EUROPEAN MICRO HOLDINGS INC, S-1/A, 1998-03-24

EUROPEAN MICRO HOLDINGS INC
S-1/A, 1998-03-24
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1998
REGISTRATION NO. 333-44393

================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------

AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
EUROPEAN MICRO HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
NEVADA 5045 65-0803752
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

<TABLE>
<S> <C>
JOHN B. GALLAGHER
6073 N.W. 167TH STREET, UNIT C-25 6073 N.W. 167TH STREET, UNIT C-25
MIAMI, FLORIDA 33015 MIAMI, FLORIDA 33015
(305) 825-2458 (305) 825-2458
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>

----------------
COPIES TO:

<TABLE>
<S> <C>
CLAYTON E. PARKER, ESQ. D. RONALD SURBEY, ESQ.
TROY J. RILLO, ESQ. HOLLAND & KNIGHT LLP
KIRKPATRICK & LOCKHART LLP ONE EAST BROWARD BOULEVARD
201 S. BISCAYNE BOULEVARD, SUITE 2000 FORT LAUDERDALE, FLORIDA 33301
MIAMI, FLORIDA 33131 (954) 525-1000
(305) 539-3300
</TABLE>

----------------
Approximate date of commencement of proposed sale to the public:

AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
----------------
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. [x]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED MARCH 24, 1998

PROSPECTUS
European Micro Holdings, Inc. [Logo]

1,100,000 SHARES OF COMMON STOCK
---------------
Of the 1,100,000 shares of common stock (the "Common Stock") offered
hereby (the "Offering"), 1,000,000 shares are being offered by European Micro
Holdings, Inc. ("European Micro" or the "Company") and 100,000 shares are being
offered by certain shareholders of the Company (the "Selling Shareholders").
The Company will not receive any of the proceeds from the sale of shares by the
Selling Shareholders. See "Principal and Selling Shareholders." Prior to this
Offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price will be $10.00
per share. See "Underwriting" for information relating to the factors to be
considered in determining the initial public offering price. Application has
been made to have the Common Stock listed on the Nasdaq National Market under
the symbol "EMCC."
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------

THESE SECURITIES ARE BEING OFFERED ON A BEST EFFORTS BASIS BY TARPON
SCURRY INVESTMENTS, INC. (THE "UNDERWRITER"). THE TERMINATION DATE OF THE
OFFERING IS SIXTY DAYS AFTER THE DATE OF THIS PROSPECTUS (THE "TERMINATION
DATE"). ALL PROCEEDS FROM THE PURCHASE OF SECURITIES WILL BE HELD IN A
NON-INTEREST BEARING ESCROW ACCOUNT BY THE CHASE MANHATTAN BANK (THE "ESCROW
AGENT") UNTIL THE TERMINATION DATE. PAYMENT BY CHECK FOR THE SECURITIES OFFERED
HEREBY MUST BE MADE PAYABLE TO THE ESCROW AGENT. IF ON THE TERMINATION DATE AT
LEAST $10,000,000 OF SECURITIES HAVE BEEN PURCHASED FROM THE COMPANY, THE
PROCEEDS WILL BE DISBURSED BY THE ESCROW AGENT TO THE COMPANY. IF ON THE
TERMINATION DATE THE AGGREGATE AMOUNT OF SECURITIES PURCHASED FROM THE COMPANY
IS GREATER THAN $7,000,000 BUT LESS THAN $10,000,000, THE COMPANY SHALL HAVE
THE DISCRETION TO ACCEPT THE OFFERING, IN WHICH CASE ALL PROCEEDS WILL BE
DISBURSED BY THE ESCROW AGENT TO THE COMPANY, OR TO RETURN ALL PROCEEDS TO THE
PURCHASERS. IF ON THE TERMINATION DATE THE AGGREGATE AMOUNT OF SECURITIES
PURCHASED FROM THE COMPANY IS LESS THAN $7,000,000, THE OFFERING WILL BE
TERMINATED AND ALL PROCEEDS WILL BE RETURNED TO THE PURCHASERS. NO SECURITIES
OF THE SELLING SHAREHOLDERS WILL BE SOLD UNTIL $10,000,000 OF SECURITIES HAVE
BEEN PURCHASED FROM THE COMPANY.

<TABLE>
<CAPTION>
=========================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(2)
<S> <C> <C> <C> <C>
Per Share ............ $ 10.00 $ 0.80 $ 9.20 $ 9.20
- -----------------------------------------------------------------------------------------
Total Minimum(3) ..... $ 7,000,000 $560,000 $6,440,000 $ 0
- -----------------------------------------------------------------------------------------
Total Maximum ........ $11,000,000 $880,000 $9,200,000 $920,000
- -----------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $800,000.
Except for the underwriting commissions, all expenses associated with the
sale of the shares of Common Stock by the Selling Shareholders will be
borne by the Company.
(3) No securities of the Selling Shareholders will be sold until $10,000,000
worth of securities have been purchased from the Company.

---------------
The shares of Common Stock are being sold for the account of the Company
and the Selling Shareholders by the Underwriter on a "best efforts" basis,
subject to prior sale, when, as and if accepted by the Company and the
Underwriter and subject to the Company's right to reject any order in whole or
in part. It is expected that delivery of certificates for such shares will be
made through the offices of the Underwriter in Oak Brook, Illinois, on or about
, 1998.

Tarpon Scurry Investments, Inc. [Logo]

THE DATE OF THIS PROSPECTUS IS MARCH , 1998.
<PAGE>

[ARTWORK]

The artwork contains a satellite picture of earth. Overlaid are arrows
identifying some of the manufacturers whose products are sold by the Company.
Also identified on this page are the names of the Company and its subsidiaries.
This page also briefly describes the Company's business and the benefits which
the Company offers to its customers.

--------------
UNLESS OTHERWISE STATED, ALL AMOUNTS IN THIS PROSPECTUS ARE STATED IN
UNITED STATES DOLLARS. THE TRANSLATION FROM FOREIGN CURRENCIES TO UNITED STATES
DOLLARS IS PERFORMED FOR BALANCE SHEET ACCOUNTS USING EXCHANGE RATES IN EFFECT
AT THE BALANCE SHEET DATE AND FOR REVENUE AND EXPENSE ACCOUNTS USING THE
AVERAGE EXCHANGE RATES DURING THE PERIOD.

<PAGE>

PROSPECTUS SUMMARY

UNLESS THE CONTEXT OTHERWISE REQUIRES AND EXCEPT AS OTHERWISE SPECIFIED,
REFERENCES HEREIN TO "EUROPEAN MICRO" OR THE "COMPANY" INCLUDE EUROPEAN MICRO
HOLDINGS, INC. AND ITS TWO WHOLLY-OWNED SUBSIDIARIES, EUROPEAN MICRO PLC, A
PUBLIC LIMITED COMPANY ORGANIZED UNDER THE LAWS OF THE UNITED KINGDOM
("EUROPEAN MICRO UK"), AND NOR'EASTER MICRO, INC., A NEVADA CORPORATION
("NOR'EASTER") (COLLECTIVELY THE TWO WHOLLY-OWNED SUBSIDIARIES ARE REFERRED TO
AS THE "SUBSIDIARIES").

UNLESS OTHERWISE INDICATED, ALL REFERENCES TO THE NUMBER OF SHARES
OUTSTANDING PRIOR TO THE OFFERING HAVE BEEN ADJUSTED TO GIVE RETROACTIVE EFFECT
TO THE SHARE EXCHANGE DISCUSSED IN "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING THAT APPEARING UNDER THE CAPTION "RISK FACTORS," AND
CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. REFERENCES HEREIN TO FISCAL YEARS ARE REFERENCES
TO THE FISCAL YEAR OF EUROPEAN MICRO ENDED JUNE 30 OF THE YEAR SPECIFIED.
CERTAIN INFORMATION (FINANCIAL AND OTHERWISE) IN THIS PROSPECTUS HAS BEEN
ADJUSTED TO REFLECT A REORGANIZATION OF THE COMPANY BY WHICH THE SHAREHOLDERS
OF EUROPEAN MICRO UK HAVE EXCHANGED THEIR SHARES OF EUROPEAN MICRO UK FOR
SHARES IN EUROPEAN MICRO HOLDINGS, INC. RESULTING IN EUROPEAN MICRO HOLDINGS,
INC. BECOMING THE PARENT CORPORATION OF EUROPEAN MICRO UK. SEE "CERTAIN
TRANSACTIONS AND RELATED TRANSACTIONS."

THE COMPANY

The Company is an independent distributor of microcomputer products,
including personal computers, memory modules, disc drives and networking
products, to customers mainly in Western Europe and to related parties in the
United States. The Company's customers consist of more than 250 value-added
resellers, corporate resellers, retailers, direct marketers and distributors.
The Company does not sell to end-users. Substantially all of the products sold
by the Company are manufactured by well-recognized manufacturers such as IBM,
Compaq, Hewlett-Packard and 3Com, although the Company generally does not
obtain its inventory directly from such manufacturers. European Micro monitors
the geographic pricing strategies related to such products, currency
fluctuations and product availability in order to obtain inventory at favorable
prices from other distributors, resellers and wholesalers. As a result of this
purchasing strategy, the Company has achieved gross margins of 11.0%, 11.4% and
9.5% for the fiscal years ended June 30, 1996, 1997 and the six-month period
ended December 31, 1997, respectively. In the three-year period ended June 30,
1997, total net sales of European Micro increased from $33.9 million in 1995 to
$46.7 million in 1997 and operating profit of European Micro increased from
$1.8 million in 1995 to $2.0 million in 1997. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

European Micro considers itself to be a focused distributor, as opposed to
a broadline distributor, dealing with a limited and select group of products
from a limited and select group of leading manufacturers. The Company believes
that being a focused distributor enables it to respond more quickly to customer
requests and gives it greater availability of products, access to products and
improved pricing. The Company believes that as a focused distributor it has
been able to develop greater expertise in the products which it sells. The
Company places significant emphasis on market awareness and planning and
actively shares this knowledge with its customers in order to further enhance
trading relations. The Company strives to monitor and react quickly to market
trends in order to enable its multilingual sales team to maintain the highest
levels of customer service.

European Micro Holdings, Inc. is the parent of Nor'easter and European
Micro UK. Nor'easter was formed on December 26, 1997 to serve as an independent
distributor of microcomputer products in

3
<PAGE>

the United States. European Micro UK was organized under the laws of the United
Kingdom in 1991 and became a public limited company in 1996 to serve as an
independent distributor to customers mainly in Western Europe and to related
parties in the United States.

European Micro UK is the parent of European Micro GmbH (formerly known as
European Micro Computer Center GmbH) ("European Micro Germany") and has a 50%
joint venture interest in Big Blue Europe, B.V. ("Big Blue Europe"). European
Micro Germany was formed in 1993 as a wholly owned subsidiary of European Micro
UK and it operates as a sales office in Dusseldorf, Germany. All products sold
by European Micro Germany are procured and shipped from the facilities of
European Micro UK. In January 1997, European Micro UK agreed with Big Blue
Products, Inc., a New York corporation ("Big Blue Products"), to form Big Blue
Europe. Big Blue Europe is a computer parts distributor located near Amsterdam,
Holland. Selling primarily to computer maintenance companies, Big Blue Europe
has experienced growth in sales and the Company believes that Big Blue Europe
is positioned to participate in the relatively high margin parts after-market
industry. Big Blue Europe has no affiliation with International Business
Machines Corporation.

European Micro UK is also the parent of European Micro B.V. European Micro
B.V. was formed in 1995, commenced operations in January 1996 and ceased
operations in December 1996.

4
<PAGE>

The following organizational chart summarizes the relationships among
European Micro Holdings, Inc., Nor'easter, European Micro UK, European Micro
Germany and Big Blue Europe.

[Organizational Chart Omitted]

The organizational chart identifies the Company and its respective ownership
interests in the Subsidiaries.

European Micro Holdings, Inc. was formed in December 1997 to serve as a
holding company of the Subsidiaries. European Micro Holdings, Inc. does not
have any operations of its own. Its headquarters are located at 6073 N.W. 167th
Street, Unit C-25, Miami, Florida 33015, where its telephone number is (305)
825-2458.

STRATEGY

European Micro's objective is to continue to strengthen its position as a
distributor of microcomputer products within Western Europe. It also proposes
to expand its operations into the United States, Eastern Europe, and to a
lesser extent, Africa, the Middle East and Asia. In attempting to achieve these
objectives, the Company intends to implement the following strategies:

GROWTH THROUGH START-UPS AND ACQUISITIONS. The Company hopes to expand
into new markets through a combination of start-up companies and acquisitions
of existing distributors, although the Company has not identified any
acquisition candidates and there can be no assurances that any acquisitions can
be consummated on terms satisfactory to the Company. The Company expects to
seek acquisition candidates which have strong entrepreneurial management teams
with experience in the local markets and the potential to benefit from the
economies of scale that the Company could provide through its focused product
lines. The Company intends that any acquisitions will adopt its policies and
financial reporting procedures but operate as autonomous business units.

5
<PAGE>

intends to seek new products and suppliers that will reflect the requirements
of the marketplace while at the same time allowing the Company to remain a
focused distributor. The Company believes that this focused approach also
results in more effective asset management. Generally, because popular products
from leading manufacturers are in greater demand, the Company believes that
this results in more efficient inventory management by virtue of more frequent
inventory turns and, therefore, lower working capital requirements.

FURTHER DEVELOP NEW INTERNATIONAL MARKETS. European Micro has, to date,
focused its activities on the distribution of microcomputer products in Western
Europe and to related parties in the United States. However, the Company
believes that new opportunities are emerging in Eastern Europe, Africa, the
Middle East and Asia as well as more mature markets such as North America. The
Company believes that its success in the culturally and linguistically diverse
markets of Western Europe will be advantageous to the Company in expanding into
new regions.

INTERNET PRODUCTS. European Micro plans to address directly the demand for
internet oriented products. The Company has recently received distribution
rights to distribute firewall products manufactured by WatchGuard Technologies,
Inc. throughout Europe. The Company intends to seek to acquire distribution
rights in other internet oriented products and to enhance its technical
capability by recruiting qualified personnel.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company ...................... 1,000,000 shares

Common Stock offered by the Selling Shareholders ......... 100,000 shares

Common Stock to be Outstanding
after the Offering ...................................... 5,000,000 shares(1)

Use of Proceeds .......................................... The net proceeds of this Offering will be used
to expand European Micro's ability to fund
the operations and provide working capital to
European Micro UK, for expansion purposes,
including mergers and acquisitions, to fund
operations and provide working capital to
Nor'easter, to expand its sales and marketing
capabilities and for general corporate
purposes, including investor relations.

Proposed Nasdaq National Market Symbol ................... Common Stock: "EMCC"
</TABLE>

- ----------------
(1) Excludes (i) 500,000 shares issuable upon the exercise of options to
purchase shares of Common Stock reserved for issuance upon the grant of
options under European Micro's 1998 Stock Incentive Plan and (ii) 50,000
shares of Common Stock reserved for issuance under European Micro's 1998
Employee Stock Purchase Plan. See "Management--1998 Stock Incentive Plan"
and "Management--1998 Employee Stock Purchase Plan."

6
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following selected statement of operations and balance sheet data of
the Company as of June 30, 1996 and 1997 and each of the years in the
three-year period ended June 30, 1997 have been derived from the Company's
audited financial statements and should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Prospectus. The following selected statement of operations and balance
sheet data of the Company as of June 30, 1993, 1994 and 1995 and for the fiscal
years ended June 30, 1993 and 1994, and the six months ended December 31, 1996
and 1997 have been derived from unaudited consolidated financial statements of
the Company. In the opinion of management, the unaudited financial statements
of the Company have been prepared on the same basis as the audited financial
statements included herein and include all adjustments necessary for the fair
presentation of financial position and results of operations at these dates and
for these periods which adjustments are only of a normal recurring nature. The
results of operations for interim periods are not necessarily indicative of
results that may be expected for the full year. See "Index to Financial
Statements."

<TABLE>
<CAPTION>
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS SIX MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
-------------------------------------------------------------------- DECEMBER 31, DECEMBER 31,
1993 1994 1995 1996 1997 1996 1997
------------ ------------- ------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net Sales ............ $ 24,277 29,235 33,864 40,348 46,655 19,659 46,109
Income from
operations .......... 1,622 984 1,848 1,478 2,051 632 1,913
Net income ........... 1,064 524 1,115 845 1,034 371 1,154
Net income per
share ............... $ 0.27 0.13 0.28 0.21 0.26 0.09 0.29
Weighted average
common shares
outstanding ......... 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
</TABLE>

<TABLE>
<CAPTION>
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, AS ADJUSTED
----------------------------------------- DECEMBER 31, DECEMBER 31,
1993 1994 1995 1996 1997 1997 1997(1)
-------- -------- ------- ------- ------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(2) ........... $ 196 674 1,736 1,474 1,976 3,011 2,511
Total assets ................. 1,927 3,928 5,873 7,857 8,844 16,191 15,691
Long-term debt, net of
current portion ............. 39 68 41 37 45 110 110
Shareholders' equity ......... $ 308 843 1,924 1,769 2,511 3,634 3,134
</TABLE>

(2) Total current assets less total current liabilities.

7
<PAGE>

RISK FACTORS

THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE
RISKS DESCRIBED BELOW. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS TOGETHER WITH THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS BEFORE PURCHASING THE SHARES OFFERED HEREBY. EUROPEAN MICRO CAUTIONS
THAT THE FACTORS DESCRIBED BELOW COULD CAUSE ACTUAL RESULTS OR OUTCOMES TO
DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS OF
EUROPEAN MICRO MADE BY OR ON BEHALF OF EUROPEAN MICRO.

NO CONTRACTS OR DISTRIBUTION AGREEMENTS WITH SUPPLIERS

European Micro is an independent distributor of personal computers and
related products. With only one exception, the Company has not entered and does
not expect to enter into any long-term distribution arrangements with its
suppliers. Rather, the Company depends almost entirely on the availability of
product in the surplus or aftermarket. The microcomputer products industry is
characterized by periods of severe product shortages and customer backlog due
to suppliers' difficulty in projecting demand. There can be no assurance that
suppliers will be able to maintain an adequate supply of products which will
adequately fulfill all of the Company's customer orders on a timely basis.
Failure to obtain adequate product in required quantities would have a material
adverse effect on the Company's business, financial condition and results of
operations. Moreover, because the Company does not utilize supplier contracts,
it does not enjoy the traditional benefits that they provide, such as inventory
price protection, market development funds or payment terms.

RELATED PARTY PURCHASES AND SALES

Since its formation in 1991, the Company has belonged to a group of
related companies called the Micro Computer Center Group (the "Group"). The
Group is comprised of European Micro, Technology Express, Inc. in Nashville,
Tennessee ("Technology Express"), American Surgical Supply Corp. d/b/a American
Micro Computer Center in Miami, Florida ("American Micro Computer Center") and,
until August 1, 1997, Ameritech Exports Inc. in Miami, Florida ("Ameritech
Exports") and Ameritech Argentina S.A. in Buenos Aires, Argentina ("Ameritech
Argentina"). All members of the Group were owned and controlled by either of
the two primary shareholders of European Micro, John B. Gallagher and Harry D.
Shields. In order to facilitate fast and efficient international transactions,
each member of the Group has acted as a supplier for, and purchaser from, the
other members of the Group. Such factors as country supply, currency
fluctuation and manufacturer's geographic pricing strategy lead to a constantly
changing model where purchases and sales to other members of the Group depend
on the then current economic balance. The Group has attempted to price
inter-Group sales at one percent above the selling Group member's cost,
although the Group has made numerous exceptions in times of short supply, to
cover assembly costs and to reward certain Group members for exceptional
low-cost purchases. This low mark-up has enabled each Group member to buy
product quickly and efficiently in the others' primary territories and to take
advantage of quantity purchasing, financing and logistics of the other members
of the Group. Additionally, the Company has paid certain management and
consulting fees to the other members of the Group. The amount of these fees is
set forth in the "Certain Relationships and Related Transactions" section of
this Prospectus.

8
<PAGE>
The following table describes the inter-Group sales and purchases for the
time periods specified:

<TABLE>
<CAPTION>
($ IN THOUSANDS)
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
--------------------------- DECEMBER 31,
1995 1996 1997 1997
------ ------ --------- -------------
<S> <C> <C> <C> <C>
SALES TO GROUP MEMBERS
American Micro Computer Center ......... $323 306 66 10,413
Technology Express ..................... 22 104 (2) 3,582
Ameritech Argentina .................... - - 90 -
Ameritech Exports ...................... 1 26 - -
---- --- ---- ------
$346 436 154 13,995
==== === ==== ======
</TABLE>

<TABLE>
<CAPTION>
($ IN THOUSANDS)
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
------------------------------- DECEMBER 31,
1995 1996 1997 1997
--------- -------- -------- -------------
<S> <C> <C> <C> <C>
PURCHASES FROM GROUP MEMBERS
American Micro Computer Center ......... $4,082 2,289 1,092 325
Technology Express ..................... 3,265 14,890 20,717 2,937
Ameritech Argentina .................... - - - -
Ameritech Exports ...................... 70 1,116 848 -
------ ------ ------ -----
$7,417 18,295 22,657 3,262
====== ====== ====== =====
</TABLE>

With the exception of the six-month period ended December 31, 1997,
European Micro has traditionally purchased significantly more products than it
has sold to the United States members of the Group. None of the members of the
Group are under any legal obligation to continue to act as a supplier for or
purchaser from the other members of the Group. Any member of the Group could at
its sole discretion terminate its relationship with the other members of the
Group. In the event that the Company were unable to purchase product from the
United States members of the Group in accordance with the inter-Group pricing
structure, the Company's margins would be significantly reduced and its
business, financial condition and results of operations would be materially
adversely effected. Moreover, in the event the Company is unable to sell
product to other members of the Group, the Company's revenues will be
significantly reduced and its business, financial condition and results of
operations will be materially adversely affected. See "Certain Relationships
and Related Transactions."

The Group pricing structure is subject to review by the applicable taxing
agency, including the Internal Revenue Service in the United States and Inland
Revenue in the United Kingdom. An adverse decision by any such taxing agency
with respect to the inter-Group pricing structure could result in the
imposition of additional income taxes, interest or penalties. This would have a
material adverse effect on the Company's business, financial condition and
results of operations.

RISKS ASSOCIATED WITH INTERNATIONAL SALES

European Micro's existing and planned international operations are subject
to political and economic uncertainties, including, without limitation,
inflation, hyperinflation, risk of renegotiation or modification of existing
agreements or arrangements with governmental authorities, transportation,
tariffs, export controls, foreign exchange restrictions which limit the
repatriation of investments and earnings therefrom, changes in taxation,
governmental challenges to the Company's tax strategies, hostilities and
confiscation or nationalization of property. The Company's expected expansion
into certain markets, such as Asia and Eastern Europe where, among other
things, the financial, economic, legal systems and infrastructures are less
developed, poses a greater degree of these and other risks than the Company's
current business operations in Western Europe and the United States. A material

9
<PAGE>

increase in the risks posed by these and other considerations could have a
material adverse effect on the Company's business, financial condition and
results of operations.

RISK OF CURRENCY FLUCTUATIONS

With the exception of the six-month period ended December 31, 1997, a
significant amount of European Micro's sales has historically been to customers
outside of the United States. A majority of the Company's sales were
denominated in currencies other than the United States dollar. Changes in the
value of foreign currencies relative to the United States dollar could
adversely affect the Company's results of operations and financial position,
and transaction gains and losses could contribute to fluctuations in the
Company's results of operations and cash position. When possible, the Company
engages in currency hedging transactions primarily through the purchase and
sale of forward exchange contracts intended to reduce these risks. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Currency Risk Management." There can be no assurance that
fluctuations in foreign currency rates will not have a material adverse effect
on the Company's business, financial condition and results of operations.

DEPENDENCE ON KEY PERSONNEL

The Company's success to date has been significantly dependent on the
contributions of John B. Gallagher and Harry D. Shields, the founders of the
Company. The loss of the services of either person would have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company's success also depends to a significant extent upon a
number of its other key employees, and the loss of the services of one or more
other key employees could also have a material adverse effect on the Company.
The Company has key-man life insurance policies with respect to these key
employees. In addition, the Company believes that its future success will
depend in part upon its ability to attract and retain additional highly-skilled
professional, managerial, sales and marketing personnel. Competition for such
personnel is intense. There can be no assurance that the Company will be
successful in attracting, training and retaining the personnel that it requires
for its business and planned growth, and the failure to do so could have a
material adverse effect on the Company's business, financial condition and
results of operations.

RELIANCE ON KEY SUPPLIERS

European Micro does not manufacture any of its own products but rather
resells products purchased from suppliers. For the fiscal year ended June 30,
1997, the Company obtained 86.5% of its products from ten suppliers (36.2%
excluding Technology Express). Accordingly, the Company is highly dependent
upon such suppliers and the loss of a combination of suppliers would have a
material adverse effect on the Company's business, financial condition and
results of operations.

RELIANCE ON KEY PRODUCTS

For the fiscal year ended June 30, 1997, the five best selling products
accounted for 46.7% of its net sales. Accordingly, the inability of the Company
to obtain adequate supplies of products would have a material adverse effect on
the Company's business, financial condition and results of operations.

RELIANCE ON KEY CUSTOMERS

For the fiscal year ended June 30, 1997, European Micro's twenty largest
customers (excluding sales to any member of the Group) accounted for 53.8% of
the Company's net sales. None of these customers individually accounted for
more than 8.1% of such net sales. However, the Company is highly dependent upon
such customers and the loss of any such customer or customers could have a
material adverse effect on the Company's business, financial condition and
results of operations.

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RELIANCE ON KEY MARKETS

Certain markets within which the Company operates represent a high
percentage of its total operating earnings and net sales. For example,
approximately 45.1% of net sales were attributable to the markets of the United
Kingdom for the fiscal year ended June 30, 1997. Decreases in the volume of
sales in such regions or declines in operating margins could have a material
adverse effect on the Company's business, financial condition or results of
operations.

CONTROL BY CURRENT SHAREHOLDERS

Upon completion of the Offering, the Selling Shareholders will
beneficially own approximately 68% of the outstanding shares of Common Stock.
As a result, these shareholders, acting together, will retain the voting power
required to approve all matters requiring approval by European Micro's
shareholders, including the election of directors of the Company, transactions
involving the potential sale or merger of the Company, the issuance of
additional equity, warrants or options or the incurrence of significant
indebtedness. Moreover, two trusts (the "Trust Shareholders") created by the
Selling Shareholders together will beneficially own approximately 10% of the
outstanding shares of Common Stock. Pursuant to a Trusteed Shareholders
Cross-Purchase Agreement dated January 31, 1998 (the "Shareholders Agreement"),
the Selling Shareholders agreed to vote all shares of Common Stock owned or
controlled by them together on all matters submitted to a vote of the
shareholders of European Micro, including the election of directors. In the
event that the Selling Shareholders cannot agree on the manner in which to vote
their respective shares, then neither Selling Shareholder may vote his shares.
Pursuant to the Shareholders Agreement, the Trust Shareholders have agreed to
vote all shares of Common stock owned or controlled by them together on all
matters submitted to a vote of the shareholders of European Micro, including
the election of directors. In the event that the Trust Shareholders cannot
agree on the manner in which to vote their respective shares, then neither
Trust Shareholder may vote its shares. See "Principal and Selling
Shareholders--Shareholders Agreement."

NARROW PROFIT MARGINS

As a result of intense price competition in the microcomputer products
industry, European Micro has had, and expects to continue to have, narrow gross
profit and operating profit margins. These narrow margins magnify the impact on
operating results of variations in sales and operating costs. The Company's
gross margins have declined from 14.2% for the fiscal year ended 1995 to 9.5%
for the six-month period ended December 31, 1997, and operating margins have
declined from 5.5% for the fiscal year ended 1995 to 4.1% for the six-month
period ended December 31, 1997. The Company has taken a number of steps
intended to address these declining margins, including improving and enhancing
its information systems and partially offsetting the effects of such low gross
profit margins by increasing sales and reducing operating expenses as a
percentage of sales. There can be no assurance that the Company will maintain
or increase sales or further reduce operating expenses as a percentage of sales
in the future. Moreover, there can be no assurance that these steps will
prevent these margins from continuing to decline. Future gross profit margins
may be adversely affected by changes in product mix, manufacturer pricing
actions and competitive and economic pressures. While the Company will continue
to explore ways to improve gross margins and reduce operating expenses as a
percentage of sales, there can be no assurance that the Company will be
successful in such efforts or that the Company's margins will not decline in
the future. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

LIMITED UNDERWRITING HISTORY

The Underwriter has not previously participated in any public offerings as
an underwriter. In evaluating an investment in the Company, prospective
investors in the Common Stock offered hereby should consider the Underwriter's
lack of experience as an underwriter of public offerings. Although the
Underwriter does not intend to make a market in the Common Stock, there can be
no assurance that the Underwriter's limited experience will not adversely
affect the development of a trading market

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for, or liquidity of, the Company's securities. Therefore, purchasers of the
Common Stock offered hereby may suffer a lack of liquidity in their investment
or a material diminution of the value of their investment. See "Underwriting."

BEST EFFORTS OFFERING; ESCROW OF OFFERING PROCEEDS IN A NON-INTEREST BEARING
ACCOUNT PENDING CONSUMMATION OF THE OFFERING

There is no firm commitment on the part of the Underwriter to purchase any
or all of the Common Stock offered hereby. Rather, the Underwriter has agreed
to sell the Common Stock through licensed dealers on a "best efforts" basis.
Accordingly, there can be no assurance that any or all of the Common Stock
being offered hereby will be sold. Further, the proceeds of the Offering will
be deposited in escrow in a non-interest bearing account at The Chase Manhattan
Bank and will be released only (i) at the option of the Company upon receipt
into the escrow account of proceeds from the sale of at least 700,000 shares of
Common Stock or (ii) upon receipt into the escrow account of the proceeds from
the sale of at least 1,000,000 shares of Common Stock. This account is not
insured by the Bank Insurance Fund or Savings Association Insurance Fund of the
Federal Deposit Insurance Corporation or by any other governmental agency.
Unless the funds from this Offering are released from the escrow account within
sixty days of the date of this Prospectus (the "Offering Period"), the Offering
will terminate and all funds theretofore received from the sale of the Common
Stock will be promptly returned to the subscribers without deduction therefrom
or interest thereon. Moreover, during the Offering Period, subscribers will not
be entitled to a return of their subscriptions. Therefore, prospective
investors in the Common Stock should consider that any funds used by them to
purchase shares of Common Stock in the Offering could be held in escrow and be
unavailable for the entire duration of the Offering Period and, in the event
that 1,000,000 shares of Common Stock are not sold during the Offering Period,
such funds could be returned to them at the close of the Offering Period
without interest thereon.

CUSTOMER CREDIT EXPOSURE

European Micro sells its products and services to a customer base of more
than 250 value-added resellers, corporate resellers, retailers, direct
marketers and distributors. The Company finances a significant portion of such
sales by extending trade credit. As a result, the Company's business could be
adversely affected in the event of the deterioration of the financial condition
of its customers, resulting in the customers' inability to repay the Company.
In order to minimize the risk associated with such credit, the Company has
sought to insure substantially all of its accounts receivable. No assurances
can be given that the Company will maintain such insurance or, if such
insurance is maintained, that it will be maintained in an amount equal to the
aggregate amount of credit extended by the Company. In addition, no assurances
can be given that such insurance will be available in the future on terms
acceptable to the Company, if at all. Moreover, the deterioration of the
financial condition of one or more of its customers may make future sales to
such customers uninsurable.

ABILITY TO INSURE INVENTORY AGAINST THEFT

The Company has experienced several thefts of inventory in 1997. The
Company insures its inventory against theft and other damage up to a maximum of
the higher of $2,900,000 or the carrying value of the inventory. On December
31, 1997, the maximum coverage was $8,900,000. See "Note 7 of the Notes to
Financial Statements." There can be no assurance that such insurance coverage
will adequately compensate the Company for all losses incurred as a result of
theft or other casualty and there can be no assurance that the Company will be
able to find replacement coverage if such coverage terminates or is otherwise
cancelled. There can be no assurance that such coverage will remain available
and, if available, at affordable rates. A loss in excess of the Company's
coverage or for which coverage is not available could have a material adverse
effect on the Company's business, financial condition and results of
operations.

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RISKS ASSOCIATED WITH ACQUISITIONS

European Micro may use a portion of the net proceeds from this Offering
for acquisitions of other companies' assets or product lines that the Company
believes would complement or expand its existing business. No letters of intent
or other documents regarding an acquisition have been entered into.
Acquisitions involve a number of risks that could adversely affect the
Company's operating results, including: (i) the diversion of management's
attention; (ii) the difficulty of assimilation of the operations and personnel
of the acquired companies; (iii) the amortization of acquired intangible
assets; (iv) the assumption of potential liabilities, disclosed or undisclosed,
associated with the businesses acquired, which may exceed the amount of
indemnification available from the seller, if any; (v) the risk that the
financial and accounting systems utilized by the businesses acquired will not
meet the Company's standards; (vi) the risk that the businesses acquired will
not maintain the quality of services that the Company has historically
provided; (vii) the dilutive effect of the use of the Company's Common Stock as
consideration for acquisitions; and (viii) the inability to attract and retain
qualified local management. There can be no assurance that the Company will be
able to consummate any future acquisitions on satisfactory terms, if at all,
that adequate financing will be available on terms acceptable to the Company,
that any acquired operations will be successfully integrated or that such
operations will ultimately have a positive impact on the Company's business,
financial condition and results of operations.

TRADE RESTRICTIONS ON CROSS-BORDER SALES

Substantially all of the products purchased by European Micro are
trademarked or copyrighted products which may have been sold to distributors by
the manufacturers and resold to the Company. From time to time, trademark or
copyright owners and their licensees and trade associations have initiated
litigation or administrative agency proceedings seeking to halt the importation
of such products into many of the countries in which the Company operates.
There can be no assurance that future judicial, legislative or administrative
agency action in such countries, including possible import, export, tariff or
other trade restrictions, will not limit or eliminate some of the Company's
secondary sources of supply or other business activities. In addition, there
can be no assurance that the Company's business activities will not become the
subject of legal or administrative actions brought by manufacturers,
distributors or others based on violations of trademark or copyright rights or
other laws. Such judicial, legislative, administrative or legal actions could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company sells products in the United States and
expects to continue to do so in the future. United States trademark and
copyright owners and their licensees and trade associations in other industries
have initiated litigation or administrative agency proceedings seeking to halt
the importation into the United States of foreign manufactured or previously
exported trademarked or copyrighted products. Such actions in the United States
may prevent the Company from selling products in the United States or, if, at
that time, the Company is already selling products in the United States, cause
the Company to cease selling products in the United States. See
"Business--Sources of Supply."

