-----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, R2NJsmoFpEJj7ebKcREUjLSPNKLGWn5hZU8szPvKsOyIdXAkbvmXUhSa5u/Guv0T 1WAN4j6X7BKxmWRZoclZpw== 0000950131-99-006760.txt : 19991221 0000950131-99-006760.hdr.sgml : 19991221 ACCESSION NUMBER: 0000950131-99-006760 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991220 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991220 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: 8-K/A SEC ACT: SEC FILE NUMBER: 000-15187 FILM NUMBER: 99777669 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 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 6, 1999 IFX Corporation --------------- (Exact name of registrant as specified in its charter) DELAWARE 0-15187 36-3399452 -------- ------- ---------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) IFX Corporation 707 Skokie Blvd., 5th Floor Northbrook, Illinois 60062 -------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (847) 412-9411 ________________________________________________________________________________ Page 1 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On October 6, 1999, IFX Corporation ("IFX"), through a wholly owned subsidiary, Unete.com do Brasil S/C Ltda., acquired 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 $5.15 million, of which approximately $1.72 million was paid or is payable in cash, approximately $3.27 million was paid or is payable by issuing shares of the Company's common stock and assuming liabilities in the approximate amount of $0.16 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 October 8, 1999, IFX Corporation issued a press release announcing the consummation of this transaction. The governing transaction documents are drafted in the Portuguese language and fair and accurate English translation of the originally executed Share Purchase Agreement has been filed with the SEC. In accordance with Rule 3-05 of Regulation S-X, the financial statements of the Conex Group, a significant subsidiary, are being filed herewith. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statement of Business Acquired. The financial statements of the Conex Group required by this item are contained in the financial statements and footnotes thereto listed in the Index on page 3 herein and are incorporated by reference herein. (b) Pro Forma Financial Information. The pro forma financial information required by this item is contained in the financial statements and footnotes thereto listed in the Index on page 3 and is incorporated by reference herein. _______________________________________________________________________________ Page 2 INDEX TO FINANCIAL STATEMENTS THE CONEX GROUP. Report of Independent Auditors............................................. 4 Financial Statements Combined Balance Sheets.................................................... 5 Combined Statements of Income.............................................. 6 Combined Statements of Stockholders' Equity................................ 7 Combined Statements of Changes in Financial Position....................... 8 Notes to Financial Statements.............................................. 9 PRO-FORMA DATA FOR IFX CORPORATION AND THE CONEX GROUP Unaudited Pro Forma Financial Information.................................. 14 Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1999.... 15 Notes to Unaudited Pro Forma Consolidated Balance Sheet.................... 16 Unaudited Pro Forma Consolidated Statement of Operations for the year ended June 30, 1999 and for the three months ended September 30, 1999.... 17 Notes to Unaudited Pro Forma Consolidated Statements of Operations......... 19 _______________________________________________________________________________ Page 3 A free translation from Portuguese into English of Report of Independent Auditors on financial statements expressed in Brazilian currency and prepared in conformity with the accounting practices originating in Brazil's Corporation Law. ________________________________________________________________________________ REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS The Directors and Stockholders Conex Brasil S.A. Conex Canoas Ltda. K3 Informatica Ltda. W3 Informatica Ltda. We have audited the accompanying combined balance sheet of the companies listed in Note 2 as of June 30, 1999, and the related combined statements of income, stockholders' equity and changes in financial position for the year then ended, expressed in Brazilian currency and prepared on the basis described in Note 2. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the companies listed in Note 2 at June 30, 1999 and the combined results of their operations, changes in their stockholders' equity and changes in their financial position for the year then ended, in accordance with the accounting practices originating in Brazil's Corporation Law. Porto Alegre, November 30, 1999 Ernst & Young Auditores Independentes S.C. CRC 2SP15199/O-6/S/RS Arnaldo C. Kurayama Accountant CRC 1SP101151/S/RS _______________________________________________________________________________ Page 4 CONEX BRASIL S.A. CONEX CANOAS LTDA. K3 INFORMATICA LTDA. W3 INFORMATICA LTDA. COMBINED BALANCE SHEETS (In Brazilian Reales)
Unaudited --------- September 30, --------------------------- June 30, 1999 1999 1998 ------------- ---- ---- Assets Current assets: Cash and cash equivalents 170,664 204,925 378,440 Accounts receivable 278,636 347,673 241,903 Recoverable taxes 5,627 4,750 4,150 Inventories 7,864 9,637 12,783 Vehicles for sale 33,154 33,154 - Other assets 8,092 8,624 1,080 ------- ------- ------- Total current assets 504,037 608,763 638,356 Non-current Assets: Tax credits 1,262 - 392 Due from stockholders 62,100 62,100 - Loans to stockholders 3,800 3,800 2,000 ------- ------- ----- 67,162 65,900 2,392 Permanent assets: Investments 6,147 6,147 6,147 Equipment and office installations 702,081 747,338 483,271 Accumulated depreciation (249,698) (292,764) (157,964) --------- --------- ------- 458,530 460,721 331,454 --------- --------- -------- Total assets 1,029,729 1,135,384 972,202 ========= ========= ======== Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued expenses 246,961 248,942 99,474 Provision for income taxes 9,314 11,797 43,840 Due to banks 4,909 3,272 59 ------- ------- ------- Total current liabilities 261,184 264,011 143,373 Non-current notes payable 1,000 - 1,000 Stockholders' equity: Capital 145,000 145,000 145,000 Capital reserve 108,000 108,000 108,000 Income reserve 25,848 25,848 13,547 Retained earnings 488,697 592,525 561,282 --------- --------- -------- 767,545 871,373 827,829 --------- --------- -------- Total liabilities and stockholders' equity 1,029,729 1,135,384 972,202 ========= ========= ========
