<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, 1999

                                       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
                                Class C 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:  $32,951,480.

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 June 28, 1999 was approximately $9,430,000.

The total number of shares of the  registrant's  Common  Stock,  $.05 par value,
outstanding on June 28, 1999 was 5,206,750.

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................................... 12
Item   3.         Legal Proceedings......................................... 12
Item   4.         Submission of Matters to a Vote of Security Holders....... 12


                                     PART II

Item   5.  Market for Common Equity and Related Stockholder Matters......... 13
Item   6.  Management's Discussion and Analysis or Plan of Operation........ 15
Item   7.  Financial Statements
             Historical Financial Statements
             Independent Auditors' Report................................... 21
             Consolidated Statements of Financial Condition................. 22
             Consolidated Statements of Operations.......................... 23
             Consolidated Statements of Comprehensive Income................ 23
             Consolidated Statements of Changes in Shareholders' Equity..... 24
             Consolidated Statements of Cash Flows.......................... 25
             Notes to Consolidated Financial Statements..................... 27
Item  8.   Changes In and Disagreements with Accountants on Accounting
           and Financial Disclosure......................................... 40


                                    PART III

Item   9.  Directors   and   Executive  Officers, Promoters and Control
           Persons; Compliance with Section 16(a) of the Exchange Act....... 41
Item 10.   Executive Compensation........................................... 43
Item 11.   Security Ownership of Certain Beneficial Owners and Management... 46
Item 12.   Certain Relationships and Related Transactions................... 47
Item 13.   Exhibits, List  and Reports on Form 8-K.......................... 49
Signatures.................................................................. 50

                                      -2-

<PAGE>

                                     PART I


                             DESCRIPTION OF BUSINESS

GENERAL

   SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

      This  Prospectus  contains  forward-looking   statements.   These  include
statements about anticipated financial performance, future revenues or earnings,
business  prospects,   projected  ventures,  new  products,  anticipated  market
performance and similar matters. The words "budgeted,"  "anticipate," "project,"
"estimate,"  "expect," "may," "believe,"  "potential" and similar statements are
intended to be among the statements that are forward looking statements. Because
such statements  reflect the reality of risk and uncertainty that is inherent in
our  business,  actual  results may differ  materially  from those  expressed or
implied by such forward-looking  statements.  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,  we caution our readers  that a variety of factors  could cause the
actual results of Eastbrokers to differ materially from the anticipated  results
or other  expectations  expressed in  Eastbrokers'  forward-looking  statements.
These risks and uncertainties,  many of which are beyond  Eastbrokers'  control,
include, but are not limited to:

o    transaction volume in the securities markets;

o    the volatility  of the securities markets, fluctuations in  interest rates;

o    changes  in  regulatory  requirements which  could affect the cost of doing
     business, fluctuations in currency rates;

o    general economic conditions, both domestic and international;

o    changes in the rate of inflation and related impact on securities markets;

o    competition from existing financial institutions and other new participants
     in the securities markets;

o    significant and  rapid  changes in technology which could negatively affect
     our internet related projects;

o    legal  developments  affecting  the litigation experience of the securities
     industry;

o    changes in  federal and state tax laws which could affect the popularity of
     products sold by Eastbrokers; and

o    those risks and uncertainties set forth under the caption "Risk Factors" on
     page 10 and in Eastbrokers' filings with the SEC.

      Eastbrokers  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.

   IMPORTANT TERMS

      We use the  following  terms to identify  various  companies  or groups of
companies.  These terms help to simplify the presentation of information in this
Prospectus.

                                      -3-
<PAGE>

      EASTBROKERS  refers  to  Eastbrokers   International   Incorporated  only.
Eastbrokers is the issuer of the publicly traded common stock covered hereby.

      EASTBROKERS  GROUP, we, us, or our refers  collectively to Eastbrokers and
its subsidiaries.

      EASTBROKERS VIENNA refers to Eastbrokers  Beteiligungs AG and its European
subsidiaries.


BACKGROUND

      Eastbrokers International Incorporated ("Eastbrokers") was incorporated in
the State of  Delaware  on January 20,  1993,  as the Czech  Fund.  Eastbrokers'
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, Eastbrokers
held an interest in a Czech hotel and an interest in a Czech department store.

      In 1996, we re-evaluated  our business  strategy and, after  considering a
variety of investment  opportunities,  acquired Eastbrokers Vienna.  Eastbrokers
Vienna is an Austrian  brokerage  company  with offices  throughout  Central and
Eastern  Europe.  This  transaction  enhanced our prospects by both providing us
with  a  vehicle  to  implement   our   acquisition   strategy  and  extend  our
opportunities  beyond the Czech  Republic to the entirety of Central and Eastern
Europe.   Thereafter,   our  name  was  changed  to  Eastbrokers   International
Incorporated, our present name.

      Eastbrokers is primarily a holding company for thirteen  subsidiaries  and
affiliates  which  are  directly  and  indirectly  owned.  Nine of  Eastbrokers'
subsidiaries  and affiliates are incorporated and located in Central and Eastern
Europe.  Eastbrokers also owns 100 percent of EBI Securities  Corporation  ("EBI
Securities"),  100 percent of EBI Leasing Corporation, 92 percent of Eastbrokers
North America Inc. ("Eastbrokers NA") and 70 percent of EBonlineinc.com. Most of
Eastbrokers'  subsidiaries and affiliates are engaged in the investment banking,
broker-dealer,  consulting,  advisory and  securities  business.  The  principal
strategic  objective of the Eastbrokers Group 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  Eastbrokers  Group provides  financial
services in Central and Eastern 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) Almaty, Kazakhstan, (c) Prague, Czech Republic, (d) Ljubljana, Slovenia, (e)
Zagreb,  Croatia,  (f) Warsaw,  Poland and (g) Baku,  Azerbaijan.  Although  the
Eastbrokers  Group sold its  operations in Budapest,  Hungary,  the  Eastbrokers
Group  continues  to have a working  relationship  with the buyer.  Through  its
subsidiaries  and affiliate  offices,  the Eastbrokers  Group is a member of the
Vienna Stock Exchange,  the Budapest Stock Exchange,  the Zagreb Stock Exchange,
the Ljubljana Stock Exchange,  the Central Asian Stock Exchange,  and the Warsaw
Stock Exchange. Eastbrokers Vienna also owns 51 percent 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 Eastbrokers Group determined that it was in the best
interest of the Eastbrokers Group and shareholders to dispose of this operation.
73.55 percent of the  Eastbrokers  Group interest in this subsidiary was sold in
June 1998.

                                      -4-
<PAGE>

      Eastbrokers  Vienna's  brokerage,   trading  and  market  making  business
generated  approximately  10 percent of all the  Eastbrokers  Group revenues for
fiscal year ended March 31, 1999 and 41 percent of all of the Eastbrokers  Group
revenues for the fiscal year ended March 31,  1998.  The  percentage  decline in
fiscal 1999 was largely due to the added revenue  generated from EBI Securities.
Eastbrokers  Vienna  conducts its sales  activities  as  principal  and agent on
behalf of its  clients.  Eastbrokers  Vienna  primarily  distributes  and trades
Central and Eastern  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. For the fiscal
year ended March 31, 1999, EBI Securities generated  approximately 48 percent of
the Eastbrokers Group consolidated revenue.

      Eastbrokers  Vienna  is also a Central  and  Eastern  European  investment
banking  firm which  provides  advice to, and raises  capital  for,  Central and
Eastern 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 Eastbrokers Group acquired 90 percent of Eastbrokers NA in March 1997.
On January 4, 1999,  Eastbrokers  NA request to withdraw its  registration  as a
broker-dealer  with  the  SEC  and a  member  of  the  National  Association  of
Securities Dealers ("NASD") was approved.  The office space previously  occupied
by Eastbrokers NA has been converted into a branch office of EBI Securities.

      In October  1997,  we announced  our 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, we decided to
continue our evaluation of this market and will delay this expansion  until such
time as we feel the expansion is economically viable.

      On February 20, 1998, we consummated a private placement.  Under the terms
of this private placement,  we sold 1,227,000 units at $5.00 per unit, with each
unit  consisting  of one share of  Eastbrokers'  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,  Eastbrokers 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,  we also  announced  certain
adjustments  relating  to the  pricing of its Class A and Class B  warrants.  In
conjunction with this private placement, we 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 a total of 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 as of March 31, 1998.

      During April 1998, the  Eastbrokers  Group  announced that a consortium in
which the  Eastbrokers  Group  was  participating  was  awarded  the  management
contract for Polish National  Investment  Fund #9. This consortium  consisted of
the Eastbrokers  Group,  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  management 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.

                                      -5-
<PAGE>

      In May 1998,  Eastbrokers  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,  Eastbrokers changed the name of Cohig &
Associates,  Inc. to EBI Securities Corporation ("EBI Securities").  Eastbrokers
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.  Eastbrokers  believes that its current
organizational structure as an entrepreneurial 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 180 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  and  personalized   service.  Its  trading
department  makes a market in  approximately  100  securities  which include its
investment banking clients and those securities that its research department has
identified as promising,  small to  middle-market  and  potentially  high growth
companies. The investment banking department's mission is 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 Eastbrokers Group 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 "Management's Discussion and Analysis or Plan of Operation -
Impact of the Year 2000".

      In June 1998, the  Eastbrokers  Group largest  European  subsidiary,  WMP,
successfully  raised 60 million Austrian  Schillings  (approximately  $4,800,000
USD) in a bond offering.  The Eastbrokers  Group originally  intended 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 percent,  payable at maturity,  and mature in June 2002. In
December 1998, the Eastbrokers Group redeemed  approximately 45 million Austrian
Schillings of these bonds. The Eastbrokers Group intends to redeem the remaining
bonds in the future.

      In June 1998, the Eastbrokers  Group sold 73.55 percent of its interest in
Eastbrokers  Prague a.s. See  "Acquisitions  and Dispositions  During the Fiscal
Year" below.

      On November 25, 1998,  Eastbrokers sold 10 newly issued units in a private
placement  consisting in the  aggregate of  $1,100,000 in 7 percent  Convertible
Debentures  (the "7 percent  Convertible  Debentures")  and Class C Common Stock
Purchase  Warrants to purchase  125,000  shares of Common  Stock.  The 7 percent
Convertible  Debentures  were  redeemed  in March  1999  from a  portion  of the
proceeds of the  offering  related to the  issuance of the 10 percent  Notes (as
defined below).

                                      -6-
<PAGE>


      In December 1998,  Eastbrokers sold its subsidiary,  Eastbrokers  Budapest
Rt.  for HUF  217,000,000  (approximately  $1,000,000  USD at the  then  current
exchange rates). The Eastbrokers Group continues to have a working  relationship
with the buyer and  maintains a presence in  Budapest  through its  relationship
with the buyer.

      In January  1999,  Eastbrokers  sold 125,000  restricted  shares of Common
Stock in a  private  placement  to a  private  investor  for  $4.00  per  share.
Eastbrokers  also  issued  7,500  shares of its Common  Stock to a broker of EBI
Securities as a commission in connection with this transaction.

      In March 1999,  Eastbrokers issued 10 percent Convertible Promissory Notes
due  2003  (the  "10  percent  Notes")  in  an  aggregate  principal  amount  of
$1,350,000.  Holders of the 10 percent  Notes have the right to convert their 10
percent  Notes into shares of Common Stock at $5.75 per share.  A portion of the
proceeds of the Notes was used to redeem the 7 percent Convertible Debentures.

      A key  component  of the  Eastbrokers  Group'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  Eastbrokers  Group is  currently  focused  on
maximizing the  profitability of the acquisitions  that have been consummated to
date,  and  it  is  continuing  to  selectively  seek  additional  complementary
acquisition and/or merger candidates.

      In February 1998,  Eastbrokers  participated in a capital increase for its
subsidiary,  Eastbrokers Vienna. In this capital increase,  Eastbrokers 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 Eastbrokers'  ownership interest
in Eastbrokers Vienna from approximately 94 percent to approximately 96 percent.

      Through its subsidiary,  Eastbrokers Vienna,  Eastbrokers  acquired a 48.1
percent 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,  Eastbrokers'
ownership  of WMP has  exceeded  50  percent  when  including  WMP shares in its
trading  portfolio.  At December  31,  1996,  Eastbrokers'  aggregate  ownership
percentage in WMP, including its trading position, was approximately 55 percent.
This  investment was accounted for using the equity method in the March 31, 1997
financial  statements as Eastbrokers 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 Eastbrokers deemed its control of WMP was no longer temporary.
For the fiscal year ended March 31, 1998,  WMP was  consolidated  for the entire
year. At December 31, 1998, Eastbrokers' aggregate ownership interest in WMP was
51 percent.

      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.

      In  December  1997,  Eastbrokers  Vienna  sold its 51 percent  interest in
Su(beta)warenindustrie  Beteiligungs  GmbH ("SWIB") to Peter Schmid,  the former
Chairman of the Board, President,  Chief Executive Officer and a former Director

                                      -7-
<PAGE>

of Eastbrokers, for 13 million Austrian Schillings (approximately $1,025,000 USD
at the  then  current  exchange  rates).  The  Eastbrokers  Group  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  Eastbrokers  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).

      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 DURING THE FISCAL YEAR

      In May 1998,  Eastbrokers  acquired all of the outstanding common stock of
EBI  Securities  in exchange  for 445,000  unregistered  shares of  Eastbrokers'
Common  Stock and an  agreement  to advance  $1,500,000  in  additional  working
capital into EBI Securities. Eastbrokers 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.
Eastbrokers   believes   that  its  current   organizational   structure  as  an
entrepreneurial  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,   Eastbrokers  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).

      In December 1998,  Eastbrokers sold its subsidiary,  Eastbrokers  Budapest
Rt.  for HUF  217,000,000  (approximately  $1,000,000).  The  Eastbrokers  Group
continues to have a working relationship with the buyer and maintains a presence
through its relationship with the buyer.

      In December 1998,  Eastbrokers also liquidated two of its  underperforming
subsidiaries: Eastbrokers Romania and Eastbrokers Slovakia.

ACQUISITIONS AND DISPOSITIONS SUBSEQUENT TO THE FISCAL YEAR END

      In April  1999,  Eastbrokers  signed  a joint  venture  agreement  with A1
Internet.com,  Inc.  ("A1"),  a website  development  firm,  to jointly  own and
develop  EBonlineinc.com,  Inc.  ("EBonline"),  a newly established  subsidiary.
EBonline is owned seventy percent by Eastbrokers and thirty percent by A1. Under
the terms of the joint venture  agreement,  Eastbrokers will provide $300,000 in
initial funding and A1 will provide $200,000 in developmental costs. EBonline is
also in the process of merging  into a publicly  traded  entity which we believe
will enhance  EBonline's  ability to raise capital,  make  acquisitions and hire
personnel, through the use of stock incentive plans.

      EBonline  is an internet  based  service  (www.Ebonlineinc.com)  that will
allow domestic and  internationally  based  companies to post their  businesses,
match with  buyers and sellers  and have  access to the  investment  banking and
securities network of the Eastbrokers Group.  Eastbrokers believes that EBonline
will have potentially three revenue streams: monthly membership fees, consulting
income and banner advertising income. Eastbrokers is currently in the process of
revising the website and we intend to begin  marketing the website in the Summer
of 1999 in international print media and major search engines on the internet.

                                      -8-

<PAGE>

GOVERNMENT REGULATION

      The  Eastbrokers  Group has  operations  based in the United  States and 7
foreign  countries.  The  Eastbrokers  Group'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 Eastbrokers Group 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 Eastbrokers Group's business, and the securities
industry generally,  are subject to extensive regulation at both the federal and
state levels. 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' broker-dealer operations are subject to
the terms of their respective Restriction Agreements with the NASD. In the event
that EBI  Securities  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.  EBI  Securities is subject to the
SEC's net capital  rules,  which require them to maintain  prescribed  levels of
capital in order to conduct  business.  EBI  Securities has capital in excess of
the required minimums.

      The  Eastbrokers  Group's  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  Eastbrokers  owns WMP, an
Austrian bank that engages in the securities  business,  including on the Vienna
Stock Exchange.  Each of these authorities  impose regulation on the Eastbrokers
Group'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 Eastbrokers Group is currently in compliance with the net
capital  requirements in each of the Central and Eastern European  jurisdictions
in which the Eastbrokers Group 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  Eastbrokers   Group's   perceived   creditworthiness,   reputation  and
competitiveness.  Customers of the  Eastbrokers  Group or others who allege that
they have been  damaged  by the  Eastbrokers  Group's  violation  of  applicable
regulations also may seek to obtain compensation from the Company, including the
unwinding of any transactions with the Eastbrokers Group.

      In addition to the existing laws and regulations affecting the Eastbrokers
Group,  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 Eastbrokers Group.

COMPETITION

      The Eastbrokers Group is engaged in a highly  competitive  business.  With
respect to one or more aspects of its  business,  Eastbrokers  Group  encounters
substantial  competition from both foreign and domestic businesses in the United

                                      -9-
<PAGE>

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  Eastbrokers  Group.
Discount  brokerage firms  affiliated with commercial  banks and companies which
provide  electronic  on-line trading  provide  additional  competition.  In many
instances,  the Eastbrokers Group is also competing  directly for customer funds
with investment  opportunities offered by real estate,  insurance,  banking, and
savings and loan industries.  The Eastbrokers Group competes  principally on the
basis of  service,  product  selection,  location  and  reputation  in its local
markets.

EMPLOYEES

      As of June 25, 1999,  Eastbrokers  Group had  approximately  400 full-time
employees  and 40 part-time  employees.  No employees  are covered by collective
bargaining  agreements and the Eastbrokers Group believes its relations are good
with both its employees and its independent contractors and consultants.

COMPLIANCE WITH ENVIRONMENTAL REGULATIONS

      The Eastbrokers  Group 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 Eastbrokers  Group,  have a material
effect on the capital expenditures, earnings, or the competitive position of the
Eastbrokers Group.


RISK FACTORS

      WE FACE A VARIETY OF RISKS IN THE  CONDUCT OF OUR  BUSINESS,  ANY OF WHICH
COULD  MATERIALLY  AND  ADVERSELY  AFFECT US,  OUR  BUSINESS  AND OUR  FINANCIAL
PERFORMANCE.  SOME OF THESE  RISKS ARE  SUMMARIZED  BELOW.  THIS  SUMMARY IS NOT
INTENDED TO BE A COMPLETE  LIST OF ALL MATTERS THAT COULD  ADVERSELY  AFFECT US,
AND THERE ARE MANY  FACTORS  BEYOND OUR CONTROL THAT AFFECT US, OUR BUSINESS AND
OUR FINANCIAL PERFORMANCE.


