remarkable, a newly formed
subsidiary of the Company, had purchased all the outstanding common shares
of Dynamic Products Corp. ("Dynamic") and Creadis Promotions. Dynamic's
statement of operations and cash flows are included for the nine month
period ended January 31, 2000.
Intercompany balances and transactions have been eliminated in
consolidation.
All of these acquisitions occurred in May 1999 (see Note 6).
Revenue recognition:
Deerskin: Revenue from product sales is recognized on the day the
order is received from the customer and is then removed from inventory.
Provision for returns and refunds is provided in the same period the
related sales are recorded based on historical information.
Remarkable: Revenue from product sales is recognized upon shipment of
merchandise and is then removed from inventory.
Return and refunds represent an insignificant percentage of sales.
Inventory:
Inventories, consisting principally of finished goods, are valued at
the lower of cost (first-in, first-out basis) or market. The inventory of
Deerskin for the Deerskin catalog business is composed of clothing,
principally leather and suede, and accounts for approximately 77% of the
dollar value of the Company's inventory; its inventory for the Joan Cook
catalog business is composed of housewares and gift products and accounts
for approximately 15% of the dollar value of the Company's inventory.
F-11
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 2000 AND THE
NINE MONTHS THEN ENDED IS UNAUDITED)
1. ORGANIZATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND HISTORICAL
DATA:--(CONTINUED)
The inventory of Remarkable, composed of housewares and novelties,
accounts for approximately 8% of the Company's inventory.
The Company operated a close out store for excess inventory that was
closed in December 1999. All excess inventory has been liquidated.
The Company calculates its inventory from perpetual records on an
interim basis and from actual physical inventory on an annual basis.
Property and equipment:
Property and equipment are stated at cost less accumulated
depreciation. Depreciation will be provided over the estimated useful lives
of the assets using the straight-line method, principally over 10 years.
Prepaid advertising costs:
Costs of producing and mailing catalogs are deferred and amortized
over the estimated productive life of each mailing based on projected
sales. As prescribed under SOP 93-7, the Company only capitalizes as assets
those costs which are incremental direct costs with independent third
parties and payroll and payroll-related costs of employees who are directly
associated with, and devote time to, the advertising. The Company assesses
the realizability of the assets created based on the likelihood of
achieving the estimated revenues on a quarterly basis. No write downs were
required to report the capitalized advertising expenses at net realizable
value.
Advertising expense for the nine months ended January 31, 2000
amounted to $3,360,248.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosures 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.
Unaudited financial statements:
The financial statements as of January 31, 2000 and for the nine
months then ended are unaudited and are not necessarily indicative of the
results that may be expected for the year ending April 30, 2000. In the
opinion of management, the financial statements include all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation
of the Company's financial position and results of operations.
Intangible assets:
The cost of customer lists, trademarks, trade-names and copyrights and
telephone numbers are being amortized over 10 to 15 years; a covenant not
to complete is being amortized over 5 years; and goodwill is being
amortized over 15 years.
F-12
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 2000 AND THE
NINE MONTHS THEN ENDED IS UNAUDITED)
1. ORGANIZATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND HISTORICAL
DATA:--(CONTINUED)
Earnings (loss) per share:
Earnings (loss) per share is calculated based on the weighted average
number of shares outstanding during the period. The effect of possible
conversion of debentures and preferred shares and the exercise of warrants
have not been included in the calculation of earnings per share as their
effect would be anti-dilutive.
2. PROPERTY AND EQUIPMENT:
Major classifications of property and equipment are summarized as
follows:
<TABLE>
<CAPTION>
JANUARY 31,
2000
-----------
<S> <C>
Equipment.............................................................. $ 213,802
Transportation equipment............................................... 49,471
Furniture and fixtures................................................. 75,811
Leasehold improvement.................................................. 56,205
---------
395,289
Less: Accumulated depreciation and amortization........................ 145,473
---------
$ 249,816
=========
</TABLE>
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
AMORTIZED
OVER
AMOUNT YEARS
---------- ---------
<S> <C> <C>
Customer lists............................................ $2,312,874 10-15
Trademarks and copyrights................................. 145,000 10-15
Telephone numbers......................................... 50,000 15
Covenant not to compete................................... 45,000 5
Goodwill.................................................. 45,000 15
----------
2,597,874
Less: Accumulated amortization............................ 624,778
----------
$1,973,096
==========
</TABLE>
The Company is amortizing the intangible assets on a straight-line
basis based on its analysis and estimate of the expected useful life of the
assets.
4. SUBSCRIBED SHARES:
On February 12, 1997, a shareholder of Sciences agreed to be
personally liable for, and to pay, $290,000 due the Company's creditors in
exchange for 14,500,000 of Sciences' common shares. These shares were
issued in April 1999.
In March and April 1999, shareholders of Sciences subscribed for a
total of 16,750,000 common shares of Sciences (including the 3,000,000
shares mentioned below) at a total price of $335,000. At April 30, 1999,
$140,000 of the purchase price was still unpaid. The balance was received
by Sciences
F-13
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 2000 AND THE
NINE MONTHS THEN ENDED IS UNAUDITED)
4. SUBSCRIBED SHARES:--(CONTINUED)
in May 1999. In April 1999, 6,750,000 of the shares were issued and the
remaining 10,000,000 shares were issued in May 1999.
In April 1999, $60,000 of unpaid consulting fees due the president of
Sciences were converted into a total of 3,000,000 common shares.
5. CONSULTING AND MANAGEMENT AGREEMENTS:
The Company had a consulting agreement with its president which
provided for a monthly fee of $7,500 through March 31, 1999.
In addition, the Company had a management agreement with a corporation
controlled by the president of the Company to provide office space,
secretarial, telephone and other services for a monthly fee of $2,500
through April 30, 1999.
6. SUBSEQUENT EVENTS:
(A) In May 1999, a venture capital firm, Pioneer Ventures Associates
Limited Partnership ("Pioneer"), purchased 10,000 shares of Series
A Senior Convertible Preferred Stock of the Company for
$4,200,000. The 10,000 preferred shares are convertible into
1,200,000 common shares at a conversion price of $3.50 per share.
The conversion price may be reset to a lower value in the future
should the average closing bid price of the Company's common stock
as reported on the OTC Bulletin Board be below $3.50. The
conversion price and the number of shares of common stock issuable
upon conversion of the preferred stock is also subject to further
adjustment in order to protect against dilution. The holders of
the preferred stock are entitled to cumulative annual cash
dividends at the rate of 8% of the stated value ($420 per share)
per annum, and a liquidation preference of $1,000 per share. The
preferred shareholders acquired warrants to purchase 1,000,000
common shares of the Company at $4.50 per share at any time until
May 21, 2004, subject to certain adjustments. In February 2000,
the option price to purchase the 1,000,000 shares was lowered to
$4.00 per share.
The preferred shares have equal voting rights with the
common shares, as if the preferred shares were converted into
common shares. The Company has the right to redeem the preferred
shares at the stated value ($420 per share) plus an annual return
of 25% from the original issue date to the dateof redemption.
The Company may, upon approval by a majority of its entire
board of directors, elect to pay dividends on the preferred
shares, by issuing additional preferred shares of the same class.
If the Company elects to pay any dividend by the issuance of
preferred shares in lieu of a cash dividend, the dividend shall be
calculated at the rate of 13% of the stated value per share per
annum.
Pioneer and certain principal common shareholders are
parties to a voting and shareholders agreement dated May 21, 1999
whereby, as long as Pioneer owns any of the preferred or common
shares obtained through conversion of the preferred shares or
any amounts are outstanding under the $2,000,000 subordinated
debenture due May 1, 2003, each of the parties shall vote all of
their common shares to elect one designee of the preferred
shareholder as a director. In the event of default under the
voting and shareholders agreement, the related investment
agreement or the subordinated debenture, the parties to the
voting and shareholders
F-14
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 2000 AND THE
NINE MONTHS THEN ENDED IS UNAUDITED)
6. SUBSEQUENT EVENTS:--(CONTINUED)
agreement have agreed to vote in favor of a number of designees
selected by Pioneer that will constitute a majority of the
board of directors.
(B) In May 1999, the Company purchased the assets of the Deerskin and
the Joan Cook catalog businesses, subject to certain liabilities,
from Initio, Inc. ("Initio"), a public company, for total
consideration of approximately $5,975,000, which the Company paid
by:
I. Assuming a $2,000,000 8% subordinated debenture due May 1,
2003 of Initio held by Pioneer. See Note 6G.
II. Issuing $3,500,000 of 8% convertible debentures due June 1,
2004 (see Note 7B).
III. Making a cash payment of approximately $475,000.
The acquisition was accounted for as a reorganization of
commonly-controlled entities and, accordingly, historical
balances were carried over and the portion of the purchase
price in excess of the net assets of $3,500,000, less actual
net customer lists acquired of $1,234,298, was charged to
shareholders' equity. The Company and Initio are considered to
be under the common control of Pioneer due to the beneficial
ownership by Pioneer of 22% of the common shares of Initio and
80% of the common shares of the Company. Pioneer's beneficial
ownership results from voting agreements Pioneer has with both
Initio and the Company (see Note 6A). 1,200,000 shares are
contingently issuable to Pioneer upon conversion of the
Company's Series A Senior Convertible Preferred Stock and
1,000,000 common shares are contingently issuable upon the
exercise of a stock purchase warrant held by Pioneer.
In connection with the asset purchase, Pioneer agreed to
the assumption by the Company of $2,000,000 of a total of
$3,000,000 of Initio's 8% subordinated debentures held by
Pioneer. The Company has accounted for this assumption as a
reduction in the net assets acquired.
The assets acquired are operated by Deerskin.
(C) In May 1999, Remarkable, a newly formed wholly-owned subsidiary of
the Company, purchased all outstanding common shares of Dynamic
for 240,000 common shares of the Company. Certain former
shareholders of Dynamic are principal shareholders of the Company.
The purchase was accounted for as a reorganization of
commonly-controlled entities and, accordingly, historical balances
were carried over and the purchase price of $432,000 was charged
to shareholders' equity. The purchase price was arrived at by
valuing the shares issued at $1.80 per share, the approximate
market value of the shares when issued.
Dynamics prior merger in 1996 with Remarkable is also
considered to be a reorganization of commonly-controlled
entities and accordingly $300,000 of goodwill recorded in 1997
was charged to shareholder's equity.
(D) In May 1999, Remarkable purchased all the outstanding shares of
Creadis Promotions, Inc. ("Creadis") for $400,000 in cash and
700,000 common shares of the Company. Creadis is a corporation
formed by certain principal shareholders of the Company in
December 1998 to purchase the operating assets of Heyden
Incorporated for cash and notes of approximately $360,000. The
purchase was accounted for as a reorganization of
commonly-controlled entities and, accordingly, historical balances
were carried over and the purchase price of $1,660,000 was charged
to shareholders' equity. The purchase price was arrived at by
valuing the shares
F-15
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 2000 AND THE
NINE MONTHS THEN ENDED IS UNAUDITED)
6. SUBSEQUENT EVENTS:--(CONTINUED)
issued at $1.80 per share, the approximate market value of the
shares when issued plus the $400,000 in cash.
(E) In May 1999 the Company entered into a compensation agreement with
the president of the Company for an annual salary of $250,000. The
agreement expires on April 30, 2004.
(F) On July 14, 1999, Sciences merged with and into the Company, a
newly formed subsidiary incorporated by Sciences on May 4, 1999
under the name America's Shopping Mall, Inc., which became the
surviving corporation. In connection with the merger, each
outstanding common share of Sciences was converted into 1/30th of
a common share of the Company and all fractional shares were
rounded up to the nearest whole share.
(G) In April 2000, the Company entered into an agreement with Pioneer
Venture Associates Limited Partnership pursuant to which Pioneer
exercised 500,000 of its 1,000,000 warrants to purchase common
stock, at a reduced exercise price of $4.00 per share. In payment
of the exercise price of the warrants, Pioneer canceled the
$2,000,000 subordinated debenture assumed by the Company in
connection with the purchase of Deerskin and Joan Cook.
Additionally, Pioneer assigned the remaining 500,000 warrants to
Suffern Hills Associates LLC, an entity controlled by John L.
Patten, a principal holder of America's Shopping Mall common
stock. The warrants assigned to Suffern Hills Associates LLC have
a reduced exercise price of $4.00 per share if exercised prior to
July 31, 2000. In order to induce Pioneer to enter into this
transaction, the Company issued Pioneer 600,000 warrants on the
same terms and conditions as those being exercised and assigned.
7. LONG-TERM DEBT:
Long-term debt consists of:
(A) A $2,000,000 subordinated debenture due May 1, 2003 with 8%
interest per annum payable quarterly. Such indebtedness is senior
to the $3,500,000 of convertible debentures (see below) and
subordinated to all senior indebtedness as defined.
(B) $3,500,000 of convertible debentures due June 1, 2004 with 8%
interest per annum payable quarterly. The debentures may be
redeemed in whole or in part at the option of the Company on or
after June 1, 2001 at a redemption price equal to the percentage
of the principal amount set forth below:
If redeemed during the 12-month period beginning on June 1
of each of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ------------------------------------------------------------- ----------
<S> <C>
2001......................................................... 105%
2002......................................................... 104%
2003......................................................... 103%
</TABLE>
and at 100% of the principal amount thereafter.
The convertible debentures are convertible into common
shares at a conversion price of $5.50 per share; provided,
however, that if on or before December 31, 1999 the Company
shall repay to the holder of $3,400,000 principal amount of the
debentures $400,000 of such
F-16
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 2000 AND THE
NINE MONTHS THEN ENDED IS UNAUDITED)
7. LONG-TERM DEBT:--(CONTINUED)
principal amount plus interest accrued to the date of repayment,
the initial conversion price of these convertible debentures shall
be increased from $5.50 to $6.00. In December 1999, the Company
repaid $400,000 principal amount of the convertible debentures
held by such holder and the conversion price of that holder's
remaining $3,000,000 of convertible debentures increased to
$6.00. In January 2000, the remaining $100,000 of convertible
debentures were converted into 18,181 common shares at a price
of $5.50 per share.
The debentures are secured by a security interest in
certain intangible assets of the Company, including customer
lists, mail order software, artwork, trademarks and copyrights.
(C) A note payable in the amount of $37,363, maturing in 60 monthly
installment of $705 plus interest at 8% per annum. Final payment
is due in December 2003. The note is guaranteed by two of the
Company's shareholders.
8. COMMITMENTS:
The Company is obligated at January 31, 2000 under various leases for
warehouse and office facilities expiring from March 2000 through May 2010.
A warehouse lease providing for annual rent of $336,000 expires in April
2000.
In September 1999, the Company entered into two leases of space in a
New Jersey building for five years commencing in February 2000 at an annual
aggregate rental of $195,054. The Company intends to move and consolidate
its facilities located elsewhere in New Jersey and in New York into this
new building, and is currently negotiating for release of its obligations
under the leases to the other facilities, totaling $270,390 for the
remaining terms of the leases. The Company, as of January 31, 2000, had
recognized an estimated loss of $50,000 in regards to these negotiations
with the landlords.
In February 2000, the Company entered into two leases of space in
Pompano Beach, Florida. One of these leases is for warehouse space,
commencing on the later of (1) 30 days after certain improvements are made
or (2) May 1, 2000 and ending 120 months thereafter, for an initial annual
rental of $496,500 including specified estimated utilities and common
charges. The other lease is a residential lease for one year, commencing
February 15, 2000, at an annual rental of $36,000.
Rent for the nine months ended January 31, 2000 amounted to $372,700.
Annual rent commitments are as follows:
<TABLE>
<CAPTION>
JANUARY 31,
----------------------------
INCLUSIVE OF
LEASES BEING LEASES BEING
NEGOTIATED NEGOTIATED
APRIL 30 FOR RELEASE FOR RELEASE
-------- ------------ ------------
<S> <C> <C> <C>
2000........................................ $465,873 $ -- $ --
2001........................................ 77,020 761,697 74,160
2002........................................ 74,160 771,548 72,730
2003........................................ 68,440 766,594 57,000
2004........................................ 52,250 777,667 57,000
2005........................................ -- 741,540 9,500
Thereafter.................................. -- 3,017,510 --
-------- ---------- --------
$737,743 $6,836,556 $270,390
======== ========== ========
</TABLE>
F-17
<PAGE>
AMERICA'S SHOPPING MALL, INC.
(FORMERLY ADVANCED MEDICAL SCIENCES, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 2000 AND THE
NINE MONTHS THEN ENDED IS UNAUDITED)
8. COMMITMENTS:--(CONTINUED)
The Company is obligated to make payments of $6,120 per month under a
consulting agreement expiring in December 2003.
9. COMMON SHARES RESERVED FOR ISSUANCE:
At January 31, 2000, common shares of the Company were reserved for
issuance as follows upon the possible:
<TABLE>
<S> <C>
Conversion of preferred shares......................................... 1,200,000
Conversion of debentures............................................... 500,000
Exercise of warrants................................................... 1,000,000
---------
2,700,000
=========
</TABLE>
10. INCOME TAXES:
The Company's net operating losses through April 30, 1999 are
effectively eliminated under the change in ownership rules of the Internal
Revenue Service. Valuation allowances have been provided against the income
tax benefit of net losses for the nine months ended January 31, 2000 in the
amount of $700,000.
11. DUE TO SHAREHOLDERS:
Loans payable to shareholders in the amount of $296,940 bear interest
at 7% per annum.
Interest expense to shareholders for the nine months ended
January 31, 2000 amounted to $30,875.
12. CLOSURE OF CLOSE-OUT STORE:
In December 1999, the Company closed its close-out retail store in
Danvers, Massachusetts. Operations for the nine months ended January 31,
2000 are summarized as follows:
<TABLE>
<S> <C>
Revenues............................................................... $ 327,878
Costs and expenses..................................................... 576,448
---------
Loss................................................................... $(248,570)
=========
</TABLE>
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
America's Shopping Mall, Inc.
Monsey, New York
We have audited the accompanying statements of assets acquired subject to
certain liabilities of Deerskin and Joan Cook Catalog Businesses as of April 30,
1999 and the related statements of revenues and direct operating expenses of
business acquired, and cash flows for each of the two years 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 audits.
We conducted our audits 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 audits of the financial statements provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets acquired subject to certain liabilities as of
April 30, 1999 and the results of its operations and cash flows for each of the
two years then ended, in conformity with generally accepted accounting
principles.
ARTHUR YORKES & COMPANY
New York, New York
September 10, 1999
F-19
<PAGE>
DEERSKIN AND JOAN COOK CATALOG BUSINESSES
STATEMENT OF ASSETS ACQUIRED SUBJECT TO CERTAIN LIABILITIES
APRIL 30, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash.............................................................................................. $ 3,600
Accounts receivable............................................................................... 14,582
Inventory......................................................................................... 1,934,969
Prepaid advertising and other prepaid expenses.................................................... 362,333
Other current assets.............................................................................. 14,766
----------
Total current assets................................................................................ 2,330,250
Property and equipment.............................................................................. 254,122
Customer lists, net of amortization of $228,574..................................................... 1,234,298
----------
$3,818,670
==========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable.................................................................................. $ 77,044
Due to affiliated company......................................................................... 34,000
----------
Total current liabilities........................................................................... 111,044
Long term debt:
Subordinated debenture payable.................................................................... 2,000,000
----------
Total liabilities................................................................................... 2,111,044
Commitments (Note 3)
Equity in acquired assets........................................................................... 1,707,626
----------
$3,818,670
==========
</TABLE>
See notes to financial statements.
F-20
<PAGE>
DEERSKIN AND JOAN COOK CATALOG BUSINESSES
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF BUSINESS ACQUIRED
<TABLE>
<CAPTION>
FOR THE YEARS ENDED APRIL
30,
---------------------------
1999 1998
---------- -----------
<S> <C> <C>
Revenues.......................................................................... $9,682,096 $11,133,544
Cost of goods sold................................................................ 3,478,436 4,632,363
---------- -----------
6,203,660 6,501,181
Selling, general and administrative expenses...................................... 6,686,989 7,367,641
---------- -----------
Operating loss.................................................................... $ (483,329) $ (866,460)
========== ===========
</TABLE>
See notes to financial statements.
F-21
<PAGE>
DEERSKIN AND JOAN COOK CATALOG BUSINESSES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
APRIL 30,
-----------------------
1999 1998
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................................. $(483,329) $ (866,460)
--------- ----------
Adjustment to reconcile net loss to cash provided by operating activities:
Depreciation and amortization................................................... 94,063 103,898
(Increase) decrease in:
Inventory.................................................................... (144,710) 1,457,146
Prepaid assets and other assets.............................................. 202,717 438,353
Decrease in accounts payable, accrued expenses and other current liabilities.... (18,015) (321,166)
--------- ----------
Total adjustments............................................................ 134,055 1,678,231
--------- ----------
Net cash provided by (used in) operating activities............................. (349,274) 811,771
--------- ----------
Cash flows from investing activities:
Purchase of fixed assets............................................................. (189,718) (39,268)
--------- ----------
Net cash used in investing activities.................................................. (189,718) (39,268)
--------- ----------
Adjustment to cash flows for items not included in acquisition......................... 542,592 (772,503)
--------- ----------
Increase in cash and cash equivalents.................................................. 3,600 --
Cash and cash equivalents beginning of period.......................................... -- --
--------- ----------
Cash and cash equivalents end of period................................................ $ 3,600 $ --
========= ==========
</TABLE>
See notes to financial statements.
F-22
<PAGE>
DEERSKIN AND JOAN COOK CATALOG BUSINESSES
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of operations:
The Deerskin and Joan Cook catalog businesses consist of mail order retail
sale of consumer products, principally through mail order catalogs.
Basis of presentation:
The financial statements reflect the assets acquired subject to certain
liabilities from Initio, Inc. ("Initio"), a public company, as of May 1, 1999 by
America's Shopping Mall, Inc. (the "Company") and the results of the operations
purchased for each of the two years ended April 30, 1999 and 1998.
These assets and liabilities were assigned to The Deerskin Companies, Inc.,
a subsidiary of the Company, subsequent to May 1, 1999.
Inventory:
Inventories, consisting principally of finished goods, are valued at the
lower of cost (first-in, first-out basis) or market.
Property and equipment:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation will be provided over the estimate useful lives of the assets using
the straight-line method, principally over 10 years.
Prepaid advertising costs:
Costs of producing and mailing catalogs are deferred and amortized over the
estimated productive life of each mailing based on projected sales. As
prescribed under SOP 93-7, The Company only capitalizes as assets those costs
which are incremental direct costs with independent third parties and payroll
and payroll-related costs of employees who are directly associated with, and
devote time to, the advertising. The Company assesses the realizability of the
assets created based on the likelihood of achieving the estimated revenues on a
quarterly basis. No writedowns were required to report the capitalized
advertising expenses at net realizable value.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosures 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.
2. ASSETS ACQUIRED SUBJECT TO LIABILITIES:
The net assets acquired from Initio by the Company for approximately
$5,975,000 was paid by:
I. Assumption by the Company of a $2,000,000 8% subordinated debenture due
May 1, 2003 of Initio.
II. Issuance by the Company of $3,500,000 of 8% convertible debentures due
June 1, 2004.
III.
Payment of approximately $475,000 in cash.
F-23
<PAGE>
DEERSKIN AND JOAN COOK CATALOG BUSINESSES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 30, 1999 AND 1998
3. COMMITMENTS:
The Company entered into a lease for warehouse facilities located in Carson
City, Nevada in May 1999 for a one year period ending April 30, 2000 for an
annual rental of $336,000.
The Company has also assumed a lease for office premises in Teterboro, New
Jersey expiring in March 2004 for an annual rental of $57,000 and is paying a
monthly rental of $1,050 for property in Danvers, Massachusetts through
April 30, 2000.
Annual rental commitments are as follows:
<TABLE>
<CAPTION>
APRIL 30, AMOUNT
- -------------------------------------------------------------- --------
<S> <C>
2000.......................................................... $405,600
2001.......................................................... 57,000
2002.......................................................... 57,000
2003.......................................................... 57,000
2004.......................................................... 52,250
</TABLE>
4. CONSULTING AGREEMENT:
The Company has entered into an agreement dated May 1999 to pay a
consulting fee to the former officers of Initio for a total of $4,000 per month
through December 31, 1999.
5. PRO FORMA ADJUSTMENT:
All of the Company's cost of doing business are reflected in the statement
of revenues and direct operating expenses of business acquired except for the
costs associated with the warehouse which was not purchased by the Company.
The following pro forma statement of operations reflects the rent expense
of the warehouse leased by the Company in May 1999:
<TABLE>
<CAPTION>
APRIL 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues....................................................... $ 9,682,096 $11,133,544
Costs and expenses............................................. 10,165,425 12,000,004
----------- -----------
Net loss as reported........................................... (483,329) (866,460)
Pro forma adjustment:
Rent expense under lease entered into........................ 336,000 336,000
----------- -----------
Pro forma loss................................................. $ (819,329) $(1,202,460)
=========== ===========
</TABLE>
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Dynamic Products Corp. and Subsidiary
Monsey, New York
We have audited the accompanying consolidated balance sheet of Dynamic Products
Corp. and Subsidiary as of June 30, 1999 and the related consolidated statement
of operations, accumulated deficit, and cash flows for the year then ended.
These consolidated 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. The financial statements of Dynamic Products
Corp. and Subsidiary as of June 30, 1998 were audited by other auditors whose
report dated July 23, 1998 on these statements included an explanatory paragraph
relating to a going concern uncertainty due to net capital and working capital
deficiencies as well as losses from operations.
