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 AUGUST 31, 1996.
[_] 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 October 1, 1996, was 20,498,333.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
August 31, 1996
(Unaudited)
CURRENT ASSETS:
Cash $ 235,995
Accounts receivable, net of allowance
of $55,000 111,232
Inventory 150,451
Foreign taxes receivable 12,383
Prepaid expenses and other 48,269
--------
TOTAL CURRENT ASSETS 558,330
PROPERTY AND EQUIPMENT, less
accumulated depreciation 87,752
SOFTWARE DEVELOPMENT COSTS, less
accumulated amortization 30,197
DEPOSITS AND OTHER ASSETS 27,109
--------
TOTAL ASSETS $ 703,388
========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 868,198
Customer deposits and unearned revenue 54,940
Other 50,000
--------
TOTAL CURRENT LIABILITIES 973,138
--------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock ($.001 par value;
2,000,000 shares authorized):
Series A Preferred Stock (257,500
shares issued and outstanding)
(liquidation preference $515,000) 257
Common stock ($.001 par value; 35,000,000
shares authorized; 20,498,333 shares
issued and outstanding) 20,498
Additional paid-in capital 5,588,564
Accumulated deficit (5,745,333)
Stock subscription receivable (25,000)
Cumulative translation adjustment (108,736)
--------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (269,750)
--------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 703,388
========
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,
1996 1995
REVENUES:
License and exchange fees $ 320,520 $ 444,130
Net system sales 25,446 43,693
Other 11,012 10,002
--------- --------
TOTAL REVENUES 356,978 497,825
--------- --------
COSTS AND EXPENSES:
Cost of Sales:
Market data and communication costs 343,298 348,494
Cost of system sales 14,121 33,657
--------- ---------
TOTAL COST OF SALES 357,419 382,151
--------- ---------
Selling, general and administrative 311,107 302,214
Research and development 76,217 81,427
--------- ---------
TOTAL EXPENSES 744,743 765,792
--------- ---------
NET (LOSS) $ (387,765) $ (267,967)
========= =========
NET (LOSS) PER SHARE: $ (.02) $ (.02)
========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING 20,498,333 16,060,000
========== ==========
See Selected Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Three Months Ended
August 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(387,765) $(267,967)
--------- ---------
Adjustments to reconcile net (loss) to
net cash provided by (used in) operating
activities:
Expenses paid by issuance of options 23,000 -
Depreciation and amortization 51,605 61,287
Changes in assets and liabilities:
(Increase) decrease in:
Inventory 1,485 21,346
Accounts receivable 4,136 13,480
Foreign tax receivable 4,567 (4,446)
Prepaid and other 13,670 (32,990)
Increase (decrease) in:
Accounts payable and accrued expenses 94,419 (182,964)
Other liabilities (63,396) -
--------- --------
Total adjustments 129,486 (124,287)
--------- --------
Net cash provided by (used in)
operating activities (258,279) (392,254)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of stock subscription
receivable - 250,000
-------- -------
Net cash provided by (used in)
financing activities - 250,000
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (23,350) (5,010)
-------- --------
Net cash (used in) investing
activities (23,350) (5,010)
-------- --------
EFFECT OF EXCHANGE RATES ON CASH (39,892) 35,579
-------- --------
NET INCREASE (DECREASE) IN CASH (321,521) (111,685)
CASH, BEGINNING OF PERIOD 557,516 255,178
-------- --------
CASH, END OF PERIOD $ 235,995 $ 143,493
======== ========
See Selected Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED AUGUST 31, 1996
(UNAUDITED)
<CAPTION>
Preferred Stock Common Stock Additional Stock Cumulative
$.001 par value $.001 par value paid-in Accumulated Subscription Translation
Number Amount Number Amount Capital Deficit Receivable Adjustment Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
June 1, 1995 257,000 $257 20,498,333 $20,498 $5,565,564 $(5,357,568) $(25,000) $ (91,893) $111,858
Net loss - - - - - (387,765) - - (387,765)
Foreign
currency
translation
adjustment - - - - - - - (16,843) (16,843)
Compensation - - - - 23,000 - - - 23,000
------- ---- ---------- ------- ---------- ----------- --------- --------- ---------
Balance,
August 31,
1996 257,500 $257 20,498,333 $20,498 $5,588,564 $(5,745,333) $(25,000) $(108,736) $(269,750)
======= ===== ========== ====== ========= ========== ======== ======== ========
</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, 1996 and the
related consolidated statements of operations, cash flows and changes
in stockholders' equity for the three months ended August 31, 1996
and 1995 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 August 31, 1996
and for all periods presented have been made. The results of
operations for the period ended August 31, 1996 are not necessarily
indicative of the operating results for the full year ending May 31,
1997.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with general accepted
accounting principles 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, 1996.
