<PAGE>
As filed with the Securities and Exchange Commission on December 23, 1999
Registration No. 333-_________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
IBS INTERACTIVE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3817344
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
2 RIDGEDALE AVENUE, SUITE 350
CEDAR KNOLLS, NEW JERSEY 07927
(973) 285-2600
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
NICHOLAS R. LOGLISCI, JR.
President and Chief Executive Officer
IBS INTERACTIVE, INC.
2 Ridgedale Avenue, Suite 350
Cedar Knolls, NJ 07927
(973) 285-2600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Please send a copy of all communications to:
JOHN T. CAPETTA, ESQ.
Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
(203) 324-1400
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
__________________________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_] __________________________
<PAGE>
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------- ------------------- ------------------- ---------------------- -------------------
Proposed Maximum Proposed
Title of Shares to be Amount to be Offering Price Maximum Aggregate Amount of
Registered Registered Per Share(1) Offering Price (1) Registration Fee
- ------------------------- ------------------- ------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value per share 934,668 shares $10.84 $10,131,801 $2,674.80
- ------------------------- ------------------- ------------------- ---------------------- -------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee based on the average of the high and low prices of the Common Stock as
reported on the Nasdaq SmallCap Market on December 20, 1999 pursuant to Rule
457(c).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 23, 1999
PROSPECTUS
IBS INTERACTIVE, INC.
934,668 SHARES
COMMON STOCK
This prospectus relates to 934,668 shares of IBS Interactive, Inc.
common stock that may be offered for sale by certain of our stockholders and
will not be underwritten. The shares being registered under this prospectus for
the selling stockholders consist of: (1) a total of 480,000 shares of common
stock of the Company and 120,000 shares of common stock issuable upon the
exercise of certain warrants issued to several private investors in a private
placement transaction in November 1999 (the "November Offering"), (2) a total of
100,000 shares of common stock of the Company and 25,000 shares of common stock
issuable upon the exercise of certain warrants issued to several private
investors in a private placement transaction in December 1999 (the "December
Offering"), (3) 100,000 shares of common stock issuable upon the exercise of
certain warrants issued to EBI Securities Corporation as fees payable in
connection with mergers and acquisitions consulting services performed by EBI
Securities Corporation on behalf of IBS, (4) 86,668 shares of common stock
issued to Arnold Schron pursuant to the Agreement and Plan of Merger among
Spencer Analysis, Inc., IBS Interactive, Inc. and SAI Acquisition Corp. dated as
of June 30, 1999, (5) up to 15,000 shares of common stock issuable upon the
exercise of certain warrants issued to several private investors in a private
placement transaction consummated in October 1999 (the "October Offering"); and
(6) 8,000 shares of common stock issuable upon the exercise of certain warrants
issued to LaSalle St. Securities, L.L.C. as a commission in December 1999.
The selling stockholders may sell their shares from time to time on the
Nasdaq SmallCap Market in regular brokerage transactions, in transactions
directly with market makers or in certain privately negotiated transactions. We
will not receive any proceeds from the sale of these shares. We have agreed to
indemnify the selling stockholders against certain liabilities, including
liabilities under the Securities Act of 1933. We will pay the costs relating to
the registration of these shares. See "Plan of Distribution."
We have prepared this prospectus so future sales of common stock by the
selling stockholders will not be restricted under the Securities Act. The
selling stockholders and any broker-dealers, agents or underwriters that
participate with the selling stockholders in the distribution of the shares may
be deemed to be an "Underwriter" within the meaning of Section 2(11) of the
Securities Act. Any commissions received by them and any profit on the resale of
the shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. See "Plan of Distribution."
Our common stock is quoted on the Nasdaq SmallCap Market under the
symbol "IBSX." On December 22, 1999, the last reported sale price of our common
stock was $11.00 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN
FACTORS THAT YOU SHOULD CONSIDER BEFORE BUYING THESE SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
December __, 1999
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TABLE OF CONTENTS
PAGE
Where You Can Find More Information.................................... 3
Information Incorporated by Reference.................................. 3
Our Business........................................................... 5
Risk Factors...........................................................17
Indemnification of Officers and Directors..............................25
Use of Proceeds........................................................26
Selling Stockholders...................................................26
Plan of Distribution...................................................27
Legal Matters..........................................................28
Experts................................................................28
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM
THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS CONSTITUTES AN OFFER TO SELL
OR A SOLICITATION TO BUY SHARES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OR OF ANY SALE
OF COMMON STOCK. IN THIS PROSPECTUS, "IBS," "WE," "US" AND "OUR" REFER TO IBS
INTERACTIVE, INC. AND ITS SUBSIDIARIES.
Our consolidated financial statements as of December 31, 1997 and 1998,
and for the years then ended have been retroactively restated, as required, to
reflect the acquisition of Spencer Analysis, Inc. ("Spencer"). The consolidated
financial statements included in our Current Report on Form 8-K filed on
December 20, 1999 (and incorporated herein by reference) give retroactive effect
to the acquisition of Spencer, which has been accounted for using the
pooling-of-interests method and, as a result, the financial position, results of
operations and cash flows are presented as if Spencer had been consolidated for
all periods presented.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance with the Exchange Act, file
reports, proxy statements and other information with the SEC. This filed
material can be read and copied at regional offices of the SEC located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511 and 7 World Trade Center, Suite 1300, New York, New York 10048; and at the
Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site at
http://www.sec.gov that contains our reports, proxy and information statements
and other information about us and other companies that file electronically with
the SEC.
This prospectus constitutes a part of a registration statement on Form
S-3 filed by IBS with the SEC under the Securities Act. This prospectus does not
contain all of the information set forth in the registration statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. For further information with respect to IBS and the shares of common stock
offered hereby, reference is made to the registration statement. Statements
contained herein concerning the provisions of any document are not necessarily
complete, and each such statement is qualified in its entirety by reference to
the copy of such document filed with the SEC.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Memorandum, and later information filed with the
SEC will update and supersede that information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Exchange Act until our offering is completed.
o Our Annual Report on Form 10-KSB for the year ended December 31,
1998.(1)
o Our Quarterly Report on Form 10-QSB for the quarter ended March
31, 1999.
o Our Quarterly Report on Form 10-QSB for the quarter ended June
30, 1999.
o Our Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1999.
o Our Current Report on Form 8-K/A filed on December 9, 1998.
o Our Current Report on Form 8-K/A filed on February 26, 1999.
o Our Current Report on Form 8-K filed on April 15, 1999.
o Our Current Report on Form 8-K/A filed on June 2, 1999.
_________________________
(1)Financial statements for the year ended December 31, 1998 have been restated,
as required, to reflect the June 30, 1999 acquisition of Spencer Analysis, Inc.,
which was accounted for under the pooling of interests method of accounting.
Such financial statements are included in our Current Report on Form 8-K filed
on December 20, 1999.
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o Our Current Report on Form 8-K filed on June 7, 1999.
o Our Current Report on Form 8-K filed on July 15, 1999.
o Our Current Report on Form 8-K/A filed on September 13, 1999.
o Our Current Report on Form 8-K filed on December 20, 1999.
o Our Proxy Statement relating to the Annual Meeting of
Stockholders held on June 4, 1999, filed on April 30, 1999.
o The description of our common stock set forth in our Registration
Statement on Form 8-A/A filed with the SEC on April 30, 1998,
including any amendment thereto or report filed for the purpose
of updating such description.
You can request a copy of any or all of the documents incorporated by
reference, other than exhibits to the documents, by writing or telephoning us at
the following address: IBS Interactive, Inc., 2 Ridgedale Avenue, Suite 350,
Cedar Knolls, New Jersey 07927, telephone: (973) 285-2600, attention Howard B.
Johnson, Chief Financial Officer.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
STATEMENTS IN THIS PROSPECTUS THAT ARE NOT PURELY HISTORICAL ARE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 21E OF THE EXCHANGE ACT, INCLUDING STATEMENTS REGARDING OUR
EXPECTATIONS, HOPES, INTENTIONS OR STRATEGIES REGARDING THE FUTURE.
FORWARD-LOOKING STATEMENTS INCLUDE OUR PLANS AND OBJECTIVES FOR FUTURE
OPERATIONS AND TRENDS AFFECTING OUR BUSINESS. ALL FORWARD-LOOKING STATEMENTS IN
THIS PROSPECTUS ARE BASED ON INFORMATION AVAILABLE TO US AS OF THE DATE OF THIS
PROSPECTUS, AND WE ASSUME NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE
NOT LIMITED TO, (I) A DECLINE IN GENERAL ECONOMIC CONDITIONS OR A LOSS OF MAJOR
CUSTOMERS, (II) THE UNAVAILABILITY OR MATERIAL INCREASE IN THE PRICE OF
TELECOMMUNICATIONS SERVICES AND FACILITIES, (III) AN ADVERSE JUDGEMENT IN
PENDING OR FUTURE LITIGATION, (IV) TECHNOLOGICAL DEVELOPMENTS AND INCREASED
COMPETITIVE PRESSURE FROM CURRENT COMPETITORS AND FUTURE MARKET ENTRANTS AND (V)
THE FAILURE ON OUR PART OR ON THE PART OF OTHERS WHO IMPACT THE SERVICES WE
PROVIDE TO BE YEAR 2000 COMPLIANT. SEE "RISK FACTORS." WE UNDERTAKE NO
OBLIGATION TO RELEASE PUBLICLY THE RESULTS OF ANY FUTURE REVISIONS WE MAY MAKE
TO FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
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OUR BUSINESS
OUR COMPANY
We are a leading provider of one-stop Internet and Information
Technology (IT) professional services to businesses, organizations and public
sector institutions in the Eastern U.S. We represent an emerging breed of IT
professional services firm: one that provides total solutions by transforming
technology into value for clients through our integrated, multi-disciplinary
service offering. We utilize the industry's most advanced technologies for
programming and applications development, network services, IT consulting and
training, and Web-site hosting and Internet access.
