-----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, JpgzQXGxaJ9f1NqhuiPTicx/8jMlTFN3nRK5Rjd1u5fWSsj8VV92ky2lZKWwxnbm 1qc9KzqLdkN3oaqJTxdwRA== 0000932440-99-000252.txt : 19990923 0000932440-99-000252.hdr.sgml : 19990923 ACCESSION NUMBER: 0000932440-99-000252 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990913 DATE AS OF CHANGE: 19990921 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IBS INTERACTIVE INC CENTRAL INDEX KEY: 0001057257 STANDARD INDUSTRIAL CLASSIFICATION: 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: 99710882 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): June 30, 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 July 15, 1999 to incorporate Item 7. As announced in its press release of Tuesday, July 6, 1999, on June 30, 1999, IBS Interactive, Inc. ("IBS") entered into an Agreement and Plan of Merger (the "Agreement") with Arnold Schron, Spencer Analysis Inc., a New York corporation ("Spencer"), and SAI Acquisition Corp. ("SAI"), a Delaware corporation and a wholly owned subsidiary of IBS. Pursuant to the terms of the Agreement, Spencer merged with SAI and became the surviving entity. In exchange for all of the issued and outstanding shares of Spencer, IBS issued 240,505 shares of its Common Stock, par value $.01 per share (the "Common Stock"), and reserved an additional 19,500 shares of Common Stock for potential later issuance, valued by the parties at $23.08 per share. Spencer provides network consulting services and is based in New York, New York. IBS intends to continue the existing operations of Spencer without any material changes. The foregoing summary of the Agreement is qualified in its entirety by reference to the 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 Spencer Analysis, 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 Retained Earnings; d. Statements of Cash Flows; and e. Notes to Financial Statements. 2. Unaudited condensed financial statements of Spencer Analysis, Inc. as of June 30, 1999 and for the six-month periods ended June 30, 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. -2- SPENCER ANALYSIS, INC. INDEX TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 PAGE Report of Independent Certified Public Accountants....................4 Balance Sheets as of December 31, 1998 and 1997.......................5 Statements of Operations for the years ended December 31, 1998 and 1997..........................................6 Statements of Retained Earnings for the years ended December 31, 1998 and 1997....................................7 Statements of Cash Flows for the years ended December 31, 1998 and 1997....................................8 Notes to Financial Statements.........................................9-14 -3- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Spencer Analysis, Inc. We have audited the accompanying balance sheets of Spencer Analysis, Inc. as of December 31, 1998 and 1997, and the related statements of operations, retained earnings 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 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 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 Spencer Analysis, Inc. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ BDO Seidman, LLP BDO Seidman, LLP Woodbridge, New Jersey July 22, 1999 -4- Spencer Analysis, Inc. BALANCE SHEETS DECEMBER 31, 1998 AND 1997 December 31, 1998 1997 - - -------------------------------------------------------------------------------- Assets Current: Cash $ 395 $ 113,848 Accounts receivable, net of allowance for doubtful accounts of $50,000 and $10,000 in 1998 and 1997, respectively 1,121,151 1,115,731 Prepaid expenses and other current assets - 405 - - -------------------------------------------------------------------------------- Total current assets 1,121,546 1,229,984 Fixed assets, net 1,679 5,845 Other assets 6,913 6,913 - - -------------------------------------------------------------------------------- Total assets $1,130,138 $1,242,742 ================================================================================ Liabilities and Stockholder's Equity Current liabilities: Accounts payable and accrued expenses $ 93,239 $ 88,031 Deferred income tax liability 84,000 92,000 - - -------------------------------------------------------------------------------- Total current liabilities 177,239 180,031 Pension obligation 208,256 150,660 - - -------------------------------------------------------------------------------- Total liabilities 385,495 330,691 - - -------------------------------------------------------------------------------- Commitments and Contingencies Stockholder's equity: Common stock, 200 shares authorized, 1 share issued and outstanding at no par value 46,456 46,456 Retained earnings 698,187 865,595 - - -------------------------------------------------------------------------------- Total stockholder's equity 744,643 912,051 - - -------------------------------------------------------------------------------- Total liabilities and stockholder's equity $1,130,138 $1,242,742 ===============================================================================- SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. -5- SPENCER ANALYSIS, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 YEAR ENDED DECEMBER 31, 1998 1997 ------------------------------------------------------------------------------- Revenues $3,733,684 $3,891,594 Cost of revenues 2,363,488 2,263,976 ------------------------------------------------------------------------------- Gross profit 1,370,196 1,627,618 Selling, general and administrative expenses 830,625 688,675 Stockholder compensation 420,000 375,000 ------------------------------------------------------------------------------- Operating income 119,571 563,943 Other income (expense), net 4,642 (36,881) ------------------------------------------------------------------------------- Income before provision for income taxes 124,213 527,062 Provision for income taxes 11,000 46,000 ------------------------------------------------------------------------------- Net income $ 113,213 $ 481,062 =============================================================================== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. -6- SPENCER ANALYSIS, INC. STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 YEAR ENDED DECEMBER 31, 1998 1997 ------------------------------------------------------------------------------- Retained earnings, beginning of year $ 865,595 $432,460 Net income 113,213 481,062 Distributions to stockholder (280,621) (47,927) ------------------------------------------------------------------------------- Retained earnings, end of year $ 698,187 $865,595 =============================================================================== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. -7- SPENCER ANALYSIS, 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 income $ 113,213 $ 481,062 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,166 9,318 Bad debt expense 40,000 5,000 Deferred tax expense (benefit) (8,000) 30,000 Changes in operating assets and liabilities: Accounts receivable (45,420) (389,612) Prepaid expenses and other current assets 405 4,373 Other assets - 780 Accounts payable and accrued expenses 5,208 45,597 Pension obligation 57,596 5,555 - - -------------------------------------------------------------------------------- Net cash provided by operating activities 167,168 192,073 - - -------------------------------------------------------------------------------- Cash flows from financing activities: Distributions to stockholder (280,621) (47,927) Payments on loans - (117,659) - - -------------------------------------------------------------------------------- Net cash used in financing activities (280,621) (165,586) - - -------------------------------------------------------------------------------- Increase (decrease) in cash (113,453) 26,487 Cash, beginning of year 113,848 87,361 - - -------------------------------------------------------------------------------- Cash, end of year $ 395 $ 113,848 ================================================================================ Supplemental disclosures of cash flow information: Cash paid during the year for interest $ - $ 43,439 ================================================================================ SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. -8- SPENCER ANALYSIS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 1. ORGANIZATION AND Spencer Analysis, Inc. (the "Company") was organized NATURE OF in November 1973 as a New York Corporation. The BUSINESS Company provides network consulting services to a wide array of commercial businesses, including financial, pharmaceutical and insurance companies located in the New York City metropolitan area. 2. SUMMARY OF REVENUE RECOGNITION SIGNIFICANT ACCOUNTING Revenue is recognized as services are rendered to POLICIES clients. INCOME TAXES The stockholder has elected, under the applicable provisions of the Internal Revenue Code and applicable state code, to report his results of operations for federal and state income tax purposes as an "S" Corporation. Under those regulations, the stockholder individually assumes the income tax liability of the Company's net income. 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. However, the Company is subject to New York City income taxes and has recorded a provision for such taxes for the years ended December 31, 1998 and 1997. The Company files New York City income tax returns on a cash basis. Deferred income taxes are recognized, using the liability method, for the tax consequences of "temporary differences" by applying New York City statutory rates to differences between the financial statement carrying amounts (accrual basis) and the tax basis of assets and liabilities. FINANCIAL INSTRUMENTS AND CONCENTRATIONS Financial instruments which potentially subject the Company to credit risk consist primarily of a concentration of unsecured trade accounts receivables in a limited number of customers. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. -9- SPENCER ANALYSIS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 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: ------------------------------------------------------- Office equipment 5 years Vehicles 5 years Furniture and fixtures 7 years ======================================================= ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS The carrying values reported in the accompanying balance sheets for accounts receivable and accounts payable approximate fair value because of the short-term maturity 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 valuation of the allowances for doubtful accounts and the useful lives ascribed to fixed assets. 