      THE VOLATILE NATURE OF THE SECURITIES  BUSINESS COULD ADVERSELY AFFECT OUR
FINANCIAL  PERFORMANCE AS WELL AS OUR STOCK PRICE.  The  securities  business is
naturally  subject  to various  risks,  particularly  in  volatile  or  illiquid
markets.  Among the risks are  potential  losses  resulting  from the  following
activities:

o     underwriting or owning securities,

o     trading, arbitrage and merchant banking activities,

o     failure by the other party to meet commitments,

o     customer fraud and employee fraud,

o     misconduct and errors,

o     failures in connection with processing securities transactions and

o     litigation


      Various  factors affect a securities  firm's  business and  profitability.
These factors include 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 issuances of securities or merger, acquisition, restructuring, and leveraged

                                      -10-
<PAGE>

capital activities,  including leveraged buyouts and high-yield financing.  Such
factors  may also  help  reduce  the level of  participation  in  financing  and
investment related to these activities. This generally results in lower revenues
from investment and merchant  banking fees and from  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 companies issuing  securities and
parties on the other side of a  transaction  to perform  their  obligations  can
result  in  illiquid  markets.  In  such  markets,  we may  not be  able to sell
securities  and may have  difficulty  covering our  securities  positions.  Such
markets,  if  prolonged,  may also lower our revenues from  investment  banking,
merchant banking and other investments, and could have a material adverse effect
on our results of operations, financial condition and cash flows.


      Our principal business activities  (investment  banking,  securities sales
and  trading  and  correspondent   brokerage   services)  are  naturally  highly
competitive  and  subject  to  various  risks,   volatile  trading  markets  and
fluctuations in the volume of market activity.  Consequently, our net income and
revenues, as well as our stock price, have been, and may continue to be, subject
to wide fluctuations.  This, of course, reflects the impact of many factors that
are beyond our control. These factors include:

o     securities market conditions,

o     the level and volatility of interest rates,

o     competitive conditions, and

o     the size and timing of transactions.


Numerous other national and international factors affect the securities business
and the profitability of securities firms. These include:

o     economic and political conditions,

o     broad trends in business and finance,

o     legislation  and  regulation  affecting  the  national  and  international
      business and financial communities,

o     currency values,

o     inflation,

o     market conditions,

o     the availability of short-term or long-term funding and capital,

o     the  credit  capacity  or  perceived  creditworthiness  of  the securities
      industry in the marketplace, and

o     the level and volatility of interest rates.


      WE COULD BE ADVERSELY  AFFECTED BY THE SIGNIFICANT  COMPETITION WITHIN THE
SECURITIES INDUSTRY. We encounter significant  competition in all aspects of the
securities  business  and compete  worldwide  directly  with other  domestic and
foreign  securities  firms.  Many of these  competitors  have  greater  capital,
financial  and other  resources  than we have. 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.


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

                                      -11-

<PAGE>

      Such  competition  could  also  affect our  ability to attract  and retain
highly skilled individuals to conduct our various businesses,  which may have an
adverse effect on our business.  The principal  competitive  factors influencing
our business are:

o     our professional staff,

o     our reputation in the marketplace,

o     our existing client relationships,

o     the ability to commit capital to client transactions, and

o     our mix of market capabilities.


      The  adequacy of our capital  levels  will also  influence  our ability to
compete  effectively in securities  brokerage and investment banking activities.
In  addition,  our ability to expand our  business  may depend on our ability to
raise additional capital. SEE "Description of Business - Competition."


      OUR  FAILURE  TO COMPLY  WITH THE  EXTENSIVE  FEDERAL,  STATE AND  FOREIGN
REGULATION OF OUR BUSINESS COULD HAVE POSSIBLE MATERIAL ADVERSE EFFECTS UPON US.
Our business  (and the  securities  industry  generally) is subject to extensive
regulation.  First,  we are subject to regulation in the United States,  Austria
and all other Central and Eastern European states where our subsidiaries operate
at the state level.  Second,  we are subject to  regulation  by various  foreign
financial  regulatory  authorities  in the  jurisdictions  outside of the United
States,  Austria and Central and Eastern Europe where we do business,  including
regulation  by the  Securities  and  Futures  Authority  of the United  Kingdom.
Finally, we are subject to regulation by industry self regulatory  organizations
(known as "SROs"). SEE "Description of Business - Governmental Regulation."


      SROs such as the NASD  require  strict  compliance  with  their  rules and
regulations.  Our failure to comply with any of these laws, rules or regulations
could result in fines,  suspension or expulsion,  with which could have possible
material adverse effects upon us and may affect our stock price accordingly.


      The scope of EBI  Securities'  broker-dealer  operations is subject to the
terms  of its  Restriction  Agreements  with the  NASD.  In the  event  that EBI
Securities  violates  the  terms  of its  Restriction  Agreements,  the NASD can
suspend  or revoke its  membership  and may  impose  fines  upon or censure  EBI
Securities.


      Compliance with many of the regulations that apply to us 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.  These  proceedings or arbitrations  may
result in censure,  fine, civil penalties  (including treble damages in the case
of  insider   trading   violations),   issuance  of   cease-and-desist   orders,
de-registration  of or  suspension  of a  broker-dealer,  investment  adviser or
futures  commission  merchant,  statutory  disqualification  of our  officers or
employees or other adverse consequences.  Moreover,  even if no such actions are
taken,   there   could  be  a   material   adverse   effect  on  our   perceived
creditworthiness,  reputation and  competitiveness.  Customers of ours or others
who allege that our violation of applicable  regulations  have damaged them also
may seek to obtain  compensation  from us, including  unwinding any transactions
with us. Such unwinding could have an adverse impact on our business.


Other  changes may adversely  affect our manner of operation and  profitability.
These include:

o     additional  legislation  and regulations,  including those relating to the
      activities of affiliates of broker-dealers,

o     changes in rules  promulgated  by the SEC, the Ministry or other  Austrian
      or foreign governmental regulatory authorities and SROs, and

                                      -12-

<PAGE>

o     changes in the interpretation or enforcement of existing laws and rules.


      Regulations  may  materially  affect  our  business  in two  ways.  First,
regulations  may directly  apply to us in the conduct of our  business.  Second,
laws,  rules and regulations  that apply generally to the industry or the market
as a whole may materially affect the market for our products and services.  Some
examples of factors that could affect the volume of our underwriting, merger and
acquisition and merchant banking business in any year are:

o     existing and proposed tax legislation,

o     antitrust   policy   and   other  governmental  regulations  and  policies
      (including  the interest rate policies), and

o     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 our related underwriting,
advisory and trading revenues.


      THERE  ARE  MARKET,   CREDIT  AND  LIQUIDITY  RISKS  ASSOCIATED  WITH  OUR
UNDERWRITING  AND TRADING  ACTIVITIES WHICH COULD HAVE A MATERIAL ADVERSE EFFECT
ON US. We  conduct  our  underwriting,  securities  trading,  market-making  and
arbitrage  activities  as  principal  and in doing so  subject  our  capital  to
significant  risks,  including  market,  credit  (including   counterparty)  and
liquidity risks.


      Our  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. From time to
time we have large  position  concentrations  in certain  types of securities or
commitments  and in the securities of or  commitments  to a single  issuer.  The
issuers could include sovereign governments and other entities,  issuers located
in a particular  country or geographic  area, or issuers engaged in a particular
industry.   Through  our  subsidiaries  and  affiliate  offices,  we  engage  in
proprietary trading of United States and Central and Eastern European securities
with an emphasis on government and corporate  bonds,  local debt instruments and
equity  securities.   These  transactions  involve  risks  associated  with  the
political  instability and relative  currency values of the nations in which the
issuer principally  engages in business,  including the risk of nationalization.
Additionally,  from time to time we have 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 our high-yield
securities  inventories  and the impact of such  activities  upon our results of
operations can fluctuate  from period to period as a result of customer  demands
and economic and market considerations.


      For competitive and other reasons,  the trend in all major capital markets
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 our exposure to specific
credit,  market and political  risks.  Also,  material  fluctuations  in foreign
currencies against 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
assets located or denominated in non-U.S. jurisdictions or currencies.


      We  derive  much  of  our  revenue  from  commissions   generated  by  our
broker-dealers from retail brokerage transactions in equity and debt securities,
underwriting activities and private placements.  We believe 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

                                      -13-

<PAGE>

or short sale of securities as principal and may involve certain risks which may
limit our ability to resell securities we purchased or to repurchase  securities
sold in such  transactions.  These risks  include  change in the market price of
such  securities  and a decrease  in the  liquidity  of markets.  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."


      OUR MERCHANT  BANKING  ACTIVITIES  ARE VERY CAPITAL  INTENSIVE  AND HAVE A
POTENTIAL  FOR  LOSS  WHICH  COULD  HAVE  AN  ADVERSE  AFFECT  ON OUR  BUSINESS.
Securities  firms,  such  as  ourselves,   increasingly   promote  major  client
transactions and transactions  sponsored by the clients' own pools of capital by
using their 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  various
transactions.   These  include  mergers,  acquisitions,  and  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.  Purchasers of equity  securities in these
transactions  generally hold them for  appreciation,  and the securities 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. We also provide and
arrange  bridge   financing.   Bridge   financing   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 we will not experience  significant  losses
as a result of such  activities.  Such losses may have an adverse  effect on our
business. SEE "Management's Discussion and Analysis or Plan of Operation."


      ALTHOUGH WE DO NOT CURRENTLY USE  DERIVATIVE  FINANCIAL  INSTRUMENTS,  OUR
INABILITY TO ENGAGE IN CURRENCY  HEDGING  ACTIVITIES  MAY RESULT IN OUR EARNINGS
BEING SUBJECT TO GREATER  VOLATILITY DUE TO EXCHANGE RATE  FLUCTUATIONS.  At the
present time, we do not engage in the use of derivative  financial  instruments.
In some of the  countries  where we have  operations  (E.G.,  Kazakhstan,  Czech
Republic,  Slovenia,  Croatia, Poland and Azerbaijan),  the local currencies are
referred to as "soft" or  "exotic".  Soft  currency is the  currency of a nation
where a person can exchange the currency  only with  difficulty.  Soft  currency
countries  typically  have  minimal  amounts of currency  reserved  for exchange
purposes. As such, there are very few, if any, cost effective hedging strategies
available to us or potential investors. Our inability engage in currency hedging
activities may result in our earnings being subject to greater volatility due to
exchange rate fluctuations.


      OUR INABILITY TO RAISE  ADDITIONAL  REQUIRED CAPITAL COULD HAVE A MATERIAL
ADVERSE EFFECT ON US. We may need to raise  additional  funds to provide working
capital or to respond to unforeseen  needs or to take advantage of unanticipated
opportunities.  Over  the  longer  term,  it is  likely  that  we  will  require
substantial  additional  monies to continue to fund our 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 us. If adequate funds are not
available on acceptable  terms,  we 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
our business, financial condition, results of operations and cash flows.


      INADEQUATE  FINANCING  TO  SUPPORT  OUR  BUSINESSES  COULD HAVE A MATERIAL
ADVERSE  EFFECT ON US. A  substantial  portion of our total  assets  consists of
highly liquid  marketable  securities  and short-term  receivables  arising from
securities  transactions.  The highly liquid nature of these assets  provides us
with flexibility in financing and managing our business. However, certain of our
activities,  such as merchant banking,  frequently involve  substantial  capital
commitments  in  securities  which are often  illiquid.  Such funds and  capital
include  equity,  long-term  debt and  short-term  borrowings  which  consist of

                                      -14-
<PAGE>

securities sold under agreements to repurchase ("repurchase agreements"), master
notes and committed and uncommitted lines of credit.


      All repurchase  transactions and a portion of our bank borrowings are made
on a collateralized  basis.  This means that we have to pledge assets of ours in
order to secure the funds involved in the repurchase transactions or borrowings.
Liquidity  management  includes  monitoring  assets  available to pledge against
short-term borrowing.  We maintain borrowing relationships with a broad range of
banks,  financial  institutions,  counterparties  and others.  The volume of our
borrowings  generally  fluctuates in response to changes in the amount of resale
transactions  outstanding,  the level of our securities  inventories and overall
market  conditions.  Availability  of financing 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.
There can be no assurance that adequate financing to support our businesses will
continue  to be  available  in the  future.  SEE  "Management's  Discussion  and
Analysis or Plan of Operation."


      OUR ABILITY TO PAY DIVIDENDS,  REPAY DEBT AND REDEEM OR REPURCHASE  SHARES
OF OUR  OUTSTANDING  CAPITAL  STOCK COULD BE  ADVERSELY  AFFECTED  BY  POTENTIAL
RESTRICTIONS  RESULTING  FROM  NET  CAPITAL  REQUIREMENTS  ON  THE  BUSINESS  OF
REGULATED  SUBSIDIARIES  AND ON  THE  WITHDRAWAL  OF  CAPITAL.  As a  registered
broker-dealer  and member of  numerous  stock  exchanges  throughout  the United
States and Central and Eastern  Europe,  we are  required to comply with each of
the  countries'  regulatory  authorities  and net  capital  rules  of the  stock
exchanges.  These rules specify minimum net capital  requirements for registered
broker-dealers  and  stock  exchange  members.   They  attempt  to  ensure  that
broker-dealers  maintain  adequate  regulatory  capital  in  relation  to  their
liabilities  and the size of their  customer  business.  Accordingly,  the rules
require that at least a substantial  portion of 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  our ability to withdraw
capital from restricted  accounts governed by regulatory  restrictions,  even in
circumstances where these accounts hold more than the minimum amount of required
capital.  This, in turn,  could  prevent or limit our ability to pay  dividends,
repay debt and redeem or repurchase shares of our outstanding capital stock.


      WE HAVE POTENTIAL  SECURITIES  LAWS LIABILITY  EXPOSURE IN CONNECTION WITH
OUR  business.  Many  aspects  of our  business  involve  substantial  risks  of
liability.  In recent years  litigation  involving the  securities  industry has
increased,  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.


      WE DEPEND ON CERTAIN KEY MEMBERS OF MANAGEMENT  AND THE LOSS OF ANY ONE OF
THEM COULD HAVE A SIGNIFICANT ADVERSE EFFECT ON OUR PERFORMANCE AS A WHOLE. Most
aspects  of  our  business  depend  on  highly-skilled  individuals.  We  devote
considerable resources to recruiting, training and compensating such individuals
and have taken  further  steps to encourage  such  individuals  to remain in our
employ.  Individuals employed by us may, however, choose to leave at any time to
pursue other opportunities. Moreover, operating our business depends principally
on certain key management  personnel.  In particular,  Martin A.  Sumichrast and
Wolfgang  Kossner have played  significant  roles in promoting,  developing  and
managing Eastbrokers. Wolfgang Kossner serves as a consultant to Eastbrokers. If
Mr.  Kossner's  affiliation  with us  were to  cease,  or if he were  unable  to
continue to serve in this role, there may be a significant adverse effect on our
performance  as a whole.  Martin  A.  Sumichrast  is an  officer,  director  and
employee of ours. If we terminate his employment,  or if he is unable to perform
his duties,  there may be a significant  adverse effect on our  performance as a
whole. We expect that our potential  growth and any expansion into new areas and
activities   requiring   additional  expertise  (such  as  new  markets  or  the
development  of new  products)  will  place  additional  demands  on  our  human
resources.  We  anticipate  such demands  will require us to add new  management
personnel  and  to  develop  additional  expertise  in our  existing  management
personnel.  The failure to acquire such  services or to develop  such  expertise
could have a material  adverse effect on our prospects for success.  Competition
for such  personnel is intense and we can give no assurance that we will be able
to hire and/or retain adequate personnel. At the present time, we have a key-man
life insurance policy in effect on Mr. Sumichrast. However, we cannot be certain

                                      -15-

<PAGE>

that the  proceeds  from such  policy will be adequate to offset the loss of his
services.  We do not have key-man life insurance policies in effect with respect
to Mr. Kossner.


      WE HAVE SUFFERED OPERATING LOSSES AND WE CANNOT PREDICT WHETHER OUR FUTURE
OPERATIONS  WILL BE PROFITABLE OR THAT WE WILL HAVE AVAILABLE  FUNDS ADEQUATE TO
FUND OUR OPERATIONS. Since the Company's formation, we have suffered substantial
cash flow deficits and operating losses.  The net loss for the fiscal year ended
March 31, 1999 was  $5,911,848  and the net loss for the fiscal year ended March
31, 1998 was $3,676,607.  Cash and cash  equivalents were $2,215,000 as of March
31, 1999 and $7,157,000 as of March 31, 1998. There can be no assurance that our
future  operations  will be  profitable  or that we will  have  available  funds
adequate to fund our  operations.  Should our  operations be  profitable,  it is
likely that we would retain much or all of our earnings to finance future growth
and expansion.


      IF OUR COMMON STOCK WERE DELISTED,  STOCKHOLDERS MAY HAVE A MORE DIFFICULT
TIME SELLING THEIR SECURITIES. In the event that the Common Stock were no longer
to meet applicable Nasdaq SmallCap  requirements  including timely reporting and
were delisted  from Nasdaq  SmallCap,  we would  attempt to have our  securities
traded in the  over-the-counter  market via the Electronic Bulletin Board or the
"pink sheets." In such event,  holders of our securities  would likely encounter
greater  difficulty in disposing of these securities  and/or obtaining  accurate
quotations as to the prices of our securities.


