-----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, TfE43/OBvisJR184YkxYqKZmnPcfIDpvkL8E9hQdKwu3IUuiOX4xuOcxP38VlmUv VDVo8kAi7nwIbZI4a1BmqA== 0000950131-00-001240.txt : 20000215 0000950131-00-001240.hdr.sgml : 20000215 ACCESSION NUMBER: 0000950131-00-001240 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IFX CORP CENTRAL INDEX KEY: 0000792861 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] 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: 543432 BUSINESS ADDRESS: STREET 1: 707 SKOKIE BLVD 5TH FLOOR CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 8474129411 MAIL ADDRESS: STREET 1: 707 SKOKIE BLVD 5TH FLOOR CITY: NORTHBROOK STATE: IL ZIP: 60062 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 December 31, 1999 [ ] 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.) 707 Skokie Blvd Ste 580, Northbrook, Illinois 60062 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (847) 412-9411 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (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 December 31, 1999, the issuer had outstanding 11,084,920 shares of common stock, $.02 par value per share. IFX CORPORATION AND SUBSIDIARIES Page ---- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Condensed consolidated balance sheets as of December 31, 1999 (Unaudited) and June 30, 1999 3 Condensed consolidated statements of operations for the three months ended December 31, 1999 (Unaudited) and 1998 (Unaudited), and for the six months ended December 31, 1999 (Unaudited) and 1998 (Unaudited) 4 Condensed consolidated statements of cash flows for the six months ended December 31, 1999 (Unaudited) and 1998 (Unaudited) 5 Notes to condensed consolidated financial statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations for the Period Ended December 31, 1999 10 Item 3 - Quantitative and Qualitative Disclosures about Market Risk 15 PART II - OTHER INFORMATION Item 1 - Legal Proceedings 16 Item 6 - Exhibits and reports on form 8-K 16 (A) Exhibits Exhibit 3.1 Spinway Media Network, Inc. Agreement Exhibit 27 Financial Data Schedule (EDGAR only) Exhibit 99.1 Risk Factors (B) Reports on Form 8-K PART I--FINANCIAL INFORMATION IFX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Item 1--Financial Statements Certain information in the financial statements presented below, except for net income and basic net income per share, differs from amounts previously reported due to the reclassification of certain revenues and operating expenses to discontinued operations, reflecting the disposition of the Company's trading business.
December 31, June 30, 1999 1999 ASSETS (Unaudited) ----------- ----------- CURRENT ASSETS: Cash and cash equivalents.................................. $ 2,318,100 $ 5,482,800 Receivables, net of allowance for doubtful accounts of $634,100 and $80,100, respectively........................ 866,000 458,300 Note receivable............................................ 2,900,000 -- Net assets of discontinued operations...................... 707,100 3,726,900 ----------- ----------- Total current assets..................................... 6,791,200 9,668,000 ----------- ----------- PROPERTY AND EQUIPMENT: Equipment, furniture and leasehold improvements............ 5,758,400 2,253,500 Assets under capital lease................................. 2,740,500 -- ----------- ----------- 8,498,900 2,253,500 Less: accumulated depreciation and amortization............ (1,445,900) (369,300) ----------- ----------- Total property and equipment, net........................ 7,053,000 1,884,200 ----------- ----------- OTHER ASSETS: Acquired customer base, net of amortization of $1,801,200 and $155,500 respectively................................ 13,692,100 2,686,600 Investment in Yupi Internet Inc............................ 3,113,500 3,113,500 Investments in and advances to affiliates.................. 95,100 241,500 Notes receivable........................................... 618,900 612,500 Deferred income taxes...................................... 1,427,000 -- Capitalized software, net.................................. 235,000 -- Other assets............................................... 1,632,900 655,200 ----------- ----------- Total other assets....................................... 20,814,500 7,309,300 ----------- ----------- TOTAL ASSETS................................................ $34,658,700 $18,861,500 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses...................... $12,490,400 $ 2,447,200 Capital lease obligation................................... 283,200 -- ----------- ----------- Total current liabilities................................ 12,773,600 2,447,200 ----------- ----------- LONG-TERM LIABILITIES: Notes payable.............................................. 436,700 316,900 Capital lease obligation................................... 2,451,200 -- ----------- ----------- Total long-term liabilities.............................. 2,887,900 316,900 ----------- ----------- TOTAL LIABILITIES........................................... 15,661,500 2,764,100 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock, $.02 par value; 50,000,000 shares authorized, 11,084,920 and 6,830,240 shares issued and outstanding, respectively............................. 221,700 136,600 Paid-in capital........................................... 25,356,800 11,299,100 (Accumulated deficit) Retained earnings................... (4,770,700) 4,817,200 Accumulated other comprehensive income (loss)............. 98,700 (26,000) Deferred compensation...................................... (1,909,300) (129,500) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY.................................. 18,997,200 16,097,400 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $34,658,700 $18,861,500 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. IFX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended December 31, December 31, - ------------------------------------------------------------------------------------------------------------------------ 1999 1998 1999 1998 (Unaudited) (Unaudited) (Unaudited) (Unaudited) - ------------------------------------------------------------------------------------------------------------------------ STATEMENT OF OPERATIONS DATA: Revenues: Dial Up.................................................. $ 2,016,800 $ -- $ 2,927,400 $ -- Dedicated................................................ 252,100 -- 431,500 -- Hosting and Design Web Services.......................... 113,000 -- 167,900 -- Other.................................................... 216,100 -- 289,800 -- ------------ ---------- ------------ ---------- Total revenues........................................... 2,598,000 -- 3,816,600 -- Cost and expenses: Cost of revenues......................................... 1,471,300 -- 2,547,900 -- General and administrative............................... 6,660,900 302,200 11,051,500 452,500 Depreciation and amortization............................ 1,502,500 -- 2,354,900 -- ------------ ---------- ------------ ---------- Total operating expenses................................. 9,634,700 302,200 15,954,300 452,500 Operating loss from Continuing operations.................................... (7,036,700) (302,200) (12,137,700) (452,500) Other income (expense): Interest income.......................................... 65,100 90,000 150,100 183,400 Income (Loss) on operations of equity investee........................................ (13,500) -- (35,500) -- Other.................................................... 38,100 24,300 68,200 16,700 ------------ ---------- ------------ ---------- Total other income....................................... 89,700 114,300 182,800 200,100 Loss from continuing operations before income taxes...................................... (6,947,000) (187,900) (11,954,900) (252,400) (Provision)/Benefit from income tax......................... 550,600 52,200 1,427,000 (6,800) ------------ ---------- ------------ ---------- Loss from continuing operations............................. (6,396,400) (135,700) (10,527,900) (259,200) Income from discontinued operations, net of taxes................................. 497,700 784,800 940,000 1,731,500 ----------- ---------- ------------ ---------- Net income (loss)........................................... $(5,898,700) $ 649,100 $ (9,587,900) $1,472,300 BASIC AND DILUTED INCOME (LOSS) PER SHARE: Loss from continuing operations............................. $ (0.74) $ (0.02) $ (1.31) $ (0.04) Income from discontinued operations......................... $ 0.06 $ 0.12 $ 0.12 $ 0.28 ------------ ---------- ------------ ---------- Net income (loss)............................................. $ (0.68) $ 0.10 $ (1.19) $ 0.24 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic and diluted........................................... 8,626,999 6,397,496 8,031,845 6,261,517 - ------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. IFX CORPORATION AND SUBSIDIARIES CONSDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended December 31, ----------------------------- 1999 1998 ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)............................... $(9,587,900) $1,472,300 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation.................................... 709,200 - Amortization.................................... 1,645,700 - Deferred taxes.................................. (1,427,000) - Bad debt expense................................ 554,000 - Compensation associated with stock options...... 1,640,500 - Equity in net (gain) loss of affiliated partnerships................................ 35,500 - Changes in operating asset and liabilities: Receivables................................... (549,300) (36,400) Other assets.................................. (793,700) (40,200) Due to/from affiliates........................ 10,300 15,400 Accounts payable and accrued expenses......... 2,309,200 120,600 Change in net assets from discontinued operations.................................. 3,019,800 (132,000) ----------- ---------- Cash provided (used) by operating activities...... (2,433,700) 1,399,700 ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, primarily customer base......... (1,865,100) - (Increase) decrease in investments in and advances to affiliates....................... 110,900 (220,100) Increase (decrease) in notes receivable....... (6,400) 1,100 Purchase of PP&E.............................. (1,950,900) (56,800) Purchase of capitalized software.............. (235,000) - ----------- ---------- Cash used in investing activities.............. (3,946,500) (275,800) ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable................... 96,900 - Proceeds (payments) of capital lease obligation.................................. (6,100) - Issuance of common stock...................... 3,000,000 1,000,000 ----------- ---------- Cash provided by financing activities........... 3,090,800 1,000,000 ----------- ---------- Effect of exchange rate changes on cash........... 124,700 - ----------- ---------- Increase (decrease) in cash and cash equivalents.. (3,164,700) 2,123,900 ----------- ---------- Cash and cash equivalents, beginning of period.... 5,482,800 5,633,200 ----------- ---------- Cash and cash equivalents, end of period.......... $ 2,318,100 $7,757,100 =========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for income taxes................... - $ 250,000 =========== ========== SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES DISCLOSURE: Value of stock issued in conjunction with acquisitions................................ $ 4,822,400 - =========== ========== Acquisition of equipment through assumption of capital lease obligations................... $ 2,740,500 - =========== ==========
The accompanying notes are an integral part of the consolidated financial statements. IFX CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 (Unaudited) NOTE 1. BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of IFX Corporation and its majority-owned subsidiaries for which it has a controlling financial interest. All material intercompany accounts and transactions, including those related to the Company's former subsidiaries, are eliminated in consolidation. These condensed 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. The balance sheet at June 30, 1999, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended June 30, 1999. Operating results for the quarter ended December 31, 1999 are not necessarily indicative of the results that may be expected for the year ending June 30, 2000. Certain reclassifications have been made in the 1999 financial statements to conform to the fiscal 2000 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, 1999. NOTE 2. DISCONTINUED OPERATIONS In June 1999, IFX divested itself of its 50.1% interest in IFX Ltd. in exchange for approximately $2.45 million and a redeemable preference share entitling IFX to quarterly payments equal to approximately 30% of the net profits, as specifically defined, of IFX Ltd. through June 30, 2002. Following the sale of its U.K. subsidiary, IFX decided not to invest the sales proceeds in the trading business and, instead, decided to continue to develop businesses in the Internet industry. Accordingly, the Company has accounted for this disposal, and the disposal of operations related to the same business segment made in prior years, as noted below, as discontinued operations. On May 31, 1996, an agreement was reached to sell, transfer and assign to E.D. & F Man International Inc. ("MINC") substantially all of the brokerage accounts maintained by FX Chicago, Inc. (formerly Index Futures Group, Inc., or "Index"), together with all positions, securities and other assets held in or for such accounts and other agreed-upon assets used in the conduct of the brokerage activities. MINC is a unit of E.D.& F. Man Group, plc, a London-based international trading and finance conglomerate. This sale was completed as of July 1, 1996. During 1997, Index ceased being a clearing member at all exchanges, and ceased being a registered futures commission merchant. The purchase price payable by MINC in connection with this transaction 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. Because the purchase price is contingent upon the future earnings of the customer accounts sold, none of which is guaranteed, income is recognized as earned beginning in fiscal year 1997, over the five and one-half years after the date of the sale. The sales contract required Lee S. Casty to sign a non- competition agreement. As compensation for providing such an agreement, a portion of the purchase price was to be paid to Lee S. Casty. Mr. Casty irrevocably transferred his right to receive payments under such agreement to the Company. Accordingly, a portion of the purchase price which would otherwise have been received by Lee S. Casty is being included in revenue by the Company. In addition, in conjunction with the sale, the Company issued a limited indemnification agreement to MINC. The agreement covers potential customer claims arising from activity prior to the sale. The following table summarizes financial information related to the discontinued trading business:
