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