      IF AT ANY  TIME  REGULATORS  DELIST  THE  COMMON  STOCK  FROM  THE  NASDAQ
SMALLCAP,  TRANSACTIONS  INVOLVING THE  SECURITIES  MAY BECOME  SUBJECT TO PENNY
STOCK RULES THAT IMPOSE ADDITIONAL SALES PRACTICE REQUIREMENTS ON BROKER-DEALERS
WHO SELL SUCH  SECURITIES  TO  PERSONS  OTHER  THAN  ESTABLISHED  CUSTOMERS  AND
ACCREDITED  INVESTORS.  The SEC has adopted  regulations  which generally define
"penny stock" to be any equity  security that has a market price (as defined) of
less than  $5.00 per share or an  exercise  price of less than  $5.00 per share,
subject to certain exceptions. Since our Common Stock is currently listed on the
Nasdaq  SmallCap we are exempt from the definition of penny stock at this time .
If at any time  regulators  delist  the Common  Stock from the Nasdaq  SmallCap,
transactions  involving the  securities  may become subject to penny stock rules
that impose additional sales practice  requirements on  broker-dealers  who sell
such  securities to persons  other than  established  customers  and  accredited
investors.  (Generally,  accredited  investors  are those persons with assets in
excess of $1,000,000 or annual income exceeding $200,000, $300,000 together with
their spouse.) For transactions  subject to penny stock 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,  the Commission mandates a risk disclosure
document relating to the penny stock market which the broker-dealer must deliver
prior  to  any  transaction   involving  a  penny  stock,   unless  exempt.  The
broker-dealer   also  must  disclose  the   commissions   payable  to  both  the
broker-dealer and the registered  representative and disclose current quotations
for  the  securities.  If  the  broker-dealer  is  the  sole  market-maker,  the
broker-dealer  must also disclose this fact as well as its presumed control over
the market.  Finally,  broker-dealers  must send monthly  statements  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 our securities in the secondary
market.


      THERE COULD BE POSSIBLE  DILUTIVE AND OTHER ADVERSE EFFECTS OF OUTSTANDING
OPTIONS AND  WARRANTS  BEING  EXERCISED  WHICH COULD AFFECT OUR ABILITY TO RAISE
ADDITIONAL  CAPITAL.  Under  the  terms  of  the  outstanding  Class  A, B and C
warrants, options issued under our 1996 Stock Option Plan, and other outstanding
options  and  warrants,  the holders of such  warrants  and options 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 existence of
such  options and  warrants  may  adversely  affect terms on which we may obtain
additional  financing.  For example,  the holders of the warrants might exercise
them at a time when we are attempting to obtain additional capital through a new
offering of securities on terms more favorable than those which the warrants and
options provide.


      THE  ISSUANCE  OF  PREFERRED  STOCK  COULD  MAKE A  POSSIBLE  TAKEOVER  OF
EASTBROKERS,  OR  REMOVAL  OF  EASTBROKERS'  MANAGEMENT  MORE  DIFFICULT.  As of
December  1997,  our  Board  of  Directors  authorized  the  issuance  of  up to

                                      -16-
<PAGE>

10,000,000  shares  of  preferred  stock.  As of April  30,  1999 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.  The Board of Directors could use
this as a means to prevent a change in control of the Eastbrokers Group.  Future
issuances of preferred stock may provide for dividends,  certain  preferences in
liquidation and conversion rights.  Such preferred stock issuance could make the
possible takeover of the Eastbrokers  Group, or the removal of management of the
Eastbrokers  Group,  more difficult.  The issuance of such preferred stock could
discourage   hostile  bids  for  control  of  the  Eastbrokers  Group  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.


      THERE ARE SPECIFIC RISKS OF THE GEOGRAPHIC AREAS COVERED BY US OUTSIDE THE
UNITED STATES WHICH COULD, IF REALIZED,  RESULT IN A MATERIAL  ADVERSE EFFECT ON
US.  Our  investments  will  include  securities  of issuers  resident  in areas
currently  in a state of flux - Central  and Eastern  Europe and  Central  Asia.
These  regions'  political  institutions  and  economic  policies  now  face the
challenges  of rapid  change.  Their  populations  are  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  our  investments  will be  subject  to risks of a nature and
degree not normally  encountered in more  developed  economies and additional to
those  inherent  in any equity  investment.  Specific  examples of some of these
risks are described below:

o  LIQUIDITY  OF OUR  INVESTMENTS:  The  nature  of  our  investments  in  these
   geographic areas limits their potential secondary market. Accordingly, we may
   not be able to  achieve  the  full  value  of our  investments  on  disposal.
   Although we anticipate  that  liquidity will improve once local stock markets
   are operational,  there is no guarantee that the markets will be as liquid as
   those of developed countries.

o  POLITICAL  AND ECONOMIC  FACTORS:  The   countries  in   which  some  of  our
   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  whether such reforms will
   achieve their intended aims.  Countries may impose  restrictions on investing
   in specific  companies or  industries  which they consider to be important or
   sensitive to national  interests,  but which also may be the best  investment
   opportunities available there. Additionally, changes in government policy may
   result in countries expropriating investments.

o  VALUATION  RISK:  Accounting  and financial  reporting  standards in selected
   countries are not equivalent to  International  Accounting  Standards or U.S.
   Generally Accepted Accounting  Standards.  Consequently,  less information is
   available  to  investors in the  selected  countries  than in more  developed
   capital markets.  Nevertheless,  we will use valuations and financial reports
   of  international  auditing  firms and will apply all other  means to monitor
   unlisted investments.

o  PROBLEMS OF TRANSITION AND BUSINESS FAILURE:  Until very recently,  virtually
   all  industrial  output  within the  Comecon and Warsaw  Pact  countries  was
   generated 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 the United  States.  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  we have  invested  may have a  significant  adverse  effect  on our
   performance as a whole.

                                      -17-
<PAGE>


o  CHANGES IN LAW AND  ENFORCEMENT OF RIGHTS:  In cases where  competing  claims
   arise or in cases of  re-nationalization,  it may be difficult to enforce our
   rights in  several  of the  countries  where we  operate.  There are  several
   reasons for this. First,  legislation  relating to securities,  stock markets
   and property  rights may not exist.  Second,  these  countries  may only very
   recently have introduced such legislation,  and may introduce significant new
   legislation  at any  time.  Finally,  existing  legislation  is  likely to be
   subject to extensive amendment.

o  INVESTMENT  AND  REPATRIATION  RESTRICTIONS:   We  may  require  governmental
   registration  and/or  approval  in order  to  repatriate  investment  income,
   capital and the proceeds of sales by foreign investors. A number of countries
   in which we may invest do not have  freely  convertible  currencies  or their
   currencies may only be convertible at rates determined by their  governments.
   Countries may also impose  repatriation  restrictions at any time. Changes in
   the value of currencies in which our investments are denominated  will result
   in a  corresponding  change in the value of our  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  corresponding  result  that  delays  in
   currency conversion may cause significant losses.

o  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, we could, in the future,  become
   subject to local tax liabilities  that had not been anticipated in conducting
   our investment activities or valuing our assets.


      A SUBSTANTIAL  PORTION OF OUR ASSETS ARE LOCATED OUTSIDE THE UNITED STATES
WHICH COULD MAKE IT DIFFICULT TO ENFORCE CIVIL JUDGMENTS  OBTAINED AGAINST US IN
THE U.S. A  substantial  portion of our assets are  located  outside  the United
States.  It may be  difficult  for  investors  to enforce  outside of the United
States judgments  against the Eastbrokers Group obtained in the United States in
any actions,  including  actions based on the civil liability  provisions of the
securities laws of the United States.  In addition,  certain of our officers and
directors  are not  citizens  or  residents  of the  United  States and all or a
substantial  portion of their  assets are or may be located  outside  the United
States.  As a result,  it may be difficult  for  investors to affect  service of
process within the United States against them or to enforce  judgments  obtained
in  the  United  States,  including  judgments  based  on  the  civil  liability
provisions of the securities laws of the United States.

      SIGNIFICANT AND RAPID CHANGES IN TECHNOLOGY  COULD  NEGATIVELY  AFFECT OUR
INTERNET-RELATED  PROJECTS.  The market for  internet  products and services has
only   recently   begun  to  develop  and  is  rapidly   evolving.   Significant
technological  changes could render our existing  internet-related  products and
services  obsolete.  To be  successful,  we must adapt to this rapidly  changing
market by continually  improving the responsiveness,  functionality and features
of our products and services to meet our customers'  needs.  If we are unable to
respond to technological  advances and conform to emerging industry standards in
a  cost-effective  and timely basis,  certain  portions of our business could be
materially adversely affected.

                             DESCRIPTION OF PROPERTY

      The  Eastbrokers  Group  does not own any  real  property.  Leases  on the
properties leased by the Eastbrokers Group expire at various times over the next
five years. At current  production  levels,  the Eastbrokers  Group believes its
leased  space  is  suitable  and  adequate.  However,  if  volume  and  activity
increases, it may necessitate leasing additional office space.

      The  Eastbrokers  Group's  corporate  offices  are  located in  Rockville,
Maryland.  The Eastbrokers Group leases its office space in Rockville,  Maryland
and through its  subsidiaries.  At March 31, 1999, it leased office space in the
following locations:  (i) Denver, Colorado; (ii) Aspen, Colorado; (iii) Colorado
Springs,  Colorado;  (iv)  Meza,  Arizona;  (v) La Jolla,  California;  (vi) Los
Angeles,  California;  (vii) Newark, Delaware;  (viii) Boca Raton, Florida; (ix)
Baltimore, Maryland; (x) Farmington,  Michigan; (xi) Aberdeen, New Jersey; (xii)
Sea Girt, New Jersey;  (xiii) Albuquerque,  New Mexico;  (xiv) Charlotte,  North
Carolina; (xv) Seattle, Washington; (xvi) Spokane, Washington;  (xvii) New York,

                                      -18-
<PAGE>


New York;  (xviii) Vienna,  Austria;  (xix)  Klagenfurt,  Austria;  (xx) Zagreb,
Croatia;  (xxi) Almaty,  Kazakhstan;  (xxii) Warsaw,  Poland; (xxiii) Ljubljana,
Slovenia and (xxiv) Baku, Azerbaijan. The Eastbrokers Group maintains a presence
in Budapest,  Hungary due to its  relationship  with the buyer of its operations
previously located there.


                                LEGAL PROCEEDINGS

      Through its recently acquired subsidiary,  EBI Securities,  Eastbrokers 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  creditworthiness  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 in 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  pleadings  and  during  a court
deposition  taken in  October  1998 that its  damage  claim had been  reduced to
$332,000 and that it would  dismiss its RICO claims.  EBI  Securities  has filed
counterclaims   for   defamation   based  upon  certain  false  and   defamatory
representations regarding EBI Securities.  The trial had been scheduled to start
in January 1999 but the Court removed the case from its docket after USCAN filed
a petition for relief under Chapter 11 of the United States  Bankruptcy Code. In
the event the case should ever be restored to the active court docket for trial,
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.  Plaintiffs'  motion  for a new  trial was
denied.  EBI  Securities  filed a  motion  seeking  recovery  of its  costs  and
attorney's  fees incurred in connection  with defending  this action.  The court
awarded  EBI  Securities  $12,500 in costs but denied its motion for  attorney's
fees.  Plaintiffs  have filed an appeal of the judgment and EBI  Securities  has
cross-appealed the denial of its motion for attorney's fees.

      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

                                      -19-
<PAGE>

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.  The case is
presently scheduled for trial in October 1999.

      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  in  the  NFC
Litigation  to vacate this award and plans to  vigorously  contest this award on
appeal.

      JACK G. LARSEN, AS RECEIVER FOR SOUTHWEST  INCOME,  TRUST ADVANTAGE INCOME
TRUST AND INVESTORS TRADING TRUST V. COHIG AND ASSOCIATES, INC. ET AL., Maricopa
County Superior Court, Arizona,  Case No. CV 98-20281.  Plaintiff commenced this
action  against EBI  Securities  and one of its  brokers in  December  1998 (and
process was served on EBI Securities in January 1999) seeking  damages in excess
of $8 million  dollars  against EBI Securities as well as an accounting of funds
allegedly in possession of EBI  Securities.  Plaintiff,  who apparently has been
appointed receiver for three trusts,  alleges that customer accounts established
at EBI Securities by third parties contained funds that actually belonged to the
Trusts,  and that EBI Securities  negligently failed to supervise its employees,
in  failing to  determine  that the third  parties'  trading  activities,  which
allegedly resulted in significant trading losses, were in violation of the terms
of agreements between the third parties and the Trusts.  Plaintiff also contends
that EBI Securities  has in its possession and has wrongfully  refused to return
approximately  $270,000  belonging  to the Trusts.  EBI  Securities  has filed a
Motion to Compel  Arbitration and a Motion to Dismiss for Lack of Subject Matter
Jurisdiction.  A court  hearing on these two motions is presently  scheduled for
the fall of 1999. EBI Securities  believes that it has meritorious  defenses and
intends to vigorously defend against Plaintiff's claims.

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

      In addition to the litigation  described above,  Eastbrokers,  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 Eastbrokers Group's financial
condition or operating results.

                          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            Not applicable.

                                      -20-
<PAGE>




                                     PART II

                  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

      Eastbrokers'  Common  Stock is traded  on the  Nasdaq  SmallCap  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 Eastbrokers' Common Stock, which
occurred in September 1996) 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
                                       -------------------------------

            FISCAL 1997
            First Quarter                 $ 7.5000        $4.2500
            Second Quarter                $ 7.2500        $6.0625
            Third Quarter                 $11.1250        $6.3750
            Fourth Quarter                $11.0000        $8.3750

            FISCAL 1998
            First Quarter                 $10.5000        $4.0000
            Second Quarter                $14.0000        $4.0000
            Third Quarter                 $ 5.7500        $2.0313
            Fourth Quarter                $13.0000        $3.7500

            FISCAL 1999
            First Quarter (through        $ 9.3750        $3.5625
            June 28, 1999)

      On June 28, 1999, the closing bid price for  Eastbrokers'  Common Stock as
reported on the Nasdaq SmallCap was $3.625 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).

      Eastbrokers  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.  Eastbrokers  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 Eastbrokers' Board of Directors and will depend upon the earnings,
capital requirements and operating and financial condition of Eastbrokers, among
other factors.

      In April 1997,  the Company  issued  125,002  shares of common stock,  par
value $.05, of the Company ("Common  Stock").  The securities were sold to three
individuals:  Calvin S.  Caldwell,  Frank  Huang and Jay  Raubvogel  for a total
offering  price of $750,012 or $6.00 per share.  The net proceeds to the Company

                                      -21-
<PAGE>

were $725,012. There were no underwriting discounts or commissions. The Offering
was made  pursuant  to an  exemption  from  registration  under  Rule 506 of the
Securities Act of 1933, as amended (the "Securities Act"). The Offering was made
only to selected  "accredited  investors" as that term is defined in Rule 501(a)
of the Securities Act.

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

      On February  20,  1998,  Eastbrokers  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
percent  below the then current  market  price as of February  19,  1998.) These
units were offered and sold to various accredited investors. With regard to this
sale,  Eastbrokers  relied  upon  the  exemption  from  registration  under  the
Securities  Act of 1933,  as amended  (the "Act")  provided by  Regulation  D as
promulgated under the Act.

      In connection with the private placement,  1,227,000 Class C Warrants were
issued to the Placement Agents.

      In  connection  with  the   acquisition  of  Cohig  &  Associates,   Inc.,
Eastbrokers  issued  445,000  shares of common  stock,  par value  $.05,  of the
Company to the selling  corporation,  Cherry Creek Investments,  Ltd. During the
five days before the  effective  date of the  acquisition,  the average  closing
price of Eastbrokers' 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 Cohig &  Associates,  Inc.,
Eastbrokers  incurred an obligation to deliver  25,000 shares of common stock to
J.B. Sutton, LLC as an investment banking advisory fee. To maintain  consistency
with the assigned valuation on the acquisition of Cohig & Associates,  Inc., The
Board of  Directors  assigned  a value of $5.00 per  share for a total  value of
$125,000 to this transaction.

      On November 25, 1998,  Eastbrokers sold 10 newly issued units in a private
placement  consisting in the  aggregate of  $1,100,000 in 7 percent  Convertible
Debentures  (the "7 percent  Convertible  Debentures")  and Class C Common Stock
Purchase  Warrants to purchase  125,000  shares of Common  Stock.  The 7 percent
Convertible  Debentures  were  redeemed  in March  1999  from a  portion  of the
proceeds of the  offering  related to the  issuance of the 10 percent  Notes (as
defined below).

      In January  1999,  Eastbrokers  sold 125,000  restricted  shares of Common
Stock in a  private  placement  to a  private  investor  for  $4.00  per  share.
Eastbrokers  also  issued  7,500  shares of its Common  Stock to a broker of EBI
Securities  as  compensation  for  services  rendered  in  connection  with this
transaction.

      In March 1999,  Eastbrokers issued 10 percent Convertible Promissory Notes
due  2003  (the  "10  percent  Notes")  in  an  aggregate  principal  amount  of
$1,350,000.  Holders of the 10 percent  Notes have the right to convert their 10
percent  Notes into shares of Common Stock at $5.75 per share.  A portion of the
proceeds of the Notes was used to redeem the 7 percent Convertible Debentures.

      In May 1999, we issued 5 percent  Convertible  Debentures due 2002 (the "5
percent Debentures") in an aggregate principal amount of $2,000,000.  Holders of
the 5 percent  Debentures  have the right to convert  their 5 percent Notes into
shares of Common Stock at the lesser of $5.50 per share or 90% of the average of
the three  lowest  closing  bid prices for the 20 trading  days ending five days
before  the date of  delivery  of the  notice of  conversion.  A portion  of the
proceeds of the Debentures will be used to expand our operations.

                                      -22-
<PAGE>



                 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

PLAN OF OPERATION

    GENERAL OVERVIEW

      Prior  to  August  1996,  we  engaged  in the  purchase  and sale of newly
privatized  businesses  in the Czech  Republic.  In August 1996,  we entered the
Central and Eastern European  investment banking and securities business through
our acquisition of Eastbrokers  Beteiligungs AG ("Eastbrokers  AG"), an Austrian
holding  company  providing  financial  services in Eastern  and Central  Europe
through its network of  subsidiaries.  The  acquisition  of  Eastbrokers  AG was
intended to not only provide an earnings stream from brokerage  activities,  but
also position us to provide  investment  banking and corporate  finance services
throughout Central and Eastern Europe.

      In March 1997, we expanded our  brokerage  operations in the United States
through the  acquisition  of an existing New York-based  broker  dealer.  In May
1998, we continued the expansion of our U.S.  operations through the acquisition
of Cohig & Associates ("EBI  Securities"),  a Denver,  Colorado based investment
banking  and  brokerage  firm.  Currently,   we  operate  a  highly  diversified
investment   banking  and  securities   network,   with  20  US  offices  and  8
international  branches  and  affiliates  located  in the  following  countries:
Austria; Czech Republic; Poland; Kazakhstan; Croatia; Slovenia and Azerbaijan.

