UNITED STATES
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 NOVEMBER 30, 1995.
[_] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT FOR
THE TRANSITION PERIOD FROM ______________ TO ________________.
Commission file number 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
incorporation or organization) Identification No.)
50 Broad Street, Suite 516
New York, New York 10004
(Address of principal executive offices)
(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 Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing 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 January 1, 1996, was 16,060,000.
Page __ of ___ Pages
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
November 30, 1995
(Unaudited)
CURRENT ASSETS:
Cash $ 186,819
Accounts receivable, net of allowance 92,228
Inventory 262,910
Foreign taxes receivable 81,861
Prepaid expenses and other 32,717
--------
TOTAL CURRENT ASSETS 656,535
PROPERTY AND EQUIPMENT, less accumulated depreciation 118,215
SOFTWARE DEVELOPMENT COSTS, less accumulated amortization 140,632
DEPOSITS AND OTHER ASSETS 39,074
--------
TOTAL ASSETS $ 954,456
========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 978,598
Customer deposits and unearned revenue 82,779
Other 66,617
--------
TOTAL CURRENT LIABILITIES 1,127,994
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock ($.001 par value; 2,000,000 shares
authorized)
Series A Preferred Stock (167,500 shares issued and
outstanding) (liquidation preference $335,000)
Common stock ($.001 par value; 35,000,000 shares 167
authorized; 16,060,000 shares issued and outstanding) 16,060
Additional paid-in capital 4,356,502
Accumulated deficit (4,432,720)
Cumulative translation adjustment (113,547)
----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (173,538)
----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 954,456
==========
See Selected Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For The Six Months Ended For The Three Months Ended
November 30, November 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES:
License and exchange fees $ 805,889 $1,011,911 $ 385,192 $ 510,261
Net system sales 138,089 521,830 75,839 140,521
Other 19,539 28,197 4,680 16,490
---------- ---------- ---------- ----------
TOTAL REVENUES 963,517 1,561,938 465,711 667,272
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of Sales:
Market data and communication
costs 672,132 750,660 319,157 345,587
Cost of system sales 72,137 373,383 42,980 195,720
---------- ---------- ---------- ----------
TOTAL COST OF SALES 744,269 1,124,043 362,137 541,307
Selling, general and administrative 575,397 905,989 273,003 472,199
Research and development 132,436 91,681 51,189 38,973
---------- ---------- ---------- ----------
TOTAL EXPENSES 1,452,102 2,121,713 686,329 1,052,479
---------- ---------- ---------- ----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAX BENEFIT AND
DISCONTINUED OPERATIONS (488,585) (559,775) (220,618) (385,207)
INCOME TAX BENEFIT - 28,075 - 15,477
---------- ---------- ---------- ----------
LOSS FROM CONTINUING OPERATIONS
BEFORE DISCONTINUED OPERATIONS (488,585) (531,700) (220,618) (369,730)
---------- ---------- ---------- ----------
DISCONTINUED OPERATIONS:
Income from discontinued operations
(net of taxes of $0, $28,075, $0
and $15,477) - 52,130 - 28,743
---------- ---------- ---------- ----------
NET LOSS $ (488,585) $ (479,570) $ (220,618) $ (340,987)
========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE:
Continuing operations $ (.03) $ (.04) $ (.01) $ (.03)
Discontinued operations - - - -
---------- ---------- ---------- ----------
$ (.03) $ (.04) $ (.01) $ (.03)
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 16,060,000 11,960,000 16,060,000 11,960,000
========== ========== ========== ==========
</TABLE>
See Selected Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Six Months Ended
November 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(488,585) $(479,570)
--------- ---------
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 105,443 63,764
Changes in assets and liabilities:
(Increase) decrease in:
Inventory 24,965 5,770
Accounts receivable 6,325 (16,955)
Foreign tax receivable 14,437 11,813
Prepaid and other (31,940) 787
Increase (decrease) in:
Accounts payable and accrued
expenses (314,728) 406,731
Other liabilities 16,960 (97,590)
--------- ---------
Total adjustments (178,538) 374,320
--------- ---------
Net cash provided by (used in)
operating activities (667,123) (105,250)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of Preferred Stock 335,000 -
Collection of stock subscription
receivable 250,000 70,000
