U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1995
/_/ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
__________________ TO _______________________
Commission File No. 0-17483
EUROAMERICAN GROUP INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3477824
(State or other jurisdiction of) (I.R.S. Employer
Identification No.)
50 Broad Street, Suite 516
New York, New York 10004
(Address of principal executive offices) (zip code)
(212) 269-6686
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
The number of shares outstanding of the Issuer's Common Stock, par value
$.001 per share, as of October 1, 1995 was 16,060,000.
<PAGE>
EUROAMERICAN GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
August 31, 1995
(Unaudited)
CURRENT ASSETS:
Cash $ 143,493
Accounts receivable, net of allowance 84,491
Inventory 264,396
Foreign taxes receivable 98,968
Prepaid expenses and other 33,222
--------
TOTAL CURRENT ASSETS 624,570
PROPERTY AND EQUIPMENT, less accumulated
depreciation 128,077
SOFTWARE DEVELOPMENT COSTS, less
accumulated amortization 170,514
DEPOSITS AND OTHER ASSETS 38,804
-------
TOTAL ASSETS $ 961,965
=======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,041,520
Customer deposits and unearned revenue 136,741
Other 50,000
-----------
TOTAL CURRENT LIABILITIES 1,228,261
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock ($.001 par value; 2,000,000 shares
authorized; none issued) -
Common stock ($.001 par value; 35,000,000 shares
authorized; 16,060,000 issued and outstanding) 16,060
Additional paid-in capital 4,021,669
Accumulated deficit (4,212,102)
Cumulative translation adjustment (91,923)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (266,296)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 961,965
===========
See Selected Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For The Three Months Ended
August 31, 1995
1995 1994
REVENUES:
License and exchange fees $ 519,265 $ 501,650
Net system sales 43,693 381,309
Other 10,002 11,707
----------- -----------
TOTAL REVENUES 572,960 894,666
----------- -----------
COSTS AND EXPENSES:
Cost of Sales:
Market data and communication costs 423,629 481,817
Cost of system sales 33,657 177,663
----------- -----------
TOTAL COST OF SALES 457,286 659,480
Selling, general and administrative 302,214 358,347
Research and development 81,427 52,708
----------- -----------
TOTAL EXPENSES 840,927 1,070,535
----------- -----------
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAX BENEFIT AND DISCONTINUED
OPERATIONS (267,967) (175,869)
INCOME TAX BENEFIT - 12,600
----------- -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE DISCONTINUED OPERATIONS (267,967) (163,269)
----------- -----------
DISCONTINUED OPERATIONS:
Income from discontinued operations
(net of taxes of $0 and $12,600) - 24,694
----------- -----------
NET LOSS $ (267,967) $ (138,575)
=========== ===========
NET INCOME (LOSS) PER SHARE:
Continuing operations $ (.02) $ (.01)
Discontinued operation - -
---------- -----------
$ (.02) $ .(01)
========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 16,060,000 11,960,000
========== ===========
See Selected Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Three Months Ended
August 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(267,967) $(138,575)
--------- ---------
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 61,287 34,699
Changes in assets and liabilities:
(Increase) decrease in:
Inventory 21,346 (65,416)
Accounts receivable 13,480 15,698
Foreign tax receivable ( 4,446) 22,824
Prepaid and other (32,990) 5,892
Increase (decrease) in:
Accounts payable and accrued expenses (182,964) 172,821
Other liabilities - (97,625)
--------- ---------
Total adjustments (124,287) 88,893
--------- ---------
Net cash provided by (used in)
operating activities (392,254) (49,682)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of stock subscription
receivable 250,000 70,000
Payments of stockholder advances - (16,983)
Repayments under capitalized leases - (2,016)
--------- ---------
Net cash provided by (used in)
financing activities 250,000 51,001
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,010) (17,615)
--------- ---------
Net cash (used in) investing
activities (5,010) (17,615)
--------- ---------
EFFECT OF EXCHANGE RATES ON CASH 35,579 14,219
--------- ---------
NET INCREASE (DECREASE) IN CASH (111,685) (2,077)
CASH, BEGINNING OF PERIOD 255,178 296,384
--------- ---------
CASH, END OF PERIOD $ 143,493 $ 294,307
========= =========
See Selected Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
EUROAMERICAN GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED AUGUST 31, 1995
(UNAUDITED)
<CAPTION>
Common Stock
$.001 par value Additional Cumulative
Number of paid-in Accumulated Translation
Shares Amount Capital Deficit Adjustment Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE
June 1, 1995 16,010,000 $16,010 $4,011,719 $(3,944,135) $(137,570) $ (53,976)
Net loss - - - (267,967) - (267,967)
Foreign currency
translation
adjustment - - - - 45,647 45,647
Issuance of common
stock in satisfac-
tion of liabilities 50,000 50 9,950 - - 10,000
---------- ------- ---------- ---------- -------- ---------
Balance,
August 31, 1995 16,060,000 $16,060 $4,021,669 $(4,212,102) $ (91,923) $(266,296)
========== ======= ========== =========== ========= =========
</TABLE>
See Selected Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP INC. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of August 31, 1995 and the related
consolidated statements of operations, cash flows and changes in
stockholders' equity for the three months ended August 31, 1995 and
1994 have been prepared by the Company, without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position, results of operations and changes in cash flows at August
31, 1995 and for all periods presented have been made. The results
of operations for the period ended August 31, 1995 are not
necessarily indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with general accepted
accounting principals have been condensed or omitted. It is
suggested that these condensed consolidated financial statements be
read in conjunction with the financial statements and notes included
in the Company's Form 10-KSB for the year ended May 31, 1995.