      Overall,  1998, was a very challenging year. First, we had to contend with
the global  financial  crisis,  which  resulted in the collapse in the Asian and
Russian markets and caused enormous  turmoil  throughout the emerging markets of
Central and Eastern Europe. Second, the we had to contend with the correction in
the US  equities  market,  which  devastated  an  already  depressed  small  and
micro-cap  market.  These two factors  directly  accounted for 77 percent of our
year-end loss.

      Despite these unprecedented  market conditions,  we have continued to grow
our assets under  management,  our  commission  revenue,  underwriting  fees and
distribution  capabilities.  We have  streamlined  our  operations in Europe and
under-performing  assets were sold or  liquidated.  We have also  launched a new
subsidiary,  EBonline. We remain committed to our mission of building, through a
acquisitions  and  strategic  alliances,  a highly  successful,  global,  middle
market, investment banking and securities firm.


    EUROPEAN OPERATIONS

      Since the  acquisition  of Eastbrokers  AG, in August,  1996, our business
strategy for European operations was to utilize its emerging market expertise in
the areas of merchant banking, corporate finance,  privatization and trading, in
order to expand throughout Central and Eastern Europe.  However, during 1998, we
modified our business  strategy for Europe,  in response to an overall  economic
downturn that covered much of Central and Eastern Europe.  This market downturn,
which  peaked in the Summer of 1998,  led to sharp  decreases  in stock  markets
worldwide,  particularly in Central and Eastern Europe. In addition,  to falling
prices,  the overall  liquidity  throughout much of the region was significantly
reduced. In order to minimize the negative effects on our financial  operations,
we reduced  our work force in Austria  and closed our  operations  in  Slovakia,
Romania,  Turkey, Russia and Bulgaria.  In Austria,  Poland and Croatia, we made
significant changes in our management and cost structures. In the Czech Republic
and Hungary, we sold our operations. See "Business-Acquisitions and Dispositions
During the Fiscal Year." However, we maintain an affiliate relationship with the
management in Hungary.  We have also  re-entered the Czech Republic  through the
purchase of a minority  interest in Stratego  Invest a.s.  Prague.  We have also
organized an office in Baku, Azerbaijan. At the time of this filing, this office
was in its development stage.

      Despite the negative sentiment in emerging markets during 1998, we believe
that  Central  and  Eastern  Europe's  ultimate  unification  into the  European
Economic and Monetary  Union,  will lead to a  significant  increase in investor
interest in the region.  This potential increase in the emerging market interest
will benefit  those firms that have had existing  operations  in the region.  We
also intend to maintain  our solid  long-term  involvement  in the region and to
continue to providing our clients with quality brokerage and investment  banking
services.  We also intend to expand its operations into other markets of Western
Europe  through  possible  acquisitions,  mergers,  joint  ventures or strategic
relationships.

                                      -23-
<PAGE>


      Since  our  acquisition  of EBI  Securities  in  May  1998,  our  European
subsidiaries have had direct access to the US securities marketplace.  We expect
that during 1999,  our two main  subsidiaries,  EBI  Securities  and WMP Bank AG
("WMP"),  will  cross  market,  to their  respective  retail  and  institutional
clientele,  their  research,  corporate  finance and trading  opportunities.  We
believe that it is possible to  significantly  increase the overall  revenues if
EBI Securities, through WMP, is successful in marketing US securities to Western
European institutional clientele, and vice-versa.

AUSTRIA

      Austria's real economic  growth was 2.5 percent in 1997,  which was higher
than projected  mainly due to the solid  expansion of real goods exports of 15.3
percent.  This favorable  development was mainly  attributable to an increase in
foreign trade activity and gains in Austria's export markets.  Austria's exports
continued to be strong in 1998,  with 8.5 percent annual  growth,  while imports
declined  slightly from 9.2 percent in 1997, to 8.3 percent in 1998.  Currently,
the 1999, year is estimated to have approximately the same export growth.

      Austria's  1998,  Gross Domestic  Product  ("GDP")  increased 3.3 percent,
substantially  above the 2.5 percent in 1997.  During  1999,  GDP is expected to
increase  at a 2.8  percent  rate.  Most  forecasts  for  the  year  2000,  show
approximately  the same rate of growth.  Austria's  accession  into the European
Union and the opening-up of Eastern Europe has helped  Austrian  exports advance
from 37 percent in 1994, to 44 percent in 1996. In addition,  the  stabilization
of European  exchange  rates  largely  reversed the  downward  trend of the real
effective exchange rate in the prior years. Real effective exchange rate dropped
2.6 percent in 1997,  and  narrowed to minus 0.5 percent in 1998 and an expected
minus 0.3 percent or break even in 1999.

      Beginning in 1993, the  devaluation  of the weak  currencies had gradually
undermined Austria's competitiveness.  This changed in 1996 and 1997, due to the
establishment  of the EMU, and 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  increased the competitiveness of
the Austrian  economy during the past three years,  returning it to the level it
held in the early 1990s.

      At 5.1 percent of GDP, the federal budget deficit was at its highest level
since 1995. By 1997, it had been reduced to 2.7 percent,  then to 2.6 percent in
1998,  and is  projected  to remain at about the same level this year.  This was
done through public  spending and tax increases,  in order so that Austria could
meet the fiscal convergence criteria determined by the Maastricht Treaty. In the
opinion of management, the outlook for the Austrian economy in 1999 and 2000, is
very  positive.  In its most recent  projections,  the  Austrian  Institute  for
Economic Research projects growth rates of 2.8 percent and 3.0 percent for 1999,
and 2000,  respectively.  Interest rates,  as measured by an average  commercial
credit,  declined  from 7.82  percent in 1995,  to 6.96  percent  in 1996,  6.50
percent in 1997,  and 6.39  percent by 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 budget deficit was
82.3  billion ATS in 1998,  107.l  billion ATS in 1996,  and 65.7 billion ATS in
1997.  Inflation  increased in 1992 by 4.1 percent 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,
and 1.3 percent in 1997 and 1.2 percent in the first half of 1998.

      We operate  two  subsidiaries  in  Austria,  Eastbrokers  AG, the  holding
company  for  its  European   operations,   and  WMP,  the  Company's   Austrian
broker-dealer.  During 1998,  we  significantly  streamlined  the  operations of
Eastbrokers AG, reducing its overall  expenditures by  approximately 75 percent.
As the holding  company for all  European  operations,  Eastbrokers  AG divested
itself of its Hungarian,  Slovakian,  Romanian,  Turkish,  Russian and Bulgarian
operations.

      WMP has historically  generated  revenue from sales and trading of Central
and Eastern  European  securities  and also market making on the Austrian  Equos
(electronic  quotation  order) system for equities and the PATS (partly assisted
traded)  system for options and warrants.  During 1999,  WMP's plans include the
broadening  of its  business  into three  areas.  First,  WMP has hired an asset
management  team and portfolio  management  director in order to increase  WMP's
assets under management.  WMP also intends to broaden its client base to include
not only Austrian  clients,  but also clients located in Italy,  Switzerland and
other  Western  European  countries.  Second,  due to the expansion of the Xetra
system (the  German  electronic  system),  we expect  that all  Austrian  stocks
currently  quoted on the Equos  system  will  cease  trading on Equos and resume
trading on the Xetra.  Since WMP is  expected  to be able to qualify as a market

                                      -24-
<PAGE>

maker on the Xetra,  we will continue to make markets in the Austrian  stocks as
well as have access to market  making in German  stocks.  Third,  WMP intends to
develop online  trading for US equities in the Austrian  market and is reviewing
the possible expansion of online trading for Austrian and German stocks.

      In order to facilitate these developments  mentioned above, WMP intends to
raise  additional  equity  capital  in 1999.  In order  for us to  maintain  our
majority  equity  position in WMP, we will have to increase our equity  interest
prior to any financing,  so that dilution will not reduce our ownership below 51
percent.  In order to accomplish  this, we intend to combine  Eastbrokers AG and
WMP  into  a  single  entity.  This  will  also  result  in the  elimination  of
Eastbrokers  AG's  overhead  costs.  If  successfully  completed,  WMP would own
Eastbrokers operations in Poland, Czech Republic,  Slovenia, Croatia, Kazakhstan
and Azerbaijan.

POLAND

      Poland has the  fastest  growing  economy  in the  region and its  reforms
helped  minimize  the turmoil  caused by the Russian  crisis and the Balkan war.
Poland is expected  to grow by 4.0  percent in 1999 and 5.5 percent in 2000,  as
compared to 4.8 percent in 1998.  The  government is continuing to privatize the
largest  companies  and  the  stock  market  has  helped  a  great  deal in this
privatization process.

      The Warsaw  Stock  Exchange  is highly  regulated  and  follows 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 increase  through May, 1998.
At that time,  the Warsaw  Stock  Exchange  Index  reached a record high of over
18,000.  Unfortunately,  this  market  was  affected  by the Asian  and  Russian
economic  crises.  By  mid-October  1998,  the Warsaw Stock  Exchange  Index had
dropped by over 40 percent to below 11,000.  However, as of mid 1999, the Warsaw
Stock Exchange Index has recovered to almost 16,000.

      Poland's  current  GDP growth of 4.8  percent is the highest in the former
Soviet block. Poland was able to reduce its inflation rate by more than one half
from 13.7 percent to 6.3 percent. This gave the Polish central bank the platform
to lower the discount rate from 24.5 percent to 15.5 percent.  However, Poland's
unemployment  rate  increased  from 10.4 percent in 1998, to the current rate of
12.1 percent.

      Currently,  the country is in a period of economic stability with interest
rates and inflation heading lower and its currency, the Polish Zloty, appears to
be  stabilizing  against  the major  currencies.  The Zloty was  3.9115 per U.S.
dollar as of June 21,  1999,  slightly  weaker than the 3.4 per U.S.  dollar the
previous  year.  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 13.7 percent in 1998.  In 1999,  inflation  has dropped
substantially,  to only  6.3  percent  annual  rate or over one half of the 1998
rate.

      Eastbrokers WDM SA is a Polish  broker-dealer and specialist on the Warsaw
Stock  Exchange.  Eastbrokers  WDM SA generates  revenue from four main sources:
commissions  from retail  clients,  investment  banking fees from initial public
offerings,  sponsorship fees on the Warsaw Stock Exchange, and principal trading
and  specialist  fees.  During  1998,  Eastbrokers  WDM SA was  affected  by the
downturn in the Polish  market.  Revenue was reduced in all  categories  and the
number of  underwritings  declined.  In October 1998, a new management  team was
hired  and  costs  were  lowered   through   reductions  in  personnel,   office
expenditures,  and  the  sales  staff  was  changed  from  a  salary-based  to a
commission-based  compensation plan. These changes,  together with the increased
strength in the Polish market  resulted in an increase in performance at the end
of 1998. In 1999, Eastbrokers WDM SA expects to further increase its revenue and
market share. Eastbrokers WDM SA also expects to launch a similar online trading
system as other Eastbrokers subsidiaries.

CZECH REPUBLIC

      The Czech  Republic's  GDP  dropped  to only a 1 percent  in 1998,  and is
currently at a minus 2.7 percent rate for 1999. Industrial production,  after an
exceptionally strong 10.5 percent in 1998, dropped to 6.5 percent in April 1999,
and for the first four months of 1999,  dropped another 8.5 percent  compared to
the same period in 1998. GDP per capita dropped from $11,566 in 1998, to $10,787

                                      -25-

in 1999. The largest drop came in mining,  which was down 19 percent from a year
ago. The largest production increases were in woodworking  products,  paper, the
publishing industry and transportation. Work productivity dropped 1.5 percent on
a year to year basis,  while real wages grew 3.5  percent and nominal  wages 6.1
percent.

      The budget  deficit  decreased  from a minus 1 percent in 1998, to a minus
1.6 percent.  The  unemployment  rate  increased from 5.4 percent in 1998 to 8.2
percent to date.  The number of  unemployed as of May 1999,  reached  421,574 or
146,223  more  that at the  same  time a year  ago.  This has had an  impact  on
inflation and interest  rates.  The Consumer Price Index fell 0.l percent in May
1999,  as compared to an  increase  of 0.l percent a year  before.  Year-on-year
growth of the Consumer Price Index was 2.4 percent in 1999, versus 13 percent in
May 1998.  As the result,  the Central Bank  decreased the discount rate from 13
percent to 6 percent.

      Despite a recession,  the Czech  economy is still  attracting  significant
foreign  investments  which  amounted to $6.2 billion in 1998,  and $8.7 billion
rate in the first quarter of 1999.  Direct foreign  investment  doubled in 1998,
with  services  accounting  for 29 percent,  the  financials  sector 19 percent,
transportation 12 percent,  machinery 10 percent and others 22 percent. Domestic
demand,  after  dropping  from 8 percent in 1996, to minus 3 percent in 1998, is
running now at a plus 1 percent and is expected to recover to 2 percent by 2000.

      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 drop was a partial result
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.

      During  1998,  the Czech stock  market was also  severely  impacted by the
global financial crisis. In addition,  the Czech Republic was 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.  In June 1998, we sold our operations
in the Czech Republic. However, we were able to re-enter the market on favorable
terms and  conditions  through our  purchase,  by WMP, of 49 percent of Stratego
Invest.

      In 1998, Stratego Invest was one of the more stable brokerage firms in the
Czech Republic.  Even in the difficult year of 1998,  Stratego Invest  accounted
for a significant  amount of the volume on the Prague Stock  Exchange.  Stratego
Invest's volume of executed  transactions  continued to increase and in 1998, it
was CZK 53 billion ($1.5 billion USD),  which  represents an annual  increase of
more than 30 percent.

      Stratego Invest generates its revenue from trading,  corporate finance and
asset  management.   In  trading,  Stratego  Invest  continued  to  enlarge  its
international  business  activities  by  securing  a foreign  currency  license,
primarily for US, Germany and Great Britain  currencies.  In connection with the
substantial  interest of clients in transactions  in these markets,  the Company
strengthened its team by hiring brokers who have had many years of experience in
foreign trading. This international expansion is also leading Stratego Invest to
develop  an online  trading  system  for US  equities  in  conjunction  with EBI
Securities.  Stratego Invest believes that this system will be functional during
the summer of 1999. In corporate finance,  due to depressed economic conditions,
corporations sought corporate finance alternatives. In order to best manage this
opportunity,  Stratego  Invest  invested into a dedicated  subsidiary,  which it
named SI  Corporate  Finance,  a.s. In asset  management,  the average  yield of
Stratego Invest's asset managers were above the most advantageous interest rates
of time deposits, despite the official index of the Prague Stock Exchange, which
decreased by more than 20 percent in 1998. This exceptional performance has lead
to the increase in assets under management.

      Stratego Invest attaches great  importance to public  relations.  Stratego
Invest  provides a bulletin  for its  clients  which is an  important  source of
information  both for the  investors  and the general  public.  Stratego  Invest
publishes  its  investment  recommendations,  which are  widely  quoted in major
newspapers  and  economic  magazines,  and its  statistics  serve as  background
material for Czech television news. An important source of information on events
in the Czech capital market can be found on Stratego Invest's internet home page
(HTTP://WWW.STRATEGO.CZ.).

                                      -26-
<PAGE>


SLOVENIA AND CROATIA

      Sloevenia's  current annual  inflation  rate is 6.5 percent,  which is the
lowest rate since 1991. A long period of subdued  wage growth,  a fall in import
prices,  the real appreciation of the Slovenian Tolar ("SIT") against the German
Mark  and  stronger  competition  in  the  domestic  market  contributed  to the
stabilization of prices.  After two years, the SIT appreciated  significantly in
1998.  It  increased by 4 percent in real terms  against a basket of  currencies
measured by relative consumer prices. The high rate of SIT appreciation  through
June 1998,  was followed by the SIT's  depreciation  in the second half of 1998,
mainly  triggered by  interventions  on the part of the Bank of Slovenia.  After
improving  substantially in the first quarter of 1998, GDP decreased  throughout
the end of the year.  Annual  economic growth of 3.9 percent was slightly behind
expectations  of 4 percent.  Unlike in 1997,  when export demand was the driving
force behind economic  growth,  domestic demand played a major role in 1998. The
main  reason for the fall in  Slovenia's  exports was the  deterioration  of the
economic  situation in its trading  partners,  resulting  from the impact of the
Asian and Russian financial crises.  Total exports of goods rose by 8.4 percent,
and the Russian share in total exports  dropped from 3.9 percent to 2.6 percent.
The rise in total  imports of goods (10.4  percent in real terms)  exceeded  the
rise in exports.  Net foreign capital inflows dropped  considerably  compared to
1997, due to the lower inflow of foreign direct  investment,  decreased  foreign
investments  in  securities  and the decreased  borrowing of domestic  companies
abroad. The registered unemployment rate in 1998, was 14.5 percent,  compared to
14.4 percent in 1997.  The surveyed  unemployment  rate in 1998, was 7.9 percent
compared to 7.4 percent in 1997.  In 1998,  the budget  deficit  amounted to 0.9
percent of estimated  GDP,  general  government  revenues rose by 6.5 percent in
real terms while  general  government  expenditures  increased by 5.2 percent in
real terms.

      Slovenia was confirmed as an EU Associate Member on February 1, 1999, with
full  membership  expected  in the year 2002.  The  current EU members are still
preoccupied  with the EURO  integration  and potential Y2K problems,  therefore,
corporate takeover activity has been deferred.  Starting in the first quarter of
2000, it is anticipated that foreign takeovers of two Slovenian  pharmaceuticals
will begin,  while  closed-end  investment  funds that hold these shares will be
possible takeover candidates themselves.

      In  1998,  Eastbrokers  Slovenia  improved  its  financial  situation  and
increased its annual turnover on the Ljubljana Stock Exchange by 390 percent and
its assets under management by 274 percent. In 1999, the emphasis of Eastbrokers
Slovenia will be fee-based, recognizing that 1999 will be a transition year that
management  believes will provide  significant returns on investment in the year
2000.  Partial  pension reform has been passed by Parliament,  which has already
encourage  retail  clients to invest in  stocks.  When a more  complete  pension
reform is passed, it is anticipated that trading and portfolio management volume
will  increase   dramatically.   Revenues  will  be  generated   from  increased
transaction  commissions due to an enhanced trading facility,  the establishment
of an internet site which will offer research  reports for a fee, the management
of  clients'  portfolios,   retainers  from  major  European  companies  seeking
information on local legislative conditions, and advisory fees on takeovers. The
target  for  assets  under  management  by year  end 1999 is 4  billion  SIT($25
million) or more than double the 1998 year end number.

