UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended May 31, 1996
[_] Transition Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934 [No Fee Required]
For the transition period from ____________ to ____________.
Commission file number 0-17483
EUROAMERICAN GROUP INC.
(Name of small business issuer 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) (Zip Code)
Issuer's Telephone Number (212) 269-6686
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
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 ____
Check if disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. ____
State issuer's revenues for its most recent fiscal year:
$1,815,843
State the aggregate market value of the voting stock held by
non-affiliates of the registrant on September 9, 1996, computed by
reference to the average of last bid and asked price on the OTC Bulletin
Board on that date: approximately $2,439,667. Solely for purposes of
making this computation, the affiliates of the registrant are its
directors and officers and CAL International Limited.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of shares outstanding of the registrant's Common
Stock, par value $.001 per share (the "Common Stock"), as of August 15,
1996, was 20,498,333.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format: Yes ___; No X
<PAGE>
PART I
Item 1. Description of Business.
(a) Business Development
General
EuroAmerican Group Inc., directly and through its wholly-owned
subsidiaries (the "Company"), supplies real-time business and financial
information through its market quotation system, known as "Satquote." The
system, which utilizes proprietary computer software and hardware
installed on a personal computer, provides financial information on
publicly-traded companies in Europe and the United States, including real-
time stock quotations, option prices, commodities and futures pricing,
foreign currency rates and other financial data, as well as global news
coverage of the world's financial markets. Satquote also performs
analytical functions such as real-time and historical charting,
theoretical options pricing, limit alerts for pre-set highs and lows and
other user definable analytical functions. The flexibility of Satquote
enables subscribers to build a personalized, market-specific network
accessing only data that they select.
The Company was incorporated in the State of Delaware on August
8, 1985. Its executive offices in the United States are located at 50
Broad Street, Suite 516, New York, New York 10004. The Company's
principal operations are conducted in Europe, where the Company operates
through two wholly-owned subsidiaries: EAG Financial Informations GmbH
("EFI GmbH") and EuroAmerican Group PLC ("EAG-PLC"). EFI GmbH is located
at Hanauer Landstrasse 208-216, D-60314 Frankfurt am Main, Germany, and
EAG-PLC is located at 6 Charterhouse Buildings, London, England. In the
United States, the Company operates a technical support office at the
address in New York City referred to above.
The Memorandum of Understanding
CAL International Limited ("CAL") (a significant shareholder of
the Company), the Company, Messrs. Hubert Scharnowski (at the time, the
Company's Chairman and CEO), a corporation controlled by Mr. Scharnowski
(collectively, the "S Group"), George Tsirivakos (the Company's Systems
Consultant and currently a Vice President and Director of the Company),
Alexis Charamis (at the time, the President and principal stockholder of
the Company's agency located in Greece and currently the Company's CEO)
and Eurotech Invest. Ltd., a Liberian corporation, entered into a
Memorandum of Understanding, dated January 23 1995, as amended by an
Amendment to Memorandum of Understanding, dated as of March 30, 1995
(collectively, the "Memorandum"). In part, the Memorandum provides for
the following:
- A reconstitution of the Company's Board of Directors so
that until January 1998 one director shall be Mr. Charamis
(or a designee), one shall be Mr. Tsirivakos (or a
designee), one shall be a designee of CAL and one shall be
Steven C. Millner, the Company's former Chief Financial
Officer. Such elections occurred in February 1995, with
CAL designating Mr. Millner as CAL's designee.
- The resignation of Mr. Scharnowski as Chairman and CEO upon
the filing with the Securities and Exchange Commission of
all past due periodic reports relating to fiscal 1994.
Such filings were made on February 22, 1995 and in early
March 1995, Mr. Scharnowski resigned from these offices.
Mr. Scharnowski was to receive a consulting fee of DM
12,000 per month ($8,500 using exchange rates in effect at
May 31, 1995) for one year and receive 15% of the Company's
net brokerage commissions for the subsequent two years.
Both of these obligations were released in conjunction with
sale of the Brokerage Business described below.
- The appointment of a new Chairman and CEO. Mr. Charamis
was subsequently appointed Chairman and CEO in March 1995.
- A business plan to be developed to include the following:
Settlement of certain existing indebtedness (see Note
13 to the Company's Consolidated Financial Statements
included elsewhere herein)
Reduction of operating costs and raising additional
capital (see Note 6 to the Company's Consolidated
Financial Statements included elsewhere herein)
The Memorandum provides that, for a period ending January 20,
1998, (i) Messrs. Charamis and Tsirivakos have a right of first refusal on
shares of Common Stock that the S Group or CAL desires to sell non-
publicly, and (ii) any sale of shares by the S Group or CAL shall not
exceed the greater of 1% of the outstanding shares or the average weekly
trading volume during the preceding four weeks.
The Memorandum provides that the Company shall grant Mr.
Charamis a four year option expiring in January 1999 to purchase from time
to time up to 2,000,000 shares of Common Stock with anti-dilution
provisions so that the shares subject to the option shall at all times be
not less than 13.3333% of the Common Stock. In fiscal 1996, the option
was extended to January 2000 at which time the maximum number of shares
subject to the option was fixed at 3,387,258 shares (subject to anti-
dilution provisions for stock dividends and the like). The Memorandum
provides that the Company shall grant CAL a four year option to purchase
from time to time up to 1,000,000 shares of the Common Stock. The
purchase price per share under both options is $.20. The Memorandum
provides the option shares have "piggy-back" registration rights.
The foregoing summary description of the Memorandum is qualified
by reference to the full text thereof which is filed as Exhibits 10.5 and
10.6 hereto.
In April 1995, certain assets of the Company's brokerage
business (the "Brokerage Business") were sold to Mr. Hubert Scharnowski
(see Note 3 to the Company's Consolidated Financial Statements included
elsewhere herein). The Company had, until the sale, provided equities,
options, and commodity brokerage services by acting as an introducing
broker to United States based brokerage houses. Mr. Scharnowski resigned
from the Company's Board of Directors in April 1995.
(b) Business of Issuer
General
Virtually all of the Company's customers are located in Europe.
The Company's marketing focus has been in Europe as management believes
that the European market provides greater potential than the United
States, primarily because of more favorable pricing and less competition.
The Company does not have plans to increase its limited presence in the
United States market.
The principal users of the Satquote system are professional
investors, securities brokers, dealers and traders, and portfolio
managers.
The Company's subscribers are charged a fee on either a
quarterly or monthly basis for the services provided. The fee varies
depending upon the number of Satquote systems and services (for example,
number of markets and news services for which information is provided)
installed on the customer's computer. In addition, the subscriber is
responsible for paying user fees to the various exchanges from which the
subscriber has selected to receive market information. The Company
receives revenues from either sale or lease of computer hardware referred
to under "Supply Sources" below.
The Satquote System
The Company's proprietary software and RISC-based, 32-bit co-
processor board operate on standard personal computers. Data for the
Satquote system are transmitted by the Company via satellite and/or leased
public telecommunications lines to subscribers. The data are fed to the
co-processor on a continuous basis. The utilization of the co-processor
enables the subscriber to use his personal computer for other functions,
such as for word processing or spreadsheet applications. The Satquote
system is intended to allow the subscriber to access the Satquote system
at any time (24 hours a day, 365 days a year) and receive real-time
prices, rates and other data. Accordingly, subscribers do not need to
dedicate their personal computers solely to the Satquote system.
The Satquote system is available in either a DOS or Windows
version. Since November 1994, when the Company introduced its Windows
version, a majority of Satquote sales have been for the Windows version.
The Windows version takes full advantage of the Windows architecture and
factors including, networking capabilities and provides the user with a
low-cost solution in multi-user environments.
Data for the Satquote system which consist of real-time market
quotations and newswire services from markets and exchanges (i.e.: New
York Stock Exchange, American Stock Exchange, NASDAQ and the London,
German, Swiss and Greek exchanges) and newswire services are integrated by
the Company through a self-developed integration station (known as a
ticker plant).
The ticker plant became operational in September 1994.
Previously, the Company purchased market data from an international
wholesaler, TeleKurs (North America) Inc. The Company believes that it is
the first company to develop an international integration system which
operates in a PC environment using sophisticated network technology. The
Company believes this configuration is significantly more cost effective
and reliable then a main frame computer. Moreover its modularity enables
quick and cost effective additions of new market centers and other
products. The Company also believes that the operations of its own
integration system enables the Company to better control the quality and
integrity of its data supply, and will also lead to cost reductions. For
additional information, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Furthermore, the Company believes opportunities may exist to
sell the data to other financial information providers, both as a primary
and back-up data feed. However, to date, the Company has not made efforts
to sell the data.
Supply Sources
The Company depends on third parties for the supply of financial
data and news that feed the Satquote system. The Company purchases data
from various suppliers including various regional and national securities
exchanges and markets, and various newswire services.
The Company requires a steady source of computer hardware,
including, but not limited to, co-processor boards, modems and satellite
dishes, necessary to operate the Satquote system. Although prices of
these products vary, the Company does not anticipate an inability to
procure adequate supplies of these products or any significant changes in
the prices of these products.
The Company currently offers Satquote via satellite and leased
public telephone lines in Europe, the Middle East and Northern Africa.
The Company has a satellite transmission agreement with NBC/Superchannel,
a television station in the United Kingdom, under which Superchannel is
providing satellite capacity to the Company to transmit its Satquote
system to subscribers throughout Europe, the Middle East and Northern
Africa. The Company's satellite transmission agreement with Superchannel
has a term ending in November 1996 and requires an annual fixed fee,
payable monthly. A new agreement has been negotiated with
NBC/Superchannel to extend the contract until November 1998 and includes
more favorable pricing than is provided in the current contract. The new
agreement is expected to be executed in October 1996.
In September 1994, the Company's satellite transmission in North
America was suspended due to a default by the Company with respect to
payments to the satellite provider. The suspension of satellite
transmission did not have a material impact on the Company due to the
limited number of United States customers utilizing satellite
transmission. In connection with a settlement agreement with this
satellite provider, the Company entered into a new satellite lease which
provided for the Company to resume service of the satellite no later than
January 1, 1996 for a six year term. In fiscal 1996, the Company and the
satellite provider agreed to cancel the new lease.
The Company uses leased telephone lines to transmit data from
North America to Europe and across Europe. These leased lines are
provided by national and regional public and private telephone companies.
Contracts for these leased lines are generally terminable by either party
on three (3) months notice. The Company does not anticipate an inability
to procure adequate leased lines or any significant change in the prices
of these lines.
Marketing and Distribution
The Company markets Satquote through the use of its own sales
force in Germany and England. The Company uses a combination of direct
marketing, including telemarketing, and advertising in trade magazines.
The Company uses independent sales agents throughout other parts of Europe
and the Middle East. The Company has written agreements with independent
sales agents in the following countries:
Estonia
Greece (1)
Lebanon
Norway
Netherlands
___________________
(1) This agency is beneficially owned by the Company's CEO.
The Company also has understandings with various firms regarding
sales representation of the Company in the following countries:
Israel
Switzerland
Cyprus
Certain of the written sales agency agreements include minimum
annual license fees payable to the Company which vary in amount depending
on geographic region. Each sales agent is responsible, pursuant to
Company specification and monitoring, for advertising and sales
promotional activities and, in certain cases, system installations and
local system maintenance. The Company's sales agency agreements are
generally terminable by either the Company or the sales agent upon 30 days
written notice by either party.
See "Customers" for additional information regarding the
Company's marketing and distribution.
At present, there are several companies providing quotation
services comparable to those provided by the Company's Satquote system.
Most of those companies have substantially greater financial,
technological and personnel resources than the Company.
