<PAGE>


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


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                       ----------------------------------

                               FORM 10-KSB/A NO. 1
                       ----------------------------------

  MARK ONE
     |X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED MARCH 31, 1998

                                       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)
                       ----------------------------------

                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 |_| No |X|

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. |_|

State issuer's revenues for its most recent fiscal year:  $10,138,881.

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates  computed by reference to the average of the bid and ask price of
such common equity on October 26, 1998 was approximately $13,000,000.

The total number of shares of the  registrant's  Common  Stock,  $.05 par value,
outstanding on October 26, 1998, was 4,767,750.

Transitional Small Business Disclosure Format:  Yes |_|     No  |X|


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



<PAGE>


                                Explanatory Note

         The undersigned  registrant hereby amends portions of Item 7, Financial
Statements, of its Form 10-KSB for the fiscal year ended March 31, 1998.

                     EASTBROKERS INTERNATIONAL INCORPORATED



                          INDEX TO FORM 10-KSB/A NO. 1
<TABLE>
<CAPTION>

                                                                                                                   PAGE
<S>                                                                                                               <C>


Item   7.  Financial Statements                                                                                    
              Historical Financial Statements
              Independent Auditors' Report as at and for the period ended March 31, 1998..........................   4
              Independent Auditors' Report as at and for the period ended March 31, 1997..........................   5
              Consolidated Statements of Financial Condition as at March 31, 1998 and 1997........................   6
              Consolidated Statements of Operations for the 12 months ended March 31, 1998 and 1997...............   7
              Consolidated Statements of Changes in Shareholders' Equity for the 12 months
                ended March 31, 1998 and 1997.....................................................................   8
              Consolidated Statements of Cash Flows for the 12 months ended March 31, 1998 and 1997...............   9
              Notes to Consolidated Financial Statements..........................................................  11

</TABLE>

<PAGE>


<TABLE>
<CAPTION>

     Item   7.                                          Financial Statements
     <S>                                                                                                           <C>


               Historical Financial Statements
                 Independent Auditors' Report.....................................................................   4
                 Independent Auditors' Report.....................................................................   5
                 Consolidated Statements of Financial Condition as at March 31, 1998 and 1997.....................   6
                 Consolidated Statements of Operations for the 12 months ended March 31, 1998 and 1997............   7
                 Consolidated Statements of Changes in Shareholders' Equity for the 12 months
                   ended March 31, 1998 and 1997..................................................................   8
                 Consolidated Statements of Cash Flows for the 12 months ended March 31, 1998 and 1997............   9
                 Notes to Consolidated Financial Statements.......................................................  11


</TABLE>



<PAGE>



                          INDEPENDENT AUDITORS' REPORT



Board of Directors and Shareholders
Eastbrokers International Incorporated

We have audited the accompanying  consolidated  statement of financial condition
of Eastbrokers International Incorporated and subsidiaries as of March 31, 1998,
and the related consolidated statements of operations,  changes in shareholders'
equity,  and cash flows for the year then ended.  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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 March  31,  1998,  and the
results  of its  operations  and its  cash  flows  for the  year  then  ended in
conformity with generally accepted accounting principles.

As discussed in Note 12, the accompanying 1998  financial  statements  include a
gain of $1,025,429 from a related party transaction.




DELOITTE & TOUCHE LLP





Baltimore, Maryland
October 30, 1998



<PAGE>




                          INDEPENDENT AUDITORS' 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 as of March 31, 1997,
and the related consolidated statements of operations,  changes in shareholders'
equity,  and cash flows for the year then ended.  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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 March  31,  1997,  and the
results of  operations  and its cash flows for the year ended  March 31, 1997 in
conformity with generally accepted accounting principles.

The financial statements as of March 31, 1997, have been restated.






                                       PANNELL KERR FORSTER PC




June 23, 1997





<PAGE>

<TABLE>
<CAPTION>


                                             EASTBROKERS INTERNATIONAL INCORPORATED
                                                    (A DELAWARE CORPORATION)

                                         CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                                                         MARCH 31,              MARCH 31,
                                                                                           1998                   1997
                                                                                      --------------         --------------
                                                                                                              (As Restated)
<S>                                                                                    <C>                     <C>

ASSETS
Cash and cash equivalents                                                              $  7,156,702            $  6,867,624
Cash and securities deposited with clearing organizations                                   986,233                 119,274
      Or segregated under federal and other regulations
Securities purchased under agreements to resell                                             887,170                 408,865
Receivables
      Customers                                                                           4,819,958               1,904,112
      Brokers, dealers and clearing organizations                                         4,404,608                 572,399
      Affiliated companies                                                                2,286,277               1,511,917
      Related to disposition of entity                                                    1,493,913                       -
      Financial institution                                                               1,018,642                       -
      Receivable from executive officer                                                     517,221                       -
      Other                                                                               3,384,125               2,043,306
Securities owned, at fair value
      Corporate equities                                                                  7,985,484               3,349,684
      Other sovereign government obligations                                                692,428                       -
Net assets held for sale                                                                    868,960                       -
Office facilities, furniture and equipment, at cost (less accumulated                     1,153,439                 926,565
   depreciation and   amortization of $766,898 and $628,014, respectively)
Deferred taxes                                                                            4,558,801                 492,098
Available for sale securities                                                                     -               2,378,054
Investments in affiliated companies                                                         156,800               8,272,240
Goodwill, net                                                                             2,073,774               1,894,398
Other assets and deferred amounts                                                           394,318               1,222,193
                                                                                        -----------             -----------
         Total Assets                                                                   $44,838,853             $31,962,729
                                                                                        ===========             ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings
      Lines of credit                                                                   $ 2,570,499             $ 1,602,182
      Affiliated companies                                                                   31,937               1,480,700
Securities sold under agreements to repurchase                                                    -               1,200,793
Bonds payable                                                                                     -               2,307,500
Payables
      Customers                                                                           5,405,464               1,051,810
      Brokers, dealers and clearing organizations                                         6,169,159                 960,226
Accounts payable and accrued expenses                                                       727,512               1,573,104
Other liabilities                                                                         1,169,272               1,502,803
                                                                                       ------------            ------------
                                                                                         16,073,843              11,679,118
Deferred taxes                                                                               84,382                       -
Long-term borrowings                                                                      2,020,087                 934,374
                                                                                       ------------           -------------
         Total liabilities                                                               18,178,312              12,613,492
                                                                                        -----------             -----------
Minority interest in consolidated subsidiaries                                            8,776,678               1,549,386
                                                                                       ------------            ------------

Commitments and contingencies

Shareholders' equity
      Preferred stock; $.01 par value; 10,000,000 shares authorized; no shares                    -                       -
        issued and outstanding at March 31, 1998 or March 31, 1997, respectively
      Common stock; $.05 par value; 10,000,000 shares authorized; 4,297,750 and             214,888                 146,150
        2,923,000, shares issued and outstanding at March 31, 1998 and March 31,
        1997, respectively
      Paid-in capital                                                                    25,640,114              19,314,883
      Accumulated deficit                                                                (5,517,386)               (569,829)
      Note receivable - common stock                                                       (313,133)                      -
      Treasury stock, at cost                                                                     -                (213,750)
      Unrealized loss on available for sale investments                                           -                (246,794)
      Cumulative translation adjustment                                                  (2,140,620)               (630,809)
                                                                                      -------------          ---------------
         Total shareholders' equity                                                      17,883,863               17,799,851
                                                                                       ------------               ----------
         Total Liabilities and Shareholders' Equity                                     $44,838,853              $31,962,729
                                                                                        ===========              -----------

                 See notes to consolidated financial statements.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                                             EASTBROKERS INTERNATIONAL INCORPORATED
                                                    (A DELAWARE CORPORATION)

                                              CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                                FOR THE YEARS ENDED
                                                                                    -----------------------------------------
                                                                                         MARCH 31,              MARCH 31,
                                                                                          1998                   1997
                                                                                    -------------           -----------------
                                                                                                              (As Restated)
<S>                                                                                  <C>                      <C>

Revenues
     Commissions                                                                       $  2,521,031            $    439,531
     Investment banking                                                                     807,803               1,149,195
     Principal transactions
        Trading                                                                           4,735,825               1,806,278
        Investment                                                                         (560,802)              1,872,767
     Interest and dividends                                                                 391,121                 557,188
     Equity in losses of unconsolidated subsidiaries                                        (38,388)               (396,209)
     Gain on sale of investment - related party                                           1,025,429                       -
     Other                                                                                1,256,862                 312,725
                                                                                         ----------            ------------
         Total revenues                                                                  10,138,881               5,741,475
                                                                                         ----------            ------------
Costs and expenses
     Compensation and benefits                                                            3,748,948               2,181,419
     Consulting fees                                                                      2,177,145                 743,397
     Brokerage, clearing, exchange fees and other                                         1,145,567                       -
     Occupancy                                                                              982,095                 333,096
     Interest                                                                               761,156                 236,235
     Information processing and communications                                              678,718                 177,473
     Office supplies and expenses                                                           426,889                 240,448
     Professional fees                                                                      235,642                 123,905
     Travel                                                                                 593,898                 209,977
     General and administrative                                                           3,698,052                 806,056
     Depreciation and amortization                                                          590,743                 274,573
     (Gain)/loss on foreign currency transactions                                           (29,384)                166,044
                                                                                         ----------           -------------
         Total costs and expenses                                                        15,009,469               5,492,623
                                                                                         ----------           -------------

