<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A-2
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 1, 1996
---------------
IBAH, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant specified in Charter)
Delaware 0-19892 52-1670189
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employee
of incorporation) File Number) Identification No.)
Four Valley Square
512 Township Line Road
Blue Bell, Pennsylvania 19422
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code: (215) 283-0770
- -------------------------------------------------------------------------------
(Former name and former address, if changed since last report)
<PAGE>
Item 7. Financial Statements and Exhibits
IBAH, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
(a) Financial Statements of businesses acquired
HGB, Inc. ............................................... F-2
(b) Pro forma financial information
Pro Forma Combined Financial Statements ................ F-12
(c) Exhibits
None
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To H.G.B., Inc.:
We have audited the accompanying balance sheets of H.G.B., Inc. (a New Jersey
corporation) as of December 31, 1994 and 1995, and the related statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of H.G.B., Inc. as of December 31,
1994 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
October 1, 1996
F-2
<PAGE>
H.G.B., INC.
------------
BALANCE SHEETS
---------------
<TABLE>
<CAPTION>
December 31,
------------------------ September 30,
ASSETS 1994 1995 1996
- ------ ----------- ---------- ------------
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $467,978 $1,925,392 $2,032,589
Short-term investments (Note 2) 54,923 63,355 64,232
Accounts receivable (Notes 2 and 3) 2,186,830 2,369,001 4,010,206
Prepaid expenses 120,032 20,752 10,667
----------- ---------- ------------
Total current assets 2,829,763 4,378,500 6,117,694
PROPERTY AND EQUIPMENT, net (Notes 2 and 4) 160,859 158,105 283,714
RELATED PARTY MORTGAGES RECEIVABLE (Note 9) 915,591 633,371 151,662
OTHER ASSETS 172,952 34,084 56,870
----------- ---------- ------------
$4,079,165 $5,204,060 $6,609,940
=========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $746,478 $736,159 $932,805
Accrued compensation and related costs 109,102 141,534 128,630
Other accrued expenses 54,972 75,683 115,117
Contract deposits (Note 2) 1,568,160 2,554,405 3,532,771
Contract advances (Note 2) 46,135 779,241 590,777
Taxes payable 66,560 - -
Current portion of stockholder buyout payable (Note 5) 128,091 142,403 142,403
----------- ---------- ------------
Total current liabilities 2,719,498 4,429,425 5,442,503
----------- ---------- ------------
LONG-TERM STOCKHOLDER BUYOUT PAYABLE (Note 5) 414,892 273,060 167,428
----------- ---------- ------------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 7)
STOCKHOLDERS' EQUITY:
Common stock, no par value, 40,000 shares authorized, 10,000 10,000 10,000
34,060 shares issued and outstanding
Retained earnings 936,775 493,575 992,009
Less - Treasury stock of 2,000 shares, at cost (2,000) (2,000) (2,000)
----------- ---------- ------------
Total stockholders' equity 944,775 501,575 1,000,009
----------- ---------- ------------
$4,079,165 $5,204,060 $6,609,940
=========== ========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
H.G.B., INC.
------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended
For the Years Ended December 31, September 30,
------------------------------------------ --------------------------
1993 1994 1995 1995 1996
-------------- ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $13,597,054 $13,591,649 $16,015,851 $10,555,329 $15,806,325
Less- Billable expenses 2,068,189 2,297,368 4,263,409 1,844,289 5,229,636
-------------- ------------ ------------ ------------ ------------
Net revenues 11,528,865 11,294,281 11,752,442 8,711,040 10,576,689
-------------- ------------ ------------ ------------ ------------
OPERATING EXPENSES:
Direct 6,261,481 6,243,947 6,271,819 4,660,477 5,365,259
Selling, general and
administrative (Note 5) 6,316,848 3,111,904 4,326,230 3,090,016 3,296,701
-------------- ------------ ------------ ------------ ------------
Total operating expenses 12,578,329 9,355,851 10,598,049 7,750,493 8,661,960
-------------- ------------ ------------ ------------ ------------
Operating income (loss) (1,049,464) 1,938,430 1,154,393 960,547 1,914,729
OTHER INCOME (EXPENSES):
Interest expense (10,825) (57,529) (52,507) (40,745) (28,615)
Gain on sales of investments 8,449 - - - -
Loss on sale of property and equipment - (9,801) - - -
Interest and dividend income 90,123 70,440 109,460 78,696 70,177
-------------- ------------ ------------ ------------ ------------
Income (loss) before income taxes (961,717) 1,941,540 1,211,346 998,498 1,956,291
PROVISION FOR STATE INCOME TAXES (Note 2) (13,459) (31,998) (52,246) (43,763) (67,457)
-------------- ------------ ------------ ------------ ------------
Net income (loss) ($975,176) $ 1,909,542 $ 1,159,100 $ 954,735 $ 1,888,834
============== ============ ============ ============ ============
S CORPORATION TERMINATION PRO FORMA
DATA:
Income (loss) before income taxes, as
reported ($961,717) $ 1,941,540 $ 1,211,346 $ 998,498 $ 1,956,291
Income tax benefit (provision) 460,000 (760,000) (472,000) (389,000) (762,000)
-------------- ------------ ------------ ------------ ------------
Pro forma net income (loss) ($501,717) $ 1,181,540 $ 739,346 $ 609,498 $ 1,194,291
============== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
H.G.B., INC.
