<PAGE>

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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                             -----------------------

                               FORM 10-KSB/A NO. 1

                             -----------------------

        [X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended March 31, 1997

                                       OR

        [ ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                             -----------------------

                         Commission file number 0-26202

                     EASTBROKERS INTERNATIONAL INCORPORATED
        (Exact name of small business issuer as specified in its charter)
                             -----------------------

             Delaware                                 52-1807562
  (State or other jurisdiction of        (I.R.S. Employer Identification No.)
  incorporation or organization)

          15245 Shady Grove Road, Suite 340, Rockville, Maryland 20850
               (Address of principal executive offices) (Zip Code)

                                 (301) 527-1110
                (Issuer's telephone number, including area code)

                             CZECH INDUSTRIES, INC.
                   (Former name, if changed since last report)
                             -----------------------

         Securities registered under Section 12(b) of the Exchange Act:
                                      None

         Securities registered under Section 12(g) of the Exchange Act:
                          Common Stock, $.05 par value
                                Class A Warrants

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 there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of the  registrant's  knowledge,  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part III of this Form  10-QSB or any
amendment to this Form 10-QSB. [ ]

State issuer's revenues for its most recent fiscal year:  $5,552,069.

The aggregate market value of the voting stock held by  non-affiliates  computed
by  reference  to the average of the bid and ask price of such stock on June 27,
1997 was $10,162,084.

The total number of shares of the  registrant's  Common  Stock,  $.05 par value,
outstanding on June 27, 1997, was 3,003,000.

Transitional Small Business Disclosure Format:  Yes  [ ]  No  [X]


================================================================================


<PAGE>


                                  EASTBROKERS INTERNATIONAL INCORPORATED


                                           Index to Form 10-KSB
<TABLE>
<CAPTION>


                                                                                                                 Page
                                                  PART I
<S>                                                                                                               <C>
Item  1.  Description of Business................................................................................   3
Item  2.  Description of Property................................................................................  12
Item  3.  Legal Proceedings......................................................................................  12
Item  4.  Submission of Matters to a Vote of Security Holders....................................................  12


                                                 PART II

Item  5.  Market for Common Equity and Related Stockholder Matters...............................................  13
Item  6.  Management's Discussion and Analysis or Plan of Operation..............................................  15
Item  7.  Financial Statements
             Historical Financial Statements
                Independent Auditor's Report.....................................................................  22
                Consolidated Statements of Financial Condition...................................................  23
                Consolidated Statements of Operations
                  Year Ended December 31, 1995, Transition Period Ended March 31, 1996,
                     and Year Ended March 31, 1997...............................................................  24
                Consolidated Statements of Changes in Stockholders' Equity.......................................  25
                Consolidated Statements of Cash Flows............................................................  26
                Notes to Consolidated Financial Statements.......................................................  28
Item  8.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure...................  41


                                                 PART III

Item  9.  Directors and Executive Officers of the Registrant.....................................................  42
Item 10.   Executive Compensation................................................................................. 44
Item 11.   Security Ownership of Certain Beneficial Owners and Management......................................... 47
Item 12.   Certain Relationships and Related Transactions......................................................... 48
Item 13.   Exhibits and Reports on Form 8-K....................................................................... 50
Signatures........................................................................................................ 51


</TABLE>





                                     - 2 -
<PAGE>


                                     PART I


Item  1. DESCRIPTION OF BUSINESS

GENERAL

     Certain  information  set forth in this report under the captions  "Item 1.
Description of Business," and "Item 6.  Management's  Discussion and Analysis or
Plan of Operation"  includes "forward looking  statements" within the meaning of
the Private  Securities  Litigation Reform Act of 1995 and is subject to certain
risks and  uncertainties,  including but not limited to the effect of political,
economic  and market  conditions  both  domestically  and in Eastern and Central
Europe.  Readers  are  cautioned  not to place undue  reliance on these  forward
looking statements,  which are made as of the date hereof and are referred to in
the  discussion  of risks and  uncertainties  set forth under the caption  "Risk
Factors"  which  appears  later  in  this  Item 1.  The  Company  undertakes  no
obligation to release any revisions to the forward looking statements to reflect
events or circumstances after the date hereof or to reflect unanticipated events
or developments.

REVERSE STOCK SPLIT

     At a Special  Meeting of the Company's  shareholders  held on September 10,
1996, the  shareholders  approved a one-for-five  reverse split of the Company's
Common Stock. Unless otherwise indicated, the information contained herein gives
effect to the  one-for-five  reverse  stock split of the issued and  outstanding
Common  Stock and the  reduction  in the  authorized  number of shares of Common
Stock from 50,000,000 to 10,000,000.

CHANGE OF NAME

     At the 1996 Annual Meeting of  Shareholders  held on December 10, 1996, the
shareholders of Czech Industries,  Inc. approved the change of the Corporation's
name to Eastbrokers International Incorporated (the "Company" or "Eastbrokers").
The Board of  Directors  of the  Company  believes  that the change of name more
accurately  reflects  the nature and scope of the  Company's  business  and will
serve to enhance the Company's  recognition  by reflecting  the expansion of its
business activities in Central and Eastern Europe.

BACKGROUND

     Eastbrokers International  Incorporated (the "Company") was incorporated in
the State of Delaware on January  20,  1993,  as the Czech Fund in order to take
advantage  of the  rapid  growth  in  business  opportunities  arising  from the
privatization  of the  newly-democratized  Czech  Republic  by  merging  with or
acquiring Czech businesses.

     In July 1993,  the Company had a small initial public  offering,  following
which it  purchased a  controlling  interest  in Hotel  Fortuna,  a.s.,  a Czech
corporation  owning a hotel located in Prague, and was renamed Czech Industries,
Inc.  The  Company  also  entered  into an  agreement  to acquire a  controlling
interest in Moravacentrum, a collection of eight department stores in Brno. This
acquisition  was  consummated  using a portion of the $15 million gross proceeds
from a secondary public offering in June 1995.

     Later in 1995,  however,  the  Company  shifted  its focus in  response  to
changes in the marketplace. As major institutional investors began to appreciate
the  investment  opportunities  available  in the Czech  Republic,  most of such
opportunities  were seized by a limited number of major  institutions  which now
control much of the Czech economy.  This  development made it very difficult for
smaller  players such as the Company to effectively  take advantage of available
opportunities.

     In 1996,  the Company  received what it considered an attractive  offer for
its  interest  in  Moravacentrum.  The  Company  accepted  this  offer  to  sell
Moravacentrum,  determining  that the sale  proceeds  could  be  better  applied
towards other  acquisitions  which would provide better  prospects for return on
investment.

     Having  considered  a variety of  investments,  the Company  decided on the
acquisition of Eastbrokers  Beteiligungs AG ("Eastbrokers  Vienna"), an Austrian
brokerage  company  with offices  throughout  Central and Eastern  Europe.  This
transaction  enhanced the Company's prospects by both providing the Company with
a  vehicle  for  its  existing   acquisition   strategy   while   extending  its
opportunities  beyond the Czech  Republic to the entirety of Central and Eastern
Europe.  The  acquisition  was  completed  on  August  1,  1996.  Following  the
acquisition,  the  Company's  name  was  changed  to  Eastbrokers  International
Incorporated.

                                     - 3 -


<PAGE>


     The  Company,  through its  Vienna-based  subsidiary,  Eastbrokers  Vienna,
provides  financial  services  in Eastern  and  Central  Europe.  The  principal
strategic  objective  of the Company is to  establish  controlling  ownership of
independent  broker-dealers  and to create a  network  that  provides  access to
emerging market investment  opportunities in Eastern and Central Europe. Through
its U.S.  subsidiary,  Eastbrokers  North America,  Inc., the Company intends to
market these  investment  opportunities  to Western  European and United  States
institutional and commercial investors.

     Eastbrokers  Vienna's  primary  business is to provide its  customers  with
stock brokering and investment  banking  services.  Eastbrokers  Vienna conducts
business  through its head office in Vienna,  Austria and in its  subsidiary and
affiliate offices located in (a) Prague,  Czech Republic (b) Budapest,  Hungary,
(c) Bratislava,  Slovakia,  (d) Almaty,  Kazakhstan,  (e) Istanbul,  Turkey, (f)
Moscow,  Russia, (g) Bucharest,  Romania,  (h) Sofia,  Bulgaria,  (i) Ljubljana,
Slovenia, (j) Zagreb,  Croatia, and (k) Warsaw, Poland. Through its subsidiaries
and affiliate offices, the Company is a member of the Vienna Stock Exchange, the
Budapest  Stock  Exchange,  the  Bratislava  Stock  Exchange,  the Zagreb  Stock
Exchange,  the Ljubljana  Stock  Exchange,  the Bucharest  Stock  Exchange,  the
Central Asian Stock  Exchange,  the Warsaw Stock Exchange and a shareholder  and
member of the Prague  Stock  Exchange.  Eastbrokers  Vienna also owns 49% of WMP
Borsenmakler  AG  ("WMP"),  a  publicly-held  Austrian  investment  banking  and
brokerage firm.

     Through its Vienna affiliate,  Eastbrokers Vienna's brokerage,  trading and
market making business generates approximately 10% of all revenues.  Eastbrokers
Vienna  conducts its sales  activities  as principal  and agent on behalf of its
clients. Eastbrokers Vienna primarily distributes and trades Eastern and Central
European equity securities and to a lesser degree, debt securities.  Eastbrokers
Vienna, through WMP, actively makes a market for the securities of more than 400
companies on the Vienna Stock Exchange.

     Eastbrokers   Vienna  is  also  a  leading  Eastern  and  Central  European
investment banking firm which provides advice to, and raises capital for Eastern
and Central European companies. Eastbrokers Vienna provides advisory services on
key  strategic  matters  such as mergers,  acquisitions,  privatizations,  joint
ventures as well as long range financial  planning.  Eastbrokers Vienna seeks to
raise much of its capital in Western Europe through institutional and commercial
investors.

     Additionally,  through  its  recently  acquired  subsidiary  in the  United
States,  Eastbrokers  North America,  Inc.  ("Eastbrokers  NA", member NASD, the
Company intends to provide added value,  performance-driven  research,  trading,
asset  management  and  corporate  finance  services in the emerging  markets of
Central and Eastern Europe to North American  institutional  investors  (buyside
and sellside) and high net worth  individuals.  The U.S.  based broker dealer is
expected to complement the existing European based units. Eastbrokers NA intends
to focus on seeking out North American  companies whose primary focus is Central
and Eastern Europe.  Differentiation of the services provided will be emphasized
in an effort to enable  Eastbrokers  NA to fulfill its  objective  of  assisting
existing  foreign units by accessing and transacting with North American capital
markets,  which represent a source of emerging  market capital,  through quality
research and by  establishing  relationships  that would evolve  naturally  into
other financial  related  products and services.  The Company has not previously
operated a broker dealer in the United States and there can be no assurance that
Eastbrokers NA can be successfully established or operated.

ACQUISITIONS AND DISPOSITIONS DURING THE FISCAL YEAR

     Through a series of stock  purchase  transactions  beginning July 1995, the
Company purchased a 42.75% equity interest in Moravacentrum  a.s., a joint stock
company which owns a major quality  department  store chain based in Brno, Czech
Republic.  In December 1995,  the Company  entered into an agreement to sell its
shares in Moravacentrum a.s. for approximately $8.73 million. The parties agreed
upon an installment sale, and, the final installment was paid in April 1996. The
Company  recorded a gain from the sale aggregating  approximately  $1.2 million.
The Company  determined that the sale of Moravacentrum  a.s.  presented a unique
opportunity to accelerate  further mergers and  acquisitions  through  increased
working capital.

     On August,  1, 1996,  the Company  acquired  80 percent of the  outstanding
stock of  Eastbrokers  Beteiligungs  Aktiengesellschaft  ("Eastbrokers  Vienna")
through the issuance of 1,080,000 shares of the Company's common stock valued at
$5,400,000.  As a participant  in Eastbrokers  Vienna's  capital  increase,  the
Company  subsequently  acquired an  additional  245,320 of an available  270,000
shares for cash increasing its ownership  percentage to 83.62 percent.  In three
separate  transactions in November and December 1996 and March 1997, the Company
purchased  81,550  additional  shares,  increasing  its ownership  percentage to
approximately 94 percent.

     The  fair  value  of the  net  assets  acquired  under  these  transactions
approximated  $8,400,000.  The  acquisition  has been  accounted  for  under the
purchase  method of  accounting.  The excess of the purchase price over the fair
value of the

                                     - 4 -


<PAGE>

net assets acquired resulted in the Company recording  approximately  $1,950,000
in goodwill,  which is being amortized over 25 years on a  straight-line  basis.
These  consolidated  financial  statements  include the results of operations of
Eastbrokers  Vienna from the date of acquisition  through December 31, 1996. See
Item  7  -  Financial  Statements.   The  purchase  agreements  contain  certain
provisions  whereby  the  selling  shareholders  may be  eligible  to receive an
additional  120,000  shares of the  Company's  common stock in the event certain
earnings targets are achieved.

     On October 1, 1996, the Company entered into an agreement with Y.S.E.  a.s.
to dispose of the  Company's  controlling  equity  interest in the Hotel Fortuna
a.s. The Company had owned  251,000  shares of Common Stock of the Hotel Fortuna
a.s., which owns and operates a 242 room hotel, restaurant and lounge located in
Prague,  Czech Republic.  The disposition of the Company's interest in the Hotel
Fortuna  a.s.  is  deemed to be a  disposition  of a  significant  amount of the
Company's assets.

     In return for its equity  interest in the Hotel Fortuna  a.s.,  the Company
received  100,000  shares  of Common  Stock of Ceske  energeticke  zavody  a.s.,
nominal value 1,100 CZK ("CEZ"),  a Czech utility company,  and 86,570 shares of
Common Stock of Vodni stavby Praha a.s., nominal value 1,000 CZK ("VS"), a Czech
construction  company.  Both CEZ and VS are actively  traded on the Prague Stock
Exchange's ("PSE") Main Market. The VS shares were transferred to the Company on
or about October 15, 1996,  and the CEZ shares were  transferred  to the Company
about  November 5, 1996.  Although  the Company  received  the shares at various
dates,  the title to these  shares did not  transfer  until the  delivery of the
Hotel Fortuna,  a.s.  shares.  The Company  transferred  its shares of the Hotel
Fortuna a.s. to Y.S.E.  a.s. on or about November 6, 1996 which also  represents
the final closing of the sale.

     The Company  determined the cost basis of the Hotel Fortuna a.s.  shares by
adding the  Company's  historical  cost  basis in the hotel  with the  Company's
proportionate  share of the hotel's  earnings it received through June 30, 1996.
Based on this  computation,  the Company  determined  that the cost basis of its
interest in the hotel was approximately  $9,400,000 USD. In negotiating the sale
of the Company's  interest in Hotel Fortuna,  a.s., the Purchaser offered shares
of CEZ and VS as  considerations  for the  shares  of Hotel  Fortuna,  a.s.  The
Company  negotiated  the  number of the CEZ and VS shares it was to  receive  as
consideration  by  utilizing  the then  current  market  values of the shares as
quoted on the PSE on October 1, 1996,  the date of the signing of the  contract.
On  October  1,  1996,  the PSE  quoted  prices  of CEZ and VS  were  1,040  CZK
(approximately  $37.50 USD) and 1,900 CZK (approximately  $69.50 USD) per share,
respectively.  Based on these  October 1, 1996 quoted  prices,  the value of the
consideration to be received was approximately $9,800,000 USD.

     The Company valued the  consideration  received on the sale of its interest
in Hotel Fortuna,  a.s. as of November 6, 1996, which is the date title to these
shares was transferred to the Company. This is consistent with the provisions of
current accounting  literature which describes the conditions required to be met
for a sale to be considered  consummated.  As of November 6, 1996, the per share
prices of the CEZ and VS were 950 CZK  (approximately  $35.00 USD) and 1,300 CZK
(approximately  $51.00  USD),  respectively,   which  represented  approximately
$7,957,012 USD at the then current exchange rates. The Company  classified these
shares as available for sale securities.

     On a date subsequent to obtaining the shares, the Company used 2,500 shares
of CEZ and  30,302  shares  of VS to repay  the  balance  of the  principal  and
interest due under a Note payable owed to Finn s.r.o. in the approximate  amount
of $2.1 million  USD.  Also,  the Company sold 13,900  shares of VS at 1,800 CZK
(approximately $65.50 USD) per share for approximately $910,000 USD.

     In January and February 1997,  the Company sold its entire  interest in CEZ
in a series of transactions with a total value of approximately  $3,700,000 USD.
The average sales price per share was 1,067 CZK (approximately $38.00 USD).

     On March 6,  1997,  the  Company  purchased  a 90%  interest  of  Financial
Planning Services International, Inc. ("FPS"), a Delaware Corporation and member
of the National  Association  of Securities  Dealers,  Inc.  ("NASD"),  from Mr.
Robert Sass, a non-affiliate.  In consideration of the 90% interest, the Company
issued to Mr. Sass,  22,500  shares of the Company's  common stock.  The Company
subsequently renamed FPS to Eastbrokers North America, Inc.  ("Eastbrokers NA").
Mr. John Paul DeVito,  Vice  President of Brokerage  and Sales and President and
CEO of  Eastbrokers  NA purchased the balance of the 10% of FPS for 2,500 shares
of the Company's  Common Stock.  Mr. DeVito  purchased the 2,500 shares from the
Company at $4.00 per share for an aggregate  amount of $10,000,  $9,875 of which
was loaned to Mr. DeVito by the Company in exchange for a promissory  note.  Mr.
Sass is a board  member of the  Eastbrokers  NA and  serves as an advisor to the
Chairman of the Board of the Company.

GOVERNMENT REGULATION

     The Company has operations  based in 12 foreign  countries.  The Company is
exposed to the risk of changes in

                                     - 5 -


<PAGE>

social,  political  and  economic  conditions  inherent  in foreign  operations,
including  changes in the laws and policies  that govern  foreign  investment in
countries  where it has  operations as well as, to a lesser  extent,  changes in
United States laws and  regulations  relating to foreign  trade and  investment.
There  can be no  assurance  as to the  future  effect  of  changes  in  social,
political  and  economic  conditions  on the  Company's  business  or  financial
condition.

COMPETITION

     The  Company  encounters  substantial  competition  from both  foreign  and
domestic businesses in Central and Eastern Europe. A large number of established
and well-financed  entities  including  multinational  businesses and investment
banking firms such as Creditanstaldt,  Credit Suisse-First  Boston, ING Bearings
and  ABN  Amro,  have  recently  and  substantially   increased  their  business
activities  in Central  and Eastern  Europe.  Nearly all of such  entities  have
substantially  greater financial  resources,  technical expertise and managerial
capabilities  than  the  Company,  and  consequently,  the  Company  may be at a
substantial  competitive  disadvantage in the conduct of its business in Central
and Eastern Europe.

EMPLOYEES

     The  Company  currently  has  207  full-time  employees  and  28  part-time
employees.

COMPLIANCE WITH ENVIRONMENTAL REGULATIONS

     The Company must comply with various federal,  state and local  regulations
relating  to the  protection  of the  environment.  Federal,  state,  and  local
provisions  which have been  enacted  or adopted  regulating  the  discharge  of
materials into the  environnment or otherwise  relating to the protection of the
environment  will not, in the opinion of the Company,  have a material effect on
the capital expenditures, earnings, or the competitive position of the Company.

RISK FACTORS

Volatile Nature of Securities Business

     The  securities  business  is, by its  nature,  subject to  various  risks,
particularly  in  volatile  or illiquid  markets,  including  the risk of losses
resulting from the underwriting or ownership of securities,  trading,  arbitrage
and  merchant  banking  activities,  counterparty  failure to meet  commitments,
customer fraud,  employee fraud,  misconduct and errors,  failures in connection
with the processing of securities transactions and litigation.

     The Company's principal business activities, investment banking, securities
sales and trading and  correspondent  brokerage  services  are, by their nature,
highly  competitive and subject to various risks,  volatile  trading markets and
fluctuations in the volume of market activity.  Consequently,  the Company's net
income  and  revenues  have  been,  and  may  continue  to be,  subject  to wide
fluctuations,  reflecting  the  impact  of many  factors  beyond  the  Company's
control,  including  securities market  conditions,  the level and volatility of
interest rates, competitive conditions and the size and timing of transactions.

     The securities  business and its profitability are affected by many factors
of a  national  and  international  nature,  including  economic  and  political
conditions,  broad trends in business and finance,  legislation  and  regulation
affecting the national and  international  business and  financial  communities,
currency values, inflation, market conditions, the availability of short-term or
long-term funding and capital, the credit capacity or perceived creditworthiness
of the security  industry in the  marketplace  and the level and  volatility  of
interest rates.

