<PAGE>

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


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

                                   FORM 10-KSB
                       ----------------------------------

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

                    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>

                    EASTBROKERS INTERNATIONAL INCORPORATED


                             INDEX TO FORM 10-KSB

                                                                        PAGE
                                    PART I

Item   1.   Description of Business.....................................  3
Item   2.   Description of Property..................................... 15
Item   3.   Legal Proceedings........................................... 15
Item   4.   Submission of Matters to a Vote of Security Holders......... 16


                                   PART II

Item   5.   Market for Common Equity and Related Stockholder Matters.... 17
Item   6.   Management's Discussion and Analysis or Plan of Operation... 18
Item   7.   Financial Statements
               Historical Financial Statements
               Independent Auditor's Report as at and for the period 
                    ended March 31, 1998 ............................... 31
               Independent Auditor's Report as at and for the period 
                    ended March 31, 1997 ............................... 32
               Consolidated Statements of Financial Condition as at 
                    March 31, 1998 and 1997 ............................ 33
               Consolidated Statements of Operations for the 12 months 
                    ended March 31, 1998 and 1997....................... 34
               Consolidated Statements of Changes in Shareholders' 
                    Equity for the 12 months ended March 31, 1998 
                    and 1997............................................ 35
               Consolidated Statements of Cash Flows for the 12 months 
                    ended March 31, 1998 and 1997....................... 36
               Notes to Consolidated Financial Statements............... 38
Item   8.   Changes In and Disagreements with Accountants on Accounting
               and Financial Disclosure................................. 56


                                   PART III

Item  9.    Directors and Executive Officers of the Registrant.......... 57
Item 10.    Executive Compensation...................................... 59
Item 11.    Security Ownership of Certain Beneficial Owners and
               Management............................................... 62
Item 12.    Certain Relationships and Related Transactions.............. 63
Item 13.    Exhibits and Reports on Form 8-K............................ 65
Signatures.............................................................. 66






<PAGE>

                                     PART I


Item   1.      Description of Business

General

         Certain  information set forth in this report under the captions Item 1
"Description of Business," and Item 6  "Management's  Discussion and Analysis or
Plan of Operation"  includes "forward looking  statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. In addition,  from time to
time, the Company may publish "forward-looking statements" within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities and Exchange Act of 1934, as amended,  or make oral  statements  that
constitute  forward-looking  statements.  These  forward-looking  statements may
relate to such matters as anticipated financial performance,  future revenues or
earnings,  business prospectus,  projected ventures,  new products,  anticipated
market performance and similar matters. Readers are cautioned not to place undue
reliance  on these  forward  looking  statements,  which are made as of the date
hereof.  The Private  Securities  Litigation  Reform Act of 1995 provides a safe
harbor for forward-looking  statements. In order to comply with the terms of the
safe harbor,  the Company cautions readers that a variety of factors could cause
the Company's actual results to differ  materially from the anticipated  results
or other  expectations  expressed in the Company's  forward-looking  statements.
These risks and  uncertainties,  many of which are beyond the Company's control,
include,  but are not  limited  to:  (i)  transaction  volume in the  securities
markets,  (ii) the volatility of the securities  markets,  (iii) fluctuations in
interest rates, (iv) changes in regulatory  requirements  which could affect the
cost of doing business,(v) fluctuations in currency rates, (vi) general economic
conditions,  both  domestic  and  international,  (vii)  changes  in the rate of
inflation and related  impact on securities  markets,  (viii)  competition  from
existing  financial  institutions  and other new  participants in the securities
markets,  (ix) legal  developments  affecting the  litigation  experience of the
securities  industry,  (x)  changes  in federal  and state tax laws which  could
affect the  popularity  of  products  sold by the Company and (xi) the risks and
uncertainties  set forth under the caption "Risk  Factors" which appears in Item
1. Eastbrokers  International  Incorporated  undertakes no obligation to release
publicly any revisions to the forward  looking  statements to reflect  events or
circumstances  after  the date  hereof  or to  reflect  unanticipated  events or
developments.  Section  21E of the  Securities  and  Exchange  Act of  1934,  as
amended,  or make oral statements that  constitute  forward-looking  statements.
These  forward-looking  statements  may relate to such  matters  as  anticipated
financial  performance,   future  revenues  or  earnings,  business  prospectus,
projected  ventures,  new products,  anticipated  market performance and similar
matters.  Readers are  cautioned  not to place undue  reliance on these  forward
looking statements, which are made as of the date hereof. The Private Securities
Litigation  Reform  Act of  1995  provides  a safe  harbor  for  forward-looking
statements.  In order to comply with the terms of the safe  harbor,  the Company
cautions  readers  that a variety of factors  could cause the  Company's  actual
results to differ materially from the anticipated  results or other expectations
expressed  in  the  Company's  forward-looking   statements.   These  risks  and
uncertainties,  many of which are beyond the Company's control, include, but are
not limited  to: (i)  transaction  volume in the  securities  markets,  (ii) the
volatility of the securities markets, (iii) fluctuations in interest rates, (iv)
changes  in  regulatory  requirements  which  could  affect  the  cost of  doing
business,  (v) fluctuations in currency rates, (vi) general economic conditions,
both  domestic and  international,  (vii)  changes in the rate of inflation  and
related impact on securities markets, (viii) competition from existing financial
institutions  and other new participants in the securities  markets,  (ix) legal
developments affecting the litigation experience of the securities industry, (x)
changes  in federal  and state tax laws which  could  affect the  popularity  of
products  sold by the  Company  and (xi) the risks and  uncertainties  set forth
under the caption "Risk Factors" which appears in Item 1.

Background

         Eastbrokers  International  Incorporated  ("EII," and together with its
subsidiaries the "Company") was incorporated in the State of Delaware on January
20, 1993, as the Czech Fund. The Company's initial goal was to take advantage of
the rapid growth in business opportunities arising from the privatization of the
newly-democratized Czech Republic by merging with or acquiring Czech businesses.
From 1993  through  1996,  the Company  held an interest in a Czech hotel and an
interest in a Czech department store.

         In 1996,  the Company  re-evaluated  its  business  strategy  and after
considering  a  variety  of  investment   opportunities,   acquired  Eastbrokers
Beteiligungs AG, an Austrian  brokerage company with offices  throughout Central
and  Eastern  Europe  ("Eastbrokers  Vienna").  This  transaction  enhanced  the
Company's  prospects  by both  providing  the  Company  with a  vehicle  for its
existing acquisition strategy while extending its opportunities beyond the Czech
Republic  to  the  entirety  of  Central  and  Eastern  Europe.   Following  the
acquisition,  the  Company's  name  was  changed  to  Eastbrokers  International
Incorporated, its present name.

                                       3
<PAGE>

         EII is  primarily  a  holding  company  for  sixteen  subsidiaries  and
affiliates which are directly and indirectly  owned. The Company  generally owns
at least 50 percent but less than 100 percent of each of the active subsidiaries
and  affiliates.  Twelve  of  the  Company's  subsidiaries  and  affiliates  are
incorporated  and located in Central and Eastern  Europe.  The Company also owns
100 percent of EBI Securities  Corporation  ("EBI  Securities"),  100 percent of
Eastbrokers  Leasing  Ltd.,  90  percent  of  Eastbrokers  North  America,  Inc.
("Eastbrokers  NA") and 100 percent of an inactive U.S.  subsidiary.  All of the
Company's  subsidiaries  and affiliates  are engaged in the investment  banking,
broker-dealer, advisory and security business. The principal strategic objective
of the  Company  has been to  establish  controlling  ownership  of  independent
broker-dealers  located  primarily in Central and Eastern Europe and to create a
network that provides  access to emerging  market  investment  opportunities  in
Central and Eastern Europe.  In fiscal year 1998, this objective was expanded to
include establishing controlling ownership of independent  broker-dealers in the
United States.

Current Operations

         Through  Eastbrokers Vienna, the Company provides financial services in
Eastern and Central Europe.  Eastbrokers Vienna's primary business is to provide
its customers with stock brokering and investment banking services.  Eastbrokers
Vienna conducts  business through its head office in Vienna,  Austria and in its
subsidiary  and  affiliate  offices  located  in (a)  Klagenfurt,  Austria,  (b)
Budapest,  Hungary,  (c)  Bratislava,  Slovakia,  (d)  Almaty,  Kazakhstan,  (e)
Istanbul,  Turkey,  (f)  Moscow,  Russia,  (g)  Bucharest,  Romania,  (h) Sofia,
Bulgaria, (i) Ljubljana,  Slovenia, (j) Zagreb, Croatia, and (k) Warsaw, Poland.
Through its subsidiaries and affiliate  offices,  the Company is a member of the
Vienna Stock  Exchange,  the  Budapest  Stock  Exchange,  the  Bratislava  Stock
Exchange, the Zagreb Stock Exchange, the Ljubljana Stock Exchange, the Bucharest
Stock Exchange, the Central Asian Stock Exchange, and the Warsaw Stock Exchange.
Eastbrokers  Vienna also owns 51% of WMP Bank AG (formerly WMP  Borsenmakler AG)
("WMP"), a publicly-held  Austrian investment banking and brokerage firm. Due to
the continued  decline in the Czech  Republic  markets and  recurring  operating
losses  generated  through  its  subsidiary  office  located  in  Prague,  Czech
Republic, the Company determined that it was in the best interest of the Company
and shareholders to dispose of this operation.  73.55% of the Company's interest
in this subsidiary was sold in June 1998.

         Eastbrokers  Vienna's  brokerage,  trading and market  making  business
generated  approximately  25  percent  and 41  percent  of all of the  Company's
revenues  for the fiscal  years  ended  March 31,  1997 and 1998,  respectively.
Eastbrokers  Vienna  conducts its sales  activities  as  principal  and agent on
behalf of its  clients.  Eastbrokers  Vienna  primarily  distributes  and trades
Eastern and Central  European  equity  securities and to a lesser  degree,  debt
securities.  Eastbrokers  Vienna,  through WMP,  actively makes a market in more
than 800 debt and equity securities on the Vienna Stock Exchange.

         Eastbrokers  Vienna is also a Central and Eastern  European  investment
banking  firm which  provides  advice to, and raises  capital  for,  Eastern and
Central European companies. Eastbrokers Vienna provides advisory services on key
strategic matters such as mergers, acquisitions,  privatizations, joint ventures
as well as long range  financial  planning.  Eastbrokers  Vienna  seeks to raise
capital for its investment  banking  clients from  institutional  and commercial
investors in Western Europe.  Since 1993,  Eastbrokers  Vienna has assisted with
over twenty-five investment banking transactions.

         The Company acquired Eastbrokers North America, Inc. ("Eastbrokers NA")
in March 1997.  Eastbrokers NA is a registered  broker-dealer with the SEC and a
member of the National Association of Securities Dealers ("NASD").  It commenced
operations in October 1997.  Eastbrokers NA is currently approved to do business
in 17 states and the District of  Columbia.  Based  primarily  on the  operating
results of  Eastbrokers  NA for the year ended March 31,  1998,  and the hurdles
encountered in locating and marketing suitable  investment products developed in
Central  and  Eastern  Europe,  the  Company  determined  that  its  plan to use
Eastbrokers  NA to complement  the Company's  European  operations was no longer
viable and a change in both focus and  direction  was  required  with respect to
Eastbrokers NA. After the acquisition of EBI Securities in May 1998, the Company
reduced the level of its  operations in  Eastbrokers NA and is in the process of
evaluating how best to utilize this entity. The office space previously occupied
by Eastbrokers  NA is in the process of being  converted into a branch office of
EBI Securities.

         In October  1997,  the Company  announced  its intention to establish a
full service  brokerage  operation  in Kiev,  Ukraine  subject to obtaining  the
required  regulatory  approvals.  Due to the overall  instability  in the region
caused by the economic crisis in Asia and potential currency problems in Russia,
the Company has decided to continue its evaluation of this market and will delay
this expansion until such time as it feels the expansion is economically viable.

         On February  20, 1998,  the Company  consummated  a private  placement.
Under the terms of this private  placement,  the Company sold 1,227,000 units at
$5.00 per unit, with each unit  consisting of one share of the Company's  common

                                       4
<PAGE>

stock,  par value $.05 per share (the  "Common  Stock"),  and one Class C Common
Stock purchase warrant with an exercise price of $7.00 per share. After expenses
related  to  this  private   placement,   the  Company  received   approximately
$5,400,000.  As  provided  by the  terms  of the  Class A and  Class B  warrants
outstanding  at the time of this private  placement,  the Company also announced
certain adjustments relating to the pricing of its Class A and Class B warrants.
In  conjunction  with this private  placement,  the Company  announced a 1-for-5
reverse split of its Class A and Class B warrants with corresponding  changes in
the  number  of  warrants  required  for  exercise.  This  reverse  split was in
proportion to the 1-for-5  reverse  split of the Common Stock in September  1996
and caused each warrant again to be  exercisable  for one share of Common Stock.
The effect of these changes  resulted in there being at March 31, 1998 1,101,000
Class A  warrants  outstanding  with an  exercise  price of $18.00 per share and
250,000 Class B warrants outstanding with an exercise price of $19.00 per share.