------------
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
<TABLE>
<CAPTION>
Common Stock Retained Treasury Stock Total
- - - - - - - - - - - - - - - - - - - - Stockholders'
Shares Amount Earnings Shares Amount Equity
--------- -------- ----------- -------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1993 10,000 $10,000 $1,518,593 - $ - $1,528,593
Net loss - - (975,176) - - (975,176)
Stockholders' distribution - - (48,307) - - (48,307)
Purchase of treasury stock (2,000) - - (2,000) (2,000) (2,000)
--------- -------- ----------- -------- --------- -----------------
BALANCE, December 31, 1993 8,000 10,000 495,110 (2,000) (2,000) 503,110
Net income - - 1,909,542 - - 1,909,542
Stockholders' distribution - - (1,467,877) - - (1,467,877)
Retirement of common stock (8,000) (10,000) - - - (10,000)
Issuance of common stock 34,060 10,000 - - - 10,000
--------- -------- ----------- -------- --------- -----------------
BALANCE, December 31, 1994 34,060 10,000 936,775 (2,000) (2,000) 944,775
Net income - - 1,159,100 - - 1,159,100
Stockholder's distribution - - (1,602,300) - - (1,602,300)
--------- -------- ----------- -------- --------- -----------------
BALANCE, December 31, 1995 34,060 10,000 493,575 (2,000) (2,000) 501,575
Net income (unaudited) - - 1,888,834 - - 1,888,834
Stockholder's distribution (unaudited) - - (1,390,400) - - (1,390,400)
--------- -------- ----------- -------- --------- -----------------
BALANCE, September 30, 1996
(unaudited) 34,060 $10,000 $992,009 (2,000) ($2,000) $1,000,009
========= ======== =========== ======== ========= =================
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
H.G.B., INC.
------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended
For the Years Ended December 31, September 30,
-------------------------------------- -------------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($975,176) $1,909,542 $1,159,100 $954,735 $1,888,834
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities-
Depreciation and amortization 45,419 48,181 78,548 32,590 59,650
Changes in assets and liabilities-
Increase in accounts receivable (58,951) (220,202) (182,171) (510,056) (1,641,205)
(Increase) decrease in prepaid expenses (26,028) (42,957) 99,280 34,895 10,085
(Increase) decrease in other assets 4,732 (144,866) 138,868 138,868 (22,786)
Increase (decrease) in accounts payable 189,192 80,282 (10,319) 156,429 196,646
Increase (decrease) in accrued
compensation and related costs 66,740 (93,557) 32,432 409,774 (12,904)
Increase in other accrued expenses 50,757 4,215 20,711 496,031 39,434
Increase in contract deposits 119,562 410,185 986,245 428,891 978,366
Increase (decrease) in contract advances 164,835 (118,700) 733,106 535,300 (188,464)
Increase (decrease) in taxes payable 55,624 (35,736) (66,560) - -
---------- ---------- ---------- ----------- -----------
Net cash provided by (used in)
operating activities (363,294) 1,796,387 2,989,240 2,677,457 1,307,656
---------- ---------- ---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemptions (purchases) of short-term investments (6,294) 3,349 (8,432) (5,077) (877)
Purchases of property and equipment (55,546) (98,228) (75,794) (49,816) (185,259)
Receipts (disbursements) of mortgages receivable 17,871 (480,749) 282,220 274,628 481,709
---------- ---------- ---------- ----------- -----------
Net cash provided by (used in)
investing activities (43,969) (575,628) 197,994 219,735 295,573
---------- ---------- ---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in long-term
stockholder's buyout payable 699,904 (156,921) (127,520) (94,311) (105,632)
Distributions to stockholders (48,307) (1,467,877) (1,602,300) (1,170,000) (1,390,400)
---------- ---------- ---------- ----------- -----------
Net cash provided by (used in)
financing activities 651,597 (1,624,798) (1,729,820) (1,264,311) (1,496,032)
---------- ---------- ---------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 244,334 (404,039) 1,457,414 1,632,881 107,197
CASH AND CASH EQUIVALENTS, beginning of
period 627,683 872,017 467,978 467,978 1,925,392
---------- ---------- ---------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $872,017 $467,978 $1,925,392 $2,100,859 $2,032,589
========== ========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
H.G.B., INC.
