UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest reported): December 16, 2004
EUROWEB INTERNATIONAL CORP.
(Exact name of registrant as specified in charter)
Delaware 1-1200 13-3696015
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1138 Budapest, Vaci ut 141. Hungary
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: +36-1-8897000
Registrant's telephone number, including area code: (604) 685-8355
Copies to:
Gregory Sichenzia, Esq.
Stephen M. Fleming, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018
Phone: (212) 930-9700
Fax: (212) 930-9725
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instructions A.2. below):
/_/ Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
/_/ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
/_/ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
/_/ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 1.01 Entry Into a Material Definitive Agreement
Item 2.01 Completion of Acquisition or Disposition of Assets
On November 29, 2004, Euroweb International Corp. (the "Company") entered into a
Shareholding Interest Sale and Purchase and Loan Assignment Agreement (the
"Agreement") with Globix Communications Limited, a company registered under the
laws of the Isle of Man ("Globix"). Pursuant to the Agreement, the Company sold
and, Globix purchased, 100% of the Company's interest in Euroweb Czech Republic,
spol ("Euroweb Czech"), a wholly-owned subsidiary of the Company. In addition,
the Company assigned to Globix two loans payable by Euroweb Czech to the Company
in the aggregate principal amount of US$400,000. The purchase price paid to the
Company is US$500,000 in cash. The closing of the sale of Euroweb Czech occurred
on December 16, 2004. The Company accounted over US$400,000 profit on the sale
of Euroweb Czech. No material relationship exists between the Globix and the
Company and/or its affiliates, directors, officers or any associate of an
officer or director.
Euroweb Czech provides communications solutions using Internet technologies to
business located on the Czech Republic.
Item 9.01 Financial Statements and Exhibits
(a) Financial Information of Business Acquired
Not applicable.
(b) Proforma Financial Information
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 2004 (attached hereto following the signature page)
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Nine Months ended September 30, 2004 (attached
hereto following the signature page)
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Nine Months ended September 30, 2003 (attached
hereto following the signature page)
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year ended December 31, 2003 (attached hereto
following the signature page)
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year ended December 31, 2002 (attached hereto
following the signature page)
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(c) Exhibits
Exhibit No. Description
10.1 Shareholding Interest Sale and Purchase and Loan
Assignment Agreement by and between Euroweb
International Corp. and ETEL Group Limited
(incorporated by reference to the Form 8-K Current
Report filed with the Securities and Exchange
Commission on December 3, 2003)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EUROWEB INTERNATIONAL CORPORATION
By:/s/ CSABA TORO
---------------
Name: Csaba Toro
Title: Chief Executive Officer
Date: December 17, 2004
Budapest, Hungary
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Unaudited Pro Forma Financial Information
The unaudited pro forma condensed consolidated financial information is filed as
part of this Current Report on Form 8-K to reflect the disposition by Euroweb
International Corporation (the "Company") of its Czech subsidiary Euroweb Czech
Republic s.r.o ("Euroweb Czech"). On December 16, 2004, the Company closed the
sale of 100% of the outstanding stock of its subsidiary in Czech Republic for
$500,000 in cash to Globix Communications Limited (the `Buyer'). The Company has
also effectively forgiven $400,000 of loans receivable from Euroweb Czech as a
part of this transaction.
The unaudited pro forma condensed consolidated financial information reflects
the pro forma impact on the Company's financial position and results of
operations of the sale of Euroweb Czech for the historical periods presented.
The unaudited condensed consolidated balance sheet is presented as of September
30, 2004, reflecting the historical financial position of the Company with pro
forma adjustments to reflect the disposition of Euroweb Czech as if the sale was
consummated on that date. The unaudited pro forma condensed consolidated
statements of operations are presented for the nine months ended September 30,
2004, 2003 and the year ended December 31, 2003, 2002 reflecting the historical
results of operations with pro forma adjustments to reflect the disposition of
Euroweb Czech as if the sale was consummated at the beginning of each period
presented. Certain management assumptions and adjustments are described in the
accompanying notes to the unaudited pro forma condensed consolidated financial
information.