         During  April 1998,  a date  subsequent  to the date of this Report but
prior to the filing date,  the Company  announced that a consortium in which the
Company  was  participating  was  awarded  the  management  contract  for Polish
National  Investment Fund #9. This consortium  consisted of the Company,  Tonlor
Finance,  a Polish finance and investment  company based in Warsaw,  and General
Partners  AG, an Austrian  investment  and holding  company.  Subsequent  to the
signing of the preliminary  agreement but prior to the signing and  ratification
of the final management  agreement,  the consortium was informed that the Polish
national  government  had  reached a  strategic  decision  to change  the focus,
structure,  and process related to the privatization of its national  investment
funds. The consortium was encouraged to resubmit its application and compete for
a management  contract under the new criteria.  After considerable  deliberation
and  an  evaluation  of the  time,  energy,  effort,  and  financial  commitment
originally  expended  in the  bidding  process  and an  evaluation  of the  cost
required to continue in the bidding process, the consortium  determined that its
resources,  financial  and human,  were  better  allocated  to other  worthwhile
projects.

         In May 1998,  subsequent  to the date of this Report,  but prior to the
filing date, the Company acquired all of the outstanding common stock of Cohig &
Associates,  Inc., a Denver,  Colorado  based  investment  banking and brokerage
firm,  in exchange  for 445,000  unregistered  shares of the Common Stock and an
agreement  to  advance  $1,500,000  in  additional  working  capital  to Cohig &
Associates.  Following the acquisition,  the Company changed the name of Cohig &
Associates,  Inc. to EBI Securities Corporation ("EBI Securities").  The Company
intends to develop EBI  Securities as the  foundation  to expand its U.S.  based
investment  banking and brokerage  presence and anticipates  that EBI Securities
will be the first in a series of acquisitions  targeting other successful medium
size   investment   banking   and   brokerage   firms  both   domestically   and
internationally.  EII believes that its current  organizational  structure as an
entrepreneurial,  well-capitalized,  and international  publicly-traded  company
will be particularly appealing to potential acquisition candidates.

         EBI  Securities  is a  full  service  brokerage  firm  specializing  in
providing  investment  advice  and  counsel to  individuals  and small to middle
market  institutions.  At the present time, EBI Securities has approximately 150
licensed  representatives.  EBI Securities provides its brokerage clients with a
broad range of traditional investment products and services. EBI Securities also
strives to establish itself with investors and corporate finance clients through
its  commitment  to  a  professional  but  personalized   service.  Its  trading
department  makes a market in  approximately  150  securities  which include its
investment banking clients and those securities that its research department has
identified  as  promising,  small  to  middle-market,  potentially  high  growth
companies.  EBI Securities' investment banking department operates with a single
goal in mind:  to enhance and develop the capital  structures of small to middle
market emerging growth companies through private  placements,  bridge financing,
and public offerings in order to enable the firm's corporate  finance clients to
capitalize on promising  business  opportunities,  favorable market  conditions,
and/or late stage product development.

         EBI  Securities is registered  as a  broker-dealer  with the SEC and is
licensed in 50 states and the District of  Columbia.  It is also a member of the
NASD and the  Securities  Investor  Protection  Corporation  ("SIPC").  Customer
accounts are insured to $25 million under the SIPC excess insurance program. EBI
Securities  operates  pursuant to the  exemptive  provisions  of SEC Rule 15c3-3
(k)(2)(ii)  and  clears  all  transactions  with  and for  customers  on a fully
disclosed basis.

         EBI  Securities   maintains  its  clearing   arrangement   with  Fiserv
Correspondent Services,  Inc. ("Fiserv"),  a subsidiary of Fiserv, Inc. (NASDAQ:
FISV).  Fiserv  provides EBI Securities  with back office  support,  transaction
processing  services on all the  principal  national  securities  exchanges  and
access to many other financial services and products.  This arrangement  enables
EBI  Securities to offer its clients a broad range of products and services that
is typically  only offered by firms that are larger and/or have a larger capital
base.  Fiserv has advised the Company that it is aware of the year 2000 computer
issue and is  working  to  mitigate  the  effect  of the year 2000  issue on its
operations.  See  Item 6  "Management's  Discussion  and  Analysis  or  Plan  of
Operation - Impact of the Year 2000".

                                       5
<PAGE>

         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,  subsequent to the date of this Report,  but prior to the
filing date, the Company sold 73.55% of its interest in Eastbrokers  Prague a.s.
See "Acquisitions  and Dispositions  Subsequent to the Fiscal Year End" below in
this Item 1 Description of Business.

         A key component of the  Company's  business plan is to grow through the
purchase and roll-up of  complementary  businesses both in the United States and
in Europe,  with the  acquisitions  financed by the  issuance  of Common  Stock.
Management  believes  that  consolidation  within the  industry  is  inevitable.
Concerns  attributable to the volatility  currently  prevailing in the financial
markets help explain the increasing  number of acquisition  opportunities  being
introduced  to  the  Company.   The  Company  is  focused  on   maximizing   the
profitability of the  acquisitions  that have been consummated to date, while it
continues to selectively seek additional complementary acquisition and/or merger
candidates.

Acquisitions and Dispositions during the Fiscal Year

         In February 1998, the Company  participated  in a capital  increase for
its  subsidiary,  Eastbrokers  Vienna.  In this  capital  increase,  the Company
acquired  389,925  shares of the  available  390,000  shares  for  approximately
$4,000,000  USD. The shares were  offered at a price of 130 Austrian  Schillings
per  share  (approximately  $10.40  USD per  share)  and  raised  the  Company's
ownership  interest  in  Eastbrokers   Vienna  from   approximately   93.68%  to
approximately 95.73%.

         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%.

         In October 1997, WMP sold its interest in WMP Vermogensverwaltungs GmbH
("WMP GmbH") for 2.5 million Austrian Schillings  (approximately $200,000 USD at
the then current exchange rates). The sales price approximated the cost basis of
WMP GmbH at the date of disposition.  At the date of  disposition,  WMP GmbH was
primarily an inactive  subsidiary.  WMP GmbH was originally  created to hold the
assets of WMP.

         In December 1997,  Eastbrokers  Vienna sold its 51 percent  interest in
Su(beta)warenindustrie  Beteiligungs GmbH ("SWIB") to Peter Schmid,  Chairman of
the Board,  President,  Chief  Executive  Officer and a Director of EII,  for 13
million Austrian  Schillings  (approximately  $1,025,000 USD at the then current
exchange rates). The Company acquired its ownership interest in SWIB in mid-1997
for 510,000 Austrian Schillings  (approximately  $40,000 USD at the then current
exchange rates). 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 primary asset.  Based
on  the  information  available  at  that  time  SWIB's  value  at the  date  of
disposition  was  determined by the Board of Directors of EII to be in the range
of 12 million to 14  million  Austrian  Schillings  (approximately  $950,000  to
$1,100,000 USD at the then current exchange rates).

                                       6
<PAGE>

         In  December  1997,  Eastbrokers  Budapest  Rt.  sold its wholly  owned
subsidiary,  1001 Pengo Kft., to three directors of Eastbrokers Budapest Rt. for
100 million  Hungarian Forints  (approximately  $500,000 USD at the then current
exchange rates). As of the date of disposition, the sales price approximated the
cost basis of 1001 Pengo Kft.

Acquisitions and Dispositions Subsequent to the Fiscal Year End

         In May 1998,  subsequent  to the date of this Report,  but prior to the
filing date,  the Company  acquired all of the  outstanding  common stock of EBI
Securities 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 into
EBI Securities.  The Company intends to develop EBI Securities as the foundation
to  expand  its  U.S.  based  investment  banking  and  brokerage  presence  and
anticipates  that EBI Securities  will be the first in a series of  acquisitions
targeting other  successful  medium size investment  banking and brokerage firms
both   domestically   and   internationally.   EII  believes  that  its  current
organizational   structure   as  an   entrepreneurial,   well-capitalized,   and
international   publicly  traded  company  will  be  particularly  appealing  to
potential  acquisition  candidates.  The  office  space  presently  occupied  by
Eastbrokers  NA is in the process of being  converted to a branch  office of EBI
Securities.

         In June 1998,  subsequent to the date of this Report,  but prior to the
filing  date,  the Company  sold 73.55  percent of its  interest in  Eastbrokers
Prague a.s. to a third party for 15 million Austrian  Schillings  (approximately
$1,200,000 USD at the then current exchange rates).

Government Regulation

         The Company has  operations  based in the United  States and 11 foreign
countries.  The Company's business is, and the securities industry generally is,
subject  to  extensive  regulation  in each of these  jurisdictions  at both the
federal and state level,  as well as by industry  self-regulatory  organizations
("SROs"). The Company is also subject to regulation by various foreign financial
regulatory  authorities  in the  jurisdictions  outside  of the  United  States,
Austria and Central and Eastern  Europe where it does  business,  including  for
example by The Securities and Futures Authority of the United Kingdom.

         In the  United  States,  the  Company's  business,  and the  securities
industry generally,  are subject to extensive regulation at both the federal and
state levels.  The U.S.  Securities and Exchange  Commission  (the "SEC") is the
agency primarily responsible for administration of federal securities laws. Much
of the regulation of broker-dealers,  however,  has been delegated by the SEC to
SROs,  primarily the NASD.  The NASD has the authority to adopt rules (which are
subject to approval by the SEC) for governing the industry and the NASD conducts
periodic  examinations  to ensure  compliance.  The scope of EBI Securities' and
Eastbrokers  NA's  broker  dealer  operations  are subject to the terms of their
respective  Restriction  Agreements  with  the  NASD.  In  the  event  that  EBI
Securities or Eastbrokers NA violates the terms of its Restriction  Agreement or
NASD rules,  its NASD  membership  can be  suspended or revoked and the NASD may
impose  fines  upon  it or  censure  it.  Broker-dealers  are  also  subject  to
regulation  by state  securities  commissions  in the  states in which  they are
registered.  EBI Securities is registered in all 50 states and Eastbrokers NA is
registered in 17 states.  EBI Securities  and  Eastbrokers NA are subject to the
SEC net capital  rules,  which  require  them to maintain  prescribed  levels of
capital in order to conduct business.  Each of EBI Securities and Eastbrokers NA
has capital in excess of the required capital.

         The Companies non-U.S. business is also subject to extensive regulation
by  various  non-U.S.  governments,  securities  exchanges,  central  banks  and
regulatory bodies, especially in Austria where the Company owns WMP, an Austrian
bank that engages in the  securities  business,  including on the Austrian Stock
Exchange.  Each of these authorities impose regulation the Company's  activities
within  the  scope of their  respective  jurisdictions.  These  regulations  are
generally  intended  to protect the  integrity  of the stock  exchange,  bank or
financial market subject to regulation and to protect customers of the regulated
agency,  and not  primarily to protect  investors in the regulated  entity.  The
Company is currently in compliance with the net capital  requirements in each of
the Eastern and Central European jurisdictions in which the Company operates.

         The  SEC,  the  Austrian  Ministry  of  Finance,   other   governmental
authorities and SROs have the authority to institute  administrative or judicial
proceedings against any entity subject to their  jurisdiction,  and the officers
and employees of any such entity. These proceedings may result in censure, fine,
civil  penalties  (including  treble  damages  in the  case of  insider  trading
violations),  the issuance of  cease-and-desist  orders, the  de-registration or
suspension  of  a  broker-dealer,   investment  adviser  or  futures  commission
merchant,  the statutory  disqualification of its officers or employees or other
adverse  consequences,  and, even if none of such actions is taken, could have a
material adverse effect on the Company's perceived creditworthiness,  reputation
and  competitiveness.  Customers  of the  Company or others who allege that they
have been damaged by the Company's violation of applicable  regulations also may
seek to obtain  compensation  from the Company,  including  the unwinding of any
transactions with the Company.

                                       7
<PAGE>

         In addition to the existing laws and regulations affecting the Company,
additional  legislation  and  regulations,   amendments  to  existing  laws  and
regulations  may be adopted in the  future,  or  changes in  interpretations  or
enforcement of existing laws and regulations  may be adopted in the future.  Any
such event could directly affect the manner and operation and  profitability  of
the Company.

         In view of the inherent  difficulty of  predicting  the outcome of such
matters,  the Company cannot state what the eventual  outcome of pending matters
against EBI Securities will be. Management believes, based upon discussions with
the Company's counsel, that the outcome of such matters will not have a material
adverse affect on the consolidated financial condition of the Company but may be
material to the Company's  operating results for any particular period depending
on the  outcome  of the matter  and the level of the  Company's  income for such
period.

Competition

         The Company is engaged in a highly competitive  business.  With respect
to one or more  aspects of its  business,  the  Company  encounters  substantial
competition  from both foreign and domestic  businesses in the United States and
Central and Eastern Europe.  Its competitors  include an elite list comprised of
member  organizations  of the New  York  Stock  Exchange  and  other  registered
securities  exchanges in North America and Central and Eastern  Europe.  A large
number  of  established  and  well-financed  entities  including   multinational
businesses  and investment  banking firms such as Bank Austria,  Creditanstaldt,
Credit  Suisse-First  Boston,  ING  Bearings  and ABN  Amro  have  recently  and
substantially increased their business activities in Central and Eastern Europe.
Nearly all of such  entities have  substantially  greater  financial  resources,
technical  expertise  and  managerial  capabilities  than the Company.  Discount
brokerage firms  affiliated  with  commercial  banks and companies which provide
electronic  on-line trading provide additional  competition.  In many instances,
the  Company is also  competing  directly  for  customer  funds with  investment
opportunities offered by real estate,  insurance,  banking, and savings and loan
industries.  The Company competes  principally on the basis of service,  product
selection, location and reputation in its local markets.

Employees

         At October  30,  1998,  the Company  currently  has  approximately  450
full-time  employees  and 40 part-time  employees.  No employees  are covered by
collective bargaining agreements and the Company believes its relations are good
with both its employees and its independent contractors and consultants.

