<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): March 2, 2000
IBS INTERACTIVE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-24073 13-3817344
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
2 RIDGEDALE AVENUE, SUITE 350, CEDAR KNOLLS, NEW JERSEY 07927
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (973) 285-2600
*Item 2 and Item 7 of the Form 8-K, filed March 24, 2000 are being
amended hereby to revise Item 2 and to include in Item 7 the
financial statements of the business acquired and pro forma financial
information.
=======================================================================
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As announced in its press release of Thursday, March 2, 2000, on March 1,
2000, IBS Interactive, Inc. ("IBS") entered into an Agreement and Plan of Merger
(the "Agreement") with Sean D. Mann, Roy E. Crippen III, Michael Mandt, Ali A.
Husain, Robert E. Siegmann, digital fusion, inc. a Florida corporation ("digital
fusion"), and Digital Fusion Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of IBS ("DFAC"). Pursuant to the terms of the Agreement,
digital fusion merged with DFAC and became the surviving entity. In exchange for
all of the issued and outstanding shares of digital fusion, IBS issued: (i)
925,000 shares of its unregistered common stock, par value $.01 per share (the
"Common Stock"), and reserved an additional 50,000 shares of Common Stock for
potential later issuance subject to certain adjustments and (ii) a three-year
subordinated note accruing 6% interest. IBS also assumed debt totaling
approximately $4.2 million ($3.3 million of which is secured in the Company's
assets). digital fusion provides e-Business services and is based in Tampa,
Florida.
The foregoing summary of the Agreement is qualified in its entirety by reference
to the Agreement, a copy of which is attached hereto as an exhibit.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
1. Audited financial statements of digital fusion, inc.
as of and for the years ended December 31, 1999 and
1998, which includes the following:
a. Balance Sheets;
b. Statements of Operations;
c. Statements of Shareholders' Equity;
d. Statements of Cash Flows; and
e. Notes to Financial Statements.
-2-
<PAGE>
digital fusion, inc.
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
PAGE
Reports of Independent Certified Public Accountants...................4
Balance Sheets as of December 31, 1999 and 1998.......................6
Statements of Operations for the years ended
December 31, 1999 and 1998..........................................7
Statements of Shareholders' Equity for the years
ended December 31, 1999 and 1998....................................8
Statements of Cash Flows for the years
ended December 31, 1999 and 1998....................................9
Notes to Financial Statements........................................10
-3-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
digital fusion, inc.
We have audited the accompanying balance sheet of digital fusion, inc. as of
December 31, 1999, and the related statements of operations, shareholders'
equity and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 digital fusion, inc. as of
December 31, 1999, 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
May 4, 2000
-4-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
digital fusion, inc.
We have audited the accompanying balance sheet of digital fusion, inc.
(formerly ROI Consulting, Inc.) (the Company) as of December 31, 1998, and the
related statements of operations, shareholders' equity and cash flows for the
year ended December 31, 1998. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 digital fusion, inc. (formerly
ROI Consulting, Inc.) as of December 31, 1998, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Ernst & Young, LLP
Tampa, Florida
March 31,1999
-5-
<PAGE>
digital fusion, inc.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
December 31, 1999 1998
- --------------------------------------------------------------------------------
Assets
Current:
Cash and cash equivalents $ 40,381 $254,702
Accounts receivable, net of allowance for
doubtful accounts of $315,000 and $5,000 in
1999 and 1998, respectively 1,649,296 379,072
Due from related party 281,656 -
Prepaid expenses and other current assets 90,039 4,812
- --------------------------------------------------------------------------------
Total current assets 2,061,372 638,586
Property, equipment and software, net 1,228,174 17,976
Intangible assets, net 6,702,540 -
Other assets 55,346 292
- --------------------------------------------------------------------------------
Total assets $10,047,432 $656,854
- --------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Borrowings - line of credit $ 3,323,113 $ -
Accounts payable 167,448 2,280
Due to related party 408,757 -
Accrued expenses 539,718 204,886
Income taxes payable - 1,423
Deferred income tax liability - 5,063
Deferred revenue 118,470 -
- --------------------------------------------------------------------------------
Total current liabilities 4,557,506 213,652
Long-term notes payable 827,500 -
Convertible subordinated debentures 3,000,000 -