Three Months Ended Six Months Ended December 31, December 31, ----------------------- ----------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Total revenues....................................... $ 807,600 $2,761,400 $1,531,400 $5,665,000 ========== ========== ========== ========== Income from discontinued operations before income taxes..................... $ 765,600 $1,207,400 $1,446,100 $2,624,800 Income tax provision on discontinued operation...... (267,900) (422,600) (506,100) (893,300) ---------- ---------- ---------- ---------- Income from discontinued operations, net of taxes... $ 497,700 $ 784,800 $ 940,000 $1,731,500 ========== ========== ========== ==========
The information set forth in the remaining Notes to the Financial Statements relates to continuing operations unless otherwise specified. NOTE 3. ACQUISITIONS AND RECENT DEVELOPMENTS NetSpace, S.A. de C.V. On October 1, 1999, IFX purchased all of the subscriber base of NetSpace, S.A. de C.V. ("NetSpace"), an ISP located in Toluca, Mexico. NetSpace currently serves customers providing standard dial-up connections, dedicated Internet products and web hosting. The Conex Group. On October 6, 1999, IFX purchased all of the capital stock of Conex Brasil S.A., W3 Informatica Ltda., K3 Informatica Ltda, and Conex Canoas Ltda. (referred to collectively as the "Conex Group"), which provide Internet services in the Brazilian city of Porto Alegre and the surrounding cities of Novo Hamburgo, Santa Maria, and Canoas. The Conex Group currently serves customers providing standard dial-up connections, dedicated Internet products and web hosting. On October 21, 1999, the Company filed a Form 8-K with respect to the acquisition of the Conex Group and its affiliated companies. On December 20, 1999, the Company filed a Form 8-K/A amending the Form 8-K previously filed. Sistemas Integrales, Servicios y Comunicacion, S.A. de C.V. On November 8, 1999, IFX purchased all of the users and assets of Sistemas Integrales, Servicios y Comunicacion, S.A. de C.V. ("SISCO"). SISCO provides dial-up, web design and web hosting services to consumers and corporations in Guadalajara, Jalisco, Mexico. Panaweb Corporation. On November 30, 1999, IFX purchased all of the capital stock of Panaweb S.A. ("Panaweb"), a Panama Internet design firm. Panaweb provides web design and web hosting services to consumers and corporations in the Republic of Panama. Panaweb also owns and manages one of Panama's leading local Internet portals, www.panama.net. Networks Mexico, S.A. de C.V. On December 15, 1999, IFX purchased all of the users and assets of Networks Mexico, S.A. de C.V. ("NETMEX"). NETMEX provides dial-up, Web design and Web hosting services to consumers and corporations in Mexico City, Mexico. Zalhe Informatica Ltda. On December 14, 1999, IFX purchased all of the shares of Zalhe Informatica Ltda. ("Zalhe"), a Brazilian Internet Service Provider. Zalhe is a provider of Internet services including, dial up access, dedicated access, web design and web hosting in Pelotas, Brazil. Nicanet, S.A. On December 20, 1999, IFX purchased all of the shares of Nicanet S.A. ("Nicanet"). Nicanet is a provider of Internet services to consumers and businesses in Managua, Nicaragua, providing dial up access, dedicated and wireless access, web development, design and hosting. Parmil, S.A. On December 23, 1999, IFX purchased all of the shares of Parmil S.A. ("Multired"). Multired is a provider of Internet services to Uruguayan consumers and businesses, providing dial-up, dedicated and wireless access, as well as web development, design and hosting. For the acquisitions during the second quarter of fiscal 2000, the total purchase prices were approximately $8 million, of which approximately $2.1 million was paid or will be paid in cash, approximately $5.7 million was paid or will be paid by issuing approximately 253,192 shares of the Company's common stock and assumed liabilities of approximately $0.2 million. The total cash acquired in those acquisitions was $0.2 million. Each of the acquisitions was accounted for under the purchase method of accounting. The purchase price in excess of the net tangible assets aggregated approximately $6,692,800 and was allocated to Acquired Customer Base. This allocation is preliminary and is subject to finalization of the Company's valuation analysis. The Acquired Customer Base is being amortized using the straight-line method over an estimated life of 3 years. The consolidated financial statements include the accounts of these acquisitions since the date of purchase. The following unaudited pro forma data summarize the results of operations for the periods indicated as if these acquisitions had been completed on July 1, 1998, the beginning of the 1999 fiscal year. The pro forma data gives effect to actual operating results prior to the acquisitions and adjustments to goodwill amortization and income taxes. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions had occurred on July 1, 1998 or that may be obtained in the future. The pro forma data does not give effect to acquisitions completed subsequent to December 31, 1999.
Six Months Ended December 31, ------------------------ 1999 1998 -------- -------- (Unaudited) Total revenues............................ $ 5,893,600 $2,540,900 Net income (loss)......................... (9,910,500) 857,900 Basic and diluted net income (loss) per common share.......................... ($1.23) $.14
NOTE 4. STOCK BASED COMPENSATION PLANS Employee Stock Option Plan On October 13, 1999, the Company filed a Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, in which, among other things, it requested shareholder approval for an amendment to the IFX Corporation 1998 Stock Option and Incentive Plan (the "Option Plan") to increase the number of shares of common stock available for issuance under the Option Plan. On November 9 the shareholders voted in favor of the amendment increasing the number of common shares available under the Option Plan from 900,000 to 1,800,000. Directors Stock Option Plan On October 13, 1999, the Company filed a Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, in which, among other things, it requested shareholder approval for the IFX Corporation Directors Stock Option Plan (the "Directors Plan"). The purpose of the Directors Plan is to assist the Company in securing individuals who are not already employees or officers of the Company to serve on its Board of Directors, and to provide financial incentives to such directors to exert their best efforts on behalf of the Company. In general, the Directors Plan provides that, each eligible director automatically will receive an option to purchase (i) 450 shares of Common Stock, upon such director's initial election to the Board of Directors of the Company, provided such director is elected after the effective date of the Directors Plan, and (ii) for each year thereafter and on the date of each annual meeting of the stockholders of the Company (including this annual meeting), 450 shares of Common Stock for service as a director and 75 shares of Common Stock for each Committee of the Board of Directors upon which such director serves. On November 9 the shareholders voted in favor of the Directors Plan. NOTE 5. SUBSEQUENT EVENTS Free Internet Access. On January 3, 2000, IFX announced that it would offer a class of service featuring free Internet access in Latin America. The free access offering is provided by Tutopia.com, Inc., a subsidiary of IFX,and currently covers 6 countries: Argentina, Brazil, Chile, Colombia, El Salvador and Mexico. Following the initial implementation, the program will then be rolled out in the rest of the IFX network. Tutopia.com became the first company to offer free Internet access in Latin America on a pan-regional basis. IFX will also continue to offer fee-based premium and business service. Openway, Ltda. On January 12, 2000, IFX purchased substantially all of the assets of Openway Ltda., a leading Colombian Internet Service Provider. Openway provides dial-up, web design and web hosting services to consumers and corporations in Bogota, Colombia. Spinway Media Network, Inc. On January 24, 2000, Tutopia.com, Inc. entered into an agreement (the "Spinway Agreement") with Spinway Media Network, Inc. ("Spinway") under which Tutopia.com's free Internet access will utilize Spinway's persistent advertising box technology to provide Tutopia.com users with general and targeted advertising. A copy of the Spinway Agreement is filed as Exhibit 3.1 to this report. Brasilnet Comunicacoes S.A. On January 28, 2000, IFX purchased the shares of Brasilnet Comunicacoes S.A. ("Brasilnet"), a Brazilian Internet Service Provider. Brasilnet provides dial-up access, web design and web hosting services to consumers in Joinville, Itajai, Blumenau, Criciuma and Florianopolis, Brazil. NOTE 6. GEOGRAPHIC INFORMATION In fiscal 1999 the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosure About Segments of an Enterprise and Related Information". The new standard changes the information the Company reports about its operating segments. The Company is structured primarily around the geographic markets it serves and operates four reportable segments in Brazil, Chile, Mexico and Venezuela. All of the segments provide Internet connectivity services. The accounting policies of the segments are the same as those described in the Significant Accounting Policies footnote of the June 30, 1999 consolidated financial statements. The Company evaluates performance based on profit or loss from operations before income taxes excluding interest income and expenses, equity income, and gains or losses from securities and other investments. The Company does not derive more than 10% of its revenues from any individual customer. Selected unaudited financial information for the three months ended December 31, 1999 by segment is presented below:
United Brazil Chile Mexico Venezuela Other Total States - ---------------------------------------------------------------------------------------------------- Revenues - 899,600 395,000 421,000 470,500 411,900 2,598,000 - ---------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before taxes (4,452,600) (340,900) (632,600) (137,400) (364,800) (1,018,700) (6,947,000) - ----------------------------------------------------------------------------------------------------
Selected unaudited financial information for the six months ended December 31, 1999 by segment is presented below
United Brazil Chile Mexico Venezuela Other Total States - ---------------------------------------------------------------------------------------------------- Revenues - 1,008,000 805,700 689,900 733,100 579,900 3,816,600 - ---------------------------------------------------------------------------------------------------- Loss from continuing operations before taxes (7,097,700) (538,400) (1,225,900) (336,700) (468,100) (2,288,100) (11,954,900) - ----------------------------------------------------------------------------------------------------
Information by product lines is presented on the Condensed Consolidated Statement of Operations. NOTE 7. Cash & Cash Equivalents Cash and cash equivalents includes cash and investments of less than three months in duration. NOTE 8. Capitalized Software Effective for fiscal year 2000, the Company adopted the American Institute of Certified Public Accountants' Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The statement requires capitalization of certain costs incurred in the development of internal-use software, including external direct material and service costs. Prior to adoption of SOP 98-1, the Company expensed these costs as incurred. NOTE 9. Stockholders' Equity International Technology Investments, LC. On December 31, 1999, International Technology Investments, LC ("ITI"), exercised its right to purchase 2,500,000 shares of the Company's common stock for $50,000 in cash and a short-term note in the amount of $4,950,000. ITI is controlled by Michael Shalom, CEO of IFX. On January 12, 2000, ITI made a partial payment of $2,900,000, leaving a remaining principal balance of $2,050,000. The $2,900,000 is reflected as a note receivable on the December 31, 1999 Balance Sheet and the $2,050,000 is reflected as a reduction to Paid-in Capital. The note receivable from ITI bears interest at the rate of 7 percent per annum. Authorization Of Preferred Shares. On November 9, 1999, the shareholders approved an amendment to the Company's Restated Certificate of Incorporation providing the Company the authority to issue up to 10,000,000 shares of preferred stock and, with respect to such shares, to establish among other things, the price and the rate and nature of dividends, the terms and conditions on which shares may be redeemed, the terms and conditions for conversion or exchange into any other class or series of the stock and the voting rights. Decrease In The Number Of Shares Of Authorized Common Stock. IFX's Restated Certificate of Incorporation authorized the issuance of 150,000,000 shares of Common Stock, $.02 par value. As of December 31, 1999, 11,084,920 shares of Common Stock were issued and outstanding. On November 9, 1999, the shareholders approved an amendment to the Restated Certificate of Incorporation providing that the authorized number of shares of Common Stock be decreased from 150,000,000 shares to 50,000,000 shares. ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations for the Period Ended December 31, 1999. The results shown herein are not necessarily representative of the results that may be expected in any future period. A discussion of certain risk factors that could cause future results to differ materially from the results reported herein is filed herewith as Exhibit 99.1 to this Form 10-Q. OVERVIEW The following discussion should be read in conjunction with its Consolidated Financial Statements and notes that follow it and with the audited consolidated financial statements, notes thereto, and management's discussion and analysis for the year ended June 30, 1999, included in the annual report filed on Form 10-K for such period. This discussion and analysis reflects the adjustments made to segregate the discontinued operations ("discontinued operations") that resulted from (i) the sale of the Company's brokerage assets in July 1996 to E.D. & F. Man International, Inc., a unit of E.D. & F. Man Group, plc, a London-based international trading and finance conglomerate, and (ii) from the divesture in June 1999 of its 50.1% interest in IFX Ltd. Discontinued operations are shown under a separate line item on the Income Statement and Balance Sheet for fiscal years 2000 and 1999. Due to the discontinued operations, IFX's primary source of revenues changed from trading revenues and from foreign exchange operations to subscriber and other fees from Internet operations. IFX's revenues from 2000 and 1999 related to discontinued operations are shown as "Income from Discontinued Operations, net of income taxes." The revenues from the ISP acquisitions are accounted from the date of purchase. Due to the discontinued operations, IFX's expenses changed from consisting mostly of interest, commissions and other related brokerage costs to local dial- up lines, local Internet connections, and depreciation and amortization expenses. The expenses from the ISP acquisitions are accounted from the date of purchase. GENERAL IFX is a pan-regional Internet Service Provider, or ISP, in Latin America. The Company's focus is on serving individuals and small businesses. The Company's primary service is dial-up Internet access, which IFX offers through its Unete service, in various price and usage plans designed to meet the needs of its subscribers. Our business services include dedicated phone lines, web hosting, web page design, and domain name registration. In addition, in February 2000 IFX started offering free basic-level Internet access in 6 countries in Latin America through its newly-created Tutopia.com, Inc. subsidiary. IFX will continue to offer premium services to paying users. IFX offers subscribers complete Internet access in English, Spanish, and Portuguese, with a user-friendly and easy to install software. The software contains a set of popular Internet applications including electronic mail, World Wide Web access, File Transfer Protocol and Internet Relay Chat. Through its infrastructure of IFX owned subsidiaries and third-party providers, IFX's subscribers are able to access the Internet in thirteen countries in Latin America, and in many major cities in the United States via a local telephone call and with no roaming fees. Over the past year, IFX has established a regional presence by acquiring the stock or assets of established independent ISPs throughout Latin America. The Company hopes that it will attain economies of scale (as the number of subscribers increases, the costs and expenses per subscriber decrease) in selling, general and administrative costs, particularly in the areas of numbers of employees and salaries, operating leases, and marketing expenses. However, there can be no assurance that the Company will achieve these anticipated cost reductions. In addition to providing Internet access service, the Company hopes to expand its Latin American Internet offerings to include advertising, content and e-commerce. As of December 31, 1999, the Company had approximately 490 employees. During the quarter ended December 31, 1999 the Company completed the following acquisitions and investments:
Date Acquisition Business Country - ---- ----------- -------- ------- October 1999 Netspace, S.A. de C.V ISP Mexico The Conex Group ISP Brazil
- ------------------------------------------------------------------------- November 1999 SISCO ISP Mexico - ------------------------------------------------------------------------- December 1999 Panaweb Corporation Web Design Panama Networks Mexico S.A de C.V. ISP Mexico Zalhe Informatica, Ltda. ISP Brazil Nicanet S.A. ISP Nicaragua Parmil S.A. ISP Uruguay - ------------------------------------------------------------------------ Prior to July 1996, the primary business of IFX was providing commodity brokerage services. On July 1, 1996, IFX sold substantially all of its brokerage assets (other than certain assets of its majority-owned U.K. subsidiary) to E.D.& F. Man International, Inc., a unit of E.D. & F. Man Group, plc, a London- based international trading and finance conglomerate, for a purchase price consisting of cash earn-out payments based upon the sold business's profitability (as defined in the sale agreement) during the sixty-six months following the sale. Since July 1996, IFX's revenues have consisted primarily of earn-out payments from such asset sale, interest income and income from operations of the Company's former majority-owned British subsidiary, IFX Ltd., which conducts foreign exchange business as a registrant of the British Securities and Futures Authority. In June 1999, IFX divested its 50.1% interest in IFX Ltd. in exchange for approximately $2.45 million in cash and a note receivable, and a redeemable preference share entitling IFX to quarterly payments equal to approximately 31% of the net profits (as specifically defined) of IFX Ltd. through June 31, 2002. LIQUIDITY AND CAPITAL RESOURCES For the six months ended December 31, 1999, cash used by continuing and discontinued operations was approximately $2.4 million compared to cash provided by continuing and discontinued operations of $1.4 million for the same period in 1998. The majority of cash for the six months ended December 31, 1999, was used by the Company's continuing investments and general operating expenses in the Internet operations. In general, the Company invests cash not needed for operations at any of its subsidiaries in short-term investments such as U.S. Government obligations and overnight time deposits which are classified as cash equivalents. As of December 31, 1999, the Company held approximately $2.3 million in cash and cash equivalents. The Company expects to meet its operating cash flow requirements through funds generated by earn-out payments, operations, and debt and/or equity financings. For the six months ended December 31, 1999, cash used in investment activities was approximately $3.9 million compared to cash used in investment activities of $0.3 million for the same period in 1998. The increase was primarily due to the purchases of equipment and acquisitions. Stockholders' equity at December 31, 1999 was approximately $19.0 million as compared with $16.1 million at June 30, 1999. RESULTS OF OPERATIONS - THREE MONTHS AND SIX MONTHS ENDED DECEMBER 1999 COMPARED TO 1998 Revenues. In the three months and six months ended December 31, 1999, IFX derived $2,016,800 or 78%, and $2,927,400 or 77%, respectively of the total continuing revenues from subscriptions from individuals for dial-up access to the Internet. Monthly subscription fees vary by billing plan. With the current pricing plans, customers have several choices including unlimited local, unlimited pan-regional and limited local plans. In addition, in the three months and six months ended December 31, 1999, IFX derived $252,100 or 10%, and $431,500 or 11%, respectively of the total continuing revenues from full-time dedicated access connections to the Internet. Full-time dedicated lines offer small businesses direct and uninterrupted connections to the Internet without the need to dial any number. The remaining $329,100 or 12%, and $457,700 or 12% of the total continuing revenues for the three months and six months ended December 31, 1999 were derived from certain small business services which include web-hosting, web design, and other value-added services such as domain name registration, and from the sale of such items as modems and computer cameras related to promotions. IFX's web-hosting services allow a business or individual to post information on the World Wide Web through IFX's servers. IFX's Web design services offer Internet site development services for small businesses. Revenues for three months and six months ended December 31, 1998 from continuing operations are $0, since the Company had not yet been involved in the Internet business. Revenues for the period ended December 31, 1998 are shown in the income statement as discontinued operations. Costs of Revenues. IFX's cost of revenues include all the costs that are primarily related to the number of subscribers. The primary costs are the local Internet connection fees paid to the telecommunication companies in each country and the subscriber start-up expenses. The telecommunication expenses include the costs of providing its subscribers with local telephone dialing numbers to its POPs, the costs related to third-party POPs, and the costs of the connections of IFX's hubs to the Internet backbone. Start-up expenses include the cost of distributing the compact disk with its starter kit software. Cost of revenues were $1,471,300 and $0 for the three months ended December 31, 1999 and December 31, 1998, respectively; and were $2,547,900 and $0 for the six months ended December 31, 1999 and December 31, 1998, respectively. General and Administrative Expenses. General and administrative costs are primarily for salaries, legal, accounting and consulting fees, and advertising, market analysis, and trade show expenses related to the promotions of its ISP service. General and administrative expenses were $6,660,900 and $302,200 for the three months ended December 31, 1999 and December 31, 1998, respectively; and were $11,051,500 and $452,500 for the six months ended December 31, 1999 and December 31, 1998, respectively. The increase was primarily due to an increase in payroll and an increase in the marketing strategies including expanding sales and marketing efforts. IFX believes that it is necessary to purchase or install POPs in each major country in Latin America. As IFX continues with that expansion into new markets, both costs of sales and selling, general and administrative expenses will increase. IFX expects that these costs will have a short-term negative impact on its net income. In cities where the Company does not want to establish a presence, but wants its subscribers to have access to the Internet, it will use third-party POPs. Depreciation and amortization. Depreciation and amortization are related to the depreciation of fixed assets and the amortization of the acquired customer base from other ISPs. IFX depreciates its assets based on estimated useful lives that range from three to five years. IFX amortizes purchased customer bases using the straight-line method over a period of three years, commencing when the purchase is completed. This amortization has a negative effect on net income. Depreciation and amortization expense was $1,502,500 and $0 for the three months ended December 31, 1999 and December 31, 1998, and were $2,354,900 and $0 for the six months ended December 31, 1999 and December 31, 1998, respectively. The Company will continue to invest heavily in purchases of computer equipment, software and acquisitions in Latin America, which will increase its depreciation and amortization costs. These costs will have a short-term negative impact on net income, but the Company believes that these increased costs should be offset by anticipated increases in revenue attributable to overall subscriber growth and advertising. However, there can be no assurance that the Company will be able to build, increase or maintain its subscriber base in a given market to the extent necessary to generate sufficient revenues to offset these expenses. Other Income. Other income is mostly derived from investment in short-term government notes. Other income was $89,700 and $114,300 for the three months ended December 31, 1999 and December 31, 1998, respectively; and was $182,800 and $200,100 for the six months ended December 31, 1999 and December 31, 1998, respectively. The decreases were primarily due to a decrease in average cash balances available for investment. Other Income and Gains from Discontinued Operations. Earn out payments from the 1996 sale of its brokerage asset to E.D. & F. Man International, Inc., and from the 1999 sale of it's 50.1% interest in IFX Ltd. are shown as discontinued operations, net of expenses and taxes. In the three months ended December 31, 1999, the Company earned approximately $497,700 compared to $784,800 for the three months ended December 31, 1998. For the six months ended December 31, 1999 the Company earned $940,000 compared to $1,731,500 for the six months ended December 31, 1998. The decrease in income was due to lower profitability of the businesses sold. All the earn-out proceeds were invested in IFX's Internet operations. Income tax provision. For the three months ended December 31, 1999 and December 31, 1998, the Company recorded a tax benefit from its continuing operations of approximately $550,600 and $52,200, respectively. For the six months ended December 31, 1999, the Company recorded a tax benefit from its continuing operations of approximately $1,427,000 and for December 31, 1998 a tax provision of $6,800. The effective tax rate for the three months ended December 31, 1999 was 8.0% compared to 27.8% for the three months ended December 31, 1998. The effective tax rate for the six months ended December 31, 1999 was 11.9% compared to 2.7% for the six months ended December 31, 1998. Net income (loss) and income (loss) per share. As a result of the factors discussed above, IFX's loss from continuing operations for the three months ended December 31, 1999 was approximately $6.3 million, or $(0.74) per share, compared to a net loss of $0.1 million, or $(0.02) per share, for the three months ended December 31, 1998. Including discontinued operations, the Company recorded a net loss of $5.9 million, or $(0.68) per share, compared to a net income of $0.6 million, or $0.10 per share, for the three months ended December 31, 1998. IFX's loss from continuing operations for the six months ended December 31, 1999 was approximately $10.5 million, or $(1.31) per share, compared to a net loss of $0.3 million, or $(0.04) per share, for the six months ended December 31, 1998. Including discontinued operations, the Company recorded a net loss of $9.6 million, or $(1.19) per share, compared to a net income of $1.5 million, or $0.24 per share, for the six months ended December 31, 1998. CREDIT AGREEMENTS In January 2000, the Company signed a four-year lease agreement with the Graham Group for 12,500 square feet of office space in Miami Lakes, Florida, to commence in January 2000. This lease provides for aggregate payments totaling approximately $1 million over the next 4 years. YEAR 2000 COMPLIANCE The commonly referred to "Year 2000" problem relates to whether computer systems will properly recognize date sensitive information when the year changes from 1999 to 2000. Systems that do not properly recognize such information will generate wrong data and could fail. IFX has identified two main areas of Year 2000 risk: 1. Internal computer systems or embedded chips could be disrupted or fail, causing an interruption or decrease in productivity in our operations; and 2. Computer systems or embedded chips of third parties including, without limitation, financial institutions, suppliers, vendors, landlords, customers, international suppliers of telecommunications services and others, could be disrupted or fail, causing an interruption or decrease in our ability to continue our operations. This risk is particularly acute in Latin America, where many older computer systems are still in use. Prior to entering the year 2000, the Company developed plans for implementing, testing and completing any necessary modifications to its key computer systems and equipment with embedded chips to help ensure that they were Year 2000 compliant. The costs of addressing Year 2000 issues has been minor to date, as most of our PC's, laptops, servers, routers and other computer equipment were found to be Year 2000 compliant. In addition, the Company identified and communicated with third-party entities with which it transacts significant business, including critical vendors and financial institutions, to determine their Year 2000 status and any probable impact on the Company. Our inquiries did not reveal any significant