IFX CORP, 10-Q/A, 2000-05-17

IFX CORP
10-Q/A, 2000-05-17
COMPUTER PROGRAMMING, DATA PROCESSING, ETC.

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<PAGE>

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from __________________ to _________________

Commission File # 0-15187

IFX CORPORATION
----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 36-3399452
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

707 Skokie Blvd Ste 580, Northbrook, Illinois 60062
----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

(847) 412-9411
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(Registrant's telephone number, including area code)

----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

X Yes No
----- -----

As of March 31, 2000, the issuer had outstanding 12,926,924 shares of common
stock, $.02 par value per share.

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Page 1
<PAGE>

IFX CORPORATION AND SUBSIDIARIES

Page
----
PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

Condensed consolidated balance sheets as of
March 31, 2000 (Unaudited) and June 30, 1999 3

Condensed consolidated statements of operations
for the three months ended March 31, 2000
(Unaudited) and 1999 (Unaudited), and for
the nine months ended March 31, 2000
(Unaudited) and 1999 (Unaudited) 4

Condensed consolidated statements of cash flows
for the nine months ended March 31, 2000
(Unaudited) and 1999 (Unaudited) 5

Notes to condensed consolidated financial
statements 6

Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
for the Period Ended March 31, 2000 11

Item 3 - Quantitative and Qualitative Disclosures
about Market Risk 17

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings 18

Item 5 - Related Party Transaction 18

Item 6 - Exhibits and reports on form 8-K 18

(A) Exhibits
Exhibit 27 Financial Data Schedule (EDGAR only)
Exhibit 99.1 Risk Factors

EXPLANATORY NOTE

This Amendment No. 1 to Quarterly Report on Form 10-Q/A is being filed to
correct a typographical error on the Consolidated Statements of Cash Flows for
the 9 months ended March 31, 2000, to revise notes 6 and 11 to the enclosed
financial statements, to revise the enclosed "Management's Discussion and
Analysis of Financial Condition and Results of Operations", and to revise the
Financial Data Schedule on Exhibit 27.

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Page 2
<PAGE>

PART I--FINANCIAL INFORMATION

IFX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

Item 1--Financial Statements

Certain information in the financial statements presented below, except for
net income and basic net income per share, differs from amounts previously
reported due to the reclassification of certain revenues and operating expenses
to discontinued operations, reflecting the disposition of the Company's trading
business.
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
ASSETS (Unaudited)
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $14,080,800 $ 5,482,800
Receivables, net of allowance for doubtful accounts of
$724,800 and $80,100, at March 31, 2000 and June 30, 1999
respectively............................................. 1,263,500 458,300
Deferred income taxes..................................... 458 000 --
Net assets (liabilities) of discontinued operations....... (242,600) 3,726,900
----------- -----------
Total current assets.................................... 15,559,700 9,668,000
----------- -----------
PROPERTY AND EQUIPMENT:
Equipment, furniture and leasehold improvements........... 6,600,200 2,253,500
Assets under capital lease................................ 6,179,100 --
----------- -----------
12,779,300 2,253,500
Less: accumulated depreciation and amortization........... (2,113,600) (369,300)
----------- -----------
Total property and equipment, net....................... 10,665,700 1,884,200
----------- -----------
OTHER ASSETS:
Acquired customer base, net of amortization of $3,319,600
and $155,500, respectively.............................. 17,036,100 2,686,600
Investment in Yupi Internet Inc........................... 2,565,500 3,113,500
Investments in and advances to affiliates................. 94,300 241,500
Notes receivable.......................................... 620,000 612,500
Deferred income taxes..................................... 1,270,600 --
Foreign taxes recoverable................................. 799,700
Capitalized software, net................................. 2,378,500 --
Other assets.............................................. 2,035,500 655,200
----------- -----------
Total other assets...................................... 26,800,200 7,309,300
----------- -----------
TOTAL ASSETS............................................... $53,025,600 $18,861,500
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 9,967,500 $ 2,447,200
Accrued liabilities for acquisitions...................... 3,743,000 --
Deferred revenues......................................... 90,700 --
Deferred lease credits.................................... 35,300 --
Capital lease obligation.................................. 802,400 --
----------- -----------
Total current liabilities............................... $14,638,900 2,447,200
----------- -----------
LONG-TERM LIABILITIES:
Deferred gain on sale of investment....................... 2,551,900 --
Notes payable............................................. 451,700 316,900
Deferred lease credits.................................... 105,700 --
Capital lease obligation.................................. 5,832,800 --
----------- -----------
Total long-term liabilities............................. 8,942,100 316,900
----------- -----------
TOTAL LIABILITIES.......................................... 23,581,000 2,764,100
----------- -----------
ADVANCE ON SALE OF SUBSIDIARY COMMON STOCK................. 5,572,500 --
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.02 par value; 50,000,000 shares
authorized, 12,926,924 and 6,830,240 shares issued
and outstanding, respectively............................ 258,500 136,600
Paid-in capital.......................................... 51,524,800 11,299,100
(Accumulated deficit) Retained earnings.................. (15,737,400) 4,817,200
Accumulated other comprehensive income (loss)............ 456,700 (26,000)
Deferred compensation..................................... (12,630,500) (129,500)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY................................. 23,872,100 16,097,400
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................. $53,025,600 $18,861,500
=========== ===========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

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Page 3
<PAGE>

IFX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended Nine Months Ended
March 31, March 31,
- ------------------------------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Dial Up............................................... $ 2,076,900 $ -- $ 5,004,300 $ --
Dedicated............................................. 1,066,100 -- 1,497,600 --
Hosting and Design Web Services....................... 125,200 -- 293,100 --
Other................................................. 1,000 -- 290,800 --
------------ ----------- ------------ ----------
Total revenues........................................ 3,269,200 -- 7,085,800 --

Cost and expenses:
Cost of revenues...................................... 2,385,600 -- 4,933,500 --
General and administrative............................ 5,359,200 647,800 12,725,600 1,100,300
Depreciation and amortization......................... 2,262,600 -- 4,617,500 --
Sales and Marketing................................... 4,668,900 6,713,500
Stock Compensation.................................... 2,289,500 3,930,000
------------ ----------- ------------ ----------
Total operating expenses.............................. 16,965,800 647,800 32,920,100 1,100,300

Operating loss from
Continuing operations................................. (13,696,600) (647,800) (25,834,300) (1,100,300)

Other income (expense):
Interest income....................................... 83,800 100,300 233,900 283,700
Income (Loss) on operations of
equity investee..................................... (6,400) -- (41,900) 6,700
Gain on sale of investment, related party............. 1,900,000 -- 1,900,000 --
Other................................................. (43,700) 8,900 24,500 18,900
------------ ----------- ------------ ----------
Total other income.................................... 1,933,700 109,200 2,116,500 309,300

Loss from continuing operations
before income taxes................................... (11,762,900) (538,600) (23,717,800) (791,000)

(Provision)/Benefit from income tax..................... 301,600 (3,400) 1,728,600 (10,200)
------------ ----------- ------------ ----------
Loss from continuing operations......................... (11,461,300) (542,000) (21,989,200) (801,200)
Income from discontinued
operations, net of taxes.............................. 494,600 1,036,000 1,434,600 2,767,500
------------ ----------- ------------ ----------
Net income (loss)....................................... $(10,966,700) $ 494,000 $(20,554,600) $1,966,300
============ =========== ============ ==========

BASIC AND DILUTED INCOME (LOSS) PER SHARE:
Loss from continuing operations......................... $ (1.01) $ (0.08) $ (2.41) $ (0.12)
Income from discontinued operations..................... $ 0.04 $ 0.15 $ 0.16 $ 0.43
------------ ----------- ----------- ----------
Net income (loss)......................................... $ (0.97) $ 0.07 $ (2.25) $ 0.31
============ =========== =========== ==========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted....................................... 11,315,382 6,655,539 9,121,522 6,390,950
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

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Page 4

<PAGE>

IFX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------------
2000 1999
------------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss).............................................. $(20,554,600) $1,966,300

Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation................................................... 1,453,400 -
Amortization................................................... 3,164,100 -
Deferred taxes................................................. (1,728,600) 833,300
Bad debt expense............................................... 644,700 -
Compensation associated with stock options..................... 3,930,000 -
Loss on operations of equity investee.......................... 41,900 -

Changes in operating asset and liabilities:
Receivables.................................................. (856,900) (32,800)
Foreign taxes recoverable.................................... (799,700) -
Other assets................................................. (1,196,300) (122,800)
Due to/from affiliates....................................... (112,500) (5,100)
Deferred revenues............................................ 90,700 -
Deferred lease credits....................................... 141,000
Accounts payable and accrued expenses........................ 6,338,700 245,200