      During  1998,  our  operations  in Croatia were  significantly  reduced in
reaction  to the  Yugoslavian  crisis.  We intend to maintain a presence in this
market on a limited basis during 1999.

KAZAKHSTAN AND AZERBAIJAN

      Kazakhstan  is  located  in mid  Asia,  between  China and  Russia  and is
geographically  as large as Western  Europe and one third as large as the United
States,  but has only 17 million  people.  Kazakhstan has the second largest oil
reserve in the world,  after Saudi Arabia.  It has vast resources of natural gas
and one quarter of the world's uranium, as well as significant reserves of gold.
Since its independence, Kazakhstan has suffered economically with high inflation
and declining industrial output.  However,  over the past two years, the country
is starting to resurrect its faltering economy. After a major GDP drop of nearly
14% in 1994, the GDP increased 1% in 1996, 2% in 1997 and in 1998. Inflation was
reduced from 17% in 1997 to 10% in 1998.  Money raised from  privatization  will
largely offset the budged deficit.  Foreign  investment is significant at a rate
of $1.6  billion  in 1997 and  nearly $2 billion  in 1998.  Almost  every  major
international  petroleum  company  has a  presence  in this  market.  The Kazakh
economy has seen extensive privatization with 21 energy businesses and 34 mining
companies privatized in 1997.

                                      -27-
<PAGE>


      During 1998,  Eastbrokers Kazakhstan Securities House, Ltd. was one of the
largest market makers on the Kazakhstan  Stock Exchange.  A significant  part of
our revenue was generated through principal trading activities.  Our decision to
focus on generating  this type of revenue was due in part to the  elimination of
the capital  gains tax in  Kazakhstan.  In 1999, we intend to expand our revenue
base to include  mergers  and  acquisition  fees,  advisory  fees and  corporate
finance  fees.  We also intend to market our  services  to the  country  pension
funds.

      We have also organized an office in Baku, Azerbaijan.  At the time of this
filing, this office was in its development stage.


    UNITED STATES OPERATIONS

EBI SECURITIES CORPORATION

      Subsequent to the acquisition of Eastbrokers AG, we commenced expansion of
our brokerage operations in the United States. Our goal was to build a strong US
brokerage  presence that would enable it to distribute  European  middle market,
corporate finance product in the US and also to provide its European  operations
access to US corporate finance product,  trading and research  capabilities.  In
the  Spring of 1997,  the we  purchased  our  first  U.S.  based  broker-dealer,
Eastbrokers North America,  Inc. During the process of establishing  Eastbrokers
North  America,  we  were  approached  by  numerous  U.S.  based  broker-dealers
interested  in being  acquired by us. We believe that  consolidation  within the
securities  industry,  particularly  in the United States,  is inevitable.  This
consolidation  can be  attributed  to the current  volatility  prevailing in the
financial  markets,  the  higher  degree of  capital  needed to  maintain  solid
brokerage functions and the increased  regulatory  environment.  We have decided
that   as  a   well-capitalized,   entrepreneurially   managed,   international,
publicly-traded,  investment banking firm, we would be particularly appealing to
the sellers of medium size  brokerage  firms.  In addition,  we believe that the
purchase and roll-up of complementary  securities  businesses both in the United
States and in Europe, can be financed by the issuance of our Common Stock.

      In May 1998,  we made a  significant  step in our roll-up  strategy in the
United  States.  We  acquired  all of the  outstanding  common  stock of Cohig &
Associates,  Inc., a Denver,  Colorado  based  investment  banking and brokerage
firm. Following the acquisition, we changed the name of Cohig & Associates, Inc.
to  EBI  Securities  Corporation.   The  office  space  previously  occupied  by
Eastbrokers  North  America,  has been  converted  into a branch  office  of EBI
Securities.  We  believe  that EBI  Securities  will be the first in a series of
acquisitions  targeting  other  successful  medium size  investment  banking and
brokerage firms.

      EBI Securities  operates 20 retail  brokerage  offices in 16 cities across
the United  States.  These  offices  include 10 company owned  branches,  and 10
franchise  branches  employing  over 200  people,  of which  190 are  registered
representatives.  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.  Since its inception  Cohig/EBI has  participated in the
underwriting  and/or  co-underwriting  of  over  $400  million  in  initial  and
secondary equity and debt offerings for over 30 public U.S. companies.

      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 2  "Management's  Discussion  and  Analysis  or  Plan  of
Operation - Impact of the Year 2000".

                                      -28-
<PAGE>


      EBI Securities has primarily  operated as a retail brokerage firm focusing
on individual investors with a full service approach which the company augmented
with  corporate  finance,  proprietary  research  and  trading  activities.  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 markets in
approximately  100 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.  The investment  banking
departments'  mission is 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 actively realigning itself in order to create additional
revenue growth that leverages  existing resources and creates a more stable base
of  revenue.  The  potential  result  is  increased  growth  internally,   which
compliments external growth through  acquisitions.  Several initiatives that EBI
Securities has undertaken in this regard are as follows:

      1. Fixed Income.  In December 1998,  EBI  Securities  added a fixed income
department.  This group is responsible  for the  underwriting,  trading,  retail
distribution  and research of government,  municipal and corporate  bonds.  This
group  adds an  additional  profit  center to the three  existing  divisions  of
retail, corporate finance and equity trading and also creates synergies with the
other  departments.  As EBI Securities  works to broaden the product base of its
retail  brokers and their  customers,  the fixed income  department  creates new
product through underwritings or independent research ideas.  Additionally,  the
fixed  income  department  allows EBI  Securities  corporate  finance to capture
business that would not have been previously available.

      2. Asset  Allocation.  EBI  Securities  has  developed  an in-house  asset
allocation program to augment the breadth of the sales force's efforts.  This in
house  system  was  developed  utilizing  industry  software  which,  along with
additional  marketing  materials,  is  customized  for the firm.  This  approach
represents an investment  strategy which is based on a Noble Prize winning study
called "Modem  Portfolio  Theory"  (MPT).  MPT's basis is that people can create
"optimal"  risk vs.  return  portfolios by mixing  varying  amounts of different
asset classes according to their correlation to one another. Many market studies
suggest  that asset  allocation  rather  than  individual  investment  selection
accounts for over 90 percent of a typical  portfolio's  returns.  EBI Securities
concurs  with this  notion,  and as a result,  is  educating  the sales force to
utilize the program. The results have been very favorable and effective tool for
gathering assets.  EBI Securities  believes that the new  communication  systems
that are being  implemented and which will be available at the desk top level to
all  brokers,  will also  enhance  the sales  forces  ability  utilize the asset
allocation model.

      3.  Managed  Money.  In keeping  with the changes in the retail  brokerage
business,  EBI  Securities  is actively  entering the field of managed money and
wrap fee  compensation  arrangements  in place of the more  traditional  fee per
transaction approaches.  In short, the managed money approach charges the client
a flat  annual  percentage  of the  money  managed  rather  than a fee for  each
transaction. Many people believe that this approach better aligns the investment
advisor's goals with that of the client.  This approach requires some additional
accounting and registration procedures, both of which have been set in motion by
the firm and its applicable  business  partners.  EBI Securities intends to hire
additional  salespeople  with managed  money  experience in addition to actively
re-educating the existing sales force.

      4. Premier Customer  Accounts.  The formation of an account for the firm's
biggest  customers may allow better  utilization  of several of the  initiatives
mentioned  above.  In addition,  this sort of account may also give a customer a
good introduction into several other parts of the business.  The most obvious of
these is online  trading.  Others  include  joint  ventures  and  cross  selling
opportunities with local community banks,  mortgage companies,  investment sites
and others.

      5. Retail Expansion.  Currently, EBI Securities is focusing on filling its
existing  retail space in order to improve  efficiencies.  EBI  Securities  also
believes that retail expansion through additional offices will be most effective
if it occurs in and around the corporate  headquarters in Denver,  Colorado. EBI
Securities  believes  that  creating  a more  visible  sales  force  around  the
corporate  headquarters  will create a number of efficiencies on several fronts.

                                      -29-
<PAGE>

These  locations  make it easier and less  expensive  to manage from a corporate
perspective. In addition, economies of scale are created in terms of advertising
and community development, which can help to enhance the EBI Securities name and
make it a more  recognizable  entity amongst retail clients,  corporate  finance
clients and additional salespeople.


EBONLINEINC.COM, INC.

      In April 1999,  we organized a new  subsidiary,  EBonlineinc.com,  Inc. in
conjunction with A1 Internet.com, Inc. A1 provides comprehensive, cost-effective
Internet  technology  solutions to  businesses  and  organizations  with a total
turnkey  approach.  Services  are  designed to enable  companies to operate more
efficiently by outsourcing their Internet work, communications,  e-commerce, and
database  needs.  A1 offers  web  development,  design,  connectivity,  database
applications,  distance learning, and information integration programs. Services
include web  programming,  e-commerce,  web-site  hosting,  national leased line
connections,  dial-up,  xDSL,  and e-mail  access.  A1  Internet.com  Inc.'s ISP
website is: HTTP://WWW.A1IS.COM

      EBonline  is  a  Web-based  business  consisting  of  a  website  globally
accessible  via the Internet,  designed to facilitate  merger,  acquisition  and
corporate finance activity.  The site attracts  businesses looking to sell, make
an acquisition,  seek a merger or joint venture  partner,  obtain debt or equity
capital or simply gain  exposure  within the  international  investment  banking
community.  In addition,  the site  attracts  accredited  investors  looking for
investment opportunities.

      EBonline  will  derive its revenue  from three  initial  sources:  monthly
membership fees,  banner  advertising  income and consulting fees from syndicate
members.  Syndicate  members will be made up of  recognized  financial  services
firms that have been selected from around the world.  They have met  EBbonline's
standards  for  professionalism  and  integrity  and they have agreed to provide
financial advisory services,  write research and expose the qualifying companies
to the investment community.  The broad exposure provided to these companies may
attract institutional  investors and public interest. The syndicate members will
also be able to electronically make available to all accredited investors of the
site any offering  memoranda.  We believe that EBonline's approach to connecting
businessmen and investors to a group of recognized  financial  professionals  is
truly unique, cost effective and efficient.

      We  believe  that  the  combination  of  finance  and  the  internet  will
differentiate EBonline from its competition. Other similarly focused sites offer
business listings and matching services, but none are backed by an international
group of emerging growth financial specialists such as EBonline.

      In April 1999,  EBonline  launched the initial version of its website,  at
URL address HTTP://WWW.EBONLINEINC.COM.  In early July 1999, EBonline intends to
launch  version 2.0 of its website  (same  address).  EBonline  has retained EBI
Securities as its investment  banker for the purposes of raising  capital in the
Company's  second  quarter.  EBonline is also in the  process of merging  into a
publicly  traded  entity  which the Company  believes  will  enhance  EBonline's
ability to raise capital, make acquisitions and hire personnel,  through the use
of stock incentive plans.

                                      -30-
<PAGE>


RESULTS OF OPERATIONS

      See  Note 1 of the  Notes to  Consolidated  Financial  Statements  for the
twelve  months  ended  March  31,  1999,  for an  explanation  of the  basis  of
presentation of the financial statements.

      For the twelve  months  ended March 31, 1999,  we  generated  consolidated
revenues in the amount of $32,951,480, compared to $10,342,976, for the previous
twelve months ended March 31, 1998.  Total  revenues were  significantly  higher
than the  previous  periods  due to the  acquisition  of EBI  Securities,  which
contributed  approximately  $15,877,822,   from  May  14,  1998,  (the  date  of
acquisition  of  EBI  Securities  - see  Note 3 to  the  Consolidated  Financial
Statements).

      We incurred total consolidated costs and expenses of $39,332,732,  for the
twelve months ended March 31, 1999,  compared to  $15,010,815,  for the previous
twelve  months  ended March 31,  1998.  Total costs and  expenses for the twelve
months ended March 31, 1999, are significantly  higher than the previous periods
due to  the  acquisition  of EBI  Securities,  which  contributed  approximately
$18,763,724,  from May 14, 1998, (the date of acquisition of EBI Securities (see
Note 3 to the Financial Statements).

      Our loss  before  provision  for income  taxes and  minority  interest  in
earnings of subsidiaries  was  $6,381,252,  for the previous twelve months ended
March 31, 1999,  compared to a loss of  $4,667,839,  for the twelve months ended
March 31, 1998. Our provision for income taxes and minority interest in earnings
of  subsidiaries  for the twelve  month  periods  are  attributed  solely to our
European  operations,  and are primarily related to WMP and Eastbrokers Budapest
Rt.

      We reported a consolidated  net loss of $5,911,848,  for the twelve months
ended March 31, 1999,  compared to a consolidated net loss of $3,676,607 for the
twelve months ended March 31, 1998. Of the $5,911,848, consolidated net loss for
1999, approximately $1,335,518 was from operations and approximately $4,576,330,
was from the  following  one time items:  $2,650,000  for trading  losses due to
inventory   adjustments  incurred  in  August,   September  and  December  1998;
$1,426,330  was for the  disposition  and  liquidation  of three of our European
operations (Romania,  $158,248,  Hungary,  $491,886 and Slovakia,  $776,197) and
approximately $500,000 was a reserve against an outstanding receivable.

      For the twelve months ending March 31, 1999, our operations  were impacted
by the  global  financial  crisis  that  occurred  during  the  Summer  of 1998.
Specifically, during this period, our European operations experienced a slowdown
in its commission,  trading and corporate finance business. Second, our European
operations  incurred  costs related to the reduction of the workforce in several
of its European offices.  Third, in the US, EBI Securities incurred higher costs
associated  with the  expansion of its  operations in New York,  California  and
Colorado.  In addition,  EBI Securities  experienced a continued slowdown in its
gross  commission  revenue through October.  However,  revenue at EBI Securities
increased  significantly in November through the end of March, 1999. And fourth,
we continued to incur higher than  expected  legal and  consulting  fees through
October, mainly due to costs associated with the completion of its audit for the
fiscal year ended March 31, 1998, which was completed on October 30, 1998.

      On  March  31,  1999,  we had  total  assets  of  $48,880,039,  and  total
liabilities  of   $23,614,002,   compared  to  $44,431,509,   and   $18,093,930,
respectively,  on March 31, 1998. As of the date of this filing, we believe that
we have  adequate  liquidity  to  meet  our  current  obligations.  However,  no
assurances  can be made as to our  ability  to meet  our  cash  requirements  in
connection  with  any  expansion  of our  operations  or any  possible  business
combinations.

      On  November  25,  1998,  in  order  to  increase  its  working   capital,
Eastbrokers sold 10 newly issued units in a private placement  consisting in the
aggregate  of  $1,100,000  in 7  percent  Convertible  Debentures  and  Series C
Warrants to purchase  125,000 shares of Common Stock.  Eastbrokers has the right
to redeem the Convertible Debentures on or before March 24, 1999, at 115 percent
of the aggregate price or $1,265,000.  In March 1999,  Eastbrokers  redeemed the
debenture in full.  Eastbrokers  paid an additional  14,000 shares of its common
stock for interest.

      In January, 1999, Eastbrokers sold 125,000 restricted shares of its common
stock in a  private  placement  to a  private  investor  for  $4.00  per  share.
Eastbrokers  also  issued  7,500  shares of its common  stock to a broker at EBI
Securities Corporation as a commission in connection with this transaction.

      In March 1999, we issued 10 percent Convertible  Promissory Notes due 2003
(the "10 percent Notes") in an aggregate principal amount of $1,350,000. Holders
of the 10 percent  Notes have the right to convert  their 10 percent  Notes into
shares of Common  Stock at $5.75 per  share.  A portion of the  proceeds  of the
Notes was used to redeem the 7 percent Convertible Debentures.

      In May 1999, we issued 5 percent  Convertible  Debentures due 2002 (the "5
percent Debentures") in an aggregate principal amount of $2,000,000.  Holders of
the 5 percent  Debentures  have the right to convert  their 5 percent Notes into
shares of Common Stock at the lesser of $5.50 per share or 90% of the average of
the three  lowest  closing  bid prices for the 20 trading  days ending five days
before  the date of  delivery  of the  notice of  conversion.  A portion  of the
proceeds of the Debentures will be used to expand our operations.

                                      -31-
<PAGE>

      The cash flows for nine month  period  ended March 31,  1999,  reflect the
volatile  nature of the securities  industry and the  reallocation of our assets
indicative  of a  growing  organization.  The  change  in the  foreign  currency
translation   adjustment  is  primarily  related  to  the  fluctuations  in  our
functional  currencies to the U.S.  dollar.  The U.S.  dollar and its unexpected
strength  coupled  with  the  unexpected  weakness  of the  European  currencies
(including  the German  Deutsche  mark) have  negatively  impacted  our  overall
earnings  as  well  as  the  cumulative  translation  adjustment.   The  primary
functional  currencies  affecting  the  Company  are as  follows:  U.S.  Dollar,
Austrian Schilling, Czech Koruna, Hungarian Forint, Slovak Koruna and the Polish
Zloty.

      As a broker/dealer in securities,  we will periodically  acquire positions
in  securities  on behalf of our  clients.  As  disclosed in "Note 2 - Financial
Instruments", we have title to various financial instruments in the countries in
which  we  operate.  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".

      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,  we believe 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.

      Our earnings are subject to wide fluctuations since there are many factors
over which we have 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.

   FOREIGN CURRENCY TRANSLATION ADJUSTMENTS

      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  Eastbrokers  Group's  overall  earnings as well as the
cumulative translation  adjustment.  The primary functional currencies affecting
us are as follows: U.S. Dollar, Austrian Schilling, Czech Koruna, and the Polish
Zloty.

      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

                                      -32-
<PAGE>

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  Eastbrokers  Group,  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  Eastbrokers  Group's  investment  and
merchant  banking  services in the countries  where its primary  operations  are
located.  The Eastbrokers  Group is further affected by changes in valuations of
the  local  currencies  to the  U.S.  Dollar  (the  functional  currency  of the
Eastbrokers Group) 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 some of the  countries  where we have  operations
(E.G., Kazakhstan,  Czech Republic,  Slovenia,  Croatia, Poland and Azerbaijan),
the local currencies are referred to as "soft" or "exotic". Soft currency is the
currency  of a  nation  where a person  can  exchange  the  currency  only  with
difficulty.  Soft currency countries  typically have minimal amounts of currency
reserved  for  exchange  purposes.  As such,  there are very few,  if any,  cost
effective hedging strategies available to us or potential investors.

