-----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, Ds6SrtCRLvufWPs/chOmkper2P8CGwd0otYS9egqxz5zHh/Zh+q103ylz7SUek3j 85EBhsltgXasR7o8MNrrYA== 0000932440-99-000061.txt : 19990301 0000932440-99-000061.hdr.sgml : 19990301 ACCESSION NUMBER: 0000932440-99-000061 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981210 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IBS INTERACTIVE INC CENTRAL INDEX KEY: 0001057257 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 133817344 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-24073 FILM NUMBER: 99552350 BUSINESS ADDRESS: STREET 1: 2 RIDGEDALE AVE STREET 2: STE 350 CITY: CEDAR KNOLLS STATE: NJ ZIP: 07927 BUSINESS PHONE: 9732852600 MAIL ADDRESS: STREET 1: 2 RIDGEDALE AVE STREET 2: STE 350 CITY: CEDAR KNOLLS STATE: NJ ZIP: 07927 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A (AMENDMENT NO. 1) CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): December 10, 1998 IBS INTERACTIVE, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) DELAWARE 0-24073 13-3817344 (STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 2 RIDGEDALE AVENUE, SUITE 350, CEDAR KNOLLS, NEW JERSEY 07927 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (973) 285-2600 ================================================================================ ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. As announced in its press release of Monday, December 14, 1998, on December 10, 1998 IBS Interactive, Inc. ("IBS") entered into a Membership Interest Acquisition Agreement (the "Acquisition Agreement") with all of the members of Halo Network Management, LLC and Halo Network Management, LLC, an Eatontown, New Jersey based network management company that offers full-service network solutions including planning, installation and maintenance. Pursuant to the terms of the Acquisition Agreement, IBS acquired all of the issued and outstanding membership interests of Halo Network Management, LLC, in exchange for $1,425,000 (subject to certain adjustments) of unregistered shares of IBS common stock, par value $.01 per share, valued by the parties at $6.50 per share. IBS intends to continue the existing operations of Halo Network Management, LLC without any material changes. The foregoing summary of the Acquisition Agreement is qualified in its entirety by reference to the Acquisition Agreement, a copy of which is attached hereto as an exhibit. 1 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. 1. Audited financial statements of Halo Network Management, LLC as of and for the years ended December 31, 1997 and 1996, which includes the following: a. Balance Sheets; b. Statements of Operations; c. Statements of Members' Equity (Deficit); d. Statements of Cash Flows; and e. Notes to Financial Statements. 2. Unaudited condensed financial statements of Halo Network Management, LLC as of September 30, 1998 and for the nine-month periods ended September 30, 1997 and 1998, which includes the following: a. Condensed Balance Sheet; b. Condensed Statements of Operations; c. Condensed Statements of Cash Flows; and d. Notes to the Unaudited Condensed Financial Statements. 2 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Management Halo Network Management, LLC We have audited the accompanying balance sheets of Halo Network Management, LLC as of December 31, 1997 and 1996, and the related statements of operations, members' equity (deficit) and cash flows for the 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 audits 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 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 Halo Network Management, LLC as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ BDO Seidman, LLP BDO Seidman, LLP Woodbridge, New Jersey February 22, 1999 3
HALO NETWORK MANAGEMENT, LLC BALANCE SHEETS December 31, 1997 1996 --------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT: Cash $ 29,819 $ 22,564 Accounts receivable (net of allowance for doubtful accounts of $25,000 and $0) 259,061 274,662 --------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 288,880 297,226 Fixed assets, net 70,914 125,653 Other assets 600 600 Due from related party - 2,714 --------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $360,394 $426,193 --------------------------------------------------------------------------------------------------------------------- LIABILITIES AND MEMBERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable $ 73,489 $ 26,460 Accrued expenses 66,143 5,011 Notes payable - current 39,358 35,000 Accrued expenses - related party 127,888 115,803 Deferred revenue 265,331 227,137 --------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 572,209 409,411 Note payable - long-term 11,799 - --------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 584,008 409,411 Members' equity (deficit) (223,614) 16,782 --------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND MEMBERS' EQUITY (DEFICIT) $ 360,394 $426,193 --------------------------------------------------------------------------------------------------------------------- SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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HALO NETWORK MANAGEMENT, LLC STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 1996 --------------------------------------------------------------------------------------------------------------------- Revenues $1,847,494 $1,710,704 Cost of revenues 1,152,893 1,173,289 --------------------------------------------------------------------------------------------------------------------- Gross profit 694,601 537,415 General and administrative 295,362 229,889 Selling and marketing 288,214 221,294 Management fee - related party 120,000 120,000 --------------------------------------------------------------------------------------------------------------------- Operating loss (8,975) (33,768) Losses on disposals of fixed assets (45,463) - Other income, net 1,082 - Interest expense (14,040) (8,156) --------------------------------------------------------------------------------------------------------------------- NET LOSS $ (67,396) $(41,924) --------------------------------------------------------------------------------------------------------------------- SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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HALO NETWORK MANAGEMENT, LLC STATEMENTS OF MEMBERS' EQUITY (DEFICIT) YEAR ENDED DECEMBER 31, 1997 1996 --------------------------------------------------------------------------------------------------------------------- MEMBERS' EQUITY, BEGINNING OF YEAR $ 16,782 $ 75,206 Net loss (67,396) (41,924) Return of capital (173,000) (16,500) --------------------------------------------------------------------------------------------------------------------- MEMBERS' EQUITY (DEFICIT), END OF YEAR $(223,614) $ 16,782 --------------------------------------------------------------------------------------------------------------------- SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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HALO NETWORK MANAGEMENT, LLC STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 1997 1996 --------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (67,396) $ (41,924) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 51,777 46,646 Losses on disposals of fixed assets 45,463 - Changes in operating assets and liabilities: Accounts receivable 15,601 (92,151) Due from related party 2,714 (2,278) Accounts payable 47,029 (97,229) Accrued expenses 61,132 4,234 Accrued expenses - related party 12,085 31,226 Deferred revenue 38,194 227,137 --------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 206,599 75,661 --------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (23,714) (79,261) --------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of notes payable (2,630) 5,000 Return of capital (173,000) (16,500) --------------------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (175,630) (11,500) --------------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash 7,255 (15,100) Cash, beginning of year 22,564 37,664 --------------------------------------------------------------------------------------------------------------------- CASH, END OF YEAR $ 29,819 $ 22,564 --------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 14,040 $ 8,156 --------------------------------------------------------------------------------------------------------------------- Income taxes $ - $ - ---------------------------------------------------------------------------------------------- ---------------------- NON-CASH INVESTING AND FINANCING ACTIVITIES: In 1997, the Company incurred a liability of $18,787 to purchase a fixed asset. --------------------------------------------------------------------------------------------------------------------- SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7 HALO NETWORK MANAGEMENT, LLC NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION AND NATURE Halo Network Management, LLC (the OF BUSINESS "Company") was organized in April 1995 as a New Jersey Limited Liability Company. The Company principally provides network wiring, design, installation and maintenance services for commercial businesses. 2. SUMMARY OF SIGNIFICANT Revenue Recognition ACCOUNTING POLICIES Revenue is recognized as services are rendered to clients. In the event that there are significant performance obligations yet to be fulfilled arising from service and maintenance projects, revenue recognition is deferred until such conditions are removed. Income Taxes The Company has elected and its owners, the members, have consented, under the applicable provisions of the Internal Revenue Code and applicable state code, to report its results of operations for federal and state income tax purposes as a limited liability corporation. Under those provisions, the members individually receive the income tax benefit of their respective share of the Company's net loss. Accordingly, no benefit has been recorded for federal and state income taxes in the accompanying financial statements. Financial Instruments and Concentrations Financial instruments which potentially subject the Company to credit risk consist primarily of a concentration of unsecured trade accounts receivables. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. Fixed Assets Fixed assets are stated at cost, reduced by a reserve for accumulated depreciation. Depreciation is provided under the straight line method based upon the following useful lives: ------------------------------------------ Computer equipment 3 years Computer vehicles 5 years Furniture and fixtures 7 years ------------------------------------------ Estimated Fair Values of Financial Instruments The carrying values reported in the accompanying balance sheet for accounts receivable, accounts payable and notes payable approximate fair value because of the short-term maturity and variable interest rates of these financial instruments. 8 HALO NETWORK MANAGEMENT, LLC NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates used by the Company include the useful lives ascribed to fixed assets. 3. FIXED ASSETS Major classes of fixed assets, net, consist of the following:
