<PAGE>
As Filed With The Securities And Exchange Commission On September 5, 2000
Registration No. 333-
The information in this prospectus is not complete and may be changed. The
Selling Stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------
IFX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3399452
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
707 Skokie Boulevard, 5th Floor
Northbrook, Illinois 60062
(847) 412-9411
--------------
(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)
Joel M. Eidelstein
IFX Corporation
707 Skokie Boulevard, 5th Floor
Northbrook, Illinois 60062
(847) 412-9411
--------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------
With copies to:
Scott J. Bakal, Esq.
Neal, Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
(312) 269-8000
-------------
Approximate date of commencement of proposed sale to the public:
From time to time after the registration statement becomes effective.
-------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
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Title of Each Class Proposed Maximum Proposed Maximum
of Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered(1) Per Share(2) Offering Price(2) Registration Fee
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 142,513 shares $9.75 $1,389,501.75 $367.00
$.02 par value per
share
------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416, this registration statement also covers such
indeterminate number of shares of IFX's Common Stock as may be issued as a
result of stock dividends, stock splits or similar transactions prior to the
termination of this registration statement.
(2) Estimated solely for the purpose of calculating the registration fee and
based upon the average of the high and low sales prices of the Company's Common
Stock as reported on the Nasdaq SmallCap Market on September 1, 2000.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this prospectus is not complete and may be changed. The
Selling Stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED [SEPTEMBER 5], 2000
PROSPECTUS
----------
142,513 Shares
IFX CORPORATION
Common Stock
($.02 par value per share)
This prospectus relates to 142,513 shares of our common stock that may be
offered for sale or otherwise transferred from time to time by one or more of
the selling stockholders identified in this prospectus. The aggregate net
proceeds to the selling stockholders from the sale of the shares of IFX common
stock will equal the sales price of such shares of common stock, less any
commissions. See "Plan of Distribution." We will not receive any of the
proceeds from the sale of the shares of common stock by the selling
stockholders. The expenses incurred in registering the 142,513 shares of common
stock, including legal and accounting fees, will be paid by us.
67,679 of the shares of common stock offered hereby were acquired by
certain selling stockholders from us in connection with our August and October
1999 acquisitions of Internet service provider businesses in Brazil, our
December 1999 acquisition of an Internet service provider business in Nicaragua,
our January 2000 acquisitions of Internet service provider businesses in
Colombia and Brazil, and our June 2000 acquisition of a Web hosting business in
Brazil.
46,709 of the shares of common stock offered hereby were acquired by
certain selling stockholders from us upon the April 2000 exercise of stock
options issued in consideration for consulting services. 28,125 of the shares
of common stock offered hereby were acquired by certain selling stockholders
from us as employment bonuses. All of the shares offered hereby will be
available immediately for sale hereunder. See "Selling Stockholders."
Our common stock is listed on the Nasdaq SmallCap Market under the symbol
"FUTR." The last reported sale price of our common stock on September 1, 2000
on the Nasdaq SmallCap Market was $8 1/2 per share.
Our principal executive offices are located at 707 Skokie Boulevard, 5th
Floor, Northbrook, Illinois, 60062, and our telephone number is (847) 412-9411.
Investing in our common stock involves certain risks. See "Risk Factors"
beginning on page 3.
___________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
___________
The date of this Prospectus is , 2000.
<PAGE>
_______________________________________________
_______________________________________________
YOU SHOULD RELY ONLY ON INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS. NEITHER WE NOR THE SELLING STOCKHOLDERS HAVE AUTHORIZED ANYONE
TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE SELLING STOCKHOLDERS ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THE
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
___________
TABLE OF CONTENTS
<TABLE>
<S> <C>
RISK FACTORS....................................................... 3
FORWARD-LOOKING STATEMENTS......................................... 10
IFX'S BUSINESS..................................................... 11
USE OF PROCEEDS.................................................... 15
SELLING STOCKHOLDERS............................................... 16
PLAN OF DISTRIBUTION............................................... 17
DESCRIPTION OF SECURITIES.......................................... 18
LEGAL MATTERS...................................................... 19
EXPERTS............................................................ 19
WHERE TO FIND MORE INFORMATION..................................... 19
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................... 20
</TABLE>
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RISK FACTORS
You should consider carefully the following factors and the other
information in this Prospectus before deciding to invest in shares of our common
stock, $.02 par value per share (the "Common Stock").
Lack of Operating History and Experience in the Internet Service Business
Our strategy of developing Internet services and acquiring Internet service
providers ("ISPs") in Latin America is in the early development stages. We have
limited experience in providing Internet services and, accordingly, a limited
operating history upon which an evaluation of our prospects can be made. Such
prospects must be considered in light of the substantial risks, expenses and
difficulties encountered by new entrants, such as us, in the Internet services
industry. These risks include identification of entry opportunities, intense
competition, changing technology and evolving industry standards, changing user
demand for Internet access and other Internet services, dependence upon the
Internet and general economic conditions in the region. If we fail to add
significantly to our user base in Latin America, we may not be able to grow
revenues, implement our business plan or achieve economies of scale.
Our success in the ISP business will also depend upon our ability to hire
and retain qualified executive and management employees with significant
experience in managing and expanding an Internet services business in the
markets in which we seek to operate. We can give no assurance that we will be
able to successfully hire, retain or motivate qualified employees. Further, we
can give no assurance that we will be successful in acquiring or building the
necessary Internet service network or that the services we offer over any such
network will be profitable.
Dependence upon the Creation of a Network Infrastructure
Our success depends in part upon our ability to create an Internet network
infrastructure that covers significant regions or areas of Latin American
countries. Our primary strategy for creating the necessary infrastructure is to
acquire ISPs that have an existing network infrastructure, qualified personnel
and an existing subscriber base and, in certain countries, to develop new ISPs.
We also anticipate that expansions and adaptations of our network infrastructure
will be necessary to supplement our acquisition strategy. This will require
substantial financial, operational and managerial resources. We can give no
assurance that we will be able to acquire and develop the network infrastructure
in Latin America necessary to compete successfully with the industry's evolving
standards on a timely or cost-effective basis, or at all. Also, we may not be
able to deploy successfully any expanded and adapted network infrastructure.
Failure to create a successful infrastructure may materially adversely affect
our business and operating results.
The process of consolidating our ISPs and integrating our regional
operations may take a significant period of time, may place a significant strain
on our resources, and could prove to be more expensive than predicted. We may be
required to increase current expenditures in order to accelerate the integration
and consolidation of our ISPs with the goal of achieving longer-term cost
savings and improved profitability. These expenses may include the following,
among others: severance expenses related to the elimination of redundant
staffing positions; personnel relocation; termination fees related to the
cancellation of overlapping Internet access contracts; the closure of redundant
points of presence; system upgrades; and the integration of these ISPs'
operations onto our network, customer care, billing, financial and other
international support systems. However, we have limited practical experience
related to the process of consolidating ISPs and can give no assurance that
these projected long-term cost savings and improvements in profitability can or
will be realized. Further, we can give no assurance that customer support or
network infrastructure resources will be sufficient to manage the growth in our
business or that we will be successful in implementing our expansion program in
whole or in part.
