UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1996.
[_] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT FOR
THE TRANSITION PERIOD FROM ______________ TO ________________.
Commission file number 0-17483
EUROAMERICAN GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3477824
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Broad Street, Suite 516
New York, New York 10004
(Address of principal executive offices)
(212) 269-6686
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
The number of shares outstanding of the Issuer's Common Stock, par
value $.001 per share, as of January 14, 1997, was 21,498,333.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
November 30, 1996
(Unaudited)
CURRENT ASSETS:
Cash $ 104,916
Accounts receivable, net of allowance $66,000 116,721
Inventory 128,410
Foreign taxes receivable 15,902
Prepaid expenses and other 29,170
-----------
TOTAL CURRENT ASSETS 395,119
PROPERTY AND EQUIPMENT, less accumulated depreciation 76,990
SOFTWARE DEVELOPMENT COSTS, less accumulated amortization 5,287
DEPOSITS AND OTHER ASSETS 26,406
-----------
TOTAL ASSETS $ 503,802
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,021,153
Notes payable 120,500
Customer deposits and unearned revenue 23,023
Other 50,000
-----------
TOTAL CURRENT LIABILITIES 1,214,676
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock ($.001 par value; 2,000,000 shares
authorized; 257,500 shares issued and outstanding)
(liquidation preference $515,000)
Common stock ($.001 par value; 35,000,000 shares 257
authorized; 20,498,333 shares issued and outstanding) 20,498
Additional paid-in capital 5,588,564
Accumulated deficit (6,206,390)
Stock subscription receivable (25,000)
Cumulative translation adjustment (88,803)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (710,874)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 503,802
===========
See Selected Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For The Six Months Ended For The Three Months Ended
November 30, November 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES:
License and exchange fees $ 586,640 $ 805,889 $ 266,120 $ 385,192
Net system sales 58,442 138,089 32,996 75,839
Other 30,882 19,539 19,870 4,680
---------- ---------- ---------- ----------
TOTAL REVENUES 675,964 963,517 318,986 465,711
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of Sales:
Market data and communication costs 715,583 672,132 372,285 319,157
Cost of system sales 36,712 72,137 22,591 42,980
---------- ---------- ---------- ----------
TOTAL COST OF SALES 752,295 744,269 394,876 362,137
Selling, general and administrative 652,927 575,397 341,820 273,003
Research and development 119,564 132,436 43,347 51,189
---------- ---------- ---------- ----------
TOTAL EXPENSES 1,524,786 1,452,102 780,043 686,329
---------- ---------- ---------- ----------
NET LOSS $ (848,822) $ (488,585) $ (461,057) $ (220,618)
========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE $ (.04) $ (.03) $ (.02) $ (.01)
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 20,498,333 16,060,000 20,498,333 16,060,000
========== ========== ========== ==========
</TABLE>
See Selected Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Six Months Ended
November 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (848,822) $(488,585)
---------- --------
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 89,448 105,443
Expenses paid by issuance of options 23,000 -
Changes in assets and liabilities:
(Increase) decrease in:
Inventory 32,528 24,965
Accounts receivable 5,091 6,325
Foreign tax receivable 1,871 14,437
Prepaid and other 35,863 (31,940)
Increase (decrease) in:
Accounts payable and accrued expenses 212,519 (314,728)
Other liabilities (104,194) 16,960
---------- ---------
Total adjustments 296,126 (178,538)
---------- ---------
Net cash provided by (used in)
operating activities (552,696) (667,123)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 120,500 -
Proceeds from sale of Preferred Stock - 335,000
Collection of stock subscription
receivable - 250,000
---------- ---------
Net cash provided by financing
activities 120,500 585,000
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (18,007) (5,900)
---------- ---------
EFFECT OF FOREIGN EXCHANGE RATES ON
CASH (2,397) 19,664
---------- ---------
NET (DECREASE) IN CASH (452,600) (68,359)
CASH, BEGINNING OF PERIOD 557,516 255,178
---------- ---------
CASH, END OF PERIOD $ 104,916 $ 186,819
========== =========
See Selected Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1996
(UNAUDITED)
<CAPTION>
Preferred Stock Common Stock
$.001 par value $.001 par value Additional Stock Cumulative
paid-in Subscription Translation
Number Amount Number Amount Capital Deficit Receivable Adjustment Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
June 1, 1996 257,500 $ 257 20,498,333 $20,498 $5,565,564 $(5,357,568) $(25,000) $(91,893) $ 111,858
Net loss - - - - - (848,822) - - (848,822)
Foreign
currency
translation
adjustment - - - - - - - 3,090 3,090
Compensation - - - - 23,000 - - - 23,000
------- ----- ---------- ------- --------- --------- -------- -------- --------
Balance,
November 30,
1996 257,500 $257 20,498,333 $20,498 $5,588,564 $(6,206,390) $(25,000) $(88,803) $(710,874)
======= ===== ========== ======= ========== =========== ======== ======== =========
</TABLE>
See Selected Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of November 30, 1996 and the
related consolidated statements of operations, cash flows and changes
in stockholders' equity for the six months ended November 30, 1996
and 1995 have been prepared by the Company, without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position, results of operations and changes in cash flows at November
30, 1996 and for all periods presented have been made. The results
of operations for the period ended November 30, 1996 are not
necessarily indicative of the operating results for the full year
ending May 31, 1997.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with general accepted
accounting principles have been condensed or omitted. It is
suggested that these condensed consolidated financial statements be
read in conjunction with the financial statements and notes included
in the Company's Form 10-KSB for the year ended May 31, 1996.