Payments of stockholder advances - (17,260)
Repayments under capitalized leases - (4,765)
--------- ---------
Net cash provided by financing
activities 585,000 47,975
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,900) (92,298)
--------- ---------
Net cash (used in) investing
activities (5,900) (92,298)
--------- ---------
EFFECT OF FOREIGN EXCHANGE RATES ON CASH 19,664 27,987
--------- ---------
NET (DECREASE) IN CASH (68,359) (121,586)
CASH, BEGINNING OF PERIOD 255,178 296,384
--------- ---------
CASH, END OF PERIOD $ 186,819 $ 174,798
========= =========
See Selected Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995
(UNAUDITED)
<CAPTION>
Preferred Stock Common Stock
$.001 par value $.001 par value
Additional Cumulative
paid-in Accumulated Translation
Number Amount Number Amount Capital Deficit Adjustment Total
<S> <C> <C> <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 - - - - - (488,585) - (488,585)
Foreign
currency
translation
adjustment - - - - - - 24,023 24,023
Issuance of
common stock
in satisfaction
of liabilities - - 50,000 50 9,950 - - 10,000
Issuance of
preferred stock 167,500 167 - - 334,833 - - 335,000
------- --- ---------- ------- ------- ----------- ------- --------
Balance,
November 30,
1995 167,500 $167 16,060,000 $16,060 $4,356,502 $(4,432,720) $(113,547) $(173,538)
======= === ========== ======= ========== ============ ========== ==========
</TABLE>
See Selected Notes to Consolidated Financial Statements
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of November 30, 1995 and the
related consolidated statements of operations, cash flows and changes
in stockholders' equity for the six months ended November 30, 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 cash flows at November 30, 1995
and for all periods presented have been made. The results of
operations for the period ended November 30, 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 May 31, 1995 filing on Form 10-KSB.
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 prior period 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 at the
time was a current member of the Company's Board of Directors, 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.
Six Months Ended Three Months Ended
November 30, November 30,
1995 1994 1995 1994
$ - $254,632 $ - $130,711
======== ======== ======== ========
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 (approximately
$4,100 using exchange rates in effect at November 30, 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 common
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 (approximately $74,000 using exchange
rates in effect at November 30, 1995).
NOTE 6 - 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. The Company requires
additional financing. Management may explore possible additional
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 on favorable terms.
NOTE 7 - STOCKHOLDERS' EQUITY
(A) 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.
(B) Preferred Stock
In November 1995, the Board of Directors designated 325,000 shares of
the Company's Preferred Stock, $.001 par value, as Series A Non-
Voting Convertible Senior Preferred Stock ("Series A Preferred
Stock"), with the rights and preferences described below.
The Series A Preferred Stock is not entitled to vote and is not
entitled to any dividends. On November 30, 1997 (the "First
Redemption Date"), the Company shall be entitled to, and on
November 30, 1998 (the "Final Redemption Date"), the Company
shall, redeem all but not less than all of the Series A Preferred
Stock. The Company may, at its election, redeem Series A
Preferred Stock in shares of common stock ("Shares") on the First
Redemption Date, except that the Company may not redeem the Series A
Preferred Stock in Shares on the First Redemption Date unless the
Net Income Test (defined below) is met. If redemption is made in
cash, the redemption price is $2.00 per share plus $.32 per share if
redeemed on the First Redemption Date, and $.48 per share if redeemed
on the Final Redemption Date. If redemption is made in Shares, (i)
if the Net Income Test is met, the number of Shares issued for each
share of Series A Preferred Stock shall be equal to the quotient of
dividing $2.00 by 90% of the Average Price (defined below), and (ii)
if the Net Income Test is not met, the number of Shares is equal to
the Conversion Rate (defined below). "Net Income Test" means that
the Company's consolidated net income, determined in accordance with
generally accepted accounting principles, for the last fiscal year
ending prior to the date of the redemption, is at least $750,000.