Compliance with Environmental Regulations

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

                                       8

<PAGE>

Risk Factors

               The  Company  faces a  variety  of  risks in the  conduct  of its
business, any of which could result in a material adverse effect on the Company,
its  business  and  its  financial  performance.  Certain  of  these  risks  are
summarized  below.  This  summary is not  intended to be a complete  list of all
matters  that could  adversely  affect the  Company,  and there are many factors
beyond the  Company's  control that affect it, its  business  and its  financial
performance.

Volatile Nature of Securities Business

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

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

         Lower  price  levels of  securities  may result in a reduced  volume of
transactions  and in losses from declines in the market value of securities held
in trading,  investment  and  underwriting  positions.  Sudden sharp declines in
market values of  securities  and the failure of issuers and  counterparties  to
perform their obligations can result in illiquid markets.  In such markets,  the
Company may not be able to sell  securities and may have  difficulty in covering
its  securities  positions.  Such  markets,  if  prolonged,  may also  lower the
Company's  revenues  from  investment   banking,   merchant  banking  and  other
investments,  and could have a material adverse effect on the Company's  results
of operations and financial condition.

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

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

Significant Competition Within the Securities Industry

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

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

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

                                       9
<PAGE>

Business Subject to Extensive Federal, State and Foreign Regulations

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

         The Company's  business,  and the securities  industry  generally,  are
subject to  extensive  regulation  in the United  States at both the federal and
state levels. In addition,  SROs such as the NASD require strict compliance with
their rules and regulations.  Failure to comply with any of these laws, rules or
regulations could result in fines,  suspension or expulsion,  which could have a
material adverse affect upon the Company.

         The  scope  of EBI  Securities'  and  Eastbrokers  NA's  broker  dealer
operations are subject to the terms of their respective  Restriction  Agreements
with the NASD. In the event that EBI  Securities or  Eastbrokers NA violates the
terms of its  Restriction  Agreement,  its NASD  membership  can be suspended or
revoked and the NASD may impose fines upon or censure  either EBI  Securities or
Eastbrokers NA.

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

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

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

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

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

         The  Company's  underwriting,  securities  trading,  market-making  and
arbitrage  activities  often  involve  the  purchase,   sale  or  short-sale  of
securities  as  principal  in  markets  that may be  characterized  by  relative
illiquidity or that may be  particularly  susceptible to rapid  fluctuations  in
liquidity.  The Company from time to time has large position  concentrations  in
certain  types  of  securities  or  commitments  and  in  the  securities  of or
commitments  to a single  issuer,  including  sovereign  governments  and  other

                                       10
<PAGE>

entities, issuers located in a particular country or geographic area, or issuers
engaged  in a  particular  industry.  Through  its  subsidiaries  and  affiliate
offices,  the  Company  engages  in  proprietary  trading  of  Eastern  European
securities  with an emphasis  on  government  and  corporate  bonds,  local debt
instruments and Central and Eastern  European equity  securities,  which involve
risks associated with the political  instability and relative currency values of
the nations in which the issuer  principally  engages in business as well as the
risk of  nationalisation.  In  addition,  the  Company  has,  from time to time,
substantial  position  concentrations  in high yield issuers or  commitments  to
high-yield issuers.

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

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

         The  Company  derives  a  significant   portion  of  its  revenue  from
commissions  generated by its broker dealers from retail brokerage  transactions
in equity and debt securities,  underwriting  activities and private placements.
The Company  believes that as the business of the broker dealers  develops,  the
broker dealers will engage in securities  trading for their own accounts.  These
activities  may  involve the  purchase,  sale or short sale of  securities  as a
principal and the risk of a change in the market price of such securities and of
a  decrease  in the  liquidity  of  markets,  all of which may limit the  broker
dealer's ability to resell  securities it purchased or to repurchase  securities
sold in such transactions.  Principal and underwriting transactions also involve
economic,  political,  credit, currency,  interest rate and other related risks,
any of which  could  result  in an  adverse  change in the  market  price of the
relevant  securities.  See  "Management's  Discussion  and  Analysis  or Plan of
Operation".

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

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

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

         There  can  be no  assurance  that  the  Company  will  not  experience
significant  losses as a result  of such  activities.  See Item 6  "Management's
Discussion and Analysis or Plan of Operation".

Derivative Financial Instruments

         At the  present  time,  the  Company  does  not  engage  in the  use of
derivatives  financial  instruments.  In many of the countries where the Company
has operations (i.e., Russia, Kazakhstan and Bulgaria), the local currencies are
referred to as "soft" or  "exotic".  As such,  there are very few, if any,  cost
effective hedging  strategies  available to the Company or potential  investors.
The Company's  inability to engage in currency hedging  activities may result in
its  earnings  being  subject  to  greater   volatility  due  to  exchange  rate
fluctuations.

Requirements for Additional Capital

         The  Company  may need to raise  additional  funds to  provide  working
capital or in order for the  Company to respond to  unforeseen  needs or to take
advantage of  unanticipated  opportunities.  Over the longer term,  it is likely

                                       11
<PAGE>

that the Company will require substantial  additional monies to continue to fund
the Company's  working  capital  needs.  There can be no assurance that any such
funds will be  available  at the time or times  needed,  or  available  on terms
acceptable  to the Company.  If adequate  funds are not  available on acceptable
terms, the Company may not be able to take advantage of market opportunities, to
develop new services or products or otherwise respond to competitive  pressures.
Such inability could have a material  adverse effect on the Company's  business,
financial condition and results of operations.

Dependence upon Availability of Capital and Funding

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

         All  repurchase  transactions  and a  portion  of  the  Company's  bank
borrowings are made on a collateralized basis. Liquidity management includes the
monitoring  of assets  available to  hypothecate  or pledge  against  short-term
borrowing.  The Company maintains borrowing  relationships with a broad range of
banks,  financial  institutions,  counterparties  and others.  The volume of the
Company's  borrowings  generally fluctuates in response to changes in the amount
of  resale  transactions  outstanding,  the  level of the  Company's  securities
inventories  and overall  market  conditions.  Availability  of financing to the
Company can vary depending upon market conditions, the volume of certain trading
activities,  credit  ratings,  credit  capacity and the overall  availability of
credit to the  securities  industry and there can be no assurance  that adequate
financing to support the Company's  businesses  will continue to be available in
the  future.  See  Item 6  "Management's  Discussion  and  Analysis  or  Plan of
Operation".

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

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

Potential Securities Laws Liability

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

Dependence on Personnel and Certain Key Management

         Most aspects of the Company's  business are dependent on highly-skilled
individuals. The Company devotes considerable resources to recruiting,  training
and compensating  such individuals and has taken further steps to encourage such
individuals  to remain in the  Company's  employ.  Individuals  employed  by the
Company  may,  however,  choose to leave the Company at any time to pursue other
opportunities.   In  addition,  the  operation  of  the  Company's  business  is
principally dependent on certain key management personnel. In particular, Martin
A. Sumichrast,  Wolfgang Kossner, and Peter Schmid have played significant roles
in the promotion,  development and management of the Company.  Wolfgang  Kossner
serves  in an  advisory  role  and is not  compensated  by the  Company.  If Mr.
Kossner's affiliation to the Company were to cease, or he was unable to continue
to  serve  in this  role,  there  may be a  significant  adverse  effect  on the
performance of the Company as a whole. Martin A. Sumichrast and Peter Schmid are
officers,  directors,  and  employees of the Company.  If the  employment by the
Company of either of these two people terminates,  or they are unable to perform

                                       12
<PAGE>

their duties,  there may be a significant  adverse effect on the  performance of
the Company as a whole.  The Company's  potential  growth and any expansion into
areas and  activities  such as new markets or the  development  of new  products
requiring  additional  expertise will be expected to place additional demands on
the  Company's  human  resources.  These  demands  are  expected  to require the
addition of new management personnel and the development of additional expertise
by existing  management  personnel.  The failure to acquire such  services or to
develop such  expertise  could have a material  adverse  effect on the Company's
prospects  for  success.  Competition  for  such  personnel  is  intense  and no
assurance  can be given  that the  Company  will be able to hire  and/or  retain
adequate  personnel.  At the  present  time,  the  Company  has a  key-man  life
insurance  policy in effect on Mr.  Sumichrast.  However,  no  assurance  can be
provided  that the proceeds from such policy will be adequate to offset the loss
of his services.  The Company does not have key-man life  insurance  policies in
effect  with  respect to Messr.  Kossner or Schmid.  See Item 9  "Directors  and
Executive Officers of the Registrant."

Operating Losses and Financial Condition

         Since its  formation,  the Company has suffered  substantial  cash flow
deficits and  operating  losses.  The net loss for the year ended March 31, 1998
was  $4,947,557.  As of such date, the Company had cash and cash  equivalents of
$7,156,702.  There can be no assurance that the Company's future operations will
be  profitable  or  that it will  have  available  funds  adequate  to fund  its
operations.  Should the  operations of the Company be  profitable,  it is likely
that the  Company  would  retain much or all of its  earnings to finance  future
growth and expansion.

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

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

Dilutive and Other Adverse Effects of Outstanding Options and Warrants

         Under the terms of the outstanding  Class A, B and C warrants,  options
issued under the Company's 1996 Stock Option Plan, and other outstanding options
and warrants, the holders thereof are given an opportunity to profit from a rise
in the  market  price of the  Common  Stock  with a  resulting  dilution  in the
interests of the other  shareholders.  The terms on which the Company may obtain
additional  financing may be adversely affected by the existence of such options
and warrants.  For example, the holders of the warrants could exercise them at a
time when the Company was attempting to obtain additional  capital through a new
offering  of  securities  on terms more  favorable  than those  provided  by the
warrants and options.

Possible Adverse Effects of Authorization and Issuance of Preferred Stock

         As of December  1997, the Company's  Board of Directors  authorized the
issuance of up to 10,000,000  shares of preferred stock. As of October 30, 1998,
no shares of preferred  stock were issued.  The Board of Directors has the power
to  establish  the  dividend  rates,  liquidation  preferences,  voting  rights,
redemption  and  conversion  terms,  and  all  other  rights,   preferences  and
privileges  with respect to any series of preferred  stock.  The issuance of any
series of preferred  stock having  rights  superior to those of the Common Stock
may result in a decrease  in the value or market  price of the Common  Stock and
could  be used by the  Board of  Directors  as a means to  prevent  a change  in

                                       13
<PAGE>

control of the Company.  Future  issuances  of  preferred  stock may provide for
dividends,  certain  preferences in liquidation,  as well as conversion  rights.
Such preferred  stock issuance could make the possible  takeover of the Company,
or the removal of management  of the Company,  more  difficult.  The issuance of
such preferred stock could discourage hostile bids for control of the Company in
which  shareholders  could receive  premiums for their Common Stock or warrants,
could adversely  affect the voting and other rights of the holders of the Common
Stock, or could depress the market price of the Common Stock or warrants.

Delisting of Securities to Adversely Affect Market

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

Specific Risks of the Geographic Area Covered by the Company

         The  Company's  investments  will be primarily in securities of issuers
resident in an area which is  currently in a state of flux - Central and Eastern
Europe and Central Asia. Its political  institutions  and economic  policies now
face the challenges of rapid change.  Its  population is ethnically  diverse and
cultural and religious tensions abound.  Memories of conflicts,  past injustices
and the legacy of the denial of justice and the  expropriation  of property will
continue to create  tension for years to come.  These problems will compound the
difficulties of the change from a centrally planned economy to a market economy.
For these reasons the Company's investments will be subject to risks of a nature
and degree not normally  encountered in relation to more developed economies and
additional to those inherent in any equity investment. Specific examples of some
of these risks are described below:

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

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

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

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

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

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

                                       14
<PAGE>

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

  - Taxation: Taxation of dividends and capital gains received by non-residents
    varies among the selected  countries.  In addition,  the selected  countries
    generally have less well-defined tax laws and procedures,  and such laws may
    permit  retroactive  taxation.  As a result, the Company could in the future
    become  subject to local tax  liabilities  that had not been  anticipated in
    conducting its investment activities or valuing its assets.

Enforceability of Civil Liabilities

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

Item   2.      Description of Property

         The Company does not own any real property.  Its corporate  offices are
located in Rockville, Maryland. At March 31, 1998, the Company leased its office
space in Rockville, Maryland and through its subsidiaries it leased office space
in New York, New York; Vienna,  Austria;  Klagenfurt,  Austria; Sofia, Bulgaria;
Zagreb,  Croatia;  Budapest,   Hungary;  Almaty,  Kazakhstan;   Warsaw,  Poland;
Bucharest,  Romania; Moscow, Russia; Bratislava, Slovak Republic; and Ljubljana,
Slovenia.  Commencing  with the  acquisition  of EBI  Securities in May 1998 the
Company also leased office space in Denver, Colorado; Aspen, Colorado;  Colorado
Springs, Colorado; Meza, Arizona; La Jolla, California; Los Angeles, California;
Newark,  Delaware;  Boca  Raton,  Florida;  Baltimore,   Maryland;   Farmington,
Michigan;  Aberdeen, New Jersey; Sea Girt, New Jersey; Albuquerque,  New Mexico;
Charlotte, North Carolina; Seattle, Washington; and Spokane, Washington.

         The leases expire at various times over the next five years. At current
production  levels,  the  Company  believes  its leased  space is  suitable  and
adequate.  However, if volume and activity increases, it may necessitate leasing
additional office space.

Item   3.      Legal Proceedings

         Through its recently acquired subsidiary,  EBI Securities,  the Company
is subject to several legal proceedings in various jurisdictions  throughout the
United States.

         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

                                       15
<PAGE>

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.

         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.