MANAGEMENT OF GROWTH

The rapid growth of the Company's business has required the Company to
make significant additions in personnel and has significantly increased its
working capital requirements. Such growth has resulted in new and increased
responsibilities for management personnel and has placed and continues to place
a significant strain upon the Company's management, operating and financial
systems and other resources. There can be no assurance that the strain placed
upon the Company's management, operating and financial systems and other
resources will not have a material adverse effect on the Company's business,
financial condition and results of operations, nor can there be any assurance
that the Company will be able to attract or retain sufficient personnel to
continue the planned expansion of its operations. Also crucial to the Company's
success in managing its growth will be its ability to achieve economies of
scale, such as enhanced purchasing power, the ability to purchase a higher
percentage of product on credit and the ability to obtain product which the
Company might not otherwise be able to

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<PAGE>

obtain. There can be no assurance that the Company will be able to achieve such
economies of scale, and the failure to do so could have a material adverse
effect on the Company's business, financial condition and results of
operations. Although the Company has experienced significant sales growth, such
growth may not be indicative of future sales growth.

To manage the expansion of its operations, the Company must continuously
evaluate the adequacy of its management structure and its existing systems and
procedures, including, without limitation, its data processing, financial and
internal control systems. When entering new geographic markets, the Company
will be required to implement its policies and financial reporting procedures,
recruit personnel, and adapt its distribution systems to varying cultural,
economic and governmental systems. There can be no assurance that management
will adequately anticipate all of the changing demands that growth could impose
on the Company's systems, procedures, and structure. In addition, the Company
will be required to react to changes in its industry, and there can be no
assurance that it will be able to do so successfully or at all. Any failure to
adequately anticipate and respond to such changing demands may have a material
adverse effect on the Company's business, financial condition and results of
operations.

RISKS ASSOCIATED WITH HOLDING FOREIGN SUBSIDIARIES

All of the operations of European Micro Holdings, Inc. are and will be
conducted through its direct or indirect subsidiaries, some of which are formed
outside of the United States. European Micro Holdings, Inc.'s available cash
will depend upon the cash flow of its subsidiaries and the ability of those
subsidiaries to make funds available to European Micro Holdings, Inc. in the
form of loans, dividends, intercompany advances, management fees or otherwise.
The Subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to make funds available to European Micro
Holdings, Inc., whether in the form of loans, dividends, intercompany advances,
management fees or otherwise. The applicable law in certain countries may limit
the ability of the Company's foreign Subsidiaries to pay dividends in the
absence of sufficient withholding taxes, distributable reserves or for other
reasons. None of European Micro Holdings, Inc.'s current Subsidiaries are
subject to any currency exchange controls. However, future exchange controls,
or the existence of such controls in other countries in which European Micro
Holdings, Inc. establishes or acquires subsidiaries, could limit or restrict
the ability of European Micro Holdings, Inc. to obtain loans, dividends,
intercompany advances, management fees or otherwise access the financial
resources of such subsidiaries. In addition, the subsidiaries may from time to
time in the future become parties to financing arrangements, which may contain
limitations on the ability of such subsidiaries to pay dividends or to make
loans or advances to European Micro Holdings, Inc. In the event of any
insolvency, bankruptcy or similar proceedings, creditors of the subsidiaries
would generally be entitled to priority over European Micro Holdings, Inc. with
respect to assets of the affected subsidiaries.

AVAILABLE CAPITAL FOR OBTAINING PRODUCTS IN BULK

The Company's business often requires the volume buying of discounted
products. This requires the Company to have sufficient available cash or
financing to be able to take advantage of such discounted prices on a timely
basis. There can be no assurance that the Company will continue to have
available cash or financing. A shortage of available cash or financing may
prevent the Company from being able to purchase inventory at favorable prices
and therefore have a material adverse effect on the Company's business,
financial condition and results of operations.

NEED FOR ADDITIONAL CAPITAL

European Micro has historically grown through internal expansion, which
has resulted in the need for significant amounts of capital or financing which
often has been provided by the Company's founding shareholders. To maintain
historical levels of growth, European Micro may need to seek additional funding
through public or private financing and may, when attractive sources of capital
become available, elect to obtain capital in anticipation of such needs. There
can be no assurances that

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<PAGE>

the founding shareholders will continue to extend credit to the Company.
Adequate funds may not be available when needed or may not be available on
terms favorable to European Micro. If additional funds are raised by issuing
equity securities, dilution to existing shareholders may result. If funding is
insufficient, the Company may be required to delay, reduce the scope of or
eliminate some or all of its expansion plans.

RISK OF INDEBTEDNESS

The Company may incur substantial amounts of indebtedness in its
operations. In such event, European Micro would dedicate an increasing portion
of its cash flow to servicing such indebtedness, thereby exposing it to the
risks inherent in a highly leveraged company, including, among other things,
interest rate and default risks. An increase in interest rates charged by
lending institutions will increase the cost of servicing the Company's
indebtedness as well as increase the cost of financing future acquisitions.
Additionally, the Company anticipates that such indebtedness will be secured by
liens on the Company's assets, and a default on such indebtedness may result in
the Company's lenders foreclosing such liens. The occurrence of any of these
things could have a material adverse affect on the Company's business,
financial condition and results of operations. Loan agreements also typically
impose substantial restrictions on borrowers and normally require strict
compliance with certain financial ratios and other criteria, all of which may
significantly restrict the Company's business or financial flexibility and have
a material adverse effect on the Company's business and financial condition. If
funding is insufficient, European Micro may be required to delay, reduce the
scope of or eliminate some or all of its expansion plans. This would have a
material adverse effect of the Company's business, financial condition and
results of operations.

VARIABILITY OF CUSTOMER REQUIREMENTS

The level and timing of orders placed by European Micro's customers vary
due to a number of factors, including customer attempts to manage inventory,
changes in customers' business strategies and variations in demand for
products. European Micro relies on its estimate of anticipated future volumes
when making commitments regarding the quantities and the mix of products that
it intends to carry in inventory. European Micro does not have long term
contracts with its customers. As such, nothing would prohibit European Micro's
customers from reducing or eliminating their orders with European Micro which
would result in a decrease in sales and an increase in inventory carrying costs
and obsolescence. Any significant reduction in customer orders could have a
material adverse effect on European Micro's business, financial condition and
results of operation.

COMPETITION

European Micro operates in a highly competitive environment. The computer
wholesale distribution industry is characterized by intense competition, based
primarily on product availability, credit availability, price, speed of
delivery, quality and range of product lines, service and support. Certain of
European Micro's competitors have greater financial, marketing, service and
technical support resources than European Micro and may sell products at prices
below those charged by European Micro. There can be no assurance that European
Micro's resources will be sufficient to allow European Micro to compete
effectively in the future. Continued increases in competition could have a
material adverse effect on European Micro's business, financial condition and
results of operations due to, among other things, potential price reductions
and potential loss of market share.

FLUCTUATIONS IN QUARTERLY RESULTS

European Micro's quarterly net sales and operating results have varied
significantly in the past and will likely continue to do so in the future as a
result of such factors as seasonal variations in the demand for the products
and services offered by the Company, the introduction of new hardware and
software technologies and products offering improved features and
functionality, the introduction of new products and services by the Company and
its competitors, the loss or consolidation of a significant

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<PAGE>

supplier or customer, changes in the level of operating expenses, inventory
adjustments, product supply constraints, competitive conditions including
pricing, interest rate fluctuations, the impact of acquisitions, currency
fluctuations and general economic conditions.

Specific historical seasonal variations in European Micro's operating
results have included a reduction in demand in Europe during the summer months
and changes in the product cycle of major products. European Micro may be
unable to adjust spending sufficiently in a timely manner to compensate for any
unexpected sales shortfall, which could materially adversely affect quarterly
operating results. Accordingly, European Micro believes that period-to-period
comparisons of its operating results should not be relied upon as an indication
of future performance. In addition, the results of any quarterly period are not
indicative of results to be expected for a full fiscal year. In certain future
quarters, European Micro's operating results may be below the expectations of
public market analysts or investors. In such event, the market price of the
Common Stock would be materially adversely affected.

EFFECTS OF TECHNOLOGICAL CHANGE

The products sold by European Micro are characterized by rapidly changing
technology, frequent new product introductions and evolving industry standards
that can render the products marketed by European Micro obsolete or
unmarketable in a relatively short period of time. Although it is the policy of
most manufacturers of microcomputer products to protect distributors in the
form of price protection and/or stock rotation, the nature of European Micro's
business does not allow it to enjoy those benefits. See "Risk Factors--No
Contracts or Distribution Agreements with Suppliers." European Micro's future
success will depend upon its ability to limit its exposure to obsolescence in
its inventory and to gain access to its vendors' new product lines, as well as
product lines of any additional vendors that release new and desirable
technology.

ANTI-TAKEOVER CONSIDERATIONS

The Company's Board of Directors has the authority to issue up to
1,000,000 shares of Preferred Stock in one or more series and to fix the
powers, designations, preferences and relative rights thereof without any
further vote or action by the Company's shareholders. The issuance of Preferred
Stock could dilute the voting power of holders of Common Stock and could have
the effect of delaying, deferring or preventing a change in control of the
Company. The Company's Articles of Incorporation provide that the holders of a
majority of the Preferred Stock, voting separately from the holders of the
Common Stock, must approve certain transactions. The Company's Board of
Directors has been divided into three equal size classes serving staggered
three-year terms. See "Management--Directors." Therefore, any shareholder
(other than Messrs. Gallagher and Shields) interested in gaining control of the
Company will be precluded from electing a majority of directors in any single
year. Certain change of control transactions such as mergers, share exchange or
sale of substantially all of the assets of the Company require an affirmative
vote of a majority of the holders of the Company's Common Stock and a majority
of the holders of the Company's Preferred Stock.

In addition, Messrs. Gallagher and Shields together control approximately
68% (78% if the Shares of the Trust Shareholders are included although Messrs.
Gallagher and Shields do not have voting power with respect to the shares held
by the Trust Shareholders) of the outstanding shares of Common Stock and the
voting power of these shareholders could have the effect of delaying or
preventing a change in control of European Micro. These, and certain other
provisions of the Company's Articles of Incorporation and Bylaws, as well as
Nevada law, may operate in a manner that could discourage or render more
difficult a takeover of the Company or the removal of management or the Board
of Directors or may limit the price certain investors may be willing to pay in
the future for shares of Common Stock. See "Principal and Selling Shareholders"
and "Description of Capital Stock--Anti-Takeover Effects of Provisions of the
Articles of Incorporation, Bylaws and Nevada Law."

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<PAGE>

FOREIGN CORRUPT PRACTICES ACT

The Company, like other companies operating internationally, is subject to
the Foreign Corrupt Practices Act ("FCPA") and other laws which prohibit
improper payments to foreign governments and their officials by United States
and other business entities. The FCPA also requires companies to maintain
accurate record keeping and systems of internal control to ensure that funds
are not misappropriated. The Company's operations in certain countries create
the risk of an unauthorized payment by an employee or agent of the Company
which would be in violation of such laws, including the FCPA. Violations of the
FCPA or these other laws may result in severe criminal penalties which could
have a material adverse effect on the Company's business, financial condition
and results of operations.

NO ANTICIPATION OF DIVIDENDS FOLLOWING OFFERING

European Micro anticipates that, following the completion of this Offering
and for the foreseeable future, earnings, if any, will be retained for the
development of its business and will not be distributed to shareholders as
dividends. The declaration and payment of dividends, if any, by European Micro
at some future time will depend upon European Micro's results of operations,
financial condition, cash requirements, future prospects, limitations imposed
by credit agreements or senior securities and any other factors deemed relevant
by European Micro's Board of Directors. The declaration and payment of
dividends, if at all, by European Micro will be at the discretion of the Board
of Directors. See "Dividend Policy."

IMPACT OF THE EUROPEAN MONETARY UNION

European Monetary Union is scheduled to commence in 1999, when certain
European countries will adopt a single European currency called the "Euro."
Substantially all of the countries in which the Company currently conducts
business (except for the United States) will be affected by the European
Monetary Union and the Euro. The Company cannot predict the impact which the
European Monetary Union or the Euro will have on the Company. Either the
European Monetary Union or the Euro may have a material adverse affect on the
Company's business, financial condition or results of operations.

BROAD DISCRETION IN USE OF PROCEEDS

European Micro intends to use the net proceeds of this Offering for the
purposes set forth in the Section entitled "Use of Proceeds." However,
management of European Micro has broad discretion to adjust the application and
allocation of the net proceeds of this Offering in order to address different
circumstances and opportunities. As a result, European Micro's success will be
substantially dependent upon the discretion and judgment of the management of
European Micro with respect to the application and allocation of the net
proceeds of this Offering.

QUALIFICATION AND MAINTENANCE CRITERIA FOR NASDAQ SECURITIES

The National Association of Securities Dealers, Inc. ("NASD"), which
administers the Nasdaq National Market (the exchange on which European Micro
proposes the Common Stock to trade), requires that in order for the Common
Stock to be included on this market, the Company must satisfy and maintain
certain financial criteria established by the NASD. The failure to satisfy or
maintain such criteria may result in the discontinuance of the inclusion of the
Common Stock on the Nasdaq National Market. In such event, trading of the
Common Stock may then continue to be conducted in the Nasdaq SmallCap Market.
This market generally contains shares of emerging growth companies. Shares
generally trade less frequently on the Nasdaq SmallCap Market than on the
Nasdaq National Market. As a result, investors may find it more difficult to
dispose of the Common Stock. In the event that the Company's Common Stock fails
to satisfy or maintain the minimum financial requirements for either the Nasdaq
National Market or the Nasdaq SmallCap Market, trading of the Common Stock may
then continue to be conducted in the non-Nasdaq over-the-counter market (in
what are commonly referred

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<PAGE>

to as the "bulletin board") where an investor will find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Common Stock. If European Micro fails to meet certain requirements, sales of
the Common Stock would be subject to a rule promulgated by the Commission which
imposes various sales practice requirements on broker-dealers who sell
securities governed by the rule to persons other than established customers and
accredited investors. For these types of transactions, the broker-dealer must
make a special suitability determination for the purchaser and have received
the purchaser's written consent to the transactions prior to sale.
Consequently, the rule may have a material adverse effect on the ability of
broker-dealers to sell the Common Stock, which may affect the ability of
purchasers in this Offering to sell the Common Stock in the secondary market.

POTENTIAL VOLATILITY OF STOCK PRICE DUE TO NO PRIOR TRADING MARKET AND OTHER
FACTORS

Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market for the
Common Stock will develop or, if one does develop, that it will be maintained.
The initial public offering price, which will be established by negotiations
between European Micro and the Underwriter, does not reflect book value per
share or any other quantitative factor and may not be indicative of prices that
will prevail in the trading market for the Common Stock. The stock market has
experienced extreme price and volume fluctuations which have particularly
affected the market price for many computer related distribution companies and
which have often been unrelated to the operating performance of these
companies. The trading price of the Common Stock could also be subject to
significant fluctuations in response to variations in periodic operating
results, changes in management, future announcements concerning European Micro,
legislative or regulatory changes, general trends in the industry, changes in
the level of acquisition opportunities available to the Company and the
Company's ability to efficiently price and negotiate such acquisitions on a
favorable basis, the financial condition of the Company's customers, the
failure to properly manage growth and the inability to source products on
favorable terms.

DILUTION

The initial public offering price of the Common Stock is substantially
more than the net tangible book value per share of the Common Stock.
Accordingly, the purchasers of shares of Common Stock pursuant to the Offering
will experience immediate and substantial dilution in the net tangible book
value per share of Common Stock from the initial public offering price. The net
tangible book value dilution to new investors in the Offering will be $8.13 per
share at an assumed initial public offering price of $10.00 per share. See
"Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market after
this Offering, including sales pursuant to Rule 144 promulgated under the
Securities Act ("Rule 144") or otherwise, or the perception that such sales
could occur, may adversely affect the market price of European Micro's Common
Stock. Upon completion of this Offering and assuming this Offering will be
fully subscribed, European Micro will have 5,000,000 shares of Common Stock
outstanding. Of these shares, all of the 1,100,000 shares sold in this Offering
will be freely tradable without restriction or further registration under the
Securities Act. All of the remaining 3,900,000 shares are deemed "restricted
shares" under Rule 144 in that they were originally issued and sold in private
transactions in reliance upon exemptions under the Securities Act. All of those
shares are held by the Selling Shareholders who are deemed "affiliates" of
European Micro as such term is defined in Rule 144. The restricted shares may
not be sold except in compliance with the registration requirements of the
Securities Act or pursuant to an exemption from registration such as the
exemption provided by Rule 144. Except for the 100,000 shares of Common Stock
being sold by the Selling Shareholders in this Offering, the Selling
Shareholders and the Trust Shareholders have agreed not to sell or dispose of
any of the remaining 3,900,000 shares of Common Stock held by them for six
months after the date of this Prospectus without the prior written consent of
the Underwriter. For the period beginning six months after the date of this
Prospectus and

18
<PAGE>
ending one year from such date, the Selling Shareholders and the Trust
Shareholders have agreed not to sell or dispose of any of the remaining
3,900,000 shares of Common Stock held by them in amounts exceeding those set
forth in Section (e)(1) of Rule 144 and only in the manner of sale provided in
Section (f) of such rule. See "Underwriting." Subject to the restrictions
described above, the Selling Shareholders have certain demand and piggy-back
registration rights with respect to the shares of Common Stock held by them.
Either of the Selling Shareholders may require the Company to file a
registration statement with respect to any of their shares once per year.
Moreover, either Selling Shareholder may include these shares in certain other
offerings by the Company. See "Description of Capital Stock--Registration
Rights."

The Company intends to file a registration statement covering all 550,000
shares of Common Stock issuable under the Company's employee benefit plans in
effect on the date of this Prospectus, including the Incentive Plan and
Purchase Plan. See "Management--1998 Stock Incentive Plan" and
"Management--1998 Employee Stock Purchase Plan." Accordingly, any shares issued
under the Company's employee benefit plans or upon the exercise of options
issued under such plans will be eligible for sale in the public market
beginning on the effective date of such registration statement.

LABOR RELATIONS

European Micro's labor force is currently not unionized. European Micro,
however, does business in certain foreign countries where labor disruption is
more common than in the United States. The majority of the freight carriers
used by European Micro are unionized. A labor strike by one of European Micro's
freight carriers or vendors, a general strike by civil service employees, a
governmental shutdown or any type of labor disruption could have a material
adverse effect on European Micro's business, financial condition and results of
operation.

USE OF PROCEEDS

The net proceeds to European Micro (after deducting underwriting discounts
and commissions and estimated offering expenses) from the sale of 700,000 or
1,000,000 shares of Common Stock offered by the Company, assuming a public
offering price of $10.00 per share, are estimated to be approximately
$5,640,000, and $8,400,000, respectively. The Company considers that the net
proceeds from this Offering will be sufficient to accomplish the specific uses
of the net proceeds set forth in the table below and the Company does not
expect any material amounts of other funds to be necessary to accomplish the
specific uses of the proceeds of this Offering. The Company will not receive
any proceeds from the sale of shares by the Selling Shareholders. See
"Principal and Selling Shareholders."

<TABLE>
<CAPTION>
ALLOCATION OF PROCEEDS ALLOCATION OF PROCEEDS
(NET PROCEEDS OF (NET PROCEEDS OF
$5,640,000) $8,400,000)
------------------------- ------------------------
USE (IN ORDER OF PRIORITY) AMOUNT PERCENT AMOUNT PERCENT
- ------------------------------------------------- ------------- --------- ------------- --------
<S> <C> <C> <C> <C>
Fund operations and provide working capital to
European Micro UK .............................. $3,140,000 56% $4,000,000 48%
For expansion purposes, including mergers and
acquisitions(1) ................................ 1,000,000 18 2,400,000 28
Fund operations and provide working capital to
Nor'easter ..................................... 1,000,000 18 1,000,000 12
Expand sales and marketing capabilities ......... 250,000 4 500,000 6
General corporate purposes, including investor
relations ...................................... $ 250,000 4% $ 500,000 6%
</TABLE>

- ----------------
(1) European Micro is not currently engaged in any discussions for any material
acquisitions and no assurance can be given that any such acquisitions will
be consummated or when, if any, expansions will occur.

Pending utilization of the net proceeds as described above, the Company
intends to invest the proceeds in money market or similar secure investments.
The Company has not, however, adopted specific investment guidelines to
implement this general policy.

19
<PAGE>

DIVIDEND POLICY

During the fiscal years ended June 30, 1996 and 1997, European Micro
declared and paid cash dividends of $961,000 or $0.24 per share and $562,000 or
$0.14 per share, respectively. The dividends per share were calculated based on
4,000,000 shares of Common Stock outstanding.

On February 9, 1998, European Micro declared and paid a cash dividend of
$500,000 or $0.125 per share of Common Stock. The effect of this cash dividend
reduced both the cash and retained earnings on the consolidated balance sheet
of European Micro by an aggregate of $500,000. In addition, the cash dividend
reduced the amount of cash available to European Micro for working capital and
other corporate purposes.

European Micro anticipates that, following the completion of the Offering,
earnings will be retained for development of its business and will not be
distributed to shareholders as dividends. The declaration and payment by
European Micro of any future dividends and the amount thereof will depend upon
European Micro's results of operations, financial condition, cash requirements,
future prospects, limitations imposed by credit agreements or senior securities
and other factors deemed relevant by the Board of Directors. The declaration
and payment of dividends, if at all, by European Micro will be at the
discretion of the Board of Directors. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

CAPITALIZATION

The following table sets forth (i) the historical capitalization of the
Company as of December 31, 1997, and (ii) the pro forma capitalization of the
Company as of such date as adjusted to reflect the sale by the Company of
700,000 shares of Common Stock (i.e. the minimum amount of shares which could
be accepted by the Company) in the Offering at an assumed initial public
offering price of $10.00 per share after deducting estimated underwriting
commissions and estimated offering expenses and after giving effect to the
anticipated application of the net proceeds therefrom and after giving effect
to the impact of the $500,000 cash dividend declared and paid to the
shareholders of record on February 9, 1998.

<TABLE>
<CAPTION>
($ IN THOUSANDS)
DECEMBER 31, 1997
-----------------------------------------------
(UNAUDITED) AS PRO
ACTUAL ADJUSTED(1)(2) FORMA(2)(3)
------------- ---------------- ------------
<S> <C> <C> <C>
Long-term debt, net of current portion ...................... $ 110 110 110
Shareholders' equity:
Preferred Stock, $0.01 par value, 1,000,000 shares
authorized, none issued on a proforma basis .............. -- -- --
Common Stock, par value $0.01 per share; 20,000,000 shares
authorized, 4,000,000 shares issued and outstanding. On a
pro forma basis, par value $0.01 per share; 20,000,000
shares authorized; 4,700,000 shares issued and outstanding 40 40 47
Additional paid-in capital ................................. 1,624 1,624 7,257
Retained earnings .......................................... 1,965 1,465 1,465
Cumulative foreign currency adjustment ..................... 5 5 5
------ ----- -----
Total shareholders' equity ................................ $3,634 3,134 8,774
------ ----- -----
Total capitalization ...................................... $3,744 3,244 8,884
====== ===== =====
</TABLE>

- ----------------
(1) Takes into account the $500,000 cash dividend declared and paid to the
shareholders of record on February 9, 1998, but does not take into account
the receipt of any proceeds from the Offering. See "Dividend Policy."
(2) Excludes (i) 500,000 shares issuable upon the exercise of options to
purchase shares of Common Stock reserved for issuance upon the grant of
options under European Micro's 1998 Stock Incentive Plan and (ii) 50,000
shares of Common Stock that have been reserved for issuance under European
Micro's Employee Stock Purchase Plan. See "Management--1998 Stock
Incentive Plan" and "Management--1998 Employee Stock Purchase Plan."
(3) Takes into account the $500,000 cash dividend declared and paid to the
shareholders of record on February 9, 1998, and assumes that $5,640,000 of
net proceeds were received by the Company in the Offering.

20
<PAGE>
DILUTION

The net tangible book value of the Company at December 31, 1997, as
adjusted for the $500,000 cash dividend which was distributed to the
shareholders on February 9, 1998, was $3,134,000 or $0.78 per share of Common
Stock assuming 4,000,000 shares outstanding. Net tangible book value represents
total tangible assets less total liabilities. All per share calculations
immediately after the Offering assume 4,700,000 shares of Common Stock are
outstanding. After giving effect to the sale of 700,000 shares of Common Stock
in the Offering (i.e. the minimum amount of the offering at an assumed initial
offering price of $10.00 per share) and after deducting anticipated offering
expenses and underwriting discounts and commissions, the adjusted pro forma net
tangible book value of the Company at December 31, 1997 would have been
$8,774,000 or $1.87 per share, representing an immediate $8.13 per share
dilution to new investors purchasing shares at the initial public offering
price. The following table illustrates such per share dilution.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ........................ $ 10.00
Net tangible book value per share before the Offering as adjusted(1) .. $ 0.78
Increase per share attributable to new investors ...................... $ 1.09
------
Adjusted pro forma net tangible book value per share after the Offering $ 1.87
-------
Dilution per share to new investors(2) ................................. $ 8.13
=======
</TABLE>

- ----------------
(1) Takes into account the $500,000 cash dividend declared and paid to the
shareholders as recorded on February 9, 1998, but does not take into
account the receipt of any proceeds from the Offering. See "Dividend
Policy."
(2) Dilution is determined by subtracting pro forma net tangible book value per
share after giving effect to the Offering from the initial public offering
price paid by a new investor for a share of Common Stock.

Sales of the Common Stock for other purposes after the completion of the
Offering could also have dilutive effect to those persons purchasing Common
Stock in the Offering.

The following table sets forth, on a pro forma basis as of December 31,
1997, the number of shares of Common Stock purchased from the Company, the
total consideration paid and the average price per share paid by existing
shareholders and by new investors (assuming the sale by the Company of 700,000
shares in the Offering at an assumed initial public offering price of $10.00
per share), before deduction of underwriting commissions and offering expenses:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------------- -------------------------------
PERCENT AFTER PERCENT AFTER AVERAGE PRICE
NUMBER OFFERING AMOUNT OFFERING PER SHARE
----------- -------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1) ......... 4,000,000 85% $1,664,000 19% $ 0.42
New shareholders ................. 700,000 15% $7,000,000 81% $ 10.00
--------- --- ---------- ----- -------
Total .......................... 4,700,000 100% $8,664,000 100.0%
========= === ========== =====
</TABLE>
- ----------------

(1) Includes John B. Gallagher, Harry D. Shields, Thomas H. Minkoff, Trustee of
the Gallagher Family Trust (the "Gallagher Family Trust") and Stuart S.
Southard and Robert H. True, Trustees of the 1997 Henry Daniel Shields
Irrevocable Education Trust (the "Shields Educational Trust"). On January
31, 1998, the existing shareholders exchanged one hundred percent (100%)
of their shares of ordinary stock of European Micro UK for 4,000,000 newly
issued shares of Common Stock of European Micro Holdings, Inc. No other
consideration was given by the existing shareholders for the 4,000,000
shares of Common Stock of European Micro Holdings, Inc. As a result of the
exchange, the existing shareholders own one hundred percent (100%) of the
issued and outstanding Common Stock of European Micro Holdings, Inc. prior
to the consummation of this Offering.

21
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected statement of operations and balance sheet data of
the Company as of June 30, 1996 and 1997 and each of the years in the
three-year period ended June 30, 1997 have been derived from the Company's
audited consolidated financial statements and should be read in conjunction
with the Consolidated Financial Statements and the Notes thereto included
elsewhere in this Prospectus. The following selected statement of operations
and balance sheet data of the Company as of June 30, 1993, 1994 and 1995 and
for the fiscal years ended June 30, 1993 and 1994, and the six months ended
December 31, 1996 and 1997 have been derived from unaudited consolidated
financial statements of the Company. In the opinion of management, the
unaudited consolidated financial statements of the Company have been prepared
on the same basis as the audited consolidated financial statements included
herein and include all adjustments necessary for the fair presentation of
financial position and results of operations at these dates and for these
periods which adjustments are only of a normal recurring nature. The results of
operations for interim periods are not necessarily indicative of results that
may be expected for the full year. See "Index to Financial Statements."

<TABLE>
<CAPTION>
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED JUNE 30,
----------------------------------------------------------------
1993 1994 1995 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales to third parties ................................. $ 23,968 28,293 33,518 39,912 46,501
Net sales to related parties ............................... 309 942 346 436 154
---------- ------ ------ ------ ------
Total net sales ............................................ 24,277 29,235 33,864 40,348 46,655
---------- ------ ------ ------ ------
Cost of goods sold to third parties ........................ (20,951) (24,829) (28,687) (35,475) (41,163)
Cost of goods sold to related parties ...................... (305) (932) (353) (417) (156)
---------- ------- ------- ------- -------
Cost of goods sold ......................................... (21,256) (25,761) (29,040) (35,892) (41,319)
---------- ------- ------- ------- -------
Gross Profit ............................................... 3,021 3,474 4,824 4,456 5,336
---------- ------- ------- ------- -------
Operating expenses ......................................... (1,313) (2,368) (2,832) (2,884) (3,230)
Operating expenses attributable to related parties ......... (80) (120) (144) (94) (55)
---------- ------- ------- ------- -------
Total operating expenses ................................... (1,393) (2,488) (2,976) (2,978) (3,285)
---------- ------- ------- ------- -------
Operating profit ........................................... 1,628 986 1,848 1,478 2,051
---------- ------- ------- ------- -------
Interest expense ........................................... (18) (30) (156) (160) (293)
Share of net (loss) income in unconsolidated affiliate ..... -- -- -- -- (73)
---------- ------- ------- ------- -------
Income before income taxes ................................. 1,610 956 1,692 1,318 1,685
Taxes on income ............................................ (546) (432) (577) (473) (651)
---------- ------- ------- ------- -------
Net income ................................................. $ 1,064 524 1,115 845 1,034
========== ======= ======= ======= =======
Net income per share ....................................... $ 0.27 0.13 0.28 0.21 0.26
Cash dividend per share .................................... $ 0.06 -- 0.10 0.24 0.14

<CAPTION>
SIX SIX
MONTHS MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------- -------------
<S> <C> <C>
STATEMENT OF OPERATIONS:
Net sales to third parties ................................. 19,593 32,114
Net sales to related parties ............................... 66 13,995
------ ------
Total net sales ............................................ 19,659 46,109
------ ------
Cost of goods sold to third parties ........................ (17,338) (28,019)
Cost of goods sold to related parties ...................... (66) (13,710)
------- -------
Cost of goods sold ......................................... (17,404) (41,729)
------- -------
Gross Profit ............................................... 2,255 4,380
------- -------
Operating expenses ......................................... (1,579) (2,423)
Operating expenses attributable to related parties ......... (44) (44)
------- -------
Total operating expenses ................................... (1,623) (2,467)
------- -------
Operating profit ........................................... 632 1,913
------- -------
Interest expense ........................................... (62) (223)
Share of net (loss) income in unconsolidated affiliate ..... -- 21
------- -------
Income before income taxes ................................. 570 1,711
Taxes on income ............................................ (199) (557)
------- -------
Net income ................................................. 371 1,154
======= =======
Net income per share ....................................... 0.09 0.29
Cash dividend per share .................................... 0.07 0.01
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, AS ADJUSTED(1)
----------------------------------------- DECEMBER 31, DECEMBER 31,
1993 1994 1995 1996 1997 1997 1997
-------- -------- ------- ------- ------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(2) .................... $ 196 674 1,736 1,474 1,976 3,011 2,511
Total assets .......................... 1,927 3,928 5,873 7,857 8,844 16,191 15,691
Long-term debt, net of current portion 39 68 41 37 45 110 110
Shareholders' equity .................. $ 308 843 1,924 1,769 2,511 3,634 3,134
</TABLE>

- ---------------
(1) Takes into account the $500,000 cash dividend declared and paid to the
shareholders of record on February 9, 1998, but does not take into account
the receipt of any proceeds from the Offering. See "Dividend Policy."

(2) Total current assets less current liabilities.

22
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited consolidated quarterly
statement of operations data for each of the four quarters in the periods ended
June 30, 1996 and 1997. In the opinion of management, this information has been
prepared on the same basis as the audited consolidated financial statements
appearing elsewhere in this Prospectus, and includes all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of this information in accordance with generally accepted
accounting principles. Such quarterly results are not necessarily indicative of
future results of operations and should be read in conjunction with the audited
consolidated financial statements of the Company and the notes thereto.

<TABLE>
<CAPTION>
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
----------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1996 1996
--------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales(1) ................. $ 8,718 9,323 8,092 14,214
Gross profit ................. 1,013 1,143 912 1,388
Net income ................... 245 282 117 201
Net income per share ......... $ 0.06 0.07 0.03 0.05
</TABLE>

<TABLE>
<CAPTION>
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
----------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1996 1996 1997 1997
--------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales ....................... $ 8,696 10,963 13,571 13,425
Gross profit .................... 1,231 1,025 1,454 1,627
Net income(2) ................... 287 94 291 362
Net income per share(2) ......... $ 0.07 0.02 0.07 0.10
</TABLE>

- ----------------

(1) The net sales for the three-month period ended June 30, 1996, increased due
primarily to the Company's purchase of products in short supply in Europe
from related parties in the United States. The demand for such products
resulted in increased net sales for the period.
(2) Net income and net income per share for the three-month period ended
December 31, 1996, decreased primarily due to adverse fluctuations in the
exchange rates in Europe, particularly the pound sterling. The rapid
strengthening of the pound sterling affected central European currency
receivable balances considerably.

23
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF EUROPEAN MICRO AND THE NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

European Micro is an independent distributor of microcomputer products,
including personal computers, memory modules, disc drives and networking
products, operating primarily in Western Europe. European Micro has pursued and
expects to continue to pursue a strategy of purchasing product for resale on
the worldwide surplus or aftermarket, as opposed to purchasing products for
resale directly from manufacturers. European Micro's ability to purchase
products for resale in these markets has enabled European Micro to increase net
sales and achieve strong operating results. For the three-year period ended
June 30, 1997, European Micro's total net sales increased from $33.9 million in
fiscal 1995 to $46.7 million in fiscal 1997, and gross profit increased from
$4.8 million to $5.3 million. European Micro attributes these increases in
sales to increased customer demand for European Micro's products and, more
recently, to the expansion of the range of products offered.

European Micro has derived substantially all of its operating income and
cash flow from European Micro UK. Generally, European Micro purchases and sells
its products in currencies other than the United States dollar. European Micro
seeks to limit its exposure to currency fluctuations through hedging. See "Risk
Factors--Risk of Currency Fluctuations" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Currency Risk
Management."