See accompanying notes. _______________________________________________________________________________ Page 5 CONEX BRASIL S.A. CONEX CANOAS LTDA. K3 INFORMATICA LTDA. W3 INFORMATICA LTDA. COMBINED STATEMENTS OF INCOME (In Brazilian Reales)
Unaudited -------------------------------- Year ended Three months ended September 30, -------------------------------- June 30, 1999 1999 1998 ------------- -------- --------- Revenues: Dial Up 2,169,983 579,159 494,556 Dedicated 228,182 85,980 46,163 Hosting and design web services 244,719 78,745 60,262 Other 308,947 114,497 80,353 --------- ------- ------- Total revenues 2,951,831 858,381 681,334 Sales Taxes (243,410) (52,754) (51,030) --------- ------- ------- Net Sales 2,708,421 805,627 630,304 Cost and expenses: Cost of revenues (366,005) (141,012) (89,327) General and administrative (1,647,824) (481,766) (306,050) Depreciation (124,107) (43,067) (26,739) --------- ------- ------- Total operating expenses (2,137,936) (665,845) (422,116) --------- ------- ------- Operating income 570,485 139,782 208,188 Other income (expense): Financial expenses, net (20,455) (9,212) (3,928) Other income, net 14,066 7,807 15,575 --------- ------- ------- Total other income (expense) (6,389) (1,405) 11,647 --------- ------- ------- Income before income taxes 564,096 138,377 219,835 Provision for income taxes (78,989) (8,973) (35,886) --------- ------- ------- Net income 485,107 129,404 183,949 ========= ======= =======
See accompanying notes. ________________________________________________________________________________ Page 6 CONEX BRASIL S.A. CONEX CANOAS LTDA. K3 INFORMATICA LTDA. W3 INFORMATICA LTDA. COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (In Brazilian Reales)
Capital Income Retained Capital reserve reserve earnings Total ----------------------------------------------------------------------- Balance at June 30, 1998 129,000 108,000 13,547 412,616 663,163 Capital increase 16,000 - - - 16,000 Net income - - - 485,107 485,107 Appropriation to legal reserve - - 12,301 (12,301) - Dividend payments - - - (396,725) (396,725) ----------------------------------------------------------------------- Balance at June 30, 1999 145,000 108,000 25,848 488,697 767,545 ======================================================================= Capital Income Retained Capital reserve reserve earnings Total ----------------------------------------------------------------------- Unaudited Balance at June 30, 1999 145,000 108,000 25,848 488,697 767,545 Net income - - - 129,404 129,404 Dividend payments - - - (25,576) (25,576) ----------------------------------------------------------------------- Balance at September 30, 1999 145,000 108,000 25,848 592,525 871,373 ======================================================================= Capital Income Retained Capital reserve reserve earnings Total ----------------------------------------------------------------------- Unaudited Balance at June 30, 1998 129,000 108,000 13,547 412,616 663,163 Capital increase 16,000 - - - 16,000 Net income - - - 183,949 183,949 Dividend payments - - - (35,283) (35,283) ----------------------------------------------------------------------- Balance at September 30, 1998 145,000 108,000 13,547 561,282 827,829 =======================================================================
See accompanying notes. ________________________________________________________________________________ Page 7 CONEX BRASIL S.A. CONEX CANOAS LTDA. K3 INFORMATICA LTDA. W3 INFORMATICA LTDA. COMBINED STATEMENTS OF CHANGES IN FINANCIAL POSITION (In Brazilian Reales)
Unaudited --------------------------------------- Year ended Three months ended September 30, --------------------------------------- June 30, 1999 1999 1998 ---------------------- -------------- --------------- SOURCES OF WORKING CAPITAL From operations: Net income 485,107 129,404 183,949 Items not affecting working capital: Depreciation 124,107 43,067 26,739 Book value of fixed asset disposals 2,692 - - Provision for loss on vehicles for sale 31,391 4,325 - ------------- ---------- ------------ Total sources from operations 643,297 176,796 210,688 From third parties: Decrease in non-current assets - 1,262 - Capital increase 16,000 - 16,000 Increase (decrease) in non-current liabilities (16,000) (1,000) (16,000) ------------- ---------- ------------ Total sources from third parties - 262 - ------------- ---------- ------------ Total sources 643,297 177,058 210,688 APPLICATIONS OF WORKING CAPITAL Increase (decrease) in noncurrent assets 64,394 - (378) Increase in equipment and office installations 328,212 49,583 69,688 Dividend payments 396,725 25,576 35,283 ------------- ---------- ------------ Total applications 789,331 75,159 104,593 ------------- ---------- ------------ Increase (decrease) in working capital (146,034) 101,899 106,095 ============= ========== ============ VARIATION OF WORKING CAPITAL Current assets: At end of period 504,037 608,763 638,356 At beginning of period 568,229 517,605 568,229 ------------- ---------- ------------ (64,192) 91,158 70,127 Current liabilities: At end of period 261,184 264,011 143,373 At beginning of period 179,342 274,752 179,341 ------------- ---------- ------------ 81,842 (10,741) (35,968) ------------- ---------- ------------ Increase (decrease) in working capital (146,034) 101,899 106,095 ============= ========== ============