We provide the following products and services either individually or
as part of a one-stop package custom designed for each client's individual
needs:
PROGRAMMING AND APPLICATIONS DEVELOPMENT
o Customized application development including Web portals,
e-commerce, distance learning, real audio and video, online
databases, interactive communications and purchasing systems
o Content management
o Intranet and extranet systems
o Web-site development and maintenance
NETWORK SERVICES
o Network planning, design and implementation
o Network support and optimization
o Security audits and protocol recommendation
o Network and applications programming
o Cabling and wiring
IT CONSULTING AND TRAINING
o Desktop and network server support
o Software upgrades and support
o Disaster recovery plans and protocol recommendation
o Network cost audits
o IT planning and staffing
o Merger & acquisition technology integration services
o Microsoft Certified Technical Education Center (CTEC)
WEB-SITE HOSTING AND INTERNET ACCESS
o Shared hosting and co-location services
o Digital Subscriber Line (DSL)
o Dedicated access (T-1 and T-3 service)
o Dial-up access
o Integrated Services Digital Network (ISDN)
We market our products and services to mid-sized businesses and
organizations (including mid-size departments of larger enterprises) and public
sector institutions, who we believe are increasingly in need of and demanding
one-stop solutions for Internet and IT professional services due to the
difficulty and expense of managing and integrating the services of multiple
vendors. Our comprehensive suite of services enables our clients to capitalize
on the wide variety of critical business and data communication opportunities
made possible by the Internet and Internet-related technologies.
We were incorporated in February 1995 as Internet Broadcasting Systems,
Inc. and changed our name to IBS Interactive, Inc. when we went public in May
1998. We trade on the NASDAQ SmallCap Market under the symbol IBSX. As of
December 22, 1999, we have 266 full-time and part-time employees located in
several offices in the Eastern U.S. Our headquarters office in Cedar Knolls, New
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Jersey and six other offices in New Jersey and New York City service our
Northeast clients. Our Huntsville, Alabama office serves as our Southeast
headquarters. We also have offices in Virginia, North Carolina and South
Carolina. Our principal executive offices are located at 2 Ridgedale Avenue,
Cedar Knolls, NJ 07927. Our telephone number is (973)-285-2600. Our company's
Web-site is ~HTTP://WWW.INTERACTIVE.NET.
OUR INDUSTRY
International Data Corporation estimates that the market for Internet
professional services will grow from approximately $7.4 billion in 1998 to $43.7
billion in 2002.
The rapid emergence and widespread adoption of the Internet is changing
the way businesses, organizations and their clients communicate, share
information and conduct business. As businesses adapt to the Internet as a
medium of communications and commerce, an increasing number are implementing
more complex, mission-critical applications both on the Web and to support
Internet-based operations within their organizations.
The result is a need for more than a simple Web presence, Internet
connection or network environment. Businesses (as well as their clients,
business partners and suppliers) are requiring solutions that effectively
incorporate a broad array of Internet and IT professional services including:
o Programming and applications development services to create
sophisticated data-intensive and interactive Web-sites
o Network services to integrate internal and legacy systems with
Internet applications
o Consulting and training services to augment IT manpower needs
o Web-site hosting and Internet access with greater bandwidth and
capacity for faster, more reliable service
While all businesses and organizations face challenges in meeting these
needs, we believe mid-sized businesses and organizations (including mid-size
departments of larger businesses and organization) and government agencies, in
particular, face an acute problem. Generally, they maintain small IT departments
that do not have the resources to develop and manage internally all the
components of their Internet strategies.
As a consequence, we see an increasing trend toward outsourcing to
third-party service providers to help create and build business-driven Internet
solutions. According to Forrester Research, U.S. firms are now spending
approximately 25% of their overall IT budgets on outsourced services. These
services include packaged application software development, implementation and
support, customer support and network development and maintenance. The reasons
for the growth in outsourcing include:
o The desire of companies to focus on their core competencies
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o The increased costs that businesses experience in developing and
maintaining their networks and software applications
o The fast pace of technological change that shortens time to
obsolescence and increases capital expenditures as companies
attempt to capitalize on leading-edge technologies
o The challenges faced by companies in hiring, motivating and
retaining qualified application engineers and IT employees
o The desire of companies to reduce deployment time and risk
Traditionally, enterprises have sought solutions from a variety of
service providers (including Web developers, IT consulting firms, system
integrators, ISPs, hardware and software vendors and telecommunications
companies), each of which satisfies one or two elements of an enterprise's total
Internet needs. We believe these enterprises will demand a single provider that
offers all elements of Internet solutions: Web development, integration,
implementation, Internet access and operational management.
We see the need for providing complete solutions encompassing the full
suite of services necessary to bring a client's business strategy to life on the
Internet. We are part of an emerging breed of Internet and IT companies, known
as Total Solution Providers (TSPs), designed to serve the needs of this emerging
market.
OUR SOLUTION
We believe that mid-sized businesses, organizations (including mid-size
departments of larger enterprises) and public sector institutions are
increasingly demanding one-stop Internet solutions due to the difficulty and
expense of managing and integrating the products and services of multiple
vendors, using continually changing technology. Our total solutions approach
enables our clients to capitalize on the wide variety of technological
opportunities made possible by the Internet from a single source. Our customers
have the ability to use our multidisciplinary technology services on an
as-needed basis or as part of a custom-designed one-stop package.
We are able to offer a powerful blend of solutions and services to our
clients, giving them the ability to maximize their Internet and computer network
investments by integrating all of the tools and services necessary to fully
implement their solutions. Our technical expertise and track record of reliable
execution provide unique resources to clients seeking to develop advanced
information technology solutions and services.
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Our core services include: programming and applications development,
network services, IT consulting and training, and Web-site hosting and Internet
access.
o Programming & Application Development
o Web-site design
o Intranet systems
o E-commerce
o Distance Learning
Integrated
Web-site Hosting Internet o Network Services
& Internet Access Services o Design
o Web-site Hosting Company o Implementation
o DSL o Support
o High Speed
Access o IT Consulting & Training
o IT Planning and Staffing
o Support Services
o Microsoft Certified Technical
Education Center (CTEC)
We provide the following advantages to our clients:
o FLEXIBILITY AND WILLINGNESS TO CONSULT AND WORK WITH CUSTOMERS
RESULTING IN CUSTOM-TAILORED SOLUTIONS. Rather than forcing the
use of pre-defined methodologies and solutions we listen to our
clients to derive solutions that allow the best methodologies to
be employed. Our solutions are designed to be scalable to easily
accommodate a large and rapidly growing number of users, as well
as to facilitate distribution of the application over
geographically-dispersed areas.
o HIGHLY EXPERIENCED, SKILLED AND KNOWLEDGEABLE ENGINEERS AND
SALESPEOPLE. A majority of our employees have technical
backgrounds and training, and many of them have advanced
certifications in network engineering and programming.
o BROAD TECHNICAL EXPERTISE AND A TRACK RECORD OF RELIABLE
EXECUTION. Many of our clients have purchased more than one
service from us. Some of the services were purchased up-front as
part of an integrated service package while others were purchased
based on satisfaction with past performance.
o RELIABLE AND ROBUST NETWORK INFRASTRUCTURE. The Company is able
to provide Web-hosting and Internet access services that meet our
customers needs from initial simple online brochures to complex
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interactive multi-media applications. Our secure Network
Operations Center ("NOC") located in Cedar Knolls, New Jersey,
with dedicated Sun Microsystems servers, multiple high-speed
fiber optic connections to the Internet, and an uninterruptable
power supply and environmental controls, is monitored twenty four
hours a day to minimize service interruptions. We maintain
high-bandwidth paths to the Internet with UUNet Worldcom,
Winstar, Sprint, ICI/Digex, CRL, Cox and Cable & Wireless.
OUR STRATEGY
Our objective is to become the leading Total Solutions Provider (TSP)
of Internet and IT professional services to businesses and organizations.
Historically, our strategy has been to develop our integrated Internet
and IT professional service capabilities in the Eastern U.S. both through
internal initiatives and the acquisition of complementary businesses. Our
internal growth has come from a small sales force and we have expanded our
customer base primarily through references and word of mouth. We now seek
financing to rapidly expand our sales efforts and business operations in key
metropolitan areas throughout the Eastern U.S. and expand our integrated
Internet services model for businesses undertaking e-business opportunities. To
achieve this objective our strategy is to:
o RAPIDLY EXPAND OUR SALES FORCE. To date, we have experienced substantial
growth primarily through referrals and word-of-mouth. We intend to enhance
our sales force by adding new sales personnel in key geographic areas in
2000. In addition, we seek to expand market share and develop brand
recognition in key business markets by combining targeted branding
initiatives with a strong local presence to position ourselves as a TSP
offering complete solutions to companies undertaking e-business projects.
o CONTINUE TO ACQUIRE COMPLIMENTARY BUSINESSES. To date, we have made over 14
acquisitions of businesses that we believe have enhanced and expanded our
ability to provide comprehensive solutions and services to clients and/or
enhanced our market presence. We expect that we will continue to acquire
companies (in both our existing and targeted markets) that will expand and
enhance our service offerings and technical expertise by increasing our
workforce and helping us establish a stronger market presence.
o FOCUS ON BUSINESS ACCOUNTS. We believe that by concentrating on our
commercial clients in a consultative and service-oriented approach to their
entire range of Internet and IT professional services needs, we can
position ourselves as an important value-added service provider.
o EXPAND CURRENT CLIENT RELATIONSHIPS. We believe that we are one of a few
companies offering total solutions to its clients, including programming
and applications development, networking services, IT consulting and
training and Web-site hosting. We believe that we have a significant
opportunity to leverage our position as an integrated Internet solutions
provider and intend to expand our existing client relationships (e.g.
hosting or dedicated access) into additional Internet services (e.g.
customized application programming) through cross-selling as these clients'
Internet and networking needs evolve.
o CONTINUE TO BUILD OUR TECHNICAL PERSONNEL BASE. We rely upon the skilled
technical personnel in each of our divisions, and their ability to provide
high quality, consistent, cost-effective and timely solutions, services and
products to our clients. To be able to deliver these services, we
continually need additional personnel to ensure our ability to meet the
needs and expectations of our existing and new clients and compete with
other Internet services companies. We believe we can continue to acquire
the skilled technical professionals we need, as well as immediately expand
our client base, through hiring initiatives and acquisitions. We offer most
of our employees options to purchase our common stock immediately upon
joining, as well as a dynamic and flexible work environment that we believe
contributes to our low turnover rate.
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o DIVEST CONSUMER DIAL-UP BUSINESS. We recently sold the Internet access
portion of our business in Huntsville, Alabama to HiWAAY, a local Internet
service provider. As part of this transaction, we have established a
working relationship with HiWAAY in which we will resell their Internet
access services and they will introduce us to their customers in need of
professional services. We may pursue the sale of our other consumer dial-up
services to enable us to focus on the opportunity of providing Internet and
IT professional services to businesses and organizations.
o CONTINUE TO BUILD STRATEGIC RELATIONSHIPS. We have entered into affiliation
and/or reseller agreements with various hardware and software vendors,
including Microsoft, Allaire, Cisco Systems, Ascend Communications, and Sun
Microsystems, Inc. and intend to continue to establish partnerships in
strategic areas where we are not committing our own resources.