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 Dynamic Products
Corp. and Subsidiary as of June 30, 1999, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
See management plans in regards to working capital deficiency (Note 2).
ARTHUR YORKES & COMPANY
New York, New York
August 17, 1999
F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Dynamic Products Corp. and Subsidiary
Monsey, New York
We have audited the consolidated statements of operations and accumulated
deficit, and cash flows of Dynamic Products Corp. and subsidiary for the year
ended June 30, 1998. 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 financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Dynamic
Products Corp. and subsidiary for the year ended June 30, 1998 in conformity
with generally accepted accounting principles.
SMALLBERG SORKIN & COMPANY LLP
July 23, 1998
New York, New York
F-26
<PAGE>
DYNAMIC PRODUCTS CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Accounts receivable, net of allowances of $12,009................................................ $ 33,787
Inventory........................................................................................ 101,778
Due from affiliated companies.................................................................... 21,351
Prepaid assets and other current assets.......................................................... 3,741
-----------
Total current assets............................................................................... 160,657
Property and equipment, net........................................................................ 20,737
Intangible and other assets........................................................................ 740,693
-----------
$ 922,087
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft................................................................................... $ 17,232
Accounts payable, accrued expenses and other current liabilities................................. 182,504
Due to affiliated companies...................................................................... 81,998
Notes payable.................................................................................... 80,120
Due to former shareholders....................................................................... 420,690
-----------
Total current liabilities.......................................................................... 782,544
-----------
Commitments (Note 7)
Shareholders' equity:
Common stock, 25,000 shares authorized; no par value;
775 shares issued and outstanding............................................................. 7,750
Additional paid-in-capital....................................................................... 1,415,750
Retained earnings (deficit)...................................................................... (1,283,957)
-----------
139,543
-----------
$ 922,087
===========
</TABLE>
See notes to financial statements.
F-27
<PAGE>
DYNAMIC PRODUCTS CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE
30,
--------------------------
1999 1998
----------- ---------
<S> <C> <C>
Net revenues....................................................................... $ 937,683 $ 885,558
Cost of goods sold................................................................. 192,310 227,632
----------- ---------
Gross profit.................................................................. 745,373 657,926
Selling, general and administrative expenses....................................... 924,654 972,100
----------- ---------
Operating loss..................................................................... (179,281) (314,174)
Interest expense................................................................... 260,808 195,739
----------- ---------
Net loss...................................................................... (440,089) (509,913)
Accumulated deficit, beginning of year............................................. (885,168) (375,255)
Correction of prior period error (Note 7).......................................... 41,300 --
----------- ---------
Accumulated deficit, end of year................................................... $(1,283,957) $(885,168)
=========== =========
</TABLE>
See notes to financial statements.
F-28
<PAGE>
DYNAMIC PRODUCTS CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JUNE 30,
------------------------
1999 1998
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................................ $ (440,089) $(509,913)
----------- ---------
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization.................................................. 132,099 114,589
Decrease in:
Accounts receivable......................................................... 37,214 38,931
Inventory................................................................... 14,099 23,930
Prepaid assets and other assets............................................. 22,100 57,180
Decrease in:
Accounts payable, accrued expenses and other current liabilities............ (55,832) (49,115)
----------- ---------
Total adjustments................................................................... 149,680 185,515
----------- ---------
Net cash used in operating activities................................................. (290,409) (324,398)
----------- ---------
Cash flows from investing activities:
Purchase of property and equipment.................................................. (2,819) --
----------- ---------
Net cash used in investing activities................................................. (2,819) --
----------- ---------
Cash flows from financing activities:
Payments of notes and loans payable................................................. (1,305,371) (315,641)
Increase in:
Notes payable.................................................................... -- 623,698
Due to former shareholders....................................................... 120,690 --
Due to affiliates................................................................ 60,647 --
Equity investment by parent company.............................................. 1,400,000 --
----------- ---------
Net cash provided by financing activities............................................. 275,966 308,057
----------- ---------
Net decrease in cash and cash equivalents............................................. (17,262) (16,341)
Cash at beginning of year............................................................. 30 16,371
----------- ---------
Cash (overdraft) at end of year....................................................... $ (17,232) $ 30
=========== =========
Supplemental disclosures of cash flows information:
Cash paid during the period for:
Interest......................................................................... $ 145,968 $ 142,223
=========== =========
Non-cash investing transactions:
Elimination of prior years' goodwill to reflect pooling of commonly controlled
entities against equity investment by parent..................................... $ (354,250) $ --
=========== =========
</TABLE>
See notes to financial statements.
F-29
<PAGE>
DYNAMIC PRODUCTS CORP. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of operations:
Dynamic Products Corp. ("Dynamic") was organized under the laws of the
State of Nevada on October 2, 1996. On November 21, 1996 (effective October 1,
1996) Dynamic purchased all of the issued and outstanding capital stock of
Remarkable Office Products, Inc. ("Remarkable") for $1,406,250. Dynamic is
engaged in mail order retail sale of consumer products, principally through mail
order catalogues.
In May 1999, The Remarkable Group, Inc., a newly formed wholly-owned
subsidiary of America's Shopping Mall, Inc. (the "Company") purchased all the
shares of Dynamic.
Principles of consolidation:
The consolidated financial statements include the accounts of Dynamic and
its wholly-owned subsidiary, Remarkable. Intercompany balances and transactions
have been eliminated in consolidation.
Inventory:
Inventory, consisting primarily of finished goods, is valued at the lower
of cost (first-in, first-out basis) or market.
Property and equipment:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method, principally 5-7 years,
over the estimated useful lives of the assets.
Intangible assets:
The costs of the customer list, trademarks and telephone numbers acquired
are being amortized on a straight-line basis over 15 years based on management's
analysis and estimates of the expected useful life of the assets.
Use 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 dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
2. MANAGEMENT'S PLAN:
In June 1999, the Company had invested $1,400,000 in Dynamic. Dynamic has a
working capital deficiency of $621,887 at June 30, 1999; however, the management
of the Company intends to continue financing any future working capital
requirements of Dynamic.
F-30
<PAGE>
DYNAMIC PRODUCTS CORP. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1999
3. PROPERTY AND EQUIPMENT:
Major classification of property and equipment are summarized as follows:
<TABLE>
<S> <C>
Equipment.......................................................................... $60,950
Furniture and fixtures............................................................. 6,040
Leasehold improvements............................................................. 9,740
-------
76,730
Less: Accumulated depreciation and amortization.................................... 55,993
-------
$20,737
=======
</TABLE>
4. OTHER ASSETS:
<TABLE>
<S> <C>
Other assets are summarized as follows:
Intangible assets:
Customer list.............................................................. $ 850,000
Trademarks................................................................. 100,000
Telephone numbers.......................................................... 50,000
----------
1,000,000
Less: Accumulated amortization................................................ 266,667
----------
733,333
Security deposits............................................................. 7,360
----------
$ 740,693
==========
</TABLE>
5. DUE TO FORMER SHAREHOLDERS:
Loans payable to former shareholders in the amount of $420,690 bear
interest at the rate of 7% per annum.
Interest expense to former shareholders for the years ended June 30, 1999
and 1998 amounted to $28,875 and $27,000, respectively.
6. RELATED PARTY TRANSACTIONS:
Dynamic received reimbursement for salaries and benefits of employees
shared with Creadis Promotions, Inc., a related company, of approximately $5,000
per week. This income amounted to $97,500 for the period ended April 30, 1999.
7. CORRECTION OF AN ERROR:
The opening accumulated deficit at July 1, 1998 is retroactively restated
to eliminate the amortization of goodwill created by the acquisition of
Dynamic's subsidiary, Remarkable. The acquisition should be accounted for as a
pooling of commonly controlled entities and, therefore, the excess paid over
historical cost is deemed to be a reduction of shareholders' equity.
8. COMMITMENTS:
Dynamic is obligated under two leases for office space. One of the leases
expires March 31, 2000 and the other expires December 30, 2002. Dynamic's
obligation under these leases, net of reimbursements from
F-31
<PAGE>
DYNAMIC PRODUCTS CORP. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1999
8. COMMITMENTS:--(CONTINUED)
an affiliated company, is $2,730 per month. Rent expense amounted to $38,463 for
the year ended June 30, 1999 and $86,060 for the year ended June 30, 1998.
Future minimum payments are as follows:
<TABLE>
<CAPTION>
JUNE 30, AMOUNT
- ----------------------------------------------------------------------------------- -------
<S> <C>
2000............................................................................... $27,888
2001............................................................................... 17,160
2002............................................................................... 17,160
2003............................................................................... 8,580
-------
$70,788
=======
</TABLE>
9. INCOME TAXES:
Dynamic has net operating losses which will be effectively eliminated under
the change of ownership rules of the Internal Revenue Service.
F-32
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Creadis Promotions, Inc.
Monsey, New York
We have audited the accompanying balance sheet of Creadis Promotions, Inc. as of
April 30, 1999 and the related statements of operations, accumulated deficit,
and cash flows for the period December 10, 1998 through April 30, 1999. The
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 financial statements referred to above present fairly, in
all material respects, the financial position of Creadis Promotions, Inc. as of
April 30, 1999, and the results of its operations and its cash flows for the
period December 10, 1998 through April 30, 1999 in conformity with generally
accepted accounting principles.
ARTHUR YORKES & COMPANY
New York, New York
August 17, 1999
F-33
<PAGE>
CREADIS PROMOTIONS, INC.
BALANCE SHEET
APRIL 30, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................................... $ 3,422
Account receivable................................................................................. 154,427
Inventory.......................................................................................... 35,770
Prepaid assets and other current assets............................................................ 6,622
---------
Total current assets................................................................................. 200,241
Property and equipment, net of depreciation.......................................................... 26,966
Intangible assets, net of amortization............................................................... 128,750
Other assets......................................................................................... 2,860
---------
$ 358,817
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities................................... $ 167,732
Note payable--current portion...................................................................... 8,460
Due to affiliates.................................................................................. 22,579
---------
Total current liabilities............................................................................ 198,771
---------
Notes payable--net of current portion................................................................ 31,018
---------
Commitments (Note 5)
Shareholders' equity:
Common stock $.01 par value; 200 shares authorized, issued, and outstanding........................ 2
Additional paid-in-capital......................................................................... 249,998
Retained earnings (deficit)........................................................................ (120,972)
---------
129,028
---------
$ 358,817
=========
</TABLE>
See notes to financial statements.
F-34
<PAGE>
CREADIS PROMOTIONS, INC.
STATEMENT OF OPERATIONS
DECEMBER 10, 1998 THROUGH APRIL 30, 1999
<TABLE>
<S> <C>
Net revenues..................................................................... $ 632,120
Cost of goods sold............................................................... 487,921
---------
144,199
Selling, general and administrative expenses..................................... 265,171
---------
Operating loss................................................................... (120,972)
Retained earnings, beginning..................................................... --
---------
Retained earnings (deficit), end of year......................................... $(120,972)
=========
</TABLE>
See notes to financial statements.
F-35
<PAGE>
CREADIS PROMOTIONS, INC.
STATEMENT OF CASH FLOWS
DECEMBER 10, 1998 THROUGH APRIL 30, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................................................... $(120,972)
---------
Adjustment to reconcile net loss to cash used in operating activities, net of acquisition:
Depreciation and amortization................................................................. 7,476
(Increase) decrease in:
Accounts receivable........................................................................ 491,339
Inventory.................................................................................. 8,900
Prepaid assets and other assets............................................................ (9,482)
Decrease in:
Accounts payable, accrued expenses and other current liabilities........................... (296,184)
---------
Total adjustments............................................................................. 202,049
---------
Net cash provided by operating activities............................................................ 81,077
---------
Cash flows from investing activities:
Purchase of fixed assets........................................................................... (26,856)
Acquisition of assets.............................................................................. (362,856)
---------
Net cash used in investment activities............................................................... (389,712)
---------
Cash flows from financing activities:
Proceeds from issuance of common stock............................................................. 250,000
Increase in:
Due to affiliates............................................................................... 22,579
Notes payable................................................................................... 39,478
---------
Net cash provided by financing activities............................................................ 312,057
---------
Increase in cash and cash equivalents................................................................ 3,422
Cash and cash equivalents, beginning of period....................................................... --
---------
Cash and cash equivalents, end of period............................................................. $ 3,422
=========
</TABLE>
See notes to financial statements.
F-36
<PAGE>
CREADIS PROMOTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Significant accounting policies followed by Creadis Promotions, Inc.
("Creadis") in the preparation of the accompanying financial statements are
summarized below.
General:
Creadis' principal business is the sale of customized products used
primarily in sales promotions. Creadis' activities include the operations of
promotions under which Creadis operates certain lines.
Inventory:
Inventories are stated at the lower of cost or market generally on the
first-in, first-out basis.
Depreciation:
Property, plant and equipment are valued at cost. Assets are depreciated
using the accelerated method, generally three years for vehicles, five years for
furniture and fixtures, and computer equipment. Improvements to leased property
are being amortized over the estimated service lives of the improvements.
Cash and cash equivalents:
For purposes of the statements of cash flows, Creadis considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosures 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.
2. INTANGIBLE ASSETS:
Creadis recorded the following intangible assets in relation to the
purchase of assets of Heyden Corporation on December 10, 1998. Amortization is
over 15 years, except for a covenant not to compete which is amortized over
5 years.
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Goodwill.......................................................................... $ 45,000
Trade name........................................................................ 45,000
Covenant not to compete........................................................... 45,000
--------
135,000
Accumulated amortization.......................................................... 6,250
--------
$128,750
========
</TABLE>
F-37
<PAGE>
CREADIS PROMOTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 30, 1999
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
Machinery and equipment............................................................ $16,189
Office furniture................................................................... 3,919
Computer equipment................................................................. 8,084
-------
28,192
Accumulated depreciation........................................................... 1,226
-------
$26,966
=======
</TABLE>
4. NOTE PAYABLE:
Creadis provided an unsecured note to the seller of the assets of Heyden
Corporation. The note is due in 60 monthly installments of $705 plus interest at
8% per annum. Interest paid during the period ended April 30, 1999 was
approximately $1,400. This note was guaranteed by two of Creadis' shareholders.
5. COMMITMENTS:
Creadis has an agreement to pay a consulting fee of $6,120 per month for a
period of sixty months through December 2003. The consulting fee paid under this
agreement for the period ended April 30, 1999 amounted to $24,480. This
agreement is personally guaranteed by two of Creadis' shareholders.
Creadis is also obligated to pay its portion of salaries and benefits for
employees shared with Dynamic Products Corp., a related company, of
approximately $5,000 per week. This expense amounted to $97,500 for the period
ended April 30, 1999.
Creadis is obligated under a lease for office space. The current lease,
which expired June 30, 1999 was renewed for one year ending June 30, 2000. For
the period ending April 30, 1999, Creadis was obligated to pay $1,300 per month.
The renewal option, commencing July 1, 1999 requires a monthly rent of $1,430
per month.
Creadis also has an agreement with an affiliated company to pay 50% of the
affiliated company's rent. Creadis' share of the lease approximates $1,200 per
month, and expires on March 31, 2000. Rent expense amounted to $12,961 for the
period ended April 30, 1999.
Future minimum payments due under the lease are $30,007 for the year ended
April 30, 2000 and $2,860 for the year ended April 30, 2001.
6. INCOME TAXES:
Creadis has a net operating loss which will be effectively eliminated upon
the subsequent exchange of all of its common shares in May of 1999 under the
change of ownership rules of the Internal Revenue Service.
F-38
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Creadis Promotions, Inc.
Monsey, New York
We have audited the accompanying statements of assets acquired subject to
certain liabilities from Heyden Incorporated as at December 10, 1998 and the
related statements of revenues and direct operating expenses of business
acquired, and cash flows for the period January 1, 1998 through December 10,
1998 and the year ended December 31, 1997. 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 audits.
We conducted our audits 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 audits of the financial statements provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets acquired subject to certain liabilities from
Heyden Incorporated as at December 10, 1998 and the results of its operations
and cash flows for the period January 1, 1998 through December 10, 1998 and the
year ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR YORKES & COMPANY
New York, New York
April 8, 1999
F-39
<PAGE>
HEYDEN INCORPORATED
STATEMENT OF ASSETS ACQUIRED SUBJECT TO CERTAIN LIABILITIES
DECEMBER 10, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Accounts receivable................................................................................. $ 645,766
Inventory........................................................................................... 44,670
----------
Total current assets.................................................................................. 690,436
Warehouse equipment................................................................................... 1,336
Intangible assets..................................................................................... 135,000
----------
$ 826,772
==========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable.................................................................................... $ 463,916
Net equity in assets acquired by buyer................................................................ 362,856
----------
$ 826,772
==========
</TABLE>
See notes to financial statements.
F-40
<PAGE>
HEYDEN INCORPORATED
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF
BUSINESS ACQUIRED
<TABLE>
<CAPTION>
JANUARY 1, 1998
THROUGH YEAR ENDED
DECEMBER 10, DECEMBER 31,
1998 1997
--------------- ------------
<S> <C> <C>
Revenues........................................................................... $ 1,461,860 $1,728,191
Cost of goods sold................................................................. 1,066,821 1,205,699
----------- ----------
395,039 522,492
Selling, general and administrative expenses....................................... 412,801 388,387
----------- ----------
Net income (loss) before income taxes.............................................. (17,762) 134,105
Income taxes....................................................................... -- 42,000
----------- ----------
Net income (loss).................................................................. $ (17,762) $ 92,105
=========== ==========
</TABLE>
See notes to financial statements.
F-41
<PAGE>
HEYDEN INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JANUARY 1, 1998
THROUGH YEAR ENDED
DECEMBER 10, DECEMBER 31,
1998 1997
--------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................................ $ (17,762) $ 92,105
--------- --------
Adjustment to reconcile net income to cash provided by operating activities:
Depreciation................................................................ -- 1,325
(Increase) decrease in:
Accounts receivable...................................................... (316,739) 5,786
Inventory................................................................ 1,895 (12,580)
Increase (decrease) in:
Accounts payable......................................................... 307,616 10,862
Other liabilities........................................................ (79,823) 29,398
--------- --------
Total adjustments...................................................... (87,051) 34,791
--------- --------
Net cash provided by (used in) operating activities................................ (104,813) 126,896
Net cash effect of assets and liabilities not included in acquisition.............. 1,109 52,474
--------- --------
Increase (decrease) in cash........................................................ (105,922) 74,422
Cash at beginning of period........................................................ 105,922 31,500
--------- --------
Cash at end of period.............................................................. $ -- $105,922
========= ========
</TABLE>
See notes to financial statements.
F-42
<PAGE>
HEYDEN INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 10, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Significant accounting policies followed by Heyden Incorporated ("Heyden")
in the preparation of the accompanying financial statements are summarized
below.
General:
Heyden was in the principal business of sales of customized products used
primarily in sales promotions. Heyden's activities include the operations of
promotions under which Heyden operates certain lines.
Inventory:
Inventory is stated at the lower of cost or market, generally on the
first-in, first-out basis.
Depreciation:
Property and equipment are valued at cost. Assets are depreciated using the
accelerated method, generally three years for vehicles, five years for furniture
and fixtures, and computer equipment. Improvements to leased property are being
amortized over the estimated service lives of the improvements.
Cash and cash equivalents:
For purposes of the statements of cash flows, Heyden considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosures 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.
2. SALE OF ASSETS:
On December 10, 1998, substantially all of the assets and liabilities of
Heyden with a net market value of approximately $225,000 were sold for cash and
notes totaling approximately $363,000 as follows:
<TABLE>
<S> <C>
Cash at closing--December 1998.................................................... $ 75,000
Note payable--due February 1999 plus interest at 8% per annum..................... 245,557
Note payable--due in 60 monthly installments of $705 plus interest at 8% per
annum........................................................................... 42,298
----------
$ 362,855
==========
</TABLE>
3. PRIOR LEASE OBLIGATION:
Heyden was obligated under a lease for its production and warehouse location.
The lease with extension expired November 30, 1998. The monthly rent
including escalation was $2,813 per month.
Rent expense, including escalation provisions, amounted to $30,427 and
$33,750 for the period ended December 10, 1998 and the year ended December 31,
1997, respectively.
F-43
<PAGE>
PART II
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered hereby. All amounts are
estimated except the Commission registration fee.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 6,991
Accounting fees and expenses.................................. 35,000
Printing and engraving expenses............................... *
Legal fees and expenses....................................... 75,000
Miscellaneous fees and expenses............................... *
--------
Total.................................................... *
========
</TABLE>
- ------------------
* To be filed by amendment.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following securities have been sold by America's Shopping Mall, Inc. or
its predecessor, Advanced Medical Sciences, Inc. within the past three years
without registering the securities under the Securities Act:
(1) On March 9, 1999, Advanced Medical Sciences' Board of Directors issued
14,500,000 shares of its common stock to John L. Patten in
consideration for the assumption by Mr. Patten in February 1997 of
$290,000 of liabilities of Advanced Medical Sciences which Mr. Patten
subsequently paid. The sale was deemed to be exempt from registration
by virtue of Section 4(2) of the Securities Act as a transaction not
involving any public offering.
(2) On March 9, 1999, Advanced Medical Sciences' Board of Directors issued
3,750,000 shares of common stock to John L. Patten in payment of
$75,000 loaned to the company. The sale was deemed to be exempt from
registration by virtue of Section 4(2) of the Securities Act as a
transaction not involving any public offering.
(3) On March 9, 1999, Advanced Medical Sciences' Board of Directors issued
3,000,000 shares of common stock to Irwin Schneidmill, president and a
director of Advanced Medical Sciences, in consideration of $60,000 of
unpaid consulting fees due to him. The sale was deemed to be exempt
from registration by virtue of Section 4(2) of the Securities Act as a
transaction not involving any public offering.
(4) On May 11, 1999, Advanced Medical Sciences' Board of Directors issued
10,000,000 shares of common stock to Kathleen N. Patten in payment of
$200,000 loaned to the company. The issued sale was deemed to be exempt
from registration by virtue of Section 4(2) of the Securities Act as a
transaction not involving any public offering.
(5) Pursuant to an asset purchase agreement dated as of April 21, 1999
whereby America's Shopping Mall acquired the Deerskin and Joan Cook
catalog businesses, the purchase price of the acquired assets was paid
through the issuance of certain unregistered securities, including (a)
on May 1, 1999, the assumption by America's Shopping Mall of an 8%
subordinated debenture due May 1, 2003 of the seller in the principal
amount of $2,000,000 held by Pioneer Ventures Associates Limited
Partnership; (b) on May 21, 1999, the issuance of an 8% convertible
debenture due June 1, 2004 in the principal amount of $3,400,000 to
Deerskin Trading Post, Inc. which is secured by the customer list,
artwork, software and intellectual property purchased under the asset
purchase agreement; and (c) on May 21, 1999, the issuance of an 8%
convertible debenture due June 1, 2004 in the principal amount of
$100,000 to James T. Patten. The $3,500,000 8% convertible debentures
due June 1, 2004 are convertible into America's Shopping Mall common
stock at a conversion price of $5.50 per
II-1
<PAGE>
share. However, if on or before December 31, 1999 America's Shopping
Mall prepays to Deerskin Trading Post, Inc. $400,000 of the principal
amount of the debenture held by it plus interest accrued to the date of
such payment, then the conversion price shall be increased from $5.50
to $6.00 per share. The assumption and issuance of these debentures
were deemed to be exempt from registration by virtue of
Section 4(2) of the Securities Act as transactions not involving any
public offering. The common shares underlying the convertible
debentures are being registered herewith.
(6) On May 20, 1999, America's Shopping Mall through its wholly-owned
subsidiary, The Remarkable Group, Inc. purchased all of the outstanding
stock of Creadis Promotions, Inc. America's Shopping Mall paid $400,000
cash and issued 700,000 shares of common stock on May 20, 1999 to two
of Creadis Promotions' former shareholders for their interests. The
shares were issued in a private placement and were deemed to be exempt
from registration by virtue of Section 4(2) of the Securities Act as a
transaction not involving any public offering.
(7) On June 3, 1999, America's Shopping Mall through its wholly-owned
subsidiary, The Remarkable Group, Inc. purchased all of the outstanding
stock of Dynamic Products Corp. America's Shopping Mall issued an
aggregate 240,000 shares of common stock on June 3, 1999 to thirteen of
Dynamic Products' former shareholders for their interests. The shares
were issued in a private placement and were deemed to be exempt from
registration by virtue of Section 4(2) of the Securities Act as a
transaction not involving any public offering.
(8) On May 21, 1999, America's Shopping Mall completed a $4,200,000
financing. Pursuant to the terms of the transaction, America's Shopping
Mall issued the following unregistered securities to Pioneer Ventures
Associates Limited Partnership: (a) 10,000 shares of Series A Senior
Convertible Preferred Stock, $.001 par value per share; and (b)
1,000,000 warrants each of which will entitle the holder thereof to
purchase one share of America's Shopping Mall common stock at $4.50 per
share at any time until May 21, 2004. The Series A Senior Convertible
Preferred Stock is currently convertible into 1,200,000 shares of
America's Shopping Mall common stock. At the closing, America's
Shopping Mall paid an investment banking fee of $105,000 to Ventures
Management Partners LLC, the general partner of Pioneer Ventures
Associates Limited Partnership and a $5,000 non-accountable expense
allowance to Ventures Management Partners LLC for its out-of-pocket
expenses incurred in connection with the transaction. The issuance of
the Series A Senior Convertible Preferred Stock and the warrants were
deemed to be exempt from registration by virtue of Section 4(2) of the
Securities Act as a transaction not involving any public offering. The
common shares underlying the Series A Senior Convertible Preferred
Stock and the warrants are being registered herewith.