     A securities firm's business and its profitability are also affected by the
firm's credit capacity or perceived  creditworthiness  and competitive  factors,
including its ability to attract and retain highly skilled employees.  These and
other  factors  may  contribute  to  reduced  levels  of new  issue  or  merger,
acquisition,   restructuring,   and  leveraged  capital  activities,   including
leveraged  buyouts and high-yield  financing,  or the level of  participation in
financing and  investment  related to such  activities,  generally  resulting in
lower revenues from investment and merchant  banking fees and  underwriting  and
corporate development investments. Reduced volume of securities transactions and
reduced  market  liquidity  generally  result in lower  revenues from dealer and
trading activities and commissions.

     Lower  price  levels  of  securities  may  result  in a  reduced  volume of
transactions  and in losses from declines in the market value of securities held
in trading,  investment  and  underwriting  positions.  Sudden sharp declines in
market values of  securities  and the failure of issuers and  counterparties  to
perform their obligations can result in illiquid

                                     - 6 -

<PAGE>

markets. In such markets, the Company may not be able to sell securities and may
have  difficulty  in  covering  its  securities  positions.   Such  markets,  if
prolonged,  may also  lower the  Company's  revenues  from  investment  banking,
merchant banking and other investments, and could have a material adverse effect
on the Company's results of operations and financial condition.


Significant Competition Within the Securities Industry

     The  Company  encounters  significant  competition  in all  aspects  of the
securities  business and competes  worldwide  directly  with other  domestic and
foreign securities firms, a number of which have greater capital,  financial and
other  resources  than the  Company.  In  addition  to  competition  from  firms
currently in the securities business, there has been increasing competition from
other sources, such as commercial banks and investment boutiques.

     As a result of anticipated  legislative  and regulatory  initiatives in the
U.S.  to remove or relieve  certain  restrictions  on  commercial  banks,  it is
possible  that  competition  in some markets  currently  dominated by investment
banks may increase in the near future.

     Such  competition  could also affect the  Company's  ability to attract and
retain  highly  skilled  individuals  to conduct  its  various  businesses.  The
principal  competitive  factors  influencing  the  Company's  business  are  its
professional  staff, the Company's  reputation in the marketplace,  its existing
client  relationships,  the ability to commit capital to client transactions and
its mix of market capabilities.  The Company's ability to compete effectively in
securities  brokerage and investment  banking activities will also be influenced
by the adequacy of its capital  levels.  In addition,  the Company's  ability to
expand its business may depend on its ability to raise additional  capital.  See
"Description of Business - Competition".

Business Subject to Extensive Federal, State and Foreign Regulations

     The  Company's  business  is, and the  securities  industry  generally  is,
subject to  extensive  regulation  in Austria and all other  Central and Eastern
European states where its subsidiaries operate at the state level, as well as by
industry self-regulatory  organizations ("SROs"). The company is also subject to
regulation  by  various  foreign   financial   regulatory   authorities  in  the
jurisdictions  outside of Austria or Central  and Eastern  Europe  where it does
business,  including  by The  Securities  and  Futures  Authority  of the United
Kingdom and the  Securities  and  Exchange  Commission  of the United  States of
America. See "Description of Business - Governmental Regulation".

     Compliance with many of the regulations  applicable to the Company involves
a number of risks,  particularly  in areas where  applicable  regulations may be
unclear.  The Austrian Ministry of Finance (the "Ministry"),  other governmental
regulatory  authorities,   including  state  securities  regulators,  and  SROs,
including the Vienna Stock Exchange  Chamber,  may institute  administrative  or
judicial  proceedings or arbitrations  which may result in censure,  fine, civil
penalties  (including treble damages in the case of insider trading violations),
the issuance of cease-and-desist  orders, the de-registration or suspension of a
broker-dealer,  investment adviser or futures commission merchant, the statutory
disqualification  of its officers or employees  or other  adverse  consequences,
and, even if none of such actions is taken, could have a material adverse effect
on the Company's  perceived  creditworthiness,  reputation and  competitiveness.
Customers of the Company or others who allege that they have been damaged by the
Company's   violation  of  applicable   regulations  also  may  seek  to  obtain
compensation from the Company,  including the unwinding of any transactions with
the Company.

     Additional  legislation  and  regulations,  including those relating to the
activities of affiliates of broker-dealers,  changes in rules promulgated by the
Ministry or other Austrian or foreign  governmental  regulatory  authorities and
SROs or changes in the  interpretation or enforcement of existing laws and rules
may adversely affect the manner of operation and profitability of the Company.

     The Company's businesses may be materially affected not only by regulations
applicable to it as a financial market intermediary,  but also by regulations of
general  application.  For example,  the volume of the  Company's  underwriting,
merger  and  acquisition  and  merchant  banking  business  in any year could be
affected  by,  among  other  things,  existing  and  proposed  tax  legislation,
antitrust policy and other governmental  regulations and policies (including the
interest   rate   policies  of  the  Austrian   Central  Bank)  and  changes  in
interpretation  or  enforcement  of  existing  laws and rules  that  affect  the
business  and  financial  communities.  From  time to  time,  various  forms  of
anti-takeover  legislation  and  legislation  that  could  affect  the  benefits
associated with financing leveraged transactions with high-yield securities have
been proposed that, if enacted,  could adversely affect the volume of merger and
acquisition  and  investment  banking  business,  which in turn could  adversely
affect the Company's underwriting, advisory and trading revenues

                                     - 7 -


<PAGE>

related thereto.

Market,  Credit and Liquidity  Risks  Associated with  Underwriting  and Trading
Activities

     The Company's underwriting, securities trading, market-making and arbitrage
activities  are  conducted by the Company as principal and subject the Company's
capital to significant risks, including market, credit (including  counterparty)
and liquidity risks.

     The Company's underwriting, securities trading, market-making and arbitrage
activities  often  involve the  purchase,  sale or  short-sale  of securities as
principal in markets that may be characterised  by relative  illiquidity or that
may be particularly  susceptible to rapid fluctuations in liquidity. The Company
from  time to time  has  large  position  concentrations  in  certain  types  of
securities or  commitments  and in the  securities of or commitments to a single
issuer, including sovereign governments and other entities, issuers located in a
particular  country  or  geographic  area,  or issuers  engaged in a  particular
industry. Through its subsidiaries and affiliate offices, the Company engages in
proprietary   trading  of  Eastern  European  securities  with  an  emphasis  on
government and corporate  bonds,  local debt instruments and Central and Eastern
European equity  securities,  which involve risks  associated with the political
instability  and  relative  currency  values of the  nations in which the issuer
principally  engages  in  business  as well as the risk of  nationalisation.  In
addition,   the  Company   has,   from  time  to  time,   substantial   position
concentrations in or commitments to high-yield issuers.

     These securities generally involve greater risk than  investment-grade debt
securities due to credit considerations,  liquidity of secondary trading markets
and  vulnerability  to general economic  conditions.  The level of the Company's
high-yield  securities  inventories  and the impact of such  activities upon the
Company's  results of operations can fluctuate from period to period as a result
of customer demands and economic and market considerations.

     In addition,  the trend in all major capital  markets,  for competitive and
other reasons,  toward larger commitments on the part of lead underwriters means
that,  from  time to  time,  an  underwriter  may  retain  significant  position
concentrations  in  individual  securities.  Such  concentrations  increase  the
Company's exposure to specific credit,  market and political risks. In addition,
material  fluctuations in foreign  currencies  vis-a-vis the U.S. dollar, in the
absence of countervailing covering or other procedures,  may result in losses or
gains in the  carrying  value of  certain  of the  Company's  assets  located or
denominated  in  non-U.S.   jurisdictions  or  currencies.   See   "Management's
Discussion and Analysis or Plan of Operation".

Capital Intensive Nature of and Potential Losses Resulting from Merchant Banking
Activities

     Securities  firms,  including the Company,  increasingly  facilitate  major
client  transactions and transactions  sponsored by their  proprietary  pools of
capital by using their own capital in a variety of  investment  activities  that
have been broadly described as merchant banking.

     Such  activities  include,  among other things,  purchasing  equity or debt
securities  or  making  commitments  to  purchase  such  securities  in  merger,
acquisition,   restructuring  and  leveraged  capital  transactions,   including
leveraged buyouts and high-yield  financing.  Such positions and commitments may
involve  substantial  amounts of capital  and  significant  exposure  to any one
issuer or  business,  as well as market,  credit  and  liquidity  risks.  Equity
securities purchased in these transactions  generally are held for appreciation,
are not readily  marketable and typically do not provide dividend  income.  Debt
securities  purchased in such  transactions  typically rank  subordinate to bank
debt of the issuer and may rank  subordinate  to other  debt of the  issuer.  In
addition, the Company also provides and arranges bridge financing, which assures
funding for major  transactions,  with the expectation  that refinancing will be
obtained  through the placement of  high-yield  debt or other  securities.  Such
activities  may also  involve  substantial  amounts of capital  and  significant
exposure  to any one  issuer as well as various  risks  associated  with  credit
conditions and vulnerability to general economic conditions.

     There can be no assurance that the Company will not experience  significant
losses as a result of such activities. See "Management's Discussion and Analysis
or Plan of Operation".

Derivative Financial Instruments

     At the present time,  the Company does not engage in the use of derivatives
financial  instruments.   In  many  of  the  countries  where  the  Company  has
operations, the local currencies are referred to as "soft" or "exotic". As such,
there

                                     - 8 -

<PAGE>

are very few, if any, cost effective hedging strategies available to the Company
or potential  investors.  The Company's  inability to engage in currency hedging
activities, in a cost effective manner, may result in its earnings being subject
to greater volatility due to exchange rate fluctuations.

Dependence upon Availability of Capital and Funding

     A  substantial  portion of the  Company's  total assets  consists of highly
liquid marketable securities and short-term  receivables arising from securities
transactions. The highly liquid nature of these assets provides the Company with
flexibility  in financing  and managing its  business.  However,  certain of the
Company's  activities such as merchant banking  frequently  involve  substantial
capital commitments in securities which are often illiquid. The funding needs of
the Company are satisfied from internally generated funds and capital, including
equity,  long-term  debt and short-term  borrowings  which consist of securities
sold under agreements to repurchase ("repurchase agreements"),  master notes and
committed and uncommitted lines of credit.

     All repurchase  transactions and a portion of the Company's bank borrowings
are made on a collateralized basis. Liquidity management includes the monitoring
of assets available to hypothecate or pledge against short-term  borrowing.  The
Company maintains borrowing relationships with a broad range of banks, financial
institutions,  counterparties and others. The volume of the Company's borrowings
generally fluctuates in response to changes in the amount of resale transactions
outstanding,  the level of the  Company's  securities  inventories  and  overall
market  conditions.  Availability of financing to the Company can vary depending
upon  market  conditions,  the  volume of  certain  trading  activities,  credit
ratings,  credit  capacity  and  the  overall  availability  of  credit  to  the
securities  industry and there can be no assurance  that  adequate  financing to
support the  Company's  businesses  will continue to be available in the future.
See "Management's Discussion and Analysis or Plan of Operation".

Potential Restrictions on Business of, and Withdrawal of Capital from, Regulated
Subsidiaries Resulting from Net Capital Requirements

     As a  registered  broker-dealers  and member of  numerous  stock  exchanges
throughout  Central and Eastern  Europe,  the Company is required to comply with
each of the countries' regulatory authorities and net capital rules of the stock
exchanges.  These rules,  which  specify  minimum net capital  requirements  for
registered  broker-dealers  and stock exchange  members,  are designed to assure
that  broker-dealers  maintain adequate  regulatory capital in relation to their
liabilities  and the size of their  customer  business  and have the  effect  of
requiring that at least a substantial portion of their assets be kept in cash or
highly liquid investments.  Compliance with such net capital  requirements could
limit operations that require the intensive use of capital, such as underwriting
and trading activities. These rules also could restrict the Company's ability to
withdraw capital from the regulatory  authorities,  even in circumstances  where
these  authorities  hold more than the minimum amount of the Company's  required
capital,  which in turn,  could limit the  Company's  ability to pay  dividends,
repay debt and redeem or repurchase shares of its outstanding capital stock.

Potential Securities Laws Liability

     Many  aspects  of the  Company's  business  involve  substantial  risks  of
liability.  In recent years,  there has been increasing  incidence of litigation
involving the securities  industry,  including class actions that generally seek
substantial  damages.  Companies engaged in the underwriting and distribution of
securities  are exposed to substantial  liability  under  applicable  securities
laws.

Dependence on Personnel and Certain Key Management

     Most  aspects of the  Company's  business are  dependent on  highly-skilled
individuals. The Company devotes considerable resources to recruiting,  training
and compensating  such individuals and has taken further steps to encourage such
individuals  to remain in the  Company's  employ.  Individuals  employed  by the
Company  may,  however,  choose to leave the Company at any time to pursue other
opportunities.   In  addition,  the  operation  of  the  Company's  business  is
principally dependent on certain key management personnel. In particular, Martin
A. Sumichrast and Peter Schmid have played  significant  roles in the promotion,
development  and management of the Company.  If the employment by the Company of
either of these two  people  terminates,  or they are  unable to  perform  their
duties,  there may be a significant  adverse  effect on the  performance  of the
Company as a whole.  At the present  time,  the Company  does not have a key-man
life insurance policy in effect with respect to Mr. Schmid. See "Item 9".

                                - 9 -
<PAGE>

Operating Losses and Financial Condition

     Since  its  formation,  the  Company  has  suffered  substantial  cash flow
deficits and  operating  losses.  The net loss for the year ended March 31, 1997
was  $866,411.  As of such date,  the Company had cash and cash  equivalents  of
$4,755,723 and net working capital of approximately $6,500,000.  There can be no
assurance  that the Company's  future  operations  will be profitable or that it
will have available funds adequate to fund its operations. Should the operations
of the Company be profitable, it is likely that the Company would retain much or
all of its earnings to finance future growth and expansion.

"Penny Stock"  Regulations May Impose Certain  Restrictions on  Marketability of
Securities

     The  Securities  and  Exchange   Commission   ("Commission")   has  adopted
regulations  which generally define "penny stock" to be any equity security that
has a market price (as defined)  less than $5.00 per share or an exercise  price
less than $5.00 per share,  subject to certain exceptions.  The Company's Common
Stock is currently  listed in the Nasdaq SmallCap Market and, as a result,  such
securities are currently exempt from the definition "penny stock." If the Common
Stock is removed from listing on Nasdaq at any time,  the  Company's  securities
may become subject to rules that impose  additional sales practice  requirements
on  broker-dealers  who sell such  securities to persons other than  established
customers  and  accredited  investors  (generally,  those persons with assets in
excess of $1,000,000 or annual income exceeding $200,000, $300,000 together with
their spouse).  For transactions  covered by these rules, the broker-dealer must
make a special suitability determination for the purchase of such securities and
have received the purchaser's  written  consent to the transaction  prior to the
purchase.  Additionally,  for any  transaction  involving a penny stock,  unless
exempt,  the rules require the  delivery,  prior to the  transaction,  of a risk
disclosure  document  mandated  by the  Commission  relating  to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer  and the  registered  representative,  current  quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must  disclose  this  fact and the  broker-dealer's  presumed  control  over the
market.  Finally,  monthly  statements  must be  sent  disclosing  recent  price
information  for the penny  stock held in the  account  and  information  on the
limited  market in penny  stocks.  Consequently,  the  "penny  stock"  rules may
restrict the ability of broker-dealers  to sell the Company's  securities in the
secondary market.

Proposed Changes to Nasdaq Listing Requirements

     On November 6, 1996,  the Board of  Directors of Nasdaq  approved  proposed
changes to the entry  standards  necessary  to qualify  for  listing on both the
Nasdaq National Market (the "National  Market") and the Nasdaq SmallCap  Market.
Following a 30-day comment period,  the Nasdaq Board of Directors has considered
comments,  made modifications of the proposed changes and filed the rule changes
with the  Securities  and  Exchange  Commission  for final  approval.  Among the
proposed changes to the Nasdaq SmallCap Market listing and maintenance  criteria
are the following: eliminating the alternative test to the $1 minimum bid price;
extending the corporate  governance standards currently required by the National
Market to the SmallCap  issuers;  increasing  the  quantitative  standards;  and
implementing a requirement that auditors of  Nasdaq-listed  companies be subject
to  proper  review.  If  the  proposed  or  other  changes  to the  listing  and
maintenance  criteria are approved by the  Securities  and Exchange  Commission,
there  can be no  assurance  that  the  Company  will be able  to  fulfill  such
criteria.

Delisting of Securities to Adversely Affect Market

     In the event that the Common Stock were to no longer meet applicable Nasdaq
requirements  and were delisted  from Nasdaq,  the Company would attempt to have
its securities traded in the over-the-counter market via the Electronic Bulletin
Board or the "pink sheets." In such event,  holders of the Company's  securities
would likely  encounter  greater  difficulty  in  disposing of these  securities
and/or  obtaining  accurate  quotations  as  to  the  prices  of  the  Company's
securities.

Specific Risks of the Geographic Area Covered by the Company

     The  Company's  investments  will be  primarily  in  securities  of issuers
resident in an area which is  currently in a state of flux - Central and Eastern
Europe and Central Asia. Its political  institutions  and economic  policies now
face the challenges of rapid change.  Its  population is ethnically  diverse and
cultural and religious tensions abound.  Memories of conflicts,  past injustices
and the legacy of the denial of justice and the  expropriation  of property will
continue to create  tension for years to come.  These problems will compound the
difficulties of the change from a centrally planned

                                     - 10 -


<PAGE>

economy to a market economy. For these reasons the Company's investments will be
subject to risks of a nature and degree not normally  encountered in relation to
more  developed  economies  and  additional  to  those  inherent  in any  equity
investment. Specific examples of some of these risks are described below:

     Liquidity  of the  Company's  Investments:  The  nature  of  the  Company's
     investments  limits their  potential  secondary  market.  Accordingly,  the
     Company  may not be able to achieve  the full value of its  investments  on
     disposal. Once local stock markets are operational,  it is anticipated that
     liquidity  will  improve,  but there exists no  guarantee  that the markets
     should be as liquid as those of  developed  countries.  Due to the risks of
     illiquidity of its  investments,  the Company could be faced with a risk of
     non-reimbursement of its loans.

     Political  and  Economic  Factors:  The  countries  in which the  Company's
     operations are concentrated had centrally-planned,  socialist economies for
     many years.  Attempts at political and economic  reform have been made with
     limited  success  and it is  impossible  to  foresee if such  reforms  will
     achieve their  intended aims.  Restrictions  may be imposed on investing in
     specific companies or industries which may be considered to be important or
     sensitive  to  national  interests  and which may also  represent  the best
     investment opportunities. In addition, investments may be expropriated on a
     change of government policy.

     Valuation  Risk:  Accounting  and  financial  reporting  standards  in  the
     selected countries are not equivalent to International Accounting Standards
     and  consequently,  less  information  is  available  to  investors  in the
     selected  countries than in more developed  capital markets.  Nevertheless,
     the  Company  will  use for the  valuation,  financial  reports  issued  by
     international  auditing  firms and all other means will be applied in order
     to monitor the unlisted investments.

     Problems of Transition and Business Failure: Until very recently, virtually
     all industrial output within the Comecon and Warsaw Pact countries was from
     state-owned  industry.  As  a  result,  few  individuals  understand  basic
     capitalistic management skills and techniques. Privatization of much of the
     region's  industry and the transition to a more  market-orientated  economy
     will be difficult.  Industry in the region is  considerably  less developed
     and less  efficient  than  industry  in Western  Europe and, in addition to
     doubts as to the  continuing  viability of much of the  region's  industry,
     those businesses which survive are likely to require  considerable  capital
     investment  and  restructuring.  The failure of one or more  businesses  in
     which the Company has invested may have a significant adverse effect on the
     performance of the Company as a whole.

     Legal Infrastructure: The Company and its advisors will be reliant on legal
     advisors in the jurisdictions in which it invests. Due to the inadequacy or
     immaturity of legal  systems in some  jurisdictions  and the  difficulty of
     obtaining adequate or satisfactory legal advice, it may be impossible to be
     certain that the Company has valid legal title to the  investments  located
     in such  jurisdictions  or to be  able to  protect  its  interests  in such
     investments.

     Changes  in  Law  and  Enforcement  of  Rights:   Legislation  relating  to
     securities, stock markets and property rights is either non existent or has
     been  introduced  very  recently  in  several  of the  countries  where the
     Company's  operations  are located.  Existing  legislation  is likely to be
     subject to extensive  amendment  and  significant  new  legislation  may be
     introduced at any time. It may be difficult to enforce the Company's rights
     in cases where competing claims arise or in case of re-nationalization.

     Investment  and  Repatriation  Restrictions:   Repatriation  of  investment
     income,  capital and the proceeds of sales by foreign investors may require
     governmental  registration and/or approval.  A number of countries in which
     the Company may invest do not have freely  convertible  currencies or their
     currencies  may  only  be   convertible   at  rates   determined  by  their
     governments.  Repatriation  restrictions  may also be  imposed at any time.
     Changes in the value of currencies in which the Company's  investments  are
     denominated  will  result  in a  corresponding  change  in the value of the
     Company's  assets which are generally  denominated in the local  functional
     currencies. Investors should note that the local currencies involved may be
     subject to rapid devaluation against the major "hard" currencies,  with the
     result that delays in currency conversion may cause significant losses.