- --------------------------------------------------------------------------------
Total liabilities 8,385,006 213,652
- --------------------------------------------------------------------------------
Shareholders' equity:
Common stock, $.01 par value -3,500,000
authorized; 3,500,000 and 1,020,000 shares,
issued and outstanding at December 31, 1999
and 1998, respectively 35,000 10,200
Additional paid-in capital 2,645,060 94,860
Retained earnings (accumulated deficit) (1,017,634) 338,142
- --------------------------------------------------------------------------------
Total shareholders' equity 1,662,426 443,202
- --------------------------------------------------------------------------------
Total liabilities and shareholders'
equity $10,047,432 $656,854
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
-6-
<PAGE>
digital fusion, inc.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
YEAR ENDED DECEMBER 31, 1999 1998
-------------------------------------------------------------------------------
Revenues $ 9,561,238 $2,834,257
Cost of revenues 6,113,213 2,163,773
-------------------------------------------------------------------------------
Gross profit 3,448,025 670,484
Selling, general and administrative expenses 2,990,623 269,036
Depreciation 213,647 5,901
Amortization of intangible assets 1,182,801 -
-------------------------------------------------------------------------------
Operating income (loss) (939,046) 395,547
Interest (expense) income, net (421,793) 11,797
-------------------------------------------------------------------------------
Income (loss) before provision
(benefit) for income taxes (1,360,839) 407,344
Provision (benefit) for income taxes (5,063) 156,805
-------------------------------------------------------------------------------
Net income (loss) $(1,355,776) $ 250,539
-------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
-7-
<PAGE>
digital fusion, inc.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Retained
Common Stock Additional earnings
------------------------ paid-in (accumulated
Shares Amount capital deficit) Total
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1997 510,000 $ 5,100 $ - $ 87,603 $ 92,703
Net income 250,539 250,539
Common stock
issued pursuant to
stock purchase 510,000 5,100 94,860 99,960
-----------------------------------------------------------------------------------
Balance at
December 31, 1998 1,020,000 10,200 94,860 338,142 443,202
Net loss (1,355,776) (1,355,776)
Contribution of
PowerCerv stock
owned by
shareholder in
return for
common stock 1,680,000 16,800 1,558,200 - 1,575,000
Sales of common
stock to
shareholder 800,000 8,000 992,000 - 1,000,000
-----------------------------------------------------------------------------------
Balance at
December 31,
1999 3,500,000 $35,000 $2,645,060 $(1,017,634) $1,662,426
-----------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
-8-
<PAGE>
digital fusion, inc.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
YEAR ENDED DECEMBER 31, 1999 1998
-------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $(1,355,776) $250,539
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,396,448 5,901
Deferred tax expense (benefit) (5,063) 2,595
Changes in operating assets and
liabilities, net of effects of
PowerCerv acquisition:
Accounts receivable 73,419 (160,072)
Amounts due to/from related party 127,101 -
Prepaid expenses and other current
assets (81,180) (1,644)
Income taxes receivable - 3,307
Accounts payable 165,168 (59,503)
Accrued expenses 102,149 (65,423)
Income taxes payable (1,423) 1,423
Deferred revenue (17,794) -
-------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 403,049 (22,877)
-------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures - property and equipment (140,846) (13,943)
PowerCerv acquisition and related costs (2,632,841) -
Purchases of software technology (895,750) -
-------------------------------------------------------------------------------
Net cash used in investing activities (3,669,437) (13,943)
-------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,000,000 99,960
Line of credit proceeds, net 3,323,113 -
Proceeds from convertible subordinated
debentures 3,000,000 -
Repayments of notes payable (4,271,046) -
-------------------------------------------------------------------------------
Net cash provided by financing
activities 3,052,067 99,960
-------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (214,321) 63,140
Cash and cash equivalents, beginning of year 254,702 191,562
-------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 40,381 $254,702
-------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
-9-
<PAGE>
GENERAL
1. Organization and digital fusion, inc. (formerly ROI Consulting, Inc.)
Nature of (the "Company") was organized in May 1997 as a
Business (see Florida corporation. The Company provides e-Business
Note 14) and information technology consulting and education
services to a wide array of commercial businesses and
governmental entities. The Company has its main
administrative office in Tampa, Florida along with
regional offices in Minnesota, Florida, Michigan and
Alabama.
