SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 8 - K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 23, 1999
Euroweb International Corp.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-1200 13-3696015
(Commission File Number) (IRS Employer Identification No.)
445 Park Avenue, 15th Floor, New York, NY 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 758-9870
N/A
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7 Financial Statements and Exhibits
(a) Financial statements of business acquired
1. Financial statements of Global Network Services a.s. as of
December 31, 1998 and for each of the two years in the period
ended December 31, 1998
2. Financial statements of Global Network Services a.s. for the six
months ended June 30, 1999 and 1998 (unaudited)
(b) Unaudited pro forma consolidated financial information
1. Unaudited pro forma consolidated statements of operations for the
year ended December 31, 1998 and the six months ended June 30,
1999
<PAGE>
Global Network Services a.s.
Financial Statements
Years Ended December 31, 1998 and 1997
<PAGE>
Global Network Services a.s.
Financial Statements
Years Ended December 31, 1998 and 1997
<PAGE>
Global Network Services a.s.
Contents
Independent auditors' report 3
Financial statements:
Balance sheet 4
Statements of operations and deficit 5
Statements of cash flows 6
Notes to financial statements 7-10
<PAGE>
Independent Auditors' Report
Board of Directors
Euroweb International Corp.
New York, New York
We have audited the accompanying balance sheet of Global Network Services a.s.
(the "Company") as of December 31, 1998, and the related statements of
operations and deficit and cash flows for each of the two years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Network Services a.s.
as of December 31, 1998, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles in the United States.
BDO-SK s.r.o.
Bratislava
September 23, 1999
<PAGE>
Global Network Services a.s.
Balance Sheet
December 31, 1998
Sk 000's
Assets
Current:
Cash 778
Accounts receivable, net of allowance for
doubtful accounts of Sk 3,500 1,898
Inventories 2,371
Other (Note 2) 4,979
------
Total current assets 10,026
Property and equipment, net (Note 3) 9,327
------
19,353
======
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses 19,324
Payable to stockholder (Note 4) 28,920
Deferred revenues 4,412
------
Total current liabilities 52,656
------
Commitments (Note 5)
Stockholders' deficit (Note 6):
Capital stock, 1000 Sk nominal value per A share,
registered, issued and outstanding 1,000 1,000
Additional paid-in capital 123
Deficit (34,426)
------
Total stockholders' deficit (33,303)
------
19,353
======
See accompanying notes to financial statements.
<PAGE>
Global Network Services a.s.
Statements of Operations and Deficit
Year ended December 31, 1998 1997
Sk 000's
Revenues:
Internet services 23,739 9,927
Sale of devices 1,069 11
------- -------
24,808 9,938
------- -------
Expenses (income):
Cost of revenues 11,491 7,756
Selling, general and administrative 22,856 11,309
Depreciation 4,084 3,348
Interest expense (Note 4) 4,913 4,061
Interest income (Note 4) (38) (4,739)
------- -------
43,306 21,735
------- -------
Net loss (18,498) (11,797)
Deficit, beginning of year (15,928) (4,131)
------- -------
Deficit, end of year (34,426) (15,928)
======= =======
See accompanying notes to financial statements.
<PAGE>
Global Network Services a.s.
Statements of Cash Flows
Year ended December 31, 1998 1997
Sk 000's
Cash flows from operating activities:
Net loss (18,498) (11,797)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 4,084 3,348
Provision for bad debts 1,800 1,700
Decrease (increase) in:
Accounts receivable 2,412 (6,073)
Inventories (1,019) (644)
Other assets (2,197) (70)
Increase (decrease) in:
Accounts payable, accrued expenses and
deferred revenue 9,013 (328)
------- -------
Net cash used in operating activities (4,405) (13,864)
------- -------
Cash flows from investing activities:
Acquisition of property and equipment (3,268) (3,319)
------- -------
Cash flows from financing activities:
Increase in additional paid-in capital 11 8
Payable to stockholder 7,279 17,641
------- -------
Net cash provided by financing activities 7,290 17,649
------- -------
Net increase (decrease) in cash (383) 466
Cash, beginning of year 1,161 695
------- -------
Cash, end of year 778 1,161
======= =======
See accompanying notes to financial statements.