Change in net assets from discontinued operations.............. 3,969,500 1,734,500
------------ ----------
Cash provided (used) by operating activities..................... (5,474,600) 4,618,600
------------ ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) of investment in Yupi Internet Inc........... 548,000 (113,500)
Deferred gain on sale of investment.......................... 2,551,900 -
Acquisitions, primarily customer base........................ (1,927,500)
(Increase) decrease in investments in and
advances to affiliates..................................... 105,300 (229,800)
Increase (decrease) in notes receivable...................... (7,500) 3,700
Purchase of PP&E............................................. (2,504,100) (342,700)
Purchase of capitalized software............................. (1,878,500) -
------------ ----------
Cash used in investing activities.............................. (3,112,400) (682,300)
------------ ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable.................................. 111,900 -
Payments of capital lease obligation......................... (43,900) -
Issuance of common stock..................................... 11,061,900 1,000,000
Advance on sale of subsidiary common stock................... 5,572,500 -
------------ ----------
Cash provided by financing activities.......................... 16,702,400 1,000,000
------------ ----------

Effect of exchange rate changes on cash.......................... 482,600 -
------------ ----------
Increase (decrease) in cash and cash equivalents................. 8,598,000 4,936,300
------------ ----------
Cash and cash equivalents, beginning of period................... 5,482,800 5,633,200
------------ ----------
Cash and cash equivalents, end of period......................... $ 14,080,800 10,569,500
============ ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes................................... - $ 250,000
============ ==========

SUPPLEMENTAL NONCASH INVESTING AND FINANCING
ACTIVITIES DISCLOSURE:
Value of stock issued in conjunction with acquisitions....... $ 12,854,500 -
============ ==========
Acquisition of equipment and software through assumption of
capital lease obligations.................................. $ 6,679,100 -
============ ==========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

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Page 5
<PAGE>

IFX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of IFX
Corporation and its majority-owned subsidiaries for which it has a controlling
financial interest. All material intercompany accounts and transactions,
including those related to the Company's former subsidiaries, are eliminated in
consolidation.

These condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation have been
reflected in these condensed consolidated financial statements. The balance
sheet at June 30, 1999, has been derived from the audited financial statements
at that date but does not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended June 30, 1999. Operating results for the quarter ended March 31, 2000
are not necessarily indicative of the results that may be expected for the year
ending June 30, 2000. Certain reclassifications have been made in the 1999
financial statements to conform to the fiscal 2000 presentation. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's financial statements on Form 10-K for the year
ended June 30, 1999.

NOTE 2. DISCONTINUED OPERATIONS

IFX Ltd. In June 1999, IFX divested itself of its 50.1% interest in IFX Ltd.
in exchange for approximately $2.45 million and a redeemable preference share
entitling IFX to quarterly payments equal to approximately 30% of the net
profits, as specifically defined, of IFX Ltd. through June 30, 2002. Following
the sale of IFX Ltd., IFX decided not to invest the sales proceeds in the
trading business and, instead, decided to continue to develop businesses in the
Internet industry in Latin America. Accordingly, the Company has accounted for
this disposal, and the disposal of operations related to the same business
segment made in prior years, as noted below, as discontinued operations.

FX Chicago Brokerage Accounts. On May 31, 1996, an agreement was reached to
sell, transfer and assign to E.D. & F Man International Inc. ("MINC")
substantially all of the brokerage accounts maintained by FX Chicago, Inc.
(formerly Index Futures Group, Inc., or "Index"), together with all positions,
securities and other assets held in or for such accounts and other agreed-upon
assets used in the conduct of the brokerage activities. MINC is a unit of E.D.&
F. Man Group, plc, a London-based international trading and finance
conglomerate. This sale was completed as of July 1, 1996. During 1997, Index
ceased being a clearing member at all exchanges, and ceased being a registered
futures commission merchant.

The purchase price payable by MINC in connection with this transaction is
based on a percentage of the net income (as defined in the sales agreement) of
the transferred activities during the ninety-nine month period following the
sale. Because the purchase price is contingent upon the future earnings of the
customer accounts sold, none of which is guaranteed, income is recognized as
earned beginning in fiscal year 1997, over the five and one-half years after the
date of the sale. The sales contract required Lee S. Casty to sign a non-
competition agreement. As compensation for providing such an agreement, a
portion of the purchase price was to be paid to Lee S. Casty. Mr. Casty
irrevocably transferred his right to receive payments under such agreement to
the Company. Accordingly, a portion of the purchase price which would otherwise
have been received by Lee S. Casty is being included in revenue by the Company.

In addition, in conjunction with the sale, the Company issued a limited
indemnification agreement to MINC. The agreement covers potential customer
claims arising from activity prior to the sale.

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Page 6
<PAGE>

The following table summarizes financial information related to the
discontinued trading business of IFX Ltd. and FX Chicago:

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------- -----------------------
2000 1999 2000 1999
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total revenues..................................... $ 801,900 $2,765,300 $2,333,300 $8,430,300
========= ========== ========== ==========

Income from discontinued
operations before income taxes................... $761,000 $1,593,800 $2,207,100 $4,218,600

Income tax provision on discontinued operation..... (266,400) (557,800) (772,500) (1,451,100)
--------- ---------- ---------- ----------
Income from discontinued operations, net of taxes.. $ 494,600 $1,036,000 $1,434,600 $2,767,500
========= ========== ========== ==========
</TABLE>

The information set forth in the remaining Notes to the Financial
Statements relates to continuing operations unless otherwise specified.

NOTE 3. RECENT DEVELOPMENTS AND ACQUISITIONS

Developments
- ------------

Tutopia.com and Free Internet Access. On January 3, 2000, IFX announced
that it would offer a class of service featuring free Internet access in Latin
America. The free access offering is provided by Tutopia.com, Inc., a subsidiary
of IFX, and currently covers 9 countries: Argentina, Brazil, Chile, Colombia, El
Salvador, Guatemala, Mexico, Panama and Venezuela. Tutopia.com became the first
company to offer free Internet access in Latin America on a pan-regional basis.
IFX will also continue to offer fee-based premium and business service.

Tutopia.com Inc. is a combination content / free access provider that
offers users throughout the region free Internet access services and a default
destination to the Tutopia portal site when the users first log on to use the
Internet. The Tutopia portal has been developed to offer Internet users
localized information about select major cities in Latin America. Through the
end of April 2000, Tutopia.com raised approximately $5.5 million through a
private placement. Tutopia intends to use the proceeds to expand its content
development team, assemble an advertising-space sales force, cover customer
support expenses, invest in marketing and compact disc distribution, and pay for
Internet connectivity, which Tutopia will purchase on a wholesale basis from
IFX. IFX provides certain technical and administrative support to Tutopia.

Yupi Internet, Inc. On January 18, 2000, Yupi Internet, Inc. ("Yupi")
filed a Form S-1 for the registration of its initial public offering of
approximately 7,000,000 shares at a price range of $13 to $15. IFX currently
holds a minority interest in Yupi that it purchased in 1999 for approximately
$3.1 million in exchange for convertible preferred stock, common stock and the
right to acquire up to 25,901 shares of the common stock of Yupi at a
predetermined price.

Spinway Media Network, Inc. On January 24, 2000, Tutopia.com, Inc. entered
into an agreement (the "Spinway Agreement") with Spinway Media Network, Inc.
("Spinway") providing Tutopia with the use of Spinway's persistant-ad box
technology. A copy of the Spinway Agreement was filed as an exhibit in the
prior Form 10Q.

- --------------------------------------------------------------------------------
Page 7
<PAGE>

Facilito, Inc. In March 2000, IFX and The Intcomex Group ("Intcomex")
launched Facilito.com, a multi-category Internet e-tailer in Mexico. By
leveraging off the in-country distribution and logistics infrastructure and
fulfillment capabilities of its strategic partner, Intcomex, as well as the on-
line audience and Internet related assets in the Latin American Internet space
of IFX, Facilito.com should be able to target and serve the growing Internet
audience in Latin America. Intcomex is a privately-held company controlled by
affiliates of Michael Shalom.

Graham Group. In January 2000, the Company signed a four-year lease
agreement with the Graham Group for 12,500 square feet of office space in Miami
Lakes, Florida, to commence in January 2000. This lease provides for aggregate
payments totaling approximately $1.1 million over the next four years.

Haworth Capital. In January 2000 IFX entered into a leasing agreement with
De Lage Landen Financial Services, a division of Haworth Capital. The agreement
provided IFX the financing for approximately $200,000 in office furniture.

Acquisitions
- ------------

Openway, Ltda. On January 3, 2000, IFX purchased substantially all of the
assets of Openway Ltda., a Colombian Internet Service Provider. Openway provides
dial-up, web design and web hosting services to consumers and corporations in
Bogota, Colombia.

