U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 6,308,416 Shares
(Class) (Outstanding at September 30, 1998)
Transitional Small Business Disclosures Format (Check one): Yes No X
<PAGE>
EUROWEB INTERNATIONAL CORP.
INDEX
PART I. Financial Information
Item 1. Financial Statements
Consolidated balance sheets as of December 31, 1997 (audited)
and September 30, 1998 (unaudited) 2
Consolidated statements of loss and comprehensive loss (unaudited)
for the three months ended September 30, 1997 and 1998 and the
nine months ended September 30, 1997 and 1998 3
Consolidated statements of stockholders' equity (unaudited)
for the nine months ended September 30, 1997 and 1998 4
Consolidated statements of cash flows (unaudited) for the
nine months ended September 30, 1997 and 1998 5
Notes to consolidated financial statements (unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 18
PART II. Other Information 24
Signature 27
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 1997 September 30, 1998
(Audited) (Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 697,948 $ 803,918
Accounts receivable, less allowance
for doubtful accounts of $39,216
and $36,986 172,437 250,208
VAT refund receivable - 37,776
Receivable from Hungarian Broadcasting
Corporation 177,597 -
Investment in Hungarian Broadcasting
Corporation - 246,698
Prepaid and other current assets 103,073 32,264
Total current assets 1,151,055 1,370,864
Property and equipment, less accumulated
depreciation of $102,402 and $178,065 240,887 205,566
Condominium building held for sale, net
of $793,870 allowance for reduction
to market value, and accumulated
depreciation of $25,000 - 1,500,000
Construction in progress, net of
$1,350,000 allowance for reduction
to market value 3,279,900 -
Goodwill, less accumulated amortization
of $383,000 and $674,000 1,529,912 1,267,707
Other 70,094 121,436
$6,271,848 $4,465,573
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Payable to former owners of acquired
businesses $ 191,000 $ 76,000
Accounts payable and accrued expenses 789,623 621,980
Total current liabilities 980,623 697,980
10% Convertible Debentures 150,000 -
Deferred Revenue 1,589,653 58,041
Total liabilities 2,720,276 756,021
Commitments and Contingencies
Common stock subject to mandatory
redemption, $.001 par value, shares
issued and outstanding 166,666 - 125,000
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;
1997 1998
Issued 4,949,936 6,308,416
Less shares
subject to
mandatory
redemption - 166,666
Issued and
outstanding 4,949,936 6,141,750 4,950 6,142
Additional paid-in capital 18,755,225 19,475,655
Accumulated deficit (15,172,703) (15,939,165)
Accumulated other comprehensive
gains(losses):
Foreign currency translation
adjustment (35,900) (27,360)
Unrealized gain on investment in
Hungarian Broadcasting Corporation - 69,280
Total stockholders' equity 3,551,572 3,584,552
$6,271,848 $4,465,573
See accompanying notes to consolidated financial statements.
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1998 1997 1998
Revenues
Internet $ 323,625 $ 505,953 $ 931,705 $1,345,953
Construction income - - - 1,724,468
Rent income - 36,553 - 102,553
Total 323,625 542,506 931,705 3,172,974
Expenses(Income)
Cost of construction - - - 1,723,870
Compensation and related costs 172,811 167,262 558,928 484,207
Network costs 187,243 213,303 381,736 562,841
Consulting and professional fees 70,068 70,475 273,430 163,599
Rent 24,807 34,179 80,000 99,772
Depreciation and amortization
of property and equipment 31,950 44,471 86,218 100,663
Amortization of goodwill 98,000 97,000 289,000 291,000
Interest and dividend income (12,796) (2,505) (53,007) (29,355)
Interest expense 58,492 41,637 437,009 56,754
Financing costs 17,144 - 150,847 -
Foreign currency (gain)loss (1,380) 12,946 74,381 19,094
Cost of cancelled public offering - 137,055 - 137,055
Write-down of condominium building
held for sale to market value - 75,000 - 75,000
Loss on sale of office
condominium unit - - 75,000 -
Other 60,870 41,041 373,440 254,936
Total 707,209 931,864 2,726,982 3,939,436
Net loss (383,584) (389,358) (1,795,277) (766,462)
Other comprehensive gain:
Foreign currency translation gain - 948 - 8,540
Unrealized gain on investment in
Hungarian Broadcasting
Corporation - 69,280 - 69,280
Comprehensive loss $(383,584) $(319,130) $(1,795,277) $ (688,642)
Net loss per share - basic
and diluted $ (.10) $ (.07) $ (.54) $ (.15)
Weighted average number of
common shares outstanding 4,015,695 5,499,811 3,347,238 5,247,261
See accompanying notes to consolidated financial statements
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Gains(losses)
Unrealized
Gain on
Foreign Investment in
Additional Currency Hungarian
Common Stock Paid-in Accumulated Translation Broadcasting
Shares Amount Capital Deficit Adjustment Corporation
NINE MONTHS ENDED
SEPTEMBER 30, 1997:
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 2,476,269 $2,476 $17,189,447 $(13,165,475) $ - $ -
Issuance of put options on
common stock issued in
connection with acquisitions (144,000) (144) (359,856) - - -
Compensation relating to the
extension of the period of
exercisability of former
officers' options - - 137,500 - - -
Issuance of shares on
conversion of debentures 2,209,448 2,210 1,153,566 - - -
Incremental interest from
revaluation of convertible
debentures - - 327,000 - - -
Net loss for the period - - - (1,795,277) - -
Balance, September 30, 1997 4,541,717 $4,542 $18,447,657 $(14,960,752) $ - $ -
NINE MONTHS ENDED SEPTEMBER 30, 1998:
Balance, January 1, 1998 4,949,936 $4,950 $18,755,225 $(15,172,703) $(35,900) $ -
Issuance of shares in private
placements 700,000 700 424,240 - - -
Issuance of shares on exercise
of options 135,000 135 134,865 - - -
Issuance of shares on
conversion of debentures 356,814 357 161,325 - - -
Net loss for the period - - - (766,462) - -
Foreign currency
translation gain - - - - 8,540 -
Unrealized gain - - - - - 69,280
Balance, September 30, 1998 6,141,750 $6,142 $19,475,655 $(15,939,165) $(27,360) $69,280
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1997 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,795,277) $(766,462)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of
property and equipment 86,218 100,663
Amortization of goodwill 289,000 291,000
Amortization of imputed interest income (26,000) -
Options granted/extended as compensation 137,500 -
Incremental interest on revaluation of
convertible debentures 327,000 -
Interest on debentures paid in shares
of capital stock 40,775 11,682
Write-down of condominium building held for sale - 75,000
Loss on sale of property 75,000 247
Foreign currency loss 74,381 19,094
Changes in operating assets and liabilities:
(Increase)decrease in:
Accounts receivable (217,779) 12,229
