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): May 23, 2006
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.)
468 North Camden Drive Suite 256(I) Beverly Hills, CA 90210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 860-5697
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 December 19, 2005, Euroweb International Corp. (the "Company") entered into a
Share Purchase Agreement (the "Agreement") with Invitel Tavkozlesi Szolgaltato
Rt., a Hungarian joint stock company ("Invitel"). Pursuant to the Agreement, the
Company sold and, Invitel purchased, 100% of the Company's interest in the
Company's two Internet and telecom related operating subsidiaries, Euroweb
Hungary Rt. and Euroweb Romania S.A (the "Subsidiaries"). The closing of the
sale of the Subsidiaries occurred on May 23, 2006. The purchase price paid to
the Company is USD $30,000,000 in cash of which USD $29,400,000 was paid at
closing and the remaining $600,000 is payable upon delivery of a certificate
prepared by an independent auditor identifying the net indebtedness of the
Subsidiaries, which are required to be debt free. The purchase price is to be
reduced by the amount of any debt held in the Subsidiaries including USD
$6,000,000 payable to Commerzbank. Shareholders holding a majority of the
Company's outstanding shares of common stock approved the sale of the
Subsidiaries at the special meeting held to vote on such matter on May 15, 2006.
No material relationship exists between Invitel and the Company and/or its
affiliates, directors, officers or any associate of an officer or director.
The Subsidiaries provided communications solutions using Internet technologies
to businesses located in Hungary and Romania.
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 March
31, 2006 (attached hereto following the signature page)
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 2005 (attached hereto following the
signature page)
(c) Exhibits
Exhibit No. Description
----------- -----------
10.1 Share Purchase Agreement by and between Euroweb
International Corp. and Invitel Tavkozlesi
Szolgaltato Rt. (incorporated by reference to
the Form 8-K Current Report filed with the
Securities and Exchange Commission on December
21, 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/ MOSHE SCHNAPP
-----------------------------
Name: Moshe Schnapp
Title: President
Date: May 30, 2006
Budapest, Hungary
EUROWEB INTERNATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated financial statements
(the "unaudited pro forma financial statements") give effect to the sale of 100%
of the interest of Euroweb International Corporation ("Euroweb") in each of
Euroweb Internet Szolgaltato Rt. ("Euroweb Hungary") and Euroweb Romania S.A.
("Euroweb Romania") to Invitel Tavkozlesi Szolgaltato Rt. and the acquisition of
100% of Navigator Informatika Rt. ("Navigator").
Acquisition of 100% of Navigator
The unaudited pro forma condensed consolidated statements of operations for the
year ended December 31, 2005 also give effect to the acquisition by Euroweb of
100% of Navigator as if the acquisition occurred on January 1, 2005.
Sale of 100% of the interest of Euroweb in Euroweb Hungary and Euroweb Romania
The unaudited pro forma financial statements give effect to the sale of 100% of
the Company's interest in Euroweb Hungary and Euroweb Romania. The sale was
completed on May 23, 2006. Euroweb Hungary and Euroweb Romania are together
expected to be sold for approximately $30,000,000 cash, less outstanding debt
including $6,000,000 repayment of bank loan by Euroweb Hungary for ensuring debt
free status and less estimated transaction costs, severances, success fees and
estimated guarantee provision accrual of approximately $1,900,000. Euroweb
Hungary covers the cash need of $6,000,000 repayment of bank loan from the
$8,500,000 cash proceed received from Euroweb in exchange for 85% ownership of
Navigator currently held by Euroweb Hungary.
Euroweb believes that the sale of Euroweb Hungary and Euroweb Romania meets the
criteria for presentation as a discontinued operation under the provisions of
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." Accordingly, Euroweb Hungary and
Euroweb Romania are presented as discontinued operations in the historical
consolidated financial statements of Euroweb. The estimated gain is $16,205,366
on the sale of Euroweb Hungary and Euroweb Romania, which is not reflected in
the unaudited pro forma condensed consolidated statements of operations due to
the non-recurring nature of the gain.
