Losses Leave iMall Unshaken

Traditionally, when companies announce financial results on a Friday, it is likely that they are hoping to attract as little attention as possible to their results. This Friday, iMall (Nasdaq: IMAL), released its 1998 fourth quarter financials, indicating that the e-commerce mall developer lost more than $13 million (US$) in the fiscal year. Nonetheless, the company’s stock held steady as of mid-day trading, indicating a high level of confidence in iMall’s future, and a standard of review not often seen in most other industries.

The company reported revenues from continuing operations for the three month period ended December 31, 1998 of $753,637, up 243% from revenues of $219,409 for the same three month period in 1997. Revenues from continuing operations for the twelve months ended December 31, 1998 were $1,596,023, an increase of 64% over revenues from continuing operations of $973,635 for 1997.

With relatively insignificant revenues, one could wonder why iMall is considered to be an e-commerce industry force. The reason is that the industry and its investors feed on the hope of big returns in the next 3-5 years, fueled by the explosive increase in global Internet traffic, and an unparalleled willingness of businesses and consumers to shop online. A well-defined long term strategy with concrete steps taken to implement that strategy has positioned iMall as a major e-commerce player, and has enabled the company to attract significant cross-marketing deals and investment, despite its operating losses.

iMALL’s chairman and CEO Richard Rosenblatt stated, “The financial results for the year, taken in isolation, do not reflect the significant progress that was achieved in positioning this company for future growth. We made the decision at the beginning of the year to focus on building long-term value for our shareholders, fully realizing that this investment in our future could reduce short-term revenues and profitability. We believe that the pieces are now in place to successfully implement our long-term growth strategy.”

Major Moves in 1998

Indeed, Rosenblatt and his staff have taken steps to ensure iMall’s longevity. The company launched Stuff.com, a second consumer oriented shopping mall currently offering nearly 2.5 million products, according to the company. Rather than taking the company in a completely different direction from its existing iMall.com site, Stuff.com represents an additional consumer intake point for iMall products.

iMall has also wisely placed a considerable emphasis on back-end technology issues, in addition to front-end marketing. In 1998 and the beginning of 1999, iMall added new e-commerce technologies like Bolt-on e-commerceTM, i-STORETM, and MerchantStuff, an integrated e-commerce solution that provides hosting, e-commerce services, a secure payment gateway, merchant account, and shopper traffic. A recent acquisition of Pure Payments Inc., an Internet payment processing gateway developer was met positively by the iMall stockholders.

The company also appointed Joe Ruszkiewicz as chief operating officer and executive vice president. Ruszkiewicz has an Internet business management background from AT&T’s WorldNet Service. The new appointment adds business expertise to iMall’s management team and, just as importantly, increases investor confidence in iMall’s ability to achieve its long term goals.

Capital was Key

Arguably, the most significant development for iMall in 1998, was a key alliance with First Data Merchant Service, which pumped $14 million into iMall, and also provides a major marketing boost for iMall.

“First Data Merchant Services, which is one of the nation’s leading processors of merchant credit card transactions, will participate in marketing our complete suite of Internet-related services to their banking alliances and merchant client base. As a part of the agreement, First Data Merchant Services also made a $14 million equity investment in iMALL last November, which we believe is not only a validation of our technology and expertise in providing e-commerce solutions, but also represents an indication of their commitment to the partnership,” Rosenblatt added.