VAT refund receivable 67,095 (37,776)
Receivables from related parties (21,384) -
Prepaid and other assets (48,096) 19,467
Increase(decrease) in:
Accounts payable and accrued expenses 487,856 (167,643)
Compensation payable to officers (50,000) -
Payable to former owners of acquired businesses - (115,000)
Deferred revenue - 58,041
Payable to former officer 136,172 -
Net cash used in operating activities (437,539) (499,458)
CASH FLOWS FROM INVESTING ACTIVITIES
Receivable from Hungarian Broadcasting Corporation,
net 50,538 179
Acquisition of Internet Service Companies,
net of cash acquired (505,687) -
Acquisition of property and equipment and
construction in progress (568,352) (40,342)
Proceeds from sale of office condominium unit 134,000 -
Acquisition of intangibles - (28,795)
Net cash used in investing activities (889,501) (68,958)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debt 850,000 -
Proceeds from note payable to Hungarian
Broadcasting Corporation 350,000 -
Proceeds from issuance of common stock
in private placements - 549,940
Proceeds from issuance of common stock
on exercise of options - 135,000
Net cash provided by financing activities 1,200,000 684,940
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH (74,381) (10,554)
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (201,421) 105,970
Cash and cash equivalents at beginning of period 495,703 697,948
Cash and cash equivalents at end of period $ 294,282 $ 803,918
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ NONE $ 6,000
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock upon conversion of debentures
and accrued interest $ 1,155,775 $ 161,682
Shares of stock received in settlement of net
balance due from Hungarian Broadcasting Corporation - 177,418
Unrealized gain on investment in Hungarian Broadcasting
Corporation - 69,280
See accompanying notes to consolidated financial statements.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of EuroWeb
International Corp., formerly Hungarian Teleconstruct Corp.,
(the "Company") and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated.
Certain 1997 items have been reclassified to conform to the 1998
presentation.
(b) Use of Estimates and Assumptions
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(c) Fiscal Year
The Company's reporting period is the fiscal year ending December 31.
(d) Revenue Recognition
Revenues from monthly Internet services are recognized in the month
in which the services are provided.
Sales of completed condominium apartments are recognized when
collection of the sales price is assured.
(e) Foreign Currency Translation
The Company's Hungarian subsidiary, EuroWeb Rt, uses the local
currency, the Hungarian forint, as the functional currency and
translates all assets and liabilities at exchange rates in effect
at the balance sheet date and all income and expense accounts at
average rates, and records adjustments resulting from the translation
in a separate component of stockholders' equity.
The Company uses the U.S. dollar as the functional currency for its
Hungarian subsidiary, Teleconstruct Epitesi Rt ("Teleconstruct").
Accordingly, monetary assets and liabilities of Teleconstruct were
remeasured by using the exchange rates in effect at the balance
sheet date, while nonmonetary assets and liabilities were remeasured
at historical rates. Income and expense accounts were remeasured at
the average rates in effect during the period. Remeasurement
adjustments and transaction gains or losses are reflected in
the consolidated statements of loss.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
(f) Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
(g) Fair Value of Financial Instruments
The carrying values of cash equivalents, accounts receivable, VAT
refund receivable, receivable from and loan payable to Hungarian
Broadcasting Corporation ("HBC"), payable to former owners of acquired
businesses, accounts payable and accrued expenses and the 10%
convertible debentures approximate fair values.
(h) Equity in Net Loss of Unconsolidated Affiliate
The Company's 9.7% equity interest in HBC was accounted for using
the equity method through September 30, 1996 since the Company had
the ability to exercise significant influence over HBC. Beginning
October 1, 1996, the Company discontinued its use of the equity method
of accounting for its investment in HBC, since the Company no longer
had the ability to exercise significant influence over HBC. On
October 29, 1997, the Company sold its interest in HBC.
(i) Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets of 3 to 5 years.
(j) Goodwill
Goodwill is amortized on a straight-line basis over its estimated
useful life of five years. The Company periodically evaluates
goodwill based upon the expected undiscounted cash flow from the
acquired businesses.
(k) Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board ("FASB")
ssued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"),
which established a fair value method of accounting for stock-based
compensation, through either recognition or disclosure. The Company
adopted the disclosure option for the employee stock-based
compensation provisions of SFAS No. 123. However, since the pro
forma net loss and net loss per share amounts assuming the fair value
method was adopted January 1, 1995 did not differ materially from the
comparable amounts reported on the consolidated statements of loss, no
such pro forma amounts have been disclosed.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
(l) Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." This statement requires a liability
approach for measuring deferred taxes based on temporary differences
between the financial statement and income tax bases of assets and
liabilities existing at the balance sheet date using enacted rates
for the years in which the taxes are expected to be paid or recovered.
(m) Net Loss Per Share
During 1997, the FASB issued SFAS No. 128, "Earnings per Share,"
("SFAS No. 128"), which provides for the calculation of "basic" and
"diluted" earnings per share. This statement became effective for
financial statements issued for periods ending after December 15,
1997. Basic earnings per share include no dilution and are computed
by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted
earnings per share reflect, in periods in which they have a dilutive
effect, the effect of common shares issuable upon exercise of stock
options and warrants. Although SFAS No. 128 requires that all periods
presented be restated to comply with the provisions of this statement,
no restatement was required since the Company's basic net loss per
share and primary loss per share for the three months and nine months
ended September 30, 1997 were the same.