3. FIXED ASSETS Major classes of fixed assets, net, consist of the following: DECEMBER 31, 1998 1997 ------------------------------------------------------- Office equipment $227,931 $227,931 Vehicles 34,467 34,467 Furniture and fixtures 2,683 2,683 ------------------------------------------------------- 265,081 265,081 Less: Accumulated depreciation 263,402 259,236 ------------------------------------------------------- $ 1,679 $ 5,845 ======================================================= -10- SPENCER ANALYSIS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 4. ACCRUED EXPENSES At December 31, 1998 and 1997, accrued expenses were comprised of the following: DECEMBER 31, 1998 1997 ------------------------------------------------------- Payroll and payroll taxes $ 83,254 $ 73,938 Other 9,985 14,093 ------------------------------------------------------- $ 93,239 $ 88,031 ======================================================= 5. INCOME TAXES Deferred tax liabilities arise from the following temporary differences: DECEMBER 31, 1998 1997 ------------------------------------------------------- Deferred tax (asset) liabilities: Accounts receivable $100,000 $103,000 Allowance for doubtful accounts (1,000) (4,000) Pension obligation (7,000) 1,000 Accounts payable (8,000) (8,000) ------------------------------------------------------- $ 84,000 $ 92,000 ======================================================= As discussed in Note 2, the entire tax provision relates to New York City income taxes and is comprised of the following expense (benefit): December 31, 1998 1997 ------------------------------------------------------ Current $19,000 $16,000 Deferred (8,000) 30,000 ------------------------------------------------------ $11,000 $46,000 ====================================================== 6. BENEFIT PLANS DEFERRED COMPENSATION PLAN Substantially all employees who meet certain requirements of age and length of service are covered by a Company sponsored non-qualified, non-contributory defined benefit pension plan. The benefits become fully vested upon the employees retirement from the Company. Benefits paid to retirees are based upon age at retirement, compensation levels and years of credited service. Plan assets are stated at fair value and are comprised of stocks and bonds. -11- SPENCER ANALYSIS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 Net periodic pension cost for this plan includes the following components: DECEMBER 31, 1998 1997 ------------------------------------------------------- Components of net periodic pension cost: Service cost $185,020 $122,455 Interest cost 25,960 9,209 Actual return on plan assets (26,570) (13,090) Recognized net actuarial loss 13,186 6,881 ------------------------------------------------------- Net periodic pension cost $197,596 $125,455 ======================================================= The following provides a reconciliation of benefit obligations, plan assets, the funded status of the plan and the amounts recorded in the Company's balance sheets: DECEMBER 31, 1998 1997 ------------------------------------------------------- Changes in benefit obligation: Benefit obligation, beginning of year $370,859 $122,793 Service cost 185,020 122,455 Interest cost 25,900 9,209 Actuarial loss 187,331 116,402 ------------------------------------------------------- Benefit obligation, end of year 769,170 370,859 ------------------------------------------------------- Changes in plan assets: Fair value of plan assets, beginning of year 133,090 100 Actual return on plan assets 26,570 13,090 Employer contribution 140,000 119,900 ------------------------------------------------------- Fair value of plan assets, end of year 299,660 133,090 ------------------------------------------------------- Unfunded status (469,510) (237,769) Unrecognized net actuarial loss 261,254 87,109 ------------------------------------------------------- Accrued benefit cost $(208,256) $(150,660) ======================================================= -12- SPENCER ANALYSIS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 Assumptions used in these actuarial valuations were: DECEMBER 31, 1998 1997 ------------------------------------------------------- Discount rate 7.0% 7.5% Expected long-term rate of return 8.0% 8.5% ======================================================= 401(K) PLAN The Company sponsors a defined contribution benefit plan covering substantially all employees. Eligible employees are allowed to contribute up to 6% of their compensation. Company contributions are at the sole discretion of management. There were no contributions for the years ended December 31, 1998 and 1997. 7. MAJOR CUSTOMERS Two customers accounted for 37% and 24%, respectively, of the Company's revenues for the year ended December 31, 1998 and 72% and 10%, respectively, of the Company's net accounts receivable at December 31, 1998. One other customer accounted for 22% of the Company's revenues for the year ended December 31, 1998. Three customers accounted for 45%, 36% and 10%, respectively, of the Company's revenues for the year ended December 31, 1997 and 40%, 39% and 11%, respectively, of the Company's net accounts receivable at December 31, 1997. 8. COMMITMENTS The Company leases its administrative office under an operating lease, which expires in November 1999. Future net minimum annual rental payments under the non-cancelable lease are $41,000. Rent expense for each of the years ended December 31, 1998 and 1997 totaled $37,000. -13- SPENCER ANALYSIS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 9. 