See accompanying notes. _______________________________________________________________________________ Page 8 Conex Brasil S.A. Conex Canoas Ltda. K3 Informatica Ltda. W3 Informatica Ltda. NOTES TO COMBINED FINANCIAL STATEMENTS June 30, 1999 (audited), and September 30, 1999 and 1998 (unaudited) (In Brazilian Reales) 1. Description of Business The Companies have as their main objective the rendering of services in the information technology and communications segments, consisting of consulting, design and development of systems and games, Internet connections, Intranet - use of Internet within companies, design, maintenance and hosting of home pages, on-line sales, means of access to World Wide Web, electronic mail and data processing for third parties. 2. Basis of Preparation and Presentation of Financial Statements In order to meet the requirements of the Securities and Exchange Commission (SEC) of the United States as to the presentation of the financial statements of the businesses being acquired, the financial statements were prepared combining those of Conex Brasil S.A., Conex Canoas Ltda., W3 Informatica Ltda. and K3 Informatica Ltda. for the year ended June 30, 1999, the unaudited three months ended September 30, 1999 and 1998, in accordance with the provisions of Brazil's Corporation Law. The financial statements reflect the accounting balances, supplemented by the following adjustments made in the combined financial statements:
Net income ------------------------------------- Unaudited ------------------------ Year ended Three months ended ------------------------ 6/30/99 9/30/99 9/30/98 ------------------------------------- Combined accounting balances 439,634 66,226 158,408 Cash adjustment (cash count vs. accounting records) (5,195) 7,506 2,311 Invoicing by the accrual method 43,753 61,609 (10,294) Depreciation 12,587 (13,787) (6,385) Dividend payments recorded in operating results 13,254 - 13,254 Services rendered by independent contractors (1,228) (4,956) (2,604) Reversal of fixed asset items recorded as expense 44,105 2,841 - Accrual for vacations 4,827 (1,232) 4,460 Accrual for 13th monthly salary 2,414 (1,249) 2,155 Provision for social security on vacations and 13th monthly salary 3,427 190 2,287 Non-provision for advertising expenses - (1,989) - Provision for losses on vehicles for sale (31,391) (4,325) - Provision for tax contingencies (8,178) 2,990 3,983 ICMS (state VAT tax) payable (3,255) 3,255 (3,255) Provision for payment of royalties (3,618) 3,388 (2,370) Credits from blocked credit cards 6,035 (622) 7,810 Moraes & Kirchoff Advogados - legal advisory services (3,896) 1,205 - Compensable income tax (3,166) (674) (3,844) Goods in possession of third parties - - - Zigmundo & Cia. Ltda. - outsourced accounting services (2,204) (14) - Koliver Co. LLC - advisory services for sale of the companies (18,965) 8,078 - Provision for meal tickets - (4,275) - Provision for social charges on 1997 and 1999 employees participation 5,723 (2,619) 6,357 COFINS (a social tax) payable (5,388) 2,564 - Social contribution tax due in prior years 4,759 870 5,634 Income tax due in prior years 4,027 794 4,825 ISSQN (service tax) payable (8,364) 5,766 (393) Provision for social contribution tax (4,436) 2,379 (3,566) Provision for income tax (6,512) 5,334 (9,408) Salaries payable - trainees (982) 1,901 (153) Social charges on indirect salaries (1,813) 4,259 3,186 Real estate and condominium payable (2,909) - - Deferred social contribution tax 6,186 (7,961) 4,167 Deferred income tax 9,501 (8,725) 7,605 Communication toll - Embratel (2,411) 5,543 3,435 Provision for telephone payment - CRT (1,214) (4,866) (3,656) --------- ------- ------- 485,107 129,404 183,949 ========= ======= ======= Stockholders'equity ------------------------------------------------------------------ Unaudited ----------------------------- Year ended Year ended Three months ended -------------- ----------------------------- 6/30/99 6/30/98 9/30/99 9/30/98 ---------------- -------------- ------------- ------------- Combined accounting balances 620,607 561,697 661,257 700,823 Cash adjustment (cash count vs. accounting records) (7,506) (2,311) - - Invoicing by the accrual method 250,113 206,360 311,722 196,066 Depreciation 1,821 (10,766) (11,966) (17,151) Dividend payments recorded in operating results - (13,254) - - Services rendered by independent contractors (3,469) (2,241) (8,425) (4,845) Reversal of fixed asset items recorded as expense 44,105 - 46,946 - Accrual for vacations (3,777) (8,604) (5,009) (4,144) Accrual for 13th monthly salary (2,324) (4,738) (3,573) (2,583) Provision for social security on vacations and 13th monthly salary (283) (3,709) (93) Non-provision for advertising expenses - - (1,989) - Provision for losses on vehicles for sale (31,391) - (35,716) - Provision for tax contingencies (13,458) (5,280) (10,468) (1,297) ICMS (state VAT tax) payable (3,255) - - (3,255) Provision for payment of royalties (4,432) (814) (1,044) (3,184) Credits from blocked credit cards (6,290) (12,325) (6,912) (4,515) Moraes & Kirchoff Advogados - legal advisory services (3,896) - (2,691) - Compensable income tax 820 3,986 146 142 Goods in possession of third parties (1,710) (1,710) (1,710) (1,710) Zigmundo & Cia. Ltda. - outsourced accounting services (2,204) - (2,218) - Koliver Co. LLC - advisory services for sale of the companies (18,965) - (10,887) - Provision for meal tickets - - (4,275) - Provision for social charges on 1997 and 1999 employees participation (849) (6,572) (3,468) (215) COFINS (a social tax) payable (5,388) - (2,824) - Social contribution tax due in prior years (1,059) (5,818) (189) (184) Income tax due in prior years (966) (4,993) (172) (168) ISSQN (service tax) payable (10,396) (2,032) (4,630) (2,425) Provision for social contribution tax (2,379) 2,057 - (1,509) Provision for income tax (1,706) 4,806 3,628 (4,602) Salaries payable - trainees (5,901) (4,919) (4,000) (5,072) Social charges on indirect salaries (6,489) (4,676) (2,230) (1,490) Real estate and condominium payable (2,909) - (2,909) - Deferred social contribution tax 1,106 (5,080) (6,855) (913) Deferred income tax 156 (9,345) (8,569) (1,740) Communication toll - Embratel (7,517) (5,106) (1,974) (1,671) Provision for telephone payment - CRT (2,664) (1,450) (7,530) (5,106) ------- ------- -------- -------- 767,545 663,163 871,373 827,829 ======= ======= ======== ========