(9) On July 14, 1999, Advanced Medical Sciences merged into America's
Shopping Mall. Pursuant to the terms of the Amended and Restated Plan
of Merger dated June 24, 1999, each share of common stock of Advanced
Medical Sciences issued and outstanding immediately prior to the
effective time of the merger was converted into one-thirtieth (1/30) of
a share of common stock of America's Shopping Mall. No fractional
shares of common stock were issued as a result of the merger and all
fractional shares were rounded to the next larger whole number.
America's Shopping Mall intended that this transaction would constitute
an exchange of its common stock with Advanced Medical Sciences'
shareholders exclusively where no commission or other remuneration was
paid or given directly or indirectly for soliciting such exchange, and
that, therefore, the securities issued would constitute exempt
securities under Section 3(a)(9) of the Securities Act. America's
Shopping Mall has been advised by its counsel, however, that such
exemption was not then available to it by reason of the requirements
contained in Rule 145. America's Shopping Mall has no other basis to
claim exemption from registration for this transaction. In order to
rectify this inadvertent error, America's Shopping Mall is registering
all of its issued and outstanding shares of common stock as well as all
of the shares of its common stock which may be issued pursuant to
conversion of convertible securities or the exercise of warrants
previously issued. No proceeds will be received by America's Shopping
Mall upon any subsequent sales (if any) of its common stock registered
hereunder.
II-2
<PAGE>
(10) On January 30, 2000 America's Shopping Mall issued 18,181 shares of
common stock to James T. Patten upon conversion of $100,000 principal
amount of 8% convertible debentures due June 1, 2004. The transaction
was deemed to be exempt from registration by virtue of
Section 3(a)(9) of the Securities Act as it involved an exchange by
the issuer with an existing security holder, no commission or other
remuneration having been paid or given directly or indirectly for
soliciting the exchange.
(11) On April 17, 2000 America's Shopping Mall issued 500,000 shares of
common stock to Pioneer Ventures Associates Limited Partnership upon
the exercise by Pioneer Ventures Associates of 500,000 warrants to
purchase common stock. In payment of the exercise price of the shares
of common stock, Pioneer Ventures Associates surrendered for
cancellation the $2,000,000 subordinated debenture that America's
Shopping Mall assumed in connection with its purchase of the Deerskin
and Joan Cook catalog businesses from Initio, Inc. The sale was deemed
to be exempt from registration by virtue of Section 4(2) of the
Securities Act as a transaction not involving a public offering.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Asset Purchase Agreement dated as of April 21, 1999, between Advanced Medical Sciences, Inc. and
Deerskin Trading Post, Inc.
2.2 -- Stock Purchase Agreement dated as of May 1, 1999, among Remarkable Acquisition Corp., Irwin
Schneidmill and Kathleen Patten for the purchase of all of the issued and outstanding capital stock
of Creadis Promotions, Inc.
2.3 -- Stock Purchase Agreement dated as of May 1, 1999, among Remarkable Acquisition Corp., and the selling
shareholders of Dynamic Products Corp for the purchase of all of the issued and outstanding capital
stock of Dynamic Products Corp.
*2.4 -- Amended and Restated Plan of Merger dated as of June 24, 1999, between Advanced Medical Sciences,
Inc. and America's Shopping Mall, Inc.
3.1 -- Articles of Incorporation of America's Shopping Mall, Inc., as filed with the Secretary of State of
the State of Nevada on May 4, 1999.
3.2 -- Articles of Amendment of the Articles of Incorporation of America's Shopping Mall, Inc., as filed
with the Secretary of State of the State of Nevada on May 21, 1999.
3.3 -- Articles of Merger of Advanced Medical Sciences, Inc. and America's Shopping Mall, Inc., as filed
with the Secretary of State of the State of Nevada on July 14, 1999.
3.4 -- Composite copy of Articles of Incorporation of America's Shopping Mall, Inc., as amended.
3.5 -- By-laws of America's Shopping Mall, Inc.
4.1 -- Investment Agreement dated as of May 21, 1999, between Pioneer Ventures Associates Limited
Partnership and America's Shopping Mall, Inc for purchase of 10,000 shares of Series A Senior
Convertible Preferred Stock.
4.2 -- Certificate of Designation of the Series A Senior Convertible Preferred Stock of America's Shopping
Mall, Inc.
4.3 -- $3,400,000 Convertible Debenture due May 1, 2004 to Deerskin Trading Post, Inc. from Advanced Medical
Sciences, Inc., dated May 21, 1999.
4.4 -- $100,000 Convertible Debenture due May 1, 2004 to James T. Patten from America's Shopping Mall, Inc.,
dated May 21, 1999.
4.5 -- Amendment, dated July 22, 1999 to $3,400,000 Convertible Debenture due May 1, 2004.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
4.6 -- $2,000,000 Subordinated Debenture due May 1, 2003 to Pioneer Ventures Associates Limited Partnership
from America's Shopping Mall, Inc., dated May 1, 1999.
4.7 -- Warrant to purchase 1,000,000 shares of common stock dated May 21, 1999, held by Pioneer Ventures
Associates Limited Partnership.
*4.8 -- Warrant to purchase 600,000 shares of common stock dated April 17, 2000, held by Pioneer Ventures
Associates Limited Partnership.
*4.9 -- Warrant to purchase 500,000 shares of common stock dated April 17, 2000, held by Suffern Hills
Associates LLC.
**5.1 -- Opinion of Emmet, Marvin & Martin, LLP.
9.1 -- Voting and Shareholders Agreement dated as of May 21, 1999 by and among Advanced Medical Sciences,
Pioneer Ventures Associates Limited, and certain shareholders of Advanced Medical Sciences, Inc.
10.1 -- Employment Agreement dated as of May 1, 1999 between America's Shopping Mall, Inc. and Irwin
Schneidmill.
10.2 -- Assignment and Assumption Agreement, dated as of May 21, 1999, among Initio, Inc., America's Shopping
Mall, Inc. and Pioneer Ventures Associates Limited Partnership.
10.3 -- Assignment and Assumption Agreement, dated May 21, 1999, between Deerskin Trading Post, Inc. and
America's Shopping Mall, Inc.
10.4 -- Indenture of Lease, dated May 21, 1999, between Deerskin Trading Post, Inc. and America's Shopping
Mall, Inc.
10.5 -- Lease, dated September 22, 1999, between Whitney Associates and America's Shopping Mall, Inc. (2,708
square feet).
10.6 -- Lease, dated September 22, 1999, between Whitney Associates and America's Shopping Mall, Inc. (7,635
square feet).
*10.7 -- Lease, dated February 4, 2000, between ProLogis Trust and America's Shopping Mall, Inc.
*11.1 -- Statement regarding computation of per share earnings.
21.1 -- Subsidiaries of the registrant.
*23.1 -- Consent of Arthur Yorkes & Company.
*23.2 -- Consent of Smallberg Sorkin & Company, LLP.
**23.3 -- Consent of Emmet, Marvin & Martin, LLP.
24.1 -- Powers of Attorney.
*27 -- Financial Data Schedule.
</TABLE>
- ------------------
* Filed herewith.
** To be filed by amendment.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this amendment to the
registration statement to be signed on its behalf by the undersigned, in the
City of New York State of New York on May 19, 2000.
AMERICA'S SHOPPING MALL, INC.
By:_/s/ IRWIN SCHNEIDMILL_____________
Irwin Schneidmill
President
In accordance with the requirements of the Securities Act of 1933, this
amendment to the registration statement was signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------------- -------------
<C> <S> <C>
/s/ IRWIN SCHNEIDMILL Director; Chief Executive Officer May 19, 2000
- ------------------------------------------
Irwin Schneidmill
* DENNIS J. MCNANY Director: Chief Financial Officer May 19, 2000
- ------------------------------------------
Dennis J. McNany
* CHASE CARO Director May 19, 2000
- ------------------------------------------
Chase Caro
* JOHN FERRARO Director May 19, 2000
- ------------------------------------------
John Ferraro
* ROBERT W. TRAUSE Director May 19, 2000
- ------------------------------------------
Robert W. Trause
* RICHARD TRUZZOLINO Director May 19, 2000
- ------------------------------------------
Richard Truzzolino
* By: /s/ IRWIN SCHNEIDMILL
- ------------------------------------------
Irwin Schneidmill,
as Attorney-in-fact
</TABLE>
II-5
<PAGE>
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICA'S SHOPPING MALL INC.
------------------------
VOLUME I OF II
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICA'S SHOPPING MALL INC.
------------------------
VOLUME II OF II
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Asset Purchase Agreement dated as of April 21, 1999, between Advanced Medical Sciences, Inc. and
Deerskin Trading Post, Inc.
2.2 -- Stock Purchase Agreement dated as of May 1, 1999, among Remarkable Acquisition Corp., Irwin
Schneidmill and Kathleen Patten for the purchase of all of the issued and outstanding capital stock
of Creadis Promotions, Inc.
2.3 -- Stock Purchase Agreement dated as of May 1, 1999, among Remarkable Acquisition Corp., and the selling
shareholders of Dynamic Products Corp for the purchase of all of the issued and outstanding capital
stock of Dynamic Products Corp.
*2.4 -- Amended and Restated Plan of Merger dated as of June 24, 1999, between Advanced Medical Sciences,
Inc. and America's Shopping Mall, Inc.
3.1 -- Articles of Incorporation of America's Shopping Mall, Inc., as filed with the Secretary of State of
the State of Nevada on May 4, 1999.
3.2 -- Articles of Amendment of the Articles of Incorporation of America's Shopping Mall, Inc., as filed
with the Secretary of State of the State of Nevada on May 21, 1999.
3.3 -- Articles of Merger of Advanced Medical Sciences, Inc. and America's Shopping Mall, Inc., as filed
with the Secretary of State of the State of Nevada on July 14, 1999.
3.4 -- Composite copy of Articles of Incorporation of America's Shopping Mall, Inc., as amended.
3.5 -- By-laws of America's Shopping Mall, Inc.
4.1 -- Investment Agreement dated as of May 21, 1999, between Pioneer Ventures Associates Limited
Partnership and America's Shopping Mall, Inc for purchase of 10,000 shares of Series A Senior
Convertible Preferred Stock.
4.2 -- Certificate of Designation of the Series A Senior Convertible Preferred Stock of America's Shopping
Mall, Inc.
4.3 -- $3,400,000 Convertible Debenture due May 1, 2004 to Deerskin Trading Post, Inc. from Advanced Medical
Sciences, Inc., dated May 21, 1999.
4.4 -- $100,000 Convertible Debenture due May 1, 2004 to James T. Patten from America's Shopping Mall, Inc.,
dated May 21, 1999.
4.5 -- Amendment, dated July 22, 1999 to $3,400,000 Convertible Debenture due May 1, 2004.
4.6 -- $2,000,000 Subordinated Debenture due May 1, 2003 to Pioneer Ventures Associates Limited Partnership
from America's Shopping Mall, Inc., dated May 1, 1999.
4.7 -- Warrant to purchase 1,000,000 shares of common stock dated May 21, 1999, held by Pioneer Ventures
Associates Limited Partnership.
*4.8 -- Warrant to purchase 600,000 shares of common stock dated April 17, 2000, held by Pioneer Ventures
Associates Limited Partnership.
*4.9 -- Warrant to purchase 500,000 shares of common stock dated April 17, 2000, held by Suffern Hills
Associates LLC.
**5.1 -- Opinion of Emmet, Marvin & Martin, LLP.
9.1 -- Voting and Shareholders Agreement dated as of May 21, 1999 by and among Advanced Medical Sciences,
Pioneer Ventures Associates Limited, and certain shareholders of Advanced Medical Sciences, Inc.
10.1 -- Employment Agreement dated as of May 1, 1999 between America's Shopping Mall, Inc. and Irwin
Schneidmill.
10.2 -- Assignment and Assumption Agreement, dated as of May 21, 1999, among Initio, Inc., America's Shopping
Mall, Inc. and Pioneer Ventures Associates Limited Partnership.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.3 -- Assignment and Assumption Agreement, dated May 21, 1999, between Deerskin Trading Post, Inc. and
America's Shopping Mall, Inc.
10.4 -- Indenture of Lease, dated May 21, 1999, between Deerskin Trading Post, Inc. and America's Shopping
Mall, Inc.
10.5 -- Lease, dated September 22, 1999, between Whitney Associates and America's Shopping Mall, Inc. (2,708
square feet).
10.6 -- Lease, dated September 22, 1999, between Whitney Associates and America's Shopping Mall, Inc. (7,635
square feet).
*10.7 -- Lease, dated February 4, 2000, between ProLogis Trust and America's Shopping Mall, Inc.
*11.1 -- Statement regarding computation of per share earnings.
21.1 -- Subsidiaries of the registrant.
*23.1 -- Consent of Arthur Yorkes & Company.
*23.2 -- Consent of Smallberg Sorkin & Company, LLP.
**23.3 -- Consent of Emmet, Marvin & Martin, LLP.
24.1 -- Powers of Attorney.
*27 -- Financial Data Schedule.
</TABLE>
- ------------------
* Filed herewith.
** To be filed by amendment.
<PAGE>
EXHIBIT 2.4
AMENDED AND RESTATED PLAN OF MERGER
THIS AMENDED AND RESTATED PLAN OF MERGER, dated as of June 24, 1999, is by
and between ADVANCED MEDICAL SCIENCES, INC., a corporation organized under the
laws of the Commonwealth of Virginia ("AMS") with its principal place of
business at 382 Route 59, #310, Monsey, New York 10952, and AMERICA'S SHOPPING
MALL, INC., a corporation organized under the laws of the State of Nevada (the
"Company") with its principal place of business at 382 Route 59, #310, Monsey,
New York 10952.
RECITALS:
On May 10, 1999, the Boards of Directors of AMS and the Company each
determined that it is in the best interests of their respective shareholders for
AMS to merge with and into the Company and adopted a Plan and Articles of Merger
(the "Original Plan") providing for the merger of AMS with and into the Company
upon the terms and subject to the conditions set forth therein.
On June 24, 1999, the Board of Directors of AMS and the Company adopted
this Amended and Restated Plan of Merger to amend in certain respects and
restate in its entirety the Original Plan.
In consideration of the premises and the mutual agreements set forth
herein, AMS and the Company agree as follows:
1. Merger. At the Effective Time (as defined below), AMS shall be merged
with and into the Company in accordance with the provisions of Article 12 of the
Virginia Stock Corporation Act and Chapter 92A of the Nevada Revised Statutes
(the "Merger"). The separate corporate existence of AMS shall cease at the
Effective Time, and the Company, as the surviving entity (the "Surviving
Corporation"), shall continue its corporate existence under the laws of the
State of Nevada under its present name. The Merger shall have the effect set
forth in ss. 92A.250 of the Nevada Revised Statutes. The terms and conditions of
the Merger and the mode of carrying the same into effect shall be as set forth
in this Plan.
2. Effective Time. The Merger shall become effective at the time that both
(i) a Certificate of Merger of AMS into the Company shall have been issued by
the State Corporation Commission of the Commonwealth of Virginia, and (ii)
Articles of Merger of AMS into the Company shall have been filed with the
Secretary of State of the State of Nevada (the "Effective Time").
3. Articles of Incorporation. The Articles of Incorporation of the Company
as in effect at the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation, except that:
<PAGE>
(A) Each of Article IV (relating to preemptive rights of
shareholders), Article VII (relating to indemnification) and Article VIII
(relating to transactions between the corporation and its directors) of the
Articles of Incorporation shall be deleted in its entirety, it being the
intention of the parties that the matters covered by the deleted articles
shall, at and after the Effective Time, be governed by the applicable
provisions of the Nevada Revised Statutes;
(B) Articles V, VI, IX, X and XI of the Articles of Incorporation
shall be renumbered Articles IV, V, VI, VII and VIII, respectively; and
(C) Article IV of the Articles of Incorporation (formerly Article V)
shall be deleted in its entirety and the following new Article IV shall be
substituted in its place:
"ARTICLE IV
The purposes for which the corporation is organized are:
To engage in a specialty advertising business and a retail
catalogue business; and in connection therewith to purchase and
otherwise acquire, hold for sale, advertise for sale by catalogues or
other means, and sell and otherwise dispose of by means of mail
orders, telephone orders, or otherwise, goods of every type and
description, and in general to do all lawful things necessary or
convenient for the conduct of such a business; and
To engage in any lawful act or activity for which a corporation
may be organized pursuant to the General Corporation Law of the State
of Nevada, except that the corporation is not organized to engage in
any act or activity requiring the consent or approval of any official,
department, board, agency or other body of the State of Nevada without
such consent or approval first being obtained."
Said Articles of Incorporation as amended by this Plan shall continue in full
force and effect until further amended and changed in the manner prescribed by
the provisions of the Nevada Revised Statutes.
4. By-Laws. The by-laws of the Company as in effect at the Effective Time
shall be the by-laws of the Surviving Corporation and will continue in full
force and effect until changed, altered, or amended as therein provided and in
the manner prescribed by the provisions of the Nevada Revised Statutes.
2
<PAGE>
5. Directors. The directors of the Company at the Effective Time shall, at
and after the Effective Time, be the directors of the Surviving Corporation and
shall hold their offices until their successors have been duly elected or
appointed and qualified, or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
by-laws and the applicable provisions of the Nevada Revised Statutes.
6. Officers. The officers of the Company at the Effective Time shall, at
and after the Effective Time, be the officers of the Surviving Corporation and
shall hold their offices until their successors have been duly elected or
appointed and qualified, or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
by-laws and the applicable provisions of the Nevada Revised Statutes.
7. Conversion of Shares in the Merger.
(a) At the Effective Time of the Merger, by virtue of the Merger and
without any action on the part of AMS, the Company or any shareholder thereof:
(i) Subject to Paragraph 7(b) below, each share of common stock, $.005
par value, of AMS issued and outstanding immediately prior to the Effective
Time shall be converted into one-thirtieth (1/30) of a share of common
stock, $.001 par value, of the Surviving Corporation (the "Common Stock");
(ii) Each share of common stock, $.001 par value, of the Company
issued and outstanding immediately prior to the Effective Time shall be and
remain one (1) share of Common Stock; and
(iii) Each share of Series A Senior Convertible Preferred Stock, $.001
par value, of the Company issued and outstanding immediately prior to the
Effective Time shall be and remain one (1) share of Series A Senior
Convertible Preferred Stock, $.001 par value, of the Surviving Corporation.
(b) No fractional shares of Common Stock shall be created or issued as a
result of the Merger. If any holder of common stock of AMS would be entitled to
receive a fraction of a share of Common Stock as a result of the conversion of
his shares pursuant to Paragraph 7(a)(i), the aggregate number of shares of
common stock of AMS represented by all certificates registered in the name of
such holder shall instead be converted by dividing such number by 30 and
rounding the quotient up to the next larger whole number.
(c) All shares of common stock of AMS shall, upon conversion into shares of
Common Stock, cease to be outstanding and shall automatically be cancelled and
retired, and each holder of a certificate previously evidencing shares of AMS
common stock shall thereafter cease to have any rights with respect to such
shares, except
3
<PAGE>
the right to receive for each of his shares, upon surrender of his certificate
to the Surviving Corporation, a certificate representing that number of shares
of Common Stock into which his shares of AMS were converted pursuant to this
Paragraph 7.
(d) Each share of common stock of the Company held by AMS immediately prior
to the Effective Time shall be cancelled and extinguished without conversion and
shall cease to exist.
8. Conditions to Effectiveness. This Plan and the Merger shall not become
effective until this Plan and the Merger contemplated hereby shall have been
duly approved:
(i) by the affirmative vote of holders of two-thirds of the
outstanding shares of common stock of AMS at a meeting duly called and held
for such purpose in accordance with the Articles of Incorporation of AMS
and applicable provisions of the Virginia Stock Corporation Act; and
(ii) by the affirmative vote of holders of a majority of the
outstanding shares of common stock of the Company, voting separately as a
class, and by the holders of a majority of the shares of Series A Senior
Convertible Preferred Stock of the Company, voting separately as a class,
or by the unanimous written consent of such holders, in accordance with the
Articles of Incorporation of the Company and applicable provisions of the
Nevada Revised Statutes.
9. Articles of Merger. Subject to approval of this Plan in accordance with
Paragraph 8, AMS and the Company shall promptly prepare, or cause to be
prepared, and execute Articles of Merger in the prescribed forms, and shall
promptly file the same with the State Corporation Commission of the Commonwealth
of Virginia and the Secretary of State of the State of Nevada, and shall do or
cause to be done all other acts and things necessary to effectuate the Merger.
10. Authority of Officers. The proper officers of AMS and the Company,
respectively, are hereby authorized, empowered, and directed to do any and all
acts and things, and to make, execute, deliver, file, and/or record any and all
instruments, papers, and documents which shall be or become necessary, proper,
or convenient to carry out or put into effect any of the provisions of this Plan
or the Merger herein provided for.
4
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Plan of Merger has been duly
executed and delivered by the duly authorized officers of the parties hereto as
of the date first above written.
ADVANCED MEDICAL SCIENCES, INC.
By: /s/ Irwin Schneidmill
---------------------------
Irwin Schneidmill
President
AMERICA'S SHOPPING MALL, INC.
By: /s/ Irwin Schneidmill
-------------------------
Irwin Schneidmill
President
5
<PAGE>
EXHIBIT 4.8
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE UNDERLYING SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES OR
BLUE SKY LAWS OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION, AND NEITHER THESE SECURITIES NOR ANY
INTEREST OR PARTICIPATION THEREIN MAY BE SOLD, ASSIGNED OR IN ANY OTHER MANNER
TRANSFERRED OR DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS THEREOF AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS.
AMERICA'S SHOPPING MALL, INC.
WARRANT CERTIFICATE No
Dated April 17, 2000
Warrants to Purchase Common Stock
AMERICA'S SHOPPING MALL, INC., a Nevada corporation (the "Company"), hereby
certifies that, for value received, Pioneer Ventures Associates Limited
Partnership ("Holder"), or its registered assigns, is the registered owner of
Six Hundred Thousand (600,000) Warrants (the "Warrants"), each of which will
entitle the Holder thereof to purchase one share, as adjusted from time to time
as provided in Section 7, of the Common Stock, par value $.001 per share, of the
Company (the "Common Stock", each such share being a "Warrant Share" and all
such shares being the "Warrant Shares") at an initial exercise price of Four
Dollars ($4.00) per share if the Warrants are exercised on or prior to July 31,
2000, and after July 31, 2000 at the exercise price of Four Dollars and Fifty
Cents ($4.50) per share (as adjusted from time to time as provided in Section
3(e) or Section 7, the "Exercise Price") at any time on or after the date hereof
(the "Initial Exercise Date") until and including May 21, 2004 (the "Expiration
Date"), all subject to the following terms and conditions.
This Warrant is being issued and delivered pursuant to that certain
Investment Agreement between the Company and the Pioneer Ventures Associates
Limited Partnership (the "Investment Agreement"). Capitalized terms used and not
otherwise defined herein shall have the meanings given such terms in the
Investment Agreement.
For purposes of calculating the Exercise Price, the following definitions
shall apply:
"Per Share Market Value" means on any particular date (a) the closing bid
price per share of the Common Stock on such date on the Nasdaq National Market
or other stock exchange on which the Common Stock is then listed, as reported on
Bloomberg, L.P. or if there is no such bid price on such date, then the last
closing bid price on such exchange on the date nearest preceding such date, as
reported on Bloomberg, L.P., or (b) if the Common Stock is not listed on the
Nasdaq National Market or any stock exchange, the closing bid price for a share
of Common Stock on such date on the Nasdaq SmallCap Market or the OTC Bulletin
Board, as reported on Bloomberg, L.P. (or similar organization or agency
succeeding to its functions of reporting prices), or (c) if the Common Stock is
no longer reported on Bloomberg, L.P. (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" bids on such date, or (d) if the Common Stock is no longer publicly
traded, the fair market value of a share of Common Stock as determined by an
Appraiser (as defined below) selected in good faith by the Holder; provided,
however, that the Company, after receipt of the determination by such Appraiser,
shall have the right to select an additional Appraiser, in which case, the fair
market value shall be equal to the average of the determinations by each such
Appraiser.
"Trading Day" means (a) a day on which the Common Stock is traded on the
Nasdaq National Market or Nasdaq SmallCap Market or principal national
securities exchange or market on which the Common Stock has been listed or
quoted, or (b) if the Common Stock is not listed or quoted on the Nasdaq
National Market or Nasdaq SmallCap Market or any principal national securities
exchange or market, a day on which the Common Stock is
1
<PAGE>
traded in the over-the-counter market, as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding its
functions of reporting prices).
1. Registration of Warrants. The Company shall register each Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder of such Warrant from time to time.
The Company may deem and treat the registered Holder of each Warrant as the
absolute owner thereof for the purpose of any exercise thereof or any
distribution to the Holder thereof, and for all other purposes, and the Company
shall not be affected by the notice to the contrary.
2. Registration of Transfers and Exchanges.
a. The Company shall register, or instruct the Transfer Agent to register,
the transfer of any Warrants in the Warrant Register, upon surrender of this
Warrant Certificate, with the Form of Assignment attached hereto duly completed
and signed, to the Transfer Agent or the Company at the office specified in or
pursuant to Section 3(c). Upon any such registration of transfer, a new Warrant
Certificate, in substantially the form of this Warrant Certificate ("New
Warrants"), evidencing the Warrants so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining Warrants not so
transferred, if any, shall be issued to the then registered holder thereof.
b. This Warrant Certificate is exchangeable, upon the surrender hereof by
the holder hereof to the Transfer Agent or at the office of the Company
specified in or pursuant to Section 3(c), for New Warrants evidencing in the
aggregate the right to purchase the number of Warrant Shares which may then be
purchased hereunder, each of such New Warrants to be dated the date of such
exchange and to represent the right to purchase such number of Warrant Shares as
shall be designated by said holder hereof at the time of such surrender.
