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 June 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 5,306,750 Shares
(Class) (Outstanding at June 30, 1998)
Transitional Small Business Disclosures Format (Check one): Yes No X
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 1997 June 30, 1998
(Audited) (Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 697,948 $ 263,089
Accounts receivable, less allowance
for doubtful accounts of $39,216 and $37,293 172,437 194,903
Receivable from Hungarian Broadcasting
Corporation 546,053 556,372
Prepaid and other current assets 103,073 79,165
Total current assets 1,519,511 1,093,529
Property and equipment, less accumulated
depreciation of $102,402 and $148,594 240,887 224,060
Condominium building held for sale, net
of $718,870 allowance for reduction
to market value, and accumulated depreciation
of $10,000 - 1,590,000
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 $577,000 1,529,912 1,364,707
Other 70,094 205,018
$6,640,304 $4,477,314
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to Hungarian Broadcasting
Corporation $ 368,456 $ 378,954
Payable to former owners of acquired
businesses 191,000 76,000
Accounts payable and accrued expenses 789,623 632,618
Total current liabilities 1,349,079 1,087,572
10% Convertible Debentures 150,000 -
Deferred Revenue 1,589,653 46,000
Total liabilities 3,088,732 1,133,572
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 4,949,936 and 5,306,750 4,950 5,307
Additional paid-in capital 19,770,725 19,932,050
Accumulated deficit (16,188,203) (16,565,307)
Accumulated other comprehensive loss:
Foreign currency translation adjustment (35,900) (28,308)
Total stockholders' equity 3,551,572 3,343,742
$6,640,304 $4,477,314
See accompanying notes to consolidated financial statements.
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Revenues
Internet $ 321,828 $ 455,100 $ 608,080 $ 840,000
Construction income - - - 1,724,468
Rent income - 66,000 - 66,000
Total 321,828 521,100 608,080 2,630,468
Expenses(Income)
Cost of construction - - - 1,723,870
Compensation and related costs 148,450 150,999 386,117 316,945
Network costs 119,332 282,029 194,493 453,269
Consulting and professional fees 110,972 49,674 203,362 93,124
Rent 22,906 32,589 55,193 65,593
Depreciation and amortization
of property and equipment 33,860 37,119 54,268 56,192
Amortization of goodwill 105,000 97,000 191,000 194,000
Interest and dividend income (21,211) (10,142) (40,211) (26,850)
Interest expense 426,320 13,322 854,517 15,117
Financing costs 73,779 - 133,703 -
Foreign currency (gain)loss 1,337 (35,428) 75,761 6,148
Loss on sale of office
condominium unit 75,000 - 75,000 -
Other 189,661 25,957 312,570 110,164
Total 1,285,406 643,119 2,495,773 3,007,572
Net loss (963,578) (122,019) (1,887,693) (377,104)
Other comprehensive gain:
Foreign currency translation gain - 19,727 - 7,592
Comprehensive loss $ (963,578) $ (102,292) $(1,887,69 $ (369,512)
Net loss per share - basic
and diluted $ (.30) $ (.02) $ (.63) $ (.07)
Weighted average number of common
shares outstanding 3,197,570 5,210,725 3,007,469 5,118,892
</TABLE>
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
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 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 (144,000) (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 845,484 846 604,589 - -
Incremental interest from
revaluation of convertible
debentures - - 780,000 - -
Net loss for the period - - - (1,887,693) -
Balance, June 30, 1997 3,177,753 $3,178 $18,831,680 $(15,545,668) $ -
SIX MONTHS ENDED JUNE 30, 1998:
Balance, January 1, 1998 4,949,936 $4,950 $19,770,725 $(16,188,203) $(35,900)
Issuance of shares on
conversion of debentures 356,814 357 161,325 - -
Net loss for the period - - - (377,104) -
Foreign currency
translation gain - - - - 7,592
Balance, June 30, 1998 5,306,750 $5,307 $19,932,050 $(16,565,307) $(28,308)
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
EUROWEB INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1997 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,887,693) $(377,104)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of
property and equipment 54,268 56,192
Amortization of goodwill 191,000 194,000
Amortization of imputed interest income (26,000) -
Options granted/extended as compensation 125,000 -
Incremental interest on revaluation of
convertible debentures 780,000 -
Interest on debentures paid in shares of
capital stock 20,435 11,682
Loss on sale of property 75,000 247
Foreign currency loss 75,761 6,148
Changes in operating assets and liabilities:
(Increase)decrease in:
Accounts receivable (219,133) 67,534
VAT refund receivable 19,396 -
Receivables from related parties 616 -
Prepaid and other assets (65,030) (111,016)
Increase(decrease) in:
Accounts payable and accrued expenses 395,728 (157,005)
Compensation payable to officers (50,000) -
Payable to former owners of acquired businesses - (115,000)
Deferred revenue - 46,000
Payable to former officer 125,059 -
Net cash used in operating activities (385,593) (378,322)
CASH FLOWS FROM INVESTING ACTIVITIES
Receivable from Hungarian Broadcasting Corporation, net 16,084 179
Acquisition of Internet Service Companies, net of
cash acquired (458,629) -
Acquisition of property and equipment and
construction in progress (477,023) (29,365)
Proceeds from sale of office condominium unit 134,000 -
Acquisition of intangibles - (28,795)
Net cash used in investing activities (785,568) (57,981)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debt 780,000 -
Proceeds from note payable to Hungarian
Broadcasting Corporation 350,000 -
Net cash provided by financing activities 1,130,000 -
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH (75,761) 1,444
DECREASE IN CASH AND CASH EQUIVALENTS (116,922) (434,859)
Cash and cash equivalents at beginning of period 495,703 697,948
Cash and cash equivalents at end of period $ 378,781 $ 263,089
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 $ 605,435 $ 161,682
See accompanying notes to consolidated financial statements.