Research and Development
The Company has an ongoing research and development program.
This program includes product enhancements and updates to reflect changes
in technology. Satquote has been enhanced to make the system more
powerful by increasing its transmission speed, enabling it to carry more
quotes and news and to distribute data faster. During the fiscal year
ended May 31, 1996, the Company expended approximately $253,000 on
research and development activities as compared with approximately
$201,000 in the fiscal year ended May 31, 1995.
Customers
As of August 1996 there were approximately 210 Satquote systems
in use. Virtually all of these systems are located in Europe and the
Middle East.
In June 1996, the Company was notified by Agenzia Giomalistica
Italia SPA. ("AGI"), the Company's Italian sales agent and largest
customer, that it would no longer continue as the Company's Italian sales
agent. AGI is an Italian state-owned news agency. The Company supplied
certain financial data and transmitted AGI's news service to AGI's
customers located in Italy. Revenue from AGI in fiscal 1996 and 1995
represented approximately 23% and 22% of the Company's gross revenues,
respectively. Management believes that virtually all of the revenue
introduced by AGI will no longer continue. 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 be similar to
AGI's.
No other single customer represented in excess of 10% of the
Company's revenues (excluding sales agents) in fiscal 1996 or 1995.
Government Regulation
The Company's use of telecommunications facilities, including
telephone and satellite communications facilities, entails compliance, by
either the Company or entities from which the Company obtains such
services, with the rules of various governmental and regulatory agencies.
Such compliance can sometimes be time-consuming and costly, but to date
such compliance has not and is not anticipated to pose any substantial
difficulties to the Company's operations.
Intellectual Property
Other than in the United Kingdom, as described below, the
Company does not own and has not applied for copyright or patent
protection for its proprietary computer software and hardware products,
nor does it believe such protection is necessary. The Company utilizes
various anti-pirating technologies in its software product. "Satquote" is
a registered trademark in the United Kingdom.
Employees
The Company employs eleven persons on a full-time basis.
Item 2. Description of Property.
The Company leases approximately 600 square feet of office space
in New York City as its United States corporate headquarters. Such lease
provides for annual rental payments of $16,870 and expires in 1999. EFI
GmbH leases approximately 4,000 square feet as its operating office in
Frankfurt, Germany, at a monthly rental of approximately $7,900 (using
exchange rates in effect at May 31, 1996) under a lease that expires in
December 1997.
Item 3. Legal Proceedings.
In January 1995, the Company was notified by the Securities and
Exchange Commission (the "SEC") that the Company may be subject to an
enforcement action and civil penalties arising from its failure to file
its periodic reports. The unfiled reports were filed in February 1995 and
the Company has not received any subsequent correspondence from the SEC in
this regard. No provision has been made in the accompanying financial
statements for the ultimate outcome of this uncertainty.
From time to time, the Company has been subject to litigation
initiated by suppliers seeking payment of overdue amounts owed to them.
During fiscal 1995, the Company settled various litigation of this type
and recognized an aggregate gain before tax effects of approximately
$198,400.
In 1996, a legal action was brought against the Company by
Locat, SPA, an Italian financing company ("Locat"). Locat alleges that in
1994 it made payments aggregating 115,600 DM (approximately $76,000 using
exchange rates in effect at May 31, 1996) for the purchase of certain
equipment which was purportedly not delivered to Locat. The Company's
records indicate that the sales in question were made to Fainex, SPA, the
Company's then sales agent in Italy ("Fainex"). This case is in the early
stages and therefore the ultimate outcome of this matter is not currently
determinable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the holders of Common
Stock during the fourth quarter ended May 31, 1996.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's securities trade in the over-the-counter market on
the OTC Pink Sheets under the symbol EUAME and on the OTC Bulletin Board
under the symbol EUAM. The following table sets forth the range of the
reported closing high asked and low bid quotations for the Company's
Common Stock during the periods indicated for the last two fiscal years.
The quotations represent prices between dealers, do not include retail
markups, markdowns or commissions, and do not necessarily represent actual
transactions.
High Asked Low Bid
Fiscal 1995
June 1, 1994 to August 31, 1994 $1.875 $.75
September 1, 1994 to November 30, 1994 3.00 .563
December 1, 1994 to February 28, 1995 3.00 .25
March 1, 1995 to May 31, 1995 .563 .125
Fiscal 1996
June 1, 1995 to August 31, 1995 $.313 $.125
September 1, 1995 to November 30, 1995 .375 .125
December 1, 1995 to February 29, 1996 .219 .063
March 1, 1996 to May 31, 1996 .813 .188
As of September 9, 1996, there were 156 record holders of the
Company's Common Stock, which includes shares of Common Stock held by
nominees.
The Company has not paid any cash dividends on its Common Stock
and does not currently intend to declare or pay cash dividends in the
foreseeable future. The Company intends to retain any earnings that may
be generated to provide funds for the operation and expansion of its
business.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition and Liquidity
As a result of the Company's continued losses and deficiency in
working capital, the Company's independent public accountants have
included a modification to their audit report expressing substantial doubt
about the Company's ability to continue as a going concern.
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. Revenues from AGI in 1996 and 1995
represented approximately 23% and 22% of the Company's gross revenues,
respectively. Management believes that virtually all of the revenues
introduced by AGI will no longer continue. 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 develop similar
to those of AGI.
Historically, the Company's liquidity and capital resources have
been provided from proceeds from sales of equity and trade credit. 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.
In response to the loss from operations and the loss of AGI,
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 has 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. 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 provides 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, Messrs. Charamis and Millner
have notified the Company of their intention of suspending 50% of further
compensation payments to them subsequent to September 1, 1996 and Mr.
Tsirivakos has agreed to an approximate 37% suspension in further
compensation payments, with all such suspensions to be reviewed on a
quarterly basis.
There can be no assurance that managements' plan will reduce the
Company's negative cash flow sufficiently for the Company to continue as a
going concern. The Company's continued existence is dependent upon its
ability to achieve and maintain positive cash flow. Management believes
it is likely that additional financing will be required. There can be no
assurance such financing will be obtained or that such financing will have
terms favorable to the Company.
Management is also considering merger and acquisition
opportunities. There can be no assurance that the Company will be able to
identify and consummate a merger or acquisition. If a merger or
acquisition is consummated the Company will most likely need to obtain
additional financing. There can be no assurance that said financing can
be achieved and that if achieved will be on terms favorable to the
Company.
The Company has no material commitments for capital
expenditures.
Year Ended May 31, 1996 Compared with Year Ended May 31, 1995
Management's discussion and analysis has been presented in a
manner consistent with the financial statements with respect to the
presentation of the Brokerage Business as a discontinued operation.
In fiscal 1996, the Company reported a loss from continuing
operations of $1,490,253 as compared with $1,241,694 for the prior year.
Managements' plan for 1996 had two basic tenets: increase gross
revenues with particular emphasis on revenues from license fees through an
increase in the number of Satquote users and a reduction in operating
expenses.
The Company's overall revenues decreased from $2,584,456 in
fiscal 1995 to $1,815,843 in fiscal 1996, a decrease of $768,613 or 30%.
The decrease is primarily due to one-time hardware sales to AGI in fiscal
1995 which did not recur in fiscal 1996. Also, in fiscal 1996, management
refocused the way in which the Satquote system is sold. Historically, the
Company sold the hardware necessary to operate Satquote as a one-time up
front cost to the customer. The hardware historically carried gross
margins of up to 80%. In an attempt to gain market share, and in part due
to competitive market pressure, the Company substantially reduced profit
margins to approximately 30% on sales of hardware and in some cases
provided the customer with hardware at no cost. As a consequence of this
strategy and the reduction in sales to AGI, net system sales (hardware)
decreased by $536,629 or 75% in fiscal 1996. License fees decreased by
$236,605 or 13% in fiscal 1996. In fiscal 1996, the Company experienced
an increase of 33% in the number of Satquote systems. However, the
increase in installed systems did not result in a net increase in license
fees due to a reduction in the license fee pricing structure and lower
average per terminal pricing. The reduction in pricing was in part due to
increasingly competitive market conditions. The average per terminal
price decreased in fiscal 1996 due to an increase in the number of
customers operating in a multi-user environment, which carries reduced
progressive pricing for customers with multiple systems.
Operating expenses decreased from $4,013,650 in fiscal 1995 to
$3,347,096 in fiscal 1996 a decrease of $666,554 or 17%. Direct expenses
relating to revenues decreased by $521,139 or 25%. This decrease is due
primarily to a decrease in cost of system sales of $363,130 or 71%
corresponding with the decline in system sales. Additionally, the Company
realized a decrease in market data and communication costs of $158,009 or
10%. This decrease primarily results from savings by utilizing the
Company's data integration plant (ticker plant) in all of fiscal 1996 as
compared with a part of fiscal 1995. Selling, general and administrative
expenses decreased by $197,613 or 12% in fiscal 1996 as compared with
fiscal 1995. This decrease is due primarily to a reduction in
professional fees of approximately $160,000 in fiscal 1996 as compared
with fiscal 1995 resulting from one time costs associated with the
execution of the Memorandum of Understanding; a reduction in bad debt
expense of approximately $90,000; and other cost savings of approximately
$27,000. These savings were offset by a provision for litigation of
$80,000.
In fiscal 1996, the Company incurred $253,298 of research and
development costs as compared with $201,100 in fiscal 1995, an increase of
$52,198 or 26%. This increase is primarily related to the shift from
capitalized software development to research and development in 1996 and
increased development costs associated with the introduction and
integration of new technologies.
Year Ended May 31, 1995 Compared with Year Ended May 31, 1994
In fiscal 1995, the Company made significant changes to its
operating structure. The Company's Board of Directors was reconstituted
with three (3) new members and a new Chairman was elected. Furthermore,
there were significant changes to senior operating management. The new
management team has addressed the following matters:
- Resolving outstanding lawsuits
- Resolving outstanding debts
- Raising capital
- Stabilizing performance of the Satquote system
- Increasing marketing efforts
The Company has been able to resolve all outstanding lawsuits on
what management believes to be favorable terms. Senior management has met
with significant creditors and in a number of cases obtained discounts on
past due amounts and in certain cases extended repayment terms.
As discussed in Note 6 to the financial statements, the Company
commenced a private placement of shares which upon completion raised
$950,000 of new capital, the proceeds of which were used, in part, to fund
settlements of lawsuits and past-due creditors.
During fiscal 1995, the Company implemented its data integration
system (ticker plant) and introduced its Windows Satquote system. The
Company is in the process of negotiating with third party sales agents and
marketing firms to enhance the Company's marketing efforts in Europe.
In March 1995, the Board of Directors approved the sale of
substantially all of the assets of its Brokerage Business to Mr. Hubert
Scharnowski, the Company's former Chairman and Chief Executive Officer and
member of the 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 Company
recognized a gain of approximately $73,000 net of related costs and income
taxes from this sale (See Note 3 to the financial statements).
Management's discussions and analysis has been presented in a
manner consistent with the financial statements with respect to the
presentation of the Brokerage Business as a discontinued operation.
In fiscal 1995, the Company reported a loss from continuing
operations of $1,241,694 as compared with $703,095 for the prior year.
The Company's overall revenues decreased from $3,353,306 in
fiscal 1994 to $2,584,456 in fiscal 1995, a decrease of $768,850 or 23%.