Year 2000 noncompliance issues affecting our material third parties. Now that we have entered the year 2000, we have tested our key computer systems and equipment and have confirmed that they appear to be Year 2000 compliant. To date, the Company has not experienced any material Year 2000 related disruptions or failures of our systems or services, nor has the Company been notified of any disruptions or failures in the systems of any of our third parties. There is an ongoing risk that Year 2000 related problems could still occur and the Company will continue to monitor and evaluate these risks; however, we believe that the Year 2000 problem should not pose any significant operational problems for us. Item 3. - Quantitative and Qualitative Disclosures about Market Risk The Company's continuing operations are focused primarily in Latin America, subjecting the Company to certain political, currency, economic and commercial risks and uncertainty not typically found in the U.S. The Company's exposure to market risk is directly related to its role as a Latin American ISP. The Company's primary market risk exposure relates to foreign exchange rate risk. Foreign exchange rate risk arises from the possibility that changes in foreign currency exchange rates will adversely impact the value of the Company's assets, liabilities and/or equity. When the Company operates in a foreign country, the value of the local currency will probably fluctuate, especially in Latin America. This fluctuation can cause the Company to gain or lose on the translation to US Dollars. PART II - OTHER INFORMATION ITEM 1 - LEGAL PRECEDINGS 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. In a matter related to the Company's discontinued operations, on December 28, 1998, John and Christina Blazina had previously filed an NFA arbitration against Index and others, alleging breach of fiduciary duty, fraud, breach of contract and negligence in the solicitation and trading of a series of managed accounts opened at Index in 1995. On November 30, 1999, after a two-day hearing in Washington DC, a three member arbitration panel ruled that the claimants' claim was filed outside the two-year limitation on actions contained in the NFA's Code of Arbitration and terminated the proceeding without any award against respondents. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits 3.1 Spinway Media Network, Inc. Agreement 27 Financial Data Schedule (EDGAR only) 99.1 Risk Factors (B) REPORTS ON FORM 8-K On October 21, 1999, IFX Corporation filed a Current Report on Form 8-K that contained certain exhibits with respect to its acquisition, through its wholly owned subsidiary Unete.com do Brasil S/C Ltda, of all the issued and outstanding ownership interests (quotas) of Conex Brasil S.A, W3 Informatica Ltda, K3 Informatica Ltda, and Conex Canoas Ltda., referred to collectively herein as the "Conex Group", for aggregate consideration (including commissions) of approximately $5.2 million, of which approximately $1.8 million was paid or is payable in cash, approximately $3.3 million was paid or is payable by issuing shares of the Company's common stock and assuming liabilities in the approximate amount of $0.1 million. The purchase was determined through arms' length negotiations with the sellers of the Conex Group, which are unrelated third parties with respect to the Company. On December 20, 1999, the Company filed on Form 8-K/A an amendment to the Form 8-K previously filed on October 21, 1999. 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: February 14, 2000 By: /S/ JOEL EIDELSTEIN ------------------------ Joel Eidelstein President Dated: February 14, 2000 By: /S/ JOSE LEIMAN ------------------------ Jose Leiman Chief Financial Officer EX-3.1 2 SPINWAY MEDIA NETWORK, INC. AGREEMENT Exhibit 3.1 CO-BRANDED FREE ISP AGREEMENT This Co-Branded Free ISP Agreement (the "Agreement") is entered into as of January 24, 2000 (the "Effective Date") by and between Spin Media Network, Inc., a California corporation with its principal place of business at 925 Commercial Street, Palo Alto, CA 94303 ("Spinway"), and Tutopia.com, inc., a Delaware corporation with a principal place of business at 17701 Biscayne Blvd, Aventura, Florida 33160 ("Company") (collectively, the "Parties" and each a "Party"). Whereas, Spinway is an advertising solution and free Internet Service Provider ("ISP") that owns and operates a service that allows people to receive free access to the Internet (the "Spinway Service"); Whereas, Company (i) owns and operates: a site on the Internet at http://www.tutopia.com (the "Company Site") with a base of users; and (ii) has contracted with a related company to utilize ISP infrastructure providing dial- up internet access to various markets in Central and South America (the "Company Network"); Whereas, Spinway desires to co-brand and operate the Spinway Service on behalf of Company; Now, Therefore, Spinway and Company hereby agree, for and in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, as follows: 1. Definitions 1.1 "Spinway Service" shall mean Spinway's advertising solution. 1.2 "Company Marks" shall mean all Company trademarks and logos to be licensed for Spinway to perform under this Agreement, and listed on Exhibit A ("Company Marks"), and as such Exhibit A may be updated from time to time by Company in its sole discretion. 1.3 "Company Site" shall mean all the Internet pages located at http://www.tutopia.com, or any successor Internet pages. 1.4 "Company User" shall mean any registered or unregistered user of the Company Site, but excluding Service Users 1.5 "Company Network" shall mean the ISP infrastructure, owned by a related party, which the Company utilizes to offer dial-up internet access for the Service. 1.6 "Confidential Information" shall mean any confidential or proprietary information, including, without limitation, the terms of this Agreement, any source code, software tools, designs, schematics, plans or any other information relating to any research project, work in process, future development, scientific, engineering, manufacturing, marketing or business plan, or financial or personnel matter relating to either party, its present or future products, sales, suppliers, pricing, business model, customers, employees, investors or business partners, identified by the disclosing party as Confidential Information, whether in oral form, or in written, graphic or electronic form and marked as confidential. If disclosed in oral form, such information must be identified as confidential at the time of disclosure and must be reduced to writing, marked as confidential and delivered to the receiving party within thirty (30) days following disclosure to be deemed Confidential Information for purposes of this Agreement. 1.7 "Launch Date" shall mean March 15, 2000, which shall be no less than forty-five (45) days from the Effective Date. 1.8 "Implementation Requirements" shall mean all the graphics, logos, links and other information that Company must provide to Spinway in order to launch the Service as set forth in Exhibit H "Company Implementation Requirements." 1.9 "Marks" shall mean either the Company Marks or the Spinway Marks, as applicable. 1.10 "Service" shall mean the Spinway Service that is co-branded for Company under the terms of this Agreement, as further described in Exhibit B ("Description & Specifications of the Service"). 1.11 "Service User" shall mean a Company User who registers for the Service. 1.12 "Spinway Marks" shall mean all Spinway trademarks and logos to be licensed for Company to perform under this Agreement, and listed on Exhibit C ("Spinway Marks"), and as such Exhibit C may be updated from time to time by Spinway in its sole discretion. 1.13 "Spinway Site" shall mean the Internet pages located on the Internet at http://www.spinway.com, or any successor Internet pages. 1.14 "User" shall mean Company Users and Service Users, collectively. 1.15 "Service User Data" shall mean all Registration Information gathered from a Service User during registration for the Service as well as all information collected during the course of the Service. 1.16 "Spinway Client" shall mean Spinway's proprietary Client-based Application software that (i) allows Service Users to establish a dialup connection to the Internet, (ii) serves as the delivery medium for the advertisements, and (iii) serves as the user interface that the Service User sees the entire time they are connected to the Internet. 1.17 "Co-Branded Client" shall mean the Spinway Client that is co-branded for Company for the Service in accordance with the terms of this Agreement 1.18 "Client-based Application" shall mean a persistent information/advertising bar that serves as a user interface. 1.19 "Advertising Revenue" shall mean actual amounts received by Company for the sale of all banner advertising, full motion video, and button/link sponsorship on the Co-Branded Client and excludes any Barter Transactions. 1.20 "Barter Transactions" shall mean solely the trading of advertising inventory on the Co-Branded Client for advertising of another form. Any trading of advertising on the Co- branded Client for other tangible non-monetary consideration may be subject to the Revenue Sharing provision in Exhibit F. 1.21 "Total Monthly Impressions" shall mean the total number of Service User Hours multiplied by 120. 1.22 "Service User Hours" shall mean the aggregate number of hours that all Service Users are on the Service during a calendar month. 1.23 "Unique Service User Registration" shall mean the sum of all registrations for the Service by a single individual user of the Service. For example, if an individual registers for the Service on more than one occasion under one or more user names, all such registrations shall collectively equal one Unique Service User Registration. 2. Development, Registration and Implementation. 2.1 Co-Branded Client. The Parties shall, on or before the Launch Date, develop and implement the Co-Branded Client according to the Specifications contained in Exhibit B ("Description & Specifications of the Service"). The Launch Date is contingent upon the completion and timely satisfaction of the following milestones set forth below as well as in Exhibit H "Company Implementation Requirements": (i) At least 45 days prior to the Launch Date: Agreement executed and Implementation Requirements provided to Company by Spinway; (set forth herein as Exhibit H to this Agreement) (ii) At least 40 Days Prior to Launch Date: Company provides Spinway with all completed information pursuant to the Implementation Requirements and any other agreed upon implementation procedures; (iii) Timely completion of any other requirements agreed upon by Spinway and Company. Spinway agrees that it will make an English version of the Co-branded Client available to Company for release within fourteen (14) days of receipt of all information pursuant to the Implementation Requirements. Company acknowledges that certain other agreed upon implementation procedures must be completed prior to release of any version of the Co-branded Client in Central or South America in order to ensure operability. 2.2 Advertising. Spinway reserves the right, at any time, to take over control and sell 20% of the Run of Site ("ROS") advertising inventory on the Co- branded Client. Company shall retain and have the right to control all other advertising. Company agrees not to sell advertising on the Co-branded Client or the Service to any competitor of Spinway as defined in Exhibit J. Spinway agrees not to sell advertising on the Co-branded Client (i) to any competitor of Company as defined in Exhibit K or (ii) to any advertiser with which the Company has entered into an advertising exclusivity agreement. Company shall provide a complete list of any such advertisers to Spinway and shall provide timely updates to any such list. 2.3 Registration Information. All Service Users shall be required to register and to provide the information set forth in Schedule G "Registration Questions." Spinway and Company may modify the required information fields from time to time. All of the foregoing information is collectively "Registration Information". Spinway and Company shall work together to develop a mutually agreeable registration process. 2.4 Ownership of Registration Information. Spinway and Company shall jointly own all Registration Information, with no duty to account to the other party, for all Service Users. Company shall be permitted to use such Registration Information for marketing and other purposes without notice to or approval of Spinway, provided such Registration Information is used in a manner consistent with the privacy statements of the parties disclosed to the users in connection with the collection of the Registration Information. Spinway shall be permitted to use such Registration Information for marketing and other purposes without notice to or approval of the Company, provided such Registration Information is used in a manner consistent with the privacy statements of the parties disclosed to the users in connection with the collection of the Registration Information. 2.5 Usage Agreement. Each user shall be required to agree to Spinway's standard terms and conditions for use of the Service, which terms and conditions shall be accessible by hyperlink from one or more registration pages (set forth herein in Exhibit I "Spinway.com Terms of Use"). Such terms and conditions will be modified to reflect the Company's and Spinway's joint ownership of Registration Information. 3. Company Obligations 3.1 Promotion and Marketing. Company shall actively and affirmatively advertise, market and otherwise promote the Service in order to maximize the number of users of the Service, including but not limited to the activities listed in Exhibit E ("Company Promotional Activities"). Upon prior approval by Spinway, which approval shall not be unreasonably withheld, promotion of the Service by Company may include the bundling or preloading of the Co-Branded Client. Spinway may review Company's marketing activities on a quarterly basis in order to assess performance and suggest additional activities in order to increase the number of Service Users of the Services. 3.2 Limited Exclusivity. Company agrees that, during the Term of this Agreement and any Renewal Terms (as defined below), Company shall not provide Internet access services or other Client-based applications (as defined above) to any Company Users except through the Service. 3.3 Company Network. Company agrees that execution of this Agreement is contingent upon simultaneous execution of the agreement granting Spinway access to the Company Network ("The ISP Network Agreement"). 4. Spinway Obligations 4.1 Service. Spinway shall use commercially reasonable efforts to provide the Service to Service Users in accordance with the specifications described in Exhibit B ("Description & Specifications of the Service"). The network infrastructure and access costs are the sole responsibility of Company. Spinway will not pay for any portion of the network infrastructure or access costs under this Agreement. 