The unaudited pro forma condensed consolidated financial information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have actually occurred if
the disposition had been consummated as of the dates indicated, nor are they
necessarily indicative of future operating results or financial position.
Euroweb Czech was a wholly owned subsidiary of the Company. The company believes
that the sale of Euroweb Czech meets the criteria for presentation as a
discontinued operation under the provisions of Financial Accounting Standards
Board No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets".
Therefore, the historical results of Euroweb Czech will be reported in the
Company's consolidated financial statements as a discontinued operation.
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Euroweb International Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2004
Pro Forma
Historical adjustment Pro forma
------------ ----------- -----------
ASSETS
Current Assets
Cash and cash equivalents $ 4,607,608 449,159 (1) $ 5,056,767
Trade accounts receivable, net 3,166,749 (109,642) (2) 3,057,107
Related party receivables 1,439,565 1,439,565
Current portion of note receivable 21,771 21,771
Prepaid and other current assets 2,315,421 (30,848) (2) 2,284,573
------------ ----------- --- -----------
Total current assets 11,551,114 308,669 11,859,783
Property and equipment, net 7,057,793 (32,181) (2) 7,025,612
Assets under construction 435,023 - 435,023
Intangibles - customer contracts 2,167,015 - 2,167,015
Goodwill 5,943,821 - 5,943,821
------------ ----------- -----------
Total assets $27,154,766 276,488 $27,431,254
============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $4,079,193 (70,638) (2) $4,008,555
Related party payables 928,955 - 928,955
Related party loan payable - short term portion 488,729 - 488,729
Overdrafts and current portion of bank loans 435,637 - 435,637
Current portion of notes payable 1,053,975 - 1,053,975
Other current liabilities 715,039 (87,535) (2) 627,504
Accrued expenses 2,157,728 4,591 (2) 2,162,319
(3)
Deferred IRU revenue 46,000 46,000
Deferred other revenue 1,116,985 (11,995) (2) 1,104,990
------------ ----------- --- -----------
Total current liabilities 11,022,241 (165,577) 10,856,664
-----------
Non-current portion of deferred IRU revenue 808,834 - 808,834
Non-current portion of related party loan payable 733,093 - 733,093
Non-current portion of bank loans 711,111 - 711,111
Non-current portion of notes payable 181,712 - 181,712
Non-current portion of lease obligations 144,605 - 144,605
------------ -----------
Total liabilities 13,601,596 (165,577) 13,436,019
Stockholders' Equity
Preferred stock, $.001 par value - Authorized 5,000,000
shares;
no shares issued or outstanding - -
Common stock, $.001 par value - Authorized 35,000,000
shares;
Issued and outstanding 5,342,533 and 4,665,332 24,807 - 24,807
shares respectively
Additional paid-in capital 50,755,993 - 50,755,993
Accumulated deficit (36,066,607) 405,410 (4) (35,661,197)
Accumulated other comprehensive losses: (45,611) 36,655 (8,956)
Treasury stock - 175,490 common shares, at cost (1,115,412) - (1,115,412)
------------ ----------- -----------
Total stockholders' equity 13,553,170 442,065 13,995,235
------------ ----------- -----------
Total liabilities and stockholders' equity $27,154,766 $276,488 $27,431,254
============ =========== ===========
See notes to unaudited pro forma condensed consolidated balance sheet
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Euroweb International Corporation
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
1) Adjustment to reflect the cash proceeds received upon the sale of Euroweb
Czech of $ 500,001 and the elimination of $ 50,842 of cash at Euroweb Czech
2) Adjustment to eliminate assets sold and liabilities assumed upon the sale
of Euroweb Czech
3) Pro forma adjustment to reflect the accrual of the estimated direct
transaction costs of $10,000 to be paid in connection with the sale of
Euroweb Czech
4) Adjustment reflects the estimated pro forma gain on the sale of the Euroweb
Czech net of the estimated tax liability (expected to be zero). The gain is
net of $400,000 in forgiven loans and release of accumulated deficit. The
actual gain may differ as a result of operating results of the Euroweb
Czech through the measurement date, disposal and other costs.
