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) June 11, 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 2. Acquisition or Dispostion of Assets
The registrant purchased from Mr. Richard Koza and his wife Lucie
Kozova, (jointly "the Transferor") all of the issued and outstanding
stock of Luko Czech Net s.r.o., a Czech corporation providing
Internetservice primarily to businesses located in Prague and other
major cities in the Czech Republic. Registrant paid for shares
(a) USD $900,000 (nine hundred thousand US Dollars); and
(b) 450,000 (four hundred and fifty thousand) shares of its common
stock; and
(c) additional shares of Registrant's common stock to be issued to
the Transferor when the shares issued under paragraph (b) above
are registered, calculated to ensure that at that point, the
value of the shares in the Transferor issued in accordance with
his agreement amounts to USD $900,000 (nine hundred thousand US
Dollars), market value.
ITEM 7. Financial Statements, Pro Forma Financial Information and
Exhibits
The following financial statements and pro forma financial
information omitted from the Company's Report on Form 8-K for
the event dated June 11, 1999 filed with the Commission on
June 23, 1999, in reliance upon instructions 7(a)(4) and 7(b)(2)
of Form 8-K, are filed herewith.
(a) Financial statements of business acquired
1. Financial statements of Luko Czech-Net s.r.o. as
of and for the year ended December 31, 1998.
2. Financial statements of Luko Czech-Net s.r.o. for the
three months ended March 31, 1999 and 1998 (unaudited).
(b) Unaudited pro forma condensed consolidated financial information
1. Unaudited pro forma condensed consolidated financial
statements as of March 31, 1999 and for the three months
then ended and the year ended December 31, 1998.
<PAGE>
LUKO CZECH-NET s.r.o.
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
<PAGE>
C O N T E N T S
Page
Independent Auditor's Report 3
Financial statements:
Balance sheet 4
Statement of operations and retained earnings 5
Statement of cash flows 6
Notes to financial statements 7-10
-2-
<PAGE>
Independent Auditors' Report
Board of Directors
Euroweb International Corp.
New York, New York
We have audited the accompanying balance sheet of Luko Czech-Net s.r.o.
(the "Company") as of December 31, 1998, and the related statement of
operations and retained earnings, and cash flows for the year then ended.
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 audit 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 audit provides 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 Luko-Czech s.r.o. as
of December 31, 1998, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles in the United States.
BDO CS s.r.o.
Prague
May 11, 1999
-3-
<PAGE>
LUKO CZECH-NET s.r.o.
BALANCE SHEET
DECEMBER 31, 1998
_______________________________
Kc
000's
ASSETS
Current:
Cash 7,706
Accounts receivable, net of allowance for
doubtful accounts of Kc 173 295
Inventories 324
Other 386
Total current assets 8,711
Property and equipment, net (Note 2) 1,822
10,533
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 2,356
Income tax payable 1,398
Payable to related parties (Note 3) 1,782
5,536
Members' equity (Note 6):
Registered capital 100
Additional paid-in capital 2,372
Retained earnings 2,525
Total members' equity 4,997
10,533
See accompanying notes to financial statements. -4-
<PAGE>
LUKO CZECH-NET s.r.o.
STATEMENT OF OPERATIONS AND
RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1998
_________________________________________
Kc
000's
Revenues:
Internet services 23,910
Sale of devices 1,000
24,910
Expenses:
Cost of revenues 10,375
Selling general and administrative 7,488
Depreciation 2,298
20,161
Income before tax 4,749
Income tax (Note 4) (1,374)
Net income 3,375
Retained earnings (deficit), January 1, 1998 (850)
Retained earnings, December 31, 1998 2,525
See accompanying notes to financial statements. -5-
<PAGE>
LUKO CZECH-NET s.r.o.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
_______________________________________
Kc
000's
Cash flows from operating activities:
Net income 3,375
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,298
Provision for bad debts 138
Decrease (increase) in:
Accounts receivable 1,022
Inventories 6
Other assets (293)
Increase (decrease) in:
Accounts payable and accrued expenses (1,848)
Income tax payable 1,398
Payable to related parties 1,782
Net cash provided by operating activities 7,878
Cash flows from investing activities:
Acquisition of property and equipment (2,556)
Net cash used in investing activities (2,556)
Net increase in cash and cash equivalents 5,322
Cash, beginning of year 2,384
Cash, end of year 7,706
See accompanying notes to financial statements -6-
<PAGE>
LUKO CZECH-NET s.r.o.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF ACCOUNTING POLICIES
(a) Organization and Description of Business
Luko Czech-Net s.r.o. (the "Company"), is a Czech limited liability
company which was founded on March 10, 1993. The Company is an
Internet service provider.