ACQUISITION
On March 31, 1999, the Company acquired certain
assets of the General Consulting and Education
division of PowerCerv Technologies Corporation
("PowerCerv"), in exchange for $2,455,000 of cash,
$5,098,546 of notes payable and 700,000 shares of
PowerCerv stock owned by the Company (see note 12).
To finance a portion of the acquisition, the Company
sold 800,000 shares of common stock for $1,000,000 to
an existing shareholder and officer. The value of the
consideration and the direct costs of the acquisition
($9.2 million) less the fair value of the net assets
acquired ($1.3 million) resulted in goodwill of
approximately $7.9 million, which is being amortized
over an estimated life of five years.
The following summarized unaudited pro forma
information for the year ended December 31, 1999
assumes that the PowerCerv acquisition occurred on
January 1, 1999.
-------------------------------------------------------
Net revenues $12,100,000
Operating loss (1,103,000)
Net loss (1,529,000)
-------------------------------------------------------
The pro forma operating results reflect estimated pro
forma adjustments for the amortization of intangibles
arising from the acquisition ($388,000) additional
interest expense from debt related to the acquisition
($9,000) and the operating results of PowerCerv
through March 1999. Pro forma results of operations
information is not necessarily indicative of the
results of operations that would have occurred had
the acquisition been consummated at the beginning of
1999, or of future results of the combined companies.
-10-
<PAGE>
2. Summary of REVENUE RECOGNITION
Significant
Accounting Revenue is recognized as services are rendered and
Policies performance obligations are fulfilled. Deferred
revenue is recorded for any payments received prior
to the services being performed or performance
obligations fulfilled.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term
investments with original maturities of three months
or less to be cash equivalents.
INCOME TAXES
The Company has elected, as of January 1, 1999, under
the applicable provisions of the Internal Revenue
Code and applicable state code, to report its results
of operations for income tax purposes as an "S"
Corporation. Under those regulations, the shareholders
individually assume the income tax liability or
benefits of the Company's net income or loss.
Prior to 1999, the Company reported its results of
operations for income tax purposes as a "C"
Corporation and accounted for income taxes using the
liability method. Under the liability method,
deferred tax assets and liabilities are recognized
for the future tax consequences attributable to
differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and
liabilities were measured using enacted tax rates
expected to apply to taxable income in the years in
which those temporary differences are expected to be
recovered or settled. The effect on deferred tax
assets and liabilities of the change in the Company's
tax status was recognized in 1999. Accordingly, the
Company's benefit for federal and state income taxes
for the year ended December 31, 1999 of $5,063 is
comprised of the effects of reducing previously
recorded deferred income tax liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash
and cash equivalents, accounts receivable, accounts
payable, accrued liabilities, notes payable and
convertible subordinated debentures. The carrying
value of these financial instruments approximate the
instruments' fair values at December 31, 1999 and
1998.
-11-
<PAGE>
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose the
Company to concentrations of credit risk consist
primarily of trade accounts receivable. The Company
continually evaluates the credit worthiness of its
customers' financial position and monitors accounts
on a periodic basis, but typically does not require
collateral related to trade receivables.
PROPERTY, EQUIPMENT AND SOFTWARE
Property, equipment and software are stated at cost.
Depreciation is provided on a straight line method
based upon the following useful lives:
-------------------------------------------------------
Office equipment 2 - 5 years
Computer equipment 2 - 4 years
Furniture and fixtures 5 -7 years
Software technology 5 years
-------------------------------------------------------
LONG-LIVED ASSETS
The Company follows SFAS No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" ("SFAS 121"). In accordance
with SFAS 121, the carrying values of long-lived
assets are periodically reviewed by the Company and
impairments would be recognized if the expected
future operating non-discounted cash flows derived
from an asset were less than its carrying value.