NOTE 2 - INVENTORIES
Inventory, consisting of electronic components, is stated at the
lower of cost (FIFO) or market.
NOTE 3 - 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 and trade credit.
In June 1996, the Company was notified by AGI, its Italian sales
agent and largest customer, that it would no longer continue as the
Company's Italian sales agent. Since June 1996, virtually all of the
revenues historically generated by AGI have ceased. The Company is
currently seeking a new sales agent in Italy, although there can be
no assurance that it will be successful in entering into a new agency
relationship in Italy or that revenues from a new Italian sales agent
will equal the revenues historically generated by AGI.
In response to the loss from operations and the loss of AGI as Italian
sales agent, management has developed a plan to increase revenues,
reduce expenses, and increase operating cash flow.
In the last quarter of fiscal 1996 and first quarter of fiscal 1997,
the Company entered into a sales agreement in Germany, and sales
representation agreements in the Baltic States, and Lebanon. The
Company is also in negotiations to replace AGI for the Italian agency
and to establish sales agencies in Switzerland and Poland. Furthermore,
the Company executed a sales and marketing agreement with a major
worldwide provider of financial instruments. This sales and marketing
agreement will initially be launched in England and could be expanded
throughout Europe. These new agreements have not yet resulted in
significant revenues. However, the Company expects increased sales
to result from the aforementioned growth in sales representation,
although these can be no assurance that this will occur.
Throughout fiscal 1996 and continuing into fiscal 1997, the Company
has focused on reducing costs. Initially these cost reductions took
the form of reduced headcount, reductions in professional fees, and
the utilization of the Company's proprietary ticker plant. In fiscal
1997, the Company will implement the next stage in the development of
its proprietary ticker plant, through the utilization of a new
satellite transmission of North American financial data to Europe
replacing leased telephone lines. Commencing in November 1996, the
Company's new satellite agreement for its European Downlink will
provide for an approximate 25% reduction in cost as compared with the
existing contract. The Company has made a study of other costs and
has made further reductions in headcount and the utilization of
consultants. The Company continues to seek out other cost savings
opportunities. Lastly, certain officers have notified the Company of
their intention of suspending from 37% to 50% of further compensation
payments to them from September 1, 1996 until such time as the Company's
cash flow improves. The suspension of such compensation payments is
expected to be reviewed on a quarterly basis.
The Company's continued existence is dependent upon its ability to
achieve and maintain positive cash flow. Management believes that
additional financing will be required in the second quarter of fiscal
1997. There can be no assurance such financing will be obtained or
that such financing will have terms favorable to the Company. In the
event that the Company is unable to secure such financing, it may need
to curtail its current operations.
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three months ended August 31, 1996 compared to
the three months ended August 31, 1995
In the first quarter of fiscal 1997 the Company reported a loss from
continuing operations of $387,765 as compared with a loss of $267,967 for
the comparable period of fiscal 1996.
The Company's overall revenues decreased from $497,825 in the first
quarter of fiscal 1996 to $356,978 for the comparable period in fiscal
1997, a decrease of $140,847 or 28%. The decrease in revenues in 1997 as
compared with 1996 is principally due to the loss of the Company's Italian
sales agent and largest customer, AGI, in June 1996.