     Taxation: Taxation of dividends and capital gains received by non-residents
     varies among the selected  countries.  In addition,  the selected countries
     generally have less well-defined tax laws and procedures, and such laws may
     permit retroactive  taxation.  As a result, the Company could in the future
     become subject to local tax  liabilities  that had not been  anticipated in
     conducting  its  investment  activities or valuing its assets.  The Company
     may, if, in the opinion of the Directors and the Company's Tax Advisor,  it
     is likely to be fiscally beneficial for the Company, invest via one or more
     wholly owned subsidiaries located in any jurisdiction in the world.


                                     - 11 -

<PAGE>

Enforceability of Civil Liabilities

     A  substantial  portion of the  Company's  assets are  located  outside the
United  States.  It may be difficult  for  investors  to enforce  outside of the
United States judgments against the Company obtained in the United States in any
actions, including actions predicated upon the civil liability provisions of the
securities laws of the United States.  In addition,  certain of the officers and
directors of the Company are not citizens or residents of the United  States and
all or a substantial portion of the assets of such persons are or may be located
outside the United  States.  As a result,  it may be difficult  for investors to
effect  service of process  within the United States  against such persons or to
enforce judgments obtained in the United States,  including judgments predicated
upon the civil liability provisions of the securities laws of the United States.


Item  2. DESCRIPTION OF PROPERTY

     The Company does not own any  properties and is not a party to any material
leases.


Item  3. LEGAL PROCEEDINGS

         The Company is not a party to any material litigation.


Item  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted during the fourth quarter of the Company's fiscal
year to a vote of  security  holders  through  the  solicitation  of  proxies or
otherwise.

























                                     - 12 -

<PAGE>

                                     PART II

Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's  Common Stock is traded on the NASDAQ  SmallCap  Market under
the symbol "EAST" (previously, the symbol was "CZCH").

     The following table sets forth the reported high and low bid quotations (as
adjusted for the  one-for-five  reverse split of the Company's  Common Stock) of
the Common Stock for the periods indicated,  commencing with the date the Common
Stock  became  listed  on the  NASDAQ  SmallCap  Market  (June  8,  1995).  Such
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>

                                                 Common Stock
                                   -----------------------------------------
                                          High                  Low
                                   -------------------- --------------------
        <S>                              <C>                 <C>

            1995
        Second Quarter                   $ 32.5000           $  20.0000
        (June 8-June 30)
        Third Quarter                    $ 26.2500           $   8.1250
        Fourth Quarter                   $ 11.8750           $   5.0000
            1996
        First Quarter                    $  9.0625           $   5.0000
        Second Quarter                   $ 13.7500           $   5.6250
        Third Quarter                    $ 11.2500           $   4.5625
        Fourth Quarter                   $  6.0000           $   3.5000
            1997
        First Quarter                    $  5.2500           $   3.3750
        Second Quarter                   $  7.3750           $   4.3125
        Third Quarter                    $  7.1250           $   6.3750
       (through August 8, 1997)

</TABLE>

     On August 8, 1997,  the  Company's  Common  Stock as reported on the NASDAQ
SmallCap Market system was $6.750  (closing bid price).  On that date there were
approximately  70 holders of record of Common Stock  (including  entities  which
hold stock in street name on behalf of other beneficial owners).

     The Company has not paid any cash  dividends  on its Common  Stock to date,
and  does  not  anticipate  declaration  or  payment  of  any  dividends  in the
foreseeable  future. The Company  anticipates that for the foreseeable future it
will  follow a policy of  retaining  earnings,  if any,  in order to finance the
expansion and  development  of its business.  Payment of dividends is within the
discretion  of the  Company's  Board  of  Directors  and  will  depend  upon the
earnings,  capital  requirements  and operating  and financial  condition of the
Company, among other factors.

     On December  10, 1996,  the Board of Directors  approved a plan whereby the
Company was  authorized to begin a buy-back  program of its common stock.  Under
the terms of this plan, the Company was authorized to redeem up to $1,000,000 of
common stock at a price not to exceed $5.00 per share beginning in January 1997.
On January 23, 1997, the Company  redeemed 45,000 of its  outstanding  shares at
$4.75 per share. Currently,  the Company's common stock is trading at a price in
excess of the approved plan and no additional buy-backs are anticipated.

     The following  information sets forth all securities of the Company sold by
it within the past three (3) years,  which  securities were not registered under
the Securities Act of 1933, as amended:

     On August 1, 1996, the Company issued  1,080,000 shares of its common stock
to the selling security holders of Eastbrokers  Beteiligungs AG in a transaction
valued at $5,400,000. During the period surrounding the acquisition, the

                                     - 13 -


<PAGE>

Company's  common stock was trading  approximately  between  $6.25 and $8.00 per
share for its fully  registered and  unrestricted  shares.  Due to the nature of
restricted  shares and the various  covenants  restricting the transfer of these
shares,  the  Board  of  Directors  assigned  a  value  of  $5,400,000  to  this
transaction.

     On March 6, 1997,  the Company  issued  22,500 shares of common stock value
relating to the acquisition of Eastbrokers North America, Inc. In a separate but
related  transaction to the Eastbrokers  North America,  Inc.  acquisition,  the
Company sold 2,500 shares of the Company's stock to an officer of the Company in
exchange for a promissory  note.  These shares were  transferred  to the selling
shareholder of Eastbrokers North America,  Inc. as part of the acquisition.  The
shares were valued in accordance with the terms of the Stock Purchase  Agreement
of  Eastbrokers  North  America,  Inc. As of the date of the closing,  the total
amount of the common stock transferred was $100,000.

     On March 20, 1997 the Company  entered into a consulting  agreement with JB
Sutton Group, Inc. ("Sutton"). under which the Company granted to Sutton 150,000
warrants  (the  "Warrants').  Pursuant to a  Termination  Agreement  between the
Company and Sutton dated August 8, 1997, the consulting agreement was terminated
and the 150,000 warrants were accordingly canceled.

     During the year ended March 31, 1997,  the Company issued a total of 37,000
shares  of common  stock at a per share  price  approximating  the then  current
market price for services rendered to the Company.

     In April 1997, the Company issued 125,002 shares of common stock, par value
$.05,  of the  Company  ("Common  Stock").  The  securities  were  sold to three
individuals:  Calvin S.  Caldwell,  Frank  Huang and Jay  Raubvogel  for a total
offering  price of $750,012 or $6.00 per share.  The net proceeds to the Company
were $725,012. There were no underwriting discounts or commissions. The Offering
was made  pursuant  to an  exemption  from  registration  under  Rule 506 of the
Securities Act of 1933, as amended (the "Securities Act"). The Offering was made
only to selected  "accredited  investors" as that term is defined in Rule 501(a)
of the Securities Act.

     The Company has relied upon Section 4(2) of the  Securities Act of 1933, as
amended,  for its  private  placement  exemption,  such  that  the  sales of the
securities were transactions by an issuer not involving any public offering.  In
each  transaction,   the  purchasers  were   sophisticated  and  had  access  to
information about the Company.





























                                     - 14 -

<PAGE>



Item  6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

     The following  discussion of the Company's  financial condition and results
of operations  should be read in conjunction  with the financial  statements and
notes thereto appearing elsewhere in this Form 10-KSB.

     The Company's  principal  activities have changed  dramatically  during the
past fiscal  year.  During the fiscal year ending  March 31,  1997,  the Company
completely  disposed of its  interest in the Hotel  Fortuna,  a.s.  and acquired
Eastbrokers   Beteiligungs  AG,  an  Austrian  based  securities   broker-dealer
providing  financial  services in Central and Eastern Europe through its network
of subsidiaries and affiliate offices.

     The  earnings of the Company  are subject to wide  fluctuations  since many
factors  over which the  Company  has  little or no  control,  particularly  the
overall volume of trading and the volatility and general level of market prices,
may significantly affect its operations.

     The Company's  assets have increased from  $26,242,561 at December 31, 1995
to  $32,014,929  at March 31, 1997,  the Company's  liabilities  increased  from
$2,300,136  at  December  31, 1995 to  $12,613,492  at March 31,  1997,  and the
Company's  minority  interest  in  consolidated   subsidiaries   decreased  from
$9,353,228 at December 31, 1995 to $1,549,386 at March 31, 1997. The increase in
assets and liabilities is primarily attributable to the Company's acquisition of
Eastbrokers  Beteiligungs  AG in 1996.  The  decrease  in  minority  interest is
primarily due to the Company's disposition of its interest in the Hotel Fortuna,
a.s. during 1996.

     The information contained in this Item contains forward looking statements.
Readers are  cautioned  not to place undue  reliance on this  information  which
speaks only as of the date hereof.  The matters  referred to in such  statements
could be  affected  by the risks and  uncertainties  inherent  in the  Company's
business, including (without limitation) the effects of political,  economic and
market conditions both  domestically and in Eastern and Central Europe.  See the
discussion of risks and uncertainties set forth under the caption "Risk Factors"
which  appears in Item 1.  Further,  the Company  undertakes  no  obligation  to
release  publicly any revisions to these forward  looking  statements to reflect
events  occurring  after the date hereof or to reflect  unanticipated  events or
developments.

Plan of Operation

     On August 1, 1996, the Company  consummated  its acquisition of Eastbrokers
AG reflecting its previously  stated  objective of seeking to invest into, merge
with or acquire one or more companies in growth  oriented  industries.  Although
the  Company's  focus had been  primarily  in the Czech  Republic,  its original
mission  was to pursue  such  investment  opportunities  throughout  Eastern and
Central Europe. Eastbrokers AG is a holding company providing financial services
in  Eastern  and  Central  Europe  through  its  network  of  subsidiaries.  The
acquisition of Eastbrokers AG is intended to not only provide an earnings stream
from its core  brokerage  business,  but also  positions  the Company to provide
investment  banking  and  corporate  finance  services  in  an  emerging  market
infrastructure and growth industries.

     The Company's business strategy is to (1) utilize its marketing and Central
and Eastern Europe emerging market  expertise to take advantage of opportunities
for growth in this sector of the global securities  market; (2) develop the base
of its asset management  business  through  concentrating on Central and Eastern
European  debt and equity  securities;  (3) enhance  and  develop the  Company's
merchant banking activities; (4) identify potential corporate finance candidates
for  investment  banking  opportunities;  and (5) utilize its  expertise  in the
privatization   activities  still  available  in  Central  and  Eastern  Europe.
Management also believes there are significant  opportunities  available in this
region for specialized account and institutional sales.

     The Company believes that investment in the emerging markets of Central and
Eastern  Europe will  continue to grow rapidly in the coming  years.  Currently,
Hungary,  Romania,  and Poland are  enjoying  enhanced  interest  on the part of
foreign  investors.   The  Company  has  successfully   marketed  its  NIF  Trud
Privatization Fund of Bulgaria.  NIF Trud has approximately 120,000 shareholders
and owns  interests  in 78  Bulgarian  companies.  The Company  currently is the
exclusive  management  company  for NIF Trud.  The  Company  intends  to provide
ongoing  management  services to NIF Trud and investment banking services to the
companies in its portfolio.

     While  investing  in the  emerging  markets of Central and  Eastern  Europe
involves  risk  considerations  not  typically   associated  with  investing  in
securities of U.S. issuers,  the Company believes that such  considerations  are
outweighed by the benefits of diversification and potentially superior returns.

                                     - 15 -


<PAGE>


     Among the considerations  involved in investing in emerging markets such as
Central and  Eastern  Europe is that less  information  may be  available  about
foreign companies than about domestic companies.  Foreign companies are also not
generally  subject to  uniform  accounting,  auditing  and  financial  reporting
standards or to other regulatory practices and requirements  comparable to those
applicable  to  domestic  companies.  In  addition,  unlike  investing  in  U.S.
companies, securities of non-U.S. companies are generally denominated in foreign
currencies,  thereby  subjecting  each  security  to  changes  in value when the
underlying  foreign  currency  strengthens or weakens  against the U.S.  dollar.
Currency  exchange rates can also be affected  unpredictably  by intervention of
U.S.  or  foreign  governments  or  central  banks or by  currency  controls  or
political developments in the U.S. and abroad.

     The value of international  fixed income products also responds to interest
rate changes in the U.S. and abroad. In general, the value of such products will
rise when  interest  rates fall,  and fall when  interest  rates rise.  However,
interest rates in each foreign country and the U.S. may change  independently of
each other.

     Debt and equity  securities in emerging markets such as Central and Eastern
Europe  may  also  not be as  liquid  as  U.S.  securities  and  their  markets.
Securities of some foreign companies may involve greater risk than securities of
U.S companies.  Investing in Central and Eastern European securities may further
result in higher expenses than investing in domestic securities because of costs
associated  with  converting  foreign  currencies  to U.S.  dollars and expenses
related  to foreign  custody  procedures.  Investment  in  Central  and  Eastern
European  securities may also be subject to local  economic or political  risks,
including  instability of some foreign governments,  inadequate market controls,
the possibility of currency  blockage or the imposition of withholding  taxes on
dividend  or   interest   payments   and  the   potential   for   expropriation,
re-nationalization  or  confiscatory  taxation  and  limitations  on the  use or
repatriation of funds or other assets.

     The Company is also in the process of building its research  department  to
include  reviewing  the general  market  conditions,  specific  industries,  and
individual  companies and providing  timely,  cost  effective  information  with
respect thereto in monthly  newsletters,  which will discuss Central and Eastern
European  economic and  currency  trends and give  readers  specific  investment
recommendations  and ideas. The potential fee for this service,  if any, has not
yet been determined.

     During the year ended March 31, 1997,  management  continued its program of
augmenting mid-level  personnel,  leasing additional office space, and enhancing
the management  information  systems in several of our Eastern European offices.
Management  also began  preparations  to offer certain  services and products to
firms and individuals associated with the U.S. capital markets.

     The Company  intends to have its North American  offices fully  operational
prior to the end of the fiscal year ending March 31, 1998.  This subsidiary will
act as an  introducing  broker  in that it does  not  clear  its own  securities
transactions,  but  instead,  it  contracts  to have such  transactions  cleared
through a  clearing  broker on a fully  disclosed  basis.  In a fully  disclosed
clearing  transaction,  the  identity  of the  Company's  client is known to the
clearing broker.  Generally, a clearing broker physically maintains the client's
account and performs a variety of services as agent for the  Company,  including
clearing all securities  transactions  (delivery of securities sold,  receipt of
securities  purchased  and transfer of related  funds).  The Company  intends to
utilize the services of the Bear Stearns Companies, Inc. ("Bear Stearns") as its
fully disclosed clearing broker. Bear Sterns is recognized as one of the leading
firms in clearing  transactions in emerging  markets such as Central and Eastern
Europe.

Results of Operations

     Fiscal Year 1997 Compared with the Fiscal Year 1995

     The Company is comparing  the calendar  year ending  December 31, 1995 with
the fiscal year ending March 31, 1997.  Since the transition  period ended March
31, 1996  represents  only a short period,  it will be left out of this analysis
except where a material transaction has occurred.

     As noted in the "General" sections, the Company's principal activities have
changed  dramatically  during the past fiscal year. During the fiscal year ended
March 31,  1997,  the Company  completely  disposed of its interest in the Hotel
Fortuna,  a.s.  and  acquired  Eastbrokers  Beteiligungs  AG, an Austrian  based
securities  broker-dealer  providing  financial  services in Central and Eastern
Europe through its network of  subsidiaries  and affiliate  offices.  As such, a
comparison  between  Fiscal  Year Ended March 31, 1997 and the Fiscal Year Ended
December 31, 1995 provides minimal meaningful information.

                                     - 16 -


<PAGE>

     A  non-recurring  item  reflected in the  operations of the Company for the
year ended December 31, 1995,  the  transition  period ended March 31, 1996, and
the year ended March 31, 1997 is the gain on the  disposition  of available  for
sale  securities  of  Moravacentrum  a.s. of $637,417,  $327,104,  and $229,574,
respectively.

     Other  non-recurring  items  reflected in the operations for the year ended
March  31,  1997  are  the  loss on  discontinued  operations  of  approximately
($1,300,000)  on the  disposition of the Company's  entire interest in the Hotel
Fortuna a.s. and the gain on the  disposition  of available for sale  securities
which resulted in a fourth quarter gain of approximately $655,000.

     As an overview of the year ended March 31, 1997,  Eastbrokers  Beteiligungs
AG was first  consolidated  on August 1, 1996 and has a calendar year end. It is
important to note that the  Consolidated  Statements of Operations  includes the
revenues and  expenses of  Eastbrokers  Beteiligungs  AG for the period from the
date of  acquisition  (August 1, 1996)  through  December 31, 1996 (a five month
period)  in  accordance  with Note 1 to the  financial  statements.  See Item 7.
Financial Statements. The overall increase in the volume of revenue and expenses
is  indicative  of a change  from a one  location,  single  operating  unit to a
multi-location, diverse entity.

     Pro  forma  results  of  operations  as  presented  in  Note 5 -  "Business
Acquisitions"  reflect  total  revenues for the year ended  December 31, 1995 as
$7,193,061  versus  $8,639,986  for the year ended March 31, 1997. The Company's
total  revenues  increased in each of its  subsidiaries  with the single largest
increase coming from merchant banking activities in Eastbrokers AG. The addition
of the Warsaw office in late  September/early  October 1996 further enhanced the
revenues  for the year ended  March 31,  1997.  The  expenses  also  reflect the
corresponding   operational  costs  of  the  Warsaw  office  from  the  date  of
acquisition.   The  primary  component  of  minority  interest  in  earnings  of
subsidiaries  reflects the minorities share of the net loss of the Warsaw office
through the date of acquisition by the Company.

     The  net  tax  benefit  represents  the  cumulative  effect  of  individual
subsidiaries' unique tax calculations.  In some instances, certain revenue items
are  non-taxable  in accordance  with statutory  requirements  in the country in
which the office is located.  In others,  net  operating  losses  available  for
carryforward  created a generous tax benefit.  As discussed in Note 13 - "Income
Taxes",  the Company has  approximately  $1,060,000  USD in net  operating  loss
carryforwards  available  in Austria  and  approximately  $1,800,000  USD in net
operating loss  carryforwards  available for future use in the U.S. The Austrian
net operating losses are available for carryforward  indefinitely.  The U.S. net
operating loss  carryforwards will expire, if unused, in varying amounts through
the year 2012. The Company does not anticipate  any  significant  changes in the
effective tax rates.

     The expenses of the Company increased in the 4th quarter as compared to the
3rd quarter due to a "seasonal"  effect and that the 3rd quarter only included 2
months of  expenses  versus 3 months in the 4th  quarter.  July and  August  are
typically "holiday" (vacation) months in Europe. Revenues and expenses generally
respond  accordingly to this seasonal effect. The October to December quarter is
typically a strong  quarter as people return from holiday and work to finish the
year  strong.   The  Company  is  also  pursuing   several   corporate   finance
opportunities  and has found that  outsourcing  portions of the work to industry
experts is sound corporate policy to manage  personnel and overhead costs.  Many
of the projects began in late September/early October 1996 and continued through
year end.  General and  administrative  expenses,  as well as other  operational
expenses,  increased  due to the  Company's  increased  focus  on  privatization
activities  in  countries  that are  currently  in the process of opening  their
markets to western investors.  Involvement in privatization activities generally
involves  much time and patience as the  investments  begin to come to fruition.
Prior experience and success in the privatization  process in the Czech Republic
are two of the Company's more important assets.

     Significant  items on the statements of cash flows are primarily related to
customers'  receivables,  payables, and the related underlying  securities.  The
Company's  policy is to close as many open positions as possible at year end and
re-evaluate  its  strategic  focus as it moves into the 1st quarter.  Also,  the
regulatory  bodies in several of the  countries  in which the  Company  operates
prefer to see a strong, liquid balance sheet at year end. The Company strives to
accommodate  the needs of these  regulatory  agencies.  Also  affecting the cash
flows  statement is the sale of the Hotel  Fortuna a.s.  Cumulative  translation
adjustments at March 31, 1996 were eliminated with the sale of the hotel.

     The Company  recognizes it has  concentrated  a  significant  amount of its
assets as advances to its  affiliates.  At the present  time,  the bulk of these
loans  have been  related  to  privitization  activities  which  were  discussed
earlier.  Since the Company's  affiliates are generally  accounted for as equity
investments,  these  advances do not  eliminate on  consolidation.  Based on the
Company's  prior  experience  and  success  in the Czech  Republic  along with a
significant

                                     - 17 -
<PAGE>

ownership  interest in the affiliate  (generally  greater than 40 percent),  the
Company  does  not  anticipate  any  material  uncertainies   surrounding  these
advances.

Foreign Currency Translation Adjustments

     The  unexpected  strength of the U.S.  dollar as  compared to the  Austrian
Schilling  created an  unpleasant  surprise  for the  Company.  The  Company had
collateralized a short term borrowing arrangement with approximately  $1,500,000
in cash held in an Austrian  Schilling  account just as the U.S. dollar began to
increase in strength relative to the Austrian Schilling. During the term of this
arrangement,  the Austrian  Schilling lost approximately 10 percent of its value
relative to the U.S. dollar.  This single  transaction  makes up the majority of
the loss on foreign currency transactions for the year ended March 31, 1997. The
Company  is no  longer  collateralizing  its  short  term  borrowing  on a "soft
currency" basis.