<PAGE>
Global Network Services a.s.
Notes to Financial Statements
1. Summary of (a) Organization and Description of Business
Accounting Global Network Services a.s. (the "Company") is a
Policies Slovak corporation, which provides Internet services
primarily to businesses in Bratislava and other cities
in the Slovak Republic.
(b) Basis of Presentation
The financial statements of the Company have been
prepared in conformity with accounting principles
generally accepted in the United States and are stated
in Slovak korunas (Sk) which is the currency of the
Slovak Republic. On December 31, 1998 and 1997, the
U.S. exchange rate was approximately $.028 per Slovak
koruna.
(c) 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 at the
date of the financial statements and revenues and
expenses during the reporting period. Actual results
could differ from those estimates.
(d) Revenue Recognition
Revenue from monthly Internet services are recognized in
the month in which the services are provided. Sales of
Internet devices are recognized upon shipment.
(e) Inventory Valuation
Inventories, which are comprised of Internet devices,
are stated at the lower of cost or market. Cost has been
determined on the first-in, first-out basis.
(f) Property and Equipment, and Depreciation
Property and equipment are stated at cost. Depreciation
is computed by the straight-line method over the
estimated useful life of 4 years.
<PAGE>
Global Network Services a.s.
Notes to Financial Statements
(g) Financial Instruments
The carrying amounts of financial instruments, including
cash, accounts receivable and payable to stockholder
approximated fair value as of December 31, 1998 because
of the relatively short maturity of these instruments.
(h) Income Taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes". This statement
requires an asset and 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.
(i) Effect of Recently Issued Accounting Standards
In March 1998, the American Institute of Certified
Public Accountants ("AICPA") issued Statement of
Position ("SOP") 98-1. "Accounting for the Cost of
Computer Software Developed or Obtained for Internal
Use" ("SOP 98-1). SOP 98-1 is effective for financial
statements for years beginning after December 15, 1998.
SOP 98-1 provides guidance over accounting for computer
software developed or obtained for internal use
including the requirement to capitalize specified costs
and amortization of such costs. The Company does not
expect the adoption of this standard to have a material
effect on its capitalization policy.
<PAGE>
Global Network Services a.s.
Notes to Financial Statements
In June 1998, the FASB issued SFAS No. 133, "Accounting
for Derivatives and Hedging Activities", which
establishes accounting and reporting standards for
derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities.
SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company
does not expect the adoption of this statement to have
a significant impact on the Company's results of
operations, financial position or cash flows.
2. Other Current Other current assets include the following:
Assets
December 31, 1998 Sk 000's
Advances to vendors 1,403
Employee advances 1,347
VAT refund receivable 1,261
Other 968
------
4,979
======
3. Property and Property and equipment consists of the following:
Equipment
December 31, 1998 Sk 000's
Equipment and software 14,637
Vehicles 2,629
------
17,266
Less: Accumulated depreciation 7,939
------
9,327
======
<PAGE>
Global Network Services a.s.
Notes to Financial Statements
4. Related Party Payable to stockholder represents disbursements made by the
Transactions majority stockholder on behalf of the Company. The Company
was charged interest of 4,913 Sk and 4,061 Sk during the
years ended December 31, 1998 and 1997, respectively.
During 1997, the Company purchased from the majority
stockholder a third party noninterest-bearing note with a
face amount of 20,944 Sk for 16,216 Sk. The Company
recognized interest income of 4,728 Sk upon collection of
the note.
5. Lease Future minimum lease payments under a noncancellable lease
Commitment for office facilities expiring on September 30, 2001 are
as follows:
Sk 000's
1999 1,107
2000 1,107
2001 830
Rent expense was approximately 1,400 Sk for the years ended
December 31, 1998 and 1997.