3. Duration and Exercise of Warrants.
a. Warrants shall be exercisable by the registered holder thereof on any
business day before 5:00 P.M., Eastern time, at any time and from time to time
on or after the Initial Exercise Date to and including the Expiration Date. At
5:00 P.M., Eastern time, on the Expiration Date, each Warrant not exercised
prior thereto shall be and become void and of no value.
b. Subject to the limitations set forth in Section 3(c) and to the other
provisions of this Warrant Certificate, including adjustments to the number of
Warrant Shares issuable on the exercise of each Warrant and to the Exercise
Price pursuant to Section 3(e) and Section 7, the Holder of this Warrant shall
have the right to purchase from the Company (and the Company shall be obligated
to issue and sell to the Holder) at the Exercise Price one fully paid Warrant
Share which is non-assessable.
c. Subject to Sections 2(b), 4 and 8, upon surrender of this Warrant
Certificate, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its office at 600 E. Crescent Avenue,
2nd Floor, Upper Saddle River, New Jersey 07458, Attention: Irwin Schneidmill,
President, or at such other address as the Company may specify in writing to the
then registered Holder of the Warrants, and upon payment of the Exercise Price
multiplied by the number of Warrant Shares then issuable upon exercise of the
Warrants being exercised in lawful money of the United States of America, all as
specified by the Holder of this Warrant Certificate in the Form of Election to
Purchase, the Company shall promptly issue and cause to be delivered to or upon
the written order of the registered Holder of such Warrants, and in such name or
names as such registered Holder may designate, a certificate for the Warrant
Shares issued upon such exercise of such Warrants, free of restrictive legends
other than legends that may be required in the opinion of the Company's counsel
in the event at such time there is not an effective Registration Statement as
contemplated by the Investment Agreement. Any person so designated to be named
therein shall be deemed to have become Holder of record of such Warrant Shares
as of the Date of Exercise of such Warrants.
2
<PAGE>
The "Date of Exercise" of any Warrant means the date on which the Transfer
Agent or the Company shall have received (i) this Warrant Certificate (or any
New Warrant, as applicable) with the Form of Election to Purchase attached
hereto (or thereto) appropriately completed and duly signed, and (ii) payment of
the Exercise Price for such Warrant.
d. The Warrants evidenced by this Warrant Certificate shall be exercisable,
either as an entirety or, from time to time, for part of the number of Warrants
evidenced by this Warrant Certificate so long as at least twenty-five hundred
(2,500) Warrant Shares are exercised. If less than all of the Warrants evidenced
by this Warrant Certificate are exercised at any time, the Company shall issue,
at its expense, a New Warrant for the remaining number of Warrants evidenced by
this Warrant Certificate.
e. The Exercise Price shall be subject to reset as follows. In the event
that the Per Share Market Value for the twenty (20) trading days immediately
preceding the ninetieth (90th) day after the Company's Common Stock is eligible
for public trading (the "Reset Average Price"), the Exercise Price shall be
reset to a price per share of Common Stock equal to seventy-five percent (75%)
of the Reset Average Price. Once reset in accordance with the provisions of this
Section 3(e), the Conversion Price shall remain at the reset Conversion Price,
subject to adjustment in accordance with Section 7, below.
4. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of the Warrants
represented by this Warrant Certificate; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
in a name other than that of the Holder, and the Company shall not be required
to issue or deliver the certificates for Warrant Shares unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid. The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring the
Warrants represented by this Warrant Certificate or receiving the Warrant Shares
under this Warrant Certificate.
5. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company may in its discretion issue in exchange and substitution
for and upon cancellation hereof, or in lieu of and substitution for this
Warrant, a new Warrant of like tenor, but only upon receipt of evidence
reasonably satisfactory to the Company and the Transfer Agent of such loss,
theft or destruction and bond or other indemnity, if requested, satisfactory to
it. Applicants for a substitute Warrant certificate also shall comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
6. Reservation of Warrant Shares. The Company will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock or its authorized and issued Common Stock
held in its treasury, for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon exercise of the Warrants, a number of shares of
Common Stock equal to at least the maximum number of Warrant Shares (as adjusted
from time to time pursuant to Section 7 hereof) which may then be deliverable
upon the exercise of this Warrant and all other outstanding warrants issued and
sold pursuant to the Investment Agreement. The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
thereof, be duly and validly authorized, issued and fully paid, and
nonassessable.
7. Adjustment to the Number of Warrant Shares Issuable. The number of
Warrant Shares issuable upon the exercise of this Warrant is subject to
adjustment from time to time as set forth in Section 3(e) and this Section 7.
Upon each such adjustment of the Exercise Price pursuant to Section 3(e) or this
Section 7, the Holder shall thereafter prior to the Expiration Date be entitled
to purchase, at the Exercise Price resulting from such adjustment, the number of
Warrant Shares obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares issuable upon exercise
of this Warrant immediately prior to such
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adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment. In the event the Company and the holders of the Warrants issued
pursuant to the Investment Agreement that are then outstanding disagree as to
any adjustment to the Exercise Price hereunder, an Appraiser selected by the
holders of a majority of the Warrants issued pursuant to the Investment
Agreement that are then outstanding (the "Majority Holders") shall give its
opinion as to the adjustment, if any (not inconsistent with the standards
established in this Section 7), of the Exercise Price; provided, however that
the Company, after receipt of the determination by such Appraiser, shall have
the right to promptly select an additional Appraiser, in which case the
adjustment shall be equal to the average of the adjustments recommended by each
such Appraiser. The Board of Directors shall make the adjustment recommended
forthwith upon the receipt of such opinion or opinions; provided, however, that
no such adjustment of the Exercise Price shall be made which in the opinion of
the Appraiser(s) giving the aforesaid opinion or opinions would result in an
increase of the Exercise Price to more than the Exercise Price then in effect.
a. If the Company, at any time while this Warrant is outstanding, (i) shall
pay a stock dividend or otherwise make a distribution or distributions on shares
of its Junior Securities (as such term is defined in the Convertible Debentures)
payable in shares of its capital stock (whether payable in shares of its Common
Stock or of capital stock of any class), (ii) subdivide outstanding shares of
Common Stock into a larger number of shares, (iii) combine outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue by reclassification
of shares of Common Stock any shares of capital stock of the Company, the
Exercise Price shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section 7(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
b. In case of any reclassification of the Common Stock, any consolidation
or merger of the Company with or into another person, the sale or transfer of
all or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities,
cash or property, then the Holder shall have the right thereafter to exercise
this Warrant only into the shares of stock and other securities and property
receivable upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property as the shares of the Common Stock into which this Warrant
could have been converted immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange would have been
entitled. The terms of any such consolidation, merger, sale, transfer or share
exchange shall include such terms so as to continue to give to the Holder the
right to receive the securities or property set forth in this Section 7(c) upon
any exercise following such consolidation, merger, sale, transfer or share
exchange. This provision shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
c. For the purposes of this Section 7, the following clauses shall also be
applicable:
(i) Record Date. In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock or in convertible securities, or (B)
to subscribe for or purchase Common Stock or convertible securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
the Company, and the disposition of any such shares shall be considered an issue
or sale of Common Stock for the purposes of this subsection (e).
(iii) Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of any
Exercise Price in case of the issuance of the Preferred Stock, the Warrants,
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the Underlying Shares and the Warrant Shares pursuant to the Investment
Agreement, or in the event that the Company shall grant options to purchase the
Company's Common Stock pursuant to a bona fide employee stock option, stock
purchase or non-employee director plan duly adopted by its shareholders in
accordance with the Investment Agreement or for (i) securities issued upon the
exercise or conversion of the Debentures or (ii) any shares of Common Stock
issued pursuant to the exercise of options, warrants or other securities,
options, rights or securities convertible into or exchangeable for capital stock
of the Company in connection with any stock split, stock dividend or similar
event affecting the Company Common Stock.
d. If:
i. the Company shall declare a dividend (or any other distribution) on
its Common Stock (other than a subdivision of the outstanding shares
of Common Stock) or shall authorize a repurchase or redemption or
otherwise enter into any other transaction (including stock split,
recapitalization or other transaction) which would cause a decrease in
the number of its shares of Common Stock issued and outstanding (other
than transactions that similarly decrease the number of shares of
Common Stock for which this Warrant is exercisable); or
ii. the Company shall declare a special nonrecurring cash dividend on its
then-outstanding Common Stock; or
iii. the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
iv. the approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock of the
Company (other than a subdivision or combination of the outstanding
shares of Common Stock), any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all
of the assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property;
or
v. the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding-up of the affairs of the Company;
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least thirty (30) days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, repurchase, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distributions, repurchase, redemption,
rights or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding-up; provided,
however, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice.
e. In any case in which this Section 7 shall require that an adjustment be
made effective as of the record date for a specified event, the Company may
elect to defer until occurrence of such event (A) issuing to the Holder, if this
Warrant is exercised after such record date, the Warrant Shares and other
capital stock of the Company, if any, issuable upon such exercise over and above
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the Exercise Price prior to adjustment and (B)
paying to the Holder any amount in cash in lieu of a fractional share pursuant
to Section 8 hereof, provided, however, that the Company shall deliver to the
Holder a due bill or other appropriate instrument evidencing the Holder's right
to receive such
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additional Warrant Shares, other capital stock and/or cash upon the occurrence
of the event requiring such adjustment.
f. Any determination that the Company or the Board of Directors must make
pursuant to this Section 7 shall be conclusive if made in good faith.
g. If at any time conditions shall arise by reason of action taken by the
Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially affect the
rights of the Holders (different than or distinguished from the effect generally
on rights of holders of any class of the Company's capital stock) or if at any
time such conditions are expected to arise by reason of any action contemplated
by the Company, the Company shall mail a written notice briefly describing the
action contemplated and the material adverse effects of such action on the
rights of the Holders at least 30 calendar days prior to the effective date of
such action, and an Appraiser selected by the Holders of majority in interest of
the Warrants shall give its opinion as to the adjustment, if any (not
inconsistent with the standards established in Section 7(e)), of the Exercise
Price (including, if necessary, any adjustment as to the Warrant Shares to be
purchased upon exercise of this Warrant) and any distribution which is or would
be required to be preserved without diluting the rights of the Holders.
8. Fractional Shares. The Company shall not be required to issue fractional
Warrant Shares on the exercise of this Warrant. The number of full Warrant
Shares which shall be issuable upon the exercise of this Warrant shall be
computed on the basis of the aggregate number of Warrant Shares purchasable on
exercise of this Warrant so presented. If any fraction of a Warrant Share would,
except for the provisions of this Section 8, be issuable on the exercise of this
Warrant, the Company shall, at its option (a) pay an amount in cash equal to the
Exercise Price multiplied by such fraction or (b) shall round the number of
Warrant Shares issuable, up to the next whole number of such shares.
9. Warrant Agent.
a. The Company shall serve as warrant agent under this Warrant. Upon thirty
(30) days' notice to the holders of Warrants issued pursuant to the Investment
Agreement, the Company and the Majority Holders may appoint a new warrant agent.
b. Any corporation into which the Company or any new warrant agent may be
merged or any corporation resulting from any consolidation to which the Company
or any new warrant agent shall be a party or any corporation to which the
Company or any new warrant agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor warrant agent under
this Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown
on the register maintained by the warrant agent pursuant to this Warrant.
10. Notices. All notices or other communications hereunder shall be given,
and shall be deemed duly given and received if given, by facsimile and by mail,
postage prepaid: (1) if to the Company, addressed as follows: America's Shopping
Mall, Inc., 600 E. Crescent Avenue, 2nd Floor, Upper Saddle River, New Jersey
07458, Attention: Irwin Schneidmill, President, or by facsimile to (201)
934-2101/02; or (ii) if to the Holder, addressed to the Holder at the facsimile
telephone number and address of the Holder appearing on the Warrant Register or
such other address or facsimile number as the Holder may provide to the Company
in accordance with this Section 10. Any such notice shall be deemed given and
effective upon the earliest to occur of (i) receipt of such facsimile at the
facsimile telephone number specified in this Section 10, (ii) five (5) Business
Days after deposit in the United States mails or (iii) upon actual receipt by
the party to whom such notice is required to be given.
11. Miscellaneous.
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a. This Warrant shall be binding on and inure to the benefit of the parties
hereto and their respective successors and assigns (provided that the Company's
obligation to a transferee of this Warrant arises only if such transfer is made
in accordance with the terms of the Investment Agreement and the transferee
agrees to be bound by the terms of the Investment Agreement and the other
Documents executed in connection therewith).
b. Subject to Section 11(a) above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company, the
Holder and any registered holder of Warrant Shares any legal or equitable right,
remedy or cause under this Warrant; this Warrant shall be for the sole and
exclusive benefit of the Company, the Holder and any other registered holder of
Warrant Shares.
c. This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
d. The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
e. In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer as of the date first indicated above.
AMERICA'S SHOPPING MALL, INC.
By: /s/ Irwin Schneidmill
--------------------------
Name: Irwin Schneidmill
Title: President
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FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise Warrants
Evidenced by the Foregoing Warrant Certificate)
To America's Shopping Mall, Inc.:
The undersigned hereby irrevocably elects to exercise ___________ Warrants
evidenced by the foregoing Warrant Certificate for, and to purchase thereunder,
_____________ full shares of Common Stock issuable upon exercise of said
Warrants and delivery of $___________________ in cash and any applicable taxes
payable by the undersigned pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued in the
name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
--------------------------------
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
If said number of Warrants shall not be all the Warrants evidenced
by the foregoing Warrant Certificate, the undersigned requests that a
new Warrant Certificate evidencing the Warrants not
so exercise be issued in the name of and delivered to:
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated:______________________, 200_ Name of Holder:
(Print)___________________________
(By:)_____________________________
(Title:)
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED, hereby sells, assigns, and transfers to each assignee
set forth below all of the rights of the undersigned in and to the number of
Warrants (as defined in and evidenced by the foregoing Warrant Certificate) set
opposite the name of such assignee below and in and to the foregoing Warrant
Certificate with respect to said Warrants and the shares of Common Stock
issuable upon exercise of said Warrants:
Name of Assignee Address Number of Warrants
- ---------------- ------- ------------------
If the total of said Warrants shall not be all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so assigned be issued in the name of and
delivered to the undersigned.
Dated:________________, 200__ Name of Holder:
(Print)___________________________
(By:)_____________________________
(Title:)
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EXHIBIT 4.9
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE UNDERLYING SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES OR
BLUE SKY LAWS OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION, AND NEITHER THESE SECURITIES NOR ANY
INTEREST OR PARTICIPATION THEREIN MAY BE SOLD, ASSIGNED OR IN ANY OTHER MANNER
TRANSFERRED OR DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS THEREOF AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS.
AMERICA'S SHOPPING MALL, INC.
WARRANT CERTIFICATE No
Dated April 17, 2000
Warrants to Purchase Common Stock
AMERICA'S SHOPPING MALL, INC., a Nevada corporation (the "Company"), hereby
certifies that, for value received, Suffern Hills Associates LLC ("Holder"), the
assignee of Pioneer Ventures Associates Limited Partnership, or its registered
assigns, is the registered owner of Five Hundred Thousand (500,000) Warrants
(the "Warrants"), each of which will entitle the Holder thereof to purchase one
share, as adjusted from time to time as provided in Section 7, of the Common
Stock, par value $.001 per share, of the Company (the "Common Stock", each such
share being a "Warrant Share" and all such shares being the "Warrant Shares") at
an initial exercise price of Four Dollars ($4.00) per share if the Warrants are
exercised on or prior to July 31, 2000, and after July 31, 2000 at the exercise
price of Four Dollars and Fifty Cents ($4.50) per share (as adjusted from time
to time as provided in Section 3(e) or Section 7, the "Exercise Price") at any
time on or after the date hereof (the "Initial Exercise Date") until and
including May 21, 2004 (the "Expiration Date"), all subject to the following
terms and conditions.
This Warrant is being issued and delivered pursuant to that certain
Investment Agreement between the Company and the Pioneer Ventures Associates
Limited Partnership (the "Investment Agreement"). Capitalized terms used and not
otherwise defined herein shall have the meanings given such terms in the
Investment Agreement.
For purposes of calculating the Exercise Price, the following definitions
shall apply:
"Per Share Market Value" means on any particular date (a) the closing bid
price per share of the Common Stock on such date on the Nasdaq National Market
or other stock exchange on which the Common Stock is then listed, as reported on
Bloomberg, L.P. or if there is no such bid price on such date, then the last
closing bid price on such exchange on the date nearest preceding such date, as
reported on Bloomberg, L.P., or (b) if the Common Stock is not listed on the
Nasdaq National Market or any stock exchange, the closing bid price for a share
of Common Stock on such date on the Nasdaq SmallCap Market or the OTC Bulletin
Board, as reported on Bloomberg, L.P. (or similar organization or agency
succeeding to its functions of reporting prices), or (c) if the Common Stock is
no longer reported on Bloomberg, L.P. (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" bids on such date, or (d) if the Common Stock is no longer publicly
traded, the fair market value of a share of Common Stock as determined by an
Appraiser (as defined below) selected in good faith by the Holder; provided,
however, that the Company, after receipt of the determination by such Appraiser,
shall have the right to select an additional Appraiser, in which case, the fair
market value shall be equal to the average of the determinations by each such
Appraiser.
"Trading Day" means (a) a day on which the Common Stock is traded on the
Nasdaq National Market or Nasdaq SmallCap Market or principal national
securities exchange or market on which the Common Stock has been listed or
quoted, or (b) if the Common Stock is not listed or quoted on the Nasdaq
National Market or Nasdaq SmallCap Market or any principal national securities
exchange or market, a day on which the Common Stock is
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traded in the over-the-counter market, as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding its
functions of reporting prices).
1. Registration of Warrants. The Company shall register each Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder of such Warrant from time to time.
The Company may deem and treat the registered Holder of each Warrant as the
absolute owner thereof for the purpose of any exercise thereof or any
distribution to the Holder thereof, and for all other purposes, and the Company
shall not be affected by the notice to the contrary.
2. Registration of Transfers and Exchanges.
a. The Company shall register, or instruct the Transfer Agent to register,
the transfer of any Warrants in the Warrant Register, upon surrender of this
Warrant Certificate, with the Form of Assignment attached hereto duly completed
and signed, to the Transfer Agent or the Company at the office specified in or
pursuant to Section 3(c). Upon any such registration of transfer, a new Warrant
Certificate, in substantially the form of this Warrant Certificate ("New
Warrants"), evidencing the Warrants so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining Warrants not so
transferred, if any, shall be issued to the then registered holder thereof.
b. This Warrant Certificate is exchangeable, upon the surrender hereof by
the holder hereof to the Transfer Agent or at the office of the Company
specified in or pursuant to Section 3(c), for New Warrants evidencing in the
aggregate the right to purchase the number of Warrant Shares which may then be
purchased hereunder, each of such New Warrants to be dated the date of such
exchange and to represent the right to purchase such number of Warrant Shares as
shall be designated by said holder hereof at the time of such surrender.
3. Duration and Exercise of Warrants.
a. Warrants shall be exercisable by the registered holder thereof on any
business day before 5:00 P.M., Eastern time, at any time and from time to time
on or after the Initial Exercise Date to and including the Expiration Date. At
5:00 P.M., Eastern time, on the Expiration Date, each Warrant not exercised
prior thereto shall be and become void and of no value.
b. Subject to the limitations set forth in Section 3(c) and to the other
provisions of this Warrant Certificate, including adjustments to the number of
Warrant Shares issuable on the exercise of each Warrant and to the Exercise
Price pursuant to Section 3(e) and Section 7, the Holder of this Warrant shall
have the right to purchase from the Company (and the Company shall be obligated
to issue and sell to the Holder) at the Exercise Price one fully paid Warrant
Share which is non-assessable.
c. Subject to Sections 2(b), 4 and 8, upon surrender of this Warrant
Certificate, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its office at 600 E. Crescent Avenue,
2nd Floor, Upper Saddle River, New Jersey 07458, Attention: Irwin Schneidmill,
President, or at such other address as the Company may specify in writing to the
then registered Holder of the Warrants, and upon payment of the Exercise Price
multiplied by the number of Warrant Shares then issuable upon exercise of the
Warrants being exercised in lawful money of the United States of America, all as
specified by the Holder of this Warrant Certificate in the Form of Election to
Purchase, the Company shall promptly issue and cause to be delivered to or upon
the written order of the registered Holder of such Warrants, and in such name or
names as such registered Holder may designate, a certificate for the Warrant
Shares issued upon such exercise of such Warrants, free of restrictive legends
other than legends that may be required in the opinion of the Company's counsel
in the event at such time there is not an effective Registration Statement as
contemplated by the Investment Agreement. Any person so designated to be named
therein shall be deemed to have become Holder of record of such Warrant Shares
as of the Date of Exercise of such Warrants.
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<PAGE>
The "Date of Exercise" of any Warrant means the date on which the Transfer
Agent or the Company shall have received (i) this Warrant Certificate (or any
New Warrant, as applicable) with the Form of Election to Purchase attached
hereto (or thereto) appropriately completed and duly signed, and (ii) payment of
the Exercise Price for such Warrant.
d. The Warrants evidenced by this Warrant Certificate shall be exercisable,
either as an entirety or, from time to time, for part of the number of Warrants
evidenced by this Warrant Certificate so long as at least twenty-five hundred
(2,500) Warrant Shares are exercised. If less than all of the Warrants evidenced
by this Warrant Certificate are exercised at any time, the Company shall issue,
at its expense, a New Warrant for the remaining number of Warrants evidenced by
this Warrant Certificate.
e. The Exercise Price shall be subject to reset as follows. In the event
that the Per Share Market Value for the twenty (20) trading days immediately
preceding the ninetieth (90th) day after the Company's Common Stock is eligible
for public trading (the "Reset Average Price"), the Exercise Price shall be
reset to a price per share of Common Stock equal to seventy-five percent (75%)
of the Reset Average Price. Once reset in accordance with the provisions of this
Section 3(e), the Conversion Price shall remain at the reset Conversion Price,
subject to adjustment in accordance with Section 7, below.
4. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of the Warrants
represented by this Warrant Certificate; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
in a name other than that of the Holder, and the Company shall not be required
to issue or deliver the certificates for Warrant Shares unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid. The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring the
Warrants represented by this Warrant Certificate or receiving the Warrant Shares
under this Warrant Certificate.
5. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company may in its discretion issue in exchange and substitution
for and upon cancellation hereof, or in lieu of and substitution for this
Warrant, a new Warrant of like tenor, but only upon receipt of evidence
reasonably satisfactory to the Company and the Transfer Agent of such loss,
theft or destruction and bond or other indemnity, if requested, satisfactory to
it. Applicants for a substitute Warrant certificate also shall comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
6. Reservation of Warrant Shares. The Company will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock or its authorized and issued Common Stock
held in its treasury, for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon exercise of the Warrants, a number of shares of
Common Stock equal to at least the maximum number of Warrant Shares (as adjusted
from time to time pursuant to Section 7 hereof) which may then be deliverable
upon the exercise of this Warrant and all other outstanding warrants issued and
sold pursuant to the Investment Agreement. The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
thereof, be duly and validly authorized, issued and fully paid, and
nonassessable.
7. Adjustment to the Number of Warrant Shares Issuable. The number of
Warrant Shares issuable upon the exercise of this Warrant is subject to
adjustment from time to time as set forth in Section 3(e) and this Section 7.
Upon each such adjustment of the Exercise Price pursuant to Section 3(e) or this
Section 7, the Holder shall thereafter prior to the Expiration Date be entitled
to purchase, at the Exercise Price resulting from such adjustment, the number of
Warrant Shares obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares issuable upon exercise
of this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment. In the event the
Company and the holders of the Warrants issued pursuant to the Investment
Agreement that are then outstanding disagree as to any adjustment to the
Exercise Price hereunder, an Appraiser selected by the holders of a majority of
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<PAGE>
the Warrants issued pursuant to the Investment Agreement that are then
outstanding (the "Majority Holders") shall give its opinion as to the
adjustment, if any (not inconsistent with the standards established in this
Section 7), of the Exercise Price; provided, however that the Company, after
receipt of the determination by such Appraiser, shall have the right to promptly
select an additional Appraiser, in which case the adjustment shall be equal to
the average of the adjustments recommended by each such Appraiser. The Board of
Directors shall make the adjustment recommended forthwith upon the receipt of
such opinion or opinions; provided, however, that no such adjustment of the
Exercise Price shall be made which in the opinion of the Appraiser(s) giving the
aforesaid opinion or opinions would result in an increase of the Exercise Price
to more than the Exercise Price then in effect.
a. If the Company, at any time while this Warrant is outstanding, (i) shall
pay a stock dividend or otherwise make a distribution or distributions on shares
of its Junior Securities (as such term is defined in the Convertible Debentures)
payable in shares of its capital stock (whether payable in shares of its Common
Stock or of capital stock of any class), (ii) subdivide outstanding shares of
Common Stock into a larger number of shares, (iii) combine outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue by reclassification
of shares of Common Stock any shares of capital stock of the Company, the
Exercise Price shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section 7(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
b. In case of any reclassification of the Common Stock, any consolidation
or merger of the Company with or into another person, the sale or transfer of
all or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities,
cash or property, then the Holder shall have the right thereafter to exercise
this Warrant only into the shares of stock and other securities and property
receivable upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property as the shares of the Common Stock into which this Warrant
could have been converted immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange would have been
entitled. The terms of any such consolidation, merger, sale, transfer or share
exchange shall include such terms so as to continue to give to the Holder the
right to receive the securities or property set forth in this Section 7(c) upon
any exercise following such consolidation, merger, sale, transfer or share
exchange. This provision shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
c. For the purposes of this Section 7, the following clauses shall also be
applicable:
(i) Record Date. In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock or in convertible securities, or (B)
to subscribe for or purchase Common Stock or convertible securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
the Company, and the disposition of any such shares shall be considered an issue
or sale of Common Stock for the purposes of this subsection (e).
