-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fn4EF2ijXN9c+j6MoqCz1XevefgzYZguBd+sV3Kbn4Monq4juS06r6S5843SPLiF rB6h3oP8WAe1UZQLTBo9Aw== 0000950131-97-006660.txt : 19971114 0000950131-97-006660.hdr.sgml : 19971114 ACCESSION NUMBER: 0000950131-97-006660 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IFX CORP CENTRAL INDEX KEY: 0000792861 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES [6200] IRS NUMBER: 363399452 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15187 FILM NUMBER: 97712499 BUSINESS ADDRESS: STREET 1: 200 WEST ADAMS ST STREET 2: STE 1500 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124075700 MAIL ADDRESS: STREET 1: 200 WEST ADAMS ST STE 1500 STREET 2: 200 WEST ADAMS ST STE 1500 CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: CARL JACK 312 FUTURES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: 312 FUTURES INC DATE OF NAME CHANGE: 19860916 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File # 0-15187 IFX CORPORATION ------------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 36-3399452 --------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 West Adams Street, Suite 1500, Chicago, Illinois 60606 -------------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (312) 419-9530 ------------------------------------------------------------ (Registrant's telephone number, including area code) Not Applicable ------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. X Yes No ----- ----- As of the date of this report, the issuer had outstanding 31,395,649 shares of common stock, $.004 par value per share. 1 IFX CORPORATION AND SUBSIDIARIES Part I - Financial Information Item 1. Financial Statements Immediately following this page, the following financial information of the Registrant is filed as part of this Report. Page ---- Consolidated statements of financial condition as of September 30, 1997 and June 30, 1997. 3 Consolidated statements of operations for the three months ended September 30, 1997 and 1996. 4 Consolidated statements of cash flows for the three months ended September 30, 1997 and 1996. 5 Notes to consolidated financial statements. 6 2 IFX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS September 30, June 30, 1997 1997 (Unaudited) (Audited) ------------- ------------ Cash $ 542,100 $ 3,279,300 U.S. Government obligations 3,481,600 1,527,100 Other short term investments 37,905,000 44,875,100 Receivables: Brokers and dealers 3,015,400 2,911,600 September 30, June 30, 1997 1997 ------------- ---------- Customers & counterparties $2,054,800 $1,422,900 Other 1,556,900 1,503,300 Less - Allowance for doubtful accounts (430,000) (430,000) 3,181,700 2,496,200 ---------- ---------- Investments in and advances to affiliated partnerships 62,200 50,000 Notes receivable 617,200 618,900 Furniture, equipment, and leasehold improvements, net of accumulated depreciation and amortization of $192,100 and $140,300, respectively 218,900 269,000 Other assets 521,200 616,000 ----------- ----------- Total $ 49,545,300 $ 56,643,200 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Payables: Brokers and Dealers $ 1,527,000 $ 1,068,200 Customers & counterparties 33,333,700 41,284,600 Affiliates and employees 69,900 57,900 Accounts payable and accrued expenses 3,335,600 3,406,600 Notes payable 836,600 1,586,600 ----------- ----------- Total 39,102,800 47,403,900 ----------- ----------- Minority Interest 1,351,100 1,035,600 ----------- ----------- Stockholders' equity: Common stock, $.004 par value; 150,000,000 shares authorized, 31,395,649 shares issued and outstanding respectively 125,600 125,600 Paid-in capital and retained earnings 9,011,500 8,123,800 Cumulative translation adjustment (45,700) (45,700) ----------- ----------- Total stockholders' equity 9,091,400 8,203,700 ----------- ----------- Total $ 49,545,300 $ 56,643,200 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 3 IFX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended September 30, -------------------------- 1997 1996 ---- ---- Revenues: Commissions $ 112,800 $ 61,300 Interest 1,029,500 532,600 Trading gains, net 2,071,800 957,400 Earn-out from Sale of Assets 785,500 375,500 Other - 658,200 ---------- ---------- Total revenues 3,999,600 2,585,000 ---------- ---------- Expenses: Commission, floor brokerage and clearing costs 171,200 54,900 Compensation and related benefits 626,300 927,900 Communications 198,600 174,200 Interest 687,200 474,900 Rent and other occupancy costs 178,300 152,200 Business promotion 120,100 87,500 Professional and consulting fees 245,600 155,100 Depreciation 51,800 22,000 Other 151,100 118,700 ---------- ---------- Total expenses 2,430,200 2,167,400 ---------- ---------- Income before income taxes and minority interest 1,569,400 417,600 Income tax expense 366,300 152,200 ---------- ---------- Net income before minority interest 1,203,100 265,400 Minority interest 315,500 - ---------- ---------- Net income 887,600 265,400 Assumed cumulative dividend on Class A preferred stock - (10,000) ---------- ---------- Net income applicable to common stock $ 887,600 $ 255,400 ========== ========== Primary earnings per common share: Net income $ .03 $ .01 ========== ========== Weighted average number of common shares outstanding 31,395,649 33,624,530 ========== ========== Fully diluted earnings per common share: Net income $ .03 $ .01 ========== ========== Weighted average number of common shares outstanding 31,395,649 33,624,530 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 4 IFX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended September 30, ------------------------ 1997 1996 ---- ---- Cash Flows From Operating Activities: Net income (loss) $ 887,600 $ 265,400 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 51,800 22,000 Deferred taxes (6,000) (9,800) Doubtful accounts expense (benefit) - (56,500) Loss on the sale of exchange memberships - 22,300 Gain on sale of clearing corporation stock - (664,000) Equity in net gain of affiliated partnership (12,200) - Changes in: Cash segregated or secured under Commodity Exchange Act, net - 2,140,900 U.S. Government obligations (1,954,500) 139,343,000 Other short term investments 6,970,100 12,692,300 Deposits with clearing organizations - 40,895,400 Warehouse receipts - 959,500 Receivables (750,900) 11,903,400 Other assets 100,900 285,200 Payables (7,518,500) (201,140,800) Accounts payable and accrued expenses (71,000) (2,064,300) ---------- ----------- Cash provided by (used in) operating activities (2,302,700) 4,594,000 ---------- ----------- Cash Flows From Investing Activities: Decrease in notes receivable 1,700 2,100 Purchase of furniture, equipment and leasehold improvements (1,700) (43,900) Proceeds from the sale of exchange memberships - 16,000 Proceeds from the sale of clearing corporation stock - 1,024,000 Proceeds from the sale of furniture and equipment - 79,600 ---------- ----------- Cash provided by (used in) investing activities - 1,077,800 ---------- ----------- Cash Flows From Financing Activities: Repayment of notes payable (750,000) (900,000) Repayment of liabilities subordinated to claims of general creditors - (4,000,000) Minority interest 315,500 - ---------- ----------- Cash provided by (used in) financing activities (434,500) (4,900,000) ---------- ----------- Effect of exchange rate changes on cash - (31,200) Increase (decrease) in cash (2,737,200) 740,600 Cash, beginning of period 3,279,300 1,587,300 ---------- ----------- Cash, end of period $ 542,100 $ 2,327,900 ========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 5 IFX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Basis of Presentation The consolidated financial statements include the accounts of IFX Corporation (formerly Jack Carl/312-Futures, Inc.) and Subsidiaries, (collectively, the "Company"). All material intercompany accounts and transactions have been eliminated in consolidation. Until July 1, 1996, the Company engaged principally in the business of effecting transactions in futures and options on futures contracts for the accounts of customers and the operation of commodity pools. Index Futures Group, Inc. ("Index"), until July 1, 1996, was the principal operating subsidiary of Jack Carl/312-Futures, Inc. Effective July 1, 1996, Index sold, transferred and assigned substantially all of its brokerage accounts ("Sale of Assets") to E.D. & F. Man International Inc. ("MINC"). Index ceased being a registered futures commission merchant with the Commodity Futures Trading Commission ("CFTC") in December, 1996. As a condition of the Sale of Assets, Index changed its name to FX Chicago, Inc. IFX, Ltd. (formerly Index FX, Ltd.), a British corporation and a majority owned subsidiary of IFX Corporation, continues to conduct foreign exchange business as a registrant of the British Securities and Futures Authority. These consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these condensed consolidated financial statements. Operating results for the quarter are not necessarily indicative of the results that may be expected for the year ending June 30, 1998. Certain reclassifications have been made in the 1996 financial statements to conform to the 1997 presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's financial statements on Form 10-K for the year ended June 30, 1997. Commitments and Contingencies Litigation- The Company is a defendant in, and may be threatened with, various legal proceedings arising from its regular business activities. Management, after consultation with legal counsel, is of the opinion that the ultimate liability, if any, resulting from any pending action or proceedings will not have a material effect on the financial position or results of operations of the Company. On May 16, 1996, Index filed suit in the Circuit Court of Cook County--Law Division against Doug Niemann, a former customer, for breach of contract, seeking to recover a debit balance of $88,200 (Index Futures Group, Inc. v. Doug Niemann, case no. 96L-5506). On January 14, 1997, Niemann filed a counterclaim for $688,200. The Company believes that the counterclaim is without merit and will defend vigourously. 