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 FEBRUARY 28,
1997.
[_] 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 February 28, 1997, was 21,598,333.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
ITEM 1. Financial Statements
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
February 28, 1997
(Unaudited)
CURRENT ASSETS:
Cash $ 22,648
Accounts receivable, net of allowance of $63,000 121,242
Inventory 121,744
Foreign taxes receivable 18,895
Prepaid expenses and other 82,878
---------
TOTAL CURRENT ASSETS 367,407
PROPERTY AND EQUIPMENT, less accumulated depreciation 58,858
SOFTWARE DEVELOPMENT COSTS, less accumulated
amortization 8,832
DEPOSITS AND OTHER ASSETS 24,757
---------
TOTAL ASSETS $ 459,854
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,080,993
Notes payable 120,500
Customer deposits and unearned revenue 39,053
Other 25,356
---------
TOTAL CURRENT LIABILITIES 1,265,902
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock ($.001 par value; 2,000,000 shares
authorized):
Series A Preferred Stock (257,500 shares issued
and outstanding) (liquidation preference
$515,000) 257
Series B Non-Voting Convertible Preferred Stock
(10,000 shares issued and outstanding) 10
Common stock ($.001 par value; 35,000,000 shares
authorized; 21,598,333 shares issued and
outstanding) 21,598
Additional paid-in capital 5,887,454
Accumulated deficit (6,645,267)
Cumulative translation adjustment (45,100)
Stock subscription receivable (25,000)
---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (806,048)
---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 459,854
=========
See Selected Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For The Nine Months For The Three Months
Ended February 28, Ended February 28,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
License and exchange fees $ 833,585 $ 1,207,660 $ 246,945 $ 401,771
Net system sales 81,889 135,083 23,447 3,006
Other 37,134 32,147 6,252 6,596
---------- ---------- ---------- ----------
TOTAL REVENUES 952,608 1,374,890 276,644 411,373
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
COST OF SALES:
Market data and communication
costs 1,094,943 1,038,690 379,360 366,558
Cost of system sales 49,105 94,815 12,393 22,678
---------- ---------- ---------- ----------
TOTAL COST OF SALES 1,144,048 1,133,505 391,753 389,236
Selling, general and
administrative 937,701 915,412 284,774 340,015
Research and development 158,558 185,401 38,994 52,965
---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES 2,240,307 2,234,318 715,521 782,216
---------- ---------- ---------- ----------
NET (LOSS) $(1,287,699) $ (859,428) $ (438,877) $ (370,843)
========== ========== ========== ==========
(LOSS) PER SHARE $ (.06) $ (.05) $ (.02) $ (.02)
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 20,620,555 16,060,000 20,864,999 16,060,000
========== ========== ========== ==========
</TABLE>
See Selected Notes to Consolidated Financial Statements
<PAGE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For Nine Months Ended
February 28,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(1,287,699) $(859,428)
---------- --------
Adjustments to reconcile net (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 100,942 157,517
Changes in operating assets and liabilities:
(Increase) decrease in:
Inventory 30,497 37,003
Accounts receivable (11,244) (41,856)
Foreign taxes receivable (3,025) 46,738
Prepaid and other (25,178) (19,647)
Increase (decrease) in:
Accounts payable and accrued expenses 381,523 (223,047)
Other liabilities (106,045) 7,986
--------- --------
TOTAL ADJUSTMENTS 367,470 (35,306)
--------- --------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (920,229) (894,734)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common and
preferred stock 300,000 489,981
Proceeds from notes payable 120,500 -
Collection of stock subscription
receivable - 250,000
--------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 420,500 739,981
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (21,346) (17,581)
--------- --------
NET CASH (USED IN) INVESTING
ACTIVITIES (21,346) (17,581)
--------- --------
EFFECT OF FOREIGN EXCHANGE RATES
ON CASH (13,793) 736
--------- --------
NET (DECREASE) IN CASH AND
CASH EQUIVALENTS (534,868) (171,600)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 557,516 255,178
--------- --------
CASH AND CASH EQUIVALENTS, END
OF PERIOD $ 22,648 $ 83,578
========= ========
See Selected Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
EUROAMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED FEBRUARY 28, 1997
(UNAUDITED)
<CAPTION>
Preferred Stock Common Stock
$.001 par value $.001 par value Additional Cumulative Stock
paid-in Translation Subscription
Number Amount Number Amount Capital Deficit Adjustment Receivable 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) $(91,893) $(25,000) $ 111,858
Net loss - - - - - (1,287,699) - - (1,287,699)
Foreign
currency
translation
adjustment - - - - - - 46,793 - 46,793
Issuance of
common
stock - - 1,100,000 1,100 148,900 - - - 150,000
Issuance of
preferred
stock 10,000 10 - - 149,990 - - - 150,000
Compensation - - - - 23,000 - - - 23,000
------- ---- ---------- ------- ---------- ----------- -------- -------- -----------
Balance,
February 28,
1997 267,500 $267 21,598,333 $21,598 $5,887,454 $(6,645,267) $(45,100) $(25,000) $ (806,048)
======= ==== ========== ======= ========== =========== ======== ======== ===========
</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 February 28, 1997 and the
related consolidated statements of operations, cash flows and changes
in stockholders' equity (deficit) for the nine months ended February
28, 1997 and 1996 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 February 28, 1997 and for all periods presented have been made.