(iii) Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of any
Exercise Price in case of the issuance of the Preferred Stock, the Warrants, the
Underlying Shares and the Warrant Shares pursuant to the Investment Agreement,
or in the event that the Company shall grant options to purchase the Company's
Common Stock pursuant to a bona fide employee stock option, stock purchase or
non-employee director plan duly adopted by its shareholders in accordance with
the Investment Agreement or for (i) securities issued upon the exercise or
conversion of the Debentures or (ii) any shares of Common Stock issued pursuant
to the exercise of options, warrants or other securities, options, rights or
4
<PAGE>
securities convertible into or exchangeable for capital stock of the Company in
connection with any stock split, stock dividend or similar event affecting the
Company Common Stock.
d. If:
i. the Company shall declare a dividend (or any other distribution) on
its Common Stock (other than a subdivision of the outstanding shares
of Common Stock) or shall authorize a repurchase or redemption or
otherwise enter into any other transaction (including stock split,
recapitalization or other transaction) which would cause a decrease in
the number of its shares of Common Stock issued and outstanding (other
than transactions that similarly decrease the number of shares of
Common Stock for which this Warrant is exercisable); or
ii. the Company shall declare a special nonrecurring cash dividend on its
then-outstanding Common Stock; or
iii. the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
iv. the approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock of the
Company (other than a subdivision or combination of the outstanding
shares of Common Stock), any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all
of the assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property;
or
v. the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding-up of the affairs of the Company;
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least thirty (30) days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, repurchase, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distributions, repurchase, redemption,
rights or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding-up; provided,
however, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice.
e. In any case in which this Section 7 shall require that an adjustment be
made effective as of the record date for a specified event, the Company may
elect to defer until occurrence of such event (A) issuing to the Holder, if this
Warrant is exercised after such record date, the Warrant Shares and other
capital stock of the Company, if any, issuable upon such exercise over and above
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the Exercise Price prior to adjustment and (B)
paying to the Holder any amount in cash in lieu of a fractional share pursuant
to Section 8 hereof, provided, however, that the Company shall deliver to the
Holder a due bill or other appropriate instrument evidencing the Holder's right
to receive such additional Warrant Shares, other capital stock and/or cash upon
the occurrence of the event requiring such adjustment.
f. Any determination that the Company or the Board of Directors must make
pursuant to this Section 7 shall be conclusive if made in good faith.
5
<PAGE>
g. If at any time conditions shall arise by reason of action taken by the
Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially affect the
rights of the Holders (different than or distinguished from the effect generally
on rights of holders of any class of the Company's capital stock) or if at any
time such conditions are expected to arise by reason of any action contemplated
by the Company, the Company shall mail a written notice briefly describing the
action contemplated and the material adverse effects of such action on the
rights of the Holders at least 30 calendar days prior to the effective date of
such action, and an Appraiser selected by the Holders of majority in interest of
the Warrants shall give its opinion as to the adjustment, if any (not
inconsistent with the standards established in Section 7(e)), of the Exercise
Price (including, if necessary, any adjustment as to the Warrant Shares to be
purchased upon exercise of this Warrant) and any distribution which is or would
be required to be preserved without diluting the rights of the Holders.
8. Fractional Shares. The Company shall not be required to issue fractional
Warrant Shares on the exercise of this Warrant. The number of full Warrant
Shares which shall be issuable upon the exercise of this Warrant shall be
computed on the basis of the aggregate number of Warrant Shares purchasable on
exercise of this Warrant so presented. If any fraction of a Warrant Share would,
except for the provisions of this Section 8, be issuable on the exercise of this
Warrant, the Company shall, at its option (a) pay an amount in cash equal to the
Exercise Price multiplied by such fraction or (b) shall round the number of
Warrant Shares issuable, up to the next whole number of such shares.
9. Warrant Agent.
a. The Company shall serve as warrant agent under this Warrant. Upon thirty
(30) days' notice to the holders of Warrants issued pursuant to the Investment
Agreement, the Company and the Majority Holders may appoint a new warrant agent.
b. Any corporation into which the Company or any new warrant agent may be
merged or any corporation resulting from any consolidation to which the Company
or any new warrant agent shall be a party or any corporation to which the
Company or any new warrant agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor warrant agent under
this Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown
on the register maintained by the warrant agent pursuant to this Warrant.
10. Notices. All notices or other communications hereunder shall be given,
and shall be deemed duly given and received if given, by facsimile and by mail,
postage prepaid: (1) if to the Company, addressed as follows: America's Shopping
Mall, Inc., 600 E. Crescent Avenue, 2nd Floor, Upper Saddle River, New Jersey
07458, Attention: Irwin Schneidmill, President, or by facsimile to (201)
934-2101/02; or (ii) if to the Holder, addressed to the Holder at the facsimile
telephone number and address of the Holder appearing on the Warrant Register or
such other address or facsimile number as the Holder may provide to the Company
in accordance with this Section 10. Any such notice shall be deemed given and
effective upon the earliest to occur of (i) receipt of such facsimile at the
facsimile telephone number specified in this Section 10, (ii) five (5) Business
Days after deposit in the United States mails or (iii) upon actual receipt by
the party to whom such notice is required to be given.
11. Miscellaneous.
a. This Warrant shall be binding on and inure to the benefit of the parties
hereto and their respective successors and assigns (provided that the Company's
obligation to a transferee of this Warrant arises only if such transfer is made
in accordance with the terms of the Investment Agreement and the transferee
agrees to be bound by the terms of the Investment Agreement and the other
Documents executed in connection therewith).
b. Subject to Section 11(a) above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company, the
Holder and any registered holder of Warrant Shares any legal or equitable
6
<PAGE>
right, remedy or cause under this Warrant; this Warrant shall be for the sole
and exclusive benefit of the Company, the Holder and any other registered holder
of Warrant Shares.
c. This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
d. The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
e. In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer as of the date first indicated above.
AMERICA'S SHOPPING MALL, INC.
By: /s/ Irwin Schneidmill
--------------------------
Name: Irwin Schneidmill
Title: President
7
<PAGE>
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise Warrants
Evidenced by the Foregoing Warrant Certificate)
To America's Shopping Mall, Inc.:
The undersigned hereby irrevocably elects to exercise ___________ Warrants
evidenced by the foregoing Warrant Certificate for, and to purchase thereunder,
_____________ full shares of Common Stock issuable upon exercise of said
Warrants and delivery of $___________________ in cash and any applicable taxes
payable by the undersigned pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued in the
name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
--------------------------------
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
If said number of Warrants shall not be all the Warrants evidenced
by the foregoing Warrant Certificate, the undersigned requests that a
new Warrant Certificate evidencing the Warrants not
so exercise be issued in the name of and delivered to:
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated:______________________, 200_ Name of Holder:
(Print)___________________________
(By:)_____________________________
(Title:)
8
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, hereby sells, assigns, and transfers to each assignee
set forth below all of the rights of the undersigned in and to the number of
Warrants (as defined in and evidenced by the foregoing Warrant Certificate) set
opposite the name of such assignee below and in and to the foregoing Warrant
Certificate with respect to said Warrants and the shares of Common Stock
issuable upon exercise of said Warrants:
Name of Assignee Address Number of Warrants
- ---------------- ------- ------------------
If the total of said Warrants shall not be all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so assigned be issued in the name of and
delivered to the undersigned.
Dated:________________, 200__ Name of Holder:
(Print)___________________________
(By:)_____________________________
(Title:)
9
<PAGE>
EXHIBIT 11.1
AMERICA'S SHOPPING MALL, INC.
COMPUTATION OF EARNINGS PER SHARE
Weighted average number of shares
Year ended April 30, 1998
<TABLE>
<CAPTION>
Date Shares # of days
---- ------ ---------
<S> <C> <C> <C>
May-97 24,677,200 31 764,993,200
Jun-97 24,677,200 30 740,316,000
Jul-97 24,677,200 31 764,993,200
Aug-97 24,677,200 31 764,993,200
Sep-97 24,677,200 30 740,316,000
Oct-97 24,677,200 31 764,993,200
Nov-97 24,677,200 30 740,316,000
Dec-97 24,677,200 31 764,993,200
Jan-98 24,677,200 31 764,993,200
Feb-98 24,677,200 28 690,961,600
Mar-98 24,677,200 31 764,993,200
Apr-98 24,677,200 30 740,316,000
--- -------------
365 9,007,178,000
=== =============
Average shares outstanding 24,677,200
=============
Shares outstanding -
adjusted for 1-for-30
conversion in July 1999 822,573
=============
</TABLE>
<PAGE>
Weighted average number of shares
Year ended April 30, 1999
<TABLE>
<CAPTION>
Date Shares # of days
---- ------ ---------
<S> <C> <C> <C>
May-98 24,677,200 31 764,993,200
Jun-98 24,677,200 30 740,316,000
Jul-98 24,677,200 31 764,993,200
Aug-98 24,677,200 31 764,993,200
Sep-98 24,677,200 30 740,316,000
Oct-98 24,677,200 31 764,993,200
Nov-98 24,677,200 30 740,316,000
Dec-98 24,677,200 31 764,993,200
Jan-99 24,677,200 31 764,993,200
Feb-99 24,677,200 28 690,961,600
Mar-99 24,677,200 31 764,993,200
April 1 - April 7, 1999 24,677,200 7 172,740,400
April 8- April 30, 1999 31,427,200 23 722,825,600
--- -------------
365 9,162,428,000
=== =============
Average shares outstanding 25,102,542
=============
Shares outstanding -
adjusted for 1-for-30
conversion in July 1999 836,751
=============
</TABLE>
<PAGE>
Weighted average number of shares
May 1, 1999 to January 31, 2000
<TABLE>
<CAPTION>
Date Shares # of days
---- ------ ---------
<S> <C> <C> <C>
May 1- May 25, 1999(A) 1,987,614 25 49,690,350
May 26- May 31, 1999 2,320,948 6 13,925,688
Jun-99 2,320,948 30 69,628,440
Jul-99 2,320,948 31 71,949,388
Aug-99 2,320,948 31 71,949,388
Sep-99 2,320,948 30 69,628,440
Oct-99 2,320,948 31 71,949,388
Nov-99 2,320,948 30 69,628,440
Dec-99 2,320,948 31 71,949,388
Jan-00 2,339,129 31 72,512,999
-- -----------
276 632,811,909
=== ===========
Average shares outstanding 2,292,797
===========
</TABLE>
<TABLE>
<S> <C> <C> <C>
(A) 30-Apr-99 31,427,200
---------- = 1,047,614
30
May 1, 1999 shares issued 940,000
-----------
1,987,614
===========
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the America's Shopping Mall, Inc. Registration
Statement on Form SB-2 of our reports dated July 30, 1999 for America's Shopping
Mall, Inc., September 10, 1999 for the Deerskin and Joan Cook Catalog
Businesses, August 17, 1999 for Dynamic Products Corp. and Subsidiary, August
17, 1999 for Creadis Promotions, Inc. and April 8, 1999 for Heyden Incorporated,
which appear in such Registration Statement. We also consent to the reference to
us under the heading "Experts" in such Registration Statement.
/s/ Arthur Yorkes & Company
Arthur Yorkes & Company
New York, New York
May 19, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement on Form SB-2 and the
related prospectus relating to the offering of 5,678,129 shares of Common Stock
of America's Shopping Mall, Inc. of our report, dated July 23, 1998, on the
consolidated financial statements of Dynamic Products Corp. and Subsidiary
contained herein, and to the use of our name and the statements with respect to
us appearing under the heading "Experts" in the prospectus.
/s/ Smallberg Sorkin & Company LLP
New York, NY
May 19, 2000
<PAGE>
[Florida Net Lease]
LEASE AGREEMENT
THIS LEASE AGREEMENT is made this 4th day of February, 2000, between
ProLogis Trust ("Landlord"), and the Tenant named below.
Tenant: America's Shopping Mall, Inc.
--------------------------------------------
Tenant's representative, Irwin Schneidmill
address, and phone no.: --------------------------------------------
Chief Executive Officer
--------------------------------------------
10 Henry Street
--------------------------------------------
Teterboro, NJ 07608
--------------------------------------------
(201) 462-0970
--------------------------------------------
Premises: That portion of the Building, containing
approximately 69,539 rentable square feet,
as determined by Landlord, as shown on
Exhibit A.
Project: Centerport Distribution Center
--------------------------------------------
Building: Centerport Distribution Center #100,
--------------------------------------------
750 NW 33rd Street, Pompano Beach, FL
--------------------------------------------
Tenant's Proportionate Share
of Project: 22% (based on the Premises containing
approximately 69,539 rentable s.f. and the
Project containing approximately 305,000
rentable s.f.)
Tenant's Proportionate Share
of Building: 73% (based on the Premises containing
approximately 69,539 rentable s.f. and the
Building containing approximately 94,820
rentable s.f.)
Lease Term: Beginning on the Commencement Date and
ending on the last day of the 120th full
calendar month thereafter, subject to
Tenant's right to Renew in Addendum 3.
Commencement date: The date which is the later of (i) the date
which is 30 days after the date upon which
the Initial Improvements are Substantially
Completed as defined in Addendum 2, or (ii)
May 1, 2000.
Initial Monthly Base Rent: See Addendum 1
Initial Estimated Monthly 1. Utilities: N/A
Operating Expense Payments:
(estimates only and subject 2. Common Area Charges: $5,099.53
to adjustment to actual costs
and expenses according to the 3. Taxes: $4,056.44
provisions of this Lease)
4. Insurance: $231.80
5. Others: $0.00
Initial Estimated Monthly Operating
Expense Payments: $9,387.77
Initial Monthly Sales Tax: $ 0.00
Initial Monthly Base Rent,
Operating Expense and
Sales Tax Payments: $41,375.71
Security Deposit: $175,575.00, which a portion of the Security
Deposit in the amount of $135,000 shall be
in the form of an irrevocable letter of
credit as more fully described in Addendum 5
attached hereto.
Broker: Cushman & Wakefield of Florida,
--------------------------------------------
Inc./Colliers Lehrer
--------------------------------------------
Addenda: Addendum 1 (Base Rent Adjustments); Addendum
--------------------------------------------
2 (Construction); Addendum 3 (One Renewal
--------------------------------------------
Option at Market); Addendum 4 (Assignment &
--------------------------------------------
Subletting); Addendum 5 (Letter of Credit)
--------------------------------------------
1. Granting Clause. In consideration of the obligation of Tenant to pay
rent as herein provided and in consideration of the other mutual terms,
covenants, and conditions hereof, Landlord leases to Tenant, and Tenant takes
from Landlord, the Premises, to have and to hold for the Lease Term, subject to
the terms, covenants and conditions of this Lease.
2. Acceptance of Premises. Landlord shall use its commercially reasonable
efforts to complete the Initial Improvements (as defined in Addendum 2) by April
1, 2000, (the "Delivery Date") subject to delays due to Force Majeure, Tenant
Caused Delays (as defined in Addendum 2) and change orders. Upon the Initial
Improvements being Substantially Completed pursuant to Addendum 2, Tenant shall
accept the Premises in its condition on the date on which the Initial
Improvements are Substantially Completed subject to all applicable laws,
ordinances, regulations, covenants and restrictions. Landlord represents that
the Initial Improvements shall be constructed in compliance with Legal
Requirements in all material respects and in a good and workmanlike manner.
Landlord has made no representation or warranty as to the suitability of the
Premises for the conduct of Tenant's business, and Tenant waives
-1-
<PAGE>
any implied warranty that the Premises are suitable for Tenant's intended
purposes. Except as provided in Paragraph 10, for punch list items under
Addendum 2, and latent defects, in no event shall Landlord have any obligation
for any defects in the Premises or any limitation on its use. The taking of
possession of the Premises shall be conclusive evidence that Tenant accepts the
Premises and that the Premises were in good condition at the time possession was
taken except for items that are Landlord's responsibility under Paragraph 10,
latent defects, and any punchlist items agreed to in writing by Landlord and
Tenant.
3. Use. The Premises shall be used only for the purpose of receiving,
storing, shipping and selling (but limited to wholesale sales) products,
materials and merchandise made and/or distributed by Tenant, administrative
offices, a call center, and for such other lawful purposes as may be incidental
thereto; provided, however, with Landlord's prior written consent, Tenant may
also use the Premises for light manufacturing. Tenant shall not conduct or give
notice of any auction, liquidation, or going out of business sale on the
Premises. Tenant will use the Premises in a careful, safe and proper manner and
will not commit waste, overload the floor or structure of the Premises or
subject the Premises to use that would damage the Premises. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise, or
vibrations to emanate from the Premises, or take any other action that would
constitute a nuisance or would disturb, unreasonably interfere with, or endanger
Landlord or any tenants of the Project. Outside storage, including without
limitation, storage of trucks and other vehicles, is prohibited without
Landlord's prior written consent; provided however, that Tenant shall have the
right to park operable trucks and trailers overnight at the truck loading docks
and truck parking areas adjacent to the Premises. Tenant, at its sole expense,
shall use and occupy the Premises in compliance with all laws, including,
without limitation, the Americans With Disabilities Act, orders, judgments,
ordinances, regulations, codes, directives, permits, licenses, covenants and
restrictions now or hereafter applicable to the Premises (collectively, "Legal
Requirements"). The Premises shall not be used as a place of public
accommodation under the Americans With Disabilities Act or similar state
statutes or local ordinances or any regulations promulgated thereunder, all as
may be amended from time to time. Tenant shall, at its expense, make any
alterations or modifications, within or without the Premises, that are required
by Legal Requirements related to Tenant's use or occupation of the Premises.
Tenant will not use or permit the Premises to be used for any purpose or in any
manner that would void Tenant's or Landlord's insurance, increase the insurance
risk. If any increase in the cost of any insurance on the Premises or the
Project is caused by Tenant's use or occupation of the Premises, or because
Tenant vacates the Premises, then Tenant shall pay the amount of such increase
to Landlord. Additionally, in the event the use of any other tenant at the
Project increases the cost of any insurance at the Project, Tenant shall not be
responsible for its Proportionate Share of such increase. Any occupation of the
Premises by Tenant prior to the Commencement Date shall be subject to all
obligations of Tenant under this Lease, except for the payment of rent which
shall commence on the Commencement Date.
4. Base Rent. Tenant shall pay Base Rent in the amount set forth above.
The first month's Base Rent, the cash portion of Security Deposit, and the first
monthly installment of estimated Operating Expenses (as hereafter defined) shall
be due and payable on the date hereof, and Tenant promises to pay to Landlord in
advance, without demand, deduction or set-off, monthly installments of Base Rent
on or before the first day of each calendar month succeeding the Commencement
Date. Payments of Base Rent and Operating Expenses for any fractional calendar
month shall be prorated. All payments required to be made by Tenant to Landlord
hereunder shall be payable at such address as Landlord may specify from time to
time by written notice delivered in accordance herewith. The obligation of
Tenant to pay Base Rent and other sums to Landlord and the obligations of
Landlord under this Lease are independent obligations. Tenant shall have no
right at any time to abate, reduce, or set-off any rent due hereunder except as
may be expressly provided in this Lease. If Tenant is deliquent in any monthly
installment of Base Rent or of estimated Opeating Expenses for more than 5 days,
Tenant shall pay to Landlord on demand a late charge equal to 5 percent of such
deliquent sum. The provision for such late charge shall be in addition to all of
Landlord's other rights and remedies hereunder or at law and shall not be
construed as a penalty. The late charge provided for in this Paragraph 4 shall
not accrue with respect to the first 2 occurrences of deliquent payment in any
consecutive 12-month period, so long as payment is made by Tenant within 5 days
of written notice from Landlord to Tenant of Tenant's failure to pay an
installment of Base Rent or estimated Operating Expenses as therein described.
5. Security Deposit. The Security Deposit shall be held by Landlord as
security for the performance of Tenant's obligations under this Lease. The
Security Deposit is not an advance rental deposit or a measure of Landlord's
damages in case of Tenant's default. Upon each occurrence of an Event of Default
(hereinafter defined), Landlord may use all or part of the Security Deposit to
pay delinquent payments due under this Lease, and the cost of any damage,
injury, expense or liability caused by such Event of Default, without prejudice
to any other remedy provided herein or provided by law. Tenant shall pay
Landlord on demand the amount that will restore the Security Deposit to its
original amount. Landlord's obligation respecting the Security Deposit is that
of a debtor, not a trustee; no interest shall accrue thereon. The Security
Deposit shall be the property of Landlord, but shall be paid to Tenant the later
of (i) 30 days following the termination of the Lease, provided no default has
occurred and is continuing, and (ii) when Tenant's obligations under this Lease
have been completely fulfilled. Landlord shall be released from any obligation
with respect to the Security Deposit upon transfer of this Lease and the
Premises to a person or entity assuming Landlord's obligations under this
Paragraph 5 provided that such Security Deposit is transferred to such party.
6. Operating Expense Payments. During each month of the Lease Term, on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal
to 1/12 of the annual cost, as estimated by Landlord from time to time, of
Tenant's Proportionate Share (hereinafter defined) of Operating Expenses for the
Project. Payments
-2-
<PAGE>
thereof for any fractional calendar month shall be prorated. The term "Operating
Expenses" means all costs and expenses incurred by Landlord with respect to the
ownership, maintenance, and operation of the Project including, but not limited
to costs of: Taxes (hereinafter defined) and fees payable to tax consultants and
attorneys for consultation and contesting taxes; insurance; utilities for the
common areas and those areas not occupied by tenants of the Project,
maintenance, repair and replacement of all portions of the Project, including
without limitation, paving and parking areas, roads, the roof and roof membrane,
alleys, and driveways, mowing, landscaping, exterior painting, utility lines,
heating, ventilation and air conditioning systems which are within the common
areas, and not exclusively serving the premises of another tenant at the
Project, lighting, electrical systems and other mechanical and building systems;
amounts paid to contractors and subcontractors for work or services performed in
connection with any of the foregoing; charges or assessments of any association
to which the Project is subject; property management fees in the amount of three
percent (3%) of the gross revenues from the Building payable to a property
manager, including any affiliate of Landlord; security services, if any; trash
collection, sweeping and removal; and additions or alterations made by Landlord
to the Project or the Building in order to comply with Legal Requirements (other
than those expressly required herein to be made by Tenant) or that are
appropriate to the continued operation of the Project or the Building as a bulk
warehouse facility in the market area, provided that the cost of additions or
alterations that are required to be capitalized for federal income tax purposes
shall be amortized on a straight line basis over a period equal to the lesser of
the useful life thereof for federal income tax purposes or 10 years. Operating
Expenses do not include costs, expenses, depreciation or amortization for
capital repairs and capital replacements required to be made by Landlord under
Paragraph 10 of this Lease, debt service under mortgages or ground rent under
ground leases, costs of restoration to the extent of net insurance proceeds
received by Landlord with respect thereto or which would have been received had
Landlord maintained the insurance required of Landlord hereunder, leasing
commissions, the costs of renovating space for tenants, legal fees incurred by
Landlord in disputes with tenants other than Tenant, utilities provided to
tenants other than Tenant, services provided exclusively to a tenant which are
not provided to all tenants generally, or costs of repair or replacement related
exclusively to another building at the Project (such as a roof replacement).
Notwithstanding the foregoing, during the Initial Lease Term, Operating Expenses
shall not include the cost of replacement of the roof and roof membrane.
If Tenant's total payments of Operating Expenses for any year are less
than Tenant's Proportionate Share of actual Operating Expenses for such year,
then Tenant shall pay the difference to Landlord within 30 days after demand,
and if more, then Landlord shall retain such excess and credit it against
Tenant's next payments. For purposes of calculating Tenant's Proportionate Share
of Operating Expenses, a year shall mean a calendar year except the first year,
which shall begin on the Commencement Date, and the last year, which shall end
on the expiration of this Lease. With respect to Operating Expenses which
Landlord allocates to the entire Project, Tenant's "Proportionate Share" shall
be the percentage set forth on the first page of this Lease as Tenant's
Proportionate Share of the Project as reasonably adjusted by Landlord in the
future for changes in the physical size of the Premises or the Project; and,
with respect to Operating Expenses which Landlord allocates only to the
Building, Tenant's "Proportionate Share" shall be the percentage set forth on
the first page of this Lease as Tenant's Proportionate Share of the Building as
reasonably adjusted by Landlord in the future for changes in the physical size
of the Premises or the Building. The estimated Operating Expenses for the
Premises set forth on the first page of this Lease are only estimates, and
Landlord makes no guaranty or warranty that such estimates will be accurate.