     Income (loss) from continuing operations before                                     
         provision for income taxes and
         minority interest in earnings of subsidiaries                                   (4,870,588)                248,852
     Income tax benefit (expense)                                                          (285,830)                  8,305
     Minority interest in earnings of subsidiaries                                          208,861                 105,416
                                                                                       ------------           -------------
     Income from continuing operations                                                   (4,947,557)                362,573
     Discontinued operations
         Income (loss) from discontinued operations (net of                                       
              income taxes of $0 for the year ended March 31, 1997)                               -                  41,899
         Loss on sale of discontinued operations                                                  -              (1,323,083)
                                                                                        ------------  -         ------------
     Net loss                                                                           $(4,947,557)            $  (918,611)
                                                                                        ------------            ------------

     Earnings (loss) per common share from continuing operations
         Basic                                                                              $(1.57)                   $0.15
                                                                                     --------------            ------------
         Diluted                                                                            $(1.57)                   $0.15
                                                                                     --------------            ------------
     Earnings per common share
         Basic                                                                              $(1.57)                  $(0.37)
                                                                                     --------------           -------------
         Diluted                                                                            $(1.57)                  $(0.37)
                                                                                     --------------           -------------

     Average common shares outstanding
         Basic                                                                            3,149,009               2,497,137
                                                                                       ------------            ------------
         Diluted                                                                          3,149,009               2,497,137
                                                                                       ------------            ------------


                 See notes to consolidated financial statements.


</TABLE>

<PAGE>


                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                   FOR THE YEARS ENDED MARCH 31, 1997 AND 1998


<TABLE>
<CAPTION>

                                                                                                                          
                                                                                                              
                                                                                                                             
                                                                                               Retained              Treasury
                                                                                                Earnings              Stock &
                                                Common Stock                Paid-in          (Accumulated              Note
                                           Shares         Par Value         Capital             Deficit)            Receivable
                                          ------------    -------------     ----------       --------------         ------------
<S>                                      <C>              <C>              <C>              <C>                    <C>           

Balances, April 1, 1996                  1,781,000        $  89,050        $13,693,733       $    348,782                  -      
   Issuance of common stock in           1,080,000           54,000          5,346,000                  -                  -      
     Eastbrokers AG acquisition
   Issuance of common stock in              25,000            1,250             98,750                  -                  -      
     Eastbrokers NA acquisition
   Issuance of common stock in              37,000            1,850            176,400                  -                  -      
     compensation for services
   Acquisition of treasury stock                 -                -                  -                  -          $(213,750)     
   Net unrealized loss on                        -                -                  -                  -                  -      
     investments
   Net loss                                      -                -                  -           (918,611)                 -      
   Cumulative translation adjustment             -                -                  -                  -                  -      
                                         ------------    -------------    --------------    ----------------    --------------    
Balances at March 31, 1997 (as           2,923,000         $146,150        $19,314,883          $(569,829)         $(213,750)     
restated)
   Issuance of common stock in             125,000            6,250            716,945                  -                  -      
     private placement
   Retirement of treasury stock            (45,000)          (2,250)          (211,500)                 -            213,750      
   Issuance of common stock in              10,000              500             65,480                  -                  -      
     compensation for services
   Issuance of common stock to              50,000            2,500            297,500                  -           (300,000)     
     officer for note receivable
   Net unrealized gain on                        -                -                  -                  -                  -      
     investments
   Issuance of common stock in           1,227,000           61,350          5,354,619                  -                  -      
     private placement
   Exercise of stock options                 7,750              388             49,987                  -                  -      
   Sale of Subsidiary Stock                                                     52,200                                            
   Net loss                                      -                -                  -         (4,947,557)                 -      
   Accrued interest on note                      -                -                  -                  -            (13,133)     
     receivable
   Cumulative translation adjustment             -                -                  -                  -                  -      
                                                                                                                                  
                                         ------------    -------------    --------------    ----------------    --------------    
Balances at March 31, 1998               4,297,750         $214,888        $25,640,114        $(5,517,386)         $(313,133)     
                                         ------------    -------------    --------------    ----------------    --------------    


</TABLE>





                 See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                           Unrealized
                                            Loss on
                                            Available     Cumulative
                                            For Sale      Translation
                                           Investments     Adjustment            Total
                                            -----------    -----------         ----------
<S>                                        <C>            <C>                 <C>

Balances, April 1, 1996                         -       $    558,090         $14,689,655
   Issuance of common stock in                  -                 -            5,400,000
     Eastbrokers AG acquisition
   Issuance of common stock in                  -                 -              100,000
     Eastbrokers NA acquisition
   Issuance of common stock in                  -                 -              178,250
     compensation for services
   Acquisition of treasury stock                -                 -             (213,750)
   Net unrealized loss on                 $(246,794)              -             (246,794)
     investments
   Net loss                                     -                 -             (918,611)
   Cumulative translation adjustment            -        (1,188,899)          (1,188,899)
                                       -------------    ---------------    --------------
Balances at March 31, 1997 (as            $(246,794)      $(630,809)         $17,799,851
restated)
   Issuance of common stock in                  -                 -              723,195
     private placement
   Retirement of treasury stock                 -                 -                    -
   Issuance of common stoc                      -                 -               65,980
     compensation for services
   Issuance of common stock to                  -                 -                    -
     officer for note receivable
   Net unrealized gain on                  246,794                -              246,794
     investments
   Issuance of common stock in                   -                 -            5,415,969
     private placement
   Exercise of stock options                     -                 -               50,375
   Sale of Subsidiary Stock                                                        52,200
   Net loss                                      -                 -           (4,947,557)
   Accrued interest on note                      -                 -              (13,133)
     receivable
   Cumulative translation adjustmen              -        (1,509,811)          (1,509,811)
                                         -------------  -------------         ------------
 Balances at March 31, 1998                $     -       $(2,140,620)         $17,883,863
                                         -------------  -------------         -------------



</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                                   EASTBROKERS INTERNATIONAL INCORPORATED
                                                                          (A DELAWARE CORPORATION)

                                                                    CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                            FOR THE YEARS ENDED
                                                                                  --------------------------------------------
                                                                                          MARCH 31,              MARCH 31,
                                                                                            1998                  1997
                                                                                  -----------------           ----------------
                                                                                                              (As Restated)
<S>                                                                               <C>                          <C>

      Cash flows from operating activities
           Net loss                                                                   $(4,947,557)        $    (918,611)
           Adjustments to reconcile net loss to net
              Cash used in operating activities:
                Minority interest in subsidiaries                                        (208,861)             (105,416)
                Gain on the sale of investment                                                  -              (884,530)
                Loss on sale of discontinued operations                                         -             1,323,083
                Depreciation and amortization                                             590,743               274,573
                Deferred taxes                                                         (1,696,396)              (69,377)
                Other                                                                    (104,368)              396,209

              Changes in operating assets and liabilities
                Cash and securities segregated for regulatory purposes                     82,415               (85,696)
                  or deposited with regulatory agencies
                Securities purchased under agreements to resell                          (478,305)            6,278,371
                Receivables                                                            (3,744,971)            2,041,221
                Securities owned, at value                                             (6,443,982)           (3,233,293)
                Other assets and deferred amounts                                         827,875              (214,931)
                Payables
                    Customers                                                           4,353,654            (8,529,846)
                    Brokers, dealers and others                                         5,208,933                77,726
                Accounts payable and accrued expenses                                    (879,123)            1,374,879
                                                                                    --------------       --------------
      Net cash used in operating activities                                            (7,231,207)           (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                                                (264,036)           (3,619,137)
                Available for sale securities                                           2,378,054             6,277,191
                Capital expenditures                                                     (289,070)             (503,336)
                                                                                  ----------------        -------------
      Net cash provided by investing activities                                        (1,824,948)              765,141
                                                                                  ----------------         ------------