     The U.S.  dollar and its  unexpected  strength  coupled with the unexpected
weakness of the European  currencies  (including  the German  Deutchmarke)  have
negatively  impacted the Company's  overall  earnings as well as the  cumulative
translation adjustment.  The primary functional currencies affecting the Company
are as follows: U.S. Dollar, Austrian Schilling, Czech Koruna, Hungarian Forint,
Slovak Koruna and the Polish Zloty.

     Assets and  liabilities of operations  having  non-U.S.  dollar  functional
currencies  are  translated  at  year-end  rates  of  exchange,  and the  income
statements are translated at weighted average rates of exchange for the year. In
accordance  with Statement of Financial  Accounting  Standards  ("SFAS") No. 52,
"Foreign  Currency  Translation,"  gains or losses  resulting  from  translating
foreign currency  financial  statements,  net of hedge gains or losses and their
related tax effects,  are reflected in  cumulative  translation  adjustments,  a
separate  component of  stockholders'  equity.  Gains or losses  resulting  from
foreign  currency  transactions  are  included in net income.  Foreign  currency
transactions  are generally  completed  transactions  denominated  in a currency
other than the  functional  currency  or changes in  exchange  rates that impact
monetary assets and liabilities denominated in currencies other than the primary
functional currency.

Calculation of Earnings Per Share

     The calculation of earnings per share on the financial  statements included
in this report is based on the weighted average number of shares outstanding, as
calculated.

Viability of Operating Results

     The Company,  like many other  securities  firms,  is directly  affected by
general economic conditions and market conditions, changes in levels of interest
rates, and demand for the Company's  investment and merchant banking services in
the countries where its primary  operations are located.  The Company is further
affected by changes in  valuations of the local  currencies  to the U.S.  dollar
(the  functional  currency of the  Company) in the regions in which it operates,
the  interest of foreign  investors  in the local  economies,  and  governmental
regulations  restricting the  repatriation of profits.  In many of the countries
where the  Company's  primary  operations  are  located,  the local  currency is
considered to be "soft" or "exotic".  As such,  there are very few, if any, cost
effective hedging strategies available to the Company or potential investors.

     All of  these  factors  have an  impact  on the  Company's  net  gain  from
securities transactions,  underwriting,  and commissions revenues. In periods of
reduced market  activity,  profitability  is adversely  affected because certain
expenses,   consisting  primarily  of  non-officer  compensation  and  benefits,
communications,  occupancy,  and  general  and  administrative  expenses  remain
relatively constant.

     Currently,  the Czech Republic and Slovak Republic markets are experiencing
extremely  difficult economic  conditions and market reforms may be necessary to
restore these economies to health. In light of these  developments,  the Company
has  reduced  the  level of its  operations  in  these  countries.  The  Company
recognizes  that it may be  necessary to support  negative  cash flow from these
operations in the next 12 to 24 months.

Liquidity and Capital Resources

     The Company's  statements of financial  position reflect a liquid financial
position as cash and assets readily  convertible to cash represent 9 percent, 20
percent,  and 28 percent of total assets at December  31, 1995,  March 31, 1996,
and March 31, 1997, respectively.

                                     - 18 -

<PAGE>

     The  Company is subject to net capital and  liquidity  requirements  in the
local jurisdictions in which it operates.  As of March 31, 1997, the Company was
in  excess  of  its  minimum  net  capital  and  liquidity  requirements  in all
jurisdictions in which it operates.

     The Company  finances its operations  primarily  with existing  capital and
funds generated from its diversified operations.

     In the opinion of management,  the Company's existing capital and cash flow
from operations will be adequate to meet its capital needs for at least the next
12 months in light of  currently  known and  reasonably  estimable  trends.  The
Company is currently  exploring its options with regards to  additional  debt or
equity financing and there can be no assurance such financing will be available.
However,  the Company recognizes that with increased  liquidity it may be better
positioned to take advantage of potential  opportunities in the markets where it
maintains its operations.  No assurances can be made as to the Company's ability
to meet its cash requirements subsequent to any further business combinations.

     In April 1997, the Company issued 125,002 shares of common stock, par value
$.05,  of the  Company  ("Common  Stock").  The  securities  were  sold to three
individuals:  Calvin S.  Caldwell,  Frank  Huang and Jay  Raubvogel  for a total
offering  price of $750,012 or $6.00 per share.  The net proceeds to the Company
were $725,012. There were no underwriting discounts or commissions. The Offering
was made  pursuant  to an  exemption  from  registration  under  Rule 506 of the
Securities Act of 1933, as amended (the "Securities Act"). The Offering was made
only to selected  "accredited  investors" as that term is defined in Rule 501(a)
of the Securities Act.

     At March 31, 1997, the Company had $1,200,793  outstanding under repurchase
agreements.  The weighted average  interest rate on these repurchase  agreements
was 12.91  percent.  Securities  listed on the Prague Stock Exchange Main Market
with a market value of approximately  $1,700,000 were used to collateralize this
arrangement.

Effects of Inflation

     The Company  maintains  operations in several economies that are considered
inflationary.  To the extent that inflation results in rising interest rates and
devaluation  of the local  currencies in relation to the U.S.  dollar have other
adverse affects on the securities markets and on the value of securities held in
inventory,  it may  affect  the  Company's  financial  position  and  results of
operations.


















                                     - 19 -

<PAGE>

Selected Financial Data

The  historical  selected  financial  data set forth  below  for the  respective
periods are derived from the Company's  financial  statements included elsewhere
in this Form  10-KSB and  should be read in  conjunction  with  those  financial
statements and notes thereto.  Those  financial  statements have been audited by
Pannell Kerr Forster PC, independent certified public accountants,  whose report
with respect thereto appears elsewhere in this Form 10-KSB.
<TABLE>
<CAPTION>

                                                         December 31,          March 31,           March 31,
                                                             1995                1996                1997
                                                        --------------      --------------      --------------
       <S>                                              <C>                 <C>                 <C>
       Balance Sheet Data
       Assets                                           $ 26,242,561        $ 26,251,364        $ 32,014,929
       Liabilities                                         2,300,136           2,208,481          12,613,492
       Minority interest in consolidated subsidiaries      9,353,228           9,353,228           1,549,386
       Stockholders' equity                               14,589,197          14,689,655          17,852,051

     Statement of Operations Data
                                                         December 31,          March 31,           March 31,
                                                             1995                1996                1997
                                                        --------------      --------------      --------------
     Revenues
       Principal transactions, net                      $    637,417        $    327,104        $  1,872,767
       Commissions, underwritings & fees                     --                  --                1,588,726
       Interest, dividends & other revenues                  227,119              72,114           2,486,785
       Equity in earnings of unconsolidated affiliates        87,072             --                 (396,209)
                                                        --------------      --------------      --------------
                                                             951,608             399,218           5,552,069
                                                        --------------      --------------      --------------
     Expenses
       Compensation and benefits                             342,904             106,583           1,712,308
       Commissions                                           --                  --                  469,111
       Professional and consulting fees                      --                  --                  867,302
       General and administrative                            229,906             133,929             642,897
       Other operating costs                                 310,248              58,248           1,801,005
                                                        --------------      --------------      --------------
                                                             883,058             298,760           5,492,623
                                                        --------------      --------------      --------------
       Net income from continuing operations
         before income taxes and minority interest            68,550             100,458              59,446
       Provision for income taxes                              5,484             --                  249,911
       Minority interest in earnings of subsidiaries         --                  --                  105,416
                                                        --------------      --------------      --------------
       Income (loss) from continuing operations               74,034             100,458             414,773
       Discontinued operations                               181,764             --               (1,281,184)
                                                        --------------      --------------      --------------
       Net income (loss)                                $    255,798        $    100,458        $   (866,411)
                                                        ==============      ==============      ==============

</TABLE>












                                     - 20 -


<PAGE>

Item  7. Financial Statements
<TABLE>
<CAPTION>

         <S>                                                                                        <C>
         Historical Financial Statements
           Independent Auditor's Report...........................................................  22
           Consolidated Statements of Financial Condition.........................................  23
           Consolidated Statements of Operations
             Year Ended December 31, 1995, Transition Period Ended March 31, 1996,
                and Year Ended March 31, 1997.....................................................  24
           Consolidated Statements of Changes in Stockholders' Equity.............................  25
           Consolidated Statements of Cash Flows..................................................  26
           Notes to Consolidated Financial Statements.............................................  28



</TABLE>















                                     - 21 -


<PAGE>








                          INDEPENDENT AUDITOR'S REPORT


Board of Directors and Shareholders
Eastbrokers International Incorporated

We have audited the accompanying  consolidated statements of financial condition
of Eastbrokers  International  Incorporated  and  subsidiaries  (formerly  Czech
Industries,  Inc.) as of December 31, 1995,  March 31, 1996, and March 31, 1997,
and the related consolidated statements of operations,  changes in shareholders'
equity,  and cash flows for the years ended December 31, 1995 and March 31, 1997
and the three month transition  period ended March 31, 1996. These  consolidated
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  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits 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, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  Eastbrokers
International  Incorporated  and subsidiaries as of December 31, 1995, March 31,
1996 and March 31, 1997,  and the results of  operations  and its cash flows for
the  years  ended  December  31,  1995 and March  31,  1997 and the three  month
transition  period ended March 31, 1996 in conformity  with  generally  accepted
accounting principles.






                                   /s/ Pannell Kerr Forster PC






June 23, 1997











                                     - 22 -

<PAGE>


                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware Corporation)

                 Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>

                                                                          December 31,          March 31,           March 31,
                                                                              1995                1996                1997
                                                                       ----------------    ----------------    -----------------
<S>                                                                    <C>                 <C>                 <C>

ASSETS
    Cash and cash equivalents                                          $     2,316,991     $     5,190,586     $      4,755,723
    Cash and securities segregated for regulatory
        purposes or deposited with clearing organizations                           -                   -               119,274
    Securities purchased under agreements to resell                                 -                   -               408,865
    Receivables
        Customers                                                              325,942             325,942            1,904,112
        Broker dealers and other                                                    -                   -               572,399
        Affiliated companies                                                        -                   -             3,623,818
        Other                                                                1,225,500                  -             2,043,306
    Securities owned, at value
        Equities and other                                                          -                   -             4,253,164
    Buildings, furniture and equipment, at cost (net of
        accumulated depreciation and amortization of
        $604,374, $604,374 and $840,217, respectively)                      18,560,155          18,565,670              926,565
    Deferred taxes                                                              82,565              82,565              289,938
    Available for sale securities                                            3,258,413           1,677,623            2,378,054
    Investments in affiliated companies                                             -                   -             7,064,064
    Goodwill                                                                        -                   -             2,453,454
    Other assets and deferred amounts                                          472,995             408,978            1,222,193
                                                                       ----------------    ----------------    -----------------

           Total Assets                                                $    26,242,561     $    26,251,364     $     32,014,929
                                                                       ================    ================    =================

LIABILITIES AND STOCKHOLDERS' EQUITY
    Short-term borrowings
        Lines of credit                                                $            -      $            -      $      1,602,182
        Affiliated companies                                                        -                   -             1,480,700
    Securities sold under agreements to repurchase                                  -                   -             1,200,793
    Bonds payable                                                                   -                   -             2,307,500
    Payables
        Customers                                                                   -                   -             1,051,810
        Broker dealers and other                                                    -                   -               960,226
    Accounts payable and accrued expenses                                      200,478             182,049            1,573,104
    Other liabilities and deferred amounts                                          -                   -             1,502,803
                                                                       ----------------    ----------------    -----------------

                                                                               200,478             182,049           11,679,118

    Long-term borrowings                                                     2,099,658           2,026,432              934,374
                                                                       ----------------    ----------------    -----------------

           Total liabilities                                                 2,300,136           2,208,481           12,613,492
                                                                       ----------------    ----------------    -----------------

    Minority interest in consolidated subsidiaries                           9,353,228           9,353,228            1,549,386
                                                                       ----------------    ----------------    -----------------

    Stockholders' equity
        Common stock; $.05 par value;  10,000,000 shares authorized;  1,781,000,
           1,781,000,  and  2,923,000  shares  issued  and  and  outstanding  at
           December 31, 1995, March 31, 1996 and
           March 31, 1997, respectively                                         89,050              89,050              146,150
        Paid-in capital                                                     13,693,733          13,693,733           19,314,883
        Retained earnings (accumulated deficit)                                248,324             348,782             (517,629)
        Treasury stock, at cost                                                     -                   -              (213,750)
        Unrealized loss on available for sale investments                           -                   -              (246,794)
        Cumulative translation adjustments                                     558,090             558,090             (630,809)
                                                                       ----------------    ----------------    -----------------

           Total stockholders' equity                                       14,589,197          14,689,655           17,852,051
                                                                       ----------------    ----------------    -----------------

           Total Liabilities and Stockholders' Equity                  $    26,242,561     $    26,251,364     $     32,014,929
                                                                       ================    ================    =================

</TABLE>

                See notes to consolidated financial statements.

                                     - 23 -


<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware Corporation)

                      Consolidated Statements of Operations
<TABLE>
<CAPTION>

                                                                                            For the
                                                                        For the           Transition              For the
                                                                      Year Ended         Period Ended            Year Ended
                                                                     December 31,           March 31,             March 31,
                                                                         1995                 1996                   1997
                                                                 ------------------    ------------------    -------------------
<S>                                                              <C>                   <C>                   <C>

Revenues
    Commissions                                                  $             -        $            -        $        439,531
    Underwritings                                                              -                     -                 343,998
    Fees                                                                       -                     -                 805,197
    Interest and dividends                                                     -                     -                 557,188
    Principal transactions, net
       Trading                                                                 -                     -               1,616,872
       Investment                                                         637,417               327,104              1,872,767
    Other                                                                 227,119                72,114                312,725
    Equity in earnings (losses) of unconsolidated affiliates               87,072                    -                (396,209)
                                                                 ------------------    ------------------    -------------------

           Total revenues                                                 951,608               399,218              5,552,069
                                                                 ------------------    ------------------    -------------------

Costs and expenses
    Compensation and benefits                                             342,904               106,583              1,712,308
    Commissions                                                                -                     -                 469,111
    Interest                                                              148,677                45,595                236,235
    Occupancy                                                                  -                     -                 333,096
    Office supplies and expenses                                               -                     -                 240,448
    Communications                                                             -                     -                 177,473
    Advertising                                                                -                     -                 163,159
    Professional fees                                                          -                     -                 123,905
    Consulting fees                                                            -                     -                 743,397
    Travel                                                                     -                     -                 209,977
    General and administrative                                            229,906               133,929                642,897
    Depreciation and amortization                                              -                     -                 274,573
    Loss on foreign currency transactions                                 161,571                12,653                166,044
                                                                 ------------------    ------------------    -------------------

           Total costs and expenses                                       883,058               298,760              5,492,623
                                                                 ------------------    ------------------    -------------------

Income from continuing operations
    before provision for income taxes and
    minority interest in earnings of subsidiaries                          68,550               100,458                 59,446

Benefit from income taxes                                                   5,484                    -                 249,911
Minority interest in earnings of subsidiaries                                  -                     -                 105,416
                                                                 ------------------    ------------------    -------------------

Income from continuing operations                                          74,034               100,458                414,773

Discontinued operations
    Income from discontinued  operations (net of income taxes of $75,867 for the
      year ended December 31, 1995 and
      $0 for the year ended March 31, 1997)                               181,764                    -                  41,899

    Loss on sale of discontinued operations                                    -                     -              (1,323,083)
                                                                 ------------------    ------------------    -------------------

Net income (loss)                                                $        255,798      $        100,458      $        (866,411)
                                                                 ==================    ==================    ===================


Weighted average number of shares outstanding                           1,781,000             1,781,000              2,497,137
                                                                 ==================    ==================    ===================



Income from continuing operations per share                      $           0.04      $           0.06      $            0.17
                                                                 ==================    ==================    ===================


Net income (loss) per share                                      $           0.14      $           0.06      $           (0.35)
                                                                 ==================    ==================    ===================

</TABLE>

                See notes to consolidated financial statements.

                                     - 24 -

<PAGE>








                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware Corporation)

           Consolidated Statements of Changes in Stockholders' Equity

For the Year Ended December 31, 1995, the Transition Period Ended March 31, 1996
                        and the Year Ended March 31, 1997
<TABLE>
<CAPTION>

                                                                                                 Unrealized
                                                                             Retained               Loss
                                             Common Stock                    Earnings             Available   Cumulative
                                       -----------------------   Paid-in   (Accumulated Treasury  For Sale   Translation
                                          Shares    Par value    Capital     Deficit)     Stock  Investments  Adjustment    Total
                                       ----------- ----------- ----------- ------------ --------- ---------- ----------- -----------
<S>                                      <C>       <C>        <C>          <C>         <C>       <C>         <C>        <C>

Balances, December 31, 1994               865,083  $ 43,254   $ 2,034,193  $  (7,474)  $     -   $(111,083)  $ 310,905  $2,269,795

    Redemption of stock, January 1995    (200,083)  (10,004)     (239,996)        -          -          -          -      (250,000)

    Redemption of initial warrants             -         -       (200,000)        -          -          -          -      (200,000)

    Stock issued to bridge lenders        250,000    12,500       (12,500)        -          -          -          -            -

    Recovery of unrealized losses              -         -             -          -          -     111,083         -       113,083

    Proceeds of secondary offering, net   866,000    43,300    12,112,036         -          -          -          -    12,155,336

    Net income                                 -         -             -     255,798         -          -          -       255,798

    Cumulative translation adjustment          -         -             -          -          -          -     247,185      247,185
                                       ----------- ---------  ------------ ---------- ---------- ---------- ---------- -----------
Balances, December 31, 1995             1,781,000    89,050    13,693,733    248,324         -          -     558,090   14,589,197

    Net income, transition period              -         -             -     100,458         -          -          -       100,458
                                       ----------- ---------  ------------ ---------- ---------- ---------- ---------- -----------
Balances, March 31, 1996                1,781,000    89,050    13,693,733    348,782         -          -     558,090   14,689,197

    Issuance of common stock in
       Eastbrokers AG acquisition       1,080,000    54,000     5,346,000         -          -          -          -     5,400,000

    Issuance of common stock in
       Eastbrokers NA acquisition          25,000     1,250        98,750         -          -          -          -       100,000

    Issuance of common stock
       in compensation for services        37,000     1,850       176,400         -          -          -          -       178,250

    Acquisition of treasury stock              -         -             -          -    (213,750)        -          -      (213,750)

    Net unrealized loss on investments         -         -             -          -          -          -          -      (246,794)

    Net income                                 -         -             -    (866,411)        -          -          -      (866,411)

    Cumulative translation adjustment          -         -             -          -          -          -  (1,188,899)  (1,188,899)
                                       ----------- --------- ------------- ---------- ---------- ---------- ---------- -----------
Balances at March 31, 1996              2,923,000  $146,150   $19,314,883  $(517,629) $(213,750) $(246,794) $(630,809) $17,852,051
                                       =========== ========= ============= ========== ========== ========== ========== ===========
</TABLE>


                See notes to consolidated financial statements.