(n) Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which established standards for reporting and display of
comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions
to owners. Among other disclosures, SFAS 130 requires that all
items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence
as other financial statements. SFAS No. 130 became effective for
financial statements for periods beginning after December 15, 1997
and requires comparative information for earlier periods. The Company
adopted SFAS No. 130 as of January 1, 1998.
(o) Other Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No.131, "Disclosures About Segments
of an Enterprise and Related Information", which supersedes SFAS No.
14, "Financial Reporting for Segments of a Business Enterprise". SFAS
131 establishes standards for the way that public companies report
information about operating segments in annual financial statements
and requires reporting of selected information about operating
segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products
and services, geographic areas and major customers. SFAS 131
defines operating segments as components of a company about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997 and requires comparative information for
earlier years to be restated. Management has been unable to fully
evaluate the impact, if any, it may have on future financial
statement disclosures. Results of operations and financial position,
however, will be unaffected by implementation of this standard.
2. Organization and Business
The Company is a Delaware corporation which was organized on November 9,
1992. Its wholly-owned Hungarian subsidiary, Teleconstruct, was organized
on March 19, 1993 and is currently holding for sale a luxury 14-unit
condominium building in Budapest. (See Note 7).
On January 2, 1997, the Company acquired three Hungarian Internet service
companies for a purchase price of approximately $1,913,000, of which
$76,000, still due at September 30, 1998, was paid in October 1998.
These acquisitions have been accounted for using the purchase method of
accounting. The Company is operating the Internet service companies
through its wholly-owned subsidiary, EuroWeb Rt.
3. Interim Periods
The accompanying consolidated financial statements for the three months
and nine months ended September 30, 1997 and 1998 are unaudited but, in
the opinion of management, include all adjustments, consisting mainly of
normal recurring accruals necessary for fair presentation. Results for
the interim periods are not necessarily indicative of the results for a
full year.
4. Incorporation by Reference
Reference is made to the Company's annual report on Form 10-KSB for the
fiscal year ended December 31, 1997 and to the notes to the consolidated
financial statements included therein, which are incorporated herein by
reference.
5. Cash Concentration
At September 30, 1998, cash of $671,138, denominated in U.S. dollars, was
on deposit with two money market funds and a major money center bank in
the United States. In addition, $132,780 was on deposit in Hungarian
banks.
6. Advances to, Payable from and Investment in HBC
(a) Amounts receivable from HBC at June 30, 1998 consisted of the
following:
Loans, advances and accrued interest receivable $556,372
Less note payable to HBC, including accrued interest 378,954
$177,418
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
Both the loan receivable and the note payable were originally due on
June 30, 1997 and the note payable was secured by the loan receivable.
Effective July 1, 1998, the companies agreed to offset the asset and
liability and HBC agreed to settle the balance due to the Company by
issuing 68,732 restricted shares of HBC common stock. The valuation
of the stock represented a discount of 30% from its market value at
that date. The Company cannot sell these shares prior to July 1, 1999.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", the Company has classified the investment in stock
of HBC as available for sale and therefore, the balance sheet at
September 30, 1998 includes the investment at current market value.
The unrealized gain on the investment in HBC (a separate component of
stockholders' equity) consists of the following:
Market value at September 30, 1998 $246,698
Market value at July 1, 1998 177,418
Unrealized gain at September 30, 1998 $ 69,280
(b) The Company's prior 9.7% interest in HBC, represented by 250,000 shares
of common stock, was subject to a lock-up agreement through February 7,
1999. On October 29, 1997, the Company sold the 250,000 shares for
$649,000 to the then three principals of HBC's underwriter on its
previous two public offerings. The sales price was approximately
55% of the market price of HBC's common stock as of the date of the
agreement to sell, and approximately 40% at the time of the closing
of the sale. The Company recognized a gain of $524,000 based on a
carrying value of $125,000.
7. Construction-in-Progress and Condominium Building - Held for Sale
(a) Construction-in-progress of two luxury 14-unit condominium buildings
held for sale included the cost of land ($885,000) and construction
costs incurred through December 31, 1997, net of a provision of
$1,350,000 to write down to estimated net realizable value. The
provision was required based on the real estate market conditions
in Budapest.
(b) As of December 31, 1997, deposits of $1,589,653 out of a total sales
price of $1,679,653 were received for all of the apartments in one of
the condominium buildings, with the balance received in April 1998.
All the deposits for the apartments with the exception of one for
$200,000 were received from the Company's former President.
Construction was completed in March 1998 and the sale of the
apartments was recognized during the three months ended March 31,
1998. The sales price of these apartments approximated the cost of the
apartments net of the allocated provision for write-down of
approximately $631,000.
(c) The second condominium building has been leased under a net lease.
At September 30, 1998, the building was carried at cost, net of a
provision of approximately $794,000 to write it down to net realizable
value.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
The provision includes $75,000 which was charged to operations during
the third quarter of 1998. The Company has agreed to sell the building
to a company which is owned by Peter Klenner, the Company's former
President, for $1,500,000, consisting of $500,000 in cash when the
contract is signed and a mortgage for $1,000,000 payable over six
years with interest at 8 1/8% per year.
8. Private Placements and Capital Stock
(a) 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 expenses of approximately
$253,000. No sales of convertible debentures were made during 1998.
Commencing 45 days after issuance, the original principal amount of the
debentures was convertible into shares of the Company's common stock
at a conversion price of 50% of the market price, as defined, of the
Company's common stock. From November 1, 1996 to December 31, 1997,
debentures of $1,492,500 and accrued interest of $46,159 were converted
into 2,677,646 shares of common stock. During the nine months ended
September 30, 1998, an additional $150,000 of debentures and $11,682
of accrued interest were converted into 356,814 shares of common stock.
