-----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, HxDauvFWR22ijw/utXMEuwuI8V9st4q+1JxPnDOkX/GUGtM7ibfjoI7krDJCQYfe ron/M+BV3A4ApeDlTdTr6Q== 0000932440-99-000154.txt : 19990603 0000932440-99-000154.hdr.sgml : 19990603 ACCESSION NUMBER: 0000932440-99-000154 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990331 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990602 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: 99639439 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): March 31, 1999 IBS INTERACTIVE, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) DELAWARE 0-24073 13-3817344 (STATE OR OTHER (COMMISSION (IRS EMPLOYER JURISDICTION FILE NUMBER) IDENTIFICATION NO.) OF INCORPORATION) 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. This Form 8-K/A amends the Current Report on Form 8-K filed on April 15, 1999 to incorporate Item 7. As announced in its press release of Thursday, April 1, 1999, on March 31, 1999, IBS Interactive, Inc. ("IBS") entered into an Exchange Agreement (the "Agreement") with Spectrum Information Systems, Inc., an Alabama corporation ("Spectrum"), and all of Spectrum's stockholders. Spectrum is a full-service provider of network and systems integration solutions based in Madison, Alabama. Pursuant to the terms of the Agreement, IBS acquired all of the issued and outstanding shares of Spectrum in exchange for $3,200,000 or 145,456 (subject to certain adjustments) unregistered shares of IBS Common Stock, par value $.01 per share, valued by the parties at $22.00 per share. IBS intends to continue the existing operations of Spectrum 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. Item 7 is hereby amended to state as follows: (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. 1. Audited financial statements of Spectrum Information Systems, Inc. as of and for the years ended December 31, 1998 and 1997, which includes the following: a. Balance Sheets; b. Statements of Operations; c. Statements of Accumulated Deficit; d. Statements of Cash Flows; and e. Notes to Financial Statements. 2. Unaudited condensed financial statements of Spectrum Information Systems, Inc. as of March 31, 1999 and for the three-month periods ended March 31, 1999 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. (b) PRO FORMA FINANCIAL INFORMATION. 1. Pro forma unaudited financial information of IBS Interactive, Inc. ("IBS"), which includes the following: a. Pro Forma Unaudited Condensed Statement of Operations for the year ended December 31, 1998; b. Pro Forma Unaudited Condensed Statement of Operations for the year ended December 31, 1997; and c. Notes to Pro Forma Unaudited Condensed Financial Statements. (c) EXHIBITS. 2 SPECTRUM INFORMATION SYSTEMS, INC. INDEX TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 PAGE Report of Independent Certified Public Accountants....................4 Report of Independent Certified Public Accountants....................5 Balance Sheets as of December 31, 1998 and 1997.......................6 Statements of Operations for the years ended December 31, 1998 and 1997..........................................7 Statements of Accumulated Deficit for the years ended December 31, 1998 and 1997....................................8 Statements of Cash Flows for the years ended December 31, 1998 and 1997....................................9 Notes to Financial Statements...................................10 - 14 3 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Spectrum Information Systems, Inc. We have audited the accompanying balance sheet of Spectrum Information Systems, Inc. as of December 31, 1998, and the related statements of operations, accumulated deficit and cash flows for the year 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 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 Spectrum Information Systems, Inc. as of December 31, 1998, 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 May 26, 1999 4 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Spectrum Information Systems, Inc. We have audited the accompanying balance sheet of Spectrum Information Systems, Inc., as of December 31, 1997, and the related statements of operations and accumulated deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Out 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 the 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 Spectrum Information Systems, Inc., as of December 31, 1997 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Barfield, Murphy, Shank & Smith, P.C. Barfield, Murphy, Shank & Smith, P.C. Birmingham, Alabama May 13, 1999 5 SPECTRUM INFORMATION SYSTEMS, INC. BALANCE SHEETS DECEMBER 31, 1998 AND 1997 December 31, 1998 1997 - -------------------------------------------------------------------------------- ASSETS Current: Cash $ 54,708 $ 10,091 Accounts receivable ($0 allowance for doubtful accounts in 1998 and 1997) 65,126 121,411 Inventory and supplies 9,381 - Prepaid expenses and other current assets 260 621 - -------------------------------------------------------------------------------- Total current assets 129,475 132,123 Fixed assets, net 37,694 10,535 Other assets 4,025 4,408 - -------------------------------------------------------------------------------- Total