COMPANY SERVICES
We currently offer our clients a full array of custom-designed,
scalable and reliable Internet and IT professional services. These include:
o Programming and applications development
o Network services
o IT consulting and training
o Web-site hosting and Internet access
PROGRAMMING AND APPLICATIONS DEVELOPMENT
PROGRAMMING. Programming for Intranet and Internet applications
requires knowledge of several different programming languages, including PERL,
UNIX, Windows NT, C++, JAVA, HTML, Cold Fusion and customized database and
applications programming. We maintain a full range of network and applications
programming expertise to: (i) ensure that clients' networks and applications are
specifically tailored to meet their requirements, (ii) develop and maintain
clients' Web sites, (iii) provide clients with technical assistance and (iv)
provide consulting services.
CUSTOMIZED APPLICATIONS DEVELOPMENT AND DISTANCE LEARNING. Customized
applications development includes services such as: E-Commerce solutions of
full-featured "shopping cart" style on-line catalogs, multi-media including
audio and video, purchasing systems, intranet and extranet systems, and Distance
Learning applications development. Distance Learning applications allow
businesses and organizations to distribute course material, administer training
evaluations and manage employee-student status from a single (or multiple)
location via the Internet or an Intranet.
WEB-SITE DEVELOPMENT AND MAINTENANCE. Web-site development involves the
design and development of a client's Web-site production. Working with clients
and outside graphic designers and programmers, the Company designs, creates and
maintains multi-media, interactive Web-sites for its clients, using the latest
applications and development tools, such as Cold Fusion and HTML.
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NETWORK SERVICES
We provide a comprehensive range of network services, including network
planning, design, implementation, operations, optimization, consulting and
training.
NETWORK PLANNING. Network planning focuses on providing clients with
strategic and tactical analyses of their current network operations and future
network requirements. We provide network planning services which encompass a
number of critical planning elements including: (i) defining client business
requirements; (ii) developing strategic information architectures; (iii)
performing network baseline audits; (iv) preparing capacity plans for the
physical network, logical transport and services; (v) selecting preferred
technologies; and (vi) conducting network security audits and planning.
NETWORK DESIGN. Network design includes services that assist in the
design of physical, logical and operational information infrastructures. These
services involve detailing the network specifications and implementation tactics
necessary to achieve clients' business objectives. To accomplish this task, we
generate a set of work papers that identify the specific technologies to be used
and the manner in which such technologies will be configured and implemented.
These work papers also provide an analysis of the manner in which new technology
will be integrated with the client's existing hardware and software and the
manner in which such integrated components will be managed on an ongoing basis.
Examples of the network design services we offer include: (i) life-cycle
planning, (ii) developing future technology integration plans, (iii) defining
functional requirements, (iv) developing multi-vendor integration plans, (v)
preparing technical design documentation, (vi) developing engineering
specifications and documents, (vii) preparing specifications in connection with
requests for proposals or other make/buy criteria and (viii) providing detailed
component purchasing lists.
NETWORK IMPLEMENTATION. Network implementation includes high
value-added network services such as IP addressing and router configuration, as
well as traditional system integrator functions such as hardware and software
installation and procurement. To serve our clients' networking needs, we
maintain affiliations and reseller arrangements with leading hardware and
software vendors, including Hewlett Packard Co., COMPAQ, Novell, Cisco Systems
and a variety of distributors. We customize implementation plans for each
client, which may include the following activities: (i) project management; (ii)
installing the cabling infrastructure to support network services; (iii)
integrating new hardware and software products and systems; (iv) building
network operations and management centers; (v) re-configuring and upgrading
network elements, systems and facilities; and (vi) implementing installation
documentation, conformance testing and compliance certification. In addition, we
offer Year 2000 compliance testing services on customer network hardware and
off-the-shelf vendor software.
NETWORK OPERATIONS. Network operations includes ongoing tasks necessary
to keep the client's network fully operational. We provide network operations
services to a range of clients, including those with client/server networks
running both Internet (TCP/IP) and workgroup (Novell and Microsoft) protocols
intermingled with existing networks. We perform specific operation activities in
accordance with individual client requirements only after analyzing the client's
existing operating practices. Examples of the network operation activities we
offer include: (i) network administration, including management of user
accounts, service levels and client administrative practices; (ii) network
utilization analysis, involving ongoing measurement of network activity against
established network baselines; (iii) ongoing management of documentation,
including physical assets, policies and procedures; (iv) network trouble
shooting, involving fault detection, isolation, repair and restoration; (v)
alarm management, including setting alarm levels, cross-correlation, problem
diagnosis and dispatch of service resources; (vi) network backup, including
design and supervision of backup processes and policies and exercise of disaster
recovery procedures; and (vii) routine moves, additions and changes to network
elements, infrastructure and services.
NETWORK OPTIMIZATION. Network optimization involves maximizing a
client's rate of return on network investments through such means as reduction
of operating costs and increases in network utilization. Optimization is closely
related to each of the other phases of network development. Optimization
services may be long term in nature, address issues such as cost containment and
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utilization and are often designed to optimize local area network
infrastructures. The network optimization services we offer can also be packaged
as discrete projects, designed to present alternatives for optimization of
workgroup, departmental, building or campus network investments. Additionally,
we can provide assistance to clients in optimizing "logical" networks, by
addressing a protocol, service or application operating in the larger context of
the client's network. Examples of the network optimization services we offer
include: (i) recommendations for efficient allocation of bandwidth; (ii) network
traffic analysis, identification of bottlenecks and recommendations for change;
(iii) network process re-engineering; and (iv) knowledge transfer to client
operations personnel on topics such as basic practices, or operations of network
management tools and stations.
INFORMATION TECHNOLOGY (IT) CONSULTING AND TRAINING
CONSULTING. Consulting services are provided to businesses and
organizations seeking information, guidance and staffing in order to effectively
analyze and utilize computer networks, the Internet and other information
technology prior to the time such businesses make investments of capital, time
and/or personnel. The consulting services we provide are closely related to
network optimization and include: (i) desktop and other network server support;
(ii) software upgrades and support, (iii) merger and acquisitions technology
integration services, (iv) security audits and protocol recommendations, (ii)
disaster recovery plan audit and protocol recommendations, (v) network cost
audits and (vi) strategic plan development.
TRAINING. Training services offered by the Company include (i)
one-on-one Internet training for executives and (ii) group training for
non-computer professionals.
We are a Microsoft Certified Technical Education Center or "CTEC."
CTECs are training centers authorized by Microsoft to offer instructor-led
classes, Web-based training and self-study programs to computer professionals on
its technical networking and development products. A CTEC must use Microsoft
Official Curriculum and Microsoft Certified Trainers to provide education to its
customers. The courses a CTEC teaches prepare students to pass Microsoft
Certification Tests to become Microsoft Certified System Engineers and Microsoft
Certified Solution Developers. In our Huntsville, Alabama office, we have
achieved Microsoft Partner Level status.
WEB-SITE HOSTING AND INTERNET ACCESS
We provide a broad range of: (i) Web-site hosting and (ii) Internet
access services, including T-3, T-1 and Digital Subscriber Line service,
dedicated leased lines, dial-up services and hosting services.
WEB-SITE HOSTING. Internet hosting is a multi-media Internet service
that permits clients to have a continued presence on the Web directly through
our high-speed servers and a multi-homed Internet network. The hosting services
we provide include virtual hosting and co-location. Virtual hosting allows a
client's Web-site (which may be hosted on either a UNIX or NT server platform)
to be connected to the Internet via our NOC. Co-location permits a client's
Internet content to be hosted on a dedicated server located at our NOC, and we
either own the server or it is leased to the client. Co-location eliminates or
substantially reduces the capital investments a client would otherwise be
required to make to purchase and manage necessary hardware, software and network
operations and eliminates certain of the client's security concerns associated
with connection of the client's private network(s) to a Web server.
INTERNET ACCESS. The Internet access options we offer to our
subscribers include: (i) 56 Kbps, T-1 and T-3 service; (ii) integrated services
digital networks (ISDN); (iii) digital subscriber line (DSL); (iv) dedicated
modems for SLIP/PPP access; and (v) dial-up accounts. Our high-speed, digital
communications network provides business and consumer subscribers with direct
access to the full range of Internet applications and resources.
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ACQUISITION PROGRAM
Since becoming a public company in May 1998 we have acquired over 14
companies. Our acquisition strategy is to acquire businesses that will generate
a positive return on investment along with:
o Complementing our integrated solutions model by acquiring core
competencies and value-added services in key business segments
and geographic markets
o Leveraging the technical and managerial talent gained in each
acquisition to support our integrated model
o Accelerating the expansion of our Eastern U.S. sales efforts
while gaining immediate revenue streams
o Building market-share and brand awareness in newly entered
markets
o Strengthening our reseller and referral partner relationships
o Broadening our management team
We believe the integration of acquired companies increases our operating
efficiencies and significantly expands our service offerings.
Below is a chart of the companies we have acquired since September 1998
and their principal lines of business and locations:
<TABLE>
<CAPTION>
------------------ -------------------------------- ----------------------------------- -------------------
ACQUISITION DATE COMPANY NAME LINE OF BUSINESS LOCATION
------------------ -------------------------------- ----------------------------------- -------------------
<S> <C> <C> <C>
9/24/98 DesignFX Interactive Web Programming New Jersey
12/1/98 Micro Business Systems Training Alabama
12/10/98 Halo Network Management Network Services New Jersey
1/29/99 Mainsite Internet Service Provider (ISP) New Jersey
2/22/99 Renaissance (1) ISP/ Web Programming Alabama
3/1/99 Ez-Net ISP Virginia
3/25/99 ADViCOM (1) ISP Alabama
3/31/99 Spectrum Network Services Alabama
4/30/99 Millennium ISP & Network Services North Carolina
4/30/99 Realshare Web Programming New Jersey
5/7/99 Planet Access ISP (Dial-up customers) New Jersey
6/30/99 Spencer Analysis IT Consulting & Programming New York City
7/30/99 Jaguar ISP New Jersey
8/28/99 Florence Business Systems ISP South Carolina
------------------ -------------------------------- ----------------------------------- -------------------
</TABLE>
(1) Subsequently sold in 1999 (See "Our Business - Recent Developments").
We intend to continue to acquire companies (in both our existing and
targeted markets) that we believe will expand and enhance our service offerings
and technical expertise through increasing our workforce and helping us
establish a stronger market presence. Specifically, we intend to focus on Web
integration and Internet technology companies with established business client
bases and/or technical capabilities. We may pursue the sale of our consumer
dial-up services in order to focus on providing Internet and IT professional
services to businesses and organizations.