5. Licenses 5.1 Trademarks. Spinway hereby grants to Company a non-exclusive, worldwide, non-transferable and non-sublicensable license to use the Spinway Marks solely to advertise and promote the Service. Company hereby grants to Spinway a non-exclusive, worldwide, non-transferable and non-sublicensable license to use Company Marks to develop, implement and maintain the Co-Branded Client and the Service, and advertise and promote the Service. 5.2 Trademark Restrictions. The Mark owner may terminate the foregoing trademark license if, in its reasonable discretion, the licensee's use of the Marks tarnishes, blurs or dilutes the quality associated with the Marks or the associated goodwill and such problem is not cured within ten (10) days of notice of breach; alternatively, instead of terminating the license in total, the owner may specify that certain licensee uses may not contain the Marks. Title to and ownership of the owner's Marks shall remain with the owner. The licensee shall use the Marks exactly in the form provided and in conformance with any trademark usage policies. The licensee shall not take any action inconsistent with the owner's ownership of the Marks, and any benefits accruing from use of such Marks shall automatically vest in the owner. The licensee shall not form any combination marks with the other party's Marks 5.3 No Implied Licenses. There are no implied licenses under this Agreement, and any rights not expressly granted to a licensee hereunder are reserved by the licensor or its suppliers. Neither Party shall exceed the scope of the licenses granted hereunder. 6. Payment and Revenue Shares 6.1 Payments. The Parties shall make all payments described in Exhibit F ("Payments and Revenue Shares"). 6.2 Inspection Rights. (i) Company shall maintain accurate records with respect to the calculation of all payments due under this Agreement. Spinway shall have the right, at its expense (except as provided below) to audit the Company's books and records for the purpose of verifying revenues and advertising sold on the Co-branded Client and Service. If the auditor's figures reflect Advertising Revenues higher than those reported by the Company, then the Company shall pay the difference to Spinway and Company shall also pay the reasonable cost of the audit. (ii) Company shall maintain accurate records with respect to the costs associated with its use of Company Network and amounts charged to Spinway for use of Company Network as provided for under the ISP Network Agreement. Spinway shall have the right, at its expense (except as provided below) to audit the Company's books and records for the purpose of verifying costs of the Company Network. If the auditor's figures reflect costs lower than those reported by the Company and charged to Spinway, then the Company shall pay the difference to Spinway and the Company shall also pay the reasonable cost of the audit. (iii) Company shall maintain accurate records with respect to all amounts spent on marketing and promotion of the Service. Spinway shall have the right, at its expense (except as provided below) to audit the Company's books and records for the purpose of verifying amounts spent on marketing and promotion of the Service. If the auditor's figures reflect amounts lower than those reported by the Company, then Spinway may elect to terminate the agreement subject to the provisions of Section 12.3 and Company shall pay the reasonable cost of the audit. 7. Ownership 7.1 By Spinway. As between Spinway and Company, Spinway shall retain all rights, title and interest in and to, embodied in or associated with the Spinway Service, Spinway Marks and the Spinway Site, including but not limited to all worldwide intellectual property rights. 7.2 By Company. As between Spinway and Company, Company shall retain all rights, title and interest in and to, embodied in or associated with the Company Site, the Company Users and the Company Marks, including but not limited to all worldwide intellectual property rights. 7.3 Co-Ownership. The Parties shall co-own all rights, title and interest in and to, embodied in or associated with the Service, Service Users, Service User Data and Registration Information. 8. Confidentiality 8.1 Confidentiality Terms. Each Party hereto will maintain in confidence all Confidential Information disclosed by the other Party hereto. Neither Party will use, disclose or grant use of such Confidential Information except as expressly authorized by this Agreement. To the extent that disclosure is authorized by this Agreement, the disclosing Party will obtain prior agreement from its employees, agents or consultants to whom disclosure is to be made to hold in confidence and not make use of such information for any purpose other than those permitted by this Agreement. Each Party will use at least the same standard of care as it uses to protect its own most confidential information (and in no event less than reasonable care) to ensure that such employees, agents or consultants do not disclose or make any unauthorized use of such Confidential Information. Each Party will promptly notify the other upon discovery of any unauthorized use or disclosure of the Confidential Information. 8.2 Exceptions. The obligations of confidentiality contained in Section 8.1 will not apply to the extent that it can be established by the receiving Party by competent proof that such Confidential Information: (a) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party; (b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the other Party; (c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement; (d) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a third party who had no obligation to the other party not to disclose such information to others; (e) is independently developed by the receiving Party; or (f) is required to be disclosed under operation of law or governmental process. In the event either Party is required to disclose the other's Confidential Information under operation of law or government process, such Party agrees to provide the disclosing Party with reasonable advance notice prior to such disclosure. Neither Party shall use any Confidential Information for any purpose other than the performance of this Agreement 8.3 Return of Confidential Information. Upon the expiration or termination of this Agreement, all Confidential Information, upon the disclosing Party's written request (i) shall be returned to the disclosing Party or (ii) the recipient shall execute a written certification that all confidential information has been destroyed. 8.4 Remedies. The Parties agree that the breach of any of the obligations contained in this section 8 is a material breach of this Agreement that may cause irreparable harm to the nonbreaching Party justifying both legal and equitable relief. 9. Warranties 9.1 By Spinway. Spinway hereby represents and warrants to Company that neither the Spinway Marks nor the Spinway Site contain any materials that infringe any third party patent, copyright, trademark, trade secret or other proprietary or intellectual property rights. 9.2 By Company. Company hereby represents and warrants to Spinway that: (a) neither the Company Marks nor the Company Site contain any materials that infringe any third party patent, copyright, trademark, trade secret or other proprietary or intellectual property rights; and (b) that the Company has made all privacy notifications and acquired all rights from Users to the extent provided in Spinway.com Terms of Use and to the extent permissible under local law. 9.3 Disclaimer. EXCEPT FOR THE EXPRESS WARRANTIES CONTAINED IN THIS SECTION 9, EACH PARTY PROVIDES ALL MATERIALS AND SERVICES TO THE OTHER PARTY "AS IS," WITHOUT ANY WARRANTY OF ANY KIND, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES (EXPRESS, IMPLIED, OR STATUTORY) OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE. 9.4 Each Party acknowledges that it has not entered into this Agreement in reliance upon any warranty of representation except those specifically set forth herein. 10. Limitation of Liability 10.1 NEITHER PARTY SHALL BE LIABLE FOR LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (HOWEVER ARISING, INCLUDING NEGLIGENCE) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF THE PARTIES ARE AWARE OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY IN AN AMOUNT GREATER THAN THE AGGREGATE AMOUNT SPINWAY ACTUALLY PAYS TO COMPANY DURING THE SIX (6) MONTHS PRECEDING THE EVENT THAT GAVE RISE TO THE CLAIM OR ACTION. NEITHER PARTY SHALL BE LIABLE FOR THE COST OF PROCUREMENT OF SUBSTITUTE SERVICES, TECHNOLOGY, DATA OR CONTENT. 11. Indemnities 11.1 Indemnity. Each Party (the "Indemnifying Party") shall indemnify the other Party (the "Indemnified Party") against any and all claims, losses, costs and expenses, including reasonable attorneys' fees, which the Indemnified Party may incur as a result of claims in any form by third parties arising from: (a) the Indemnifying Party's acts, omissions or misrepresentations to the extent that the Indemnifying Party is deemed an agent of the Indemnified Party, or (b) the Indemnifying Party's breach of any warranties contained in Section 9. 11.2 Conditions. The foregoing obligations are conditioned on the Indemnified Party: (i) giving the Indemnifying Party notice of the relevant claim, (ii) cooperating with the Indemnifying Party, at the Indemnifying Party's expense, in the defense of such claim, and (iii) giving the Indemnifying Party the right to control the defense and settlement of any such claim, except that the Indemnifying Party shall not enter into any settlement that affects the Indemnified Party's rights or interest without the Indemnified Party's prior written approval. The Indemnified Party shall have the right to participate in the defense at its expense. 12. Term and Termination 12.1 Term. This Agreement will become effective on the Effective Date and will continue in effect for two (2) years following the Effective Date (the "Initial Term"). This Agreement shall automatically renew for one (1) year renewal terms (each, a "Renewal Term"), unless either Party gives notice of its intent not to renew the Agreement at least ninety (90) days prior to the end of the then current term. 12.2 Termination for Failure to Perform. Either Party may terminate this agreement upon material breach of this Agreement by the other party, provided such breach remains uncured by the breaching party for thirty (30) days after written notice from the non-breaching party. 12.3 Early Termination. This Agreement may be terminated by Spinway thirty (30) days after written notice to Company of Company's failure to meet or exceed the Minimum Requirements as set forth in Exhibit E. 12.4 Other Termination. Either Party may terminate this Agreement (a) if the other Party files a petition for bankruptcy, becomes insolvent, or makes assignment for the benefit of its creditors or (b) by mutual consent of both Parties. 12.5 Effects of Termination. Upon expiration or termination of this Agreement for any reason, all licenses granted hereunder shall terminate. Sections 1, 5, 6, 7, 8, 9.3, 10, 11, 12.3 and 13, and any obligation to pay any owed but unpaid amounts, shall survive any expiration or termination of this Agreement. Upon termination, (i) Company shall immediately cease all use of and references to the Service and the Spinway Service and (ii) Company shall no longer have any right to license, use, or market the Service or the Spinway Service. 13. Miscellaneous. 13.1 Governing Law. This Agreement will be governed and construed in accordance with the laws of the State of California without giving effect to conflict of laws principles. Both Parties submit to personal jurisdiction in California and further agree that any cause of action arising under this Agreement shall be brought in a court in Santa Clara County, California. 13.2 Publicity. Neither Party shall issue any press release or similar publicity statement regarding this Agreement without the prior approval of both Parties (not to be unreasonably withheld) or as required by law. Neither Party will make any public disclosure of the specific business terms of this Agreement without the prior consent of the other Party. 13.3 Legal Fees and Prevailing Party. The prevailing Party in any legal action brought by one Party against the other and arising out of this Agreement shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses, including court and arbitration costs, as well as reasonable attorneys' fees. 13.4 Independent Contractors. The Parties are independent contractors, and no agency, partnership, franchise, joint venture or employment relationship is intended or created by this Agreement. Neither Party shall make any warranties or representations on behalf of the other Party. 13.5 Assignment. Neither Party shall assign its rights or delegate its obligations under this Agreement (except to an affiliated company, or to a successor in interest in the event of a merger, sale of assets of the business to which this Agreement is related, or consolidation) without the prior written consent of the other Party and any purported attempt to do so is null and void, provided that Spinway may assign or transfer all its rights and obligations to a successor in interest upon a merger, reorganization, change of control, acquisition or sale of all or substantially all its assets. All terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted transferees, successors and assigns. 13.6 Right to Market. Nothing in this Agreement shall impair Spinway's right to license, market, co-market, brand, or co-brand the Spinway Service or develop a similar relationship as contemplated by this Agreement with any other party. 13.7 Ambiguities. Each Party and its counsel have participated fully in the review and revision of this Agreement. Any rule of construction to the effect that ambiguities are to be resolved against the drafting Party shall not apply in interpreting this Agreement. The language in this Agreement shall be interpreted as to its fair meaning and not strictly for or against any Party. 13.8 Severability; Headings. If any provision herein is held to be invalid or unenforceable for any reason, the remaining provisions will continue in full force without being impaired or invalidated in any way. The Parties agree to replace any invalid provision with a valid provision that most closely approximates the intent and economic effect of the invalid provision. Headings are for reference purposes only and in no way define, limit, construe or describe the scope or extent of such section. 13.9 Counterparts. This Agreement may be executed in counterparts, each of which will be considered an original, but all of which together will constitute the same instrument. 13.10 Force Majeure. Except as otherwise provided, if performance hereunder (other than payment) is interfered with by any condition beyond a Party's reasonable control, the affected Party, upon giving prompt notice to the other Party, shall be excused from such performance to the extent of such condition. However, if a force majeure detrimentally affects a Party's performance of a material covenant hereunder for thirty (30) days or more, the other Party can terminate this Agreement. Each Party acknowledges that website operations may be affected by numerous factors outside of a Party's control. 