_______________________________________________________________________________ Page 9 3. Summary of Principal Accounting Practices and Criteria for Preparation of Combined Financial Statements Following are the principal accounting practices used in the preparation of the combined financial statements: a. Operating results Operating results are recognized on the accrual basis. The Companies normally bill their customers in the month subsequent to that in which the services are rendered, i.e., on the cash basis, except for sale of dedicated lines, which are recorded on the accrual basis. To adjust the revenue to the accrual method, all amounts invoiced in a certain month, were brought back one month. Revenues are categorized into four segments: dial up, dedicated lines, hosting and design web services, and all other which include domain registration, home service and royalties. The revenue split was determined to be the ideal presentation for the combined statements of income. The Companies recognize most expenses in the period in which they are incurred. If the Companies did not recognize an expense in the period in which it was incurred, an adjustment was made to reflect only expenses related to the period. Expenses are split into three categories: I. Cost of Revenues: Refers to costs of connections to the Internet. In this case, a reclassification entry was made to cost of revenues since the expenses were booked as administrative expenses. II. General and Administrative: Refers to all salaries, rent expenses, and any other expenses. Adjustments were made to this account to obtain a total based on the accrual method. III. Depreciation expense: Was reclassified from administrative expense, as originally recorded in the Companies' statutory accounting records, to depreciation expense. b. Marketable securities Are stated at cost plus earnings to the balance sheet date, not exceeding market value. The Companies consider all high liquidity investments with a maturity of three months or less when purchased to be cash equivalents. c. Allowance for doubtful accounts The Companies' risk of loss is limited due to their ability to terminate access by delinquent accounts. Since the Companies operate on a cash basis, they did not carry receivable balances. However, adjustments were made to the accrual method to reflect the services rendered in the last month of the year end or three-month period, but billed in the month following the end of the year or three-month period. An allowance for doubtful accounts was not deemed necessary. Sales not collected 15 days after invoiced are written off as bad debt expense and the services to the customer are interrupted. d. Inventories Inventory of goods for resale is stated at average acquisition cost, not exceeding market value. e. Investments Investments are shown at acquisition cost, not exceeding market value. f. Equipment and office installations ________________________________________________________________________________ Page 10 Equipment and office installations are stated at cost. Depreciation is computed principally by the straight-line method. g. Current and non-current liabilities Are shown at known or computable amounts plus corresponding charges to the balance sheet date, when applicable. h. Provision for income and social contribution taxes For Conex Brasil S.A., the provision for income tax was calculated at the rate of 15% on taxable income plus a surtax of 10% on the amount exceeding R$ 240,000, while the provision for social contribution tax was calculated at the rate of 12% on income adjusted in accordance with the governing legislation. The tax anticipations are recorded as recoverable taxes up to the filing of the annual income tax return. Conex Canoas Ltda., W3 Informatica Ltda. and K3 Informatica Ltda. are under the simplified tax system with monthly tax payments based on a percentage of gross revenues. i. Sales taxes Sales taxes on services rendered are calculated on billing at the following rates: Conex Brasil S.A. - City of Porto Alegre 5 % Conex Canoas Ltda. - City of Canoas 3 % K3 Informatica Ltda. - City of Santa Maria 4 % W3 Informatica Ltda. - City of Novo Hamburgo exempt j. Leasing of vehicles The monthly lease payments are recorded as expenses on the cash basis, the guaranteed residual values are recorded in current assets due to the intention to sell the leased vehicles. k. Combined financial statements The combined financial statements include the financial statements of Conex Brasil S.A., Conex Canoas Ltda., W3 Informatica Ltda. and K3 Informatica Ltda. The financial statements have been prepared to present the Companies' financial position and results of operations on a stand-alone basis. The combination process of the financial statements excluded income and expenses related to royalties charged to and collected from the other companies by Conex Brasil S.A. l. Quarterly information The balance sheets, as of September 30, 1999 and September 30, 1998, and the related statements of income, stockholders' equity and changes in financial position for the three months then ended are unaudited and have been prepared by management in accordance with the accounting practices originating in Brazil's Corporation Law. 4. Inventories
Unaudited ------------------------------------- September 30, ------------------------------------- June 30, 1999 1999 1998 --------------------------------------------------------- Goods for resale 155 1,928 8,748 Goods in demonstration 7,649 7,649 3,975 Goods in consignment 60 60 60 --------------------------------------------------------- Total 7,864 9,637 12,783 =========================================================
________________________________________________________________________________ Page 11 5. Other Assets
Unaudited ---------------------------------- September 30, ---------------------------------- June 30, 1999 1999 1998 ------------------------------------------------------- Advances to employees 387 690 146 Advances to suppliers 6,403 6,943 515 Advances for judicial processes 419 419 419 Collectable checks 196 543 - Prepaid expenses 687 29 - ------------------------------------------------------- 8,092 8,624 1,080 =======================================================