Continuing Incurrence of Losses and Negative Cash Flow From Continuing
Operations
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in new and rapidly evolving
markets, as well as difficulties encountered by companies operating in emerging
markets. We must, among other things, respond to competitive developments,
attract and retain qualified persons, upgrade our management and financial
systems, and upgrade our technologies and commercialize our
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<PAGE>
network services incorporating such technologies. We can give no assurance that
we will be successful in addressing such risks, and the failure to do so could
have a material adverse effect on our business, financial condition and results
of operations. Although we have experienced revenue growth from continuing
operations from quarter to quarter, we have incurred net losses and experienced
negative EBITDA from continuing operations during those quarters. We expect to
continue to operate at a net loss and to experience negative EBITDA as we
continue our acquisition program and the expansion of our Latin America network
operations. We can give no assurance that we will be able to achieve or sustain
profitability or sustain positive EBITDA in the foreseeable future. Our
operating results may fluctuate in the future as a result of a variety of
factors, some of which are outside our control. These factors, include, among
others:
- general economic conditions and specific economic conditions in the
Internet access industry;
- user demand for Internet services;
- capital expenditures and other costs relating to the expansion of
operations of our network;
- pricing changes and new product introductions by our competitors and us;
- delays in obtaining sufficient supplies of sole or limited source
equipment and telecom facilities; and
- potential adverse regulatory developments.
As a strategic response to a changing competitive environment, we may elect
from time to time to make pricing, service or marketing decisions that could
have a material adverse effect on our business, results of operations and cash
flow.
Need for Significant Additional Financing
We must continue to acquire, develop and upgrade our network in order to
maintain our competitive position and continue to meet the increasing demands
for service, quality, availability, and competitive pricing. We intend to expand
or open points of presence ("POPs") or make other capital investments as
dictated by subscriber demand or strategic considerations. We must spend
significant amounts of money for acquisitions, new equipment, leased
telecommunications facilities, compensation expenses and advertising. In
addition, we probably will be required to spend significant amounts of money on
additional equipment to maintain the high speed and reliability of our Internet
access services. We also will be required to spend significant amounts of cash
to fund growth, continuing operating losses and respond to unanticipated
developments or competitive pressures.
Presently, in addition to Internet revenues, we derive funds from the earn-
out payments from the sale of assets of discontinued operations. For the sale of
E.D.& F. Man International, Inc., the amount of future earn-outs payments will
depend on the profitability of that business and the percentage earn-out
decreases, successively, over the remainder of the payment period, which ends on
December 31, 2001. For the IFX Ltd. sale, the amount of the earn-out payments
depends upon the profitability of the business that was sold over the remainder
of the payment period, which ends on June 30, 2002. See "IFX's Business." We can
give no assurance that such payments will continue at their current levels. In
addition, we recently signed an agreement to sell our remaining interest in IFX
Ltd. for $2.4 million (U.S.). Such sale is contingent on the purchaser of our
IFX Ltd. shares being able to resell such shares on or before October 31, 2000.
To the extent we do not have enough cash on hand, cash generated from earn-
out payments from our discontinued operations, or cash available under vendor
financing agreements, we will need to seek alternative sources of financing.
Such financing may include borrowings or placements of debt or equity
securities. We may not be able to raise needed cash on terms acceptable to us or
at all. If alternative sources of financing are required, but are insufficient
or unavailable, we will be required to modify our growth and operating plans,
which could have a material adverse effect on our business, financial condition
or results of operations.
4
<PAGE>
Challenges of Growth By Acquisitions
We depend in part on our ability to identify and acquire ISPs in our target
locations that meet our acquisition criteria. We seek to create a market
presence internationally, to gain strength in Internet connectivity and web
hosting core service platforms, and to add additional enhanced service
capabilities. We face and may continue to face significant competition for
appropriate acquisition candidates. We may compete with other communications or
Internet companies with similar acquisition strategies, many of which may be
larger, have greater financial and other resources and be owned or partially-
owned by foreign governments. Competition for independent ISPs is based on a
number of factors, including price, terms and conditions, size and access to
capital, ability to offer cash, stock or other forms of consideration and other
matters. We can give no assurance that we will be able to identify suitable ISPs
or be able to complete any acquisitions of or investments in those targeted ISPs
on acceptable terms and conditions.
Once consummated, these acquisitions will continue to present certain
risks, including:
- the difficulty of integrating the acquired operations, technology and
personnel;
- the possible inability of our management to maximize our financial and
strategic position by the successful incorporation of acquired
technology and products into our service offerings and to maintain
uniform standards, controls, procedures and policies;
- the possible acquisition of substantial contingent or undisclosed
liabilities;
- the risks of entering markets in which we have little or no direct prior
experience; and
- the potential impairment of relationships with employees and customers
as a result of changes in management or other business operations.
We may not be successful in overcoming these risks or any other problems
encountered in connection with future acquisitions. In addition, future
acquisitions could materially adversely affect our operating results as a result
of dilutive issuances of equity securities, the incurrence of additional debt or
the amortization of expenses related to acquired customer bases, goodwill or
other intangible assets. Further, our ability to complete transactions with ISPs
may require significant additional financial resources.
As with each of our recent acquisitions, the purchase price of many of the
businesses that might become attractive acquisition candidates for us likely
will significantly exceed the fair values of the net assets of the acquired
businesses. As a result, material goodwill and other intangible assets would be
required to be recorded which would result in significant amortization charges
in future periods. Furthermore, in connection with acquisitions or strategic
alliances, we could incur substantial expenses, including the expenses of
integrating the business of the acquired company or the strategic alliance with
our existing business.
Pricing Competition and Fluctuation
The market for Internet connectivity and related services is extremely
competitive and characterized by rapidly changing technology and evolving
standards which can be significantly influenced by the marketing and pricing
decisions of the largest industry participants. We anticipate that competition
will continue to intensify as the use of the Internet grows. The tremendous
growth and potential market size of the Internet access market has attracted and
likely will continue to attract many new start-ups as well as existing
businesses from different industries. In addition, while we have established a
new subsidiary to pursue the free ISP model in which users do not pay for
connectivity service, other companies which pursue this model may pose a
significant risk to us.
In some cases, we will be forced to compete with and/or buy services from
government-owned or subsidized telecommunications providers. Some of these
providers may enjoy a monopoly on telecommunications services essential to our
business or other competitive advantages. We can give no assurance that we will
be able to purchase such services at a reasonable price or at all. In addition,
foreign competitors may possess a better
5
<PAGE>
understanding of their local markets and customs, and enjoy better relationships
with customers and suppliers. We can give no assurance that we can obtain
similar levels of local knowledge, access or expertise. Failure to obtain that
knowledge could place us at a significant competitive disadvantage .
We currently compete or expect to compete with the following types of
companies:
- established national ISPs in Latin America;
- computer hardware and software and other technology companies that will
start bundling Internet access in their products;
- numerous regional and local commercial ISPs which vary widely in
quality, service offerings, and pricing;
- national and regional Web hosting companies that focus primarily on
providing Web hosting services;
- cable operators and on-line cable services;
- local telephone companies providing ISP services; and
- other free ISPs that may enter the market.
We believe that new competitors, including established ISP and
telecommunications companies, will continue to enter the Internet access market,
resulting in even greater competition. In addition, telecommunications companies
may be able to offer customers reduced communications costs in connection with
ISP services, reducing the overall cost of their Internet access and
significantly increasing pricing pressures on us. The ability of our competitors
to acquire other ISPs, to enter into strategic alliances or joint ventures or to
bundle other services and products with Internet access or Web hosting could
also put us at a significant competitive disadvantage.
Risks Associated With International Operations and Expansion
We focus our Internet business on Latin American markets. We can give no
assurance that acceptance of the Internet or demand for Internet connectivity,
web hosting and other enhanced Internet services will increase significantly in
these markets. However, we believe that we need to move quickly into Latin
American markets in order to establish critical market presence and credibility,
though we can give no assurance that we will be able to do so.