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OUR CLIENTS
Our ability to provide complete, integrated and cost-effective
solutions and services is reflected in our growing roster of blue chip clients.
Our commercial clients include large national corporations in industries such as
manufacturing, insurance, banking and healthcare, leading national and local
educational institutions, as well as regional and local businesses. Our clients
in 1999 include: Aetna/U.S. Healthcare Inc. ("Aetna"); Toshiba; Black & Decker
Corp.; TRW, Inc.; ING Barings; Foster Wheeler Corporation; American Museum of
Natural History; The Wharton School of Business; Commerce Bank; The Archdiocese
of New York (Catholic Healthcare Network); Pfizer; TIAA-CREF; Deutsche Bank;
McKinsey; and Loews Theaters. In addition, as of December 22, 1999 we had
approximately 17,000 Internet dial-up clients.
COMPETITION
The markets for our services are highly competitive. With limited
barriers to entry we believe the competitive landscape will continue to grow
both from new entrants to the market as well as from existing players, such as
ISPs, expanding the breadth of their services into our arena. We believe that
competition in the network services, programming and applications development
and IT consulting market is based upon the following factors:
o Flexibility and willingness to adapt to client needs
o Responsiveness to client demands
o Number and availability of qualified engineers and programmers
o Project management capability
o Breadth of service offerings
o Technical expertise
o Size and reputation
o Brand recognition and geographic presence
o Price
Traditional professional services firms (e.g. management consultants),
traditional IT service providers and advertising firms have created divisions
within their organizations that focus on the Internet needs of their clients.
Many of these service providers, however, do not provide the breadth of services
needed to offer comprehensive, integrated Internet solutions and services.
Management consulting firms focus on overall business strategies and the
remodeling of business processes for use in Internet environment. The more
traditional IT service providers are focused on systems integration and the
development and implementation of enterprise software applications. Advertising
agencies and pure Web design shops have focused on the marketing and creative
development of services, but typically lack deep technical capabilities and the
ability to provide complete, integrated solutions.
Additionally, the Company believes that competition in the Internet
access market is primarily based upon quality of service, range of services,
technical support and experience. Our competition in this arena includes
specialized ISPs such as Concentric Network Corporation, Exodus Communications,
Inc., Globix Corporation, as well as emerging ISPs such as QWEST/ICON CMT and
AboveNet, and ISPs that cluster in major markets and regional ISPs which have
facilities in key metropolitan areas, including Frontier GlobalCenter, GTE/BBN,
DIGEX and Verio Inc.
Still other competitors who offer some of the services we offer may
expand their capabilities to include a full suite of solutions. Companies in
this arena include Applied Theory, US Interactive or Interliant.
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RECENT DEVELOPMENTS
On October 22, 1999 we announced the sale of our Internet access
business in Huntsville, Alabama to HiWAAY, an Internet service provider in the
area. We expect a loss of approximately $175,000 in connection with this sale
which will be reflected in the Company's results of operations in the quarter
ended December 31, 1999. As part of this transaction, we have established a
working relationship with HiWAAY in which we will resell their Internet access
services and they will introduce us to their customers in need of professional
services. We may pursue the sale of our other consumer dial-up services in order
to focus on providing Internet and IT professional services to businesses and
organizations.
On October 29, 1999 we commenced a $5,000,000 private placement (the
"October Private Placement") of units (the "October Units"). Each unit consists
of: (i) 5,000 shares of Common Stock, par value $.01, of the Company at a price
per share of $10.00, and (ii) a warrant to purchase 1,250 shares of the Common
Stock of the Company at an exercise price per share of $12.50. The purchase
price of each October Unit was $50,000. In the event that the Company shall, for
a period of one (1) year after the Closing Date (as defined herein), sell any
equity securities or equity derivative securities for a consideration per share
of $10.00 or less (a "Subsequent Price"), then a number of shares of Common
Stock shall be issued to each investor, at no additional cost to the investor
and in addition to the Shares contained in the Units purchased by such investor
pursuant hereto, such number to be equal to: (x) the number of Shares contained
in the Units purchased by an investor multiplied by a fraction, the numerator of
which shall be the $10.00 and the denominator of which shall be the Subsequent
Price, less (y) the number of Shares contained in the Units purchased by such
investor.
On October 29, 1999, we entered into a consulting agreement with EBI
Securities, Inc. ("EBI") in which the Company agreed to issue to EBI: (a)
warrants to purchase 50,000 shares of Common Stock at an exercise price of
$10.25 per share and (b) warrants to purchase 50,000 shares of Common Stock at
an exercise price of $11.25 per share upon the closing of certain mergers or
acquisitions to be identified (collectively, the "EBI Warrants"). In the event
the EBI Warrants are issued, the Company will realize a non-cash charge to
operations for the fair value of these warrants. The period(s) that such charge
will be recognized over will be determined based upon the nature of the merger
or acquisition involved, if any (that is whether the merger or acquisition, if
any, is accounted for as a purchase or a pooling of interests).
On December 7, 1999 we closed $4.2 million of the October Units and
converted $600,000 of convertible debentures (the "Convertible Debentures") into
12 of the October Units. Pursuant to the terms of our Convertible Debentures
offering, the Convertible Debentures are convertible at the option of the
Company into Common Stock at a price equal to the price of the Company's
subsequent equity offering of greater than $3,000,000. In connection with the
October Private Placement, the holders of the Convertible Debentures received
$600,000 of October Units consisting of 60,000 shares (without taking into
account shares which may be issued for unpaid interest), and warrants to
purchase 15,000 shares of Common Stock at an exercise price of $12.50 per share.
In addition, holders of Convertible Debentures also received warrants to
purchase up to an additional 15,000 shares of Common Stock (the "Convertible
Debt Warrants"). The Company expects to incur a non-cash charge relating to the
conversion of the Convertible Debentures. The ultimate amount of such charge
will be subject to a formal analysis of the fair value of the consideration
received by the Convertible Debenture holders upon conversion. Such charge could
be material to the Company's operations.
On December 8, 1999 we commenced a $5,000,000 private placement (the
"December Private Placement") of units (the "December Units"). Each unit
consists of: (i) 5,000 shares of Common Stock, par value $.01, of the Company at
a price per share of $10.00, and (ii) a warrant to purchase 1,250 shares of the
Common Stock of the Company at an exercise price per share of $12.50. The
purchase price of each December Unit was $50,000. In the event that the Company
shall, for a period of one (1) year after the Closing Date (as defined herein),
sell any equity securities or equity derivative securities for a consideration
per share of $10.00 or less (a "Subsequent Price"), then a number of shares of
Common Stock shall be issued to each investor, at no additional cost to the
investor and in addition to the Shares contained in the Units purchased by such
investor pursuant hereto, such number to be equal to: (x) the number of Shares
contained in the Units purchased by an investor multiplied by a fraction, the
numerator of which shall be the $10.00 and the denominator of which shall be the
Subsequent Price, less (y) the number of Shares contained in the Units purchased
by such investor. As of December 22, 1999, we had closed $1 million of the
December Units.
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HISTORY
IBS was originally incorporated in February 1995 in Delaware as
Internet Broadcasting System, Inc. On May 10, 1998, we changed our name to IBS
Interactive, Inc. Our principal executive offices are located at 2 Ridgedale
Avenue, Cedar Knolls, New Jersey 07927, and our telephone number is (973)
285-2600. IBS' Web-site address is http://www.interactive.net.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING
AN INVESTMENT DECISION. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES FACING THE COMPANY. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY
KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS
OPERATIONS.
IN ADDITION, YOU SHOULD CAREFULLY CONSIDER THE INFORMATION INCORPORATED
BY REFERENCE, AND INFORMATION THAT WE FILE WITH THE SEC FROM TIME TO TIME. IF
ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS COULD BE MATERIALLY
ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT. THE INFORMATION IN
THIS MEMORANDUM IS COMPLETE AND ACCURATE AS OF THIS DATE, BUT THE INFORMATION
MAY CHANGE AFTER THE DATE ON THIS MEMORANDUM.
WE BEGAN OPERATIONS IN 1995, SO YOUR BASIS FOR EVALUATING US IS LIMITED.
We have only been in operation since 1995 and many of our services have
only been offered since 1997 or later. In addition, we have only been a publicly
reporting company since May 1998. Accordingly, we have a limited operating
history on which you may evaluate us. You should consider the risks and
difficulties frequently encountered by early stage companies in new, rapidly
evolving and technology-dependent markets. If we fail to adequately address
these risks successfully, our business will be materially and adversely
affected.
OPERATING LOSSES ARE EXPECTED TO CONTINUE AT LEAST FOR THE NEAR FUTURE. WE MAY
NOT HAVE SUFFICIENT CASH FLOW FOR OUR BUSINESS.
We have recently experienced significant losses in our operations. We
expect to continue to incur significant losses for the foreseeable future. For
the nine months ended September 30, 1999 the unaudited operating loss was
approximately $3,280,000. We expect our expenses to increase as we seek to grow
our business and as our business expands. We cannot assure you that our revenues
will increase as a result of our increased spending. If revenues grow more
slowly than anticipated, or if operating expenses exceed expectations, we may
not become profitable. Even if we become profitable, we may be unable to sustain
our profitability. We may not generate sufficient cash flow from operations or
be able to raise capital in sufficient amounts to enable us to continue to
operate our business. An inability to sustain profitability may also result in
an impairment loss in the value of our long-lived assets, principally goodwill,
property and equipment, and other tangible and intangible assets. If we are
unable to generate sufficient cash flow from operations or raise capital in
sufficient amounts, our business will be materially and adversely affected.
OUR DEPENDENCE ON AETNA; NON-RECURRING REVENUES.
For the year ended December 31, 1998, our largest client, Aetna (who
engaged us in October 1997) accounted for approximately 23% of our revenues. In
December 1998, we entered into a contractual agreement with Aetna to provide
certain additional IT services. For the nine month period ended September 30,
1999, Aetna accounted for 15% of our revenues. Non-renewal or termination of our
contract with Aetna would have a material adverse effect on us. Revenues derived
from our consulting contracts are generally non-recurring in nature. There can
be no assurance that we will obtain additional contracts for projects similar in
scope to those previously obtained from Aetna or any other client, that we will
be able to retain existing clients or attract new clients or that we will not
remain largely dependent on a limited client base, which may continue to account
for a substantial portion of our revenues. In addition, we generally will be
subject to delays in client funding; lengthy client review processes for
awarding contracts; non-renewal; delay, termination, reduction or modification
of contracts in the event of changes in client policies or as a result of
budgetary constraints; and increased or unexpected costs resulting in losses in
the event of "fixed-price" contracts.