License fees from the Satquote system decreased by $609,146 or 25%. The
decrease resulted primarily from an erosion in the Company's customer
base. Management believes that the erosion in the customer base results
from delays in the introduction of its Windows based product, a delay in
the transition to the new satellite provider in Europe which provides a
speedier transmission of data, and delays in the implementation of the
Company's data integration system. These delays and system interruptions
caused a loss of customers in fiscal 1994 which continued throughout most
of fiscal 1995. Net system sales decreased by $136,835 or 16%. The
decrease primarily relates to the matters discussed above and a large
system sale to AGI in 1994.
Operating expenses decreased from $4,185,001 in fiscal 1994 to
$4,013,650 in fiscal 1995, a decrease of $171,351 or 4%. Direct expenses
relating to revenues decreased by $32,066 or 2%. This decrease results
from a decrease in market data and communication costs of $145,583. This
decrease reflects reduced costs associated with the operations of the
European Satellite pursuant to a new contact in 1995. However, this was
offset by increased costs associated with cost of system sales of $113,517
or 28%. This increase results from increases in the cost of memory chips,
failure to receive volume discounts which were available in 1994, and
replacement of out-of-date technology. Selling, general and
administrative expenses decreased by $205,196 or 11% in fiscal 1995 as
compared with fiscal 1994. This decrease primarily results from a
reduction of a one time charge for bad debt expense in fiscal 1994 of
approximately $515,000 offset by certain one-time charges associated with
the Company's restructuring pursuant to the Memorandum of Understanding.
In fiscal 1995, the Company incurred $201,100 of research and
development costs as compared with $135,189 in fiscal 1994, an increase of
$65,911 or 49%. This increase is primarily related to the shift from
capitalized software development to research and development in 1995.
Foreign Operations and Foreign Currency Transactions
A substantial portion of the Company's operations are conducted
in foreign countries, primarily located in Western Europe. The Company
primarily transacts business in German Marks, British Pounds, U.S. Dollars
and Swiss Francs. The Company reduces its exposure to foreign currency
fluctuations to the best of its ability by attempting to match inflows and
outflows with the same currency. The Company's operations in Germany, the
United Kingdom and the United States are conducted primarily in their
respective local currencies, hence the risk of fluctuations in foreign
currencies has not had a significant effect on operations. The operating
companies in the consolidated group make intercompany loans to each other
which are unhedged and the Company is exposed to potential gains or losses
resulting in changes in foreign currencies on these amounts. The Company
records translation gains and losses on intercompany balances as a
component of stockholders' equity in the cumulative translation adjustment
account, because settlement of these balances is no longer planned or
anticipated in the foreseeable future. These amounts resulted in
increases of $49,601 and $214,282 and in stockholders' equity in fiscal
1996 and 1995, respectively.
For financial reporting purposes, the Company considers the
respective local currency of its operating subsidiaries as the functional
currency (German Marks and British Pounds), which is different than the
reporting currency (i.e., the U.S. Dollar). Fluctuations in the
functional currencies have historically affected the reported amounts as
follows:
Using Prior Effect of
Year's Change in
As Reported Exchange Rates Foreign Currency
Fiscal Year Ended May 31, 1996
Revenues . . . . . . . $1,815,843 $1,752,290 $63,553
Net Loss . . . . . . . $1,413,433 $1,378,548 $34,885
Total Assets . . . . . $1,098,513 $1,163,548 ($65,035)
Total Liabilities . . . $ 986,655 $1,069,181 ($82,526)
Fiscal Year Ended May 31, 1995
Revenues . . . . . . . $2,584,456 $2,323,165 $ 261,291
Net Loss . . . . . . . $ 893,430 $ 860,138 $ 33,292
Total Assets . . . . . $1,401,829 $1,275,047 $ 126,782
Total Liabilities . . . $1,455,805 $1,306,986 $ 148,819
Impact of Inflation
Inflation has not had a significant impact on the Company's
operations.
<PAGE>
Item 7. Financial Statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Reports of Independent Accountants . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheet as of May 31, 1996 . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the years
ended May 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity <Deficit> for
the years ended May 31, 1996 and 1995 . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the years
ended May 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . F-7
<PAGE>
ARTHUR
ANDERSEN
Report of Independent Public Accountants
To the Board of Directors of EuroAmerican Group, Inc.:
We have audited the accompanying consolidated balance sheet of
EuroAmerican Group, Inc. and subsidiaries as of May 31, 1996, and the
related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the two years in the period ended
May 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the
financial statements of EuroAmerican Group PLC, a foreign subsidiary,
which statements reflect total assets of 8 percent as of May 31, 1996, and
total revenues of 11 percent and 10 percent for the years ended May 31,
1996 and 1995, respectively, of the consolidated totals. Those statements
were audited by other auditors whose report has been furnished to us and
our opinion, insofar as it relates to the amounts included for this
entity, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of EuroAmerican Group, Inc. and
subsidiaries as of May 31, 1996, and the results of their operations and
their cash flows for each of the two years in the period ended May 31,
1996, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from
operations and, at May 31, 1996, has a working capital deficiency that
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note
2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Arthur Andersen LLP
New York, New York
September 9, 1996
<PAGE>
Independent Auditor's Report
The Board of Directors of
EuroAmerican Group PLC
We have audited the balance sheet of EuroAmerican Group PLC (a wholly-
owned subsidiary of EuroAmerican Group Inc) as of 31 May 1996 and the
related statement of the profit and loss account and cash flow statement
for the year ended 31 May 1996 which have been prepared in accordance
with generally accepted accounting principles used in the United Kingdom
and have been provided to the management of EuroAmerican Group Inc, for
the purpose of translating the financial statements prepared in English
Pounds Sterling to U.S. dollars and presenting the consolidated financial
position, results of operations and cash flows of EuroAmerican Group Inc,
and Subsidiaries. The financial statements of EuroAmerican Group PLC are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit,
We conducted our audit in accordance with auditing standards accepted in
the United Kingdom which are substantially the same as those used in the
United States. These standards require that we plan and perform our audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above give a true and
fair view of the state of EuroAmerican Group PLC's affairs at 31 May 1996
and of its loss for the year then ended in accordance with generally
accepted accounting policies
United Kingdom Baker Tilly
27 August 1996 Chartered Accountants
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
May 31, 1996
CURRENT ASSETS:
Cash and cash equivalents $ 557,516
Accounts receivable, net of
allowance of $46,000 121,061
Inventory 157,653
Foreign taxes receivable 17,873
Prepaid expenses and other 56,100
---------
TOTAL CURRENT ASSETS 910,203
---------
PROPERTY AND EQUIPMENT, less accumulated
depreciation and amortization 101,227
SOFTWARE DEVELOPMENT COSTS, net of accumulated
amortization of $243,076 51,761
DEPOSITS AND OTHER ASSETS 35,322
---------
TOTAL ASSETS $ 1,098,513
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 812,018
Customer deposits and unearned revenue 124,637
Other 50,000
---------
TOTAL CURRENT LIABILITIES 986,655
---------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY:
Preferred stock ($.001 par value; 2,000,000
shares authorized; 257,500 issued) (liquidation
preference $515,000) 257
Common stock ($.001 par value; 35,000,000
shares authorized; 20,498,333 issued and
outstanding) 20,498
Additional paid-in capital 5,565,564
Accumulated deficit (5,357,568)
Stock subscription receivable (25,000)
Cumulative translation adjustment (91,893)
---------
TOTAL STOCKHOLDERS' EQUITY 111,858
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,098,513
=========
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended
May 31,
1996 1995
REVENUES:
License and exchange fees $ 1,597,367 $ 1,833,972
Net system sales 181,850 718,479
Other 36,626 32,005
----------- -----------
TOTAL REVENUES 1,815,843 2,584,456
----------- -----------
COSTS AND EXPENSES:
Cost of Sales:
Market data and communication costs 1,424,429 1,582,438
Cost of system sales 150,961 514,091
----------- -----------
TOTAL COST OF SALES 1,575,390 2,096,529
Selling, general and administrative 1,518,408 1,716,021
Research and development 253,298 201,100
----------- -----------
TOTAL EXPENSES 3,347,096 4,013,650
----------- -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAX BENEFIT, DISCONTINUED
OPERATIONS AND EXTRAORDINARY ITEM (1,531,253) (1,429,194)
INCOME TAX BENEFIT 41,000 187,500
----------- -----------
LOSS FROM CONTINUING OPERATIONS BEFORE
DISCONTINUED OPERATIONS AND
EXTRAORDINARY ITEM (1,490,253) (1,241,694)
----------- -----------
DISCONTINUED OPERATIONS:
Income from discontinued operations
(net of taxes of $55,100) - 102,295
Gain on disposition of discontinued
operations (net of taxes of $39,200) - 72,836
----------- -----------
INCOME FROM DISCONTINUED OPERATIONS - 175,131
----------- -----------
EXTRAORDINARY ITEM:
Gain on debt restructuring (net of
taxes of $41,000 and $93,200) 76,820 173,133
----------- -----------
NET LOSS $(1,413,433) $ (893,430)
=========== ===========
NET INCOME (LOSS) PER SHARE:
Continuing operations $ (.09) $ (.09)
Discontinued operations - .01
Extraordinary item .01 .01
----------- -----------
$ (.08) $ (.07)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 16,654,375 12,426,667
=========== ===========
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED MAY 31, 1996 AND 1995
<CAPTION>
Preferred Stock Common Stock
$.001 par value $.001 par value Additional Cumulative
paid-in Accumulated Stock Translation
Number Amount Number Amount capital Deficit Subscription Adjustment Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
June 1, 1994 - $ - 11,960,000 $11,960 $3,205,769 $(3,050,705) $ - $ (99,714) $ 67,310
Net loss - - - - - (893,430) - - (893,430)
Sale of
subsidiary - - (700,000) (700) (139,300) - - - (140,000)
Sale of stock - - 4,750,000 4,750 945,250 - - - 950,000
Foreign
currency
translation
adjustment - - - - - - - (37,856) (37,856)
------- ------ ---------- ------- ---------- ----------- ------ --------- -----------
Balance,
May 31, 1995 - - 16,010,000 16,010 4,011,719 (3,944,135) - (137,570) (53,976)
Net loss - - - - - (1,413,433) - - (1,413,433)
Issuance of
common stock
in satisfac-
tion of
liabilities - - 100,000 100 19,900 - - - 20,000
Sale of
common stock - - 4,388,333 4,388 972,221 - - - 976,609
Sale of
preferred
stock 257,500 257 - - 514,724 - (25,000) - 489,981
Compensation - - - - 47,000 - - - 47,000
Foreign
currency
translation
adjustment - - - - - - - 45,677 45,677
------- ------ ---------- ------- ---------- ----------- ------ --------- -----------
Balance,
May 31, 1996 257,500 $ 257 20,498,333 $20,498 $5,565,564 $(5,357,568) $(25,000) $ (91,893) $ 111,858
======= ====== ========== ======= ========== =========== ====== ========= ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
May 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,413,433) $(893,430)
---------- --------
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Sale of discontinued operations by
receipt of stock - (140,000)
Expenses paid by issuance of options 47,000 -
Depreciation and amortization 243,302 217,576
Increase in allowance for uncollectible
accounts receivable 45,138 151,639
Decrease (increase) in:
Accounts receivable (73,502) 75,731
Inventory 124,324 21,392
Foreign taxes receivable 76,827 10,910
Prepaid expenses and other (55,914) 44,579
Deposits and other assets 2,262 1,996
Increase (decrease) in:
Accounts payable and accrued expenses (345,252) (131,596)
Customer deposits and unearned revenue (29,445) (96,791)
Other - 50,000
--------- ---------
Total adjustments 34,740 205,436
--------- ---------
Net cash (used in) operating
activities (1,378,693) (687,994)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment (36,348) (68,667)
Software development costs capitalized (10,577) (46,558)
--------- ---------
Net cash (used in) investing
activities (46,925) (115,225)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common and
preferred stock 1,466,590 770,000
Collection of stock subscription
receivable 250,000 -
Repayment of advances from
stockholder - (17,432)
--------- ---------
Net cash provided by
financing activities 1,716,590 752,568
--------- ---------
EFFECTS OF EXCHANGE RATE CHANGES
ON CASH 11,366 9,445
--------- ---------
NET INCREASE (DECREASE)IN CASH AND
CASH EQUIVALENTS 302,338 (41,206)
CASH AND CASH EQUIVALENTS,
beginning of year 255,178 296,384
--------- ---------
CASH AND CASH EQUIVALENTS, end
of year $ 557,516 $ 255,178
========= =========
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS
Euroamerican Group, Inc. ("EAG" or the "Company") was incorporated in
the State of Delaware on August 8, 1985. EAG's activities commenced
June 1, 1987. EAG and its subsidiaries' principal business is the
sale of its real time securities quotation system, Satquote (the
"System"), which employs PC technology to display pricing, statistics
and analytical studies for securities traded on over 40 exchanges in
the United States and the principal markets in Europe, as well as
market charting capabilities. Most of EAG's business activity is
with customers located in Europe.