6 IFX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) In April, 1994, Index without admitting or denying the allegations, paid $100,000 to the CFTC, settling an administrative action filed on September 29, 1992. In a related action, the equity receiver of an alleged commodity pool operator brought an action to recover losses of approximately $600,000, alleging various theories such as constructive trust, negligence, breach of fiduciary duty and conversion. On May 29, 1996, the district judge dismissed the complaint in its entirety. Supplemental Plaintiff filed a timely Notice of Appeal with the U.S. Court of Appeals for the Seventh Circuit on May 16, 1997. The Seventh Circuit has yet to rule on whether this case may be appealed. A former officer of Index whose employment was terminated as a result of the Sale of Assets rejected Index's severance payment offer. The officer had made a demand for $500,000. The Company settled this case in July, 1997 for $75,000. Other- In connection with the Sale of Assets, if certain conditions occur over the next year, the Company may be subject to additional severance payments of up to $100,000. The Company has also entered into a consulting contract, which expires during fiscal 1999, providing for aggregate minimum payments of $97,500. The Company had quaranteed performance under the Commodity Exchange Act of certain introducing brokers with respect to their customer accounts. In connection with the Sale of Assets, these introducing broker quarantees were terminated or transferred to MINC effective July 1, 1996. Index issued a limited indemnification agreement to MINC related to the Sale of Assets. This agreement covers potential customer claims arising from activity prior to the sale. Sale of Assets The purchase price payable by MINC in connection with the Sale of Assets is based on a percentage of the net income, as defined in the Sales Agreement, of the transferred activities during the sixty-six month period following the sale. During the three months ended September 30, 1997 and 1996, the Company, as its percentage of net income from the Sale of Assets, earned $781,800 and $375,500 respectively from the Sale of Assets. Such earnings are included in other revenue in the Statements of Operations. Capital Requirements IFX Ltd. became a registrant of the British Securities and Futures Authority ("SFA") in November, 1996. As such, IFX Ltd. is subject to the financial resources requirements adopted and administered by the SFA. As of September 30, 1997, IFX Ltd.'s financial resources, as defined by the SFA, were $6,857,000, which was $3,813,000, in excess of its requirements. 7 IFX CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Period Ended September 30, 1997. IFX Corporation (formerly Jack Carl/312-Futures, Inc.), (which when consolidated with its subsidiaries is henceforth referred to as the "Company") is a holding company which operates its business through its subsidiaries. Index Futures Group, Inc. ("Index"), until July 1, 1996, the Company's principal operating subsidiary, provided a full range of futures brokerage, clearing and back office services for institutional and public commodity traders. It was a clearing member of all major U.S. commodity exchanges. Effective July 1, 1996, Index sold, transferred and assigned substantially all of its brokerage accounts ("Sale of Assets") to E.D.& F. Man International, Inc. ("MINC"). As a result of the Sale of Assets, Index no longer acts as a futures commission merchant. It immediately withdrew as a clearing member from all commodity exchanges, and terminated its registration as a futures commission merchant in December, 1996. As a condition of the Sale of Assets, Index changed its name to FX Chicago Inc. Operations at FX Chicago Inc. are currently limited to activity relating to the net income derived from the Sale of Assets. IFX Ltd. (formerly Index FX, Ltd.), a British corporation and a majority-owned subsidiary of IFX Corporation continues to conduct foreign exchange business as a registrant of the British Securities and Futures Authority ("SFA"). IFX Ltd. commenced trading operations in October, 1995 and became an SFA registrant in November, 1996. Financial Condition The Company's cash and short-term investment portfolio totaled $41,928,700 at September 30, 1997. Included in this amount is $31,500,000 of funds from IFX Ltd. customers, which have been invested by IFX Ltd. on the customers' behalf or are held in segregated cash accounts, pursuant to rules of the SFA. The Company's positions are generally liquid. The portfolio is invested primarily in U.S. dollar denominated securities, but also includes foreign currency positions deposited by IFX customers. As a registrant of the SFA, IFX Ltd. is subject to the financial resources requirements adopted and administered by the SFA. As of September 30, 1997, IFX Ltd.'s financial resources, as defined by the SFA, were $6,857,000, which was $3,813,000 in excess of its requirements. For the three months ended September 30, 1997, cash used in operations was $2,302,700 compared to cash provided by operations of $4,594,000 for the same period in fiscal 1996. The majority of cash used in operations is related to payments of customer funds made to customers of IFX Ltd. In addition, $750,000 of notes payable were repaid during the quarter ended September 30, 1997. As of September 30, 1997, the Company had $836,600 of notes payable to its principal stockholder. Stockholders' equity at September 30, 1997 was $9,091,400. Management believes existing cash and short-term investments together with operating cash flows, access to equity capital, and borrowing capacity, provide adequate resources to fund ongoing operating requirements and future capital expenditures related to the expansion of existing businesses and development of new projects. 