7. Utilities. Tenant shall pay for all water, gas, electricity, heat,
light, power, telephone, sewer, sprinkler services, refuse and trash collection,
and other utilities and services used on the Premises, all maintenance charges
for utilities, and any storm sewer charges or other similar charges for
utilities imposed by any governmental entity or utility provider on the
utilities used by Tenant at the Premises, together with any taxes, penalties,
surcharges or the like pertaining to Tenant's use of the Premises. Landlord may
cause at Tenant's expense any utilities to be separately metered or charged
directly to Tenant by the provider. Tenant shall pay its share of all charges
for jointly metered utilities based upon consumption, as reasonably determined
by Landlord. No interruption or failure of utilities shall result in the
termination of this Lease or the abatement of rent. Tenant agrees to limit use
of water and sewer for normal restroom, use and office and warehouse use.
Notwithstanding anything to the contrary contained in Paragraph 7 of this Lease,
if an interruption or cessation of utilities results from a cause within the
Landlord's reasonable control and the Premises are not usable by Tenant for the
conduct of Tenant's business as a result thereof, Base Rent and applicable
Operating Expenses not actually incurred by Tenant shall be abated for the
period which commences three (3) business days after the date Tenant gives to
Landlord notice of such interruption until such utilities are restored.
8. Taxes. Landlord shall pay all taxes, assessments and governmental
charges (collectively referred to as "Taxes") that accrue against the Project
during the Lease Term, which shall be included as part of the Operating Expenses
charged to Tenant. Landlord may contest by appropriate legal proceedings the
amount, validity, or application of any Taxes or liens thereof. All capital
levies or other taxes assessed or imposed on Landlord upon the rents payable to
Landlord under this Lease and any franchise tax, any excise, transaction, sales
or privilege tax, assessment, levy or charge measured by or based, in whole or
in part, upon such rents from the Premises and/or the Project or any portion
thereof shall be paid by Tenant to Landlord monthly in estimated installments or
upon demand, at the option of Landlord, as additional rent; provided, however,
in no event shall Tenant be liable for any income taxes imposed on Landlord
unless such net income taxes are in subsitution for any Taxes payable hereunder.
If any such tax or excise is levied or assessed directly against Tenant, then
Tenant shall be responsible for and shall pay the same at such times and in such
manner as the taxing authority shall require. Tenant shall be liable for all
taxes levied or assessed against any personal property or fixtures placed in the
Premises, whether levied or assessed against
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Landlord or Tenant. Notwithstanding anything contained herein to the contrary,
Tenant shall be charged as an Operating Expense for any special assessments with
respect to the Building or Project based on Tenant's Proportionate Share of the
Building or Project, as applicable, and based on payment of the special
assessment over the longest period allowed for payment by the applicable taxing
authority and upon the amount due if such special assessment were paid over such
period of time.
9. Insurance. Landlord shall maintain all risk property insurance covering
the full replacement cost of the Building and commercial liability insurance in
commercially reasonable amounts. Landlord may, but is not obligated to, maintain
such other insurance and additional coverages as it may deem necessary,
including, but not limited to rent loss insurance. All such insurance shall be
included as part of the Operating Expenses charged to Tenant. The Project or
Building may be included in a blanket policy (in which case the cost of such
insurance allocable to the Project or Building will be determined by Landlord
based upon the insurer's cost calculations). Tenant shall also reimburse
Landlord for any increased premiums or additional insurance which Landlord
reasonably deems necessary as a result of Tenant's use of the Premises; provided
however, that Tenant shall not be responsible for any increases in insurance
premiums due exclusively to the use of any other tenant at the Project.
Tenant, at its expense, shall maintain during the Lease Term: all risk
property insurance covering the full replacement cost of all property and
improvements installed or placed in the Premises by Tenant at Tenant's expense;
worker's compensation insurance with no less than the minimum limits required by
law; employer's liability insurance with such limits as required by law; and
commercial liability insurance, with a minimum limit of $1,000,000 per
occurrence and a minimum umbrella limit of $1,000,000, for a total minimum
combined general liability and umbrella limit of $2,000,000 (together with such
additional umbrella coverage as Landlord may reasonably require) for property
damage, personal injuries, or deaths of persons occurring in or about the
Premises. Landlord may from time to time require reasonable increases in any
such limits. The commercial liability policies shall name Landlord as an
additional insured, insure on an occurrence and not a claims-made basis, be
issued by insurance companies which are reasonably acceptable to Landlord, not
be cancelable unless 30 days prior written notice shall have been given to
Landlord, contain a hostile fire endorsement and a contractual liability
endorsement and provide primary coverage to Landlord (any policy issued to
Landlord providing duplicate or similar coverage shall be deemed excess over
Tenant's policies). Such policies or certificates thereof shall be delivered to
Landlord by Tenant upon commencement of the Lease Term and upon each renewal of
said insurance.
The all risk property insurance obtained by Landlord and Tenant shall
include a waiver of subrogation by the insurers and all rights based upon an
assignment from its insured, against Landlord or Tenant, their officers,
directors, employees, managers, agents, invitees and contractors, in connection
with any loss or damage thereby insured against. Neither party nor its officers,
directors, employees, managers, agents, invitees or contractors shall be liable
to the other for loss or damage caused by any risk coverable by all risk
property insurance, and each party waives any claims against the other party,
and its officers, directors, employees, managers, agents, invitees and
contractors for such loss or damage. The failure of a party to insure its
property shall not void this waiver. Landlord and its agents, employees and
contractors shall not be liable for, and Tenant hereby waives all claims against
such parties for, business interruption and losses occasioned thereby sustained
by Tenant or any person claiming through Tenant resulting from any accident or
occurrence in or upon the Premises or the Project from any cause whatsoever,
including without limitation, damage caused in whole or in part, directly or
indirectly, by the negligence of Landlord or its agents, employees or
contractors.
Tenant and its subtenants, assignees, invitees, employees, contractors and
agents shall not be liable for, and Landlord hereby waives all claims against
Tenant and its subtenants, assignees, invitees, employees, contractors and
agents for damage to property sustained by Landlord or any person claiming
through Landlord resulting from any accident or occurrence in or upon the
Premises or in or about the Project from any cause whatsoever, including,
without limitation, damage caused in whole or in part, directly or indirectly,
by the negligence of Tenant or its subtenants, assignees, invitees, employees,
contractors or agents; provided, however, such waiver shall only apply to claims
in excess of the commercially reasonable deductible under Landlord's insurance
policy.
10. Landlord's Repairs. Landlord shall maintain, at its expense, the
structural soundness of the roof, foundation, and exterior walls of the Building
in good repair, reasonable wear and tear and uninsured losses and damages caused
by Tenant, its agents and contractors excluded. The term "walls" as used in this
Paragraph 10 shall not include windows, glass or plate glass, doors or overhead
doors, special store fronts, dock bumpers, dock plates or levelers, or office
entries. Tenant shall promptly give Landlord written notice of any repair
required by Landlord pursuant to this Paragraph 10, after which Landlord shall
have a reasonable opportunity to repair.
In the event of an emergency, Tenant shall have the right to make such
temporary, emergency repairs (and only such temporary, emergency repairs) to the
roof, foundation or exterior walls of the Building as may be reasonably
necessary to prevent material damage to Tenant's property at the Premises and/or
personal injury to Tenant's employees at the Premises (provided Tenant first
attempts to notify Landlord telephonically of such emergency and notifies
Landlord of such circumstances in writing as soon as practicable thereafter). In
such event, Landlord shall reimburse Tenant for the reasonable, out-of-pocket
costs actually incurred by Tenant in making such emergency repairs. If Landlord
fails to reimburse Tenant for the reasonable, out-of-pocket costs incurred by
Tenant in making such repairs, up to but not to exceed $2,000.00 with respect to
such emergency, within 30 days after demand therefor, accompanied by supporting
evidence of the costs incurred by Tenant, then Tenant may bring an
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action for damages against Landlord to recover such costs, together with
interest thereof at the rate provided for in Paragraph 37(j) of the
Lease, and reasonable attorney's fees incurred by Tenant in bringing
such action for damages. In no event, however, shall Tenant have a right
to terminate the Lease.
11. Tenant's Repairs. Landlord, the cost of which shall be an
Operating Expense as provided in Paragraph 6, shall maintain in good repair and
condition the roof and roof membrane, parking areas and other common areas of
the Building, including, but not limited to driveways, alleys, landscape and
grounds surrounding the Premises; provided however, that during the Initial
Lease Term, all replacements of the roof or roof membrane at the Building shall
be at Landlord's expense. Subject to Landlord's obligation in Paragraph 10 and
subject to Paragraphs 9 and 15, Tenant, at its expense, shall repair, replace
and maintain in good condition all non-structural portions of the Premises and
all areas, improvements and systems exclusively serving the Premises including,
without limitation, dock and loading areas, truck doors, plumbing, water and
sewer lines exclusively serving the Premises up to points of common connection
(provided however, that Landlord, at Tenant's expense, shall maintain and repair
such plumbing, water and sewer lines which are outside the perimeter of the
Building), interior fire sprinklers and fire protection systems or those systems
that exclusively serve the Premises, entries, doors, ceilings, windows, interior
walls, and the interior side of demising walls, and heating, ventilation and air
conditioning systems. Such repair and replacements include capital expenditures
and repairs whose benefit may extend beyond the Term. Heating, ventilation and
air conditioning systems and other mechanical and building systems servicing the
Premises shall be maintained at Tenant's expense pursuant to maintenance service
contracts entered into by Tenant or, at Landlord's election, by Landlord. The
scope of services and contractors under such maintenance contracts shall be
reasonably approved by Landlord. At Landlord's request, Tenant shall enter into
a joint maintenance agreement with any railroad that services the Premises. If
Tenant fails to perform any repair or replacement for which it is responsible
after thirty (30) days notice from Landlord of such repairs, then Landlord may
perform such work and be reimbursed by Tenant within 10 days after demand
therefor; provided however, that if such failure to repair creates an emergency
condition, a threat to health or safety, a hazardous condition, such repairs are
necessary due to weather conditions, or such failure to repair unreasonably
interferes with another tenant's use of the Building or Project, then no notice
prior to Landlord's repair is required. Subject to Paragraphs 9 and 15, Tenant
shall bear the full cost of any repair or replacement to any part of the
Building or Project that results from damage caused by Tenant, its agents,
contractors, or invitees and any repair that benefits only the Premises but,
with respect to repairs which may benefit only the Premises, repairs to the
roof, fire sprinklers and fire protection system shall be paid by Tenant as an
Operating Expense. Tenant shall not pay for repairs which exclusively benefit
another tenant's premises.
12. Tenant-Made Alterations and Trade Fixtures. Any alterations,
additions, or improvements made by or on behalf of Tenant to the Premises
("Tenant-Made Alterations") shall be subject to Landlord's prior written
consent; provided however, that Landlord will not unreasonably withhold its
consent to Tenant-Made Alterations the cost of which do not exceed $10,000.00,
which are decorative alterations to the interior of the Premises, and which do
not involve any structural elements of the Building or Project, or modify the
utility systems of the Building or Project. Tenant shall cause, at its expense,
all Tenant-Made Alterations to comply with insurance requirements and with Legal
Requirements and shall construct at its expense any alteration or modification
required by Legal Requirements as a result of any Tenant-Made Alterations. All
Tenant-Made Alterations shall be constructed in a good and workmanlike manner by
contractors reasonably acceptable to Landlord and only good grades of materials
shall be used. All plans and specifications for any Tenant-Made Alterations
shall be submitted to Landlord for its approval. Landlord may monitor
construction of the Tenant-Made Alterations. Tenant shall reimburse Landlord for
its reasonable out-of-pocket costs in reviewing plans and specifications and in
monitoring construction. Landlord's right to review plans and specifications and
to monitor construction shall be solely for its own benefit, and Landlord shall
have no duty to see that such plans and specifications or construction comply
with applicable laws, codes, rules and regulations. Tenant shall provide
Landlord with the identities and mailing addresses of all persons performing
work or supplying materials, prior to beginning such construction, and Landlord
may post on and about the Premises notices of non-responsibility pursuant to
applicable law. Tenant shall furnish security or make other arrangements
satisfactory to Landlord to assure payment for the completion of all work free
and clear of liens and shall provide certificates of insurance for worker's
compensation and other coverage in amounts and from an insurance company
satisfactory to Landlord protecting Landlord against liability for personal
injury or property damage during construction. Upon completion of any
Tenant-Made Alterations, Tenant shall deliver to Landlord sworn statements
setting forth the names of all contractors and subcontractors who did work on
the Tenant-Made Alterations and final lien waivers from all such contractors and
subcontractors. Upon surrender of the Premises, all Tenant-Made Alterations and
any leasehold improvements constructed by Landlord or Tenant shall remain on the
Premises as Landlord's property, except to the extent Landlord requires removal
at Tenant's expense of any such items or Landlord and Tenant have otherwise
agreed in writing in connection with Landlord's consent to any Tenant-Made
Alterations. Tenant shall repair any damage caused by such removal.
Tenant, at its own cost and expense and without
Landlord's prior approval, may erect such shelves, bins, machinery and
trade fixtures (collectively "Trade Fixtures") in the ordinary course of
its business provided that such items do not alter the basic character
of the Premises, do not overload or damage the Premises, and may be
removed without injury to the Premises, and the construction, erection,
and installation thereof complies with all Legal Requirements and with
Landlord's requirements set forth above. Tenant shall remove its Trade
Fixtures and shall repair any damage caused by such removal.
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<PAGE>
13. Signs. Tenant shall not make any changes to the exterior of the
Premises, install any exterior lights, decorations, balloons, flags, pennants,
banners, or painting, or erect or install any signs, windows or door lettering,
placards, decorations, or advertising media of any type which can be viewed from
the exterior of the Premises, without Landlord's prior written consent. Upon
surrender or vacation of the Premises, Tenant shall have removed all signs and
repair, paint, and/or replace the building facia surface to which its signs are
attached. Tenant shall obtain all applicable governmental permits and approvals
for sign and exterior treatments. All signs, decorations, advertising media,
blinds, draperies and other window treatment or bars or other security
installations visible from outside the Premises shall be subject to Landlord's
approval and conform in all respects to Landlord's requirements.
14. Parking. Tenant shall be allocated 120 parking spaces as described
in Exhibit A and shall be entitled to park in common with other tenants of the
Project in those areas designated for nonreserved parking. Landlord may allocate
parking spaces among Tenant and other tenants in the Project if Landlord
determines that such parking facilities are becoming crowded; provided that the
spaces allocated to Tenant shall not be less than 120. Landlord shall not be
responsible for enforcing Tenant's parking rights against any third parties.
15. Restoration. If at any time during the Lease Term the Premises are
damaged by a fire or other casualty, Landlord shall notify Tenant within 60 days
after such damage as to the amount of time Landlord reasonably estimates it will
take to restore the Premises. If the restoration time is estimated to exceed 6
months, either Landlord or Tenant may elect to terminate this Lease upon notice
to the other party given no later than 30 days after Landlord's notice. If
neither party elects to terminate this Lease or if Landlord estimates that
restoration will take 6 months or less, then subject to receipt of sufficient
insurance proceeds (provided that Landlord maintained the insurance required
under this Lease), Landlord shall promptly restore the Premises excluding the
improvements installed by Tenant or by Landlord and paid by Tenant, subject to
delays arising from the collection of insurance proceeds or from Force Majeure
events. Tenant at Tenant's expense shall promptly perform, subject to delays
arising from the collection of insurance proceeds, or from Force Majeure events,
all repairs or restoration not required to be done by Landlord and shall
promptly re-enter the Premises and commence doing business in accordance with
this Lease. Notwithstanding the foregoing, either party may terminate this Lease
if the Premises are damaged during the last year of the Lease Term and Landlord
reasonably estimates that it will take more than one month to repair such
damage; provided however, if Tenant has exercised its right to renew under
Addendum 3 hereof, the provisions of the second sentence of this Paragraph 15
shall apply. Tenant shall pay to Landlord with respect to any damage to the
Premises the amount of the commercially reasonable deductible under Landlord's
insurance policy (currently $25,000) within 10 days after presentment of
Landlord's invoice. If the damage involves the premises of other tenants, Tenant
shall pay the portion of the deductible that the cost of the restoration of the
Premises bears to the total cost of restoration, as determined by Landlord. Base
Rent and Operating Expenses shall be abated for the period of repair and
restoration in the proportion which the area of the Premises, if any, which is
not usable by Tenant bears to the total area of the Premises. Such abatement
shall be the sole remedy of Tenant, and except as provided herein, Tenant waives
any right to terminate the Lease by reason of damage or casualty loss.
16. Condemnation. If any part of the Premises or the Project should
be taken for any public or quasi-public use under governmental law, ordinance,
or regulation, or by right of eminent domain, or by private purchase in lieu
thereof (a "Taking" or "Taken"), and the Taking would prevent or materially
interfere with Tenant's use of the Premises or in Landlord's judgment would
materially interfere with or impair its ownership or operation of the Project,
then upon written notice by Landlord or Tenant this Lease shall terminate and
Base Rent shall be apportioned as of said date. If part of the Premises shall be
Taken, and this Lease is not terminated as provided above, the Base Rent and
Operating Expenses payable hereunder during the unexpired Lease Term shall be
reduced in the proportion which the area of the Premises, if any, which is not
usable by Tenant bears to the total area of the Premises. In the event of any
such Taking, Landlord shall be entitled to receive the entire price or award
from any such Taking without any payment to Tenant, and Tenant hereby assigns to
Landlord Tenant's interest, if any, in such award. Tenant shall have the right,
to the extent that same shall not diminish Landlord's award, to make a separate
claim against the condemning authority (but not Landlord) for such compensation
as may be separately awarded or recoverable by Tenant for moving expenses, and
damage to Tenant's personal property including Trade Fixtures, if a separate
award for such items is made to Tenant.
17. Assignment and Subletting. Without Landlord's prior written
consent, Tenant shall not assign this Lease or sublease the Premises or any part
thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any
concession or license within the Premises and any attempt to do any of the
foregoing shall be void and of no effect. For purposes of this paragraph, a
transfer of the ownership interests controlling Tenant shall be deemed an
assignment of this Lease unless such ownership interests are publicly traded.
Notwithstanding the above, Tenant may assign or sublet the Premises, or any part
thereof, to any entity controlling Tenant, controlled by Tenant or under common
control with Tenant (a "Tenant Affiliate"), without the prior written consent of
Landlord. Tenant shall reimburse Landlord for all of Landlord's reasonable
out-of-pocket expenses in connection with any assignment or sublease not to
exceed $1,000.00. Upon Landlord's receipt of Tenant's written notice of a
desire to assign or sublet the Premises, or any part thereof (other than to a
Tenant Affiliate or a Successor Entity as defined below), Landlord may, by
giving written notice to Tenant within 30 days after receipt of Tenant's notice,
terminate this Lease with respect to the space described in Tenant's notice, as
of the date specified in Tenant's notice for the commencement of the proposed
assignment or sublease; provided however, that Tenant shall have the right to
nullify any such termination by withdrawing in writing its request for
Landlord's consent to sublease or assignment within ten (10) days of the date of
Landlord's termination notice.
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Provided no default has occurred and is continuing under this Lease, upon
10 days prior written notice to Landlord, Tenant may, without Landlord's prior
written consent, assign this Lease to an entity (the "Successor Entity") into
which Tenant is merged or consolidated or to an entity to which substantially
all of Tenant's assets are transferred, provided (x) such merger, consolidation,
or transfer of assets is for a good business purpose and not principally for the
purpose of transferring Tenant's leasehold estate, and (y) the assignee or
successor entity has a net worth at least equal to the net worth of Tenant
immediately prior to such merger, consolidation, or transfer.
Notwithstanding any assignment or subletting, Tenant shall at all times
remain fully responsible and liable for the payment of the rent and for
compliance with all of Tenant's other obligations under this Lease (regardless
of whether Landlord's approval has been obtained for any such assignments or
sublettings). In the event that the rent due and payable by a sublessee or
assignee, except for a Tenant Affiliate or a successor entity, (or a combination
of the rental payable under such sublease or assignment plus any bonus or other
consideration therefor or incident thereto) exceeds the rental payable under
this Lease, then Tenant shall be bound and obligated to pay Landlord as
additional rent hereunder all such excess rental and other excess consideration
within 10 days following receipt thereof by Tenant. With respect to the
obligation of Tenant to pay Landlord any excess rental and other excess
consideration payable with respect to any assignment or subleasing, Landlord
agrees that Tenant shall be entitled, in determining the amount of such excess
rental or other excess consideration, to first recapture the actual, reasonable
out-of-pocket costs of improvements made by Tenant in connection therewith, the
actual, reasonable out-of-pocket leasing commissions, and the actual, reasonable
out-of-pocket attorney's fees paid by Tenant in connection therewith.
If this Lease be assigned or if the Premises be subleased (whether in whole
or in part) or in the event of the mortgage, pledge, or hypothecation of
Tenant's leasehold interest or grant of any concession or license within the
Premises or if the Premises be occupied in whole or in part by anyone other than
Tenant, then upon a default by Tenant hereunder Landlord may collect rent from
the assignee, sublessee, mortgagee, pledgee, party to whom the leasehold
interest was hypothecated, concessionee or licensee or other occupant and,
except to the extent set forth in the preceding paragraph, apply the amount
collected to the next rent payable hereunder; and all such rentals collected by
Tenant shall be held in trust for Landlord and immediately forwarded to
Landlord. No such transaction or collection of rent or application thereof by
Landlord, however, shall be deemed a waiver of these provisions or a release of
Tenant from the further performance by Tenant of its covenants, duties, or
obligations hereunder.
18. Indemnification. Except for the negligence or willful misconduct of
Landlord, its agents, employees or contractors, and to the extent permitted by
law, Tenant agrees to indemnify, defend and hold harmless Landlord, and
Landlord's agents, employees and contractors, from and against any and all
losses, liabilities, damages, costs and expenses (including attorneys' fees)
resulting from claims by third parties for injuries to any person and damage to
or theft or misappropriation or loss of property occurring in or about the
Project and arising from the use and occupancy of the Premises or from any
activity, work, or thing done, permitted or suffered by Tenant in or about the
Premises or due to any other act or omission of Tenant, its subtenants,
assignees, invitees, employees, contractors and agents. The furnishing of
insurance required hereunder shall not be deemed to limit Tenant's obligations
under this Paragraph 18.
19. Inspection and Access. Landlord and its agents, representatives, and
contractors may enter the Premises upon 24 hours prior telephonic notice, unless
an emergency exists in which case, no notice is required, at any reasonable time
to inspect the Premises and to make such repairs as may be required or
permitted pursuant to this Lease and for any other business purpose. Landlord
and Landlord's representatives may enter the Premises during business hours for
the purpose of showing the Premises to prospective purchasers and, during the
last year of the Lease Term, to prospective tenants. Landlord may erect a
suitable sign at the Building stating the Premises are available to let or that
the Project is available for sale. Landlord may grant easements, make public
dedications, designate common areas and create restrictions on or about the
Premises, provided that no such easement, dedication, designation or restriction
materially interferes with Tenant's use or occupancy of the Premises. At
Landlord's request, Tenant shall execute such instruments as may be necessary
for such easements, dedications or restrictions.
20. Quiet Enjoyment. If Tenant shall perform all of the convenants and
agreements herein required to be performed by Tenant, Tenant shall, subject to
the terms of this Lease, at all times during the Lease Term, have peaceful and
quiet enjoyment of the Premises against any person claiming by, through or under
Landlord.
21. Surrender. Upon termination of the Lease Term or earlier termination of
Tenant's right of possession, Tenant shall surrender the Premises to Landlord in
the same condition as received, broom clean, ordinary wear and tear and casualty
loss and condemnation covered by Paragraphs 15 and 16 excepted. Any Trade
Fixtures, Tenant-Made Alterations and property not so removed by Tenant as
permitted or required herein shall be deemed abandoned and may be stored,
removed, and disposed of by Landlord at Tenant's expense, and Tenant waives all
claims against Landlord for any damages resulting from Landlord's retention and
disposition of such property. All obligations of Tenant and Landlord hereunder
not fully performed as of the termination of the Lease Term shall survive the
termination of the Lease Term, including without limitation, indemnity
obligations, payment obligations with respect to Operating Expenses and
obligations concerning the condition and repair of the Premises.
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22. Holding Over. If Tenant retains possession of the Premises after the
termination of the Lease Term, unless otherwise agreed in writing, such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease (excluding any expansion
or renewal option or other similar right or option) shall be applicable during
such holdover period, except that Tenant shall pay Landlord from time to time,
upon demand, as Base Rent for the holdover period, an amount equal to 150% of
the Base Rent in effect on the termination date, computed on a monthly basis for
each month or part thereof during such holding over. All other payments shall
continue under the terms of this Lease. In addition, Tenant shall be liable for
all damages incurred by Landlord as a result of such holding over. No holding
over by Tenant, whether with or without consent of Landlord, shall operate to
extend this Lease except as otherwise expressly provided, and this Paragraph 22
shall not be construed as consent for Tenant to retain possession of the
Premises.
23. Events of Default. Each of the following events shall be an event of
default ("Event of Default") by Tenant under this Lease:
(i) Tenant shall fail to pay any installment of Base Rent or any
payment required herein when due, and such failure shall continue for a
period of 5 days from the date of Landlord's written notice to Tenant
of such failure to pay; provided, however, that Landlord shall not be
obligated to provide written notice of such failure more than 2 times
in any consecutive 12-month period, and failure of Tenant to pay any
third or subsequent installment of Base Rent or any other payment
required herein when due in any consecutive 12-month period shall
constitute an Event of Default by Tenant under this Lease without the
requirement of notice or opportunity to cure.