      All of these  factors have an impact on the  Eastbrokers  Group'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.

   LIQUIDITY AND CAPITAL RESOURCES

      The Eastbrokers  Group's statements of financial position reflect a liquid
financial position as cash and cash equivalents  convertible to cash represent 5
percent and 16 percent of total assets at March 31, 1999, and March 31, 1998.

      The Eastbrokers Group is subject to net capital and liquidity requirements
in the local jurisdictions in which it operates.  As of March 31, 1999 and 1998,
the  Eastbrokers  Group was in excess of its minimum  net capital and  liquidity
requirements in all jurisdictions in which it operates.

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

      In the opinion of management, the Eastbrokers Group'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 Eastbrokers Group 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 Eastbrokers Group 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 Eastbrokers  Group's ability to meet its cash requirements
subsequent to any further business combinations.

      In April 1997,  Eastbrokers  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 Eastbrokers
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.

                                      -33-
<PAGE>


      On February 20, 1998,  Eastbrokers  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 percent
below the then  current  market  price.  These  units were  offered  and sold to
various accredited investors.  With regard to this sale, Eastbrokers relied upon
the exemption from registration pursuant to Rule 506 under the Securities Act.

      In June 1998, the  Eastbrokers  Group largest  European  subsidiary,  WMP,
successfully  raised 60 million Austrian  Schillings  (approximately  $4,800,000
USD) in a bond offering.  The Eastbrokers  Group originally  intended 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 percent,  payable at maturity,  and mature in June 2002. In
December 1998, the Eastbrokers Group redeemed  approximately 45 million Austrian
Schillings of these bonds. The Eastbrokers Group intends to redeem the remaining
bonds in the future.

      In  June  1998,   Eastbrokers  sold  73.55  percent  of  its  interest  in
Eastbrokers  Prague  a.s.  for  15  million  Austrian  Schillings.   Eastbrokers
recognized a profit from the sale of Prague of approximately  $1,312,000, at the
then current  exchange  rates.  This amount is reflected in the revenue  section
under gain on sale of interest in subsidiary.

      On November 25, 1998, Eastbrokers sold 10 newly issued units consisting in
the  aggregate of $1,100,000 in 7 percent  Convertible  Debentures  and Series C
Warrants to purchase 125,000 shares of common stock.  The 7 percent  Convertible
Debentures were redeemed in March 1999 from a portion of the proceeds related to
the issuance of the 10 percent Notes.

      In January  1999,  Eastbrokers  sold  125,000  shares of Common  Stock for
$500,000.  With regard to this sale,  the Company relied upon the exemption from
registration pursuant to Rule 506 under the Securities Act.

      In March 1999, we issued 10 percent Convertible  Promissory Notes due 2003
(the "10 percent Notes") in an aggregate principal amount of $1,350,000. Holders
of the 10 percent  Notes have the right to convert  their 10 percent  Notes into
shares of Common  Stock at $5.75 per  share.  A portion of the  proceeds  of the
Notes was used to redeem the 7 percent Convertible Debentures.

      In May 1999, we issued 5 percent  Convertible  Debentures due 2002 (the "5
percent Debentures") in an aggregate principal amount of $2,000,000.  Holders of
the 5 percent  Debentures  have the right to convert  their 5 percent Notes into
shares of Common Stock at the lesser of $5.50 per share or 90% of the average of
the three  lowest  closing  bid prices for the 20 trading  days ending five days
before  the date of  delivery  of the  notice of  conversion.  A portion  of the
proceeds of the Debentures will be used to expand our operations.

   EFFECTS OF INFLATION

      The Eastbrokers  Group 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  Eastbrokers  Group in  inventory,  it may  affect  the  Eastbrokers
Group's financial position and results of operations.


   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 us  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

                                      -34-
<PAGE>

comprehensive income and its components (revenues,  expenses,  gains and losses)
in a full  set of  general-purpose  financial  statements.  This  statement  was
adopted by us beginning with the fiscal year ended March 31, 1999.

      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  was adopted by us for the fiscal year
ended  March  31,  1999.  In  the  initial  year  of  application,   comparative
information for earlier years is to be restated.

      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, 2000. At this time,
we do not believe that this statement will have a significant impact on us.

   IMPACT OF THE 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  Eastbrokers  Group is currently  in the process of a systems  upgrade
unrelated  to the Year  2000  issue.  In  conjunction  with  this  upgrade,  the
Eastbrokers  Group is in the process of establishing a program to address issues
associated with the Year 2000. To ensure that the Eastbrokers  Group's  computer
systems are Year 2000 compliant,  the  Eastbrokers  Group has been reviewing its
systems and programs to identify those that contain  two-digit  year codes,  and
the  Eastbrokers  Group intends to replace them in conjunction  with the systems
upgrade  provided by the Baan  Corporate  Office  Solutions.  In  addition,  the
Eastbrokers   Group  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 Eastbrokers  Group 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 Eastbrokers Group;

          (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

                                      -35-
<PAGE>

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

      As of June 25, 1999, the Eastbrokers Group had substantially completed the
Inventory  phase and was also  conducting  the  procedures  associated  with the
Assessment,  Remediation,  Testing and  Implementation  phases.  The Eastbrokers
Group  expects to  complete  the  Inventory  and  Assessment  phase in the third
calendar  quarter of 1999.  The  Remediation  and Testing phases with respect to
business critical applications have been completed.  The Implementation phase is
expected to be completed by the end of the third  calendar  quarter of 1999. The
Integration  phase will commence at the time the Eastbrokers  Group receives its
new operating  system which is expected to be  implemented in July 1999 and will
continue  through 1999.  In addition,  the  Eastbrokers  Group will identify the
major business  relationships of the Eastbrokers  Group by the end of the second
calendar  quarter of 1999, and many of them will be tested as soon thereafter as
practicable.  The Eastbrokers Group 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
vulnerable to Year 2000 issues.  As of April 30, 1999, the Eastbrokers Group 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 Central and Eastern 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 Eastbrokers Group's computer and non-information
technology  systems.  Such failures could have a material  adverse effect on the
Eastbrokers  Group 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
Eastbrokers  Group's  exposure  to  trading  risks and  disruptions  of  funding
requirements. In addition, even if the Eastbrokers Group 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   Eastbrokers   Group  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
Eastbrokers Group.

      If the above mentioned risks are not remedied,  the Eastbrokers  Group may
experience  business  interruption  or  shutdown,   financial  loss,  regulatory
actions, damage to the Eastbrokers Group's global franchise and legal liability.
The  Eastbrokers  Group 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  Eastbrokers  Group's
financial position and results of operation.

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

      Based upon current  information,  the Eastbrokers Group 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
June  25,  1999,  the   Eastbrokers   Group   estimates  that  it  has  expended
approximately  $600,000 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  Eastbrokers  Group'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  Eastbrokers  Group 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

                                      -36-
<PAGE>

Eastbrokers Group'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  Eastbrokers
Group'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 came 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.

      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  Eastbrokers  Group 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  Eastbrokers  Group 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  Eastbrokers  Group is
also  monitoring  the  compliance of its software  suppliers in addressing  this
issue. Based on a recent  evaluation,  the Eastbrokers Group has determined that
material costs and resources will not be required to permit its computer systems
to properly handle Euro reporting and transactions.

                                      -37-

<PAGE>



SELECTED FINANCIAL DATA

      The historical  selected financial data set forth below for the respective
periods are derived from our  financial  statements  included  elsewhere in this
Form 10-KSB and should be read in conjunction  with those  financial  statements
and notes  thereto.  Those  financial  statements  have been  audited by Spicer,
Jeffries & Co.,  independent  certified public accountants.  Spicer,  Jeffries &
Co.'s report with respect thereto appears elsewhere in this Form 10-KSB.

<TABLE>
<CAPTION>

                                                          March 31,           March 31,
                                                            1999                1998
                                                       ------------          -----------

   BALANCE SHEET DATA
<S>                                                    <C>                   <C>
     Assets                                            $48,880,039           $44,431,509
     Liabilities                                        23,614,002            18,093,930
     Minority interest in consolidated subsidiaries      7,619,233             7,173,873
     Stockholders' equity                               17,646,804            19,163,706

   STATEMENT OF OPERATIONS DATA
   REVENUES
     Operating revenues, net                           $29,770,618           $ 8,884,364
     Interest, dividends & other revenues                1,908,288               401,107
     Equity in earnings of unconsolidated affiliates       (39,483)               32,076
                                                       -----------           -----------
                                                        31,639,423             9,317,547

   EXPENSES
     Operating expenses                                 37,906,402            15,010,815

     Net loss                                          $(5,911,847)          $(3,676,607)

     Net loss per share                                $     (1.23)          $     (1.17)

</TABLE>
                                      -38-

<PAGE>


LIL
ITEM 7.  FINANCIAL STATEMENTS

   Historical Financial Statements
     Independent Auditor's Report............................................ 40
     Consolidated Statements of Financial Condition.......................... 41
     Consolidated Statements of Operations................................... 42
     Consolidated Statements of Comprehensive Income......................... 43
     Consolidated Statements of Changes in Shareholders' Equity.............. 44
     Consolidated Statements of Cash Flows................................... 45
     Notes to Consolidated Financial Statements.............................. 46


                                      -39-
<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, 1999
and 1998, and the related consolidated  statements of operations,  comprehensive
income,  changes  in  shareholders'  equity,  and cash  flows for the years 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 audits.

We  conducted  our  audits  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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  Eastbrokers
International  Incorporated  and subsidiaries as of March 31, 1999 and 1998, and
the  results  of its  operations  and its cash flows for the years then ended in
conformity with generally accepted accounting principles.





                                       /S/ Spicer, Jeffries & Co.

                                          SPICER, JEFFRIES & CO.









Denver, Colorado
June 29, 1999


                                      -40-
<PAGE>

                    EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

                    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>


                                                           MARCH 31,       MARCH 31,
                                                             1999            1998
                                                         ------------    ------------
<S>                                                      <C>             <C>
ASSETS
   Cash and cash equivalents                             $  2,214,705    $  7,156,702
   Cash and securities segregated for regulatory
      purposes or deposited with clearing
      organizations                                            50,431         986,233
   Securities purchased under agreements to resell                  -         887,170
   Securities borrowed                                      1,653,742             -
   Receivables
      Customers                                             4,140,016       4,819,958
      Broker dealers and other                              2,356,965       4,404,608
      Affiliated companies                                  2,103,929       2,286,277
      Related to disposition of subsidiary                  1,782,814       1,493,913
      Financial institutions                                  549,938       1,018,642
      Receivable from shareholders and
        executive officers                                  3,787,339         517,221
      Other                                                 3,414,674       1,890,212
   Securities owned, at value
      Government and agencies                                       -         692,428
      Corporate debt                                        1,876,229               -
      Equities and other                                   11,665,327       7,985,484
   Net assets held for resale                               1,836,442       2,362,873
   Furniture and equipment, at cost (net of
      accumulated depreciation and amortization
      of $xxx,xxx and  $766,898, respectively)              2,061,612       1,142,281
   Deferred taxes                                           5,499,245       4,162,615
   Goodwill, net                                            2,215,910       2,073,774
   Other assets and deferred amounts                        1,670,721         551,118
                                                         ------------    ------------
        Total Assets                                     $ 48,880,039    $ 44,431,509
                                                         ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
   Short-term borrowings                                 $  2,408,354    $  2,570,499
   Advances from affiliated companies                       4,699,821          31,937
   Payables
      Customers                                             2,684,343       5,405,464
      Broker dealers and other                              2,833,028       6,169,159
   Securities sold not yet purchased, at value
      Government and agencies                               1,036,428               -
      Equities and other                                    1,567,290               -
   Accounts payable and accrued expenses                    1,185,551         727,512
   Other liabilities and deferred amounts                   1,994,925       1,118,179
                                                         ------------    ------------
                                                           18,409,740      16,022,750

   Deferred tax                                                     -           51093
   Long-term borrowings                                     5,204,262       2,020,087
                                                         ------------    ------------
        Total liabilities                                  23,614,002      18,093,930
                                                         ------------    ------------
   Minority interest in consolidated subsidiaries           7,619,233       7,173,873
                                                         ------------    ------------
   Commitments and contingencies
   Shareholders' equity
      Preferred stock; $.01 par value;
      10,000,000 shares authorized; no shares
      issued and outstanding at March 31, 1999
      and 1998, respectively                                        -               -
      Common stock; $.05 par value; 10,000,000 shares
      authorized; 5,160,250 and 4,297,750
      shares issued and outstanding at
      March 31, 1999 and 1998, respectively                   258,013         214,888
      Paid-in capital                                      29,650,450      25,614,348
      Accumulated deficit                                 (10,158,283)     (4,246,436)
      Notes receivable - common stock
         and warrants                                        (893,214)       (313,133)
      Accumulated other comprehensive income               (1,210,162)     (2,105,961)
                                                         ------------    ------------
        Total shareholders' equity                         17,646,804      19,163,706
                                                         ------------    ------------
        Total Liabilities and Shareholders' Equity       $ 48,880,039    $ 44,431,509
                                                         ============    ============

</TABLE>

                See notes to consolidated financial statements.

                                       41

<PAGE>
                          EASTBROKERS INTERNATIONAL INCORPORATED
                                 (A DELAWARE CORPORATION)

                           CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                         FOR THE YEARS
                                                                        ENDED MARCH 31,
                                                                    ------------------------
                                                                        1999        1998
                                                                    -----------  -----------

<S>                                                                 <C>             <C>
Revenues
   Commissions                                                      $ 14,246,465    $  2,539,260
   Investment banking                                                  2,165,753         807,803
   Interest and dividends                                              1,908,288         401,107
   Principal transactions, net
      Trading                                                          2,370,734       4,738,701
      Investment                                                       7,671,982        (462,221)
   Gain on sale of interest in subsidiary                              1,312,057               -
   Gain on sale of investment - related party                                          1,025,429
   Other                                                               3,315,684       1,260,821
   Equity in earnings of unconsolidated affiliates                       (39,483)         32,076
                                                                    ------------    ------------
        Total revenues                                                32,951,480      10,342,976
                                                                    ------------    ------------

Costs and expenses
   Compensation and benefits                                          15,830,533       3,818,549
   Brokerage, clearing, exchange fees and other                        9,195,493       1,163,171
   General and administrative                                          2,608,037       3,476,026
   Occupancy                                                           2,389,741         997,814
   Communications                                                      1,962,495         698,688
   Consulting fees                                                     1,446,669       2,233,543
   Interest                                                            1,340,421         746,821
   Professional Fees                                                   1,075,393         213,913
   Travel                                                                792,163         622,722
   Office supplies and expense                                           738,223         435,173
   Loss on disposition of subsidiary                                     491,886               -
   Loss on liquidation of subsidiaries                                   934,444               -
   Depreciation and amortization                                         527,233         604,395
                                                                    ------------    ------------
        Total costs and expenses                                      39,332,731      15,010,815
                                                                    ------------    ------------

Loss before provision for income taxes and
   minority interest in earnings of
   subsidiaries                                                       (6,381,251)     (4,667,839)

Benefit for income taxes                                                 789,315         640,163
Minority interest in earnings of subsidiaries                           (319,911)        351,069
                                                                    ------------    ------------
Net loss                                                             $(5,911,847)    $(3,676,607)
                                                                    ------------    ------------

Weighted average number of common shares outstanding
   Basic and diluted                                                   4,800,551       3,149,009
                                                                    ------------    ------------

Loss per common share
   Basic and diluted                                                      $(1.23)         $(1.17)
                                                                    ------------    ------------
</TABLE>

                See notes to consolidated financial statements.

                                       42

<PAGE>



                         EASTBROKERS INTERNATIONAL INCORPORATED
                                (A DELAWARE CORPORATION)

                    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                                        FOR THE YEARS ENDED
                                                               MARCH 31,
                                                     ---------------------------
                                                         1999          1998
                                                     ------------   ------------


Net loss                                             $(5,911,847)   $(3,676,607)

   Other comprehensive income (loss)
      Foreign currency translation adjustments           895,799     (1,475,152)
      Unrealized holding gains                                 -        246,794
      Less: recovery of unrealized holding losses              -       (246,794)
                                                     -----------    -----------
Comprehensive income (loss)                          $(5,016,048)   $(5,151,759)
                                                     -----------    -----------

                See notes to consolidated financial statements.

                                       43



<PAGE>



                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                   FOR THE YEARS ENDED MARCH 31, 1998 AND 1999

<TABLE>
<CAPTION>
                                                                                  UNREALIZED
                         COMMON STOCK                                  TREASURY    LOSS ON                ACCUMULATED
                   ----------------------                               STOCK &   AVAILABLE   CUMULATIVE     OTHER
                                   PAR       PAID-IN     ACCUMULATED      NOTE     FOR SALE   TRANSLATION COMPREHENSIVE
                      SHARES      VALUE      CAPITAL       DEFICIT     RECEIVABLE INVESTMENTS ADJUSTMENT     INCOME        TOTAL
                   -----------  ---------  ------------  ------------  ---------  ---------  -----------  -----------  ------------
<S>                  <C>          <C>        <C>             <C>        <C>        <C>          <C>          <C>         <C>
Balances at March
  31, 1997           2,923,000    146,150    19,314,883      (569,829)  (213,750)  (246,794)    (630,809)    (877,603)   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       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                   -          -        26,434             -          -          -            -           -         26,434
   Net loss                  -          -             -    (3,676,607)         -          -            -           -     (3,676,607)
   Accrued interest
     on note
     receivable              -          -             -             -    (13,133)         -            -           -        (13,133)
   Cumulative
     translation
     adjustment              -          -             -             -          -          -   (1,475,152) (1,475,152)    (1,475,152)
                   -----------  ---------  ------------  ------------  ---------  ---------  -----------  -----------  ------------
Balances at
  March 31, 1998   $ 4,297,750  $ 214,888  $ 25,614,348  $ (4,246,436) $(313,133) $       -  $(2,105,961) $(2,105,961) $ 19,163,706
   Issuance of
     common stock
     in Cohig &
     Assoc.
     acquisition       470,000     23,500     2,326,500             -          -          -            -           -      2,350,000
   Redemption
     of note
     receivable              -          -             -             -    335,304          -            -           -        335,304
   Issuance of
     common stock
     to officer
     for note
     receivable        200,000     10,000       690,000             -   (700,000)         -            -           -              -
   Issuance of
     common stock
     to officer
     for note
     receivable         50,000      2,500       147,500             -   (150,000)         -            -           -              -
   Issuance of
     common stock
     in private
     placement         125,000      6,250       463,750             -          -          -            -           -        470,000
   Exercise of
     stock options      10,000        500        69,500             -          -          -            -           -         70,000
   Issuance of
     common stock
     in compensation
     for services        7,500        375        29,625             -          -          -            -           -         30,000
   Issuance of
     warrants in
     connection with
     debt offerings          -          -       283,581             -          -          -            -           -        283,581
   Issuance of
     warrants to
     officers for
     note receivables        -          -        25,646             -    (25,646)         -            -           -              -
   Net loss                  -          -             -    (5,911,847)         -          -            -           -     (5,911,847)
   Accrued interest
     on notes
     receivable              -          -             -             -    (39,739)         -            -           -        (39,739)
   Cumulative
     translation
     adjustment              -          -             -             -          -          -      895,799     895,799        895,799
                   -----------  ---------  ------------  ------------  ---------  ---------  -----------  -----------  ------------
Balances at
  March 31, 1999   $ 5,160,250  $ 258,013  $ 29,650,450  $(10,158,283) $(893,214) $       -  $(1,210,162) $(1,210,162) $ 17,646,804
                   -----------  ---------  ------------  ------------  ---------  ---------  -----------  -----------  ------------

</TABLE>

                See notes to consolidated financial statements.

