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As filed with the Securities and Exchange Commission on June 7, 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
<PAGE>
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. [_] _____________________
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 209,484 $21.13 $4,426,397 $1,231
- ------------------------- ------------------- ------------------- ---------------------- -------------------
</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 June 4, 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 JUNE 7, 1999
PROSPECTUS
IBS INTERACTIVE, INC.
209,484 SHARES
COMMON STOCK
This prospectus relates to 209,484 shares of IBS Interactive, Inc.
common stock that may be offered for sale by certain of our stockholders and
other parties and will not be underwritten. The shares being registered under
this prospectus for the selling stockholders consist of (1) a total of 48,872
shares in connection with the exercise of certain warrants issued to several
private investors in a private placement transaction on October 31, 1997, (2)
50,000 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 and (3) 110,612 shares of common stock underlying warrants to
purchase common stock sold by IBS to Whale Securities Co., LP, the underwriter
of IBS' initial public offering of its common stock.
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 June 4, 1999, the last reported sale price of our common stock
was $20.75 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 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.
June 7, 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........................................................... 7
Indemnification of Officers and Directors.............................. 17
Use of Proceeds........................................................ 17
Selling Stockholders................................................... 19
Plan of Distribution................................................... 18
Legal Matters.......................................................... 19
Experts................................................................ 19
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.
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 prospectus, 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.
o Our Quarterly Report on Form 10-QSB for the quarter ended March 31, 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.
o Our Current Report on Form 8-K filed on June 7, 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.
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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
We provide a broad range of Internet, programming, applications
development and computer networking services primarily to businesses and
organizations. These services are designed to permit clients to outsource a
variety of business needs such as computer networking, programming, maintenance,
Internet connectivity and technical support. We believe that by combining
computer network consulting and Internet related services we are positioned to
capitalize on increasing demand by businesses and organizations for
comprehensive, cost-effective information technology solutions.
SERVICES
Our services include:
o High speed Internet connectivity for both businesses and consumers
o Customized Web-site design, programming and applications development,
including e-commerce solutions and Intranet applications.
o Commercial Web-site hosting and management.
o Information Technology (IT) consulting and project management.
o Systems integration services, including, network consultation, design,
installation, management and support, cabling and wiring, and hardware and
software procurement.
o Training, including Microsoft Certified Technical Education Center -
Partner Level.
Our solutions and services are primarily used by our clients to:
o Create and implement Internet business strategies using Web-sites accessed
via the Internet and/or software applications accessed via Intranets and
private networks.
o Develop high speed communication links to the Internet and private
networks.
o Design and implement computer network solutions for offices.
o Enhance employee skills through technical training or staff augmentation
through our consulting services.
We presently offer our solutions and services in New Jersey, New York,
Pennsylvania, Connecticut, Massachusetts, Alabama, Kentucky, Virginia and North
Carolina. We have approximately 180 employees including 32 dedicated sales and
marketing personnel, 95 network engineers and programmers and 32 technical
support personnel whose expertise allow us to quickly and efficiently evaluate
and meet our clients' initial and ongoing business needs and preferences while
keeping pace with the rapid developments within the Internet and computer
networking industries.
CLIENTS
Our commercial clients include large national and regional corporations
in industries such as manufacturing, insurance, banking and healthcare, leading
national and local educational institutions, as well as local businesses such as
auto dealerships. Our clients presently include: Aetna/U.S. Healthcare Inc.
("Aetna"); Mobil Oil Corporation; Black & Decker Corp.; TRW, Inc.; Foster
Wheeler Corporation; Unilever; New York University; The Wharton School of
Business; Commerce Bank; The Archdiocese of New York (Catholic Healthcare
Network); the National Aeronautics and Space Administration; Litton
Industries-Airtron Division; and Sony Theaters. In addition, we have
approximately 15,000 consumer internet access clients.