NOTE 2 - INVENTORIES
Inventory, consisting of electronic components, is stated at the
lower of cost (FIFO) or market.
NOTE 3 - RECLASSIFICATIONS
Certain classifications have been made to the 1994 financial
statements to conform with the current period presentation.
NOTE 4 - DISCONTINUED OPERATIONS
At a Board of Directors meeting held in March 1995, the Board
approved the sale of certain assets of the Company's brokerage
business (the "Discontinued Business") to Mr. Hubert Scharnowski, the
Company's former Chairman and Chief Executive Officer and who was
at the time a member of the Board of Directors (Mr. Scharnowski
subsequently resigned), for 700,000 shares of the Company's
common stock owned by Mr. Scharnowski and certain releases from
employment and other consulting agreements with Mr. Scharnowski.
The assets sold consisted of fixed assets with nominal carrying value
and the brokerage customer list which value was not reflected on the
Company's books and records. The Company recognized a gain of
approximately $73,000 net of related costs and income taxes in fiscal
1995. Operating results for the Discontinued Business for the
periods presented are shown separately in the accompanying statements
of operations.
Three Months Ended
August 31,
1995 1994
$ - $123,921
======== ========
The above amounts are not included in net revenues in the
accompanying statements of operations.
NOTE 5 - CONSULTING AGREEMENT
As of August, 1995, the Company entered into a consulting agreement
with Mr. George Tsirivakos (an Officer and Director of the Company)
and his affiliate Tsirivakos Software for the period August 1, 1995
to July 31, 2000 at a monthly rate of 6000 Marks ($4,100 using
exchange rates in effect at August 31, 1995). On each June 30 on
which this contract is in effect and not terminated (beginning June
30, 1996), EAG shall award Mr. Tsirivakos a number of shares of
common stock equal to the quotient of dividing $15,000 by the average
of the closing bid and asked prices of the stock as reported by the
principal market in which the Company's common stock trades for the
thirty (30) days prior to the June 30 in question, but in no event
less then $.20 per share.
Furthermore, the Company granted Mr. Tsirivakos an option to purchase
an aggregate of 500,000 shares of common stock, exercisable in whole
or in part after the dates set forth below:
Number of
Shares First Date Exercisable Price
100,000 June 30, 1996 U.S. $.20
100,000 June 30, 1997 U.S. $.30
100,000 June 30, 1998 U.S. $.40
100,000 June 30, 1999 U.S. $.50
100,000 June 30, 2000 U.S. $.60
Also in August 1995, the Company entered into an employment agreement
with Mr. Tsirivakos for an indefinite period at an annual
compensation of 108,000 Marks ($74,000 using exchange rates in effect
at August 31, 1995).
NOTE 6 - ISSUANCE OF COMMON STOCK
In fiscal 1995, the Company issued 50,000 shares of common stock to a
consultant in satisfaction of $10,000 in liabilities owed to the
consultant.
NOTE 7 - GOING CONCERN
As reflected in the consolidated financial statements, the Company
has suffered recurring losses and has a working capital deficiency.
The Company's continued existence is dependent upon its ability to
achieve and maintain profitable operations and positive cash flow.
The Company's liquidity and capital resources to date have been
provided from proceeds from sales of equity, trade credit and, to a
limited extent, operating activities. As discussed under Item 2,
the Company currently requires additional financing. Management is
exploring possible sales of equity or issuance of debt to enable the
Company to continue in existence. There can be no assurance that the
Company will be able to raise additional capital or that if capital
is available it will be available on favorable terms.