There were no debentures outstanding at September 30, 1998.
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 $327,000 to the
consolidated statement of loss for the nine months ended September 30,
1997. In addition, financing costs of $150,847 incurred in connection
with the sale of the debentures were charged to operations in the first
nine months of 1997, since a substantial portion of the debentures was
expected to be converted to common stock within a short period.
(b) During the third quarter of 1998, the Company issued 866,666 shares of
its common stock at $.75 per share in two private placements (including
333,333 shares sold to Peter Klenner, the Company's former President).
The net proceeds from these private placements amounted to $549,940
after deducting placement agent fees and offering expenses of $100,061.
In addition, the placement agent for one of the offerings was granted
100,000 five-year warrants to purchase 100,000 shares of common stock
on or after September 16, 1998 at an exercise price of $1.10 per share.
The agreement with Mr. Klenner requires the Company to repurchase
166,666 shares of common stock at $.75 per share upon request by Mr.
Klenner during a six month put period beginning September 12, 1998.
Accordingly, the 166,666 shares and related amounts have been excluded
from stockholders' equity in the accompanying financial statements.
(c) During the third quarter of 1998, Mr. Klenner exercised options to
purchase 135,000 shares of common stock at $1.00 per share.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
(d) Cancelled Public Offering
On September 1, 1998, due to unfavorable conditions in the financial
markets, the Company withdrew an application which it had previously
filed with the Securities and Exchange Commission for a public offering
and $137,055 of costs incurred in connection with the public offering
were charged to expense during the third quarter of 1998.
(e) Proposed Increase in Authorized Shares
On July 15, 1998, the Board of Directors approved a resolution to
increase the authorized number of shares of stock from 20,000,000 to
30,000,000 shares, consisting of 25,000,000 shares of common stock
and 5,000,000 shares of preferred stock. Such resolution is subject
to approval by the shareholders.
9. Stock Option Plan and Warrants
(a) Stock Options
On May 14, 1996, the stockholders approved an increase in the number of
stock options available under the Company's Stock Option Plan (the
"Plan") to 350,000. At December 31, 1997, 90,000 stock options were
available under the Plan and they were granted to the Company's officers
and directors in April 1998. These options are exercisable at $1.625
per share for a period of five years. On July 15, 1998, the Board of
Directors approved an increase in the number of shares of common stock
to be available under the 1993 Stock Option Plan from 350,000 to
700,000. Such resolution is subject to approval by the shareholders.
For options granted to employees at exercise prices equal to the fair
market value of the underlying common stock at the date of grant, no
compensation cost is recognized.
SFAS No. 123 requires the Company to provide, beginning with 1995
grants, pro forma information regarding net income and net income per
common share as if compensation costs for the Company's stock option
plans had been determined in accordance with the fair value based method
prescribed in SFAS No. 123. Such pro forma information has not been
presented because management has determined that the compensation
costs associated with options granted in 1997 and 1998 are not material
to net loss or net loss per common share.
Transactions involving options granted under the Plan during the year
ended December 31, 1997 are summarized below:
Weighted
Number Average
of Exercise
Shares Price
Outstanding, January 1, 775,000 $1.71
Granted 240,000 $1.77
Cancelled (195,000) $2.33
Outstanding, December 31, 820,000 $1.39
Exercisable 720,000 $1.32
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes information about stock options outstanding
under the Plan at December 31, 1997:
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercisable Number Contractual Exercisable Number Exercisable
Prices Outstanding Life Price Exercisable Price
$1.00-3.38 820,000 2.6 $ 1.39 720,000 $ 1.32
(b) Stock Warrants
The following table summarizes information about stock warrants at
December 31, 1997:
Warrants Outstanding
and Exercisable
Number Weighted
Outstanding at Average
December 31, Remaining
Range of exercise prices 1997 Contractual Life
$ 1.25 - $ 4.00 555,700 4.8
$13.20 - 14.75 87,000 1.7
642,700 4.4
10. Commitments and Contingencies
(a) Employment Agreements
In February 1997, Peter Klenner, the former President of the Company,
was retained as a consultant to the Company to oversee the Company's
real estate interests and Internet business. He agreed to render
consulting services for a two-year period for a fee of 100,000 five-year
options exercisable at $2.00 per share. Compensation of $50,000
relating to these options is being charged to operations over a two-year
period.
Also in February, 1997, Robert Genova, the Company's then Chairman of
the Board, resigned as an officer, director and employee, and agreed
to a cancellation of his employment agreement upon payment of $50,000,
which represented the approximate amount owed to him with respect to
1996 salary. In addition, 125,000 stock options which were granted
to him under his employment agreement did not terminate as a result
of the resignation, but continue to be governed by the original terms
of the options. Compensation of $100,000 was charged to operations
during the first quarter of 1997 relating to the extension of the
period of exercisability of the options.
Effective October 1, 1998, Robert Genova was appointed President and
the Company entered into six-year agreements with three officers. The
agreements provide for aggregate annual compensation of $318,000 for the
Chairman of the Board, President and Vice President of the Company, and
the granting of Options to the officers to purchase 300,000 shares of
Common Stock at the exercise price of $1 per share. The Closing high
bid price for the shares on
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
the date of the grant was $1 per share. The Company also agreed to
provide the Chairman of the Board with a Split Dollar Life Insurance
policy in the face amount of up to $1,000,000 to be structured so
that the premiums and other costs paid by the Company would be
recovered by the Company out of insurance proceeds.
(b) Lease Commitment
The Company leases office space in Budapest, Hungary, under a lease
which provides for future minimum annual lease payments of approximately
$114,000 through March 31, 2002.
(c) Financial Consulting Services
In October 1998, the Company retained the financial consulting services
of MJJ Management Group Corp. for two years. Payment for such services
will be in the form of 200,000 three-year Common Stock Purchase Warrants
exercisable at $1 per share.