NOTE 2 - INVENTORIES
Inventory, consisting of electronic components, is stated at the
lower of cost (FIFO) or market.
NOTE 3 - NOTES PAYABLE
In November 1996, certain Stockholders and Directors lent the Company
$120,500. These loans bear interest at 9% per annum. Interest is
payable in either cash or in the Company's common stock (valued at
$.10 per share). The loans are repayable the earlier of ninety (90)
days after the origination of the loan or the closing of any debt or
equity offering of $500,000. The notes are convertible at the option
of the holder at a rate of $.10 per share.
NOTE 4 - GOING CONCERN
As reflected in the consolidated financial statements, the Company
has suffered recurring losses and has a working capital deficiency.
The Company's continued existence is dependent upon its ability to
achieve and maintain profitable operations and positive cash flow.
The Company's liquidity and capital resources to date have been
provided from proceeds from sales of equity and trade credit.
In June 1996, the Company was notified by AGI, its Italian sales
agent and largest customer, that it would no longer continue as the
Company's Italian sales agent. Since July 1996, virtually all of the
revenues historically generated by AGI have ceased. The Company is
currently seeking a new sales agent in Italy, although there can be
no assurance that it will be successful in entering into a new agency
relationship in Italy or that revenues from a new Italian sales agent
will equal the revenues historically generated by AGI.
In response to the loss from operations and the loss of AGI as
Italian sales agent, management has developed a plan to increase
revenues, reduce expenses, and increase operating cash flow.
In the last quarter of fiscal 1996 and the first quarter of fiscal
1997, the Company entered into a sales agreement in Germany, and
sales representation agreements in the Baltic States, and Lebanon.
The Company is also in negotiations to replace AGI for the Italian
agency and to establish sales agencies in Switzerland and Poland.
Furthermore, the Company executed a sales and marketing agreement
with a major worldwide provider of financial instruments. This sales
and marketing agreement will initially be launched in England and
could be expanded throughout Europe. These new agreements have not
yet resulted in significant revenues. However, the Company expects
increased sales to result from the aforementioned growth in sales
representation commencing in July 1997, although there can be no
assurance that this will occur.
Throughout fiscal 1996 and continuing into fiscal 1997, the Company
has focused on reducing costs. Initially these cost reductions took
the form of reduced headcount, reductions in professional fees, and
the utilization of the Company's proprietary ticker plant. In fiscal
1997, the Company will implement the next stage in the development of
its proprietary ticker plant, through the utilization of a new
satellite transmission of North American financial data to Europe
replacing leased telephone lines. Commencing in November 1996, the
Company's new satellite agreement for its European Downlink will
provide for an approximate 25% reduction in cost as compared with the
existing contract. The Company has made a study of other costs and
has made further reductions in headcount and the utilization of
consultants. The Company continues to seek out other cost savings
opportunities. Lastly, certain officers have notified the Company of
their intention of suspending from 37% to 50% of further compensation
payments to them from September 1, 1996 until such time as the
Company's cash flow improves. The suspension of such compensation
payments is expected to be reviewed on a quarterly basis.
The Company's continued existence is dependent upon its ability to
achieve and maintain positive cash flow. Management believes that
additional financing will be required by the end of the third quarter
of fiscal 1997. There can be no assurance such financing will be
obtained or that such financing will have terms favorable to the
Company. In the event that the Company is unable to secure such
financing, it may need to curtail its current operations.
NOTE 5 - SUBSEQUENT EVENT
In January 1997, the Company received $100,000 upon the issuance of
1,000,000 shares of common stock to a private investor.
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Six months ended November 30, 1996 compared to
the six months ended November 30, 1995
Through the second quarter of fiscal 1997 the Company reported a loss from
continuing operations of $848,822 as compared with a loss $488,585 for the
comparable period of fiscal 1996.
The Company's overall revenues decreased from $963,517 through the second
quarter of fiscal 1996 to $675,964 for the comparable period in fiscal
1997, a decrease of $287,553 or 30%. The decrease in revenues in 1997 as
compared with 1996 is principally due to the loss of the Company's Italian
sales agent and largest customer AGI in June 1996. Furthermore, the
Company continues to face increased competition resulting in a reduced
license fee pricing structure and lower average per terminal pricing.