6. Subsequent In 1999, the Company raised 35,500 Sk of capital by issuing
Event 3,550 B shares.
<PAGE>
Global Network Services a.s.
Unaudited Financial Statements
Six Months Ended June 30, 1999 and 1998
<PAGE>
Global Network Services a.s.
Unaudited Financial Statements
Six Months Ended June 30, 1999 and 1998
<PAGE>
Global Network Services a.s.
Contents
Financial statements:
Balance sheet 14
Statements of operations and deficit 15
Statements of cash flows 16
Notes to financial statements 17
<PAGE>
Global Network Services a.s.
Balance Sheet
(unaudited)
June 30, 1999
Sk 000's
Assets:
Current:
Cash and cash equivalents $33,072
Accounts receivable, net of allowance for doubtful
accounts of Sk 4,000 4,303
Inventories 2,732
Other 6,119
-------
Total current assets 46,226
Property and equipment, net 9,208
-------
$55,434
=======
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses $20,926
Payable to parent 32,518
Deferred revenues 3,944
-------
Total current liabilities 57,388
-------
Stockholders' deficit:
Capital stock:
1,000 Sk nominal value per A share, registered, issued
and outstanding 1,000 1,000
10,000 Sk nominal value per B share, registered, issued
and outstanding 3,550 35,500
Additional paid-in capital 137
Deficit (38,591)
-------
Total stockholders' deficit (1,954)
-------
$55,434
=======
See accompanying notes to financial statements.
<PAGE>
Global Network Services a.s.
Statement of Operations and Deficit
(unaudited)
Six months ended June 30, 1999 1998
Sk 000's
Revenues $ 17,867 $ 10,502
-------- --------
Expenses:
Cost of revenues 7,243 3,597
Selling, general and administrative 11,453 9,485
Depreciation 2,513 1,829
Interest 823 2,495
-------- --------
22,032 17,406
-------- --------
Net loss (4,165) (6,904)
Deficit, beginning of period (34,426) (15,928)
-------- --------
Deficit, end of period $(38,591) $(22,832)
See accompanying notes to financial statements.
<PAGE>
Global Network Services a.s.
Statement of Operations and Deficit
(unaudited)
Six months ended June 30, 1999 1998
Sk 000's
Cash flows from operating activities:
Net loss $(4,165) $(6,904)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 2,513 1,829
Provision for bad debts 500 2,000
Decrease (increase) in:
Accounts receivable (2,905) 3,631
Inventories (361) (863)
Other assets (1,140) (6,494)
Increase (decrease) in:
Accounts payable and accrued expenses 1,602 2,035
Deferred revenues (468) 931
------- -------
Net cash used in operating activities (4,424) (3,835)
------- -------
Cash flows from investing activities:
Acquisition of property and equipment (2,394) (507)
------- -------
Cash flows from financing activities:
Payable to stockholder 3,598 3,651
Proceeds from issuance of B shares 35,500 -
Increase in additional paid-in capital 14 5
------- -------
Net cash provided by financing activities 39,112 3,656
------- -------
Net increase (decrease) in cash and
cash equivalents 32,294 (686)
Cash and cash equivalents, beginning of period 778 1,161
------- -------
Cash and cash equivalents, end of period $33,072 $ 475
======= =======
See accompanying notes to financial statements.
<PAGE>
Global Network Services a.s.
Notes to Financial Statements
A. Basis of Global Network Services a.s. (the "Company") is a Slovak
Presentation corporation, which is a wholly-owned subsidiary of Slavia
Capital, a.s., o.c.p. (the "Parent"). The Company is an
Internet service provider in the Slovak Republic.
The accompanying unaudited condensed financial statements
of the Company for the six months ended June 30, 1999 and
1998 have been prepared in accordance with U.S. generally
accepted accounting principles for interim financial
information and are stated in Slovak korunas ("Sk") which
is the currency in the Slovak Republic. Accordingly, they
do not include all of the information and footnotes
required by U.S. generally accepted accounting principles
for complete financial statements. In the opinion of
management, these financial statements 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 fiscal year. These condensed financial statements
should be read in conjunction with the audited financial
statements for the two years in the period ended
December 31, 1998.