                                     - 25 -


<PAGE>
                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware Corporation)

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                                     For the
                                                                                 For the            Transition         For the
                                                                                Year Ended         Period Ended       Year Ended
                                                                                December 31,         March 31,         March 31,
                                                                                   1995                1996              1997
                                                                            -----------------  -----------------  -----------------
<S>                                                                         <C>                <C>                <C>
Cash flows from operating activities
    Net income (loss)                                                       $       255,798    $       100,458    $      (866,411)
    Adjustments to reconcile net income (loss) to net
       cash provided by (used in) operating activities:
          Minority interest in earnings of subsidiaries                             180,315                 -            (105,416)
          Gain on the sale of investments                                          (706,869)          (327,104)          (884,530)
          Loss on sale of discontinued operations                                        -                  -           1,323,083
          Depreciation and amortization                                             420,795                 -             274,573
          Deferred taxes                                                             69,117                 -             (69,377)
          Equity in (earnings) loss of unconsolidated affiliates                    (87,072)                -             396,209
                                                                            -----------------  -----------------  -----------------

                                                                                    132,084           (226,646)            68,131
       Changes in operating assets and liabilities
          Cash and securities segregated for regulatory purposes
             or deposited with regulatory agencies                                       -                  -             (85,696)
          Securities purchased under agreements to resell                                -                  -           6,278,371
          Receivables
             Customers                                                              129,713                 -           1,093,680
             Brokers, dealers and others                                                 -                  -             202,244
             Other                                                                       -                  -             745,297
          Securities owned, at value                                                     -                  -          (3,285,493)
          Other assets                                                             (191,624)            64,017           (214,931)
          Payables
             Customers                                                                   -                  -          (8,529,846)
             Brokers, dealers and others                                                 -                  -              77,726
          Accounts payable and accrued expenses                                     (19,109)           (18,429)         1,374,879
                                                                            -----------------  -----------------  -----------------

Net cash provided by (used in) operating activities                                  51,064           (181,058)        (2,275,638)
                                                                            -----------------  -----------------  -----------------
Cash flows from investing activities
    Net proceeds from (payments for)
       Acquisition of net assets of Eastbrokers
          Beteiligungs AG, net of cash acquired                                          -                  -          (1,389,577)
       Investments in affiliates                                                 (6,467,388)                -          (5,731,038)
       Proceeds from the disposition of affiliate                                 2,662,609          3,099,403                 -
       Available for sale securities                                              1,045,279                 -           6,277,191
       Furniture and equipment                                                     (302,908)            (5,515)          (503,336)
                                                                            -----------------  -----------------  -----------------

Net cash provided by (used in) investing activities                              (3,062,408)         3,093,888         (1,346,760)
                                                                            -----------------  -----------------  -----------------
Cash flows from financing activities
    Net proceeds from (payments for)
       Net proceeds from public offering                                         12,155,336                 -                  -
       Capital contributions by minority interests                                1,056,295                 -             304,166
       Common stock and warrants reacquired                                        (450,000)                -                  -
       Short-term borrowings                                                             -                  -             568,303
       Securities sold under agreements to repurchase                                    -                  -           1,200,793
       Other long-term debt                                                      (6,755,685)                -                  -
       Repurchase of common stock                                                        -                  -            (213,750)
                                                                            -----------------  -----------------  -----------------

Net cash provided by (used in) financing activities                               6,005,946                 -           1,859,512
                                                                            -----------------  -----------------  -----------------

Foreign currency translation adjustment                                            (889,875)           (39,235)         1,328,023
                                                                            -----------------  -----------------  -----------------

Increase (decrease) in cash and cash equivalents                                  2,104,727          2,873,595           (434,863)

Cash and cash equivalents, beginning of period                                      212,264          2,316,991          5,190,586
                                                                            -----------------  -----------------  -----------------

Cash and cash equivalents, end of period                                    $     2,316,991    $     5,190,586    $     4,755,723
                                                                            =================  =================  =================
</TABLE>
                 See notes to consolidated financial statements.

                                     - 26 -
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware Corporation)

                Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>

                                                                                                    For the
                                                                                For the           Transition         For the
                                                                               Year Ended        Period Ended       Year Ended
                                                                              December 31,         March 31,         March 31,
                                                                                  1995               1996               1997
                                                                            -----------------  -----------------  -----------------
<S>                                                                         <C>                <C>                <C>

Supplemental disclosure of cash flow information
    Cash paid for income taxes                                              $            -     $        12,847    $       371,534
                                                                            -----------------  -----------------  -----------------

    Cash paid for interest                                                  $       395,493    $            -     $        87,795
                                                                            -----------------  -----------------  -----------------

    Non-cash transactions
       Common shares of CEZ and Vodni Stavby, Praha
          received in the disposition of the Hotel Fortuna                  $            -     $            -     $     7,957,012
                                                                            -----------------  -----------------  -----------------

       Common shares of CEZ and Vodni stavby, Praha transferred
          in lieu of cash payment for debt and accrued interest             $            -     $            -     $     1,550,508
                                                                            -----------------  -----------------  -----------------

       Eastbrokers International shares issued for acquisition
          of net assets of Eastbrokers Beteiligungs AG                      $            -     $            -     $     5,400,000
                                                                            -----------------  -----------------  -----------------

       Eastbrokers International shares issued in
          compensation for services                                         $            -     $            -     $       178,250
                                                                            -----------------  -----------------  -----------------

       Eastbrokers International shares issued for acquisition
          of net assets of Eastbrokers North America, Inc.                  $            -     $            -     $        90,000
                                                                            -----------------  -----------------  -----------------


       Valuation adjustment of available for sale securities                $            -     $            -     $       246,794
                                                                            -----------------  -----------------  -----------------

       Stock subscription payable assumed on
          purchase of Moravacentrum, a.s.                                   $      (864,024)   $            -     $            -
                                                                            -----------------  -----------------  -----------------

       Stock subscription payable transferred to
          purchaser on sale of Moravacentrum, a.s.                          $       864,024    $            -     $            -
                                                                            -----------------  -----------------  -----------------





</TABLE>



















                See notes to consolidated financial statements.

                                     - 27 -
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

                   Notes to Consolidated Financial Statements
                        For the Year Ended March 31, 1997


1.   Summary of Significant Accounting Policies

         Organization and Basis of Presentation

     The consolidated  financial  statements include  Eastbrokers  International
     Incorporated   (formerly   Czech   Industries,   Inc.)  and  its  U.S.  and
     international subsidiaries (collectively,  "Eastbrokers" or the "Company").
     The  shareholders  of the Company  approved the name change on December 10,
     1996 at its Annual Meeting of Shareholders.

     These  consolidated   financial  statements  reflect,  in  the  opinion  of
     management,  all  adjustments  necessary  for a  fair  presentation  of the
     consolidated  financial  position and the results of the  operations of the
     Company. All significant  intercompany  balances and transactions have been
     eliminated in  consolidation.  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.  Management
     believes that the estimates utilized in the preparation of the consolidated
     financial  statements  are prudent and  reasonable.  Actual  results  could
     differ from these estimates.

     The Company,  through its subsidiaries,  provides a wide range of financial
     services  primarily  in the United  States,  Central  Europe,  and  Eastern
     Europe. Its businesses include  securities  underwriting,  distribution and
     trading; merger,  acquisition,  restructuring,  and other corporate finance
     advisory activities; asset management; merchant banking and other principal
     investment  activities;  brokerage and research  services;  and  securities
     clearance  services.  These services are provided to a diversified group of
     clients  and  customers,  including  corporations,  governments,  financial
     institutions, and individuals.  Substantially all of the Company's revenues
     and  expenses  are  generated   through  its  European   subsidiaries   and
     affiliates. Accordingly, no segment information has been provided.

         Change in Fiscal Year-End

     On February 10, 1996, the Board of Directors  unanimously approved a change
     in the Company's  fiscal year-end from December 31 to March 31. This change
     became  effective for the fiscal period ended March 31, 1996.  Accordingly,
     this report  includes  the results for the fiscal year ended  December  31,
     1995, the transition  period ended March 31, 1996 and the fiscal year ended
     March 31, 1997.

     The fiscal year-end of the Company's  domestic  subsidiary was also changed
     to March 31.

         Fiscal Year-End of the Company's European Subsidiaries

     The fiscal year-end of the Company's European  Subsidiaries is December 31.
     These  subsidiaries are included on the basis of closing dates that precede
     the Company's closing date by three months.

         Financial Instruments

     Substantially all of the Company's financial assets and liabilities and the
     Company's  trading  positions,   as  well  as  financial  instruments  with
     off-balance sheet risk, are carried at market or fair values or are carried
     at amounts which approximate fair value because of their short-term nature.
     Estimates  of fair  value are made at a  specific  point in time,  based on
     relevant market information and information about the financial instrument,
     specifically,  the  value of the  underlying  financial  instrument.  These
     estimates  do not reflect any  premium or discount  that could  result from
     offering for sale at one time the Company's entire holdings of a particular
     financial instrument. The Company has no investments in derivatives.

     Equity  securities  purchased in connection with merchant banking and other
     principal  investment  activities  are initially  carried as their original
     costs.  The  carrying  value of such equity  securities  is  adjusted  when
     changes in


                                     - 28 -

<PAGE>


                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997


1.   Summary of Significant Accounting Policies (continued)

         Financial Instruments (continued)

     the  underlying  fair  values  are  readily  ascertainable,   generally  as
     evidenced by listed market prices or transactions which directly affect the
     value of such  equity  securities.  Downward  adjustments  relating to such
     equity  securities are made in the event that the Company  determines  that
     the eventual realizable value is less than the carrying value.

     Securities  classified as available for sale are carried at fair value with
     unrealized   gains  and  losses   reported  as  a  separate   component  of
     stockholders'  equity.  Realized  gains and losses on these  securities are
     determined on a specific identification basis and are included in earnings.

         Collateralized Securities Transactions

     Accounts  receivable  from and payable to customers  include amounts due on
     cash transactions. Securities owned by customers are held as collateral for
     these  receivables.  Such  collateral is not reflected in the  consolidated
     financial statements.

     Securities  sold  under  agreements  to resell  are  treated  as  financing
     arrangements and are carried at contract amounts  reflecting the amounts at
     which  the  securities  will be  subsequently  resold as  specified  in the
     respective  agreements.  The Company  takes  possession  of the  underlying
     securities  purchased  under  agreements  to resell and obtains  additional
     collateral  when the market  value  falls  below the  contract  value.  The
     maximum term of these agreements is generally less than ninety-one days.

         Other Receivables

     From  time to time,  the  Company  provides  operating  advances  to select
     companies as a portion of its merchant banking activities.

         Underwritings

     Underwritings  include gains,  losses,  and fees, net of syndicate expenses
     arising  from  securities  offerings  in  which  the  Company  acts  as  an
     underwriter  or  agent.  Underwriting  fees  are  recorded  at the time the
     underwriting is completed and the income is reasonably determinable.

         Fees

     Fees  are  earned  from  providing   merger  and   acquisition,   financial
     restructuring  advisory, and general management advisory services. Fees are
     recorded based on the type of engagement and terms of the contract  entered
     into by the Company.

         Securities Transactions

     Government  and  agency  securities  and  certain  other  debt  obligations
     transactions  are  recorded  on a trade date  basis.  All other  securities
     transactions  are recorded on a settlement  date basis and  adjustments are
     made to a trade date basis, if significant.

         Commissions

     Commissions  and related  clearing  expenses  are  recorded on a trade-date
     basis as securities transactions occur.

                                     - 29 -

<PAGE>

         Translation of Foreign Currencies

     Assets and  liabilities of operations  having  non-U.S.  dollar  functional
     currencies  are  translated at year-end  rates of exchange,  and the income
     statements  are  translated  at weighted  average rates of exchange for the
     year.  In  accordance  with  Statement  of Financial  Accounting  Standards
     ("SFAS") No. 52, "Foreign Currency  Translation," gains or losses resulting
     from translating foreign currency financial statements,  net of hedge gains
     or losses and their  related  tax  effects,  are  reflected  in  cumulative
     translation  adjustments,  a separate  component of  stockholders'  equity.
     Gains or losses resulting from foreign  currency  transactions are included
     in net income.

         Buildings, Furniture, and Equipment

     Furniture  and  equipment  are  carried  at cost and are  depreciated  on a
     straight-line  basis over the estimated  useful life of the related  assets
     ranging  from  four  to ten  years.  Buildings  are  carried  at  cost  and
     depreciated on a straight-line basis over a period of 50 years.

         Common Stock Data

     Earnings (loss) per share is based on the weighted average number of common
     stock and stock equivalents  outstanding.  Common stock data for the fiscal
     year ended December 31, 1995 and the transition period ended March 31, 1996
     have been retroactively  adjusted  throughout these consolidated  financial
     statements  to  reflect  a  one-for-five  reverse  common  stock  split  in
     September  1996. The  outstanding  warrants and stock options are currently
     excluded  from the earnings  (loss) per share  calculation  as their effect
     would be antidilutive.

         Stock-Based Compensation

     In October 1995, the FASB issued SFAS No. 123,  "Accounting for Stock-Based
     Compensation." SFAS No. 123 encourages,  but does not require, companies to
     record  compensation cost for stock-based  employee  compensation  plans at
     fair  value.  The  Company  has  elected  to  account  for its  stock-based
     compensation   plans  using  the  intrinsic  value  method   prescribed  by
     Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees"  (APB No. 25). Under the provisions of APB No. 25,  compensation
     cost for stock  options is measured  as the  excess,  if any, of the quoted
     market  price of the  Company's  common stock at the date of grant over the
     amount an employee must pay to acquire the stock.

         Deferred Income Taxes

     Deferred  income taxes in the  accompanying  financial  statements  reflect
     temporary differences in reporting results of operations for income tax and
     financial accounting purposes.

         Cash and Cash Equivalents

     For  purposes  of  the  consolidated  financial  statements,   the  Company
     considers  all demand  deposits  held in banks and  certain  highly  liquid
     investments  with  maturities  of 90 days or less other than those held for
     sale in the ordinary course of business to be cash equivalents.

         Goodwill and Other Intangible Assets

     Goodwill and other intangible assets are amortized on a straight-line basis
     over  periods  from five to 25 years  and are  periodically  evaluated  for
     impairment.

         Reclassifications

     Certain  amounts in prior periods have been  reclassified to conform to the
     current presentation.

                                     - 30 -

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997


2.    Cash and Securities Segregated Under Federal and Other Regulations

     Cash and securities  segregated for regulatory purposes or as deposits with
     clearing  organizations  was $119,274 as of March 31,  1997.  There were no
     such amounts segregated as of December 31, 1995 and March 31, 1996.

3.    Financial Instruments

     Financial  instruments owned consist of the Company's  proprietary  trading
     and investment  accounts,  securities purchased under agreements to resell,
     and investments held for resale. The Company's  financial  instruments,  at
     fair value, are as follows:
<TABLE>
<CAPTION>

                                                         December 31,          March 31,           March 31,
                                                             1995                1996                1997
                                                        --------------      --------------      --------------
     <S>                                                <C>                 <C>                 <C>
     Securities purchased under agreements to resell
         Sovereign government debt - Hungary            $     --            $    --             $    228,965
         Corporate equities - Hungary                         --                 --                  179,900
                                                        --------------      --------------      --------------
                                                        $     --            $    --             $    408,865
                                                        ==============      ==============      ==============

     Securities owned at value
         Corporate equities - Austria                   $     --            $    --             $  2,208,623
         Corporate equities - Czech Republic                  --                 --                  871,638
         Corporate equities - Slovak Republic                 --                 --                  485,141
         Corporate equities - Poland                          --                 --                  687,762
                                                        --------------      --------------      --------------
                                                        $     --            $    --             $  4,253,164
                                                        ==============      ==============      ==============
     Available for sale securities
         Corporate equities - Austria                   $     --            $    --             $     40,321
         Corporate equities - Czech Republic                3,258,413          1,677,623           1,893,115
         Corporate equities - Hungary                         --                 --                  189,610
         Corporate equities - Slovak Republic                 --                 --                  255,008
                                                        --------------      --------------      --------------
                                                        $   3,258,413       $  1,677,623        $  2,378,054
                                                        ==============      ==============      ==============

</TABLE>

4.    Buildings, Furniture and Equipment

     Buildings, furniture and equipment are summarized below:
<TABLE>
<CAPTION>

                                                         December 31,          March 31,           March 31,
                                                             1995                1996                1997
                                                        --------------      --------------      --------------
         <S>                                            <C>                 <C>                 <C>
         Buildings                                      $  18,624,248       $ 18,624,248        $    --
         Furniture and equipment                              540,281            545,796           1,766,782
                                                        --------------      --------------      --------------
                                                           19,164,529         19,170,044           1,766,782
         Less accumulated depreciation                       (604,374)          (604,374)           (840,217)
                                                        --------------      --------------      --------------
                                                        $  18,560,155       $ 18,565,670        $    926,565
                                                        ==============      ==============      ==============
</TABLE>


     Depreciation  expense for the year ended  December 31, 1995, the transition
     period  ended  March  31,  1996,  and the year  ended  March  31,  1997 was
     $227,586, $0, and $108,915, respectively.

                                     - 31 -

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997


5.    Business Acquisitions

         Eastbrokers Beteiligungs Aktiengesellschaft

     Eastbrokers   Vienna  is  an  Austrian  based  holding   company  that  has
     established a presence in 12 Central and Eastern European countries through
     its network of subsidiaries and affiliate offices.  On August, 1, 1996, the
     Company  acquired  80  percent  of the  outstanding  stock  of  Eastbrokers
     Beteiligungs Aktiengesellschaft ("Eastbrokers Vienna") through the issuance
     of 1,080,000 shares of the Company's common stock valued at $5,400,000.  As
     a participant in Eastbrokers  Vienna's capital increase,  the Company later
     acquired an  additional  245,320 of an  available  270,000  shares for cash
     increasing  its ownership  percentage to 83.62  percent.  In three separate
     transactions  in November  and  December  1996 and March 1997,  the Company
     purchased 81,550 additional shares,  increasing its ownership percentage to
     approximately 94 percent.

     The  fair  value  of the  net  assets  acquired  under  these  transactions
     approximated  $8,400,000.  The acquisition has been accounted for under the
     purchase  method of  accounting.  The excess of the purchase price over the
     fair value of the net assets  acquired  resulted in the  Company  recording
     approximately  $1,950,000  in goodwill,  which is being  amortized  over 25
     years on a straight-line  basis. The significant  equity  investment of the
     Company,  WMP, was written up to book value, which  approximated  estimated
     market  value at the date of  acquisition.  The amount of this net write-up
     was approximately  $607,000 USD. These  consolidated  financial  statements
     include the consolidated  results of operations of Eastbrokers  Vienna from
     the date of acquisition  through  December 31, 1996 in accordance with Note
     1. The purchase  agreement  contains certain provisions whereby the selling
     shareholders may be eligible to receive an additional 120,000 shares of the
     Company's common stock in the event certain earnings targets are achieved.

         Eastbrokers North America, Inc.

     On March 6, 1997, the Company  acquired a 90 percent  interest in Financial
     Planning Services, Inc. ("FPSI"), a Delaware corporation and member firm of
     the National  Association  of Securities  Dealers,  Inc.  ("NASD") from Mr.
     Robert Sass. As  consideration  for this 90 percent  interest in FPSI,  the
     Company  issued  22,500 shares of the  Company's  common  stock.  The value
     assigned to this stock as of the date of transfer was $4.00 per share. FPSI
     has been renamed  Eastbrokers  North America,  Inc.  ("Eastbrokers  NA") to
     reflect its affiliation.

     The net assets acquired under this transaction approximated $90,000 and the
     acquisition has been accounted for under the purchase method of accounting.
     There was no excess of the  purchase  price  over the fair value of the net
     assets received at the date of acquisition.  These  consolidated  financial
     statements  include the results of  operations of  Eastbrokers  NA from the
     date of acquisition through March 31, 1997 in accordance with Note 1.

         Pro forma Results of Operations

     The following  summarized,  unaudited,  pro forma results of operations for
     the years ended  December  31,  1995 and March 31,  1997  assumes the above
     listed  acquisitions  occurred at the beginning of the respective  periods.
     There was no effect for the transition period ended March 31, 1996.

                                     - 32 -

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997


5.    Business Acquisitions (continued)

         Pro forma Results of Operations (continued)

                                              Year Ended          Year Ended
                                          December 31, 1995     March 31, 1997
                                          -----------------    ----------------
     Revenues                                  $ 7,193,061        $8,639,986
     Net income (loss)                             891,859            77,167
     Net income (loss) per share                      0.02              0.03

6.   Investments in Affiliated Companies

         Investment in WMP Borsenmakler Aktiengesellschaft

     Through its subsidiary,  Eastbrokers  Vienna, the Company owns a 49 percent
     interest   in  the   outstanding   capital   stock   of  WMP   Borsenmakler
     Aktiengesellschaft  ("WMP").  WMP is a stock broker-dealer and market maker
     in Vienna,  Austria and is licensed as a Class B bank under Austrian law. A
     Class B bank may, at its discretion,  conduct any of the normal  activities
     associated with a bank with one major exception:  it cannot accept customer
     deposits.

     The  Company  accounts  for this  investment  using  the  equity  method of
     accounting.  The carrying value of this  investment was $6,547,821 on March
     31, 1997. The summarized  statement of financial condition and statement of
     operations  information for WMP for the year ended December 31, 1996 was as
     follows:

                                                                  1996
                                                              -----------
      Summarized Statement of Financial Condition
               Total assets                                   $18,938,275
               Total liabilities                                4,513,957
                                                              -----------
               Stockholders' equity                           $14,424,318
                                                              ===========

      Summarized Statement of Operations
               Revenues                                       $ 4,559,675
               Expenses                                         4,240,310
                                                              -----------
               Net income                                     $   319,365
                                                              ===========

     This summarized financial information has been translated from the Austrian
     Schilling  into U.S dollars at the foreign  currency  exchange  rates as of
     September 30, 1996. Fluctuations in the foreign currency exchange rates may
     affect the comparability of this information on a period to period basis.

     Although the summarized  financial  information  for WMP reflects  earnings
     year to date,  WMP  experienced  losses from  operations in the period from
     August 1, 1996 through  September  30, 1996.  These losses from  operations
     totaled approximately  $250,000 USD. During the period from October 1, 1996
     through  December  31,  1996,  WMP  generated  net income of  approximately
     $50,000.