Overall expenses decreased from $765,792 for the first quarter of fiscal
1996 to $744,743 for the comparable period in fiscal 1997, a decrease of
$21,049 or 3%. Direct expenses relating to revenues decreased by $24,732
or 6%. This decrease is primarily related to a decrease in certain costs
associated with AGI which were no longer required. Selling, general and
administrative expenses increased by $8,893 or 3% in the first quarter of
fiscal 1997 as compared with fiscal 1996.
In the first quarter of fiscal 1997, the Company incurred $76,217 of
research and development costs as compared with approximately $81,427 in
the comparable period of fiscal 1996, a $5,210 decrease or 6%.
Financial Condition and Liquidity
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 and trade credit.
In June 1996, the Company was notified by AGI, its Italian sales agent
and largest customer, that it would no longer continue as the Company's
Italian sales agent. Since June 1996, virtually all of the revenues
historically generated by AGI have ceased. The Company is currently
seeking a new sales agent in Italy, although there can be no assurance
that it will be successful in entering into a new agency relationship in
Italy or that revenues from a new Italian sales agent will equal the
revenues historically generated by AGI.
In response to the loss from operations and the loss of AGI as Italian
sales agent, management has developed a plan to increase revenues, reduce
expenses, and increase operating cash flow.
In the last quarter of fiscal 1996 and the first quarter of fiscal 1997,
the Company entered into a sales agreement in Germany, and sales
representation agreements in the Baltic States, and Lebanon. The Company
is also in negotiations to replace AGI for the Italian agency and to
establish sales agencies in Switzerland and Poland. Furthermore, the
Company executed a sales and marketing agreement with a major worldwide
provider of financial instruments. This sales and marketing agreement
will initially be launched in England and could be expanded throughout
Europe. These new agreements have not yet resulted in significant
revenues. However, the Company expects increased sales to result from the
aforementioned growth in sales representation, although there can be no
assurance that this will occur.
Throughout fiscal 1996 and continuing into fiscal 1997 the Company has
focused on reducing costs. Initially these cost reductions took the form
of reduced headcount, reductions in professional fees, and the utilization
of the Company's proprietary ticker plant. In fiscal 1997, the Company
will implement the next stage in the development of its proprietary ticker
plant, through the utilization of a new satellite transmission of North
American financial data to Europe replacing leased telephone lines.
Commencing in November 1996, the Company's new satellite agreement for its
European Downlink will provide for an approximate 25% reduction in cost as
compared with the existing contract. The Company has made a study of
other costs and has made further reductions in headcount and the
utilization of consultants. The Company continues to seek out other cost
savings opportunities. Lastly, certain officers have notified the Company
of their intention of suspending from 37% to 50% of further compensation
payments to them from September 1, 1996 until such time as the
Company's cash flow improves. The suspension of such compensation payments
is expected to be reviewed on a quarterly basis.
The Company's continued existence is dependent upon its ability to achieve
and maintain positive cash flow. Management believes that additional
financing will be required in the second quarter of fiscal 1997. There
can be no assurance such financing will be obtained or that such financing
will have terms favorable to the Company. In the event that the Company
is unable to secure such financing, it may need to curtail its current
operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule [EDGAR version only]
(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 21, 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 [EDGAR version only]
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 235,995
<SECURITIES> 0
<RECEIVABLES> 166,232
<ALLOWANCES> 55,000
<INVENTORY> 150,451
<CURRENT-ASSETS> 558,330
<PP&E> 753,030
<DEPRECIATION> 635,081
<TOTAL-ASSETS> 703,388
<CURRENT-LIABILITIES> 973,138
<BONDS> 0
0
257
<COMMON> 20,498
<OTHER-SE> (290,505)
<TOTAL-LIABILITY-AND-EQUITY> 703,388
<SALES> 25,446
<TOTAL-REVENUES> 356,978
<CGS> 14,121
<TOTAL-COSTS> 357,419
<OTHER-EXPENSES> 387,324
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (387,765)
<INCOME-TAX> 0
<INCOME-CONTINUING> (387,765)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (387,765)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