The results of operations for the period ended February 28, 1997 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 - STOCKHOLDERS' EQUITY (DEFICIT)
In January 1997, the Company received $100,000 upon the issuance of
1,000,000 shares of common stock to a private investor. Also in
January 1997, the Company issued 100,000 shares of common stock
previously sold to a private investor for $50,000.
In February 1997, the Company issued 10,000 shares of its newly
designated Series B Non-Voting Convertible Preferred Stock (the
"Series B Preferred Stock") to a private investor for $150,000.
The Company's Board of Directors has designated 250,000 of its
preferred shares as Series B Preferred Stock. The Series B Preferred
Stock is non-voting, has no specified dividend and is convertible on
January 31, 2000 into the Company's common stock at the rate of 1
Series B Preferred Share for 100 shares of common stock. The Series
B Preferred Stock ranks pari pasu with the Company's common stock as
to rights upon liquidation.
NOTE 5 - GOING CONCERN
As reflected in the consolidated financial statements, the Company
has suffered recurring losses and has a working capital deficiency.
The Company's continued existence is dependent upon its ability to
achieve and maintain profitable operations and positive cash flow.
The Company's liquidity and capital resources to date have been
provided from proceeds from sales of equity and trade credit.
In June 1996, the Company was notified by AGI, its Italian sales
agent and largest customer, that it would no longer continue as the
Company's Italian sales agent. Since June 1996, virtually all of the
revenues historically generated by AGI have ceased. The Company is
currently seeking a new sales agent in Italy, although there can be
no assurance that it will be successful in entering into a new agency
relationship in Italy or that revenues from a new Italian sales agent
will equal the revenues historically generated by AGI.
In response to the loss from operations and the loss of AGI as
Italian sales agent, management has developed a plan to increase
revenues, reduce expenses, and increase operating cash flow.
In the last quarter of fiscal 1996 and the first quarter of fiscal
1997, the Company entered into a sales agreement in Germany, and
sales representation agreements in the Baltic States, and Lebanon.
The Company is also in negotiations to replace AGI for the Italian
agency and to establish sales agencies in Switzerland and Poland.
Furthermore, the Company executed a sales and marketing agreement
with a major worldwide provider of financial instruments. This sales
and marketing agreement will initially be launched in England and
could be expanded throughout Europe. These new agreements have not
yet resulted in significant revenues. However, the Company expects
increased sales to result from the aforementioned growth in sales
representation, although there can be no assurance that this will
occur.
Throughout fiscal 1996 and continuing into fiscal 1997, the Company
has focused on reducing costs. Initially these cost reductions took
the form of reduced headcount, reductions in professional fees, and
the utilization of the Company's proprietary ticker plant. In fiscal
1997, the Company will implement the next stage in the development of
its proprietary ticker plant, through the utilization of a new
satellite transmission of North American financial data to Europe
replacing leased telephone lines. Commencing in November 1996, the
Company's new satellite agreement for its European Downlink will
provide for an approximate 25% reduction in cost as compared with the
existing contract. The Company has made a study of other costs and
has made further reductions in headcount and the utilization of
consultants. The Company continues to seek out other cost savings
opportunities. Lastly, certain officers have notified the Company of
their intention of suspending from 37% to 50% of further compensation
payments to them from September 1, 1996 until such time as the
Company's cash flow improves. The suspension of such compensation
payments is expected to be reviewed on a quarterly basis.
The Company's continued existence is dependent upon its ability to
achieve and maintain positive cash flow. Management believes that
additional financing will be required in the fourth 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.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Nine months ended February 28, 1997 compared to
the nine months ended February 28, 1996
Through the third quarter of fiscal 1997 the Company reported a loss from
continuing operations of $1,287,699 as compared with a loss $859,428 for
the comparable period of fiscal 1996.