Assets $ 171,194 $ 147,066 ================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 188,079 $ 4,421 Accrued expenses 239,783 5,802 Notes payable - current 31,509 49,069 - -------------------------------------------------------------------------------- Total current liabilities 459,371 59,292 Note payable - long-term 52,182 - - -------------------------------------------------------------------------------- Total liabilities 511,553 59,292 Stockholders' deficit: Common stock 500 500 Additional paid-in capital 28,389 28,289 Contributed capital 160,000 160,000 Accumulated deficit (529,248) (101,015) - -------------------------------------------------------------------------------- Total stockholders' equity (deficit) (340,359) 87,774 - -------------------------------------------------------------------------------- Total liabilities and stockholders' equity (deficit) $ 171,194 $ 147,066 ================================================================================ SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 6 SPECTRUM INFORMATION SYSTEMS, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 YEAR ENDED DECEMBER 31, 1998 1997 ------------------------------------------------------------------------------- Revenues $1,674,158 $411,145 Cost of revenues 1,404,878 389,606 ------------------------------------------------------------------------------- Gross profit 269,280 21,539 Selling, general and administrative expenses 653,025 121,177 ------------------------------------------------------------------------------- Operating loss (383,745) (99,638) Other income, net 10,228 2,100 Interest expense (45,401) (1,945) ------------------------------------------------------------------------------- Net loss $ (418,918) $ (99,483) ================================================================================ SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 7 SPECTRUM INFORMATION SYSTEMS, INC. STATEMENTS OF ACCUMULATED DEFICIT FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 YEAR ENDED DECEMBER 31, 1998 1997 ------------------------------------------------------------------------------- Accumulated deficit, beginning of year $ (101,015) $ - Net loss (418,918) (99,483) Distributions to stockholders (9,315) (1,532) ------------------------------------------------------------------------------- Accumulated deficit, end of year $(529,248) $(101,015) =============================================================================== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 8 SPECTRUM INFORMATION SYSTEMS, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 YEAR ENDED DECEMBER 31, 1998 1997 ------------------------------------------------------------------------------- Cash flows from operating activities: Net loss $(418,918) $ (99,483) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 29,747 19,563 Non-cash compensation - 160,000 Changes in operating assets and liabilities: Accounts receivable 56,285 (121,411) Inventory and supplies (9,381) - Prepaid expenses and other current assets 361 (621) Other assets - (4,485) Accounts payable 183,658 4,421 Accrued expenses 233,981 5,802 ------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 75,733 (36,214) ------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (24,062) (30,021) ------------------------------------------------------------------------------- Cash flows from financing activities: Repayments of notes payable (37,939) (21,031) Borrowings 40,100 70,100 Capital contributions 100 28,789 Distributions to stockholders (9,315) (1,532) ------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (7,054) 76,326 ------------------------------------------------------------------------------- Increase in cash 44,617 10,091 Cash, beginning of year 10,091 - ------------------------------------------------------------------------------- Cash, end of year $ 54,708 $ 10,091 =============================================================================== Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 2,800 $ 1,900 =============================================================================== Non-cash investing and financing activities: In 1998, the Company incurred liabilities of $32,461 to purchase fixed assets. =============================================================================== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 9 SPECTRUM INFORMATION SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 1. ORGANIZATION AND Spectrum Information Systems, Inc. (the "Company") NATURE OF was organized in January 1997 as an Alabama BUSINESS Corporation. The Company principally develops, markets and installs fiber optic networks and information systems. 2. SUMMARY OF REVENUE RECOGNITION SIGNIFICANT ACCOUNTING Revenue is recognized as services are rendered to POLICIES 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 stockholders have elected, under the applicable provisions of the Internal Revenue Code and applicable state code, to report their respective results of operations for federal and state income tax purposes as an "S" Corporation. Under those regulations, the stockholders individually received the income tax benefit of their respective share of the Company's net loss. Accordingly, the Company has not recorded a provision or benefit for federal and state income taxes for the years ended December 31, 1998 and 1997. 