6. Due from Stockholders The amount of R$ 62,100 refers to a payment made by Conex Brasil S.A. on behalf of its stockholders Daniel Francisco Sachet, Fernando Miguel de Alava Soto and Rodrigo de Losina Silva. The respective stockholders acquired 3,000 common shares issued by the company from Dinamerico Schwingel. There is no incidence of financial charges nor stipulated maturity date. 7. Equipment and Office Installations
Unaudited ------------------------- Annual rates September 30, of depreciation June 30, 1999 1999 1998 ------------------ ----------------------------------------- Equipment and office installations 10% 77,302 79,618 67,589 Information technology equipment and software 20% and 40% 624,779 667,720 415,682 ----------------------------------------- 702,081 747,338 483,271 Accumulated depreciation (249,698) (292,764) (157,964) ----------------------------------------- 452,383 454,574 325,307 =========================================
8. Accounts Payable and Accrued Expenses
Unaudited ----------------------------------- September 30, ----------------------------------- June 30, 1999 1999 1998 ------------------------------------------------------- Suppliers 42,816 60,614 20,300 Tax obligations 53,327 49,199 20,723 Social charges 47,266 48,530 19,823 Salaries payable 34,535 24,768 23,179 Other accounts payable 69,017 65,831 15,449 ------------------------------------------------------- 246,961 248,942 99,474 =======================================================
9. Notes Payable Refers to a loan to a quotaholder, without interest charge. The loan was repaid on July 30, 1999. 10. Vehicles for sale - Leasing W3 Informatica Ltda. has a leasing agreement for three vehicles, as follows: Lessor Alfa Arrendamento Mercantil S.A. Value of leased assets 108,900 Installments paid in 1998 5,774 Installments paid in 1999 14,416 (6/30/99) and 8,650 (9/30/99) Residual value paid in 1998 2,887 Residual value paid in 1999 7,208 (6/30/99) and 4,325 (9/30/99) Balance not yet due 49,015 (6/30/99) and 40,365 (9/30/99) Total contract value 123,734 Final maturity date of contract November 3, 2000
________________________________________________________________________________ Page 12 As per contractual clause, the amount of R$ 54,450 was paid in cash, corresponding to 50% of the value of the vehicles. The guaranteed residual value established in the contract is being anticipated monthly at 50% of each installment. At June 30, 1999 and September 30, 1999, the amounts paid totaled R$ 10,095 and R$ 4,325, respectively. The amount paid in cash (R$ 54,450) and the guaranteed residual value paid (R$ 10,095 at 6/30/99 and R$ 14,420 at 9/30/99) were recorded as vehicles for sale in current assets, deducted from the provision for loss of R$ 31,391 (6/30/99) and R$ 35,716 (9/30/99), since the vehicles were sold for R$ 33,154 on November 24, 1999 to the former quotaholders. The outstanding balance of the leasing contract of R$ 33,154 was liquidated by the Company on October 27, 1999. 11. Labor Contingency Conex Canoas Ltda. has a labor claim filed against it. A provision of R$ 1,200 was made, representing management expectation of the loss. 12. Capital and Dividends a. Capital Subscribed and paid-in capital at June 30, 1999 (audited), September 30, 1999 and 1998 (unaudited) is as follows:
Shares/Quotas Par value ------------------------------------------------------------------------------------ Unaudited Unaudited ---------------- ------------------ June 30, September 30, June 30, September 30, Company 1999 1999 1998 1999 1999 1998 -------------------------------------------------------------------------------------------------------------------- Conex Brasil S.A. 60,000 60,000 60,000 (1) (1) (1) Conex Canoas Ltda. 200 200 200 100.00 100.00 100.00 W3 Informatica Ltda. 10,000 10,000 10,000 3.90 3.90 3.90 K3 Informatica Ltda. 260 260 260 100.00 100.00 100.00
(1) without par value. b. Dividends As per Conex Brasil S.A.'s articles of incorporation shareholders are entitled to an annual obligatory dividend of 25% of net income after the appropriation of the amount for the legal reserve. The annual net income of Conex Canoas Ltda., W3 Informatica Ltda. and K3 Informatica Ltda. is distributed to quotaholders in proportion to their capital participation or could be retained for capital increase. For the year ended June 30, 1999 (audited) and three-month periods ended September 30, 1999 and 1998 (unaudited) the following amounts were distributed to quotaholders/shareholders as dividend:
Unaudited --------------------------------------- September 30, --------------------------------------- Company June 30, 1999 1999 1998 ------------------------------------------------------------------------------------------------------------------- Conex Brazil S.A 293,607 - - W3 Informatica Ltda. 103,118 25,576 35,283 ------------------------------------------------------------------ 396,725 25,576 35,283 ==================================================================
13. Subsequent Event a. On October 6, 1999, the companies Unete.com do Brasil S/C Ltda. and ENI Brazilian Holdings, Inc. acquired the total shares and quotas of Conex Brasil S.A., Conex Canoas Ltda., W3 Informatica Ltda. and K3 Informatica Ltda. b. As a consequence of the matter mentioned above, the companies Conex Canoas Ltda., W3 Informatica Ltda. and K3 Informatica Ltda. lost their option of paying their federal taxes under the simplified tax system mentioned in paragraphs VI and X of article 9 of Law No. 9,317/96. As stated in article 13 of that law, the new taxation regimen will be the so-called "assumed income" or "taxable income", as from the month subsequent to the event, i.e. as from November 1999. ________________________________________________________________________________ Page 13 UNAUDITED PRO FORMA FINANCIAL DATA The following pro forma consolidated balance sheet as of September 30, 1999 was prepared assuming the acquisition had been consummated on September 30, 1999. The consolidated statements of operations for the year ended June 30, 1999, and for the three months ended September 30, 1999 are, as if the acquisition of the Conex Group had occurred on July 1, 1998 and July 1, 1999, respectively. Each