There were no impairment losses recorded in the years
ended December 31, 1999 and 1998.
INTANGIBLE ASSETS
Intangible assets are comprised primarily of goodwill
arising from the PowerCerv acquisition and related
costs. Such asset values are amortized over a period
of five years.
-12-
<PAGE>
USE OF ESTIMATES
The preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements
and the reported amounts of revenues and expenses
during the reporting period. Actual results could
differ from these estimates. Significant estimates
used by the Company include the valuation of the
allowances for doubtful accounts and the useful lives
ascribed to property, equipment, software and
goodwill.
3. Accounts Accounts receivable includes unbilled receivables of
Receivable $155,000 and $87,000 under contracts to purchase
services as of December 31, 1999 and 1998,
respectively. Such amounts are billable upon
completion of performance milestones and are expected
to be collected within one year.
4. Property, Major classes of property, equipment and software,
Equipment and net, consist of the following:
Software
DECEMBER 31, 1999 1998
-------------------------------------------------------
Office equipment $ 41,306 $ -
Computer equipment 406,490 23,966
Software technology 895,750 -
Furniture and fixtures 95,886 944
-------------------------------------------------------
1,439,432 24,910
Less: Accumulated
depreciation (211,258) (6,934)
-------------------------------------------------------
$ 1,228,174 $17,976
-------------------------------------------------------
Depreciation expense totaled $213,647 and $5,901 for
the years ended December 31, 1999 and 1998,
respectively.
5. Intangible Assets Intangible assets, net, are comprised of goodwill
related to the PowerCerv acquisition ($7,885,341 at
December 31, 1999) less accumulated amortization of
$1,182,801.
Amortization expense totaled $1,182,801 for the year
ended December 31, 1999.
-13-
<PAGE>
6. Accrued Expenses At December 31, 1999 and 1998, accrued expenses
consist of the following:
DECEMBER 31, 1999 1998
-------------------------------------------------------
Compensation and benefits $217,581 $188,140
Interest 164,624 -
Other 157,513 16,746
-------------------------------------------------------
$539,718 $ 204,886
-------------------------------------------------------
7. Borrowings LINE OF CREDIT
In June 1999, the Company secured a $4 million line
of credit from a bank with an interest rate of LIBOR
plus 2.5% (8.33% at December 31, 1999). This line
of credit was secured by all of the Company's assets
and guaranteed by certain shareholders. On February
29, 2000, the terms of the line of credit were
amended and the borrower was changed to IBS
Interactive, Inc. ("IBS") (see Note 14). This new
facility is secured by IBS' assets and has a rate of
prime plus 2% and is due in a series of installments
through August 29, 2000.
LONG-TERM NOTES PAYABLE
As part of the consideration for the PowerCerv
acquisition, the Company issued three notes payable
totaling $5,098,540. Of the total amount $4,271,046
was paid off during June 1999. The balance outstanding
at December 31, 1999 $827,500 accrues interest at
4.56% per annum and has maturities of $209,970 in
2001, $225,786 in 2002, $236,259 in 2003 and $155,485
in 2004. The effects of adjusting these notes to fair
value as of the acquisition date were not considered
material. Interest expense on such notes totaled
approximately $180,000 in 1999.
CONVERTIBLE DEBT
During 1999, the Company sold $3,000,000 of 9%
convertible subordinated debentures with a five-year
term which was convertible into common stock at $1.75
per share; of the total sale, $1,500,000 of the
debentures were sold to two existing shareholders and
officers at the same terms afforded to others.
The total debt was converted into shares of Company
common stock on March 1, 2000 in conjunction with
selling the outstanding shares of the Company to IBS
as discussed in Note 14 below.