      Cash flows from financing activities
           Net proceeds from (payments for)
                Net proceeds from private placements                                    6,139,164                     -
                Capital contributions by minority interests                                     -               304,166
                Short-term borrowings                                                  (1,339,183)              568,303
                Securities sold under agreements to repurchase                         (1,200,793)            1,200,793
                Proceeds from long-term debt                                           (1,085,713)                    -
                Repurchase of common stock                                                      -              (213,750)
                Other                                                                     102,575                  -
                                                                                   --------------        --------------
     Net cash provided by financing activities                                          4,787,476             1,859,512
                                                                                   --------------        --------------
     Foreign currency translation adjustment
                                                                                          907,861             1,328,023
                                                                                   --------------        --------------
     Increase in cash and cash equivalents
                                                                                          289,078            1,677,038
      Cash and cash equivalents, beginning of period
                                                                                        6,867,624            5,190,586
                                                                                   --------------        --------------
     Cash and cash equivalents, end of period
                                                                                   $    7,156,702        $    6,867,624
                                                                                   ==============        ==============
      


                 See notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                                                   EASTBROKERS INTERNATIONAL INCORPORATED
                                                                          (A DELAWARE CORPORATION)

                                                              CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


                                                                                                    MARCH 31,           MARCH 31,
                                                                                                      1998                1997
                                                                                                  ------------      ------------
      <S>                                                                                          <C>              <C>

                                                                                                  $  261,633        $  371,534
                                                                                                  =============     ============
      Supplemental disclosure of cash flow information
           Cash paid for income taxes

           Cash paid for interest                                                                 $  679,265       $   87,795
                                                                                                  =============     ============

           Non-cash transactions

              Retirement of treasury stock                                                        $  213,750       $       -
                                                                                                  =============     ============

              Common stock sold to a shareholder and officer
                received in the disposition of the Hotel Fortuna                                  $        -       $ 7,957,012
                                                                                                  =============    =============

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

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

              Eastbrokers International shares issued in                                          $  65,980        $  178,250
                                                                                                  ==============   =============   
                compensation for services

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

                 See notes to consolidated financial statements.


</TABLE>

<PAGE>



                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED MARCH 31, 1998 AND 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.
     See Note 18 -"Significant 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.

         FISCAL YEAR-END

     The fiscal year-end of Eastbrokers International  Incorporated and its U.S.
     subsidiaries  other  than EBI  Securities  is March  31. At the time of the
     Company's  acquisition of EBI Securities in May 1998 the fiscal year of EBI
     Securities  ended  September  30. The Company  intends to change the fiscal
     year of EBI Securities to March 31 effective as of March 31, 1999.

         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  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 at their original
     costs.  The  carrying  value of such equity  securities  is  adjusted  when
     changes in 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



<PAGE>



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         FINANCIAL INSTRUMENTS (CONTINUED)

     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  purchased  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.   These
     receivables are due on demand.

         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.  The
     Company reflects this income in its investment banking revenue.

         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.  The Company  reflects  this income in its  investment
     banking revenue.

         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.





<PAGE>



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         TRANSLATION OF FOREIGN CURRENCIES

     Assets and  liabilities of operations in foreign  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.

         OFFICE FACILITIES, FURNITURE, AND EQUIPMENT

     Office  facilities 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 three to ten years.

         COMMON STOCK DATA

     Earnings per share is based on the weighted  average number of common stock
     and stock  equivalents  outstanding.  The  outstanding  warrants  and stock
     options are currently  excluded from the earnings 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 expense 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.  Deferred  tax  assets  are  reduced  by a
     valuation  allowance when, in the opinion of management,  it is more likely
     than not that some  portion or all of the  deferred  tax assets will not be
     realized.

         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

     Goodwill is amortized on a straight line basis over periods from five to 25
     years and is periodically  evaluated for impairment on an undiscounted cash
     flow basis.  The accumulated  amortization was $132,015 and $46,987 for the
     periods ended March 31, 1998 and 1997, respectively.

         RECLASSIFICATIONS

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



<PAGE>



1.   Summary of Significant Accounting Policies (continued)

RESTATEMENT OF 1997 FINANCIAL STATEMENT

     During fiscal 1998,  management  determined that the Austrian net operating
     losses   available  for   carryforward   had  been   underreported  on  the
     consolidated  statement  of financial  condition  as of March 31, 1997.  In
     addition,  management determined that it had inappropriately  recognized an
     unrealized gain and had incorrectly  classified a portion of its investment
     in WMP.  Accordingly,  the accompanying 1997 financial statements have been
     restated.

     Following is a summary of the effects of the restatement:

<TABLE>
<CAPTION>
                                                                     As Previously
                                                                        Reported          As Restated
                                                                     -------------        -----------
       <S>                                                             <C>                 <C>

       Corporate equities                                               $4,253,164          $3,349,684
       Deferred tax asset                                                  289,938             492,098
       Investments in affiliated companies                               7,064,064           8,272,240
       Goodwill                                                          2,453,454           1,894,398
       Trading revenues                                                  1,886,478           1,806,278
       Net loss                                                           (866,411)           (918,611)
       Earnings per common share                                             (0.35)              (0.37)

</TABLE>

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 and $986,233 as of March 31, 1997 and
     1998, respectively.

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
     estimated fair market value, are as follows:

<TABLE>
<CAPTION>
     
                                                                          March 31,           March 31,
                                                                            1998                1997
                                                                                            (As Restated)
                                                                          ---------         -------------
     <S>                                                                  <C>               <C>

     Securities purchased under agreements to resell                                        
         Sovereign government debt - Austria                                $    887,170        $    --
         Sovereign government debt - Hungary                                     --                  228,965
         Corporate equities - Hungary                                            --                  179,900
                                                                            -------------       ------------

                                                                            $    887,170            $408,865
                                                                            --------------      -------------
     Securities owned at fair value
         Corporate equities - Austria                                       $  6,587,220*       $  1,305,143
         Corporate equities - Hungary                                            410,244                --
         Corporate equities - Czech Republic                                     --                  871,638
         Corporate equities - Slovak Republic                                     84,074             485,141
         Corporate equities - Poland                                             760,552             687,762
         Corporate equities - Other                                              143,394                --
                                                                            --------------              --

                                                                            $  7,985,48         $  3,349,684
                                                                            --------------      ------------
       Sovereign government debt
         Austria                                                            $    621,35         $       --
         Hungary                                                                  71,075                --
                                                                            --------------      ------------

                                                                            $    692,428        $       --
                                                                            --------------      ------------
     Available for sale securities
         Corporate equities - Austria                                       $    --             $     40,321
         Corporate equities - Czech Republic                                     --                1,893,115
         Corporate equities - Hungary                                            --                  189,610
         Corporate equities - Slovak Republic                                    --                  255,008
                                                                            -------------       ------------

                                                                            $    --             $  2,378,054
                                                                            -------------       ------------


</TABLE>

<PAGE>



3.   FINANCIAL INSTRUMENTS (CONTINUED)

As of March 31,  1998,  the Company  has 3  significant  concentrations  in the
securities  portfolio.  A description of these  securities and their  respective
carrying  amounts are as  follows:  a security  of a Russian  chemical  producer
traded on the OTC market of the Vienna Stock Exchange -- $1,030,270,  a security
of a Bulgarian  pharmaceutical  company  traded on the Bulgarian  Stock Exchange
--$3,185,630, and a security of a Bulgarian oil refinery traded on the Bulgarian
Stock Exchange -- $1,354,830. All other securities are relatively liquid and the
carrying value  approximates  the market value as of the balance sheet date. The
Company  does not have any  material  concentrations  to high  yield  issuers or
commitments to high-yield issuers as of the balance sheet date.

4.   OFFICE FACILITIES, FURNITURE AND EQUIPMENT

     Office facilities, furniture and equipment are summarized below:

                                                 March 31,           March 31,
                                                   1998                1997
                                                 ---------           ---------


         Furniture and equipment                $ 1,920,337        $ 1,554,579
         Less accumulated depreciation             (766,898)          (628,014)
                                                ------------       ------------

                                                $  1,153,439       $    926,565
                                                ------------       ------------

     Depreciation  expense  for the years  ended  March 31,  1997 and 1998,  was
     $108,915 and $418,804, respectively.

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 in the fiscal year
     ended March 31, 1997, the Company later acquired an additional 245,320 (out
     of a total issue of 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  $8,200,000.  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 1997 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
     by December 31, 1998. No such shares have been earned to date.

     In a capital increase for Eastbrokers Vienna in the fiscal year ended March
     31, 1998, the Company  purchased  389,925 (out of a total issue of 390,000)
     for cash, increasing its ownership to 96%.