                                       44

<PAGE>
                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                       FOR THE YEARS ENDED
                                                                                                            MARCH 31,
                                                                                               ------------------------------------
                                                                                               1999                1998
                                                                                               -----------------   ----------------

<S>                                                                                            <C>                      <C>
Cash flows from operating activities
     Net loss                                                                                  $     (5,911,847)   $    (3,676,607)
     Adjustments to reconcile net loss to net cash
        provided by (used in) operating activities:
           Minority interest in earnings of subsidiaries                                                319,911           (351,069)
           Losses on dispositions of subsidiaries                                                     1,426,330                  -
           Gain on sale of subsidiary                                                                (1,312,057)        (1,025,429)
           Allowance for doubtful accounts                                                              549,938                  -
           Depreciation and amortization                                                                527,233            604,395
           Deferred taxes                                                                              (919,768)        (2,305,662)
           Other                                                                                       (410,572)           104,368

        Changes in operating assets and liabilities
           Cash and securities segregated for regulatory purposes
              or deposited with regulatory agencies                                                     914,625             82,415
           Securities purchased under agreements to resell                                              887,170           (478,305)
           Securities borrowed                                                                       (1,653,742)                 -
           Receivables                                                                               (3,851,453)        (3,744,971)
           Securities owned, at value                                                                (2,239,065)        (6,443,982)
           Other assets                                                                                (696,035)           827,875
           Payables
              Customers                                                                               1,366,143          4,353,654
              Brokers, dealers and others                                                            (2,988,422)         5,208,933
           Accounts payable and accrued expenses                                                        (77,837)          (879,123)
                                                                                               -----------------   ----------------

Net cash provided by (used in) operating activities                                                 (14,069,448)        (7,723,508)
                                                                                               -----------------   ----------------

Cash flows from investing activities
     Net proceeds from (payments for)
        Net cash acquired on acquisition of EBI Securities                                              970,056                  -
        Investments in affiliates                                                                      (386,345)          (264,036)
        Sales of interests in subsidiaries                                                            2,159,204                  -
        Investments held for resale                                                                    (526,431)         2,378,054
        Capital expenditures                                                                         (1,384,072)          (289,070)
                                                                                               -----------------   ----------------

Net cash provided by (used in) investing activities                                                     832,412          1,824,948
                                                                                               -----------------   ----------------

Cash flows from financing activities
     Net proceeds from (payments for)
        Net proceeds from private placement                                                             500,000          6,139,164
        Short-term financings                                                                                 -         (1,339,183)
        Advances from affiliates                                                                      4,850,232                  -
        Securities sold under agreements to repurchase                                                        -         (1,200,793)
        Proceeds from long term debt                                                                  3,284,426          1,085,713
        Dividends paid to minority interests on subsidiary's stock                                     (190,277)                 -
        Other                                                                                           104,702            102,575
                                                                                               -----------------   ----------------

Net cash provided by (used in) financing activities                                                   8,549,083          4,787,476
                                                                                               -----------------   ----------------

Foreign currency translation adjustment                                                                (254,044)         1,400,162
                                                                                               -----------------   ----------------

Increase (decrease) in cash and cash equivalents                                                     (4,941,997)           289,078

Cash and cash equivalents, beginning of year                                                          7,156,702          6,867,624
                                                                                               -----------------   ----------------

Cash and cash equivalents, end of year                                                          $     2,214,705    $     7,156,702
                                                                                               -----------------   ----------------
</TABLE>

                                   -46-
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                       FOR THE YEARS ENDED
                                                                                                            MARCH 31,
                                                                                               ------------------------------------
                                                                                               1999                1998
                                                                                               -----------------   ----------------


<S>                                                                                            <C>                <C>
Supplemental disclosure of cash flow information
     Cash paid for income taxes                                                                 $       130,789    $       261,633
                                                                                               -----------------   ----------------

     Cash paid for interest                                                                     $       335,116    $       173,560
                                                                                               -----------------   ----------------


     Non-cash transactions
        Eastbrokers International shares issued as part of
           EBI Securities Corporation acquisition                                               $     2,350,000    $             -
                                                                                               -----------------   ----------------

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

        Eastbrokers International shares issued in compensation for services                    $        30,000    $        65,980
                                                                                               -----------------   ----------------

        Issuance of Eastbrokers International Class C warrants
           in connection with debt offerings                                                    $       283,581    $             -
                                                                                               -----------------   ----------------
</TABLE>



                                    -47-
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998

NOTE 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.  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 19  -"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 is March 31.

      FISCAL YEAR-END OF THE COMPANY'S EUROPEAN SUBSIDIARIES

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

      FINANCIAL INSTRUMENTS

      Proprietary  securities  transactions,  commission  revenues  and  related
expenses are  recorded on a trade date basis.  Securities  owned and  securities
sold,  but not yet  purchased  are  recorded  at fair value with  resulting  net
unrealized gains and losses reflected in earnings. Fair value is generally based
on quoted market prices.  If quoted market prices are not available,  fair value
is estimated based on other relevant factors,  including dealer price quotations
and recent  price  activity.  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  security.  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 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.

                                      -48-
<PAGE>


                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998



NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      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.

      Securities borrowed transactions facilitate the settlement process and may
require the Company to deposit cash or other collateral with the lender.

      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 syndication 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.

      FAIR VALUE OF FINANCIAL INSTRUMENTS

      SFAS  107,  "Disclosures  about  Fair  Value  of  Financial  Instruments,"
requires  the  Company  to report the fair value of  financial  instruments,  as
defined.  Substantially  all of the Company's assets and liabilities are carried
at fair value or contracted  amounts which approximate fair value.  Estimates of
fair  value  are made at a  specific  point in time,  based on  relative  market
information and information about the financial  instrument,  specifically,  the
value of the underlying financial instrument.

      Securities owned and securities sold, but not yet purchased are carried at
fair  value.  Assets  which  are  recorded  at fair  value  consist  largely  of
short-term  receivables  and  include  reverse  repurchase  agreements,

                                      -49-

<PAGE>

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

securities  borrowed and certain  other  receivables.  Similarly,  the Company's
short-term  liabilities are recorded at contracted  amounts  approximating  fair
value. The estimated fair value of the Company's long-term borrowings,  based on
market rates of interest and similar  maturities,  approximates  their  carrying
value or contracted amounts.

      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 earnings.

      FURNITURE, AND EQUIPMENT

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

      COMMON STOCK DATA

      Loss 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.  NOTE 1.  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                                      -50-
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      GOODWILL

      Goodwill is amortized on a  straight-line  basis over periods from 5 to 25
years and is periodically  evaluated for impairment on an undiscounted cash flow
basis. The accumulated amortization was $62,492 and $132,015 for the years ended
March 31, 1999 and 1998, respectively.

      RECLASSIFICATIONS

      Certain amounts in the prior year have been reclassified to conform to the
current year's presentation.

NOTE 2.   CASH AND SECURITIES SEGREGATED UNDER FEDERAL AND OTHER REGULATIONS

      Cash and securities segregated for regulatory purposes or as deposits with
clearing  organizations  was $50,431 and $986,233 as of March 31, 1999 and 1998,
respectively.

NOTE 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:

                                               March 31,        March 31,
                                                  1999            1998
                                              -------------    ------------
Securities purchased under agreements to
resell
    Sovereign government debt - Austria       $        --      $  887,170
                                              -------------    ------------

Securities borrowed
    Sovereign government debt - Austria       $ 1,036,430      $       --
    Corporate equities - Austria                  617,312              --
                                              -------------    ------------
                                              $ 1,653,742      $       --
                                              -------------    ------------

Securities owned at fair value
    Corporate debt - Austria                  $ 1,876,229      $       --
                                              -------------    ------------
    Corporate equities - United States        $ 2,972,800      $       --
    Corporate equities - Austria                8,009,235(1)    6,587,220(2)
    Corporate equities - Hungary                       --         410,244
    Corporate equities - Czech Republic                --              --
    Corporate equities - Slovak Republic               --          84,074
    Corporate equities - Poland                   145,725         760,552
    Corporate equities - Other                    537,567         143,394
                                              -------------    ------------
                                              $11,665,327      $7,985,484
                                              -------------    ------------

   Sovereign government debt
    Austria                                   $        --      $  621,353
    Hungary                                            --          71,075
                                              -------------    ------------
                                              $        --      $  692,428
                                              -------------    ------------

                                      -51-
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998



NOTE 3.   FINANCIAL INSTRUMENTS (CONTINUED)

(1) As of March 31,  1999,  the Company has  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  --  $1,420,095  and
securities  (both debt and equity) of a significant  shareholder  of the Company
traded on the Vienna Stock Exchange -- $6,011,048. The Company does not have any
material  concentrations  to high yield  issuers or  commitments  to  high-yield
issuers as of the balance sheet date.

(2) 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.

NOTE 4.   INVESTMENTS IN SUBSIDIARIES

      EASTBROKERS BETEILIGUNGS AKTIENGESELLSCHAFT

      Eastbrokers  Vienna is an Austrian based holding  company that  originally
had 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 percent.

      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.

                                      -52-
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998



NOTE 4.   INVESTMENTS IN SUBSIDIARIES (CONTINUED)

      WMP BANK AKTIENGESELLSCHAFT

      Through its subsidiary,  Eastbrokers  Vienna,  the Company acquired a 48.1
percent 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 percent  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  percent.  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.

      EBI SECURITIES CORPORATION

      In May 1998, 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 Company's
common  stock and an  agreement  to advance  $1,500,000  in  additional  working
capital.  Following  the  acquisition,  the name was  changed to EBI  Securities
Corporation ("EBI Securities").  The fair value of the net assets acquired under
this  transaction  approximated  $1,700,000 as of the date of  acquisition.  The
excess of the  purchase  price over the fair  value of the net  assets  acquired
approximated  $750,000 and has been recorded as goodwill and is being  amortized
over 25 years on the straight-line  method. 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.

      PRO FORMA RESULTS OF OPERATIONS

      The following summarized,  unaudited,  pro forma results of operations for
the year ended March 31,  1999 and 1998  assumes  the above  listed  acquisition
occurred at the beginning of fiscal 1998.

                                               Year Ended      Year Ended
                                               March 31,        March 31,
                                                  1999            1998
                                              -------------    ------------

    Revenues from continuing operations       $37,507,686      $28,071,825

    Net loss from continuing operations        (5,835,951)      (4,290,719)

    Net loss per share from continuing              (1.22)           (1.36)
    operations


                                      -53-

<PAGE>
                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 4.   INVESTMENTS IN SUBSIDIARIES (CONTINUED)

      SALES OF INTERESTS IN SUBSIDIARIES

      In  June  1998,  the  Company  sold  73.55  percent  of  its  interest  in
Eastbrokers  Prague  a.s  for  15  million  Austrian  schillings  (approximately
$1,180,000 USD at the then current  exchange  rates).  The Company  recognized a
gain on the sale of this interest before taxes of approximately  $1,312,000 USD,
at the then current exchange rates.

      In December 1998, the Company sold its entire  interest in its subsidiary,
Eastbrokers  Budapest RT. for 217,000,000 HUF  (approximately  $1,000,000 USD at
the then current exchange rates).  The Company recognized a loss on this sale of
approximately $490,000 USD, at the then current exchange rates.

      LIQUIDATION OF INTERESTS IN SUBSIDIARIES

      The Company also has liquidated its  investments  Eastbrokers  Romania and
Eastbrokers  Slovakia as of  December  31,  1998.  The effects are a net loss of
$776,197  on the  liquidation  of  Eastbrokers  Slovakia  and a net  loss on the
liquidation of Eastbrokers  Romania of $158,247 for a total loss on liquidations
of $934,444.


NOTE 5.   INVESTMENTS IN 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.
As of December 31, 1997, these unconsolidated affiliate investments included the
following offices: Zagreb, Croatia; Ljubljana,  Slovenia; Moscow, Russia; Sofia,
Bulgaria;  and  NIF  TRUD  Investment  Fund.  As of  December  31,  1998,  these
unconsolidated  affiliate  investments  included the following offices:  Zagreb,
Croatia  and  Ljubljana,  Slovenia.  The  combined  carrying  amounts  of  these
investments  as of  December  31,  1999  and  1998 was  $460,900  and  $156,800,
respectively.

      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.

NOTE 6.   SHORT-TERM BORROWINGS

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

      LINES OF CREDIT

      The  Company  had  outstanding  advances  on its lines of credit  totaling
$1,182,719  and  $2,570,499 as of March 31, 1999 and 1998,  respectively.  As of
March  31,  1999,   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.


                                      -54-

<PAGE>
                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 6.   SHORT-TERM BORROWINGS (CONTINUED)

      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.

      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.  These unsecured bonds were redeemed by the Company on
July 31, 1997.

      In June 1998, the Company's largest Austrian subsidiary, raised 60 million
Austrian schillings (approximately $4,800,000 USD) in a bond offering. The bonds
bear interest at 7.5 percent,  payable at maturity,  and are scheduled to mature
in June 2002.  As of March 31,  1999,  the Company has  redeemed  bonds equal to
44,850,000  Austrian schillings and is attempting to redeem the remaining amount
outstanding.

      UNSECURED DEBENTURES

      On November 25, 1998,  the Company sold 10 newly issued units in a private
placement  consisting in the  aggregate of  $1,100,000 in 7 percent  convertible
debentures  and Class C series  warrants  to purchase  125,000  shares of common
stock. The Company redeemed the debentures prior to its fiscal year end.

NOTE 8.   LONG-TERM BORROWINGS

      Long-term borrowings consist of the following:

                                                   March 31,        March 31,
                                                     1999             1998
                                                  ------------     ------------

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                               $ 1,023,601      $   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 percent
  of the  Company's  WMP  shares  as of March
  31,   1999),    principal   of   10,000,000
  Austrian  Schillings  and accrued  interest
  payable in full on November 30, 2001               430,912           804,308

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


                                      -55-

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 8.   LONG-TERM BORROWINGS (CONTINUED)
                                                   March 31,        March 31,
Convertible promissory notes,  convertible at        1999             1998
  $5.75 per share of  common  stock,  secured     ------------     ------------
  by the common stock of EBI  Securities  and
  certain  securities  with a fair  value  of
  $400,000  bearing  interest  at 10  percent
  and due March 25, 2002                           1,249,749               --

Subordinated   note   payable   to   clearing
  organization,   bearing   interest   at  10
  percent and maturing on June 30, 2000            2,500,000               --
                                                  ------------     ------------
                                                  $5,204,262       $2,020,087
                                                  ------------     ------------

      The scheduled  maturities of long-term debt  outstanding at March 31, 1999
are summarized as follows:  $225,697 in 2000,  $2,986,829 in 2001, $1,991,736 in
2002.

NOTE 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 $202,000 and  $131,000  for the periods  ended March 31,
1999, 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: 2000 -- $1,168,000;
2001 -- $1,076,000;  2002 -- $1,063,000; and 2003 -- $896,000; 2004 -- $514,000;
thereafter $71,000 and in the aggregate $4,788,000.

      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.

NOTE 10.   SHAREHOLDERS' EQUITY

      STOCK REPURCHASE

      On January 23, 1997,  the Company  repurchased  45,000 of its  outstanding
shares at $4.75 per share under a Board of Director's approved plan.  Currently,
no additional buy-backs are anticipated.  This treasury stock was retired during
the fiscal year ended March 31, 1998.

      STOCK TRANSACTIONS

      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.

                                      -56-

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 10.   SHAREHOLDERS' EQUITY (CONTINUED)

      STOCK TRANSACTIONS (CONTINUED)

      In September 1997, an officer  acquired 50,000 shares of Common Stock at a
price of $6.00 per share in exchange for a note  receivable  bearing an interest
rate of 8 percent in the amount of  $300,000.  This note was paid in full,  with
accrued interest in February 1999.

      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
percent  below the then current  market  price as of February  19,  1998.) After
deducting  offering  expenses of  approximately  $899,000,  the  Company  netted
approximately  $5,416,000.   These  units  were  offered  and  sold  to  various
accredited investors.

      In January 1999, an officer  acquired  200,000 shares of Common Stock at a
price of $3.50 per share in exchange for a note  receivable  bearing an interest
rate of 7 percent in the amount of $700,000.

      In January 1999, another officer acquired 50,000 shares of Common Stock at
a price of $3.00 per share in exchange for a note receivable bearing an interest
rate of 7 percent in the amount of $150,000.

      In January 1999, the Company sold 125,000  restricted shares of its common
stock in a private placement to an individual  investor for $4.00 per share. The
Company  also  issued  7,500  shares  of its  common  stock to a  broker  of EBI
Securities  as  compensation  for  services  provided  in  connection  with 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.

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.


                                      -57-
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 10.   SHAREHOLDERS' EQUITY (CONTINUED)

      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 various common stock and debt  offerings,  the Company
has issued a total of 1,505,900  Class C warrants  through March 31, 1999.  Each
Class C Warrant entitles the holder to purchase one share of Common Stock during
the period  commencing  February 20, 1999 and  expiring  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.