-14-
<PAGE>
8. Income Taxes The provision (benefit) for income taxes consists of
the following:
DECEMBER 31, 1999 1998
-------------------------------------------------------
Current:
Federal $ - $134,038
State - 20,172
-------------------------------------------------------
- 154,210
Deferred:
Federal (4,429) 2,270
State (634) 325
-------------------------------------------------------
(5,063) 2,595
-------------------------------------------------------
$(5,063) $156,805
-------------------------------------------------------
As discussed in Note 2, the Company changed from a
"C" corporation to a "S" corporation as of January 1,
1999; therefore, the 1999 benefit relates to a
reduction of previously recorded deferred tax
liabilities.
The deferred income tax liability at December 31,
1998 reflects the net tax effect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and
the amounts used for income tax purposes. The
Company's only significant temporary difference is
related to the basis difference in property and
equipment related to the use of accelerated
depreciation for tax purposes.
The difference in the Company's 1999 effective tax
rate when compared to the Federal statutory rate of
34% principally relates to: (i) the Company's benefit
for taxes, as an "S" Corporation, reverts to the
shareholders rather than the Company and (ii) the
benefit of the Company's change in tax status
described in note 2. The difference in the Company's
1998 effective tax rate when compared to the Federal
statutory rate of 34% principally relates to state
taxes.
9. Benefit Plans During 1997, the Company initiated the ROI
Consulting, Inc. 401(k) Retirement Saving Plan (the
"ROI 401(k) Plan") effective May 2, 1997, for the
benefit of the employees hired with the Company prior
to April 1, 1999. This ROI 401(k) Plan is funded by
certain employee payroll deductions. In addition,
the Company has the option to contribute to the ROI
401(k) Plan on the employee's behalf. The Company
did not make any contributions to the ROI 401(k) Plan
during 1999 or 1998.
-15-
<PAGE>
For employees associated with the PowerCerv
acquisition and employees hired after March 31, 1999,
the Company adopted the PowerCerv Corporation 401(k)
Profit Sharing Plan (the "Multiple Employer 401(k)
Plan") which is a multiple employer plan. This
Multiple Employer 401(k) Plan covers employees who
meet established eligibility requirements. Under the
Multiple Employer 401(k) Plan, the Company may match
participant contributions. During 1999, the Company
matched 30% of participant contributions to a maximum
matching amount of 6% of participant base
compensation. Total Company contributions were
approximately $156,500 during the year ended December
31, 1999.
10. Major Customers One customer accounted for 12% and 69% of the
Company's revenues for the years ended December 31,
1999 and 1998, respectively. At December 31, 1999
and 1998 accounts receivable from this customer were
$118,935 and $226,111, respectively.
11. Commitments The Company conducts its operations in leased
facilities. The remaining lease terms range from one
month to three and one-half years. Rental expenses
under operating leases approximated $254,000 and $800
during the years ended December 31, 1999 and 1998,
respectively.
Future minimum lease payments under non-cancelable
operating lease agreements during the years following
December 31, 1999 are approximately $155,000 for the
year ending December 31, 2000; $76,000 for the
year ending December 31, 2001; $68,000 for the year
ending December 31, 2002; $19,000 for the year ending
December 31, 2003 and $2,000 for the year ending
December 31, 2004.
12. Related Party A Shareholder and officer of the Company also serves
Transactions as a Director of PowerCerv. The Company transacts
business with PowerCerv on a regular basis. During the
year ended December 31, 1999, the Company recognized
revenues of $494,541, for services rendered to
PowerCerv and incurred expenses of $158,859, for
services received and ongoing facility costs. In
addition, the Company capitalized costs of $895,750
for software developed by PowerCerv and utilized in
the Company's operations. Amounts due from and due to
PowerCerv at December 31, 1999 totaled $281,656 and
$408,757, respectively.
-16-
<PAGE>
In March 1999, a shareholder and officer contributed
700,000 shares of personally owned PowerCerv stock to
the Company. In return, the shareholder and officer
received 1,680,000 shares of Company common stock
with an ascribed value of $1,575,000. The value of
the 1,680,000 shares was based on the value assigned
to the PowerCerv stock in consummating the acquisition
described in note 1.