Brasilnet Comunicacoes S.A. On January 21, 2000, IFX purchased the shares
of Brasilnet Comunicacoes S.A. ("Brasilnet"), a Brazilian Internet Service
Provider. Brasilnet provides dial-up access, web design and web hosting services
to consumers in Joinville, Itajai, Blumenau, Criciuma and Florianopolis, Brazil.

For the acquisitions during the third quarter of fiscal 2000, the total
purchase prices were approximately $2.12 million, of which none was paid or will
be paid in cash, approximately $2.0 million was paid or will be paid by issuing
approximately 99,146 shares of the Company's common stock and by assuming
liabilities of approximately $0.12 million. The total cash acquired in those
acquisitions was approximately $22,000. Each of the acquisitions was accounted
for under the purchase method of accounting. The purchase price in excess of the
net tangible assets aggregated approximately $1,786,800 and was allocated to
Acquired Customer Base. This allocation is preliminary and is subject to
finalization of the Company's valuation analysis. The Acquired Customer Base is
being amortized using the straight-line method over an estimated life of 3
years. The consolidated financial statements include the accounts of these
acquisitions since the date of purchase.

The following unaudited pro forma data summarize the results of operations
for the periods indicated as if these acquisitions had been completed on July 1,
1998, the beginning of the 1999 fiscal year. The pro forma data gives effect to
actual operating results prior to the acquisitions and adjustments to goodwill
amortization and income taxes. These pro forma amounts do not purport to be
indicative of the results that would have actually been obtained if the
acquisitions had occurred on July 1, 1998 or that may be obtained in the future.

The pro forma data does not give effect to acquisitions completed
subsequent to March 31, 2000.

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Page 8
<PAGE>

Nine Months Ended
March 31,
-------------------------
2000 1999
------------ ----------
(Unaudited)

Total revenues............................ $ 8,463,400 $3,020,400
Net income (loss)......................... (18,917,000) 220,500
Basic and diluted net income (loss) per
common share............................ $ (2.07) $ .03

NOTE 5. SUBSEQUENT EVENTS

Accelerated Payments to Consultants. IFX has several consulting agreements
in place with service providers in Latin America. These consultants have helped
IFX build its network and expand its services in the region. Consulting
Agreements with certain of the consultants required the issuance by IFX of IFX
stock depending on the growth of IFX users. During April 2000 IFX fixed certain
contingent amounts and accelerated certain payments to those consultants by
issuing 325,963 shares of IFX common stock with an approximate value of $9.3
million.

Secured Promissory Note to Lucent Technologies. In April 2000, IFX
received $2,691,000 from Lucent Technologies to finance Lucent equipment that
IFX had acquired in Brazil. The amount advanced is pursuant to the existing $10
million credit line that IFX has established with Lucent and will be repaid in
30 equal monthly installments of principal and interest beginning on the first
day of the sixth month following the date of the first scheduled interest
payment.

NOTE 6. GEOGRAPHIC INFORMATION

In fiscal 1999 the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosure About Segments of an Enterprise and Related
Information". The new standard changes the information the Company reports about
its operating segments.

The Company is structured primarily around the geographic markets it serves
and operates four reportable segments in Brazil, Chile, Mexico and Venezuela.
All of the segments provide Internet connectivity services. The accounting
policies of the segments are the same as those described in the Significant
Accounting Policies footnote of the June 30, 1999 consolidated financial
statements. The Company evaluates performance based on profit or loss from
operations before income taxes excluding interest income and expenses, equity
income, and gains or losses from securities and other investments.

The Company does not derive more than 10% of its revenues from any
individual customer.

Selected unaudited financial information for the three months ended March
31, 2000 by segment is presented below:

<TABLE>
<CAPTION>
United Brazil Chile Mexico Venezuela Other Total
States
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 4,900 1,435,300 409,400 537,700 391,400 490,500 3,269,200
- --------------------------------------------------------------------------------------------------
Income (loss)
from continuing
operations
before taxes (7,447,000) (1,647,100) (250,100) (495,600) (50,200) (1,872,900) (11,762,900)
- --------------------------------------------------------------------------------------------------
</TABLE>

Selected unaudited financial information for the nine months ended March
31, 2000 by segment is presented below:

- ------------------------------------------------------------------------------
Page 9

<PAGE>

<TABLE>
<CAPTION>
United Brazil Chile Mexico Venezuela Other Total
States
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 4,900 2,443,300 1,215,100 1,227,500 1,124,500 1,070,500 7,085,800
- ----------------------------------------------------------------------------------------------------
Loss from
continuing
operations
before taxes (15,233,100) (2,185,500) (1,478,100) (832,300) (518,200) (3,470,600) (23,717,800)
- ----------------------------------------------------------------------------------------------------
</TABLE>

Information by product lines is presented on the Condensed Consolidated
Statement of Operations.

NOTE 7. Cash & Cash Equivalents

Cash and cash equivalents includes cash and investments of less than three
months in duration.

NOTE 8. Capitalized Software

Effective for fiscal year 2000, the Company adopted the American Institute
of Certified Public Accountants' Statement of Position (SOP) 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use." The
statement requires capitalization of certain costs incurred in the development
of internal-use software, including external direct material and service costs.
Prior to adoption of SOP 98-1, the Company expensed these costs as incurred.

NOTE 9. Deferred Lease Credit

Deferred lease credits are amortized on a straight-line basis primarily
over the life of the applicable lease. In January 2000, IFX received $147,000
from Compaq Computers ("Compaq") in order for IFX to assume Compaq's property
lease in Miami Lakes. That amount will be amortized over the remainder of the
four year lease that IFX assumed.

NOTE 10. Stockholders' Equity

International Technology Investments, LC. On March 29, 2000, International
Technology Investments, LC ("ITI"), exercised its remaining 1,500,000 options to
acquire IFX common stock at $2.00 per share for a total of $3.0 million. In
addition, ITI paid the outstanding note payable of $4.95 million from the
options that it had exercised in the prior quarter. This brings the total number
of shares held by ITI to 6,000,000. ITI is controlled by Michael Shalom, CEO of
IFX.

NOTE 11. Related Party Transaction

In February 2000, IFX entered into a Stock Purchase Agreement ("agreement")
with Lee Casty, a more than five percent holder of IFX common stock. The
agreement is for the sale to Mr. Casty of a certain number shares of Yupi
Internet, Inc. ("Yupi") Preferred Stock owned by IFX. The sale proceeds of
$5,000,000 will be used for the Company's working capital. The exact number of
Yupi preferred shares to be transferred by IFX to Mr. Casty will be fixed upon
the initial public offering of Yupi shares, or, in the absence of a Yupi public
offering, then upon the occurrence of certain other valuation events. In no
event will the valuation event extend beyond twelve months plus one day from the
initial sale transaction. The Company recorded a gain of $1.9 million and
deferred gain of $2.6 million in connection with the sale. The gain recognized
represents the minimum amount the Company expects to realize on this
transaction.

NOTE 12. Accrued Liabilities on Acquisitions

On most of IFX's acquisitions, the Company pays a certain amount at the
closing ("first payment") and another amount 60 to 360 days after closing
("second payment"). The amounts owed by IFX to the ISP's it has acquired are
classified as accrued liabilities on acquisitions. As of March 31, 2000, IFX had
accrued liabilities on acquisition of approximately $3.8 million of which
approximately $2.8 million is due in IFX common stock and approximately $1.0
million is due in cash.

NOTE 13. Foreign Taxes Recoverable

In general, IFX's foreign subsidiaries pay a Foreign Value Added Tax
("VAT") on their purchases. The foreign taxes recoverable is the difference
between what IFX has paid in VAT Taxes and what it has collected in VAT from
it's customers. At March 31, 2000, IFX had a net difference of approximately
$0.8 million which was classified as Foreign Taxes Recoverable.
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ITEM 2

Management's Discussion and Analysis of Financial Condition and Results of
Operations for the Period Ended March 31, 2000.

The results shown herein are not necessarily representative of the results
that may be expected in any future period. A discussion of certain risk factors
that could cause future results to differ materially from the results reported
herein is filed herewith as Exhibit 99.1 to this Form 10-Q.

OVERVIEW

The following discussion should be read in conjunction with its
Consolidated Financial Statements and notes that follow it and with the audited
consolidated financial statements, notes thereto, and management's discussion
and analysis for the year ended June 30, 1999, included in the annual report
filed on Form 10-K for such period. This discussion and analysis reflects the
adjustments made to segregate the discontinued operations ("discontinued
operations") that resulted from (i) the sale of the Company's brokerage assets
in July 1996 to E.D. & F. Man International, Inc., a unit of E.D. & F. Man
Group, plc, a London-based international trading and finance conglomerate, and
(ii) from the divesture in June 1999 of its 50.1% interest in IFX Ltd.
Discontinued operations are shown under a separate line item on the Income
Statement and Balance Sheet for fiscal years 2000 and 1999.