(ii) Tenant or any guarantor or surety of Tenant's obligations
hereunder shall (A) make a general assignment for the benefit of
creditors; (B) commence any case, proceeding or other action seeking to
have an order for relief entered on its behalf as a debtor or to
adjudicate it a bankrupt or insolvent, or seeking reorganzation,
arrangement, adjustment, liquidation, dissolution or composition of it
or its debts or seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or of any substantial part
of its property (collectively a "proceeding for relief"); (c) become
the subject of any proceeding for relief which is not dismissed within
60 days of its filing or entry; or (D) die or suffer a legal disability
(if Tenant, guarantor, or surety is an individual) or be dissolved or
otherwise fail to maintain its legal existence (if Tenant, guarantor or
surety is a corporation, partnership or other entity).
(iii) Any insurance required to be maintained by Tenant pursuant
to this Lease shall be cancelled or terminated or shall expire or shall
be reduced or materially changed, except, in each case, as permitted in
this Lease.
(iv) Tenant shall not occupy or shall vacate the Premises or
shall fail to continuously operate its business at the Premises for the
permitted use set forth herein, whether or not Tenant is in monetary or
other default under this Lease. Tenant's vacating of the Premises shall
not consitute an Event of Default if, prior to vacating the Premises,
Tenant has made arrangements reasonably acceptable to Landlord to (a)
insure that Tenant's insurance for the Premises will not be voided or
cancelled with respect to the Premises as a result of such vacancy, (b)
insure that the Premises are secured and not subject to vandalism, and
(c) insure that the Premises will be properly maintained after such
vacation. Tenant shall inspect the Premises at lease once each month
and report monthly in writing to Landlord on the condition of the
Premises.
(v) Tenant shall attempt or there shall occur any assignment,
subleasing or other transfer of Tenant's interest in or with respect to
this Lease except as otherwise permitted in this Lease.
(vi) Tenant shall fail to discharge any lien placed upon the
Premises in violation of this Lease within 30 days after Tenant obtains
knowledge that such a lien or encumbrance is filed against the
Premises.
(vii) Tenant shall fail to comply with any provision of this
Lease other than those specifically referred to in this Paragraph 23,
and except as otherwise expressly provided herein, such default shall
continue for more than 30 days after Landlord shall have given Tenant
written notice of such default; provided however, Tenant shall not be
in default under this Paragraph 23(vii) if such cure will, due to the
nature of the obligation, require a period of time in excess of 30 days
to cure, and Tenant diligently pursues such cure and completes such
within a commercially reasonable time not to exceed 120 days after
Landlord's notice of such default.
24. Landlord's Remedies. Upon each occurrence of an Event of Default and
so long as such Event of Default shall be continuing, Landlord may at any time
thereafter at its election terminate this Lease or Tenant's right of possession,
(but Tenant shall remain liable as hereinafter provided) and/or pursue any other
remedies at law or in equity. Upon the termination of this Lease or termination
of Tenant's right of possession, it shall be lawful for Landlord without formal
demand or notice of any kind, except as otherwise provided by applicable law, to
re-enter the Premises by summary dispossession proceedings or any other action
or proceeding authorized by law and to remove Tenant and all persons and
property therefrom. If Landlord re-enters the Premises, Landlord shall have the
right to keep in place and use, or remove and store, all of the furniture,
fixtures and equipment at the Premises. Notwithstanding anything contained
herein to the contrary, provided that Landlord receives written notice that
Tenant
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has cured any non-monetary default under subparagraphs 23(ii) through 23(v) of
this lease within ten (10) days after Landlord's notice to Tenant that such
default has occurred, Landlord will not exercise any of its rights under this
paragraph 24.
If Landlord terminates this Lease, Landlord may recover from Tenant the
sum of: all Base Rent and all other amounts accrued hereunder to the date of
such termination; the cost of reletting the whole or any part of the Premises,
including without limitation brokerage fees and/or leasing commissions incurred
by Landlord, and costs of removing and storing Tenant's or any other occupant's
property, repairing, altering, remodeling, or otherwise putting the Premises
into condition acceptable to a new tenant or tenants, and all reasonable
expenses incurred by Landlord in pursuing its remedies, including reasonable
attorneys' fees and court costs; and the excess of the then present value of the
Base Rent and other amounts payable by Tenant under this Lease as would
otherwise have been required to be paid by Tenant to Landlord during the period
following the termination of this Lease measured from the date of such
termination to the expiration date stated in this Lease, over the present value
of any net amounts which Tenant establishes Landlord can reasonably expect to
recover by reletting the Premises for such period, taking into consideration the
availability of acceptable tenants and other market conditions affecting
leasing. Such present values shall be calculated at a discount rate equal to the
90-day U.S. Treasury bill rate at the date of such termination.
If Landlord terminates Tenant's right of possesion (but not
this Lease), Landlord may, but shall be under no obligation to, relet
the Premises for the account of Tenant for such rent and upon such terms
as shall be satisfactory to Landlord without thereby releasing Tenant
from any liability hereunder and without demand or notice of any kind to
Tenant. For the purpose of such reletting Landlord is authorized to make
any repairs, changes, alterations, or additions in or to the Premises as
Landlord deems reasonably necessary or desirable. If the Premises are
not relet, then Tenant shall pay to Landlord as damages a sum equal to
the amount of the rental reserved in this Lease for such period or
periods, plus the cost of recovering possession of the Premises
(including attorneys' fees and costs of suit), the unpaid Base Rent and
other amounts accrued hereunder at the time of repossession, and the
costs incurred in any attempt by Landlord to relet the Premises. If the
Premises are relet and a sufficient sum shall not be realized from such
reletting [after first deducting therefrom, for retention by Landlord,
the unpaid Base Rent and other amounts accrued hereunder at the time of
reletting, the cost of recovering possession (including attorneys' fees
and costs of suit), all of the costs and expense of repairs, changes,
alterations, and additions, the expense of such reletting (including
without limitation brokerage fees and leasing commissions) and the cost
of collection of the rent accruing therefrom] to satisfy the rent
provided for in this Lease to be paid, then Tenant shall immediately
satisfy and pay any such deficiency. Any such payments due Landlord
shall be made upon demand therefor from time to time and Tenant agrees
that Landlord may file suit to recover any sums falling due from time to
time. Notwithstanding any such reletting without termination, Landlord
may at any time thereafter elect in writing to terminate this Lease
for such previous breach. If Landlord terminates Tenant's right to possession
without terminating the Lease after an Event of Default, Landlord shall use
commercially reasonable efforts to relet the Premises; provided, however,
(a) Landlord shall not be obligated to accept any tenant proposed by Tenant,
(b) Landlord shall have the right to lease any other space controlled by
Landlord first, and (c) any proposed tenant shall meet all of Landlord's leasing
criteria.
Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
Premises and/or a termination of this Lease by Landlord, whether by agreement or
by operation of law, it being understood that such surrender and/or termination
can by effected only by the written agreement of Landlord and Tenant. Any law,
usage, or custom to the contrary notwithstanding, Landlord shall have the right
at all times to enforce the provisions of this Lease in strict accordance with
the terms hereof; and the failure of Landlord at any time to enforce its rights
under this Lease strictly in accordance with same shall not be construed as
having created a custom in any way or manner contrary to the specific terms,
provisions, and covenants of this Lease or as having modified the same. Tenant
and Landlord further agree that forbearance or waiver by Landlord to enforce
its rights pursuant to this Lease or at law or in equity, shall not be a waiver
of Landlord's right to enforce one or more of its rights in connection with any
subsequent default. A receipt by Landlord of rent or other payment with
knowledge of the breach of any covenant hereof shall not be deemed a waiver of
such breach, and no waiver by Landlord of any provision of this Lease shall be
deemed to have been made unless expressed in writing and signed by Landlord. To
the greatest extent permitted by law, Tenant waives all right of redemption in
case Tenant shall be dispossessed by a judgment or by warrant of any court or
judge. The terms "enter," "re-enter," "entry" or "re-entry," as used in this
Lease, are not restricted to their technical legal meanings. Any reletting of
the Premises shall be on such terms and conditions as Landlord in its sole
discretion may determine (including without limitation a term different than the
remaining Lease Term, rental concessions, alterations and repair of the
Premises, lease of less than the entire Premises to any tenant and leasing any
or all other portions of the Project before reletting the Premises). Landlord
shall not be liable, nor shall Tenant's obligations hereunder be diminished
because of, Landlord's failure to relet the Premises or collect rent due in
respect of such reletting.
25. Tenant's Remedies/Limitation of Liability. Landlord shall not be in
default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after written notice from Tenant specifying such
failure (unless such performance will, due to the nature of the obligation,
require a period of time in excess of 30 days and Landlord diligently pursues
such cure, then after such period of time as is reasonably necessary). All
obligations of Landlord hereunder shall be construed as covenants, not
conditions. All obligations of Landlord under this Lease will be binding upon
Landlord only during the period of its ownership of the Premises and not
thereafter. The term "Landlord" in this Lease shall mean only the owner, for the
time being of the Premises, and in the event of the transfer by such owner of
its interest in the Premises, such owner shall thereupon be released and
discharged
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from all obligations of Landlord thereafter accruing, but such obligations shall
be binding during the Lease Term upon each new owner for the duration of such
owner's ownership. Any liability of Landlord under this Lease shall be limited
solely to its interest in the Project, and in no event shall any personal
liability be asserted against Landlord in connection with this Lease nor shall
any recourse be had to any other property or assets of Landlord. Landlord's
interest in the Project shall be deemed to include: (i) the rents or other
income from the Project received by Landlord after Tenant obtains a final
judgment against Landlord, (ii) the net proceeds received by Landlord from the
sale or other disposition of all or any part of Landlord's right, title and
interest in the Project after Tenant obtains a final judgment against Landlord,
(iii) the net proceeds received by Landlord from any condemnation or conveyance
in lieu of condemnation of all or any portion of the Project after Tenant
obtains a final judgment against Landlord, and (iv) the net proceeds of
insurance received by Landlord from any casualty loss of all or any portion of
the Project after Tenant obtains a final judgment against Landlord. The failure
of Tenant at any time to enforce its rights under this lease strictly in
accordance with same shall not be construed as having created a custom in any
way or manner contrary to the specific terms, provisions, and covenants of this
lease or as having modified the same. Landlord and Tenant further agree that
forbearance or waiver by Tenant to enforce its rights pursuant to this Lease or
at law or in equity, shall not be a waiver of Tenant's right to enforce one or
more of its rights in connection with a subsequent default.
26. Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL
BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS
LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
27. Subordination. Landlord represents that, at the time of the
execution of this Lease by Landlord, Landlord is the fee simple owner of the
Project and the Building is not subject to any mortgage or deed of trust. This
Lease and Tenant's interest and rights hereunder are and shall be subject and
subordinate at all times to the lien of any first mortgage, now existing or
hereafter created on or against the Project or the Premises, and all amendments,
restatements, renewals, modifications, consolidations, refinancing, assignments
and extensions thereof, without the necessity of any further instrument or act
on the part of Tenant. Tenant agrees, at the election of the holder of any such
mortgage, to attorn to any such holder. Tenant agrees upon demand to execute,
acknowledge and deliver such instruments, confirming such subordination and such
instruments of attornment as shall be requested by any such holder.
Notwithstanding the foregoing, any such holder may at any time subordinate its
mortgage to this Lease, without Tenant's consent, by notice in writing to
Tenant, and thereupon this Lease shall be deemed prior to such mortgage without
regard to their respective dates of execution, delivery or recording and in that
event such holder shall have the same rights with respect to this Lease as
though this Lease had been executed prior to the execution, delivery and
recording of such mortgage and had been assigned to such holder. The term
"mortgage" whenever used in this Lease shall be deemed to include deeds of
trust, security assignments and any other encumbrances, and any reference to the
"holder" of a mortgage shall be deemed to include the beneficiary under a deed
of trust. Notwithstanding the preceding provisions of this Paragraph 27, this
Lease and Tenant's interest in the Premises shall not be subordinate to any
future mortgage or deed of trust on the Project, and Tenant shall not be
obligated to execute an instrument subordinating this Lease or Tenant's interest
in the Premises to any future mortgage or deed of trust on the Project, unless
concurrently with such subordination the holder of such mortgage or deed of
trust agrees in such instrument of subordination not to disturb Tenant's
possession of the Premises (so long as no default exists under the Lease) in the
event such holder acquires title to the Premises through foreclosure, deed in
lieu of foreclosure or otherwise.
28. Mechanic's Liens. Tenant has no express or implied authority to
create or place any lien or encumbrance of any kind upon, or in any manner to
bind the interest of Landlord or Tenant in, the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Tenant covenants and agrees that it will pay or cause
to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Landlord harmless from all loss, cost or
expense based on or arising out of asserted claims or liens against the
leasehold estate or against the interest of Landlord in the Premises or under
this Lease. Tenant shall give Landlord immediate written notice of the placing
of any lien or encumbrance against the Premises and cause such lien or
encumbrance to be discharged within 30 days of Tenant's knowledge of the filing
or recording thereof; provided, however, Tenant may contest such liens or
encumbrances as long as such contest prevents foreclosure of the lien or
encumbrance and Tenant causes such lien or encumbrance to be bonded or insured
over in a manner satisfactory to Landlord within such 30 day period.
29. Estoppel Certificates. Landlord and Tenant agree, from time to
time, within 10 days after request of the other party, to execute and deliver
to the other party, or its designee, any estoppel certificate requested by such
other party, stating that this Lease is in full force and effect, the date to
which rent has been paid, that the other party is not in default hereunder (or
specifying in detail the nature of the other party's default), the termination
date of this Lease and such other matters pertaining to this Lease as may be
reasonably requested by the other party. Tenant's obligation to furnish each
estoppel certificate in a timely fashion is a material inducement for Landlord's
execution of this Lease. No cure or grace period provided in this Lease shall
apply to Tenant's obligations to timely deliver an estoppel certificate.
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30. Environmental Requirements. Except for Hazardous Material contained
in products used by Tenant in de minimis quantities for ordinary cleaning and
office purposes, Tenant shall not permit or cause any party to bring any
Hazardous Material upon the Premises or transport, store, use, generate,
manufacture or release any Hazardous Material in or about the Premises without
Landlord's prior written consent. Tenant, at its sole cost and expense, shall
operate its business in the Premises in strict compliance with all Environmental
Requirements and shall remediate in a manner satisfactory to Landlord any
Hazardous Materials released on or from the Project by Tenant, its agents,
employees, contractors, subtenants or invitees. Not more than two times per
year, Tenant shall complete and certify to disclosure statements as reasonably
requested by Landlord relating to Tenant's transportation, storage, use,
generation, manufacture or release of Hazardous Materials on the Premises. The
term "Environmental Requirements" means all applicable present and future
statutes, regulations, ordinances, rules, codes, judgments, orders or other
similar enactments of any governmental authority or agency regulating or
relating to health, safety, or environmental conditions on, under, or about the
Premises or the environment, including without limitation, the following: the
Comprehensive Environmental Response, Compensation and Liability Act; the
Resource Conservation and Recovery Act; and all state and local counterparts
thereto, and any regulations or policies promulgated or issued thereunder. The
term "Hazardous Materials" means and includes any substance, material, waste,
pollutant, or contaminant listed or defined as hazardous or toxic, under any
Environmental Requirements, asbestos and petroleum, including crude oil or any
fraction thereof, natural gas liquids, liquified natural gas, or synthetic gas
usable for fuel (or mixtures of natural gas and such synthetic gas). As defined
in Environmental Requirements, Tenant is and shall be deemed to be the
"operator" of Tenant's "facility" and the "owner" of all Hazardous Materials
brought on the Premises by Tenant, its agents, employees, contractors or
invitees, and the wastes, by-products, or residues generated, resulting, or
produced therefrom.
Tenant shall indemnify, defend, and hold Landlord harmless from and
against any and all losses (including, without limitation, diminution in value
of the Premises or the Project and loss of rental income from the Project),
claims, demands, actions, suits, damages (including, without limitation,
punitive damages), expenses (including, without limitation, remediation,
removal, repair, corrective action, or cleanup expenses), and costs (including,
without limitation, actual attorneys' fees, consultant fees or expert fees and
including, without limitation, removal or management of any asbestos brought
into the property or disturbed in breach of the requirements of this Paragraph
30, regardless of whether such removal or management is required by law) which
are brought or recoverable against, or suffered or incurred by Landlord as a
result of any release of Hazardous Materials for which Tenant is obligated to
remediate as provided above or any other breach of the requirements under this
Paragraph 30 by Tenant, its agents, employees, contractors, subtenants,
assignees or invitees, regardless of whether Tenant had knowledge of such
noncompliance. The obligatons of Tenant under this Paragraph 30 shall survive
any termination of this Lease.
Landlord shall have access to, and a right to perform inspections and
tests of, the Premises to determine Tenant's compliance with Environmental
Requirements, its obligations under this Paragraph 30, or the environmental
condition of the Premises. Access shall be granted to Landlord upon Landlord's
prior notice to Tenant and at such times so as to minimize, so far as may be
reasonable under the circumstances, any disturbance to Tenant's operations. Such
inspections and tests shall be conducted at Landlord's expense, unless such
inspections or tests reveal that Tenant has not complied with any Environmental
Requirement, in which case Tenant shall reimburse Landlord for the reasonable
cost of such inspection and tests. Landlord's receipt of or satisfaction with
any environmental assessment in no way waives any rights that Landlord holds
against Tenant.
Notwithstanding anything to the contrary in this Paragraph 30, Tenant
shall only have liability to Landlord as to Hazardous Materials on the Project
caused or permitted by Tenant, its agents, employees, contractors, subtenants,
assignees or invitees or as a result of Tenant's use of the Project or Premises;
Tenant shall have no liability of any kind to Landlord as to Hazardous Materials
on the Project caused or permitted by: (i) Landlord, its agents, employees,
contractors or invitees; or (ii) any other tenants in the Project or their
agents, employees, contractors, subtenants, assignees or invitees; or (iii) any
other person or entity located outside of the Premises or the Project.
31. Rules and Regulations. Tenant shall, at all times during the Lease
Term and any extension thereof, comply with all reasonable rules and regulations
at any time or from time to time established by Landlord covering use of the
Premises and the Project; provided that such rules and regulations do not
conflict with Tenant's rights hereunder and are uniformly enforced. The current
rules and regulations are attached hereto. In the event of any conflict between
said rules and regulations and other provisions of this Lease, the other terms
and provisions of this Lease shall control. Landlord shall not have any
liability or obligation for the breach of any rules or regulations by other
tenants in the Project.
32. Security Service. Tenant acknowledges and agrees that, while Landlord
may patrol the Project, Landlord is not providing any security services with
respect to the Premises and that Landlord shall not be liable to Tenant for, and
Tenant waives any claim against Landlord with respect to, any loss by theft or
any other damage suffered or incurred by Tenant in connection with any
unauthorized entry into the Premises or any other breach of security with
respect to the Premises.
33. Force Majeure. Except for the payment of monetary obligations under
this Lease, neither Landlord nor Tenant shall be held responsible for delays in
the performance of their respective obligations hereunder when caused by
strikes, lockouts, labor disputes, acts of God, inability to obtain labor or
materials or reasonable
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substitutes therefor, governmental restrictions, governmental regulations,
governmental controls, delay in issuance of permits, enemy or hostile
governmental action, civil commotion, fire or other casualty, and other causes
beyond the reasonable control of such party ("Force Majeure").
34. Entire Agreement. This Lease constitutes the complete
agreement of Landlord and Tenant with respect to the subject matter hereof. No
representations, inducements, promises or agreements, oral or written, have been
made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant,
which are not contained herein, and any prior agreements, promises,
negotiations, or representations are superseded by this Lease. This Lease may
not be amended except by an instrument in writing signed by both parties hereto.
35. Severability. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this Lease shall
not be affected thereby. It is also the intention of the parties to this Lease
that in lieu of each clause or provision of this lease that is illegal, invalid
or unenforceable, there be added, as a part of this Lease, a clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible and be legal, valid and enforceable.
36. Brokers. Landlord and Tenant represent and warrant that they have
dealt with no broker, agent or other person in connection with this transaction
and that no broker, agent or other person brought about this transaction, other
than the broker, if any, set forth on the first page of this Lease. Landlord and
Tenant agree to indemnify and hold the other harmless from and against any
claims by any other broker, agent or other person claiming a commission or other
form of compensation by virtue of having dealt with such party with regard to
this leasing transaction. Landlord shall pay all commissions payable to Broker
pursuant to a separate agreement between Landlord and Broker.
37. Miscellaneous. (a) Any payments or charges due from Tenant to
Landlord hereunder shall be considered rent for all purposes of this Lease.
(b) If and when included within the term "Tenant," as used in this
instrument, there is more than one person, firm or corporation, each shall be
jointly and severally liable for the obligations of Tenant.
(c) All notices required or permitted to be given under this Lease shall
be in writing and shall be sent by registered or certified mail, return receipt
requested, or by a reputable national overnight courier service, postage
prepaid, or by hand delivery addressed to the parties at their addresses below,
and with a copy sent to Landlord at 14100 East 35th Place, Aurora, Colorado
80011. Either party may by notice given aforesaid change its address for all
subsequent notices. Except where otherwise expressly provided to the contrary,
notice shall be deemed given upon delivery.
(d) At Landlord's request from time to time Tenant shall furnish Landlord
with true and complete copies of its most recent annual and quarterly financial
statements prepared by Tenant or Tenant's accountants and any other financial
information or summaries that Tenant typically provides to its lenders or
shareholders.
(e) Neither this Lease nor a memorandum of lease shall be filed by or on
behalf of Tenant in any public record. Landlord may prepare and file, and upon
request by Landlord Tenant will execute, a memorandum of lease.
(f) The normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any exhibits or amendments hereto.
(g) The submission by Landlord to Tenant of this Lease shall have no
binding force or effect, shall not constitute an option for the leasing of the
Premises, nor confer any right or impose any obligations upon either party until
execution of this Lease by both parties.
(h) Words of any gender used in this Lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provision hereof, or in any
way affect the interpretation of this Lease.
(i) Any amount not paid by Tenant within 5 days after its due date in
accordance with the terms of this Lease shall bear interest from such due date
until paid in full at the lesser of the highest rate permitted by applicable law
or 15 percent per year. It is expressly the intent of Landlord and Tenant at all
times to comply with applicable law governing the maximum rate or amount of any
interest payable on or in connection with this Lease. If applicable law is ever
judicially interpreted so as to render usurious any interest called for under
this Lease, or contracted for, charged, taken, reserved, or received with
respect to this Lease, then it is Landlord's and Tenant's express intent that
all excess amounts theretofore collected by Landlord be credited on the
applicable obligation (or, if the obligation has been or would thereby be paid
in full, refunded to Tenant), and the provisions of this Lease immediately shall
be deemed reformed and the amounts thereafter collectible hereunder reduced,
without the necessity of the execution of any new document, so as to comply with
the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder.
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(j) Construction and interpretation of this Lease shall be governed by the
laws of the state in which the Project is located, excluding any principles of
conflicts of laws.
(k) Time is of the essence as to the performance of Tenant's obligations
under this Lease.
(l) All exhibits and addenda attached hereto are hereby incorporated into
this Lease and made a part hereof. In the event of any conflict between such
exhibits or addenda and the terms of this Lease, such exhibits or addenda shall
control.
(m) Landlord hereby grants Tenant the right to install, maintain and
replace from time to time a satellite dish or similar antennae device
(hereinafter "Satellite Dish") on the roof of the Premises, subject to the
following: (a) applicable governmental laws; (b) the right of Landlord to
supervise any roof penetrations; (c) compliance with the conditions of any roof
bond maintained by Landlord on the Premises; and (d) the Satellite Dish not
being visible at street level. Tenant shall be responsible for the repair of any
damage to any portion of the Premises caused by Tenant's installation, use or
removal of the Satellite Dish. The Satellite Dish shall remain the exclusive
property of Tenant, and Tenant shall have the right to remove same at any time
during the term of the Lease so long as Tenant is not in default under the
Lease. Tenant shall protect, defend, indemnify and hold harmless Landlord from
and against any and all claims, damages, liabilities, costs or expenses of every
kind and nature (including without limitation reasonable attorney fees) imposed
upon or incurred by or asserted against Landlord arising out of Tenant's
installation, maintenance, use or removal of the Satellite Dish.
38. Landlord's Lien/Security Interest. Provided Tenant is not in default
under the Lease and provided that any bank, other financial institution or
vendor as detailed in this Paragraph executes an agreement substantially in the
form of Exhibit B attached hereto or a similar agreement otherwise reasonably
acceptable to Landlord, Landlord agrees that any Landlord's lien arising under
the Lease or by virtue of any statutory Landlord's lien against Tenant's
property located on the Premises, shall be automatically subordinate to the lien
of any bank or other financial institution providing financing for Tenant's
property, and to the lien of any vendor of Tenant's equipment or financing
entity related to such vendor. Tenant shall reimburse Landlord for all
reasonable out-of-pocket expenses incurred by Landlord in negotiating and
executing such agreement with Tenant's lender.
39. Radon Gas. Radon is a naturally occurring radioactive gas, that when it
has accumulated in a building in sufficient quantities, may present health risks
to persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
40. Limitation of Liability of Trustees, Shareholders, and Officers of
ProLogis Trust. Any obligation or liability whatsoever of ProLogis Trust, a
Maryland real estate investment trust, which may arise at any time under this
Lease or any obligation or liability which may be incurred by it pursuant to any
other instrument, transaction, or undertaking contemplated hereby shall not be
personally binding upon, nor shall resort for the enforcement thereof be had to
the property of, its trustees, directors, shareholders, officers, employees or
agents, regardless of whether such obligation or liability is in the nature of
contract, tort, or otherwise.
