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): April 15, 2005
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
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 April 15, 2005, Euroweb International Corp. (the "Company") entered into a
Securities Purchase Contract (the "Agreement") with DanubiaTel, a.s., a company
registered under the laws of Slovakia ("DanubiaTel"). Pursuant to the Agreement,
the Company sold and, DanubiaTel has agreed to purchase, 100% of the Company's
interest in Euroweb Slovakia a.s. ("Euroweb Slovakia"), a wholly-owned
subsidiary of the Company. The purchase price is USD $2,700,000 in cash (the
"Purchase Price"). The Purchase Price was settled in two installments in April
2005 as follows:
(1) $1,770,000 was transferred by DanubiaTel to the Company on April 15,
2005; and
(2) $930,000 was paid by Euroweb Slovakia as loan to the Company, which
was taken over by DanubiaTel pursuant to the Contract on Taking Over
Debt from Euroweb Slovakia, which debt was cancelled pursuant to the
Contract on Receivables Setting-off dated April 15, 2005.
As a result of these transactions, the Company expects to record over $1,800,000
profit.
The closing of the sale of Euroweb Slovakia occurred on April 15, 2005. No
material relationship exists between the DanubiaTel and the Company and/or its
affiliates, directors, officers or any associate of an officer or director.
Euroweb Slovakia provides communications solutions using Internet technologies
to businesses and private individuals located in Slovakia.
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
December 31, 2004 (attached hereto following the signature page)
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the Year ended December 31, 2004 (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)
(c) Exhibits
Exhibit No. Description
10.1 Securities Purchase Contract by and between Euroweb International
Corp. and DanubiaTel a.s. dated April 15, 2005
10.2 Contract on Taking Over Debt by and between Euroweb International
Corp., DanubiaTel a.s. and Euroweb Slovakia a.s. dated April 15,
2005
10.3 Contract on Receivables Setting-off by and between Euroweb
International Corp. and DanubiaTel a.s. dated April 15, 2005
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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: April 20, 2005
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 (the
"Disposition") by Euroweb International Corporation (the "Company") of its
Slovakian subsidiary Euroweb Slovakia a.s. ("Euroweb Slovakia"). On April 15,
2005, the Company completed the sale of 100% of the outstanding stock of its
subsidiary in Slovakia for $2,700,000 in cash to DanubiaTel a.s. (the "Buyer").
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 Slovakia for the historical periods presented.
The unaudited condensed consolidated balance sheet is presented as of December
31, 2004, reflecting the historical financial position of the Company with pro
forma adjustments to reflect the Disposition of Euroweb Slovakia as if the sale
was consummated on that date. The unaudited pro forma condensed consolidated
statements of operations are presented for the years ended December 31, 2004 and
2003 reflecting the historical results of operations with pro forma adjustments
to reflect the Disposition of Euroweb Slovakia as if the sale was consummated on
January 1, 2003. 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 Slovakia was a wholly owned subsidiary of the Company. The Company
believes that the sale of Euroweb Slovakia 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 Slovakia 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
December 31, 2004
Euroweb Pro Forma
Historical Adjustments Pro Forma
-------------- -------------- --------------
ASSETS (A) (B)
Current Assets
Cash and cash equivalents $ 4,537,633 $ 1,394,036 (1) $ 5,931,669
Trade accounts receivable, net 3,695,990 (111,859) (2) 3,584,131
Related party receivables 1,869,667 - 1,869,667
Unbilled receivable 1,107,501 (17,256) (2) 1,090,245
Prepaid and other current assets 858,694 (45,443) (2) 813,251
Deferred tax asset 253,425 - 253,425
-------------- -------------- -- --------------
Total current assets 12,322,910 1,219,478 13,542,388
Property and equipment, net 7,253,113 (234,557) (2) 7,018,556
Goodwill 5,806,181 - 5,806,181