RESULTS OF OPERATIONS

The following table sets forth, for the periods presented, the percentage
of net sales represented by certain items in European Micro's Consolidated
Statements of Operations:

PERCENTAGE OF NET SALES

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
FISCAL YEARS ENDING JUNE 30, DECEMBER 31,
------------------------------------ ------------------------
1995 1996 1997 1996 1997
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net sales to third parties .................... 99.0% 98.9% 99.7% 100.0% 69.6%
Net sales to related parties .................. 1.0 1.1 0.3 0.0 30.4
----- ----- ----- ----- -----
Total net sales ............................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of goods sold to third parties ........... (84.7) (87.9) (88.2) (88.2) (60.8)
Cost of goods sold to related parties ......... ( 1.1) ( 1.1) ( 0.4) ( 0.3) (29.7)
----- ----- ----- ----- -----
Total cost of goods sold ...................... (85.8) (89.0) (88.6) (88.5) (90.5)
----- ----- ----- ----- -----
Gross profit .................................. 14.2 11.0 11.4 11.5 9.5
Operating expenses ............................ ( 8.7) ( 7.3) ( 7.0) ( 8.3) ( 5.4)
----- ----- ----- ----- -----
Operating profit .............................. 5.5 3.7 4.4 3.2 4.1
Interest expense .............................. ( 0.5) ( 0.4) ( 0.6) ( 0.3) ( 0.4)
Share of (loss) income in the unconsolidated
affiliate ................................... -- -- ( 0.2) -- --
----- ----- ----- ----- -----
Income before income taxes .................... 5.0 3.3 3.6 2.9 3.7
Provision for income taxes .................... ( 1.7) ( 1.2) ( 1.4) ( 1.0) ( 1.2)
----- ----- ----- ----- -----
Net Income .................................... 3.3% 2.1% 2.2% 1.9% 2.5%
===== ===== ===== ===== =====
</TABLE>

24
<PAGE>

SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996

TOTAL NET SALES. Total net sales increased $26.5 million, or 134.5%, from
$19.7 million in the six-month period ended December 31, 1996, to $46.1 million
in the six months ended December 31, 1997. This increase in net sales was
attributable to sales to related parties (accounting for approximately $14
million), the return of some key personnel from temporary leave (accounting for
approximately $4 million) and the development of the Premier Dealer Division.
See "Business."

Net sales to related parties increased $13.9 million, from $66,000 in the
six-month period ended December 31, 1996, to $14.0 million in the comparable
period in 1997. This increase is attributable to opportunities in the United
States, caused by product shortages of certain computer peripherals in the U.S.
which did not exist in Europe in the prior comparable period.

Excluding net sales to related parties, net sales increased $12.5 million,
or 63.8%, from $19.6 million in the six-month period ended December 31, 1996,
to $32.1 million in the comparable period in 1997. This is largely attributable
to sales growth in connection with the return of some key personnel from leave
and establishment of the Premier Dealers Club. See "Business."

GROSS PROFIT. Gross profit increased $2.1 million, or 91.3%, from $2.3
million in the six-month period ended December 31, 1996, to $4.4 million in the
comparable period in 1997 due principally to greater sales in the period. Gross
profit excluding related party transactions increased to $4.1 million in the
six-month period ended December 31, 1997, from $2.3 million in the same period
of the prior year.

Gross margin decreased from 11.5% in the six-month period ended December
31, 1996, to 9.5% in the comparable period in 1997. This decrease was largely
attributable to lower gross margins associated with net sales to related
parties. Sales to related parties increased from $66,000 in the six-month
period ended December 31, 1996 to $14 million in the comparable period in 1997.
Gross profit on sales to related parties increased from zero in the six-month
period ended December 31, 1996 to $285,000, or 2% of total net sales, in the
comparable period in 1997. The rates charged to related parties for sales is
described in "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Inter-Group Sales." Excluding related party
transactions, gross margin increased from 11.5% in the six-month period ended
December 31, 1996, to 12.8% in the comparable period in 1997. The actual
increase was attributable to higher than usual margins caused by a large volume
of higher margin peripheral sales in the months of November and December 1997.
The Company does not expect to maintain this level of gross margin in future
periods.

Gross margin was $133,000 lower in the six-month period ended December 31,
1996 due to foreign exchange losses attributable to the strengthening of the
British pound relative to other major European currencies, resulting in a
reduction of the Company's accounts receivable. Gross margin was $279,000
higher in the six-month period ended December 31, 1997 due to foreign exchange
gains attributable to the strengthening of the British pound relative to the
currencies used to purchase goods, resulting in a reduction in the Company's
accounts payable (approximately $210,000) and the balance was due to favorable
currency movements in relation to sales made in foreign currencies.

OPERATING EXPENSES. Operating expenses as a percentage of total net sales
decreased from 8.3% in the six-month period ended December 31, 1996, to 5.4% in
the comparable period in 1997. Operating expenses consist primarily of fixed
costs, such as salaries, rents and rates. Therefore, while net sales have
increased in the period, there has not been a corresponding increase in the
fixed cost base. This is particularly relevant in respect of sales to related
parties which do not require any additional sales personnel. Excluding related
party transactions, operating expenses as a percentage of net sales decreased
from 8.3% in the six-month period ended December 31, 1996, to 7.7% in the
comparable period in 1997.

INTEREST EXPENSE. Interest expense increased by $161,000 from $62,000 in
the six-month period ended December 31, 1996, to $223,000 in the comparable
period in 1997. This was attributable to increased borrowings by European Micro
to fund the increased trading activity.

25
<PAGE>
INCOME TAXES. Income taxes as a percentage of earnings before income taxes
decreased from 34.9% in the six-month period ended December 31, 1996, to 32.6%
in the comparable period in 1997. This decrease was attributable to a reduction
in the corporate tax rate in the United Kingdom in the six-month period ended
December 31, 1997.

INTEREST IN JOINT VENTURE. European Micro's share of income from Big Blue
Europe was $21,000 in the six-month period ended December 31, 1997. These
earnings are attributed to the business maturing past the start-up stage. The
Company expects this trend to continue as Big Blue Europe attracts more
customers and further strengthens existing relationships.

WAREHOUSE BREAK-IN. In November 1997, European Micro UK's warehouse was
broken into and approximately $503,000 of inventory was stolen. All inventory
was insured and the Company was reimbursed by its insurance company for the
cost of the inventory less an $8,000 standard deductible. In order to prevent
any additional thefts, the Company has implemented the following steps:

(1) The Company has relocated its warehouse facility to a more secure
location.

(2) The Company consulted with a security specialist and expended over
$40,000 in security measures, including direct radio communication
with law enforcement.

(3) The Company implemented new procedures regarding occupancy and the
opening and closing of the warehouse facility.

A receivable was established in the accounts as it was probable that the
claim would be settled. This claim has now been settled in full following
receipt of claim in February 1998.

FISCAL YEARS ENDED JUNE 30, 1997 AND 1996

TOTAL NET SALES. Total net sales increased $6.4 million, or 15.9%, from
$40.3 million in fiscal 1996, to $46.7 million in fiscal 1997. Excluding net
sales to related parties, net sales increased $6.6 million, or 16.5%, from
$39.9 million in fiscal 1996, to $46.5 million in fiscal 1997. The increase in
net sales was attributable to the broadening of the product base as a
by-product of the new purchasing department (accounting for approximately $4.2
million) and the creation of the Premier Dealer Division (accounting for
approximately $2.4 million). For the fiscal years ended 1997 and 1996,
respectively, customer rebates and discounts were immaterial.

Net sales to related parties decreased $282,000 from $436,000 in fiscal
1996, to $154,000 in fiscal 1997. This did not have any material effect on the
Company's results of operations in the fiscal year ended June 30, 1997. See
"Risk Factors--Related Party Purchases and Sales."

GROSS PROFIT. Gross profit increased $0.8 million, or 17.8%, from $4.5
million in fiscal 1996, to $5.3 million in fiscal 1997 due to increased sales
in the period. Related party transactions did not have a material affect on
gross profit in this period.

Gross margins increased from 11.0% in fiscal 1996, to 11.4% in fiscal
1997. This was attributable to European Micro's product mix. The gross margins
were not materially affected by the related party transactions in fiscal 1997
and 1996, respectively. The Company does not expect to maintain this level of
gross margin in future periods.

Gross margin was $21,000 lower in fiscal 1996 and $157,000 lower in fiscal
1997. This reduction in gross margin was attributable to the strengthening of
the British pound relative to other major European currencies, resulting in a
reduction of the Company's accounts receivable. The British pound was
relatively stable compared to other major European currencies in fiscal 1996.

OPERATING EXPENSES. Operating expenses as a percentage of total net sales
decreased from 7.4% in fiscal 1996, to 7.0% in fiscal 1997. Operating expenses
consist primarily of fixed costs, such as salaries,

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rents and rates. Therefore, while net sales have increased in the period there
has not been a corresponding increase in the fixed cost base.

INTEREST EXPENSE. Interest expense increased $133,000 from $160,000 in
fiscal 1996, to $293,000 in fiscal 1997. The increase was attributable to
increased borrowings by European Micro to fund the increased trading activity.

INCOME TAXES. Income taxes as a percentage of earnings before income taxes
increased from 35.9% in fiscal 1996, to 37.0% in fiscal 1997. The increase was
primarily attributed to the increase in disallowed travel and entertainment
expenditures for corporate income tax purposes.

INTEREST IN JOINT VENTURE. European Micro's share of losses from Big Blue
Europe was $73,000 in fiscal 1997. These losses are attributed to business
start-up costs. Big Blue Europe commenced operations in January 1997.

WAREHOUSE BREAK-IN. In January 1997, European Micro UK's warehouse was
broken into and approximately $155,000 of inventory was stolen. All inventory
was insured and the Company was reimbursed by its insurance company for the
cost of the inventory less an $8,000 standard deductible. In order to prevent
any additional thefts, the Company took several steps including the addition of
steel bars on all roof vents and skylights.

A receivable was established in the balance sheet as it was probable that
the claim would be settled. The claim was settled in full minus the deductible
upon receipt of the claim in May 1997.

FISCAL YEARS ENDED JUNE 30, 1996 AND 1995

TOTAL NET SALES. Total net sales increased $6.4 million, or 18.9%, from
$33.9 million in fiscal 1995 to $40.3 million in fiscal 1996. A major catalyst
in the increase in sales was the addition of new products to the Company's
existing product lines in addition to an increase in the customer base. The
increase was offset by a $3.3 million reduction in sales due to price decreases
of computer memory during fiscal 1996. Related party transactions were not
material in this period. For the fiscal years ended 1996 and 1995,
respectively, cusomer rebates and discounts were immaterial.

GROSS PROFIT. Gross profit decreased $0.3 million, or 6.3%, from $4.8
million in fiscal 1995, to $4.5 million in fiscal 1996, due principally to
margin decreases in sales of computer memory. Related party transactions did
not have a material affect on gross profit in this period.

Gross margin decreased from 14.2% in fiscal 1995, to 11.0% in fiscal 1996,
due in large part to drastic worldwide computer memory price decreases. These
decreases in prices caused negative pressure on margins. Margins in fiscal 1996
fell also in part to the lower margin from sales of certain computer
peripherals. Gross margins were not materially affected by related party
transactions.

Gross margin was $10,000 higher in fiscal 1995 due to foreign exchange
gains. Gross margin was $21,000 lower in fiscal 1996 due to foreign exchange
losses. The foreign exchange gains and losses for fiscal 1995 and 1996,
respectively, were insignificant due to the relative stability of the British
pound compared to other major European currencies.

OPERATING EXPENSES. Operating expenses as a percentage of total net sales
decreased from 8.8% in fiscal 1995, to 7.4% in fiscal 1996. Operating expenses
consist primarily of fixed costs, such as salaries, rents and rates. Therefore,
while net sales increased in the period there was not a corresponding increase
in the fixed cost base.

INTEREST EXPENSE. Interest expense increased $4,000, or 2.6%, from
$156,000 in fiscal 1995, to $160,000 in fiscal 1996. The increase was
attributable to increased borrowings by European Micro.

INCOME TAXES. Income taxes as a percentage of earnings before income taxes
increased from 34.1% in fiscal 1995, to 35.9% in fiscal 1996. This increase was
primarily attributed to the increase in disallowed travel and entertainment
expenditures for corporate tax purposes.

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SEASONALITY

European Micro typically experiences variability in its total net sales
and net income on a quarterly basis as a result of many factors. These include,
but are not limited to, seasonal variations in demand for the products and
services offered by the Company, the introduction of new hardware and software
technologies and products offering improved features and functionality, the
introduction of new products and services by the Company and its competitors,
the loss or consolidation of a significant supplier or customer, changes in the
level of operating expenses, inventory adjustments, product supply constraints,
competitive conditions including pricing, interest rate fluctuations, the
impact of acquisitions, currency fluctuations and general economic conditions.
Historical operating results have included a reduction in demand in Europe
during the summer months.

LIQUIDITY AND CAPITAL RESOURCES

Short-term working capital requirements are funded by a combination of
overdraft facilities provided by National Westminster Bank Plc together with
accounts receivable financing provided by Lombard Natwest. Both of these
facilities are set and reviewed annually. Short-term obligations must be repaid
within one year. In both cases the amounts drawn down attract the same rate of
interest based on a markup over the bank borrowing rate in the United Kingdom.
The overdraft facility was $830,000 in fiscal 1997, and was increased to $2.0
million during the six-month period ended December 31, 1997. The accounts
receivable financing provides for draw-down of 80% of trade debtors.

Long-term funding is supplied to the Company in the form of hire purchase
and capital lease agreements. Long-term obligations are due for repayment in
more than one year. These agreements are made through both Lloyds Bowmaker and
Natwest Vehicle Solutions, and are secured by vehicles owned by the Company.
The agreements are usually for 36 months from the date of purchase and are
typically for 80% of the purchase value of the vehicle. All but one of the
agreements are subject to variable rate interest. As of December 31, 1997, the
borrowings were $195,000, of which $110,000 was due after more than one year.

European Micro's typical principal need for additional working capital in
fiscal 1998 is expected to be for the purchase of additional inventory to
support growth and to take greater advantage of available cash discounts
offered by certain of European Micro's suppliers for early payment. European
Micro is seeking additional cash for this purpose through this Offering and its
existing bank credit lines, but there can be no assurance that financing will
be available on terms acceptable to European Micro. The unavailability of such
financing could adversely affect the growth of European Micro. See "Risk
Factors--Need for Additional Capital," "Risk Factors--Risk of Indebtedness" and
"Use of Proceeds."

FISCAL YEAR ENDED JUNE 30, 1997. Cash provided by operating activities
during the year amounted to $247,000. Significant factors in the generation of
cash were net income for the year amounting to $1,034,000 and increases in
trade payables of $1,011,000. This was due primarily to a significant move
towards third party suppliers as opposed to related party purchases which had
been particularly high in 1996. Cash was also provided by reductions in amounts
due from related parties ($139,000) and a decrease in other current assets
($267,000). The cash provided by operations was partially offset primarily by
the decrease in amounts due to related parties of $956,000 (as a result of the
high third party purchases), an increase in trade receivables of $672,000 and
an increase in inventory of $540,000. The increase in trade receivables was due
to both a movement away from central European sales towards UK sales, which
traditionally have longer credit terms and the continuing pressure to offer
longer credit terms to the maturing marketplace.

Cash used in investing activities amounted to $412,000 which was primarily
attributed to the purchase of fixed assets to amounting $195,000 which was
partially offset by disposals ($47,000) and the investment in an unconsolidated
affiliate, Big Blue Europe of $264,000. The larger fixed asset purchases
included the addition of two cars ($69,000) and computer equipment for
additional staff, network upgrades and laptop computers ($86,000). Fixtures and
fittings purchases during the year of $40,000 included additional furniture for
the increase in employee numbers and $15,000 for warehouse security measures.

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Cash used in financing activities amounting to $123,000 was used primarily
for the payment of dividends amounting to $562,000, reductions in the bank
overdraft amounting to $314,000 and repayment of capital leases of $71,000. The
generation of $824,000 through trade receivable discounting was brought about
partially through the increase in trade receivables and partially through a
change in banking policy in December 1996. While the Company had only
discounted UK receivables up to December 1996, the change in policy allowed the
Company to additionally discount central European trade receivables. Against
this increase in the discounting creditor the level of the bank overdraft was
reduced and this is reflected by the $314,000 adverse change in the bank
overdraft.

Exchange movements of $254,000 had a favorable effect on cash. This arises
as a result of the year end sterling to dollar exchange rate moving from
/pound sterling/1:$1.5538 as of June 30, 1996, to /pound sterling/1:$1.6643 as
of June 30, 1997 and the resulting effect on translating the balance of net
assets as of June 30, 1996 together with the retained earnings for the year
ended June 30, 1997.

The overall net decrease in cash was $34,000.

FISCAL YEAR ENDED JUNE 30, 1996. Cash provided by operating activities
amounting to $170,000 was primarily attributable to net income generated for
the year amounting to $845,000, an increase in amounts due to related parties
of $866,000, reductions in inventory of $661,000 and an increase in other
current liabilities ($425,000). These amounts were partially offset by an
increase in trade receivables of $1,677,000 and increases in the amounts due
from related parties of $611,000. In addition cash was also used to reduce
trade payables ($407,000). May 1996 was a particularly strong month for
European Micro, the highest monthly turnover in the Company's history. Certain
UK customers had bought significant volumes and value of product, and with the
larger customers having longer credit terms, some May 1996 debt was still
outstanding at the end of June 1996. Much of the product bought at the end of
the 1996 fiscal year was purchased from related parties, and with the cash used
in funding debtors the level of payables due to related parties was high, while
the payables to third parties were reduced.

Inventory value decreased by $611,000 in the fiscal year ended June 30,
1996. Such fluctuations are not uncommon given that European Micro typically
purchases large amounts of inventory at a time which is then sold over a period
of weeks. This creates an uneven inventory balance on a monthly basis.

Cash used in investing activities amounted to $157,000. This amount
consisted of $171,000 (related to the purchase of fixed assets consisting
primarily of $100,000 of vehicles) which was partially offset by sales of fixed
assets ($14,000).

Cash provided by financing activities of $292,000 primarily resulted from
an increase in the level of the bank overdraft of $1,029,000 and an increase in
the discount creditor of $283,000. Cash was used in the payment of dividends
amounting to $961,000 and $59,000 of payments made on capital leases.

The net increase in cash was $275,000, which is after the impact of
exchange rates amounting to $30,000.

FISCAL YEAR ENDED JUNE 30, 1995. Cash used in operating activities was
$991,000. The significant areas where cash was used were increases in trade
receivables of $832,000 and decreases in trade payables of $808,000 and other
current liabilities ($302,000). The increase in receivables reflects the terms
needed to be offered to attract more business. This trend continues on into the
fiscal years 1996 and 1997. The trade payables decreased significantly due to
the short payment terms; the business grew dramatically in 1995 as a result of
favorable product purchases. Cash was also used as a result of an increase in
other current assets ($232,000). Cash used in operating activities was
partially offset by net income for the year amounting to $1,115,000.

Cash used in investing activities amounted to $55,000. This was as a
result of fixed asset purchases, which primarily consisted of vehicles
($150,000) and computer equipment ($57,000), amounting in total

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<PAGE>

to $222,000. This was partially offset by disposals of two high value motor
cars and a small amount of office equipment amounting in total to $167,000.

Cash provided by financing activities amounted to $640,000. The majority
of cash was provided by the introduction of trade receivable discounting, which
generated $1,116,000. The discounting facility is used in the same manner as an
overdraft and can therefore vary dramatically in relation to inventory,
receivables and payables. This was partially offset by cash used in financing
dividend payments amounting to $391,000 and repayment of capital leases
($43,000).

The net decrease in cash was $357,000 after the impact of exchange rate
changes amounting to $49,000.

SIX MONTHS ENDED DECEMBER 31, 1997. Cash used in operating activities
amounted to $1,269,000. Significant cash was used in the increase in trade
receivables amounting to $2,518,000 which was a result of the considerable
increase in business in the six months, including significant UK sales with
longer credit terms. In addition, there was also a considerable increase in
inventory of $3,751,000 which was the result of a large bulk delivery received
prior to December 31, 1997. Further cash was used following an increase in
other current assets of $966,000. This was due to the timing of payments for
insurance, rents and rates and deferred expenditure in respect of flotation
costs to European Micro Holdings, Inc. The cash used was partially offset by
net income of $1,154,000 generated in the six-month period ended December 31,
1997. In addition, cash was generated through increases in amounts due to
related parties of $2,670,000 as a result of significant month end purchases.
Further, cash was generated due to a reduction in other current assets of
$940,000, which was partially due to an increase in the amount of Value Added
Tax payable on net sales. Finally, cash was generated through an increase in
trade payables of $768,000, which was due to the higher level of inventory.

Cash used in investing activities amounted to $64,000. This was primarily
due to the purchase and sale of vehicles.

Cash provided by financing activities amounted to $1,416,000. This was
mainly a result of increases in the level of the discounting creditor amounting
to $1,739,000, which was achieved through the increase in trade receivables.
This was partially offset by reductions in the bank overdraft amounting to
$204,000, the repayment of capital leases for the vehicles of $64,000 and cash
used of $55,000 in the payment of dividends.

The net increase in cash was $65,000 for the six-month period ended
December 31, 1997, after the impact of exchange rate changes amounting to
$18,000.

YEAR 2000 ISSUES

Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the Year 2000. If not corrected in the
computer applications of the Company or its suppliers and customers, this
problem may cause computer applications to fail or to create erroneous results
by or at the Year 2000. The Company has received informal assurances from the
companies manufacturing the computer applications used in its business
operations that such computer applications are Year 2000 compliant. Although
the Company believes that its computer applications will not be affected by the
Year 2000 problem, any failure or erroneous results produced thereby may have a
material adverse effect on the Company's business, financial condition or
results of operations. The Company does not generally sell software products
and therefore the Company does not expect its products to be affected by the
Year 2000 problem.

The Company is evaluating the impact the Year 2000 problem will have on
its suppliers and customers, although the Company expects such evaluation to be
made informally through discussions with customers and suppliers. Moreover, the
Company has not developed a timetable for carrying out

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<PAGE>

its evaluation. The failure of the Company's suppliers and customers to correct
the Year 2000 problem in their computer applications may have a material
adverse affect on the Company's business, financial condition and results of
operations. As of the date of this Prospectus, the Company cannot accurately
anticipate or quantify the impact on the Company of its suppliers' and
customers' failure to correct this problem.

ASSET MANAGEMENT

INVENTORY. European Micro's goal is to achieve high inventory turns and
maintain a low number of stock keeping units and thereby reduce European
Micro's working capital requirements. European Micro's strategy to achieve this
goal is to effectively manage its inventory and to achieve high order fill
rates. Inventory levels may vary from period to period, due to factors
including increases or decreases in sales levels, European Micro's practice of
making large-volume purchases when it deems such purchases to be attractive,
new products and changes in European Micro's product mix.

ACCOUNTS RECEIVABLE. European Micro sells its products and services to a
customer base of more than 250 value-added resellers, corporate resellers,
retailers and direct marketers. European Micro offers credit terms to
qualifying customers and also sells on a pre-pay and cash-on-delivery basis.
With respect to credit sales, European Micro attempts to control its bad debt
exposure by monitoring customers' creditworthiness and, where practicable,
through participation in credit associations that provide customer credit
rating information for certain accounts. Substantially all of European Micro's
accounts receivables are insured and its positive credit results have allowed
European Micro to enjoy what it believes to be one of the most competitive
insurance rates in the industry.

CURRENCY RISK MANAGEMENT

REPORTING CURRENCY. European Micro Holdings, Inc.'s reporting and
functional currency, as defined by Statement of Financial Accounting Standards
No. 52, is the United States Dollar. The functional currency of European Micro
UK is the United Kingdom Pound Sterling. European Micro UK translates into the
reporting currency by measuring assets and liabilities using the exchange rates
in effect at the balance sheet date and results of operations using the average
exchange rates prevailing during the period.

HEDGING AND CURRENCY MANAGEMENT ACTIVITIES. European Micro attempts to
limit its risk of currency fluctuations through hedging where possible.
European Micro utilizes derivative financial instruments in the form of forward
exchange contracts for the purpose of economic hedges of anticipated sale and
purchase transactions. In addition, European Micro enters into economic hedges
for the purpose of hedging foreign currency market exposures of underlying
assets, liabilities and other obligations which exist as part of its ongoing
business operations.

European Micro UK manages its currency exposure when transactions are
consummated in currency other than Pound Sterling. For example, in the quarter
ended June 30, 1997, purchases of inventory by European Micro UK, were in
United States dollars (50%), pound sterling (38%), Dutch guilders (9%) and
other (3%). The most significant currencies in which sales were made, other
than pound sterling (63%), were the German Mark (15%), the French franc (6%)
and the United States dollar (6%). Additionally, receivables are also
significantly spread out over several currencies. Lastly, if bank balances are
maintained in different currencies they would also be subject to currency
fluctuations.

The policy of the Company is not to hedge specifically against individual
daily transactions. Instead, the exposure to a currency is determined every two
to three days. This is done by comparing the bank account balances and account
receivables with accounts payable, all in the same currency which acts as a
"natural" hedge. Thereafter, to the extent that a bank balance and the accounts
receivable are not substantially offset by the accounts payable, there would be
a need to cover the residual balance with a forward currency contract. The
Company tends to concentrate its currency management into four
currencies--pound sterling, United States dollar, Dutch guilder and German
Mark. It normally deems

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<PAGE>

the exposure in other currencies to be minimal. However, when the Company buys
products in other currencies, the Company may, in conjunction with current
market advice, enter into a forward currency contract to cover current and some
anticipated future purchases.

The currency instruments used by the Company are always forward currency
contracts with either fixed or optional take up dates. Moreover, in as much as
the need is to cover short-term receivables or payables (usually always less
than 45 days), these contracts are usually for periods that do not exceed more
than 60 days.

INTER-GROUP SALES

In order to achieve attractive prices from suppliers, a large quantity of
a product is needed to be firmly committed to. European Micro polls the other
members of the Group for informal commitments to help distribute that product.
Thereafter, European Micro, as a member of the Group, would obtain the product,
examine the product for damage and authenticity, and then supervise the
shipping to the other Group members. In that capacity, European Micro acts as a
"purchasing agent" for the other members of the Group. Such sales from European
Micro during fiscal 1997 were immaterial. Note however, that European Micro
benefited from similar low mark-up purchases from the Group to the extent of
over $22 million during that same period.

Later, when market conditions such as the strengthening of the United
States dollar and an aggressive sales effort from a leading manufacturer
changed the emphasis to European Micro purchasing during the six-month period
ended December 31, 1997, sales from European Micro to related parties increased
to over $14 million. While the average margin on these sales was just over
1.8%, compared to an average margin of 12.8% to unrelated third parties during
the same period, it was sufficient to cover any associated costs. European
Micro was also able to enjoy the marginal benefits from the lower cost of the
remaining product it needed for its sales. See "Risk Factors--Related Party
Purchases and Sales."

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BUSINESS

The Company is an independent distributor of microcomputer products,
including personal computers, memory modules, disc drives and networking
products to customers mainly in Western Europe and to related parties in the
United States. The Company's customers consist of more than 250 value-added
resellers, corporate resellers, retailers, direct marketers and distributors.
The Company does not sell to end-users. Substantially all of the products sold
by the Company are manufactured by well-recognized manufacturers such as IBM,
Compaq, Hewlett-Packard and 3Com, although the Company generally does not
obtain its inventory directly from such manufacturers. European Micro monitors
the geographic pricing strategies of such manufacturers, currency fluctuations
and product availability in order to obtain inventory at favorable prices from
other distributors, resellers and wholesalers. As a result of this purchasing
strategy, the Company has achieved gross margins of 11.0% and 11.4% for the
fiscal years ended June 30, 1996 and 1997, respectively, and 9.5% for the
six-month period ended December 31, 1997. In the three-year period ended June
30, 1997, total net sales of European Micro increased from $33.9 million in
1995 to $46.7 million in 1997 and operating profit of European Micro increased
from $1.8 million in 1995 to $2.0 million in 1997. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

European Micro considers itself to be a focused distributor, as opposed to
a broadline distributor, dealing with a limited and select group of high
quality manufacturers and only limited products from such manufacturers. It
believes that being a focused distributor enables it to respond quickly to
customer requests and gives it greater availability of products, access to
products and improved pricing. The Company believes that as a focused
distributor it has been able to develop substantial knowledge in the products
which it sells. The Company places significant emphasis on market awareness and
planning and actively shares this pool of knowledge with its customers in order
to further enhance trading relations. The Company strives to monitor and react
quickly to market trends, thus enabling its multilingual sales team to maintain
the highest levels of customer service.

European Micro Holdings, Inc. is the parent of Nor'easter and European
Micro UK. Nor'easter was formed on December 26, 1997, to serve as an
independent distributor of microcomputer products in the United States.
European Micro UK was organized under the laws of the United Kingdom in 1991
and became a public limited company in 1994, to serve as an independent
distributor of microcomputer products to customers mainly in Western Europe and
to related parties in the United States.

European Micro UK is the parent of European Micro Germany and has a 50%
joint venture interest in Big Blue Europe. European Micro Germany was formed in
1993 as a wholly owned subsidiary of European Micro UK and it operates as a
sales office in Dusseldorf, Germany. All products sold by European Micro
Germany are procured and shipped from the facilities of European Micro UK. In
January 1997, European Micro UK agreed with Big Blue Products to form Big Blue
Europe. Big Blue Europe is a computer parts distributor located near Amsterdam,
Holland. Selling primarily to computer maintenance companies, Big Blue Europe
has experienced growth in sales and the Company believes that Big Blue Europe
is positioned to participate in the higher margin parts after-market industry.
Big Blue Europe has no affiliation with International Business Machines
Corporation.

European Micro UK is also the parent of European Micro B.V. European Micro
B.V. was formed in 1995, commenced operations in January 1996 and ceased
operations in December 1996.

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The following organizational chart summarizes the relationships among
European Micro Holdings, Inc., Nor'easter, European Micro UK, European Micro
Germany and Big Blue Europe.

[Organizational Chart Omitted]

The organizational chart identifies the Company and its respective ownership
interests in the Subsidiaries.

INDUSTRY

The microcomputer products industry has grown significantly in recent
years, primarily due to increasing worldwide demand for computer products and
the use of distribution channels by manufacturers for the distribution of
products. There are two traditional distribution channels in the microcomputer
industry: (i) those that sell directly to end-users ("resellers") and (ii)
those that sell to resellers ("distributors"). Distributors generally purchase
a wide range of products in bulk directly from manufacturers and then ship
products in smaller quantities to many different types of resellers, which
typically include dealers, value-added resellers, system integrators, mail
order resellers, computer products superstores and mass merchants. European
Micro is an independent distributor and generally does not purchase products
directly from manufacturers but purchases from other distributors. See "Risk
Factors--No Contracts or Distribution Agreements with Suppliers."

European Micro operates in a fragmented industry, where little information
is available regarding its competitors. Therefore, the Company's competitive
position is not known or reasonablely ascertainable. Moreover, the Company does
not believe that the industry is dominated by one or a small number of
competitors. The Company believes that the microcomputer products industry is
ideally suited for distributors because of the large number of fragmented
resellers in the industry. As a result, it is cost efficient for manufacturers
to outsource a portion of their distribution, credit, inventory, marketing and
customer support requirements to distributors. In addition, resellers
traditionally have not been able to efficiently establish direct purchasing
relationships with each manufacturer because of the large number of
manufacturers in the industry. Instead, resellers have traditionally relied on

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<PAGE>

distributors to satisfy a significant portion of their product, financing,
marketing and technical support needs. The Company believes that resellers are
also increasingly relying on distributors for inventory management and credit
rather than stocking large inventories themselves and maintaining credit lines
to finance their working capital needs. The Company believes the need for
distributors in the microcomputer industry will continue to grow. It also
believes that more manufacturers are using distributors as declining hardware
prices, coupled with rising selling costs, make it difficult for manufacturers
to efficiently deal directly with resellers.

According to International Data Corporation ("IDC"), in 1996, Western
Europe represented approximately 24% of the worldwide personal computer market.
While the Company's sales have historically been in Western Europe and to
related parties in the United States, the Company intends to address the
emerging markets of Eastern Europe, the Middle East and Africa, regions which
the Company believes are underserved relative to the industry and offer
substantial growth opportunities. IDC projects a greater increase in the growth
of personal computer sales in Eastern Europe, the Middle East and Africa when
compared with the more mature market areas.

STRATEGY

European Micro's objectives are to continue to strengthen its position as
a distributor of microcomputer products within Western Europe. It also proposes
to expand its operations into the United States, Eastern Europe, and to a
lesser extent, Africa, the Middle East and Asia. In attempting to achieve these
objectives, the Company intends to implement the following strategies:

GROWTH THROUGH START-UPS AND ACQUISITIONS. The Company hopes to expand
into new markets through a combination of start-up companies and acquisitions
of existing distributors, although the Company has not identified any
acquisition candidates and there can be no assurance that any acquisitions can
be consummated on terms satisfactory to the Company. See "Risk Factors--Risks
Associated with Acquisitions." The Company expects to seek acquisition
candidates which have strong entrepreneurial management teams with experience
in the local markets and the potential to benefit from the economies of scale
that the Company could provide through its focused product lines. The Company
intends that any acquisitions will adopt its policies and financial reporting
procedures but operate as autonomous business units.

FOCUSED DISTRIBUTION. European Micro's strategy is to operate as a focused
distributor by addressing each national market in which it operates with a
limited and select group of products from a limited and select group of high
quality manufacturers. The Company believes this strategy helps it achieve a
degree of strength within its chosen markets. The Company also believes that
this strategy will further enhance its relationships with both its suppliers
and customers. In addition, the Company intends to seek new products and
suppliers that will reflect the requirements of the marketplace while at the
same time remaining a focused distributor. The Company believes that this
focused approach also results in more effective asset management. Generally,
because popular products from leading manufacturers are in greater demand, the
Company believes that this results in more efficient inventory management by
virtue of greater inventory turns and, therefore, lower working capital
requirements.

INTERNET PRODUCTS. European Micro plans to address directly the demand for
internet-oriented products. The Company has recently received distribution
rights to distribute firewall products manufactured by WatchGuard Technologies,
Inc. throughout Europe. The Company intends to seek to acquire distribution
rights in other internet oriented products and to enhance its technical
capability by recruiting qualified personnel.