13.11 Notice. Any notice under this Agreement will be in writing and delivered by personal delivery, overnight courier, confirmed facsimile, confirmed email, or certified or registered mail, return receipt requested, and will be deemed given upon personal delivery, 1 day after deposit with an overnight courier, five (5) days after deposit in the mail, or upon confirmation of receipt of facsimile or email. Notices shall be sent to a Party at its address set forth above as well as at the contact information below or such other address as that Party may specify in writing pursuant to this Section 13.11. Spinway.com Attn: Billy McNair VP, Business Development & Corporate Counsel Spinway.com 925 Commercial Street Palo Alto, California 94043 To Company: ____________________________ ____________________________ ____________________________ ____________________________ 13.12 Entire Agreement; Amendment & Waiver. This Agreement and all Exhibits attached hereto set forth the entire understanding and agreement of the parties, and supersedes any and all oral or written agreements or understandings between the Parties, as to the subject matter of the Agreement. This Agreement may be changed only by a writing signed by both Parties. The waiver of a breach of any provision of this Agreement will not operate or be interpreted as a waiver of any other or subsequent breach. Spin Media Network, Inc.: Company: By: By: --------------------------------- ------------------------------------- Name: Name: ------------------------------- ----------------------------------- Title: Title: ------------------------------ ---------------------------------- EX-99 3 RISK FACTORS Exhibit 99.1 RISK FACTORS Lack of Operating History and Experience in the Internet Service Business. Because IFX has recently begun to pursue the development of Internet services and the acquisition of Internet service providers in Latin America, its acquisition and development strategy is in the early development stages. IFX has limited experience in providing Internet services and, accordingly, a limited operating history upon which an evaluation of its prospects can be made. Such prospects must be considered in light of the substantial risks, expenses and difficulties encountered by new entrants, such as IFX, in the Internet services industry. These risks include identification of entry opportunities, intense competition, changing technology and evolving industry standards, changing user demand for Internet access and other Internet services, dependence upon the Internet and general economic conditions in the region. If IFX fails to add significantly to its user base in Latin America, the Company may not be able to grow revenues, implement its business plan or achieve economies of scale. IFX's success in the Internet business will also depend upon its ability to hire and retain qualified executive and management employees with significant experience in managing and expanding an Internet services business in the markets in which it seeks to operate. IFX can give no assurance that it will be able to successfully hire, retain or motivate qualified employees. Further, IFX can give no assurance that it will be successful in acquiring or building the necessary Internet service network or that the services it offers over any such network will be profitable. Dependence upon the Creation of a Network Infrastructure. IFX's success depends in part upon its ability to create an Internet network infrastructure that covers significant regions or areas of Latin American countries. IFX's success also depends upon the ability of its customers to access this network with ease of use and to have a high quality Internet experience with consistency of service throughout the network. IFX's primary strategy for creating the necessary infrastructure is to acquire ISPs that have an existing network infrastructure, qualified personnel and an existing subscriber base and, in certain countries, to develop new ISPs. IFX also anticipates that expansions and adaptations of its network infrastructure will be necessary to supplement its acquisition strategy. This will require substantial financial, operational and managerial resources. IFX can give no assurance that it will be able to acquire and develop the network infrastructure in Latin America necessary to compete successfully with the industry's evolving standards on a timely or cost- effective basis, or at all. Also, it may not be able to deploy successfully any expanded and adapted network infrastructure. Failure to create a successful infrastructure may materially adversely affect its business and operating results. The process of consolidating IFX's ISPs and integrating its regional operations may take a significant period of time, may place a significant strain on its resources, and could prove to be more expensive than predicted. IFX may be required to increase current expenditures in order to accelerate the integration and consolidation of its ISPs with the goal of achieving longer-term cost savings and improved profitability. These expenses may include the following, among others: the elimination of redundant staffing positions; personnel relocation; the cancellation of overlapping Internet access contracts; the closure of redundant points of presence; system upgrades; and the integration of these ISPs' operations onto IFX's network, customer care, billing, financial and other international support systems. However, IFX has limited practical experience related to the process of consolidating ISPs and can give no assurance that these projected long-term cost savings and improvements in profitability can or will be realized. Further, IFX can give no assurance that customer support or network infrastructure resources will be sufficient to manage the growth in its business or that it will be successful in implementing its expansion program in whole or in part. Challenges of Growth By Acquisitions. IFX depends in part on its ability to identify and acquire ISPs that meet its acquisition criteria. IFX seeks to create a market presence internationally, to gain strength in Internet connectivity and web hosting core service platforms, and to add additional enhanced service capabilities. IFX faces and may continue to face significant competition for appropriate acquisition candidates. IFX may compete with other communications or Internet companies with similar acquisition strategies, many of which may be larger, have greater financial and other resources and be owned or partially-owned by foreign governments. Competition for independent ISPs is based on a number of factors, including price, terms and conditions, size and access to capital, ability to offer cash, stock or other forms of consideration and other matters. IFX can give no assurance that it will be able to identify suitable ISPs or be able to complete any acquisitions of or investments in those targeted ISPs on acceptable terms and conditions. Once consummated, these acquisitions will continue to present certain risks, including: - the difficulty of integrating the acquired operations, technology and personnel; - the possible inability of IFX's management to maximize its financial and strategic position by the successful incorporation of acquired technology and products into its service offerings and to maintain uniform standards, controls, procedures and policies; - the possible acquisition of substantial contingent or undisclosed liabilities; - the risks of entering markets in which it has little or no direct prior experience; and - the potential impairment of relationships with employees and customers as a result of changes in management or other business operations. IFX may not be successful in overcoming these risks or any other problems encountered in connection with future acquisitions. In addition, future acquisitions could materially adversely affect its operating results as a result of dilutive issuances of equity securities, the incurrence of additional debt or the amortization of expenses related to acquired customer bases, goodwill or other intangible assets. Further, IFX's ability to complete transactions with ISPs may require significant additional financial resources. Risks Associated With an Internet Business. IFX is new to the Internet service provider business and, therefore, lacks operating history and experience in the industry. In addition, IFX's business is vulnerable to risks associated with the Internet business in general, many of which are significant. For example, the laws relating to the regulation and liability of Internet access providers in relation to information carried or disseminated is undergoing a process of development in many countries. Legal decisions, laws, regulations and other activities regarding regulation and content liability may significantly affect the development and profitability of companies offering on-line and Internet access services. Although IFX will implement certain network security measures, such as limiting physical and network access to its routers, the network's infrastructure is potentially vulnerable to computer viruses, break- ins and similar disruptive problems caused by its customers or other Internet users, which could lead to interruptions of, delays in or cessation of service to its customers. Furthermore, inappropriate use of the Internet by third parties could also potentially jeopardize the security of confidential information stored in the computer systems of IFX's customers and, in turn, could deter potential customers and adversely affect existing customer relationships. IFX relies on local telephone companies and other companies to provide data communications capacity via local telecommunications lines. IFX may experience disruptions or capacity constraints in these telecommunications services and may have no means of replacing these services on a timely basis, or at all. Changes in the regulatory environment relating to the Internet connectivity market, including regulatory changes that directly or indirectly affect telecommunications costs or increase the likelihood or scope of competition from telecommunications companies, could affect IFX's pricing. Additional laws could cover issues such as content, user pricing, privacy, libel, intellectual property protection and infringement, and technology export and other controls. IFX can give no assurance that violations of local laws will not be alleged or charged by foreign governments, that it might not unintentionally violate such laws or that such laws will not be modified, or new laws enacted in the future. Any of the foregoing developments could have a material adverse effect on IFX's business, results of operations and financial condition. In addition, its subscribers may discontinue their service at the end of any month for any reason. IFX's revenue will depend on its ability to attract and retain such subscribers. IFX may be dependent on third parties to stimulate demand for its products and services where it does not have a direct sales force. These channel distributors may include computer and telecommunications resellers, value added resellers, original equipment manufacturers, systems integrators, web designers and advertising agencies. If IFX fails to gain commercial acceptance in certain markets, these channel distributors may discontinue their relationships with IFX. The loss of channel distributors, the failure of such parties to perform under agreements with IFX, or the inability to attract other channel partners with the expertise and industry experience required to market its products and services could have a material adverse effect on IFX's operating results. Risks Associated with the Free Internet Service Model. IFX's new subsidiary, Tutopia.com, Inc., provides free basic-level Internet access in Latin America. The free access model is unproven and a number of other businesses in the United States offering free Internet access have failed. Since Tutopia.com only began offering Internet access in February 2000, we have a limited operating history, which will make it difficult for you to evaluate our performance. In addition, the free Internet access in Latin America could have a material impact on the Company's financials, because paying users may shift to free access. These risks are particularly acute in our Tutopia.com business model because, unlike our traditional Internet access fees, we do not have a measurable and predictable revenue stream from user access fees. If we are not able to successfully address these risks, we will not be able to grow our business, compete effectively or achieve profitability. These factors could cause our stock price to fall significantly. Because our Tutopia.com subsidiary does not charge our users any fees for our Internet access and e-mail services, we will depend primarily on our ability to generate advertising revenues. Accordingly, if Tutopia.com fails to generate sufficient advertising revenues, we may not be able to support our operations. We generate, and intend to generate, revenues from a variety of different arrangements including sales of targeted and untargeted banner advertising, sponsorships and referrals to third party Web-sites. Tutopia.com has limited experience marketing and pricing these types of arrangements, and have limited actual experience with respect to the performance of such arrangements. As such, we do not know if we are appropriately pricing, marketing or structuring these arrangements, or whether we will perform under these arrangements to the satisfaction of the other parties. Tutopia.com's failure to appropriately price, market or structure these arrangements could impact our ability to enter into and perform under these arrangements, or to renew these arrangements on similar or acceptable terms. In addition, the success of some of these arrangements will depend on our ability to effectively target users based on demographic and other information. Tutopia.com may encounter legal, technical, and other limitations on this ability, including problems associated with the accuracy of the information provided by our users, which we do not corroborate. In light of these factors, we cannot assure you that Tutopia.com will be able to attract sufficient advertising revenues to support our operations. In addition, competition for Internet-based advertising revenues is intense and the amount of available standard banner advertising space on the Internet is increasing at a significant rate. These factors are causing Internet advertising rates to decline, and it is possible that rates will continue to decline in the future. Many of Tutopia.com's advertising competitors have longer operating histories, greater name recognition, larger user bases, significantly greater financial, technical, sales and marketing resources and more established relationships with advertisers than we do. These advantages may allow such competitors to respond more quickly than we can to new or emerging technologies and changes in advertiser requirements. Tutopia.com must also