Intangibles - customer contracts 2,053,288 - 2,053,288
Other assets 568,356 - 568,356
-------------- -------------- --------------
Total assets $ 28,003,848 $ 984,921 $ 28,988,769
============= ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $4,254,759 $ (133,192) (2) $ 4,121,567
Related party payables 564,818 - 564,818
Related party loan payable - short term portion 543,568 - 543,568
Overdrafts and current portion of bank loans 321,704 - 321,704
Notes payable 808,441 - 808,441
Other current liabilities 1,091,470 (288,593) (2) 802,877
Accrued expenses 2,808,073 290,000 (3) 3,098,073
Deferred IRU revenue 46,000 - 46,000
Deferred other revenue 1,260,225 (692,771) (2) 567,454
-------------- -------------- -- --------------
Total current liabilities 11,699,058 (824,556) 10,874,502
-------------- -------------- --------------
Non-current liabilities
Deferred tax liability 253,425 - 253,425
Related party loan payable 543,568 - 543,568
Bank loans 747,085 - 747,085
Deferred IRU revenue 797,334 - 797,334
Lease obligations 148,359 (6,701) (2) 141,658
-------------- -------------- -- --------------
Total liabilities 14,188,829 (831,257) 13,357,572
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 shares 24,807 - 24,807
Additional paid-in capital 50,780,084 - 50,780,084
Accumulated deficit (35,982,726) 1,850,939 (4) (34,131,787)
Accumulated other comprehensive losses: 108,266 (34,761) (5) 73,505
Treasury stock - 175,490 common shares, at cost (1,115,412) (1,115,412)
-------------- -------------- -- --------------
-
Total stockholders' equity 13,815,019 1,816,178 15,631,197
-------------- -------------- --------------
Total liabilities and stockholders' equity $28,003,848 $ 984,921 $ 28,988,769
============== ============== ==============
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
(A) Reflects the balance sheet of the Company as of December 31, 2004, included
in the Company's Annual Report on Form 10-KSB.
(B) Pro forma adjustments to record the Disposition as if it had occurred on
December 31, 2004 for purposes of presenting the pro forma balance sheet:
1) Adjustment to reflect the cash proceeds received upon the sale of Euroweb
Slovakia of $ 2,700,000 and the elimination of $ 1,305,964 of cash at
Euroweb Slovakia
2) Adjustment to eliminate assets sold and liabilities transferred upon the
sale of Euroweb Slovakia
3) Pro forma adjustment to reflect the accrual of the estimated direct
transaction costs of $26,000 to be paid in connection with the sale of
Euroweb Slovakia and an estimated $264,000 severance and success fee
payable to the CEO and CFO of Euroweb Slovakia according to their incentive
agreement
4) Adjustment to reflect the estimated pro forma gain on the sale of Euroweb
Slovakia net of the estimated tax liability (expected to be zero). Because
the estimated pro forma gain assumes the Disposition was consummated on
December 31, 2004, the estimated pro forma gain will ultimately differ from
the actual gain that occurred at the April 15, 2005 date of sale.
5) Adjustment to eliminate cumulative other comprehensive losses derived from
Euroweb Slovakia.
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Euroweb International Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2004
Historical Pro Forma Pro Forma
Adjustments
-------------- -------------- --------------
(A) (B)
Revenues
Third party $ 28,111,786 $ (3,827,738) (1) $ 24,284,048
Related party 8,503,939 - 8,503,939
-------------- -------------- --------------
Total revenues 36,615,725 (3,827,738) 32,787,987
Cost of revenues (excluding deprecation and amortization
shown separately below)
Third party 17,233,994 (1,373,937) (1) 15,860,057
Related party 6,198,505 - 6,198,505
-------------- -------------- --------------
Total cost of revenues (excluding 23,432,499 (1,373,937) 22,058,562
deprecation and amortization shown separately below)
Operating expenses
Compensation and related costs 4,182,977 (1,319,609) (2) 2,863,368
Consulting and professional fees 2,829,525 (141,296) (3) 2,688,229
Other selling, general and administrative expenses 4,237,848 (522,983) (4) 3,714,865
Depreciation and amortization 2,610,764 (157,555) (6) 2,453,209
-------------- -------------- --------------
Total operating expenses 13,861,114 (2,141,443) 11,719,671
Operating loss (677,888) (312,358) (990,246)