35
<PAGE>

PRODUCTS AND CUSTOMERS

European Micro's sales consist of hardware products such as personal
computers, memory modules, disc drives and networking products to a customer
base of more than 250 value-added resellers, corporate resellers, retailers,
direct marketers and distributors. The Company anticipates the continued
expansion of its customer database as the Premier Dealers Club and Internet
Services Division add new products and services. For the six-month period ended
December 31, 1997, the Company's product mix by category was storage products
(approximately 48%), networking (approximately 20%), memory (approximately
14%), system units (approximately 9%) and other (approximately 9%). For the
six-month period ended December 31, 1997, the five best selling products
accounted for 67% of European Micro's net sales. These products generally have
short life cycles as technological obsolescence ensures that the end-user must
constantly update hardware for new technology. In order to reduce its exposure
to obsolescence, European Micro strives to achieve a continually high rate of
inventory turnover.

European Micro purchases its products from distributors and other
suppliers in large quantities. As a focused distributor, the Company focuses on
a limited and select group of products from a limited and select group of high
quality manufacturers. As a result, the Company carries fewer individual
products from fewer manufacturers than the broadline distributors. The Company
believes that this policy enables it to better understand the products it sells
and the geographical areas in which it operates.

European Micro's customers typically rely on distributors as their
principal source of microcomputer products. The Company finances a significant
portion of its total sales on trade credit. In order to minimize the risk
associated with such credit, European Micro has sought to insure substantially
all of its accounts receivable. See "Risk Factors--Customer Credit Exposure."
For the fiscal year ended June 30, 1996, one customer accounted for
approximately 10% of the Company's net sales. The loss of this customer would
not have a material adverse effect on the Company's business, financial
condition or results of operations. During the six-month period ended December
31, 1997, American Micro Computer Center, a member of the Group, accounted for
22.6% of net sales. See "Risk Factors--Related Party Purchases and Sales." For
the fiscal year ended June 30, 1997, no single customer accounted for more than
approximately 8.5% of European Micro's total net sales. The Company does not
believe the loss of any customer would have a material adverse effect on its
business, financial condition or results of operations. The Company's backlog
of orders is not considered material to its business. See Note 22 of the Notes
to Consolidated Financial Statements.

Recently, European Micro set up an Internet Services Division to address
the demand for internet oriented products. In 1997, the Company entered into a
Master Distribution Agreement with WatchGuard Technologies, Inc. to distribute
its WatchGuard range of firewall products throughout Europe. These products
have enjoyed extensive press coverage in the industry. European Micro intends
to seek to acquire distribution rights in other internet-oriented products and
to enhance its technical capability by recruiting qualified personnel.

36
<PAGE>

The Company's operations involve a single industry segment, the
distribution of microcomputer products. Historically, the Company has operated
in one geographic area--the United Kingdom--and has exported products from the
United Kingdom to other European countries and to related parties in the United
States. The following table sets forth the Company's net sales to third parties
for each of the last three fiscal years attributable to its geographic area and
the amount of export sales:

<TABLE>
<CAPTION>
($ IN THOUSANDS)
YEAR ENDED JUNE 30,
----------------------------------------------------------------------
COUNTRY 1995 % 1996 % 1997 %
- ------------------------- --------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Austria ................. $ -- 0.0% $ 49 0.1% $ -- 0.0%
Belgium ................. 163 0.6 450 1.1 1,496 3.2
Germany ................. 13,749 40.6 11,305 28.0 8,282 17.7
Denmark ................. 1,269 3.7 977 2.4 1,402 3.0
Spain ................... 520 1.5 185 0.5 35 0.1
Finland ................. 274 0.8 157 0.4 696 1.5
France .................. 298 0.9 2,700 6.7 4,173 8.9
Great Britain ........... 8,414 24.8 11,876 29.4 21,050 45.1
Ireland ................. 147 0.4 126 0.3 642 1.4
Italy ................... 67 0.2 7 0.0 26 0.1
Luxembourg .............. 76 0.2 39 0.1 40 0.1
Netherlands ............. 5,520 16.3 8,230 20.4 4,653 10.0
Portugal ................ 567 1.7 507 1.3 71 0.2
Sweden .................. 219 0.7 1,246 3.1 1,582 3.4
Other ................... 2,581 7.6 2,494 6.2 2,507 5.3
------- ----- ------- ----- ------- -----
Total Net Sales ......... $33,864 100.0% $40,348 100.0% $46,655 100.0%
======= ===== ======= ===== ======= =====
</TABLE>

SOURCES OF SUPPLY

European Micro obtains its products from distributors and other suppliers
throughout the world in an attempt to obtain products at favorable prices while
also maintaining continuity of supply. The Company generally makes its
purchases based on the most favorable combination of prices, quantities and
product selection, and therefore its suppliers are constantly changing. As a
result, the Company does not believe that the loss of any single supplier other
than Technology Express would have a material adverse effect on its operations.
For the fiscal year ended June 30, 1997, the Company obtained 86.5% of its
products from ten suppliers (36.2% excluding Technology Express). The Company
does not generally obtain products directly from manufacturers and generally
does not enter into any long-term or distribution agreements with its suppliers
(except for the Master Distribution Agreement with WatchGuard Technologies,
Inc.). In some cases suppliers are also customers. Whenever possible, products
are purchased with the benefit of price protection so that the Company will
receive a credit in the event the price of a product is reduced by the
manufacturer.

Suppliers deliver products against purchase orders tendered by European
Micro. The Company often requests specific delivery dates in its purchase
orders and lead times for delivery from suppliers are typically short. Delivery
is, however, subject to availability, and, while suppliers have no liability to
the Company for failure to meet a delivery date, orders may be cancelled by the
Company where the terms of the order have not been met. From time to time the
Company experiences delivery delays and inventory shortages. The Company
believes that these delays and shortages are common to other distributors of
microcomputer products. The Company believes that it has a better chance than
its competitors in Europe to have availability of product since it sources
product internationally and does not, like many of its competitors, rely on a
single contractual source of product supply.

Historically, European Micro has paid for a significant amount of product
on delivery, a practice which leads to lower prices and earlier delivery dates.
European Micro's suppliers have increased available credit commensurate with
its growth and the Company expects to continue to take advantage of credit
purchases.

37
<PAGE>

Substantially all of the products purchased by European Micro are
trademarked or copyrighted products which may have been sold to distributors by
the manufacturers and resold to the Company. From time to time, trademark or
copyright owners and their licensees and trade associations have initiated
litigation or administrative agency proceedings seeking to halt the importation
of such products into many of the countries in which the Company operates.
There can be no assurance that future judicial, legislative or administrative
agency action in such countries, including possible import, export, tariff or
other trade restrictions, will not limit or eliminate some of the Company's
secondary sources of supply or other business activities. In addition, there
can be no assurance that the Company's business activities will not become the
subject of legal or administrative actions brought by manufacturers,
distributors or others based on violations of trademark or copyright rights or
other laws. Such judicial, legislative, administrative or legal actions could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company sells products in the United States and
expects to continue to do so in the future. United States trademark and
copyright owners and their licensees and trade associations in other industries
have initiated litigation or administrative agency proceedings seeking to halt
the importation into the United States of foreign manufactured or previously
exported trademarked or copyrighted products. Such actions in the United States
may prevent the Company from selling products in the United States or, if, at
that time, the Company is already selling products in the United States, cease
selling products in the United States. See "Risk Factors--Trade Restrictions on
Cross-Border Sales."

SALES AND MARKETING

In order to address the individual customs, practices and business
conventions in the countries in which European Micro operates, the Company
employs a sales staff conversant in English, German, Spanish, Italian, French
and Dutch and with a general knowledge of the applicable markets. Oversight and
strategic direction are provided by senior management of the Company.

SALES. European Micro markets its products to distributors and resellers,
not end-users. As of December 31, 1997, the Company distributed products to
more than 250 value-added resellers, corporate resellers, retailers, direct
marketers and distributors. The Company's customers typically place orders with
a sales representative. The Company maintains detailed information regarding
its current inventory levels and pricing. The Company has historically
experienced a reduction in demand during the summer months. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality."

MARKETING. European Micro's marketing department monitors and evaluates
national market trends, price movements and changes in product specifications.
It is also responsible for developing and implementing the Company's
advertising programs. The marketing department routinely queries the Company's
customer base to ascertain how customers value its products, services, sales
and support compared to its competitors. The feedback allows the Company to
constantly tailor its business to its customers' needs. In 1996, European Micro
introduced the Premier Dealers Club to attract small and medium sized resellers
by offering them value-added procurement services that they were not enjoying
from their current broadline distributors. Members of the Premier Dealers Club
agree to purchase a target amount of products from the Company for a given
period and those members achieving such goals earn rebates. Members also enjoy
priority access to products in short supply, expedited shipment of orders,
monthly analysis of purchases and rebates earned, internet-ordering, marketing
information and purchasing and outsourcing assistance.

COMPETITION

European Micro operates in an industry which is characterized by intense
competition based on price, product availability and delivery times. Its
competitors include manufacturers and international distributors. Some of the
Company's competitors have greater financial and administrative resources than
the Company. The Company believes availability of the right product at the
right price is the key element of competitiveness and attempts to differentiate
itself from its competitors by providing a select

38
<PAGE>

number of products from a few name brand manufacturers and maintaining a
sufficient inventory of such products. Furthermore, the Company believes that
it enhances its competitive position by providing responsible and responsive
customer service through its sales personnel.

INTELLECTUAL PROPERTY

European Micro is attempting to build a brand name in the microcomputer
industry. To that end, European Micro has applied for trademark protection both
in the United Kingdom and within the European Community. The Company is
currently evaluating and will continue to evaluate the need to apply for
trademark protection in the United States and in other countries as the Company
expands. The following is a summary of the trademarks which the Company has
applied for and their current status:

<TABLE>
<CAPTION>
TRADEMARK CLASS(1) NO. APPLICANT DATE OF FILING COMMENTS
- ---------------------- ---------- --------- ----------- ---------------- --------------------
<S> <C> <C> <C> <C> <C>
European Micro 9 438689 European 12-23-96 Community Trademark
Micro UK application
European Micro Plc 9 2119204 European 12-20-96 U.K. Trademark
& Logo Micro UK granted
Premier Dealers Club 9 2152310 European 11-29-97 U.K. Trademark
& Logo Micro UK application
Premier Dealers Club 9 695072 European 12-01-97 Community Trademark
& Logo Micro UK application
</TABLE>

- ----------------
(1) Class 9 covers computer software, computer peripherals, parts and
accessories for all such goods.

EMPLOYEES

European Micro UK currently has twenty eight full-time employees in the
United Kingdom. European Micro Germany currently has four full-time employees
in Germany. As of January 1998, Nor'easter has one full-time employee in the
United States. Big Blue Europe currently has sixteen full-time employees in
Holland. European Micro Holdings, Inc. has two full-time and one part-time
employee in the United States. Of the total number of full-time employees,
twenty-four work in marketing and sales, eight work in warehousing and delivery
and nineteen are employed in administrative and other support positions. None
of the Company's employees are represented by unions. There has been no
disruption of operations due to a labor dispute. Management considers its
relations with its employees to be good.

FACILITIES

The corporate headquarters of European Micro Holdings, Inc. is located in
Miami, Florida. Approximately 350 square feet is dedicated to management
offices. European Micro UK operates primarily from facilities located in
Manchester, England. Approximately 4,400 square feet of the facilities in
Manchester are allocated to offices, including management, sales and
administrative areas and the remaining 8,000 square feet is warehousing space.

39
<PAGE>

European Micro's facilities are described below:

<TABLE>
<CAPTION>
LOCATION SQUARE FEET LEASE EXPIRATION
- ---------------------------------------- ------------- -----------------
<S> <C> <C>
Manchester (warehouse)(1) ........... 8,000 2012
Manchester (offices)(1) ............. 4,400 2002
Germany(2) .......................... 1,360 2004
Netherlands(3) ...................... 18,000 2002
Miami, Florida(4) ................... 350 --
Seabrook, New Hampshire(5) .......... 2,300 1998
</TABLE>

----------------
(1) European Micro UK
(2) European Micro Germany
(3) Big Blue Europe 50% Joint Venture
(4) European Micro Holdings, Inc.
(5) Nor'easter

The office in Germany is a sales office with no warehousing facility. All
products are shipped from the Company's Manchester facility directly to the
customer. European Micro considers its existing facilities to be adequate for
its foreseeable needs.

LEGAL PROCEEDINGS

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial condition, results of operations or liquidity.

40
<PAGE>

MANAGEMENT

The executive officers and directors of European Micro and their ages as
of January 1, 1998, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- ----- ---------------------------------------
<S> <C> <C>
Harry D. Shields 47 Co-Chairman, Co-President and Director

John B. Gallagher 42 Co-Chairman, Co-President and Director

Jay Nash 36 Chief Financial Officer, Controller,
Secretary and Treasurer

Laurence Gilbert 52 Director

Bernadette Spofforth 28 Director

Kyle R. Saxon 46 Director

Barrett Sutton 47 Director
</TABLE>

HARRY D. SHIELDS is co-founder of European Micro Holdings, Inc. and
European Micro UK and has served as Co-Chairman, Co-President and Director of
European Micro Holdings, Inc. since it was formed in December 1997. Mr. Shields
has also served as Co-Chairman and Director of European Micro UK since it was
formed in 1991. He has served as President of Technology Express since 1986,
and was a Director of Ameritech Exports, a computer hardware and peripheral
distributor, from 1992 to 1997. Mr. Shields has a Bachelor of Arts from DePaul
University and a Masters of Science from the University of Tennessee.

JOHN B. GALLAGHER is co-founder of European Micro Holdings, Inc. and
European Micro UK and has served as Co-Chairman, Co-President and Director of
European Micro Holdings, Inc. since it was formed in December 1997. Mr.
Gallagher has also served as Co-Chairman and Director of European Micro UK
since its was formed in 1991. He was a Director and President of Ameritech
Exports Miami from 1992 to 1997, and President of American Micro Computer
Center since 1989. Mr. Gallagher is a non-practicing attorney with a Bachelor
of Arts and a Juris Doctorate both from the University of Florida.

JAY NASH has been Chief Financial Officer, Controller, Secretary and
Treasurer of European Micro Holdings, Inc. since January 1998. He has served as
Vice President of Technology Express since 1992 and was an accountant with
Jacques Miller from 1986 to 1992 and KPMG Peat Marwick from 1983 to 1986. Mr.
Nash is a Certified Public Accountant with a Bachelor of Science in Accounting
from the University of Tennessee.

LAURENCE GILBERT has been a Director of European Micro Holdings, Inc.
since January 1998. Mr. Gilbert has been Managing Director of European Micro UK
since 1996 and was Finance Director of the Group from 1995 to 1996. He served
as a Management Consultant from 1994 to 1995 and Managing Director of Gilbert
Lawton Ltd. from 1991 to 1993. Mr. Gilbert is a Chartered Accountant.

BERNADETTE SPOFFORTH has been a Director of European Micro Holdings, Inc.
since January 1998. Ms. Spofforth has been Director of Sales of European Micro
UK since 1994 and served as Sales Manager of European Micro UK from 1991 to
1994. Ms. Spofforth was a Sales Executive with Cavelle Data Systems Ltd. from
1988 to 1991.

KYLE R. SAXON has been a Director of European Micro Holdings, Inc. since
January 1998. Mr. Saxon has also been a Director of European Micro UK since
March 1998. He has been a shareholder and vice president with the law firm of
Catlin, Saxon, Tuttle, and Evans, P.A. since 1988. Mr. Saxon has a Bachelor of
Arts and a Juris Doctorate both from the University of Florida.

BARRETT SUTTON has been a Director of European Micro Holdings, Inc. since
February 1998. Mr. Sutton has also been a Director of European Micro UK since
March 1998. Until December 31, 1997, he was an attorney, Executive
Vice-President and General Counsel for General Capital

41
<PAGE>

Corporation and Gen Cap America, Inc. since 1995. He practiced law with the
firm of White & Reasor from 1981 to 1994. Since January 1, 1998, Mr. Sutton has
been a partner at the law firm of Tuke Yopp & Sweeney. Mr. Sutton has a
Bachelor of Arts from Vanderbilt University and a Juris Doctorate from the
University of Virginia.

DIRECTORS

The Board of Directors has been divided into three equal size classes
serving staggered three-year terms. The term of office of the Class I directors
will expire at the 1998 annual meeting of shareholders, the term of the Class
II directors will expire at the 1999 annual meeting of shareholders and the
term of the Class III directors will expire at the 2000 annual meeting of
shareholders. At each annual meeting of shareholders, the class of directors to
be elected at such meeting will be elected for a three-year term, and the
directors in the other two classes will continue in office. Because holders of
Common Stock will have no right to cumulative voting for the election of
directors at annual meetings of shareholders, the holders of a majority of the
Common Stock will be able to elect all of the successors of the class of
directors whose term expires at that meeting. See "Risk Factors--Control by
Current Shareholders." The staggered term for directors may affect the
shareholders' ability to effect a change of control of the Company.

Under Nevada law, any vacancy in the Board of Directors, including any
vacancies resulting from an increase in the number of directors, may be filled
by the vote of a majority of the remaining directors. The authority of the
Board of Directors to fill vacancies may result in a majority of the directors
being elected without a vote of the shareholders. See "Description of Capital
Stock--Anti-Takeover Effects of Provisions of the Articles of Incorporation,
Bylaws and Nevada Law." As of the date of this Prospectus, the name, class and
expiration date of the initial term of the directors are as follows:

<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
- --------------------------- ----------------------- ----------------------
<S> <C> <C>
(Terms expiring 1998) (Terms expiring 1999) (Terms expiring 2000)
Laurence Gilbert Barrett Sutton John B. Gallagher
Bernadette Spofforth Kyle R. Saxon Harry D. Shields
</TABLE>

INDEMNIFICATION AND LIMITED LIABILITY

Pursuant to indemnification agreements entered into with each of the
directors, the Company has agreed to indemnify each director, to the fullest
extent permitted by law, from and against any and all claims of any type
arising from or related to his past or future acts or omissions as a director
or officer of the Company and any of its subsidiaries. In addition, the Company
has agreed to advance all expenses of each director as they are incurred and in
advance of the final disposition of any claim.

Pursuant to its Articles of Incorporation, European Micro is obligated to
indemnify each of its directors and officers to the fullest extent permitted by
law with respect to all liability and loss suffered, and reasonable expense
incurred, by such person in any action, suit or proceeding in which such person
was or is made or threatened to be made a party or is otherwise involved by
reason of the fact that such person is or was a director or officer of European
Micro. The Articles of Incorporation further eliminate the personal liability
of a director or an officer to European Micro or to any of its shareholders for
monetary damage for a breach of fiduciary duty as a director or an officer,
except for: (i) acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law; or (ii) the payment of distributions in
violation of Section 78.300 of Nevada Revised Statutes ("NRS"). European Micro
is also obligated to pay the reasonable expenses of indemnified directors or
officers in defending such proceedings if the indemnified party agrees to repay
all amounts advanced should it be ultimately determined that such person is not
entitled to indemnification.

European Micro maintains an insurance policy covering directors and
officers under which the insurer agrees to pay, subject to certain exclusions,
for any claim made against the directors and officers

42
<PAGE>

of European Micro for a wrongful act for which they may become legally
obligated to pay or for which European Micro is required to indemnify its
directors and officers.

COMMITTEES

The Company has an Audit Committee, a Compensation Committee and a Stock
Option Committee. The functions of the Audit Committee, composed of Messrs.
Saxon, Sutton and Gilbert, are to: (1) recommend annually to the Board of
Directors the appointment of the independent auditors of European Micro, (2)
discuss and review, in advance, the scope and the fees of the annual audit and
review the results thereof with the independent auditors, (3) review and
approve non-audit services of the independent auditors, (4) review compliance
with existing major accounting and financial reporting policies of European
Micro, (5) review the adequacy of the financial organization of European Micro,
and (6) review management's procedures and policies relating to the adequacy of
European Micro's internal accounting controls and compliance with applicable
laws relating to accounting practices.

The Compensation Committee, composed of Messrs. Gallagher, Shields, Saxon
and Sutton, is responsible for making recommendations to the Board of Directors
regarding compensation arrangements for the Company's officers.

The Stock Option Committee, composed of Messrs. Saxon and Sutton, is
responsible for making recommendations to the Board of Directors regarding the
adoption of any employee benefit plans and administering the 1998 Stock
Incentive Plan and the 1998 Employee Stock Purchase Plan and the grant of stock
options or other benefits under such plans.

DIRECTOR COMPENSATION

Non-employee Directors receive $1,000 for attendance at Board of Director
meetings whether in person or by telephone and are reimbursed for all
out-of-pocket expenses incurred in attending meetings of the Board of Directors
and committees thereof.

European Micro's 1998 Stock Incentive Plan (the "Incentive Plan") provides
that directors who are not employees of European Micro will automatically be
granted options to purchase (i) 10,000 shares of European Micro's Common Stock
in connection with their appointment to European Micro's Board of Directors and
(ii) 5,000 shares of European Micro's Common Stock each year thereafter that
such non-employee director serves on European Micro's Board of Directors. See
"--1998 Stock Incentive Plan." The options granted to European Micro's initial
non-employee directors will have an exercise price of 100% of the offering
price in this Offering. Options granted after completion of this Offering will
be priced no less than 100% of the fair market value on the date of the grant.
Options granted to non-employee directors will be non-statutory options and
will become exercisable after one year of service (unless otherwise determined
by the Board of Directors or in the event of a change of control of the
Company) on the Board of Directors and will be exercisable for ten years from
the date of the grant, except that options exercisable at the time of a
director's death may be exercised for twelve months thereafter. Under the terms
of the Incentive Plan, neither the Board of Directors nor any committee thereof
will have any discretion with respect to options granted to directors.

1998 STOCK INCENTIVE PLAN

The Board of Directors has adopted the Incentive Plan, which will become
effective upon the consummation of this Offering. The Incentive Plan provides a
means to attract, motivate, retain and reward key employees of European Micro
and its Subsidiaries and other selected persons and promote the success of
European Micro. A maximum of 500,000 shares of Common Stock (subject to certain
anti-dilution adjustments) may be issued pursuant to grants and awards under
the Incentive Plan.

ADMINISTRATION AND ELIGIBILITY. The Incentive Plan will be administered by
the Board of Directors or a committee appointed by the Board of Directors
comprised of at least two persons (currently the

43
<PAGE>

Stock Option Committee) (the "Administrator"). The Incentive Plan empowers the
Administrator, among other things, to interpret the Incentive Plan, to
establish and modify administrative rules for the Incentive Plan, to impose
such conditions and restrictions on awards as it determines appropriate, and to
take such steps in connection with the Incentive Plan and awards granted
thereunder as it may deem necessary or advisable. Key employees, non-employee
directors and consultants of European Micro and its Subsidiaries ("Eligible
Employees"), as selected by the Administrator, may participate in the Incentive
Plan. Under the Incentive Plan, the following may be awarded: options,
including incentive stock options ("ISOs"), as defined in the Internal Revenue
Code of 1986, as amended (the "Code"), stock appreciation rights ("SARs"),
shares of restricted stock, performance shares and other awards valued by
reference to Common Stock, based on the performance of the participant, the
performance of European Micro or its Common Stock or such other factors as the
Administrator deems appropriate. The various types of awards under the
Incentive Plan are collectively referred to as "Awards."

TRANSFERABILITY. Generally, Awards under the Incentive Plan are not
transferable other than by will or the laws of descent and distribution, are
exercisable only by the participant and may be paid only to the participant or
the participant's beneficiary or representatives. However, the Administrator
may establish conditions and procedures under which exercise by and transfers
and payments to certain third parties are permitted, to the extent permitted by
law.

OPTIONS. An option is the right to purchase shares of Common Stock at a
future date at a specified price. The option price is expected generally to be
the closing price for a share of Common Stock as reported on a national
securities exchange, as quoted on the Nasdaq National Market, or the closing
bid price as quoted by the Nasdaq Small Cap Market, whichever is applicable
(the "Fair Market Value"), on the date of grant, but may be a lesser amount if
authorized by the Administrator. The Incentive Plan authorizes the
Administrator to award options to purchase Common Stock at an exercise price
which may be less than 100% of the Fair Market Value of such stock at the time
the option is granted.

An option may be granted as an incentive stock option, as defined in
Section 422 of the Code, or a non-qualified stock option. An ISO may not be
granted to a person who, at the time the ISO is granted, owns more than 10% of
the total combined voting power of all classes of stock of European Micro and
its Subsidiaries unless the exercise price is at least 110% of the Fair Market
Value of shares of Common Stock and such option by its terms is not exercisable
after the expiration of five years from the date such option is granted. The
aggregate Fair Market Value of shares of Common Stock (determined at the time
the option is granted) for which ISOs may be first exercisable by an option
holder during any calendar year under the Incentive Plan or any other plan of
European Micro or its Subsidiaries may not exceed $100,000. A non-qualified
stock option is not subject to any of these limitations.

Generally, the shares purchased upon exercise of an option granted under
the Incentive Plan must be paid in full in cash by the optionee. However, the
Administrator may permit payment to be made by delivering to the Company (i)
shares of Common Stock or (b) any combination of cash and Common Stock or (c)
such other consideration as the Administrator deems appropriate and in
compliance with applicable law (including payment in accordance with a cashless
exercise program under which, if so instructed by the optionee, shares of
Common Stock may be issued directly to the optionees broker or dealer upon
receipt of an irrevocable written notice of exercise from the optionee).

Cash received by European Micro upon exercise will constitute general
funds of European Micro and shares of Common Stock received by European Micro
upon exercise will return to the status of authorized but unissued shares.

CONSIDERATION FOR AWARDS. Typically, the only consideration received by
European Micro for the grant of an award under the Incentive Plan will be the
future services by the optionee (as contemplated by the vesting schedule or
required by agreement), past services or a combination thereof.

SARS. The Incentive Plan authorizes the Administrator to grant SARs
independent of any other award or concurrently (and in tandem) with the grant
of options. An SAR entitles the holder to receive

44
<PAGE>

upon exercise the excess of the Fair Market Value of a specified number of
shares of Common Stock at the time of exercise over the option price. This
amount may be paid in Common Stock (valued at its Fair Market Value on the date
of exercise), cash or a combination thereof, as the Administrator may
determine. Unless the agreement awarding such option in connection with the SAR
provides otherwise, the option granted concurrently with the SAR must be
canceled to the extent that the appreciation right is exercised and the SAR
must be canceled to the extent the option is exercised.

RESTRICTED STOCK. The Incentive Plan authorizes the Administrator to grant
restricted stock to Eligible Employees on such conditions and with such
restricted periods as the Administrator may designate. During the restricted
period, stock certificates evidencing the restricted shares may be held by
European Micro or a third party designated by the Administrator and the
restricted shares may not be sold, assigned, transferred, pledged or otherwise
encumbered (other than by will or the laws of descent and distribution or to an
INTER VIVOS trust with respect to which the participant is treated as the owner
under the applicable sections of the Code.)

PERFORMANCE SHARE AWARDS. The Administrator may, in its discretion, grant
Performance Share Awards to Eligible Employees based upon certain predetermined
performance targets as may be established by the Administrator in its
discretion. The amount of cash or shares of Common Stock or a combination of
cash and Common Stock that may be deliverable pursuant to these awards will be
based upon the degree of attainment over a specified period as may be
established by the Administrator. The Administrator may provide for full or
partial credit, prior to completion of a specified period or the attainment of
the performance achievement specified in the award in the event of the
participant's retirement prior to the completion of a specified period or in
such other circumstances as the Administrator may determine. In the event of
the participant's death or disability or a Change of Control (as defined in the
Incentive Plan), the participant or the participant's personal representative
will be entitled to receive a pro-rata share of his or her award.

SPECIAL PERFORMANCE-BASED SHARE AWARDS. In addition to awards granted
under other provisions of the Incentive Plan, performance-based awards within
the meaning of Section 162(m) of the Code and awards based on operating income,
return on investment, return on shareholders' equity, earnings before interest,
taxes, depreciation and amortization or earning per share or other business
criteria relative to preestablished performance goals, may be granted under the
Incentive Plan. The specific performance goals relative to these business
criteria must be approved by the Administrator in advance of applicable
deadlines under the Code and while the performance relating to the goals
remains substantially uncertain.

TERM AND EXERCISE PERIOD OF AWARDS. The Incentive Plan provides that
awards may be granted for such terms as the Administrator may determine but not
greater than ten years after the date of the award. The Incentive Plan does not
impose any minimum vesting period, post-termination exercise period or pricing
requirement, although in the ordinary course, customary restrictions will
likely be imposed. Options and SARs will generally be exercisable during the
holder's employment by European Micro or by a related company and unearned
restricted stock and other Awards will generally be forfeited upon the
termination of the holder's employment prior to the end of the restricted or
performance period. Generally, options which have become exercisable prior to
termination of employment will terminate on the date of such termination of
employment, unless extended by the Administrator. Such periods, however, cannot
exceed the expiration dates of the Options. SARs have the same post-termination
provisions as the Options to which they relate. The Administrator has the
authority to accelerate the exercisability of Awards or (within the maximum
ten-year term) extend the exercisability periods.

TERMINATION, AMENDMENT AND ADJUSTMENT. The Incentive Plan may be
terminated by the Board of Directors at any time. In addition, the Board of
Directors may amend the Incentive Plan from time to time, without the
authorization or approval of European Micro's shareholders, unless the
amendment (i) materially increases the benefits accruing to participants under
the Incentive Plan, (ii) materially increases the aggregate number of
securities that may be issued under the Incentive Plan or

45
<PAGE>

(iii) materially modifies the requirements as to eligibility for participation
in the Incentive Plan, but in each case only to the extent then required by the
Code or applicable law, or deemed necessary or advisable by the Board of
Directors.

Upon the occurrence of a change of control, all options become immediately
exercisable and all restrictions on restricted shares lapse. A change of
control includes:

(1) the acquisition in one or more transactions by any person of
beneficial ownership of shares or other securities representing 30% or more of
either the outstanding Common Stock or the Company's voting securities, except
that a change of control shall not be deemed to occur in connection with any
acquisition by the Company, an employee benefit plan of the Company or any
person who immediately prior to the completion of this Offering is a holder of
Common Stock; or

(2) any election has occurred of persons as directors of the Company that
causes two-thirds or more of the Board of Directors to consist of persons other
than (i) persons who were members of the Board of Directors on the Termination
Date and (ii) persons who were nominated by the Board of Directors for election
as members of the Board of Directors at the time when at least two-thirds of
the Board of Directors consisted of persons who were members of the Board of
Directors on the Termination Date; or

(3) approval by the shareholders of the Company of a reorganization,
merger, consolidation or similar transaction unless, immediately following such
transaction, more than 50% of, respectively, the outstanding shares of Common
Stock of the entity resulting from or surviving the transaction and the
combined voting power of the securities of such entity entitled to vote
generally in the election of directors, is then beneficially owned by the
persons who were the respective beneficial owners of the outstanding Common
Stock immediately prior to the transaction in substantially the same
proportions as their ownership of outstanding Common Stock immediately prior to
the transaction; or

(4) approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other disposition
of all or substantially all of the assets of the Company to an entity, unless,
with respect to such entity, immediately following such sale or other
disposition more than 50% of, respectively, the outstanding shares of Common
Stock of such entity entitled to vote generally in the election of directors,
is then beneficially owned by the persons who were the respective beneficial
owners of the outstanding shares of Common Stock immediately prior to such sale
or disposition in substantially the same portions as their ownership of the
outstanding shares of Common Stock immediately prior to such sale or
disposition.

NON-EMPLOYEE DIRECTOR OPTIONS. The Incentive Plan provides that directors
who are not employees of European Micro will automatically be granted options
to purchase (i) 10,000 shares of European Micro's Common Stock in connection
with their appointment to European Micro's Board of Directors and (ii) 5,000
shares of European Micro's Common Stock each year thereafter that such
non-employee director serves on European Micro's Board of Directors. The option
price is the Fair Market Value of a share of Common Stock on the date of grant
of such option. Options granted to non-employee directors will become
exercisable after one year of service on the Board of Directors and will be
exercisable for ten years from the date of grant (unless otherwise determined
by the Board of Directors or in the event of a change of control of the Company
as described above.)

If a non-employee director's service with the Company terminates by reason
of death, his or her option may be exercised for a period of one year from the
date of death or until the expiration of the option, which ever is shorter. If
a non-employee director's service with the Company terminates other than by
reason of death, his or her option may be exercised for a period of three
months from the date of such termination or until the expiration of the stated
term of the option, whichever is shorter. See "Management--Director
Compensation."

ANTIDILUTION PROVISIONS. The number of shares of Common Stock authorized
to be issued under the Incentive Plan and subject to outstanding awards (and
the purchase or exercise price thereof) will

46
<PAGE>

be adjusted to prevent dilution or enlargement of rights in the event of any
stock dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar substantive
effect upon the Incentive Plan or the awards.

NON-EXCLUSIVITY. The Incentive Plan is not exclusive and does not limit
the authority of the Board of Directors or the Administrator to grant other
awards, in stock or cash, or to authorize other compensation, under any other
plan or authority.

1998 EMPLOYEE STOCK PURCHASE PLAN

The Company has adopted the 1998 Employee Stock Purchase Plan (the
"Purchase Plan"), a total of 50,000 shares of Common Stock will be reserved for
issuance under the Purchase Plan. The Purchase Plan will permit eligible
employees of European Micro and the Subsidiaries to purchase Common Stock at a
discount through accumulated payroll deductions. Employees are generally
eligible to participate in the Purchase Plan after twelve months of full-time
employment with European Micro or the Subsidiaries. The Purchase Plan will be
implemented through sequential offering periods, each of which is approximately
three months in duration. Participants will purchase shares of Common Stock on
the last day of each offering period. Employees may end their participation in
the Purchase Plan at any time during an offering period and participation ends
automatically upon the participant's termination of employment.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE. The following table provides information
relating to compensation for the three most recently completed fiscal years for
European Micro's Co-Chairmen and its three other most highly compensated
executive officers (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- -------------
FISCAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ----------------------------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
John Gallagher(1) 1997 -- -- --
Co-Chairman, 1996 -- -- --
Co-President and
Director 1995 $ 4,388 -- --

Harry Shields(1) 1997 -- -- --
Co-Chairman, 1996 -- -- --
Co-President and
Director 1995 $ 4,388 -- --

Laurence Gilbert(2) 1997 $64,364 $ 90,152 $11,160
Managing Director 1996 -- -- $29,418
1995 -- -- $13,319

Nils Wager(3) 1997 $20,962 $169,582 $ 450
Managing Director 1996 $73,626 $241,860 $14,509
1995 $75,748 $347,367 $59,469

Bernadette Spofforth(4) 1997 $48,328 $248,902 $13,979
Director of Sales 1996 $28,433 $168,971 $10,509
1995 $26,641 $119,668 $ 8,348
</TABLE>

- ----------------
(1) During the three-year period ended June 30, 1997, and the six-month period
ended December 31, 1997, Messrs. Gallagher and Shields devoted a part of
their working time to the consolidated operations of European Micro UK.
Such work consisted

47
<PAGE>

of the type of services generally performed by chief executive officers of
similar companies and included strategic planning, review and approval of
budgets and material contracts, negotiating bank financing and establishing
and maintaining business relationships. To compensate Messrs. Gallagher and
Shields for their work, the Company paid management fees to American Micro
Computer Center in the case of Mr. Gallagher and to Technology Express in
the case of Mr. Shields. This amounted to $60,000, $50,000 and $56,000 for
the work attributable to Mr. Gallagher and to $60,000, $50,000 and $56,000
for services attributable to Mr. Shields, in each case, for the fiscal years
ended 1997, 1996 and 1995, respectively.
(2) Mr. Gilbert became Managing Director in November 1996. All other
compensation for fiscal years 1996 and 1995 was for consultancy fees paid
to Mr. Gilbert prior to his becoming an officer of the Company. After the
consummation of the Offering, the Company expects to grant Mr. Gilbert
options to purchase 25,000 shares of Common Stock at the initial public
offering price. Such options are expected to vest over the course of six
years.
(3) As of November 1996, Mr. Wager is no longer employed by the Company.
(4) After the consummation of the Offering, the Company expects to grant Ms.
Spofforth options to purchase 50,000 shares of Common Stock at the initial
public offering price. Such options are expected to vest over the course
of six years.

