-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IBK5QoAy4fVFtKy1PiAJdligS7my9xUp+kizlYlL7cOPyqjSiJJcSgfZtfbLmM1k GBiNmDEUfjstmfnGeIFhbw== 0000889812-00-002437.txt : 20000523 0000889812-00-002437.hdr.sgml : 20000523 ACCESSION NUMBER: 0000889812-00-002437 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20000522 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAS SHOPPING MALL INC CENTRAL INDEX KEY: 0001098728 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 134045313 STATE OF INCORPORATION: NV FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: SEC FILE NUMBER: 333-92555 FILM NUMBER: 640721 BUSINESS ADDRESS: STREET 1: 10 HENRY STREET CITY: TETERBORO STATE: NJ ZIP: 07608 BUSINESS PHONE: 2014620970 MAIL ADDRESS: STREET 1: 10 HENRY STREET CITY: TETERBORO STATE: NJ ZIP: 07608 SB-2/A 1 AMENDMENT NO. 1 TO REGISTRATION STATEMENT 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) NEVADA 5961 13-4045313 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 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)
------------------------ 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)
------------------------ CALCULATION OF REGISTRATION FEE
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 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
(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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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. TABLE OF CONTENTS 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
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 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 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 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 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."
CLOSING BID CLOSING ASKED ----------------- ----------------- PERIOD HIGH LOW HIGH LOW - ------------------------------------------------------------------------ ------- ------ ------- ------ 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
5 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.
YEAR ENDED APRIL 30, ------------------------------------ NINE MONTHS HISTORICAL PRO FORMA ENDED --------------------- ----------- JANUARY 31, 1998 1999 1999 2000 -------- --------- ----------- ----------- 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
APRIL 30, ------------------------------------ HISTORICAL PRO FORMA --------------------- ----------- JANUARY 31, 1998 1999 1999 2000 -------- --------- ----------- ----------- 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)
6 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 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. 8 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. 9 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 10 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. 11 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. 12 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. 13 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. 14 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:
LOCATION USE - --------------------------------- --------------------------------------------------------------------- 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
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, 15 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 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.
NAME AGE POSITION - ----------------------- --- ----------------------- 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
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 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 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 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
FISCAL OTHER ANNUAL NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION - ------------------------------------------------------------------------------- ------ -------- ------------ Irwin Schneidmill ............................................................. 1999 $145,000 $ 60,000 Chief Executive Officer and President 1998 102,000 -- 1997 100,500 --
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
AMOUNT AND NATURE OF BENEFICIAL PERCENT NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP OF CLASS - ---------------------------------------------------------------------------- -------------- ---------- -------- 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%
- ------------------ (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 (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 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 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 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 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 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 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 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 INDEX TO FINANCIAL STATEMENTS
PAGE ---- 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
F-1 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: 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"
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 AMERICA'S SHOPPING MALL, INC. PRO FORMA UNAUDITED CONDENSED BALANCE SHEET APRIL 30, 1999
AMERICA'S SHOPPING DEERSKIN DYNAMIC MALL, INC. AND JOAN COOK PRODUCTS CORP. (FORMERLY ADVANCED CATALOG AND SUBSIDIARY MEDICAL SCIENCES, INC.) BUSINESSES (JUNE 30, 1999) ----------------------- ----------------- --------------- 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 =========== =========== =========== PRO FORMA CREADIS ADJUSTMENTS PROMOTIONS, INC. DB (CR) TOTAL ------------------------ ----------- ---------- 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 ======== =========== ==========
See notes to pro forma unaudited condensed financial statements. F-3 AMERICA'S SHOPPING MALL, INC. PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1999
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 ------------------- --------------- -------------------- ---------------- ----------- 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 ========= TOTAL ----------- 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 ===========
See notes to pro forma unaudited condensed financial statements. F-4 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 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 AMERICA'S SHOPPING MALL, INC. (FORMERLY ADVANCED MEDICAL SCIENCES, INC.) BALANCE SHEETS
CONSOLIDATED ------------ APRIL 30, JANUARY 31, 1999 2000 ----------- ------------ (UNAUDITED) 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 =========== ============
See notes to financial statements. F-7 AMERICA'S SHOPPING MALL, INC. (FORMERLY ADVANCED MEDICAL SCIENCES, INC.) STATEMENTS OF OPERATIONS
CONSOLIDATED ------------ FOR THE YEARS ENDED FOR THE NINE APRIL 30, ---------------------- JANUARY 31, 1998 1999 2000 --------- --------- ------------ (UNAUDITED) 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 ========= ========= ============
See notes to financial statements. F-8 AMERICA'S SHOPPING MALL, INC. (FORMERLY ADVANCED MEDICAL SCIENCES, INC.) STATEMENTS OF SHAREHOLDERS' EQUITY