<PAGE>



5.   BUSINESS ACQUISITIONS (CONTINUED)

     Eastbrokers Vienna completed the acquisition of its subsidiary, Eastbrokers
     Warsaw,  in September 1996.  This  acquisition has been accounted for under
     the  purchase  method  of  accounting.  The fair  value  of the net  assets
     acquired under this transaction  approximated  $1,124,000 as of the date of
     acquisition.  The excess of the  purchase  price over the fair value of the
     net assets acquired by Eastbrokers Vienna  approximated  $173,000 which has
     been  recorded  as  goodwill  and is  being  amortized  over 25  years on a
     straight-line basis.

     In  September  1996,  Eastbrokers  Vienna  acquired  additional  shares  of
     Eastbrokers  Wertpapiervermittlungs-gesellschaft  GmbH ("Eastbrokers GmbH")
     and  Eastbrokers  Slovakia a.s. from related  parties (see Note 12).  These
     acquisitions   have  been  accounted  for  under  the  purchase  method  of
     accounting.   The  fair  value  of  the  net  assets  acquired  under  this
     transaction approximated $46,000 as of the date of acquisition.  The excess
     of the  purchase  price over the fair value of the net assets  acquired  by
     Eastbrokers  Vienna  approximated  $438,000  which  has  been  recorded  as
     goodwill and is being amortized over 25 years on a straight-line basis.

         EASTBROKERS NORTH AMERICA, INC.

     On March 6, 1997,  the Company  issued 22,500 shares of Common Stock valued
     at $4.00  per  share  relating  to the  acquisition  of  Eastbrokers  North
     America, Inc.  ("Eastbrokers NA"). In a separate but related transaction to
     the  Eastbrokers  NA  acquisition,  the Company sold 2,500 shares of Common
     Stock at $4.00 per share to an officer of the  Company  in  exchange  for a
     promissory note.  These shares were transferred to the selling  shareholder
     of Eastbrokers NA as part of the acquisition. 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.

         PRO FORMA RESULTS OF OPERATIONS

     The following  summarized,  unaudited,  pro forma results of operations for
     the year  ended  March  31,  1997  assumes  the above  listed  acquisitions
     occurred at the beginning of fiscal 1997.

                                                                 Year Ended
                                                               March 31, 1997
                                                               --------------

         Revenues from continuing operations                     $8,559,786
         Net income from continuing operations                      (14,097)
         Net income per share from continuing operations              (0.01)



6.   INVESTMENTS IN AFFILIATED COMPANIES

         INVESTMENT IN WMP BANK AKTIENGESELLSCHAFT

         Through its  subsidiary,  Eastbrokers  Vienna,  the Company  acquired a
48.1% interest in the outstanding capital stock of WMP on August 1, 1996. 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.  From time to time  Eastbrokers  Vienna  has
carried shares of WMP.  Accordingly,  since August 1996, the Company's ownership
of WMP has  exceeded  50%  including  WMP shares in its  trading  portfolio.  At
December  31,  1996,  the  Company's  aggregate  ownership  percentage  in  WMP,
including its trading position, was 55%. This investment was accounted for using
the equity  method in the March 31,  1997  financial  statements  as the Company
believed  that its control of WMP may likely have been lost as the result of the
probable  occurrence  of certain  events  that lay  outside of its  control.  In
September,  1997 circumstances  surrounding these events were resolved such that
these events were no longer  considered  probable of occurrence  and the Company
deemed its  control of WMP was no longer  temporary.  Accordingly,  the  Company
began  consolidating  its  investment in WMP effective with its third quarter of
fiscal 1998 financial statements.  For the fiscal year ended March 31, 1998, WMP
has been  consolidated  for the entire year. At December 31, 1997, the Company's
aggregate ownership interest in WMP was 52%.



<PAGE>



6.   INVESTMENTS IN AFFILIATED COMPANIES (CONTINUED)

     The  following  unaudited  pro forma  information  for the Company has been
     prepared as though WMP was  acquired at the  beginning  of fiscal year 1997
     and consolidated from that date:

                                                                   1997
                                                                   ----
                             Total revenues                     $10,138,350
                             Total assets                        44,405,383


     .

         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, Kazakhstan; Moscow, Russia; Sofia, Bulgaria; and NIF TRUD
     Investment  Fund.  At December 31,  1997,  these  unconsolidated  affiliate
     investments  included the following offices:  Zagreb,  Croatia;  Ljubljana,
     Slovenia;  Moscow,  Russia; Sofia,  Bulgaria; and NIF TRUD Investment Fund.
     The combined  carrying amounts of these investments as of December 31, 1996
     and 1997  was  $516,243  and  $156,800,  respectively.  Losses  from  these
     operations totaled approximately  $145,000 USD in the period from August 1,
     1996  through  December  31,  1996.  Income from these  operations  totaled
     approximately $122,000 USD for the year ended December 31, 1997.

         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.



<PAGE>



7.   SHORT-TERM BORROWINGS (CONTINUED)

         LINES OF CREDIT

     The  Company  had  outstanding  advances  on its lines of  credit  totaling
     $1,602,182 and $2,570,499 as of March 31, 1997 and 1998,  respectively.  As
     of March 31, 1998,  the Company had  unsecured  credit  lines  available of
     approximately  $3.5  million.  These lines of credit carry  interest  rates
     between 7.00 percent and 12.00  percent and between 6.500 percent and 9.125
     percent  for the years  ended  March 31,  1997 and 1998,  respectively,  as
     computed on an annual basis.

         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. During the fiscal year ending March
     31,  1998,  the  underlying  securities  were sold to a third  party for an
     amount  approximating  the Company's cost basis. The repurchase  agreements
     were transferred to the new owner at the date of sale.

         UNSECURED BONDS PAYABLE

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

8.   LONG-TERM BORROWINGS

     Long-term borrowings consist of the following:

<TABLE>
<CAPTION>
                                                                                March 31,        March 31,
                                                                                  1998             1997
                                                                                ---------        ---------
      <S>                                                                        <C>              <C>

     Long-term borrowing arrangement with a
          financial institution requiring Note
          payable to a finance company, requiring
          annual interest payments which cannot
          exceed the 10 year government bond rate
          plus 2 percent(approximately 10.00 percent),
          principal of 12,000,000 Austrian Schillings,
          principal due at maturity on December 31, 2001                        $ 948,000        $     --

     Notes 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 (representing approximately
          24% of the Company's WMP shares as of March 31,
          1998), principal of 10,000,000 Austrian
          Schillings and accrued interest payable in full
          on  November  30, 2001                                                   804,308          934,374

     Notes payable to financial institutions requiring
          quarterly interest payments computed at varying
          percentages on a 360 day year, with varying
          maturity dates but all due in 1999                                       267,779              --
                                                                                -----------       -----------
                                                                                $2,020,087         $ 934,374
                                                                                -----------       -----------
</TABLE>


<PAGE>



8.   LONG-TERM BORROWINGS (CONTINUED)

     The scheduled  maturities of long-term  debt  outstanding at March 31, 1998
     are  summarized  as  follows:  $267,779  in 1999,  $0 in 2000,  $0 in 2001,
     $1,752,308 in 2002 and $0 thereafter.

9.   COMMITMENTS AND CONTINGENCIES

         LEASES AND RELATED COMMITMENTS

     The Company  occupies  office  space under  leases  which expire at various
     dates through 2003.  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 $35,000 and $131,000 for the periods
     ended March 31, 1997, and March 31, 1998, respectively.

     Minimum  future  rentals under these  non-cancelable  leases for the fiscal
     years  ending 1999  through  2003 are  approximately  as  follows:  1999 --
     $164,000;  2000 -- $164,000; 2001 -- $104,000; 2002 -- $84,000; and 2003 --
     $42,000 and in the aggregate $558,000.

     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 year ended  March 31,  1997,  the Hotel was  subject to land and
     equipment leases.  Under the terms of these leases, the Hotel incurred rent
     expense in the  approximate  amounts of $310,000  during  fiscal year 1997.
     These leases terminated with the disposition of the Hotel. See Note 15.

10.   SHAREHOLDERS' EQUITY

         STOCK REPURCHASE

     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 is authorized to repurchase 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  repurchased
     45,000  of its  outstanding  shares  at  $4.75  per  share.  Currently,  no
     additional  buy-backs  are  anticipated.  This  treasury  stock was retired
     during the fiscal year ended March 31, 1998.

         STOCK TRANSACTIONS

     On August 1, 1996, the Company issued  1,080,000 shares of its Common Stock
     to the selling  security  holders of  Eastbrokers  Vienna 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  NA, valued at $4.00 per share.
     In a separate but related  transaction to the  Eastbrokers NA  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 NA as part of the acquisition.
     The shares were also valued at $4.00 per share.

     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  sold  125,000  shares of Common Stock to three
     individuals:  Calvin S. Caldwell, Frank Huang and Jay Raubvogel for a total
     offering  price of  $750,000  or $6.00 per share.  The net  proceeds to the
     Company were $723,195. There were no underwriting discounts or commissions.