DECEMBER 31, 1997 1996 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Computer equipment $115,253 $127,422 Vehicles 48,034 22,355 Furniture and fixtures 4,450 3,996 Leasehold improvements - 43,037 Other 1,677 - ----------------------------------------------------------------------- 169,414 196,810 Less: Accumulated depreciation and amortization 98,500 71,157 ----------------------------------------------------------------------- $ 70,914 $125,653 -----------------------------------------------------------------------
In 1997, the Company adopted a plan to relocate administrative offices. As a result, the value of leasehold improvements was considered impaired and a loss totaling $42,745 was recorded. In addition, a loss on disposal of assets totaling $2,718 was recognized in 1997. 9 HALO NETWORK MANAGEMENT, LLC NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4. ACCRUED EXPENSES At December 31, 1997 an 1996, accrued expenses were comprised of the following:
1997 1996 ------------------------------------------------------------ ------------------------------------------------------------ Employee benefits $41,143 $5,011 Warranty 25,000 -- ------------------------------------------------------------ $66,143 $5,011 ------------------------------------------------------------
5. NOTES PAYABLE Line of Credit The Company has a credit line with a bank that bears interest (9.5% at December 31, 1997) at a rate indexed to the bank's prime rate. The outstanding balances at December 31, 1997 and 1996 totaled $35,000. The outstanding balance was repaid by the Company in the year ended December 31, 1998 and the credit line was terminated. Vehicle Loan In 1997, the Company entered into a borrowing agreement with a bank to finance the purchase of a vehicle. The secured note bears interest at a rate of 8.85% and is payable in full in May of 2001. Contractual principal repayments beyond December 31, 1997 are as follows: Year ended December 31, ------------------------------------------- 1998 $ 4,358 1999 4,761 2000 5,198 2001 1,840 ------------------------------------------- $16,157 ------------------------------------------- 6. RELATED PARTY At December 31, 1996, the Company had TRANSACTIONS advanced $2,714 to a related party. This amount was repaid in the year ended December 31, 1997. An entity, which is owned by a certain interestholder of the Company, provides managerial and administrative services to the Company. For each of the years ended December 31, 1997 and 1996, the Company incurred a charge of $120,000 for such services. At December 31, 1997 and 1996, the Company owed $127,888 and $115,803, respectively, to this entity. The related interest expense totaled $6,925 and $5,620 for the years ended December 31, 1997 and 1996, respectively. 10 HALO NETWORK MANAGEMENT, LLC NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. COMMITMENTS The Company leases its administrative office and equipment under operating leases, which expire through 2001. Future net minimum annual rental payments under non-cancelable leases, including the rental payments related to the Company's new administrative facility (see Note 3), are as follows: Year ended December 31, --------------------------------------------- 1998 $ 45,000 1999 39,000 2000 39,000 2001 13,000 --------------------------------------------- $136,000 --------------------------------------------- 8. YEAR 2000 (UNAUDITED) The Company could be adversely affected if its computer systems, or those used by suppliers or customers, do not properly process and calculate date-related information and data from the period surrounding and including January 1, 2000. This is commonly known as the "Year 2000" issue. Additionally, this issue could impact non-computer systems and various devices used in the Company's business. At this time, because of the complexities involved in this issue, management cannot provide assurances that the Year 2000 issue will not have an effect on the Company's operations. 9. SUBSEQUENT EVENT In December 1998, all of the interestholders of the Company sold their membership interests to IBS Interactive, Inc. ("IBS") in exchange for 219,230 shares of IBS common stock. The final determination of shares to be issued is contingent upon the defined financial position of the Company at closing. 