------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(All September 30, 1996 disclosures are unaudited)
(1) BACKGROUND:
-----------
H.G.B., Inc., doing business as The Hardardt Group ("H.G.B." or the
"Company"), headquartered in Parsippany, New Jersey, was founded in
December 1989 to provide a broad range of clinical development services to
the pharmaceutical, biotechnology and medical device industries. The
Company is a uniquely structured Contract Research Organization that
provides its services through a proprietary network of consultants and
various specialty firms.
(2) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
--------------------
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 those
estimates.
Cash and Cash Equivalents-
--------------------------
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents. Cash and cash equivalents
consists of money market and demand deposit accounts.
Short-Term Investments-
-----------------------
Investments, in a tax-exempt municipal bond fund, are held at market
value, and at December 31, 1993, 1994 and 1995 were classified as short-
term.
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," (SFAS
115) effective January 1, 1994. This statement requires the Company to
classify its investment securities as: (1) held to maturity, (2)
available for sale or (3) held for trading purposes. The adoption of this
statement was not material to the financial statements taken as a whole.
At December 31, 1994 and 1995, the Company's short-term investments are
classified as available for sale, therefore any unrealized holding gains
or losses would be presented in a separate component of stockholders'
equity. At December 31, 1993, 1994 and 1995, and at September 30, 1996,
there were no significant unrealized holding gains or losses.
F-7
<PAGE>
Accounts and Unbilled Receivables-
----------------------------------
The Company considers accounts and unbilled receivables as reported to be
collectible and realizable. As of December 31, 1993, the Company recorded
a $78,910 allowance for doubtful accounts to provide for a customer that
declared bankruptcy. As of December 31, 1994 and 1995, and September 30,
1996, no allowance for doubtful accounts was recorded. The Company
continually reviews the realizability of its receivables and charges
current period earnings for the amount deemed unrealizable.
Property and Equipment-
-----------------------
Property and equipment are carried at cost. Improvements and betterments
are capitalized, and maintenance and repairs are charged to expense as
incurred. The Company provides deprecation and amortization using
principally the straight-line method for financial reporting purposes
using the following estimated lives-
Office equipment 3 years
Furniture and fixtures 5 years
Leasehold improvements 6 years
Contract Deposits and Advances-
-------------------------------
The Company collects contract deposits and advances upon the initiation
of a project for its client. Contract deposits are client funds which
are held for the duration of the project. Upon completion of the project,
these funds are returned to the client. Contract advances are funds which
are earned by the Company on a pro rata basis as the project progresses
based on terms in the project contracts.
Revenue Recognition-
--------------------
Substantially all revenues are earned by performing services under
contracts from various pharmaceutical, biotechnology and medical device
companies. Time and expenses incurred by consultants carrying out the
specific aspects of the contract are billed monthly to the clients and
revenues are recognized as the time is incurred.
Included in gross revenue and billable expenses are $1,775,000 of amounts
received from customers for the year ended December 31, 1995 to provide
for investigator grants associated with obtaining patients to participate
in various research projects. As of December 31, 1995, there were
undisbursed investigator grants amounting to approximately $595,000,
which are classified as cash and a contract deposit liability in the
accompanying financial statements.
In 1993, two individual customers accounted for 32.4% and 12.4% of the
Company's net revenues, respectively. In 1994, three individual customers
accounted for 20.4%, 14.6% and 10.6% of the Company's net revenues,
respectively. In 1995, four individual customers accounted for 20.9%,
17.5%, 12.1% and 11.2% of the Company's net revenues, respectively.
