U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB/A
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-1200
EUROWEB INTERNATIONAL CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3696015
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
445 Park Avenue, 15th Floor, New York, NY 10022
(Address of principal executive offices)
(212) 758-9870
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirement for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, $.001 par value 5,178,246 Shares
(Class) (Outstanding at March 31, 1998)
Transitional Small Business Disclosures Format (Check one): Yes No X
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
March 31, 1998 December 31, 1997
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $ 543,314 $ 697,948
Accounts receivable, less allowance
for doubtful accounts of $39,216 486,870 172,437
Receivable from Hungarian Broadcasting
Corporation 552,460 546,053
Prepaid and other current assets 81,319 103,073
Total current assets 1,663,963 1,519,511
Property and equipment, less accumulated
depreciation of $121,311 and $102,402 204,430 240,887
Condominum building, net of $718,870 allowance
for reduction to market value, held for sale 1,600,000 -
Construction in progress, net of $1,350,000
allowance for reduction to market value - 3,279,900
Goodwill, less accumulated amortization of
$480,000 and $383,000 1,454,968 1,529,912
Other 101,290 70,094
$5,024,651 $6,640,304
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to Hungarian Broadcasting
Corporation $ 373,704 $ 368,456
Payable to former owners of acquired
businesses 176,000 191,000
Accounts payable and accrued expenses 990,595 789,623
Total current liabilities 1,540,299 1,349,079
10% Convertible Debentures 100,000 150,000
Deferred Revenue 50,000 1,589,653
Total liabilities 1 ,690,299 3,088,732
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.001 par value - shares
authorized 5,000,000; no shares outstanding
Common stock, $.001 par value - shares
authorized 15,000,000; issued and
outstanding 5,178,246 and 4,949,936 5,178 4,950
Additional paid-in capital 19,820,497 19,770,725
Accumulated deficit (16,443,288) (16,188,203)
Accumulated other comprehensive loss: - -
Foreign currency translation adjustment (48,035) (35,900)
Total stockholders' equity 3,334,352 3,551,572
$5,024,651 $6,640,304
See accompanying notes to consolidated financial statements.
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EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)
Three Months Ended
March 31,
1998 1997
Revenues
Internet $ 384,900 $ 286,252
Construction income 1,724,468 -
Total 2,109,368 286,252
Expenses(Income)
Cost of construction 1,723,870 -
Compensation and related costs 165,946 237,667
Network costs 171,240 75,161
Consulting and professional fees 43,450 92,390
Rent 33,004 32,287
Depreciation and amortization
of property and equipment 19,073 20,408
Amortization of goodwill 97,000 86,000
Interest and dividend income (16,708) (19,000)
Interest expense 33,612 428,197
Financing costs - 59,924
Foreign currency loss 41,576 74,424
Other 52,390 122,909
Total 2,364,453 1,210,367
Net loss (255,085) (924,115)
Other comprehensive loss:
Foreign currency translation loss (12,135) -
Comprehensive loss $ (267,220) $ (924,115)
Net loss per share-basic and diluted $ (.05) $ (.33)
Weighted average number of common
shares outstanding 5,026,039 2,815,255
See accompanying notes to consolidated financial statements
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
Accumulated
Additional Other
Common Stock Paid-in Accumulated Comprehensive
Shares Amount Capital Deficit Loss
THREE MONTHS ENDED MARCH 31, 1998:
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Balance, January 1, 1998 4,949,936 $4,950 $19,770,725 $(16,188,203) $ (35,900)
Issuance of shares on
conversion of debentures 228,310 228 49,772 - -
Net loss for the period - - - (255,085) -
Foreign currency
translation loss - - - - (12,135)
Balance, March 31, 1998 5,178,246 $5,178 $19,820,497 $(16,443,288) $(48,035)
THREE MONTHS ENDED MARCH 31, 1997:
Balance, January 1, 1997 2,476,269 $2,476 $17,681,947 $(13,657,975) $ -
Issuance of put options
on common stock issued
in connection with
acquisitions - (144) (359,856) - -
Compensation relating to the
extension of the period of
exercisability of former
officers' options - - 125,000 - -
Issuance of shares on
conversion of debentures 648,905 649 505,668 - -
Incremental interest from
revaluation of convertible
