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): October 7, 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
Item 3.02 Unregistered Sales of Equity Securities
On July 21, 2005, Euroweb International Corp. (the "Euroweb") and Euroweb
Hungary Rt. ("Euroweb Hungary"), a wholly-owned subsidiary of Euroweb
(collectively, Euroweb Hungary and Euroweb are hereinafter referred to as the
"Company"), entered into a Sale and Purchase Agreement (the "Agreement") with
Marivaux Investments Limited ("Marivaux") and Graeton Holdings Limited
("Graeton") (collectively, Marivaux and Graeton are hereinafter referred to as
the "Sellers"), which are both registered under the laws of the Cyprus. Pursuant
to the Agreement, the Company agreed to acquire and, the Sellers agreed to sell,
100% of the Seller's interest in Navigator Informatika Rt. ("Navigator"), a
Hungarian company.
The purchase of Navigator by the Company closed on October 7, 2005. In
consideration for Marivaux's interest in Navigator, the Company paid Marivaux
USD $8,500,000 of which USD $150,000 was paid upon signing of the Agreement and
$8,350,000 was paid on closing. In addition, at closing, Euroweb issued Graeton
441,566 shares of common stock of Euroweb (the "Shares"). The offering and sale
of the Shares was deemed to be exempt under rule 506 of Regulation D and Section
4(2) of the Securities Act of 1933, as amended. No advertising or general
solicitation was employed in offering the securities. No material relationship
exists between the Sellers and the Company and/or its affiliates, directors,
officers or any associate of an officer or director.
Euroweb has entered into a Registration Rights Agreement dated July 21, 2005
whereby it agreed to file a registration statement registering the Shares within
75 days from the closing and have such registration statement declared effective
within 150 days from the filing thereof. In the event that Euroweb fails to meet
its obligations to register the Shares it may be required to pay a penalty equal
to 1% of the value of the Shares on a monthly basis.
The Company obtained a $6,000,000 long term loan from Commerzbank Hungary
("Commerzbank") to finance the cash part of purchase price, while $2,500,000 was
financed from existing cash on hand. In connection with the Commerzbank loan, on
September 27, 2005, Euroweb Hungary entered into a loan contract with
Commerzbank pursuant to which Commerzbank has agreed to loan the Funds to
Euroweb Hungary. The interest rate in connection with the loan is BUBOR plus
2.5%. Euroweb Hungary is required to make scheduled payments in connection with
the loan in varying amounts from $166,828 to $354,513 commencing March 31, 2006
through June 30, 2010.
As security for providing the funds, Euroweb Hungary granted a security interest
in all of its assets, the assignment of its revenue, the assignment of all
future dividends payable by Navigator and the pledge of all of the securities of
Euroweb Hungary and Navigator held by Euroweb. Further, in the event that
Euroweb Hungary fails to satisfy its obligations under the loan agreement with
Commerzbank, Commerzbank holds an option to acquire all of the securities of
Navigator.
The Loan will be a debt obligation arising other than in the ordinary course of
business, which constitutes a direct financial obligation of the Company.
Business Description of Navigator Informatika Rt.
Overview
Navigator, through its wholly owned subsidiaries, Navigator Info Kft. and
Navigator Engineering Kft., is engaged in information technology outsourcing,
applications development and information technology consulting services
primarily in the Hungarian market. Navigator's client base includes primarily
large organizations both in the corporate and institutional (public) sector.
Products and Services
Navigator is a full service IT competence center providing the total scope of IT
services with IT hardware trade activity.. Navigator's revenues are generated
from reoccurring long-term services and project based short term service and
one-time services. In addition, Navigator also generates revenue from the sale
of IT related products. Navigator provides different levels of services
depending on the client's demands. Navigator's services include the following:
o full service IT System implementation and IT project management
including consulting and system design, development and
implementation and training;
o full service IT System operation including full service support and
maintenance with cost-effective and competitive service desk system,
call center, hotline support and remote troubleshooting;
o complete IT outsourcing including all of the above mentioned
activities;
o application development including software implementation and unique
development; and
o sale of products including IT hardware and office supplies.
Navigator seeks to initially provide a base service to its clients, which allows
it to create a foothold with the client. Navigator then seeks to provide
additional services (hosting, hardware/software distribution, consulting, etc)
to the customer with the intent of the client eventually outsourcing all of its
IT services to Navigator.
Markets
The market for Navigator's services and products is primarily focused in
Hungary. Navigator provides each of its services to medium sized enterprises,
many of the top 200 companies in the region, government and healthcare
companies.
Distribution
According to the nature of Navigator's products and services the distribution is
direct without any distributor involved and based on personal consulting
providing tailor-made solutions for corporate and governmental clients.
Competition
Navigator is an IT service provider for more than 4,000 users and approximately
80 companies, government institutes and middle and large corporations. Navigator
employs 97 employees. Navigator competes based on the following:
o competitive competence including the providing of full service IT
management with appropriate professional control;
o the provision of High-tech IT infrastructure and background (server
center, network system) competing with that of multinational service
providers and competitors;
o the provision of services at a low cost and in a flexible manner;
and
o effectively addressing niche industries such as healthcare.
Dependence on Major Customers
The dependency on Navigator's major customers can be considered to be high as
64% of the revenues are generated by four of its largest customers. However,
each of these customers has entered into definitive long term contracts.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of businesses acquired.
Audited Financial Statements of Navigator Informatika Rt. for the years
ended December 31, 2004 and December 31, 2003 and unaudited financial
statements for interim period (to be filed by amendment).
(b) Proforma Financial Information
Proforma Financial Information (to be filed by amendment).
(c) Exhibits
Exhibit No. Description
----------- -----------
10.1 Sale and Purchase Agreement by and between
the Company and the Sellers dated July 21,
2005 (1)
10.2 Registration Rights Agreement dated July 21,
2005 (1)
10.3 Loan Agreement dated September 27, 2005 by
and between Commerzbank Rt. and Euroweb
International Corp. (2)
10.4 Modification to the Sale and Purchase
Agreement by and between the Company and the
Sellers
99.1 Press Release dated October 7, 2005
----------
(1) Incorporated by reference to the Form 8-K Current Report filed with the
Securities and Exchange Commission on July 26, 2005.
(2) Incorporated by reference to the Form 8-K Current Report filed with the
Securities and Exchange Commission on October 10, 2005.
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: October 13, 2005
Budapest, Hungary