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Our revenues are difficult to forecast. We plan to significantly
increase our operating expenses to increase the number of our sales, marketing
and technical personnel to sell, provide and support our products and services.
We may not be able to adjust our spending quickly enough to offset any
unexpected revenue shortfall. In addition, at any given point in time, we may
have significant accounts receivable balances with customers that expose us to
credit risks if such customers are unable to settle such obligations. If we have
an unexpected shortfall in revenues in relation to our expenses, or significant
bad debt experience, our business will be materially and adversely affected.
EMERGING AND EVOLVING MARKETS.
The markets for our services are relatively new and evolving, and
therefore the ultimate level of demand for our services is subject to a high
degree of uncertainty. Any significant decline in demand for programming and
applications development, networking services, IT consulting, Web-site hosting
or Internet access services could materially adversely effect our business and
prospects.
UNCERTAINTY OF MARKET ACCEPTANCE.
Our success is dependent on our ability to continually attract and
retain new clients as well as to replace clients who have not renewed their
contracts. Achieving significant market acceptance will require substantial
efforts and expenditures on our part to create awareness of our services.
LIMITED MARKETING, SERVICE AND SUPPORT CAPABILITIES.
To effectively market and sell our services, we will need to expand our
client service and support capabilities to satisfy increasingly sophisticated
client requirements. We currently have limited marketing experience and limited
marketing, service, client support and other resources, which may not be
adequate to meet the needs of clients.
WE HAVE MANY COMPETITORS AND MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST
THEM.
Competition for the Internet and IT products and services that we
provide is significant, and we expect that competition will continue to
intensify. We may not have the financial resources, technical expertise, sales
and marketing or support capabilities to successfully meet this competition. If
we are unable to compete successfully against such competitors, our business
will be adversely affected. We compete against numerous large companies that
have substantially greater market presence, longer operating histories, more
significant customer bases, and more financial, technical, facilities,
marketing, capital and other resources than we have.
Our competitors include international, national, regional and
commercial Internet service providers (ISPs), established on-line service
providers, cable operators, specialized ISPs, regional Bell operating companies
and national long-distance carriers such as:
o Performance Systems International, Inc., Earthlink, Mindspring, UUNet
WorldCom, America Online, Inc., Bell Atlantic Corp., Bell South Corp.,
AT&T Corp., MCI WorldCom, Sprint Corp., Concentric Network Corporation,
Exodus Communications, Inc., Globix Corporation, QWEST/ICON CMT,
Frontier GlobalCenter, GTE/BBN, DIGEX Verio Inc. and AboveNet
Our competitors also include national, regional and local IT consulting
and networking service providers, software development firms and major
accounting firms such as:
o Andersen Consulting, Cambridge Technology Partners, Electronic Data
Systems Corporation, American Management Systems, IBM, Microsoft
Corp., Netplex Group, Inc. and Deloitte & Touche.
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Still other competitors who offer some of the services the Company
offers may expand their capabilities to include a full suite of services.
Companies in this arena include Applied Theory, US Interactive or Interliant.
In addition, we also encounter competition from numerous other
businesses that provide one or more similar goods or services, including
numerous resellers of Internet-related hardware and software and Web-site
development companies.
Our competitors may respond more quickly than we can to new or emerging
technologies and changes in customer requirements. Our competitors may also
devote greater resources than we can to the development, promotion and sale of
their products and services. They may develop Internet products and services
that are superior to or have greater market acceptance than ours. Competitors
may also engage in more extensive research and development, undertake more
extensive marketing campaigns, adopt more aggressive pricing policies and make
more attractive offers to our existing and potential employees and strategic
partners. In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties.
New competitors, including large computer hardware, software,
professional services and other technology and telecommunications companies, may
enter our markets and rapidly acquire significant market share. As a result of
increased competition and vertical and horizontal integration in the industry,
we could encounter significant pricing pressures. These pricing pressures could
result in significantly lower average selling prices for our products and
services. For example, telecommunications companies may be able to provide
customers with reduced communications costs in connection with their Internet
access services, significantly increasing pricing pressures on us. We may not be
able to offset the effects of any price reductions with an increase in the
number of customers, higher revenue from professional services, cost reductions
or otherwise. In addition, Internet access and professional services businesses
are likely to encounter consolidation in the near future, which could result in
decreased pricing and other competition.
OUR SUCCESS DEPENDS ON KEEPING UP WITH RAPID TECHNOLOGICAL CHANGES.
The market for Internet and IT products and services has only recently
begun to develop and is rapidly evolving. Significant technological changes
could render our existing products and services obsolete. To be successful, we
must adapt to this rapidly changing market by continually improving the
responsiveness, functionality and features of our products and services to meet
customers' needs. If we are unable to respond to technological advances and
conform to emerging industry standards in a cost-effective and timely basis, our
business will be materially and adversely affected.
OUR OPERATIONS DEPEND ON THE CAPABILITIES OF OUR NETWORK OPERATIONS CENTER.
Our success depends in large part upon the performance of our network
operations center ("NOC") and our ability to expand our NOC as our customer base
gets larger and the needs of our customers for Internet access, Web-site hosting
and Web-site programming services become more demanding. If we are unsuccessful
in providing a NOC with the necessary capabilities, our business will be
materially and adversely affected. Our existing NOC relies entirely on
third-party data communications and telecommunications providers. These include
Internet service providers, such as UUNet Worldcom, Sprint, Winstar, ICI/Digex,
CRL, Cox and Cable & Wireless, and long-distance and local carriers, such as
Bell Atlantic, Bell South, MCI WorldCom, Sprint, Hyperion, ICI/Digex and KMC, to
provide leased telecommunication lines on a cost-effective and continuous basis.
These carriers are subject to price constraints, including tariff controls, that
in the future may be relaxed or lifted. This could have a material and adverse
effect on the costs of maintaining our NOC. In accordance with industry custom,
we do not maintain agreements with these suppliers. Accordingly, we cannot
assure you that these suppliers will continue to provide services to us or that
we can replace them on comparable terms.
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Other risks and difficulties that we may encounter in connection with
expanding our network include our ability to adapt our network infrastructure to
changing customer requirements and changing industry standards.
BECAUSE WE ARE DEPENDENT ON COMPUTER SYSTEMS, A SYSTEMS FAILURE WOULD CAUSE A
SIGNIFICANT DISRUPTION TO OUR BUSINESS.
Our business depends predominantly on the efficient and uninterrupted
operation of our computer and communications hardware systems and
infrastructure. We currently maintain most of our computer systems in our
facility in New Jersey. While we have taken precautions against systems failure,
interruptions could result from natural disasters as well as power loss,
telecommunications failure and similar events. We also lease telecommunications
lines from local and regional carriers, whose service may be interrupted. Any
damage or failure that interrupts or delays our network operations could
materially and adversely affect our business.
IF OUR SECURITY MEASURES ARE INADEQUATE, OUR BUSINESS WILL BE ADVERSELY
AFFECTED.
We have taken measures to protect the integrity of our infrastructure
and the privacy of confidential information. Nonetheless, our infrastructure is
potentially vulnerable to physical or electronic break-ins, viruses or similar
problems. If a person circumvents our security measures, he or she could
jeopardize the security of confidential information stored on our systems,
misappropriate proprietary information or cause interruptions in our operations.
We may be required to make significant additional investments and efforts to
protect against or remedy security breaches. Security breaches that result in
access to confidential information could damage our reputation and expose us to
a risk of loss or liability.
The security services that we offer in connection with customers' use
of the networks cannot assure complete protection from computer viruses,
break-ins and other disruptive problems. Although we attempt to limit
contractually our liability in such instances, the occurrence of these problems
may result in claims against us or liability on our part. These claims,
regardless of their ultimate outcome, could result in costly litigation and
could have a material adverse effect on our business and reputation and on our
ability to attract and retain customers.
WE ARE DEPENDENT ON HARDWARE AND SOFTWARE SUPPLIERS TO PROVIDE US WITH THE
PRODUCTS AND SERVICES NEEDED TO SERVE OUR CUSTOMERS.
We rely on outside vendors to supply us with computer hardware,
software and networking equipment. These products are available from only a few
sources. We primarily buy these products from Hewlett Packard, Sun Microsystems,
Ascend, Cisco and Adtran. We cannot assure you that we will be able to obtain
the products and services that are needed on a timely basis and at affordable
prices.
We have in the past experienced delays in receiving shipments of
equipment purchased for resale. We may not be able to obtain computer equipment
on the scale, at the times required by us or at an affordable price. Our
suppliers may enter into exclusive arrangements with our competitors or stop
selling their products or services to us at commercially reasonable prices. If
our sole or limited source suppliers do not provide us with products or
services, our business may be materially and adversely affected.
WE MAY HAVE DIFFICULTY ESTABLISHING AND MANAGING OUR EXPANDING OPERATIONS.
A key element of our business strategy is the expansion of our
facilities and our network, which has required a great deal of management time
and the expenditure of large amounts of money. Our success will depend on our
ability to complete, integrate, operate and further expand and upgrade our
network and facilities. Any delay in the expansion or upgrading of our network
would materially and adversely affect our business plans. In addition, if we do
not institute adequate financial and managerial controls and reporting systems
and procedures to operate from multiple facilities in geographically dispersed
locations, our operations will be materially and adversely affected.
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WE MAY NOT BE ABLE TO IDENTIFY SUITABLE ACQUISITION CANDIDATES.
A key element of our expansion strategy is to grow through
acquisitions. If we do identify suitable candidates, we may not be able to make
investments or acquisitions on commercially acceptable terms. Acquisitions may
cause a disruption in our ongoing business, distract our management and other
resources and make it difficult to maintain our standards, controls and
procedures. We may not be able to successfully integrate the services, products
and personnel of any acquired business into our operations. We may not be able
to retain key employees of the acquired companies or maintain good relations
with their customers or suppliers. We may be required to incur additional debt,
and we may be required to issue equity securities, which may be dilutive to
existing stockholders, to fund acquisitions.
WE MAY MAKE INVESTMENTS OR ACQUISITIONS THAT ARE NOT SUCCESSFUL.