As of May 31, 1996, EAG is approximately 40% owned by CAL
International, Ltd. (all references to CAL International, Ltd. and
its affiliates are hereinafter referred to as "CAL"), a financial
services corporation operating under the laws of the United Kingdom.
In January 1995, CAL, the Company, Messrs. Hubert Scharnowski, the
Company's former Chairman and CEO, George Tsirivakos, the Company's
Systems Consultant, and Alexis Charamis, the President and Principal
Stockholder of the Company's Agency located in Greece, entered into a
Memorandum of Understanding (the "Memorandum"). In part, the
Memorandum provides for the following:
- A reconstitution of the Company's Board of
Directors whose members CAL has consented
to for three (3) years.
- The resignation of Mr. Scharnowski as
Chairman and CEO upon the submission of
all past due periodic reports to be filed
with the SEC relating to fiscal 1994. Mr.
Scharnowski will receive a consulting fee
of 12,000 German Marks per month ($8,500
using exchange rates in effect at May 31,
1995) for one year and receive 15% of the
Company's net brokerage commissions for
the subsequent two (2) years (both
subsequently settled in conjunction with
the sale of the brokerage business (See
Note 3)).
- The election of Messrs. Charamis and
Tsirivakos to the Board of Directors.
- The appointment of a new Chairman and CEO.
Mr. Charamis was subsequently appointed
Chairman and CEO.
- The Company sought an equity capital
infusion of no less than $500,000 (See
Note 6).
- The New Board of Directors developed a
business plan to include the following:
Settlement of certain existing
indebtedness (Note 13)
Reduction of operating costs
Raising additional capital
- The enactment of a Corporate Governance
Agreement.
- Provides for an indemnification and hold
harmless of the Company's Directors.
In March 1995, the Company's Board of Directors approved the sale of
certain assets of the Company's brokerage business (the "Brokerage
Business") to Mr. Hubert Scharnowski (see Note 3). The Company had,
until this date, provided equities, options, and commodity brokerage
services by acting as an introducing broker to United States based
brokerage houses. Mr. Scharnowski resigned from the Company's Board
of Directors in April 1995.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of EAG and
its subsidiaries (hereinafter collectively referred to as the
"Company"). All material intercompany accounts and transactions have
been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a
maturity of three months or less at the time of purchase to be cash
equivalents.
Inventory
Inventory, consisting of electronic components of the System, is
stated at the lower of cost (first-in, first-out (FIFO) method) or
market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
over the estimated useful life of five (5) years using the straight-
line method. Leasehold improvements are amortized on a straight-line
basis over the shorter of the life of the lease or the related asset.
Software Development Costs
Costs associated with the planning and designing phase of software
development, including coding and testing activities necessary to
establish technological feasibility of computer software products to
be sold, leased or otherwise marketed, are charged to research and
development as incurred. Once technological feasibility has been
determined, costs incurred in the construction phase of software
development, including coding, testing and product quality assurance
are capitalized.
Amortization of capitalized software development costs is provided
using the greater of the amount computed using the ratio of current
gross revenues for a product to the total of current and anticipated
future gross revenues or the straight-line method over the remaining
estimated economic life of the product. An original estimated
economic life of two (2) years was assigned to capitalized software
development costs. Amortization expense amounted to $150,237 and
$64,544 for the years ended May 31, 1996 and 1995, respectively.
Translation of Foreign Financial Statements
The assets and liabilities of EAG's foreign subsidiaries,
EuroAmerican Financial Services, GmbH, EuroAmerican Financial
Information, GmbH, and EuroAmerican PLC, are translated into U.S.
dollars at exchange rates as of the balance sheet date and revenues
and expenses are translated at the average of the rates prevailing
during the year. Adjustments from translating foreign currency
financial statements are accumulated as a separate component of
stockholders' equity.
Revenue Recognition
(i) System sales are recognized when the System is
installed and deemed operational at which time
there are no further significant obligations of
the Company.
(ii) License fees are recognized upon the
installation of the System pursuant to
contracts with customers at which time there
are no further significant obligations of the
Company.
Research and Development Costs
Costs associated with research and development are expensed as
incurred.
Net Loss Per Share
Net loss per share is computed by dividing the net loss for the year
applicable to common stock by the weighted average number of shares
of common stock outstanding during the year. The exercise of options
and conversion of preferred stock were not assumed as their effect
would be antidilutive.
Income Taxes
SFAS No. 109 requires the determination of deferred income taxes
using the liability method under which deferred tax assets and
liabilities are determined based on the differences between the
financial accounting and tax bases of assets and liabilities.
Deferred tax assets or liabilities at the end of each period are
determined using the currently enacted regular tax rate expected to
apply to taxable income in the period in which the deferred tax asset
or liability is expected to be settled or realized. There are no
material cumulative temporary differences to date.
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 (see Note 9). Revenues from AGI in
1996 and 1995 represented approximately 23% and 22% of the Company's
gross revenues. Management believes that virtually all of the
revenues introduced by AGI will not continue. 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 develop similar to those of AGI.
In response to the loss from operations and the loss of AGI,
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 has 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. 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 provides
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 subsequent to September 1, 1996 until such time as
the Company's cash flow improves 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 it is
likely that additional financing will be required. There can be no
assurance such financing will be obtained or that such financing will
have terms favorable to the Company.
NOTE 3 - DISCONTINUED OPERATIONS
At a Board of Directors meeting held in March 1995, the Board
approved the sale of substantially all of the assets of the Company's
brokerage business (the "Discontinued Business") to Mr. Hubert
Scharnowski, the Company's former Chairman and Chief Executive
Officer and member of the 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 which was a minimum annual commitment of 144,000 Marks
($102,000 using exchange rates in effect at May 31, 1995).
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. In fiscal 1995, the Company recognized
a gain of approximately $112,000 net of related costs, resulting from
the sale of these assets. The shares received were valued at
$140,000 the estimated fair value of the stock ($.20 per share).
Management believes the value of the stock received is the basis for
determining the gain on the sale because its value is more clearly
evident than the assets disposed. Operating results for the
Discontinued Business for the periods presented are shown separately
in the accompanying statements of operations.
Net revenues of the Discontinued Business were as follows:
Years Ended
May 31,
1996 1995
$ - $436,437
The above amounts are not included in net revenues in the
accompanying statements of operations.
NOTE 4 - FOREIGN TAXES RECEIVABLE
Foreign taxes receivable consists of value added taxes paid to
foreign taxing authorities which are refundable to the Company.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
1996
Computer and electronic
transmission equipment $519,845
Furniture 65,338
Leasehold improvements 30,693
Automobiles 14,316
--------
630,192
Less: Accumulated depreciation
and amortization 528,965
--------
$101,227
========
NOTE 6 - STOCKHOLDERS' EQUITY
Cumulative Transaction Adjustment
In the fiscal years ended May 31, 1996 and 1995, the Company recorded
$49,601 and $214,282, respectively, of intercompany foreign currency
translation gains resulting from translating intercompany balances
denominated in German Marks and British Sterling into U.S. dollars as
cumulative translation adjustments in stockholders' equity because
settlement of these intercompany balances is not anticipated in the
foreseeable future.
Common Stock
In April 1995, the Company commenced a private placement of its
common stock. The placement was originally for 5,500,000 shares of
the Company's common stock at $.20 per share (the estimated fair
value of the Company's common stock at the date of issuance).
Transfer of these shares was restricted until May 1996. Thereafter,
transferability will depend on whether or not an exemption from
registration is available. The Company has granted the purchasers in
the placement registration rights in the event an exemption is not
available. At May 31, 1995, the Company had completed the offering
and had placed 4,750,000 shares of common stock receiving $700,000.
2,500,000 of these shares were purchased by CAL and 1,750,000 shares
were purchased by an entity affiliated with Mr. Charamis. In July
1995, the Company received the remaining balance of $250,000.
In July 1995, the Company's Certificate of Incorporation was amended
to increase the number of authorized number of shares of common stock
from 15,000,000 to 35,000,000.
In July 1995, the Company issued 100,000 shares of its common stock
in satisfaction of $20,000 of indebtedness to a consultant.
In April 1996, the Company issued 4,388,333 shares of its common
stock in a private placement receiving net proceeds of $976,609.
Preferred Stock
The Board of Directors is authorized to issue, by resolution and
without any action by stockholders, up to 2,000,000 shares of
Preferred Stock and may establish the designations, dividend rights,
dividend rate, conversion rights, voting rights, terms of redemption,
liquidation preference, sinking fund terms and all other preferences
and rights of any series of Preferred Stock, including rights that
could adversely affect the voting power of the holders of Shares. In
November, 1995 the Board of Directors designated 325,000 shares of
Preferred Stock as 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 cash or in
common shares, except that the Company may not redeem the Series A
Preferred Stock in common 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 common
shares, and 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). If the Net Income Test is not met, the number of common
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 common share for the 30
trading days ending 15 days prior to the Company's Notice of
Redemption in the principal market in which the Shares are then
traded. It is the Company's intent to repay the redemption through
the issuance of common stock.
The Series A Preferred Stock is convertible into common shares at the
option of the holder on November 30, 1996, November 30, 1997 and
November 30, 1998 at the following rates (the "Conversion Rate"): 8
common shares for each share of Series A Preferred Stock, if
converted on November 30, 1996; 7 common shares if converted on
November 30, 1997; and 6 common shares if converted on November 30,
1998.
Preferred Stock
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 common 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 and January 1996, the Company issued 245,000 shares
of Series A Preferred Stock receiving net proceeds of $489,981.
Additionally, in May 1996 the Company received a stock subscription
from an officer and director for 12,500 shares of Series A Preferred
Stock for $25,000.
As part of the issuance of the Series A Preferred Stock, certain
members of the Company's management agreed to accept options to
acquire 35,000 shares of Series A Preferred Stock at an exercise
price of $.10 per share through November 1998 in lieu of $70,000 of
cash consideration to be paid through August 1996. Through May 31,
1996, the Company has recognized $47,000 of expense related to these
options.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
(a) The Company is obligated under various noncancellable operating
leases for machinery and equipment and office space with various
expiration dates through June 1999. Future minimum rental
payments are as follows:
Year ending
May 31,
1997 $111,804
1998 75,610
1999 16,870
2000 1,406
Rental expense for the years ended May 31, 1996 and 1995 was
approximately $107,000 and $141,000, respectively.