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 equipment, 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. 10. SUBSEQUENT EVENT In June 1999, the stockholder approved a merger whereby a wholly-owned subsidiary of IBS Interactive, Inc. ("IBS") was merged with and into the Company, and the Company became a wholly-owned subsidiary of IBS in exchange for 260,005 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. -14- SPENCER ANALYSIS, INC. CONDENSED BALANCE SHEET (UNAUDITED) JUNE 30, 1999 - - -------------------------------------------------------------------------------- Assets Current: Cash $ 324,499 Accounts receivable, net 843,454 - - -------------------------------------------------------------------------------- Total current assets 1,167,953 Fixed assets, net 849 Other assets 6,913 - - -------------------------------------------------------------------------------- Total assets $1,175,715 ================================================================================ Liabilities and Stockholder's Equity Current liabilities: Accounts payable and accrued expenses $ 214,666 Deferred income tax liability 84,000 - - -------------------------------------------------------------------------------- Total current liabilities 298,666 - - -------------------------------------------------------------------------------- Pension obligation 220,256 - - -------------------------------------------------------------------------------- Stockholder's equity: Common stock 46,456 Retained earnings 610,337 - - -------------------------------------------------------------------------------- Total stockholder's equity 656,793 - - -------------------------------------------------------------------------------- Total liabilities and stockholder's equity $1,175,715 ================================================================================ SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS. -15- SPENCER ANALYSIS, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1999 1998 - - -------------------------------------------------------------------------------- Revenues $1,677,404 $1,594,043 Cost of revenues 1,182,817 1,112,699 - - -------------------------------------------------------------------------------- Gross profit 494,587 481,344 Selling, general and administrative expenses 341,472 432,539 - - -------------------------------------------------------------------------------- Operating income 153,115 48,805 Other income 100 551 - - -------------------------------------------------------------------------------- Income before provision for income taxes 153,215 49,356 Provision for income taxes 18,000 4,000 - - -------------------------------------------------------------------------------- Net income $ 135,215 $ 45,356 ================================================================================ SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS. -16- SPENCER ANALYSIS, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1999 1998 - - -------------------------------------------------------------------------------- Cash flows provided by operating activities $ 502,923 $ 571,998 Cash flows used in financing activities (178,819) (263,411) - - -------------------------------------------------------------------------------- Net increase in cash 324,104 308,587 Cash, at beginning of period 395 113,848 - - -------------------------------------------------------------------------------- Cash, at end of period $ 324,499 $ 422,435 ================================================================================ SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS. -17- SPENCER ANALYSIS, INC. NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying condensed financial statements as of June 30, 1999 and for the six months ended June 30, 1999 and 1998 are unaudited but, in the opinion of management of Spencer Analysis, Inc. (the "Company"), contain all adjustments necessary to present fairly the financial position at June 30, 1999, the results of operations for the six months ended June 30, 1999 and 1998, and cash flows for the six months ended June 30, 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 and cash flows for the six months ended June 30, 1999 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 1999. 2. BUSINESS COMBINATION In June 1999, the stockholder of the Company approved a merger whereby a wholly-owned subsidiary of IBS Interactive, Inc. ("IBS") was merged with and into the Company, and the Company became a wholly-owned subsidiary of IBS in exchange for 260,005 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 six months ending June 30, 1999. -18- (b) PRO FORMA FINANCIAL INFORMATION. 1. Pro forma unaudited condensed 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 Spencer Analysis, Inc. ("Spencer"), adjusted to give effect to the business combinations of Entelechy (accounted for as a purchase) and Spencer (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 six month period ended June 30, 1999 are not presented herein since the effects of the Spencer business combination are reflected in the Company's consolidated financial statements included in Form 10-QSB for the period ended June 30, 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' 8-K, dated June 7, 1999, IBS' 10-QSB, dated August 16, 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 Spencer Spencer Historical Historical Adjustments Pro Forma - - --------------------------------------------------------------------------------------------- Revenues........................ $11,479,000 $3,734,000 $ - $15,213,000 Cost of services................ 7,843,000 2,363,000 - 10,206,000 ---------------------------------------------------------- Gross profit.................... 3,636,000 1,371,000 - 5,007,000 Selling, general and administrative.................. 3,654,000 1,251,000 (554,000)(a) 4,351,000 Non-cash compensation expenses.. 290,000 - - 290,000 Merger related expenses......... 109,000 - - 109,000 Amortization of intangible assets 173,000 - - 173,000 ---------------------------------------------------------- Operating income (loss)......... (590,000) 120,000 554,000 84,000 Other income, net............... 126,000 5,000 - 131,000 ---------------------------------------------------------- Income (loss) before income taxes (464,000) 125,000 554,000 215,000 Income tax provision............ (15,000) (11,000) - (26,000) ---------------------------------------------------------- Net income (loss)............... $ (479,000) $ 114,000 $ 554,000 $ 189,000 ========================================================== SEE ACCOMPANYING NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS.
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IBS INTERACTIVE, INC. PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 Entelechy Elimination Subtotal - IBS Entelechy & IBS & Spencer Spencer Historical Historical Adjustments Entelechy Historical Adjustments Pro Forma - - ---------------------------------------------------------------------------------------------------------------------------- Revenues...................... $5,572,000 $366,000 $ (42,000)(e) $ 5,896,000 $3,892,000 $ -- $9,788,000 Cost of services.............. 3,207,000 299,000 (42,000)(e) 3,464,000 2,264,000 -- 5,728,000 -------------------------------------------------------------------------------------------- Gross profit.................. 2,365,000 67,000 -- 2,432,000 1,628,000 -- 4,060,000 Selling, general and administrative............... 2,851,000 115,000 -- 2,966,000 1,064,000 (449,000)(a) 3,581,000 Merger related expenses....... -- -- -- -- -- 50,000 (b) 50,000 Amortization of intangible assets....................... 12,000 -- 156,000 (c) 168,000 -- -- 168,000 Compensation expense - Entelechy -- -- 197,000 (d) 197,000 -- -- 197,000 Non-cash compensation expenses 120,000 -- -- 120,000 -- -- 120,000 --------------------------------------------------------------------------------------------- Operating income (loss)....... (618,000) (48,000) (353,000) (1,019,000) 564,000 399,000 (56,000) Other expense, net............ (92,000) (13,000) -- (105,000) (37,000) -- (142,000) --------------------------------------------------------------------------------------------- Income (loss) before income taxes......................... (710,000) (61,000) (353,000) (1,124,000) 527,000 399,000 (198,000) Income tax provision.......... (84,000) -- -- (84,000) (46,000) -- (130,000) --------------------------------------------------------------------------------------------- Net income (loss)............. $ (794,000) $(61,000) $(353,000) $(1,208,000) $ 481,000 $399,000 $(328,000) =============================================================================================
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 Spencer business combination, as if it had occurred as of January 1, 1997 are as follows: (a) Reductions in selling, general and administrative expenses relate to the (i) the differences ($270,000 and $224,000 in 1998 and 1997, respectively) between the historical compensation of the Spencer stockholder and the compensation afforded the Spencer stockholder under terms of his employment agreement and (ii) reductions in consulting fees to an organization under terms of a new services agreement ($284,000 and $225,000 in 1998 and 1997, respectively). (b) Estimated costs arising from the Spencer 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: (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. -23- (c) EXHIBITS. The following exhibits are included as part of this Report: 2.1* Agreement and Plan of Merger, dated as of June 30, 1999, by and among Arnold Schron, Spencer Analysis, Inc., IBS Interactive, Inc. and SAI Acquisition Corp. 23.1 Consent of BDO Seidman, LLP. 99.1* Press release of IBS, dated July 6, 1999. -------------------- * Previously filed. 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. Dated: September 13, 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* Agreement and Plan of Merger, dated as of June 30, 1999, by and among Arnold Schron, Spencer Analysis, Inc., IBS Interactive, Inc. and SAI Acquisition Corp. 23.1 Consent of BDO Seidman, LLP. 99.1* Press release of IBS, dated July 6, 1999. - - -------------------- * Previously filed. EX-23.1 2 CONSENT OF BDO SEIDMAN, LLP Exhibit 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders IBS Interactive, Inc. Cedar Knolls, New Jersey We hereby consent to the incorporation by reference in the Prospectus constituting a part of the Registration Statement on Form S-3 (No. 333-80155) of our report dated July 22, 1999 relating to the financial statements of Spencer Analysis, Inc. appearing in the Company's Current Report on Form 8-K/A. We also consent to the reference to us under the caption "Experts" in the Prospectus. /s/ BDO Seidman, LLP September 10, 1999 -----END PRIVACY-ENHANCED MESSAGE-----