EMPLOYMENT AGREEMENTS

European Micro has entered into five-year employment agreements with each
of Messrs. Gallagher and Shields. Pursuant to the agreements, each executive is
employed as Co-Chairman of European Micro. These agreements are effective as of
January 1, 1998, and each provides for annual base salaries of $175,000, plus
annual cost of living adjustments and other increases to be determined at any
time or from time to time by the Board of Directors or any committee thereof.
In addition, each executive is entitled to annual incentive bonus compensation
in an amount to be determined by the Board of Directors or a committee thereof.

Each agreement further provides that each of Messrs. Gallagher and Shields
will devote a significant amount of his working time and efforts to the
business and affairs of European Micro (which means no less than 50% of his
working time); provided, however, that each of Messrs. Gallagher and Shields
may devote a reasonable amount of time and effort to other business affairs,
including, in the case of Mr. Gallagher, American Micro Computer Center and, in
the case of Mr. Shields, Technology Express and in each case other activities
disclosed to the Board of Directors.

The agreements also provide that upon termination of employment without
"cause" or termination by the executive for "good reason" (which includes a
change of control of European Micro), the executive is entitled to receive, in
addition to all accrued or earned but unpaid salary, bonus or benefits, an
amount equal to three times the compensation such executive would be entitled
to receive in the then current fiscal year, including base salary and incentive
bonus compensation. For the purposes of the employment agreement, the amount of
incentive bonus compensation such executive would be entitled to receive in the
then current fiscal year is equal to the largest amount accrued for any of the
two most recently completed fiscal years. In addition, European Micro will pay
certain relocation expenses incurred by the executive in change of principal
residence and will indemnify the executive for any loss sustained in the sale
of his principal residence. The agreements also provide that the executive will
not compete with European Micro during his employment (except for activities
related to American Micro Computer Center and Technology Express and such other
activities disclosed to the Board of Directors) and for two years thereafter
unless European Micro terminates the executive without "cause" or the executive
terminates his employment for "good reason."

In addition, the agreements grant each of Messrs. Gallagher and Shields
demand and piggy-back registration rights with respect to the shares of Common
Stock held by each. Each executive may individually require European Micro to
file a registration statement with respect to these shares on annual basis.
Moreover, each executive may include these shares in certain other offerings by
European Micro. See "Description of Capital Stock--Registration Rights."

European Micro Plc has entered into an employment agreement with Ms.
Bernadette Spofforth. Pursuant to the agreement, Ms. Spofforth is employed as
Sales Director of European Micro Plc. Ms. Spofforth's agreement was effective
April 30, 1996, will continue until terminated by either party delivering not
less than six months' written notice to the other party and provides for an
annual base salary of /pound sterling/30,000 (approximately $48,000 assuming an
exchange rate of $1.60 to /pound sterling/1.00) plus bonus. Ms. Spofforth is
also entitled to the use of a Company owned vehicle under the terms of her
employment agreement.

48
<PAGE>

European Micro Plc has entered into an employment agreement with Mr.
Lawrence Gilbert. Pursuant to the agreement, Mr. Gilbert is employed as
Managing Director of European Micro Plc. Mr. Gilbert's agreement was effective
January 1, 1998, will continue until terminated by either party delivering not
less than six months' written notice to the other party and provides for an
annual base salary of /pound sterling/60,000 (approximately $96,000 assuming an
exchange rate of $1.60 to /pound sterling/1.00) plus bonus. The minimum bonus
is /pound sterling/30,000 (approximately $48,000 assuming an exchange rate of
$1.60 to /pound sterling/1.00). Mr. Gilbert is also entitled to the use of a
Company owned vehicle under the terms of his employment agreement.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended June 30, 1997, the Company had no
compensation committee. As of the date of this Prospectus, the Compensation
Committee is composed of Messrs. Gallagher, Shields, Saxon and Sutton. Each of
Messrs. Gallagher and Shields is a Co-Chairman, Co-President and Director of
the Company and Co-Chairman of each of the Subsidiaries.

49
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On January 31, 1998, European Micro Holdings, Inc. acquired one hundred
percent (100%) of the issued and outstanding shares of ordinary stock of
European Micro UK in consideration for the issuance of 4,000,000 newly issued
shares of Common Stock of European Micro Holdings, Inc. The 4,000,000 shares of
Common Stock of European Micro Holdings, Inc. has been issued to the
shareholders of European Micro UK on a pro rata basis in accordance with such
shareholder's respective ownership interests in European Micro UK. As a result
of the exchange, the Selling Shareholders and the Trust Shareholders together
own one hundred percent (100%) of the issued and outstanding Common Stock of
European Micro Holdings, Inc. prior to the consummation of this Offering. For a
discussion of the number of shares of Common Stock owned by the Selling
Shareholders and the Trust Shareholders after the closing of this Offering see
"Principal and Selling Shareholders."

The Company has agreed to grant options to purchase up to 25,000 shares of
Common Stock to Thomas H. Minkoff for consulting fees rendered to the Company.
The options will have an exercise price equal to 100% of the Offering price.
Mr. Minkoff is the Trustee of the Gallagher Family Trust and the first cousin
of John B. Gallagher, the Co-Chairman, Co-President, a director and one of the
Selling Shareholders. See "Principal and Selling Shareholders."

Since its formation in 1991, European Micro UK has belonged to the Group.
The Group is comprised of European Micro, Technology Express, American Micro
Computer Center and, until August 1, 1997, Ameritech Exports and Ameritech
Argentina. All members of the Group were owned and controlled by either of the
two primary shareholders of European Micro, Messrs. Gallagher and Shields. In
order to facilitate fast and efficient international transactions, each member
of the Group has acted as a supplier for, and purchaser from, the other members
of the Group. Such factors as country supply, currency fluctuation, and
manufacturer's geographic pricing strategy lead to a constantly changing model
where purchases and sales to other members of the Group depend on the then
current economic balance. Inter-Group sales have historically been one percent
above the selling Group member's cost. This low mark-up has enabled each Group
member to buy product quickly and efficiently in the others' primary territory
and to take advantage of quantity purchasing, financing and logistics of the
other members of the Group. The Group has made numerous exceptions to the
general one-percent mark-up pricing policy in times of short supply, to cover
build-up costs and to reward certain Group members for exceptional low-cost
purchases. Additionally, European Micro has paid certain management and
consulting fees to the other members of the Group. Inter-Group purchases and
sales are as follows:

<TABLE>
<CAPTION>
($ IN THOUSANDS)
(UNAUDITED)
YEAR ENDED JUNE 30, SIX MONTHS ENDED
----------------------------------- DECEMBER 31,
1995 1996 1997 1997
--------- -------- ------------ -----------------
<S> <C> <C> <C> <C>
SALES TO GROUP MEMBERS
American Micro Computer Center ......... $ 323 306 66 10,413
Technology Express. .................... 22 104 (2) 3,582
Ameritech Argentina .................... - - 90 -
Ameritech Exports ...................... 1 26 - -
------ --- ---- ------
$ 346 436 154 13,995
====== === ==== ======
PURCHASES FROM GROUP MEMBERS
American Micro Computer Center ......... $4,082 2,289 1,092 325
Technology Express ..................... 3,265 14,890 20,717 2,937
Ameritech Argentina .................... - - - -
Ameritech Exports ...................... 70 1,116 848 -
------ ------ ------- ------
$7,417 18,295 22,657 3,262
====== ====== ======= ======
</TABLE>

50
<PAGE>
The management and consulting fees paid by European Micro to other Group
members are as follows:

<TABLE>
<CAPTION>
($ IN THOUSANDS)
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
------------------------------ DECEMBER 31,
1995 1996 1997 1997
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
MANAGEMENT FEES
American Micro Computer Center ......... $ 56 50 60 18
Technology Express ..................... 56 50 60 16
---- -- -- --
$112 100 120 34
==== === === ==
CONSULTANCY FEES
Technology Express ..................... $ 32 37 16 10
---- --- --- --
$ 32 37 16 10
==== === === ==
RECHARGED CONSULTANCY FEES
American Micro Computer Center ......... $ -- (14) (27) --
Technology Express ..................... -- (14) (27) --
Ameritech Argentina .................... -- (8) (13) --
Ameritech Exports ...................... -- (7) (14) --
---- ------ --- --
$ -- (43) (81) --
---- ----- --- --
$144 94 55 44
==== ===== === ==
</TABLE>

Sales to and from Group members has resulted in the following accounts
receivable:

<TABLE>
<CAPTION>
($ IN THOUSANDS)
(UNAUDITED)
SIX MONTHS
JUNE 30, ENDED
------------------------ DECEMBER 31,
1995 1996 1997 1997
------ ------ ------ -------------
<S> <C> <C> <C> <C>
ACCOUNTS RECEIVABLE
American Micro Computer Center ......... $97 259 240 446
Technology Express ..................... -- 15 -- 8
Ameritech Argentina .................... -- 274 329 --
Ameritech Exports ...................... -- 160 -- --
--- --- --- ---
$97 708 569 454
=== === === ===
</TABLE>

Accounts payable to Group members are as follows:

<TABLE>
<CAPTION>
($ IN THOUSANDS)
(UNAUDITED)
SIX MONTHS
JUNE 30, ENDED
-------------------------- DECEMBER 31,
1995 1996 1997 1997
------ -------- ------ -------------
<S> <C> <C> <C> <C>
ACCOUNTS PAYABLE
American Micro Computer Center ......... $ 34 90 -- --
Technology Express ..................... 242 535 188 2,858
Ameritech Argentina .................... -- 281 -- --
Ameritech Exports ...................... 2 238 -- --
---- --- --- -----
$278 1,144 188 2,858
==== ===== === =====
</TABLE>

51
<PAGE>

The entities listed above are related to European Micro or its officers,
directors and principal shareholders in the following manner:

AMERICAN MICRO COMPUTER CENTER

American Micro Computer Center is a distributor of computer hardware based
in Miami, Florida. John B. Gallagher who is Co-Chairman, Co-President, Director
and shareholder (owning 37% of the outstanding shares after the Offering
assuming that the Offering is fully subscribed) of European Micro is the
President of American Micro Computer Center, and owns 33.3% of the outstanding
shares of common stock of that company.

TECHNOLOGY EXPRESS

Until 1996, Technology Express was a full service authorized reseller of
computers and related products based in Nashville, Tennessee, selling primarily
to end-users. Technology Express was sold to Inacom Computers in 1996.
Concurrently with the sale, Mr. Shields founded a new computer company by the
same name. This new company is a distributor of computer products, focusing
primarily on governmental and international sales of computer products. It does
not sell to end-users. Harry D. Shields, who is Co-Chairman, Co-President,
Director and shareholder (owning 31% of the outstanding shares after the
Offering assuming that the Offering is fully subscribed) of European Micro, is
President of Technology Express, and owns 100% of the outstanding shares of
common stock of that company.

AMERITECH ARGENTINA

Ameritech Argentina SA is an authorized distributor of Compaq, Hewlett
Packard, IBM and Acer computers and accessories in Argentina. Each of Messrs.
Gallagher and Shields owned 50% of the outstanding shares of common stock each
until its sale on August 1, 1997.

AMERITECH EXPORTS

Ameritech Exports Inc. is an authorized distributor of Compaq computers
and accessories into Caribbean and certain parts of Central and South America.
Messrs. Gallagher and Shields were both officers and directors of Ameritech
Exports Inc. and owned 25% and 50% of the outstanding shares of common stock,
respectively, until its sale on August 1, 1997.

52
<PAGE>

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information known to European Micro
with respect to the beneficial ownership of Common Stock as of March 1, 1998,
and as adjusted to reflect the sale of the Common Stock in the Offering by (i)
each person who is known by European Micro to beneficially own more than five
percent of outstanding Common Stock, (ii) each of European Micro's directors,
(iii) each Named Executive Officer, and (iv) all directors and officers of
European Micro as a group. Unless otherwise indicated, the person or persons
named have sole voting and investment power.

<TABLE>
<CAPTION>
OWNERSHIP OF COMMON NUMBER OF COMMON
SHARES PRIOR TO THIS SHARES TO BE SOLD IN OWNERSHIP OF COMMON SHARES
OFFERING OFFERING(1) AFTER THIS OFFERING
-------------------------- ---------------------- -------------------------
NAME OF OWNER NUMBER PERCENTAGE NUMBER NUMBER PERCENTAGE
- --------------------------------- ----------- ------------ ---------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
John B. Gallagher(2) ............ 1,900,000 47.5% 50,000 1,850,000 37.0%
Harry D. Shields(3) ............. 1,602,696 40.0 50,000 1,552,696 31.0
Thomas H. Minkoff, Trustee
of the Gallagher Family
Trust(4) ...................... 100,000 2.5 - 100,000 2.0
Stuart S. Southard and
Robert H. True, Trustees of
the 1997 Henry Daniel
Shields Irrevocable
Educational Trust(5) .......... 397,304 10 - 397,304 8.0
Jay Nash(3) ..................... - - - - -
Laurence Gilbert(6) ............. - - - - -
Bernadette Spofforth(6) ......... - - - - -
Kyle Saxon(7) ................... - - - - -
Barrett Sutton(8) ............... - - - - -
All officers and directors
as a group(9) ................. 3,502,696 87.5% 100,000 3,402,696 68.0%
</TABLE>

- ----------------

(1) Assumes that the Offering will be fully subscribed and therefore a total of
$10,000,000 worth of Common Stock will be sold by the Company and
$1,000,000 worth of Common Stock will be sold by the Selling Shareholders.

(2) Business address is 6073 N.W. 167th Street, Unit C-25, Miami, Florida
33015. Excludes the shares held by Thomas H. Minkoff, Trustee of the
Gallagher Family Trustee, as to which Mr. Gallagher disclaims any
beneficial interest.
(3) Business address is 808 Third Avenue South, Nashville, Tennessee 37210.
Excludes the shares held by Stuart S. Southard and Robert H. True,
Trustees of the 1997 Henry Daniel Shields Irrevocable Educational Trust,
as to which Mr. Shields disclaims any beneficial ownership.
(4) Business address is 1635D Royal Palm Drive South, Gulfport, Florida 33707.
(5) Business address for Mr. Southard is 614 4th Avenue, Nashville, Tennessee
37210. Business address for Mr. True is First American Center, No. 2070,
315 Deaderick Street, Nashville, Tennessee 37278.
(6) Business address is 20-24 Church Street, Altrincham, Manchester, England
WA14 4DW.
(7) Business address is 1700 Alfred I. DuPont Building, 169 East Flagler
Street, Miami, Florida 33131-1298.
(8) Business address is NationsBank Plaza--Suite 1100, 414 Union Street,
Nashville, Tennessee 37219.
(9) Excludes Trust Shareholders because Messrs. Gallagher and Shields do not
have voting power over any of the shares held by the Trust Shareholders
and the Trust Shareholders are neither officers nor directors of the
Company.

SHAREHOLDERS AGREEMENT

Pursuant to the Shareholders Agreement, each Selling Shareholder agreed to
vote his Shares in concert on all matters submitted to a vote of shareholders
of the Company, including the election of all directors. In the event that
either Selling Shareholder cannot agree to vote his Shares in concert with the
other Selling Shareholder, neither Shareholders shall vote his Shares. See
"Risk Factors--Control by Current Shareholders." Pursuant to the Shareholder
Agreement, each Trust Shareholder agreed to

53
<PAGE>

vote its Shares in concert on all matters submitted to a vote of the
shareholders of the Company, specifically including without limitation the
election of all directors, so as to maintain continuity in the management of
the Company for the duration of this Agreement. In the event that either Trust
Shareholder cannot agree to vote its Shares in concert with the other Trust
Shareholder, neither Trust Shareholder shall vote its Shares.

In addition, in the event of the death of either Selling Shareholder, the
survivor will be entitled to purchase 1,000,000 of the shares of Common Stock
of the deceased shareholder at a predetermined price. Each Selling Shareholder
will maintain life insurance on the life of the other. The proceeds of such
life insurance will be paid to the estate of the deceased shareholder in
consideration for 1,000,000 shares of the Company then held by such
shareholder.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock and 1,000,000 shares of Preferred Stock. Upon the closing of
this Offering, the Company expects to have 5,000,000 shares of Common Stock
outstanding. The following description is a summary of the capital stock of the
Company and is subject to and qualified in its entirety by reference to the
provisions of the Articles of Incorporation (the "Articles of Incorporation")
and the Bylaws (the "Bylaws") of the Company, which are included as exhibits to
the Registration Statement of which this Prospectus forms a part.

COMMON STOCK

Each share of Common Stock entitles the holder to one vote on each matter
submitted to a vote of the Company's shareholders, including the election of
directors. There is no cumulative voting. See "Risk Factors--Control by Current
Shareholders." Subject to preferences that may be applicable to any outstanding
Preferred Stock, the holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. Holders of Common Stock have
no preemptive, conversion or other subscription rights. There are no redemption
or sinking fund provisions available to the Common Stock. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of Preferred Stock, if any,
then outstanding.

PREFERRED STOCK

The Board of Directors is authorized, subject to any limitations
prescribed by the NRS, or the rules of any quotation system or national
securities exchange on which stock of the Company may be quoted or listed, to
provide for the issuance of shares of Preferred Stock in one or more series; to
establish from time to time the number of shares to be included in each such
series; to fix the rights, powers, preferences, and privileges of the shares of
such series, without any further vote or action by the shareholders. Depending
upon the terms of the Preferred Stock established by the Board of Directors,
any or all series of Preferred Stock could have preference over the Common
Stock with respect to dividends and other distributions and upon liquidation of
the Company or could have voting or conversion rights that could adversely
affect the holders of the outstanding Common Stock. The Company has no present
plans to issue any shares of Preferred Stock.

LIMITATION OF LIABILITY; INDEMNIFICATION

Each of the directors and officers have entered into Indemnification
Agreements in which the Company has agreed to indemnify each director and
officer, to the fullest extent permitted by law, from and against any and all
claims of any type arising from or related to his past or future acts or
omissions

54
<PAGE>

as a director or officer of the Company and any of its subsidiaries. In
addition, the Company has agreed to advance all expenses of each director and
officer as they are incurred and in advance of the final disposition of any
claim.

As permitted by the NRS, the Articles of Incorporation provide that
directors of the Company shall not be personally liable to the Company or its
shareholders for monetary damages for breach of fiduciary duty as directors
(the NRS currently provides that such liability may be so limited, except for:
(i) acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law; or (ii) the payment of distributions in violation of NRS
78.300).

Each person who is or was a party to any action by reason of the fact that
such person is or was a director or officer of the Company shall be indemnified
and held harmless by the Company to the fullest extent permitted by the NRS.
This right to indemnification also includes the right to have paid by the
Company the expenses incurred in connection with any such proceeding in advance
of its final disposition, to the fullest extent permitted by the NRS. In
addition, the Company may, by action of the Board of Directors, provide
indemnification to such other employees and agents of the Company to such
extent as the Board of Directors determines to be appropriate under the NRS.

As a result of this provision, the Company and its shareholders may be
unable to obtain monetary damages from a director for breach of his duty of
care. Although shareholders may continue to seek injunctive and other equitable
relief for an alleged breach of fiduciary duty by a director, shareholders may
not have any effective remedy against the challenged conduct if equitable
remedies are unavailable.

REGISTRATION RIGHTS

In January 1998, each of Messrs. Gallagher and Shields was granted the
right, subject to various restrictions and limitations, at any time following
consummation of the Offering to individually request that the Company file with
the Commission a registration statement for the proposed sale of any shares of
Common Stock (including Common Stock to be issued upon the exercise of options)
held by either of them, subject only to the lock-up period in the Underwriting
Agreement, to be entered into between the Company and the Underwriter (the
"Underwriting Agreement"). See "Shares Eligible for Future Sale." Each of
Messrs. Gallagher and Shields may exercise such rights once each per calendar
year. The Company may postpone any such requested registration for a period of
up to 120 days if the Company believes that such registration would not be in
the Company's interest. If either Mr. Gallagher or Mr. Shields exercises his
right to demand the Company to register his shares, then the other shall have
the right to register an equivalent number of shares without reducing the
number of rights such person has to demand registration in any calendar year.
In addition, each of Messrs. Gallagher and Shields has an unlimited number of
piggyback registration rights in respect to any shares of Common Stock
(including Common Stock issued upon the exercise of options). The piggyback
registration rights will allow Messrs. Gallagher and Shields to include their
shares of Common Stock in any registration statement filed by the Company,
subject to certain limitations.

The Company will pay all expenses (other than underwriting discounts and
commissions of the Selling Shareholders) in connection with up to two requested
registrations, as well as any registrations pursuant to the exercise of
piggyback rights. The Company also will agree to indemnify such persons against
certain liabilities, including liabilities arising under the Securities Act.
The registration rights granted to each of Messrs. Gallagher and Shields will
remain as long as such person remains an "affiliate" of the Company for
purposes of Rule 144.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS
AND NEVADA LAW

The following provisions of the Articles of Incorporation and Bylaws of
European Micro could discourage potential acquisition proposals and could delay
or prevent a change in control of European Micro. Such provisions may also have
the effect of preventing changes in the management of European Micro. See "Risk
Factors--Anti-Takeover Considerations."

55
<PAGE>

DIRECTORS. The Company's Articles of Incorporation divide the Company's
Board of Directors into three classes with staggered three-year terms. Pursuant
to Section 78.335 of the NRS, any director may be removed from office by the
vote of shareholders representing two-thirds of the outstanding shares of
common stock. In addition, all vacancies on the Board of Directors may be
filled by a majority of directors even if a quorum of directors is not
possible. The authority of the Board of Directors to fill such vacancies may
result in a majority of the directors being elected without a vote of the
shareholders. Shareholders have no right to compel an election in such cases.
Any vacancies (including those caused by an increase in the number of
directors), however, may be filled by a majority of the remaining directors and
therefore the nominees of a dissident shareholder may be precluded from filling
any vacancies. Consequently, a shareholder interested in gaining control of the
Company will only be able to elect a minority of the Company's Board of
Directors in any given year. Consequently, two annual meetings will be
necessary for such a shareholder to gain control of the Company's Board of
Directors.

AUTHORIZED BUT UNISSUED STOCK. The authorized but unissued shares of
Common Stock and Preferred Stock are available for future issuance without
shareholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans.

BLANK CHECK PREFERRED STOCK. The existence of authorized but unissued and
unreserved shares of Preferred Stock may enable the Board of Directors to issue
shares to persons friendly to current management which would render more
difficult or discourage an attempt to obtain control of the Company by means of
a proxy contest, tender offer, merger or otherwise, and thereby protect the
continuity of the Company's management.

NEVADA BUSINESS COMBINATION LAW. The State of Nevada has enacted
legislation that may deter or frustrate takeovers of Nevada corporations. The
Nevada Business Combination Law generally prohibits a Nevada corporation from
engaging in a business combination with an "interested shareholder" (defined
generally as any person who beneficially owns 10% or more of the outstanding
voting stock of the Company or any person affiliated with such person) for a
period of three years following the date that such shareholder became an
interested shareholder, unless the combination or the purchase of shares made
by the interested shareholder on the interested shareholder's date of acquiring
shares is approved by the board of directors of the corporation before that
date. A corporation may not engage in any combination with an interested
shareholder of the corporation after the expiration of three years after his
date of acquiring shares unless: (i) the combination or the purchase of shares
made by the interested shareholder is approved by the board of directors of the
corporation before the date such interested shareholder acquired such shares;
(ii) a combination is approved by the affirmative vote of the holders of stock
representing a majority of the outstanding voting power not beneficially owned
by the interested shareholder proposing the combination, or any affiliate or
associate of the interested shareholder proposing the combination, at a meeting
called for that purpose no earlier than three years after the interested
shareholder's date of acquiring shares; or (iii) if the aggregate amount of
cash and the market value, as of the date of consummation, of consideration
other than cash to be received per share by all of the holders of outstanding
common shares of the corporation not beneficially owned by the interested
shareholder, satisfies the fair value requirements of Section 78.441 of NRS.

Prior to the Share Exchange, the Board of Directors of the Company
approved the purchase of shares made by each of the Selling Shareholders.
Consequently, the Nevada Business Combination Law will not prohibit either
Messrs. Gallagher or Shields from engaging in a business combination with the
Company.

CERTAIN LIMITATIONS ON SHAREHOLDERS' ACTIONS

NOTICE PROCEDURES FOR SHAREHOLDER PROPOSALS AT ANNUAL MEETINGS. The Bylaws
of the Company establish advance notice procedures with respect to shareholder
proposals to be brought before an annual meeting of shareholders. These
procedures, which are in addition to any other applicable

56
<PAGE>

requirements of law, require that a shareholder must give notice to the Company
not less than 120 days nor more than 180 days prior to the first anniversary of
the date of the notice of annual meeting provided with respect to the previous
year's annual meeting.

SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of the shareholders of
the Company may be called by its Board of Directors or other persons authorized
to do so under Nevada law. Under applicable Nevada law, shareholders do not
have the right to call a special meeting of the shareholders. This may have the
effect of discouraging potential acquisition proposals and could delay or
prevent a change in control of European Micro by precluding a dissident
shareholder from forcing a special meeting to consider removing the Board of
Directors or otherwise.

SHAREHOLDER VOTES ON CERTAIN MATTERS. The holders of the Company's Common
Stock and Preferred Stock vote as a single group on all matters except the
following, which require the affirmative vote of a majority of the holders of
the Company's Common Stock and a majority of the holders of the Company's
Preferred Stock: (a) any merger or consolidation of the Company with or into
any other corporation except in the case of a merger into the Company of a
subsidiary of the Company 90% or more of which is owned by the Company and
which does not require a vote of shareholders under Nevada law; (b) any share
exchange in which a corporation, person or entity acquires the issued or
outstanding shares of stock of the Company pursuant to a vote of shareholders
of the Company; (c) any, sale, lease, exchange or other transfer of all, or
substantially all, of the assets of the Company to any other corporation,
person or entity; or (d) any amendment to the Articles of Incorporation of the
Company. If shares of Preferred Stock are issued and outstanding, this
provision would render more difficult or discourage an attempt to obtain
control of the Company by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of management.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C. Its address is 4 Station Square, Third Floor,
Pittsburgh, Pennsylvania 15219-1173.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this Offering, there has not been any public market for the
Common Stock of the Company. No prediction can be made as to the effect, if
any, that market sales of shares or the availability of shares for sale will
have on the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock of the Company in the public market after
the restrictions described below lapse, or the perception that such sales could
occur, could adversely affect the market price of the Common Stock.

Upon completion of this Offering and assuming all shares offered hereby
have been fully subscribed, the Company will have 5,000,000 shares of Common
Stock outstanding. Of these shares, all of the 1,100,000 shares offered by the
Company and the Selling Shareholders in this Offering will be freely
transferable without restriction under the Securities Act, unless they are held
by "affiliates" of the Company, as that term is used under the Securities Act
and the rules and regulations promulgated thereunder. The remaining 3,900,000
shares of outstanding Common Stock which are held by Messrs. Gallagher, Shields
and the Trust Shareholders are "restricted" securities within the meaning of
Rule 144 under the Securities Act. These shares may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rule 144, which is summarized below. See "Risk Factors--Shares Eligible
for Future Sale."

Each of Messrs. Gallagher, Shields and the Trust Shareholders has agreed
not to offer, sell or otherwise dispose of any of the Restricted Stock for a
period of six months after the date of this Prospectus without the prior
written consent of the Underwriter. For the period of six months after the

57
<PAGE>

date of this Prospectus and ending one year after the date of this Prospectus,
Messrs. Gallagher, Shields and the Trust Shareholders have agreed not to offer,
sell or otherwise dispose of any Restricted Stock in amounts exceeding the
volume restrictions set forth in Section (e)(1) of Rule 144 and only in the
manner of sale provided in Section (f) of Rule 144 ("Limited Sale Period"). The
Underwriter may remove these restrictions with respect to the Restricted Stock
in its discretion. See "Underwriting." Messrs. Gallagher, Shields and the Trust
Shareholders may not offer, sell or otherwise dispose of their shares of Common
Stock, subject to the conditions and restrictions of Rule 144 unless such
shares are registered pursuant to the Securities Act. The shares of Common
Stock held by Messrs. Gallagher, Shields and the Trust Shareholders carry
certain demand and incidental (I.E. piggyback) rights to require the Company to
register sales of such shares of Common Stock and to participate in certain
subsequent registrations of the Common Stock by the Company for sale to the
public. See "Description of Capital Stock."

In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted shares for at least one year (including the
holding period of any prior owner other than an affiliate) is entitled to sell
in a broker's transaction or to a market maker, within any three-month period,
a number of shares that does not exceed the greater of (i) one percent (1%) of
the then outstanding shares of Common Stock (approximately 50,000 shares based
on the number of shares to be outstanding after this Offering), or (ii) the
average weekly trading volume in the public market during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale. Sales under
Rule 144 are also subject to certain requirements as to the manner and notice
of sale and the availability of public information concerning the Company.
Persons who are not affiliates of the Company whose shares have been held for
at least two years are entitled to sell such shares under Rule 144(k) without
regard to the volume limitations, manner of sale provisions, notice or public
information requirements described above.

58
<PAGE>

UNDERWRITING

Pursuant to the Underwriting Agreement, the Company has engaged the
Underwriter to use its best efforts to offer the Common Stock to the public,
subject to the terms and conditions of the Underwriting Agreement. The
Underwriter has agreed to sell the Common Stock through licensed dealers on a
"best efforts" basis, at a purchase price of $10.00 per share. The Underwriter
has made no commitment to purchase all or any part of the Common Stock offered
hereby, and there can be no assurance that any of the Common Stock will be
sold. The Underwriter has agreed to use its best efforts to find purchasers for
the Common Stock within a period of sixty days from the date of this Prospectus
(the "Offering Period"), subject to an extension by mutual written agreement
between the Company and the Underwriter. The Offering will terminate prior to
the expiration of the Offering Period if the collected proceeds of the Offering
equal or exceed $10,000,000 and may, or at the option of the Company, terminate
if, prior to the expiration of the Offering Period, the collected proceeds
equal or exceed $7,000,000.

Payment by check for the Shares offered hereby must be made payable to the
Escrow Agent for the account of the Company. All funds received by the
Underwriter or any broker-dealer acting on behalf of the Underwriter as
subscriptions for the shares of Common Stock will be deposited no later than
12:00 p.m. on the business day following receipt thereof in a non-interest
bearing account with the Escrow Agent, The Chase Manhattan Bank, pursuant to an
Escrow Agreement entered into among the Company, the Underwriter and the Escrow
Agent. In the event 700,000 shares of Common Stock are not sold within the
Offering Period, the funds will be refunded promptly to the Underwriter in full
without deduction therefrom or interest thereon and the Escrow Agent will
notify subscribers that such funds have been returned. If more than 700,000 but
less than 1,000,000 shares of Common Stock are subscribed for during the
Offering Period, the Company may, at its option, notify the Escrow Agent to
release the funds held by the Escrow Agent to the Company, the Company will
deliver the subscribed for shares of Common Stock to subscribers, and the
Offering will terminate. Upon receipt of funds by the Escrow Agent of the
proceeds of the sale of at least 1,000,000 shares offered hereby, the Escrow
Agent will deliver the proceeds of such sales to the Company and the shares
subscribed for to the subscribers.

The Underwriter has agreed that if at least 1,000,000 shares are
subscribed for within the Offering Period, the Underwriter will use its best
efforts to offer an additional 100,000 shares of Common Stock for the account
of the Selling Shareholders, the funds collected from the sale of which will be
subject to the Escrow Agreement as described above.

During the period of escrow, subscribers will not be entitled to a refund
of their subscriptions. The shares of Common Stock offered hereby will be sold
fully paid only. Common Stock certificates will be issued to purchasers only if
the proceeds from the sale of shares of Common Stock are released to the
Company as described above. Until such time as the funds have been released by
the Escrow Agent, such purchasers, if any, will be deemed subscribers and not
shareholders. The funds in escrow will not bear interest, will be held for the
benefit of those subscribers until released to the Company and will not be
subject to creditors of the Company or the expenses of this Offering.

The Underwriter is to receive a cash commission of eight percent (8%) of
the gross offering price per share sold, amounting (assuming an offering price
of $10.00 per share) to $560,000 if 700,000 shares of Common Stock are sold,
$800,000 if 1,000,000 shares of Common Stock are sold and $880,000 if 1,100,000
shares of Common Stock are sold. In addition, upon the sale of at least
1,000,000 shares of Common Stock, the Company has agreed to pay from the
proceeds of the Offering the reasonable expenses incurred by the Underwriter in
connection with the Offering, which expenses will be deemed reasonable if they
amount to $150,000 or less, up to a maximum of the lesser of $225,000 or three
percent (3%) of the gross proceeds of this Offering. The Company has advanced
to date an amount of $25,000 against the Underwriter's expenses. The
Underwriter's expenses in excess of the expenses paid by the Company will be
paid by the Underwriter. The Underwriter may elect not to proceed with the
Offering at any time, without penalty, if it believes that no favorable public
market exists for the sale of

59
<PAGE>

the Common Stock. If the Underwriter is otherwise unable or unwilling to
complete the Offering upon the terms and conditions of the Underwriting
Agreement, upon termination of the Offering Period, the Company has agreed to
reimburse the Underwriter for the expenses incurred to such date of termination
less $100,000 and less any expenses already advanced.

The Underwriter initially proposes to offer the Common Stock offered
hereby to the public at the public offering price set forth on the cover of
this Prospectus, and the Underwriter may allow certain dealers, who are members
of the National Association of Securities Dealers, Inc. ("NASD"), concessions
of not in excess of $0.70 per share of Common Stock.