We may need to enter into joint ventures or other strategic relationships
with one or more third parties in order to conduct our foreign operations
successfully. However, we can give no assurance that we will be able to
identify desirable joint venture or strategic partners in these markets or that
we will be able to obtain the permits and operating licenses required to conduct
business and offer Internet services in these markets. In addition to the
uncertainty of our ability to create an international presence, we face certain
additional risks inherent in doing business on an international level. Such
risks include:
- competition from government-owned or subsidized businesses, including
telecommunication companies and ISPs;
- unexpected changes in or delays resulting from regulatory, licensing and
foreign investment requirements, tariffs, customs, duties and other
trade barriers;
- difficulties in staffing and managing foreign operations;
- longer payment cycles and problems in collecting accounts receivable;
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- political instability, expropriation, nationalization, war, insurrection
and other political risks;
- high levels of inflation, fluctuations in currency exchange rates or
foreign exchange controls which restrict or prohibit repatriation of
funds;
- poor quality of telecommunications and lack of technological advances;
- technology export and import restrictions or prohibitions; and
- potentially adverse tax consequences.
We can give no assurance that such factors will not have an adverse effect
on our future international operations. In addition, we can give no assurance
that laws or administrative practice relating to telecommunications, taxation,
foreign exchange or other matters of countries within which we may operate will
not change in a manner adverse to our business. Any such change could have a
material adverse effect on our business, financial condition and results of
operations.
Risks Associated With an Internet Business
Our business is vulnerable to risks associated with the Internet business
in general, many of which are significant. For example, the laws relating to
the regulation and liability of Internet access providers in relation to
information carried or disseminated is undergoing a process of development in
many countries. Legal decisions, laws, regulations and other activities
regarding regulation and content liability may significantly affect the
development and profitability of companies offering on-line and Internet access
services, especially in Latin America. Although we have and will continue to
update certain network security measures, such as limiting physical and network
access to our routers, the network's infrastructure is potentially vulnerable to
computer viruses, break-ins and similar disruptive problems caused by our
customers or other Internet users, which could lead to interruptions of, delays
in or cessation of service to our customers. Furthermore, inappropriate use of
the Internet by third parties could also potentially jeopardize the security of
confidential information stored in the computer systems of our customers and, in
turn, could deter potential customers and adversely affect existing customer
relationships. We rely on local telephone companies and other companies to
provide data communications capacity via local telecommunications lines. We may
experience disruptions or capacity constraints in these telecommunications
services and may have no means of replacing these services on a timely basis, or
at all.
Changes in the regulatory environment relating to the Internet connectivity
market, including regulatory changes which directly or indirectly affect
telecommunications costs or increase the likelihood or scope of competition from
telecommunications companies, could affect our pricing. Additional laws could
cover issues such as content, user pricing, privacy, libel, intellectual
property protection and infringement, and technology export and other controls.
We can give no assurance that violations of local laws will not be alleged or
charged by foreign governments, that we might not unintentionally violate such
laws or that such laws will not be modified, or new laws enacted in the future.
Any of the foregoing developments could have a material adverse effect on our
business, results of operations and financial condition.
In general, we do not sign long-term service agreements with our
subscribers, who may discontinue their service at the end of any month for any
reason. Our revenue will depend on our ability to attract and retain such
subscribers.
We may be dependent on third parties to stimulate demand for our products
and services where we do not have a direct sales force. These channel
distributors may include computer and telecommunications resellers, value added
resellers, original equipment manufacturers, systems integrators, web designers
and advertising agencies. If we fail to gain commercial acceptance in certain
markets, these channel distributors may discontinue their relationships with us.
The loss of channel distributors, the failure of such parties to perform under
agreements with us, or the inability to attract other channel partners with the
expertise and industry experience required to market our products and services
could have a material adverse effect on our operating results.
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Equipment
Our operations are dependent upon our computer and telecommunications
equipment and software systems. We can give no assurance that we will be able to
obtain the equipment, or generate sufficient cash flow or financing to purchase
equipment, necessary to expand our Latin American network or maintain the
quality of our network. Our failure to maintain the most current and up to date
equipment and software for Internet connectivity could impede our ability to
obtain new subscribers, which could have a material adverse effect on our
business, financial condition or results of operations.
Dependence on Key Personnel
Our success in the Internet business will also depend upon our ability to
hire and retain qualified executive and management employees with significant
experience in managing and expanding an Internet services business in the
markets in which we seek to operate. We can give no assurance that we will be
able to successfully hire, retain or motivate qualified employees. Further, we
can give no assurance that we will be successful in acquiring or building the
necessary Internet service network infrastructure or that the services we offer
over any such network will be profitable.
Competition for qualified employees and personnel in the Internet services
industry is intense and there are a limited number of people with knowledge of
and experience in the Internet service industry, especially in the Latin
American market. The process of locating personnel with the combination of
skills and attributes required to carry out our strategies may often be lengthy.
Our success depends to a significant degree on our ability to attract and retain
qualified management, technical, marketing and sales personnel and on the
continued contributions of such people. Our employees may voluntarily terminate
their employment at any time. We can give no assurance that we will be
successful in attracting and retaining qualified executives and personnel. The
loss of the services of key personnel, or the inability to attract additional
qualified personnel, could have a material adverse effect on our business,
financial condition or results of operations.
Risk of Internet Technology Trends and Evolving Industry Standards
The market for Internet access and related services is relatively new and
characterized by rapidly changing technology, evolving industry standards,
changes in customer needs and frequent new product and service introductions.
Our future success will depend, in part, on our ability to effectively use
leading technologies, to continue to develop and improve our technical
expertise, to enhance our current services, to develop new products and services
that meet changing customer needs, and to influence and respond to emerging
industry standards and other technological changes on a timely and cost-
effective basis. We can give no assurance that we will be successful in
accomplishing any of these tasks or that such new technologies or enhancements
will achieve market acceptance. We believe that our ability to compete
successfully also depends upon the continued compatibility and interoperability
of our services with products and architectures offered by various third party
vendors. We can give no assurance that we will be able to effectively address
the compatibility and interoperability issues raised by technological changes or
new industry standards. In addition, we can give no assurance that services or
technologies developed by others will not render our services or technology
uncompetitive or obsolete. If the market for Internet access services fails to
develop, develops more slowly than expected, or becomes saturated with
competitors, or if the Internet access and services offered by us through our
ISPs is not broadly accepted, our business, operating results and financial
condition will be materially adversely affected.
In addition, critical issues concerning the commercial use of the Internet
remain unresolved and may impact the growth of Internet use, especially in our
target markets. Despite growing interest in the many commercial uses of the
Internet, many businesses have been deterred from purchasing Internet access
services for a number of reasons, including:
- inconsistent quality of service;
- lack of availability of cost-effective, high-speed options;
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- a limited number of local access points for corporate users;
- inability to integrate business applications on the Internet;
- the need to deal with multiple and frequently incompatible vendors;
- inadequate protection of the confidentiality of stored data and
information moving across the Internet; and
- a lack of tools to simplify Internet access and use.
In particular, numerous published reports have indicated that a perceived
lack of security of commercial data, such as credit card numbers, has
significantly impeded commercial use of the Internet to date. There can be no
assurance that encryption or other technologies will be developed that
satisfactorily address these security concerns. Published reports have also
indicated that capacity constraints caused by growth in the use of the Internet
may, unless resolved, impede further development of the Internet to the extent
that users experience delays, transmission errors and other difficulties. The
adoption of the Internet for commerce and communications, particularly by those
individuals and enterprises which have historically relied upon alternative
means of commerce and communication, generally requires the understanding and
acceptance of a new way of conducting business and exchanging information. In
particular, enterprises that have already invested substantial resources in
other means of conducting commerce and exchanging information may be
particularly reluctant or slow to adopt a new strategy that may make their
existing personnel and infrastructure obsolete. The failure of the market for
business-related Internet solutions to continue to develop would adversely
impact our business, financial condition and results of operations.