11 HALO NETWORK MANAGEMENT, LLC CONDENSED BALANCE SHEET (UNAUDITED) - --------------------------------------------------------------------------- September 30, 1998 - --------------------------------------------------------------------------- Assets Current: Cash $ 13,000 Accounts receivable, net 290,000 - --------------------------------------------------------------------------- Total current assets 303,000 Fixed assets, net 45,000 Other assets 3,000 - --------------------------------------------------------------------------- Total assets $ 351,000 - --------------------------------------------------------------------------- Liabilities and Members' Deficit Current liabilities: Accounts payable and accrued expenses $ 126,000 Deferred revenue 223,000 Notes payable - current 39,000 - --------------------------------------------------------------------------- Total current liabilities 388,000 Long-term notes payable 8,000 - --------------------------------------------------------------------------- Total liabilities 396,000 Members' deficit (45,000) - --------------------------------------------------------------------------- Total liabilities and members' deficit $ 351,000 - --------------------------------------------------------------------------- SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS. 12 HALO NETWORK MANAGEMENT, LLC CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
- ---------------------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 1998 ---- ---- Revenues $1,588,000 $1,313,000 Cost of revenues 1,047,000 1,053,000 - ---------------------------------------------------------------------------------------- Gross profit 541,000 260,000 Selling, general and administrative expenses 402,000 243,000 Management fees 90,000 90,000 - ---------------------------------------------------------------------------------------- Operating income (loss) 49,000 (73,000) - ---------------------------------------------------------------------------------------- Other expense, net 4,000 2,000 - ---------------------------------------------------------------------------------------- Net income (loss) $ 45,000 $ (75,000) - ----------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS. 13 HALO NETWORK MANAGEMENT, LLC CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------- FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 1998 ---- ---- Cash flows provided by (used in) operating activities $193,000 $(257,000) Cash flows used in investing activities (18,000) (3,000) Cash flows provided by (used in) financing activities (83,000) 244,000 - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash 92,000 (16,000) Cash, at beginning of period 23,000 29,000 - ---------------------------------------------------------------------------------------------------------- Cash, at end of period $115,000 $ 13,000 - ----------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS. 14 HALO NETWORK MANAGEMENT, LLC NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS - ---------------------------------------------------------------------------- 1. BASIS OF PRESENTATION The accompanying condensed financial statements as of September 30, 1998 and for the nine months ended September 30, 1997 and 1998 are unaudited but, in the opinion of management of Halo Network Management, LLC (the "Company"), contain all adjustments necessary to present fairly the financial position at September 30, 1998, the results of operations for the nine months ended September 30, 1997 and 1998, and cash flows for the nine months ended September 30, 1997 and 1998. These adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading. For further information, refer to the Company's financial statements and notes thereto for the years ended December 31, 1997 and 1996. The results of operations for the nine months ended September 30, 1998 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 1998. 2. BUSINESS COMBINATION In December 1998, all of the interestholders of the Company sold their membership interests to IBS Interactive, Inc. ("IBS") in exchange for 219,230 shares of IBS common stock. The final determination of shares to be issued is contingent upon the defined financial position of the Company at closing. No adjustments arising from this business combination have been reflected in the accompanying unaudited condensed financial statements as of and for the nine months ending September 30, 1998. 15 (B) PRO FORMA FINANCIAL INFORMATION. 1. Pro forma unaudited financial information of IBS Interactive, Inc., which includes the following: a. Pro Forma Unaudited Condensed Statement of Operations for the year ended December 31, 1997; b. Pro Forma Unaudited Condensed Statement of Operations for the year ended December 31, 1996; c. Pro Forma Unaudited Condensed Statement of Operations for the nine-month period ended September 30, 1998; d. Pro Forma Unaudited Condensed Balance Sheet as of September 30, 1998; and e. Notes to Pro Forma Unaudited Condensed Financial Statements. 