         Investments in Other Unconsolidated Affiliates

     The Company also has other investments in unconsolidated affiliates through
     Eastbrokers  Vienna.  These  affiliates  are accounted for using the equity
     method  of  accounting.   These  investments  are  predominantly   start-up
     operations.   At  December  31,  1996,   these   unconsolidated   affiliate
     investments  included the following offices:  Zagreb,  Croatia;  Ljubljana,
     Slovenia;  Almaty,  Kazakstan;  Moscow, Russia; Sofia,  Bulgaria;  Slovakia
     Industries;  and NIF TRUD Investment Fund. The combined  carrying amount of
     these

                                     - 33 -

<PAGE>

                      EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997

6.   Investments in Affiliated Companies (continued)

          Investments in Other Unconsolidated Affiliates (continued)

     investments   was   $516,243.   Losses   from  these   operations   totaled
     approximately  $145,000  USD in the period  from  October  1, 1996  through
     December 31, 1996.

         Receivables from Affiliated Companies

     Periodically, the Company provides operating advances to its unconsolidated
     affiliates.  These advances are generally due on demand and are not subject
     to interest charges.

7.   Short-Term Borrowings

     The Company meets its  short-term  financing  needs through lines of credit
     with financial institutions, advances from affiliates, and by entering into
     repurchase  agreements  whereby  securities  are sold with a commitment  to
     repurchase at a future date.

         Lines of Credit

     The  Company  had  outstanding  advances  on its lines of  credit  totaling
     $1,602,182 at year end.  These lines of credit carry interest rates between
     7.00 percent and 12.00 percent as computed on an annual  basis.  There were
     no lines of credit outstanding at December 31, 1995 or March 31, 1996.

         Advances from Affiliated Companies

     Periodically,  the  Company's  subsidiaries  and  affiliates  will  provide
     operating advances to other members in the affiliated group. These advances
     are generally due on demand and are not subject to interest charges.

         Securities Sold Under Agreements to Repurchase

     At March 31, 1997, the Company had $1,200,793  outstanding under repurchase
     agreements.   The  weighted  average  interest  rate  on  these  repurchase
     agreements  was  12.91  percent.  Securities  listed  on the  Prague  Stock
     Exchange Main Market with a market value of  approximately  $1,700,000 were
     used to collateralize this arrangement.

         Unsecured Bonds Payable

     The Company has  unsecured  bonds with a face value of 25 million  Austrian
     Schillings requiring annual interest payments at 10 percent per annum which
     mature on July 31,  1997.  At March 31,  1997,  the amount due under  these
     obligations was $2,307,500.

8.   Long-Term Borrowings

     Long-term borrowings consist of the following:
<TABLE>
<CAPTION>

                                                             December 31,       March 31,         March 31,
                                                                1995              1996              1997
                                                            -------------     -------------     ------------
     <S>                                                   <C>               <C>                 <C>

     Note payable to a finance company,  requiring semi-annual interest payments
       of 9.00 percent, principal due at maturity on September 30, 1997, secured
       by 73,200 shares of Fortuna
       Hotel, a.s. common stock                             $ 2,099,658       $  2,026,432       $    --
</TABLE>


                                     - 34 -

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997


8.    Long-Term Borrowings (continued)

<TABLE>
<CAPTION>

                                                             December 31,       March 31,         March 31,
                                                                1995              1996              1997
                                                            -------------     -------------     ------------
     <S>                                                   <C>               <C>                 <C>
     Note   payable  to  a  financial   institution
       requiring    quarterly   interest   payments
       computed  at  6.50  percent  on  a  360  day
       year,  collateralized  by 157,061  shares of
       WMP     Borsenmakler     Aktiengesellschaft,
       principal     of     10,000,000     Austrian
       Schillings and accrued  interest  payable in
       full at November 30, 2001                                    --               --            934,374
                                                            ------------      ------------      ------------
                                                            $ 2,099,658       $ 2,026,432        $ 934,374
                                                            ============      ============      ============
</TABLE>


9.   Commitments and Contingencies

         Leases and Related Commitments

     The Company  occupies  office  space under  leases  which expire at various
     dates through 2001.  The various  leases  contain  provisions  for periodic
     escalations  to the  extent of  increases  in certain  operating  and other
     costs.  The Company  incurred rent expense under  non-cancelable  operating
     leases in the approximate amounts of $19,000,  $12,000, and $35,000 for the
     periods  ended  December  31,  1995,  March 31,  1996,  and March 31, 1997,
     respectively.

     Minimum  future  rentals under these  non-cancelable  leases for the fiscal
     years  ending 1998  through  2002 are  approximately  as  follows:  1998 --
     $130,000; 1999 -- $144,000; 2000 -- $144,000; 2001 -- $104,000; and 2002 --
     $84,000 and in the aggregate $606,000.

     The Company's  subsidiaries  occupy  office space under  various  operating
     leases which contain  cancellation  clauses  whereby the Company may cancel
     the lease with thirty to ninety days written notice.

         Hotel Fortuna Leases

     During the years ended  December 31, 1995 and March 31,  1997,  the Fortuna
     Hotel, a.s.  (Fortuna) was subject to land and equipment leases.  Under the
     terms of these leases,  Fortuna  incurred  rent expense in the  approximate
     amounts of $350,000 and $310,000, respectively.

10.  Stockholders' Equity

     On December  10, 1996,  the Board of Directors  approved a plan whereby the
     Company was  authorized  to begin a buy-back  program of its common  stock.
     Under the terms of this plan,  the Company was  authorized  to redeem up to
     $1,000,000  of  common  stock at a price  not to  exceed  $5.00  per  share
     beginning in January 1997. On January 23, 1997, the Company redeemed 45,000
     of its  outstanding  shares at $4.75 per share.  Currently,  the  Company's
     common  stock is trading at a price in excess of the  approved  plan and no
     additional buy-backs are anticipated.

     In connection with its secondary  offering in June 1995, the Company issued
     5,505,000 Class A Warrants and 1,250,000 Class B Warrants.  Both Classes of
     Warrants expire in June 2000.

     Certain U.S. and non-U.S.  subsidiaries are subject to various  securities,
     commodities  and banking  regulations,  and capital  adequacy  requirements
     promulgated by the regulatory and exchange  authorities of the countries in
     which they operate. These subsidiaries have consistently operated in excess
     of their local capital adequacy requirements.

                                     - 35 -

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997


10.  Stockholders' Equity (continued)

     On August 1, 1996, the Company issued  1,080,000 shares of its common stock
     to  the  selling  security  holders  of  Eastbrokers  Beteiligungs  AG in a
     transaction  valued  at  $5,400,000.  During  the  period  surrounding  the
     acquisition,  the Company's common stock was trading  approximately between
     $6.25 and $8.00 per share for its fully registered and unrestricted shares.
     Due  to  the  nature  of  restricted   shares  and  the  various  covenants
     restricting the transfer of these shares, the Board of Directors assigned a
     value of $5,400,000 to this transaction.

     On March 6, 1997,  the Company  issued  22,500 shares of common stock value
     relating  to the  acquisition  of  Eastbrokers  North  America,  Inc.  In a
     separate but related  transaction to the  Eastbrokers  North America,  Inc.
     acquisition,  the Company  sold 2,500 shares of the  Company's  stock to an
     officer of the Company in exchange for a promissory note. These shares were
     transferred to the selling  shareholder of Eastbrokers North America,  Inc.
     as part of the  acquisition.  The shares were valued in accordance with the
     terms of the Stock Purchase Agreement of Eastbrokers North America, Inc. As
     of the  date  of  the  closing,  the  total  amount  of  the  common  stock
     transferred was $100,000.

     During the year ended March 31, 1997,  the Company issued a total of 37,000
     shares of common stock at a per share price  approximating the then current
     market price for services rendered to the Company.

     In April 1997, the Company issued 125,002 shares of common stock, par value
     $.05, of the Company  ("Common  Stock").  The securities were sold to three
     individuals:  Calvin S. Caldwell, Frank Huang and Jay Raubvogel for a total
     offering  price of  $750,012  or $6.00 per share.  The net  proceeds to the
     Company were $725,012. There were no underwriting discounts or commissions.
     The Offering was made pursuant to an exemption from registration under Rule
     506 of the Securities Act of 1933, as amended (the  "Securities  Act"). The
     Offering was made only to selected  "accredited  investors" as that term is
     defined in Rule 501(a) of the Securities Act.

     Cumulative  translation  adjustments include gains or losses resulting from
     translating  foreign  currency  financial  statements from their respective
     functional  currencies  to U.S.  dollars,  net of hedge gains or losses and
     related tax effects.  Increases or decreases in the value of the  Company's
     net foreign investments  generally are tax-deferred for U.S. purposes,  but
     the  related  hedge  gains and losses are  taxable  currently.  The primary
     markets in which the Company  operates are generally  economies  reliant on
     the "soft" or "exotic" currencies  prevalent in these markets.  The Company
     generally elects not to hedge its net monetary investments in these markets
     due to the lack of availability of various currency contracts at acceptable
     costs.

11.  Stock Option Plan

     During 1996,  the Company  adopted a  non-qualified  stock option plan (the
     "plan") as part of an overall compensation  strategy designed to facilitate
     a  pay-for-performance  policy and promote  internal  ownership in order to
     align the  interests  of  employees  with the  long-term  interests  of the
     Company's stock holders.

     Under the terms of the plan,  stock  options  granted will have an exercise
     price  not less  than the fair  value of the  Company's  common  stock  (as
     defined in the plan) on the date of grant.  Such options  generally  become
     exercisable  over a  three-year  period and expire 5 years from the date of
     grant.

     A total of 35,000  options a weighted  average  exercise price of $6.64 per
     share were  granted  under this plan during the fiscal year ended March 31,
     1997.  The fair  value of the  options  at the date of grant was  estimated
     using the  Black-Scholes  option  pricing  model  utilizing  the  following
     weighted average assumptions: risk-free interest rate - 5 percent; expected
     option  life in years - 5 years;  expected  stock price  volatility  - 97.7
     percent; and expected dividend yield - 0.0 percent.

     An  additional  200,000  options  were  granted  outside  of the  plan at a
     weighted average exercise price of $10.00 per share.

     Had the Company elected to recognize compensation expense based on the fair
     value of the options at the

                                     - 36 -

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997


11.  Stock Option Plan (continued)

     date of grant as  prescribed  by SFAS  No.  123,  the net loss for the year
     would  have  been  $1,553,935,  the net  loss  per  share  from  continuing
     operations would have been ($0.11), and the net loss per share for the year
     would have been ($0.62).

12.   Related Party Transactions

     Prior to the sale by the Company of the Hotel Fortuna a.s. (the "Hotel") on
     October 1, 1996, the Company previously owned 50.2 % of the Hotel. See Item
     3. Stratego Invest a.s. owned 20.6 % of the Hotel.  Stratego Invest a.s. is
     more than 50% owned by Stratego  a.s.,  which is  controlled  by Ing.  Petr
     Bednarik, former President and CEO of the Company.

     The sales  transaction  between the Company and Y.S.E. a.s. was arranged by
     Stratego  Invest a.s., a  broker-dealer  and financial  consulting  company
     organized  under the laws of the Czech  Republic.  Ing.  Petr  Bednarik,  a
     director  and  shareholder  of  the  Company,  is  the  Chairperson  of the
     Supervisory  Board and a  beneficial  owner of  Stratego  Invest  a.s.  For
     providing services related to the transaction,  Stratego Invest a.s. was to
     have  received a commission  fee of 1,000,000  CZK  (approximately  $37,000
     USD).  Stratego  Invest a.s. has agreed to waive its commission  related to
     this transaction.

     In September  1996, Mr. Schmid  received from  Eastbrokers  Beteiligungs AG
     3,511,422 Austrian  Schillings  (approximately  $340,000 USD) for his 49.95
     percent          ownership          interest         in         Eastbrokers
     Wertpapiervermittlungs-gesellschaft  mbH ("Eastbrokers  GmbH"), an Austrian
     Securities  Brokerage Company with limited liability.  The nominal value of
     these  shares  was  500,000  Austrian  Schillings.  Mr.  Schmid,  Chairman,
     President,   Chief  Executive   Officer,   and  Director  of  the  Company.
     Eastbrokers GmbH holds the ownership interest for Eastbrokers Prague.

     In  September  1996,  Mr.  Schmid  received  376,275  Austrian   Schillings
     (approximately  $36,500  USD) for his 5.60  percent  ownership  interest in
     Easbrokers Slovakia a.s., Bratislava ("Eastbrokers Slovakia").  Eastbrokers
     Slovakia is the Company's subsidiary operating in the Slovak Republic.  The
     nominal value of these shares was 280,000 Slovak Koruna.

     In September  1996, Mr. de Roode  received  1,110,250  Austrian  Schillings
     (approximately  $107,500 USD) for his 24.40 percent  ownership  interest in
     Easbrokers Slovakia a.s., Bratislava ("Eastbrokers Slovakia").  Eastbrokers
     Slovakia is the Company's subsidiary operating in the Slovak Republic.  The
     nominal value of these shares was 1,220,000 Slovak Koruna. Mr. de Roode was
     Chief  Executive  Officer,  Chief  Operating  Officer  and  Director of the
     Company.

     The Company has entered into a number of agreements with Randall F. Greene,
     a former director of the Company.  Mr. Greene provided  consulting services
     pursuant  to an  agreement  dated  July  26,  1996 in  connection  with the
     Company's  acquisition of Eastbrokers  Vienna.  Pursuant to this agreement,
     Mr. Green  received  $20,000 as a  non-accountable  expense  allowance  and
     10,000 shares of the Company's  common stock.  In addition,  Mr. Greene was
     paid $37,000 for consulting  services provided to the Company in connection
     with potential  mergers and/or  acquisitions.  In December 1996, Mr. Greene
     entered into an agreement with the Company and certain  stockholders of the
     Company  pursuant to which he was to analyze  and  evaluate  the  Company's
     operations  and to  assist  the  Company  in  evaluating  certain  possible
     business combination  transactions.  Mr. Greene was to be compensated under
     this  agreement  only  in  the  event  that  such  a  business  combination
     transaction was succesfully completed.  No such transactions have occurred,
     no  compensation  was paid to Mr. Greene  thereunder  and the agreement has
     been terminated.  In addition,  in connection with Mr. Greene's resignation
     from the Board of Directors of the Company, the Company

                                     - 37 -

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997


12.   Related Party Transactions (continued)

     entered into a consulting  agreement dated March 27, 1997 pursuant to which
     Mr. Greene is to provide  business and financial  advisory  services to the
     Company and into a related  letter  agreement also dated March 27, 1997, as
     amended by a letter dated April 29, 1997.  Under the consulting  agreement,
     Mr. Greene is to be compensated at the rate of $4,000 per month for the six
     month term of the agreement which commenced on April 1, 1997. As additional
     compensation  under  this  agreement,  Mr.  Greene was  granted  options to
     purchase  7,750  shares of the  Company's  common stock at $6.50 per share.
     Under the related letter agreement, Mr. Greene was paid $13,750 and granted
     12,500 shares in full satisfaction for consulting  services rendered during
     the period  August 1, 1996 through  March 31, 1997.  Also  pursuant to this
     agreement,  the Company  agreed to indemnify  Mr.  Greene  against  certain
     liabilities, the parties exchanged mutual releases and Mr. Greene agreed to
     sell  his  shares  of  the  Company's   common  stock  subject  to  certain
     conditions.

     The Company  entered into a Consulting  Agreement dated March 31, 1997 with
     Dr. Sumichrast, a Director of the Company, pursuant to which Dr. Sumichrast
     will  provide  services  to the Company  through  March 31,  1998,  and the
     Company has granted him 20,000 shares of the Company's Common Stock to vest
     ratably over the term of the Agreement.

     In March 1997,  Eastbrokers  Vienna  purchased  30,000 shares of Schneiders
     1895 AG for 3,618,000 Austrian Schillings (approximately $302,000 USD). Mr.
     Schmid is also a Director of Schneiders  1895 AG. Mr. Schmid's father is an
     Officer and Director of Schneiders 1895 AG.

     During 1996, the Company entered into a verbal agreement with RealWorld, an
     internet software  developer,  to design and build an online stock exchange
     game and online trading system. The initial deposit to begin development of
     the game and system was 530,000 Austrian Schillings  (approximately $50,000
     USD).  Currently  the  Company  has a  liability  to  RealWorld  of 208,000
     Austrian Schillings (approximately $20,000 USD) representing amounts due on
     progress  billings.  The agreement  recognizes  costs will be charged on an
     hourly basis and monthly  progress  billings will be made once the original
     deposit has been depleted.  Dr.  Muller-Tyl is a member of the  Supervisory
     Board for RealWorld.  VCH and Messrs.  Schmid,  Kossner, and Muller-Tyl are
     all shareholders of Realworld and represent a combined  ownership  interest
     of 26 percent.

     In December 1996,  Eastbrokers  Vienna loaned Dr. Muller-Tyl  approximately
     $72,000 USD.  Interest on the  outstanding  balance of this  obligation  is
     computed  at 8 percent  per annum  until paid in full.  Dr.  Muller-Tyl  is
     currently the Chief Operating Officer of the Company.

     The Company  leases office space from Residenz  Realbesitz AG  ("Residenz")
     for its  Vienna  operations.  Under the terms of the  leases,  the  Company
     incurred  occupancy costs of approximately  1,200,000  Austrian  Schillings
     (approximately  $114,000 USD). The terms of this lease were negotiated such
     that the  Company is  subject to  occupancy  expenses  no greater  than the
     current  market  rates.  Residenz  is  a  subsidiary  of  General  Partners
     Beteiligungs AG ("General  Partners")  (formerly KHS Beteiligungs  AG). Mr.
     Kossner owns 30 percent of the outstanding  shares of GP. He is a member of
     GP's  Supervisory  Board,  WMP's  Supervisory  Board,  the  Eastbrokers  AG
     Supervisory Board, and is a Director of the Company.

     General  Partners,  of which Mr.  Kossner is a  principal  stockholder  and
     member of the  Supervisory  Board,  owns  535,539  shares of the  Company's
     outstanding shares.

     At  December  31,  1996,  the  Company  has a  receivable  related to share
     transactions  from  Mr.  Kossner  in  the  amount  of  2,269,198   Austrian
     Schillings (approximately $209,000 USD).

     At  December  31,  1996,  the  Company  has a  receivable  related to share
     transactions from Z.E. Beteiligungs

                                     - 38 -

<PAGE>
                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997


12.  Related Party Transactions (continued)

     AG. in the amount of 5,537,202 Austrian Schillings  (approximately $511,000
     USD). Z.E. Beteiligungs AG is a subsidiary of General Partners.

     WMP is an Austrian  broker-dealer,  market maker,  and member of the Vienna
     Stock Exchange. WMP's common stock is publicly traded on the Main Market of
     the Vienna Stock  Exchange.  From time to time, WMP will make a market in a
     company's  stock that has a direct  relationship to the Company through its
     directors.

13.   Income Taxes

     The  Company's  subsidiaries  are  subject to income  taxes in the  various
     countries in which they operate.

     The provision for (benefit from) income taxes is summarized as follows:
<TABLE>
<CAPTION>

                                                                              Three Month
                                                                              Transition
                                                          Year Ended         Period Ended         Year Ended
                                                         December 31,          March 31,           March 31,
                                                             1995                1996                1997
                                                        --------------      --------------      --------------
     <S>                                                <C>                 <C>                 <C>

     Current
       Federal                                          $     --            $    --             $    --
       State                                                  --                 --                  --
       Foreign                                                --                 --                 (180,534)
                                                        --------------      --------------      --------------
           Total from continuing operations                   --                 --                 (180,534)

     Deferred
       Federal                                                 19,304            --                  --
       State                                                    4,274            --                  --
       Foreign                                                 46,805            --                  (69,377)
                                                        --------------      --------------      --------------
           Total from continuing operations                    70,383            --                  (69,377)
                                                        --------------      --------------      --------------
                                                        $      70,383       $    --             $   (249,911)
                                                        ==============      ==============      ==============

     The following is a  reconciliation  of income tax expense  (benefit) at the
     Federal statutory rates with income taxes recorded by the Company.