GENERAL

IFX is a leading provider of Internet connectivity and value-added
services in Latin America. It operates two brands:

. Unete.com. Under the Unete.com brand IFX is focused on serving
small and medium sized businesses in Latin America with the following
services: dial-up connection, dedicated lines, web hosting, web design
and co-location. The countries in which IFX provide services are:
Argentina, Brazil, Bolivia, Chile, Colombia, Costa Rica, El Salvador,
Guatemala, Honduras, Mexico, Nicaragua, Panama, Uruguay and Venezuela.
Users under the Unete network, can connect in any of the 14 countries
IFX serves and in many major cities in the United States via a local
telephone call and with no roaming fees.

. Tutopia.com. In January 2000, IFX launched Tutopia.com, a free
Internet access business and web portal with local content. Tutopia
offers individual users free access to the Internet while providing
advertisers with an online direct marketing tool. The free Internet
access is offered to users in Argentina, Brazil, Chile, Colombia, El
Salvador, Guatemala, Mexico, Panama and Venezuela. In addition,
Tutopia.com serves as a web portal for some of the major cities were
viewers can obtain local information such as news, restaurants, movies
and weather of their local city. Through the end of April 2000,
approximately 600,000 users have registered for free Internet access
with Tutopia.com.

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Historical Background

IFX was incorporated in Illinois in July 1985. IFX changed its state of
incorporation to Delaware in May 1995. Prior to July 1996, IFX's primary
business was providing commodity brokerage services. On July 1, 1996, IFX sold
substantially all of its brokerage assets (other than certain assets of our
majority-owned U.K. subsidiary) to MINC E.D. & F. Man International, Inc., a
unit of E.D. & F. Man Group, plc, a London based international trading and
finance conglomerate, for a purchase price consisting of cash earn-out payments
based upon the sold business's profitability (as defined in the sale agreement)
of a decreasing percentage during the ninety-nine months following the sale.
Since July 1996 and up until September 1999, IFX's revenues have consisted
primarily of earn-out payments from the asset sale, interest income and income
from operations of our former majority-owned British subsidiary, IFX Ltd., which
conducts foreign exchange business as a registrant of the British Securities and
Futures Authority.

In November 1998, IFX decided to pursue the Internet service markets in
Latin America. At that time, IFX 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.

In June 1999, IFX sold its 50.1% interest in IFX Ltd., the only remaining
business that was not related to the Internet, 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
(as specifically defined) of IFX Ltd. through June 30, 2002.

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, 1999 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.

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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.

As of March 31, 2000, the Company had approximately 560 employees.

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended March 31, 2000, cash used by continuing and
discontinued operations was approximately $5.5 million compared to cash provided
by continuing and discontinued operations of $4.6 million for the same period in
1999. The majority of cash for the nine months ended March 31, 2000, was used by
the Company's continuing investments and general operating expenses in the
Internet operations. In general, the Company invests cash not needed for
operations at any of its subsidiaries in short-term investments such as U.S.
Government obligations and overnight time deposits which are classified as cash
equivalents. As of March 31, 2000, the Company held approximately $14.1 million
in cash and cash equivalents. The Company expects to meet its operating cash
flow requirements through funds generated by earn-out payments, operations, and
debt and/or equity financings.

For the nine months ended March 31, 2000, cash used in investment activities
was approximately $3.1 million compared to cash used in investment activities of
$0.7 million for the same period in 1999. The increase was primarily due to the
purchases of equipment, and acquisitions and software implementations.

During the quarter, IFX received approximately $7.95 million from ITI as
part of its agreement with IFX. In addition, Tutopia.com received approximately
$5.0 million from a private placement which commenced during January 2000.

Stockholders' equity at March 31, 2000 was approximately $23.9 million as
compared with $16.1 million at June 30, 1999.

RESULTS OF OPERATIONS - THREE MONTHS AND NINE MONTHS ENDED MARCH 1999
COMPARED TO 1999

Revenues. In the three months and nine months ended March 31, 2000, IFX
derived $2.1 million or 64%, and $5.0 million or 71%, respectively of the total
continuing revenues from subscriptions from individuals for dial-up access to
the Internet. Monthly subscription fees vary by billing plan. With the current
pricing plans, customers have several choices including unlimited local,
unlimited pan-regional and limited local plans.

In addition, in the three months and nine months ended March 31, 2000, IFX
derived $1.1 million or 33%, and $1.5 million or 21%, respectively of the total
continuing revenues from full-time dedicated access connections to the Internet.
Full-time dedicated lines offer small businesses direct and uninterrupted
connections to the Internet without the need to dial any number.

The remaining $0.1 million or 3%, and $0.6 million or 8% of the total
continuing revenues for the three months and nine months ended March 31, 2000
were derived from certain small business services which include web-hosting, web
design, and other value-added services such as domain name registration, and
from the sale of such items as modems and computer cameras related to
promotions. IFX's web-hosting services allow a business or individual to post
information on the World Wide Web through IFX's servers. IFX's Web design
services offer Internet site development services for small businesses.

Revenues for three months and nine months ended March 31, 1999 from
continuing operations are $0, since the Company had not yet been involved in the
Internet business. Revenues for the period ended March 31, 1999 are shown in the
income statement as discontinued operations.

Costs of Revenues. IFX's cost of revenues include all the costs that are
primarily related to the number of subscribers. The primary costs are the local
Internet connection fees paid to the telecommunication companies in each country
and the subscriber start-up expenses. The telecommunication expenses include the
costs of providing its subscribers with local telephone dialing numbers to its
POPs, the costs related to third-party POPs, and the costs of the connections

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of IFX's hubs to the Internet backbone. Start-up expenses include the cost of
distributing the compact disk with its starter kit software. Cost of revenues
were $2.4 million and $0 for the three months ended March 31, 2000 and March 31,
1999, respectively; and were $4.9 million and $0 for the nine months ended March
31, 2000 and March 31, 1999, respectively.

General and Administrative Expenses. General and administrative costs are
primarily for salaries, legal, accounting and consulting fees, General and
administrative expenses were $5.4 million and $0.1 million for the three months
ended March 31, 2000 and March 31, 1999, respectively; and were $12.7 million
and $1.1 million for the nine months ended March 31, 2000 and March 31, 1999,
respectively. The increase was primarily due to an increase in payroll.

IFX believes that it is necessary to purchase or install POPs in each major
country in Latin America. As IFX continues with that expansion into new markets,
both costs of sales and selling, general and administrative expenses will
increase. IFX expects that these costs will have a short-term negative impact on
its net income. In cities where the Company does not want to establish a
presence, but wants its subscribers to have access to the Internet, it will use
third-party POPs.

Depreciation and amortization. Depreciation and amortization is related to
property and equipment, software and acquired customer base. IFX depreciates its
fixed assets based on estimated useful lives that range from three to five
years. IFX amortizes purchased customer bases using the straight-line method
over a period of three years, commencing when the purchase is completed. This
amortization has a negative effect on net income. Depreciation and amortization
expense was $2.3 milion and $0 for the three months ended March 31, 2000 and
March 31, 1999, and were $4.6 million and $0 for the nine months ended March 31,
2000 and March 31, 1999, respectively.

The Company will continue to invest heavily in purchases of computer
equipment and software which will increase its depreciation and amortization
costs. These costs will have a short-term negative impact on net income, but the
Company believes that these increased costs should be offset by anticipated
increases in revenue attributable to overall subscriber growth and advertising.
However, there can be no assurance that the Company will be able to build,
increase or maintain its subscriber base in a given market to the extent
necessary to generate sufficient revenues to offset these expenses.

Sales and Marketing. Sales and marketing costs are primarily for
advertising, market analysis, trade show expenses and sales related expenses of
our ISP service. Sales and marketing expenses were $4.7 million and $0 for the
three months ended March 31, 2000 and March 31, 1999, respectively; and were
$6.7 million and $0 for the nine months ended March 31, 2000 and March 31, 1999,
respectively. The increase was primarily due to an increase in launch of the
Tutopia.com free ISP and the increase in payroll of IFX's sales team.

Deferred Stock Compensation. Deferred stock compensation is primarily
expenses related to stock options issued below market price. Deferred stock
compensation was $2.3 million and $0 for the three months ended March 31, 2000
and March 31, 1999, respectively; and were $3.9 million and $0 for the nine
months ended March 31, 2000 and March 31, 1999, respectively. The increase was
primarily due to an increase in options awarded to new and existing employees.

Other Income. Other income is mostly derived from investment in short-term
government notes. Other income was $0.03 million and $0.1 million for the three
months ended March 31, 2000 and March 31, 1999, respectively; and was $0.2
million and $0.3 million for the nine months ended March 31, 2000 and March 31,
1999, respectively. The decreases were primarily due to a decrease in average
cash balances available for investment.