Officers and directors of the Company may introduce the Underwriter to
persons to consider this Offering and subscribe for shares of Common Stock
either through the Underwriter or through participating dealers. In this
connection, officers and directors will not receive any commissions or any
other compensation.

The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities in connection with
the Registration Statement, including liabilities under the Securities Act.

The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement and related documents, copies of which
are on file at the offices of the Underwriter, the Company and the Commission.

The public offering price of the Common Stock has been determined by arms'
length negotiation between the Company and the Underwriter and do not
necessarily bear any direct relationship to the Company's assets, earnings,
book value per share or other generally accepted criteria of value. Factors
considered in determining the offering price of the Common Stock included the
business in which the Company is engaged, estimates of the business potential
of the Company, the present state of the Company's development, the Company's
financial condition, an assessment of the Company's management, the general
condition of the securities markets and the demand for similar securities of
comparable companies, and other factors that the Underwriter and the Company
deemed relevant.

The Underwriter was incorporated on March 26, 1993 as Winthrop Financial
Services, Inc. Its corporate name was changed to Tarpon Scurry Investments,
Inc. on September 27, 1997. Since its incorporation, the Underwriter has not
participated in any initial public offerings of equity securities as an
underwriter, lead manager or co-manager. Prospective purchasers of Common Stock
should consider the lack of experience of the Underwriter in evaluating an
investment in the Company. See "Risk Factors--Limited Underwriting History."

EXPERTS

The consolidated financial statements of European Micro Holdings, Inc. as
of June 30, 1996 and 1997 and for each of the years in the three-year period
ended June 30, 1997, in this Prospectus and elsewhere in the Registration
Statement have been audited by KPMG, independent auditors, as stated in their
report herein and elsewhere in the Registration Statement, and are included
herein in reliance upon the report of such firm given their authority as
experts in accounting and auditing.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for European Micro by Kirkpatrick & Lockhart LLP, Miami, Florida. Certain
legal matters in connection with the Offering will be passed upon for the
Underwriter by Holland & Knight LLP, Fort Lauderdale, Florida.

60
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus, which constitutes part
of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, certain portions of which have been
omitted in accordance with the rules and regulations of the Commission. The
summaries in this Prospectus of additional information included in the
Registration Statement or any exhibit thereto are qualified in their entirety
by reference to such information or exhibit. For further information with
respect to The Company and the Common Stock, reference is hereby made to such
Registration Statement and the exhibits and schedules thereto. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement is qualified in its entirety by
such reference. The Registration Statement, including exhibits and schedules
thereto may be inspected without charge at the public reference facilities
maintained by the Securities and Exchange Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the following regional
offices of the Commission: 7 World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, or obtained from the Commission upon payment of the fees
prescribed by the Commission. In addition, registration statements and certain
other documents filed with the Commission through its Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system are publicly available
through the Commission's site on the World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.

REPORTS TO SHAREHOLDERS

The Company is currently not subject to the informational requirements of
the Securities Exchange Act of 1934, as amended. The Company intends to furnish
to its shareholders annual reports containing financial statements and an
opinion thereon expressed by independent certified public accountants and
quarterly reports for the first three quarters of each fiscal year containing
interim financial information.

61
<PAGE>

EUROPEAN MICRO HOLDINGS, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
PAGE
---
EUROPEAN MICRO HOLDINGS, INC.
Independent Auditors' Report ..................................... F-2

Consolidated Balance Sheets as of June 30, 1996 and 1997
and (unaudited) December 31, 1997 .............................. F-3

Consolidated Statements of Earnings for the years ended
June 30, 1995, 1996 and 1997 and (unaudited) for
the six months ended December 31, 1997 ......................... F-4

Consolidated Statements of Changes in Shareholders' Equity
for the years ended June 30, 1995, 1996 and 1997 and (unaudited)
for the six months ended December 31, 1997 ..................... F-5

Consolidated Statements of Cash Flows for the years ended
June 30, 1995, 1996 and 1997 and (unaudited) for
the six months ended December 31, 1997 ......................... F-6

Notes to Consolidated Financial Statements ....................... F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and the Shareholders of
European Micro Holdings, Inc.

We have audited the accompanying consolidated balance sheets of European
Micro Holdings, Inc. and its subsidiaries as of June 30, 1996 and 1997, and the
related consolidated statements of earnings, changes in shareholders' equity,
and cash flows for each of the years in the three-year period ended June 30,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted 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 our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of European
Micro Holdings, Inc. and its subsidiaries as of June 30, 1996 and 1997 and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1997 in conformity with generally accepted
accounting principles in the United States.

KPMG
CHARTERED ACCOUNTANTS
REGISTERED AUDITORS

Manchester, England
March 6, 1998

F-2
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, JUNE 30, DECEMBER 31,
1996 1997 1997
---------- ---------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ....................................................... $ 322 288 353
Trade receivables, net (Note 6) ............................ 3,314 2,956 3,300
Discounted trade receivables (Note 6) ...................... 1,749 2,779 4,953
Due from related parties (Note 21) ......................... 708 569 454
Inventories, net (Note 7) .................................. 1,020 1,560 5,311
Deferred tax asset (Note 14) ............................... 33 -- 9
Prepaid expenses ........................................... 64 75 236
Other current assets (Note 8) .............................. 315 37 842
------ ----- -----
TOTAL CURRENT ASSETS ...................................... 7,525 8,264 15,458
Property and equipment, net (Note 9) ....................... 332 389 521
Investments (Note 10) ...................................... -- 191 212
------ ----- ------
TOTAL ASSETS .............................................. $7,857 8,844 16,191
====== ===== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft (Note 11) ................................... 1,348 1,034 830
Discount creditor (Note 12 ) ............................... 1,399 2,223 3,962
Trade payables (Note 13) ................................... 1,027 2,038 2,806
Other current liabilities (Note 15) ........................ 672 376 1,316
Due to related parties (Note 21) ........................... 1,144 188 2,858
Income taxes payable (Note 14) ............................. 461 375 675
Deferred income taxes (Note 14) ............................ -- 54 --
------ ----- ------
TOTAL CURRENT LIABILITIES ................................. 6,051 6,288 12,447
Long term borrowings (Note 16) .............................. 37 45 110
------ ----- ------
TOTAL LIABILITIES ......................................... 6,088 6,333 12,557
------ ----- ------
Commitments & contingencies (Note 18) ....................... -- -- --
SHAREHOLDERS' EQUITY:
Preferred stock $0.01 par value: 1,000,000 shares authorized
at 1996 and 1997, no shares issued and outstanding
at 1996 and 1997 .........................................
Common stock $0.01 par value: 20,000,000 shares authorized
at, 1996 and 1997, shares issued and outstanding,
4,000,000 at 1996 and 1997, (Notes 3 and 17) ............. 40 40 40
Additional paid in capital ................................. 115 1,624 1,624
Retained earnings .......................................... 1,610 826 1,965
Cumulative foreign currency translation adjustment ......... 4 21 5
------ ----- ------
TOTAL SHAREHOLDERS' EQUITY ................................ 1,769 2,511 3,634
------ ----- ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................ $7,857 8,844 16,191
====== ===== ======
</TABLE>

The accompanying notes are an integral part of
the consolidated financial statements.

F-3
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EARNINGS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------------ ---------------------------
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SALES:
Net sales (Note 3) ............................. $ 33,518 39,912 46,501 19,593 32,114
Net sales to related parties (Note 21) ......... 346 436 154 66 13,995
--------- ------ ------ ------ ------
Total net sales .............................. 33,864 40,348 46,655 19,659 46,109
--------- ------ ------ ------ ------
COST OF GOODS SOLD:
Cost of goods sold ............................. (28,687) (35,475) (41,163) (17,338) (28,019)
Cost of goods sold to related parties .......... (353) (417) (156) (66) (13,710)
--------- ------- ------- ------- -------
Cost of goods sold ........................... (29,040) (35,892) (41,319) (17,404) (41,729)
--------- ------- ------- ------- -------
Gross profit .................................... 4,824 4,456 5,336 2,255 4,380
OPERATING EXPENSES:
Selling, general and administrative
expenses (Note 3) ............................ (2,832) (2,884) (3,230) (1,579) (2,423)
Expenses attributable to related
parties (Note 21) ............................ (144) (94) (55) (44) (44)
--------- ------- ------- ------- -------
Total operating expenses ..................... (2,976) (2,978) (3,285) (1,623) (2,467)
--------- ------- ------- ------- -------
Operating profit ................................ 1,848 1,478 2,051 632 1,913
Interest expense, net ........................... (156) (160) (293) (62) (223)
Equity in net (loss) income of unconsolidated
affiliate (Note 10) .......................... -- -- (73) -- 21
--------- ------- ------- ------- -------
Income before income taxes and
equity income ................................. 1,692 1,318 1,685 570 1,711
Taxes on income (Note 3 and 14) ................ (577) (473) (651) (199) (557)
--------- ------- ------- ------- -------
Net income ...................................... $ 1,115 845 1,034 371 1,154
========= ======= ======= ======= =======
Net income per share - basic (Note 3) ........... $ 0.28 0.21 0.26 0.09 0.29
========= ======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of
the consolidated financial statements.

F-4
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
CUMULATIVE
RETAINED FOREIGN
COMMON STOCK ADDITIONAL EARNINGS CURRENCY TOTAL
-------------------- PAID-IN (ACCUMULATED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT CAPITAL LOSSES) ADJUSTMENT EQUITY
----------- -------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1994 ........... 4,000,000 $40 $ 119 $ 1,026 $ -- $1,185
Net income ....................... -- -- -- 1,115 -- 1,115
Dividends declared
($0.10 per share) .............. -- -- -- (391) -- (391)
Foreign currency translation
adjustment ..................... -- -- -- -- 15 15
--------- --- ------ -------- ----- ------
Balance at June 30, 1995 .......... 4,000,000 40 119 1,750 15 1,924
Net income ....................... -- -- -- 845 -- 845
Dividends declared
($0.24 per share) .............. -- -- -- (961) -- (961)
Foreign currency translation
adjustment ..................... -- -- (4) (24) (11) (39)
--------- --- -------- -------- ----- ------
Balance at June 30, 1996 .......... 4,000,000 40 115 1,610 4 1,769
Capitalisation of retained
earnings (Note 3(j)) ........... -- -- 1,498 (1,498) -- --
Net income ....................... -- -- -- 1,034 -- 1,034
Dividends declared
($0.14 per share) .............. -- -- -- (562) -- (562)
Foreign currency translation
adjustment ..................... -- -- 11 242 17 270
--------- --- ------- -------- ----- ------
Balance at June 30, 1997 .......... 4,000,000 40 1,624 826 21 2,511
Net income (unaudited) ........... -- -- -- 1,154 -- 1,154
Dividends declared (unaudited)
($0.01 per share) .............. -- -- -- (55) -- (55)
Foreign currency translation
adjustment (unaudited) ......... -- -- -- 40 (16) 24
--------- --- ------- -------- ----- ------
Balance at December 31, 1997
(unaudited) ..................... 4,000,000 $40 $1,624 $ 1,965 $ 5 $3,634
========= === ======= ======== ===== ======
</TABLE>

The accompanying notes are an integral part of
the consolidated financial statements.

F-5
<PAGE>

EUROPEAN MICRO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
----------------------------------- -----------------------
1995 1996 1997 1996 1997
--------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ...................................... $1,115 845 1,034 371 1,154
Adjustments to reconcile net income to net cash
(used in) provided by operating activities
Depreciation and other ......................... 96 134 163 86 103
Provision for deferred taxes ................... (16) (17) 87 33 (63)
Equity in net loss (income) of
unconsolidated affiliate ..................... -- -- 73 -- (21)
Changes in assets and liabilities
Trade receivables .............................. (832) (1,677) (672) 543 (2,518)
Due from related parties ....................... (35) (611) 139 (102) 115
Inventory ...................................... (68) 661 (540) (492) (3,751)
Other current assets ........................... (232) 39 267 (219) (966)
Trade payables ................................. (808) (407) 1,011 759 768
Due to related parties ......................... (20) 866 (956) (129) 2,670
Taxes payable .................................. 111 (88) (86) 89 300
Other net ...................................... (302) 425 (273) (368) 940
------ ------ ----- ---- ------
Net cash (used in) provided by
operating activities ....................... (991) 170 247 571 (1,269)
------ ------ ----- ---- ------
INVESTING ACTIVITIES:
Purchase of fixed assets ........................ (222) (171) (195) (102) (88)
Sale of fixed assets ............................ 167 14 47 7 24
Investment in unconsolidated affiliate .......... -- -- (264) -- --
------ ------ ----- ---- ------
Net cash used in investing activities ......... (55) (157) (412) (95) (64)
------ ------ ----- ---- ------
FINANCING ACTIVITIES:
Dividends paid .................................. (391) (961) (562) (299) (55)
Repayment of capital leases ..................... (43) (59) (71) (26) (64)
Change in bank overdraft ........................ (42) 1029 (314) (917) (204)
Change in discounting creditor .................. 1,116 283 824 748 1,739
------ ------ ----- ---- ------
Net cash provided by (used in)
financing activities ....................... 640 292 (123) (494) 1,416
------ ------ ----- ---- ------
Exchange rate changes ............................ 49 (30) 254 117 (18)
------ ------ ----- ---- ------
Net (decrease) increase in cash .................. (357) 275 (34) 99 65
Cash at beginning of period ...................... 404 47 322 322 288
------ ------ ----- ---- ------
Cash at end of period ............................ $ 47 322 288 421 353
====== ====== ===== ==== ======
</TABLE>

The accompanying notes are an integral part of
the consolidated financial statements.

F-6
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS

The consolidated financial statements presented are those of European
Micro Plc. European Micro Plc was incorporated in Great Britain in 1991. On
December 23, 1997, European Micro Holdings, Inc. was incorporated and 4,000,000
shares of common stock with a par value of $0.01 per share were issued. The
4,000,000 shares were issued to the shareholders of European Micro Plc in
exchange for the entire issued share capital of that Company on January 31,
1998. Hereinafter European Micro Plc is referred to as European Micro Holdings,
Inc., the accounts presented being those of European Micro Plc as adjusted to
take account of the share for share exchange referred to above. The
consolidated financial statements of European Micro Holdings, Inc. includes the
results of operations and financial position of its wholly owned subsidiaries.
European Micro Holdings, Inc. and its subsidiaries are hereinafter referred to
as "European Micro" or "the Company". The following companies results of
operations and financial position have been included in the consolidated
financial statements based upon the relative percentages below:

<TABLE>
<CAPTION>
OWNERSHIP
-----------------------
COMPANIES 1995 1996 1997
- -------------------------------- ------ ------ -----
<S> <C> <C> <C>
European Micro Plc .......... 100% 100% 100%
European Micro GmbH ......... 100% 100% 100%
European Micro BV ........... * 100% 100%
</TABLE>

- ----------------
* Company began operations in January 1996 and ceased to trade in December
1996. There were no significant operating assets and therefore there was no
significant accounting effect for the discontinuance of European Micro BV.

European Micro operates in a single industry trading computer components.
In principle the Company purchases components from international suppliers,
including related parties, and sells them in local markets. The parent
company's principal operations are in Altrincham, England with the subsidiaries
operating in Holland and Germany.

The parent company holds a 50% interest in a Joint Venture company, Big
Blue Europe BV. Big Blue Europe BV commenced operations in January 1997. It has
been included in these consolidated financial statements under the equity
method of accounting: 50% of the net assets and results of its operations have
been included. Big Blue Europe BV operates in the same industry as the Company.

All consolidated companies have a June 30, fixed accounting period end.

NOTE 2. ADJUSTMENTS AND RECLASSIFICATIONS TO STATUTORY BOOKS OF ACCOUNTS

European Micro Holdings, Inc. and the subsidiaries maintain their books of
accounts and prepare their statutory financial statements in their local
currencies and in accordance with local commercial practice and tax regulations
applicable in the countries where they are resident. The accompanying
consolidated financial statements are based on these statutory records with
adjustments and reclassifications for the purpose of fair presentation in
accordance with accounting principles generally accepted in the United States.

F-7
<PAGE>
EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The major accounting policies followed in the preparation of the
consolidated financial statements referred to above are set out below:

A) REVENUE AND EXPENSE RECOGNITION

Revenues are recognised at the time the goods are shipped. Revenues from
related parties are recognized when the products are sold to third parties.
Discount and customer rebates are deducted from sales revenue when earned.
Costs of goods sold include material costs only. Selling, general and
administrative costs are charged to expense as incurred.

B) PRINCIPLES OF CONSOLIDATION

The consolidated results of European Micro include the results of
operations of its wholly owned subsidiaries which it controls. The principles
of consolidation are as follows:

/bullet/ All investments in the subsidiaries are eliminated.

/bullet/ All significant intercompany balances and transactions have
been eliminated in consolidation.

Investments greater than 20%, in which the company exercises significant
influence, however does not control the entity, are accounted for under the
equity method.

C) PRINCIPLES OF TRANSLATION OF THE FINANCIAL STATEMENTS

The subsidiaries record transactions in their local currencies which
represent their operating currencies. Transactions denominated in currencies
other than local currencies are recorded at the exchange rates ruling at the
date of the transactions. Assets and liabilities denominated in currencies
other than local currencies are converted into the local currencies at the
exchange rates ruling at balance sheet date. Resulting exchange differences are
recognised in the income for the period.

Financial statements of the subsidiaries have been translated into pounds
sterling the functional currency of the parent company. Accordingly, balance
sheet items are translated at the year end exchange rates while statement of
income items are translated at average rates during the year. All foreign
exchange adjustments resulting from translation of the financial statements
into pounds sterling are included in a separate section of shareholders' equity
titled `Cumulative foreign currency translation adjustment'.

The consolidated financial statements have been translated from the parent
company functional currency, pounds sterling, into US dollars, the reporting
currency.

D) PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is provided to
write off the cost less the estimated residual value of tangible fixed assets
by equal instalments over their estimated useful economic lives as follows:

Office equipment - 50% per annum on cost

Fixtures & Fittings - 15% per annum on cost

Motor vehicles - 25% per annum on cost

F-8
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The costs of ordinary maintenance and repairs are charged to expense as
incurred.

When assets are otherwise disposed of, the costs and related accumulated
depreciation are removed from the accounts and resulting gain or loss is
reflected in net income.

E) IMPAIRMENT OF LONG-LIVED ASSETS

In March 1995, the US Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, requiring that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable. The Company adopted this standard in 1996.
Adoption of this standard did not have a material impact on its result of
operations or financial position.

F) INVENTORIES

Inventories are stated at the lower of cost or market value. Cost is
determined using the weighted average cost method.

G) INCOME TAXES

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognised for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry-forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognised in income in the period that includes the
enactment date.

H) RELATED PARTY TRANSACTIONS

For the purpose of the accompanying consolidated financial statements,
shareholders and all companies in which there is direct or indirect ownership
by the shareholders of the consolidated companies are considered as related
parties.

I) USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles in the United States.
Actual results could differ from those estimates. Significant estimates and
assumptions include the amounts reflected as allowance for doubtful receivable,
allowance for obsolete inventories, amounts due to customers under incentive
programs, and deferred tax assets.

F-9
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

J) EARNINGS PER COMMON SHARE AND SHARE CAPITAL REORGANIZATION

SFAS No. 128 simplifies the earnings per share ("EPS") calculations
required by Accounting Principles Board ("APB") Opinion No. 15, and related
interpretations, by replacing the presentation of primary EPS with a
presentation of basic EPS. SFAS No. 128 requires dual presentation of basic and
diluted EPS by entities with complex capital structures. Basic EPS includes no
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution of securities that could share in
the earnings of an entity, similar to the fully diluted EPS of APB Opinion No.
15. SFAS No. 128 is effective for financial statements issued for periods
ending after 15 December 1997, including interim periods; earlier application
is not permitted.

In December 1996 retained earnings amounting to $1,498,000 were
capitalized pursuant to the requirements to re-register the Company as a plc
company in the United Kingdom.

Basic earnings per share for each year is computed by dividing net income
by the weighted average number of shares of common stock outstanding during the
year.

On incorporation of European Micro Holdings Inc. in December 1997,
4,000,000 ordinary shares were issued with par value $0.01 per share. The
4,000,000 shares were issued to the current shareholders of European Micro Plc
in exchange for the entire issued share capital of that company on 31 January
1998. The weighted average number of shares used in calculating earnings per
share has been retroactively adjusted to reflect the issued and outstanding
ordinary shares of European Micro Holdings, Inc. as 4,000,000 shares for each
period under review. The company has only presented basic earnings per share as
diluted earnings per share is the same as basic.

NOTE 4. INTERIM FINANCIAL INFORMATION

The financial statements as of December 31, 1997 and for the six months
ended December 31, 1996 and 1997 are unaudited and prepared on the same basis
as the audited consolidated financial statements included herein. In the
opinion of management, such interim financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the results for such periods. The results of operations for the
six months ended December 31, 1997 are not necessarily indicative of the
results to be expected for the full year or any other interim period.

NOTE 5. NEW ACCOUNTING PRONOUNCEMENTS

TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES

In June 1996, the FASB issued SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 125
is effective for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a financial
components approach that focuses on control. It distinguishes transfers of
financial assets that are sales from transfers that are secured borrowings. In
1996 the Company has adopted SFAS No. 125. The adoption has not had a material
effect on the Company's financial position, results of operation or liquidity.

COMPREHENSIVE INCOME

SFAS No. 130 "Reporting Comprehensive Income" was issued in June 1997 and
is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required.

F-10
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 5. NEW ACCOUNTING PRONOUNCEMENTS--(CONTINUED)

It requires that all items that are required to be recognised under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. It requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position.

The Company is currently reviewing the likely impact on the classification
of items included in shareholders' equity.

SEGMENT INFORMATION

SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" was issued in June 1997 and is effective for fiscal years
beginning after December 15, 1997. In the initial year of application
comparative information for earlier years is to be restated.

It requires that companies disclose segment data based on how management
make decisions about allocating resources to segments and measuring their
performance. It also requires entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets
and reports revenues and its major customers.

The Company is currently reviewing the likely impact on the level of
disclosure currently provided in its financial statements.

NOTE 6. TRADE RECEIVABLES, NET

Trade receivables consisted of receivables maturing within one year and
are as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
----------------------- DECEMBER 31,
1996 1997 1997
--------- ----------- -------------
<S> <C> <C> <C>
Total trade receivables .......................... $5,063 5,740 8,323
Less: Allowance for doubtful receivables ......... -- (5) (70)
------ ------ ------
$5,063 $5,735 $8,253
====== ====== ======
</TABLE>

Trade receivables include discounted trade receivables as follows (in
thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
------------------- DECEMBER 31,
1996 1997 1997
--------- ------- -------------
<S> <C> <C> <C>
Discounted trade receivables (see Note 12) ......... $1,749 2,779 4,953
Non discounted trade receivables ................... 3,314 2,956 3,300
------ ----- -----
$5,063 5,735 8,253
====== ===== =====
</TABLE>

F-11
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 6. TRADE RECEIVABLES, NET--(CONTINUED)

The allowance for doubtful trade receivables is constituted as follows (in
thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
JUNE 30, ENDED
--------------- DECEMBER 31,
1996 1997 1997
------ ------ -------------
<S> <C> <C> <C>
Beginning balance .............. $ -- 5
Provision for bad debt ......... -- 5 65
---- --- --
Ending balance ................. $ -- 5 70
==== === ==
</TABLE>

NOTE 7. INVENTORIES

Inventories comprises (in thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
--------------------- DECEMBER 31,
1996 1997 1997
--------- --------- -------------
<S> <C> <C> <C>
Finished goods and goods for resale ................ $1,136 1,595 5,494
Less: Allowance for inventory obsolescence ......... (116) (35) (183)
------ ----- -----
$1,020 1,560 5,311
====== ===== =====
</TABLE>

As of June 30, 1997 inventories were insured against theft or damage to
the extent of $1,560,000. The maximum value of stock insured under the
Company's insurance cover in place at June 30, 1997 was $2,900,000. As of
December 31, 1997 the insured value of inventory was $8,900,000 (unaudited).

The allowance for obsolescence is constituted as follows (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
JUNE 30, ENDED
----------------- DECEMBER 31,
1996 1997 1997
------ -------- -------------
<S> <C> <C> <C>
Beginning balance .................. $ 27 116 35
Provision for obsolescence ......... 89 (81) 213
Amounts written off ................ -- -- (65)
---- --- ---
Ending balance ..................... $116 35 183
==== === ===
</TABLE>

<PAGE>

NOTE 8. OTHER CURRENT ASSETS

Other current assets comprised (in thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
--------------- DECEMBER 31,
1996 1997 1997
------ ------ -------------
<S> <C> <C> <C>
VAT receivable .......... $232 -- --
Insurance claim ......... -- -- 503
Other ................... 83 37 339
---- --- ---
$315 37 842
==== === ===
</TABLE>

F-12
<PAGE>
EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 9. PROPERTY AND EQUIPMENT

Property and equipment comprised (in thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
--------------------- DECEMBER 31,
1996 1997 1997
--------- --------- -------------
<S> <C> <C> <C>
Furniture and fixtures ................. $ 94 136 173
Computers and office equipment ......... 230 365 390
Vehicles and other ..................... 253 282 364
------ --- ---
577 783 927
Less: accumulated depreciation ......... (245) (394) (406)
------ ---- ----
Net book value ......................... $ 332 389 521
====== ==== ====
</TABLE>

The charge for depreciation in each of the three years ended June 30, was
as follows (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30 ENDED
------------------------ DECEMBER 31,
1995 1996 1997 1997
------ ------ ------ -------------
<S> <C> <C> <C> <C>
Depreciation expense ......... $100 133 167 103
==== === === ===
</TABLE>

NOTE 10. INVESTMENTS (in thousands)

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
--------------- DECEMBER 31,
1996 1997 1997
------ ------ -------------
<S> <C> <C> <C>
Investments in Big Blue Europe BV ......... $ -- 191 212
==== === ===
</TABLE>

During the year ended June 30, 1997 European Micro Holdings, Inc.
purchased 50% of the issued share capital in Big Blue Europe BV at a cost of
$264,000.

<TABLE>
<CAPTION>
PERIOD ENDED (UNAUDITED)
JUNE 30, DECEMBER31,
1997 1997
-------------- ------------
<S> <C> <C>
Cost of investment ................................................. $ 264 191
Equity in net (loss) or income of unconsolidated affiliate ......... (73) 21
----- ---
At June 30, 1997 ................................................... $ 191 212
===== ===
</TABLE>

F-13

<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 10. INVESTMENTS (in thousands)--(CONTINUED)

The equity share of (loss) income is based on the results of Big Blue
Europe BV since it commenced trading in January 1997 to June 30, 1997, and
December 31, 1997. A summarised statement of earnings for Big Blue Europe BV
for the period is set out below:

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
PERIOD ENDED ENDED
JUNE 30, JUNE 30,
1997 1997
-------------- ------------
<S> <C> <C>
Net sales ....................................................... $ 465 2,152
Cost of goods sold .............................................. (354) (1,673)
------ ------
Gross profit .................................................... 111 479
Operating expenses .............................................. (325) (400)
------ ------
Income before income taxes ...................................... (214) 79
Taxes on income ................................................. 68 (37)
------ ------
Net (loss) income ............................................... (146) 42
====== ======
Equity in net (loss) income of unconsolidated affiliate ......... $ (73) 21
====== ======
</TABLE>

NOTE 11. BANK OVERDRAFT

The bank overdraft was as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
------------------- DECEMBER 31,
1996 1997 1997
--------- ------- -------------
<S> <C> <C> <C>
Bank overdraft ......... $1,348 1,034 830
====== ===== ===
</TABLE>

The bank overdraft is secured by a mortgage debenture over the assets of
the Company. Note, the collateral attaching to the discount creditor (Note 12)
and the hire purchase and capital leases (Note 16), take priority over the
mortgage debenture. At June 30, 1997 the bank overdraft of $1,034,000 was
secured by the mortgage debenture.

The bank overdraft facility is subject to review in July each year.

F-14
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 11. BANK OVERDRAFT--(CONTINUED)

Interest is charged on the bank overdraft at 1.75% over the UK bank
borrowing rate which was 6% at June 30, 1997. Interest expense in relation to
the bank overdraft in each of the three years ended June 30, 1997 was as
follows (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
------------------------ DECEMBER 31,
1995 1996 1997 1997
------ ------ ------ -------------
<S> <C> <C> <C> <C>
Bank overdraft interest expense ......... $69 119 133 60
=== === === ==
</TABLE>

NOTE 12. DISCOUNT CREDITOR

The discount creditor balance was as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
------------------- DECEMBER 31,
1996 1997 1997
--------- ------- -------------
<S> <C> <C> <C>
Discount creditor ......... $1,399 2,223 3,962
====== ===== =====
</TABLE>

The discount creditor balance represents the finance obligation to various
trade receivable balances which have been discounted. The trade receivable
balances which have been discounted, and are included within trade receivables
are as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
------------------- DECEMBER 31,
1996 1997 1997
--------- ------- -------------
<S> <C> <C> <C>
Discounted trade receivable balances (See Note 6) ......... $1,749 2,779 4,953
====== ===== =====
</TABLE>

Trade receivables can be financed up to a maximum of 80% of the value of
the trade receivables balance. The total capacity of the Company to discount
trade receivable balances at June 30, 1997 amounted to $4,133,000 (December 31,
1997; $6,562,000, unaudited) of which $2,223,000 was used (December 31, 1997;
$3,962,000, unaudited). Therefore the unused available facility at June 30,
1997 amounted to $1,910,000 (December 31, 1997; $2,600,000, unaudited).

The discount creditor balance is secured by a direct interest on the trade
receivable balances to which it relates. The discount creditor facility is
reviewed annually in November of each year.

The finance company which provides the discount creditor facility has full
recourse to the Company with respect to any doubtful or unrecovered amounts.

F-15
<PAGE>
EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 12. DISCOUNT CREDITOR--(CONTINUED)

Interest is charged at 1.5% above the bank borrowing rate, which was 6% at
June 30, 1997, on the discount creditor balance. The discount creditor finance
charge for each of the years in the three-year period ended June 30, 1997 was
as follows (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30 ENDED
------------------------ DECEMBER 31,
1995 1996 1997 1997
------ ------ ------ -------------
<S> <C> <C> <C> <C>
Discount creditor finance charge ......... $73 24 149 155
=== == === ===
</TABLE>

NOTE 13. TRADE PAYABLES

At June 30, trade payables consisted principally of balances resulting
from purchase transactions.

NOTE 14. TAXES ON INCOME

Taxes on income is only attributable to income from continuing operations
and consists of (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
---------------------------- DECEMBER 31,
1995 1996 1997 1997
-------- -------- ------ -------------
<S> <C> <C> <C> <C>
Current taxation .......... $ 589 490 564 494
Deferred taxation ......... (12) (17) 87 63
----- --- --- ---
$ 577 473 651 557
===== === === ===
</TABLE>

The taxes on income represent the statutory rate of tax of 33% adjusted
for permanent differences. The income tax expense, which arises solely on
continuing operations, is reconciled below (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
----------------------------- DECEMBER 31,
1995 1996 1997 1997
--------- ------- ------- -------------
<S> <C> <C> <C> <C>
Income before income taxes .................. $1,692 1,318 1,685 1,711
====== ===== ===== =====
Expected tax charge @ 33%/31%* .............. 558 435 556 530
Tax on permanently disallowed items ......... 19 38 95 27
------ ----- ----- -----
Taxes on income ............................. $ 577 473 651 557
====== ===== ===== =====
</TABLE>

* Statutory tax rate charged for the six months ended December 31, 1997.

F-16

<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 14. TAXES ON INCOME--(CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
JUNE 30, ENDED
----------------- DECEMBER 31,
1996 1997 1997
------ -------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Property and equipment, principally due to differences in
depreciation ........................................... $12 -- 2
Net operating loss carried forward ...................... 21 11 7
--- -- -
Total deferred tax assets ............................... 33 11 9
--- -- -
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation ........................................... -- (65) --
--- --- --
Total deferred tax liabilities .......................... -- (65) --
--- --- --
Net deferred tax assets (liabilities) ................... $33 (54) 9
=== === ==
</TABLE>

Net operating losses can be carried forward indefinitely.

There is no valuation allowance against the deferred tax assets.

NOTE 15. OTHER CURRENT LIABILITIES

Other asset liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
--------------- DECEMBER 31,
1996 1997 1997
------ ------ -------------
<S> <C> <C> <C>
Accrued expenses ....................................... $550 215 574
VAT payable ............................................ -- 33 518
PAYE and NIC ........................................... 54 63 139
Hire purchase and capital leases (see Note 16) ......... 68 44 85
Others ................................................. -- 21 --
---- --- ---
$672 376 1,316
==== === =====
</TABLE>

F-17

<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 16. HIRE PURCHASE AND CAPITAL LEASES

Balances outstanding in relation to hire purchase and capital leases were
as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
--------------- DECEMBER 31,
1996 1997 1997
------ ------ -------------
<S> <C> <C> <C>
Amounts payable:
Within one year (*) ......... $ 68 44 85
After one year .............. 37 45 110
---- -- ---
$105 89 195
==== == ===
</TABLE>

(*) Included within other current liabilities (see Note 15)

Hire purchase and capital leases are secured by the asset to which they
relate. At June 30, 1997, assets, which were all motor vehicles were pledged as
security against the respective hire purchase or capital lease agreements.
Information in respect of assets held as security were as follows:

<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1997
---------- -------------
<S> <C> <C>
Cost ................................... $ 232 319
Less: accumulated depreciation ......... (97) (53)
----- ---
Net book value ......................... $ 135 266
===== ===
</TABLE>

Hire purchase and capital lease agreements are generally for periods of
three years and they attract interest at a fixed rate of 7.5%.

The interest payment is integral within each monthly repayment. The
interest charge was as follows (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED JUNE SIX MONTHS
30, ENDED
--------------- DECEMBER 31,
1996 1997 1997
------ ------ -------------
<S> <C> <C> <C>
Hire purchase and capital lease interest ......... $5 3 8
== ====== =============
</TABLE>

<PAGE>

The present value of the future minimum lease payments of the capital
leases as of June 30 1997, in aggregate, for each of the five succeeding years
is as follows (in thousands):

F-18

<PAGE>
EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 17. COMMON STOCK

After adjusting for the share capital reorganization as disclosed in note
3(j) at June 30 1997, and December 31, 1997 the Company's authorized common
stock consists of 20,000,000 shares with par value of $0.01 per share, and
authorised preferred stock consists of 1,000,000 shares with par value of $0.01
per share. Outstanding common stock consists of 4,000,000 shares with par value
of $0.01 per share. The breakdown of outstanding common stock by shareholders
(controlling shareholders) is as follows:

<TABLE>
<CAPTION>
AMOUNT %
-------- ---------
<S> <C> <C>
John B. Gallagher .......... $20 50.0
Harold D. Shields .......... $20 50.0
</TABLE>

The liability of the members is limited to the par value of the shares.