At December 31, 1999, the Company had a subordinated
note payable in the amount of $827,500 to PowerCerv
that was issued in connection with the acquisition
described in note 1.
13. Supplemental In connection with the PowerCerv acquisition,
Cash Flow liabilities were assumed as follows:
Information
-------------------------------------------------------
Fair value of assets acquired $9,128,546
Cash paid (2,455,000)
Fair value of issued equity securities (1,575,000)
------------
Liabilities assumed (including notes
payable) $5,098,546
-------------------------------------------------------
Cash paid for interest totaled $181,831 and
$4,050, respectively, in 1999 and 1998. Cash
paid for income taxes totaled $1,423 and $150,448
respectively, in 1999 and 1998.
14. Subsequent Event In March, 2000, the stockholders sold the
outstanding shares of the Company to IBS in exchange
for 975,000 shares (50,000 shares of which will be
reserved upon settlement of certain matters) of IBS
common stock and a $500,000 unsecured, subordinated
note (accruing interest at 6% per annum) and
assumption of debt approximating $4,200,000.
(B) PRO FORMA FINANCIAL INFORMATION.
1. Pro forma unaudited condensed statements of operations for the
year ended December 31, 1999 and the three months ended March 31,
2000 ( a condensed pro forma balance sheet as of March 31, 2000,
reflecting the acquisition, are not presented herein since the
effects of the digital fusion acquisition are reflected in the
Company's financial statements included in Form 10-QSB for the
period ended March 31, 2000 and filed with the Securities &
Exchange Commission on May 15, 2000.
-17-
<PAGE>
IBS INTERACTIVE, INC.
PRO FORMA UNAUDITED CONDENSED FINANCIAL INFORMATION
The accompanying pro forma unaudited condensed statements of operations are
based upon the historical consolidated financial statements of IBS Interactive
Inc. ("IBS" or the "Company") and digital fusion Inc. ("digital fusion")
adjusted to give effect to the acquisition of digital fusion by IBS, accounted
for as a purchase, as if the acquisition had occurred at January 1, 1999. IBS
acquired the outstanding shares of digital fusion in exchange for 925,000 shares
of unregistered IBS common stock (an additional 50,000 shares may be issued in
the future pending the resolution of certain adjustments) and a three year
$500,000 subordinated note bearing interest at 6% per annum. In connection with
the acquisition, $3,000,000 of 9% convertible subordinated debentures were
converted into digital fusion common stock. The pro forma statements of
operations are not necessarily indicative of the results that would have been
obtained if the acquisition had occurred on the date indicated or for any future
period or date. The pro forma adjustments give effect to available information
and assumptions that the Company believes are reasonable. The pro forma
condensed financial information should be read in conjunction with the Company's
historical consolidated financial statements and notes thereto and the
historical consolidated financial statements of digital fusion and the notes
thereto.
<TABLE>
<CAPTION>
Year Ended December 31, 1999
HISTORICAL
---------------------- POWERCERV
DIGITAL PRO FORMA PRO FORMA PRO FORMA
IBS FUSION ADJUSTMENTS ADJUSTMENTS AS ADJUSTED
(A)
------------------------------------------------------------
(UNAUDITED, IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES $ 18,774 $ 9,561 $ 2,539 $ - $ 30,874
Cost of services 13,003 6,113 1,621 - 20,737
------------------------------------------------------------
Gross profit 5,771 3,448 918 - 10,137
Operating expenses:
Selling, general and
administrative 10,545 3,205 694 - 14,444
Amortization of
intangible assets 514 1,182 388 2,034(B) 4,118
Compensation
expense-non-cash 332 - - - 332
Merger expenses 232 - - - 232
------------------------------------------------------------
Operating income (loss) (5,852) (939) (164) (2,034) (8,989)
Interest (expense) income,
net 35 (422) (9) 143(C) (253)
Other expense, net (376) - - - (376)
------------------------------------------------------------
Income (loss) before income
taxes (6,193) (1,361) (173) (1,891) (9,618)
Tax benefit (provision) (45) 5 - (40)
------------------------------------------------------------
NET INCOME (LOSS) $ (6,238) $(1,356) $ (173) $(1,891) $ (9,658)
============================================================
LOSS PER BASIC AND DILUTED
SHARE $ (1.45) $ (1.83)
============ ===========
Weighted average common
shares outstanding
Basic 4,310,458 975,000 5,285,458
Diluted 4,310,458 975,000 5,285,458
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
IBS INTERACTIVE, INC.