(b) 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 Czech korunas ("Kc") which is the
functional currency of the Czech Republic. On December 31, 1998, the
exchange rate was $.034 per Czech 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
Revenues from monthly Internet service are recognized in the month
in which the services are provided. Sales of Internet devices is
recognized upon shipment.
-7-
<PAGE> LUKO CZECH-NET s.r.o.
NOTES TO FINANCIAL STATEMENTS
(Continued)
(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
based on the nonresidual value of the assets.
(g) Financial Instruments
The carrying amounts of financial instruments, including cash,
accounts receivable and current liabilities approximated fair value
as of December 31, 1998, because of the relatively short maturity of
these instruments.
(h) Assets financed by leasing agreements which transfer to the Company
substantially all of the benefits and risks of ownership of an asset
(finance leases) have been capitalized at amounts equal to the
relevant historical cost of the assets and depreciation is charged
on the basis of the Company's depreciation policy. The capital
elements of future obligations under finance leases are included as
liabilities in the balance sheet and interest is charged to the
profit and loss account.
(i) Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"). 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.
-8-
<PAGE>
LUKO CZECH-NET s.r.o.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 2 PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
December 31,
1998
Kc
000's
Equipment 3,854
Vehicles 1,452
5,306
Less: accumulated depreciation (3,484)
1,822
NOTE 3 PAYABLE TO RELATED PARTIES
The payable to related parties includes amounts payable to a member
and his son primarily for consulting services rendered during 1993
and 1994.
NOTE 4 INCOME TAX
The reconciliation of the Company's income tax based on the statutory
rate and the actual provision is as follows:
Year ended
December 31,
1998
Kc
000's
Statutory income tax @ 35% 1,662
Reduction in valuation allowance (298)
Other 10
Income tax 1,374
See accompanying notes to financial statements. -9-
<PAGE>
LUKO CZECH-NET s.r.o.
NOTES TO FINANCIAL STATEMENTS
(Continued)
At December 31, 1997, there was a deferred tax asset of Kc 298
primarily resulting from net operating loss carryforwards. The
deferred tax asset was reduced by a valuation allowance of Kc 298
due to uncertainties with achieving future profitable operations.
The valuation allowance was decreased by Kc 298 during 1998 due to
the Company's profitability during 1998, and the utilization of all
of the net operating loss carryforwards.
-10-
<PAGE>
LUKO CZECH-NET s.r.o.
UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
-11-
<PAGE>
C O N T E N T S
Page
Financial statements:
Balance sheet as of March 31, 1999 (Unaudited) 13
Statements of operations and retained earnings (deficit)
for the three months ended March 31, 1999 and 1998 (unaudited) 14
Statements of cash flows for the three months ended
March 31, 1999 and 1998 (unaudited) 15
Notes to financial statements (unaudted) 16
-12-
<PAGE>
LUKO CZECH-NET s.r.o.
BALANCE SHEET
MARCH 31, 1999
_______________________________
(UNAUDITED)
Kc
000's
ASSETS
Current:
Cash 9,021
Accounts receivable, net of allowance for
doubtful accounts of Kc 100 464
Inventories 191
Other 165
Total current assets 9,841
Property and equipment, net 1,874
11,715
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 1,215
Income tax payable 2,132
Payable to related parties 1,791
5,138
Commitments
Members' equity:
Registered capital 100
Additional paid-in capital 2,372
Retained earnings 4,105
Total members' equity 6,577
11,715
See accompanying notes to financial statements. -13-
<PAGE>
LUKO CZECH-NET s.r.o.
STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (DEFICIT)
_________________________________________
(UNAUDITED)
Three Months Ended
March 31,
--------------------
1999 1998
Kc Kc
000's 000's
Revenues:
Internet services 7,777 4,944
Sale of devices 567 252
8,344 5,196
Expenses:
Cost of revenues 3,427 2,808
Selling general and administrative 2,004 1,222
Depreciation 491 374
5,922 4,404
Income before tax 2,422 792
Income tax 842 (277)
Net income 1,580 515
Retained earnings (deficit), beginning of period 2,525 (850)
Retained earnings (deficit), end of period 4,105 (335)
See accompanying notes to financial statements. -14-
<PAGE>
LUKO CZECH-NET s.r.o.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
--------------------
1999 1998
Kc Kc
000's 000's
Cash flows from operating activities:
Net income 1,580 515
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 491 374
Provision for bad debts (73) -
Decrease (increase) in:
Accounts receivable (96) 296
Inventories 133 330
Other assets 221 (70)
Increase (decrease) in:
Accounts payable and accrued expenses (1,141) (1,641)
Income tax payable 734 306
Payable to related parties 9 -
Net cash provided by operating activities 1,858 110
Cash flows from investing activities:
Acquisition of property and equipment (543) (295)
Net cash used in investing activities (543) (295)
Net increase in cash and cash equivalents 1,315 (185)
Cash, beginning of period 7,706 2,384
Cash, end of period 9,021 2,199
See accompanying notes to financial statements. -15-
<PAGE>
LUKO CZECH-NET s.r.o.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A BASIS OF PRESENTATION
Luko Czech-Net s.r.o. (the "Company"), is a Czech limited liability company
which was founded on March 10, 1993. The Company is an Internet service
provider in the Czech Republic.