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NETWORK INFRASTRUCTURE
We provide our clients with high speed Internet access and web-hosting
services via our telecommunications network comprised of:
o A secure Internet Network Operations Center ("NOC") located in Cedar
Knolls, New Jersey, with dedicated Sun Microsystem servers, multiple
high-speed fiber optic connections to the Internet, an uninterruptable
power supply and environmental controls. We maintain high-bandwidth paths
to the Internet with UUNet Worldcom, Winstar, Sprint, ICI/Digex, CRL, Cox
and Cable & Wireless.
o 104 physical and virtual Points of Presence ("POPs") serving New Jersey,
New York, Pennsylvania, North Carolina, Virginia and Alabama connected to
the NOC via multiple leased high-speed T-1 data lines, from which access to
the Internet is gained through a local phone call.
o 24-hours-a-day, seven-days-a-week network monitoring and technical support.
o On-site customer support, sales and marketing, and administration of
Internet and network software and hardware, including servers and routers.
MARKET OPPORTUNITY
Our sales and marketing efforts are primarily focused on our ability to
provide clients with a single source for comprehensive, turnkey Internet and
computer networking solutions and services. With our breadth of services - from
Internet access, Web-site programming and hosting to systems integration and
consulting - IBS differentiates itself from national, regional and local
Internet service providers, which typically focus on one single product such as
Internet access and do not offer single source, turn key Internet and computer
networking solutions. Alternatively, many national, regional and local systems
integration and consulting firms do not provide and support value-added services
such as Web-site programming, hosting services and high speed Internet access.
Thus, we believe that we are well positioned to take advantage of the
significant market opportunities that exist in providing comprehensive one-stop,
turn key Internet and computer networking solutions and services to our target
markets to compete with both larger and smaller competitors.
GROWTH STRATEGY
Our objective is to become a leading national provider of one-stop,
comprehensive Internet business solutions and services to businesses and
organizations. To achieve this objective, we intend to:
o CONTINUE TO INVEST IN AND EXPAND OUR NETWORK INFRASTRUCTURE. We intend to
expand the geographical reach of our Internet access network by
establishing additional virtual and physical POPs throughout the Northeast
and Southeast United States. Increasing the geographical reach of our POP
network will allow additional clients in these areas to access the Internet
through our network via a local telephone call. In addition, we will
continue to upgrade the servers and routers used in our network so as to
continually offer state of the art Internet connectivity and Web-site
hosting.
o CONTINUE TO EXPAND OUR MARKETING, PROMOTIONAL AND ADVERTISING ACTIVITIES IN
BOTH EXISTING AND TARGETED MARKETS BY INCREASING SALES WITHIN THE CURRENT
CLIENT BASE AND TO GROW BY ADDING NEW CUSTOMERS. We recently hired a
director of marketing to develop and oversee the implementation of
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promotional, advertising and marketing activities in existing and targeted
markets to increase awareness of us and our comprehensive, turn key
Internet and computer networking solutions and services.
o CONTINUE TO EXPAND THE SOLUTIONS AND SERVICES WE OFFER. We believe that it
is critical to our future success that we continue to offer our present and
future clients cost-effective and technologically advanced Internet and
computer networking solutions and services. For instance, through our
partnership with Covad Communications Company, we recently started to
provide our clients with digital subscriber line ("DSL") Internet access,
which allows Internet access over regular phone lines at substantially
greater speeds than ISDN lines or 56 kbps modem access. Likewise, using our
in-house programming expertise, we developed our proprietary Industrial
Park(TM)series of Web-site development templates, which templates allow us
to develop, and host for one year, customized Web-sites for clients at
attractive prices. We also continue to work on other proprietary solutions.
o ACQUIRE COMPLIMENTARY BUSINESSES. To date, we have made over 15
acquisitions of businesses that we believe have enhanced and expanded our
ability to provide comprehensive solutions and services to clients and/or
enhance our market presence. We expect that we will continue to acquire
companies in both our present and targeted markets that we believe will
increase our market share, add additional service offerings or help us to
establish a strong market presence.
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 www.interactive.net.
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 IBS. 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 PROSPECTUS IS COMPLETE AND ACCURATE AS OF THIS DATE, BUT THE INFORMATION
MAY CHANGE AFTER THE DATE ON THIS PROSPECTUS.
IBS 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, our business will be materially and adversely affected.
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HISTORY OF OPERATING LOSSES AND EXPECTATION OF LOSSES TO CONTINUE, AT LEAST FOR
THE NEAR FUTURE. IBS MAY NOT HAVE SUFFICIENT CASH FLOW FOR OUR BUSINESS.