(d) Service Agreements
The Company has entered into various communications service agreements
with terms in excess of one year in connection with the Internet
business which provide for aggregate minimum annual payments by the
Company as follows:
Year Ending
December 31,
1998 $ 424,000
1999 424,000
2000 424,000
2001 190,000
2002 190,000
$1,652,000
(e) The Year 2000
The Company is conducting a comprehensive review of its internal
computer systems to ensure that these systems are adequately able
to address the issues which may arise in connection with the Year
2000. These issues include the possibility that software which does
not have the capacity to recognize four digits in a date field may
no longer function properly when use of such a date becomes
necessary. The Company also plans to review the status of its
customers and suppliers with regard to this issue in order to assess
the potential impact of non-compliance by such parties on the
Company's operations.
The Company utilizes a significant number of computer software
programs and operating systems throughout its organization,
including applications used in operating the basic Internet service,
network access, providing content and fulfilling various
administrative and billing functions. Since Internet technology is
constantly improving, both the hardware and software elements which
are provided by third parties must be upgraded at intervals ranging
from three to twelve months. A survey by the Company has shown that
approximately
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
90% of these elements are standard software such as Unix and hardware
such as Cisco routers and Sun computers which have already been
corrected. The remaining hardware and software will be updated or
replaced in the near future. Furthermore, the Company has developed
some of its own special software applications which have already
incorporated the necessary modifications to operate properly in the
Year 2000. The Company is prepared to replace certain computer
elements wherever necessary during calendar year 1999, but management
does not believe that this would have any material adverse effect on
the Company's operations or its financial results.
While the Company plans to seek reassurance from its suppliers,
service providers and customers by the early part of 1999, there
can be no assurance that the systems of other companies that the
Company deals with or upon which the Company's systems rely will
be made Year 2000 compliant on a timely basis, or that any such
failure to convert by another company could not have an adverse
effect on the Company.
The Company has not yet developed any formal contingency plans for
addressing any problems which may result if it is unable to
successfully resolve all issues by the Year 2000, or if the Company
encounters material problems as a result of the failure of third
parties to become Year 2000 compliant on a timely basis. The Company
intends to develop preliminary plans for these areas in early 1999,
but any such plan will need to be revised as additional information
becomes available.
Failure on the part of the Company to complete any necessary
remediation by the Year 2000 may have a material adverse impact on
the operations of the Company. Failure of third parties, such as
customers, suppliers and service providers, to remediate Year 2000
problems in their systems may also have a material adverse impact
on the operations of the Company.
<PAGE>
11. Subsequent Event
During November 1998, the Company completed an agreement to sell 51% of
its interest in its Internet subsidiary, EuroWeb Rt. to PanTel Rt. for a
cash payment of $2,200,000. In addition, the purchaser will contribute
$300,000 in cash directly to EuroWeb Rt. The following unaudited
pro-forma condensed consolidated balance sheet as of September 30, 1998
reflects the anticipated closing of this sale and the sale of the
second condominium building in Budapest, as if both transactions had
closed on September 30, 1998:
Assets
Current Assets
Cash and cash equivalents $3,068,952
Investment in Hungarian Broadcasting Corporation 246,698
Prepaid and other current assets 169,716
Total current assets 3,485,366
Mortgage receivable (including current
portion) payable over six years with
interest at 8 1/8% 1,000,000
Investment in EuroWeb Rt., including goodwill 805,667
Other non-current assets 45,208
$5,336,241
Liabilities and Stockholders' Equity
Liabilities
Redeemable common stock $ 125,000
Stockholders' Equity 5,211,241
$5,336,241
Stockholders' Tangible Net Equity
Stockholders' equity, as above $5,211,241
Less: Goodwill 621,176
Stockholders' tangible net equity $4,590,065
Notes:
1. The above pro-forma financial statement includes the accounts
of EuroWeb International Corp. (the "Company") and its two
subsidiaries, Hungarian Teleconstruct Epitesi Rt. and Tele-Media Kft.
All intercompany balances have been eliminated.
2. The balances shown include the September 30, 1998 account balances of
the above-mentioned entities, adjusted to reflect the anticipated
closing of the following transactions:
a. The sale by the Company of 51% of its ownership of EuroWeb Rt.
for $2,200,000 in cash. This transaction is expected to close on
November 6, 1998 or shortly thereafter. The purchaser is also
contributing $300,000 to the capital of EuroWeb Rt.
b. The sale of a condominium building in Budapest, Hungary for
$1,500,000, payable $500,000 in cash at closing and a mortgage of
$1,000,000, payable over six years with interest of 8 1/8%.
c. The payment of all liabilities outstanding as of September 30,
1998, except for Redeemable common stock.
d. No provision has been made either for income earned or expenses
incurred from October 1, 1998 to the anticipated dates of closing
of the above-described transactions.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operations
The Company was organized on November 9, 1992. It was in the development
stage through December 31, 1993 and has been unprofitable to date. Through
its wholly-owned Hungarian subsidiary, Teleconstruct Epitesi Rt.
("Teleconstruct") the Company built for sale two luxury 14-unit condominium
buildings in Budapest. During 1996 and 1997, the Company sold one of the
apartments in the first building ("Building A") to a third party and agreed
to sell the remaining 13 apartments in Building A prior to its completion to
M&A Corp. ("M&A"), a corporation wholly owned by Peter Klenner ("Klenner"),
its former president. It was agreed that the closing of the sale would take
place on the completion of the second building ("Building B"). Klenner
agreed to lend the Company funds to complete Building B, which loans were to
be applied against his purchase price of Building A. The sale of Building
A was recognized for accounting purposes in the three months ended March 31,
1998.
The Company completed Building B in March 1998 and leased it to an
unaffiliated person for a five-year term commencing April 1, 1998 at a net
rental of $22,000 per month with an option to purchase the building for
$2,000,000. At September 30, 1998, Building B was carried at cost, net of a
provision of approximately $794,000 to write it down to net realizable value.
The provision includes $50,000 which was charged to operations during the
third quarter of 1998.