Issuance of Additional Shares - Risk of Dilution
As discussed in "IFX's Business", we obtained $25 million in funding from
UBS Capital Americas III, L.P. and UBS Capital LLC in exchange for 1,929,325
shares of IFX Series A Preferred Stock which are convertible into shares of our
common stock on an one-for-one basis. If the UBS purchasers converted all of
their shares of Series A Preferred Stock, as of this date, it would represent
approximately 12.99% of the outstanding shares of our Common Stock. The
interests of our stockholders, including those investors purchasing shares of
our Common Stock being registered hereunder, could be diluted by the conversion
of the Series A Preferred Stock. In addition, we cannot predict the effect, if
any, that market sales of the shares issuable upon conversion of the Series A
Preferred Stock or the availability of such shares for future sales, will have
upon the market price of shares of Common Stock prevailing from time to time.
Risks of Recent Tutopia.com, Inc. Financing
As discussed under "IFX's Business", on August 31, 2000, the UBS purchasers
and others invested $20 million in Tutopia.com, Inc. in exchange for Tutopia
Series A Convertible Preferred Stock. We have been providing free internet
service in Latin America through Tutopia since February 2000. Prior to the sale
of the Tutopia Series A Preferred, we were the indirect majority stockholder of
Tutopia.com. After this sale, we will no longer be the indirect majority
stockholder of Tutopia.com. Prior to the UBS investment, Tutopia represented one
of our two major business lines. After the investment is completed, Tutopia will
be our largest customer, accounting for approximately 50% of our revenues as of
September 1, 2000. We have entered into an agreement with Tutopia to provide
Internet connectivity services to Tutopia for a period of three years at
wholesale rates. Either IFX or Tutopia can renew the interconnectivity agreement
for a fourth year. After that agreement terminates, there can be no assurances
that we will be the sole supplier of Internet connectivity services to Tutopia.
Volatility of Stock Price
Our Common Stock has experienced and may be subject to significant price
fluctuations in response to a variety of factors, including quarterly variations
in operating results, public announcements of acquisitions, strategic alliances
and joint ventures, general conditions in the Internet industry, and general
economic and market conditions
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in the markets in which we operate. In addition, the stock market has
experienced significant price and volume fluctuations that have adversely
affected the market prices of equity securities of some companies, including
companies in the Internet service business, and that often have been unrelated
to the operating performance of such companies.
Significant Currency and Exchange Risks in Latin America
Most of our revenues are derived from operations outside the United States
and the majority of our assets are located outside of the United States. We
anticipate that a significant percentage of our future revenue and operating
expenses will continue to be generated from operations outside the United States
and we expect to continue to invest in Latin American businesses. Consequently,
a substantial portion of our revenue, operating expenses, assets and liabilities
will be subject to significant foreign currency and exchange risks. Obligations
of customers and of us in foreign currencies will be subject to unpredictable
and indeterminate fluctuations in the event that such currencies change in value
relative to U.S. dollars. Furthermore, we and those customers may be subject to
exchange control regulations which might restrict or prohibit the conversion of
such currencies into U.S. dollars. Although we have not entered into hedging
transactions to limit our foreign currency risks, as a result of the increase in
our foreign operations, we may implement such practices in the future. We can
give no assurance that the occurrence of any of these factors will not have a
material adverse effect on our business, financial position or results of
operations.
Dependence On Our Suppliers and Telecommunication Providers
We are dependent on third party suppliers for our phone line connections,
bandwidth and e-mail. Some of these suppliers are or may become competitors of
ours, and such suppliers are not subject to any contractual restrictions upon
their ability to compete with us. If these suppliers change their pricing
structures, we may be adversely affected. Moreover, any failure or delay on the
part of our network providers to deliver bandwidth to us or to provide
operations, maintenance and other services with respect to such bandwidth in a
timely or adequate fashion could adversely affect us.
We are also dependent on third party suppliers of hardware components.
Although we attempt to maintain a minimum of two vendors for each required
product, some components used for providing our networking services are
currently acquired or available from only one source. A failure by a supplier to
deliver quality products on a timely basis, or the inability to develop
alternative sources if and as required, could result in delays which could have
a material adverse effect on us. Our remedies against suppliers who fail to
deliver products on a timely basis are limited by contractual liability
limitations contained in supply agreements and purchase orders and, in many
cases, by practical considerations relating to our desire to maintain good
relationships with the suppliers. As our suppliers revise and upgrade their
equipment technology, we may encounter difficulties in integrating the new
technology into our network.
Many of the vendors from whom we purchase telecommunications bandwidth,
including the local phone companies, competitive local exchange carriers and
other local exchange carriers, currently are subject to tariff controls and
other price constraints which in the future may be changed. In addition,
recently enacted legislation will produce changes in the market for
telecommunications services. Moreover, we are subject to the effects of other
potential regulatory actions which, if taken, could increase the cost of our
telecommunications bandwidth through, for example, the imposition of access
charges.
FORWARD-LOOKING STATEMENTS
The statements contained in this Prospectus that are not historical fact
are "forward-looking statements" (within the meaning of the Private Securities
Litigation Reform Act of 1995). The safe harbor provisions provided in Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), apply to forward-looking statements the Company makes. These statements
can be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy that involve risks and uncertainties. The Company wishes to caution
you that these forward-looking statements addressing the timing, costs and scope
of the Company's acquisition of, or investments
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in, existing or future ISPs, the revenue and profitability levels of the ISPs in
which the Company invests, the anticipated reduction in operating costs
resulting from the integration and optimization of those ISPs, and other matters
contained above and in this Prospectus regarding matters that are not historical
facts, are only predictions. The Company can give no assurance that the future
results indicated, whether expressed or implied, will be achieved. These
projections and other forward-looking statements are based upon a variety of
assumptions relating to the Company's business, which, although the Company
considered reasonable, may not be realized. Because of the number and
uncertainties of the assumptions underlying the Company's projections and
forward-looking statements, some of the assumptions may not materialize and
unanticipated events and circumstances may occur subsequent to the date of this
Prospectus. These forward-looking statements are based on current expectations,
and the Company assumes no obligation to update this information. The inclusion
of projections and other forward-looking statements should not be regarded as a
representation by the Company or any person that these estimates and projections
will be realized, and actual results may vary materially.
IFX'S BUSINESS
Historical Background
We were incorporated under the laws of the State of Illinois in July 1985
and changed our state of incorporation to Delaware in May 1994. Prior to July
1996, our primary business was providing commodity brokerage services through
our principal operating subsidiary, Index Futures Group, Inc. ("Index"). On July
1, 1996, we sold substantially all of our brokerage assets (other than the
assets of our U.K. subsidiary) to E.D. & F. Man International, Inc., a unit of
E.D. & F. Man Group, plc, a London-based international trading and finance
conglomerate. The purchase price for such sale consisted of cash earn-out
payments based upon the sold business' profitability during the sixty-six months
following the sale. Since July 1996, our revenues have consisted primarily of
earn-out payments from such asset sale, interest income and income from
operations of our U.K. subsidiary, IFX Ltd., which conducts foreign exchange
business as a registrant of the British Securities and Futures Authority. From
July 1996 through June 30, 1999, we have received approximately $10.4 million of
earn-out payments from the sale of our brokerage assets. Prior to January 1,
1999, the earn-out payments were based on 40% of the sold business'
profitability. In calendar year 1999, the earn-out payments were based on 30% of
the sold business' profitability and, in calendar years 2000 and 2001, will be
based on 20% of the sold business' profitability.