Net interest (expense) income (217,672) (32,672) (7) (250,344)
Other expenses (170,000) - (170,000)
Gain from sale of subsidiary 28,751 - 28,751
-------------- -------------- --------------
Loss before income tax (1,036,809) (345,030) (1,381,839)
Income tax expense (benefit) 62,367 (31,276) (8) 31,091
-------------- -------------- --- --------------
Loss from continuing operations $ (1,099,176) $ (313,754) $ (1,412,930)
Net loss per share from continuing operations, basic and $ (0.22) $ (0.28)
diluted
Weighted average number of shares outstanding, basic and 5,043,822 5,043,822
diluted
See notes to unaudited pro forma condensed consolidated statements of operations
7
Euroweb International Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2003
Historical Pro Forma Pro Forma
(restated) Adjustments
(A) (B)
-------------- -------------- --------------
Revenues
Third party $ 16,376,349 $ (3,424,633) (1) $ 12,951,716
Related party 5,740,709 - 5,740,709
-------------- -------------- --------------
Total Revenues 22,117,058 (3,424,633) 18,692,425
Cost of revenues (excluding deprecation and amortization
shown separately below)
Third party 8,155,836 (1,424,905) (1) 6,730,931
Related party 5,796,350 - 5,796,350
-------------- -------------- --------------
Total Cost of revenues (excluding 13,952,186 (1,424,905) 12,527,281
deprecation and amortization shown separately below)
Operating expenses
Compensation and related costs 2,814,868 (1,006,673) (2) 1,808,195
Consulting and professional fees 2,074,565 (153,325) (3) 1,921,240
Other selling, general and administrative expenses 2,458,429 (385,721) (4) 2,072,708
Goodwill impairment 887,957 (563,000) (5) 324,957
Impairment of intangible assets 100,364 - 100,364
Depreciation and amortization 1,636,133 (338,822) (6) 1,297,311
-------------- -------------- --------------
Total operating expenses 9,972,316 (2,447,541) 7,524,775
Operating loss (1,807,444) 447,813 (1,359,631)
Net interest (expense) income 344,320 9,279 (7) 353,599
Gain from sale of subsidiary 109,621 - 109,621
-------------- -------------- --------------
Income (loss) before income tax (1,353,503) 457,092 (896,411)
Income tax expense 61,590 - 61,590
-------------- -------------- --------------
Income (loss) from continuing operations $ (1,415,093) $ 457,092 $ (958,001)
Net loss per share from continuing operation, basic and $ (0.30) $ (0.21)
diluted
Weighted average number of shares outstanding, basic and 4,665,332 4,665,332
diluted
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
(A) Reflects the statements of operations of the Company for the years ended
December 31, 2004 and 2003 included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 2004. The statement of operations
for the year ended December 31, 2003 was restated in that Annual Report to
reflect the acquisition by the Company [on February 12, 2004] of the
remaining 51% of Euroweb Hungary shares that the Company did not already
own. The Company acquired those shares from PanTel Rt. ("Pantel"). The
majority shareholder of the Company and Pantel is KPN. Since the
acquisition was a transaction between entities under common control, it was
accounted for in a manner similar to a pooling-of-interest. Accordingly,
the historical consolidated financial statements were restated to include
the results of operations of Euroweb Hungary for all periods presented.
(B) Pro forma adjustments to record the Disposition as if it had occurred on
January 1, 2003 for purposes of presenting the pro forma statements of
operations:
1) Adjustment to reflect the elimination of the Euroweb Slovakia revenues
and costs of goods sold.
2) Adjustment to reflect the elimination of salary and related costs
related to Euroweb Slovakia.
3) Adjustment to reflect the elimination of consulting, professional and
directors' fees costs related to Euroweb Slovakia.
4) Adjustment to reflect the elimination of selling, general and
administrative costs related to Euroweb Slovakia.
5) Adjustment to reflect the elimination of goodwill impairment related
to Euroweb Slovakia.
6) Adjustment to reflect the elimination of depreciation charge related
to Euroweb Slovakia.
7) Adjustment to reflect the elimination net interest income related to
Euroweb Slovakia.
8) Adjustment to reflect the elimination of income tax related to Euroweb
Slovakia.
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