of the acquisitions of the Conex Group companies has been accounted for as a purchase business combination and, accordingly, the purchase price has been allocated to tangible assets acquired and liabilities assumed, based upon their respective fair values, with the excess allocated to intangible assets to be amortized over the estimated economic lives of the intangible assets from the respective dates of acquisition. The pro forma financial information does not purport to represent what the Company's consolidated results of operations would have been if the acquisition had in fact occurred on these dates, nor does it purport to indicate the future consolidated financial position or future consolidated results of operations of the Company. The pro forma adjustments are based on currently available information, certain assumptions that management believes are reasonable, the translation from the Brazilian Reales to the United States Dollars, and the translation from Brazilian GAAP to US GAAP. ________________________________________________________________________________ Page 14 IFX CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 (In US Dollars)
- ------------------------------------------------------------------------------------------------------------------------------- IFX CORP. CONEX GROUP ADJUSTMENTS TOTAL (1) (2) SUBTOTAL (3) (4) - ------------------------------------------------------------------------------------------------------------------------------- CURRENT ASSETS: Cash and cash equivalents............................. $ 7,535,800 $ 106,700 $ 7,642,500 $ (762,500) $ 6,880,000 Receivables, net of allowance for doubtful accounts.................................. 672,900 181,000 853,900 - 853,900 Net assets of discontinued operations................. 637,900 - 637,900 - 637,900 ----------- ---------- ---------- --------- ---------- Total current assets............................... 8,846,600 287,700 9,134,300 (762,500) 8,371,800 PROPERTY AND EQUIPMENT: Equipment, furniture and leasehold improvements....................................... 4,019,200 389,100 4,408,300 - 4,408,300 Assets under capital lease............................ 2,855,700 18,900 2,874,600 - 2,874,600 Less: accumulated depreciation and amortization...................................... (908,700) (154,100) (1,062,800) - (1,062,800) ----------- ---------- ---------- --------- ---------- Total property and equipment, net................... 5,966,200 253,900 6,220,100 - 6,220,100 OTHER ASSETS: Acquired customer base, net........................... 8,135,800 - 8,135,800 4,557,100 12,692,900 Investment in Yupi Internet Inc....................... 3,113,500 - 3,113,500 - 3,113,500 Investments in and advances to affiliated partnerships......................................... 233,200 - 233,200 - 233,200 Notes receivable...................................... 615,000 34,300 649,300 - 649,300 Deferred income taxes................................. 876,400 2,500 878,900 - 878,900 Other assets.......................................... 1,427,900 12,700 1,440,600 - 1,440,600 ----------- ---------- ---------- --------- ---------- Total other assets................................. 14,401,800 49,500 14,451,300 4,557,100 19,008,400 ----------- ---------- ---------- --------- ---------- TOTAL ASSETS........................................... 29,214,600 591,100 29,805,700 3,794,600 33,600,300 =========== ========== ========== ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses................. $ 7,640,000 131,300 7,771,300 - 7,771,300 Capital lease obligation.............................. 114,800 21,000 135,800 - 135,800 Liability on Conex Acquisition........................ - - - 960,400 960,400 Income Taxes Payable.................................. - 6,100 6,100 - 6,100 Total current liabilities.......................... ----------- ---------- ---------- --------- ---------- 7,754,800 158,400 7,913,200 960,400 8,873,600 LONG-TERM LIABILITIES: Notes payable......................................... 496,400 - 496,400 - 496,400 Capital lease obligation.............................. 2,740,800 - 2,740,800 - 2,740,800 ----------- ---------- ---------- --------- ---------- Total long-term liabilities........................ 3,237,200 - 3,237,200 - 3,237,200 ----------- ---------- ---------- --------- ---------- TOTAL LIABILITIES...................................... 10,992,000 158,400 11,150,400 960,400 12,110,800 ----------- ---------- ---------- --------- ---------- STOCKHOLDERS' EQUITY: Common stock.......................................... 168,800 122,200 291,000 (119,200) 171,800 Paid-in capital....................................... 17,289,700 - 17,289,700 3,263,900 20,553,600 Retained earnings..................................... 1,128,000 530,300 1,658,300 (530,300) 1,128,000 Accumulated other comprehensive income................ 5,900 (219,800) (213,900) 219,800 5,900 Deferred compensation................................. (369,800) - (369,800) - (369,800) ----------- ---------- ---------- --------- ---------- TOTAL STOCKHOLDERS' EQUITY............................. 18,222,600 432,700 18,655,300 2,834,200 21,489,500 ----------- ---------- ---------- --------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................................... 29,214,600 591,100 29,805,700 3,794,600 33,600,300 =========== ========== ========== ========= ========== - -------------------------------------------------------------------------------------------------------------------------------
