By HOWARD FINE Staff Reporter A San Fernando Valley mall recently opened its doors to the public and is now launching a full-scale advertising campaign to lure shoppers. But unlike the Sherman Oaks Galleria or the Topanga Plaza, you don’t have to worry about finding a parking place: This mall is in cyberspace. iMall Inc., based in Studio City, is an online mall offering shoppers the chance to browse through product and service offerings from its 1,600 merchants. The merchandise includes everything from Upper Deck sports cards to cat litter boxes to hotel and airline reservations, all under one “roof,” or home page on the Internet. “We are taking what has worked in retail and combining it with the power of the Web,” said iMall co-founder and Chief Executive Richard Rosenblatt. But the company, which was started three years ago by a then-25-year-old Rosenblatt as an Internet consulting firm, now finds itself at a critical crossroads. After building an Internet mall by adding to its list of merchants, iMall is focusing its efforts on getting shoppers online. iMall is a newcomer to the San Fernando Valley, having just relocated its headquarters from Provo, Utah in July to be closer to a major center of Internet commerce. The company still has some of its marketing operations and 60 of its 100 employees in Utah. Currently, there are dozens of “malls” or collections of merchant Web sites on the Internet, ranging from smaller niche directories of a dozen Web sites to Internet Mall, which has over 10,000 linked Web sites. iMall differs from most of these other malls in one area: It develops most of the Web sites for its merchant tenants and maintains those sites. Most other malls merely provide links to merchant Web sites. Although commerce over the Internet is growing, it is still in its infancy. Most retailers trying to sell their products and services over the Internet have not generated profits through that channel to date. “Everybody agrees there is money to be made through Internet commerce some day in some way. The real question is, Will the companies now entering the Internet market last long enough to make money?” said Jon Goodman, director of EC2, the Annenberg Center Incubator Project at the University of Southern California. “Right now, this is a developing market, and like television 40 years ago, it is a net user of cash, not a net generator,” Goodman said. iMall is no exception. For the second quarter ended June 30, iMall reported a net loss of $499,475, compared with net income of $483,987 for the like period a year ago. Revenue was $5.1 million vs. $4.7.million. Last year, iMall posted a gain of $101,000 on $16 million in revenues. Most of the revenues came from fees paid by retailers to get Web sites onto the iMall; that was supplemented by income from Internet seminars. Rosenblatt attributed this year’s second quarter loss to increased advertising expenditures and higher debt costs associated with two recent acquisitions: e.m.a.N.a.t.e. Inc., a Web site-design and Internet consulting company, and Inter-Active Marketing Group Inc., a company specializing in yellow-page advertising on the Internet. Rosenblatt said he expects iMall to hit break-even once again as the company shifts from recruiting merchants to recruiting consumers. The company, in its second-quarter earnings report, projected that operating revenues would be about $1.2 million a month through the rest of the year, while it projects capital expenditures to average about $1 million a month. “Our first two years were spent getting as many merchants as possible on the mall,” Rosenblatt said. “You need a certain critical mass of merchants to attract customers. From this point forward, our main focus is on people buying goods on the iMall.” Underscoring this change, iMall recently changed its fee structure: Instead of merely charging its merchants for Web-site maintenance and set-up, iMall is now taking a percentage of all sales on its merchants’ sites. That percentage, Rosenblatt said, will range between 7 percent and 15 percent. Under the former structure, typical set-up fees ranged from $300 to $5,000, depending on the Web page’s complexity and artwork. “We’ve had a positive response from putting our audiotapes on the iMall,” said Judith Sherven, who along with her husband Jim Sniechowski owns The Magic of Difference, a Malibu-based provider of self-help and relationship guidance audiotapes. “We’ve gotten calls from Australia, Indonesia and England, all of whom ran across us on our Web page on the iMall. It’s given us a lot of new leads for our new book.” Lori Friel, administrator of Internet services for Las Vegas-based Circus Circus Enterprises (which owns Excalibur and several other Las Vegas hotels), said more than 600 reservations have been placed via the iMall each month just for the Excalibur hotel. To help boost sales, Rosenblatt said iMall will launch an online advertising campaign this fall, to be followed by a more traditional marketing campaign next year. Initial funding for those campaigns will come from $500,000 in equity financing from Geller & Friend Capital Partners. iMall is still seeking additional funding, most likely in the form of a private placement. Meanwhile, company officials are preparing to put behind them a brief inquiry last year from the Securities and Exchange Commission over stock sales by shareholders of the public shell company that iMall merged with to become a public company. iMall counsel David Rees said the SEC’s suspicions of improper stock sales revolved around the removal of restrictive covenants on the stock issued by the shell company prior to its merger with iMall. Rees said that because there have been no depositions of iMall officials and no further questions from the SEC since Aug. 1996, mention of the informal investigation would be dropped from further SEC filings. An SEC spokesman said there have been no public documents filed regarding an investigation into iMall; he would neither confirm nor deny the existence of an investigation.