We may acquire and integrate complementary businesses, products,
services or technologies, but we have limited experience in these activities. If
we seek to make investments or acquisitions, it will be subject to the following
risks:
o The difficulty of assimilating the operations and personnel of
acquired companies
o The potential disruption of our business
o The inability of our management to maximize our financial and
strategic position by the incorporation of an acquired technology
or business into our service offerings
o The difficulty of maintaining uniform standards, controls,
procedures and policies
o The potential loss of key employees of acquired businesses, and
the impairment of relationships with employees and customers as a
result of changes in management
We cannot assure you that any completed acquisition will enhance our
business. If we proceed with one or more significant acquisitions in which the
consideration consists of cash, a substantial portion of our available cash
could be used to consummate the acquisitions. If we were to consummate one or
more acquisitions in which the consideration consisted of stock, our
stockholders could suffer significant dilution of their interest in us. In
addition, we could incur or assume significant amounts of indebtedness in
connection with acquisitions. Acquisitions required to be accounted for under
the purchase method could result in significant goodwill and/or amortization
charges. In addition, an inability to sustain profitability may also result in
an impairment loss in the value of our long-lived assets, principally goodwill,
property and equipment, and other tangible and intangible assets. See "Our
Business - Recent Developments."
WE MAY NOT BE ABLE TO RETAIN THE KEY PERSONNEL WE NEED TO SUCCEED.
As we continue to increase the scope of our operations, our workforce
has grown significantly. As of December 22, 1999, the Company had 266 full-time
and part-time employees in comparison to approximately 49 full-time employees as
of May 13, 1998. Despite this growth, we will still need to attract, train and
retain more employees for management, engineering, programming, sales and
marketing, and customer support technician positions. Competition for qualified
employees, particularly engineers, programmers and technicians, is intense.
Consequently, we may not be successful in attracting, training and retaining the
people we need to continue to offer solutions and services to present and future
clients in a cost effective manner or at all.
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POSSIBLE NEED FOR FUTURE FINANCINGS COULD HAVE A DILUTIVE EFFECT ON OUR
STOCKHOLDERS.
Our future capital uses and requirements will depend on numerous
factors, including:
o The extent to which our solutions and services gain market acceptance
o The level of revenues from our present and future solutions and
services
o The expansion of operations
o The costs and timing of product and service developments and sales and
marketing activities
o Costs related to acquisitions of technology or businesses
o Competitive developments
In order to continue to increase sales and marketing efforts, continue
to expand and enhance the solutions and services we are able to offer to present
and future clients and fund potential acquisitions, we will require additional
capital that may not be available on terms acceptable to us, or at all. In
addition, if unforeseen difficulties arise in the course of these or other
aspects of our business, we may be required to spend greater-than-anticipated
funds. As a consequence, we will be required to raise additional capital through
public or private equity or debt financings, collaborative relationships, bank
facilities or other arrangements. There can be no assurances that such
additional capital will be available on terms acceptable to us, or at all. Any
additional equity financing is expected to be dilutive to stockholders, and debt
financing, if available, may involve restrictive covenants and increased
interest costs. We have financed our operations to date primarily through
private sales of equity securities, proceeds from our initial public offering in
May 1998 and loan facilities. At present, we do not have any bank facilities for
use in funding our operations.
There can be no assurance that additional funding will be available for
us to finance our ongoing operations when needed or that adequate funds for our
operations, whether from financial markets, collaborative or other arrangements
with corporate partners or from other sources, will be available when needed, if
at all, or on terms acceptable to us. Our inability to obtain sufficient funds
may require us to delay, scale back or eliminate some or all of our expansion
programs, to limit the marketing of our products, or to license to third parties
the rights to commercialize products or technologies that we would otherwise
seek to develop and market ourselves. This would have a material adverse effect
on our business.
FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS MAY NEGATIVELY IMPACT OUR STOCK
PRICE.
Our revenues and operating results vary significantly from quarter to
quarter due to a number of factors, not all of which are in our control. You
should not rely on quarter-to-quarter comparisons of our results of operations
as an indication of future performance. It is possible that in some future
periods our results of operations may be below the expectations of public market
analysts and investors. In that event, the market price of our common stock may
fall.
Factors that could cause quarterly results to fluctuate include:
o Customer demand for products and services
o The timing of the expansion of operations
o Seasonality in revenues, principally during the summer and year-end
holidays
o The mix of products and services revenues from our operating divisions
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o Changes in the growth rate of Internet usage
o Changes in pricing by us or competitors
o The introduction of new products or services by us or competitors
o Costs related to acquisitions of technology or businesses
CHANGES IN GOVERNMENT REGULATIONS COULD ADVERSELY AFFECT OUR BUSINESS.
There are an increasing number of laws and regulations pertaining to
the Internet. These laws and regulations relate to liability for information
received from or transmitted over the Internet, online content regulation, user
privacy, taxation and quality of products and services. The government may also
seek to regulate some segments of our activities as basic telecommunications
services. Moreover, the applicability to the Internet of existing laws governing
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment, personal privacy and other issues is
uncertain and developing. We cannot predict the impact, if any, that future
regulation or regulatory changes may have on our business.
WE HAVE LIMITED INTELLECTUAL PROPERTY PROTECTION.
We rely on a combination of copyright and trademark laws, trade secrets
laws and license and nondisclosure agreements to protect our proprietary
information, particularly the computer software applications that we have
developed. We currently have no registered copyrights or patents or patent
applications pending. It may be possible for unauthorized third parties to copy
aspects of, or otherwise obtain and use, our proprietary information without
authorization. The majority of our current contracts with our clients contain
provisions granting to the client intellectual property rights to certain of our
work product, including the customized programming that we create for such
client. We anticipate that contracts with future clients will contain similar
provisions. Other existing agreements to which we are a party are, and future
agreements may be, silent as to the ownership of such rights. To the extent that
the ownership of such intellectual property rights is expressly granted to a
client or is ambiguous, our ability to reuse or resell such rights will or may
be limited.
Our policy is to execute confidentiality agreements with our employees
and consultants upon the commencement of an employment or consulting
relationship with us. These agreements generally require that all confidential
information developed or made known to the individual by us during the course of
the individual's relationship with us be kept confidential and not disclosed to
third parties. These agreements also generally provide that inventions conceived
by the individual in the course of rendering services to us shall be our
exclusive property. There can be no assurance that such agreements will not be
breached, that we would have adequate remedies for any breach or that our trade
secrets will not otherwise become known to or be independently developed by
competitors.
CONDUCTING OUR BUSINESS EXPOSES US TO POTENTIAL LIABILITY TO CLIENTS.
Our services involve development, implementation and maintenance of
computer systems and computer software that are critical to the operations of
our clients' businesses. Our failure or inability to meet a client's
expectations in the performance of our services could harm our business
reputation or result in a claim for substantial damages against us, regardless
of our responsibility for such failure or inability. In addition, in the course
of performing services, our personnel often gain access to technologies and
content that includes confidential or proprietary client information. Although
we have implemented policies to prevent such client information from being
disclosed to unauthorized parties or used inappropriately, any such unauthorized
disclosure or use could result in a claim for substantial damages. We attempt to
limit contractually our damages arising from negligent acts, errors, mistakes or
omissions in rendering services and, although we maintain general liability
insurance coverage, including coverage for errors and omissions, there can be no
assurance that such coverage will continue to be available on reasonable terms
or will be available in sufficient amounts to cover one or more large claims.
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The successful assertion of one or more large claims against us that are
uninsured, exceed available insurance coverage or result in changes to our
insurance policies, including premium increases or the imposition of a large
deductible or co-insurance requirements, would adversely affect us.
YEAR 2000 PROBLEMS MAY DISRUPT OUR BUSINESS.
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This situation could result in a system
failure or miscalculations causing disruptions of operations, including an
inability to process transactions or engage in normal business activities.
We have evaluated our computer software and hardware systems, and based
on currently available information, believe that we will not have to replace or
modify any of our hardware but have and will have to modify our software so that
our systems will function properly with respect to dates in the year 2000 and
thereafter. It is believed that the greatest risk to us will be from outside
firms that we rely on for our operations as well as the legacy computer systems
of our clients. The failure by outside firms and/or clients' failure to address
Year 2000 issues could interfere with our ability to provide our services, and
therefore impact future revenues. As of December 22, 1999, we have contingency
plans in place to remedy these types of problems. Estimated costs associated
with such plans are not expected to exceed $100,000, which are likely to be
funded through the use of available internal employees and resources. At this
time, we believe that the most likely "worst case" scenario involves potential
disruptions in areas in which our operations must rely on outside firms or
clients whose systems may not function properly on or after January 1, 2000.
While such failures could affect important operations, either indirectly or
directly, in a significant manner, we cannot at present provide assurances as to
our estimates for the likelihood or the potential cost of such failures.
We cannot assure you that governmental agencies, utility companies,
telecommunication companies, other Internet service providers, third party
service providers, hardware and software manufacturers and others outside our
control will be Year 2000 compliant.
WE MAY BE LIABLE FOR THE MATERIAL CUSTOMERS DISTRIBUTE OVER THE INTERNET.
The law relating to the liability of online service providers, private
network operators and ISPs for information carried on or disseminated through
their networks is currently unsettled. We may become subject to legal claims
relating to the content in the Web-sites we host or in email messages that we
transmit. For example, lawsuits may be brought against us claiming that material
inappropriate for viewing by young children can be accessed from the Web-sites
we host. Claims could also involve matters such as defamation, invasion of
privacy and copyright infringement. Providers of Internet products and services
have been sued in the past, sometimes successfully, based on the content of
material. If we have to take costly measures to reduce our exposure to these
risks, or are required to defend ourselves against such claims, our business may
be materially adversely affected.
FUTURE SALES OF OUR COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD HAVE ADVERSE
EFFECTS.
The market price of our Common Stock could decline as a result of sales
by our existing stockholders of a large number of shares of Common Stock in the
market after this offering, or the perception that these sales may occur. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate.
Our stockholders have approved our 1999 Stock Option Plan and the
authorization of 350,000 shares of Common Stock to be used for the grant of
stock options to be issued under the 1999 Plan. These 350,000 shares are in
addition to the approximately 300,000 potential shares issuable under other
plans. If the holders of these options were to exercise their rights and sell
the shares issued to them, it could have an adverse effect on the market price
of our common stock.
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The Company has also granted 32,500 shares of restricted stock to one
of its officers. Of these shares, 5,000 vested in 1999 and, of the remaining
27,500 shares, 9,167 shares will vest in each of 2000 and 2001 and 9,166 shares
will vest in 2002. None of these shares have yet been issued. In addition, the
Company has reserved up to approximately 220,000 shares for issuance in
connection with certain acquisitions. None of these shares have yet been issued.
If and when these shares are issued by the Company and sold by the various
holders, it could have an adverse effect on the market price of our common
stock.