Gain on Investment. Gain on investment was derived from the sale of 500,000
preferred shares of Yupi Internet, Inc. to Mr. Lee Casty. The company recorded
a gain of $1.9 million and a deferred gain of $2.6 million on the sale.

Other Income and Gains from Discontinued Operations. Earn out payments from
the 1996 sale of its brokerage asset to MINE E.D. & F. Man International, Inc.,
and from the 1999 sale of its 50.1% interest in IFX Ltd. are shown as
discontinued operations, net of expenses and taxes. In the three months ended
March 31, 2000, the Company earned approximately $0.5 million compared to $1.0
million for the three months ended March 31, 1999. For the nine months ended
March 31, 2000
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the Company earned $1.4 million compared to $2.8 million for the nine months
ended March 31, 1999. The decrease in income was due to lower profitability of
the businesses sold. All the earn-out proceeds were invested in IFX's Internet
operations.

Income tax provision. For the three months ended March 31, 2000 and March
31, 1999, the Company recorded a tax benefit from its continuing operations of
approximately $0.3 million and a tax provision of $0.01 million, respectively.
For the nine months ended March 31, 2000, the Company recorded a tax benefit
from its continuing operations of approximately $1.7 million and for March 31,
1999 a tax provision of $0.01 million. The effective tax rate for the three
months ended March 31, 2000 was 2.6% compared to 0.6% for the three months ended
March 31, 1999. The effective tax rate for the nine months ended March 31, 2000
was 7.3% compared to 1.3% for the nine months ended March 31, 1999.

Net income (loss) and income (loss) per share. As a result of the factors
discussed above, IFX's loss from continuing operations for the three months
ended March 31, 2000 was approximately $11.5 million, or $(1.01) per share,
compared to a net loss of $0.5 million, or $(0.08) per share, for the three
months ended March 31, 1999. Including discontinued operations, the Company
recorded a net loss of $11.0 million, or $(0.97) per share, compared to a net
income of $0.5 million, or $0.07 per share, for the three months ended March 31,
1999.

IFX's loss from continuing operations for the nine months ended March 31,
1999 was approximately $22.0 million, or $(2.41) per share, compared to a net
loss of $0.8 million, or $(0.12) per share, for the nine months ended March 31,
1999. Including discontinued operations, the Company recorded a net loss of
$20.6 million, or $(2.25) per share, compared to a net income of $2.0 million,
or $0.31 per share, for the nine months ended March 31, 1999.

CREDIT AGREEMENTS

Lucent Technologies. During the quarter, IFX increased its credit line with
Lucent Technologies from $2.7 million to $5.6 million. With this increase in the
credit line, IFX increased the capacity of its network throughout the region.

IBM Credit Corporation. In March 2000, IFX entered into a leasing agreement
with IBM Credit Corporation. The agreement provided IFX the financing for
approximately $365,000 worth of IBM equipment.

Haworth Capital. In January 2000, IFX entered into a leasing agreement with
De Lage Landen Financial Services, a division of Haworth Capital. The agreement
provided IFX the financing for approximately $200,000 in office furniture.

Year 2000 Readiness

In the prior year, the Company discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999, the Company completed its
assessment and testing of systems. As a result of those planning and assessment
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the year 2000 date change. To date, Year 2000
compliance costs have not been material. The Company is not aware of any
material problems resulting from Year 2000 issues, either with its products, its
internal systems, or the products and services of third parties. The Company
will continue to monitor its mission critical computer applications and those of
its suppliers and vendors throughout the Year 2000 to ensure that any latent
Year 2000 matters that may arise are addressed promptly.

If it comes to our attention that there are any Year 2000 problems with our
service or that some of our third-party hardware and software used in our
internal systems are not Year 2000 compliant, then we will endeavor to make
modifications to our products and internal systems, or purchase new internal
systems, to

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quickly respond to the problem. At the present time, however, we do not
anticipate incurring additional material costs related to Year 2000 compliance.

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Item 3. - Quantitative and Qualitative Disclosures about Market Risk

The Company's continuing operations are focused primarily in Latin America,
subjecting the Company to certain political, currency, economic and commercial
risks and uncertainty not typically found in the U.S. The Company's exposure to
market risk is directly related to its role as a Latin American ISP. The
Company's primary market risk exposure relates to foreign exchange rate risk.
Foreign exchange rate risk arises from the possibility that changes in foreign
currency exchange rates will adversely impact the value of the Company's assets,
liabilities and/or equity. When the Company operates in a foreign country, the
value of the local currency will probably fluctuate, especially in Latin
America. This fluctuation can cause the Company to gain or lose on the
conversion to US Dollars.

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PART II - OTHER INFORMATION

ITEM 1 - LEGAL PRECEDINGS

The Company is a defendant in, and may be threatened with, various legal
proceedings arising from its regular business activities. Management, after
consultation with legal counsel, is of the opinion that the ultimate liability,
if any, resulting from any pending action or proceedings will not have a
material effect on the financial position or results of operations of the
Company.

ITEM 5 - OTHER INFORMATION

Related Party Transaction
- -------------------------

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

27 Financial Data Schedule (EDGAR only)

99.1 Risk Factors

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

IFX CORPORATION
---------------------------
(Registrant)

Dated: May 15, 2000 By: /S/ JOEL EIDELSTEIN
-----------------------------
Joel Eidelstein
President

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Dated: May 15, 2000 By: /S/ JOSE LEIMAN
------------------------
Jose Leiman
Chief Financial Officer

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Exhibit 99.1

RISK FACTORS

We have an unproven business model and limited experience in providing
Internet services, which makes our business prospects difficult to evaluate.

We did not begin our Internet access business until November 1998, and did
not begin offering other Internet services until April 1999. In addition, we did
not launch our free Tutopia service until February 2000. Our business model is
still in development and our limited experience in providing Internet services
and limited historical operating data make our business and prospects difficult
to evaluate. In addition, the free access model is unproven and a number of
other businesses in the United States offering free Internet access have failed.
Offering free Internet access in Latin America could have a material impact on
our revenues because current Unete users who pay for their Internet service may
shift to free access through Tutopia. You must consider our business and
prospects in light of the substantial risks, expenses and difficulties typically
encountered by companies in new and rapidly evolving industries such as ours. We
may not adequately address these risks and, if we do not, we may not be able to
implement our business plan as we intend.

We have never made money providing Internet services and expect our losses to
continue.

Although we have experienced revenue growth from continuing operations from
quarter to quarter, we have incurred net losses and experienced negative cash
flow from continuing operations during those quarters. We expect to continue to
operate at a net loss and to experience negative cash flow, as the expansion and
integration of our Latin America network operations and the development of our
free access model continues. We can give no assurance that we will be able to
achieve or sustain profitability or sustain positive cash flow 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 infrastructure and access industry and in Latin America;

. user demand for Internet services;

. capital expenditures and other costs relating to the expansion of
operations of our network;

. the mix of services that we and our competitors sell or offer
without charge and the mix of channels through which those services are
sold or offered without charge;

. pricing changes and new product and service 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
financial condition.

We may not be able to successfully implement our business strategy.

We seek to create a market presence internationally and to gain strength in
Internet connectivity and web hosting core service platforms and other enhanced
service capabilities. Part of our business strategy is to 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. We believe that
we need to move quickly into Latin American markets in order to establish
critical market presence and credibility, though we may not be able to do so. In
addition, we face certain risks inherent in doing business on an international
level. Such risks include:

. competition from government-owned or subsidized businesses,
including telecommunication companies and ISPs;

. unexpected changes in or delays resulting from regulatory,
licensing and foreign investment requirements, tariffs, customs, duties and
other trade barriers;

. difficulties in staffing and managing foreign operations;

. longer payment cycles and problems in collecting accounts
receivable;

. political instability, expropriation, nationalization, war,
insurrection and other political risks;

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. 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 operations.

Our success depends in part upon our ability to continue to create and
enhance an Internet network infrastructure that covers significant regions of
Latin American countries. Our primary strategy for creating the necessary
infrastructure is to acquire ISPs that have network elements, qualified
personnel and/or 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 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. We may not 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 an expanded network
infrastructure. Failure to continue to create a successful infrastructure may
materially adversely affect our business and operating results.