PRO FORA UNAUDITED CONDENSED FINANCIAL INFORMATION (CONTINUED)
Three Months Ended March 31, 2000
HISTORICAL
----------------------
DIGITAL PRO FORMA PRO FORMA
IBS FUSION ADJUSTMENTS AS ADJUSTED
------------------------------------------------------------
(UNAUDITED, IN THOUSANDS, (D)
EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES $ 5,412 $ 1,670 $ - $ 7,082
Cost of services 4,300 1,145 - 5,445
-------------------------------------------------------------
Gross profit 1,112 525 - 1,637
Operating expenses:
Selling, general and
administrative 3,462 853 - 4,315
Amortization of
intangible assets 391 263 273(B) 927
Compensation
expense-non-cash 237 - - 237
Severance and
Restructuring 865 - - 865
-------------------------------------------------------------
Operating income (loss) (3,843) (591) (273) (4,707)
-------------------------------------------------------------
Interest expense (income),
net (1) 94 (60)(E) 33
Income (loss) before income
taxes (3,842) (685) (213) (4,740)
Tax provision (5) - (5)
-------------------------------------------------------------
NET INCOME (LOSS) $ (3,847) $ (685) $ (213) $ (4,745)
=============================================================
LOSS PER BASIC AND DILUTED
SHARE $ (0.72) $ (0.78)
============ ===========
Weighted average common
shares outstanding
Basic 5,377,553 676,944(F) 6,054,497
Diluted 5,377,553 676,944 6,054,497
</TABLE>
-20-
<PAGE>
IBS INTERACTIVE, INC.
FOOTNOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Adjustments to reflect the acquisition of digital fusion, inc. by IBS
Interactive, Inc. as if such acquisition had occurred as of January 1, 1999
are as follows:
A. The acquisition of the education and consulting division of PowerCerv
("PowerCerv Division") by digital fusion, inc. occurred on April 1,
1999. This pro forma adjustment reflects the operating results of the
PowerCerv division as if that acquisition had occurred on January 1,
1999. Certain amounts have been reclassified to conform to the
Company's presentation.
B. Reflects the amortization of intangible assets arising from the
acquisition of digital fusion, inc.
C. Reflects reductions in interest expense of $203,000 from the conversion
of $3,000,000 of DF Convertible Debt to digital fusion common stock
(the conversion occurred in connection with the acquisitions); such
reductions were offset by the interest expense arising from the
Subordinated Note ($60,000).
D. This pro forma adjustment reflects the operating results of digital
fusion for the two months ended February 29, 2000.
E. Reflects reductions in interest expense of $67,000 from the conversion
of $3,000,000 of DF Convertible Debt to common stock and offset by the
interest expense arising from the Subordinated Note ($7,000), as if
such shares were outstanding for the entire three month period.
F. Reflects the incremental weighted average number of shares issued
in the period of acquisition, as if such shares were outstanding for
the entire three-month period.
(C) EXHIBITS.
The following exhibits are included as part of this
Report:
2.1* Agreement and Plan of Merger dated as of March 1, 2000 among
Sean D. Mann, Roy E. Crippen III, Michael Mandt, Ali A.
Husain, Robert E. Siegmann, digital fusion, inc. a Florida
corporation ("digital fusion"), and Digital Fusion
Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of IBS Interactive, Inc.
99.1* Press release of IBS, dated March 2, 2000.
--------------------
* Incorporated by reference to the Current Report on Form 8-K
filed on March 24, 2000.
-21-
<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: May 16, 2000 By: /s/ Nicholas R. Loglisci, Jr.
- -------------------------------- -------------------------------------------
Name: Nicholas R. Loglisci, Jr.
Title: President and Chief Executive
Officer
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