(b) In conjunction with the operation of the Satquote System, the
Company is obligated under certain contracts for satellite
transmission services noncancellable with various terms of
expiration through 1997 as follows:
Year Ending
May 31,
1997 $78,708
(c) 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
6,000 Marks (approximately $3,900 using exchange rates in effect
at May 31, 1996). 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 $71,000
using exchange rates in effect at May 31, 1996).
(d) In February 1996, the Company entered into a two (2) year
employment with its Chief Executive Officer expiring in November
1997. The contract provides for annual base compensation of
$120,000 per annum plus an annual bonus of 5% of annual net
profits, as defined. The contract also provides for additional
compensation in the case of a change in control of the Company,
as defined.
(e) In 1996, a legal action was brought against the Company by
Locat, Spa., an Italian financing Company. Locat alleges that
in 1994 it made payments aggregating 115,600 DM ($76,000 using
exchange rages in effect at May 31, 1996) for the purchase of
certain equipment which was never delivered. The Company's
records indicate that the sales were made to Finaxx Spa, its
former Italian sales agent, and that the payments in question
were for the account of Finaxx. The action is in the early
stages and as such the ultimate outcome of this matter is not
currently determinable. The Company does not believe that the
resolution of this matter will have a materially adverse impact
on the Company's financial statements.
NOTE 8 - STOCK OPTIONS
(a) In May 1988, the Company adopted its 1988 Stock Incentive Plan
(the "Plan"). An aggregate of 1,000,000 shares of common stock
have been reserved for issuance under the Plan, subject to
adjustments in the event of stock splits, dividends,
recapitalization or similar changes affecting the Company's
outstanding common stock. The Plan provides for three types of
incentive awards which may be granted to employees and directors
who are not employees of the Company: (1) stock awards, (2)
incentive stock option awards, and (3) non-qualified stock
option awards.
1996 1995
Options outstanding, beginning
of year 800,000(1) 1,000,000
Options granted - -
Options canceled - (200,000)
------- ---------
Options outstanding, end
of year 800,000 800,000
======= =========
Options available for future
grant 200,000 200,000
======= =========
____________
(I) In fiscal 1996, the exercise price of this option was
reduced to $.20 per share through January 2000 after which
time the exercise price is $.50 per share through April
2004.
(b) In conjunction with the Memorandum of Understanding, the Company
issued the following options:
(I) CAL received an option to acquire 1,000,000
shares of common stock at an exercise price of
$.20 (the estimated fair value of the
Company's stock at the time of grant) per
share through January 23, 1999.
(ii) Mr. Charamis received an option to acquire a
number of shares equal to 13.33333% of the
Company's number of shares outstanding on a
fully diluted basis at an exercise price of
$.20 per share (the estimated fair value of
the Company's stock at the time of grant)
through January 23, 2000. In conjunction with
the Company's April 1996 private placement,
Mr. Charamis agreed to cap his option at the
then 13.33333% of the fully diluted shares
prior to the April 1996 private placement
(3,387,258).
(iii) Mr. Tsirivakos received an option to acquire 500,000
shares of common stock through September 2003 (See
Note 7(c)). The option will be exercisable for
100,000 shares beginning on June 30 of each year in
which his employment agreement is in effect
(beginning June 30, 1996) at an exercise price of
$.20 (the estimated fair value of the Company's
stock at the time of grant) for the initial 100,000
shares, increasing by $.10 per share on each
succeeding June 30 for the shares that become
exercisable on such June 30.
Options outstanding at May 31, 1996 are as follows:
Expiration Shares Subject
Date to Option Option Price Exercisable
9/01/03 100,000 $.50 -
9/01/03 100,000 $.60 -
9/01/03 100,000 $.20 -
9/01/03 100,000 $.30 -
9/01/03 100,000 $.40 -
1/23/99 1,000,000 $.20 1,000,000
1/23/00 3,387,258 $.20 3,387,258
4/01/04 800,000 $.20-$.50 800,000
NOTE 9 - SIGNIFICANT SOURCES OF REVENUE AND CREDIT RISK
In fiscal 1996 and 1995, the Company had sales to one (1) customer
representing 23% and 22% of total sales, respectively. In June 1996,
the sales agency agreement with this customer expired without renewal
and the Company does not expect to receive future revenue from this
customer.
Most of the Company's business activity is with customers in the
financial services industry primarily located in Europe.
Periodically the Company reviews its accounts receivable and makes
provisions for doubtful accounts.
NOTE 10 - CASH FLOWS
Supplemental disclosure of cash flow information:
1996 1995
Cash paid for:
Interest $13,489 $3,986
Taxes $ - $ -
NOTE 11 - GEOGRAPHIC AREAS
Summarized geographic areas exclusive of intercompany transactions
and balances, are as follows:
May 31,
GEOGRAPHIC AREA DATA 1996 1995
Sales to unaffiliated companies:
United States $ 7,370 $ 51,510
Germany 1,606,141 2,274,680
United Kingdom 202,332 258,266
----------- -----------
$ 1,815,843 $ 2,584,456
=========== ===========
Operating income (loss) from
continuing operations before
income tax benefit:
United States $ (617,538) $ (871,321)
Germany (863,681) (585,781)
United Kingdom (50,034) 27,908
----------- -----------
$(1,531,253) $(1,429,194)
=========== ===========
Identifiable assets:
United States $ 523,576 $ 134,477
Germany 488,863 847,318
United Kingdom 86,074 170,034
----------- -----------
$ 1,098,513 $ 1,151,829
=========== ===========
NOTE 12 - TAXES
The Company has unused net operating losses available for
carryforward against future years' taxable income in the U.S.
expiring through fiscal year 2011 of approximately $1,714,000
subject to certain limitations. The German subsidiaries have unused
net operating losses of approximately 4,131,000 Marks available at
May 31, 1996 ($2,704,400 using exchange rates in effect at May 31,
1996) to offset future taxable income which may be carried forward
indefinitely.
Management has assessed the likelihood of the realization of its net
operating loss carryforwards on a jurisdictional basis. The Company
has provided a full valuation allowance for the net operating losses
given the uncertainty as to their realization.
The deferred tax asset consists of the following:
Net Operating Losses $ 1,672,600
Valuation Allowance (1,672,600)
-----------
$ -
===========
The Company has recognized an income tax benefit from continuing
operations for the years presented only to the extent of taxes
provided for discontinued operations and extraordinary item in the
accompanying consolidated statements of operations.
NOTE 13 - EXTINGUISHMENT OF DEBT
(a) The Company had defaulted on its payment to its United States
satellite transmission provider. On September 26, 1994, the
Company was served with a complaint by the satellite provider.
The Company did not respond to the complaint and, on January 23,
1995, a judgment was entered against the Company in the amount
of $72,382, plus interest of $3,779. A second suit was filed by
the satellite provider in February 1995 for $70,973 representing
further defaults by the Company. In April 1995, the Company
under its new management agreed to settle this matter as
follows: the provider is marking the judgment satisfied and
canceled of record, dismissed the lawsuit with prejudice,
released the Company from any claim under the lease, the Company
agreed to pay $50,000 to the provider and the Company and the
provider entered into a new lease agreement commencing January
1, 1996 for a six year term. The lease was guaranteed by the
Company's subsidiaries. The contract is cancelable at December
31, 1998 by the Company if it ceases to be doing business in the
United States. The Company recognized a gain of approximately
$111,000, exclusive of tax benefit, in fiscal 1995 relating to
the resolution of this matter. In fiscal 1996, the Company
entered into an agreement with the satellite provider to
terminate the new lease by remitting past due amounts on the
$50,000 settlement discussed above.
(b) The Company defaulted on its payment to its former satellite
provider in Europe. On August 1, 1994, the Company was served
with a complaint by the satellite provider. Although the
Company contested the complaint, the court ruled in favor of the
satellite provider. This matter was settled by the Company's
new management in the third quarter of 1995 under an agreement
providing for aggregate payments of 190,000 Marks ($134,000
using exchange rates in effect at May 31, 1995) payable from
April 1995 through July 1996. The Company recognized a gain of
approximately $4,400, exclusive of tax benefit, in fiscal 1995
relating to the resolution of this matter.
On August 31, 1994, the Company was served a summons by a vendor
seeking payment for past due invoices aggregating $107,000 plus
costs of the lawsuit. The Company responded to the summons and
filed a counterclaim against the vendor alleging breach of
contract. This matter was settled by the Company's new
management in January 1995 by the mutual release of both parties
and no amounts were required to be paid or received by the
Company. The Company recognized a gain of approximately
$83,000, exclusive of tax benefit, in fiscal 1995.
(d) In fiscal 1995, the Company also renegotiated certain other
liabilities resulting in reductions of amounts owed of
approximately $68,000, exclusive of tax benefit.
(e) In fiscal 1996, the Company renegotiated certain liabilities
resulting in reductions of amounts owed principally to former
legal counsel of $117,820, exclusive of tax benefit.
NOTE 14 - RELATED PARTY TRANSACTIONS
(a) For part of fiscal 1996 and all of fiscal 1995, the Company's UK
subsidiary utilized certain administrative services of CAL at no
cost to the Company. These services were not material to the
Company.
(b) The Company was charged $48,000 and $45,000, in fiscal 1996 and
1995, respectively, for accounting and bookkeeping services by
an accounting firm in which an officer and director of the
Company is a partner.
(c) Revenues from the Company's sales agency located in Greece in
which the Company's Chairman and CEO is a principal stockholder
were as follows:
Year Ending
May 31,
1996 1995
License fees $87,950 $55,056
System sales 48,247 23,804
NOTE 15 - ACCOUNTING STANDARDS ISSUED NOT YET ADOPTED
In October of 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for
Stock Based Compensation (FASB 123). The Company is required to adopt
the provisions of this statement for its fiscal year ended May 31,
1997. This statement encourages all entities to adopt a fair value
based method of accounting for employees stock options or similar
equity instruments. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic-
value method of accounting prescribed by APB opinion No. 25,
Accounting for Stock Issued to Employees (APB 25). Entities electing
to remain with the accounting in APB 25 must make pro forma
disclosures of net income and earnings per share as if the fair value
based method of accounting defined in this statement had been
applied. It is currently anticipated that the Company will continue
to measure compensation costs in accordance with APB 25 and provide
the disclosures required by FASB 123.
<PAGE>
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not Applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
As of May 31, 1996, the names and ages of the directors and
executive officers of the Company and their positions with the Company,
are as follows:
Name Age Positions
Alexis Charamis 34 Chairman of the Board, Chief
Financial Officer, Chief Executive
Officer and Director
Steven C. Millner 35 Secretary and Director
George Tsirivakos 33 Vice President and Director
The principal occupations for the past five years (and, in some
instances, for prior years) of each of the persons named above are as
follows:
Alexis Charamis - Mr. Charamis became a member of the Board of
Directors in February 1995 pursuant to Memorandum of Understanding. See
Item 1. In March 1995, he replaced Mr. H. Scharnowski as Chairman and
Chief Executive Officer and is currently devoting substantially all of his
business time to the Company and EAG SA (defined below). Mr. Charamis has
been associated with the Company since 1990, when he formed EuroAmerican
Group Hellas S.A. ("EAG SA") to act as the Company's independent
representative in Greece. Since then he served as President and Managing
Director of EAG SA. In addition, during the last five years, Mr. Charamis
has been involved in investment banking and financial services in Greece.
Since 1988, Mr. Charamis has been a partner in Interact SA, which is a
correspondence office for Prudential Bache Securities in Athens, Greece,
and until 1993 was actively involved in its business. In 1991, he formed
Interact Securities SA, a Greek brokerage firm member of the Athens Stock
Exchange and was a member of its board until late in 1994 when he sold his
interest. Mr. Charamis was formerly a member of the treasury and
investment committees of the National Mortgage Bank of Greece, the third
largest bank in that country, and a member of the investment committee.