Dividends are payable at the discretion of the board and the members of
the Company.

All common shares carry equal voting rights.

NOTE 18. COMMITMENTS AND CONTINGENCIES

CONTINGENCIES

LEGAL PROCEEDINGS

LEASES

The Company's lease agreements comprise:

OPERATING LEASES

The future minimum lease payments under non cancellable operating leases
as of June 30, 1997 in aggregate for each of the five succeeding years is as
follows (in thousands):

<TABLE>
<CAPTION>
LAND AND
JUNE 30, BUILDINGS
- ------------------ ----------
<S> <C>
1998 ........... $42
1999 ........... --
2000 ........... --
2001 ........... --
2002 ........... --
===
</TABLE>

The operating leases expire in June 1998.

F-19
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 18. COMMITMENTS AND CONTINGENCIES--(CONTINUED)

CAPITAL LEASES

The future minimum lease payments of capital leases are disclosed in Note
16.

NOTE 19. FOREIGN EXCHANGE CONTRACTS

The Company utilises derivative financial instruments in the form of
forward exchange contracts for the purpose of economic hedges of anticipated
sale and purchase transactions. In addition the Company enters into economic
hedges for the purposes of hedging foreign currency market exposures of
underlying assets, liabilities and other obligations which exist as part of its
ongoing business operations.

Where the foreign currency exposure is covered by a forward foreign
exchange contract the asset, liability or other obligation is recorded at the
contracted rate each month end and the resultant mark-to-market gains and
losses are recognised as cost of sales in the current period, generally
consistent with the period in which the gain or loss of the underlying
transaction is recognised. Cash flows associated with derivative transactions
are classified in the statement of cash flows in a manner consistent with those
of the exposure being hedged.

The Company places all foreign exchange forward contracts with Global
Financial Markets, a division of the National Westminster Bank PLC, a leading
European bank.

EXCHANGE RATE SENSITIVITY

The table below summarises information on foreign currency forward
exchange agreements. The table presents the notional amounts and weighted
average exchange rates by expected (contractual) maturity dates (in thousands
except exchange rates).

<TABLE>
<CAPTION>
EXPECTED
MATURITY OR
TRANSACTION
DATE
JUNE 30, 1998 FAIR VALUE
----------------- -----------
<S> <C> <C>
FORWARD EXCHANGE AGREEMENTS
June 30, 1997
(Receive $US/Pay pounds)
Contract amount (expired 8/26/97) ......... $ 2,006 2,006
Average contractual exchange rate ......... 1.66/pound1
(Receive pounds/Pay DM)
Contract amount (expired 7/7/97) .......... 430 450
Average contractual exchange rate ......... pound0.36/DM
June 30, 1996
(Receive DM/Pay pounds)
Contract amount (expired 7/15/96) ......... 461 460
Average contractual exchange rate ......... 2.36DM/pound1
(Receive $/Pay pounds)
Contract amount (expired 7/15/96) ......... 1,913 1,900
Average contractual exchange rate ......... $ 1.54/pound1
</TABLE>

The fair value has been determined by applying the mid-price of the spread
on the buy or sell rates as appropriate, of the relevant foreign currency at
the balance sheet date. The mid-price used is that quoted by the Financial
Times.

F-20
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 19. FOREIGN EXCHANGE CONTRACTS--(CONTINUED)

Income and losses in respect of the transaction foreign exchange
transactions were as follows (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
--------------------- DECEMBER 31,
1996 1997 1997
--------- --------- -------------
<S> <C> <C> <C>
(Loss) income on foreign exchange transactions ......... $ (21) (157) 279
===== ==== ===
</TABLE>

NOTE 20. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash and equivalents, trade
receivables, borrowings and trade payables and foreign exchange contracts. The
carrying amounts of cash and equivalents, trade receivables, borrowings and
trade payables approximate their fair values because of the short maturity (see
Note 19 for fair value of forward exchange contracts).

NOTE 21. RELATED PARTY INFORMATION

RELATED PARTY TRANSACTIONS

European Micro Holdings, Inc. has belonged to a group of related companies
called Micro Computer Center Group (the "Group"). The Group is comprised of
European Micro Holdings, Inc., European Micro Plc, Technology Express Inc.
located in Nashville, Tennessee ("Technology Express"), American Surgical
Supply Corp. d/b/a American Micro Computer Center in Miami, Florida ("American
Micro Computer Center") and, until August 1, 1997, Ameritech Exports Inc.
located in Miami, Florida ("Ameritech Exports") and Ameritech Argentina S.A.
located in Buenos Aires, Argentina ("Ameritech Argentina"). All members of the
Group were owned and controlled by either of the two primary shareholders of
European Micro Holdings, Inc., John B. Gallagher and/or Harry D. Shields.

The rates charged on related party sales are lower than they would be in
arms length transactions. There are bulk buying arrangements with the related
parties which give European Micro Holdings, Inc. the benefit that it can buy
large job-lots at more competitive prices than it would otherwise be possible
to do and then immediately sell on part of the purchase to the related parties.

F-21
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 21. RELATED PARTY INFORMATION--(CONTINUED)

RELATED PARTY TRANSACTIONS

Related party transactions are summarised as follows (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
---------------------------------------- DECEMBER 31,
1995 1996 1997 1997
--------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
SALES
American Micro Computer Center ......... $ 323 306 66 10,413
Technology Express ..................... 22 104 (2) 3,582
Ameritech Argentina .................... -- -- 90 --
Ameritech Exports ...................... 1 26 -- --
------ --- ---- ------
$ 346 436 154 13,995
====== === ===== ======
PURCHASES
American Micro Computer Center ......... $4,082 2,289 1,092 325
Technology Express ..................... 3,265 14,890 20,717 2,937
Ameritech Argentina .................... -- -- -- --
Ameritech Exports ...................... 70 1,116 848 --
------ ------ ------- ------
$7,417 18,295 22,657 3,262
====== ====== ======= ======
OPERATING EXPENSES
CONSULTANCY FEES
American Micro Computer Center ......... $ 56 50 60 18
Technology Express ..................... 56 50 60 16
------ ------ ------- ------
112 100 120 34
------ ------ ------- ------
MANAGEMENT FEES
Technology Express ..................... 32 37 16 10
------ ------ ------- ------
32 37 16 10
------ ------ ------- ------
RECHARGED CONSULTANCY FEES
American Micro Computer Center ......... -- (14) (27) --
Technology Express ..................... -- (14) (27) --
Ameritech Argentina .................... -- (8) (13) --
Ameritech Exports ...................... -- (7) (14) --
------ -------- ------- ------
-- (43) (81) --
------ ------- ------- ------
$ 144 94 55 44
====== ======= ======= ======
</TABLE>

"Recharged consultancy fees" represent the consultancy fees charged by Mr
Gilbert to European Micro Plc, before he was appointed as a director of the
same, which have been recharged to the related companies on the basis of the
work completed by Mr Gilbert in respect of those related parties.

F-22
<PAGE>
EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 21. RELATED PARTY INFORMATION--(CONTINUED)

DUE FROM/TO RELATED PARTIES

a) Due from related parties comprised the following balances (in
thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
--------------- DECEMBER 31,
1996 1997 1997
------ ------ -------------
<S> <C> <C> <C>
American Micro Computer Center ......... $259 240 446
Technology Express ..................... 15 -- 8
Ameritech Argentina .................... 274 329 --
Ameritech Exports ...................... 160 -- --
---- --- ---
$708 569 454
==== === ===
</TABLE>

b) Due to related parties comprised of following balances (in thousands):

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
------------------ DECEMBER 31,
1996 1997 1997
--------- ------ -------------
<S> <C> <C> <C>
American Micro Computer Center ......... $ 90 -- --
Technology Express ..................... 535 188 2,858
Ameritech Argentina .................... 281 -- --
Ameritech Exports ...................... 238 -- --
------ --- -----
$1,144 188 2,858
====== === =====
</TABLE>

NATURE OF RELATED PARTY RELATIONSHIPS

The entities listed above are related to the company in the following
manner:

AMERICAN MICRO COMPUTER CENTER

American Micro Computer Center is a distributor of computer hardware based
in Miami, Florida. John B. Gallagher who is Co-Chairman, Co-President, Director
and shareholder (owning 39% of the outstanding shares after the Offering) in
the company is a president of American Micro Computer Center and owns 33.3% of
the stock in that company.

TECHNOLOGY EXPRESS, INC.

Until 1996, Technology Express, Inc. was a full service authorized
reseller of computers and related products based in Nashville, Tennessee,
selling primarily to end-users. Technology Express, Inc. was sold to Inacomp
Computers in 1996. Concurrently with the sale, Mr. Shields founded a new
computer company with the name Technology Express. This new company is a
distributor of computer products, focusing primarily on governmental and
international sales of computer products. It does not sell to end-users. Harry
D. Shields who is Co-Chairman, Co-President, Director and shareholder (owning
39% of the outstanding shares after the Offering) of European Micro is
president of Technology Express and owns 100% of the outstanding shares of
common stock of that company.

AMERITECH ARGENTINA SA

Ameritech Argentina SA is an authorized distributor of Compaq, Hewlett
Packard, IBM and Acer computers and accessories in Argentina. Messrs. Shields
and Gallagher were both Directors of Ameritech Argentina SA and owned 50% of
the outstanding shares of common stock each until its sale on August 1, 1997.

F-23
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 21. RELATED PARTY INFORMATION--(CONTINUED)
AMERITECH EXPORTS INC.

Ameritech Exports Inc. is an authorized distributor of Compaq computers
and accessories into Caribbean and certain parts of central and South America.
Messrs. Shields and Gallagher were both Directors of Ameritech Exports Inc. and
owned 50% of the outstanding shares of common stock each until its sale on
August 1, 1997.

NOTE 22. SEGMENTAL INFORMATION AND CONCENTRATIONS

The Company's operations involve a single industry segment, distribution
of microcomputer equipment and software products. The Company principally
operates in one geographical area being the UK and it exports product to other
countries mainly within Europe. A geographical analysis of the Company's UK
operating revenues and export sales is set out below (in thousands):

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
------------------------------- DECEMBER 31,
1995 1996 1997 1997
--------- -------- -------- -------------
<S> <C> <C> <C> <C>
UK ..................... $ 8,414 11,876 21,050 14,665
Germany ................ 13,749 11,305 8,282 6,047
Netherlands ............ 5,520 8,230 4,653 2,940
Other European ......... 4,109 6,879 10,163 6,438
United States .......... 585 436 154 13,995
Other non EU ........... 1,487 1,622 2,353 2,024
------- ------ ------ ------
$33,864 40,348 46,655 46,109
======= ====== ====== ======
</TABLE>

While these countries are considered politically stable, there is risk
that economic difficulties in any of these countries could adversely affect the
Company's business.

Most of the Company's sales are made in sterling. In some countries,
certain purchases and the resulting payable are in currencies (principally the
US dollar) which is different than the functional currency of the primary
holding company.

F-24
<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 22. SEGMENTAL INFORMATION AND CONCENTRATIONS--(CONTINUED)

The following table summarizes purchases from major suppliers in excess of
10% for the period as a percentage of total purchases:

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
------------------------------------ DECEMBER 31,
1995 1996 1997 1997
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
RELATED PARTY
Technology Express ......... 12.3% 43.2% 51.1% 4.4%
THIRD PARTIES
Supplier A ................. 24.1% 14.1% -- --
B ............ .......... 18.7% -- -- --
C ............ .......... -- -- -- 19.6%
D ............ .......... -- -- -- 18.0%
E ............ .......... -- -- -- 16.9%
F ............ .......... -- -- -- 16.6%
</TABLE>

The following table summarizes sales to major customers (sales in excess
of 10% for the period) as a percentage of total sales:

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
---------------------------- DECEMBER 31,
1995 1996 1997 1997
------ ---------- ------ -------------
<S> <C> <C> <C> <C>
RELATED PARTY
American Micro Computer Center ......... -- -- -- 22.6%
THIRD PARTY
Customer G ............................. -- 10.2% -- --
</TABLE>

The Company and it subsidiaries believe that their relationship with the
above customers are good and has no reason to believe that its distribution
arrangement will not be a long-term relationship. Amounts outstanding at the
end of each year are as follows:

Debtor balance outstanding (in thousands):

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1997
---------- -------------
<S> <C> <C>
RELATED PARTY
American Micro Computer Centre ......... $446
THIRD PARTY
Customer G ............................. $1,168
</TABLE>

F-25
<PAGE>
EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 23. SUPPLEMENTAL CASH FLOW INFORMATION (in thousands)

<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
---------------------------------- --------------------
1995 1996 1997 1996 1997
---------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid ..................... $ (150) (156) (290) (62) (223)
Taxes on paid income .............. (478) (578) (584) (110) (256)
------ ---- ---- ---- ----
$ (628) (734) (874) (172) (479)
====== ==== ==== ==== ====
</TABLE>

NOTE 24. SUBSEQUENT EVENTS (UNAUDITED)

In November 1997 the Company incurred losses with regard to an inventory
theft. A claim has been submitted to the insurers amounting to $503,000. This
amount is included as a receivable in other current assets at December 31, 1997
(Note 8). The claim was settled in full, with the exception of $8,000 policy
excess, in February 1998.

In January 1998, prior to the signing of the Subscription Agreement
referred to below, Messrs. Gallagher and Shields transferred a number of their
shares into trust. The outstanding shares of European Micro Plc after the
transfers were held as follows:

<TABLE>
<CAPTION>
PERCENT
OWNERSHIP
----------
<S> <C>
Mr. Gallagher .................................................. 47.5%
Mr. Shields .................................................... 40.1%
Thomas H. Minkoff as Trustee of the Gallagher Trust ............ 2.5%
The Shields' Trustees as Trustees of the Shields Trust ......... 9.9%
</TABLE>

European Micro Holdings Inc. was incorporated on December 23, 1997 to act
as the holding company of European Micro Plc. This company has had no
operations to date other than investing in European Micro Plc. The investment
was achieved pursuant to the Subscription Agreement dated 31 January 1998
whereby each share in European Micro Plc was exchanged for four shares in
European Micro Holdings Inc. The stock transfer forms were executed on various
dates on or before March 5, 1998. As a result the entire outstanding share
capital of European Micro Plc is now owned by European Micro Holdings Inc.
Following incorporation and its investment in European Micro Plc, the balance
sheet of European Micro Holdings Inc. is as follows (in thousands):

<TABLE>
<S> <C>
INVESTMENTS:
European Micro Plc .................................... $ 40
Nor'easter Micro Inc. (Refer below) ................... 10
-----
LESS: PAYABLES (amounting owing re Nor'easter) ......... (10)
-----
Net assets ............................................. 40
=====
EQUITY: SHARE CAPITAL .................................. $ 40
=====
</TABLE>

F-26

<PAGE>

EUROPEAN MICRO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 24. SUBSEQUENT EVENTS (UNAUDITED)--(CONTINUED)

Nor'easter Micro Inc. ("Nor'easter") was established on December 26, 1997
as a subsidiary of European Micro Holdings, Inc. In addition Nor'easter holds
one share in European Micro Plc as a nominee shareholder. This company has had
no operations to date and as at the date of incorporation its balance sheet was
as follows (in thousands):

<TABLE>
<S> <C>
RECEIVABLE (amount due from European Micro Holdings Inc.) ....... $10
===
EQUITY: SHARE CAPITAL ........................................... $10
===
</TABLE>

Executive Employment Agreements were reached between Messrs. Gallagher and
Shields on January 1, 1998. The base compensation payable to each of the
executives is $175,000, per annum. Notice of termination of the agreement by
either party, without cause, is a maximum of 60 days. In January 1998, European
Micro Holdings Inc. adopted the 1998 Stock Incentive Plan ("the plan"). The
total number of shares initially authorized to be issued under the plan is
500,000 shares of common stock. The plan will be administered by a committee of
the Board ("the committee"). The committee may grant to such participants as
the committee may select options entitling the participants to purchase shares
of common stock for the company in such numbers, at such prices and on such
terms and subject to such conditions, consistent with the terms of the plan, as
may be established by the committee. The plan shall remain in effect until
terminated by an action of the Board.

In January 1998, European Micro Holdings Inc. adopted the 1998 Employee
Stock Purchase Plan ("the employee plan"). The purpose of the employee plan is
to provide a method whereby employees of European Micro Holdings Inc. and its
subsidiaries will have an opportunity to acquire a proprietary interest in
European Micro Holdings Inc. through the purchase of shares of common stock.
The Committee, as appointed by the Board will administer the employee plan. The
maximum number of shares of common stock which shall be issued under the
employee plan is 50,000. The options issued under the employee plan, to
eligible employees, will be exercisable at 85% of market value or such higher
percentage (not in excess of 100%) as may be established by the employee plan
committee. The employee plan shall remain in effect until terminated by an
action of the Board.

F-27
<PAGE>

================================================================================

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY EUROPEAN MICRO OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF EUROPEAN MICRO SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Prospectus ................................... 1
Summary ...................................... 3
Risk Factors ................................. 8
Use of Proceeds .............................. 19
Dividend Policy .............................. 20
Capitalization ............................... 20
Dilution ..................................... 21
Selected Consolidated Financial Data ......... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 24
Business ..................................... 33
Management ................................... 41
Certain Relationships and Related
Transactions .............................. 50
Principal and Selling Shareholders ........... 53
Description of Capital Stock ................. 54
Shares Eligible For Future Sale .............. 57
Underwriting ................................. 59
Experts ...................................... 60
Legal Matters ................................ 60
Additional Information ....................... 61
Index to Financial Statements ................ F-1
</TABLE>

-----------------------------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS AN ADDITION TO THE
OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD SUBSCRIPTIONS.

European Micro Holdings, Inc. [Logo]

1,100,000 SHARES
OF
COMMON STOCK

------------------
PROSPECTUS
------------------

Tarpon Scurry Investments, Inc. [Logo]

MARCH , 1998

================================================================================

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth estimated expenses expected to be incurred
in connection with the issuance and distribution of the securities being
registered.

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee ......... $ 3,245.00
NASD Fee .................................................... 1,500.00
Nasdaq National Market Listing Fee .......................... 30,000.00
Printing and Engraving Expenses ............................. 35,000.00
Accounting Fees and Expenses ................................ 260,000.00
Legal Fees and Expenses ..................................... 200,000.00
Blue Sky Qualification Fees and Expenses .................... 30,000.00
Transfer Agent Fees and Expenses ............................ 5,000.00
Expense Allowance ........................................... 195,000.00
Miscellaneous ............................................... 40,000.00
------------
Total ..................................................... $ 799,745.00
============
</TABLE>

All amounts except the Securities and Exchange Commission Registration Fee
are estimated. No portion of the expenses associated with this Offering will be
borne by the Selling Shareholders.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Pursuant to indemnification agreements entered into with each of the
directors and officers, the Company has agreed to indemnify each director and
officer, to the fullest extent permitted by law, from and against any and all
claims of any type arising from or related to his past or future acts or
omissions as a director or officer of the Company and any of its subsidiaries.
In addition, the Company has agreed to advance all expenses of each director
and officer as they are incurred and in advance of the final disposition of any
claim.

Section 78.751 of the NRS provides, in effect, that any person made a
party to any action by reason of the fact that he is or was a director,
officer, employee or agent of European Micro may and, in certain cases, must be
indemnified by European Micro against, in the case of a non-derivative action,
judgments, fines, amounts paid in settlement and reasonable expenses (including
attorneys' fees) incurred by him as a result of such action, and in the case of
a derivative action, against expenses (including attorneys' fees), if in either
type of action he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of European Micro. This
indemnification does not apply, in a derivative action, to matters as to which
it is adjudged that the director, officer, employee or agent is liable to
European Micro, unless upon court order it is determined that, despite such
adjudication of liability, but in view of all the circumstances of the case, he
is fairly and reasonably entitled to indemnify for expenses, and, in a
non-derivative action, to any criminal proceeding in which such person had
reasonable cause to believe his conduct was lawful.

Section 78.037 of the NRS allows European Micro to eliminate or limit the
personal liability of a director to European Micro or to any of its
shareholders for monetary damage for a breach of fiduciary duty as a director,
except for: acts or omissions which involve intentional misconduct, fraud or
knowing violation of law; or (ii) the payment of distributions in violation of
NRS 78.300.

Article VI of European Micro's Articles of Incorporation provides that
European Micro shall indemnify any person (and the heirs, executors or
administrators of such person) who was or is a party

II-1
<PAGE>

or is threatened to be made a party to, or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director or officer of European Micro or is or was serving at the request
of European Micro as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, to the fullest extent permitted by
Nevada Law. Each such indemnified party shall have the right to be paid by
European Micro for any expenses incurred in connection with any such proceeding
in advance of its final disposition to the fullest extent authorized by Nevada
Law. Article VI of European Micro's Articles of Incorporation also provides
that European Micro may, by action of its Board of Directors, provide
indemnification to such of the employees and agents of European Micro to such
extent and to such effect as the Board of Directors shall determine to be
appropriate and authorized by Nevada Law.

European Micro maintains an insurance policy that provides protection,
within the maximum liability limits of the policy and subject to a deductible
amount for each claim, to European Micro under its indemnification obligations
and to the directors and officers of European Micro with respect to certain
matters that are not covered by European Micro's indemnification obligations.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted for directors, officers and controlling persons of
European Micro pursuant to the foregoing provisions, European Micro has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by European Micro of expenses incurred or
paid by a director, officer or controlling person of European Micro in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, European Micro will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

Pursuant to the Underwriting Agreement filed as Exhibit 1.01 to this
Prospectus, the Underwriter has agreed to indemnify the directors, officers and
controlling persons of European Micro against certain civil liabilities that
may be incurred in connection with this Offering, including certain liabilities
under the Securities Act.

At present, there is no pending litigation or proceeding involving any
director or officer of European Micro as to which indemnification is being
sought, nor is European Micro aware of any threatened litigation that may
result in claims for indemnification by any director or officer.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On January 31, 1998, the Company issued an aggregate of 4,000,000 shares
of Common Stock to John B. Gallagher (1,900,000 shares), Harry D. Shields
(1,602,696 shares), Thomas H. Minkoff, as Trustee of the Gallagher Family Trust
(100,000) and Stuart S. Southard and Robert H, True, Trustees of the 1997 Henry
Daniel Shields Irrevocable Educational Trust (397,304) in exchange for all of
their shares of ordinary stock of European Micro UK pursuant to an exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended.
No commissions or other remuneration will be paid in connection with the
above-described issuance of securities.

II-2
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following exhibits are filed as part of this registration
statement:

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<S> <C>
1.01 Form of Underwriting Agreement*
3.01 Articles of Incorporation*
3.02 Bylaws*
4.01 Form of Stock Certificate*
4.02 1998 Stock Incentive Plan*
4.03 1998 Employee Stock Purchase Plan*
4.04 Form of Lock-up Agreement
5.01 Opinion of Kirkpatrick & Lockhart LLP regarding the validity of the securities offered
10.01 Form of Advice of Borrowing Terms with National Westminister Bank Plc*
10.02 Invoice Discounting Agreement with Lombard Natwest Discounting Limited, dated
November 21, 1996*
10.03 Commercial Credit Insurance, policy number 60322, with Hermes Kreditversicherungs-AG
dated August 1, 1995*
10.04 Commercial Credit Insurance, policy number 82692, with Hermes Kreditversicherungs-AG
dated August 1, 1995*
10.05 Consignment Agreement with European Micro Computer Germany, dated January 1996*
10.06 Distributor Agreement with WatchGuard Technologies, Inc., dated November 5, 1997*
10.07 Shareholders' Cross-Purchase Agreement by and between Jeffrey Gerard Alnwick, Marie
Alnwick, European Micro Plc and Big Blue Europe, B.V. dated August 21, 1997*
10.08 Trusteed Shareholders Cross-Purchase Agreement by and between John B. Gallagher, Harry
D. Shields, Thomas H. Minkoff, Trustee of the Gallagher Family Trust, Robert H. True and
Stuart S. Southard, Trustees of the Henry Daniel Shields 1997 Irrevocable Educational Trust,
European Micro Holdings, Inc. and SunTrust Bank, Nashville, N.A., as Trustee dated
January 31, 1998*
10.09 Executive Employment Agreement between John B. Gallagher and European Micro Holdings,
Inc. effective as of January 1, 1998*
10.10 Executive Employment Agreement between Harry D. Shields and European Micro Holdings,
Inc. effective as of January 1, 1998*
10.11 Contract of Employment between Laurence Gilbert and European Micro UK dated March 14,
1998
10.12 Contract of Employment between Bernadette Spofforth and European Micro UK, dated
April 30, 1996*
10.13 Subscription Agreement by and between John B. Gallagher, Harry D. Shields, Thomas H.
Minkoff, Trustee of the Gallagher Family Trust, Robert H. True and Stuart S. Southard,
Trustees of the Henry Daniel Shields 1997 Irrevocable Educational Trust, European Micro
Holdings, Inc. effective as of January 31, 1998*
10.14 Administrative Services Contract by and between European Micro Holdings, Inc. and
European Micro Plc effective as of January 1, 1998*
10.15 Escrow Agreement between European Micro Holdings, Inc., Tarpon Scurry Investments, Inc.
and The Chase Manhattan Bank dated as of March 24, 1998
10.16 Form of Indemnification Agreements with officers and directors*
10.17 Form of Transfer Agent Agreement with Chase Mellon Shareholder Services, L.L.C.*
21.01 Subsidiaries of European Micro Holdings, Inc.
23.01 Consent of KPMG
23.02 Consent of Kirkpatrick & Lockhart LLP (included in opinion filed as Exhibit 5.01)
24.01 Power of Attorney*
27.01 Financial Data Schedule
</TABLE>

- ----------------

* Previously filed.

II-3
<PAGE>

ITEM 28. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.

(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, PROVIDED, that the registrant includes in the prospectus, by means
of a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements an information required by Section
10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements
and information are contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the Form
F-3.

The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations an registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Miami, Florida on March 24, 1998.

EUROPEAN MICRO HOLDINGS, INC.

By: /s/ John B. Gallagher
-----------------------------------
John B. Gallagher
Co-Chairman and Co-President
(Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- --------------------------------------------- ---------------
<S> <C> <C>
* Co-Chairman; Co-President March 24, 1998
- ---------------------------------- (Principal Executive Officer);
Harry D. Shields Director

/s/ John B. Gallagher Co-Chairman; Co-President March 24, 1998
- ---------------------------------- (Principal Executive Officer);
John B. Gallagher Director

* Chief Financial Officer March 24, 1998
- ---------------------------------- and Controller
Jay Nash (Principal Financial Officer and Controller)

* Director March 24, 1998
- ----------------------------------
Laurence Gilbert

* Director March 24, 1998
- ----------------------------------
Bernadette Spofforth

* Director March 24, 1998
- ----------------------------------
Kyle R. Saxon

/s/ Barrett Sutton Director March 24, 1998
- ----------------------------------
Barrett Sutton

*By /s/ John B. Gallagher
------------------------------
As Attorney-in-Fact
Pursuant to Powers of Attorney
previously filed
</TABLE>

II-5
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ----
<S> <C> <C>
1.01 Form of Underwriting Agreement*
3.01 Articles of Incorporation*
3.02 Bylaws*
4.01 Form of Stock Certificate*
4.02 1998 Stock Incentive Plan*
4.03 1998 Employee Stock Purchase Plan*
4.04 Form of Lock-Up Agreement
5.01 Opinion of Kirkpatrick & Lockhart LLP regarding the validity of the securities
offered
10.01 Form of Advice of Borrowing Terms with National Westminister Bank Plc*
10.02 Invoice Discounting Agreement with Lombard Natwest Discounting Limited, dated
November 21, 1996*
10.03 Commercial Credit Insurance, policy number 60322, with Hermes
Kreditversicherungs-AG dated August 1, 1995*
10.04 Commercial Credit Insurance, policy number 82692, with Hermes
Kreditversicherungs-AG dated August 1, 1995*
10.05 Consignment Agreement with European Micro Computer Germany, dated January
1996*
10.06 Distributor Agreement with WatchGuard Technologies, Inc., dated November 5,
1997*
10.07 Shareholders' Cross-Purchase Agreement by and between Jeffrey Gerard Alnwick,
Marie Alnwick, European Micro Plc and Big Blue Europe, B.V. dated August 21,
1997*
10.08 Trusteed Shareholders Cross-Purchase Agreement by and between John B.
Gallagher, Harry D. Shields, Thomas H. Minkoff, Trustee of the Gallagher Family
Trust, Robert H. True and Stuart S. Southard, Trustees of the Henry Daniel Shields
1997 Irrevocable Educational Trust, European Micro Holdings, Inc. and SunTrust
Bank, Nashville, N.A., as Trustee dated January 31, 1998*
10.09 Executive Employment Agreement between John B. Gallagher and European Micro
Holdings, Inc. effective as of January 1, 1998*
10.10 Executive Employment Agreement between Harry D. Shields and European Micro
Holdings, Inc. effective as of January 1, 1998*
10.11 Contract of Employment between Laurence Gilbert and European Micro UK dated
March 14, 1998
10.12 Contract of Employment between Bernadette Spofforth and European Micro UK
dated April 30, 1996*
10.13 Subscription Agreement by and between John B. Gallagher, Harry D. Shields,
Thomas H. Minkoff, Trustee of the Gallagher Family Trust, Robert H. True and
Stuart S. Southard, Trustees of the Henry Daniel Shields 1997 Irrevocable
Educational Trust, European Micro Holdings, Inc. effective as of January 31, 1998*
10.14 Administrative Services Contract by and between European Micro Holdings, Inc.
and European Micro Plc effective as of January 1, 1998*
10.15 Escrow Agreement between European Micro Holdings, Inc., Tarpon Scurry
Investments, Inc. and The Chase Manhattan Bank dated as of March 24, 1998
10.16 Form of Indemnification Agreements with officers and directors*
10.17 Form of Transfer Agent Agreement with Chase Mellon Shareholder Services,
L.L.C.*
21.01 Subsidiaries of European Micro Holdings, Inc.
23.01 Consent of KPMG
23.02 Consent of Kirkpatrick & Lockhart LLP (included in opinion filed as Exhibit 5.01)
24.01 Power of Attorney*
27.01 Financial Data Schedule
</TABLE>

- ----------------
* Previously filed.

EXHIBIT 4.04

FORM OF LOCK-UP AGREEMENT

EUROPEAN MICRO HOLDINGS, INC.
6073 N.W. 167TH STREET, UNIT C-25
MIAMI, FLORIDA 33015

March _____, 1998

Tarpon Scurry Investments, Inc.
501 First Avenue North, Suite 702
St. Petersburg, FL 33701

Dear Sirs:

The undersigned understands that you propose to enter into an
Underwriting Agreement (the "UNDERWRITING AGREEMENT") providing for the
engagement of you as placement agent for the public offering and sale of shares
(the "SHARES") of common Stock, par value $0.01 per share (the "COMMON STOCK"),
of European Micro Holdings, Inc. (the "COMPANY").

In consideration of your execution of the Underwriting Agreement, and
for other good and valuable consideration, the undersigned hereby irrevocably
agrees that without the prior written consent of Tarpon Scurry Investments,
Inc., the undersigned will not (and, except as may be disclosed in the
Prospectus, will not announce or disclose any intention to) sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose of, any shares of Common Stock, or any securities
convertible into or exercisable or exchangeable for Common Stock, for a period
of 180 days after the date of the final Prospectus relating to your offering of
the Shares to the public. Prior to the expiration of such period, the
undersigned will not announce or disclose any intention to do anything after the
expiration of such period which the undersigned is prohibited, as provided in
the preceding sentence, from doing during such period. Thereafter, the
undersigned will not sell, offer to sell, solicit an offer to buy, contract to
sell, grant any option to purchase, or otherwise transfer or dispose of, any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for Common Stock except in accordance with Rule 144(k).

The undersigned agrees that the provisions of this agreement shall be
binding also upon the successors, assigns, heirs and personal representatives of
the undersigned.

It is understood that, if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to the
consummation of the offering described therein, you will release us from our
obligations under this letter agreement.

Very truly yours,

EXHIBIT 5.01

OPINION RE: LEGALITY

March 23, 1998

European Micro Holdings, Inc.
4073 N.W. 167th Street, Unit C-25
Miami, Florida 33015

RE: EUROPEAN MICRO HOLDINGS, INC.
REGISTRATION STATEMENT ON FORM S-1
FILE NO. 333-44393 (THE "REGISTRATION STATEMENT")
OPINION RE: LEGALITY

Gentlemen:

We have acted as counsel to European Micro Holdings, Inc., a
Nevada corporation (the "CORPORATION"), in connection with the preparation of
the above-referenced Registration Statement filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"1933 ACT"), relating to the proposed public offering of up to 1,100,000 shares
of the Corporation's Common Stock, par value $0.01 per share (the "COMMON
STOCK"), including:

1. up to 1,000,000 shares of Common Stock to be sold by
the Corporation to the public in a best efforts
underwriting; and

2. up to 100,000 shares of Common Stock to be sold by
John B. Gallagher and Harry D. Shields (the
"SHAREHOLDERS") to the public in a best efforts
underwriting.

We are furnishing this opinion to you in accordance with Item
601(b)(5) of Regulation S-K promulgated under the 1933 Act for filing as Exhibit
5.01 to the Registration Statement.

<PAGE>

European Micro Holdings, Inc.
March 23, 1998
Page 2

We are familiar with the Registration Statement, and we have
examined the Corporation's Articles of Incorporation, as amended to date, the
Corporation's Bylaws, as amended to date, and minutes and resolutions of the
Corporation's Board of Directors and shareholders. We have also examined such
other documents, certificates, instruments and corporate records, and such
statutes, decisions and questions of law as we have deemed necessary or
appropriate for the purpose of this opinion.

Based upon the foregoing, we are of the opinion that the
shares of Common Stock to be sold by the Corporation and the Shareholders to the
public, when issued and sold in the manner described in the Registration
Statement (as amended), will be validly issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion as an Exhibit
to the Registration Statement and to the use of our name in the Prospectus
constituting a part thereof in connection with the matters referred to under the
caption "Legal Matters."