Item   4.      Submission of Matters to a Vote of Security Holders

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






                                       16
<PAGE>



                                     PART II

Item   5.      Market for Common Equity and Related Stockholder Matters

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

         The following table sets forth the reported high and low bid quotations
on a calendar year basis (as adjusted for the one-for-five  reverse split of the
Company's  Common  Stock) of the Common  Stock for the periods  indicated.  Such
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission and may not necessarily represent actual transactions.

                                                 Common Stock
                                 ---------------------------------------------
                                         High                    Low
                                 ---------------------- ----------------------
               1996

    First Quarter                      $  9.0625            $   5.0000
    Second Quarter                     $ 13.7500            $   5.9375
    Third Quarter                      $ 11.2500            $   4.5625
    Fourth Quarter                     $  6.0000            $   3.7500

               1997
    First Quarter                      $  5.2500            $   3.3750
    Second Quarter                     $  7.5000            $   4.3125
    Third Quarter                      $  7.2500            $   6.5000
    Fourth Quarter                     $ 11.1250            $   6.3750

               1998
    First Quarter                      $ 11.0000            $   8.3750
    Second Quarter                     $ 10.5000            $   4.0000
    Third Quarter                      $ 14.0000            $   4.0000
    Fourth Quarter                     $  5.0000            $   3.8750
    (through October 26, 1998)

         On October 26,  1998,  the closing bid price for the  Company's  Common
Stock as reported on the NASDAQ  SmallCap  Market system was $5.00 per share. On
that date  there  were  approximately  70  holders  of  record  of Common  Stock
(including  entities  which  hold  stock  in  street  name on  behalf  of  other
beneficial owners).

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

         On December  10, 1996,  the Board of Directors  approved a plan whereby
the  Company was  authorized  to begin a buy-back  program of its Common  Stock.
Under the terms of this plan,  the Company was  authorized  to  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.

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

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

                                       17
<PAGE>

         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  NA. In a
separate but related transaction to the Eastbrokers NA acquisition,  the Company
sold 2,500  shares of the Common  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 valued at $4.00
per share.

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

         During the year ended March 31,  1997,  the  Company  issued a total of
37,000  shares of Common  Stock for  consulting  services  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.

         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.) 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.

         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 based on the average  closing price for the period
April 1, 1997 through September 30, 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
bearing 8 percent interest in the amount of $300,000 to the Company.

         On May 14, 1998 in connection  with the  acquisition of EBI Securities,
the Company issued  445,000  shares of Common Stock to the selling  corporation,
Cherry Creek Investments, Ltd. During the five days before the effective date of
the  acquisition,  the average  closing price of the Common Stock was $9.375 per
share for its fully registered and unrestricted shares. Due to the nature of the
restricted  shares,  the relatively large block of shares  transferred and other
various  restrictive  covenants  regarding the final allocation of these shares,
the Board of Directors  assigned a value of $5.00 per share for a total value of
$2,225,000 to this transaction.

         Also in connection with the acquisition of EBI Securities,  the Company
incurred an obligation to deliver  25,000 shares of Common Stock to Sutton as an
investment  banking  advisory  fee. To maintain  consistency  with the  assigned
valuation on the acquisition of EBI Securities,  the Board of Directors assigned
a value of $5.00 per share for a total value of $125,000 to this transaction.

         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.

Item   6.         Management's Discussion and Analysis or Plan of Operation

         The  information  contained  in this  Item  includes  "forward  looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of  1995.   In   addition,   from  time  to  time,   the   Company  may  publish
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended,  and Section 21E of the  Securities and Exchange Act of
1934,  as  amended,  or make oral  statements  that  constitute  forward-looking
statements.  These  forward-looking  statements  may  relate to such  matters as
anticipated  financial  performance,   future  revenues  or  earnings,  business
prospectus, projected ventures, new products, anticipated market performance and

                                       18
<PAGE>

similar  matters.  Readers are  cautioned  not to place undue  reliance on these
forward looking  statements,  which are made as of the date hereof.  The Private
Securities   Litigation   Reform  Act  of  1995   provides  a  safe  harbor  for
forward-looking  statements.  In order  to  comply  with  the  terms of the safe
harbor,  the Company  cautions readers that a variety of factors could cause the
Company's  actual results to differ  materially from the anticipated  results or
other expectations expressed in the Company's forward-looking statements.  These
risks  and  uncertainties,  many of which  are  beyond  the  Company's  control,
include,  but are not  limited  to:  (i)  transaction  volume in the  securities
markets,  (ii) the volatility of the securities  markets,  (iii) fluctuations in
interest rates, (iv) changes in regulatory  requirements  which could affect the
cost of doing  business,  (v)  fluctuations  in  currency  rates,  (vi)  general
economic conditions, both domestic and international,  (vii) changes in the rate
of inflation and related impact on securities  markets,  (viii) competition from
existing  financial  institutions  and other new  participants in the securities
markets,  (ix) legal  developments  affecting the  litigation  experience of the
securities  industry,  (x)  changes  in federal  and state tax laws which  could
affect the  popularity  of  products  sold by the Company and (xi) the risks and
uncertainties  set forth under the caption "Risk  Factors" which appears in Item
1.  Further,  the Company  undertakes  no  obligation  to release  publicly  any
revisions to these forward looking statements to reflect events or circumstances
occurring  after  the  date  hereof  or  to  reflect   unanticipated  events  or
developments.

General

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

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

         The  earnings of the Company  are  subject to wide  fluctuations  since
there are many  factors  over which the  Company  has little or no  control.  In
particular,  the overall volume of trading,  the volatility and general level of
market prices, and fluctuations in foreign currency exchange rates are important
variables which may significantly affect its operations.

         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%.

Plan of Operation

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

         The  Company's  business  strategy is to (1) utilize its  marketing and
Central and Eastern  Europe  emerging  market  expertise  to take  advantage  of
opportunities  for growth in this sector of the global  securities  market;  (2)
develop  the base of its asset  management  business  through  concentrating  on
Central and Eastern European debt and equity securities; (3) enhance and develop

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<PAGE>

the Company's  merchant banking  activities;  (4) identify  potential  corporate
finance  candidates for investment  banking  opportunities;  and (5) utilize its
expertise in the privatization activities still available in Central and Eastern
Europe.  Management also believes there are significant  opportunities available
in this region for specialized account and institutional sales.

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

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

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

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

Results of Operations

     Fiscal Year 1997 Compared with the Fiscal Year 1998

         As noted in the "General" section,  the Company's principal  activities
have changed  dramatically  during the past two fiscal years.  During the fiscal
year ended March 31, 1997,  the Company  completely  disposed of its interest in
the  Hotel  and  acquired  Eastbrokers  Vienna,  an  Austrian  based  securities
broker-dealer providing financial services in Central and Eastern Europe through
its network of subsidiaries  and affiliate  offices.  Readers of this Report are
cautioned  that a  comparison  between  Fiscal Year Ended March 31, 1997 and the
Fiscal  Year  Ended  March  31,  1998  may  provide  only   minimal   meaningful
information.

         A non-recurring item reflected in the operations of the Company for the
year ended March 31, 1997 is the gain on the  disposition  of available for sale
securities  of  Moravacentrum  a.s.  of  $229,574.   Other  non-recurring  items
reflected  in the  operations  for the year ended March 31, 1997 are the loss on
discontinued  operations of  approximately  $1,300,000 on the disposition of the
Company's  entire  interest  in the  Hotel  and the gain on the  disposition  of
available  for  sale  securities  which  resulted  in a fourth  quarter  gain of
approximately  $655,000. A non-recurring item reflected in the operations of the
Company for the year ended March 31,  1998  includes  the sale of the 51 percent
interest in  Su(beta)warenindustrie  Beteiligungs  GmbH ("SWIB") to Peter Schmid
for approximately $1,000,000.

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

         Pro forma  results of  operations  as  presented  in Note 5 - "Business
Acquisitions"  reflect  total  revenues  for the year  ended  March 31,  1997 as

                                       20
<PAGE>

$8,559,786.  Comparing  total  revenues  for the year ended  March 31, 1998 (the
first full year of consolidated  operations) of $10,138,881 to pro forma results
of operations for the year ended March 31, 1997, shows an increase of $1,579,095
USD.

         The net tax benefit  represents  the  cumulative  effect of  individual
subsidiaries' unique tax calculations.  In some instances, certain revenue items
are  non-taxable  in accordance  with statutory  requirements  in the country in
which the office is located.  In others,  net  operating  losses  available  for
carryforward  created a tax benefit.  As discussed in Note 13 - "Income  Taxes",
the  Company  has   approximately   $12,850,000   USD  in  net  operating   loss
carryforwards  available  in Austria  and  approximately  $2,985,000  USD in net
operating  loss  carryforwards  available for future use in the U.S. The Company
has established a valuation allowance for the Austrian net operating losses. The
Company also expects its Austrian  operations to return to  profitability in the
fiscal year ended  December  31,  1998 as its  efforts in various  privatization
activities are realized and such  activities  should generate an increase in the
value of certain Company  holdings.  Further,  the Austrian net operating losses
are available for carryforward indefinitely.  Accordingly,  the Company believes
it is more likely than not that these  benefits  will be realized in the future.
Regulations in the Slovak  Republic  provide  capital gain  distribution  income
related to Slovak  privatization  activities is non-taxable.  Eastbrokers Vienna
was actively  involved in such activities and received such income in the fiscal
quarter ended March 31, 1998. It is unlikely that  Eastbrokers  Vienna will have
similar transactions in the future. As noted in the following  paragraph,  other
activities occurred in the fourth quarter that contributed to the current year's
tax benefit.  The U.S. net operating loss  carryforwards will expire, if unused,
in varying  amounts  through the year 2013.  The Company does not anticipate any
significant changes in the effective tax rates.

         In Europe,  the  expenses  of the  Company  generally  increase  in the
quarter ending  December 31 as compared to the quarter  ending  September 30 due
primarily  to a  "seasonal"  effect.  July and  August are  typically  "holiday"
(vacation) months in Europe. Revenues and expenses generally respond accordingly
to this seasonal  effect.  The quarter ending  December 31 is typically a strong
quarter in Europe as people  return from  holiday  and seek to complete  pending
transactions  by  calendar  year  end.  The  Company  is also  pursuing  several
corporate finance  opportunities and has found that outsourcing  portions of the
work to  industry  experts is sound  corporate  policy to manage  personnel  and
overhead costs. Many of the projects began in late September/early  October 1996
and 1997 and continued through year end. General and administrative expenses, as
well as other  operational  expenses,  increased due to the Company's  increased
focus on privatization activities in countries that are currently in the process
of opening  their markets to western  investors.  Involvement  in  privatization
activities generally involves much time and patience as the investments begin to
come to fruition.  Prior experience in the  privatization  process is one of the
Company's more important abilities.

         The costs  associated with the Company's  involvement in  privatization
activities,  its  pursuit of  corporate  finance  opportunities,  the  continued
downturn of the economy of the Czech  Republic and the effect this  downturn has
had on the Company's  operations,  the costs  associated with the acquisition of
Eastbrokers  Vienna  and the  establishment  of  Eastbrokers  NA and an  overall
increase  in  general  and  administrative  expenses  are  the  primary  factors
contributing to the negative operating cash flows experienced in the fiscal year
ended March 31, 1998. The Company  anticipated to offset many of these operating
expenses with revenue generated from brokerage commissions of Eastbrokers NA and
ongoing  privatization  projects  in  Central  and  Eastern  Europe.  With  this
unexpected  decrease in revenue and increased  cost,  the  Company's  $4,947,557
operating  loss  was  significantly   larger  than   anticipated.   The  Company
anticipates  that  preliminary  work  performed  related  to  corporate  finance
activities will begin  generating  operating cash flows in the second quarter of
the  Company's  fiscal year ending March 31, 2000 and its efforts in the various
privatization  activities  will begin  generating  operating cash flows near the
beginning of 1999. However, there is no guarantee that such operating cash flows
will materialize by the anticipated  dates or whether they will be sufficient to
offset other operating expenses.

         Significant items on the statements of cash flows are primarily related
to customers' receivables,  payables, and the related underlying securities. The
Company's  policy is to close as many open  positions as possible at fiscal year
end and  re-evaluate  its  strategic  focus as it moves into the first  quarter.
Also,  the  regulatory  bodies in several of the  countries in which the Company
operates  prefer to see a strong,  liquid balance sheet at year end. The Company
strives to accommodate the needs of these regulatory agencies.

         As a broker/dealer in securities, the Company will periodically acquire
positions  in  securities  on behalf of its  clients.  As  disclosed in Note 3 -
"Financial Instruments",  the Company has title to various financial instruments
in the  countries  in which it  operates.  Certain of these  investments  may be
characterized   as  relatively   illiquid  and  potentially   subject  to  rapid
fluctuations  in liquidity.  Those  securities  are classified as "available for
sale securities".  As of March 31, 1997, the Company's material concentration in

                                       21
<PAGE>

the  securities  portfolio  is limited to its  investment  in Vodni Stavby Praha
a.s.,  a  security  traded on the  Prague  Stock  Exchange  Main  Market  (Czech
Republic).  As of March 31, 1997,  the market value of the  Company's  ownership
interest in this security was  approximately  $1,750,000.  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.