In November 1996, we decided to pursue the Internet service markets in
Latin America. At that time, we entered into an agreement with International
Technology Investments to pursue the Internet market. The Company then opened
offices in Florida and started recruiting new management and operational teams.
IFX acquired its first ISP in April 1999 in Mexico. Since that date, IFX
has acquired 25 ISPs and has started 4 Internet operations in Latin America, has
made 2 strategic investments in Internet businesses (Yupi and E-Pagos) and has
started additional businesses through joint ventures (Facilito.com and
Commtouch).
Discontinued Operations
Due to the discontinued operations, our primary source of revenues changed
from trading revenues and foreign exchange operations to subscriber fees from
Internet operations. Our revenues from Fiscal Years 2000, 1999, 1998 and 1997
related to discontinued operations are shown as "Income from Discontinued
Operations, net of income taxes". The revenues from IFX's acquisitions are
accounted from the date of purchase.
Due to the discontinued operations, our expenses changed from consisting
mostly of interest, commissions and other related brokerage costs to local dial-
up lines, local Internet connections, and depreciation and amortization
expenses. The expenses from ISP acquisitions are accounted from the date of
purchase.
In June 1999, we divested ourselves of our 50.1% interest in IFX Ltd. In
exchange for approximately $2.45 million in cash and a note receivable, and a
redeemable preference share entitling us to quarterly payments equal to
approximately 30% of the net profits of IFX Ltd. through June 30, 2002. We
recently signed an agreement to sell our remaining interest in IFX Ltd. for $2.4
million (U.S.). Such sale is contingent on the purchaser of our IFX Ltd. shares
being able to resell such shares on or before October 31, 2000. Following the
initial sale of our
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U.K. subsidiary, we decided not to invest the sales proceeds in the trading
business but decided, rather, to continue to develop our businesses in the
Internet industry.
General
We believe that the Internet industry presents significant opportunities
for IFX's future investment and growth. In particular, we believe that the
market for Internet services in Latin America may present substantial growth
potential due to the increasing demand for Internet services, relatively low
market penetration and the absence of any dominant regional or pan-regional
(i.e., intercountry) service providers. Accordingly, we have begun to pursue,
and intend to continue to pursue, the acquisition and development of Internet
access and related services businesses, initially in South America and Mexico.
Ultimately, we seek to form a Latin American pan-regional network of ISPs, under
the brand name Unete. Unete is the Spanish word for `Join Us,' which we are
using as a marketing term for people to join us and become members of our Unete
service and Internet community. The Unete service would enable a subscriber
traveling in major Latin American and North American cities to access the
Internet by making a local telephone call, regardless of whether or not such
subscriber was in his or her home country.
We are a pan-regional Internet Service Provider, or ISP, in Latin America.
We focus on serving individuals and small businesses. Our services include dial-
up Internet access, which we offer through our Unete service, in various price
and usage plans designed to meet the needs of our subscribers. Our business
services include dedicated phone lines, web hosting, web page design, and domain
name registration. We will continue to offer premium services to paying users.
We offer subscribers Internet access in English, Spanish, and Portuguese,
with user-friendly and easy to install software. The software contains a
complete set of the most popular Internet applications including electronic
mail, World Wide Web access, File Transfer Protocol and Internet Relay Chat.
Through our infrastructure of our subsidiaries and third-party providers, our
subscribers are able to access the Internet in 9 countries in Latin America, and
in most major cities in the United States and Canada via a local telephone call
and with no roaming fees. By June 30, 1999, we had approximately 25,000
subscribers.
Over the past year, we have rapidly established a regional presence and
customer base by acquiring the stock or assets of established independent ISPs
throughout Latin America. Since January 1, 1999, we have established operations
in 9 countries in Latin America. We intend to continue our strategy of
acquiring ISPs in order to deepen and broaden our market presence in Latin
America. We seek to acquire an "anchor" ISP in each of our target countries,
which can provide both local management talent and serve as the ISP consolidator
for its respective country. In addition to our team of corporate development
professionals, we rely upon our local management teams to identify strategic
acquisitions.
We secured a commitment for $25 million in funding from UBS Capital
Americas III, L.P. and UBS Capital LLC, to be used for working capital purposes.
The UBS purchasers purchased 1,149,878 shares of IFX Class I Series A Preferred
Stock on June 15, 2000, and 779,447 shares of Class II Series A Preferred Stock
on July 17, 2000.
Under the terms of this investment, the UBS purchasers are entitled to
elect one director to our Board of Directors. Under a new Stockholders
Agreement among the UBS purchasers, Lee S. Casty, Joel Eidelstein, Michael
Shalom and International Technology Investments, L.C., the parties have agreed
to vote for the election of an additional director designated by the UBS
purchasers, a director designated by Mr. Eidelstein, a director designated by
ITI, a director jointly designated by ITI and Mr. Eidelstein, and two
independent directors reasonably acceptable to the UBS purchasers.
In February 2000, we started offering free basic-level Internet access in
six countries in Latin America through our newly-created subsidiary Tutopia.com,
Inc. On August 31, 2000 the UBS purchasers invested $15 million in Tutopia.com,
Inc. in exchange for Tutopia Series A Convertible Preferred Stock. Others
invested $5 million of additional funds. After this purchase we will no longer
be an indirect majority stockholder of Tutopia.com. We have entered into an
agreement with Tutopia to provide Internet connectivity services to Tutopia for
a period of
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three years at wholesale rates. Either IFX or Tutopia can renew the
interconnectivity agreement for a fourth year.
On June 12, 2000, we amended the Yupi Stock Purchase Agreement dated
February 24, 2000 with Lee Casty, to reflect certain provisions that were not
originally contained in that agreement nor contemplated by the parties at the
time of the original agreement. The effects of the amendment for financial
reporting purposes will be reflected in our fourth quarter results to be
reported in the Company's 10-K for the year ending June 30, 2000. We anticipate
recording a charge of $1.9 million as Other Income (Expense) and increasing
Deferred Gain by a similar amount in the fourth quarter.
Our principal executive offices are located at 707 Skokie Boulevard, 5th
Floor, Northbrook, Illinois, 60062, and our telephone number is (847) 412-9411.
Our web site is http://www.ifxcorp.com.
Services
Dial-Up Internet Access. Our service offerings include dial-up Internet
access through our Unete service. The basic equipment requirements for an
individual dial-up subscriber are a Windows 3.1 or later operating system or
Macintosh computer with at least 8MB of RAM and a modem of 14.4 Kbps speed or
faster. The subscriber's connection is a direct, point-to-point protocol, or
"PPP," connection to the Internet. A direct PPP connection enables a subscriber
to use any standard Internet capable software that will run on the subscriber's
computer.
We currently offer different price plans for dial-up subscription. Each
plan is adapted to the consumers of each country and the usage. We try to
maintain the most competitive rates at each of the markets we serve. While the
plans that we offer are subject to change due to changes in the market, some of
the most common plans offered include:
Platinum. Individual subscribers receive unlimited access to the entire
Unete Network at all of its points of presence through a local dial-up
connection.
Local Unlimited Access. Individual subscribers get unlimited usage at
their local point of presence in their home country.
Limited. Individual subscribers get a pre-determined number of hours for
usage at their local point of presence in their home country.
Most of our paying subscribers are on month-to-month subscriptions. We
currently offer new users 150 free hours that must be used in the first month.
Billing is monthly, with payments made by credit card, check or cash. Payments
are mostly made at the beginning of each billing cycle. Subscribers, as well
as us, may cancel an account at any time, with the cancellation taking effect as
of the first day of the following billing month.