F-8
<PAGE>
Expense Recognition-
--------------------
A portion of expenses are incurred under contracts with physicians and
other consultants. These consultants monitor and report on the progress
of clinical trials and verify data gathered from these trials. Expenses
are recognized when incurred. Direct operating costs in the accompanying
statements of operations are principally the contracted physicians' and
other consultants' costs.
Income Taxes-
-------------
Through December 31, 1995, the Company was an S Corporation for Federal
and state income tax purposes; thus, all Federal and a portion of the
state income was taxable to the shareholders. The state income tax
provision represents the differences between the rate for individuals and
the statutory corporate rate. The Company reports certain income and
expense items for income tax purposes on a basis different from that
reflected in the accompanying financial statements. The principal
difference during 1995 is related to the Company's use of the cash method
of accounting for tax purposes. At December 31, 1995, the financial
reporting basis of the Company's net assets exceeds the tax basis of the
net assets by approximately $350,000. Upon termination of the Company's S
Corporation status, as occurred effective October 1, 1996, upon
culmination of the acquisition described in Note 10, a net deferred tax
liability applicable to these differences would be reflected in the
accompanying financial statements.
The pro forma net income presentation in the accompanying statements of
operations reflect the statutory Federal and state income tax rates
adjusted for tax exempt interest income and other items of income
(expense) for financial reporting purposes not includable (deductible)
for income tax purposes.
<TABLE>
<CAPTION>
(3) ACCOUNTS RECEIVABLE:
-----------------------
December 31
--------------------------------
1994 1995
---------- ----------
<S> <C> <C>
Trade-
Billed $830,335 $1,121,801
Unbilled 1,356,495 1,247,200
---------- ----------
$2,186,830 $2,369,001
========== ==========
<CAPTION>
(4) PROPERTY AND EQUIPMENT:
-----------------------
December 31
--------------------------------
1994 1995
---------- ----------
<S> <C> <C>
Office equipment $200,447 $275,861
Furniture and fixtures 114,622 115,002
Leasehold improvements 7,411 7,411
---------- ----------
322,480 398,274
Less- Accumulated depreciation and
amortization (161,621) (240,169)
---------- ----------
$160,859 $158,105
========== ==========
</TABLE>
F-9
<PAGE>
(5) STOCKHOLDER BUYOUT:
-------------------
On August 20, 1993, the Company entered into an agreement with a
stockholder to purchase all his outstanding shares of the Company's common
stock and terminate the stockholder's employment with the Company. In
consideration of this agreement, the Company paid to the stockholder
$2,000 related to the purchase of his common stock held in the Company,
$79,288 related to the termination of his employment upon the closing date
of the agreement, and the Company agreed to pay, in sixty consecutive
monthly installments of principal and interest, based on the prime rate
plus two basis points (10.75% at December 31, 1995) an additional $749,150
in full satisfaction of the termination of employment. The costs of the
stockholders' buyout of $828,428 were considered compensation expense and
are included in selling, general and administrative expense in the
accompanying December 31, 1993 statement of operations.
The aggregate maturity of the stockholder buyout is as follows-
<TABLE>
<S> <C>
1996 $142,403
1997 158,061
1998 114,999
</TABLE>
(6) LEASES:
-------
The Company entered into several lease agreements in 1992 and 1994 for its
corporate office space, additional storage space, equipment and a
condominium. Certain equipment is leased from THG Partners. The Company's
two major shareholders are partners in THG Partners (see Note 9). Rent
expense for all operating leases was $89,969, $229,119 and $313,347 for
the three year period ended December 31, 1993, 1994 and 1995,
respectively. The future minimum lease payments as of December 31, 1995
under the noncancellable operating leases for office space and equipment
are as follows-
<TABLE>
<S> <C>
1996 $305,431
1997 302,519
1998 260,466
1999 215,553
2000 35,684
</TABLE>
(7) LINE OF CREDIT:
---------------
In 1994, the Company entered into a $500,000 line of credit with a lending
institution. As of December 31, 1994 and 1995, and September 30, 1996,
there were no balances outstanding under this line of credit.
(8) EMPLOYEE RETIREMENT PLAN:
------------------------
In January 1991, the Company established a 401(k) Savings Plan for all
qualified U. S. employees. The employer contributions credited to the plan
were charged to expenses and were $124,641, $73,845 and $100,000 for the
three year period ended December 31, 1993, 1994 and 1995, respectively.