         The Company  recognizes it has concentrated a significant amount of its
assets as advances to its  affiliates  and  investments  in  affiliates.  At the
present  time,  the bulk of these  loans  have  been  related  to  privatization
activities. Since the Company's affiliates are generally accounted for as equity
investments, these advances do not eliminate on consolidation.  Receivables from
affiliated  companies  and other  receivables  are due on  demand.  The  Company
expects to collect these  receivables  within the next 12 months.  For the years
ended  March 31,  1997 and 1998,  the  Company  has  investments  in  affiliated
companies  of  $8,272,240  and  $156,800,  respectively,  and  receivables  from
affiliated   companies  of  $1,511,917   and   $2,286,277,   respectively.   The
concentration of investments in affiliates by country are as follows: for 1997 -
Austria --  $7,755,997,  Bulgaria -- $332,584,  Slovenia -- $114,529,  Others --
$69,130;  and for 1998 - Slovenia  and  Croatia  --  $156,800.  The  significant
decline in the investments in affiliated companies is primarily  attributable to
WMP and the  conversion  from the equity method to full  consolidation  for this
subsidiary.  The  concentration of receivables from affiliates by country are as
follows:  for 1997 - Austria --  $675,456,  Bulgaria  --  $536,587,  Slovenia --
$150,994,  Czech Republic -- $72,994,  Others -- $75,886; and for 1998 - Austria
--  $2,286,277.  The cash  investments  noted in the  statements  of cash  flows
consist of direct  investments  in  affiliates  and the advances to  affiliates.
These cash  investments in each affiliate for the year ended March 31, 1997 were
as follows:  WMP  (Austria) --  $2,455,880,  Bulgaria --  $894,513,  Slovenia --
$150,994,  Czech  Republic  --  $72,994,  and  Others  --  $44,756.  These  cash
investments in each affiliate for the year ended March 31, 1998 were as follows:
Eastbrokers NA -- $512,036. As noted elsewhere in this Form 10-KSB,  Eastbrokers
Vienna owns 51 percent of WMP. During the year ended March 31, 1997, Eastbrokers
Vienna participated in a capital increase in WMP in which it acquired additional
shares sufficient to maintain its proportionate ownership percentage.

         The operating activities of the Eastbrokers Vienna are impacted by many
different  factors.  Some of the more  important  factors  are  security  market
conditions,  level and  volatility of interest  rates,  competitive  conditions,
economic and  political  conditions,  inflation,  availability  of short-term or
long-term funding and capital, and the volume of securities transactions done by
the firm.  These  factors will be addressed on a country by country  basis where
significant Eastbrokers Vienna's operations are located.

         Austria.  On July 1, 1996, the Vienna Stock Exchange ("VSE") introduced
an  electronic  trading  system  to its  continuous  trading  section  which has
significantly  reduced  the  overall  volume  of  institutional  trades  through
independent brokers.  Until that point in time,  independent brokers such as WMP
handled  many  of  these  types  of  trades.   This  change   accounted  for  an
approximately  25 percent  decline in WMP's 1996  revenues.  In response to this
change by the VSE, WMP has applied for an expanded  banking  license which would
allow it to hold  customer  accounts and perform  other  banking  functions  and
develop  new  revenue  streams.  In  addition,  WMP has  become a member  of the
European  Association  of Securities  Dealers  ("EASD") and is expected to begin
market making activities on the EASDAQ within the next 12 months.  There were no
significant  changes in the overall  competitive  conditions  between  brokerage
companies except for the  introductions of the electronic  trading system to the
continuous trading section of the VSE. The total volume of transactions  handled
by the Austrian offices increased in 1996 but the average profit per transaction
decreased in 1996 as compared with 1995. At 2.5 percent, Austria's real economic
growth in 1997 was higher than  projected,  mainly thanks to the solid expansion
of real goods exports of 14.9 percent. This favorable development is to the most
part attributable to stepped-up  foreign trade activity and hefty gains recorded
by Austria's export markets.  Austria's  accession to the European Union and the
opening up of Eastern  Europe  have  helped  Austrian  exports  advance  from 37

                                       22
<PAGE>

percent  in 1994 to 44  percent  in 1996.  In  addition,  the  stabilization  of
European  exchange  rates largely  reversed the downtrend of the real  effective
exchange rate in the past few years.  Starting in 1993, the  devaluations of the
weak currencies had gradually undermined Austria's competitiveness. This changed
for the  better  in 1996  and  1997,  not  least  owing to the  prospect  of the
establishment  of EMU,  and  resulted in a  cumulative  improvement  of the real
effective  exchange rate of 5.4 percent in 1996 and 1997. The confluence of this
development and wage moderation  significantly  shored up the competitiveness of
the Austrian economy in the past two years, pushing it back to the level it held
in the early  1990s.  At 5.1  percent,  the federal  budget  deficit  posted its
highest  level  in 1995.  By 1997 it had been  trimmed  to 2.5  percent  through
subdued public  consumption and tax hikes, so that Austria would meet the fiscal
convergence criteria of the Maastricht Treaty. In the opinion of management, the
outlook for the Austrian economy in 1998 and 1999 is very positive.  In its most
recent  projections  the  Austrian  Institute  for  Economic  Research  ("WIFO")
projects  growth  rates  of 3  percent  and  3.2  percent  for  1998  and  1999,
respectively.  Interest  rates  as  measured  by an  average  commercial  credit
declined  from 7.82  percent in 1995 to 6.96  percent in 1996 to 6.50 percent in
1997 and  further to 6.39  percent in August  1998.  The  overall  economic  and
political  situation  in Austria  has been very  stable and the  government  has
worked  diligently to reduce  budgetary  pressure.  The annual deficit peaked in
1995 with 82.3 billion ATS to 107.l  billion ATS in 1996 and to 65.7 billion ATS
1997.  Inflation  peaked  in 1992  with 4.1  percent  annual  increase  and then
continued  to drop to 3.6 percent in 1993,  3.0 percent in 1994,  2.2 percent in
1995,  1.9 percent in 1996,  1.3 percent in 1997 and to 1.2 percent in the first
half of 1998. There are no significant restrictions on transfers of funds to the
parent company.

         Czech  Republic.  Between  1995 and 1996,  the second  wave of the mass
privatization  was ending and the "third wave" was beginning.  During this time,
foreign   competitors  began  entering  the  brokerage  and  investment  banking
industry.  In the fourth  quarter of 1996, the Czech stock markets began showing
signs of instability  and the overall  market began a steep decline.  The market
dropped  because of the  outflows of foreign  capital  due to profit  taking and
institutional  investors  adjusting  their  portfolios  to focus on other,  more
regulated  Eastern European  markets.  In addition,  the Czech Republic has been
criticized for not establishing  proper securities  regulations.  In response to
these  criticisms,   the  Czech  government   recently  adopted  new  securities
legislation and is in the process of establishing a Securities  Commission based
upon the model provided by the U.S. Securities and Exchange  Commission.  Two of
the major goals of this  legislation  are to increase  the  transparency  of the
market and to afford minority  shareholders  greater protection.  Interest rates
have been relatively stable between 1995 and 1997 at approximately 13 percent on
an annualized  basis.  During 1997,  the main index of the Prague Stock Exchange
saw a gradual decline from 550 to 460. The overall volume,  although  relatively
stable,  was unusually low with an average turnover of approximately 100 million
Czech Korunas.  During the first half of 1998, the market index hovered  between
the 450 and 500 range before dropping approximately 30 percent in the first week
of October 1998.  This decline  represented a 41 percent drop from the levels of
the prior year and a  historical  low.  Average  daily  turnover  has shown some
improvement but it remains  uncertain whether these levels will be sufficient to
maintain the market or if the market will be subject to additional  corrections.
The overall economic and political situation in the Czech Republic has undergone
serious  turmoil which has reduced the  confidence  of foreign  investors in the
market. Additionally, foreign investors appear to be moving into the Hungary and
Poland  where  the  markets  appear  to be more  transparent  and  have  greater
protection for the minority  investors.  After remaining  relatively  stable for
most of 1995 and 1996 at  approximately  8 percent per annum,  inflation  in the
Czech Republic  declined slightly during 1997 followed by a dramatic increase in
the first quarter of 1998 before  settling in at  approximately  10.5 percent by
the end of the third quarter 1998. Much of the  inflationary  and overall market
turmoil was  believed to have been brought  about the economic  crises in Russia
and Asia.  There has been no significant  change in the  availability or cost of
capital  in the Czech  Republic,  although  interest  rates  have  increased  by
approximately  2.50  percent  in 1997 to  13.00  percent.  Interest  rates  have
remained  relatively  constant  at this level  through  1998.  The result of the
decline in the overall  market  conditions  has  negatively  affected  the Czech
brokerage industry,  including the Company's Czech operations.  The total volume
of securities  transactions  in the Czech  Republic has decreased  substantially
along  with an  overall  reduction  in average  profit  per  transaction  due to
increased  competition.  This has caused a decrease in revenue in the  Company's
Prague  operations  and a net operating  loss from this unit. In response to the
unexpected  downturn in the Czech Republic,  the Company has sold its operations
in the Czech Republic on June 1998.

         Hungary.  The  Budapest  Stock  Exchange  ("BSE")  became  one  of  the
pre-eminent  emerging  market stock  exchanges in 1996 thanks to overall  market
gains of over 170  percent  for the year ended  December  31, 1996 which led the
Budapest Stock Market Exchange Index ("BUX") to close the year at 4,134.  During
1997,  the BUX reached a high of 8,107 before  retreating  to the 6,000 level in
November 1997.  Positive  developments  helped the BUX recover to  approximately
8,000  by the end of  1997.  During  1998,  the BUX  reached  a  record  high of
approximately  9,100  and  then  dropped  (due  to  global  market  turmoil)  to
approximately 3,600 before recovering to approximately 5,100 as of October 1998.
Currently  the BUX is  approximately  5,100.  As the index grew,  so did overall
market  liquidity.  Technology and  regulations  also continued to improve which
contributed  to the overall  market gains.  In 1995,  interest  rates in Hungary
reached a high of 35-40  percent as inflation  reached a high of 33 percent.  In
response to the high  inflation  and  interest  rates,  Hungary  initiated a new
fiscal policy which included economic austerity measures and creating a crawling
peg  basket  for the  currency  which  tied  the  Hungarian  Forint  to  leading
currencies. The effect of these measures stabilized the currency, interest rates
and overall  inflation which served to generate  increased  investor interest in
Hungary. By the end of 1996,  interest rates and inflation  stabilized at levels
of 20-22  percent  and 19  percent.  Interest  rates  closed  the  1997  year at
approximately  24  percent  and  declined  during  the  first  half  of  1998 to
approximately   20  percent.   Inflation  was  also  curtailed  and  dropped  to
approximately  16.5 percent during 1997. The market continued its strong closing

                                       23
<PAGE>

performance  of 1997 into the first  quarter of 1998.  Through  the end of March
1998, the BUX rose to  approximately  8,600.  The market  capitalization  of the
Budapest   Stock   Exchange  also  grew  during  this   quarterly   period  from
approximately $15 billion to approximately  $17 billion.  Accompanying the stock
market  rally of 1997,  a  number  of  leading  international  investment  banks
including ABN Amro, ING Barings,  Merrill  Lynch,  Morgan  Stanley,  and Salomon
Brothers  opened  operations in Budapest and became member of BSE.  Despite this
influx of major competition, the Hungarian office maintained its client base and
doubled its overall  turnover.  In response to this increased  competition,  the
Hungarian  office has  expanded  the  services  offered to clients.  The overall
economic and political  situation  appears to be relatively stable and continues
to  improve.  This is  evident  from the level of  investor  confidence  and the
interest by major international  investment banks. There has been no significant
change in the  availability  or cost of capital  to the other than the  interest
rate fluctuations.  The total volume of transactions  increased  dramatically in
1996 (the last year for which the Company has data) with an overall reduction in
the average profit per  transaction.  There are no significant  restrictions  on
transfers of funds to the parent company.

         Poland.  The Warsaw Stock Exchange ("WSE") is a highly regulated market
following the French model.  The  transparency of this market and the protection
afforded  minority  shareholders  has  generated  both customer  confidence  and
foreign investor interest. In 1996, the main market index rose nearly 90 percent
while the index of the twenty most capitalized  firms increased 82 percent.  The
stock  market  continued  to perform  well in 1997 and  continued  to reach even
higher  through May 1998. At that time,  the Warsaw Stock Exchange Index ("WIG")
reached a record high of over 18,000.  Unfortunately,  this market was unable to
withstand the effects of the Asian and Russian economic  crises.  By mid-October
1998,  the WIG had  dropped  over 40 percent  to below  11,000.  Interest  rates
remained high at  approximately  22 percent  through 1997 and increasing to 24.5
percent during the first half of 1998.  Economic  growth seems to have continued
into 1998 with steady economic growth of approximately 7 percent.  The brokerage
industry in Poland is highly  competitive due to restrictions on commissions and
allowable  spreads  on  securities  transactions.  As a result,  many  brokerage
companies have merged or have been acquired by well-financed  competitors.  This
political  situation appears to have been stabilized in September 1997, when the
Solidarity  Electoral  Action ("AWS") won the elections  assumed  control of the
government.  Currently  the  country is in a period of economic  stability  with
interest  rates and  inflation  heading  lower and the  currency  appears  to be
stabilizing against the major currencies.  For 1996, inflation was approximately
18 percent,  a drop of approximately 3 percent from 1995 levels but still higher
than in many  transition  economies.  Inflation  remained  at  approximately  18
percent for much of 1997  before  dropping  to  approximately  14 percent by mid
1998.  There are  restrictions on transfers of funds to the parent  company.  In
certain instances, such transfers may need the permission of the national bank.