Very truly yours,

/s/ Kirkpatrick & Lockhart LLP

EXHIBIT 10.11

CONTRACT OF EMPLOYMENT

THIS AGREEMENT is made the 14th day of March 1998

BETWEEN:

(1) EUROPEAN MICRO PLC (registered number 2663964) having its registered
office at Market Court, 20-24 Church Street, Altrincham, Cheshire WA14
4DW (the "COMPANY")

(2) LAURENCE GILBERT of 20-24 Church Street, Altrincham, Cheshire WA14 4DW
(the"EXECUTIVE")

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1. In this Agreement the following words and expressions shall have
the following meanings:

"the Board" means the Board of Directors of the
Company and includes any committee
of the Board duly convened by it

"the Commencement Date" means the 1st day of January 1998

"EM Group Company" means the Company and any Company
which is a subsidiary or affiliate
of the Company

"the Employment" means the employment established by
this Agreement

"Intellectual Property" means (i) every invention discovery
design or improvement (ii) every work
in which copyright may subsist, and
(iii) moral rights as defined by s 77
and s 80 of the Copyright Design and
Patents Act 1988.

"the Termination Date" means the termination date of the
Employment under this Agreement
howsoever terminated.

1.2. The headings in this Agreement shall not affect its
interpretation or construction.

1.3. Any reference in this Agreement to any statutory provision
includes any statutory modification or re-enactment of it or
the provision referred to.
<PAGE>

2. EMPLOYMENT

The Company shall employ the Executive and the Executive agrees to act as
Managing Director of the Company on the terms set out in this Agreement.

3. FREEDOM TO TAKE UP THE APPOINTMENT

The Executive warrants that by virtue of entering into this Agreement he will
not be in breach of any express or implied terms of any contract or of any other
obligation binding upon him.

4. PERIOD

The Executive's Employment shall commence with effect from the Commencement Date
and shall (subject as hereinafter provided) be for an initial fixed term of one
(1) year and shall continue thereafter until terminated by either party giving
to the other not less than six (6) months' written notice to expire on or any
time after the expiry date for the initial fixed term.

5. DUTIES OF THE APPOINTMENT

5.1. The Executive shall faithfully and diligently perform those
duties of his appointment and exercise such powers consistent
with them which are from time to time assigned to or vested in
him and shall use his best endeavours to promote the interests
of the Company and any EM Group Company for which he is
required to perform duties.

5.2. The Executive shall (without further remuneration) if and for
so long as the Executive is so required by the Company:

(i) carry out the duties of his appointment on behalf of any
EM Group Company

(ii) act as a director of any EM Group Company or hold any
other appointment or office as nominee or
representative of the Company or any EM Group Company

(iii) carry out such duties and the duties attendant on any
such appointment as if they were duties to be
performed by him on behalf of the Company.

6. OBEDIENCE AND REPORTING

The Executive shall obey all lawful and reasonable directions of the Board and
at all times keep the Board promptly and fully informed (in writing if so
requested) of his conduct of the business or affairs of the Company and any EM
Group Company and provide such explanations as the Board may require.

2
<PAGE>

7. DEVOTION TO DUTIES

7.1. The Executive shall during the term of this Employment devote
the whole of his time, attention and abilities to the business
and affairs of the Company unless prevented by ill health from
so doing and shall not during the Employment either on his own
account or as the employer of others or otherwise be engaged
or concerned in any business other than that of the Company or
any EM Group Company or accept any other engagement or public
office except with the prior consent in writing of the Company
but the Executive may nevertheless be or become a minority
holder of any securities which are quoted on a recognized
investment exchange.

7.2. The Executive shall not be prevented from having any
shareholding in a company which exists at the date of this
Contract.

7.3. The Executive will be allowed to become a Shareholder in a
company which does not directly or indirectly compete with the
Company or any EM Group Company provided that consent is first
obtained from the Company in writing such consent not to be
unreasonably withheld.

8. COMPLIANCE/DEALINGS IN "SECURITIES"

The Executive shall during his Employment and for twelve (12) months after the
termination of his Employment comply and shall procure that his minor children
shall comply with all applicable rules of law, any recognized investment
exchange regulations including the "Model Code for Securities Transactions by
Directors of Listed Companies' issued by the International Stock Exchange of the
United Kingdom and the Republic of Ireland Limited and any Company policy issued
in relation to dealings in shares, debentures or other securities of the Company
and any EM Group Company or any unpublished price sensitive information
affecting the securities of any other company.

9. PLACE OF WORK

9.1. The Executive shall initially work at the offices of the
Company at Market Court, 20-24 Church Street, Altrincham,
Cheshire WA14 4DW but the Executive shall if required to do so
work in such place or places within a twenty (20) mile radius
of Altrincham as the Board may reasonably require for the
proper performance of his duties hereunder.

9.2. The Executive shall not be required (except for travel on the
business of the Company or any EM Group Company) to reside in
other parts of the world.

10. HOURS OF WORK

There are no normal fixed working hours for the Employment. The Executive is
expected to work at such times as the efficient and conscientious discharge of
his duties hereunder requires.

3
<PAGE>

11. REMUNERATION

11.1. During the Employment the Executive shall receive as
remuneration a basic salary at the rate of /pound sterling/
60,000 per annum to be paid by equal monthly installments on
the last day of each calendar month. Any increase in
remuneration shall be notified in writing to the Executive
and the details thereof shall be entered in the table in
Schedule 1 to the Company's signed copy of this Agreement and
initialed by an officer of the Company.

11.2. The remuneration shall unless otherwise by agreed in writing
by the Company be inclusive of any fees or other remuneration
which the Executive would otherwise be entitled to receive
from the Company or any EM Group Company in connection with
the performance of the duties delegated to him under this
Agreement (subject to Clause 11.3 hereof).

11.3. During the Employment the Executive will also receive a bonus
calculated in accordance with Schedule 3.

12. CAR

12.1. The Company shall make available to the Executive for his use
in performing his duties (and shall replace from time to time
as necessary) a motor vehicle in keeping with the Executive's
position. The Company shall maintain service tax and
comprehensively insure the car as appropriate and shall bear
all running expenses of the car including fuel consumed during
private use of the car. The Executive shall ensure that he has
at all times a current valid license to drive private motor
cars.

12.2. Immediately upon the termination of the Employment howsoever
arising, the Executive shall return the car and its keys to
the Company at its principal place of business (or any other
place nominated by the Company for its return).

13. EXPENSES

In addition to his basic salary hereunder the Executive shall be reimbursed the
amount of all reasonable traveling, hotel, entertainment and other expenses
properly and necessarily incurred and defrayed by him in the discharge of his
duties hereunder (including "professional fees"). The Executive shall produce to
the Company at its request all supporting vouchers and documents in respect of
such expenses. The Company will also pay any telephone expenses incurred by the
Executive in relation to this Contract of Employment upon production of
supporting bills in respect of such expenses.

14. PENSION AND OTHER BENEFITS

No pension contributions shall be paid by the Company on behalf of the
Executive. The Executive will however be entitled to private health insurance
for the benefit of himself and his two daughters during the term of this
Agreement.

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<PAGE>

15. HOLIDAYS

15.1. The Executive shall be entitled (in addition to normal bank
and other public holidays) to twenty (20) days paid holiday in
each calendar year at such times as shall be convenient to the
Company and such additional holidays as the Board shall
approve.

15.2. The Executive shall not be entitled to carry forward any
unused holiday entitlement from one holiday year to the next
without the written consent of the Company.

16. SICKNESS OR INJURY

16.1. The Executive agrees that at any time during the course of the
Employment he shall at the request of the Company submit
himself to a medical examination by a registered medical
practitioner nominated by the Company. The purpose of such
medical examination shall be to determine whether there are
any matters which might impair the Executive's ability to
perform his duties under this Agreement and accordingly the
Executive shall give such authority as is required for the
Company's nominated doctor to disclose to the Company the
findings. All expenses associated with obtaining the report
will be borne by the Company.

16.2. In the event that the Executive is unable to perform his
duties under this Agreement by reason of sickness or injury
for a period of seven (7) days or more, the Executive shall if
required to do so by the Company provide the Company with a
medical certificate in respect of the whole period of the
absence. Immediately following his return from any period of
absence the Executive shall complete a self-certification form
detailing the reason for the absence.

16.3. During the Executive's first ten (10) weeks of absence he will
receive ninety percent (90%) of his average weekly earnings
calculated by taking the total of his earnings over the
previous twelve months and dividing the same by fifty two
(52). At the end of such ten (10) week period any further
payment will only be made to the Executive at the discretion
of the Board.

16.4. The Company shall have the right to deduct from the
remuneration paid to the Executive any statutory sick pay or
other social security benefits which he is entitled to claim
in consequence of sickness or accident or payable to him under
any scheme for the time being in force of which by virtue of
his employment by the Company he is a non-contributory member.

16.5. In the event that the Executive is incapable of performing
his duties by reason of injury sustained wholly or partially
as a result of actionable negligence or breach of any
statutory duty on the part of any third party all payments
made to the Executive by the Company by way of remuneration
shall to the extent that compensation is recoverable from that
third party constitute loans by the Company to the Executive
(notwithstanding that as an interim measure income tax has
been

5
<PAGE>

deducted from payments as if they were emoluments of
employment) and shall be repaid when and to the extent that
the Executive recovers compensation for loss of earnings from
that third party by action or otherwise.

16.6. The Company will maintain on behalf of the Executive the
permanent health insurance scheme currently in place during
the term of this Agreement.

17. CONFIDENTIALITY

The Executive shall not, either during the Employment, otherwise than in the
proper course of his duties, or thereafter, without the consent in writing of
the Company being first obtained, use directly or indirectly, divulge to any
person, firm or company and shall during the continuance of the Employment use
his best endeavours to prevent the publication, disclosure or non-authorized use
of any confidential information of the Company or any EM Group Company or any of
its or their secrets, dealings or transactions whatsoever which may have come or
may come to his knowledge during his Employment or previously or otherwise and
which include but are not limited to the following matters:

(i) the working of any manufacturing process or invention
or any other methods, formulae, technical data and
know-how used by or which relate to the business of
the Company or any EM Group Company;

(ii) lists of customers and potential customers or of
suppliers and potential suppliers to the Company and
any EM Group Company and any other information
collected by the Company and any EM Group Company in
relation to those customers or suppliers;

(iii) the dealings or transactions or other business
affairs of the Company or any EM Group Company and
its or their finances or management accounts.

The restriction shall cease to apply to information or knowledge which may
(otherwise than by reason of the default of the Executive ) become available to
the public generally without requiring a significant expenditure of labour,
skill or money.

18. INTELLECTUAL PROPERTY

18.1. The Executive shall forthwith communicate to the Company in
confidence all intellectual property which the Executive may
make or originate either solely or jointly with another or
others during the Employment (hereinafter referred to as
"Intellectual Property").

18.2. In the case of such Intellectual Property as is made or
originated hereunder wholly or substantially in the course of
his normal duties or in the course of duties specifically
assigned to him and which relate to the affairs of the Company
or any EM Group Company the following subclauses of this
clause shall apply.

6
<PAGE>

18.3. Such Intellectual Property (or in the case of the Intellectual
Property made or originated by the Executive jointly with
another or others to the full extent of the Executive's
interest therein so far as the law allows) shall be and become
the exclusive property of the Company and shall not be
disclosed to any other person, firm or company without the
consent of the Company being previously obtained which if
given may be subject to conditions. The provisions of this
subclause shall not entitle the Executive to any compensation
beyond the salary hereinafter mentioned except that in the
case of any invention on which a British Patent has been
granted or assigned to the Company and the Company has derived
outstanding benefit from such patent, the Executive may be
entitled by virtue of s 40 of the Patents Act 1977.

18.4. The Executive shall if and when required by the Company and at
the expense of the Company do and/or combine with others in
doing all acts and sign and execute all applications and other
documents (including Powers of Attorney in favour of nominees
of the Company) necessary or incidental to obtaining,
maintaining or extending patent or other forms of protection
for such Intellectual Property in the UK and in any other part
of the world or for transferring to or vesting in the Company
or its nominees the Executive's entire right, title and
interest to and in such Intellectual Property or to and in any
application, patent or other form of protection to copyright
as the case may be including the right to file applications in
the name of the Company or its nominees for patent or other
forms of protection or for registration of copyright in any
country claiming priority from the date of filing of any
application or other date from which priority may run in any
other country.

18.5. The provisions of this clause shall remain in full force and
effect notwithstanding that after the Executive has made or
originated any such Intellectual Property the Employment may
have ceased or been determined for any reason whatsoever with
the intention that the same shall bind the heirs of an/or
assigns of the Executive.

19. COPYRIGHT

The Executive shall promptly disclose to the Company all works in which
copyright or design rights may exist which the Executive may make or originate
either solely or jointly with others during the Employment. Any such copyright
works or designs created by him in the normal course of his Employment or in the
course of carrying out duties specifically assigned to him which relate to the
affairs of the Company shall be the property of the Company whether or not the
work was made by direction of the Company or was intended for the Company and
the copyright in it and the rights in any design shall belong to the Company and
to the extent that such copyright or design rights are not otherwise vested in
the Company the Executive hereby assigns the same to the Company.

7
<PAGE>

20. POST-TERMINATION OBLIGATIONS

20.1. The Executive shall not during the period of six (6) months
after termination of the Employment solicit or endeavour to
entice away from or discourage from being employed by the
Company or any EM Group Company any employee or director
employed by the Company or any EM Group Company and who to his
knowledge was an employee thereof at the date of such
termination or whom to his knowledge has at that date agreed
to be engaged as an employee of the Company or any EM Group
Company and with whom the Executive has dealt or had contact
in the normal course of his duties.

20.2. The Executive shall not for a period of six (6) months after
the termination of the Employment (without the previous
consent in writing of the Company) and whether on his own
account or for any other person, firm or company directly in
connection with any business similar to or in competition
with the business of the Company solicit or endeavour to
entice away from the Company any person, firm or company (a)
who or which in the twelve (12) months prior to the end of his
Employment shall have been a customer of or in the habit of
dealing with the Company and (b) with whom or which the
Executive had personal dealings in the course of his
employment in the twelve (12) months prior to the end of his
Employment.

20.3. The Executive shall not for a period of six (6) months after
the termination of his Employment (without the previous
consent in writing of the Company) and whether on his own
account or for any other person, firm or company directly or
indirectly in connection with any business similar to or in
competition with the business of the Company do any business
with, accept orders from, or have any business dealings with
any person, firm or company (a) who or which in the twelve
(12) months prior to the end of his Employment was a customer
of the Company and (b) with whom or which the Executive had
personal dealings in the course of his Employment in the
twelve (12) months prior to the end of his Employment.

20.4. The Executive shall not for a period of six (6) months after
the termination of his Employment and within the United
Kingdom (without the previous consent in writing of the
Company) directly or indirectly be engaged concerned or
interested (whether as principal, servant, agent,consultant
or otherwise) in any trade or business which is in competition
with any trade or business being carried on by the Company at
the end of the Employment or during a period of twelve (12)
months prior to the end of his Employment and with which the
Executive was concerned in the course of his Employment,
provided always that during such six (6) month period the
Company will pay the Executive a further six (6) month salary
and bonus even though his Employment has been terminated but
only in circumstances where no summary termination has
occurred in accordance with Clause 22 of this Agreement and
the Executive is not in breach of the covenants contained
in Clause 20. Bonuses will be calculated by dividing the
previous 12 months bonus total by 12.

8
<PAGE>

20.5. The Executive shall not at any time after the Termination Date
represent himself as being employed by or connected with the
Company or any EM Group Company.

20.6. The Executive acknowledges:

(i) that each of the foregoing subclauses of this clause
constitutes an entirely separate and independent
restriction on him; and

(ii) while at the date of this Agreement the duration,
extent and application of each of the restrictions
are considered by the parties no greater than is
necessary for the protection of the interests of the
Company and any EM Group Company and reasonable in
all the circumstances it is acknowledged that
restrictions of such a nature may become invalid
because of changing circumstances and accordingly if
any of the restrictions shall be adjudged to be void
or ineffective for whatever reason but would be
adjudged to be valid and effective if part of the
wording thereof were deleted or the periods thereof
reduced or the area thereof reduced in scope they
shall apply with such modifications as may be
necessary to make them valid and effective.

21. DELIVERY OF DOCUMENTS AND PROPERTY

The Executive shall upon request at any time and in any event upon the
termination of the Executive's Employment immediately deliver up to the Company
or its authorized representative all keys, security passes, credit cards, plans,
statistics, documents, records, papers, magnetic disks, tapes or other software
storage media and all property of whatsoever nature which may be in his
possession or control or relate in any way to the business affairs of the
Company or any EM Group Company and the Executive shall not, without the written
consent of the Company, retain any copies thereof.

22. REMEDIES

It is expressly agreed by the Executive and the Company that the provisions of
Sections 17, 18, 19, 20 and 21 are reasonable for purposes of preserving for the
Company its business, goodwill and proprietary information. In the event any
breach of the aforementioned provisions by the Executive, the parties recognize
and acknowledge that a remedy at law will be inadequate and the Company may
suffer irreparable injury. The Executive acknowledges that the services to be
rendered by him are of a character giving them peculiar value, the loss of which
cannot be adequately compensated for in damages; accordingly the Executive
consents to injunctive and other appropriate equitable relief upon the
institution of proceedings therefor by the Company in order to protect the
Company's rights. Such relief shall be in addition to any other relief to which
the Company may be entitled at law or in equity.

9
<PAGE>

23. SUMMARY TERMINATION

In any of the following cases the Company may terminate the Executive's
Employment by written notice taking effect on the date of its service in which
case the Executive shall not be entitled to any further payment from the Company
except such sums as shall then have accrued due;

(i) if the Executive shall be guilty of any gross
misconduct or any repeated breach of any of the terms
of this Agreement;

(ii) if the Executive shall be convicted of a criminal
offense (except for a road traffic offense or an
offense not involving a custodial sentence);

(iii) if the Executive be adjudged bankrupt or makes any
composition or enters into any deed of arrangement
with his creditors;

(iv) if the Executive is prohibited by law from being or
acting as a director;

(v) if the Executive shall become of unsound mind or
become a patient under the Mental Health Act 1983;

(vi) if the Executive resigns as a director of the Company
otherwise than at the request of the Company

24. NO RIGHT TO WORK

24.1. The Company shall be under no obligation to provide any work
for the Executive during any period of notice either given by
the Company or the Executive to terminate the Executive's
Employment under this Agreement. The Company may at any time
during the said period suspend the Executive from his
Employment or exclude him from any premises of the Company.
Provided that during such period the Executive shall continue
to receive salary and all other contractual benefits including
a months bonus figure (calculated by dividing the previous
total bonus payment over the preceding twelve (12) month
period by twelve (12).

24.2. If the Contract is terminated by notice in accordance with
Clause 4 then the period referred to in Clause 20.1 to 20.4
shall start to run from the date of such notice. This proviso
will not apply should the Contract be terminated in accordance
with Clause 23.

25. SHORT NOTICE

If the Executive shall at any time become or be unable properly to perform his
duties hereunder by reason of ill health accident or otherwise for a period or
periods aggregating at least one hundred eighty (180) days in any period of
twelve (12) consecutive calendar months the Company may by not less than three
(3) month's notice in writing determine this Agreement.

10
<PAGE>

26. RESIGNATION OF OFFICE

Upon the termination of the Employment the Executive shall at any time or from
time to time thereafter upon the request of the Company resign without claim for
compensation from all offices held by him in the Company and any EM Group
Company and should he fail to do so the Company is hereby irrevocably authorized
to appoint some person in his name and on his behalf to sign and execute all
documents or things necessary or requisite to give effect thereto.

27. RETIREMENT

The Employment shall automatically terminate on the Executive reaching his 65th
birthday.

28. PRIOR RIGHTS

The termination of the Employment shall be without prejudice to any right that
the Company may have in respect of any breach by the Executive of any of the
provisions of this Agreement which may have occurred prior to such
determination.

29. NOTICES

Any notice given under this Agreement shall be deemed to have been duly given if
dispatched by either party hereto by registered post addressed to the other
party in the case of the Company to its registered office for the time being and
in the case of the Executive to his last known address and such notice shall be
deemed to have been given on the day on which in the ordinary course of post it
would be delivered.

30. PRIOR AGREEMENTS

This Agreement is in substitution for all previous contracts of employment
express or implied between the Company or EM Group Company and the Executive
which shall be deemed to have been terminated by mutual consent as from the
Commencement Date.

31. FIXED TERM

Pursuant to ss. 196 of the Employment Rights Act 1996 the Executive hereby
agrees that no rights shall arise under ss.ss. 94 and 135 respectively of that
Act in relation to this Agreement if the term of the Executive's Employment
under it expires without being renewed.

32. DISCIPLINARY AND GRIEVANCE PROCEDURE

There are no fixed rules for the resolution of grievance or disciplinary
problems. In the event of the Executive being dissatisfied with any decision
taken against him, or have any grievance relating to the Employment, he should
apply in the first instance to the Chairman of the Board who will either propose
a solution or refer the matter to the Board for a final decision.

11
<PAGE>

33. THE COMPANY'S STAFF HANDBOOK

The terms of the Company's standard terms and conditions and employment policies
and procedures which are set out in the Company's staff handbook shall be the
terms of the Executive Employment save to the extent that they are inconsistent
with this Agreement.

34. RECONSTRUCTION OR AMALGAMATION

If before the termination of this Agreement the Employment shall be determined
by reason of the liquidation of the Company for the purposes of reconstruction
or amalgamation and the Executive shall be offered employment with any concern
or undertaking resulting from such reconstruction or amalgamation on terms and
conditions no less favorable than the terms of this Agreement then the Executive
shall have no claim against the Company in respect of the determination of the
Employment.

35. EMPLOYMENT RIGHTS ACT 1996

Schedule 2 to this Agreement sets out the particulars of employment not
contained in the Agreement that must be given to the Executive in accordance
with the terms of the said Employment Right Act 1996.

36. ATTORNEY'S FEE

In the event that any party hereto shall file suit to enforce any of the terms
of this Agreement or to recover damages or seek injunctive relief, the
prevailing party shall be entitled to recover reasonable attorney's fees and
costs incurred in such proceedings.

12
<PAGE>
<TABLE>
<CAPTION>

SCHEDULE 1

TABLE OF SALARY INCREASES

Date of
Current Increase commencement New salary Signed
salary of new salary
<S> <C> <C> <C> <C>
</TABLE>

13
<PAGE>

SCHEDULE 2

EMPLOYMENT RIGHTS ACT 1996

The following information is given to supplement the information given in the
Agreement in order to comply with the requirements of section 1 of the
Employment Rights Act of 1996.

1. The Executive's job title is Managing Director.

2. The Executive's continuous period of employment with the Company commenced
on 1st January 1996 and is not continuous with any previous period of
employment with any other employer.

3. There are no collective agreements in force which affect the terms and
conditions of the Executive's employment.

SCHEDULE 3

Subject to a minimum of a monthly guarantee of /poundsterling/ 2,500 per month
the bonus paid to the Executive shall be calculated as follows:

The bonus shall be equal to five percent (5%) of net pre-tax profit of European
Micro Plc, plus two and one-half percent (2.5%) of net pre-tax profit of Big
Blue Europe, B.V. In calculating the net pre-tax profit the following costs
shall be excluded: (i) any fees, consultancy costs, salaries, inter-company
charges paid either to Technology Express, Inc. or American Micro Computer
Centre and (ii) any bonus payments to any of Bernadette Spofforth, Patrick Wyley
and Ed Simpson. The bonus shall increase to six percent (6%) of net pre-tax
profit of European Micro Plc if such net pre-tax profit exceeds the plan agreed
to between the Company and the Executive before the start of the fiscal year in
which the bonus shall be paid.

14
<PAGE>

IN WITNESS WHEREOF the parties hereto have executed this Agreement as a Deed the
day and year first above written.

Signed by )
Director and by ) /s/ John B. Gallagher
Secretary )
for and on behalf of the )
Company )

Signed by the Executive ) /s/ Laurence Gilbert

EXHIBIT 10.15

ESCROW AGREEMENT

THIS ESCROW AGREEMENT (the "AGREEMENT"), dated March 24, 1998, by and
between EUROPEAN MICRO HOLDINGS, INC., a Nevada corporation ("EMCC"), TARPON
SCURRY INVESTMENTS, INC., a Illinois corporation ("TARPON SCURRY"), and THE
CHASE MANHATTAN BANK, having a place of business at 450 West 33rd Street, New
York, New York 10001 (the "ESCROW AGENT").

WITNESSETH

WHEREAS, the parties hereto desire to enter into this Agreement on the
terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises herein contained, the
parties hereto agree as follows:

1. ESCROW AGENT'S DUTIES. The Escrow Agent shall hold all of the
property (the "PROPERTY") held by it in accordance with the terms of this
Agreement.

2. PROPERTY TO BE UNINVESTED. All Property delivered to the Escrow
Agent by either EMCC or Tarpon Scurry pursuant to the terms of this Agreement
shall be held in a separate account called the "EMCC ESCROW ACCOUNT."

3. DISBURSEMENTS. If, prior to sixty (60) days after the date of the
Prospectus (which date shall be established by a written notice from EMCC and
Tarpon Scurry to the Escrow Agent promptly after the Prospectus is deemed
effective by the Securities and Exchange Commission) (the "OFFERING TERMINATION
DATE"), there is $7,000,000 or more in the EMCC Escrow Account, the Escrow Agent
shall notify EMCC and Tarpon Scurry of such event. In such case, the Escrow
Agent shall hold the Property until directed in writing by EMCC (the "NOTICE")
to disburse any or all of the Property. The Notice shall set forth the account
where the Property is to be disbursed and in what amount; provided, however,
that all disbursements shall only be made to either SunTrust Bank Miami, N.A.,
A.B.A. No. 066000604, Account Name: European Micro Holdings, Inc., and Account
No. 0189001191513, ("EMCC ACCOUNT") or NationsBank, St. Petersberg, Florida, ABA
No. 063100277, Account Name: Tarpon Scurry Investments, Inc. and Account No.
3660505324 ("TARPON SCURRY ACCOUNT"). Upon receipt of the Notice, the Escrow
Agent shall promptly disburse such Property in the manner described in the
Notice subject to the terms of this Section 3(a). Notwithstanding the foregoing,
the Notice may specify disbursements to other accounts but only if the Notice
contains a signature guaranty of either John B. Gallagher or Harry D. Shields.
In the event that on the Offering Termination Date less than $7,000,000 is
received in the EMCC Escrow Account, then the Escrow Agent shall as soon as
practicable return all funds then remaining in the EMCC Escrow Account directly
to the sources of such funds in the amount received from such sources.

<PAGE>

4. RIGHTS, DUTIES AND RESPONSIBILITIES OF ESCROW AGENT.

(a) Subject to Section 3(a) hereof, the Escrow Agent shall have the
right to act in reliance upon any document, instrument, or signature believed by
it to be genuine and to assume that any person purporting to give any notice in
accordance with this Agreement or in connection with any transaction to which
this Agreement relates has been duly authorized to do so. The Escrow Agent shall
not be obligated to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice;

(b) If the Escrow Agent is uncertain as to its duties or rights
hereunder or shall receive a notice from any of the other parties hereto with
respect to the Property that, in the Escrow Agent's sole opinion, is in conflict
with any of the terms hereof, it may refrain from taking any action until
otherwise directed by either (a) all of the other parties hereto or (b) an order
of a court of competent jurisdiction;

5. INDEMNIFICATION. Each of EMCC and Tarpon Scurry hereby indemnifies,
defends, and holds harmless the Escrow Agent from any and all liability of any
kind, including costs and expenses of litigation and reasonable attorneys' fees
incurred by the Escrow Agent in connection with this Agreement or in enforcing
this indemnification, arising from its activities pursuant to this Agreement,
unless such liability arises from gross negligence or willful misconduct by the
Escrow Agent.

6. COMPENSATION. For serving hereunder, the Escrow Agent shall be paid
pursuant to the terms of the fee schedule attached hereto as Schedule A. EMCC
and Tarpon Scurry hereby agree to jointly and severally pay the Escrow Agent
upon execution of this Agreement reasonable compensation for the services to be
rendered hereunder, as described in Schedule A attached hereto.

7. LIMITATION OF LIABILITY. Disbursements of any of the Property in
accordance with Section 3(a) hereof shall relieve the Escrow Agent of any
liability or responsibility whatsoever in connection with serving as Escrow
Agent with respect to the Property so disbursed. In the administration of the
Escrow Account hereunder, the Escrow Agent may execute any of its powers and
perform its duties hereunder directly or through agents or attorneys and may
consult with counsel, accountants and other skilled persons to be selected and
retained by it. The Escrow Agent shall not be liable for anything done, suffered
or omitted in good faith by it in accordance with the advice or opinion of any
such counsel, accountants or other skilled persons. Notwithstanding anything to
the contrary in this Agreement, in no event shall the Escrow Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever,
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action.

8. NOTICES. Any notice pursuant hereto shall be deemed effectively
given only if it is in writing and is delivered. Any delivery hereunder is
effective only if made by (a) hand, or (b) certified mail, return receipt
requested, addressed to the other parties hereto at the addresses set forth in
Section 9, or at such other address as any party hereto may hereafter specify to
the other

2
<PAGE>

parties hereto pursuant to this Section. Delivery shall be deemed complete on
the date of receipt of the notice.

9. ADDRESSES. All notices required to be given in connection with this
Agreement shall be addressed as follows:

EMCC: European Micro Holdings, Inc.
6073 N.W. 167th Street, Unit C-25
Miami, Florida 33015
Attention: John B. Gallagher, Co-Chairman
(305) 825-2458 (telephone)
(305) 825-7774 (telecopier)

with a copy to: Clayton E. Parker, Esq.
Kirkpatrick & Lockhart LLP
201 South Biscayne Boulevard
Miami Center - 20th Floor
Miami, Florida 33131
(305) 539-3306 (telephone)
(305) 358-7095 (telecopier)

Tarpon Scurry: Tarpon Scurry Investments, Inc.
619 Enterprise Drive, Suite 100
Oakbrook, Illinois 60523
Attn: Mr. Daniel Dougherty
(800) 959-1481 (telephone)
(813) 898-3517 (telecopier)

with a copy to: D. Ronald Surbey, Esq.
Holland & Knight LLP
One East Broward Boulevard
Fort Lauderdale, Florida 33301
(954) 525-1000 (telephone)
(954) 463-2030 (telecopier)

Escrow Agent: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Escrow Adm., 15th Floor
(212) 946-8156 (telecopier)

10. RESIGNATION. The Escrow Agent may resign on thirty (30) days'
notice, in which event EMCC shall give the Escrow Agent notice of the entity to
whom the Property shall be transferred. If during such thirty-day period the
Escrow Agent receives no such notice, the Escrow Agent may, after notice to EMCC
and Tarpon Scurry, transfer the Property to a court of competent jurisdiction.

<PAGE>

11. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, successors, and
assigns.

12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, written and oral, of the
parties in connection herewith.

13. GOVERNING LAW. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of New York.

14. AMENDMENT. The provisions of this Escrow Agreement may be waived,
altered, amended or supplemented, in whole or in part, only by a writing signed
by all of the parties hereto.

15. ASSIGNMENT. Neither this Escrow Agreement nor any right or interest
hereunder may be assigned in whole or in part by any party without the prior
consent of the other parties.

16. COUNTERPARTS. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

[SIGNATURE PAGE TO FOLLOW]

4
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

EURPOEAN MICRO HOLDINGS, INC.

By: /S/ JOHN B. GALLAGHER
Name: John B. Gallagher
Title: Co-Chairman

TARPON SCURRY INVESTMENTS, INC.

By: /S/ STEPHEN A. COMEAU
Name: Stephen A. Comeau
Title: President

THE CHASE MANHATTAN BANK

By: /S/ JOHN SCIACCHITANO
Name: John Sciacchitano
Title: Vice President

5
<PAGE>

SCHEDULE A

FEE SCHEDULE

For services to be rendered by The Chase Manhattan Bank, as Escrow
Agent, European Micro Holdings, Inc. and Tarpon Scurry Investments, Inc. agree
to pay $5,000 to The Chase Manhattan Bank.

EURPOEAN MICRO HOLDINGS, INC.

By: /S/ JOHN B. GALLAGHER
Name: John B. Gallagher
Title: Co-Chairman

TARPON SCURRY INVESTMENTS, INC.

By: /S/ STEPHEN A. COMEAU
Name: Stephen A. Comeau
Title: President

THE CHASE MANHATTAN BANK

By: /S/ JOHN SCIACCHITANO
Name: John Sciacchitano
Title: Vice President

EXHIBIT 21.01

SUBSIDIARIES OF EUROPEAN MICRO HOLDINGS, INC.

JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION NOTES
- ------------------ ------------- -----
<S> <C> <C>

European Micro Plc England As of the date of the financial statements,
European Micro Plc was the main operating
subsidiary of European Micro Holdings, Inc.
(the "Company"). As such, substantially all
of the Company's operations are attributable
to European Micro Plc.

Nor'easter Micro, Inc. Nevada As of the date of the financial statements,
Nor'easter Micro, Inc. ("Nor'easter") had no
operations and was a start-up company.
Nor'easter was created to act as an
independent distributor in the United States.

European Micro GmbH Germany European Micro GmbH is a wholly owned
subsidiary of European Micro Plc and it
operates as a sales office in Dusseldorf,
Germany.

Big Blue Europe, B.V. Holland European Micro Plc owns a 50% joint
venture interest in Big Blue Europe, B.V.
("Big Blue Europe"). Big Blue Europe is a
computer parts distributor selling primarily
to computer maintenance companies.
</TABLE>

[KPMG LETTERHEAD]

The Board of Directors
European Micro Holdings, Inc.:

We consent to the use of our audit report dated March 6, 1998, a copy of which
is included herein and to the reference to our firm under the heading "Experts"
in the prospectus.

March 24, 1998

/s/ KPMG
Manchester, England

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-END> JUN-30-1997 DEC-31-1997
<CASH> 288 353
<SECURITIES> 0 0
<RECEIVABLES> 5,740 8,323
<ALLOWANCES> 5 70
<INVENTORY> 1,560 5,311
<CURRENT-ASSETS> 8,264 15,458
<PP&E> 783 927
<DEPRECIATION> 394 406
<TOTAL-ASSETS> 8,844 16,191
<CURRENT-LIABILITIES> 6,288 12,447
<BONDS> 45 110
0 0
0 0
<COMMON> 40 40
<OTHER-SE> 2,471 3,594
<TOTAL-LIABILITY-AND-EQUITY> 8,844 16,191
<SALES> 46,655 46,109
<TOTAL-REVENUES> 46,655 46,109
<CGS> 41,319 41,729
<TOTAL-COSTS> 3,285 2,467
<OTHER-EXPENSES> 366 202
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 293 223
<INCOME-PRETAX> 1,685 1,711
<INCOME-TAX> 651 557
<INCOME-CONTINUING> 1,034 1,154
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,034 1,154
<EPS-PRIMARY> 0.26 0.29
<EPS-DILUTED> 0.26 0.29

</TABLE>