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 and amortization. Depreciation is provided under the straight line method based upon the following useful lives: ------------------------------------------------------- Computer equipment 3 years Vehicles 5 years Furniture and fixtures 7 years Leasehold improvements Lease term ------------------------------------------------------- 10 SPECTRUM INFORMATION SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS The carrying values reported in the accompanying balance sheets 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. 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 and the assumptions utilized in developing liabilities on warranty costs. 3. FIXED ASSETS Major classes of fixed assets, net, consist of the following: DECEMBER 31, 1998 1997 ------------------------------------------------------- Computer equipment $ 25,917 $21,961 Vehicles 36,624 6,412 Furniture and fixtures 4,793 - Leasehold improvements 4,652 517 Other 14,035 1,131 ------------------------------------------------------- 86,021 30,021 Less: Accumulated depreciation and amortization 48,327 19,486 ------------------------------------------------------- $ 37,694 $10,535 ------------------------------------------------------- 4. ACCRUED EXPENSES At December 31, 1998 and 1997, accrued expenses was comprised of the following: 1998 1997 ------------------------------------------------------- Payroll and payroll taxes $ 99,512 $ 4,052 Employee benefits 34,556 - Warranty 90,000 - Other 15,715 1,750 ------------------------------------------------------- $239,783 $ 5,802 ------------------------------------------------------- 11 SPECTRUM INFORMATION SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 5. LONG-TERM DEBT Long-term debt is as follows: AND FINANCING ARRANGEMENTS (SEE NOTE 11) DECEMBER 31, 1998 1997 ------------------------------------------------------ Notes payable, due in aggregate monthly installments of $2,241, accruing interest ranging from 8.25% to 12% through November 2003, secured in equipment and vehicles $ 83,691 $49,069 Less: Current portion 31,509 49,069 ------------------------------------------------------ $ 52,182 $ - ------------------------------------------------------ The aggregate maturities of long-term debt at December 31, 1998 are as follows: Year ended December 31, ------------------------------------------------------- 1999 $31,509 2000 18,629 2001 15,356 2002 9,690 2003 8,507 ------------------------------------------------------- $83,691 ------------------------------------------------------- FACTORING AGREEMENT In 1998, the Company entered into an agreement with a bank to factor defined accounts receivable. The Company incurs a charge of 3% on the face value of the factored accounts receivable. The bank does not have recourse against the Company on uncollectible amounts. The related financing charge totaled $42,608 for the year ended December 31, 1998. Such agreement was terminated on March 31, 1999. 6. STOCKHOLDERS' CAPITAL CONTRIBUTIONS EQUITY (DEFICIT) The stockholders contributed $100 and $28,789 of cash for the years ended December 31, 1998 and 1997, respectively. 12 SPECTRUM INFORMATION SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 COMPENSATION During the year ended December 31, 1997, the Company's stockholders did not receive cash compensation for services rendered. The Company recognized a non-cash compensation charge of $160,000 ($80,000 classified in "Cost of revenues" and $80,000 in "Selling, general and administrative expenses") for the estimated value ascribed to such services. Such values were derived, in part, from the stockholders' compensation levels for the year ended December 31, 1998. The Company increased its contributed capital in 1997 for the amount of this charge. 7. BENEFIT PLAN Effective January 1, 1998, the Company adopted a Savings Incentive Match Plan in which employees may contribute up to $6,000 in 1998. The Company matches 100% of each employee's contribution up to a maximum of 3% of the employee's salary. The Company's contribution for the year ended December 31, 1998 totaled $10,283. 8. MAJOR CUSTOMERS Two clients accounted for 24% and 15% of the Company's revenues for the year ended December 31, 1998. One customer accounted for 70% of the Company's net accounts receivable at December 31, 1998. 9. COMMITMENTS The Company leases its administrative office under an operating lease, which expires in October 1999. Future net minimum annual rental payments under the non-cancelable lease is $27,500. Rent expense for the years ended December 31, 1998 and 1997 totaled $30,000 and $5,000, respectively. 10. YEAR 2000 The Company could be adversely affected if its (UNAUDITED) 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 and services utilized 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. 13 SPECTRUM INFORMATION SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 11. SUBSEQUENT EVENTS On March 31, 1999, the stockholders sold the outstanding shares of the Company to IBS Interactive, Inc. ("IBS") in exchange for 145,456 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. Outstanding notes payable of $83,691 as of December 31, 1998 were repaid on March 31, 1999. 