The unaudited pro forma condensed consolidated balance sheet gives effect to the
disposition of Euroweb Hungary and Euroweb Romania as if it occurred on March
31, 2006.
The pro forma adjustments described in the accompanying notes are based upon
available information and certain assumptions that management believes are
reasonable. The unaudited pro forma condensed consolidated financial statements
are for illustrative purposes only and are not necessarily indicative of the
actual results of operations or financial position that would have occurred had
the transactions described above occurred on the dates indicated, nor are they
necessarily indicative of future operating results. The unaudited pro forma
financial statements are only a summary and should be read in conjunction with
the historical consolidated financial statements and related notes of Euroweb,
in its Form 10-QSB for the quarter ended March 31, 2006 and in its Form 10-KSB
for the year ended December 31, 2005.
All pro forma amounts are presented in U.S. dollars, the reporting currency of
Euroweb.
Euroweb International Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2006
Euroweb Pro Forma
Historical Adjustments Notes Pro Forma
-------------- -------------- ----- --------------
(A) (B)
ASSETS
Current Assets
Cash and cash equivalents $ 691,021 $ 30,000,000 (1) $ 24,691,021
-- (8,500,000) (2) --
-- 2,500,000 (3) --
Trade accounts receivable, net 1,430,263 -- 1,430,263
Prepaid and other current assets, unbilled receivable 395,258 (75,552) (5) 319,706
-------------- -------------- --------------
Total current assets of continuing operations 2,516,542 23,924,448 26,440,990
Total assets of discontinued operations 19,179,425 (19,179,425) (4) --
-------------- -------------- --------------
Total current assets 21,695,967 4,745,023 26,440,990
Property and equipment, net 1,072,305 -- 1,072,305
Goodwill 8,150,672 -- 8,150,672
Intangibles - customer contracts 2,784,810 -- 2,784,810
-------------- -------------- --------------
Total assets $ 33,703,754 $ 4,745,023 $ 38,448,777
============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 1,278,462 -- $ 1,278,462
Current portion of bank loan and overdraft 789,206 -- 789,206
Other current liabilities 202,462 $ 1,824,448 (5) 2,026,910
Accrued expenses 701,946 -- 701,946
-------------- -------------- --------------
Total current liabilities of continuing operations 2,972,076 1,824,448 4,796,524
Total liabilities of discontinued operations 12,905,537 (12,905,537) (4) --
-------------- -------------- --------------
Total current liabilities 15,877,613 (11,081,089) 4,796,524
Non-current liabilities
Deferred tax liability 445,570 -- 445,570
Non-current portion of bank loans 393,476 -- 393,476
-------------- -------------- --------------
Total liabilities 16,716,659 (11,081,089) 5,635,570
Stockholders' Equity
Common stock, $.001 par value - Authorized 35,000,000
shares; Issued and outstanding 5,843,067 shares 25,307 -- 25,307
Additional paid-in capital 51,900,890 -- 51,900,890
Accumulated deficit (35,332,003) 16,205,366 (6) (19,126,637)
Accumulated other comprehensive losses 392,901 (379,254) (7) 13,647
-------------- -------------- --------------
Total stockholders' equity 16,987,095 15,826,112 32,813,207
-------------- -------------- --------------
Total liabilities and stockholders' equity $ 33,703,754 $ 4,745,023 $ 38,448,777
============== ============== ==============
See accompanying notes to unaudited pro forma condensed
consolidated balance sheet
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(A) Reflects the historical condensed consolidated balance sheet of Euroweb as
of March 31, 2006, included in the Form 10-QSB of Euroweb for the quarter
ended March 31, 2006.
(B) Pro forma adjustments related to the sale of Euroweb Hungary and Euroweb
Romania on the basis described in the introduction to these unaudited pro
forma financial statements:
1) Represents the cash proceeds of $30,000,000 received upon the sale
of Euroweb Hungary and Euroweb Romania.
2) Represents the acquisition of 85% ownership of Navigator from
Euroweb Hungary by Euroweb for $8,500,000 at the date of closing.