<PAGE>
EUROWEB INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
(Unaudited)
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, for which move-in permits have been
obtained, has been leased under a net lease which provides for a
monthly rental of $22,000 for a period of five years. The lessee has
the right to purchase the leased building for $2,000,000 during the
lease period. The building is carried at cost, net of a provision
of approximately $719,000 to write down to net realizable value.
8. Private Placements
(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 the Company's shares of 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 six
months ended June 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 June 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 $780,000 to the
consolidated statement of loss for the six months ended June 30, 1997.
In addition, financing costs of $133,703 incurred in connection with
the sale of the debentures were charged to operations in the first six
months of 1997, since a substantial portion of the debentures was
expected to be converted to common stock within a short period.
<PAGE>
On August 26, 1997, the Board of Directors extended the term of the employment
agreement with Frank Cohen, its Chairman of the Board, to December 31, 2005 and
included a provision in the contract to provide Mr. Cohen with a split dollar
life insurance policy with a face amount of $1,000,000. The policy is to be
structured so that the premiums and other costs paid by the Company in
connection with the policy would be recovered by the Company out of the
proceeds of the policy.
For the six months ended June 30, 1998, the Company incurred a net loss of
$377,104 ($.07 per share); the net loss for the six months ended June 30, 1997
amounted to $1,887,693 ($.63 per share).
For the three months ended June 30, 1998 and 1997, the net loss amounted to
$122,019 ($.02 per share) and $963,578 ($.30 per share), respectively. The
net loss, exclusive of amortization of goodwill for the three months,
amounted to $25,019 ($.005 per share) in 1998 compared with $858,578 ($.27
per share) in 1997.
Total revenues for the six months ended June 30, 1998 amounted to $2,630,468,
compared with revenues of $608,080 for the six months ended June 30, 1997.
Revenues from the Internet business amounted to $840,000 and $608,080 for the
six months ended June 30, 1998 and 1997, respectively. The increase of
$231,920 in Internet revenues was due primarily to an increase in the number
of subscribers.
Cost of construction of $1,723,870 for the six months ended June 30, 1998
represents the costs associated with the construction revenue recognized
during the period.
Compensation and related costs decreased to $316,945 for the six months ended
June 30, 1998 from $386,117 in 1997. The 1997 amount includes approximately
$113,000 more of stock compensation to former officers of the Company than
the 1998 amount.
Network costs of $453,269 were incurred for the six months ended June 30, 1998
in connection with the Internet business as compared with $194,493 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 six months ended June 30, 1998 and 1997 amounted to
$194,000 and $191,000, respectively.
Financing costs of $133,703 incurred in connection with the sale of convertible
debentures were charged to operations during the six months ended June 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 six months ended June 30, 1997 includes $780,000 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.
<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
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] JUN-30-1998
[CASH] 263,089
[SECURITIES] 0
[RECEIVABLES] 194,903
[ALLOWANCES] 37,293
[INVENTORY] 0
[CURRENT-ASSETS] 1,093,529
[PP&E] 1,972,654
[DEPRECIATION] 158,594
[TOTAL-ASSETS] 4,477,314
[CURRENT-LIABILITIES] 1,087,572
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 5,307
[OTHER-SE] 3,338,435
[TOTAL-LIABILITY-AND-EQUITY] 4,477,314
[SALES] 2,564,468
[TOTAL-REVENUES] 2,630,468
[CGS] 0
[TOTAL-COSTS] 2,992,455
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 15,117
[INCOME-PRETAX] (377,104)
[INCOME-TAX] 0
[INCOME-CONTINUING] (377,104)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (377,104)
[EPS-PRIMARY] (.07)
[EPS-DILUTED] (.07)
</TABLE>