OUR COMMON STOCK MAY BE SUBJECT TO GREAT PRICE VOLATILITY.
The market price of our Common Stock has fluctuated in the past and is
likely to continue to be highly volatile and could be subject to wide
fluctuations. In addition, the stock market has experienced extreme price and
volume fluctuations. The market prices of the securities of Internet-related
companies have been especially volatile. Investors may be unable to resell their
shares of our common stock at or above the offering price.
WE DO NOT INTEND TO PAY CASH DIVIDENDS ON OUR STOCK.
We have never paid cash dividends on our capital stock and do not
anticipate paying cash dividends in the foreseeable future. Instead, we intend
to retain future earnings for reinvestment in our business.
ANTI-TAKEOVER PROVISIONS.
Provisions of our Restated Certificate of Incorporation, our Amended
and Restated By-laws and Delaware law could make it more difficult for a third
party to acquire us, even if doing so would be beneficial to its stockholders.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Section 145 of the Delaware General Corporation Law,
our Restated Certificate of Incorporation (the "Certificate") provides that to
the fullest extent permitted by Delaware law no director shall be personally
liable to us or any stockholder for monetary damages for breach of fiduciary
duty as a director, except for liability: (1) arising from payment of dividends
or approval of a stock purchase in violation of Section 174 of the Delaware
General Corporation Law, (2) for any breach of their duty of loyalty to IBS or
IBS' stockholders, (3) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law or (4) for any action from
which the director derived an improper personal benefit. While the Certificate
provides protection from awards for monetary damages for breaches of the duty of
care, it does not eliminate a director's duty of care. Accordingly, the
Certificate will not affect the availability of equitable remedies, such as an
injunction, based on a director's breach of the duty of care. The provisions of
the Certificate described above apply to officers of IBS only if they are
directors of IBS and are acting in their capacity as directors, and does not
apply to officers of IBS who are not directors.
In addition, IBS' By-Laws provide that IBS will indemnify its officers
and directors, employees and agents, to the fullest extent permitted by Delaware
law. Under Delaware law, directors and officers, as well as employees and
individuals, may be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation as a
derivative action) if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to our best interests, and with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of IBS pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock by the selling stockholders in the offering. Of the shares being offered
hereunder, an aggregate of (i) 580,000 shares were issued pursuant to the
November Offering and the December Offering each consisting of common stock of
the Company and warrants to purchase comment stock of the Company for which we
received an aggregate of $5,800,000, which includes the conversion of $600,000
of debentures issued in September and October 1999 into units of the November
Offering; and (ii) 86,668 shares were issued to Arnold Schron as partial
consideration for all of the issued and outstanding capital stock of Spencer
Analysis, Inc. pursuant to an Agreement and Plan of Merger among Arnold Schron,
Spencer Analysis, Inc., SAI Acquisition Corp. and IBS Interactive, Inc. pursuant
to which we received no cash proceeds. In addition, we will receive an aggregate
of $3,175,000 if all of the warrants into which the remaining 268,000 shares
being offered hereunder are exercised prior to the sales of any of those shares.
The use of proceeds for this amount would be: (x) $317,500 for acquisitions; (y)
$635,000 for sales and marketing; and (z) the remainder for working capital and
general corporate purposes.
SELLING STOCKHOLDERS
The following table sets forth, to our knowledge, certain information
relating to the IBS common stock beneficially owned by each of the selling
stockholders. Other than EBI Securities Corporation, which performs mergers and
acquisitions consulting services for us, none of the selling stockholders has
had a material relationship with IBS within the past three years other than as a
result of the ownership of the shares or other securities of IBS. The shares
included in this prospectus may be offered from time to time by the selling
stockholders named below. Unless otherwise indicated, each of the selling
stockholders has acquired the shares to be sold by that person in connection
with two private placement transactions in November and December 1999, or will
acquire such shares upon the exercise of warrants to purchase those shares, also
in connection with two private placement transactions in November and December
1999.
<TABLE>
<CAPTION>
Number of
Shares Number of Shares Percent of
Beneficially Number of Shares Beneficially Outstanding
Name of Selling Shareholder Owned Prior to Registered for Owned After the Shares After
- --------------------------- the Offering (1) Sale Hereby Offering(2) Offering
---------------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Elliott Broidy................................ 215,000 187,500 27,500 *
Shirley R. Mittman............................ 31,250 31,250 0 0
Robert Mittman................................ 12,500 12,500 0 0
Matthew Gohd.................................. 20,500 12,500 8,000 *
William Walters............................... 7,250 6,250 1,000 *
BNY Clearing Services LLC,
FBO William Walters IRA..................... 13,500 12,500 1,000 *
Crescent International Limited................ 87,500 87,500 0 0
Benjamin Raphan............................... 12,500 12,500 0 0
Dr. Peter Taub & Joyce Lynn Taub.............. 6,250 6,250 0 0
John D. Cohen................................. 12,500 12,500 0 0
Galt Asset Management LLC..................... 18,750 18,750 0 0
Cranshire Capital L.P......................... 125,000 125,000 0 0
Elliott Associates L.P........................ 62,500 62,500 0 0
Westgate International L.P.................... 62,500 62,500 0 0
PRD Management Corp. Profit Sharing
Plan(3)..................................... 74,544 15,000 59,544 1.1
M. Zotti & J. Martin.......................... 82,161 30,000 52,161 *
Steven R. Loglisci IRA, Bear Stearns
Securities Corporation, Cust(4)............. 30,000 30,000 0 0
Steven R. Loglisci(4)......................... 86,640 15,000 71,640 1.4
EBI Securities Corporation(5)................. 100,000 100,000 0 0
Arnold Schron(6).............................. 240,505 86,668 153,837 2.9
LaSalle St. Securities, L.L.C.(7)............. 8,000 8,000 0 0
</TABLE>
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* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the SEC and generally includes voting or investment power
with respect to securities. Information with respect to beneficial
ownership is based on information as of December 15, 1999 and assumes that
there is outstanding an aggregate of 4,405,828 shares of common stock (not
including treasury shares). No options have been issued to the selling
stockholders named in this prospectus. Except as indicated otherwise in the
footnotes below, and subject to community property laws where applicable,
IBS Interactive believes, based on information furnished by the selling
stockholders, that the persons named in the table above have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them. The number of shares beneficially owned by each
selling stockholder prior to the Offering includes shares issuable upon the
exercise of warrants as follows: Elliott Broidy 37,500; Shirley R. Mittman
6,250; Robert Mittman 2,500; William Walters 1,250; BNY Clearing Services
LLC FBO William Walters IRA 2,500; Crescent International Limited 17,500;
Benjamin Raphan 2,500; Dr. Peter Taub & Joyce Lynn Taub 1,250; John D.
Cohen 2,500; Galt Asset Management LLC 3,750; Cranshire Capital L.P.
25,000; Elliott Associates L.P. 12,500; Westgate International L.P. 12,500;
PRD Management Corp. Profit Sharing Plan 5,000; M. Zotti & J. Martin
10,000; Steven R. Loglisci IRA, Bear Stearns Securities Corporation, Cust.
10,000; Steven R. Loglisci 5,000; EBI Securities Corporation 100,000; and
LaSalle St. Securities, L.L.C. 8,000.
(2) Assumes all shares offered hereby are sold.
(3) Includes shares of common stock beneficially owned by Paula and Martin
Domansky, who are the beneficiaries of the PRD Management Corp. Profit
Sharing Plan.
(4) Steven R. Loglisci is the brother of Nicholas R. Loglisci, Jr., the
President and Chief Executive Officer of IBS Interactive, Inc.
(5) Represents 100,000 shares of common stock issuable upon the exercise of
certain warrants issued to EBI Securities Corporation as fees payable in
connection with mergers and acquisitions consulting services performed by
EBI Securities Corporation on behalf of IBS Interactive.
(6) Represents 86,668 shares of common stock issued to Arnold Schron pursuant
to the Agreement and Plan of Merger among Arnold Schron, Spencer Analysis,
Inc., IBS Interactive, Inc. and SAI Acquisition Corp. dated as of June 30,
1999.
(7) Represents 8,000 shares of common stock issuable upon the exercise of
certain warrants issued to LaSalle St. Securities, L.L.C. as a
commission.
PLAN OF DISTRIBUTION
The selling stockholders may sell the common stock in whole or in part,
from time to time, on the Nasdaq SmallCap Market or otherwise at prices and on
terms prevailing or otherwise at the time of any such sale. Any such sale may be
made in broker's transactions through broker-dealers acting as agents, through
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this prospectus, in block trades in which a broker
or dealer so engaged will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction, in
transactions directly with market makers or in privately negotiated transactions
where no broker or other third party (other than the purchaser) is involved. The
selling stockholders will pay selling commissions or brokerage fees, if any,
with respect to the sale of the common stock in amounts customary for the type
of transaction effected. The selling stockholders will also pay all applicable
transfer taxes and all fees and disbursements of counsel for the selling
stockholders incurred in connection with the sale of shares.
The selling stockholders have advised us that during such time as the
selling stockholders may be engaged in the attempt to sell the shares registered
hereunder, they will cause to be furnished to each person to whom shares
included in this prospectus may be offered, and to each broker-dealer, if any,
through whom shares are offered, such copies of this prospectus, as supplemented
or amended, as may be required by such person.
The selling stockholders, and any other persons who participate in the
sale of the shares offered in this prospectus, may be deemed to be
"Underwriters" as defined in the Securities Act. Any commissions paid or any
discounts or concessions allowed to any such persons, and any profits received
on resale of the shares, may be deemed to be underwriting discounts and
commissions under the Securities Act. From time to time, one or more of the
selling stockholders may pledge, hypothecate or grant a security interest in
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some or all of the shares owned by them, and the pledgees, secured parties or
persons to whom such securities have been hypothecated shall, upon foreclosure
in the event of a default, be deemed to be selling stockholders for purposes of
this Prospectus.
We have agreed to indemnify the selling stockholders against certain
liabilities, including liabilities under the Securities Act and the Exchange
Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of
the securities offered hereby will be passed upon for us by Kelley Drye & Warren
LLP, Stamford, Connecticut.
EXPERTS
The financial statements contained in our Annual Report on Form 10-KSB
for the year ended December 31, 1998 and our Current Reports on Forms 8-K/A
dated December 9, 1998, February 26, 1999, June 2, 1999 and September 13, 1999,
and our Current Reports on Form 8-K dated June 7, 1999 and December 20, 1999
(all incorporated by reference in this Prospectus) have been audited by BDO
Seidman, LLP, independent certified public accountants, to the extent and for
the periods set forth in their reports, and are incorporated herein by
reference.