     In September  1997, the Company issued 10,000 shares of Common Stock to Dr.
     Michael  Sumichrast in compensation for services performed on behalf of the
     Company  during  the  previous  six  months.  The  average  price per share
     assigned  to this  transaction  was $6.598 per share  based on the  average
     closing price for the period April 1, 1997 through September 30, 1997.



<PAGE>



10.   SHAREHOLDERS' EQUITY (CONTINUED)

     In September 1997,  Martin A.  Sumichrast  acquired 50,000 shares of Common
     Stock at a price of $6.00 per share in exchange for a note payable  bearing
     an interest rate of 8 percent in the amount of $300,000 to the Company.

     On February  20,  1998,  the Company  sold  1,227,000  newly  issued  units
     consisting  of one  share of Common  Stock  and one  Class C  Warrant  in a
     private  placement  for  $6,135,000  in cash,  or a price of $5.00 per unit
     (approximately  40% below the then current  market price as of February 19,
     1998.) After deducting  offering  expenses of $899,031,  the Company netted
     $5,415,969.  These  units  were  offered  and  sold to  various  accredited
     investors.

     Each  of  the  foregoing   issuances  was  made  by  the  Company   without
     registration  under the Securities Act of 1933, as amended (the "Securities
     Act").  In each  such  case the  Company  relied  upon the  exemption  from
     registration  provided  by  Section  4(2)  under  the  Securities  Act  and
     Regulation D promulgated under the Securities Act.

         CLASS A WARRANTS

     In  connection  with its June 1995  public  offering,  the  Company  issued
     5,505,000 Class A Warrants. The Class A Warrants became exercisable on June
     7, 1996. By reason of the Company's  September  1996 1-for-5  reverse stock
     split,  immediately  after that stock  split each five (5) Class A Warrants
     represented the right to acquire one (1) share of Common Stock for $20. The
     Class A Warrants include redemption provisions at the option of the Company
     and,  upon  thirty  (30)  days'  written  notice to all  holders of Class A
     Warrants,  the Company has the right to reduce the  exercise  price  and/or
     extend the term of the Class A  Warrants,  subject to  compliance  with the
     requirements of certain SEC rules and regulations to the extent applicable.
     The Class A Warrant  Holders  are also  entitled  to  certain  antidilution
     privileges.  In April 1998, the Company announced an amendment  relating to
     the number of warrants  outstanding and the exercise price.  The adjustment
     to the number of warrants  reflected the September 1996 reverse stock split
     and reduced the number of outstanding warrants by four-fifths (4/5's), such
     that one warrant again represents the right to purchase one share of Common
     Stock.  An  adjustment  to the  exercise  price of the Class A Warrants  to
     $18.00 per share  resulted in  connection  with the  February  1998 private
     placement.  Subsequent  to this  adjustment,  there are  1,101,000  Class A
     Warrants outstanding. The Class A Warrants expire in June 2000.

         CLASS B WARRANTS

     In connection with the  aforementioned  public offering whereby the Class A
     warrants  were issued,  the Company  issued  1,250,000  Class B Warrants to
     certain bridge  lenders.  By reason of the September  1996 1-for-5  reverse
     stock  split,  immediately  after  that  stock  split each five (5) Class B
     Warrants represented the right to acquire one (1) share of Common Stock for
     $21. The other terms of the Class B Warrants  are  identical to the Class A
     Warrants, including the antidilution provisions. In April 1998, the Company
     announced an amendment  relating to the number of warrants  outstanding and
     the exercise price. The adjustment to the number of warrants  reflected the
     September  1996 reverse  stock split and reduced the number of  outstanding
     warrants by four-fifths (4/5's), such that one warrant again represents the
     right to purchase one share of Common Stock.  An adjustment to the exercise
     price of the Class B Warrants to $19.00 per share  resulted  in  connection
     with the February 1998 private  placement.  Subsequent to this  adjustment,
     there are 250,000 Class B Warrants  outstanding.  The Class B Warrants have
     not been registered. These warrants expire in June 2000.

         CLASS C WARRANTS

     In  connection  with the private  placement in February  1998,  the Company
     issued 1,227,000  units,  each unit consisting of one share of common stock
     and one Class C  Warrant.  Each  Class C  Warrant  entitles  the  holder to
     purchase one share of Common Stock  during the period  commencing  February
     20, 1999 and  February  20,  2002 at an exercise  price of $7.00 per share,
     subject to certain adjustments. Commencing February 20, 1999 these warrants
     will be  redeemable  at a price of $.10 per  warrant  at any time after the
     closing  price  of the  Common  Stock is above  $10.00  for 20  consecutive
     trading days. The shares underlying these warrants are subject to a "demand
     registration"  right  upon  receipt  of a demand  for  registration  from a
     majority of the holders of the common stock and the warrants issued in this
     private  placement.  In connection  with the private  placement,  1,237,222
     Class C Warrants were issued to the  placement  agents,  including  312,583
     Class C Warrants issued to Eastbrokers NA as one of the placement agents.



<PAGE>



10.   SHAREHOLDERS' EQUITY (CONTINUED)

         OTHER

     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.

     Cumulative  translation  adjustments include gains or losses resulting from
     translating  foreign  currency  financial  statements from their respective
     currencies  to USD Increases or decreases in the value of the Company's net
     foreign investments  generally are tax-deferred for U.S. purposes.  Certain
     of the markets in which the Company operates (I.E., Russia,  Kazakhstan and
     Bulgaria) are generally reliant on the "soft" or "exotic"  currencies.  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 shareholders.

     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 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 at 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.

     Had compensation  cost been determined based on the fair value at the grant
     dates  consistent  with the method of FASB  Statement  123,  the  Company's
     earnings  and  earnings  per share would have been reduced to the pro forma
     amounts indicated below:



                                                   1998               1997
                                                   ----               ----
                                                                  (As Restated)
  
Net loss - as reported                         $(4,947,557         $(918,611)
         - pro forma                            (4,998,993        (1,606,135)
Primary and fully diluted earnings per share
         - as reported                             $(1.57)             $(.37)
         - pro forma                                (1.59)              (.64)


     During the fiscal year ended March 31, 1997, an additional  200,000 options
     were granted  outside of the plan at a weighted  average  exercise price of
     $10.00 per share and with an  expiration  date of August 1, 1999.  At March
     31, 1998 all 235,000 options  outstanding  were  exercisable.  The weighted
     average fair value of the options at the various grant dates was $5.24.

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  owned 50.2 % of the Hotel.  Stratego  Invest
     a.s., a broker-dealer and financial  consulting company organized under the
     laws of the Czech Republic, owned 20.6 % of the Hotel. Stratego Invest a.s.
     was at that time more than 50% owned by Stratego a.s., which was controlled
     by Ing. Petr  Bednarik.  Mr.  Bednarik was President and CEO of the Company
     until August 1996.  The sales  transaction  of the Hotel by the Company was
     arranged by 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),  however,  Stratego Invest a.s.
     waived its commission related to this transaction.

     In September  1996,  Mr.  Peter Schmid  received  from  Eastbrokers  Vienna
     3,511,422 Austrian  Schillings  (approximately  $340,000 USD) for his 49.95
     percent          ownership          interest         in         Eastbrokers
     Wertpapiervermittlungs-gesellschaft  GmbH ("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, is also a
     Director of Eastbrokers GmbH.

     In  September  1996,  Mr.  Schmid  received  376,275  Austrian   Schillings
     (approximately  $36,500  USD) for his 5.60  percent  ownership  interest in
     Eastbrokers 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.  August  de  Roode  received  1,110,250  Austrian
     Schillings  (approximately  $107,500 USD) for his 24.40  percent  ownership
     interest in  Eastbrokers  Slovakia.  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  until March 1997 and he was
     also a Director of Eastbrokers Slovakia at the date of this transaction.

     The Company  entered into  various  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,  during the 1997
     fiscal year Mr. Greene was paid $37,000 for consulting services provided to
     the Company in connection with potential  mergers and/or  acquisitions.  In
     connection with Mr. Greene's resignation from the Board of Directors of the
     Company,  the Company entered into a six month  consulting  agreement dated
     March 27, 1997  pursuant to which Mr.  Greene was paid  $24,000 and granted
     options to purchase 7,750 shares of the Company's Common Stock at $6.50 per
     share. A related letter  agreement was entered into with Mr. Green on March
     27, 1997,  as amended by a letter  dated April 29, 1997.  Under the related
     letter agreement,  Mr. Greene was paid $13,750 and granted 12,500 shares of
     the Company's  Common Stock 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 to the
     Company's primary market maker subject to certain conditions.