41. Tenant may terminate this Lease by written notice to Landlord received
by Landlord on or before February 29, 2000, ("Termination Notice") if Tenant is
not accepted into the Enterprise Florida Qualified Target Industry Tax Refund
Program (the "Program"). Such termination shall be effective on the date of the
Termination Notice. Tenant shall use its best efforts and take all actions
necessary, at its sole cost and expense, to become accepted into the Program.
Tenant shall promptly notify Landlord in writing of Tenant's acceptance into the
Program. Tenant's right to terminate expires and Tenant shall have no further
rights under this paragraph 41 at the earlier of: i) February 29, 2000 and ii)
Tenant's acceptance into the Program. The Termination Notice shall specify that
the Tenant was not accepted into the Program. If Tenant elects to terminate this
Lease, the effectiveness of such termination shall be conditioned upon Tenant
paying to Landlord an amount equal to all costs incurred by Landlord in
conjunction with this Lease, including but not limited to all costs to install
the Initial Improvements, any leasing commissions paid by Landlord, and any
costs to return the Premises to the condition prior to the execution of this
Lease or to remove any of the Initial Improvements, plus $175,575.00. Tenant
shall pay such amount contemporaneously with Tenant's delivery of the
Termination Notice to Landlord. Such amount is consideration for Tenant's option
to terminate and shall not be applied to rent or any other obligation of Tenant.
Landlord and Tenant shall be relieved of all obligations accruing under this
Lease after the effective date of such termination but not any obligations
accruing under the Lease prior to the effective date of such termination.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
day and year first above written.
TENANT: LANDLORD:
AMERICA'S SHOPPING MALL, INC. PROLOGIS TRUST
- ------------------------------------- ------------------------------------
-13-
<PAGE>
By: /s/ Irwin Schneidmill By: /s/ [illegible]
----------------------------- -------------------------
Title: President & CEO Title: Sr. Vice President
Attn: Irwin Schneidmill, Chief Executive Officer
Address: Address:
10 Henry Street 2791 Peterson Place
- ----------------------------------- -----------------------------
Teterboro, NJ 07608 Norcross, GA 30071
- ----------------------------------- -----------------------------
with a copy to:
America's Shopping Mall, Inc.
10 Henry Street
Teterboro, NJ 07608
Attn: Denny McNanny, Chief Financial Officer
WITNESSES AS TO TENANT: WITNESSES AS TO LANDLORD:
/s/ [illegible]
-------------------------
Kathleen Devine
/s/
-------------------------
-14-
<PAGE>
Rules and Regulations
---------------------
1. The sidewalk, entries, and driveways of the Project shall not be obstructed
by Tenant, or its agents, or used by them for any purpose other than ingress
and egress to and from the Premises.
2. Tenant shall not place any objects, including antennas, outdoor furniture,
etc., in the parking areas, landscaped areas or other areas outside of its
Premises, or on the roof of the Project.
3. Except for seeing-eye dogs, no animals shall be allowed in offices, halls or
corridors in the Project.
4. Tenant shall not disturb the occupants of the Project or adjoining buildings
by the use of any radio or musical instrument or by the making of loud or
improper noises.
5. If Tenant desires telegraphic, telephonic or other electric connections in
the Premises, Landlord or its agent will direct the electrician as to where
and how the wires may be introduced; and, without such direction, no boring
or cutting of wires will be permitted. Any such installation or connection
shall be made at Tenant's expense.
6. Tenant shall not install or operate any steam or gas engine or boiler, or
other mechanical apparatus in the Premises, except as specifically approved
in the Lease. The use of oil, gas or inflammable liquids for heating,
lighting or any other purpose is expressly prohibited. Explosives or other
articles deemed extra hazardous shall not be brought into the Project.
7. Parking any type of recreational vehicles is specifically prohibited on or
about the Project. Except for the overnight parking of operative vehicles,
no vehicle of any type shall be stored in the parking areas at any time. In
the event that a vehicle is disabled, it shall be removed within 48 hours.
There shall be no "For Sale" or other advertising signs on or about any
parked vehicle. All vehicles shall be parked in the designated parking areas
in conformity with all signs and other markings. All parking will be open
parking, and no reserved parking, numbering or lettering of individual
spaces will be permitted except as specified by Landlord.
8. Tenant shall maintain the Premies free from rodents, insects and other
pests.
9. Landlord reserves the right to exclude or expel from the Project any person
who, in the judgment of Landlord, is intoxicated or under the influence of
liquor or drugs or who shall in any manner do any act in violation of the
Rules and Regulations of the Project.
10. Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and
cleanliness. Landlord shall not be responsible to Tenant for any loss of
property on the Premises, however occurring, or for any damage done to the
effects of Tenant by janitors or any other employee or person.
11. Tenant shall give Landlord prompt notice of any defects in water, lawn
sprinkler, sewage, gas pipes, electrical lights and fixtures, heating
apparatus, or any other service equipment affecting the Premises.
12. Subject to Paragraph 3 of the Lease, Tenant shall not permit storage outside
the Premises, including without limitation, outside storage of trucks and
other vehicles, or dumping of waste or refuse or permit any harmful
materials to be placed in any drainage system or sanitary system in or about
the Premises.
13. All moveable trash receptacles provided by the trash disposal firm for the
Premises must be kept in the trash enclosure areas, if any, provided for
that purpose.
14. No auction, public or private, will be permitted on the Premises or the
Project.
15. No awnings shall be placed over the windows in the Premises except with the
prior written consent of Landlord.
16. The Premises shall not be used for lodging, sleeping or cooking or for any
immoral or illegal purposes or for any purpose other than that specified in
the Lease. No gaming devices shall be operated in the Premises.
17. Tenant shall ascertain from Landlord the maximum amount of electrical
current which can safely be used in the Premises, taking into account the
capacity of the electrical wiring in the Project and the Premises and the
needs of other tenants, and shall not use more than such safe capacity.
Landlord's consent to the installation of electric equipment shall not
relieve Tenant from the obligation not to use more electricity than such
safe capactity.
18. Tenant assumes full responsibility for protecting the Premises from theft,
robbery and pilferage.
19. Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not directly related to Tenant's ordinary use
of the Premises and shall keep all such machinery free of vibration, noise
and air waves which may be transmitted beyond the Premises.
-15-
<PAGE>
ADDENDUM 1
BASE RENT ADJUSTMENTS
---------------------
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED ______________________, 2000, BETWEEEN
PROLOGIS TRUST
and
AMERICA'S SHOPPING MALL, INC.
Base Rent shall equal the following amounts for the respective periods set forth
below:
Period Monthly Base Rent
------ -----------------
Month 1 through Month 12 $31,987.94
Month 13 through Month 24 $32,867.61
Month 25 through Month 36 $33,771.47
Month 37 through Month 48 $34,700.18
Month 49 through Month 60 $35,654.44
Month 61 through Month 72 $36,634.94
Month 73 through Month 84 $37,642.40
Month 85 through Month 96 $38,677.56
Month 97 through Month 108 $39,741.19
Month 109 through Month 120 $40,834.08
-16-
<PAGE>
ADDENDUM 2
CONSTRUCTION
(TURNKEY)
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED ______________, 2000. BETWEEN
PROLOGIS TRUST
and
AMERICA'S SHOPPING MALL, INC.
(a) Landlord agrees to furnish or perform at Landlord's sole cost
and expense and in substantial conformance with Plans and Specifications
attached hereto as Exhibit A (the "Plans") and Landlord's Standard
Specifications attached hereto as Exhibit B those items of construction and
those improvements (the "Initial Improvements") specified below:
1. Approximately 4,000 s.f. of office space, including demising
wall and electrical service.
2. Warehouse area, including 100% humidity controlled environment
(1 ton per 500 RSF), metal halide lighting system to
approximately 20 foot candles in warehouse, ESFR sprinkler
system, canopied loading areas, one drive-in and at least ten
loading doors (one "UPS Height") with three (3) load levelers.
(b) If Tenant shall desire any changes, Tenant shall so advise
Landlord in writing and Landlord shall determine whether such changes can be
made in a reasonable and feasible manner. Any and all costs of reviewing any
requested changes, and any and all costs of making any changes to the Initial
Improvements which Tenant may request and which Landlord may agree to shall be
at Tenant's sole cost and expense and shall be paid to Landlord upon demand
and before execution of the change order.
(c) Landlord shall proceed with and complete the construction of the
Initial Improvements. Landlord shall endeavor to give Tenant approximately
thirty (30) days prior notice of the anticipated date on which the Initial
Improvements will be Substantially Completed. As soon as such improvements have
been Substantially Completed, Landlord shall notify Tenant in writing of the
date that the Initial Improvements were Substantially Completed. The later of
(i) thirty (30) days following such date or (ii) May 1, 2000, shall be the
"Commencement Date," unless the completion of such improvements was delayed due
to any act or omission of, or delay caused by, Tenant including, without
limitation, Tenant's failure to approve plans, complete submittals or obtain
permits within time periods agreed to by the parties or as reasonably required
by Landlord, in which case the Commencement Date shall be thirty (30) days after
the date such improvements would have been completed but for the delays caused
by Tenant. The Initial Improvements shall be deemed substantially completed
("Substantially Completed") when, in the opinion of the construction manager
(whether an employee or agent of Landlord or a third party construction
manager) ("Construction Manager"), the Premises are substantially completed in
substantial conformance with the Plans except for punch list which do not
prevent in any material way the use of the Premises for the purposes for which
they were intended and a temporary certificate of occupancy or its equivalent
has been issued for the Premises. In the event Tenant, its employees, agents,
or contractors cause construction of such improvements to be delayed, the date
on which the Initial Improvements are Substantially Completed shall be deemed
to be the due date that, in the opinion of the Construction Manager, the Initial
Improvements would have been Substantially Completed if such delays had not
taken place. Without limiting the foregoing, Tenant shall be solely responsible
for delays caused by Tenant's request for any changes in the plans, Tenant's
request for long lead items or Tenant's interference with the construction of
the Initial Improvements, and such delays shall not cause a deferral of the
Commencement Date beyond what it otherwise would have been. After the
Commencement Date Landlord and Tenant shall enter into a letter agreement
setting forth the Commencement Date and Tenant's acceptance of delivery of the
Premises. In the event of any dispute as to the Initial Improvement, including
the Commencement Date, the certificate of the Construction Manager shall be
conclusive absent manifest error.
(d) The failure of Tenant to take possession of or to occupy the
Premises shall not serve to relieve Tenant of obligations arising on the
Commencement Date or delay the payment of rent by Tenant. Subject to applicable
ordinances and building codes governing Tenant's right to occupy or perform in
the Premises, Tenant shall be allowed to install its tenant improvements,
machinery, equipment, fixtures, or other property on the Premises during the
final stages of completion of construction provided that Tenant does not thereby
interfere with the completion of construction or cause any labor dispute as a
result of such installations, and provided further that Tenant does hereby
agree to indemnify, defend, and hold Landlord harmless from any loss or damage
to such property, and all liability, loss, or damage arising from any injury
to the Project or the property of Landlord, its contractors, subcontractors, or
materialmen, and any death or personal injury to any person or persons arising
out of such installations, whether or not any such loss, damage, liability,
death, or personal injury was caused by Landlord's negligence. Any such
occupancy or performance in the Premises shall be in accordance with the
provisions governing Tenant-Made Alterations and Trade Fixtures in the Lease,
and shall be subject to Tenant providing to Landlord satisfactory evidence of
insurance for personal injury and property damage related to such installations
and satisfactory
-17-
<PAGE>
payment arrangements with respect to installations permitted hereunder. Delay in
putting Tenant in possession of the Premises shall not serve to extend the term
of this Lease or to make Landlord liable for any damages arising therefrom.
(e) Except for incomplete punch list items, any conditions listed on the
temporary certificate of occupancy which are required to obtain a final
certificate of occupancy and are obligations of Landlord in completing the
Initial Improvements, and as otherwise set forth in the Lease, Tenant upon the
Commencement Date shall have and hold the Premises as the same shall then be
without any liability or obligation on the part of Landlord for making any
further alterations or improvements of any kind in or about the Premises.
(f) In the event the Initial Improvements are not Substantially Completed by
May 1, 2000, subject to Force Majeure events and Tenant-caused delays, Tenant
shall receive one day free Base Rent and Operating Expenses for each day after
May 1, 2000, until the Initial Improvements are Substantially Completed. In the
event the Initial Improvements are not Substantially Completed by June 30, 2000,
subject to Force Majeure events and Tenant-caused delays, Tenant shall receive
two (2) days free Base Rent and Operating Expenses for each day after June 30,
2000, until the earlier of (i) the date on which the Initial Improvements are
Substantially Completed and (ii) August 31, 2000. In the event that the Initial
Improvements are not Substantially Completed by September 1, 2000, subject to
Force Majeure events and Tenant-caused delays, the Commencement Date shall be
the later of (i) the date which is thirty (30) days following the date on which
the Initial Improvements are Substantially Completed and (ii) February 1, 2001.
-18-
<PAGE>
ADDENDUM 3
ONE RENEWAL OPTION AT MARKET
----------------------------
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEB. 4, 2000, BETWEEN
PROLOGIS TRUST
and
AMERICA'S SHOPPING MALL, INC.
(a) Provided that as of the time of the giving of the Extension Notice
and the Commencment Date of the Extension Term (as such terms are defined
below), (x) Tenant is the Tenant originally named herein, or a Tenant Affiliate
or Successor Entity (y) Tenant, Tenant Affiliate or Successor Entity actually
occupies all of the Premises initially demised under this Lease and any space
added to the Premises, and (z) no Event of Default exists, or would exist but
for the passage of time or the giving of notice, or both; then Tenant shall have
the right to extend the Lease Term for an additional term of five (5) years
(such additional term is hereinafter called the "Extention Term") commencing on
the day following the expiration of the Lease Term (hereinafter referred to as
the "Commencement Date of the Extension Term"). Tenant must give Landlord notice
(hereinafter called the "Extension Notice") of its election to extend the term
of the Lease Term at least 12 months, but not more than 18 months, prior to the
scheduled expiration date of the Lease Term.
(b) The Base Rent payable by Tenant to Landlord during the Extension Term
shall be the greater of:
(i) the Base Rent in effect on the expiration of the Lease Term (if
the Base Rent is stated as an annual or other periodic rate, adjusted for
the length of the Lease Term), and
(ii) the Fair Market Rent, as defined and determined pursuant to
Paragraphs (c), (d), and (e) below.
(c) The term "Fair Market Rent" shall mean the Base Rent, expressed as an
annual rent per square foot of floor area, which Landlord would have received
from leasing the Premises for the Extension Term to an unaffiliated person which
is not then a tenant in the Project, assuming that such space were to be
delivered in "as-is" condition, and taking into account the rental which such
other tenant would most likely have paid for such premises, including market
escalations, provided that Fair Market Rent shall not in any event be less than
the base Rent for the Premises as of the expiration of the Lease Term. Fair
Market Rent shall not be reduced by reason of any costs or expenses saved by
Landlord by reason of Landlord's not having to find a new tenant for the
Premises (including without limitation brokerage commissions, cost of
improvements necessary to prepare the space for such tenant's occupancy, rent
concession, or lost rental income during any vacancy period). Fair Market Rent
means only the rent component defined as Base Rent in the Lease and does not
include reimbursements and payments by Tenant to Landlord with respect to
operating expenses and other items payable or reimbursable by Tenant under the
Lease. In addition to its obligation to pay Base Rent (as determined herein),
Tenant shall continue to pay and reimburse Landlord as set forth in the Lease
with respect to such operating expenses and other items with respect to the
Premises during the Extension Term. The arbitration process described below
shall be limited to the determination of the Base Rent and shall not affect or
otherwise reduce or modify the Tenant's obligation to pay or reimburse Landlord
for such operating expenses and other reimbursable items.
(d) Landlord shall notify Tenant of its determination of the Fair Market
Rent (which shall be made in Landlord's sole discretion and shall in any event
be not less than the Base Rent in effect as of the expiration of the Lease Term)
for the Extension Term, and Tenant shall advise Landlord of any objection within
10 days of receipt of Landlord's notice. Failure to respond within the 10-day
period shall constitute Tenant's acceptance of such Fair Market Rent. If Tenant
objects, Landlord and Tenant shall commence negotiations to attempt to agree
upon the Fair Market Rent within 30 days of Landlord's receipt of Tenant's
notice. If the parties cannot agree, each acting in good faith but without any
obligation to agree, then the Lease Term shall not be extended and shall
terminate on its scheduled termination date and Tenant shall have no further
right hereunder or any remedy by reason of the parties' failure to agree unless
Tenant or Landlord invokes the arbitration procedure provided below to determine
the Fair Market Rent.
(e) Arbitration to determine the Fair Market Rent shall be in accordance
with the Real Estate Valuation Arbitration Rules of the American Arbitration
Association. Unless otherwise required by state law, arbitration shall be
conducted in the metropolitan area where the Project is located by a single
arbitrator unaffiliated with either party. Either party may elect to arbitrate
by sending written notice to the other party and the Regional Office of the
American Arbitration Association within 5 days after the 30-day negotiating
period provided in Paragraph (d), invoking the binding arbitration provisions of
this paragraph. Landlord and Tenant shall each submit to the arbitrator their
respective proposal of Fair Market Rent. The arbitrator must choose between the
Landlord's proposal and the Tenant's proposal and may not compromise between
the two or select some other amount. Notwithstanding any other provision herein,
the Fair Market Rent determined by the arbitrator shall not be less than, and
the arbitrator shall have no authority to determine a Fair Market Rent less
than, the Base Rent in effect as of the scheduled expiration of the Lease Term.
The cost of the arbitration shall be paid by Landlord if the Fair Market Rent is
that proposed by Landlord and by Tenant if the Fair Market Rent is that proposed
by Tenant; and shall be borne equally otherwise. If the arbitrator has not
determined the Fair Market Rent as of the end of the Lease Term, Tenant shall
pay 105 percent of the Base Rent in effect under the Lease as of the end of the
Lease Term until the Fair Market Rent is determined as provided herein. Upon
such
<PAGE>
determination, Landlord and Tenant shall make the appropriate adjustments to the
payments between them.
(f) The parties consent to the jurisdiction of any appropriate court to
enforce the arbitration provisions of this Addendum and to enter judgment upon
the decision of the arbitrator.
(g) Except for the Base Rent as determined above, Tenant's occupancy of
the Premises during the Extension Term shall be on the same terms and conditions
as are in effect immediately prior to the expiration of the initial Lease Term;
provided, however, Tenant shall have no further right to extend the Lease Term
pursuant to this addendum or to any allowances, credits or abatements or options
to expand, contract, renew or extend the Lease.
(h) If Tenant does not send the Extension Notice within the period set
forth in Paragraph (a), Tenant's right to extend the Lease Term shall
automatically terminate. Time is of the essence as to the giving of the
Extension Notice and the notice of Tenant's objection under Paragraph (d).
(i) Landlord shall have no obligation to refurbish or otherwise improve
the Premises for the Extension Term. Subject to Landlord's obligations pursuant
to the Lease, the Premises shall be accepted by Tenant on the Commencement Date
of the Extension Term in "as-is" condition.
(j) If the Lease is extended for the Extension Term, then Landlord shall
prepare and Tenant shall execute an amendment to the Lease confirming the
extension of the Lease Term and the other provisions applicable thereto.
(k) If Tenant exercises its right to extend the term of the Lease for the
Extension Term pursuant to this Addendum, the term "Lease Term" as used in the
Lease, shall be construed to include, when practicable, the Extension Term
except as provided in (g) above.
<PAGE>
ADDENDUM 4
ASSIGNMENT AND SUBLETTING (CONSENT)
-----------------------------------
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEB. 4, 2000, BETWEEN
PROLOGIS TRUST
and
AMERICA'S SHOPPING MALL, INC.
(a) Landlord shall not unreasonably withhold or delay its consent to
Tenant's request for permission to assign the Lease or sublease all or part of
the Premises. It shall be reasonable for the Landlord to withhold its consent to
any assignment or sublease in any of the following instances:
(i) The assignee or sublessee does not have a net worth calculated
according to generally accepted accounting principles at least equal
to the greater of the net worth of Tenant immediately prior to such
assignment or sublease or the net worth of the Tenant at the time it
executed the Lease;
(ii) The intended use of the Premises by the assignee or sublessee
is not reasonable satisfactory to Landlord;
(iii) The intended use of the Premises by the assignee or sublessee
would materially increase the pedestrian or vehicular traffic to the
Premises or the Project;
(iv) Occupancy of the Premises by the assignee or sublessee would,
in Landlord's opinion, violate any agreement binding upon Landlord
or the Project with regard to the identity of tenants, usage in the
Project, or similar matters;
(v) The identity or business reputation of the assignee or
sublessee will, in the good faith judgment of Landlord, tend to
damage the goodwill or reputation of the Project;
(vi) The assignment or sublet is to another tenant in the Project
and is at rates which are below those charged by Landlord for
comparable space in the Project;
(vii) In the case of a sublease, the subtenant has not acknowledged
that the Lease controls over any inconsistent provision in the
sublease; or
(viii) The proposed assignee or sublessee is a government entity.
The foregoing criteria shall not exclude any other reasonable basis for Landlord
to refuse its consent to such assignment or sublease.
(b) Any approved assignment or sublease shall be expressly subject to
the terms and conditions of this Lease.
(c) Tenant shall provide to Landlord all information concerning the
assignee or sublessee as Landlord may reasonably request.
(d) Landlord may revoke its consent immediately and without notice if,
as of the effective date of the assignment or sublease, there has occurred and
is continuing any Event of Default under the Lease.
<PAGE>
ADDENDUM 5
LETTER OF CREDIT FOR SECURITY DEPOSIT
-------------------------------------
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED FEB. 4, 2000, BETWEEN
PROLOGIS TRUST
and
AMERICA'S SHOPPING MALL, INC.
One Hundred Thirty-Five Thousand Dollars ($135,000.00) of the $175,575.00
Security Deposit may be in the form of an unconditional, irrevocable letter of
credit from a bank reasonably acceptable to Landlord. Tenant shall provide such
letter of credit to Landlord on or before February , 2000, or pay such
$135,000.00 to Landlord in cash on or before February 4, 2000; provided however,
in the event Tenant pays such amount in cash, Tenant may provide Landlord a
letter of credit as provided herein in the amount of $135,000.00, and upon
receipt of such letter of credit, Landlord shall promptly return the $135,000.00
to Tenant. The letter of credit shall either provide that it does not expire
until the end of the Lease Term or, if it is for less than the full term of the
Lease, shall be renewed by Tenant at least 30 days prior to its expiration
during the term of the Lease. The letter of credit shall provide that it may be
drawn down upon by Landlord at any time Landlord delivers its site draft to the
bank. If Landlord sells or conveys the Premises, Tenant shall, at Landlord's
request, cooperate in having the letter of credit transferred to the purchaser.
If the letter of credit is ever drawn upon by Landlord pursuant to the terms of
the Lease and this Addendum, Tenant shall within ten (10) days thereafter cause
the letter of credit to be restored to its original amount.
Notwithstanding anything contained herein to the contrary, provided (a) no
Event of Default exists, (b) no condition then exists which with the passage of
time or the giving of notice, or both, would constitute an Event of Default, and
(c) Tenant has not failed to timely pay rent as provided in Paragraph 4 of the
Lease more than three (3) times in the preceding twelve (12) calendar months,
then the letter of credit shall be reduced as follows: (i) by $75,000 at the end
of the first 12 months of the Lease Term, (ii) by $20,000 at the end of the 24th
month of the Lease Term, (iii) by $20,000 at the end of the 36th month of the
Lease Term, and (iv) by $20,000 at the end of the 48th month of the Lease Term.
In the event that at the time the Letter of Credit could be reduced pursuant to
Subparagraphs (i)-(iv) herein but for Tenant's failure to comply with
Subpragraphs (a) or (b) hereof, Landlord shall cause the Letter of Credit to be
reduced by the applicable amount when Tenant has cured the Event of Default or
condition(s) referenced in Subparagraph (b) to Landlord's sole satisfaction. In
the event that at the time the Letter of Credit could be reduced pursuant to
Subparagraphs (i)-(iv) but for Tenant's failure to comply with Subparagraph (c),
Landlord shall cause the Letter of Credit to be reduced by the applicable amount
to be reduced pursuant to Subparagraphs (i)-(iv) at such time as Tenant complies
with the terms of Subparagraph (c) provided that at such time Tenant also
complies with Subparagraphs (a) and (b) hereof.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> APR-30-1999 APR-30-2000
<PERIOD-END> APR-30-1999 JAN-31-2000
<CASH> 0 685,777
<SECURITIES> 0 0
<RECEIVABLES> 0 369,875
<ALLOWANCES> 0 0
<INVENTORY> 0 2,041,984
<CURRENT-ASSETS> 150,000 3,568,351
<PP&E> 0 395,289
<DEPRECIATION> 0 145,473
<TOTAL-ASSETS> 206,509 5,965,112
<CURRENT-LIABILITIES> 27,022 2,589,836
<BONDS> 0 5,024,673
0 0
0 3,994,990
<COMMON> 1,673,590 1,971,340
<OTHER-SE> (1,494,103) (7,615,737)
<TOTAL-LIABILITY-AND-EQUITY> 206,509 5,965,112
<SALES> 0 10,908,415
<TOTAL-REVENUES> 0 10,908,415
<CGS> 0 5,198,824
<TOTAL-COSTS> 0 5,198,824
<OTHER-EXPENSES> 118,040 6,810,270
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 396,582
<INCOME-PRETAX> (118,040) (1,497,261)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (118,040) (1,497,261)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (118,040) (2,026,620)
<EPS-BASIC> (0.14) (0.88)
<EPS-DILUTED> (0.14) (0.88)
</TABLE>