Because we do not charge our Tutopia users fees for Internet access and e-
mail services, we will depend primarily on our ability to generate advertising
revenues to support our Tutopia business. Therefore, if we fail to generate
sufficient advertising revenues, we may not be able to support our Tutopia
operations. We intend to generate Tutopia revenues from a variety of different
arrangements including sales of targeted and untargeted banner advertising,
sponsorships and referrals to third party web sites. Because we have very
limited experience structuring, marketing, and pricing these types of
arrangements, we do not know if we are appropriately structuring, pricing, or
marketing these arrangements, or whether we will perform under these
arrangements to the satisfaction of other parties. The success of some of these
arrangements will depend on our ability to effectively target Tutopia users
based on demographic and other information. We may encounter legal, technical,
and other limitations on this ability, including problems associated with the
accuracy of the information provided by our users, which we do not verify or
update. Under our marketing arrangement with Spinway, a prominent advertising
and navigation banner referred to as the persistent ad box will be displayed on
our users' computer screens at all times while they are connected to the Web.
Some users may find the persistent ad box intrusive and that it interferes with
their use of the service. Competitors may introduce free Internet access that
does not contain similar persistent advertising. If subscribers are not willing
to use our services because of the persistent ad box, or if competitors
introduce free Internet access without persistent advertising, then we may not
be able to retain users of our free Tutopia service and our ability to attract
advertisers may be harmed. In addition, competition for Internet-based
advertising revenues is intense and the amount of available standard banner
advertising space on the Internet is increasing rapidly. These factors are
causing Internet advertising rates to decline, and it is possible that rates
will continue to decline in the future. Our competitors may also engage in more
extensive research and development, undertake more far-reaching marketing
campaigns, adopt more aggressive pricing policies and make more attractive
offers to existing and potential employees, strategic partners, advertisers and
Web publishers. Further, there are no widely accepted standards for measuring
the effectiveness of advertising on the Internet. Therefore, the demand and
market acceptance for this type of advertising is uncertain. If the industry
does not develop standard measurements to support and promote online service and
Internet advertising, existing advertisers may not maintain their current levels
of spending for this type of advertising and prospective advertisers may be
reluctant to advertise on the Internet. Some new users use the Internet only as
a novelty and do not become consistent users of Internet services and,
therefore, may be less likely to continue using our service. If we are not able
to demonstrate to our advertisers that our registered Tutopia users are actively
using our service, advertisers may choose not to advertise with us or may be
unwilling to pay our advertising rates, and our advertising revenues could be
materially and adversely affected. In light of all of these factors, we cannot
assure you that we will be able to attract sufficient advertising revenues to
support our operations.

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We face certain risks associated with our acquisitions and will need to expend
significant time and resources to integrate acquired ISPs into our company and
manage our growth

The acquisitions of ISPs that we have made present and 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 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. 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.

Our rapid growth has placed a strain on our administrative, operational and
financial resources and has increased demands on our systems and controls. We
have completed over 20 investments in acquisitions of companies during 1999 and
2000. The process of consolidating acquired 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. We cannot assure you that we will be able to
integrate these companies successfully or in a timely manner. In addition, we
cannot assure you that our existing operating and financial control systems and
infrastructure will be adequate to maintain and effectively monitor future
growth. We have limited practical experience related to the process of
consolidating ISPs and therefore can give no assurance that long-term cost
savings and improvements in profitability can or will be realized.

You should not rely on our quarterly operating results as an indication of our
future results because they are subject to significant fluctuations. We may also
fail to meet or exceed the expectations of securities analysts or investors,
causing our stock price to decline.

Our future revenues and results of operations may fluctuate significantly
from quarter to quarter due to various factors, including:

. the start-up nature of our business;

. our acquisition and growth strategy; and

. promotional activities by us and our competitors which could
cause heavier Internet usage in some periods.

Accordingly, you should not rely on quarter to quarter comparisons of our
results of operations as an indication of our future performance. In addition,
if our results of operations in future periods are below the expectations of
securities analysts or investors, the trading price of our common stock could
decline substantially.

We may need additional financing, which we may not be able to obtain

We must continue to 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 or make other capital investments as dictated by
subscriber demand or strategic considerations. We must spend significant amounts
of money for, among other things, leased telecommunications facilities,
compensation expenses and marketing. In addition, we expect to spend significant
amounts of money on new equipment to maintain the high speed and reliability of
our Internet

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access and enhanced value-added services. We also will be required to spend
significant amounts to fund growth, continuing operating losses and
unanticipated developments or competitive pressures.

Presently, in addition to Internet revenues, we derive funds from the
contingent earn-out payments from the sale of assets of our discontinued
operations. In connection with the sale of E.D.& F. Man International, Inc., the
amount of future contingent earn-out payments, if any, will depend on the future
profitability of that business. The percentage earn-out decreases over the
remainder of the payment period, which ends on December 31, 2001. In connection
with the IFX Ltd. sale, the amount of the contingent 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 "Management's Discussion and
Analysis of Financial Condition and Results of Operations." We can give no
assurance that such payments will continue at their current levels.

We may not be able to compete effectively against our competitors, many of
whom have greater experience in providing Internet services or have greater
financial resources

The market for Internet connectivity and enhanced value-added services for
small and medium sized businesses in Latin America 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 and services market for small and medium sized
businesses 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 begun to pursue the free ISP model in which users do not pay for
connectivity service, other companies which pursue this model still pose a
significant risk to us.

In some cases, we will be forced to compete with 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 may not be able to purchase such
services at a reasonable price or at all. In addition, foreign competitors may
possess a better 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 and other services 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 small and medium sized business customers reduced
communications costs in connection with ISP services, reducing the overall cost
of their Internet access and enhanced value-added services 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.

Concerns about computer viruses, confidentiality of information on the
Internet and the security of electronic commerce transactions may reduce the use
of our network and impede our growth

Although we have updated 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. Computer viruses may cause our systems to incur delays
or other service interruptions. In addition, the inadvertent transmission of
computer viruses could expose us to a material risk of loss or litigation and
possible liability.

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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. Any of these problems
could materially adversely affect our business, financial condition and results
of operations.

Our subscribers may discontinue their service at the end of any month for any
reason

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 revenues from providing Internet services will depend on our ability
to attract and retain such subscribers.

We rely on third parties to stimulate demand for our products and services

We rely on third parties to stimulate demand for our products and services.
These third parties 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 third parties may discontinue their relationships with
us. The loss of these third parties, the failure of them 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 materially adversely affect our operating results.

We will not be able to attract users if we do not continually enhance and
develop the features of our network and our software

The market for Internet access and other Internet 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. In addition, our future success also depends on our
ability to obtain the equipment necessary to expand our network or maintain the
quality of our network. We may be unsuccessful in accomplishing any of these
tasks and new technologies or enhancements may not 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. Our failure to maintain the most current and up to date equipment and
software for Internet connectivity and network infrastructure could impede our
ability to obtain new subscribers, which could materially adversely affect our
business, financial condition or results of operations.

Our business growth will suffer if key personnel leave IFX and if we are
unable to hire and retain other key personnel

Competition for qualified employees and personnel in the Internet services
industry is intense and there are a limited number of people with knowledge of
and experience in the Internet service industry, especially in the Latin
American market. The process of locating personnel with the combination of
skills and attributes required to carry out our strategies may often be lengthy.
Our success depends to a significant degree on our ability to attract and retain
qualified executive, 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 any of these personnel, or the inability to attract
additional qualified personnel, could have a material adverse effect on our
business, financial condition or results of operations.

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If third party suppliers and telecommunications providers are unable to meet
our needs, we may not have adequate capacity to maintain or grow our business

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. In addition, 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 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.

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
materially adversely affect 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.

Our operating results may fluctuate due to seasonal factors

Use of our services may be subject to seasonal fluctuations, which may
cause fluctuations in our revenues and operating results. Some fluctuations may
be related to:

. it is summertime in Latin America at that time;

. many users in our target markets take extended vacations during
these months; and

. schools and universities are generally closed during this time.

Challenges of Growth By Acquisitions.

IFX may depend in part on its ability to identify and acquire additional
Internet companies that meet its acquisition criteria. IFX seeks to create a
market presence internationally, to gain strength in Internet connectivity and
web hosting core service platforms, and to add additional enhanced service
capabilities. IFX faces and may continue to face significant competition for
appropriate acquisition candidates. IFX may compete with other communications or
Internet companies with similar acquisition strategies, many of which may be
larger, have greater financial and other resources and be owned or partially-
owned by foreign governments. Competition for independent ISPs is based on a
number of factors, including price, terms and conditions, size and access to
capital, ability to offer cash, stock or other forms of consideration and other
matters. IFX can give no assurance that it will be able to identify suitable
ISPs or be able to complete any acquisitions of or investments in those targeted
ISPs on acceptable terms and conditions.

Once consummated, these acquisitions will continue to present certain
risks, including:

. the difficulty of integrating the acquired operations, technology
and personnel;

. the possible inability of IFX's management to maximize its
financial and strategic position by the successful incorporation of
acquired technology and products into its service offerings and to maintain
uniform standards, controls, procedures and policies;

. the possible acquisition of substantial contingent or undisclosed
liabilities;

. the risks of entering markets in which it has little or no direct
prior experience; and

. the potential impairment of relationships with employees and
customers as a result of changes in management or other business
operations.