We have experienced significant losses since we began operations. We
expect to continue to incur significant losses for the foreseeable future. We
incurred net losses of approximately $794,000 for the year ended December 31,
1997 and $479,000 for the year ended December 31, 1998. The unaudited loss for
the quarter ended March 31, 1999 was approximately $163,000. As of March 31,
1999, IBS's unaudited accumulated deficit was approximately $1,757,000. 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
believe that operating cash flow generated through existing customers and
business activities, current cash and cash equivalents, funds available from a
$1.5 million line of credit, and available credit through equipment vendor
arrangements are sufficient to fund operating cash flow needs, capital
expenditures (principally network improvements) and acquisitions. However, 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 30% of our revenues. In
December 1998, we entered into a three-year agreement with Aetna to continue to
provide services. Revenues derived from our consulting contracts are generally
non-recurring in nature. For the quarter ended March 31, 1999, Aetna accounted
for 19% of our revenues. Non-renewal or termination of our contract with Aetna
would have a material adverse effect on us. 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; nonrenewal; 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.
Our revenues are difficult to forecast. We plan to significantly
increase our operating expenses to expand and upgrade our network, increase the
number of our technical, sales and marketing personnel 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 unsecured accounts receivable balances with customers which
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, then 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 our systems
integration and consulting, programming and applications development or Internet
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 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.
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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 products and services that we provide is
intense, 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 and financial, technical, marketing, capital and other
resources than we have.
Our competitors include international, national, regional and
commercial Internet service providers, established on-line service providers,
cable operators, 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 and Sprint Corp.
Our competitors also include national, regional and local information
technology consulting and 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. and Deloitte
& Touche.
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.
Many of our competitors, as well as a number of potential new
competitors, have:
o Longer operating histories.
o Greater name recognition.
o Larger customer bases.
o Larger networks.
o More and larger facilities.
o Significantly greater financial, technical, marketing, capital and other
resources.
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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, media 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 value-added services, cost reductions or otherwise. In
addition, Internet access service 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 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.
Our success depends in large part upon the performance of our network
and our ability to expand our network 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 network with the necessary capabilities, our business will be materially and
adversely affected. Our existing network 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 network. 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.
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.
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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
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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.
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 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 complementary businesses, products, services or
technologies, but we have very 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.
WE MAY NOT BE ABLE TO RETAIN THE KEY PERSONNEL WE NEED TO SUCCEED.
Our growth is placing a significant strain on our management systems
and resources. If we cannot successfully manage our expansion, our business will
suffer. As we continue to increase the scope of our operations, our workforce
has grown significantly. As of May 13, 1999, IBS had approximately 180 full-time
employees in comparison to approximately 40 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
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engineers, programmers and technicians, is intense. Consequently, we may not be
successful in attracting, training and retaining the people we needs to continue
to offer its solutions and services to present and future clients in a cost
effective manner or at all.
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 expand and upgrade our network, 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. 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.
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.
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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.
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 is 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.
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
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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.
POTENTIAL LIABILITY TO CLIENTS.
Our services involve development, implementation and maintenance of
computer systems and computer software that are critical to the operations of
the 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 include 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 the we maintain general liability
insurance coverage in the amount of $1,000,000, 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. 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 June 1, 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 after January 1, 2000.
While such failures could affect important operations, either indirectly or
directly, in a significant manner, we cannot at present estimate either 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.
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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 Internet service providers 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 and 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 330,000 potential shares issuable upon the
exercise of outstanding options. 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.
IBS 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, IBS has
reserved up to approximately 263,029 shares for issuance in connection with
certain acquisitions. None of these shares have yet been issued. If and when
these shares are issued by IBS 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. Our credit agreement
requires the approval of our bank to declare or pay cash dividends.
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.
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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.
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 44,732 shares were issued upon the exercise of
warrants for which we received an aggregate of $230,007. In addition, we will
receive an aggregate of $1,168,957 if all of the warrants into which the
remaining 164,752 shares being offered hereunder are exercised prior to the
sales of any of those shares.