compete with television, radio, cable and print media for a share of advertisers' total advertising budgets. Advertisers may be reluctant to devote a significant portion of their advertising budget to Internet advertising if they perceive the Internet to be a limited or ineffective advertising medium. Advertising Revenues Will Suffer If We Are Unable To Demonstrate That Our Registered Users Are Actively Using Our Service. If Tutopia.com is not able to demonstrate to our advertisers that our registered users are actively using our service, advertisers may choose not to advertise with us and our advertising revenues could be materially and adversely affected. Also, some new users use the Internet only as a novelty and do not become consistent users of Internet services and, therefore, may be less likely to continue using our service. Risks Associated With International Operations and Expansion. IFX focuses its Internet business on Latin American markets. It can give no assurance that acceptance of the Internet or demand for Internet connectivity, web hosting and other enhanced Internet services will increase significantly in these markets. However, IFX believes that it will need to move quickly into international markets in order to establish critical market presence and credibility, though it can give no assurance that it will be able to do so. IFX may need to enter into joint ventures or other strategic relationships with one or more third parties in order to conduct its foreign operations successfully. However, it can give no assurance that it will be able to identify desirable joint venture or strategic partners in these markets or that it will be able to obtain the permits and operating licenses required to conduct business and offer Internet services in these markets. In addition to the uncertainty of IFX's ability to create an international presence, IFX faces certain additional risks inherent in doing business on an international level. Such risks include: - competition from government-owned or subsidized businesses, including telecommunication companies and ISPs; - unexpected changes in or delays resulting from regulatory, licensing and foreign investment requirements, tariffs, customs, duties and other trade barriers; - difficulties in staffing and managing foreign operations; - longer payment cycles and problems in collecting accounts receivable; - political instability, expropriation, nationalization, war, insurrection and other political risks; - high levels of inflation, fluctuations in currency exchange rates or foreign exchange controls which restrict or prohibit repatriation of funds; - poor quality of telecommunications and lack of technological advances; - technology export and import restrictions or prohibitions; and - potentially adverse tax consequences. IFX can give no assurance that such factors will not have an adverse effect on its future international operations. In addition, it can give no assurance that laws or administrative practice relating to telecommunications, taxation, foreign exchange or other matters of countries within which it may operate will not change in a manner adverse to its business. Any such change could have a material adverse effect on IFX's business, financial condition and results of operations. Underdeveloped Telecommunications Infrastructure Could Limit The Growth Of Our Internet Operation In Latin America And Adversely Affect Our Business. Access to the Internet requires a relatively advanced telecommunications infrastructure. The telecommunications infrastructure in many parts of Latin America is not as well-developed as in the United States or Europe. The quality and continued development of the telecommunications infrastructure in Latin America will have a substantial impact on our ability to deliver our services and on the market acceptance of the Internet in Latin America in general. If further improvements to the Latin American telecommunications infrastructure are not made, the Internet will not gain broad market acceptance in Latin America. If access to the Internet in Latin America does not continue to grow or grows more slowly than we anticipate, our business, financial condition and results of operations will be materially and adversely affected. Competition; Pricing Fluctuation. The market for Internet connectivity and related services is extremely competitive and characterized by rapidly changing technology and evolving standards which can be significantly influenced by the marketing and pricing decisions of the largest industry participants. IFX anticipates that competition will continue to intensify as the use of the Internet grows. The tremendous growth and potential market size of the Internet access market has attracted and likely will continue to attract many new start- ups as well as existing businesses from different industries. In addition, new business models, such as the free Internet service provider model in which users do not pay for connectivity service, may pose a significant risk to the Company. In some cases, IFX will be forced to compete with and/or buy services from government-owned or subsidized telecommunications providers. Some of these providers may enjoy a monopoly on telecommunications services essential to IFX's business or other competitive advantages. IFX can give no assurance that it will be able to purchase such services at a reasonable price or at all. In addition to the risks associated with its previously described competitors, foreign competitors may pose an even greater risk, as they may possess a better understanding of their local markets and customs, and enjoy better relationships with customers and suppliers. IFX can give no assurance that it can obtain similar levels of local knowledge, access or expertise. Failure to obtain that knowledge could place IFX at a significant competitive disadvantage. Our Competitors. The Company currently competes or expects to compete with the following types of companies: - established national Internet service providers in Latin America, - computer hardware and software and other technology companies that will start bundling Internet access in their products; - numerous regional and local commercial ISPs which vary widely in quality, service offerings, and pricing; - national and regional Web hosting companies that focus primarily on providing Web hosting services; - cable operators and on-line cable services; - local telephone companies providing ISP services; and - other free Internet service providers that may enter the market. IFX believes that new competitors, including established ISP and telecommunications companies, will continue to enter the Internet access market, resulting in even greater competition. In addition, telecommunications companies may be able to offer customers reduced communications costs in connection with ISP services, reducing the overall cost of their Internet access and significantly increasing pricing pressures on the Company. The ability of its competitors to acquire other ISPs, to enter into strategic alliances or joint ventures or to bundle other services and products with Internet access or Web hosting could also put the Company at a significant competitive disadvantage. Equipment. IFX cannot guarantee that it will be able to obtain the necessary equipment, or the financing to acquire such equipment, to enable it to expand its Latin American network. In addition, IFX cannot guarantee that the equipment it maintains will be the most current and up to date equipment for its subscribers' connectivity to the Internet, which could have an impact in the number of subscribers it has. Dependence on Key Personnel. Competition for qualified employees and personnel in the Internet services industry is intense and there are a limited number of people with knowledge of and experience in the Internet service industry, especially in the Latin American market. The process of locating personnel with the combination of skills and attributes required to carry out its strategies may often be lengthy. IFX's success depends to a significant degree on its ability to attract and retain qualified management, technical, marketing and sales personnel and on the continued contributions of such people. IFX's employees may voluntarily terminate their employment at any time. IFX can give no assurance that it will be successful in attracting and retaining qualified executives and personnel. The loss of the services of key personnel, or the inability to attract additional qualified personnel, could have a material adverse effect on IFX's business, financial condition or results of operations. Need for Additional Financing. The Company must continue to enhance and develop its network in order to maintain its competitive position and continue to meet the increasing demands for service, quality, availability, and competitive pricing. The Company intends to expand or open POPs or make other capital investments as dictated by subscriber demand or strategic considerations. The Company must spend significant amounts of money for acquisitions, new equipment, leased telecommunications facilities , compensation expenses and advertising. In addition, to further expand its subscriber base, the company will probably have to spend significant amounts of money on additional equipment to maintain the high speed and reliability of its Internet access services. The Company may also need to spend significant amounts of cash to fund growth, operating losses and respond to unanticipated developments or competitive pressures. Presently, the Company derives a significant amount of its funds from the earn-out payments from the sale of assets of discontinued operations. For the E.D.& F Man sale, the amount of the earn-outs payments will depend on the profitability (as specifically defined) of that business and the percentage earn-out decreases, successively, over the remainder of the payment period, which ends on December 31, 2001. For the IFX Ltd. sale, the amount of the earn- out payments depends upon the profitability (as specifically defined) of the business that was sold over the remainder of the payment period, which ends on June 30, 2002. There can be no assurance that such payments will continue at their current levels, or that those earn-out will be sufficient to continue to fund a significant portion of the operations. If the Company does not have enough cash on hand, cash generated from earn- out payments from its discontinued operations, or cash available under vendor financing agreements, the Company will need to seek alternative sources of financing, such as borrowings or placements of debt or equity securities, to carry out its growth and operating plans. The Company may not be able to raise needed cash on terms acceptable to it or at all. If alternative sources of financing are required, but are insufficient or unavailable, the Company will be required to modify its growth and operating plans to the extent of available funding, if any. No assurance can be given that actual cash requirements will be met, that such requirements will not exceed IFX's budget or that anticipated revenues will be realized. Risk of Internet Technology Trends and Evolving Industry Standards. IFX's products and services target users of the Internet. The number of Internet users has experienced rapid growth. The market for Internet access and related services is relatively new and characterized by rapidly changing technology, evolving industry standards, changes in customer needs and frequent new product and service introductions. IFX's future success will depend, in part, on its ability to effectively use leading technologies, to continue to develop and improve its technical expertise, to enhance its current services, to develop new products and services that meet changing customer needs, and to influence and respond to emerging industry standards and other technological changes on a timely and cost-effective basis. IFX can give no assurance that it will be successful in accomplishing any of these tasks or that such new technologies or enhancements will achieve market acceptance. IFX believes that its ability to compete successfully also depends upon the continued compatibility and interoperability of its services with products and architectures offered by various third party vendors. IFX can give no assurance that it will be able to effectively address the compatibility and interoperability issues raised by technological changes or new industry standards. In addition, IFX can give no assurance that services or technologies developed by others will not render its services or technology uncompetitive or obsolete. If the market for Internet access services fails to develop, develops more slowly than expected, or becomes saturated with competitors, or if the Internet access and services offered by IFX through its ISPs is not broadly accepted, IFX's business, operating results and financial condition will be materially adversely affected. In addition, critical issues concerning the commercial use of the Internet remain unresolved and may impact the growth of Internet use, especially in IFX's target business market. Despite growing interest in the many commercial uses of the Internet, many businesses have been deterred from purchasing Internet access services for a number of reasons, including: - inconsistent quality of service; - lack of availability of cost-effective, high-speed options; - a limited number of local access points for corporate users; - inability to integrate business applications on the Internet; - the need to deal with multiple and frequently incompatible vendors; - inadequate protection of the confidentiality of stored data and information moving across the Internet; and - a lack of tools to simplify Internet access and use. In particular, numerous published reports have indicated that a perceived lack of security of commercial data, such as credit card numbers, has significantly impeded commercial use of the Internet to date. There can be no assurance that encryption or other technologies will be developed that satisfactorily address these security concerns. Published reports have also indicated that capacity constraints caused by growth in the use of the Internet may, unless resolved, impede further development of the Internet to the extent that users experience delays, transmission errors and other difficulties. The adoption of the Internet for commerce and communications, particularly by those individuals and enterprises which have historically relied upon alternative means of commerce and communication, generally requires the understanding and acceptance of a new way of conducting business and exchanging information. In particular, enterprises that have already invested substantial resources in other means of conducting commerce and exchanging information may be particularly reluctant or slow to adopt a new strategy that may make their existing personnel and infrastructure obsolete. The failure of the market for business-related Internet solutions to continue to develop would adversely impact IFX's business, financial condition and result of operations. Volatility of Stock Price. IFX's