A subscriber who is within local dialing range of one of the IFX POPs or a
designated third-party provider POP can access the Internet with a local
telephone call. All dial-up subscribers can connect to our network (including
the third-party provider POPs) via modem at speeds up to 56.6-Kbps (kilobytes-
per-second). All dial-up subscribers also have the option of using our servers
to publish information on the Internet through the World Wide Web or File
Transfer Protocol (FTP).
Business Services. Our Latin American subsidiaries provide the following
services for small businesses:
Dedicated phone lines. Businesses can have a direct connection to the
Internet, 24 hours a day, 7 days a week, without the need to dial an access
number.
Web hosting. We offer web hosting accounts for customers that wish to
create their own World Wide Web sites without maintaining their own Web
servers and high-speed Internet connections.
Web page design. We can design Internet Web sites for our subscribers.
Domain name registration. We will process all documentation necessary to
register a domain name in any of the countries in which we operate.
Support Services. Our services and operations are supported (i) by our
national Network Operating Centers ("NOCs"), which ensure efficient network
operations, (ii) by our national Customer Service Centers, which provide
comprehensive customer support, and (iii) by our fully integrated information
systems.
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Network Operating Center. Our NOCs monitor our network, including our
backbone, POPs, servers, and client co-located servers, as well as all
individual client circuits. We track network utilization patterns, proactively
adding capacity as needed to maintain performance standards and minimize network
congestion. In addition, our NOC technicians run systems and network diagnostics
in order to quickly respond to customer inquiries.
Fully Integrated Operating and Financial Support Systems. We are installing
and customizing Portal software, which integrates our various back office
activities including order processing, billing and customer service, network
operations and telecommunications facilities provisioning. Once implemented,
Portal software will allow us to readily access a current, comprehensive
database of operating and customer information.
Customer Care Center. The Customer Care Center representatives respond to
inquiries from our subscribers. Representatives are available to assist
customers with such matters as dial-up software installations, e-mail box set-up
and a variety of other service-related issues. Once implemented, Portal software
will allow our customer service representatives to have instant access to
current, detailed customer profiles, which chronicle customer service and
account histories. Such information will allow Customer Care Center
representatives to offer timely and informed responses to customer inquiries.
Network and Related Infrastructure
The network infrastructure utilized by us consists of three primary tiers:
local POPs; a middle tier, which connects the POPs to national hubs; and a
backbone tier, which connects the national hubs to the Internet. Our network
currently covers 10 countries and includes approximately 25 POPs owned by us and
540 POPs owned by third party network providers. Each POP is connected to our
network operating center in its respective country through a dedicated point-to-
point line, typically provided by a local telecommunications carrier. The
principal backbone capacity utilized by us is provided by InterPacket Inc., a
U.S.-based provider of high speed Internet access via satellite, and GlobalOne.
We currently have committed capacity agreements with InterPacket for up to 10
Mbps and the right to additional capacity of up to 50 Mbps in total.
Geographic Coverage. Through our network of IFX-owned and third-party
provider-owned POPs, our subscribers are able to access the Internet in 10
countries via a local telephone call. The countries with POPs operated by us
are: Argentina, Bolivia, Brazil, Chile, Colombia, Mexico, El Salvador,
Honduras, Venezuela and the U.S.
Network Operations Center. We maintain a Network Operations Center at our
Miami Lakes, Florida office through which our technical staff monitors network
traffic, service quality, and security, as well as equipment at individual POPs,
to ensure reliable Internet access. In addition, we continue to invest in
improved network monitoring software and hardware systems.
Our Software and Licenses
A key component of our service offering for dial-up subscribers is the
Unete starter software. The software includes these applications:
- Our installation program. It enables the user to input all required
information regarding user name, billing information and passwords.
- World Wide Web Navigation Software. It allows its user to navigate
through the different multimedia presentations across Web sites. Users
can choose between Netscape Navigator(R) and Microsoft Internet
Explorer(R).
- Electronic Mail. It allows subscribers to exchange messages
electronically with anyone else who has an e-mail address. The messages
can include text and attachments such as images, computer programs, or
word processing documents. Users can choose between Outlook Express(R)
and Eudora Light(R).
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- Internet Relay Chat. It allows users to participate in more than 10,000
Internet Communities using Tribal Voice's PowWow software. The software
allows the user to communicate over the Internet using instant-voice,
instant messaging, chatting, and buddy lists.
- Winzip 7.0(R). With this trial version, users can compress large files
into smaller zip files and decompress zipped files to their original
version.
- WS FTP LE(R). It allows users to send and retrieve files in order to
create their web sites.
The main objective of the software package is to automatically configure
the individual's Internet access programs after the initial one-time entries by
the user. Once the initial set-up is completed, the user will be able to log on
to our network with the click of a button and be able to use the different
applications that are included.
Subscribers we acquired from our recent ISP acquisitions connect to the
Internet using software provided to such subscribers by the acquired ISPs. Those
subscribers may switch to our software at their option at any time, a migration
that we encourage by mailing a Unete starter software kit to these subscribers.
In addition, their e-mail address from the previous account can be forwarded to
their new Unete e-mail address.
We have obtained permission and, in certain cases, licenses from each
manufacturer of the software that we bundle in our software starter kit.
USE OF PROCEEDS
We will not receive any proceeds from the sale by the stockholders
identified in this Prospectus (the "Selling Stockholders") of any of the shares
of Common Stock (the "Shares") covered by this Prospectus.
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SELLING STOCKHOLDERS
The following table sets forth with respect to the Selling Stockholders (i)
the number of Shares beneficially owned as of August 31, 2000 and prior to the
offering contemplated hereby, (ii) the maximum number of Shares which may be
sold in the offering pursuant to this Prospectus and (iii) the number of Shares
which will be beneficially owned after the offering, assuming the sale of all
Shares set forth in (ii) above:
<TABLE>
<CAPTION>
Beneficial Ownership Shares to Beneficial Ownership
Selling Stockholders Prior to Offering be Offered After Offering
-------------------- -------------------- ---------- --------------------
Shares(1) Percentage Shares Percentage
--------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Daniel Sachet.................... 2,629 * 151 2,478 *
Fernando Soto.................... 2,629 * 151 2,478 *
Rodrigo de Losina Silva.......... 2,629 * 151 2,478 *
Claudia Suzel Berthold........... 460 * 26 434 *
Simone Maria Sbaraini Kapp....... 460 * 26 434 *
Valeria Kapp Piageti............. 102 * 6 96 *
Eduardo Carvalho Ramos........... 1,323 * 76 1,247 *
Eduardo Broell da Silva.......... 1,323 * 76 1,247 *
Ricardo Canani................... 1,323 * 76 1,247 *
Nilo Agostinho Martins........... 1,045 * 60 985 *
Suzana Terezinha Martins......... 11 * 1 10 *
Openway Ltda..................... 14,150 * 9,576 4,574 *
Jorge Robelo..................... 5,578 * 5,578 0 -
Bassini Playfair & Associates, 16,709 * 16,709 0 -
LLC.............................
Ariel Bentata.................... 22,227 * 22,227 0 -
Leonardo Brito................... 2,972 * 2,972 0 -
Carlos Aguilar................... 4,801 * 4,801 0 -
Juan Samuel Flores Garcia........ 2,000 * 2,000 0 -
Juan Pablo Ambrosini............. 22,184 * 21,184 1,000 *
Zalman Lekach.................... 158,159 * 6,941 151,218 *
Richard Croshere................. 20,182 * 20,182 0 -
Tatiana Figliulo Juca............ 6,928 * 6,928 0 -
Raul Oliviera Motta Junior....... 3,012 * 3,012 0 -
Sergio Nader da Cunha Sardo...... 11,762 * 11,762 0 -
Adriana Gomes Ferreira Lima...... 6,861 * 6,861 0 -
Cecilia Thereza Nader de Cunha
Sardo........................... 980 * 980 0 -
</TABLE>
___________
* Less than 1%.