F-10
<PAGE>
(9) RELATED PARTY TRANSACTIONS:
---------------------------
As of December 31, 1995, the Company had three mortgage receivables of
$633,371 due from two stockholders which bore interest at 8.00%, 5.50% and
5.78%, respectively. These mortgages are secured by a condominium leased
by the Company and personal residences, respectively. Payments are due in
monthly installments of $764, $4,085 and $773, including principal and
interest. Interest income on these mortgages for the three year period
ended December 31, 1993, 1994 and 1995 was $31,345, $30,278 and $43,610,
respectively. In 1996, one stockholder paid approximately $468,000 to
satisfy one mortgage.
As of December 31, 1994 and 1995, the Company had employee loans
receivable of $145,000 and $24,132, respectively, which are included in
other assets in the accompanying balance sheets. During 1996, all but
$6,000 of the loans were repaid.
During the three year period ended December 31, 1993, 1994 and 1995 the
Company provided $3,027,797, $205,169 and $599,230, respectively, for
bonuses to its stockholders who are also the key executives of the
Company.
During 1994, the Company entered into several lease agreements with THG
Partners for use of equipment which extend through October 1998 (see Note
6). Rent expense for these operating leases was $46,186 and $79,957 for
the two year period ended December 31, 1994 and 1995. During 1992, the
Company entered into a lease agreement with a major shareholder for use of
a condominium.
(10) SUBSEQUENT EVENT:
-----------------
Effective September 30, 1996, the Company consummated its Agreement and
Plan of Merger (the "Agreement") with IBAH, Inc. and IBAH Acquisition
Company whereby the Company was merged with and into IBAH Acquisition
Company. Under the Agreement, each Company common share was converted into
the right to receive cash of $437 and 85 common shares of IBAH, Inc. The
common shares of the Company held in treasury were canceled.
F-11
<PAGE>
IBAH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
(Unaudited)
The accompanying Pro Forma Combined Balance Sheet as of September 30, 1996, and
the Pro Forma Combined Statements of Operations for the nine months ended
September 30, 1996 and for the year ended December 31, 1995, give effect to (i)
the acquisition by IBAH, Inc. ("IBAH" or "the Company") of Resource Biometrics,
Inc. ("RBI"); and (ii) the acquisition by IBAH of HGB, Inc., doing business as
The Hardardt Group ("THG"), as if these transaction had occurred in the case of
the Pro forma Combined Balance Sheet, as of September 30, 1996 for THG and as of
July 18, 1996 for RBI, or in the case of the Pro Forma Combined Statements of
Operations, as of December 31, 1994.
The Pro Forma Combined Financial Statements have been prepared by management and
should be read in conjunction with the historical financial statements of IBAH
(as included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and the Company's Quarterly Report filed on Form 10-Q for the
nine months ended September 30, 1996) and THG (as included herewith). The
historical financial statements of RBI are not presented herewith due to
materiality. The Pro Forma Combined Financial Statements are based on certain
assumptions and preliminary estimates which are subject to change. These
statements do not purport to be indicative of the financial position or results
of operations that might have occurred, nor are they indicative of future
results.
F-12
<PAGE>
IBAH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEETS
SEPTEMBER 30, 1996
(Unaudited)
(In thousands, except share information)
<TABLE>
<CAPTION>
THG Acquisition
-----------------------------------
ASSETS IBAH THG Pro Forma Combined
------ Historical Historical Adjustments Pro Forma
------------ ------------ ------------- -----------
(Note 1) (Note 1) (Note 3)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,198 $ 2,033 $ (14,000) (E) $ 1,056
(1,175) (F)
Short-term investments 4,954 64 - 5,018
Accounts receivable 24,823 4,010 - 28,833
Prepaid expenses and other 887 11 56 (G) 954
------------- ------------ ----------- -----------
Total current assets 44,862 6,118 (15,119) 35,861
PROPERTY AND EQUIPMENT, net 7,263 284 - 7,547
GOODWILL, net 4,890 - 29,747 (H) 34,637
OTHER ASSETS 381 208 - 589
------------- ------------ ---------- ----------