The Company intends to sell the building to a company which is owned by Peter
Klenner for $1,500,000, consisting of $500,000 in cash when the contract is
signed and a mortgage for $1,000,000 payable over six years with interest at
8 1/8% per year.
In January 1997, the Company acquired three operating Internet service
provider businesses and has consolidated the three businesses under one roof.
At present, EuroWeb is a leading Internet service provider operating in
Hungary that provides full Internet and Web Site solutions and services
primarily to businesses. The Company offers a comprehensive range of
services to deliver Internet solutions designed to improve clients' business
processes. The Company's services include providing access to an
international backbone, design of web sites, hosting of web sites, strategy
consulting, analysis and design, software development, electronic commerce
and discount Fax. The Company markets its services principally to medium-sized
and large companies.
In February 1997, Robert Genova, the Company's then Chairman of the Board,
resigned as an officer, director and employee, and agreed to a cancellation
of his employment agreement upon payment of $50,000, which represented the
approximate amount owed to him with respect to 1996 salary. In addition,
125,000 stock options which were granted to him under his employment
agreement will not terminate as a result of the resignation, but will
continue to be governed by the original terms of the options. Compensation
<PAGE>
of $100,000 was charged to operations for the year ended December 31, 1997,
relating to the period of exercisability of the options.
In February 1997, Peter Klenner was retained as a consultant to the Company
to oversee the Company's real estate interests and Internet business. He
agreed to render consulting services for a two-year period for a fee of
100,000 five-year options exercisable at $2.00 per share. Compensation of
$50,000 relating to these options is being charged to operations over a two-year
period.
Effective July 9, 1997, the Company changed its name to EuroWeb International
Corp. and increased the authorized number of shares of capital stock from
10,000,000 shares of common stock to 15,000,000 shares of common stock and
5,000,000 shares of preferred stock. In addition, one of the three Internet
subsidiaries changed its name to EuroWeb Rt. and the accounts of the three
subsidiaries were consolidated into this company.
Effective October 1, 1998, Robert Genova was appointed President and the
Company entered into six-year agreements with three officers. The agreements
provide for aggregate annual compensations of $318,000 for the Chairman of
the Board, President and Vice President of the Company, and the granting of
Options to the officers to purchase 300,000 shares of Common Stock at the
exercise price of $1 per share. The Closing high bid price for the shares on
the date of the grant was $1 per share. The Company also agreed to provide
the Chairman of the Board with a Split Dollar Life Insurance policy in the
face amount of up to $1,000,000 to be structured so that the premiums and
other costs paid by the Company would be recovered by the Company out of
insurance proceeds.
For the nine months ended September 30, 1998, the Company incurred a net loss
of $766,462 ($.15 per share); the net loss for the nine months ended
September 30, 1997 amounted to $1,795,277 ($.54 per share). Without
amortization of goodwill, costs of the cancelled public offering and
write-down of the condominium building to market value, the net loss for
nine months would have been $263,407 ($.05 per share) in 1998 compared with
$1,506,277 ($.45 per share) in 1997.
For the three months ended September 30, 1998 and 1997, the net loss amounted
to $389,358 ($.07 per share) and $383,584 ($.10 per share), respectively.
The net loss for the three months, exclusive of amortization of goodwill,
costs of the cancelled public offering and write-down of the condominium
building to market value amounted to $80,303 ($.01 per share) in 1998
compared with $285,584 ($.07 per share) in 1997.
Total revenues for the nine months ended September 30, 1998 amounted to
$3,172,974, compared with revenues of $931,705 for the nine months ended
September 30, 1997. Revenues from the Internet business amounted to
$1,345,953 and $931,705 for the nine months ended September 30, 1998 and
1997, respectively. The increase of $414,248 in Internet revenues was due
primarily to an increase in the number of subscribers.
<PAGE>
Cost of construction of $1,723,870 for the nine months ended September 30,
1998 represents the costs associated with the construction revenue recognized
during the period.
Compensation and related costs decreased to $484,207 for the nine months
ended September 30, 1998 from $558,928 in 1997. The 1997 amount includes
approximately $119,000 more of stock compensation to former officers of the
Company than the 1998 amount.
Network costs of $562,841 were incurred for the nine months ended September
30, 1998 in connection with the Internet business as compared with $381,736
in the comparable period of 1997. Network costs represent connection fees
charged to the Company by the owner of the international and Hungarian
telephone lines leased to the Company and subleased by the Company to its
subscribers. The increase in network costs was due primarily to the increase
in the number of subscribers.
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 nine months ended September 30, 1998 and 1997 amounted
to $291,000 and $289,000, respectively.
Financing costs of $150,847 incurred in connection with the sale of
convertible debentures were charged to operations during the nine months
ended September 30, 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 1998.
Interest expense for the nine months ended September 30, 1997 includes
$327,000 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.
On September 1, 1998, due to unfavorable conditions in the financial markets,
the Company withdrew an application which it had previously filed with the
Securities and Exchange Commission for a public offering and $137,055 of
costs incurred in connection with the public offering were charged to expense
during the third quarter of 1998.
Liquidity and Capital Resources
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 expenses of approximately $253,000. No sales of
convertible debentures were made in 1998.
<PAGE>
From November 1, 1996 to December 31, 1997, debentures of $1,492,500 and
accrued interest of $46,159 were converted into 2,677,646 shares of common
stock. During the nine months ended September 30, 1998, an additional
$150,000 of debentures and $11,682 of accrued interest were converted into
356,814 shares of common stock.
On July 15, 1998, the Board of Directors approved an increase in the
authorized number of shares of stock from 20,000,000 shares to 30,000,000
shares, consisting of 25,000,000 shares of common stock and 5,000,000 shares
of preferred stock. The Directors also approved an increase in the number of
shares of common stock to be available under the Company's 1993 Incentive
Stock Option Plan from 350,000 to 700,000. Both of these actions are subject
to future approval by the Company's shareholders.