3) Reflects the repayment of $2,500,000 intercompany loan from Euroweb
Hungary to Euroweb at the date of closing originated from the
Navigator acquisition
4) Adjustment to eliminate assets sold and liabilities transferred upon
the sale of Euroweb Hungary and Euroweb Romania
5) Adjustment to reflect the estimated direct transaction costs,
bonuses, success fees, severances and accrued provision on estimated
warranty claims totalling $1,900,000, to be paid, payable in
connection with the sale
6) Adjustment to reflect the pro forma gain on the sale of Euroweb
Hungary and Euroweb Romania, after estimated direct transaction
costs, bonuses, success fees, severances and accrued provision on
estimated warranty claims of $1,900,000 to be paid or payable in
connection with the sale. No tax liability is expected to arise as a
result of the sale. Because the estimated pro forma gain assumes the
sale was consummated on March 31, 2006, the pro forma gain will
ultimately differ from the actual gain that will occur at the
closing date of sale.
7) Adjustment to eliminate cumulative other comprehensive gain/losses
of Euroweb Hungary and Euroweb Romania
No adjustments have been made to reflect any income tax effect of
the pro forma adjustments since Euroweb has significant net
operating loss carryforwards and, therefore, does not expect to have
taxable income in the foreseeable future.
Euroweb International Corporation
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 2005
Euroweb Pro Forma
Historical Adjustments Notes Pro Forma
-------------- -------------- ----- --------------
(A) (B)
Revenues $ 1,964,998 $ 5,673,926 (1) $ 7,638,924
Cost of revenues (exclusive of depreciation and
amortization shown separately below) 511,658 1,406,427 (1) 1,918,085
Operating expenses
Compensation and related costs 1,054,342 894,984 (2) 1,949,326
Consulting, professional and directors fees 1,396,096 1,237,731 (3) 2,633,827
Other selling, general and administrative expenses 703,770 1,198,590 (4) 1,902,360
Depreciation and amortization 509,478 1,378,784 (5) 1,888,262
-------------- -------------- --------------
Total operating expenses 3,663,686 4,710,089 8,373,775
Operating loss (2,210,346) (442,590) (2,652,936)
Interest income 2,512 15,185 (6) 17,697
Interest expense (38,240) (94,367) (6) (132,607)
Other income (expenses) 170,000 -- 170,000
Loss from continuing operations before income taxes (2,076,074) (521,772) (2,597,846)
-------------- -------------- --------------
Income tax expense - current -- (143,677) (7) (143,677)
Income tax expense-deferred 57,908 166,796 (7) 224,704
-------------- -------------- --------------
Income tax expense 57,908 23,119 81,027
Loss from continuing operations $ (2,018,166) $ (498,653) $ (2,516,819)
============== ============== ==============
Loss per share from continuing operations,
basic and diluted (0.37) -- (0.44)
Weighted average number of shares outstanding,
basic and diluted 5,445,363 -- 5,784,099
See accompanying notes to unaudited pro forma condensed
consolidated statement of operations
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(A) Reflects the statements of operations of the Company for the years ended
December 31, 2005 included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2005.
(B) Pro forma adjustments to record the acquisition of Navigator Informatika
Rt. ("Navigator") as if it had occurred on January 1, 2005 for purposes of
presenting the pro forma statements of operations:
1) Adjustment to reflect the revenues and costs of goods sold of
Navigator for the period from January 1, 2005 to October 7, 2005.
2) Adjustment to reflect the salary and related costs of Navigator for
the period from January 1, 2005 to October 7, 2005..
3) Adjustment to reflect the consulting, professional and directors'
fees of Navigator for the period from January 1, 2005 to October 7,
2005.
4) Adjustment to reflect the selling, general and administrative costs
of Navigator for the period from January 1, 2005 to October 7, 2005.
5) Adjustment to reflect the amortization and depreciation charge of
Navigator for the period from January 1, 2005 to October 7, 2005.
6) Adjustment to reflect the interest income and expenses of Navigator
for the period from January 1, 2005 to October 7, 2005.
7) Adjustment to reflect the income tax of Navigator for the period
from January 1, 2005 to October 7, 2005.