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any shares of Common Stock which such person has the right to
acquire within 60 days after the date of this Prospectus. For purposes of
computing the percentage of outstanding shares of Common Stock held by each
person named above, any security which such person has the right to acquire
from us within 60 days after the date of this Prospectus is deemed to be
outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
___________
67,679 of the Shares offered hereby were acquired by certain Selling
Stockholders from us in connection with our August and October 1999 acquisitions
of Internet service provider businesses in Brazil, our December 1999 acquisition
of an Internet service provider business in Nicaragua, our January 2000
acquisitions of Internet service provider businesses in Columbia and Brazil, and
our June 2000 acquisition of a Web hosting business in Brazil. 46,709 of the
Shares offered hereby were acquired by certain Selling Stockholders from us upon
the April 2000 exercise of stock options issued in consideration for consulting
services. 28,125 of the Shares offered hereby were acquired by certain Selling
Stockholders from us as employment bonuses. Mr. Lekach serves as one of our
directors
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and as our vice president. The Shares acquired by the Selling Stockholders from
us are "restricted securities" within the meaning of the Securities Act.
Consequently, in accordance with the provisions of the respective agreements,
this Prospectus has been prepared for the purpose of registering the Shares
under the Securities Act to enable the Selling Stockholders to make future sales
without restriction.
PLAN OF DISTRIBUTION
We are registering the Shares on behalf of the Selling Stockholders. The
Shares covered by this Prospectus may be offered and sold by the Selling
Stockholders, or by purchasers, transferees, donees, pledgees or other
successors in interest, directly or through brokers, dealers, agents or
underwriters who may receive compensation in the form of discounts, commissions
or similar selling expenses paid by a Selling Stockholder or by a purchaser of
the Shares on whose behalf such broker-dealer may act as agent. Sales and
transfers of the Shares may be effected from time to time in one or more
transactions, in private or public transactions, on the Nasdaq SmallCap Market,
in the over-the-counter market, in negotiated transactions or otherwise, at a
fixed price or prices that may be changed, at market prices prevailing at the
time of sale, at negotiated prices, without consideration or by any other
legally available means. Any or all of the Shares may be sold from time to time
by means of (a) a block trade, in which a broker or dealer attempts to sell the
Shares as agent but may position and resell a portion of the Shares as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and the subsequent sale by such broker or dealer for its account pursuant to
this Prospectus; (c) ordinary brokerage transactions (which may include long or
short sales) and transactions in which the broker solicits purchasers; (d) the
writing (sale) of put or call options on the Shares; (e) the pledging of the
Shares as collateral to secure loans, credit or other financing arrangements
and, upon any subsequent foreclosure, the disposition of the Shares by the
lender thereunder; and (f) any other legally available means.
To the extent required with respect to a particular offer or sale of the
Shares, a Prospectus Supplement will be filed pursuant to Section 424(b)(3) of
the Securities Act, and will accompany this Prospectus, to disclose (a) the
number of Shares to be sold, (b) the purchase price, (c) the name of any broker,
dealer or agent effecting the sale or transfer and the amount of any applicable
discounts, commissions or similar selling expenses, and (d) any other relevant
information.
The Selling Stockholders may transfer the Shares by means of gifts,
donations and contributions. This Prospectus may be used by the recipients of
such gifts, donations and contributions to offer and sell the Shares received by
them, directly or through brokers, dealers or agents and in private or public
transactions; however, if sales pursuant to this Prospectus by any such
recipient could exceed 500 Shares, then a Prospectus Supplement would need to be
filed pursuant to Section 424(b)(3) of the Securities Act to identify the
recipient as a Selling Stockholder and disclose any other relevant information.
Such Prospectus Supplement would be required to be delivered, together with this
Prospectus, to any purchaser of such Shares.
In connection with distributions of the Shares or otherwise, the Selling
Stockholders may enter into hedging transactions with brokers, dealers or other
financial institutions. In connection with such transactions, brokers, dealers
or other financial institutions may engage in short sales of our Common Stock in
the course of hedging the positions they assume with Selling Stockholders. To
the extent permitted by applicable law, the Selling Stockholders also may sell
the Shares short and redeliver the Shares to close out such short positions.
The Selling Stockholders and any broker-dealers who participate in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act and any discounts, commissions or similar
selling expenses they receive and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. As a result, we have informed the Selling Stockholders
that Regulation M, promulgated under the Exchange Act, may apply to sales by the
Selling Stockholders in the market. The Selling Stockholders may agree to
indemnify any broker, dealer or agent that participates in transactions
involving the sale of the Shares against certain liabilities, including
liabilities arising under the Securities Act. The aggregate net proceeds to the
Selling Stockholders from the sale of the Shares will be the purchase price of
such Shares less any discounts, concessions or commissions.
The Selling Stockholders are acting independently of us in making decisions
with respect to the timing, price, manner and size of each sale. No broker,
dealer or agent has been engaged by us in connection with the
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distribution of the Shares. There is no assurance, therefore, that the Selling
Stockholders will sell any or all of the Shares. In connection with the offer
and sale of the Shares, we have agreed to make available to the Selling
Stockholders copies of this Prospectus and any applicable Prospectus Supplement
and have informed the Selling Stockholders of the need to deliver copies of this
Prospectus and any applicable Prospectus Supplement to purchasers at or prior to
the time of any sale of the Shares offered hereby.
The Shares covered by this Prospectus may qualify for sale pursuant to
Section 4(1) of the Securities Act or Rule 144 promulgated thereunder, and may
be sold pursuant to such provisions rather than pursuant to this Prospectus.
We will not receive any proceeds from the sale of the Shares covered by
this Prospectus and have agreed to pay all of the expenses incident to the
registration of the Shares, other than discounts and selling concessions or
commissions, if any, and fees and expenses of counsel for the Selling
Stockholders, if any.
DESCRIPTION OF SECURITIES
Pursuant to our Certificate of Incorporation, as amended (the
"Certificate"), we are authorized to issue an aggregate of 50,000,000 shares of
Common Stock, par value $.02 per share. As of August 29, 2000, there were
13,337,943 shares of Common Stock outstanding. As of August 29, 2000, there
were approximately 845 holders of record of Common Stock. The Common Stock is
listed on the Nasdaq SmallCap Market under the symbol "FUTR." In addition, we
have issued 1,149,878 shares of IFX Class I Series A Preferred Stock and 779,447
shares of IFX Class II Series A Preferred Stock. Each share of preferred stock
is convertible into IFX common stock on a one-for-one basis.
The holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefor, if and when declared by the
Board of Directors and in such amounts as the Board of Directors may from time
to time determine. The shares of Common Stock are neither redeemable nor
convertible and the holders thereof have no preemptive or subscription rights to
purchase any securities of the Company. Upon our liquidation, dissolution or
winding up, the holders of Common Stock are entitled to receive, pro rata, our
assets that are legally available for distribution, after payment of all of our
debts and other liabilities. Each outstanding share of Common Stock is entitled
to one vote on all matters submitted to a vote of stockholders. There is no
cumulative voting in the election of directors.