$ 57,396 $ 6,610 $ 14,628 $ 78,634
============= ============ ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,274 $ 142 $ - $ 1,416
Accounts payable 1,937 933 - 2,870
Accrued expenses 5,924 244 - 6,168
Payable to independent investigators 2,175 - - 2,175
Deferred revenue 11,575 4,124 - 15,699
------------- ------------ ---------- -----------
Total current liabilities 22,885 5,443 - 28,328
------------- ------------ ---------- -----------
DEFERRED RENT 613 - - 613
------------- ------------ ---------- -----------
DEFERRED INCOME TAXES - - 190 (G) 190
------------- ------------ ---------- -----------
LONG-TERM DEBT 2,040 167 - 2,207
------------- ------------ ---------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock (IBAH pro forma), $.01
par value, 2,000,000 shares authorized,
749,665 shares issued and outstanding 7 - - 7
Common stock (IBAH pro forma), $.01
par value, 50,000,000 shares authorized,
21,315,031 shares issued and outstanding 186 10 17 (I) 213
Additional paid-in capital 57,483 14,421 (I) 72,894
992 (J)
(2) (K)
Retained earnings (accumulated deficit) (25,823) 992 (992) (J) (25,823)
Cumulative translation adjustment 5 - - 5
Treasury stock (2) 2 (K) -
------------- ------------ ---------- ----------
Total stockholders' equity 31,858 1,000 14,438 47,296
------------- ------------ ---------- ----------
$ 57,396 $ 6,610 $ 14,628 $ 78,634
============= ============ ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
F-13
<PAGE>
IBAH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
(In thousands, except share information)
<TABLE>
<CAPTION>
RBI Acquisition
-----------------
IBAH RBI Pro Forma IBAH
Historical Historical Adjustments Pro Forma
----------------- ---------------- --------------- ----------------
(Note 1) (Notes 1 and 2) (Note 2)
<S> <C> <C> <C> <C>
REVENUES $ 55,984 $ 946 $ - $ 56,930
Less- Independent investigators' costs 14,302 - - 14,302
----------------- ---------------- --------------- ----------------
Net revenues 41,682 946 - 42,628
----------------- ---------------- --------------- ----------------
OPERATING EXPENSES:
Direct 21,404 288 - 21,692
Selling, general and administrative 20,117 792 (82) (A) 20,889
55 (B)
17 (C)
Non-recurring item - Acquired
research and development 510 - (510) (D) -
----------------- ---------------- --------------- ----------------
Total operating expenses 42,031 1,080 (520) 42,591
----------------- ---------------- --------------- ----------------
Operating income (loss) (349) (134) 520 37
INTEREST INCOME (EXPENSE), net 299 (16) - 283
----------------- ---------------- --------------- ----------------
Income (loss) before income taxes (50) (150) 520 320
INCOME TAXES - - - -
----------------- ---------------- --------------- ----------------
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (50) $ (150) $ 520 $ 320
================= ================ =============== ================
LOSS PER COMMON SHARE $ -
=================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 17,031,000
==================
<CAPTION>
THG Acquisition
----------------------------
THG Pro Forma Combined
Historical Adjustments Pro Forma
----------------- ---------------- ---------------
(Note 1) (Note 3)
<S> <C> <C> <C>
REVENUES $ 15,806 $ (33) (L) $ 72,703
Less- Independent investigators' costs 5,229 - 19,531
----------------- ---------------- ---------------
Net revenues 10,577 (33) 53,172
----------------- ---------------- ---------------
OPERATING EXPENSES:
Direct 5,365 (33) (L) 27,024
Selling, general and administrative 3,297 1,116 (M) 25,214
(98) (N)
Non-recurring item - Acquired
research and development - - -
----------------- ---------------- ---------------
Total operating expenses 8,662 985 52,238
----------------- ---------------- ---------------
Operating income (loss) 1,915 (1,018) 934
INTEREST INCOME (EXPENSE), net 41 (757) (O) (433)
----------------- ---------------- ---------------
Income (loss) before income taxes 1,956 (1,775) 501
INCOME TAXES 67 118 (P) 185
----------------- ---------------- ---------------
INCOME (LOSS) FROM CONTINUING OPERATIONS $ 1,889 $ (1,893) $ 316
================= ================ ===============
LOSS PER COMMON SHARE $ 0.01
===============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 26,790,000
===============
</TABLE>
The accompanying notes are an integral part of these statements.