Mr. Charamis holds a Bachelor of Arts from New York University in
Economics and Political Science. In 1987 he took his Master of Science
from the London School of Economics in the Politics of the World Economy.
Steven C. Millner - Mr. Millner became the Company's Secretary
and a member of the Board of Directors in March 1995. Mr. Millner was
formerly the Company's Chief Financial Officer from August 1, 1992 through
August 1993. Mr. Millner has been a partner in the accounting firm of
Dalessio, Millner & Leben LLP since 1990. Prior to assuming that
position, he was an audit manager at BDO Seidman, an international
accounting firm, where he was employed from October 1983 to October 1989.
Mr. Millner is a Certified Public Accountant licensed in the State of New
York and holds a Bachelor of Science degree from Bentley College in
Waltham, Massachusetts. By agreement with the Company's Board, Mr.
Millner devotes approximately 10% to 15% of his time to the Company.
George Tsirivakos - Mr. Tsirivakos became a Vice President of
the Company and a member of the Board of Directors in March 1995. Mr.
Tsirivakos has been associated with the Company as an independent
consultant since 1988 providing systems consulting services. He served as
the Company's Senior Vice President from September 1989 to May 1991, and
as a Director from August 1990 to May 1991. Mr. Tsirivakos taught
computer science at the Mathematics Institute of Greece from 1987 to 1988.
Prior to that time, he was a student at the University of Patras in Rion,
Greece, where he majored in electrical engineering and computer science
and graduated in 1986 with a Bachelor's Degree in Voice Processing
(computer-aided speech analysis/synthesis).
Directors of the Company serve until the Company's next annual
meeting of stockholders. The parties to the Memorandum of Understanding
(see Item 1), who collectively beneficially own a majority of the
outstanding Common Stock (see Item 11), have agreed that until January
1998 they will elect as directors of the Company Mr. Charamis, Mr. Millner
and Mr. Tsirivakos and a designee of CAL. Mr. Millner is currently
serving as CAL's designee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's executive officers, directors and holders
of more than 10% of the Company's Common Stock to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. The Company believes that, during fiscal year 1996, the
following persons did not make timely filings: Mr. Charamis (two reports
covering two transactions with the Company involving changes to his Common
Stock option and the grant of an option on the Company's Series A Non-
Voting Convertible Senior Preferred Stock (the "Series A Preferred
Stock"). Mr. Millner (two reports covering two transactions with the
Company involving changes to his Common Stock option and the grant of an
option on the Series A Preferred Stock); and CAL (two reports covering two
transactions with the Company involving the purchase of Series A Preferred
Stock). In addition, the Company believes that during such year Hubert
Scharnowski, who with a corporation owned by him, was the owner during
part of fiscal 1996 of more than 10% of the Common Stock, did not file two
reports covering two transactions (the grant to the Company of a
transferrable option to purchase certain of his Common Stock and the
subsequent exercise of such option by the transferee thereof).
Item 10. Executive Compensation.
The following table sets forth information about compensation
from the Company for the executive officers shown below.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Compensation
Securities
Annual Underlying Options
Compensation (No. of Shares)
Other Series A All Other
Name and Fiscal Year Annual Common Preferred Compensation
Principal Position May 31, Salary ($) Bonus Compensation Stock Stock ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Alexis Charamis, CEO 1996 $105,054 -0- -0- 3,387,258(a) 20,000(b) -0-
1995(c) $ 21,546 -0- -0- 2,816,916(a) -0- -0-
George Tsirivakos, 1996 $130,032 -0- $20,325(d) -0- -0- (e)
Vice President 1995 -0- -0- -0- 500,000 -0- (e)
1994 -0- -0- -0- 200,000(f) -0- (e)
<FN>
__________________
(a) The number of shares of Common Stock shown above in 1995 and 1996
arise under the same option, which was initially granted to Mr.
Charamis in January 1995. Until April 1996, the shares of Common
Stock subject to this option were 13.3333% of the shares, assuming
the exercise of Mr. Charamis' option and all other options
outstanding at time of such exercise. In April 1996, the maximum
number of shares subject to the option was fixed at 3,387,258 shares
(subject to anti-dilution provisions for stock dividends and the
like) and the expiration date of the option was extended by one year
to January 23, 2000. The shares of Common Stock subject to the
option are shown based on the number of outstanding shares and those
subject to outstanding options at each fiscal year-end.
(b) For information about this option, see "Option Grants in Fiscal
1996."
(c) Mr. Charamis began receiving annual compensation from the Company in
February 1995.
(d) Of the amounts under "Other Annual Compensation" for Mr. Tsirivakos,
approximately 64% was the cost of the lease of an automobile and the
remainder was the cost of health insurance.
(e) During fiscal 1994 and 1995, Mr. Tsirivakos' services were provided
to the Company by Tsirivakos Software, a company owned by Mr.
Tsirivakos. In 1996, certain services were provided to the Company
through Tsirivakos Software and other services were provided by Mr.
Tsirivakos directly. For information about payments to Tsirivakos
Software, see "Arrangements with Directors" below.
(f) These options were canceled in connection with the grant of options
covering 500,000 shares of Common Stock in fiscal 1995.
</TABLE>
Stock Options.
The following table gives information about options granted in
fiscal 1996 to the persons named in the Summary Compensation Table to whom
options were granted.
<TABLE>
OPTION GRANTS IN FISCAL 1996
<CAPTION>
Number of Securities % of Total Options
Underlying Granted to
Name Options Granted Employees in Fiscal Year Exercise Price Expiration Date
Common Preferred Common Preferred Common Preferred Common Preferred
Stock(a) Stock(b) Stock(a) Stock Stock(a) Stock Stock(a) Stock
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alexis Charamis 3,387,258 20,000 81% 57% $.20 $.10 1/23/2000 11/30/98
<FN>
____________________
(a) The number of shares of Common Stock shown above in 1996 arise under
an option which was initially granted to Mr. Charamis in January
1995. Until April 1996, the shares of Common Stock subject to this
option were 13.3333% of the shares, assuming the exercise of Mr.
Charamis' option and all other options outstanding at time of such
exercise. In April 1996, the maximum number of shares subject to the
option was fixed at 3,387,258 shares (subject to anti-dilution
provisions for stock dividends and the like) and the expiration date
of the option was extended by one year to January 23, 2000. The
shares of Common Stock subject to the option are shown based on the
number of outstanding shares and those subject to outstanding options
at each fiscal year-end. For purposes of this table, the extension
of the term of the option has been treated as the grant of a new
option.
(b) The options on shares of Series A Preferred Stock were granted under
Mr. Charamis' Employment Agreement which provides for a compensation
reduction by Mr. Charamis of $40,000 during the period November 1,
1995-August 1, 1996. To raise capital, during fiscal 1996, the
Company sold shares of Series A Preferred Stock to CAL, the Company's
principal shareholder, and to other investors, at a price of $2.00
per share. Each share of Series A Preferred Stock is convertible in
shares of Common Stock as follows: if converted on November 30, 1996
(the Series A Preferred is convertible only on the dates set forth
herein), 8 shares of Common stock for each share of Series A
Preferred Stock; if converted on November 30, 1997, 7 shares; and if
converted on November 30, 1998, 6 shares.
</TABLE>
No options were exercised during fiscal 1996. The following
table presents certain information about options held at the end of fiscal
1996 by the executive officers named in the Summary Compensation Table.
The value of unexercised in-the-money options for Common Stock has been
computed by the difference between (i) the average of the closing low bid
and high asked prices for the Common Stock on May 31, 1996 ($.75) (the
"Year-End Common Stock Price") and (ii) the $.20 per share option price in
the case of Mr. Charamis, and in the case of Mr. Tsirivakos, option prices
of $.20 per share for the 100,000 shares exercisable on June 30, 1996,
increasing by $.10 per share for the 100,000 shares that become
exercisable on each of the next four anniversaries. The value of
unexercised in-the-money options for Series A Preferred Stock has been
computed by the difference between (i) the Year-End Common Stock Price
multiplied by the eight shares of Common Stock into which each share of
Series A Preferred Stock is convertible on November 30, 1996 and (ii) the
option price of $.10 per share of Series A Preferred Stock.
<TABLE>
FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Options/SARs at Fiscal Year End Options at Fiscal Year-End
Common Stock Preferred Stock Common Stock Preferred Stock
Exercisable/ Exercisable/ Exercisable/ Exercisable/
Name Unexercisable Unexercisable Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Alexis Charamis 3,387,258/-0- 14,000/6,000 $1,862,992/-0- $82,600/$35,400
George Tsirivakos -0-/500,000 --- -0-/$175,000 ---
</TABLE>
Arrangements With Directors.
The Company and Mr. Charamis are parties to an employment
agreement entered into as of February 29, 1996. Under this agreement, Mr.
Charamis is employed as the Company's Chief Executive Officer, effective
November 1, 1995, for a term of two years. During the first year of the
term, Mr. Charamis' base salary is $120,000 comprised of $80,000 in cash
and options on Series A Preferred Stock valued at $40,000 described under
the "Option Grants in Fiscal 1996" table. The agreement provides that the
parties will endeavor to negotiate an appropriate salary adjustment for
the second year of the employment term to reflect the Company's growth and
profitability. Mr. Charamis is also entitled to incentive compensation of
5% of the Company's annual pre-tax profit, without deduction for any
research and development expenses in excess of $80,000, determined on a
calendar year basis, except if such pre-tax profit exceeds $1,000,000 the
percentage to determine incentive compensation on the excess is 4%. Mr.
Charamis is also entitled to all the benefits generally available to
executive officers of the Company, including the use of an automobile and
health and life insurance. If the Company is sold, the agreement provides
Mr. Charamis is to be paid a bonus at the closing as follows: if the
price is equivalent to at least $.75 per share but less than $1.00 per
share, $250,000; if at least $1.00 per share but less than $1.25,
$500,000; if at least $1.25 per share, $750,000.
During the fiscal years ended May 31, 1994, 1995 and 1996, the
Company made payments to Tsirivakos Software, a company owned by Mr.
Tsirivakos, of DM 289,800 ($175,967 using the exchange rate used in the
preparation of the Company's financial statements for that year), DM
280,600 ($198,076), and DM 98,400 ($64,422), respectively. Tsirivakos
Software provided the services of Mr. Tsirivakos, among other persons, to
the Company. Under a Consulting Agreement entered into as of August 1,
1995, Tsirivakos Software is providing services for a monthly fee of DM
6,000 ($3,928 using the exchange rate in effect at May 31, 1996). The
agreement may be terminated by the Company for cause (as defined in the
agreement) and has a term expiring on July 31, 2000. The options held by
Mr. Tsirivakos referred to in the Fiscal Year-End Option Values table were
granted under this agreement. The agreement also provides that on each
June 30 in which the agreement is in effect (beginning June 30, 1996) the
Company will award Mr. Tsirivakos a number of shares of Common Stock
having a value of $15,000, determined by the average of the closing bid
and asked prices (but not less than $.20 per share) during the 30 days
prior to the award. The shares to be awarded on June 30, 1996 were not
awarded. In lieu thereof, the Company and Mr. Tsirivakos agreed in August
1996 that upon payment by Mr. Tsirivakos to the Company of $10,000, 12,500
shares of Series A Preferred Stock would be issued to him.