Overall expenses increased from $1,452,102 through the second quarter of
fiscal 1996 to $1,524,786 for the comparable period in fiscal 1997, an
increase of $72,684 or 5%. Direct expenses relating to revenues
increased by $8,026 or 1%. This increase resulted from increased costs
associated with the introduction of the London Stock Exchange Service
offset by savings associated with the AGI termination. Selling, general
and administrative expenses increased by $77,530 or 13% through the second
quarter of fiscal 1997 as compared with fiscal 1996.
Through the second quarter of fiscal 1997, the Company incurred $119,564
of research and development costs as compared with approximately $132,436
in the comparable period of fiscal 1996, a $12,872 decrease or 10%.
Financial Condition and Liquidity
As reflected in the consolidated financial statements, the Company has
suffered recurring losses and has a working capital deficiency. The
Company's continued existence is dependent upon its ability to achieve and
maintain profitable operations and positive cash flow. The Company's
liquidity and capital resources to date have been provided from proceeds
from sales of equity and trade credit.
In June 1996, the Company was notified by AGI, its Italian sales agent and
largest customer, that it would no longer continue as the Company's
Italian sales agent. Since July 1996, virtually all of the revenues
historically generated by AGI have ceased. The Company is currently
seeking a new sales agent in Italy, although there can be no assurance
that it will be successful in entering into a new agency relationship in
Italy or that revenues from a new Italian sales agent will equal the
revenues historically generated by AGI.
In response to the loss from operations and the loss of AGI as Italian
sales agent, management has developed a plan to increase revenues, reduce
expenses, and increase operating cash flow.
In the last quarter of fiscal 1996 and the first quarter of fiscal 1997,
the Company entered into a sales agreement in Germany, and sales
representation agreements in the Baltic States, and Lebanon. The Company
is also in negotiations to replace AGI for the Italian agency and to
establish sales agencies in Switzerland and Poland. Furthermore, the
Company executed a sales and marketing agreement with a major worldwide
provider of financial instruments. This sales and marketing agreement
will initially be launched in England and could be expanded throughout
Europe. These new agreements have not yet resulted in significant
revenues. However, the Company expects increased sales to result from the
aforementioned growth in sales representation commencing in July 1997,
although there can be no assurance that this will occur.
Throughout fiscal 1996 and continuing into fiscal 1997, the Company has
focused on reducing costs. Initially these cost reductions took the form
of reduced headcount, reductions in professional fees, and the utilization
of the Company's proprietary ticker plant. In fiscal 1997, the Company
will implement the next stage in the development of its proprietary ticker
plant, through the utilization of a new satellite transmission of North
American financial data to Europe replacing leased telephone lines.
Commencing in November 1996, the Company's new satellite agreement for its
European Downlink will provide for an approximate 25% reduction in cost as
compared with the existing contract. The Company has made a study of
other costs and has made further reductions in headcount and the
utilization of consultants. The Company continues to seek out other cost
savings opportunities. Lastly, certain officers have notified the Company
of their intention of suspending from 37% to 50% of further compensation
payments to them from September 1, 1996 until such time as the Company's
cash flow improves. The suspension of such compensation payments is
expected to be reviewed on a quarterly basis.
The Company's continued existence is dependent upon its ability to achieve
and maintain positive cash flow. On January 9, 1997, the Company announced
that it closed a $100,000 private placement of 1,000,000 shares of its
common stock to a private investor. Additionally, certain stockholders and
officers advanced the Company approximately $100,000. These funds will be
used to meet the Company's short-term working capital requirements. In
addition to the foregoing, management believes that additional financing
will be required during fiscal 1997. There can be no assurance such
financing will be obtained or that such financing will have terms
favorable to the Company. In the event that the Company is unable to
secure such financing, it may need to curtail its current operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule [EDGAR version only]
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EUROAMERICAN GROUP, INC.
Date: January 14, 1997 By: /s/Alexis Charamis
Alexis Charamis, Chairman of
the Board and Chief Executive Officer
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule [EDGAR version only]
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 104,916
<SECURITIES> 0
<RECEIVABLES> 182,721
<ALLOWANCES> 66,000
<INVENTORY> 128,410
<CURRENT-ASSETS> 45,072
<PP&E> 742,283
<DEPRECIATION> 660,006
<TOTAL-ASSETS> 503,802
<CURRENT-LIABILITIES> 1,214,676
<BONDS> 0
0
257
<COMMON> 20,498
<OTHER-SE> (731,372)
<TOTAL-LIABILITY-AND-EQUITY> 503,802
<SALES> 58,442
<TOTAL-REVENUES> 675,964
<CGS> 36,712
<TOTAL-COSTS> 752,295
<OTHER-EXPENSES> 772,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (848,822)
<INCOME-TAX> 0
<INCOME-CONTINUING> (848,822)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (848,822)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