F-14
<PAGE>
IBAH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
(In thousands, except share information)
<TABLE>
<CAPTION>
RBI Acquisition
--------------------------------------------------
IBAH RBI Pro Forma IBAH
Historical Historical Adjustments Pro Forma
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(Note 1) (Note 1) (Note 2)
REVENUES $ 56,985 $ 1,581 $ - $ 58,566
Less- Independent investigators' costs 12,214 - - 12,214
------------- ----------- ----------- -----------
Net revenues 44,771 1,581 - 46,352
------------- ------------ ----------- -----------
OPERATING EXPENSES:
Direct 26,304 726 - 27,030
Selling, general and administrative 21,369 890 102(B) 22,393
32(C)
------------- ------------ ----------- -----------
Total operating expenses 47,673 1,616 134 49,423
------------- ------------ ----------- -----------
Operating income (loss) (2,902) (35) (134) (3,071)
INTEREST INCOME (EXPENSE), net (111) (22) - (133)
------------- ------------ ----------- -----------
Income (loss) before income taxes (3,013) (57) (134) (3,204)
INCOME TAXES - - - -
------------- ------------ ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (3,013) $ (57) $ (134) $ (3,204)
============= ============ =========== ===========
LOSS PER COMMON SHARE $ (0.21)
=============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,276,000
=============
<CAPTION>
THG Acquisition
----------------------------------------------------
THG Pro Forma Combined
Historical Adjustments Pro Forma
------------ ------------ --------------
<S> <C> <C> <C>
(Note 1) (Note 3)
REVENUES $ 16,016 $ - $ 74,582
Less- Independent investigators' costs 4,264 - 16,478
------------- ------------ --------------
Net revenues 11,752 - 58,104
------------- ------------ --------------
OPERATING EXPENSES:
Direct 6,272 - 33,302
Selling, general and administrative 4,326 1,487 (M) 27,477
(729)(N)
------------- ---------- --------------
Total operating expenses 10,598 758 60,779
------------- ---------- --------------
Operating income (loss) 1,154 (758) (2,675)
INTEREST INCOME (EXPENSE), net 57 (1,256)(O) (1,332)
------------- ---------- --------------
Income (loss) before income taxes 1,211 (2,014) (4,007)
INCOME TAXES 52 123 (P) 175
------------- ---------- --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS $ 1,159 $ (2,137) $ (4,182)
============= ========== ==============
LOSS PER COMMON SHARE $ (0.24)
==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 17,346,000
==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-15
<PAGE>
IBAH, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
1. HISTORICAL:
The historical balances represent the financial position and results of
operation for each company and were derived from the respective financial
statements for the indicated period, with the following exceptions. No
separate RBI historical balance sheet as of September 30, 1996 is presented as
the financial position of RBI (see Note 2) is already consolidated in the IBAH
historical balance sheet as of that date. Also, the RBI historical statement of
operations for the nine months ended September 30, 1996 only includes the period
from January 1, 1996 through July 17, 1996, as the results of RBI's operations
since the July 18, 1996 acquisition date are included in the IBAH historical
statement of operations for the nine-month period. The IBAH historical
statement of operations for the year ended December 31, 1995 does not include a
$1,546,000 loss from discontinued operations.
The unaudited THG balance sheet and statement of operations have been prepared
on a basis consistent with the THG audited financial statements included
elsewhere in this Filing. The unaudited IBAH balance sheet and statements of
operations and the unaudited RBI statements of operations have been prepared on
a basis consistent with the IBAH audited financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995. In
the opinion of management, these historical financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial condition and results of operation for the period
presented.
2. ACQUISITION OF RESOURCE BIOMETRICS, INC. ("RBI"):
On July 18, 1996, the Company purchased all of the outstanding shares of stock
of RBI for an initial consideration of 350,000 shares of the Company's common
stock. RBI is a provider of software products and data services to the
pharmaceutical, biotechnology and medical device industries. RBI's software
tools are used to increase the efficiency of data clean-up, database
consolidation, data analysis and reporting. The acquisition was recorded using
the purchase method of accounting. The total purchase price of $2,463,000
including estimated transaction costs of $174,000, was allocated to the fair
value of the assets acquired and liabilities assumed. The $2,718,000 excess of
purchase price over book value on the acquisition date was allocated based on an
independent appraisal as follows: (1) $510,000 to acquired research and
development, which has been charged to the statement of operation as a non-
recurring item; (2) $160,000 to software technology being amortized over 5
years; and (3) $2,048,000 to goodwill being amortized over 20 years.
Additional consideration may be payable to the former shareholders of RBI in the
form of cash or shares of the Company's common stock. This additional
consideration is contingent on RBI exceeding certain earnings levels related to
software products, as defined in the acquisition agreement during the years
ended December 31, 1997 through 1999. Any payments made under this contingency
will be accounted for as additional purchase price when paid.