Delaware Statutory Business Combination Provision
Section 203 of the Delaware General Corporation Law (the "DGCL") is
applicable to corporate takeovers in Delaware. Subject to certain exceptions
set forth therein, Section 203 of the DGCL provides that a corporation shall not
engage in any business combination with any "interested shareholder" for a
three-year period following the date that such shareholder becomes an interested
shareholder unless (a) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction that
resulted in the shareholder becoming an interested shareholder, (b) upon
consummation of the transaction that resulted in the shareholder becoming an
interested shareholder, the interested shareholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain specified shares) or (c) on or after such date, the
business combination is approved by the board of directors of the corporation
and by the affirmative vote of at least 66 2/3% of the outstanding voting stock
that is not owned by the interested shareholder. Except as specified therein, an
"interested shareholder" is defined to include any person that is (i) the owner
of 15% or more of the outstanding voting stock of the corporation, (ii) an
affiliate or associate of that corporation who or which and owned 15% or more of
the outstanding voting stock of the corporation at any time within three years
immediately prior to the relevant date, and (iii) an affiliate or associate of
the persons described in the foregoing clauses (i) or (ii).
In our Certificate, we have elected not to be governed by the restrictions
imposed by Section 203 of the DGCL. Accordingly, in the event we become the
subject of a takeover or third party acquisition attempt, we may not be able to
avail ourselves of the benefits afforded by Section 203 of the DGCL.
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<PAGE>
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is Computershare
Investor Services LLC.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for us by
Neal, Gerber & Eisenberg, Chicago, Illinois.
EXPERTS
Our consolidated financial statements and schedule at June 30, 1999, and
for the year then ended, appearing in our Annual Report (Form 10-K) for the year
ended June 30, 1999, have been audited by Ernst & Young LLP, independent
certified public accountants, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
Our consolidated financial statements as of June 30, 1998 and 1997,
incorporated in this Prospectus by reference to our Annual Report on Form 10-K
for the fiscal year ended June 30, 1999, have been audited by Arthur Andersen
LLP, independent public accountants, as set forth in their report with respect
thereto, which is incorporated by reference herein. Such financial statements
are incorporated by reference herein in reliance upon the authority of such firm
as experts in auditing and accounting.
WHERE TO FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act,
relating to the shares of common stock to be sold or otherwise transferred by
the Selling Stockholders identified herein. This Prospectus is a part of the
Registration Statement, but the Registration Statement also contains additional
information and exhibits not included herein.
We are subject to the informational requirements of the Exchange Act.
Accordingly, we file annual, quarterly and current reports with the SEC. You
can read and copy the Registration Statement and the other statements and
reports that we file with the SEC at the SEC's public reference rooms at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, 7 World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can also be obtained from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Our filings with the SEC are also available from
the SEC's web site at http://www.sec.gov. Please call the SEC's toll-free
telephone number at 1-800-SEC-0330 if you need further information about the
operation of the SEC's public reference rooms. The Common Stock is listed on
the Nasdaq SmallCap Market and our reports can also be inspected at the offices
of the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20549.
19
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We file annual, quarterly and special reports and other information with
the SEC. The SEC allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this Prospectus. Any statement contained in a document which
is incorporated by reference in this Prospectus is automatically updated and
superseded if information contained in this Prospectus, or information that we
later file with the SEC, modifies or replaces this information. We incorporate
by reference the following documents:
1. Our Annual Report on Form 10-K for the fiscal year ended June 30, 1999,
filed September 28, 1999.
2. Our Quarterly Report on Form 10-Q (and Amendment thereto) for the fiscal
quarter ended March 31, 2000, filed May 15, 2000 and amended May 17, 2000.
3. Our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31,
1999, filed February 14, 2000.
4. Our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
1999, filed November 15, 1999.
5. Our Current Report on Form 8-K, filed August 23, 2000.
6. Our Current Report on Form 8-K, filed July 5, 2000.
7. Our Amendment No. 1 to Form 8-K, filed December 20, 1999.
To receive a free copy of any of the documents incorporated by reference in this
Prospectus (other than exhibits), call or write us at IFX Corporation, 707
Skokie Boulevard, 5th Floor, Northbrook, Illinois, 60062, Attention: Secretary,
Telephone (847) 412-9411.
20
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses in connection with the sale
and distribution of securities being registered, other than discounts,
concessions and brokerage commissions:
<TABLE>
<S> <C>
SEC registration fee.............................. $ 367
Legal fees and expenses........................... 3,000*
Accounting fees and expenses...................... 2,000*
Miscellaneous..................................... 1,756*
------
Total $7,123*
======
</TABLE>
___________
* Estimated
IFX will bear all of the foregoing expenses.
Item 15. Indemnification of Directors and Officers.
Under the DGCL, a corporation has the authority to indemnify any person who
was or is a party or is threatened to be made a party to an action (other than
an action by or in the right of the corporation) by reason of such person's
service as a director of officer of the corporation, or such person's service,
at the corporation's request, as a director, officer, employee or agent of
another corporation or other enterprise, against amounts paid and expenses
incurred in connection with the defense or settlement of such action, if such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that such
person's conduct was unlawful. If such person has been judged liable to the
corporation in any action or proceeding brought by or in the right of the
corporation, however, indemnification is only permitted to the extent that the
adjudicating court (or the court in which the action was brought) determines,
despite the adjudication of liability, that such indemnification is proper.
As permitted by the DGCL, the by-laws of IFX authorize IFX to indemnify any
officer, director and employee of IFX against amounts paid or expenses incurred
in connection with any action, suit or proceeding (other than any such action by
or in the right of the corporation) to which such person is or is threatened to
be made a party as a result of such position if the Board of Directors or
shareholders of or independent legal counsel to, IFX, in a written opinion,
determine that indemnification is proper. The by-laws also limit the personal
liability of directors for breach of fiduciary duty, other than for breach of
duty of loyalty, intentional misconduct or violation of law, acts under Section
174 of the DGCL or with respect to any transaction in which the director derives
an improper personal benefit.
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<PAGE>
Item 16. Exhibits.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
5.1 Opinion of Neal, Gerber & Eisenberg.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Neal, Gerber & Eisenberg (included in Exhibit 5.1).
24.1 Powers of Attorney of certain officers and directors of IFX
(included on signature page).
</TABLE>
(b) Supplemental Financial Statement Schedules: None.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
Provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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<PAGE>
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than insurance payments and the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Miami, State of Florida, on September 5, 2000.
IFX CORPORATION
By: /s/ Michael Shalom
-------------------------
Michael Shalom,
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael Shalom and Jose Leiman, and each of them,
his/her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, to sign, execute and file with the Securities
and Exchange Commission (or any other governmental or regulatory authority), for
us and in our names in the capacities indicated below, this registration
statement on Form S-3 (including all amendments thereto) with all exhibits and
any and all documents required to be filed with respect thereto, granting unto
said attorneys-in-fact and agents and each of them, full power and authority to
do and to perform each and every act and thing necessary and/or desirable to be
done in and about the premises in order to effectuate the same as fully to all
intents and purposes as he himself/she herself might or could do if personally
present, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-3 has been signed on September 5, 2000 by
the following persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
--------- -----
<C> <S>
/s/ Michael Shalom Chief Executive Officer and Director
-------------------------------- (Principal Executive Officer)
Michael Shalom
/s/ Jose Leiman Chief Financial Officer
-------------------------------- (Principal Financial and Accounting Officer)
Jose Leiman
/s/ Joel M. Eidelstein President and Director
--------------------------------
Joel M. Eidelstein
/s/ George A. Myers Director
--------------------------------
George A. Myers
/s/ Zalman Lekach Vice President and Director
--------------------------------
Zalman Lekach
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
5.1 Opinion of Neal, Gerber & Eisenberg.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Neal, Gerber & Eisenberg (included in Exhibit 5.1).
24.1 Powers of Attorney of certain officers and directors of IFX
(included on signature page).
</TABLE>
II-5