     The Company  entered into a one year  consulting  agreement dated March 31,
     1997 with Dr. Sumichrast, a Director of the Company,  pursuant to which Dr.
     Sumichrast was granted 20,000 shares of the Company's  Common Stock to vest
     ratably over the term of the agreement. Dr. Sumichrast provided services to
     the Company during the period April 1, 1997 through  September 30, 1997 and
     received  10,000  shares  at an  average  price  of  $6.598  per  share  as
     compensation for these services.

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

     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 was the
     Chief  Operating  Officer of the Company until his  resignation  in January
     1998.



<PAGE>



12.   RELATED PARTY TRANSACTIONS (CONTINUED)

     The  Company   leases  office  space  from  General   Partners   Immobilenz
     ("GPI")(formerly  Residenz  Realbesitz  AG  ("Residenz"))  for  its  Vienna
     operations  pursuant  to a  month-to-month  lease.  Under  the terms of the
     leases,  the Company incurred  occupancy costs of  approximately  1,200,000
     Austrian Schillings  (approximately  $95,000 USD) in the fiscal years ended
     March 31, 1997 and 1998. The terms of this lease were  negotiated such that
     the Company is subject to  occupancy  expenses no greater  than the current
     market  rates.  GPI is a subsidiary  of General  Partners  Beteiligungs  AG
     ("General Partners"),  an Austrian holding company and the beneficial owner
     of 1,477,139 shares of Common Stock. Mr. Kossner, a Director of the Company
     and an officer of the Company from August, 1996 until November,  1996, owns
     approximately 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.

     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  states that 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.  Venture  Capital  Holdings Gmbh, an Austrian  company
     owned and controlled by Mr. De Roode and Mr. Muller-Tyl ("VCH") and Messrs.
     Schmid, Kossner, and Muller-Tyl were at that time shareholders of RealWorld
     and represented a combined ownership interest of 26 percent.

     At December 31, 1996,  the Company has a receivable  related to  securities
     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 ("ZE") in the amount of 5,537,202
     Austrian  Schillings  (approximately  $511,000  USD). ZE 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
     stock of companies that have a direct  relationship  to the Company through
     its Directors.

     In October  1997,  WMP sold its interest in WMP  Vermogensverwaltungs  GmbH
     ("WMP GmbH"),  primarily an inactive  subsidiary  to COR  Industrieberatung
     GmbH, for 2.5 million Austrian Schillings (approximately $200,000 USD). The
     sales  price  approximated  the  cost  basis  of WMP  GmbH  at the  date of
     disposition.

     In  December  1997,  Eastbrokers  Vienna  sold its 51 percent  interest  in
     Su(beta)warenindustrie  Beteiligungs  GmbH  ("SWIB")  to Mr.  Schmid for 13
     million  Austrian  Schillings  (approximately  $1,025,000 USD). The Company
     acquired its  ownership  interest in SWIB in mid-1997 for 510,000  Austrian
     Schillings  (approximately  $40,000 USD). At the time of  acquisition,  the
     principal  asset of SWIB was an  investment in a company which was entering
     bankruptcy proceedings and there was considerable uncertainty regarding the
     future  realizable  value  of this  asset.  By  December  1997,  bankruptcy
     proceedings  had  progressed to a point where an estimate  could be made on
     the net realizable value of this asset. Based on the information  available
     at that time, SWIB's value at the date of disposition was determined by the
     Board of Directors to be in the range of 12 million to 14 million  Austrian
     Schillings  (approximately  $950,000 to $1,100,000  USD).  The sale of SWIB
     resulted in a gain of approximately $1.0 million USD and is included in the
     accompanying consolidated statement of operations.

     As of December 31, 1997, ZE, a 26.27% owned subsidiary of General Partners,
     owned  approximately  25% of UCP  Beteiligungs  AG ("UCP AG"),  an Austrian
     holding company. UCP AG, in turn, owns 27.7% of a Russian chemical company,
     UCP AOOT.  Shares of UCP AOOT are  listed  over-the-counter  on the  Vienna
     Stock  Exchange.  WMP is a market  maker in the  shares  of UCP AOOT on the
     Vienna Stock  Exchange.  During 1997, WMP facilitated the purchase and sale
     of several  blocks of UCP AOOT  shares.  As of year end,  the Company  held
     approximately 38,000 shares of UCP AOOT as an investment. At this time, the
     estimated value of these shares was approximately  $1,030,270.  This amount
     is reported in the Securities owned at value, Corporate equities section of
     the  financial  statements.  Subsequent  to  year  end,  the  Company  sold
<PAGE>

     approximately  8,000 shares in 6 separate  transactions  for  approximately
     $400,000.  As of October 26,  1998,  the current  market  price of UCP AOOT
     shares was  approximately  $54 per share on the Vienna Stock Exchange.  For
     the fiscal year ended March 31, 1998, the Company recorded,  as a charge to
     earnings, a market value adjustment of approximately  ($610,000).  Although


12.   RELATED PARTY TRANSACTIONS (CONTINUED)

     the UCP AOOT  shares are trading at a premium to the  original  cost basis,
     the  Company  wrote  down  the  carrying  value  of this  item  based on an
     independent  valuation  of UCP AOOT  and the  uncertainty  surrounding  the
     Russian economy.

     Upon acquiring  Eastbrokers  Beteiligungs AG on August 1, 1996, the Company
     assumed  a  receivable  in  the  amount  of  7,387,697  ATS  (approximately
     $704,000)  from Peter  Schmid.  As of December  31,  1997,  the  receivable
     increased due to cash advances to 8,046,177 ATS (approximately $635,000) at
     the then current  exchange  rates.  These cash  advances  included the U.S.
     Dollar denominated amount fluctuates based on the foreign currency exchange
     rate. On May 31, 1998, Mr. Schmid entered into a  Non-Negotiable  Term Note
     in the amount of 8,046,177 Austrian Schillings.  This amount is reported in
     the Receivable  from  executive  officer in the  consolidated  statement of
     financial  condition.  This Note bears interest at 8% per annum and matures
     May 31, 2000. It was  collateralized by 150,000 shares of the Common Stock.
     On October 8, 1998, Mr. Schmid repaid 6,748,111 Austrian  Schillings of the
     total  amount due.  Mr.  Schmid has informed the Company that he intends to
     repay the remaining outstanding balance by December 31, 1998.

     Periodically,  the Company  engages in  securities  transactions  with URBI
     S.A.,  ("URBI"),  a Spanish investment company. Mr. Kossner was a member of
     URBI's  Supervisory  Board from  November  1996  through  June 1998 and Mr.
     Schmid was a member until May 1997. All  transactions  between URBI and the
     Company were consummated at the then current market prices. At December 31,
     1997,  the  amount  due from  URBI was  7,023,576  Austrian  Schillings  or
     approximately   $555,000,   arising  exclusively  from  various  securities
     transactions.  This amount is reported in the  Receivable  from  affiliated
     companies in the consolidated  statement of financial  condition.  Prior to
     June 30,  1998,  URBI had  repaid  all  amounts  due  with  respect  to the
     transactions  open at December 31, 1997.  As of June 30, 1998,  the Company
     had a receivable from URBI in the amount of 4,698,215  Austrian  Schillings
     or approximately  $370,000 related to transactions  occurring subsequent to
     December  31,  1997.  In  addition,  the Company  entered into a repurchase
     agreement with URBI in June 1997. This repurchase agreement and the related
     shares of Vodni Stavby a.s., a Czech construction  company,  were sold to a
     non-affiliated Czech Republic company in October 1997.

     During October 1997, WMP entered into a stock loan  transaction with VCH in
     the amount of 4,065,000 Austrian Schillings  (approximately  $325,000).  In
     August,  1998,  VCH  repaid  the  Company  in  full  for  this  stock  loan
     transaction.  WMP  periodically  engages  in stock loan  transactions  as a
     portion of its normal business operations.

     In December 1997, WMP purchased  7,200,000 ATS (approximately  $576,000) of
     8% bonds due April 1, 2000 of ZE. This amount is reported in the Securities
     owned  at  value,  Corporate  equities  in the  consolidated  statement  of
     financial  condition.  The ZE bonds earn a  comparatively  higher  interest
     rates (350 basis point above comparable Austrian governmental rates).

     As of December 31, 1997, the Company had a receivable  from C.R.F.  a.s., a
     Slovak  privatization  company,  related  to a stock sale  transaction  and
     consulting fees. The total amount due from these transactions was 7,078,500
     Austrian Schillings  (approximately  $559,000).  This amount is reported in
     the Receivable from affiliated  companies in the consolidated  statement of
     financial  condition.  Mr.  Schmid was the  Chairman of the Board of C.R.F.
     a.s. from November 1995 through October 1997.