During the third quarter of 1998, the Company issued 866,666 shares of its
common stock at $.75 per share in two private placements (including 333,333
shares sold to Peter Klenner). The net proceeds from these private
placements amounted to $549,940 after deducting placement agent fees and
offering expenses of $100,061. In addition, the placement agent for one of
the offerings was granted 100,000 five year warrants to purchase 100,000
shares of common stock on or after September 16, 1998 at an exercise price of
$1.10 per share.
The agreement with Mr. Klenner requires the Company to repurchase 166,666
shares of common stock at $.75 per share upon request by Mr. Klenner during
a six month put period beginning September 12, 1998.
During the third quarter of 1998, Mr. Klenner exercised options to purchase
135,000 shares of common stock at $1.00 per share.
During November 1998, the Company finalized an agreement to sell 51% of the
shares of stock of its Internet subsidiary, EuroWeb Rt. to Pan Tel Rt. for a
cash payment of $2,200,000. In addition, the purchaser will contribute
$300,000 in cash directly to EuroWeb Rt.
The Company currently anticipates that its current cash position and its cash
flows from current operations, together with the proceeds of the sale of 51%
of EuroWeb Rt., and the cash from the sale of the second condominium building
will be sufficient to meet its presently anticipated working capital and
capital expenditure requirements for at least the next 12 months. The
Company's future liquidity and capital requirements will depend upon numerous
factors, including the success of the Company's existing and new service
offerings and competing technological and market developments. The Company
may be required to raise additional funds through public or private
financing, strategic relationships or other arrangements. There can be no
assurance that such additional funding, if needed, will be available on terms
acceptable to the Company, or at all. If adequate funds are not available on
acceptable terms, the Company may be unable to develop or enhance its
services and products, take advantage of future opportunities or respond to
competitive pressures, any of which could have a material adverse effect on
the Company's business, results of operations and financial condition.
The Year 2000
The Company is conducting a comprehensive review of its internal computer
systems to ensure that these systems are adequately able to address the
issues which may arise in connection with the year 2000. These issues
include the possibility that software which does not have the capacity to
recognize four digits in a date field may no longer function properly when
use of such a date becomes necessary. The Company also plans to review the
status of its customers and suppliers with regard to this issue in order to
assess the potential impact of non-compliance by such parties on the
Company's operations.
The Company utilizes a significant number of computer software programs and
operating systems throughout its organization, including applications used in
operating the basic Internet service, network access, providing content and
fulfilling various administrative and billing functions. Since Internet
technology is constantly improving, both the hardware and software elements
which are provided by third parties must be upgraded at intervals ranging
from three to twelve months. A survey by the Company has shown that
approximately 90% of these elements are standard software such as Unix and
hardware such as Cisco routers and Sun computers which have already been
corrected. The remaining hardware and software will be updated or replaced
in the near future. Furthermore, the Company has developed some of its own
special software applications which have already incorporated the necessary
modifications to operate properly in the Year 2000. The Company is prepared
to replace certain computer elements wherever necessary during calendar year
1999, but management does not believe that this would have any material
adverse effect on the Company's operations or its financial results.
While the Company plans to seek reassurance from its suppliers, service
providers and customers by the early part of 1999, there can be no assurance
that the systems of other companies that the Company deals with or upon which
the Company's systems rely will be made Year 2000 compliant on a timely
basis, or that any such failure to convert by another company could not have
as adverse effect on the Company.
The Company has not yet developed any formal contingency plans for addressing
any problems which may result if it is unable to successfully resolve all
issues by the Year 2000, or if the Company encounters material problems as a
result of the failure of third parties to become Year 2000 compliant on a
timely basis. The Company intends to develop preliminary plans for these
areas in early 1999, but any such plan will need to be revised as additional
information becomes available.
Failure on the part of the Company to complete any necessary remediation by
the Year 2000 may have a material adverse impact on the operations of the
Company. Failure of third parties, such as customers, suppliers and service
providers, to remediate Year 2000 problems in their systems may also have a
material adverse impact on the operations of the Company.
<PAGE>
Inflation and Seasonality
The rate of inflation in Hungary was 18% in 1997 as compared with 23% in 1996
and 28% in 1995. Prices have been rising rapidly in recent years.
Internet operations are not seasonal.
Foreign Currency
The Company is subject to significant foreign exchange risk. There are
currently no meaningful ways to hedge currency risk in Hungary. Therefore,
the Company's ability to limit its exposure to currency fluctuations is
significantly restricted. Although the forint has become exchangeable
outside Hungary, there is not yet a freely convertible exchange market in
place for the forint. In addition, Hungarian law permits the repatriation of
foreign currency only for dividends to the extent of capital investment and
earnings, as determined under applicable Hungarian law. There can be no
assurances as to the future exchangeability or convertibility of forints.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
Except for historical information provided in the Management's Discussion and
Analysis, statements made throughout this document are forward-looking and
contain information about financial results, economic conditions, trends and
known uncertainties. The Company cautions the reader that actual results
could differ materially from those expected by the Company, depending on the
outcome of certain factors (some of which are described with the forward-looking
statements) including: 1) heightened competition, particularly price
competition, reducing margins; and 2) slower growth than expected in the
market for Internet services in Hungary.