F-16
<PAGE>
As indicated in Note 1, RBI's financial position and results of operations since
the acquisition date have been included in IBAH's historical balance sheet as of
September 30, 1996 and historical statement of operations for the nine months
ended September 30, 1996, respectively. The RBI historical statement of
operations included in the Pro Forma Combined Statement of Operations for the
nine months ended September 30, 1996 only includes the period from January 1,
1996 through July 17, 1996.
The following pro forma adjustments are reflected as if the acquisition of RBI
had occurred as of December 31, 1994 in the case of the Pro Forma Combined
Statement of Operations:
(A) Elimination of non-recurring transaction costs associated with the
acquisition recorded on the books of RBI.
(B) Amortization of goodwill on a straight-line basis over 20 years.
(C) Amortization of capitalized software technology on a straight-line basis
over 5 years.
(D) Elimination of non-recurring acquired research and development charge
related to RBI purchase accounting.
3. ACQUISITION OF HGB, INC., DOING BUSINESS AS THE HARDARDT GROUP ("THG"):
On October 1, 1996, the Company purchased all of the outstanding shares of stock
of THG for $14 million in cash and 2,719,999 shares of the Company's common
stock. The former stockholders of THG are restricted from selling their IBAH
common stock for a six month period. THG is a provider of clinical trials
management and clinical monitoring services to the pharmaceutical, biotechnology
and medical device industries. THG provides these services predominantly in the
U. S. This acquisition will be recorded under the purchase method of
accounting. The total purchase price of approximately $30,613,000, including
estimated transaction costs of $1,175,000, will be allocated to the fair value
of assets acquired and liabilities assumed. It is anticipated that the book
value of THG's assets and liabilities will approximate their fair value. The
$29,747,000 excess of purchase price over book value on the acquisition date
will be allocated to goodwill, and will be amortized on a straight-line basis
over 20 years. The goodwill amortization period is based upon preliminary
estimates by management and is subject to change. Management is in the process
of evaluating the goodwill life.
The following pro forma adjustments are reflected as if the acquisition of THG
had occurred as of September 30, 1996 in the case of the Pro Forma Combined
Balance Sheet, or as of December 31, 1994 in the case of the Pro Form Combined
Statements of Operations:
Pro Forma Combined Balance Sheet
(E) Payment of cash portion of purchase price.
(F) Payment of estimated transaction costs.
(G) Deferred state income taxes required as a result of the termination of
THG's S Corporation status (see Note 4).
(H) Portion of purchase price allocated to goodwill.
F-17
<PAGE>
(I) Issuance of 2,719,999 shares of IBAH common stock to THG stockholders and
related adjustment to additional paid-in capital.
(J) Elimination of THG's retained earnings due to the application of purchase
accounting.
(K) Cancellation of 2,000 shares of THG common stock held in treasury.
Pro Forma Combined Statements of Operations
(L) Elimination of intercompany revenues and direct expenses between IBAH and
THG.
(M) Amortization of goodwill on a straight-line basis over 20 years.
(N) Adjustment to reflect officer's compensation of THG based upon employment
agreements entered into upon the closing of the acquisition.
(O) Adjustment to reflect increased interest expense/reduced interest income
related to the cash portion of the purchase price.
(P) Adjustment of income tax provision for combined operating results (see
Note 4).
4. INCOME TAXES:
The Pro Forma Combined Statements of Operations do not reflect tax benefits for
the historical losses of IBAH and RBI as the realization of such benefits is
uncertain.
Upon the acquisition of THG on October 1, 1996, THG became a C Corporation as
its S Corporation status was terminated. As a C Corporation, THG is liable for
Federal and state income taxes. The need for any current and/or deferred
Federal income tax provisions or liabilities is eliminated due to IBAH's net
operating loss carryforward. However, the accompanying Pro Forma Financial
Statements have been adjusted to reflect the appropriate state income tax
provisions and deferred liabilities.
5. PRO FORMA NET INCOME (LOSS) PER SHARE:
The shares used in computing pro forma net income (loss) per share assumes (i)
the acquisition of RBI by IBAH and (ii) the acquisition of THG by IBAH had
occurred as of the beginning of each period presented. The loss per share
calculations do not include the effect of outstanding stock options, warrants or
convertible preferred stock as their inclusion would be antidilutive.
F-18