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Euroweb International Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine months ended September 30, 2004
Pro Forma
Historical Adjustments Pro Forma
------------ ----------- -----------
Revenues
Third party revenues $19,631,983 (736,844) (2) 18,895,139
Related party revenues 5,533,618 - 5,533,618
------------ ----------- -----------
Total Revenues 25,165,601 (736,844) 24,428,757
Cost of revenues
Third party cost of revenues 11,606,917 (461,368) (2) 11,145,549
Related party cost of revenues 4,454,898 - 4,454,898
------------ ----------- -----------
Total Cost of revenues 16,061,815 (461,368) 15,600,447
------------ ----------- -----------
Gross profit 9,103,786 (275,476) 8,828,310
Operating expenses
Compensation and related costs 3,306,058 (181,216) (3) 3,124,842
Consulting and professional fees 2,158,069 (13,573) (4) 2,144,496
Other selling, general and administrative expenses 2,836,855 (97,219) (5) 2,739,636
Depreciation and amortization 1,466,329 (23,726) (7) 1,442,603
------------ ----------- -----------
Total operating expenses 9,767,311 (315,734) 9,451,577
Loss from operations (663,525) 40,258 (623,267)
Net loss per share, basic and diluted (.13) (.13)
Weighted average number of shares outstanding, basic and 4,948,753 (8) 4,948,753
diluted
See notes to unaudited pro forma condensed consolidated statements of operations
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Euroweb International Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine months ended September 30, 2003
Historical Pro Forma
Restated Adjustments Pro Forma
1)
------------ ----------- -----------
Revenues
Third party revenues $13,191,279 (894,315) (2) 12,296,964
Related party revenues 3,990,294 - 3,990,294
------------ ----------- -----------
Total Revenues 17,181,573 (894,315) 16,287,258
Cost of revenues
Third party cost of revenues 6,764,310 (513,473) (2) 6,250,837
Related party cost of revenues 4,126,802 - 4,126,802
------------ ----------- -----------
Total Cost of revenues 10,891,112 (513,473) 10,377,639
------------ ----------- -----------
Gross profit 6,290,461 (380,842) 5,909,619
Operating expenses
Compensation and related costs 2,418,226 (264,877) (3) 2,153,349
Consulting and professional fees 1,299,616 (19,473) (4) 1,280,143
Other selling, general and administrative expenses 1,963,853 (182,098) (5) 1,781,755
Depreciation and amortization 1,301,017 (62,210) (7) 1,238,807
------------ ----------- -----------
Total operating expenses 6,982,712 (528,658) 6,454,054
Loss from operations (692,251) 147,816 (544,435)
Loss from operations per share, basic and diluted (.15) (.12)
Weighted average number of shares outstanding, basic and 4,665,332 (8) 4,665,332
diluted
See notes to unaudited pro forma condensed consolidated statements of operations
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Euroweb International Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2003
Historical
Restated Pro Forma
(Note 1) Adjustment Pro Forma
------------ ----------- -----------
Revenues
Third party revenues $ 17,540,011 (1,163,662) (2) $ 16,376,349
Related party revenues 5,740,709 5,740,709
------------ ----------- -----------
-
Total Revenues 23,280,720 (1,163,662) 22,117,058
Cost of revenues
Third party cost of revenues 8,827,513 (671,677) (2) 8,155,836
Related party cost of revenues 5,796,350 5,796,350
------------ ----------- -----------
-
Total Cost of revenues 14,623,863 (671,677) 13,952,186
------------ ----------- -----------
Gross profit 8,656,857 (491,985) 8,164,872
-----------
Operating expenses
Compensation and related costs 3,173,720 (358,852) (3) 2,814,868
Severance to officers - - -
Consulting, professional and directors fees 2,135,056 (60,491) (4) 2,074,565
Other selling, general and administrative