Common Stock may be subject to significant price fluctuations in response to a variety of factors, including quarterly variations in operating results, public announcements of acquisitions, strategic alliances and joint ventures, general conditions in the Internet industry, and general economic and market conditions in the markets in which the Company operates. In addition, the stock market has experienced significant price and volume fluctuations that have adversely affected the market prices of equity securities of some companies, including companies in the Internet service business, and that often have been unrelated to the operating performance of such companies. Continuing Losses and Negative Cash Flow from Continuing Operations. The Company's prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in new and rapidly evolving markets, as well as difficulties encountered by companies operating in emerging markets. To address these risks, the Company must, among other things, respond to competitive developments, continue to attract and retain qualified persons, continue to upgrade its management and financial systems, and continue to upgrade its technologies and commercialize its network services incorporating such technologies. The Company cannot assure you that it will be successful in addressing such risks, and the failure to do so could have a material adverse effect on its business, financial condition and results of operations. Although the Company has experienced revenue growth from continuing operation from quarter to quarter, it has incurred losses and experienced negative EBITDA from continuing operations during those quarter. The Company may continue to operate at a net loss and may experience negative EBITDA as it continues its acquisition program and the expansion of its Latin America network operations. The Company cannot assure you that it will be able to achieve or sustain profitability or sustain positive EBITDA. The Company's operating results may fluctuated in the future as a result of a variety of factors, some of which are outside its control. These factors, include, among others: - general economic conditions and specific economic conditions in the Internet access industry; - user demand for Internet services; - capital expenditures and other costs relating to the expansion of operations of the Company's network; - the introduction of new services by IFX or its competitors; - the mix of services sold and the mix of channels through which those services are sold; - pricing changes and new product introductions by the Company and its competitors; - delays in obtaining sufficient supplies of sole or limited source equipment and telecom facilities; and - potential adverse regulatory developments. As a strategic response to a changing competitive environment, the Company may elect from time to time to make pricing, service or marketing decisions that could have a material adverse effect on its business, results of operations and cash flow. Acquisitions and Strategic Alliances. Growth through acquisitions represents a principal component of its business strategy. Over the past 10 months ended December 31, 1999, the Company acquired approximately 18 ISPs primarily in some of the largest Latin American telecommunications markets. The Company may also seek to develop strategic alliances and investments (including venture capital investments) both domestically and internationally. Any such future acquisitions or strategic alliances and investments would be accompanied by the risks commonly encountered in acquisitions, strategic alliances or investments. Such risks include, among other things: - the difficulty of integrating the operations and personnel of the companies, particularly in Latin American markets; - the potential disruption of its ongoing business; - the inability of management to maximize its financial and strategic position by the successful incorporation of licensed or acquired technology and rights into its service offerings; and - the inability to maintain uniform standards, controls, procedures and policies and the impairment of relationships with employees and customers as a result of changes in management. The Company cannot assure you that it will be successful in overcoming these risks or any other problems encountered in connection with such acquisitions, strategic alliances or investments. The Company believes that after eliminating redundant network architecture and administrative functions and taking other actions to integrate the operations of acquired companies it will be able to realize cost savings. However, the Company cannot assure you that its integration of acquired companies' operations will be successfully accomplished. The Company's inability to improve the operating performance of acquired companies' businesses or to integrate successfully the operations of acquired companies could have a material adverse effect on its business, financial condition and results of operations. In addition, as the Company proceeds with acquisitions in which the consideration consists of cash, a substantial portion of its available cash will be used to consummate such acquisitions. As with each of its recent acquisitions, the purchase price of many of the businesses that might become attractive acquisition candidates for the Company likely will significantly exceed the fair values of the net assets of the acquired businesses. As a result, material goodwill and other intangible assets would be required to be recorded which would result in significant amortization charges in future periods. Furthermore, in connection with acquisitions or strategic alliances, the Company could incur substantial expenses, including the expenses of integrating the business of the acquired company or the strategic alliance with its existing business. The Company expects that competition for appropriate acquisition candidates may be significant. The Company may compete with other telecommunications companies with similar acquisition strategies, many of which may be larger and have greater financial and other resources than the Company has. Competition for Internet companies is based on a number of factors including price, terms and conditions, size and access to capital, ability to offer cash, stock or other forms of consideration and other matters. The Company cannot assure you that it will be able to successfully identify and acquire suitable companies on acceptable terms and conditions. Ability to Manage its Operations and its Financial Resources. Our rapid growth has placed a strain on its administrative, operational and financial resources and has increased demands on its systems and controls. The Company plans to continue to expand the capacity of existing points-of-presence as customer-driven demand dictates. The Company anticipates that its Internet Service Provider may require continued enhancements to and expansion of its network. The process of consolidating the businesses and implementing the strategic integration of these acquired businesses with its existing business may take a significant amount of time. It may also place additional strain on the Company's resources and could subject it to additional expenses. The Company cannot assure you that it will be able to integrate these companies successfully or in a timely manner. In addition, the Company cannot assure you that its existing operating and financial control systems and infrastructure will be adequate to maintain and effectively monitor future growth. The following risks, associated with its growth, could have a material adverse effect on its business, results of operations and financial condition: - its inability to continue to upgrade its networking systems or its operating and financial control systems; - its inability to recruit and hire necessary personnel or to successfully integrate new personnel into its operations; - its inability to successfully integrate the operations of acquired companies or to manage its growth effectively; or - its inability to adequately respond to the emergence of unexpected expansion difficulties. Currency and Exchange Risks. Most of its revenues are derived from operations outside the United States and the majority of its assets were in operations outside of the United States. The Company anticipate that a significant percentage of its future revenue and operating expenses will continue to be generated from operations outside the United States and the Company expect to continue to invest in Latin American businesses. Consequently, a substantial portion of its revenue, operating expenses, assets and liabilities will be subject to significant foreign currency and exchange risks. Obligations of customers and of IFX in foreign currencies will be subject to unpredictable and indeterminate fluctuations in the event that such currencies change in value relative to U.S. dollars. Furthermore, those customers and IFX may be subject to exchange control regulations which might restrict or prohibit the conversion of such currencies into U.S. dollars. Although the Company have not entered into hedging transactions to limit its foreign currency risks, as a result of the increase in its foreign operations, the Company may implement such practices in the future. The Company cannot assure you that the occurrence of any of these factors will not have a material adverse effect on its business, financial position or results of operations. Dependence on Suppliers. The Company is dependent on third party suppliers for its phone line connections, bandwidth and e-mail. Some of these suppliers are or may become competitors of the Company, and such suppliers are not subject to any contractual restrictions upon their ability to compete with the Company. If these suppliers change their pricing structures, the Company may be adversely affected. Moreover, any failure or delay on the part of the Company's network providers to deliver bandwidth to it or to provide operations, maintenance and other services with respect to such bandwidth in a timely or adequate fashion could adversely affect the Company. The Company is also dependent on third party suppliers of hardware components. Although the Company attempts to maintain a minimum of two vendors for each required product, some components used for providing its networking services are currently acquired or available from only one source. A failure by a supplier to deliver quality products on a timely basis, or the inability to develop alternative sources if and as required, could result in delays which could have a material adverse effect on the Company. Our remedies against suppliers who fail to deliver products on a timely basis are limited by contractual liability limitations contained in supply agreements and purchase orders and, in many cases, by practical considerations relating to its desire to maintain good relationships with the suppliers. As its suppliers revise and upgrade their equipment technology, the Company may encounter difficulties in integrating the new technology into its network. Many of the vendors from whom the Company purchase telecommunications bandwidth, including the local phone companies, competitive local exchange carriers and other local exchange carriers, currently are subject to tariff controls and other price constraints which in the future may be changed. In addition, recently enacted legislation will produce changes in the market for telecommunications services. Moreover, the Company is subject to the effects of other potential regulatory actions which, if taken, could increase the cost of its telecommunications bandwidth through, for example, the imposition of access charges. Risks Of Computer Viruses Entering our Computer Systems. Computer viruses may cause our systems to incur delays or other service interruptions. In addition, the inadvertent transmission of computer viruses could expose us to a material risk of loss or litigation and possible liability. Moreover, if a computer virus affecting our system is highly publicized, our reputation could be materially damaged and our visitor traffic may decrease. Year 2000 Compliance. The commonly referred to "Year 2000" problem relates to whether computer systems will properly recognize date sensitive information when the year changes from 1999 to 2000. Systems that do not properly recognize such information will generate wrong data and could fail. IFX has identified two main areas of Year 2000 risk: 1. Internal computer systems or embedded chips could be disrupted or fail, causing an interruption or decrease in productivity in our operations; and 2. Computer systems or embedded chips of third parties including, without limitation, financial institutions, suppliers, vendors, landlords, customers, international suppliers of telecommunications services and others, could be disrupted or fail, causing an interruption or decrease in our ability to continue our operations. This risk is particularly acute in Latin America, where many older computer systems are still in use. Prior to entering the year 2000, the Company developed plans for implementing, testing and completing any necessary modifications to our key computer systems and equipment with embedded chips to help ensure that they were Year 2000 compliant. The cost of addressing Year 2000 issues has been minor to date, as most of our PC's, laptops, servers, routers and other computer equipment were found to be Year 2000 compliant. In addition, the Company identified and communicated with third-party entities with which we transact significant business, including critical vendors and financial institutions, to determine their Year 2000 status and any probable impact on us. Our inquiries did not reveal any significant Year 2000 noncompliance issues affecting our material third parties. Now that we have entered the year 2000, we have tested our key computer systems and equipment and have confirmed that they appear to be Year 2000 compliant. To date, the Company has not experienced any material Year 2000 related disruptions or failures of our systems or services, nor have we been notified of any disruptions or failures in the systems of any of our third parties. There is an ongoing risk that Year 2000 related problems could still occur and we will continue to monitor and evaluate these risks; however, we believe that the Year 2000 problem should not pose any significant operational problems for us. EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from The Quarterly report filed on Form 10-Q for the period ended December 31, 1999, and is qualified in its entirety by reference to such financial statements. 3-MOS 6-MOS JUN-30-2000 JUN-30-2000 OCT-01-1999 JUL-01-1999 DEC-31-1999 DEC-31-1999 2,318,100 0 0 0 4,384,900 0 634,100 0 0 0 6,791,200 0 8,498,900 0 1,445,900 0 34,658,700 0 12,773,600 0 0 0 0 0 0 0 221,700 0 18,775,500 0 34,658,700 0 2,598,000 3,816,600 2,598,000 3,816,600 1,471,300 2,547,900 9,634,700 15,954,300 13,500 35,500 0 0 46,400 60,500 (6,947,000) (11,954,900) 550,600 1,427,000 (6,396,400) (10,527,900) 497,700 940,000 0 0 0 0 (5,898,700) (9,587,900) (0.68) (1.19) (0.68) (1.19)
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