         Slovak Republic.  Due to the unstable  political and economic situation
in the Slovak  Republic,  investor  interest  remains very low when  compared to
other countries in the region.  However,  the September 1998 election ousted the
current  political party sending a clear signal that change was not only desired
but  expected.  The  overall  trading  volume in the  market is very low and the
shares that are listed are  perceived  to be fairly  illiquid in part due to the
dominance of direct trades.  Inflation  appeared to be heading lower in 1996 and
interest rates followed.  In the first quarter of 1997, inflation appeared to be
on the rise again  which moved the  national  bank to raise  interest  rates and
restrict the money supply. In 1997, the monetary policy was aimed at maintaining
internal and external  stability.  Inflation reached a rate of approximately 6.5
percent and GDP grew at a similar pace.  For 1998,  GDP appears to be growing at
approximately  6.5 percent  with  inflation  increasing  to  approximately  7.25
percent.   Due  to  the  restrictive  monetary  policy  being  followed  by  the
government, credit is generally not available or comes with a very high interest
rate. There are no significant  restrictions on transfers of funds to the parent
company.

Foreign Currency Translation Adjustments

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

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

                                       24
<PAGE>

Slovak  Koruna and the Polish  Zloty.  For the year ended  March 31,  1997,  the
Company reported a foreign currency  translation  adjustment in its statement of
cash  flows of  approximately  $1.3  million.  The effect of the  exchange  rate
changes  on a country by  country  basis are  approximately  as  follows:  Czech
Republic  --  $600,000,  Austria --  $400,000,  Hungary --  $210,000,  Poland --
$120,000.

         Assets and  liabilities  of operations  having  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.  Foreign currency transactions
are generally  completed  transactions  denominated in a currency other than the
functional currency or changes in exchange rates that impact monetary assets and
liabilities   denominated  in  currencies  other  than  the  primary  functional
currency.

Calculation of Earnings Per Share

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

Viability of Operating Results

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

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

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

Liquidity and Capital Resources

         The  Company's  statements  of  financial  position  reflect  a  liquid
financial position as cash and cash equivalents convertible to cash represent 21
percent and 16 percent of total  assets at March 31,  1997,  and March 31, 1998,
respectively.

         The Company is subject to net capital and liquidity requirements in the
local  jurisdictions  in which it operates.  As of March 31, 1997 and 1998,  the
Company was in excess of its minimum net capital and liquidity  requirements  in
all jurisdictions in which it operates.

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

                                       25
<PAGE>

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

         In April 1997, the Company 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. The Offering
was made pursuant to an exemption from  registration  pursuant to Rule 506 under
the Securities Act of 1933, as amended (the "Securities Act").

         On February 20, 1998, the Company sold 1,227,000 newly issued units for
$6,135,000  in cash,  or $5.00 per unit,  with each  consisting  of one share of
Common Stock and one Class C Warrant. This price was approximately 40% below the
then  current  market  price.  These  units  were  offered  and sold to  various
accredited  investors.  With regard to this sale,  the  Company  relied upon the
exemption from registration pursuant to Rule 506 under the Securities Act.

         At March  31,  1997,  the  Company  had  $1,200,793  outstanding  under
repurchase  agreements.  The weighted  average interest rate on these repurchase
agreements  was 12.91  percent.  Securities  listed on the Prague Stock Exchange
Main  Market  with a  market  value of  approximately  $1,700,000  were  used to
collateralize  this  arrangement.  During the fiscal year ending March 31, 1998,
the underlying securities were sold to a third party for an amount approximating
the Company's carrying basis. The repurchase  agreements were transferred to the
new owner at the date of sale.

Effects of Inflation

         The  Company  maintains   operations  in  several  economies  that  are
considered inflationary. To the extent that inflation results in rising interest
rates and devaluation of the local currencies in relation to the U.S. Dollar, or
has other adverse  affects on securities  markets and on the value of securities
held by the Company in inventory, it may affect the Company's financial position
and results of  operations.  The 1996  inflation  rates in the  countries  where
Eastbrokers  Vienna  has  significant  operations  are as  follows:  Austria - 2
percent, Czech Republic - 8 percent,  Hungary - 19 percent, Poland - 18 percent,
and Slovak Republic - 5 percent. The 1997 inflation rates in the countries where
Eastbrokers  Vienna  has  significant  operations  are as  follows:  Austria - 3
percent, Czech Republic - 10 percent, Hungary - 18 percent, Poland - 13 percent,
and Slovak Republic - 6 percent.

New Accounting Standards

         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
impact 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 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 retained.  At this time, the Company does
not believe that this statement will have a significant impact on the Company.

                                       26
<PAGE>

         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.

Impact of the Year 2000

Year 2000

          Many  of  the   world's   computer   systems   (including   those   in
non-information  technology  equipment and systems)  currently record years in a
two-digit  format.  If not  addressed,  such computer  systems will be unable to
properly  interpret  dates  beyond the year 1999,  which  could lead to business
disruptions  in the U.S.  and  internationally  (the  "Year  2000"  issue).  The
potential  costs and  uncertainties  associated  with the Year 2000  issue  will
depend on a number of factors,  including  software,  hardware and the nature of
the  industry  in  which  a  company  operates.  Additionally,   companies  must
coordinate with other entities with which they electronically interact.

         The Company is currently in the process of a systems upgrade  unrelated
to the Year 2000 issue. In conjunction with this upgrade,  the Company is in the
process of  establishing  a program to address issues  associated  with the Year
2000. To ensure that the Company's computer systems are Year 2000 compliant, the
Company  has been  reviewing  its systems  and  programs to identify  those that
contain  two-digit  year  codes,  and the  Company  intends to  replace  them in
conjunction  with the systems  upgrade  provided by the Baan  Corporate  Off. In
addition,  the  Company  is in the  process  of  contacting  its major  external
counterparties and suppliers to assess their compliance and remediation  efforts
and the Company's exposure to them.

          In addressing the Year 2000 issue, the Company has divided its program
into six phases:

                  (1) the Inventory phase, involving the identification of items
                  that may be affected by Year 2000 compliance issues, including
                  facilities  and  related  non-information  technology  systems
                  (embedded   technology),   computer  systems,   hardware,  and
                  services and products provided by third parties;

                  (2) the  Assessment  phase,  involving the evaluation of items
                  identified  in the  Inventory  phase to  determine  which will
                  function properly with the change to the new century,  and the
                  prioritizing  of items  which will need  remediation  based on
                  their potential impact to the Company;

                  (3) the Remediation phase, involving the analysis of the items
                  that are affected by Year 2000, the  identification of problem
                  areas and the replacement of non-compliant items;

                  (4) the Testing  phase  involving  the testing of all proposed
                  repairs,  including forward date testing which simulates dates
                  in the Year 2000;

                  (5) the  Implementation  phase  consists  of placing all items
                  that  have  been  remediated  and  successfully   tested  into
                  operation; and

                  (6)  the  Integration  phase,  involving  the  testing  of the
                  Company's   business   critical   systems  in  a  future  time
                  environment with external entities.

          As of October 26, 1998,  the Company had  substantially  completed the
Inventory  phase and was also  conducting  the  procedures  associated  with the
Assessment,  Remediation, Testing and Implementation phases. The Company expects
to complete the Inventory and Assessment phase in the fourth calendar quarter of
1998.  The  Remediation  and Testing  phases with  respect to business  critical
applications  are  expected  to be  completed  by the end of the first  calendar
quarter of 1999. The Implementation phase is expected to be completed by the end
of the second calendar  quarter of 1999. The Integration  phase will commence at
the time the Company  receives its new operating  system in the fourth  calendar
quarter of 1998 and will continue  through  1999. In addition,  the Company will
identify the major business relationships of the Company by the end of the first
calendar  quarter of 1999, and many of them will be tested as soon thereafter as
practicable.   The  Company  will  continue  to  survey  and  communicate   with
counterparties,  intermediaries and vendors with whom it has important financial
and  operational  relationships  to  determine  the  extent  to  which  they are

                                       27
<PAGE>

vulnerable to Year 2000 issues.  As of October 26, 1998, the Company has not yet
received  sufficient  information from all parties about their remediation plans
to predict the outcomes of their efforts. In particular, Management believes the
level of awareness and  remediation  efforts  relating to the Year 2000 is issue
less advanced in the Eastern and Central  European  markets in which the Company
conducts business than in the United States.

         There are many risks associated with the Year 2000 issue, including the
possibility  of  a  failure  of  the  Company's  computer  and   non-information
technology  systems.  Such failures could have a material  adverse effect on the
Company and may cause systems malfunctions,  incorrect or incomplete transaction
processing  resulting in failed trade  settlements,  the  inability to reconcile
accounting books and records,  the inability to reconcile  trading positions and
balances with  counterparties,  inaccurate  information  to manage the Company's
exposure to trading risks and disruptions of funding requirements.  In addition,
even if the Company  successfully  remediates  its Year 2000  issues,  it can be
materially  and  adversely  affected by failures of third  parties to  remediate
their own Year 2000 issues.  The failure of third parties with which the Company
has  financial  or  operational  relationships  such  as  securities  exchanges,
clearing  organizations,  depositories,  regulatory  agencies,  banks,  clients,
counterparties,   vendors  and  utilities,   to  remediate  their  computer  and
non-information  technology  systems issues in a timely manner could result in a
material financial risk to the Company.

         If the  above  mentioned  risks  are  not  remedied,  the  Company  may
experience  business  interruption  or  shutdown,   financial  loss,  regulatory
actions,  damage to the  Company's  global  franchise and legal  liability.  The
Company is currently  unable to quantify the adverse  effect such risks  impose,
but management  believes that if the Year 2000 issue is not remedied there could
be a material adverse effect on the Company's  financial position and results of
operation.

         The Company does not have business continuity plans in place that cover
the Year 2000  issue.  The  Company  intends  to  evaluate  Year  2000  specific
contingency plans during 1999 as part of its Year 2000 risk mitigation efforts.

         Based upon current  information,  the Company  estimates that the total
cost of  implementing  its Year 2000  initiative  will be between  $750,000  and
$1,500,000,  including the cost of its general  systems  upgrade.  The Year 2000
costs include all activities  undertaken on Year 2000 related matters across the
Company,  including,  but not limited to,  remediation,  testing  (internal  and
external), third party review, risk mitigation and contingency planning. Through
September 30, 1998,  the Company  estimates  that it has expended  approximately
$350,000 on the Year 2000 project. These costs have been and will continue to be
funded through  operating cash flow and are expensed in the period in which they
are incurred.

         The Company's expectations about future costs and the timely completion
of its Year 2000  modifications  are subject to  uncertainties  that could cause
actual results to differ materially from what has been discussed above.  Factors
that could  influence  the amount of future  costs and the  effective  timing of
remediation  efforts include the success of the Company in identifying  computer
programs and  non-information  technology  systems that contain  two-digit  year
codes,  the nature and amount of programming and testing  required to upgrade or
replace  each of the affected  programs  and  systems,  the nature and amount of
testing,  verification and reporting required by the Company's regulators around
the  world,   including   securities   exchanges,   central  banks  and  various
governmental  regulatory  bodies,  the rate and  magnitude of related  labor and
consulting costs, and the success of the Company's  external  counterparties and
suppliers,   as  well  as  worldwide  exchanges,   clearing   organizations  and
depositories, in addressing the Year 2000 issue.

Impact of the Euro

         The Euro issue is the result of the Economic  and  Monetary  Union (the
"EMU")  which comes into effect on January 1 1999 and the  conversion  of member
states to a single currency known as the Euro. The introduction of the Euro will
have a profound impact on the way enterprises  operate.  Further, it will be one
of the most  important  changes in the economic  landscape of Europe in the next
few years.

         The single currency is expected to contribute  significantly to further
market  integration  throughout the member  countries.  Prices will be easier to
compare which should increase market transparency.  As businesses recognize that
they will no longer be exposed to foreign  currency  exchange rate risks and the
related costs of currency conversion,  cross-border  transactions within the EMU
are expected to become more attractive.

                                       28
<PAGE>

         The  introduction  of the Euro has been  described as a unique event in
history.  This  uniqueness  is also the root of potential  problems.  During the
transition  period,  companies  will be required to use two  different  currency
units. This could create a basic input functionality problem whereby enterprises
will receive  financial  information in both the Euro and the national  currency
units. A potential  output  functionality  problem may be that companies will be
required to produce  financial  information  in either the Euro or the  national
currency  unit or in some cases both  currencies.  Further  adding to  potential
problems is a requirement that historical  financial  information  stored in the
system must be converted to the Euro unit.

         The Company is currently in the process of a systems upgrade  unrelated
to the year 2000 or Euro issues.  In the course of this  upgrade and  addressing
the Year 2000 issue,  the Company will be  installing  new software that is Euro
capable  and will  evaluate  any  potential  problems  identified  that could be
related to the Euro issue.  The Company is also monitoring the compliance of its
software suppliers in addressing this issue.  Based on a recent evaluation,  the
Company has determined that material costs and resources will not be required to
permit its computer systems to properly handle Euro reporting and transactions.














                                       29
<PAGE>



 Item 7.                       Financial Statements

  Historical Financial Statements
    Independent Auditors' Report...........................................  31
    Independent Auditors' Report...........................................  32
    Consolidated Statements of Financial
     Condition as at March 31, 1998 and 1997...............................  33
    Consolidated Statements of Operations for
     the 12 months ended March 31, 1998 and 1997...........................  34
    Consolidated Statements of Changes in
     Shareholders' Equity for the 12 months
     ended March 31, 1998 and 1997.........................................  35
    Consolidated Statements of Cash Flows
     for the 12 months ended March 31, 1998 and 1997.......................  36
    Notes to Consolidated Financial Statements.............................  38



















                                       30
<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


                                       31
<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


                                       32

<PAGE>




                         EASTBROKERS INTERNATIONAL INCORPORATED
                                (A DELAWARE CORPORATION)

                     CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                           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 or segregated under federal                   
  and other regulations                                       986,233           119,274
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 depreciation and amortization of
    $766,898 and $628,014, respectively)                    1,153,439           926,565
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 2,923,000, shares
      issued and outstanding at March 31, 1998 and
      March 31, 1997, respectively                            214,888           146,150
    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
                                                         ============      ============

</TABLE>

                    See notes to consolidated financial statements.