1. Reflects the unaudited consolidated financial position of IFX Corporation and Subsidiaries as of September 30, 1999, previously presented on the Form 10-Q. 2. Reflects the unaudited financial position of the Conex Group as of September 30, 1999. 3. See Notes to Unaudited Pro Forma Consolidated Balance Sheet (Note 2 - Pro Forma Adjustments). 4. Reflects the consolidated financial position of the Company, on a pro forma basis, assuming the acquisition of the Conex Group had been consummated on September 30, 1999. ________________________________________________________________________________ Page 15 IFX CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET As of September 30, 1999 NOTE 1 - BASIS OF PRESENTATION Management believes that the assumptions used in preparing the Unaudited Pro Forma Consolidated Balance Sheet provide a reasonable basis for presenting all of the significant effects of the acquisitions of the Conex Group, that the pro forma adjustments give appropriate effect to those assumptions and that the pro forma adjustments are properly applied in the Unaudited Pro Forma Consolidated Balance Sheet. NOTE 2 - PRO FORMA ADJUSTMENTS Reflects the acquisitions of the Conex Group including (i) $762,500 cash paid at closing, (ii) a liability to Conex Shareholders and other non- related parties of $960,400 that will be paid in cash, (iii) a $4,557,100 adjustment for the Acquired Customer Base with a three year useful life, (iv) the effect on equity due to the issuance of approximately 150,007 shares in connection with the acquisition of the Conex Group and payments to other non- related third parties, and (v) the elimination of the equity accounts of the Conex Group. ________________________________________________________________________________ Page 16 IFX CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 1999 (US Dollars)
- ----------------------------------------------------------------------------------------------------------------------- IFX CORP. CONEX GROUP SUBTOTAL ADJUSTMENTS TOTAL (1) (2) (3) (4) - ----------------------------------------------------------------------------------------------------------------------- STATEMENT OF OPERATIONS DATA: Revenues: Dial Up........................................ $ 616,300 $1,546,000 $ 2,162,300 - $ 2,162,300 Dedicated...................................... 83,500 162,600 246,100 - 246,100 Web hosting and design services................ 25,500 174,300 199,800 - 199,800 Other.......................................... - 46,700 46,700 - 46,700 ----------- ---------- ---------- ---------- ---------- Total revenues. ............................... 725,300 1,929,600 2,654,900 - 2,654,900 Cost and expenses: Cost of revenues............................... 445,500 260,800 706,300 - 706,300 General and administrative..................... 2,978,400 1,174,000 4,152,400 - 4,152,400 Depreciation and amortization.................. 232,400 88,300 320,700 1,519,000 1,839,700 ----------- ---------- ---------- ---------- ---------- Total operating expenses....................... 3,656,300 1,523,100 5,179,400 1,519,000 6,698,400 ----------- ---------- ---------- ---------- ---------- Operating income/(loss) from continuing operations........................ (2,931,000) 406,500 (2,524,500) (1,519,000) (4,043,500) Other Income (Expense): Interest income / (expense).................... 376,100 (14,600) 361,500 - 361,500 Loss on operations of equity investee........................... (107,700) - (107,700) - (107,700) Other.......................................... 136,200 10,000 146,200 - 146,200 ----------- ---------- ---------- ---------- ---------- Total other income (expense)................... 404,600 (4,600) 400,000 - 400,000 ----------- ---------- ---------- ---------- ---------- Income/(Loss) from continuing operations before income taxes............... (2,526,400) 401,900 (2,124,500) (1,519,000) (3,643,500) Provision/(Benefit) from income tax.............................. (811,000) 56,300 (754,700) (531,600) (1,286,300) ----------- ---------- ---------- ---------- ---------- Income/(loss) from continuing operations................................... (1,715,400) 345,600 (1,369,800) (987,400) (2,357,200) Income from discontinued operations, net of taxes..................... 3,117,600 - 3,117,600 - 3,117,600 ----------- ---------- ---------- ---------- ---------- Net income (loss)............................... 1,402,200 345,600 1,747,800 (987,400) 760,400 =========== ========== ========== ========== ========== BASIC AND DILUTED INCOME (LOSS) PER SHARE: Loss from continuing operations................. $ (0.26) - - - $ (0.35) Income from discontinued operations................................... 0.48 - - - 0.46 ----------- ---------- Net Income (loss)............................... 0.22 - - - 0.11 =========== ========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic and diluted........................... 6,498,204 - - 150,007 6,648,211 - -----------------------------------------------------------------------------------------------------------------------
1. Reflects the audited consolidated results of operations of IFX Corporation and Subsidiaries for the year ended June 30, 1999, previously presented on the Form 10-K. 2. Reflects the consolidated results of operations of the Conex Group for the twelve month period ended June 30, 1999 prepared in accordance with accounting principles generally accepted in the United States. Certain amounts have been reclassified to conform to the Company's presentation. 3. See Notes to Unaudited Pro Forma Consolidated Statements of Operations (Note 2 - Pro Forma Adjustments). 4. Reflects the results of operations of the Company, on a pro forma basis, assuming (i) the acquisitions of the Conex Group, (ii) the issuance by the Company of 150,007 shares of common stock to the Conex Group shareholders and commission paid to companies that participated in the transaction as if it had been consummated on July 1, 1998. - -------------------------------------------------------------------------------- Page 17 IFX CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 (US Dollars)
