<PAGE>
==============================================================================
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
==============================================================================
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
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<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
<TABLE>
<CAPTION>
IBS INTERACTIVE, INC.
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
IBS Spencer Spencer
Historical Historical Adjustments Pro Forma
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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.
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
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
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
=============================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA UNAUDITED CONDENSED FINANCIAL STATEMENTS.
-22-
<PAGE>
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-
<PAGE>
(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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