16 IBS INTERACTIVE, INC. PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS The accompanying pro forma unaudited condensed statement of operations for the year ended December 31, 1997 is based upon the historical financial statements of IBS, Entelechy, Inc. ("Entelechy"), DesignFX Interactive, LLC ("DesignFX") and Halo Network Management, LLC ("Halo"), adjusted to give effect to the business combinations of Entelechy (accounted for as a purchase), DesignFX and Halo (both accounted for as poolings of interests), as if such business combinations had occurred on January 1, 1997. The accompanying pro forma unaudited condensed statement of operations for the year ended December 31, 1996 is based upon the historical financial statements of IBS, DesignFX and Halo, adjusted to give effect to the Design FX and Halo business combinations (both accounted for as poolings of interests), as if such business combinations occurred on January 1, 1996. The accompanying pro forma unaudited condensed financial statements as of, and for the nine months ended September 30, 1998, are based upon the historical financial statements of IBS (which includes the unaudited financial statements of DesignFX) and Halo, adjusted to give effect to the acquisition of Halo by IBS (for the pro forma unaudited condensed balance sheet, as if such acquisition had occurred on September 30, 1998 and for the pro forma unaudited condensed statement of operations, as if such acquisition had occurred on January 1, 1998). The pro forma unaudited condensed statements of operations and balance sheet data are not necessarily indicative of the results that would have been obtained if such business combinations had occurred on the dates indicated or for any future period or date. The pro forma unaudited adjustments give effect to available information and assumptions that IBS believes are reasonable. The pro forma unaudited condensed financial information should be read in conjunction with the historical financial statements of IBS, Entelechy, DesignFX and Halo and notes thereto included in IBS' Prospectus dated May 14, 1998, the Company's filing of Form 8-K/A (Amendment No. 1) dated December 9, 1998 and this Form 8-K/A (Amendment No. 1). 17 IBS INTERACTIVE, INC. PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997
ENTELECHY SUBTOTAL - IBS ENTELECHY ELIMINATIONS IBS & DESIGNFX HALO HALO PRO HISTORICAL HISTORICAL & ADJUSTMENTS ENTELECHY HISTORICAL HISTORICAL ADJUSTMENTS FORMA ---------- ---------- ------------- ---------- ---------- ---------- ----------- ----- Revenues...................... $2,741,000 $366,000 $ (42,000)(c) $3,065,000 $ 572,000 $1,847,000 $ -- $5,484,000 Cost of services.............. 1,099,000 299,000 (42,000)(c) 1,356,000 565,000 1,153,000 -- 3,074,000 ----------------------------------------------------------------------------------------------------- Gross profit.................. 1,642,000 67,000 -- 1,709,000 7,000 694,000 -- 2,410,000 Selling, general and administrative.............. 1,296,000 115,000 -- 1,411,000 851,000 703,000 (120,000)(a) 2,845,000 Amortization of intangible assets...................... 12,000 -- 156,000 (c) 168,000 -- -- -- 168,000 Compensation expense - Entelechy................... -- -- 197,000 (d) 197,000 -- -- -- 197,000 ---------------------------------------------------------------------------------------------------- Operating income (loss)....... 334,000 (48,000) (353,000) (67,000) (844,000) (9,000) 120,000 (800,000) Other income (expense), net... (52,000) (13,000) -- (65,000) 18,000 (58,000) -- (105,000) ---------------------------------------------------------------------------------------------------- Income (loss) before income taxes....................... 282,000 (61,000) (353,000) (132,000) (826,000) (67,000) 120,000 (905,000) Income tax provision.......... (84,000) -- -- (84,000) -- -- -- (84,000) ---------------------------------------------------------------------------------------------------- Net income (loss)............. $ 198,000 $(61,000) $(353,000) $(216,000) $(826,000) $(67,000) $120,000 $(989,000) ====================================================================================================
SEE ACCOMPANYING NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS. 18 IBS INTERACTIVE, INC. PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
IBS DESIGNFX HALO HALO HISTORICAL HISTORICAL HISTORCAL ADJUSTMENTS PRO FORMA ---------- ---------- --------- ---------- --------- Revenues..................... $1,023,000 $ 177,000 $1,711,000 $ -- $2,911,000 Cost of services............. 650,000 147,000 1,173,000 -- 1,970,000 --------------------------------------------------------------------------------- Gross profit................. 373,000 30,000 538,000 -- 941,000 Selling, general and administrative............. 670,000 508,000 572,000 (120,000) (a) 1,630,000 Acquisition expenses......... -- -- -- 100,000 (b) 100,000 Amortization of intangible assets 1,000 -- -- -- 1,000 --------------------------------------------------------------------------------- Operating loss............... (298,000) (478,000) (34,000) 20,000 (790,000) Other expense, net........... (12,000) (25,000) (8,000) -- (45,000) --------------------------------------------------------------------------------- Loss before income taxes..... (310,000) (503,000) (42,000) 20,000 (835,000) Income tax benefit........... 59,000 -- -- -- 59,000 --------------------------------------------------------------------------------- Net loss..................... $(251,000) $(503,000) $ (42,000) $ 20,000 $ (776,000) =================================================================================
SEE ACCOMPANYING NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS. 19 IBS INTERACTIVE, INC. PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1998