14 SPECTRUM INFORMATION SYSTEMS, INC. CONDENSED BALANCE SHEET (UNAUDITED) MARCH 31, 1999 - -------------------------------------------------------------------------------- ASSETS Current: Cash $ 138,000 Accounts receivable, net 319,000 Other current assets 13,000 - -------------------------------------------------------------------------------- Total current assets 470,000 Fixed assets, net 56,000 Other assets 4,000 - -------------------------------------------------------------------------------- TOTAL ASSETS $ 530,000 ================================================================================ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued expenses $ 340,000 Due to IBS Interactive, Inc. 410,000 - -------------------------------------------------------------------------------- Total current liabilities 750,000 - -------------------------------------------------------------------------------- Stockholders' deficit: Common stock 1,000 Additional paid-in capital 31,000 Contributed capital 160,000 Accumulated deficit (412,000) - -------------------------------------------------------------------------------- Total Stockholders' Deficit (220,000) - -------------------------------------------------------------------------------- Total liabilities and stockholders' deficit $ 530,000 ================================================================================ SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS. 15 SPECTRUM INFORMATION SYSTEMS, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 1999 1998 - -------------------------------------------------------------------------------- Revenues $672,000 $341,000 Cost of revenues 472,000 248,000 - -------------------------------------------------------------------------------- Gross profit 200,000 93,000 Selling, general and administrative expenses 79,000 47,000 - -------------------------------------------------------------------------------- Operating income 121,000 46,000 Other expense (income), net 4,000 (3,000) - -------------------------------------------------------------------------------- Net income $117,000 $ 49,000 ================================================================================ SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS. 16 SPECTRUM INFORMATION SYSTEMS, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 1999 1998 - -------------------------------------------------------------------------------- Cash flows provided by operating activities $192,000 $177,000 Cash flows used in investing activities (25,000) (22,000) Cash flows used in financing activities (84,000) (27,000) - -------------------------------------------------------------------------------- Net increase in cash 83,000 128,000 Cash, at beginning of period 55,000 10,000 - -------------------------------------------------------------------------------- Cash, at end of period $138,000 $138,000 ================================================================================ SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS. 17 SPECTRUM INFORMATION SYSTEMS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying condensed financial statements as of March 31, 1999 and for the three months ended March 31, 1999 and 1998 are unaudited but, in the opinion of management of Spectrum Information Systems, Inc. (the "Company"), contain all adjustments necessary to present fairly the financial position at March 31, 1999, the results of operations for the three months ended March 31, 1999 and 1998, and cash flows for the three months ended March 31, 1999 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, 1998 and 1997. The results of operations for the three months ended March 31, 1999 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 1999. 2. BUSINESS COMBINATION In March 1999, all of the shareholders of the Company sold their ownership interests to IBS Interactive, Inc. ("IBS") in exchange for 145,456 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 and the resolution of specific matters. No adjustments arising from this business combination have been reflected in the accompanying unaudited condensed financial statements as of and for the three months ending March 31, 1999. 18 (b) PRO FORMA FINANCIAL INFORMATION. 1. Pro forma unaudited financial information of IBS Interactive, Inc. ("IBS"), which includes the following: a. Pro Forma Unaudited Condensed Statement of Operations for the year ended December 31, 1998; b. Pro Forma Unaudited Condensed Statement of Operations for the year ended December 31, 1997; c. Notes to Pro Forma Unaudited Condensed Financial Statements. 