The accompanying unaudited condensed financial statements of the Company
for the three months ended March 31, 1999 and 1998, have been prepared in
accordance with U.S. generally-accepted accounting principles for interim
financial information and are stated in Czech korunas ("Kc") which is the
functional currency in the Czech 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 year ended December 31, 1998.
-16-
<PAGE>
EUROWEB INTERNATIONAL CORP. AND
LUKO CZECH-NET s.r.o.
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
-17-
<PAGE>
C O N T E N T S
Page
Basis of Preparation 19
Unaudited Pro Forma Consolidated Balance Sheet 20
Unaudited Pro Forma Consolidated Statements of Operations 22
Notes to Unaudited Pro Forma Consolidated Financial Statements 24
-18-
<PAGE>
EUROWEB INTERNATIONAL CORP. AND
LUKO CZECH-NET s.r.o.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
On June 11, 1999, Euroweb International Corp. (the "Company") acquired 100%
of the participation interests in Luko Czech-Net s.r.o., a Czech limited
liability company which is a provider of Internet service primarily to
businesses in Prague and other cities in the Czech Republic. The purchase
price of $1,800,000 consisted of a cash payment of $900,000 plus 450,000
shares of the Company's common stock, subject to upward adjustment so that
the aggregate market value of the shares issued to the sellers on the date
the shares are registered is $900,000. Based on the June 11, 1999 closing
market price of $1.625 per share, the Company would have been required to
issue 553,846 shares.
The acquisition is accounted for as a purchase with the results of Luko
included in the consolidated financial statements of the Company from the
date of acquisition.
The unaudited pro forma consolidated balance sheet as of March 31, 1999
assumes that the acquisition occurred on March 31, 1999 and includes the
March 31, 1999 historical balance sheets of the Company and Luko, adjusted
for the pro forma effects of the acquisition. The unaudited pro forma
consolidated statements of operations for the three months ended March 31,
1999 and the year ended December 31, 1998 assumes that the acquisitions had
occurred on January 1, 1998 and includes the historical statements of
operations of the Company and Luko for the periods presented adjusted for
the pro forma effects of the acquisition. The Luko balance sheet as of
March 31, 1999 was translated from Czech korunas to U.S. dollars using the
exchange rate on March 31, 1999 ($.028 per Czech koruna). The Luko
statements of operations for the year ended December 31, 1998 and the three
months ended March 31, 1999 were translated from Czech korunas to U.S.
dollars using the average of the exchange rates on the first and last day
of the respective periods ($.031 per Czech koruna for the year ended
December 31, 1998 and $.031 per Czech Koruna for the three months ended
March 31, 1999).
The unaudited pro forma consolidated financial statements 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 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 financial statements should
be read in conjunction with the respective historical financial statements
of the Company and those of Luko, which are contained elsewhere herein.
-19-
<PAGE>
EUROWEB INTERNATIONAL CORP. AND
LUKO CZECH-NET s.r.o.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
<TABLE>
Pro Forma
Euroweb Luko Adjustments Combined
(Note A)
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $2,331,748 $250,583 ($900,000) $1,682,331
Certificate of deposit 1,016,482 - - 1,016,482
Accounts receivable - 12,289 - 12,889
Current portion of note receivable 144,699 - - 144,699
Current portion of loan receivable 85,954 - - 85,954
Receivable from Euroweb Rt. 35,388 - - 35,388
Investment in Hungarian
Broadcasting Corp. 147,417 - - 147,417
Prepaid and other current assets 110,818 9,888 - 120,706
TOTAL CURRENT ASSETS 3,872,506 273,360 (900,000) 3,245,866
Property and equipment, net - 52,055 - 52,055
Note receivable, less current portion 820,742 - - 820,742
Loan receivable, less current portion 43,988 - - 43,988
Investment in Euroweb Rt., at equity 744,837 - - 744,837
Intangibles - - 1,616,028 1,616,028
$5,482,073 $325,415 $ 716,028 $6,523,516
</TABLE>
-20-
EUROWEB INTERNATIONAL CORP. AND
LUKO CZECH-NET s.r.o.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(Continued)