                                                                              Three Month
                                                                              Transition
                                                          Year Ended         Period Ended         Year Ended
                                                         December 31,          March 31,           March 31,
                                                             1995                1996                1997
                                                        --------------      --------------      --------------
       <S>                                              <C>                 <C>                 <C>

       Income taxes at Federal statutory rate           $     172,209       $    --             $     20,212
       State income taxes net of Federal tax benefit           23,400            --                    2,746
       Change in valuation allowance                          (93,217)           --                  697,301
       Discontinued operations                                --                 --                 (510,975)
       Non-taxable income under foreign regulations
          Austria                                             --                 --                 (269,606)
          Slovak Republic                                     --                 --                 (191,515)
       Other                                                  (32,009)           --                    1,926
                                                        --------------      --------------      --------------
                                                        $      70,383       $    --             $   (249,911)
                                                        ==============      ==============      ==============
</TABLE>


                                     - 39 -

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A Delaware corporation)

             Notes to Consolidated Financial Statements (continued)
                        For the Year Ended March 31, 1997


13.  Income Taxes (continued)

     Temporary  differences  which  give  rise to  deferred  tax  assets  are as
     follows:
<TABLE>
<CAPTION>

                                                                              Three Month
                                                                              Transition
                                                          Year Ended         Period Ended         Year Ended
                                                         December 31,          March 31,           March 31,
                                                             1995                1996                1997
                                                        -------------       --------------      --------------
       <S>                                              <C>                 <C>                 <C>

       Depreciation and amortization                    $    (141,747)      $    --             $      6,070
       Basis difference on building                           123,110            --                  --
       Basis difference on marketable securities              --                 --                 (133,385)
       Other                                                  --                 --                  (11,425)
       Net operating losses available for carryforward        101,202            --                  938,033
                                                        -------------       --------------      --------------
                                                               82,565            --                  799,243
           Valuation allowance                                --                 --                 (697,301)
                                                        -------------       --------------      --------------
                                                               82,565            --                  101,942
       Eastbrokers AG deferred taxes acquired                 --                 --                  187,996
                                                        -------------       --------------      --------------
                                                        $      82,565       $    --             $    289,938
                                                        =============       ==============      ==============
</TABLE>

     The foreign  effective tax rates utilized for purposes of computing  income
     taxes are not substantially  different from the combined effective domestic
     rates  utilized for computing  domestic  taxes.  The temporary  differences
     giving rise to the  deferred tax asset are  primarily  net  operating  loss
     carryforwards.  The foreign net operating loss  carryforwards are primarily
     in  Austria   and  are   approximately   11,500,000   Austrian   Schillings
     (approximately  $1,060,000  USD).  These net operating losses are available
     for   carryforward   indefinitely.   The   domestic  net   operating   loss
     carryforwards are  approximately  $1,800,000 and will expire, if unused, in
     varying  amounts  through the year 2012.  The deferred tax asset related to
     discontinued  operations was computed at the effective  statutory rates and
     has been fully reserved.

14.  Discontinued Operations

     In October  1996,  the  Company  agreed to sell its  interest  in the Hotel
     Fortuna,  a.s.  ("Fortuna") for 100,000 shares of Ceske energeticke  zavody
     a.s. ("CEZ") and 86,570 shares of Vodni stavby Praha a.s. based on the then
     current  market  prices  for  each  stock.  In  November  1996,  the  sales
     transaction  was completed.  As of the sale date,  the Company  revised its
     estimate of the net  realizable  value of the shares  received based on the
     then  current  market  prices  for each  stock.  As a result,  the  Company
     recognized a loss on the sale of discontinued  operations of  ($1,323,083).
     An income from discontinued operations was $41,899 through the sale date.

15.  Recent Accounting Pronouncements

     In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial  Accounting  Standards ("SFAS") No. 128, "Earnings per share".
     The effective  date is for financial  statements  with periods ending after
     December  15, 1997 and changes the method by which  earnings per share will
     be computed.  Adoption of this statement will not have a material effect on
     earnings per share.






















                                     - 40 -


<PAGE>




Item 8.  Changes  In  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

     The Company has not had any changes in or disagreements  with its principal
independent accountant within its two most recent fiscal years.



























                                     - 41 -

<PAGE>

                                    PART III

Item 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A.       Directors and Executive Officers

     Biographical  information,  including  the  age,  position  held  with  the
Company, term of office as officer or director,  employment during the past five
years, and certain other  directorships of each officer or director is set forth
below.  Messr.  Kossner has been  elected to serve as director  until the annual
meeting  of  stockholders  to be held  during  the year  1999.  Messrs.  Michael
Sumichrast,  Ph.D. and Martin A. Sumichrast have been elected as directors, each
to serve  until the annual  meeting of  stockholders  to be held during the year
1998.  Messr.  Schmid has been  elected as  director  to serve  until the annual
meeting of  stockholders  to be held  during the year 1997.  There are no family
relationships  among any  officers and  directors  of the  Company,  except that
Michael  Sumichrast,  Ph.D.  and  Martin  A.  Sumichrast  are  father  and  son,
respectively.

PETER  SCHMID,  31,  Chairman  of the Board and Chief  Executive  Officer of the
Company since March 1997; President of the Company since August 1996; a Director
of the Company since January  1994.  Since 1991,  Mr. Schmid has been a founder,
Chairman of the Board,  Chief Executive  Officer,  and Member of the Supervisory
Board of Eastbrokers  Beteiligungs AG, a Vienna based securities  brokerage firm
which was acquired by the Company in August 1996.  Mr.  Schmid is also Member of
the Supervisory  Board of WMP  Borsenmakler  AG, a Vienna based investment firm;
Eastbrokers  a.s.  Prague,  a  subsidiary  and  Prague,   Czech  Republic  based
securities brokerage firm; Eastbrokers Slovakia a.s.,  Bratislava,  a subsidiary
and Bratislava,  Slovak Republic based  securities  brokerage firm;  Eastbrokers
Zagreb an affiliate  office and Stock Company for Mediation,  a Zagreb,  Croatia
based securities brokerage firm;  Eastbrokers WDM s.a., Warsaw, a subsidiary and
Warsaw,  Poland based securities brokerage firm; NIF Trud (National  Cooperative
Investment  Fund plc,  Sofia),  an affiliate  office and Sofia,  Bulgaria  based
investment fund;  Eastbrokers  Budapest Rt., a subsidiary and Budapest,  Hungary
based securities brokerage firm;  Eastbrokers s.a., Bucharest,  a subsidiary and
Bucharest,  Romania based  securities  brokerage  firm;  and  Eastbrokers  d.d.,
Ljubljana,  an  affiliate  office  and  Ljubljana,   Slovenia  based  securities
brokerage  firm; and Schneiders  1895 AG, a retailing firm. Mr. Schmid is also a
Director of Eastbrokers North America, Inc., a subsidiary and New York, New York
based securities brokerage firm.

MARTIN A.  SUMICHRAST,  30,  Vice  Chairman  of the  Company  since  March 1997;
Secretary,  and a Director  of the  Company  since its  inception  in 1993.  Mr.
Sumichrast is a founder of the Company and was formerly Executive Vice President
and Chief Financial  Officer of the Company.  Mr. Sumichrast is also Chairman of
Eastbrokers  North  America,  a subsidiary of the Company and New York, New York
based  brokerage  firm.  From 1987  until  1992,  Mr.  Sumichrast  served as the
President of Sumichrast Publications, Inc., a real estate publication located in
Rockville,  Maryland.  Mr.  Sumichrast  also serves as President  of  Sumichrast
Enterprises, Inc., a holding company located in Rockville, Maryland.

KEVIN D. MCNEIL, 37, Vice President, Treasurer and Chief Financial Officer since
March 1997.  Since  August  1996,  Mr.  McNeil had been the  comptroller  of the
Company.  Mr. McNeil  implemented  an accounting  system that  consolidates  the
financial  statements of eleven different standards of accounting and currencies
into U.S.  general  accepted  accounting  principles  for filing with the United
States  Securities  and  Exchange  Commission  and the National  Association  of
Securities Dealers. Mr. McNeil is also  Secretary/Treasurer of Eastbrokers North
America,  Inc.,  a  subsidiary  of the  Company  and New  York,  New York  based
securities brokerage firm. From 1994 to 1996, Mr. McNeil served as a supervising
auditor for Pannell Kerr Forster PC, an international accounting firm. From 1990
until 1994, Mr. McNeil served as a supervising auditor for Schoenadel,  Marginot
& Company,  CPAs,  a large local  accounting  firm.  Incident to a divorce,  Mr.
McNeil filed for personal  bankruptcy  and was granted relief under Chapter 7 in
1994.  Mr.  McNeil is a member of the American  Institute  of  Certified  Public
Accountants,  the  Virginia  Society of  Certified  Public  Accountants  and the
International  Auditors  Division of the Securities  Industry  Association.  Mr.
McNeil holds a B.S. degree from Kansas State University.

FALKO  MUELLER-TYL,  27, Vice President and Chief Operating  Officer since March
1997.  Dr.  Mueller-Tyl  joined  Eastbrokers  Beteiligungs  AG  in  1994,  after
finishing his Ph.D. at the  University of Economics and Business  Administration
in Vienna, where he was also a teaching assistant.  Formerly, he was involved in
various consulting projects with the Eastbrokers group and other companies.  Dr.
Mueller-Tyl now is a member of the supervisory


                                     - 42 -


<PAGE>


board of Eastbrokers  Beteiligungs AG and Vice President and the Chief Operating
Officer of the Company,  responsible for the supervision of the Eastern European
operations.   Dr.   Mueller-Tyl   serves  as  General   Manager  of  Eastbrokers
Wertpapiervermittlungs-gesellschaft   mbH  ("Eastbrokers   GmbH"),  an  Austrian
Securities  Brokerage Company with limited liability;  WMP  Vermogensverwaltungs
GmbH, an Austrian property management company; and VCH  Vermogensverwaltund  und
Holding GmbH ("VCH"), a property management and holding company. Dr. Mueller-Tyl
also serves on the supervisory  boards of Eastbrokers  Beteiligungs AG, a Vienna
based  securities  brokerage  firm;  Eastbrokers  Slovakia a.s.,  Bratislava,  a
subsidiary and  Bratislava,  Slovak  Republic based  securities  brokerage firm;
Eastbrokers WDM s.a.,  Warsaw, a subsidiary and Warsaw,  Poland based securities
brokerage firm; Eastbrokers s.a., Bucharest, a subsidiary and Bucharest, Romania
based securities brokerage firm; and RealWorld, an internet software developer.

JOHN PAUL DEVITO,  41, Vice President,  Brokerage and Sales, since January 1997.
Mr.  DeVito has been in the financial  service  industry  since 1976,  and holds
eight  securities  licenses.  Mr. De Vito is also President and Chief  Executive
Officer of Eastbrokers North America,  Inc., a subsidiary and New York, New York
based  brokerage  business.  From 1995 until 1997,  Mr. DeVito served as the New
York Branch Manager for J.B. Oxford & Company, a discount  brokerage.  From 1990
until 1995,  Mr. DeVito was Senior Vice  President of Sales and Chief  Financial
Officer  at Adler  Coleman  Clearing  Corporation  ("Adler"),  a New York  Stock
Exchange  clearing  company.  Mr.  De Vito was  officially  removed  from the BD
application as Chief Financial Officer prior to the SIPC Liquidation of Adler in
1995.  From 1989 until  1990,  Mr.  DeVito was an account  executive  at Douglas
Bremen & Co. From 1988 until 1989, Mr DeVito was an account  executive at Blaine
Andrew & Co. From 1986 until 1988, Mr. DeVito was Vice President - Brokerage and
Marketing at Glickenhaus & Co., a New Jersey  securities  firm.  From 1981 until
1986, Mr DeVito was Vice President at the Securities Settlement  Corporation,  a
subsidiary of the Travelers Corporation. From 1978 until 1981, Mr. DeVito was an
auditor at Paine  Webber,  Inc.  and from 1976  until  1978,  Mr.  DeVito was an
auditor at Smith Barney Harris Upham.  Mr. DeVito hold B.A degrees in industrial
psychology and financial planning from New York University.

MICHAEL SUMICHRAST,  Ph.D., 76, Director of the Company since 1993, was Chairman
of the Board of the Company since its  inception in 1993 until March 1997.  From
1990 to 1994,  Dr.  Sumichrast  served as  Chairman  of the Board of  Sumichrast
Publications,  Inc., a real estate publication  located in Rockville,  Maryland.
During this time, he also served as an economic  adviser and  representative  of
various international American companies.  From 1963 to 1990, Dr. Sumichrast was
the senior vice  president and chief  economist of the National  Association  of
Home Builders (NAHB), a home builders' professional association.

WOLFGANG KOSSNER, 27, Director of the Company since August 1996. Mr. Kossner was
Executive Vice President of the Company from August 1996 until November 1, 1996.
Mr.  Kossner is one of the founders of  Eastbrokers  Beteiligungs  AG. From 1993
through  1995,  Mr.  Kossner  has  served  as  the  managing   director  of  WMP
Borsenmakler  AG.  Prior to that,  Mr.  Kossner  was the  manager of  securities
trading at WMP Borsenmakler  from 1991 to 1993. Mr. Kossner  presently serves on
the  Supervisory  Boards  of  Eastbrokers'  subsidiaries  in  Vienna,  Budapest,
Ljubljana and Zagreb.

B.       Compliance with Section 16(a)

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
officers and directors,  and persons who own more than 10% of a registered class
of the  Company's  equity  securities,  to file  reports of  ownership of equity
securities of the Company with the Securities and Exchange Commission. Officers,
directors  and  greater-than-ten   percent  shareholders  are  required  by  SEC
regulation  to furnish the Company  with copies of all Section  16(a) forms that
they file.

Based  solely  on a review  of the  copies  of  Forms 3, 4 and 5 and  amendments
thereto  furnished  to the  Company,  or written  representations  from  certain
reporting  persons  that such  persons  have filed on a timely basis all reports
required  by Section  16 (a),  and  without  researching  or making any  inquiry
regarding  delinquent Section 16 (a) filings,  the Company believes that, during
the  fiscal  year  ended  March 31,  1997,  other  than  initial  statements  of
beneficial ownership by Messrs. DeVito, McNeil and Mueller-Tyl, all such reports
were filed on a timely basis.



                                     - 43 -


<PAGE>


Item  10.  Executive Compensation

         The following  Summary  Compensation  Table sets forth the compensation
for the named  executives  for the year ended  March 31,  1997,  the three month
transition  period ended March 31,  1996,  and the twelve  month  periods  ended
December 31, 1995 and December 31, 1994.  No other  executive  officer had total
annual  salary  and  bonus  during  any such  period  equal to or  greater  than
$100,000.
 <TABLE>
<CAPTION>

                                                                               Long Term Compensation
                                                                      --------------------------------------------
                                       Annual Compensation                    Awards              Payouts
                             ---------------------------------------- --------------------------------------------

            (a)              (b)      (c)       (d)         (e)         (f)        (g)        (h)         (i)

                                                           Other    Restricted Securities
                                                           Annual     Stock    Underlying     LTIP     All Other
Name and Principal Position  Year   Salary     Bonus    Compensation  Awards ($Options/SARs(#)Payouts Compensation
---------------------------  ----  ------      -----    ----------------------------------------------------------

<S>                          <C>   <C>        <C>        <C>            <C>         <C>        <C>        <C>

Peter Schmid(1)              1997* $129,988      --          --         --          --         --         --
  Chairman, President        1996**   --         --          --         --          --         --         --
  and Chief Executive        1995     --         --          --         --          --         --         --
  Officer                    1994     --         --          --         --          --         --         --

Martin A. Sumichrast(2)      1997* $120,000   $11,000        --         --          --         --         --
  Vice-Chairman of the       1996**$ 30,000      --          --         --          --         --         --
  Board and Secretary        1995  $107,500      --          --         --          --         --         --
                             1994     --         --          --         --          --         --         --

Petr Bednarik, Ing.(1)       1997* $ 49,000      --      $24,000***     --          --         --         --
  Former President and       1996**$ 10,000      --          --         --          --         --         --
  Chief Executive Officer    1995  $107,500      --          --         --          --         --         --
                             1994     --         --          --         --          --         --         --

August A. de Roode(1)(4)     1997* $ 72,094      --          --         --          --         --         --
  Former Chief Executive     1996**   --         --          --         --          --         --         --
  Officer and Chief          1995     --         --          --         --          --         --         --
  Operating Officer          1994     --         --          --         --          --         --         --

Michael Sumichrast, Ph.D.(3) 1997* $100,000      --      $75,000***     --          --         --         --
  Former Chairman of the     1996**$ 24,999      --          --         --          --         --         --
  Board                      1995  $100,000      --          --         --          --         --         --
                             1994     --         --          --         --          --         --         --

</TABLE>

         *for the fiscal year ended March 31, 1997.

         **for the three month transition period ended March 31, 1996.

         ***these amounts constitute severance pay.

(1)  Mr. Schmid has been Chairman of the Board and Chief Executive Officer since
     March 1997 and President of the Company since August 1996. Mr. Bednarik was
     President  and  Chief  Executive  Officer  from the  time of the  Company's
     inception  in 1993  until  August  1996.  Mr. de Roode was Chief  Executive
     Officer and Chief Operating Officer from August 1996 to March 1997.

(2)  Martin A. Sumichrast became Vice Chairman of the Board in March 1997. Prior
     to that, he was Executive Vice President and Chief Financial Officer.

(3)  Dr.  Sumichrast  was  Chairman of the Board from the time of the  Company's
     inception in 1993 until March 1997.

(4)  Dr. de Roode's  compensation was paid through VCH  Vermogensverwaltung  Und
     Holding GmbH.









                                     - 44 -

<PAGE>

Employment Agreements

     Effective  January 1995,  the Company  entered into  employment  agreements
("Employment Agreements") with Messrs. Michael Sumichrast, Ph.D., Petr Bednarik,
Ing.,  and  Martin A.  Sumichrast.  Mr.  Bednarik's  employment  was  terminated
effective  August 1, 1996 in  connection  with the  acquisition  of  Eastbrokers
Vienna.  Under the terms of Mr. Bednarik's  Employment  Agreement,  Mr. Bednarik
received  $24,000 in severance  compensation  in August 1996 as a result of such
termination of employment.  Dr. Sumichrast's Employment Agreement was terminated
upon his  resignation as Chairman  effective March 20, 1997 and he was awarded a
sum of $75,000.  Mr. Martin  Sumichrast's  employment  agreement  will expire in
December  1999,  and  will  renew  for a  period  of five  years  following  the
expiration  date,  unless contrary notice is given by either party.  The Company
also entered into employment  agreements with Messrs.  August de Roode and Peter
Schmid,  effective  as of August  1,  1996.  Messr.  Kossner  continues  to be a
Director  of  the  Company.   Messr.  de  Roode's  agreement  expired  upon  his
resignation on March 15, 1997. Messr.  Schmid's  agreement will expire on August
1, 1999, and he will have a three-year renewal option, unless contrary notice is
given by either party.  The salaries for Martin A.  Sumichrast  and Peter Schmid
are $120,000 each. The salaries under the agreements may be increased to reflect
annual cost of living increases and may be supplemented by  discretionary  merit
and performance  increases as determined by a compensation  committee to consist
of three  outside  directors of the Company,  except that during the three years
following June 8, 1995, Mr. Martin  Sumichrast's salary may not exceed $150,000.
In the first three years following  August 1, 1996,  Messr.  Schmid's salary may
not exceed $150,000.  Messrs.  Martin A. Sumichrast and Schmid are each eligible
to receive an annual bonus of up to 25% of their  salary under their  respective
agreements,  such bonuses to be  determined  by the Board and not subject to any
specified performance criteria.  The agreements provide, among other things, for
participation  in an equitable manner in any  profit-sharing  or retirement plan
for  employees  or  executives  and  for   participation  in  employee  benefits
applicable to employees and executives of the Company.  The  agreements  provide
that the Company will  establish a performance  incentive  bonus plan  providing
each executive the  opportunity to earn an annual bonus of up to five percent of
the  increase in the  Company's  pretax  income,  based upon the  attainment  of
performance  goals  to be  established  by  the  Compensation  Committee  of the
Company.  The agreements  further provide for the use of an automobile and other
fringe  benefits  commensurate  with  their  duties  and  responsibilities.  The
agreements also provide for benefits in the event of disability.

     Pursuant to the  agreements,  employment  may be  terminated by the Company
with cause or by the executive  with or without good reason.  Termination by the
Company  without cause,  or by the executive for good reason,  would subject the
Company to liability for liquidated damages in an amount equal to the terminated
executive's  current  salary and a pro rata  portion of their prior year's bonus
for the remaining term of the agreement,  payable in equal monthly installments,
without  any set-off  for  compensation  received  from any new  employment.  In
addition,  the terminated executive would be entitled to continue to participate
in and  accrue  benefits  under  all  employee  benefit  plans  and  to  receive
supplemental  retirement  benefits to replace  benefits under any qualified plan
for the remaining term of the agreement to the extent permitted by law.

     Under the  agreements,  the  Company is  obligated  to  purchase  insurance
policies on the lives of Messrs.  Martin A.  Sumichrast and Schmid.  The Company
will pay the premiums on these policies and upon the death of the employee,  the
Company  will  receive an amount  equal to the premiums it paid under the policy
and the remaining proceeds will go to the employee's designated beneficiary. The
Company has a one million dollar key man life insurance policy on Martin A.
Sumichrast with the Company as its beneficiary.









                                     - 44 -

<PAGE>


Option/SAR Grants
<TABLE>
<CAPTION>


                                                  Individual Grants
                                   Number of       Percent of total
                                   securities        options/SARs
                                   underlying         granted to
                                  options/SARs       employees in      Exercise or base
             Name                 Granted (#)        fiscal year         price ($/Sh)         Expiration date
             (a)                      (b)                (c)                 (d)                    (e)
------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                <C>                 <C>               <C>
Peter Schmid                          33,000            16.5%               $10.00            August 1, 2001
Martin A. Sumichrast                 100,000            50.0%               $10.00            August 1, 2001


</TABLE>

Option/SAR Exercises

     There were no exercises  of options  during the fiscal year ended March 31,
1997.