The 1997 financial statements of Spectrum Information Systems, Inc. (a
wholly-owned subsidiary of IBS) contained in our Current Report on Form 8-K/A
dated June 7, 1999 and our Current Reports on Form 8-K dated June 4, 1999 and
December 20, 1999 (and incorporated by reference in this Prospectus) have been
audited by Barfield, Murphy, Shank & Smith, P.C., independent certified public
accountants, to the extent and for the period set forth in their reports, and
are incorporated herein by reference.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by IBS in
connection with the sale and distribution of the common stock being registered.
Selling commissions and brokerage fees and any applicable transfer taxes and
fees and disbursements of counsel for the selling stockholders are payable by
the selling stockholders. All amounts are estimates except for the registration
fee.
Amount to be Paid
--------------------
Registration Fee..................................... $ 2,674.86
Legal Fees and Expenses.............................. 10,000.00
Accounting Fees and Expenses......................... 15,000.00
Blue Sky Fees and Expenses........................... 1,300.00
Miscelleaneous....................................... 1,025.14
------------
Total................................................ $ 30,000.00
============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 145 of the Delaware General Corporation Law,
IBS' Restated Certificate of Incorporation (the "Certificate") provides that to
the fullest extent permitted by Delaware law no director shall be personally
liable to us or any stockholder for monetary damages for breach of fiduciary
duty as a director, except for liability: (1) arising from payment of dividends
or approval of a stock purchase in violation of Section 174 of the Delaware
General Corporation Law, (2) for any breach of their duty of loyalty to IBS or
IBS' stockholders, (3) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law or (4) for any action from
which the director derived an improper personal benefit. While the Certificate
provides protection from awards for monetary damages for breaches of the duty of
care, it does not eliminate the director's duty of care. Accordingly, the
Certificate will not affect the availability of equitable remedies, such as an
injunction, based on a director's breach of the duty of care. The provisions of
the Certificate described above apply to officers of IBS only if they are
directors of IBS and are acting in their capacity as directors, and does not
apply to officers of IBS who are not directors.
In addition, IBS' By-Laws provide that IBS will indemnify its officers
and directors, employees and agents, to the fullest extent permitted by Delaware
law. Under Delaware law, directors and officers, as well as employees and
individuals, may be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation as a
derivative action) if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to our best interests, and with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of IBS pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the SEC, such indemnification is against public policy
expressed in the Securities Act, and is, therefore, unenforceable.
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ITEM 16. EXHIBITS.
Exhibit
NUMBER DESCRIPTION OF EXHIBIT
5.1 Opinion of Kelley Drye & Warren LLP.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Barfield, Murphy, Shank & Smith P.C.
23.3 Consent of Kelley Drye & Warren LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page to this Registration
Statement).
_______________
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
additional or changed material information with respect to the plan of
distribution not previously disclosed in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cedar Knolls, State of New Jersey, on the 23rd
day of December, 1999.
IBS INTERACTIVE, INC.
By: /S/ Nicholas R. Loglisci, Jr.
---------------------------------------
Name: Nicholas R. Loglisci, Jr.
Title: President, Chief Executive
Officer and Chairman
POWER OF ATTORNEY
KNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints both Nicholas R. Loglisci, Jr. and Frank
R. Altieri, Jr. his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement on Form S-3, or any related Registration Statement filed for the
purpose of increasing the number of securities registered, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
In accordance with the Exchange Act, this Registration Statement has
been signed below by the following persons on behalf of the Registrant and in
the capacities indicated on the 23rd day of December, 1999.
SIGNATURE TITLE(S)
/s/ Nicholas R. Loglisci, Jr. President, Chief Executive Officer and
- ----------------------------------- Director (Principal Executive Officer)
Nicholas R. Loglisci, Jr.
/s/ Clark D. Frederick
- -----------------------------------
Clark D. Frederick Chief Technical Officer and Director
/s/ Frank R. Altieri, Jr.
- -----------------------------------
Frank R. Altieri, Jr. Chief Information Officer and Director
/s/ Howard B. Johnson
- -----------------------------------
Howard B. Johnson Chief Financial Officer (Principal
Financial and Accounting Officer)
/s/ Susan Holloway Torricelli
- -----------------------------------
Susan Holloway Torricelli Director
/s/ Barrett N. Wissman
- -----------------------------------
Barrett N. Wissman Director
/s/ David Faeder
- -----------------------------------
David Faeder Director
/s/ Patricia Duff
- -----------------------------------
Patricia Duff Director
<PAGE>
EXHIBIT INDEX
Exhibit
NUMBER DESCRIPTION OF EXHIBIT
5.1 Opinion of Kelley Drye & Warren LLP.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Barfield, Murphy, Shank & Smith P.C.
23.3 Consent of Kelley Drye & Warren LLP (included in Exhibit 5.1).
<PAGE>
KELLEY DRYE & WARREN
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3229
December 23, 1999
IBS Interactive, Inc.
2 Ridgedale Avenue, Suite 350
Cedar Knolls, New Jersey 07927
Ladies and Gentlemen:
We have acted as special counsel to IBS Interactive, Inc., a Delaware
corporation (formerly known as Internet Broadcasting System, Inc.) (the
"Company"), in connection with the preparation and filing with the Securities
and Exchange Commission (the "Commission") of a Registration Statement on Form
S-3 and any amendments thereto (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"). The Registration Statement
relates to 934,668 shares (the "Shares") of the Company's common stock, $0.01
par value per share (the "Common Stock"). Of the Shares: (i) a total of 480,000
shares of Common Stock have been issued and 120,000 shares of Common Stock are
to be issued upon the exercise of certain warrants (the "November Warrants")
issued to several private investors in a private placement transaction in
November 1999 (the "November Offering"), (ii) a total of 100,000 shares of
Common Stock have been issued and 25,000 shares of Common Stock are to be issued
upon the exercise of certain warrants (the "December Warrants") issued to
several private investors in a private placement transaction in December 1999
(the "December Offering"), (iii) 100,000 shares of Common Stock are to be issued
upon the exercise of certain warrants (the "EBI Warrants") issued to EBI
Securities Corporation as fees payable in connection with mergers and
acquisitions consulting services performed by EBI Securities Corporation on
behalf of IBS, (iv) 86,668 shares of Common Stock have been issued to Arnold
Schron pursuant to the Agreement and Plan of Merger among Spencer Analysis,
Inc., IBS Interactive, Inc. and SAI Acquisition Corp. dated as of June 30, 1999,
(v) up to 15,000 shares of Common Stock are to be issued upon the exercise of
certain warrants (the "October Warrants") issued to several private investors in
a private placement transaction consummated in October 1999 (the "October
Offering"); and (vi) 8,000 shares of Common Stock are to be issued upon the
exercise of certain warrants (the "LaSalle St. Warrants") issued to LaSalle St.
Securities, LLC as a commission in December 1999 (the November Warrants, the
December Warrants, the EBI Warrants, the October Warrants and the LaSalle St.
Warrants are sometimes collectively referred to herein as the "Warrants").
<PAGE>
IBS Interactive, Inc.
December 23, 1999
Page 2
In connection with this opinion, we have examined and relied upon
copies certified or otherwise identified to our satisfaction of: (i) the
November Warrants; (ii) the December Warrants; (iii) the EBI Warrants; (iv) the
October Warrants; (v) the LaSalle St. Warrants; (vi) an executed copy of the
Registration Statement; (iv) the Company's Restated Certificate of Incorporation
and Restated By-laws; and (v) the minute books and other records of corporate
proceedings of the Company, as made available to us by officers of the Company;
and have reviewed such matters of law as we have deemed necessary or appropriate
for the purpose of rendering this opinion.
For purposes of this opinion we have assumed the authenticity of all
documents submitted to us as originals, the conformity to originals of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of all documents submitted to us as copies. We
have also assumed the legal capacity of all natural persons, the genuineness of
all signatures on all documents examined by us, the authority of such persons
signing on behalf of the parties thereto other than the Company and the due
authorization, execution and delivery of all documents by the parties thereto
other than the Company. As to certain factual matters material to the opinion
expressed herein, we have relied to the extent we deemed proper upon
representations, warranties and statements as to factual matters of officers and
other representatives of the Company. Our opinion expressed below is subject to
the qualification that we express no opinion as to any law other than the laws
of the State of Delaware and the federal laws of the United States of America.
Without limiting the foregoing, we express no opinion with respect to the
applicability thereto or effect of municipal laws or the rules, regulations or
orders of any municipal agencies within any such state.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, it is our opinion that
(i) the Shares already issued have been duly authorized and validly issued and
are fully paid and non-assessable and (ii) the Shares to be issued upon exercise
of any of the Warrants have been duly authorized and, when issued and paid for
in accordance with the terms of the Warrants, will be validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to all references to our firm included in the
Registration Statement as of the date hereof. In giving such consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Commission promulgated
thereunder.
Very truly yours,
KELLEY DRYE & WARREN LLP
By: /s/ Jay R. Schifferli
______________________________________
A Partner
<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 of our report
dated December 9, 1999 relating to the consolidated financial statements of IBS
Interactive, Inc. appearing in the Company's Current Report on Form 8-K filed on
December 20, 1999; of our report dated June 1, 1999 relating to the consolidated
financial statements of IBS Interactive, Inc. appearing in the Company's Current
Report on Form 8-K filed on June 7, 1999; of our report dated March 29, 1999,
relating to the consolidated financial statements of IBS Interactive, Inc.
appearing in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998 filed on March 31, 1999; 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 filed on September 13, 1999; of our
report dated May 26, 1999 relating to the December 31, 1998 financial statements
of Spectrum Information Systems, Inc. appearing in the Company's Current Report
on Form 8-K/A filed on June 2, 1999; of our report dated February 22, 1999
relating to the financial statements of Halo Network Management, LLC appearing
in the Company's Current Report on Form 8-K/A filed on February 26, 1999, and of
our report dated November 30, 1998 relating to the financial statements of
DesignFX Interactive, LLC appearing in the Company's Current Report on Form
8-K/A filed on December 9, 1998.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
December 20, 1999
<PAGE>
Exhibit 23.2
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-_____) of
our report dated May 13, 1999 relating to the December 31, 1997 financial
statements of Spectrum Information Systems, Inc., appearing in the Current
Report on Form 8-K/A filed on June 2, 1999 and the Current Reports on Form 8-K
filed on June 7, 1999 and December 20, 1999 of IBS Interactive, Inc.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ Barfield, Murphy, Shank & Smith, P.C.
Birmingham, Alabama
December 20, 1999