debentures - - 395,000 - -
Net loss for the period - - - (924,115) -
Balance, March 31, 1997 3,125,174 $2,981 $18,347,759 $(14,582,090) $ -0-
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (255,085) $(924,115)
Adjustments to reconcile net loss to
net cash provided by(used in) operating activities:
Depreciation and amortization of property
and equipment 19,073 20,408
Amortization of goodwill 97,000 86,000
Amortization of imputed interest income - (13,000)
Options granted/extended as compensation - 125,000
Incremental interest on revaluation of
convertible debentures - 395,000
Interest on debentures paid in shares of
capital stock - 11,317
Foreign currency loss 41,576 74,424
Changes in operating assets and liabilities:
(Increase)decrease in:
Accounts receivable (224,433) (165,290)
VAT refund receivable - 30,929
Receivables from related parties - 616
Prepaid and other assets 8,189 (29,388)
Increase(decrease) in:
Accounts payable and accrued expenses 200,972 440,088
Compensation payable to officers - (50,000)
Payable to former owners acquired
businesses (15,000) 87,648
Deferred revenue 50,000 -
Net cash provided by(used in) operating activities (77,708) 89,637
CASH FLOWS FROM INVESTING ACTIVITIES
Receivable from Hungarian Broadcasting Corporation (1,159) 8,655
Acquisition of Internet Service Companies, net of
cash acquired - (481,801)
Acquisition of property and equipment - (321,348)
Acquisition of intangibles (22,056) -
Net cash used in investing activities (23,215) (794,494)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debt - 395,000
Proceeds from note payable to Hungarian
Broadcasting Corporation - 350,000
Net cash provided by financing activities - 745,000
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH (53,711) (74,424)
DECREASE IN CASH AND CASH EQUIVALENTS (154,634) (34,281)
Cash and cash equivalents at beginning of period 697,948 495,703
Cash and cash equivalents at end of period $ 543,314 $ 461,422
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock upon conversion of debentures
and accrued interest $ 50,000 $ 506,317
See accompanying notes to consolidated financial statements.
<PAGE>
Euroweb International Corp.
Notes to Consolidated Financial Statements
(Unaudited)
The incremental yield on the debentures relating to the convertibility of
the debentures into common stock at a 50% discount to the common stock's
market price resulted in interest charges of $395,000 to the consolidated
statement of loss for the three months ended March 31, 1997. In addition,
financing costs of $59,924 incurred in connection with the sale of the
debentures were charged to operations in the first quarter of 1997, since a
substantial portion of the debentures was expected to be converted to common
stock within a short period.
The unconverted debentures of $150,000 at December 31, 1997 and $100,000 at
March 31, 1998 are due as follows:
December 31, March 31,
1997 1998
(unaudited)
January 1999 $ 50,000 $ -
April 1999 100,000 100,000
$150,000 $ 100,000
(b) In October 1996, the Company sold a private placement consisting of
550,000 shares of common stock and 550,000 common stock purchase
warrants exercisable at $2 per share at any time from October 1,
1997 until September 30, 2001 for net proceeds of $972,450 after
deducting placement agent fees and offering expenses of $127,550.
The warrants and the underlying shares of common stock have been
registered under the Securities Act of 1933. The exercise price
was reduced to $1.25 per share on June 26, 1997.
9. Stock Option Plan and Warrants
(a) Stock Options
The Company has a Stock Option Plan (the "Plan"). An aggregate of
100,000 shares of Common Stock are authorized for issuance under the
Plan. On May 14, 1996, the stockholders approved an increase in the
number of stock options available under the Plan to 350,000. At
December 31, 1997, 90,000 stock options which were available under
the Plan were granted to the Company's officers and directors in April
1998. Plan provides that incentive and nonqualified options may be
granted to officers and directors and consultants to the Company.
The Plan may be administered by either the Board of Directors or a
committee of three directors appointed by the Board (the "Committee").
The Board or Committee determines, among other things, the persons to
whom stock options are granted, the number of shares subject to each
option, the date or dates upon which each option may be exercised
and the exercise price per share.