PREFERRED STOCK COMMON STOCK ------------------ ----------------------------------- ADDITIONAL SHARES ADDITIONAL AMOUNT PAR PAID-IN- SHARES SUBSCRIBED PAR PAID-IN- SUBSCRIBED VALUE CAPITAL ISSUED FOR VALUE CAPITAL FOR ----- ---------- ---------- ----------- -------- ----------- ---------- 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 $ -- === ========== ========== =========== ======== =========== ========== DEFICIT ----------- 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) ===========
See notes to financial statements. F-9 AMERICA'S SHOPPING MALL, INC. (FORMERLY ADVANCED MEDICAL SCIENCES, INC.) STATEMENTS OF CASH FLOWS
CONSOLIDATED ---------------- FOR THE YEAR FOR THE YEAR FOR THE NINE ENDED ENDED MONTHS ENDED APRIL 30, 1998 APRIL 30, 1999 JANUARY 31, 2000 -------------- -------------- ---------------- (UNAUDITED) 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 ======== ========== ============
See notes to financial statements. F-10 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 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 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:
JANUARY 31, 2000 ----------- 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 =========
3. INTANGIBLE ASSETS: Intangible assets consist of the following:
AMORTIZED OVER AMOUNT YEARS ---------- --------- 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 ==========
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 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 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 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:
REDEMPTION YEAR PRICE - ------------------------------------------------------------- ---------- 2001......................................................... 105% 2002......................................................... 104% 2003......................................................... 103%
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 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:
JANUARY 31, ---------------------------- INCLUSIVE OF LEASES BEING LEASES BEING NEGOTIATED NEGOTIATED APRIL 30 FOR RELEASE FOR RELEASE -------- ------------ ------------ 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 ======== ========== ========
F-17 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: Conversion of preferred shares......................................... 1,200,000 Conversion of debentures............................................... 500,000 Exercise of warrants................................................... 1,000,000 --------- 2,700,000 =========
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: Revenues............................................................... $ 327,878 Costs and expenses..................................................... 576,448 --------- Loss................................................................... $(248,570) =========
F-18 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 DEERSKIN AND JOAN COOK CATALOG BUSINESSES STATEMENT OF ASSETS ACQUIRED SUBJECT TO CERTAIN LIABILITIES APRIL 30, 1999 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 ==========
See notes to financial statements. F-20 DEERSKIN AND JOAN COOK CATALOG BUSINESSES STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF BUSINESS ACQUIRED
FOR THE YEARS ENDED APRIL 30, --------------------------- 1999 1998 ---------- ----------- 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) ========== ===========
See notes to financial statements. F-21 DEERSKIN AND JOAN COOK CATALOG BUSINESSES STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, ----------------------- 1999 1998 --------- ---------- 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 $ -- ========= ==========
See notes to financial statements. F-22 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 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:
APRIL 30, AMOUNT - -------------------------------------------------------------- -------- 2000.......................................................... $405,600 2001.......................................................... 57,000 2002.......................................................... 57,000 2003.......................................................... 57,000 2004.......................................................... 52,250
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:
APRIL 30, -------------------------- 1999 1998 ----------- ----------- 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) =========== ===========
F-24 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 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 DYNAMIC PRODUCTS CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET JUNE 30, 1999 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 ===========
See notes to financial statements. F-27 DYNAMIC PRODUCTS CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEARS ENDED JUNE 30, -------------------------- 1999 1998 ----------- --------- 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) =========== =========
See notes to financial statements. F-28 DYNAMIC PRODUCTS CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, ------------------------ 1999 1998 ----------- --------- 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) $ -- =========== =========
See notes to financial statements. F-29 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 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: Equipment.......................................................................... $60,950 Furniture and fixtures............................................................. 6,040 Leasehold improvements............................................................. 9,740 ------- 76,730 Less: Accumulated depreciation and amortization.................................... 55,993 ------- $20,737 =======
4. OTHER ASSETS: 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 ==========
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 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:
JUNE 30, AMOUNT - ----------------------------------------------------------------------------------- ------- 2000............................................................................... $27,888 2001............................................................................... 17,160 2002............................................................................... 17,160 2003............................................................................... 8,580 ------- $70,788 =======
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 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 CREADIS PROMOTIONS, INC. BALANCE SHEET APRIL 30, 1999 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 =========
See notes to financial statements. F-34 CREADIS PROMOTIONS, INC. STATEMENT OF OPERATIONS DECEMBER 10, 1998 THROUGH APRIL 30, 1999 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) =========
See notes to financial statements. F-35 CREADIS PROMOTIONS, INC. STATEMENT OF CASH FLOWS DECEMBER 10, 1998 THROUGH APRIL 30, 1999 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 =========
See notes to financial statements. F-36 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.