8 IFX CORPORATION AND SUBSIDIARIES Results of Operations IFX Ltd., the Company's London-based operation, continues to grow. IFX Ltd.'s target customer base is beginning to recognize it as an effective and efficient alternative to the larger money center banks. In addition, the Company's earnings from the Sale of Assets continue to increase as MINC generates more and more business from the brokerage accounts it purchased from Index. As such, revenues of the Company are increasing at a much greater rate than are the expenses. Revenues were $3,999,600 in the first quarter of fiscal 1998, an increase of 55% from the first quarter of fiscal 1997. Trading gains increased by $1,114,400 during the quarter ended September 30, 1997, compared to the same period a year ago. The primary component in trading gains in fiscal 1997 is the revenue from IFX Ltd. Revenues from the Sale of Assets increased by $410,000 during the quarter ended September 30, 1997, compared to the same period a year ago. Reported revenue from the Sale of Assets during the first quarter of fiscal 1997 was subsequently adjusted and increased by $168,800 by MINC. These additional earnings were received and recorded by the Company during the third and fourth quarters of fiscal 1997, as per the Sale of Assets Agreement. As noted above, the Company's earnings from the Sale of Assets continue to increase as MINC generates more and more business from the brokerage accounts it purchased from Index. Other revenue decreased $658,200 during the quarter ended September 30, 1997, compared to same period a year ago. Included in other revenue for the quarter ended September 30, 1996 was a net gain of $641,700 on the sale of clearing corporation stock and exchange memberships. Total expenses were $2,430,200 in the first quarter of fiscal 1998, a decrease of 12% from the first quarter of fiscal 1997. The decrease in expenses as resulting from the Sale of Assets has been offset somewhat by the increasing expenses from the expanding operations of IFX Ltd. As a result of the aforementioned revenues and expenses, net income for the quarter ended September 30, 1997 is $887,600 or $.03 per share compared to a net income of $255,400 or $.01 per share for the same period a year ago. The Board of Directors is exploring various business opportunities for the Company now that FX Chicago Inc. no longer acts as a futures commission merchant, and as a result has capital available for investments. 9 Item 1. Legal Proceedings See Notes to Financial Statements. Item 6. Exhibits and Reports on Form 8-K (A) Exhibits 11.1 Computation of Earnings per Common Share 27 Financial Data Schedule (EDGAR only) (B) REPORTS ON FORM 8-K During the fourth quarter the Company filed the following report on Form 8-K: August 1, 1997 Item 2, reporting restructuring of capital of IFX Ltd., the Registrant's London subsidiary, and subsequent sale of 50% of the stock to The Park Trust. 10 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 thereunto duly authorized. IFX CORPORATION ------------------------ (Registrant) Dated: November 12, 1997 By: /s/ CHRISTINA S. DONKA ------------------------ Christina S. Donka Chief Financial Officer 11 EX-11.1 2 COMPUTATION OF EARNINGS PER SHARE Exhibit 11.1 IFX CORPORATION AND SUBSIDIARIES Computation of Earnings Per Common Share
Three Months Ended September 30, ------------------------------- 1997 1996 ---- ---- Earnings (Loss) Net income (loss) $ 887,600 $ 265,400 Deduct assumed dividends on Class A preferred stock - (10,000) ---------- ---------- Net income (loss) applicable to common stock $ 887,600 $ 255,400 ========== ========== Shares Weighted average number of common shares outstanding 31,395,649 33,624,530 ========== ========== Primary earnings (loss) per common share: Net income (loss) $ .03 $ .01 ========= ==========
Note: Fully diluted earnings per share have not been presented because the effects are not material. EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from IFX Corporation's Form 10-Q as of September 30, 1997 and is qualified in its entirety by reference to such financial statements. 3-MOS JUN-30-1997 JUL-01-1997 SEP-30-1997 542,100 41,386,600 6,197,100 (430,000) 0 48,125,800 218,900 192,100 49,545,300 38,266,200 0 0 0 9,137,100 (45,700) 49,545,300 0 3,999,600 0 0 1,743,000 0 687,200 1,569,400 366,300 1,203,100 0 0 0 887,600 .03 .03
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