IBS HALO HALO HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA ---------- ---------- ----------- --------- Revenues.................................... $ 6,091,000 $ 1,313,000 -- $ 7,404,000 Cost of services............................ 3,759,000 1,053,000 -- 4,812,000 ---------------------------------------------------------- Gross profit................................ 2,332,000 260,000 -- 2,592,000 Selling, general and administrative......... 2,029,000 333,000 $(90,000) (a) 2,272,000 Amortization of intangible assets........... 147,000 -- -- 147,000 ---------------------------------------------------------- Operating income (loss)..................... 156,000 (73,000) 90,000 173,000 Other income (expense), net................. 58,000 (2,000) -- 56,000 ---------------------------------------------------------- Income (loss) before income taxes........... 214,000 (75,000) 90,000 229,000 Income tax provision........................ (120,000) -- -- (120,000) ---------------------------------------------------------- Net income (loss)........................... $ 94,000 $ (75,000) $ 90,000 $ 109,000 ==========================================================
SEE ACCOMPANYING NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS. 20 IBS INTERACTIVE, INC. PRO FORMA UNAUDITED CONDENSED BALANCE SHEET SEPTEMBER 30, 1998
IBS HALO HISTORICAL HISTORICAL PRO FORMA ---------- ---------- --------- Cash........................................ $ 6,071,000 $ 13,000 $ 6,084,000 Accounts receivable, net.................... 2,308,000 290,000 2,598,000 Other current assets........................ 208,000 -- 208,000 ------------------------------------------------------ Total current assets................... 8,587,000 303,000 8,890,000 Property and equipment, net................. 894,000 45,000 939,000 Intangible assets........................... 1,511,000 -- 1,511,000 Other non-current assets.................... 114,000 3,000 117,000 ------------------------------------------------------ Total assets........................... $11,106,000 $351,000 $11,457,000 ====================================================== Notes payable and capital lease obligations - current............... $ 539,000 $ 39,000 $ 578,000 Other current liabilities................... 1,488,000 349,000 1,837,000 ------------------------------------------------------ 2,027,000 388,000 2,415,000 Non-current liabilities..................... 758,000 8,000 766,000 ------------------------------------------------------ Total liabilities 2,785,000 396,000 3,181,000 ------------------------------------------------------ Stockholders' Equity (Deficit).............. 8,321,000 (45,000) 8,276,000 ------------------------------------------------------ Total liabilities and stockholders' equity................... $11,106,000 $351,000 $11,457,000 ======================================================
SEE ACCOMPANYING NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS. 21 IBS INTERACTIVE, INC. NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS There were no adjustments to the DesignFX business combination for the years ended December 31, 1997 and 1996, other than the related effects of adjustment (b) discussed below. Adjustments to reflect the Halo business combination, as if it had occurred as of January 1, 1996 are as follows: (a) Reductions in selling, general and administrative expenses of $120,000, $120,000, and $90,000 for the years ended December 31, 1997 and 1996 and the nine months ended September 30, 1998, respectively. Such adjustments relate to management fees which will not continue. (b) Estimated costs arising from the Halo and Design FX business combinations have been expensed in the year ended December 31, 1996. Adjustments to reflect the Entelechy business combination, as if it had occurred as of January 1, 1997 are as follows: (c) Amortization of intangible assets arising from the acquisition amounting to $156,000; such amount is amortized over an estimated useful life of five years. (d) Recognition of compensation expense related to the issuance of contingent shares of IBS common stock on the first anniversary date of the acquisition. The issuance of such shares is contingent upon the former Entelechy stockholders remaining in the employ of IBS. (e) Elimination of transactions between IBS and Entelechy. 22 (C) EXHIBITS. The following exhibits are included as part of this Report: 2.1* Membership Interest Acquisition Agreement, dated December 10, 1998, by and among IBS, Carl Broadbent, Keith Lowy, Stephen Lowy and Halo Network Management, LLC. 99.1* Press release of IBS, dated December 14, 1998. -------------------- * Previously filed. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. IBS INTERACTIVE, INC. Date: February 26, 1999 By: /s/ Nicholas R. Loglisci, Jr. _________________________________________ Name: Nicholas R. Loglisci, Jr. Title: President and Chief Executive Officer EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 2.1* Membership Interest Acquisition Agreement, dated December 10, 1998, by and among IBS, Carl Broadbent, Keith Lowy, Stephen Lowy and Halo Network Management, LLC. 99.1* Press Release of IBS, dated December 14, 1998. - -------------------- * Previously filed. -----END PRIVACY-ENHANCED MESSAGE-----