expenses 2,723,011 (194,330) (5) 2,528,681
Goodwill impairment 980,538 (92,581) (6) 887,957
Impairment of intangibles 100,364 - 100,364
Depreciation and amortization 1,727,796 (91,663) (7) 1,636,133
------------ -----------
Total operating expenses 10,840,485 (797,917) 10,042,568
------------ ----------- -----------
Loss from operations (2,183,628) 305,932 1,877,696)
Loss from operations per share, basic (0.47) (0.40)
Weighted average number of shares outstanding 4,665,332 (8) 4,665,332
See notes to unaudited pro forma condensed consolidated statements of operations
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Euroweb International Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2002
Historical Pro Forma
Restated Adjustment Pro Forma
(Note 1)
------------ ----------- -----------
Revenues
Third party revenues $ 14,495,646 (1,415,541) (2) $ 13,080,105
Related party revenues 4,981,774 4,981,774
------------ ----------- -----------
-
Total Revenues 19,477,420 (1,415,541) 18,061,879
Cost of revenues
Third party cost of revenues 7,490,713 (713,422) (2) 6,777,291
Related party cost of revenues 4,226,778 4,226,778
------------ ----------- -----------
-
Total Cost of revenues 11,717,491 (713,422) 11,004,069
------------ ----------- -----------
Gross profit 7,759,929 (702,119) 7,057,810
-----------
Operating expenses
Compensation and related costs 3,309,788 (325,450) (3) 2,984,338
Severance to officers 2,020,832 - 2,020,832
Consulting, professional and directors fees 1,558,864 (79,431) (4) 1,479,433
Other selling, general and administrative
expenses 2,846,094 (169,171) (5) 2,676,923
Goodwill impairment 2,930,271 (746,000) (6) 2,184,271
Impairment of intangibles 448,500 - 448,500
Depreciation and amortization 1,702,239 (88,312) (7) 1,613,927
------------ ----------- -----------
Total operating expenses 14,816,588 (1,408,364) 13,408,224
------------ ----------- -----------
Loss from operations (7,056,659) 706,245 (6,350,414)
Loss from operations per share, basic (1.51) (1.36)
Weighted average number of shares outstanding 4,665,332 (8) 4,665,332
See notes to unaudited pro forma condensed consolidated statements of operations
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Euroweb International Corporation
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations
1) On February 12, 2004, the Company entered into a Share Purchase Agreement
with a related party, PanTel Rt. ("Pantel") to acquire the remaining 51% of
Euroweb Hungary. shares that the Company did not already own. Pantel's
majority shareholder is also KPN. As this was a transaction between
entities under common control, the transaction was recorded in a manner
similar to a pooling-of-interest, and accordingly the historical
consolidated financial statements have been restated to include results of
operations of Euroweb Hungary for all periods presented.
2) Adjustment to reflect the elimination of the Euroweb Czech revenues and
costs of goods sold,
3) Adjustment to reflect the elimination of salary and related costs related
to the Euroweb Czech operation.
4) Adjustment to reflect the elimination of consulting, professional and
directors fees costs related to the Euroweb Czech operation.
5) Adjustment to reflect the elimination of selling, general and
administrative costs related to the Euroweb Czech operation.
6) Adjustment to reflect the elimination of goodwill impairment attributed to
Euroweb Czech
7) Adjustment to reflect the elimination of depreciation charge attributed to
Euroweb Czech
8) The change in the weighted average number of shares outstanding from
December 31, 2003 to September 30, 8) 2004 relates to the issuance of
677,201 common shares in connection with the acquisition of Elender Rt. in
June 2004.
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