<TABLE>
Pro Forma
Euroweb Luko Adjustments Combined
(Note A)
<S> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 196,574 $ 91,693 $ - $ 288,267
Deposit payable 200,000 - - 200,000
Payable to former owners of
Luko - 49,750 - 49,750
396,574 141,443 - 538,017
COMMITMENTS
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 6,534,916 and 6,444,916 6,535 2,777 (2,223) 7,089
Additional paid-in capital 20,976,762 65,889 833,557 21,876,208
Accumulated deficit (15,822,711) 115,306 (115,306) (15,822,711)
Accumulated other comprehensive loss:
Foreign currency translation
Adjustment (45,086) - - (45,086)
Unrealized loss on investment in
Hungarian Broadcasting Corp. (30,001) - - (30,001)
5,085,499 183,972 716,028 5,985,499
$5,482,073 $325,415 $716,028 $ 6,523,516
</TABLE>
See accompanying notes to pro forma financial statements. -21-
<PAGE>
EUROWEB INTERNATIONAL CORP. AND
LUKO CZECH-NET s.r.o.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
Pro Forma
Euroweb Luko Adjustments Combined
(Note A)
<S> <C> <C> <C> <C>
REVENUES - sale of services $ 1,685,245 $740,590 $ - $2,425,835
sale of devices - 31,620 - 31,620
1,685,245 772,210 - 2,457,455
EXPENSES (INCOME):
Compensations and related costs 597,988 29,047 100,000 727,035
Network costs 670,611 294,438 - 965,049
Cost of devices - 27,187 - 27,187
Consulting and professional fees 240,750 12,989 - 253,739
Rent 122,098 17,918 - 140,016
Depreciation and amortization 435,340 71,238 326,000 832,578
Interest expense (income) - net (6,029) 279 90,000 84,250
Cancelled public offering 138,434 - - 138,434
Gain on sale of interests in
Euroweb Rt and HBC (1,516,548) - - (1,516,548)
Equity in net loss of Euroweb Rt 21,000 - - 21,000
Other 434,399 171,895 - 606,294
1,138,043 624,991 516,000 2,279,034
NET INCOME FROM CONTINUING
OPERATIONS 547,202 147,219 (516,000) 178,421
INCOME TAXES (BENEFIT) - 42,594 (35,000) 7,594
NET INCOME $ 547,202 $104,625 ($481,000) $ 170,827
NET INCOME PER SHARE - BASIC $ .10 $ .03
NET INCOME PER SHARE - DILUTED $ .09 $ .03
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic 5,553,000 6,106,846
Diluted 5,906,000 6,459,846
</TABLE>
-22-
<PAGE>
EUROWEB INTERNATIONAL CORP. AND
LUKO CZECH-NET s.r.o.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
Pro Forma
Euroweb Luko Adjustments Combined
(Note A)
<S> <C> <C> <C> <C>
REVENUES - sale of services $ - $241,400 $ - $241,400
- sale of devices - 17,600 - 17,600
- 259,000 - 259,000
EXPENSES (INCOME):
Compensations and related costs 73,472 16,647 25,000 115,119
Network costs - 92,300 - 92,300
Cost of devices - 17,700 - 17,700
Consulting and professional fees 70,477 14,387 - 84,864
Depreciation and amortization - 15,576 81,500 97.076
Interest expense (income) net (57,862) 806 9,000 (48,056)
Equity in net income of Euroweb Rt (33,110) - - (33,110)
Other 9,055 26,502 - 35,557
62,032 183,918 115,500 361,450
INCOME (LOSS) FROM OPERATIONS (62,032) 75,082 (115,500) (102,450)
INCOME TAXES (BENEFIT) - 26,194 (8,750) 17,444
NET INCOME (LOSS) ($62,032) $48,888 ($106,750) ($119,894)
NET LOSS PER SHARE - BASIC
AND DILUTED ($ .01) ($ .02)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,475,694 7,029,540
</TABLE>
See accompaying notes to pro forma financial statements. -23-
<PAGE>
EUROWEB INTERNATIONAL CORP. AND
LUKO CZECH-NET s.r.o.
NOTE TO UNAUDITED CONSOLIDATED FINANCIAL INFORMATION
NOTE A
The pro forma adjustments to the unaudited pro forma consolidated financial
statements are as follows:
1. To reflect the payment of $900,000 and the issuance of 553,846 shares of
the Company's common stock to the former owners of Luko, record goodwill
and eliminate Luko's equity accounts.
2. To reflect amortization of goodwill, using an estimated useful life of 5
years.
3. To reflect increase in former owners' compensation as per employment
agreements entered into on date of acquisition.
4. To reflect interest expense on borrowing cash portion of purchase price.
5. To reflect income tax benefit on increase in former owners' compensation.
6. 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.
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Euroweb International Corp.
445 Park Avenue
New York, NY 10022
By: /s/ Frank R. Cohen
Frank R. Cohen
Chief Executive Officer and
Chairman of the Board
Date: August 20, 1999
New York, New York