Options granted under the Plan are exercisable for a period of up to
ten years from the date of grant. Options terminate upon the
optionee's termination of employment or consulting arrangement with
the Company, except that, under certain circumstances, an optionee
may exercise an option within the three-month period after such
termination of employment.
<PAGE>
In 1998, the Company started a division to develop Internet software
to provide electronic commercial-based solutions to perform many
business processes. This division was retained by Fornex, an agent
of the Budapest Stock Exchange ("BSE"), to develop software to record
all transactions on the BSE in real time, which information can be
obtained by subscribers of the Fornex service through the Internet.
The division has also been retained by Postal Bank, Hungary's second
largest bank, to help develop software for home banking use by
customers of the bank to enable the customers to transfer funds on
deposits at the bank electronically to third parties. The Company
is also working on developing software for credit card processing
and transaction validation and is negotiating to acquire software
companies engaged in phases of Electronic Banking and Electronic
Transaction Processing, but it has not yet identified any particular
acquisition as of this date.
As part of its expansion plans into the countries of Central Europe, the
Company retained Eurus Capital Corporation as its consultant in Poland to
provide various services for a period of two years, including market surveys,
advise regarding the political, economic and regulatory conditions in Poland,
considerations of possible funding sources, seeking potential joint venture
parties and identifying possible acquisitions. For its services, the Company
granted an option to Eurus in April 1998, to acquire 300,000 shares of the
Company's common stock at a price of $1.125 per share for a period expiring
on April 20, 2001.
For the three months ended March 31, 1998, the Company incurred a net loss of
$255,085 ($.05 per share); the net loss for the three months ended March 31,
1997 amounted to $924,115 ($.33 per share).
Revenues for the three months ended March 31, 1998 amounted to $2,109,368,
compared with revenues of $286,252 for the three months ended March 31, 1997.
The acquisition of the Internet business in 1997 resulted in goodwill of
approximately $1,900,000, which is being amortized over five years; amortization
for the three months ended March 31, 1998 and 1997 amounted to $97,000 and
$86,000, respectively.
Financing costs of $59,924 incurred in connection with the sale of convertible
debentures were charged to operations for the first quarter of 1997, since a
substantial portion of the debentures were expected to be converted to common
stock within a short period. There were no such costs during the first quarter
of 1998.
Interest expense for the three months ended March 31, 1997 includes $395,000, of
incremental interest on the convertible debentures relating to the
convertibility of the debentures at a 50% discount to the Common Stock's
market price.
Liquidity and Capital Resources
In October 1996, the Company sold a private placement consisting of 550,000
shares of common stock and 550,000 common stock purchase warrants exercisable
at $2 per share (subsequently reduced to $1.25 per share) at any time from
October 1, 1997 until September 30, 2001 for net proceeds of approximately
$973,000 after deducting placement agent fees and offering expenses of
approximately $127,000.
From November 1, 1996 to December 31, 1997, the Company sold $1,642,500 of 10%
convertible debentures due two years from the date of sale to foreign investors
outside the United States in private placements, receiving aggregate net
proceeds of approximately $1,389,500 after deducting placement agent fees
and offering
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the th day of November 1998.
EUROWEB INTERNATIONAL CORP.
By /s/ Frank R. Cohen
Frank R. Cohen
Chairman of the Board
[ARTICLE] 5
[CIK] 0000905428
[NAME] EUROWEB INTERNATIONAL CORP.
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] MAR-31-1998
[CASH] 543,314
[SECURITIES] 0
[RECEIVABLES] 486,870
[ALLOWANCES] 39,216
[INVENTORY] 0
[CURRENT-ASSETS] 1,663,963
[PP&E] 1,804,430
[DEPRECIATION] 121,311
[TOTAL-ASSETS] 5,024,651
[CURRENT-LIABILITIES] 1,540,299
[BONDS] 100,000
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 5,178
[OTHER-SE] 3,329,174
[TOTAL-LIABILITY-AND-EQUITY] 5,024,651
[SALES] 2,109,368
[TOTAL-REVENUES] 2,109,368
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 2,330,841
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 33,612
[INCOME-PRETAX] (255,085)
[INCOME-TAX] 0
[INCOME-CONTINUING] (255,085)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (255,085)
[EPS-PRIMARY] (.05)
[EPS-DILUTED] (.05)
</TABLE>