<PAGE>
Euroweb International Corp.,
Luko Czech-Net s.r.o. and
Global Network Services a.s.
Unaudited Pro Forma Consolidated
Statements of Operations
<PAGE>
Euroweb International Corp.,
Luko Czech-Net s.r.o. and
Global Network Services a.s.
Unaudited Pro Forma Consolidated
Statements of Operations
<PAGE>
Euroweb International Corp.,
Luko Czech-Net s.r.o. and
Global Network Services a.s.
Contents
Basis of presentation 20
Unaudited pro forma consolidated statements of operations:
Statements of operations 21-22
Notes to pro forma consolidated statements of operations 23
<PAGE>
Euroweb International Corp.,
Luko Czech-Net s.r.o. and
Global Network Services a.s.
Basis of Presentation
On September 23, 1999 and November 17, 1999, Euroweb
International Corp. (the "Company") acquired 70% and 30%,
respectively, of outstanding shares of capital stock Global
Network Services a.s. ("GNS"), a Slovak corporation which
provides Internet services primarily to businesses in
Bratislava and other cities in the Slovak Republic. The
total purchase price of $1,469,995 consisted of cash
payments of $869,995 and 355,568 shares of the Company's
common stock to the selling stockholders plus $100,000
contributed to GNS's capital. The acquisition is accounted
for as a purchase with the results of GNS included in the
consolidated financial statements of the Company from the
date of acquisition.
The unaudited pro forma consolidated statements of
operations for the year ended December 31, 1998 and the
six months ended June 30, 1999 assume that this acquisition
and the acquisition by the Company of 100% interest in Luko
Czech-Net s.r.o. ("Luko") on June 11, 1999 had occurred on
January 1, 1998 and include the historical statements of
operations of the Company, GNS and Luko for the periods
presented adjusted for the pro forma effects of the
acquisition. The Luko and the GNS statements of
operations for the year ended December 31, 1998 and the six
months ended June 30, 1999 were translated from Czech and
Slovak, respectively korunas to U.S. dollars using average
exchange rates.
The unaudited pro forma consolidated statements of
operations have been included as required and allowed by
the rules of the U.S. Securities and Exchange Commission
and are provided for informational purposes only. The pro
forma consolidated statements of operations do not purport
to be indicative of the results which would have been
obtained if the acquisition had been effected on the date
indicated or which may be obtained in the future. The
accompanying unaudited pro forma consolidated
statements of operations should be read in conjunction
with the respective historical financial statements of the
Company and GNS, which are contained elsewhere herein.
<PAGE>
Euroweb International Corp.,
Luko Czech-Net s.r.o. and
Global Network Services a.s.
Unaudited Pro Forma Consolidated Statement of Operations
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1998
Pro forma Pro forma
Euroweb Luko adjustments Combined GNS adjustments Combined
(Note B) (Note A)
Revenues $1,685,245 $772,210 $ - $2,457,455 $ 694,624 $ - $3,152,079
---------- -------- --------- ---------- --------- --------- -----------
Expenses (income):
Compensations and related costs 597,988 29,047 100,000(2) 727,035 178,640 - 905,675
Network costs 670,611 321,625 - 992,236 321,748 - 1,313,984
Depreciation and amortization 435,340 71,238 326,000(1) 832,578 114,352 300,000(1) 1,246,930
Interest expense (income) - net (6,029) 279 90,000(3) 84,250 137,564 110,000(2) 331,814
Cancelled public offering 138,434 - - 138,434 - - 138,434
Gain on sale of interests in
Euroweb Rt and HBC (1,516,548) - - (1,516,548) - - (1,516,548)
Equity in net loss of Euroweb Rt 21,000 - - 21,000 - - 21,000
Other 797,247 202,802 - 1,000,049 458,864 - 1,458,913
---------- -------- --------- ---------- --------- --------- ----------
1,138,043 624,991 516,000 2,279,034 1,211,168 410,000 3,900,202
---------- -------- --------- ---------- --------- --------- ----------
Net income (loss) from
continuing operations 547,202 147,219 (516,000) 178,421 (516,544) (410,000) (748,123)
Income taxes (benefit) - 42,594 (35,000)(4) 7,594 - - 7,594
---------- -------- --------- ---------- --------- --------- ----------
Net income(loss) $ 547,202 $104,625 $(481,000) $ 170,827 $(516,544) $(410,000) $ (755,717)
========== ======== ========= ========== ========= ========= ==========
Net income(loss) per share-basic $ .10 $ (.12)
========== ==========
Net income(loss) per share-diluted $ .09 $ (.12)
========== ==========
Weighted average number of shares
outstanding:
Basic 5,553,000 6,462,414
========= =========
Diluted 5,906,000 6,462,414
========= =========
See accompanying notes to pro forma consolidated statements of operations.
