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