                                       33
<PAGE>


                         EASTBROKERS INTERNATIONAL INCORPORATED
                                (A DELAWARE CORPORATION)

                         CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              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
                                                         ------------   ------------

</TABLE>


                    See notes to consolidated financial statements.

                                       34

<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>

                                                                                          UNREALIZED
                                                                RETAINED      TREASURY    LOSS ON                 
                               COMMON STOCK                     EARNINGS      STOCK &     AVAILABLE    CUMULATIVE
                            --------------------    PAID-IN     (ACCUMULATED  NOTE        FOR SALE     TRANSLATION
                              SHARES   PAR VALUE    CAPITAL     DEFICIT)      RECEIVABLE  INVESTMENTS  ADJUSTMENT        TOTAL
                            ---------  ---------  ------------  ------------  ----------  -----------  ------------  -------------
<S>                         <C>        <C>        <C>           <C>           <C>         <C>          <C>           <C>
Balances, April 1, 1996     1,781,000  $89,050    $13,693,733   $   348,782           -            -   $   558,090   $ 14,689,655
  Issuance of common
   stock in Eastbrokers
   AG acquisition           1,080,000   54,000      5,346,000             -           -            -             -      5,400,000
  Issuance of common
   stock in Eastbrokers
   NA acquisition              25,000    1,250         98,750             -           -            -             -        100,000
  Issuance of common
   stock in
   compensation for
   services                    37,000    1,850        176,400             -           -            -             -        178,250
  Acquisition of
   treasury stock                   -        -              -             -    (213,750)           -             -       (213,750)
  Net unrealized loss
   on investments                   -        -              -             -           -     (246,794)            -       (246,794)
  Net loss                          -        -              -      (918,611)          -            -             -       (918,611)
  Cumulative
   translation
   adjustment                       -        -              -             -           -            -    (1,188,899)    (1,188,899)
                            ---------  ---------  ------------  ------------  ----------  -----------  ------------  -------------
Balances at March 31,
 1997 (as restated)         2,923,000  $146,150   $19,314,883   $  (569,829)  $(213,750)  $ (246,794)  $  (630,809)  $ 17,799,851
  Issuance of common
   stock in private
   placement                  125,000     6,250       716,945             -           -            -             -        723,195
  Retirement of
   treasury stock             (45,000)   (2,250)     (211,500)            -     213,750            -             -              -
  Issuance of common
   stock in
   compensation for
   services                    10,000       500        65,480             -           -            -             -         65,980
  Issuance of common
   stock to officer for
   note receivable             50,000     2,500       297,500             -    (300,000)           -             -              -
  Net unrealized gain
   on investments                   -         -             -             -           -      246,794             -        246,794
  Issuance of common
   stock in private
   placement                1,227,000    61,350     5,354,619             -           -            -             -      5,415,969
  Exercise of stock
   options                      7,750       388        49,987             -           -            -             -         50,375
  Sale of Subsidiary Stock          -         -        52,200             -           -            -             -         52,200
  Net loss                          -         -             -    (4,947,557)          -            -             -     (4,947,557)
  Accrued interest on
   note receivable                  -         -             -             -     (13,133)           -             -        (13,133)
  Cumulative
   translation
   adjustment                       -         -             -             -           -            -    (1,509,811)    (1,509,811)
                            ---------  ---------  ------------  ------------  ----------  -----------  ------------  -------------
Balances at March 31,
  1998                      4,297,750  $214,888   $25,640,114   $(5,517,386)  $(313,133)   $       -   $(2,140,620)  $ 17,883,863
                            =========  =========  ============  ============  ==========  ===========  ============  =============

</TABLE>
                 See notes to consolidated financial statements.
                                       35
<PAGE>


                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

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

    <S>                                                   <C>              <C>
    Cash flows from operating activities                  $(4,947,557)     $  (866,411)
       Net loss
       Adjustments to reconcile net loss to net Cash 
         used in operating activities:
           Minority interest in earnings of subsidiaries     (208,861)        (105,416)
           Gain on the sale of investment                         -           (884,530)
           (Gain)/loss on sale of discontinued
             operations                                           -          1,323,083
           Depreciation and amortization                      590,743          274,573
           Deferred taxes                                  (1,696,396)         (69,377)
           Equity in (earnings) loss of
             unconsolidated affiliates                        (38,388)         396,209

          Changes in operating assets and liabilities
           Cash and securities segregated for
             regulatory purposes or deposited 
             with regulatory agencies                          82,415          (85,696)
           Securities purchased under agreements to
             resell                                          (478,305)       6,278,371
           Receivables                                     (2,582,190)       2,041,221
           Securities owned, at value                      (5,382,949)      (3,285,493)
           Other assets and deferred amounts                  883,889         (214,931)
           Payables
             Customers                                      4,353,654       (8,529,846)
             Brokers, dealers and others                    5,124,927           77,726
           Accounts payable and accrued expenses           (2,539,464)       1,374,879
                                                          -----------      -----------
    Net cash used in operating activities                  (6,761,706)      (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 (used in) investing
      activities                                           (2,353,020)         765,141
                                                          -----------      -----------
    Cash flows from financing activities
       Net proceeds from (payments for)
           Net proceeds from private placements             6,189,539                -
           Capital contributions by minority interests              -          304,166
           Short-term borrowings                             (968,317)         568,303
           Securities sold under agreements to
             repurchase                                    (1,200,793)       1,200,793
           Proceeds from long-term debt                    (2,167,160)               -
           Repurchase of common stock                               -         (213,750)
                                                          -----------      -----------

    Net cash provided by (used in) financing
      activities                                            3,789,903        1,859,512
                                                          -----------      -----------

    Foreign currency translation adjustment                   907,861        1,328,023
                                                          -----------      -----------

    Increase (decrease) 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
                                                          ===========      ===========

</TABLE>

                 See notes to consolidated financial statements.

                                       36
<PAGE>



                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


<TABLE>
<CAPTION>
                                                                   MARCH 31,     MARCH 31,
                                                                     1998          1997
                                                                   ---------     ---------
    <S>                                                          <C>            <C>  
    Supplemental disclosure of cash flow information
       Cash paid for income taxes                                $     261,633  $       371,534
                                                                 =============  ===============
       Cash paid for interest                                    $     679,265  $        87,795
                                                                 =============  ===============

       Non-cash transactions

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

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

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

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

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

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


                 See notes to consolidated financial statements

</TABLE>

                                       37
<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


                                       38
<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.



                                       39

<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.

                                       40

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

     Securities purchased under agreements to resell                                             (As Restated)
         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             --
                                                                            --------------       -----------

                                                                            $  7,985,484         $ 3,349,684
                                                                            --------------       -----------
       Sovereign government debt
         Austria                                                            $    621,353         $   --
         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>

                                       41


<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%.


                                       42
<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%.

                                       43

<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.

                                       44

<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>
      
                                       45

<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.

                                       46

<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.

                                       47

<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:

<TABLE>
<CAPTION>


                                                              1998                        1997
                                                              ----                        ----
                                                                                      (As Restated)
<S>                                                     <C>                          <C>  

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)

</TABLE>

     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.

                                       48
<PAGE>

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.

                                       49

<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
     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

                                       50

<PAGE>

12.   Related Party Transactions (continued)

     ended March 31, 1998,  the Company  recorded,  as a charge to  earnings,  a
     market value adjustment of approximately ($610,000).  Although 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.

                                       51

<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.

                                       52

<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)     
                                    ---------------    ----------------    ---------------     ---------------
<CAPTION>

     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.

                                       53

<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.


                                       54
<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:

                                       55
<PAGE>


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.

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

         The Company has changed its accountants from Pannell Kerr Forster PC to
Deloitte & Touche LLP. This change was reported in the Company's Current Reports
on Form 8-K dated November 4, 1997 and January 22, 1998,  which are incorporated
by  reference   herein  in  their  entirety.   The  Company  did  not  have  any
disagreements  with  its  former  independent  accountant  regarding  accounting
principles and practices or financial statement  disclosures within its two most
recent fiscal years.















                                       56
<PAGE>



                                    PART III

Item   9.      Directors and Executive Officers of the Registrant

A.       Directors and Executive Officers

         Biographical  information,  including  the age,  position held with the
Company, term of office as officer or director,  employment during the past five
years, and certain other  directorships of each officer or director is set forth
below.  Mr.  Kossner  has been  elected  to serve as  director  until the annual
meeting  of  stockholders  to be held  during  the year  1999.  Messrs.  Michael
Sumichrast,  Ph.D. and Martin A. Sumichrast have been elected as directors, each
to serve  until the annual  meeting of  stockholders  to be held during the year
1998. Mr. Schmid was  re-elected to serve as a director for an additional  three
year period at the annual  meeting of  stockholders  held on December  17, 1997.
There are no  family  relationships  among any  officers  and  directors  of the
Company,  except that Michael  Sumichrast,  Ph.D.  and Martin A.  Sumichrast are
father and son, respectively.

PETER  SCHMID,  32,  Chairman  of the Board and Chief  Executive  Officer of the
Company since March 1997; President of the Company since August 1996, a Director
of the Company  since January 1994.  Since 1991,  Mr. Schmid is the  co-founder,
Chairman of the Board,  Chief Executive  Officer,  and Member of the Supervisory
Board of Eastbrokers  Beteiligungs AG, a Vienna based securities  brokerage firm
which was acquired by the Company in August 1996. Mr. Schmid is also a Member of
the Supervisory  board of WMP  Borsenmakler  AG, a Vienna based investment firm;
and Schneiders  1895 AG, a retailing  firm. In addition,  Mr. Schmid serves as a
Director of  Eastbrokers  North  America,  Inc., a subsidiary and New York , New
York-based  securities  brokerage  firm.  Mr.  Schmid  currently  serves  on the
Supervisory Boards of Eastbrokers'  subsidiaries in Bratislava,  Zagreb, Warsaw,
Sofia, Budapest, Bucharest and Ljubljana.

MARTIN A.  SUMICHRAST,  31,  Vice  Chairman  of the  Company  since  March 1997;
Secretary,  and a Director  of the  Company  since its  inception  in 1993.  Mr.
Sumichrast is a founder of the Company and was formerly Executive Vice President
and Chief  Financial  Officer.  Mr.  Sumichrast is also Chairman of  Eastbrokers
North America,  Inc., a subsidiary of the Company and a New York, New York-based
brokerage firm. From 1987 until 1992, Mr.  Sumichrast served as the President of
Sumichrast  Publications,  Inc., a real estate publication located in Rockville,
Maryland.  Mr.  Sumichrast  also serves as President of Sumichrast  Enterprises,
Inc., a holding company located in Rockville, Maryland.

KEVIN D. MCNEIL, 38, Vice President, Treasurer and Chief Financial Officer since
March 1997.  Since  August  1996,  Mr.  McNeil had been the  comptroller  of the
Company.  Mr. McNeil is also  Secretary/Treasurer  of Eastbrokers North America,
Inc.,  a subsidiary  of the Company and a New York,  New  York-based  securities
brokerage  firm.  From 1994 to 1996, Mr. McNeil served as a supervising  auditor
for Pannell Kerr Forster PC, an  international  accounting firm. From 1990 until
1994,  Mr.  McNeil served as a supervising  auditor for  Schoenadel,  Marginot &
Company,  CPAs, a Washington  D.C.  regional  accounting  firm.  Mr. McNeil is a
member of the American Institute of Certified Public  Accountants,  the Virginia
Society of Certified Public Accountants and the International  Auditors Division
of the Securities Industry Association.

MICHAEL SUMICHRAST,  Ph.D., 77, Director of the Company since 1993, was Chairman
of the Board of the Company since its  inception in 1993 until March 1997.  From
1990 to 1994,  Dr.  Sumichrast  served as  Chairman  of the Board of  Sumichrast
Publications,  Inc., a real estate publication  located in Rockville,  Maryland.
During this time, he also served as an economic  adviser and  representative  of
various international American companies.  From 1963 to 1990, Dr. Sumichrast was
the senior vice  president and chief  economist of the National  Association  of
Home Builders (NAHB), a home builders' professional association.

WOLFGANG KOSSNER, 29, Director of the Company since August 1996. Mr. Kossner was
Executive Vice President of the Company from August 1996 until November 1, 1996.
Mr. Kossner is the co-founder of Eastbrokers  Beteiligungs AG. From 1993 through
1995, Mr. Kossner served as the managing  director of WMP Borsenmakler AG. Prior
to that, Mr. Kossner was the manager of securities  trading at WMP  Borsenmakler
from 1991 to 1993. Mr. Kossner  presently  serves on the  Supervisory  Boards of
Eastbrokers' subsidiaries in Vienna, Budapest, Ljubljana and Zagreb.

SIEGFRIED SAMM,  Ph.D.,  51,  Director of the Company since January 1998.  Since
1980, Dr. Samm has been the Professor of Economy at Handels  Academy in Villach,
Austria. Dr. Samm also serves as the Managing Director of Samm GmbH, an Austrian


                                       57

<PAGE>

based company which provides  investment advice on currency  matters.  From 1977
until 1979, Dr. Samm taught at the Handels Acadamie in Volkermarkt. From 1976 to
1977,  Dr. Samm  worked as an  assistant  director  for  Volksbank,  an Austrian
commercial  bank.  From 1976 until 1977,  Dr. Samm was an  assistant  manager at
Geiler & Perh, an Austrian based export company.  From 1973 until 1976, Dr. Samm
was an auditor at BAWAG, a Vienna, Austria based commercial bank.