</TABLE>
<PAGE>
Euroweb International Corp.,
Luko Czech-Net s.r.o. and
Global Network Services a.s.
Unaudited Pro Forma Consolidated Statement of Operations
Six months ended June 30, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Pro forma
Euroweb (a) Luko (b) GNS adjustments Combined
(Note A)
Revenues $ 71,528 $412,608 $ 446,675 $ - $ 930,811
--------- -------- --------- --------- ---------
Expenses (income):
Compensation and related costs 157,375 28,168 119,450 42,000 346,993
Network costs 42,000 172,788 181,075 - 395,863
Depreciation and amortization 3,889 22,288 62,825 292,000 381,002
Interest expense (income) - net (124,134) (2,548) 20,575 43,000 (63,107)
Equity in net income of
Euroweb Rt (60,044) - - - (60,044)
Other 250,125 78,428 166,875 - 495,428
--------- -------- --------- --------- ---------
269,211 299,124 550,800 377,000 1,496,135
--------- -------- --------- --------- ---------
Income (loss) from
operations (197,683) 113,484 (104,125) (377,000) (565,324)
Income taxes (benefit) 2,139 39,480 - (14,700) 26,919
--------- -------- --------- --------- ---------
Net income (loss) $(199,822) $ 74,004 $(104,125) $(362,300) $(592,243)
========= ======== ========= ========= =========
Net loss per share - basic and
diluted $ (.03) $ (.07)
========= =========
Weighted average number of
shares outstanding 7,412,937 8,322,351
========= =========
(a) Includes Luko's operations from June 1 to June 30, 1999.
(b) Includes Luko's operations for the five months ended May 31, 1999.
See accompanying notes to pro forma consolidated statements of operations.
</TABLE>
<PAGE>
Euroweb International Corp.,
Luko Czech-Net s.r.o. and
Global Network Services a.s.
Notes to Pro Forma Consolidated Statement of Operations
Note A The pro forma adjustments to the unaudited pro forma
consolidated statements of operations with respect to the
acquisition of GNS are as follows:
1. To reflect amortization of goodwill, using an estimated
useful life of 5 years.
2. To reflect interest expense on borrowing cash portion of
purchase price.
3. To reflect an increase of 355,568 shares in the weighted
average number of shares outstanding as if the issuance of
the shares under the stock consideration of the purchase
price occurred on January 1, 1998.
Note B The pro forma adjustments to the unaudited pro forma
consolidated statements of operations with respect to the
acquisition of Luko are as follows:.
1. To reflect amortization of goodwill, using an estimated
useful life of 5 years.
2. To reflect increase in former owners' compensation as per
employment agreements entered into on date of acquisition.
3. To reflect interest expense on borrowing cash portion of
purchase price.
4. To reflect income tax benefit on increase in former owners'
compensation.
5. To reflect an increase of 553,846 shares in the weighted
average number of shares outstanding as if the issuance of
the shares under the stock consideration of the purchase
price occurred on January 1, 1998.