"Average Price" means the average of the reported closing high bid
and low asked prices per Share for the 30 trading days ending 15 days
prior to the Corporation's Notice of Redemption in the principal
market in which the Shares are then traded.
The Series A Preferred Stock is convertible into Shares at the option
of the holder on November 30, 1996 and on the First Redemption Date
and the Final Redemption Date at the following rates (the "Conversion
Rate"): 8 Common Shares per share of Series A Preferred Stock, if
converted on November 30, 1996; 7 Common Shares if converted on the
First Redemption Date; and 6 Common Shares if converted on the Final
Redemption Date.
The Series A Preferred Stock has a security interest in all assets of
the Company (other than the stock of the Company's subsidiaries)
to secure the Company's obligation to pay the redemption price in
cash. On liquidation, the Series A Preferred Stock is entitled,
prior to any distribution on Shares, to receive an amount equal to
the amount that would be paid on a redemption of the Series A
Preferred Stock for cash.
In November 1995, the Company issued 167,500 Shares of Series A
Preferred Stock and received proceeds of $335,000.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Six months ended November 30, 1995 compared to
the six months ended November 30, 1994
For the six months ended November 30, 1995 the Company reported a loss
from continuing operations of $488,585 as compared with a loss of $559,775
for the comparable period of fiscal 1994.
The Company's overall revenues decreased from $1,561,938 for the six
months ended November 30, 1994 to $963,517 for the comparable period in
fiscal 1996, a decrease of $598,421 or 38%. The decrease in revenues in
the six months ended November 30, 1996 as compared with fiscal 1995 is
principally due to a one-time large sale of hardware in fiscal 1995 to a
single customer which did not recur in fiscal 1996. As a result, hardware
sales decreased by $383,741 or 74% in fiscal 1996 as compared with fiscal
1995. License fees from the Satquote system declined by approximately
$206,022 or 20% in fiscal 1996.
Overall expenses decreased from $2,121,712 for the six months ended
November 30, 1994 to $1,452,102 for the comparable period in fiscal 1996,
a decrease of $669,610 or 32%. Direct expenses relating to revenues
decreased by $379,774 or 34%. This decrease is primarily related to a
decrease in cost of sales attributable to the sale of hardware in the
first six months of fiscal 1995 which did not recur in 1996. Selling,
general and administrative expenses decreased by $330,592 or 36% in the
first six months of fiscal 1996 as compared with fiscal 1995. The
decrease is primarily due to cost reductions enacted in the last quarter
of fiscal 1995.
In the first six months of fiscal 1996, the Company incurred $132,436 of
research and development costs as compared with approximately $91,681 in
the comparable period of fiscal 1995, a $40,755 increase or 45%. The
increase is primarily related to the shift from capitalization of software
development costs 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 May 31, 1995 Form 10-KSB.
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 May 31, 1995
audit report 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.
Management intends to seek such financing through the sale of equity.
There can be no assurance such financing will be obtained.
PART II - OTHER INFORMATION
Item 2. Changes in Securities
(a) Not applicable
(b) Reference is made to Note 7 (B) of the
Selected Notes to Consolidated Financial
Statements in Part I hereof.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
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: January 16, 1996 By: /s/Alexis Charamis
Alexis Charamis, Chairman of
the Board and Chief Executive Officer
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 186,819
<SECURITIES> 0
<RECEIVABLES> 116,051
<ALLOWANCES> 23,823
<INVENTORY> 262,910
<CURRENT-ASSETS> 656,535
<PP&E> 609,691
<DEPRECIATION> 491,476
<TOTAL-ASSETS> 954,456
<CURRENT-LIABILITIES> 1,127,994
<BONDS> 0
0
167
<COMMON> 16,060
<OTHER-SE> (189,765)
<TOTAL-LIABILITY-AND-EQUITY> 954,456
<SALES> 138,089
<TOTAL-REVENUES> 963,517
<CGS> 72,317
<TOTAL-COSTS> 744,269
<OTHER-EXPENSES> 707,833
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (488,585)
<INCOME-TAX> 0
<INCOME-CONTINUING> (488,585)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (488,585)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