IFX may not be successful in overcoming these risks or any other problems
encountered in connection with future acquisitions. In addition, future
acquisitions could materially adversely affect its operating results as a result
of dilutive issuances of equity securities, the incurrence of additional debt or
the amortization of

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expenses related to acquired customer bases, goodwill or other intangible
assets. Further, IFX's ability to complete transactions with ISPs may require
significant additional financial resources.

Risks Associated With an Internet Business.

IFX is new to the Internet service provider business and, therefore, lacks
operating history and experience in the industry. In addition, IFX's business is
vulnerable to risks associated with the Internet business in general, many of
which are significant. For example, the laws relating to the regulation and
liability of Internet access providers in relation to information carried or
disseminated is undergoing a process of development in many countries. Legal
decisions, laws, regulations and other activities regarding regulation and
content liability may significantly affect the development and profitability of
companies offering on-line and Internet access services. Although IFX will
implement certain network security measures, such as limiting physical and
network access to its routers, the network's infrastructure is potentially
vulnerable to computer viruses, break-ins and similar disruptive problems caused
by its customers or other Internet users, which could lead to interruptions of,
delays in or cessation of service to its customers. Furthermore, inappropriate
use of the Internet by third parties could also potentially jeopardize the
security of confidential information stored in the computer systems of IFX's
customers and, in turn, could deter potential customers and adversely affect
existing customer relationships. IFX relies on local telephone companies and
other companies to provide data communications capacity via local
telecommunications lines. IFX may experience disruptions or capacity constraints
in these telecommunications services and may have no means of replacing these
services on a timely basis, or at all.

Risks Associated with the Free Internet Service Model.

IFX's new subsidiary, Tutopia.com, Inc., provides free basic-level Internet
access in Latin America. The free access model is unproven and a number of other
businesses in the United States offering free Internet access have failed. Since
Tutopia.com only began offering Internet access in February 2000, we have a
limited operating history, which will make it difficult for you to evaluate our
performance. In addition, the free Internet access in Latin America could have a
material impact on the Company's financials, because paying users may shift to
free access.

These risks are particularly acute in our Tutopia.com business model
because, unlike our traditional Internet access fees, we do not have a
measurable and predictable revenue stream from user access fees. If we are not
able to successfully address these risks, we will not be able to grow our
business, compete effectively or achieve profitability. These factors could
cause our stock price to fall significantly.

Because our Tutopia.com subsidiary does not charge our users any fees for
our Internet access and e-mail services, we will depend primarily on our ability
to generate advertising revenues. Accordingly, if Tutopia.com fails to generate
sufficient advertising revenues, we may not be able to support our operations.

We generate, and intend to generate, revenues from a variety of different
arrangements including sales of targeted and untargeted banner advertising,
sponsorships and referrals to third party Web-sites. Tutopia.com has limited
experience marketing and pricing these types of arrangements, and have limited
actual experience with respect to the performance of such arrangements. As such,
we do not know if we are appropriately pricing, marketing or structuring these
arrangements, or whether we will perform under these arrangements to the
satisfaction of the other parties. Tutopia.com's failure to appropriately price,
market or structure these arrangements could impact our ability to enter into
and perform under these arrangements, or to renew these arrangements on similar
or acceptable terms. In addition, the success of some of these arrangements will
depend on our ability to effectively target users based on demographic and other
information. Tutopia.com may encounter legal, technical, and other limitations
on this ability, including problems associated with the accuracy of the
information provided by our users, which we do not corroborate. In light of
these factors, we cannot assure you that Tutopia.com will be able to attract
sufficient advertising revenues to support our operations.

In addition, competition for Internet-based advertising revenues is intense
and the amount of available standard banner advertising space on the Internet is
increasing at a significant rate. These factors are causing Internet advertising
rates to decline, and it is possible that rates will continue to decline in the
future.

Many of Tutopia.com's advertising competitors have longer operating
histories, greater name recognition, larger user bases, significantly greater
financial, technical, sales and marketing resources and more established
relationships with advertisers than we do. These advantages may allow such
competitors to respond more quickly than we can to new or emerging technologies
and changes in advertiser requirements. Tutopia.com must also compete with
television, radio, cable and print media for a share of advertisers' total

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advertising budgets. Advertisers may be reluctant to devote a significant
portion of their advertising budget to Internet advertising if they perceive the
Internet to be a limited or ineffective advertising medium.

Advertising Revenues Will Suffer If We Are Unable To Demonstrate That Our
Registered Users Are Actively Using Our Service.

If Tutopia.com is not able to demonstrate to our advertisers that our
registered users are actively using our service, advertisers may choose not to
advertise with us and our advertising revenues could be materially and adversely
affected. Also, some new users use the Internet only as a novelty and do not
become consistent users of Internet services and, therefore, may be less likely
to continue using our service.

Risk of Internet Technology Trends and Evolving Industry Standards.

IFX's products and services target users of the Internet. The number of
Internet users has experienced rapid growth. The market for Internet access and
related services is relatively new and characterized by rapidly changing
technology, evolving industry standards, changes in customer needs and frequent
new product and service introductions. IFX's future success will depend, in
part, on its ability to effectively use leading technologies, to continue to
develop and improve its technical expertise, to enhance its current services, to
develop new products and services that meet changing customer needs, and to
influence and respond to emerging industry standards and other technological
changes on a timely and cost-effective basis. IFX can give no assurance that it
will be successful in accomplishing any of these tasks or that such new
technologies or enhancements will achieve market acceptance. IFX believes that
its ability to compete successfully also depends upon the continued
compatibility and interoperability of its services with products and
architectures offered by various third party vendors. IFX can give no assurance
that it will be able to effectively address the compatibility and
interoperability issues raised by technological changes or new industry
standards. In addition, IFX can give no assurance that services or technologies
developed by others will not render its services or technology uncompetitive or
obsolete. If the market for Internet access services fails to develop, develops
more slowly than expected, or becomes saturated with competitors, or if the
Internet access and services offered by IFX through its ISPs is not broadly
accepted, IFX's business, operating results and financial condition will be
materially adversely affected.

In addition, critical issues concerning the commercial use of the Internet
remain unresolved and may impact the growth of Internet use, especially in IFX's
target business market. Despite growing interest in the many commercial uses of
the Internet, many businesses have been deterred from purchasing Internet access
services for a number of reasons, including:

. inconsistent quality of service;

. lack of availability of cost-effective, high-speed options;

. a limited number of local access points for corporate users;

. inability to integrate business applications on the Internet;

. the need to deal with multiple and frequently incompatible
vendors;

. inadequate protection of the confidentiality of stored data and
information moving across the Internet; and

. a lack of tools to simplify Internet access and use.

In particular, numerous published reports have indicated that a perceived
lack of security of commercial data, such as credit card numbers, has
significantly impeded commercial use of the Internet to date. There can be no
assurance that encryption or other technologies will be developed that
satisfactorily address these security concerns. Published reports have also
indicated that capacity constraints caused by growth in the use of the Internet
may, unless resolved, impede further development of the Internet to the extent
that users experience delays, transmission errors and other difficulties. The
adoption of the Internet for commerce and communications, particularly by those
individuals and enterprises which have historically relied upon alternative
means of commerce and communication, generally requires the understanding and
acceptance of a new way of conducting business and exchanging information. In
particular, enterprises that have already invested substantial resources in
other means of conducting commerce and exchanging information may be
particularly reluctant or slow to adopt a new strategy that may make their
existing personnel and infrastructure obsolete. The failure of the market for
business-related Internet solutions to continue to develop would adversely
impact IFX's business, financial condition and result of operations.

Ability to Manage its Operations and its Financial Resources.

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Our rapid growth has placed a strain on its administrative, operational and
financial resources and has increased demands on its systems and controls. The
Company plans to continue to expand the capacity of existing points-of-presence
as customer-driven demand dictates. The Company anticipates that its Internet
Service Provider may require continued enhancements to and expansion of its
network. The process of consolidating the businesses and implementing the
strategic integration of these acquired businesses with its existing business
may take a significant amount of time. It may also place additional strain on
the Company's resources and could subject it to additional expenses. The Company
cannot assure you that it will be able to integrate these companies successfully
or in a timely manner. In addition, the Company cannot assure you that its
existing operating and financial control systems and infrastructure will be
adequate to maintain and effectively monitor future growth.

The following risks, associated with its growth, could have a material
adverse effect on its business, results of operations and financial condition:

. its inability to continue to upgrade its networking systems or
its operating and financial control systems;

. its inability to recruit and hire necessary personnel or to
successfully integrate new personnel into its operations;

. its inability to successfully integrate the operations of
acquired companies or to manage its growth effectively; or;

. its inability to adequately respond to the emergence of
unexpected expansion difficulties.

Year 2000 Compliance.