     In September 1997,  Martin A.  Sumichrast  acquired 50,000 shares of Common
     Stock at a price of $6.00 per share in exchange  for a note  payable in the
     amount of  $300,000  to the  Company.  This  amount is recorded in the Note
     receivable-common   stock  in  the  consolidated   statement  of  financial
     condition.  This note bears  interest at 8% per annum and is due  September
     15, 1999.



<PAGE>



13.   INCOME TAXES

     The tax  expense  recorded  of  $265,078  for the year ended March 31, 1998
     results  principally  from  foreign  taxes  on  earnings  at the  Company's
     subsidiaries.

     The  differences  between the tax  provision  (benefit)  calculated  at the
     statutory  federal  income tax rate and the actual tax provision  (benefit)
     for each period is shown in the table below:

<TABLE>
<CAPTION>

                                                                              Year Ended          Year Ended
                                                                               March 31,           March 31,
                                                                                 1998                1997
                                                                           ---------------      -------------
<S>                                                                         <C>                 <C>

       Tax benefit at federal statutory rate                                $(1,656,000)$             84,678
       State income taxes, net of federal benefit                                (93,962)             14,402
       Foreign taxes                                                             265,078             --
       Unrecognized benefit of net operating losses                            1,164,189             697,301
       Discontinued operations                                                   --                 (510,975)
       Non-taxable income from Slovak Republic                                   --                 (191,515)
       Other                                                                      34,865            (102,196)
                                                                            -------------       -------------

                                                                            $    285,830             $(8,305)
                                                                            -------------       -------------


     The  significant  components  of  the  Company's  deferred  tax  asset  and
     liability are as follows:

       Depreciation                                                         $      4,259        $      6,020
       Unrecognized gain from marketable securities                               83,437            (105,385)
       Accrued expenses                                                            9,390
       Capital loss carryforward                                                  45,445                         
       Foreign tax credit carryfoward                                             32,652
       Other                                                                       6,468             (11,425)
       Net operating loss carryforward                                         5,748,282           1,112,193

                                                                               5,929,933           1,001,403
           Valuation allowance                                                (1,455,514)           (697,301)
                                                                            ---------------      -----------
                                                                               4,474,419             304,102
       Eastbrokers AG deferred taxes acquired                                    --                  187,996
                                                                            ---------------      ------------
                                                                            $  4,474,419            $492,098
                                                                            ---------------      --- --------

</TABLE>

     At March 31,  1998,  the Company  has a U.S.  federal  net  operating  loss
     carryforward  of  approximately  $2,985,000 that may be used against future
     U.S.  taxable income until it expires  between the years March 31, 2012 and
     March 31, 2013. The Company also has a U.S.  capital loss  carryforward  of
     approximately  $118,000 USD that expires March 31, 2002 and a U.S.  foreign
     tax credit  carryforward of approximately  $33,000 USD that expires between
     the years March 31, 2010 and March 31,  2013.  At December  31,  1997,  the
     Company  has  an  Austrian  federal  net  operating  loss  carryforward  of
     approximately $12,850,000 USD that has no expiration period.

     The  non-taxable  income  from the Slovak  Republic  is from  privatization
     activities in which Eastbrokers Vienna was actively  involved.  This income
     was  received in the fourth  quarter of the fiscal year ended  December 31,
     1997.  Distributions  of this nature are non-taxable  under Slovak Republic
     regulations.

     The undistributed  earnings of the foreign  subsidiaries are intended to be
     permanent in duration.



<PAGE>



14.   SEGMENT INFORMATION

     Segment information is as follows for the year ended March 31, 1998:

<TABLE>
<CAPTION>

                                                           Share of
                                                          (Loss) of
                                                        Unconsolidated       Identifiable                Net
                                       Revenues            Entities             Assets                 (Loss)
                                       --------         --------------       ------------          -----------

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

         Austria                    $    4,152,076     $       (38,388)        22,762,098          $(1,764,309)
         Czech Republic                  1,100,457               --               868,961             (279,568)
         Hungary                         2,108,992               --             7,533,072              214,017
         Poland                          1,372,325               --             2,529,672               33,585
         Slovak Republic                     9,842               --             1,945,028             (428,439)
         United States                     218,199               --             8,062,958           (2,746,065)
         Other                           1,176,990               --             1,137,064               23,222
                                    ---------------    ----------------    ---------------     ----------------

                Total               $   10,138,881     $       (38,388)       $44,838,853       $   (4,947,557)
                                    ---------------    --------------------   -------------    ----------------


     Segment  information  is as follows  for the year ended  March 31, 1997 (As
     Restated):

                                                           Share of
                                                          (Loss) of
                                                        Unconsolidated        Identifiable              Net
                                       Revenues           Entities                Assets               (Loss)
                                       --------         --------------        ------------             ------ 
           <S>                        <C>                 <C>                 <C>                      <C>

         Austria                    $    1,433,897     $      (396,209)       $13,023,750           $  165,188
         Czech Republic                    656,079               --             2,202,134             (130,214)
         Hungary                           387,519               --             2,117,066               56,166
         Poland                            921,856               --             2,341,507              (20,705)
         Slovak Republic                 1,124,339               --             3,071,805              596,560
         United States                   1,161,940               --             9,136,486           (1,606,814)
         Other                              55,845               --                69,981               21,208
                                    ---------------    ----------------    ---------------      ---------------

                Total               $    5,741,475     $      (396,209)       $31,962,729        $    (918,611)
                                    ---------------    ----------------    ---------------      ---------------
</TABLE>


15.   DISCONTINUED OPERATIONS

     In October 1996,  the Company  agreed to sell its interest in the Hotel for
     100,000 shares of Ceske energeticke  zavody a.s. 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  USD).  Income from  discontinued  operations was
     $41,899 through the sale date.

16.   SUBSEQUENT EVENTS  (UNAUDITED)

     In May 1998,  a date  subsequent  to the fiscal  year end date of March 31,
     1998,  the Company  acquired  all of the  outstanding  common  stock of EBI
     Securities, a Denver, Colorado based investment banking and brokerage firm,
     in exchange for 445,000  unregistered  shares of the Company's Common Stock
     and an agreement to advance $1,500,000 in additional working capital to EBI
     Securities.



<PAGE>



16.   SUBSEQUENT EVENTS  (UNAUDITED) (CONTINUED)

     EBI Securities is subject to the following legal proceedings.

     USCAN FREE TRADE ZONES V. COHIG &  ASSOCIATES,  INC. (EBI  SECURITIES),  ET
     AL., United States  District Court for the Western  District of Washington.
     In March 1997,  USCAN Free Trade Zones,  Inc.  ("USCAN")  filed a complaint
     against EBI  Securities  and Steve Signer,  an employee of EBI  Securities,
     alleging that EBI Securities  misled USCAN about the credit worthiness of a
     third party in connection  with an  introduction  made by Mr.  Signer.  EBI
     Securities  categorically  denies  this  allegation.   USCAN  informed  EBI
     Securities  that it would be working  with a certain  third party to secure
     certain  loans on  behalf of USCAN  which  USCAN  would  then use to open a
     trading  account with EBI  Securities.  Once EBI Securities  learned of the
     relationship  to this third  party,  it refused to enter into any  business
     arrangements  with  USCAN as long as the third  party was  involved  due to
     regulatory  problems  encountered  in prior  business  dealings  with  this
     certain  third party.  Plaintiff  alleges that as a result of Mr.  Signer's
     referral,  it lost the ability to obtain a loan and all lost  profits  that
     might have  resulted.  Mr. Signer was dismissed as a defendant is this case
     due to lack of  personal  jurisdiction  and has  received an award of fees.
     Plaintiff  originally  sought a judgment of  approximately  $86,000,000  in
     compensatory  and punitive  damages.  However,  USCAN recently  stated in a
     pleading  and  during a court  deposition  taken in  October  1998 that its
     damage  claim  had been  reduced  to  $332,000.  EBI  Securities  has filed
     counterclaims  for  defamation  based  upon  certain  false and  defamatory
     representations regarding EBI Securities. A preliminary trial date has been
     scheduled  for January 1999.  EBI  Securities  believes it has  meritorious
     defenses and intends to vigorously defend against USCAN's claims as well as
     aggressively  pursue  claims  against  USCAN  and two of its  officers  for
     defamation, abuse of process, and civil conspiracy.