<PAGE>
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three months ended August 31, 1995 compared to
the three months ended August 31, 1994
In the first quarter of fiscal 1996 the Company reported a loss from
continuing operations of $267,967 as compared with a loss of $163,269
in fiscal 1995.
The Company's overall revenues decreased from $894,666 in the first
quarter of fiscal 1995 to $572,960 for the comparable period in fiscal
1996, a decrease of $321,706 or 36%. The decrease in revenues in 1996 as
compared with 1995 is principally due to a one-time large sale of hardware
in 1995 to a single customer which did not recur in 1996. As a result,
hardware sales decreased by $337,616 or 89% in the first quarter of fiscal
1996 as compared with fiscal 1995. License fees from the Satquote system
increased by approximately $17,615 or 4%.
Overall expenses decreased from $1,070,535 first quarter of fiscal 1995 to
$840,927 for the comparable period in fiscal 1996, a decrease of $229,608
or 22%. Direct expenses relating to revenues decreased by $202,194 or
31%. This decrease is primarily related to a decrease in cost of sales
attributable to the sale of hardware in the first quarter of fiscal 1995
which did not recur in 1996. Selling, general and administrative expenses
decreased by $56,133 or 16% in the first quarter of fiscal 1996 as
compared with fiscal 1995. The decrease is primarily due to cost
reductions implemented in the last quarter of fiscal 1995.
In the first quarter of fiscal 1996, the Company incurred approximately
$81,000 of research and development costs as compared with approximately
$53,000 in the comparable period of fiscal 1995, a $28,000 increase or
53%. The increase is primarily related to the shift from capitalized
software development to research and development in 1996.
The Company believes that the results of operations are in line with the
restructuring program effected in the third quarter of fiscal 1995 as
further detailed in the Form 10-KSB for the year ended May 31, 1995.
Financial Condition and Liquidity
As a result of the Company's continued losses, deficiency in working
capital, and relatively high level of payables, its independent public
accountants have included an explanatory paragraph in their audit report
on the Company's May 31, 1991 financial statements regarding the Company's
ability to continue as a going concern.
Historically, the Company's liquidity and capital resources have been
provided from proceeds from sales of equity, trade credit and, to a
limited extent, operating activities. The Company does not have any lines
of credit, long-term debt, or other credit facilities other than day-to-
day credit extended by its suppliers.
The Company's continued existence is dependent upon its ability to achieve
and maintain profitable operations and positive cash flow. The Company
currently requires additional financing to continue to operate. No such
financing has yet been secured and management intends to seek such financing
through the sale of equity or debt. There can be no assurance such
financing will be obtained.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) On June 13, 1995, the Company sent an information
statement to the holders of its Common Stock notifying
such holders that a majority of the shares of Common
Stock intended to amend the Company's Certificate of
Incorporation by consent action (i) to increase the
number of shares of Common Stock from 15,000,000
shares to 35,000,000 shares and the number of shares
of Preferred Stock from 1,000,000 shares to 2,000,000
shares, and (ii) to provide that the number of
directors of the Company is such number, between three
and five, as is specified in the By-laws. These
amendments were effected on July 13, 1995.
(b) Not applicable.
(c) The holders of 7,800,000 shares of Common Stock,
representing 52.8% of the outstanding shares on July
13, 1995, consented in writing to the foregoing
amendments.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3 Certificate of Incorporation, as amended.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter
for which this report is filed.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EUROAMERICAN GROUP INC.
Date: October 16, 1995 By: /s/Alexis Charamis
Alexis Charamis, Chairman of
the Board and Chief Executive Officer
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
3 Certificate of Incorporation, as amended (incorporated
by reference to Exhibit 3.1 to the Annual Report on
Form 10-KSB for the year ended May 31, 1995).
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF EUROAMERICAN GROUP INC. AS OF AND FOR THE
THREE MONTHS ENDED AUGUST 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 143,493
<SECURITIES> 0
<RECEIVABLES> 87,591
<ALLOWANCES> 3,100
<INVENTORY> 264,396
<CURRENT-ASSETS> 624,570
<PP&E> 639,405
<DEPRECIATION> 511,328
<TOTAL-ASSETS> 961,965
<CURRENT-LIABILITIES> 1,228,261
<BONDS> 0
<COMMON> 16,060
0
0
<OTHER-SE> (282,356)
<TOTAL-LIABILITY-AND-EQUITY> 961,965
<SALES> 519,265
<TOTAL-REVENUES> 572,960
<CGS> 33,657
<TOTAL-COSTS> 457,286
<OTHER-EXPENSES> 383,641
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (267,967)
<INCOME-TAX> 0
<INCOME-CONTINUING> (267,967)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (267,967)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