In addition, EFI GmbH and Mr. Tsirivakos are parties to an
employment agreement entered into as of August 1, 1995. Under this
agreement, Mr. Tsirivakos is employed as the managing director of EFI GmbH
for an indefinite term, subject to the right of each party to terminate
the agreement on three months notice, effective as of the end of the
calendar quarter following notice. Mr. Tsirivakos is entitled to an
annual salary of DM 108,000 ($70,707 using exchange rates in effect on May
31, 1996). He is also entitled to the use of an automobile provided by
EFI GmbH and reimbursement for the cost of health insurance for himself
and his minor children.
Directors do not receive any separate compensation for their
services as directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of August 1, 1996,
information about the beneficial ownership of Common Stock by (i) each
person known to the Company to be a beneficial owner of more than 5% of
the Common Stock, (ii) each director of the Company and each executive
officer named in the Summary Compensation Table (See Item 10), and (iii)
all executive officers and directors of the Company as a group. Except as
indicated below, all shares are owned with the sole voting and investment
power.
<TABLE>
<CAPTION>
Number of Shares Percentage (a)
Series A Series A
Name and Address of Common Preferred Common Preferred
Beneficial Owner Stock Stock Stock Stock
<S> <C> <C> <C> <C>
CAL International Limited(b) 9,300,000(c) -0- 43.4% -0-(b)
P.O. Box 83
Ordnance House
31 Pier Road, St. Helier
Jersey, Channel Islands
Hubert Scharnowski/SABHU 1,300,000 -0- 6.4% -0-
c/o Scharnowski GmbH
Sodener Str. 12
63454 Hanover
Germany
Alexis Charamis 3,387,258(d) 20,000 14.2%(e) 7.1%
c/o Euro American Group Hellas
S.A.
5, Milioni Street
10673 Athens, Greece
Eurotech Invest. Ltd. 1,750,000 -0- 8.6% -0-
80 Broad Street
Monrovia, Liberia
Steven C. Millner 800,000(f) 15,000 3.8% 5.4%
c/o Dalessio, Millner & Leben LLP
245 Fifth Avenue
New York, New York 10016
George Tsirivakos 150,000(g) -0- 0.7% -0-
c/o EAG Financial Information
GmbH
Hanauer Landstrasse 208-216
D-60314 Frankfurt am Main
Germany
All directors and executive 4,337,258 35,000 17.5% 12.5%
officers as a group (3 persons)(h)
<FN>
___________
(a) Determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended. Under Rule 13d-3, shares subject
to options or convertible securities that are exercisable within 60
days are treated as owned by the holder of the option and are added
to Common Stock outstanding for purposes of calculating the
percentage of the Common Stock beneficially owned by that person but
are not added to Common Stock outstanding for purposes of calculating
the percentage ownership of any other person.
(b) Klaus Hebben beneficially owns all of the capital stock of CAL and
also owns 162,500 shares of Series A Preferred Stock which on
November 30, 1996 will become convertible into 1,300,000 shares of
Common Stock. Mr. Hebben and CAL share voting and dispositive power.
(c) Includes 1,000,000 shares subject to an option to purchase Common
Stock.
(d) All of the shares of Common stock are issuable upon exercise of the
option to purchase Common Stock referred to under the "Option Grants
in Fiscal 1996" table. In addition to the shares of Common Stock
referred to above, Doupsi Investment Corporation ("Doupsi"), a
company in which Mr. Charamis's wife and brother own a majority of
the stock and in which Mr. Charamis is an officer and a director,
owns 70,000 shares of Common Stock. Mr. Charamis disclaims
beneficial ownership of these shares. All of the shares of Series A
Preferred Stock are issuable under the option to purchase Series A
Preferred Stock referred to under the "Option Grants in Fiscal 1996"
table.
(e) The percentage ownership for Mr. Charamis exceeds 13.3333% because,
in accordance with Rule 13d-3 which is described in footnote (a),
shares issuable on exercise of options in addition to Mr. Charamis'
option are not included in the percentage calculation. However, such
shares are included in determining the number of shares subject to
Mr. Charamis' option.
(f) All of these shares are issuable upon exercise of an option.
(g) Of the shares of Common Stock, 100,000 are issuable on exercise of an
option. The remaining shares are owned by Tsirivakos Software. See
"Arrangements With Directors" for a description of a proposal under
which Mr. Tsirivakos' would purchase 12,500 shares of Series A
Preferred Stock.
(h) Mr. Millner is serving as a director as a designee of CAL. Mr.
Millner has advised the Company that he is not a representative of
CAL and has no understandings with CAL regarding his service as a
director. Common Stock owned by all directors and executive officers
as a group does not include Common Stock beneficially owned by CAL or
by Mr. Hebben.
</TABLE>
For description of the Memorandum of Understanding, See Item 1.
Item 12. Certain Relationships and Related Transactions.
The accounting firm of Dalessio, Millner & Leben LLP, of which
Mr. Millner, the Company's Secretary and a Director, is a partner, charged
$48,000 during fiscal 1996 for accounting and bookkeeping services
rendered to the Company. Of such amount, it was agreed between the
Company and such firm that $30,000 would not be paid and Mr. Millner would
be granted options on 15,000 shares of Series A Preferred Stock comprised
of options on 9,500 shares granted in fiscal 1996 on terms substantially
equivalent to Mr. Charamis' options on Series A Preferred Stock described
under the "Option Grants in Fiscal 1996" table and options on 5,500 shares
of Series A Preferred Stock granted for compensation reductions taken from
June through August 1996. Charges for similar services during fiscal 1995
were $45,000 and services of a similar nature are being provided during
the current fiscal year.
EAG SA, of which Mr. Charamis is the principal stockholder, is
the Company's sales agent in Greece. During fiscal 1996 and 1995, EAG SA
made payments to the Company of $136,197 and $78,860, respectively, for
license fees and for hardware used in systems. Under the terms of the
agency agreement, EAG SA is entitled to 50% of all revenues from Satquote
customers in Greece. Revenues are determined before reduction for fees
paid to the Athens Stock Exchange by EAG SA on behalf of the Company from
the Company's share of revenues.
As described in Note 3 to the Consolidated Financial Statements
for fiscal 1996, the Company sold the assets of the Brokerage Business to
Mr. Scharnowski (who is named in the table in Item 11) in April 1995.
From the beginning of fiscal 1994 until December 1994 when the contract
expired, Mr. Scharnowski had an employment agreement with the Company
which provided for annual base compensation of DM 144,000 ($102,000 using
exchange rates in effect at May 31, 1995), plus an annual bonus of between
3% and 5% based on the Company's net profits. In addition, Mr.
Scharnowski was entitled to an automobile, certain health insurance
reimbursements and certain expense account allowances. Under the
Memorandum of Understanding, (i) Mr. Scharnowski was retained as a
consultant for a period beginning upon termination of his employment with
the Company and ending in January 1996 for compensation of DM 12,000 per
month ($8,500), and (ii) Mr. Scharnowski was retained as managing director
of the Brokerage Business for three years and he was entitled to
compensation of 15% of the Brokerage Business' net commissions during the
second and third years. No payments were made under these arrangements
and they were canceled in connection with the sale of the Brokerage
Business.
In March 1996, Mr. Scharnowski granted the Company a
transferrable option to purchase up to 1,700,000 shares of his Common
Stock at $.10 per share. The option was to expire on May 29, 1996, except
that if the option was exercised for at least 1,000,000 shares, then the
remainder of the option could be exercised, in whole or in part, by the
Company. The Company assigned 1,000,000 shares of the option to a third
party who exercised the option for all of such shares on or prior to May
29, 1996.
Under the Memorandum of Understanding, Mr. Charamis and CAL were
granted options to purchase Common Stock. See Items 1 and 10. As part of
an offering of Common Stock outside the United States that commenced in
April 1995, (i) CAL purchased 2,500,000 shares of Common Stock at a price
of $.20 per share and (ii) Eurotech Invest. Ltd. purchased 1,750,000
shares of Common Stock at a price of $.20 per share. In certain
circumstances, the Company has granted CAL, Eurotech Invest. Ltd and the
other purchasers in the offering registration rights covering the shares
purchased. In October and November 1995 and in January 1996, Mr. Klaus
Hebben, the parent of CAL, purchased an aggregate of 162,500 shares of
Series A Preferred Stock to provide capital to the Company. As described
under the "Option Grants in Fiscal 1996" table in Item 10 and in the table
in Item 11, Messrs. Charamis and Millner have been granted options for
20,000 shares and 15,000 shares, respectively, of Series A Preferred
Stock.
With respect to "parents" of the Company, see Item 11 and the
description of the Memorandum of Understanding in Item 1.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits:
The exhibits filed herewith are incorporated by reference to the
Exhibit Index.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of
fiscal 1996.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EUROAMERICAN GROUP INC.
By: /s/ Alexis Charamis
Alexis Charamis
President
Date: September 12, 1996
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ Alexis Charamis
Alexis Charamis
Principal Executive, Financial and
Accounting Officer and Director
Date: September 12, 1996
By: /s/ Steven C. Millner
Steven C. Millner
Director
Date: September 12, 1996
By: /s/ George Tsirivakos
George Tsirivakos
Director
Date: September 12, 1996
<PAGE>
EXHIBIT INDEX
EUROAMERICAN GROUP INC.
ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED MAY 31, 1996
Exhibit Description
3.1 Certificate of Incorporation of the Company, as amended.(1)
3.2 By-Laws of the Company.(2)
10.1 1988 Stock Incentive Plan.(3)
10.2 Lease for the Company's principal office in Frankfurt,
Germany.(4)
10.3 Form of Indemnification Agreement with the Company's
Officers and Directors.(5)
10.4 Asset Purchase Agreement by and between Scharnowski, GmbH
and EAG Financial Services GmbH.(6)
10.5 Memorandum of Understanding, dated January 23, 1995, among
the Company, Hubert Scharnowski, SABHU Inc., Alexis
Charamis, George Tsirivakos, CAL International Limited, CAL
Futures Limited and Eurotech Invest. Ltd.(7)
10.6 Amendment to Memorandum of Understanding.
10.7 Employment Agreement between EAG Financial Informations
GmbH, and George Tsirivakos.(8)
10.8 Consulting and Share contract between the Company, EAG
Financial Informations GmbH, and George Tsirivakos.(9)
10.9 Employment Agreement, dated February 29, 1996, between the
Company and Alexis Charamis.
22 Subsidiaries of the Company.(10)
27 Financial Data Schedule (EDGAR version only).
__________________________
(1) Incorporated by reference to Exhibit 3 to the Company's Quarterly
Report on Form 10-Q for the Quarter ended February 29, 1996.
(2) Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (No. 33-21805).
(3) Incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (Registration No. 33-21805).
(4) Incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-1 (Registration No. 33-21805).
(5) Incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-1 (Registration No. 33-21805).
(6) Incorporated by reference to the Company's Quarterly Report on Form
10-QSB for the quarter year ended February 28, 1995.
(7) Incorporated by reference to Exhibit 10.14 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31, 1994.
(8) Incorporated by reference to Exhibit 10.7 to Amendment No. 2 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended May
31, 1995.
(9) Incorporated by reference to Exhibit 10.8 to Amendment No. 2 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended May
31, 1995.
(10) Incorporated by reference to Exhibit 22 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31, 1995.
Exhibit 10.6
AMENDMENT TO
MEMORANDUM OF UNDERSTANDING
This Amendment is entered into as of this 30th day of March 1995
to the Memorandum of Understanding ("MOU") dated January 23, 1995, by and
among EuroAmerican Group, Inc. ("EAG"), Hubert Scharnowski, Sabhu Inc.,
Alexis Charamis, George Tsirivakos, CAL International Limited ("CALI"),
CAL Futures Limited, and Eurotech Invest. Ltd. ("Eurotech").