     FLORIDA  DEPARTMENT  OF INSURANCE AS RECEIVER  FOR UNITED  STATES  EMPLOYER
     INSURANCE  CONSUMER  SELF-INSURANCE  FUND OF FLORIDA  ("USEC") V. DEBENTURE
     GUARANTY CORPORATION,  ET. AL., United States District Court for the Middle
     District of Florida. In November, 1995, the plaintiff,  USEC, commenced the
     above entitled action against Debenture Guaranty Corporation  ("Debenture")
     and certain other defendants, including EBI Securities and Steve Signer, an
     employee of EBI  Securities.  In 1994,  USEC  entered  into an  arrangement
     whereby USEC lent money to Debenture,  and  Debenture  opened an account in
     Debenture's  name to  trade  U.S.  Treasuries.  The note to USEC was in the
     amount by which the  treasuries  could be margined.  This  transaction  was
     allegedly  part of a scheme  whereby  USEC was  attempting  to inflate  its
     assets for regulatory  purposes.  Debenture  allegedly  misappropriated the
     funds for its own benefit and USEC subsequently failed.  Plaintiffs alleged
     that EBI Securities and Signer aided,  abetted and conspired with Debenture
     to defraud USEC and claimed damages of $11,000,000.  After a six week trial
     held from September 8, 1998, to October 14, 1998, a jury returned a verdict
     in favor of EBI  Securities.  The plaintiffs  have filed a motion for a new
     trial.  EBI  Securities is in the process of preparing an objection to this
     motion.  EBI  Securities  is also planning to file a motion for recovery of
     its attorney's fees incurred in connection with defending this action.

     EURO-AMERICAN  INSURANCE COMPANY LTD., ET. AL. V. NATIONAL FAMILY CARE LIFE
     INSURANCE COMPANY, ET. AL., 191st Judicial District of Dallas County, Texas
     (the "NFC Litigation"). In April, 1996, National Family Care Life Insurance
     Company  ("NFC")  commenced the above action  against,  among  others,  EBI
     Securities and Steve Signer, an employee of EBI Securities. In late 1994 or
     early  1995,  NFC  entered  into an  arrangement  with  Debenture  Guaranty
     Corporation ("Debenture"), another defendant in the NFC Litigation, whereby
     NFC lent money to Debenture, and Debenture opened an account in Debenture's
     name to trade U.S.  Treasuries.  The note to NFC was in the amount by which
     the treasuries could be margined.  This transaction was allegedly part of a
     scheme  whereby NFC was  attempting  to inflate  its assets for  regulatory
     purposes.  Debenture  allegedly  misappropriated  the  funds  for  its  own
     benefit.  NFC alleged that EBI  Securities  and Signer  aided,  abetted and
     conspired with Debenture in allegedly defrauding Plaintiff. NFC has reduced
     its damages demand from approximately $11,500,000 to $1,100,000.  This case
     is related to the USEC litigation,  described above,  which also involves a
     claim  of  fraud  against  Debenture.   EBI  Securities   believes  it  has
     meritorious defenses and intends to vigorously defend against NFC's claims.



<PAGE>



16.   SUBSEQUENT EVENTS  (UNAUDITED) (CONTINUED)

     EBI Securities also is involved in an arbitration proceeding related to the
     NFC Litigation  entitled  NATIONAL  FAMILY CARE LIFE INSURANCE CO. V. PAULI
     COMPANY,  INC., ET AL., NASDR Case No.  96-02673 (the  "Arbitration").  The
     Arbitration  panel entered an award against EBI  Securities in July 1998 in
     favor  of  third-party   plaintiff  Pauli  &  Company,  Inc.  ("Pauli")  of
     approximately  370,000,  which was  significantly  below the initial  award
     sought by Pauli of  approximately  $1,100,000.  EBI  Securities has filed a
     motion to vacate and plans to vigorously contest this award on appeal.

     In addition to the litigation  described  above,  the Company,  through its
     subsidiaries,  is involved in various legal  actions and claims  arising in
     the ordinary  course of  business.  Management  believes  that each of such
     matters will be resolved  without  material adverse effect on the Company's
     financial condition or operating results.

     In June  1998,  subsequent  to the date of this  report,  but  prior to the
     filing date, the Company's largest European subsidiary,  WMP,  successfully
     raised 60 million Austrian Schillings  (approximately  $4,800,000 USD) in a
     bond offering. The Company intends to utilize these proceeds to enhance and
     further develop its European trading  activities.  The bonds were issued in
     denominations of 10,000 Austrian Schillings  (approximately $800 USD at the
     then current exchange rates), bear an annual interest rate of 7.5%, payable
     at maturity, and mature in June 2002.

     In June 1998, the Company sold a 73.55% interest in Eastbrokers Prague a.s.
     for 15 million  Austrian  Schillings  (approximately  $1,200,000 USD at the
     then current exchange rate). The net assets related to this transaction are
     presented in the accompanying balance sheet as "Net assets held for sale."

17.   RECENT ACCOUNTING PRONOUNCEMENTS

     In February 1997, the Financial  Accounting Standards Board ("FASB") issued
     Statement  of  Financial  Accounting  Standards  ("SFAS")  No. 128. The new
     standard  replaces  primary and fully diluted earnings per share with basic
     and  diluted  earnings  per share.  SFAS No. 128 was adopted by the Company
     beginning  with the interim  reporting  period ended December 31, 1997. The
     adoption did not affect previously reported earnings per share amounts.

     In June  1997,  the FASB  issued  SFAS No.  130,  "Reporting  Comprehensive
     Income." This statement  established standards for reporting and display of
     comprehensive  income and its  components  (revenues,  expenses,  gains and
     losses)  in a  full  set of  general-purposes  financial  statements.  This
     statement  shall be effective for fiscal years beginning after December 15,
     1997. Reclassification of financial statements for earlier periods provided
     for  comparative  purposes is required.  At this time, the Company does not
     believe that the addition of this statement will have a significant  impact
     on the Company.

     In June 1997, the FASB issued SFAS No. 131,  "Disclosures about Segments of
     an  Enterprise  and  Related   Information."  This  statement   established
     standards for the way that public business  enterprises  report information
     about operating  segments in annual financial  statements and requires that
     enterprises report selected information about operating segments in interim
     financial  reports issued to stockholders.  This statement is effective for
     fiscal years  beginning  after  December  15, 1997.  In the initial year of
     application,  comparative  information for earlier years is to be restated.
     At this time,  the Company does not believe that this statement will have a
     significant impact on the Company.

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  For  Derivative
     Instruments and Hedging Activities".  This Statement establishes accounting
     and  reporting  standards for  derivative  instruments,  including  certain
     derivative  instruments  embedded  in  other  contracts,  and  for  hedging
     activities. SFAS No. 133 is effective for fiscal years beginning after June
     15, 1999.  At this time,  the Company does not believe that this  statement
     will have a significant impact on the Company.

18.  SIGNIFICANT ESTIMATES

     As part of the  preparation  of its fiscal 1998 financial  statements,  the
     Company has made  several  valuation  estimates.  Such  estimates  could be
     impacted  by changes  in facts and  circumstances  in the near  term.  Such
     changes,  if they occur,  could have a significant  effect on the Company's
     financial  position  and results of  operations.  The net amounts  recorded
     related to these estimates are summarized as follows:

18.  SIGNIFICANT ESTIMATES (CONTINUED)

          .            An  approximate  $1  million  receivable  from a  Serbian
                      financial  institution  related to the Company selling its
                      creditor position with a bankrupt company.  This amount is
                      included  in  financial  institution   receivable  in  the
                      accompanying 1998 balance sheet.

           .          An approximate $1 million investment in the shares of UCP
                      AOOT (See  Note 12),  a  Russian  chemical  company.  This
                      amount  is  included  in  securities   owned  -  corporate
                      equities in the accompanying 1998 balance sheet.

            .         An   approximate   $724,000   receivable   related  to  a
                      repurchase  agreement  and the  related  shares  of  Vodni
                      Stavby,  a.s. This amount is included in other receivables
                      in the accompanying 1998 balance sheet.



<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                                December 11, 1998
   ------------------------------                       ---------------------
           Peter Schmid                                         Date
   Chairman, President,
   Chief Executive Officer, and Director



      In accordance  with the Exchange Act, 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                                December 11, 1998
---------------------------------------------           ---------------------
          Peter Schmid                                          Date
Chairman, President,
Chief Executive Officer, and Director



        /s/ Martin A. Sumichrast                           December 11, 1998
---------------------------------------------           ---------------------
        Martin A. Sumichrast                                    Date
Vice Chairman of the Board, Secretary,
and Director



       /s/ Kevin D. McNeil                                  December 11, 1998
---------------------------------------------           ---------------------
       Kevin D. McNeil                                         Date
      Vice President, Treasurer, and
     Chief Financial Officer
 (Principal Financial and Accounting Officer)



     /s/ Michael Sumichrast                                 December 11, 1998
---------------------------------------------           ---------------------
     Michael Sumichrast, Ph.D.                                Date
     Director



    /s/ Wolfgang Kossner                                   December 11, 1998
----------------------------------------------          ---------------------
    Wolfgang Kossner                                          Date
    Director



    /s/  Siegfried Samm                                    December 11, 1998
----------------------------------------------           ---------------------
    Siegfried Samm, Ph.D.                                      Date
    Director