B.       Compliance with Section 16(a)

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

         Based  solely  on a  review  of  the  copies  of  Forms  3, 4 and 5 and
amendments  thereto furnished to the Company,  or written  representations  from
certain  reporting  persons  that such  persons have filed on a timely basis all
reports  required  by  Section 16 (a),  and  without  researching  or making any
inquiry regarding  delinquent Section 16 (a) filings, the Company believes that,
during the fiscal year ended March 31,  1998,  other than  initial  statement of
beneficial ownership by Dr. Samm, all such reports were filed on a timely basis.
























                                       58
<PAGE>



Item  10.      Executive Compensation

         The following  Summary  Compensation  Table sets forth the compensation
for the named  executives for the years ended March 31, 1998 and 1997, the three
month transition period ended March 31, 1996, and the twelve month periods ended
December 31, 1995 and December 31, 1994.  No other  executive  officer had total
annual  salary  and  bonus  during  any such  period  equal to or  greater  than
$100,000.


<TABLE>
<CAPTION>
                                                                                        Long Term Compensation
                                                                      ---------------------------------------------------
                                        Annual Compensation                       Awards                  Payouts
                             ---------------------------------------  ---------------------------------------------------

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

                                                                      RESTRICTED    SECURITIES
                                                        OTHER ANNUAL    STOCK       UNDERLYING       LTIP     ALL OTHER
NAME AND PRINCIPAL POSITION  YEAR   SALARY     BONUS    COMPENSATION   AWARDS($)  OPTIONS/SARs(#)   PAYOUTS  COMPENSATION
---------------------------  ----   ------     -----    ------------   ---------  ---------------   -------  ------------

<S>                          <C>    <C>        <C>      <C>            <C>        <C>               <C>      <C>
Peter Schmid(1)              1998   $138,305  $30,000        --           --             --            --         --
  Chairman, President        1997*  $129,988     --          --           --             --            --         --
  and Chief Executive        1996**     --       --          --           --             --            --         --
  Officer                    1995       --       --          --           --             --            --         --
                             1994       --       --          --           --             --            --         --

Martin A. Sumichrast(2)      1998   $120,000  $20,000        --           --             --            --         --
  Vice-Chairman of the       1997*  $120,000  $11,000        --           --             --            --         --
  Board and Secretary        1996** $ 30,000     --          --           --             --            --         --
                             1995   $107,500     --          --           --             --            --         --
                             1994       --       --          --           --             --            --         --

Petr Bednarik, Ing.(1)       1998       --       --          --           --             --            --         --
  Former President and       1997*  $ 49,000     --       $24,000***      --             --            --         --
  Chief Executive Officer    1996** $ 10,000     --          --           --             --            --         --
                             1995   $107,500     --          --           --             --            --         --
                             1994       --       --          --           --             --            --         --

August A. de Roode(1)(4)     1998       --       --          --           --             --            --         --
  Former Chief Executive     1997*  $ 72,094     --          --           --             --            --         --
  Officer and Chief          1996**     --       --          --           --             --            --
  Operating Officer          1995       --       --          --           --             --            --         --
                             1994       --       --          --           --             --            --         --

Michael Sumichrast, Ph.D.(3) 1998       --       --       $65,980         --             --            --         --
  Former Chairman of the     1997*  $100,000     --       $75,000***      --             --            --         --
  Board                      1996** $ 24,999     --          --           --             --            --         --
                             1995$  $100,000     --          --           --             --            --         --
                             1994       --       --          --           --             --            --         --
</TABLE>


         *for the fiscal year ended March 31, 1997.

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

         ***these amounts constitute severance pay.

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

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

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

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

                                       59
<PAGE>



Employment Agreements

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

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

         Under the  agreements,  the Company is obligated to purchase  insurance
policies on the lives of Messrs.  Martin A.  Sumichrast and Schmid.  The Company
will pay the premiums on these policies and upon the death of the employee,  the
Company  will  receive an amount  equal to the premiums it paid under the policy
and the remaining proceeds will go to the employee's designated beneficiary. The
Company  has a one  million  dollar key man life  insurance  policy on Martin A.
Sumichrast  with the Company as its  beneficiary.  To date, the Company does not
have a life  insurance  policy  on Mr.  Schmid  due to the  prohibitive  cost of
obtaining such a policy.


                                       60
<PAGE>



Option/SAR Grants

         There  were  no  grants  to any  of the  named  executive  officers  or
Directors of options,  stock appreciation  rights or similar  instruments during
the fiscal year ended March 31, 1998.

Option/SAR Exercises

         There were no exercises  of options  during the fiscal year ended March
31, 1997.  Options for 7,750 shares of Common  Stock were  exercised  during the
fiscal year ended March 31, 1998.

Fiscal Year End Option/SAR Values
<TABLE>
<CAPTION>

                        AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
                                               OPTION/SAR VALUES
                                                                                          Value of Unexercised
                                                                Number of Securities          In-The-Money
                                                               Underlying Unexercised       Options/SARs at
                                                  Value        Options/SARs at FY-End    FY-End($) Exercisable/
                            Shares Acquired      Realized         (#) Exercisable/           Unexercisable
           Name             on Exercise (#)        ($)              Unexercisable                 (e)
           (a)                    (b)              (c)                   (d)
--------------------------- ----------------- --------------- -------------------------- -----------------------
<S>                            <C>             <C>              <C>                           <C>    

Peter Schmid                       0                -                 33,000/0                     -
Wolfgang Kossner                   0                -                 100,000/0                    -
</TABLE>


Compensation of Directors

         Each  Director of the Company is  entitled  to receive  $1,500.00  plus
reasonable  expenses,  for attending  scheduled  board meetings at which members
meet in person.  Directors  are not entitled to receive  compensation  for board
meetings held by telephonic  conference.  During the fiscal year ended March 31,
1997,  three  former  Directors  received  fees  totaling  $4,500.  All  current
directors  have waived such fees for the fiscal  years ending March 31, 1997 and
1998.

1996 Stock Option Plan

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

         The total number of shares of Common Stock  reserved and  available for
distribution as Awards under the Plan is 400,000.  In October 1997, the Plan was
amended to provide an additional  200,000  shares  available  for  distribution.
Total number of shares of Common Stock available after the amendment is 600,000.

         In the fiscal year ended March 31, 1997,  an aggregate of 25,000 shares
of Common Stock and options to purchase  35,000 shares were awarded  pursuant to
the Plan.

         During the fiscal  year ended  March 31,  1997,  an  additional  12,000
shares of Common  Stock  were  issued  outside of the Plan as  compensation  for
services  to the  Company.  During the  fiscal  year ended  March 31,  1998,  an
additional  10,000 shares were issued  outside of the Plan as  compensation  for
services to the Company.

                                       61

<PAGE>



Item  11. Security Ownership of Certain Beneficial Owners and Management

         The  following  table sets forth the number of shares of the  Company's
Common Stock owned as of October 26, 1998 by (I) each person who is known by the
Company  to own  beneficially  more than five  percent of the  Company's  Common
Stock; (ii) each of the Company's officers and directors; and (iii) all officers
and directors as a group.  Except as otherwise  noted,  the persons named in the
table  below do not own any other  capital  stock of the  Company  and have sole
voting and investment power with respect to all shares as beneficially  owned by
them.
<TABLE>
<CAPTION>

                                                                                                 Percentage of
       Name and Address (1)              Position with Company             Number of Shares         Shares
   ------------------------------ -------------------------------------  ---------------------- ----------------
<S>                            <C>                                          <C>                 <C>  
   Peter Schmid (2)               Chairman of the Board,                         587,659             12.24
                                      President and Chief Executive
                                     Officer, Director
   Martin A. Sumichrast (3)       Vice-Chairman of the                           101,000              2.12
                                      Board and Secretary, Director
   Michael Sumichrast, Ph.D.      Director                                          - 0 -              *
   Segfried Samm, Ph.D.           Director                                          - 0 -              *
   Wolfgang Kossner (4)           Director                                     1,776,639             33.30
   General Partners AG                                                         1,477,139             28.04
   Kevin D. McNeil                Chief Financial Officer                        2,495                 *
   All Officers and Directors as                                               2,467,793             45.97
           a Group (6 persons)
</TABLE>

-----------
*   Less than 1%

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

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

    (3)  50,000 shares are owned directly by Martin A. Sumichrast, 50,000 shares
         are owned by  Sumichrast  Enterprises,  Inc.,  a  corporation  of which
         Martin A. Sumichrast is an officer and director and the owner. Includes
         1,000  shares  issuable  upon  exercise  of Class A Warrants to acquire
         Common Stock at $18.00 per share.

    (4)  977,139  shares  are  owned   indirectly   through   General   Partners
         Beteiligungs  AG,  formerly  KHS  Beteiligungs  AG  ("GP") of which Mr.
         Kossner  is a  principal  stockholder.  200,000  shares  were  owned by
         Karntner Landes und  Hypothekenbank  AG (the "Bank") as nominee for GP.
         Mr.  Kossner may be deemed to have shared voting and  investment  power
         with respect to these shares.  Also includes  32,500 shares held by the
         Bank as nominee  for Central and Eastern  European  Fund  ("Fund"),  of
         which Mr.  Kossner is a director.  This  inclusion  of such Fund shares
         shall  not  be  construed  as an  admission  that  Mr.  Kossner  is the
         beneficial  owner of such shares.  Includes 67,000 shares issuable upon
         exercise of options to acquire Common Stock at $10.00 per share held by
         Mr.  Kossner,  100,000 shares  issuable upon the exercise of options to
         acquire  Common Stock at $10.00 per share held by GP and 400,000 shares
         issuable upon the exercise of warrants to acquire Common Stock at $7.00
         per share held by GP.

                                       62
<PAGE>

Item  12.      Certain Relationships and Related Transactions

         Prior  to the  sale by the  Company  of the  Hotel  Fortuna  a.s.  (the
"Hotel")  on October 1, 1996,  the Company  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.

         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

                                       63
<PAGE>

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 share
transactions  from Mr.  Kossner in the amount of 2,269,198  Austrian  Schillings
(approximately $209,000 USD).

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

         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.  As of March 31, 1998, at this time, the estimated
value of these shares was approximately $1,030,270.  Subsequent to year end, the
Company  sold  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 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 Note bears  interest at 8% per annum and matures May

                                       64
<PAGE>

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.  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.  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). 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 note bears interest at 8% per annum and
is due September 15, 1999.

Item  13.      Exhibits and Reports on Form 8-K

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

              1. See Index to Exhibits on page 67 which is  incorporated  herein
                 in its entirety.

     b.   Reports on Form 8-K

         Current  Report  on Form 8-K  filed on  November  6,  1997 - change  in
         auditor.

         Current  Report on Form 8-K filed on January 27, 1998 - appointment  of
         new auditor.

                                       65


<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)

<TABLE>
<S>                                                                             <C>


By                         /s/ Peter Schmid                                         October 30, 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                                         October 30, 1998
            ----------------------------------------------                        ---------------------
                             Peter Schmid                                                 Date
      Chairman, President, Chief Executive Officer, and Director



                       /s/ Martin A. Sumichrast                                     October 30, 1998
            ----------------------------------------------                        ---------------------
                         Martin A. Sumichrast                                             Date
          Vice Chairman of the Board, Secretary, and Director



                          /s/ Kevin D. McNeil                                       October 30, 1998
            ----------------------------------------------                        ---------------------
                            Kevin D. McNeil                                               Date
        Vice President, Treasurer, and Chief Financial Officer
             (Principal Financial and Accounting Officer)



                       /s/ Michael Sumichrast                                       October 30, 1998
            ----------------------------------------------                        ---------------------
                       Michael Sumichrast, Ph.D.                                          Date
                               Director



                         /s/ Wolfgang Kossner                                       October 30, 1998
            ----------------------------------------------                        ---------------------
                           Wolfgang Kossner                                               Date
                               Director



                          /s/  Siegfried Samm                                       October 30, 1998
            ----------------------------------------------                        ---------------------
                         Siegfried Samm, Ph.D.                                            Date
                               Director
</TABLE>

                                       66

<PAGE>
                                INDEX TO EXHIBITS

                                                                           Page
                                                                           ----
Exhibit No.        Description
-----------        -----------
   (2.1)           Agreement  and Plan of Merger dated May 14, 1998 by and
                   among the Registrant, East Merger Corporation,  Cohig &
                   Associates,  Inc., and Cherry Creek Investments,  Ltd.,
                   incorporated by reference to the Current Report on Form
                   8-K dated May 14, 1998 (File No. 0-26202).

   (2.2)           Amended Independent  Auditor's Report,  incorporated by
                   reference  to  the  Current  Report  on  Form  8-K,  as
                   amended, dated August 1, 1996.

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

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

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

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

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

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

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

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

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

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

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

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

                                 67
<PAGE>


  (10.9)           Consulting Agreement between Michael Sumichrast,  Ph.D.
                   and the Company  dated April 1, 1997,  incorporated  by
                   reference  to the  Company's  Form  10-KSB for the year
                   ended March 31, 1997.

 (10.10)           Subscription Agreement for the Private Placement of the
                   Company's shares                                           69

                   Letter on Change in Certifying Accountant

                   Item 7 of Current  Report on Form 8-K dated November 4,
                   1997;  incorporated  by reference to the Current Report
                   on Form 8-K dated November 4, 1997 (File No. 0-26202).

  (16.1)           Letter on Change in Certifying Accountant

                   Item 7 of Current  Report on Form 8-K dated January 22,
                   1998;  incorporated  by reference to the Current Report
                   on Form 8-K dated January 22, 1998 (File No. 0-26202).

  (21.1)           Subsidiaries of the Company.                              79

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

                                 68