Compensation of Directors

     Each  Director  of the  Company  is  entitled  to  receive  $1,500.00  plus
reasonable  expenses,  for attending  scheduled  board meetings at which members
meet in person.  Directors  are not entitled to receive  compensation  for board
meetings held by telephonic  conference.  During the fiscal year ended March 31,
1997,  three former  Directors  received  fees totaling  $4,500.00.  All current
directors have waived such fees for the fiscal year ending March 31, 1997.

1996 Stock Option Plan

     At the Annual Meeting held on December 10, 1996, the stockholders  approved
the 1996 Stock Option Plan (the "Plan")  pursuant to which officers,  employees,
directors and  consultants  of the Company and its Affiliates are eligible to be
granted Awards.  The Plan is administered by the Stock Award  Committee,  or, in
the  absence of such a  committee  by the entire  Board,  which has the  plenary
authority to grant Awards including Stock Options,  Stock  Appreciation  Rights,
Restricted  Stock,  or any  combination of the  foregoing,  and to determine the
terms and conditions of the Awards.

     The total  number of shares of Common  Stock  reserved  and  available  for
distribution as Awards under the Plan is 400,000.

     In the fiscal year ended March 31, 1997,  an aggregate of 25,000  shares of
Common Stock and options to purchase 35,000 shares were awarded  pursuant to the
Plan.
     During the fiscal year ended March 31, 1997, an additional 12,000 shares of
common stock were issued outside of the plan as compensation for services to the
Company.







                                     - 45 -

<PAGE>





Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  following  table sets forth the number of shares of the  Company's
Common  Stock  owned as of June 27,  1997 by (i) each person who is known by the
Company  to own  beneficially  more than five  percent of the  Company's  Common
Stock; (ii) each of the Company's officers and directors; and (iii) all officers
and directors as a group. The following calculations were based upon there being
3,003,000 shares of the Company's Common Stock issued and outstanding as of June
27, 1997. Except as otherwise noted, the persons named in the table below do not
own any other capital  stock of the Company and have sole voting and  investment
power with respect to all shares as beneficially owned by them.
<TABLE>
<CAPTION>

                                                                                                 Percentage of
       Name and Address (1)              Position with Company             Number of Shares         Shares
   ------------------------------ -------------------------------------  ---------------------- ----------------
   <S>                            <C>                                          <C>                  <C>

   Peter Schmid (2)               Chairman of the Board,                         554,659             18.47
                                      President and Chief Executive
                                     Officer, Director
   Martin A. Sumichrast (3)       Vice-Chairman of the                            57,000              1.90
                                      Board and Secretary, Director
   Falko Mueller-Tyl (6)           Vice President and Chief                       57,431              1.91
                                      Operating Officer
   Kevin D. McNeil                Vice President, Treasurer                        2,495              *
                                      and Chief Financial Officer
   John Paul DeVito (4)           Vice President Brokerage                         8,268              *
                                      and Sales
   Michael Sumichrast, Ph.D. (3)  Director                                         6,600              *
   Wolfgang Kossner (5)           Director                                       768,039             25.58
                                                                         ---------------------- ----------------
   All Officers and Directors as                                               1,454,492             48.43
           a Group (7 persons)

</TABLE>


*   Less than 1%

     (1)  Except as otherwise noted, c/o Eastbrokers International Incorporated,
          15245 Shady Grove Road, Suite 340, Rockville, Maryland 20850.

     (2)  359,925 shares are owned by Karntner Landes und  Hypothekenbank  AG as
          nominee  for the  Tsuyoshi  Trust  Vaduz and 194,734 are owned by said
          bank as  nominee  for Mr.  Schmid.  Mr.  Schmid  has sole  voting  and
          investment power with respect to the trust shares and is a beneficiary
          of this  trust.  Excludes  33,000  shares  issuable  upon  exercise of
          options to acquire Common Stock at $10.00 per share.

     (3)  53,600 shares are owned by Sumichrast Enterprises, Inc., a corporation
          of which Martin A. Sumichrast, Dr. Sumichrast's son, is an officer and
          director and the owner.  Dr.  Sumichrast  may be deemed to have voting
          and investment power with respect to 1,600 of these 53,600 shares. Dr.
          Sumichrast  and  Martin  Sumichrast  each own 5,000  shares  directly.
          Excludes  options held by Martin  Sumichrast to acquire 100,000 shares
          at $10.00  per share and Class A  Warrants  representing  the right to
          acquire 1,000 shares at $20.00 per share.

     (4)  Excludes  10,000 shares issuable upon exercise of options at $7.00 per
          share.

     (5)  535,539  shares  are  owned   indirectly   through  General   Partners
          Beteiligungs  AG,  formerly  KHS  Beteiligungs  AG ("GP") of which Mr.
          Kossner is a principal stockholder. 200,000 shares were owned by

                                     - 47 -

<PAGE>

          Karntner Landes und  Hypothekenbank AG (the "Bank") as nominee for GP.
          Mr. Kossner may be deemed to have shared voting and  investment  power
          with respect to these shares.  Also includes 32,500 shares held by the
          Bank as nominee for Central and Eastern  European  Fund  ("Fund"),  of
          which Mr.  Kossner is a director.  This  inclusion of such Fund shares
          shall  not be  construed  as an  admission  that  Mr.  Kossner  is the
          beneficial owner of such shares.  Excludes 67,000 shares issuable upon
          exercise of options to acquire Common Stock at $10.00 per share.

     (6)  17,331 shares are owned directly by Dr. Mueller-Tyl. 20,000 shares are
          owned  indirectly  through his  step-father  and an additional  21,600
          shares are owned indirectly through his father. Dr. Mueller-Tyl may be
          deemed to have  shared  voting and  investment  power with  respect to
          these shares.

Item  12.      Certain Relationships and Related Transactions

     Prior to the sale by the Company of the Hotel Fortuna a.s. (the "Hotel") on
October 1, 1996, the Company  previously  owned 50.2 % of the Hotel. See Item 3.
Stratego  Invest a.s.  owned 20.6 % of the Hotel.  Stratego  Invest a.s. is more
than 50% owned by Stratego  a.s.,  which is controlled  by Ing.  Petr  Bednarik,
former President and CEO of the Company.

     The sales  transaction  between the Company and Y.S.E. a.s. was arranged by
Stratego Invest a.s., a broker-dealer and financial consulting company organized
under the laws of the  Czech  Republic.  Ing.  Petr  Bednarik,  a  director  and
shareholder of the Company,  is the Chairperson of the  Supervisory  Board and a
beneficial  owner of Stratego Invest a.s. For providing  services related to the
transaction,  Stratego  Invest a.s.  was to have  received a  commission  fee of
1,000,000 CZK  (approximately  $37,000 USD).  Stratego Invest a.s. has agreed to
waive its commission related to this transaction.

     In September  1996, Mr. Schmid  received from  Eastbrokers  Beteiligungs AG
3,511,422 Austrian Schillings (approximately $340,000 USD) for his 49.95 percent
ownership  interest  in  Eastbrokers   Wertpapiervermittlungs-gesellschaft   mbH
("Eastbrokers  GmbH"),  an Austrian  Securities  Brokerage  Company with limited
liability.  The nominal value of these shares was 500,000  Austrian  Schillings.
Mr. Schmid,  Chairman,  President,  Chief Executive Officer, and Director of the
Company.  GmbH.  Eastbrokers  GmbH holds the ownership  interest for Eastbrokers
Prague.

     In  September  1996,  Mr.  Schmid  received  376,275  Austrian   Schillings
(approximately   $36,500  USD)  for  his  5.60  percent  ownership  interest  in
Easbrokers  Slovakia  a.s.,  Bratislava  ("Eastbrokers  Slovakia").  Eastbrokers
Slovakia is the  Company's  subsidiary  operating  in the Slovak  Republic.  The
nominal value of these shares was 280,000 Slovak Koruna.

     In September  1996, Mr. de Roode  received  1,110,250  Austrian  Schillings
(approximately  $107,500  USD)  for his  24.40  percent  ownership  interest  in
Easbrokers  Slovakia  a.s.,  Bratislava  ("Eastbrokers  Slovakia").  Eastbrokers
Slovakia is the  Company's  subsidiary  operating  in the Slovak  Republic.  The
nominal  value of these shares was  1,220,000  Slovak  Koruna.  Mr. de Roode was
Chief Executive Officer, Chief Operating Officer and Director of the Company.

     The Company has entered into a number of agreements with Randall F. Greene,
a former  director of the  Company.  Mr.  Greene  provided  consulting  services
pursuant to an agreement  dated July 26, 1996 in  connection  with the Company's
acquisition  of  Eastbrokers  Vienna.  Pursuant  to this  agreement,  Mr.  Green
received $20,000 as a non-accountable expense allowance and 10,000 shares of the
Company's common stock. In addition,  Mr. Greene was paid $37,000 for consulting
services  provided to the Company in connection  with  potential  mergers and/or
acquisitions.  In December  1996,  Mr. Greene entered into an agreement with the
Company and  certain  stockholders  of the  Company  pursuant to which he was to
analyze  and  evaluate  the  Company's  operations  and to assist the Company in
evaluating certain possible business combination transactions. Mr. Greene was to
be  compensated  under  this  agreement  only in the event  that such a business
combination  transaction was succesfully  completed.  No such  transactions have
occurred,  no compensation  was paid to Mr. Greene  thereunder and the agreement
has been terminated.  In addition,  in connection with Mr. Greene's  resignation
from  the  Board  of  Directors  of the  Company,  the  Company  entered  into a
consulting agreement dated March 27, 1997 pursuant to which Mr.

                                     - 48 -

<PAGE>

Greene is to provide business and financial advisory services to the Company and
into a related  letter  agreement  also dated  March 27,  1997,  as amended by a
letter dated April 29, 1997. Under the consulting agreement, Mr. Greene is to be
compensated  at the rate of  $4,000  per  month  for the six  month  term of the
agreement  which  commenced on April 1, 1997. As additional  compensation  under
this  agreement,  Mr. Greene was granted options to purchase 7,750 shares of the
Company's common stock at $6.50 per share.  Under the related letter  agreement,
Mr. Greene was paid $13,750 and granted 12,500 shares in full  satisfaction  for
consulting  services rendered during the period August 1, 1996 through March 31,
1997.  Also  pursuant to this  agreement,  the Company  agreed to indemnify  Mr.
Greene against certain  liabilities,  the parties  exchanged mutual releases and
Mr. Greene  agreed to sell his shares of the  Company's  common stock subject to
certain conditions.

     The Company  entered into a Consulting  Agreement dated March 31, 1997 with
Dr. Sumichrast, a Director of the Company, pursuant to which Dr. Sumichrast will
provide  services to the Company  through  March 31,  1998,  and the Company has
granted him 20,000 shares of the Company's Common Stock to vest ratably over the
term of the Agreement.

     In March 1997,  Eastbrokers  Vienna  purchased  30,000 shares of Schneiders
1895 AG for 3,618,000  Austrian  Schillings  (approximately  $302,000  USD). Mr.
Schmid is also a  Director  of  Schneiders  1895 AG. Mr.  Schmid's  father is an
Officer and Director of Schneiders 1895 AG.

     During 1996, the Company entered into a verbal agreement with RealWorld, an
internet software  developer,  to design and build an online stock exchange game
and online trading system.  The initial deposit to begin development of the game
and  system  was  530,000  Austrian  Schillings   (approximately  $50,000  USD).
Currently  the  Company  has  a  liability  to  RealWorld  of  208,000  Austrian
Schillings  (approximately  $20,000  USD)  representing  amounts due on progress
billings.  The agreement recognizes costs will be charged on an hourly basis and
monthly  progress  billings  will be made  once the  original  deposit  has been
depleted.  Dr.  Mueller-Tyl is a member of the Supervisory  Board for RealWorld.
VCH and  Messrs.  Schmid,  Kossner,  and  Mueller-Tyl  are all  shareholders  of
Realworld and represent a combined ownership interest of 26 percent.

     In December 1996,  Eastbrokers Vienna loaned Dr. Mueller-Tyl  approximately
$72,000 USD. Interest on the outstanding  balance of this obligation is computed
at 8 percent per annum until paid in full.  Dr.  Mueller-Tyl  is  currently  the
Chief Operating Officer of the Company.

     The Company  leases office space from Residenz  Realbesitz AG  ("Residenz")
for its Vienna  operations.  Under the terms of the leases, the Company incurred
occupancy costs of approximately  1,200,000 Austrian  Schillings  (approximately
$114,000 USD). The terms of this lease were  negotiated such that the Company is
subject to occupancy expenses no greater than the current market rates. Residenz
is a  subsidiary  of  General  Partners  Beteiligungs  AG  ("General  Partners")
(formerly KHS  Beteiligungs  AG). Mr. Kossner owns 30 percent of the outstanding
shares of GP. He is a member of GP's Supervisory Board, WMP's Supervisory Board,
the Eastbrokers AG Supervisory Board, and is a Director of the Company.

     General  Partners,  of which Mr.  Kossner is a  principal  stockholder  and
member  of  the  Supervisory   Board,  owns  535,539  shares  of  the  Company's
outstanding shares.

     At  December  31,  1996,  the  Company  has a  receivable  related to share
transactions  from Mr.  Kossner in the amount of 2,269,198  Austrian  Schillings
(approximately $209,000 USD).

     At  December  31,  1996,  the  Company  has a  receivable  related to share
transactions  from Z.E.  Beteiligungs  AG. in the amount of  5,537,202  Austrian
Schillings (approximately $511,000 USD). Z.E. Beteiligungs AG is a subsidiary of
General Partners.

     WMP is an Austrian  broker-dealer,  market maker,  and member of the Vienna
Stock Exchange.  WMP's common stock is publicly traded on the Main Market of the
Vienna Stock Exchange.  From time to time, WMP will make a market in a company's
stock that has a direct relationship to the Company through its directors.



                                     - 49 -

<PAGE>





Item 13.  EXHIBITS AND REPORTS ON FORM 8-K

     a.   Exhibits required by Item 601 of Regulation S-B

              1.       See Index to Exhibits on pages 52-53.  (a)



     b.   Reports on Form 8-K

          There were no reports on Form 8-K filed during the last quarter of the
     fiscal year ended March 31, 1997 through the date hereof.


------------------------
(a) As previously filed.

















                                     - 50 -


<PAGE>





                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
has duly caused this  amendment to this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


EASTBROKERS INTERNATIONAL INCORPORATED
             (Registrant)


By              /s/ Peter Schmid *                            August 12, 1997
----------------------------------------------             ---------------------
                   Peter Schmid                                    Date
Chairman, President, Chief Executive Officer, and Director





     In accordance with the Exchange Act, this amendment to this report has been
signed  by  the  following  persons  on  behalf  of  the  registrant  and in the
capacities and on the dates indicated.



                /s/ Peter Schmid *                            August 12, 1997
----------------------------------------------             ---------------------
                    Peter Schmid                                   Date
Chairman, President, Chief Executive Officer, and Director



            /s/ Martin A. Sumichrast                          August 12, 1997
----------------------------------------------             ---------------------
              Martin A. Sumichrast                                 Date
Vice Chairman of the Board, Secretary, and Director



               /s/ Kevin D. McNeil                            August 12, 1997
----------------------------------------------             ---------------------
                  Kevin D. McNeil                                  Date
Vice President, Treasurer, and Chief Financial Officer
    (Principal Financial and Accounting Officer)



            /s/ Michael Sumichrast  *                         August 12, 1997
----------------------------------------------             ---------------------
              Michael Sumichrast, PhD                              Date
                     Director



              /s/ Wolfgang Kossner *                          August 12, 1997
----------------------------------------------             ---------------------
                 Wolfgang Kossner                                  Date
                      Director








       * By Martin A. Sumichrast and Kevin D. McNeil as attorneys-in fact.





                                     - 51 -

<PAGE>

                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>


                                                                                                        Page

      Exhibit No.        Description
      -----------        -----------
         <S>             <C>                                                                            <C>

         (2.1)           Stock  Purchase  Agreement  dated June 14,  1996  between  the  Company  and
                         Eastbrokers  Beteiligungs AG incorporated by reference to the Company's Form
                         8-K dated August 1, 1996.

         (3.1)           Certificate of Incorporation,  as amended,  incorporated by reference to the
                         Company's Form 10-QSB for the nine months ended December 31, 1996.

         (3.2)           Bylaws  of  the  Company,  as  amended,  incorporated  by  reference  to the
                         Company's Form 10-QSB for the three months ended March 31, 1995.

         (3.3)           Amendments to the Bylaws,  incorporated  by reference to the Company's  Form
                         10-QSB for the three months ended June 30, 1996.

         (4.1)           Specimen  copy of  Common  Stock  Certificate,  Form of
                         Class A  Warrant  Agreement,  Form of  Class B  Warrant
                         Agreement,  and  Form of  Warrant  Agreement  are  each
                         incorporated by reference to the Company's Registration
                         Statement on Form S-1 as filed with the  Securities and
                         Exchange Commission (No.
                         33-89544).

         (4.2)           Underwriter's  Unit  Purchase  Option,  incorporated  by  reference  to  the
                         Company's Form 10-KSB for the year ended December 31, 1995.

         (4.3)           Warrant  Certificate  between the Company and J.B. Sutton Group,  LLC, dated
                         March 27, 1997,  incorporated  by reference to the Company's  Form S-3 filed
                         with the Securities and Exchange Commission on May 9, 1997 (No. 333-26825).

        (10.1)           Employment  Agreement  between the Company  and Martin A.  Sumichrast  dated
                         February 1995, incorporated by reference to the Company's Form S-1.

        (10.2)           Employment  Agreement  between the Company and Peter  Schmid dated August 1,
                         1996, the form of such employment  agreement is incorporated by reference to
                         the Company's Form 8-K dated August 1, 1996.

        (10.3)           Form of  Restrictive  Covenants of Wolfgang M.  Kossner,  August A. de Roode
                         and Peter Schmid,  such covenants  executed on August 1, 1996,  incorporated
                         by  reference to the  Company's  Form 10-QSB for the three months ended June
                         30, 1996.

        (10.4)           Stock Option Agreement between the Company and Wolfgang
                         M. Kossner dated August 1, 1996, the form of such stock
                         option  agreement is  incorporated  by reference to the
                         Company's Form 8-K dated August 1, 1996.

        (10.5)           Stock Option  Agreement  between the Company and August
                         A. de Roode  dated  August  1,  1996,  the form of such
                         stock option  agreement is incorporated by reference to
                         the Company's Form 8-K dated August 1, 1996.


        (10.6)           Stock Option Agreement  between the Company and Peter Schmid dated August 1,
                         1996, the form of such stock option  agreement is  incorporated by reference
                         to the Company's Form 8-K dated August 1, 1996.

        (10.7)           Stock Option Agreement between the Company and Sumichrast  Enterprises dated
                         August 1, 1996, the form of such stock option  agreement is  incorporated by
                         reference from Form 8-K dated August 1, 1996.
</TABLE>



                                     - 52 -


<PAGE>

                          INDEX TO EXHIBITS (Continued)
<TABLE>
<CAPTION>


                                                                                                        Page

      Exhibit No.        Description
      -----------        -----------
         <S>             <C>                                                                            <C>


        (10.9)           Letter Agreement between the Company and Randall F. Greene, Director of the
                         Company, for advisory services dated July 26, 1996, incorporated by reference
                         to the Company's Form 10-QSB for the three months ended June 30, 1996.

        (10.10)          Stock  Sale/Purchase   Agreement  by  and  between  Y.S.E.  a.s.  and  Czech
                         Industries,  Inc., dated as of October 1, 1996, incorporated by reference to
                         the Company's  Report on Form 10-QSB for the nine months ended  December 31,
                         1996.

        (10.11)          The 1996 Stock Option Plan of the Company, incorporated
                         by reference to the Company's Report on Form 10-QSB for
                         the nine months ended December 31, 1996.

        (10.12)          Consulting  Agreement between the Company and Randall F. Greene  ("Greene"),
                         Director of the  Company,  dated March 27,  1997,  and Letter from Greene to
                         the Company amending the Agreement, dated April 29, 1997.                       (a)

        (10.13)          Stock  Purchase and Sale  Agreement  by and among the Company,  John Paul De
                         Vito, and Robert Sass, dated March 6, 1997                                      (a)

        (10.14)          Consulting Agreement between Michael Sumichrast, Ph.D. and the Company dated
                         April 1, 1997.                                                                  (a)

        (10.15)          Letter Agreement between the Company and August de Roode dated March 10, 1997.  (a)

        (21.1)           Subsidiaries of the Company.                                                    (a)

        (23.1)           Consent of Pannell Kerr Forster PC, dated June 27, 1997.                        (a)

        (24.1)           Powers of Attorney, granted by Peter Schmid, Chairman,  President and CEO of
                         the Company, on behalf of the Company, and by Peter Schmid, Michael Sumichrast
                         Ph.D. and Wolfgang Kossner, individually,  appointing Martin A. Sumichrast and
                         Kevin D. McNeil as attorneys-in-fact.                                           (a)

         (27)            Financial Data Schedule (Electronic Filing Only).                               (a)



</TABLE>

-------------------------
(a)  As previously filed.




                                     - 53 -