The Company's overall revenues decreased from $1,374,890 through the third
quarter of fiscal 1996 to $952,608 for the comparable period in fiscal
1997, a decrease of $422,282 or 31%. 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 $2,234,318 through the third quarter of
fiscal 1996 to $2,240,307 for the comparable period in fiscal 1997, an
increase of $5,989. Direct expenses relating to revenues increased by
$10,543. Selling, general and administrative expenses increased by
$22,289 or 2% through the second quarter of fiscal 1997 as compared with
fiscal 1996.
Through the third quarter of fiscal 1997, the Company incurred $158,558 of
research and development costs as compared with $185,401 in the comparable
period of fiscal 1996, a $26,843 decrease or 14%.
Financial Condition and Liquidity
As reflected in the consolidated financial statements, the Company has
suffered recurring losses and has a working capital deficiency. The
Company's continued existence is dependent upon its ability to achieve and
maintain profitable operations and positive cash flow. The Company's
liquidity and capital resources to date have been provided from proceeds
from sales of equity and trade credit.
In June 1996, the Company was notified by AGI, its Italian sales agent and
largest customer, that it would no longer continue as the Company's
Italian sales agent. Since June 1996, virtually all of the revenues
historically generated by AGI have ceased. The Company is currently
seeking a new sales agent in Italy, although there can be no assurance
that it will be successful in entering into a new agency relationship in
Italy or that revenues from a new Italian sales agent will equal the
revenues historically generated by AGI.
In response to the loss from operations and the loss of AGI as Italian
sales agent, management has developed a plan to increase revenues, reduce
expenses, and increase operating cash flow.
In the last quarter of fiscal 1996 and the first quarter of fiscal 1997,
the Company entered into a sales agreement in Germany, and sales
representation agreements in the Baltic States, and Lebanon. The Company
is also in negotiations to replace AGI for the Italian agency and to
establish sales agencies in Switzerland and Poland. Furthermore, the
Company executed a sales and marketing agreement with a major worldwide
provider of financial instruments. This sales and marketing agreement
will initially be launched in England and could be expanded throughout
Europe. These new agreements have not yet resulted in significant
revenues. However, the Company expects increased sales to result from the
aforementioned growth in sales representation, although there can be no
assurance that this will occur.
Throughout fiscal 1996 and continuing into fiscal 1997, the Company has
focused on reducing costs. Initially these cost reductions took the form
of reduced headcount, reductions in professional fees, and the utilization
of the Company's proprietary ticker plant. In fiscal 1997, the Company
will implement the next stage in the development of its proprietary ticker
plant, through the utilization of a new satellite transmission of North
American financial data to Europe replacing leased telephone lines.
Commencing in November 1996, the Company's new satellite agreement for its
European Downlink will provide for an approximate 25% reduction in cost as
compared with the existing contract. The Company has made a study of
other costs and has made further reductions in headcount and the
utilization of consultants. The Company continues to seek out other cost
savings opportunities. Lastly, certain officers have notified the Company
of their intention of suspending from 37% to 50% of further compensation
payments to them from September 1, 1996 until such time as the Company's
cash flow improves. The suspension of such compensation payments is
expected to be reviewed on a quarterly basis.
The Company's continued existence is dependent upon its ability to achieve
and maintain positive cash flow. Management believes that additional
financing will be required in the fourth 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.
<PAGE>
PART II I- OTHER INFORMATION
ITEM 2. Changes in Securities
On January 7, 1997, the Company sold 1,000,000 shares of its Common
Stock, par value $.001 per share, to a private investor for an aggregate
of $100,000 in a private placement exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.
On February 13, 1997, the Company sold 10,000 shares of its Series
B Non-Voting Convertible Preferred Stock to a private investor for an
aggregate of $150,000 in a private placement exempt from registration
under the Securities Act of 1933, as amended, pursuant to Section 4(2)
thereof.
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.
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: April 18, 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
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EUROAMERICAN GROUP, INC. AS OF AND
FOR THE NINE MONTHS ENDED FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 22,648
<SECURITIES> 0
<RECEIVABLES> 184,242
<ALLOWANCES> 63,000
<INVENTORY> 121,744
<CURRENT-ASSETS> 367,407
<PP&E> 710,713
<DEPRECIATION> 643,023
<TOTAL-ASSETS> 459,854
<CURRENT-LIABILITIES> 1,265,902
<BONDS> 120,500
21,598
0
<COMMON> 267
<OTHER-SE> (827,913)
<TOTAL-LIABILITY-AND-EQUITY> 459,854
<SALES> 81,889
<TOTAL-REVENUES> 952,608
<CGS> 49,105
<TOTAL-COSTS> 1,144,048
<OTHER-EXPENSES> 1,096,259
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,287,699)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,287,699)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,287,699)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