WHEREAS, the parties desire to adopt certain amendments to amend
the MOU;
IT IS THEREFORE AGREED that the MOU is hereby amended in the
following respects:
1. Section 3(a) is amended to read as follows:
Eurotech shall purchase a minimum of
2,000,000 shares, subject to a maximum of
2,500,000 shares, of EAG's common stock at a
purchase price of twenty cents ($0.20) per
share on or before April 15, 1995;
2. Section 3(b) is amended to read as follows:
CALI shall cause 3,000,000 shares of EAG
common stock to be purchased at a purchase
price of twenty cents ($0.20) per share on
or before April 15, 1995 and without regard
to Eurotech's purchase pursuant to Section
3(a).
3. Section 3(k) is amended to change the option period from
three years to four years, and to change the second sentence to read as
follows:
The option purchase price per share shall be
twenty cents per share.
4. Section 3(l) is amended to read as follows:
EAG shall give CALI an option for four years
to purchase from time to time up to
1,000,000 shares of EAG's common stock with
"piggy-back" registration rights at an
option purchase price of twenty cents
($0.20) per share.
5. In all other respects, the terms and conditions of the MOU
are confirmed.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
duly executed.
EUROAMERICAN GROUP, INC. CAL INTERNATIONAL LIMITED
By:/s/ By:/s/
SABHU INC. CAL FUTURES LIMITED
By:/s/ By:/s/
/s/ Hubert Scharnowski EUROTECH INVEST. LTD.
HUBERT SCHARNOWSKI
By:/s/
/s/ Alexis Charamis /s/ George Tsirivakos
ALEXIS CHARAMIS GEORGE TSIRIVAKOS
Exhibit 10.9
EMPLOYMENT AGREEMENT
This Agreement is entered into this 29th day of February 1996,
between EuroAmerican Group, Inc., a Delaware corporation with offices at
50 Broad Street, Suite 516, New York, New York, (herein called the
"Company") and Alexis Charamis (herein called "Employee").
Whereas, Company is engaged in the business of distributing
financial and securities data and other devices to clients in the United
States and Europe; and
Whereas the Employee is experienced in sales and marketing in
the financial and securities industry generally and in particular with
respect to data of the type offered by the Company; and
Whereas the Company desires that Employee serve as an executive
of the Company and Employee is willing to accept such employment.
Now, therefore, in consideration of the mutual covenants of the
parties herein made, it is hereby agreed:
1. Employment and Duties.
The Company hereby agrees to employ the Employee and the Employee
hereby accepts employment as the Chief Executive Officer of the Company
and agrees to devote substantially all of his business time and efforts to
the diligent and faithful performance of his duties in such position under
the direction of the Board of Directors of the Company.
2. Term of Employment.
Unless sooner terminated as hereinafter provided, the term of
Employee's employment hereunder shall commence as of November 1, 1995 and
shall continue for an initial period of two (2) years.
3. Compensation.
(a) As compensation for his services, Employee shall be paid a base
salary of One Hundred Twenty Thousand Dollars ($120,000) payable in part
cash and in part option to acquire shares of the Company as follows: (i)
Eighty Thousand Dollars ($80,000.00) in equal installments in accordance
with the Company's usual practice, and (ii) options to acquire Twenty
Thousand (20,000) shares of Series A Preferred Stock of the Company at an
exercise price of $.01 per share in equal installments on a quarterly or
other periodic basis as may be determined by the Company; provided that,
after the first year of the term of this Agreement, the parties shall
endeavor to negotiate an appropriate salary adjustment to reflect the
growth and profitability of the Company. Employee shall also receive all
other benefits generally available to executive officers of the Company
from time to time, including without limitation, four weeks' vacation,
life insurance, expense accounts, company car and medical benefits.
(b) Employee also shall receive incentive compensation of an amount
equal to five percent of annual net profit, calculated on a calendar year
basis and payable promptly after closing of each year's books; provided
that for such purposes "net profit" shall be determined on a before tax
basis without deduction for any amounts expended by the Company in such
year on research or development in excess of $80,000, and provided further
than in the event net profit (as computed on such basis) exceeds
$1,000,000 in any year, the incentive compensation to be paid in respect
of such excess shall be four percent thereof.
(c) In the event of a sale of the Company or substantially all its
assets, Employee shall be paid upon the closing thereof a bonus determined
in accordance with the following:
(i) $250,000 for a sale on the basis of a price equivalent to
at least 75 cents per share, but less than $1.00.
(ii) $500,000 for a sale on the basis of a price equivalent to
at least $1.00 per share, but less than $1.25.
(iii) $750,000 for a sale on the basis of a price equivalent
to at least $1.25 per share.
For determination of the foregoing, appropriate adjustment shall be made
in respect of any dilution occurring after January 1, 1996, excluding the
conversion of the Series A Preferred Stock and any shares issued in
conjunction with the conversion of outstanding options and warrants issued
as of the date of this contract.
4. Covenants and Conditions.
(a) Employee will acquire information and knowledge respecting the
intimate and confidential affairs of the Company in the various phases of
its business. Accordingly, employee agrees that he shall not at any time
use for himself or disclose to any person not employed by the Company any
such knowledge or information heretofore acquired or acquired during the
term of his employment hereunder.
(b) Employee agrees that all memoranda, notes, records, papers or
other documents and all copies thereof relating to the Company's
operations or business, some of which may be prepared by him, and all
objects associated therewith (such as models and samples) in any way
obtained by him during the course of his employment with the Company shall
be the Company's property. Employee shall not, except for Company use,
copy or duplicate any of the aforementioned documents or objects, nor
remove them from the Company's facilities, nor use any information
concerning them except for the Company's benefit, either during his
employment or thereafter. Employee agrees that he will deliver all of the
aforementioned documents and objects that may be in his possession to the
Company on termination of his employment, or at any other time on the
Company's request, together with his written certification of compliance.
(c) With respect to all inventive ideas originated or developed by
employee for the Company's business while in the employ of the Company, or
within the period of one (1) year after the termination of said
employment, which relate to projects upon which employee has worked during
said employment, or to the business carried on or contemplated by the
Company, or as to which employee has acquired information as a result of
said employment, and all patents obtained on such inventive ideas:
(1) Employee agrees to disclose and assign all such inventive
ideas and any patents obtained thereon to the Company;
(2) Employee agrees that all such inventive ideas and any
patents thereon shall be the exclusive property of the Company; and
(3) Employee will at any and all times during and after the
term of his employment hereunder furnish such information and
assistance, and execute such applications and other documents as may
be advisable in the opinion of the Company to obtain both domestic
and foreign patents, title to which is to be vested in the Company,
and employee gives the Company full and exclusive power to prosecute
all such applications and all proceedings in connection therewith.
5. Death or Disability of Employee.
Employee's employment shall terminate immediately upon his death. In
the event the employee becomes physically or mentally disabled so as to
become unable, for a period of more than 120 consecutive working days or
for more than 120 working days in the aggregate during any 12-month
period, to perform his duties hereunder, the Company may at its option
terminate his employment upon not less than thirty (30) days written
notice. The Company's right to terminate employee's employment pursuant
to the preceding sentence shall cease in the event the notice of
termination provided for therein shall not be given during the period of
employee's disability or within ninety (90) days after such disability
ceases. In the event of termination, the Company shall be obligated to
pay the employee's salary under paragraph 3(a) hereof only through the
calendar month in which such termination occurs.
6. Termination.
The Company reserves the right to terminate employee's employment
under this agreement should any of the following occur:
(a) Employee's commission of a felony or any other act abhorrent to
the community which a reasonable person would consider materially damaging
to the reputation of the Company or its successors or assigns.
(b) Employee's material breach of or failure to perform his
obligations in accordance with the terms and conditions of this agreement.
(c) A bonus is paid pursuant to Section 3(c) hereof, and notice of
termination is given within six (6) months thereof.
7. Rights and Obligations of Successors.
This agreement shall be assignable and transferable by the Company to
any subsidiary or affiliate or to any subsidiary or affiliate of Company
and shall inure to the benefit of and be binding upon the employee and his
heirs and personal representatives and the Company and its successors and
assigns.
8. Covenant Not To Compete.
In consideration of the employment hereunder, employee hereby agrees
that during the term of his employment by the company and for a period of
twelve (12) months after the termination of said employment, employee will
not either directly or indirectly own, have a proprietary interest (except
for less than 5% of any listed company or company traded in the
over-the-counter market) of any kind in, be employed by, or serve as a
consultant to or in any other capacity for any firm, other than the
Company and its subsidiaries, engaged in financial data delivery to end-
users in the New York, London or Frankfurt metropolitan areas (if then
served by the Company at the time of such termination) without the express
written consent of the Company. Employee agrees that a breach of the
covenant contained herein will result in irreparable and continuing damage
to the Company for which there will be no adequate remedy at law and in
the event of any breach of such agreement, the Company shall be entitled
to injunctive and such other and further relief including damages as may
be proper. This covenant shall not apply if Company refuses to offer to
extend this contract after its expiration.
9. Separate Proceedings.
In the event of any breach of this agreement by the Company, the
employee shall be entitled to institute separate proceedings after the
close of each calendar year for the collection of amounts owed by the
Company in respect of such calendar year.
10. Notice.
All notices, demands and other communications hereunder shall be
deemed to have been duly given, if delivered by hand or mailed, certified
or registered mail, return receipt requested, or by an express courier
service providing for a receipted delivery, addressed as follows:
(a) If to the employee:
Alexis Charamis
5 Milioni Street
10673 Athens, Greece
(b) If to the Company:
EuroAmerican Group, Inc.
50 Broad Street,
New York, New York 10004
or to such other address as any of the aforesaid may designate for itself
or himself by written notice to the others given from time to time in the
manner herein provided.
11. Arbitration
Any and all disputes of whatever nature arising between the parties
of this Agreement relating to the terms hereof or the underlying business
relationship, including termination thereof, and which are not resolved
between the parties themselves, shall be submitted to binding arbitration
in New York City, before a single arbitrator in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Judgment upon the award of the arbitrator may be entered in any court
having jurisdiction thereof. Any and all disputes shall be submitted to
arbitration hereunder within one year from the date they first arose or
shall be forever barred. Arbitration hereunder shall be in lieu of all
other remedies and procedures available to the parties, provided that
either party hereto may seek preliminary injunctive or other interlocutory
relief prior to the commencement or during such proceedings.
IN WITNESS WHEREOF, the parties have caused their authorized
officers to execute this Agreement on the date and year first above
written.
EuroAmerican Group
By: /s/
/s/ Alexis Charamis
Alexis Charamis
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EUROAMERICAN GROUP INC. AS OF AND FOR THE
YEAR ENDED MAY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 557,516
<SECURITIES> 0
<RECEIVABLES> 167,061
<ALLOWANCES> 46,000
<INVENTORY> 157,653
<CURRENT-ASSETS> 910,203
<PP&E> 630,192
<DEPRECIATION> 528,965
<TOTAL-ASSETS> 1,098,513
<CURRENT-LIABILITIES> 986,655
<BONDS> 0
257
0
<COMMON> 20,498
<OTHER-SE> 91,103
<TOTAL-LIABILITY-AND-EQUITY> 1,098,513
<SALES> 181,850
<TOTAL-REVENUES> 1,815,843
<CGS> 150,961
<TOTAL-COSTS> 1,575,390
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,531,253)
<INCOME-TAX> (41,000)
<INCOME-CONTINUING> (1,490,253)
<DISCONTINUED> 0
<EXTRAORDINARY> 76,820
<CHANGES> 0
<NET-INCOME> (1,413,433)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