- ------------------------------------------------------------------------------------------------------------------------------------ IFX CORP. CONEX GROUP SUBTOTAL ADJUSTMENTS TOTAL (1) (2) (3) (4) - ------------------------------------------------------------------------------------------------------------------------------------ STATEMENT OF OPERATIONS DATA: Revenues: Dial Up......................................... $ 910,600 $ 312,300 $ 1,222,900 $ - $ 1,222,900 Dedicated....................................... 179,400 46,400 225,800 - 225,800 Web hosting and design services................. 54,900 42,500 97,400 - 97,400 Other........................................... 73,700 33,300 107,000 - 107,000 ------------ ----------- ----------- --------- ----------- Total revenues................................. 1,218,600 434,500 1,653,100 - 1,653,100 Cost and expenses: Cost of revenues................................ 1,076,600 76,100 1,152,700 - 1,152,700 General and administrative...................... 4,390,600 259,800 4,650,400 - 4,650,400 Depreciation and amortization................... 852,400 23,200 875,600 379,800 1,255,400 ------------ ----------- ----------- --------- ----------- Total operating expenses........................ 6,319,600 359,100 6,678,700 379,800 7,058,500 ------------ ----------- ----------- --------- ----------- Operating income/(loss) from continuing operations......................... (5,101,000) 75,400 (5,025,600) (379,800) (5,405,400) Other Income (Expense): Interest income / (expense)..................... 85,000 (5,000) 80,000 - 80,000 Loss on operations of equity investee............................ (22,000) - (22,000) - (22,000) Other........................................... 30,100 4,200 34,300 - 34,300 ------------ ----------- ----------- --------- ----------- Total other income (expense).................... 93,100 (800) 92,300 - 92,300 ------------ ---------- ---------- --------- ---------- Income/(Loss) from continuing operations before income taxes................ (5,007,900) 74,600 (4,933,300) (379,800) (5,313,100) Provision/(Benefit) from income tax.............................. (876,400) 4,800 (871,600) (66,500) (938,100) ------------ ---------- ---------- --------- ---------- Income/(loss) from continuing operations.................................... (4,131,500) 69,800 (4,061,700) (313,300) (4,375,000) Income from discontinued operations, net of taxes...................... 442,300 - 442,300 - 442,300 ------------ ---------- ---------- --------- ---------- Net income (loss)................................ (3,689,200) 69,800 (3,619,400) (313,300) (3,932,700) ============ ========== ========== ========= ========== BASIC AND DILUTED INCOME (LOSS) PER SHARE: Loss from continuing operations.................. $ (0.56) - - - $ (0.58) Income from discontinued operations.................................... 0.06 - - - 0.06 ------------ ---------- ---------- --------- ---------- Net Income (loss)................................ $ (0.50) - - - $ (0.52) ============ ========== ========== ========= ========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic and diluted............................ 7,423,547 - - 150,007 7,573,554 - ------------------------------------------------------------------------------------------------------------------------------------
1. Reflects the unaudited consolidated results of operations of IFX Corporation and Subsidiaries for the three months ended September 30, 1999, previously presented on the Form 10-Q. 2. Reflects the unaudited consolidated results of operations of the Conex Group for the three month ended September 30, 1999 prepared in accordance with accounting principles generally accepted in the United States. Certain amounts have been reclassified to conform to the Company's presentation. 3. See Notes to Unaudited Pro Forma Consolidated Statements of Operations (Note 2 - Pro Forma Adjustments). 4. Reflects the results of operations of the Company, on a pro forma basis, assuming (i) the acquisitions of the Conex Group, (ii) the issuance by the Company of 150,007 shares of common stock to the Conex Group shareholders and commission paid to companies that participated in the transaction as if it had been consummated on July 1, 1999. - ------------------------------------------------------------------------------- Page 18 IFX CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 NOTE 1 - BASIS OF PRESENTATION The Unaudited Pro Forma Consolidated Statements of Operations do not give effect to any potential cost savings and synergies that could result from the acquisitions included therein. Management believes that the assumptions used in preparing the Unaudited Pro Forma Consolidated Statements of Operations provide a reasonable basis for presenting all of the significant effects of the acquisitions included therein, that the pro forma adjustments give appropriate effect to those assumptions and that the pro forma adjustments are properly applied in the Unaudited Pro Forma Consolidated Statements of Operations. NOTE 2 - PRO FORMA ADJUSTMENTS The pro forma adjustments outlined below present separate adjustments related to the acquisition of the Conex Group. The purchase price has been allocated to tangible assets acquired and liabilities assumed, based upon their respective fair values, with the excess allocated to intangible assets to be amortized over a three year period. a. Reflects the increase in amortization resulting from the allocation of the Acquired Customer Base of $4,557,100.
(in U.S. dollars) Year ended Three months ended June 30, 1999 September 30, 1999 ------------- ------------------ Amortization $ 1,519,000 $ 379,800
b. Reflects the adjustment to weighted average shares assuming the issuance of 150,007 shares of common stock for the Conex Group acquisition. c. Reflects an adjustment to income taxes to reflect the benefit of the additional expense incurred due to the acquired customer base. NOTE 3 - BASIC AND DILUTED EARNINGS OR LOSS PER SHARE Basic and diluted earnings or loss per share are computed using net income or loss available to common shareholders divided by the weighted average number of shares of the Company's common stock that were outstanding during the periods presented and assumes that the issuance of 150,007 shares of common stock for the Conex Group. As all common stock equivalents and contingently issuable shares are antidilutive, basic and diluted loss per share are the same for all periods presented. - ----------------------------------------------------------------------------- Page 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. IFX Corporation. /s/ JOEL EIDELSTEIN ------------------------- Joel Eidelstein President /s/ JOSE LEIMAN ------------------------- Jose Leiman Chief Financial Officer Date: December 20, 1999 - ----------------------------------------------------------------------------- Page 20 -----END PRIVACY-ENHANCED MESSAGE-----