The commonly referred to "Year 2000" problem relates to whether computer
systems will properly recognize date sensitive information when the year changes
from 1999 to 2000. Systems that do not properly recognize such information will
generate wrong data and could fail. IFX has identified two main areas of Year
2000 risk:

1. Internal computer systems or embedded chips could be disrupted or
fail, causing an interruption or decrease in productivity in our operations; and

2. Computer systems or embedded chips of third parties including, without
limitation, financial institutions, suppliers, vendors, landlords, customers,
international suppliers of telecommunications services and others, could be
disrupted or fail, causing an interruption or decrease in our ability to
continue our operations. This risk is particularly acute in Latin America, where
many older computer systems are still in use.

Prior to entering the year 2000, the Company developed plans for
implementing, testing and completing any necessary modifications to our key
computer systems and equipment with embedded chips to help ensure that they were
Year 2000 compliant. The cost of addressing Year 2000 issues has been minor to
date, as most of our PC's, laptops, servers, routers and other computer
equipment were found to be Year 2000 compliant. In addition, the Company
identified and communicated with third-party entities with which we transact
significant business, including critical vendors and financial institutions, to
determine their Year 2000 status and any probable impact on us. Our inquiries
did not reveal any significant Year 2000 noncompliance issues affecting our
material third parties.

Now that we have entered the year 2000, we have tested our key computer
systems and equipment and have confirmed that they appear to be Year 2000
compliant. To date, the Company has not experienced any material Year 2000
related disruptions or failures of our systems or services, nor have we been
notified of any disruptions or failures in the systems of any of our third
parties. There is an ongoing risk that Year 2000 related problems could still
occur and we will continue to monitor and evaluate these risks; however, we
believe that the Year 2000 problem should not pose any significant operational
problems for us.

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Risks Related to Our Markets and the Industry

If the market for commercial use of the Internet does not develop, we may not
be able to grow our business

We expect to generate a significant amount of our revenues by providing
Internet services to small and medium sized businesses in Latin America. If the
Internet is not widely accepted by small and medium sized business in Latin
America, we may be unable to grow our business. 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 in Latin America 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;

. inability to integrate business applications on the Internet; and

. inadequate protection of the confidentiality of stored data and
information moving across the Internet.

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.

In addition, our business is focused on Latin American markets, where
Internet use is relatively low. If the market in Latin America for Internet
services for consumers does not develop, we may not be able to increase our
revenues. Obstacles to the development of Internet use by consumers in Latin
America include the low rates of personal computer ownership and usage,
relatively high costs of Internet access (although Tutopia and certain other
ISPs, provide free access), high costs of phone lines, lack of a well developed
telecommunications infrastructure, difficulty of use or lack of experience in
using the Internet and poor or inconsistent quality of service. Our business,
financial condition and results of operation will be materially adversely
affected if Internet usage in Latin America by consumers does not continue to
grow or grows more slowly than we anticipate.

An underdeveloped telecommunications infrastructure could limit the growth of
our Internet operations in Latin America and adversely affect our business

Access to the Internet requires a relatively advanced telecommunications
infrastructure. The telecommunications infrastructure in many parts of Latin
America is not as well-developed as in the United States or Europe. The quality
and continued development of the telecommunications infrastructure in Latin
America will have a substantial impact on our ability to deliver our services
and on the market acceptance of the Internet in Latin America in general. If
further improvements to the Latin American telecommunications infrastructure are
not made, the Internet will not gain broad market acceptance in Latin America.
If access to the Internet in Latin America does not continue to grow or grows
more slowly than we anticipate, our business, financial condition and results of
operations will be materially and adversely affected.

Our pan-regional approach to content delivery may not be appealing to our
users which may have an adverse effect on our ability to attract advertisers

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Our target markets are made up of a number of diverse regions that differ
historically, culturally, economically and politically. We generally use a pan-
regional approach to advertisements. Users, however, may prefer content and
community features which are specifically created for a local audience using a
strictly localized approach over our pan-regional approach. If users do not find
the pan-regional content on our network appealing, they may decrease in number
and advertisers will find our network an unattractive medium on which to
advertise.

Currency fluctuations and exchange control regulations in Latin America may
adversely affect our revenues

Our reporting currency is the U.S. dollar. In most cases, however,
customers in Latin America are billed in local currencies. In addition, the
majority of our assets are located in Latin America. We anticipate that a
significant percentage of our future revenues and operating expenses will
continue to be generated from operations in Latin America. Consequently, a
substantial portion of our revenues, 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 the U.S. dollar. 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. The
occurrence of any of these factors may materially adversely affect our business,
results of operations or financial condition.

High cost of Internet use may limit the growth of the Internet and slow our
growth

Unlike most telecommunications companies in the United States,
telecommunications companies in Latin America generally do not provide customers
with unlimited local telephone service for a fixed fee. Instead, fees are
charged based on the length of time that customers use telephone lines. In
addition, rates for use of local telephone services could increase. Because
customers are charged based on time, and especially if rates increase,
subscribers may be deterred from using the Internet or may reduce their use of
the Internet which could cause us to lose subscription and advertising revenues.

Economic, social and political conditions in Latin America may cause
volatility in our operations

We have derived and expect to continue to derive substantially all of our
revenues from the Latin American markets. Economic, social and political
conditions in some Latin American countries are volatile and may cause our
operations to fluctuate. We may not be able to sustain our expected growth in
light of this volatility, which could have an adverse affect on our stock price.
Volatility in Latin America has been caused by:

. significant governmental influence over many aspects of
economies;

. high rates of interest, unemployment and inflation;

. currency fluctuations;

. political instability;

. unexpected changes in regulatory requirements;

. social unrest;

. slow or negative growth in local economies;

. imposition of trade barriers between countries in Latin America
between Latin America and non-Latin American countries; and

. wage and price controls.

Legal and Regulatory Risks

We face potentially burdensome government regulations and legal uncertainties
affecting the Internet which could adversely affect our business

Because we have employees, property and business operations in the United
States and throughout Latin America we are subject to the laws and court systems
of many jurisdictions. The laws applicable to Internet access providers in many
of these jurisdictions are undergoing significant development. These laws cover
issues such as content, user pricing, privacy, libel, intellectual property
protection and infringement, and technology export and other controls and could
significantly affect the development and profitability of

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our services. These laws could require us to incur costs to comply with them or
to incur new liability. We may face increased international litigation, which is
often expensive, time consuming and distracting. In addition, 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. For example, 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 change. In addition, 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. The laws or administrative practice relating to telecommunications,
taxation, foreign exchange or other matters of countries within which we may
operate may change in a manner adverse to our business. Also, we may not able to
obtain the permits and operating licenses required to conduct business and offer
Internet services in Latin American markets. Any of the foregoing developments
could materially adversely affect our business, results of operations and
financial condition.

Our brand names are difficult to protect and may infringe on the intellectual
property rights of third parties

We are aware of other companies claiming to have rights to use our Unete
brand name. In particular, one company has notified us that it believes our use
of the Unete name infringes upon its trademark. The users of these or similar
marks may be found to have senior rights if they were ever to assert a claim
against us for trademark infringement. If a lawsuit is instituted against us, it
could result in substantial litigation expenses and we may be forced to cease
using the mark and to pay damages.

Risks Related to our Stock

The market price of our common stock, like the market prices of stock of other
Internet and technology companies, may fluctuate widely and rapidly.

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 in the markets in which we operate.

In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
securities of technology companies, particularly Internet companies, and that
often have been unrelated to the operating performance of such companies. As a
result, investors in our common stock may experience a decrease in the value of
their common stock regardless of our operating performance or prospects.

If our stock price is volatile, we may become subject to securities litigation
which is expensive and could result in a diversion of resources.

In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has often
been brought against that company. Many companies in our industry have been
subject to this type of litigation in the past. We may also become involved in
this type of litigation. Litigation is often expensive and diverts management's
attention and resources, which could have a material adverse effect upon our
business, financial condition and results of operations.

Our charter documents and Delaware law may inhibit a takeover that
stockholders may consider favorable

Provisions in our charter and bylaws may have the effect of delaying or
preventing a change of control or changes in our management that stockholders
consider favorable or beneficial. If a change of control or change in management
is delayed or prevented, the market price of our common stock could suffer.

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<PAGE>

There is a risk of substantial future dilution as a result of our obligation
to issue additional shares in the future

In November 1999, we entered into an agreement with International
Technology Investments, LC ("International Technology") to provide Internet
services and to make investments in existing ISPs and related businesses,
primarily in Latin America and other international markets. In connection with
the agreement, we granted to International Technology an option to purchase up
to 5,500,000 shares of our common stock for $2.00 per share. As of the date of
this filing, International Technology had exercised all of this options for
shares of common stock, and currently owns approximately 46% of our outstanding
common stock. The interests of our stockholders, including those investors
purchasing shares of our common stock being registered hereunder, could be
substantially diluted by the exercise of this purchase option.

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<PAGE>

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