<PAGE>
PART II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits (numbers below reference Regulations S-B)
(1) (a) Revised Form of Agreement Among Underwriters, Underwriting
Agreement, and Selected Dealer Agreement(7)
(a)(i) Amended form of Underwriting Agreement(8)
(3) (a) Certificate of Incorporation filed November 9, 1992(1)
(b) Amendment to Certificate of Incorporation filed July 9, 1997
(c) By-laws(1)
(d) Revised Proposed Certificate of Designation Relating to the
Series A Convertible Preferred Stock(8)
(4) (a) Form of Common Stock Certificate(1)
(b) Form of Underwriters' Warrants to be sold to Underwriters(1)
(c) Placement Agreement between Registrant and J.W. Barclay & Co.,
Inc. and form of Placement Agent Warrants issued in connection
with private placement financing(1)
(d) Form of 10% Convertible Debenture used in connection with
private placement financing pursuant to Regulation S(3)
(e) Form of Common Stock Purchase Warrant in connection with
private placement financing under Section 506 of Regulation
D(3)
(f) Revised Form of Warrant Agreement including Form of Common
Stock Purchase Warrant Certificate(7)
(g) Form of Series A Preferred Stock Certificate(7)
(h) Revised Form of Underwriter's Unit Warrant(7)
(i) Form of Unit Certificate(7)
<PAGE>
(j) Form of Common Stock Purchase Warrant Certificate(7)
( 5)(a) Opinion of Cohen & Cohen as to legality of shares being
offered(7)
(10)(a) Consulting agreement between Registrant and Klenner Securities
Ltd.(1)
(b) Consulting agreement between Registrant and Robert Genova(1)
(c) Consulting agreement between Registrant and Laszlo
Modransky(1)
(d) 1993 Incentive Stock Option Plan(1)
(e) Sharing agreement for space and facilities between Registrant
and Hungarian Telephone and Cable Corp.(1)
(f) Articles of Association (in English) of Teleconstruct Building
Corp.(1)
(g) Articles of Association (in English) of Termolang Engineering
and Construction Ltd.(1)
(h) Letter of intent between Teleconstruct Building Corp. and
Pilistav(1)
(i) Employment agreement between Registrant and Robert Genova(2)
and termination agreement dated February 5, 1997(3)
(j) Employment agreement between Registrant and Peter E.
Klenner(2) and termination agreement dated October 30, 1996,
and agreement for sale of condominium unit to M&A(3)
(k) Employment agreement between Registrant and Frank R. Cohen(2)
and modifications of employment agreement(3)
(l) Letter of Intent agreement between Registrant and Raba-Com
Rt.(3)
(m) Letter of Intent agreement between Registrant and Kelet-Nograd
Rt.(3)
(n) Letter of Intent agreement between Registrant and 3 Pilistav
villages for installation of cable in those areas(3)
(o) Lease agreement between Registant's subsidiary EUNET Kft. and
Varosmajor Passage, Kft. for office space(3)
(p) Acquisition agreement between Registrant and KFKI Computer
Systems Corp. dated December 13,1996(3)
(q) Acquisition agreement between Registrant and E-Net Hungary(3)
(r) Acquisition agreement between Registrant and MS Telecom Rt.(3)
(s) Employment agreement between Registrant and Imre Kovats(3)
(t) Employment agreement between Registrant and Csaba Toro(3)
(u) Promissory Note from Registrant to HBC(3)
(v) Communication services agreement between Registrant and MCI
Global Resources, Inc.(4)
(w) Lease and option agreement for Building B as of April 1, 1998
with Hafisa Kft.(5)
(x) License agreement between GRIC Communications, Inc. and
EuroWeb Internet Service Provider Co.(5)
(y) Consulting Agreement between Registrant and Eurus Capital
Corporation and Rescission Agreement(7)
(y)(i)Agreement rescinding Option Agreement with Eurus Capital
Corporation(8)
<PAGE>
(z) Financial Consulting Agreement between Registrant and J.W.
Barclay & Co., Inc.(7)
(aa) Mergers and Acquisitions Agreement between Registrant and J.W.
Barclay(7)
(bb) Placement Agreement between Registrant and J.P. Carey, Inc.
and form of Placement Agent Warrants issued in connection with
private placement financing(9)
(cc) Private Placement Agreement between Registrant and Peter E.
Klenner(9)
(dd) Employment Agreement between Registrant and Csaba Toro(9)
(ee) Employment Agreement between Registrant and Robert Genova(9)
(ff) Employment Agreement between Registrant and Frank R. Cohen(9)
(21) Subsidiaries of the Registrant(7)
(23) (a) Consent of Cohen & Cohen (included in their opinion filed as
Exhibit 5(a))(7)
(b) Consent of BDO Seidman(7)
(c) Consent of Dr. Istvan L. Fekete(8)
(25) Power of Attorney (included on signature page)
(1) All Exhibits are incorporated by reference to Registrant's Registration
Statement on Form SB-2 dated May 12, 1993 (Registration No. 33-62672-NY,
as amended)
(2) Filed with Form 8-K as of February 17, 1994
(3) Filed with Form 10-KSB for year ended December 31, 1996
(4) Filed with Form 10-QSB for quarter ended September 30, 1997
(5) Filed with Form 10-KSB for year ended December 31, 1997
(6) Filed with Registration Statement 333-52841
(7) Filed with Amendment No. 1 to Registration Statement 333-52841
(8) Filed with Amendment No. 2 to Registration Statement 333-52841
(9) Filed with Form 8-K as of October 14, 1998
B. No reports on Form 8-K have been filed during the quarter covered by this
report on Form 10-QSB but a Form 8K was filed after this quarter on
October 14, 1998.
<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 13th day of November 1998.
EUROWEB INTERNATIONAL CORP.
By s/Frank R. Cohen
Chairman of the Board
[ARTICLE] 5
[CIK] 0000905428
[NAME] EUROWEB INTERNATIONAL CORP
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] SEP-30-1998
[CASH] 803,918
[SECURITIES] 246,698
[RECEIVABLES] 287,984
[ALLOWANCES] 36,986
[INVENTORY] 0
[CURRENT-ASSETS] 1,370,864
[PP&E] 1,908,631
[DEPRECIATION] 203,065
[TOTAL-ASSETS] 4,465,573
[CURRENT-LIABILITIES] 697,980
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 6,309
[OTHER-SE] 3,703,243
[TOTAL-LIABILITY-AND-EQUITY] 4,465,573
[SALES] 3,070,421
[TOTAL-REVENUES] 3,172,974
[CGS] 0
[TOTAL-COSTS] 3,882,682
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 56,754
[INCOME-PRETAX] (766,462)
[INCOME-TAX] 0
[INCOME-CONTINUING] (766,462)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (766,462)
[EPS-PRIMARY] (.15)
[EPS-DILUTED] (.15)
</TABLE>