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, Whale Securities Co., L.P., the
underwriter of IBS' initial public offering of Common Stock, and Barrett
Wissman, a director of IBS since May 1998, 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. Each of the selling stockholders has acquired or will
acquire the shares to be sold by that person upon the exercise of warrants to
purchase those shares.
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<TABLE>
<CAPTION>
Number of Shares Number of Shares Percent of
Beneficially Owned Number of Shares Beneficially Outstanding
Prior to Registered for Owned After THE Shares After
Name of Selling Shareholder the Offering (1) Sale Hereby Offering(2) Offering
<S> <C> <C> <C> <C>
Elliott Broidy................................ 131,322 12,219 119,103 3.1%
Anthony J. DiValerio, Jr...................... 13,439 3,054 10,385 *
Gussie Sanzillo as Trustee of the *
Francis J. Sanzillo Trust................ 14,050 3,054 10,996 *
Jeffrey Fuhrman............................... 4,074 3,054 1,020 *
Frank R. Altieri, Sr.......................... 17,000 6,110 10,890 *
Jeffrey Samsen................................ 10,690 4,581 6,109 *
Steven R. Loglisci............................ 52,121 4,581 47,540 1.2%
Barrett Wissman............................... 32,219 12,219 20,000 *
EBI Securities Corporation.................... 50,000 50,000 -- --
Whale Securities Co., LP(3).................. 110,612 110,612 -- --
</TABLE>
* 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 June 4, 1999 and assumes that there
is outstanding an aggregate of 3,901,777 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 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.
(2) Assumes all shares offered hereby are sold.
(3) Includes securities held in the name of Whale Securities Co., LP ("Whale")
for the account of certain equity owners, former equity owners, lenders
and employees of Whale. Excludes shares of common stock held in any
customer account by and any trading account of Whale.
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.
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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
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 Form 8-K/A
dated December 9, 1998, February 26, 1999 and June 2, 1999 (1998 financial
statements only), and our Current Report on Form 8-K dated June 4, 1999 (1998
financial statements only)(all incorporated by reference in this Prospectus)
have been audited by BDO Seidman, LLP, independent certified public accounts, to
the extent and for the periods set forth in their report, 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 2, 1999 and our Current Report on Form 8-K dated June 4, 1999 (and
incorporated by reference into 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 report, 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........................................ $ 1,231
Legal Fees and Expenses................................. 20,000
Accounting Fees and Expenses............................ 10,000
Blue Sky Fees and Expenses.............................. 5,000
Miscellaneous........................................... 3,769
========
Total................................................... $ 40,000
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).
- ------------
* To be filed by amendment.
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 7th
day of June 1999.
IBS INTERACTIVE, INC.
By: /s/ Nicholas Loglisci, Jr.
Name: Nicholas 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, 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 Report has been signed below
by the following persons on behalf of the Registrant and in the capacities
indicated on the 7th day of May, 1999.
SIGNATURE TITLE(S)
/s/ Nicholas R. Loglisci, Jr. President, Chief Executive Officer and Director
Nicholas R. Loglisci, Jr. (Principal Executive Officer)
/s/ Clark D. Frederick Chief Technical Officer and Director
Clark D. Frederick
/s/ Frank R. Altieri, Jr. Chief Information Officer and Director
Frank R. Altieri, Jr.
/s/ Howard Johnson Chief Financial Officer (Principal Financial
Howard Johnson and Accounting Officer)
/s/ Susan Holloway Torricelli Director
Susan Holloway Torricelli
/s/ Barrett N. Wissman Director
Barrett N. Wissman
II-3
<PAGE>
/s/ David Faeder Director
David Faeder
/s/ Patricia Duff Director
Patricia Duff
II-4
<PAGE>
EXHIBIT INDEX
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 the signature page to this Registration
Statement).
- ---------------
* To be filed by amendment.
<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 June 1, 1999 relating to the consolidated financial statements of IBS
Interactive, Inc. appearing in the Company's Current Report on Form 8-K; 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; 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; 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 and 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.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
BDO SEIDMAN, LLP
Woodbridge, New Jersey
June 4, 1999
BARFIELD, MURPHY, SHANK & SMITH P.C.
1121 Riverchase Office Road
Birmingham, Alabama 35244
205-982-5500
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
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 Report on Form 8-K filed on
June 7, 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
June 7, 1999