AMOUNT -------- Goodwill.......................................................................... $ 45,000 Trade name........................................................................ 45,000 Covenant not to compete........................................................... 45,000 -------- 135,000 Accumulated amortization.......................................................... 6,250 -------- $128,750 ========
F-37 CREADIS PROMOTIONS, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) APRIL 30, 1999 3. PROPERTY AND EQUIPMENT: Property and equipment consists of the following:
AMOUNT ------- Machinery and equipment............................................................ $16,189 Office furniture................................................................... 3,919 Computer equipment................................................................. 8,084 ------- 28,192 Accumulated depreciation........................................................... 1,226 ------- $26,966 =======
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 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 HEYDEN INCORPORATED STATEMENT OF ASSETS ACQUIRED SUBJECT TO CERTAIN LIABILITIES DECEMBER 10, 1998 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 ==========
See notes to financial statements. F-40 HEYDEN INCORPORATED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF BUSINESS ACQUIRED
JANUARY 1, 1998 THROUGH YEAR ENDED DECEMBER 10, DECEMBER 31, 1998 1997 --------------- ------------ 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 =========== ==========
See notes to financial statements. F-41 HEYDEN INCORPORATED STATEMENTS OF CASH FLOWS
JANUARY 1, 1998 THROUGH YEAR ENDED DECEMBER 10, DECEMBER 31, 1998 1997 --------------- ------------ 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 ========= ========
See notes to financial statements. F-42 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: 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 ==========
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 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. 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.................................................... * ========
- ------------------ * 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 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 (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
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------ ----------------------------------------------------------------------------------------------------------- 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.
II-3
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------ ----------------------------------------------------------------------------------------------------------- 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.
- ------------------ * Filed herewith. ** To be filed by amendment. II-4 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.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------------- ------------- /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
II-5 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------ ----------------------------------------------------------------------------------------------------------- 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.
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------ ----------------------------------------------------------------------------------------------------------- 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.
- ------------------ * Filed herewith. ** To be filed by amendment. EX-2.4 2 AMENDED AND RESTATED PLAN OF MERGER 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: (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 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 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 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 EX-4.8 3 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 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 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 3 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, 4 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 5 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. 6 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 7 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 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 EX-4.9 4 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 1 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 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 3 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 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 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 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 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 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 EX-11.1 5 EXHIBIT 11.1 AMERICA'S SHOPPING MALL, INC. COMPUTATION OF EARNINGS PER SHARE Weighted average number of shares Year ended April 30, 1998
Date Shares # of days ---- ------ --------- 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 =============
Weighted average number of shares Year ended April 30, 1999
Date Shares # of days ---- ------ --------- 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 =============
Weighted average number of shares May 1, 1999 to January 31, 2000
Date Shares # of days ---- ------ --------- 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 ===========
(A) 30-Apr-99 31,427,200 ---------- = 1,047,614 30 May 1, 1999 shares issued 940,000 ----------- 1,987,614 ===========
EX-23.1 6 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 EX-23.2 7 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 EX-99.(A) 8 LEASE AGREEMENT [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- 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- 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 -3- 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 -4- 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. -5- 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. -6- 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. -7- 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 -8- 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 -9- 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. -10- 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 -11- 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. 12 (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- 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- 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- 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- 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- 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- 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 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. 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. 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. EX-27 9 FINANCIAL DATA SCHEDULE
5 YEAR 9-MOS APR-30-1999 APR-30-2000 APR-30-1999 JAN-31-2000 0 685,777 0 0 0 369,875 0 0 0 2,041,984 150,000 3,568,351 0 395,289 0 145,473 206,509 5,965,112 27,022 2,589,836 0 5,024,673 0 0 0 3,994,990 1,673,590 1,971,340 (1,494,103) (7,615,737) 206,509 5,965,112 0 10,908,415 0 10,908,415 0 5,198,824 0 5,198,824 118,040 6,810,270 0 0 0 396,582 (118,040) (1,497,261) 0 0 (118,040) (1,497,261) 0 0 0 0 0 0 (118,040) (2,026,620) (0.14) (0.88) (0.14) (0.88)
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