19 IBS INTERACTIVE, INC. PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS The accompanying pro forma unaudited condensed statements of operations for the years ended December 31, 1998 and 1997 are based upon the historical financial statements of IBS, Entelechy, Inc. ("Entelechy") and Spectrum Information Systems, Inc. ("Spectrum"), adjusted to give effect to the business combinations of Entelechy (accounted for as a purchase) and Spectrum (accounted for as a pooling of interests), as if such business combinations had occurred on January 1, 1997. A pro forma unaudited condensed balance sheet and statement of operations as of and for the three month period ended March 31, 1999 are not presented herein since the effects of the Spectrum business combination are reflected in the Company's consolidated financial statements included in Form 10-QSB for the period ended March 31, 1999. The pro forma unaudited condensed statements of operations 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 and notes thereto included in IBS' 10-KSB dated March 31, 1999, IBS' 10-QSB dated May 17, 1999, and this Form 8-K/A (Amendment No. 1). 20 IBS INTERACTIVE, INC. PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 IBS Spectrum Historical Historical Pro Forma - -------------------------------------------------------------------------------- Revenues........................ $9,805,000 $1,674,000 $11,479,000 Cost of services................ 6,438,000 1,405,000 7,843,000 --------------------------------------------- Gross profit.................... 3,367,000 269,000 3,636,000 Selling, general and administrative.................. 3,001,000 653,000 3,654,000 Non-cash compensation expenses.. 290,000 - 290,000 Merger related expenses......... 109,000 - 109,000 Amortization of intangible assets 173,000 - 173,000 --------------------------------------------- Operating loss.................. (206,000) (384,000) (590,000) Other income (expense), net..... 161,000 (35,000) 126,000 --------------------------------------------- Loss before income taxes........ (45,000) (419,000) (464,000) Income tax provision............ (15,000) - (15,000) --------------------------------------------- Net loss........................ $ (60,000) $ (419,000) $ (479,000) ============================================= SEE ACCOMPANYING NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS. 21
IBS INTERACTIVE, INC. PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 Entelechy Eliminations Subtotal - IBS Entelechy & IBS & Spectrum Spectrum Historical Historical Adjustments Entelechy Historical Adjustments Pro Forma - ------------------------------------------------------------------------------------------------------------------------------------ Revenues...................... $5,161,000 $366,000 $(42,000)(b) $ 5,485,000 $411,000 $ -- $ 5,896,000 Cost of services.............. 2,817,000 299,000 (42,000)(b) 3,074,000 390,000 -- 3,464,000 -------------------------------------------------------------------------------------------------- Gross profit.................. 2,344,000 67,000 -- 2,411,000 21,000 -- 2,432,000 Selling, general and 2,810,000 115,000 -- 2,925,000 121,000 -- 3,046,000 administrative................ Acquisition expenses.......... -- -- -- -- -- 50,000(a) 50,000 Amortization of intangible assets........................ 12,000 -- 156,000(b) 168,000 -- -- 168,000 Compensation expense - Entelechy -- -- 197,000(c) 197,000 -- -- 197,000 Non-cash compensation expenses 40,000 -- -- 40,000 -- -- 40,000 --------------------------------------------------------------------------------------------------- Operating loss................ (518,000) (48,000) (353,000) (919,000) (100,000) (50,000) (1,069,000) Other expense, net............ (92,000) (13,000) -- (105,000) -- -- (105,000) --------------------------------------------------------------------------------------------------- Loss before income taxes...... (610,000) (61,000) (353,000) (1,024,000) (100,000) (50,000) (1,174,000) Income tax provision.......... (84,000) -- -- (84,000) -- -- (84,000) --------------------------------------------------------------------------------------------------- Net loss...................... $(694,000) $(61,000) $(353,000) $(1,108,000) $(100,000) $(50,000) $(1,258,000) =================================================================================================== SEE ACCOMPANYING NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS.
22 IBS INTERACTIVE, INC. NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS Adjustments to reflect the Spectrum business combination, as if it had occurred as of January 1, 1997 are as follows: (a) Estimated costs arising from the Spectrum business combination have been expensed in the year ended December 31, 1997. Adjustments to reflect the Entelechy business combination, as if it had occurred as of January 1, 1997 are as follows: (b) Amortization of intangible assets arising from the acquisition amounting to $156,000; such amount is amortized over an estimated useful life of five years. (c) 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. 23 (c) EXHIBITS. The following exhibits are included as part of this Report: 2.1* Exchange Agreement, dated as of March 31, 1999, by and among IBS, Dan E. Spencer, Raymond Deep, Michael Bayless, Michael Ivey, Billy Lenox and Spectrum. 99.1* Press release of IBS, dated April 1, 1999. -------------------- * Previously filed in the Current Report on Form 8-K filed by IBS on April 15, 1999. 24 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: June 2, 1999 By: /s/ Nicholas R. Loglisci, Jr. -------------------------------------- Name: Nicholas R. Loglisci, Jr. Title: President and Chief Executive Officer 25 -----END PRIVACY-ENHANCED MESSAGE-----