      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.,  Kazakhstan and  Azerbaijan)  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.

NOTE 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.

                                      -58-
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 11.   STOCK OPTION PLAN (CONTINUED)

      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  with  exercise  prices  ranging  from  $6.50 to $7.00 per share  were
granted  under this plan during the fiscal year ended March 31, 1997. No options
were granted  under this plan during the year ended March 31, 1998.  As of March
31, 1999, 25,000 of these options were still outstanding.  During the year ended
March 31,  1999,  220,000  options  were  issued  under  this plan at a weighted
average  exercise price of $4.18 per share with the exercise prices ranging from
$4.00 to $6.00 per share. 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 - 4 percent;  expected
option life in years - 3 years; expected stock price volatility - 126.8 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 loss and
loss per share  would have been  increased  to the pro forma  amounts  indicated
below:

                                        March 31,           March 31,
                                           1999               1998
                                   ---------------------------------------
Net loss
       - as reported                 $(5,911,847)        $(3,676,607)
       - pro forma                    (5,991,620)         (3,728,043)
Basic and fully diluted
 earnings per share
       - as reported                 $     (1.23)        $     (1.17)
       - pro forma                         (1.25)              (1.18)

      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,  1999,
there were 445,000 options outstanding.  Of this amount,  225,000 of the options
outstanding  were  exercisable  with 220,000  options subject to various vesting
requirements.  The  weighted  average  fair value of the  options at the various
grant dates was $6.93.

NOTE 12.   RELATED PARTY TRANSACTIONS

      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

                                      -59-
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 12.   RELATED PARTY TRANSACTIONS (CONTINUED)

Comany  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 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
of General Partners  Beteiligungs AG ("General  Partners"),  an Austrian holding
company  and the  beneficial  owner of  2,420,530  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.

      At December 31, 1998,  the Company has a receivable  related to securities
transactions  from Mr.  Kossner in the amount of 1,132,776  Austrian  Schillings
(approximately $97,000 USD).

      At  December  31,  1998,  the Company  has a  receivable  related to share
transactions  from  Z.E.  Beteiligungs  AG ("ZE")  in the  amount  of  7,745,600
Austrian Schillings  (approximately $661,000 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
or  Shareholders.  For the year ended  March 31,  1999,  the  Company  generated
profits of  approximately  $1,190,000  USD  related to the  trading of shares of
these companies.

      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.

                                      -60-
<PAGE>


                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


 NOTE 12.   RELATED PARTY TRANSACTIONS (CONTINUED)

      As of December 31, 1998,  ZE, a 26.27 percent owned  subsidiary of General
Partners,  owned  approximately 25 percent of UCP Beteiligungs AG ("UCP AG"), an
Austrian  holding  company.  UCP AG,  in turn,  owns 27.7  percent  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.

      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 USD,
at the then current exchange rates) from Peter Schmid.  As of December 31, 1997,
the  receivable  increased due to cash advances to 8,046,177 ATS  (approximately
$635,000 USD, at the then current exchange rates).  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 percent 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. As of March 31, 1999, Mr.
Schmid did not owe any remaining balance under these arrangements.

      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
December  31,  1998,  the  Company had a  receivable  from URBI in the amount of
2,780,030 Austrian Schillings or approximately  $236,000 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  percent  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).

      The Company conducts various business  transactions  with General Partners
throughout  the year. As of December 31, 1998,  the Company was owed  $3,787,339
relating to these transactions.

      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.

                                      -61-

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 12.   RELATED PARTY TRANSACTIONS (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  receivable  in the
amount of $300,000.  This amount is recorded in the Note receivable-common stock
in the consolidated  statement of financial condition.  This note bears interest
at 8 percent  per annum and is due  September  15,  1999.  This note was paid in
full, with accrued interest in February 1999.

NOTE 13.   INCOME TAXES

      The tax benefit of  $789,315  and  $640,163  for the years ended March 31,
1999 and 1998 result primarily from foreign net operating loss  carryforwards of
the Company's subsidiaries.

      The  differences  between  the tax  benefit  calculated  at the  statutory
federal  income tax rate and the actual tax  benefit for each period is shown in
the table below:
                                                   Year Ended       Year Ended
                                                    March 31,        March 31,
                                                      1999             1998
                                                   ------------     ------------

Tax benefit at federal statutory rate              $ 2,079,242      $ 1,587,065
State income taxes, net of federal benefit             294,794          224,991
Foreign taxes                                          130,789         (266,411)
Unrecognized benefit of net operating losses        (2,183,465)        (897,153)
Foreign currency fluctuations in deferred taxes        467,955               --
Other                                                       --           (8,329)
                                                   ------------     ------------
                                                   $   789,315      $   640,163
                                                   ------------     ------------


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

                                                   Year Ended       Year Ended
                                                    March 31,        March 31,
                                                      1999             1998
                                                   ------------     ------------

Unrecognized gain from marketable                  $    28,553      $   142,633
Adjustments to loan portfolios                          93,548               --
Capital loss carryforward                               45,445           45,445
Foreign tax credit carryforward                         32,652           32,652
Other                                                  155,701           19,428
Net operating loss carryforward                      8,327,402        5,202,856
                                                   ------------     ------------
                                                     8,683,301        5,443,014
      Valuation allowance                           (3,184,056)      (1,331,492)
                                                   ------------     ------------
                                                   $ 5,499,245      $ 4,111,522
                                                   ------------     ------------

      The  valuation   allowance  for  deferred  tax  assets  was  increased  by
$1,852,564  and  $634,191  during  the  years  ended  March  31,  1999 and 1998,
respectively.

                                      -62-
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 13.   INCOME TAXES (CONTINUED)

      At March 31,  1999,  the Company has a U.S.  federal  net  operating  loss
carryforward  of  approximately  $8,042,000 that may be used against future U.S.
taxable  income until it expires  between the years March 31, 2012 and March 31,
2019. 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, 1999 and March 31, 2003.  At December 31, 1998,  the Company has an Austrian
federal net operating loss  carryforward of  approximately  $14,500,000 USD that
has  no  expiration  date  and a  Polish  net  operating  loss  carryforward  of
approximately $825,000.

NOTE 14.   SEGMENT INFORMATION

SEGMENT AND GEOGRAPHIC AREA DATA

      The  Company  is  primarily  engaged  in a single  line of  business  as a
securities broker and dealer, which comprises several classes of services,  such
as principal transactions,  agency transactions, and underwriting and investment
banking.  Information  regarding the Company's  operations  for the fiscal years
ended March 31, 1999 and 1998 is as follows:

Segment information is as follows for the year ended March 31, 1999:

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

      Austria          $ 5,851,025   $  (39,483)     $ 34,119,145   $  (864,163)
      Hungary            1,795,804            -                 -       251,624
      Kazakhstan         7,862,783            -           698,584       122,643
      Poland               484,807            -         1,846,888      (409,260)
      Slovak Republic      595,985            -                 -       145,345
      United States     16,236,483            -        12,215,422    (5,069,249)
      Other                124,593            -                 -       (88,787)
                        ----------   ----------      -------------  ------------
            Total      $32,951,480   $  (39,483)     $ 48,880,039   $(5,911,847)
                       -----------   ----------      ------------   -----------

Segment information is as follows for the year ended March 31, 1998:
                                         Share of
                                         Loss of
                                      Unconsolidated   Identifiable      Net
                         Revenues       Entities          Assets         Loss
                       -----------   --------------- -------------- -----------

      Austria          $ 4,168,674     $  32,076     $  22,354,754  $(1,259,891)
      Czech Republic     1,287,954            -            868,961     (279,568)
      Hungary            2,108,992            -          7,533,072      214,017
      Kazakhstan           950,136            -            993,690      247,285
      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   (1,981,618)
      Other                226,854            -            143,374     (221,978)
                       -----------     -----------   -------------  -----------
            Total      $10,342,976     $    32,076   $  44,431,509  $(3,676,607)
                       -----------     -----------   -------------  ------------

                                      -63-
<PAGE>


                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998

NOTE 15.   REGULATORY REQUIREMENTS

      EBI Securities is a registered broker-dealer and, accordingly,  is subject
to Rule 15c3-1 of the Securities  Exchange Act of 1934 (the "net capital rule").
Pursuant to the net capital provisions, EBI Securities is required to maintain a
minimum net capital,  as defined under such  provisions.  At March 31, 1999, the
net capital of EBI Securities of $1,207,528  exceeded the minimum requirement by
$957,528.

      Other 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.

      The regulatory rules referred to above may restrict the Company's  ability
to withdraw capital from its regulated  subsidiaries,  which in turn could limit
the Company's ability to pay dividends.

NOTE 16.   FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

      The Company's customer activities,  through its clearing agencies, involve
the  execution,   settlement  and  financing  of  various  customer   securities
transactions.  These  transactions  may expose the Company to off-balance  sheet
risk in the event  that  customers  are  unable  to  fulfill  their  contractual
obligations.  In the event the customers fail to satisfy their obligations,  the
Company may be required to purchase or sell financial  instruments at prevailing
market prices in order to fulfill the customers' obligations.

      The  Company  has  sold  securities  that  it does  not  own and it  will,
therefore,  be  obligated to purchase  such  securities  at a future  date.  The
Company has recorded this  obligation in the financial  statements at the market
value or fair  value of such  securities.  The  Company  may incur a loss if the
market value of the securities increases subsequent to March 31, 1999.

      The Company bears the risk of financial failure by its clearing  agencies.
If the clearing agencies should cease doing business,  the Company's  receivable
from these agencies could be subject to forfeiture.

NOTE 17.   CONTINGENCIES

      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. The trial

                                      -64-
<PAGE>


                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 17. CONTINGENCIES (CONTINUED)

had been  scheduled to start in January 1999 but the court removed the case from
its docket  after  USCAN  filed a petition  for relief  under  Chapter 11 of the
United  States  Bankruptcy  Code. In the event that that the case should ever be
restored  to the  active  docket  for  trial,  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.  Plaintiffs'  motion  for a new  trial was
denied.  EBI  Securities  filed a  motion  seeking  recovery  of its  costs  and
attorney's  fees incurred in connection  with defending  this action.  The Court
awarded  EBI  Securities  $12,500 in costs but denied its motion for  attorney's
fees.  Plaintiffs  have filed an appeal to the judgment and EBI  Securities  has
cross-appealed the denial of its motion for attorney's fees.

      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.  The case is
presently scheduled for trial in October 1999.

      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.

      JACK G. LARSEN, AS RECEIVER FOR SOUTHWEST  INCOME,  TRUST ADVANTAGE INCOME
TRUST AND INVESTORS TRADING TRUST V. COHIG AND ASSOCIATES, INC. ET AL., Maricopa
County Superior Court, Arizona,  Case No. CV 98-20281.  Plaintiff commenced this
action  against EBI  Securities  and one of its  brokers in  December  1998 (and
process was served on EBI Securities in January 1999) seeking  damages in excess
of $8 million  dollars  against EBI Securities as well as an accounting of funds
allegedly in possession of EBI  Securities.  Plaintiff,  who apparently has been

                                      -65-

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998


NOTE 17. CONTINGENCIES (CONTINUED)

appointed receiver for three trusts,  alleges that customer accounts established
at EBI Securities by third parties contained funds that actually belonged to the
Trusts,  and that EBI Securities  negligently failed to supervise its employees,
in  failing to  determine  that the third  parties'  trading  activities,  which
allegedly resulted in significant trading losses, were in violation of the terms
of agreements between the third parties and the Trusts.  Plaintiff also contends
that EBI Securities  has in its possession and has wrongfully  refused to return
approximately  $270,000  belonging  to the Trusts.  EBI  Securities  has filed a
Motion to Compel  Arbitration and a Motion to Dismiss for Lack of Subject Matter
Jurisdiction.  A court  hearing on these two motions is presently  scheduled for
May 20, 1999.  EBI  Securities  believes  that it has  meritorious  defenses and
intends to vigorously defend against Plaintiff's claims.

      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.

      YEAR 2000

      The Company  has  established  a program to address the 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  addition,  a  material  portion  of the  Company's  transactions  are
processed by its clearing agencies who are external counterparties.  The Company
has contacted these clearing  agencies,  as well as other  suppliers,  to assess
their  compliance and remediation  efforts with respect to the Year 2000 problem
and the  Company's  exposure  to them.  The  ultimate  success or failure of the
corrective  plan and the extent of such success or failure  cannot  presently be
determined.

NOTE 18.   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-purpose  financial  statements.  This  statement  was
adopted by the Company beginning with the fiscal year ended March 31, 1999.

      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  was adopted by the  Company's for the
fiscal  year  ended  March  31,  1999.  In  the  initial  year  of  application,
comparative information for earlier years is to be restated.

                                      -66-
<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998



NOTE 18.   RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

      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.

NOTE 19.    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:

o  An approximate $550,000 receivable from a Yugoslavian  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 balance sheet.

o  An  approximate  $1.4 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 balance sheet.

o  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 balance sheet.

NOTE 20.   SUBSEQUENT EVENTS

      In February 1999, the Company's Austrian subsidiary WMP Bank AG, purchased
a  forty-nine  (49  percent)  percent  equity  interest in Stratego  Invest a.s.
Prague, a Czech securities and investment firm. The purchase price was valued at
approximately  $2.9 million USD at the then  current  exchange  rates.  The book
value of Stratego Invest at the time of purchase was  approximately  190 million
Czech koruna,  or  approximately  $6.1 million USD at the then current  exchange
rates.

      Stratego  Invest is one of the leading  Czech  securities  and  investment
firms.  The  current  management  of  Stratego  Invest  has a proven  record  of
profitability and they have well positioned the firm in order to expand into the
international securities marketplace.  The partnership with Stratego Invest will
give the  Company a strong  partner  in the Czech  marketplace,  and at the same
time,  will provide  Stratego  Invest  access to the  international  marketplace
through the Company's operations in Europe and the US.

      In  April  1999,   Eastbrokers  signed  a  joint  venture  agreement  with
CyberRealm,  Inc.,  a website  development  firm,  to  jointly  own and  develop
EBonlineinc.com,  a  newly  established  subsidiary.  EBonlineinc.com  is  owned
seventy percent by Eastbrokers and thirty percent by CyberRealm,  Inc. Under the
terms of the joint  venture  agreement,  Eastbrokers  will  provide  $300,000 in
initial funding and CyberRealm will provide $200,000 in developmental costs.

      EBonlineinc.com is an internet based service  (www.Ebonline.com) that will
allow domestic and  internationally  based  companies to post their  businesses,
match with  buyers and sellers  and have  access to the  investment  banking and
securities  network of the Company.  Eastbrokers  believes that  EBonlineinc.com
will have potentially three revenue streams: monthly membership fees, consulting

                                      -67-

<PAGE>

                     EASTBROKERS INTERNATIONAL INCORPORATED
                            (A DELAWARE CORPORATION)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 1998

NOTE 20. SUBSEQUENT EVENTS (CONTINUED)


income and banner advertising income. Eastbrokers intends to begin marketing the
website in May 1999 in international print media and major search engines on the
internet.

      In May 1999, the Company issued 5 percent Convertible  Debentures due 2002
(the "5 percent  Debentures")  in an aggregate  principal  amount of $2,000,000.
Holders of the 5 percent  Debentures  have the right to convert  their 5 percent
Notes into shares of Common Stock at the lesser of $5.50 per share or 90% of the
average of the three  lowest  closing bid prices for the 20 trading  days ending
five days before the date of delivery of the notice of conversion.  A portion of
the proceeds of the Debentures will be used to expand our operations.

                                      -68-

<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

      The  Company has changed  its  accountants  from  Deloitte & Touche LLP to
Spicer, Jeffries & Co. This change was reported in the Company's Current Reports
on Form 8-K dated  February 17, 1998 and March 15, 1999.  The decision to change
was  approved  by  the  Board  of  Directors.  The  Company  did  not  have  any
disagreements with Deloitte & Touche LLP on any matter of accounting  principles
or practices,  financial statement  disclosure,  or auditing scope or procedure,
which, if not resolved to the  satisfaction of Deloitte & Touche LLP, would have
caused it to make reference thereto in their report on the financial statements.

      In 1997, the Company changed its accountants  from Pannell Kerr Forster PC
to Deloitte & Touche  LLP.  This change was  reported  in  Eastbrokers'  Current
Reports on Form 8-K,  dated  November 4, 1997 and January 22, 1998. The decision
to change was  approved by the Board of  Directors.  The reports of Pannell Kerr
Forster PC on the Company's financial statements for the fiscal year ended March
31, 1997, the  transition  period ended March 31, 1996 and the fiscal year ended
December 31, 1995 contained no adverse opinion or disclaimer of opinion and were
not  modified as to  uncertainty,  audit  scope or  accounting  principles.  The
Company has had no  disagreements  with Pannell Kerr Forster PC on any matter of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure,  which, if not resolved to the  satisfaction of Pannell Kerr
Forster PC,  would have caused it to make  reference  thereto in their report on
the financial statements.

                                      -69-
<PAGE>



                                    PART III

                        DIRECTORS AND EXECUTIVE OFFICERS

A. DIRECTORS AND EXECUTIVE OFFICERS

The executive  officers and directors of  Eastbrokers,  their ages and positions
are set forth below:

           NAME                AGE                   POSITION
           ----                ---                   --------

Martin A. Sumichrast           32      Chairman of the Board, President and
                                       Chief Executive Officer
Kevin D. McNeil                39      Executive Vice President, Secretary,
                                       Treasurer and Chief Financial Officer
Wolfgang Kossner               31      Vice Chairman of the Board
Dr. Lawrence Chimerine         59      Director
Jay R. Schifferli              39      Director
Michael Sumichrast, Ph.D.      78      Director

      Messrs.  Kossner and Martin A.  Sumichrast have been elected as directors,
each to serve  until the annual  meeting of  stockholders  to be held during the
year 2002. Mr. Jay R. Schifferli and Dr. Michael Sumichrast have been elected to
serve as directors,  each until the annual  meeting of  stockholders  to be held
during the year 2000.  Dr.  Lawrence  Chimerine  has been  elected to serve as a
director until the annual meeting of  stockholders to be held in the latter half
of 1999. There are no family  relationships  among any officers and directors of
Eastbrokers,  except that Michael Sumichrast, Ph.D. and Martin A. Sumichrast are
father and son, respectively.

      MARTIN A. SUMICHRAST,  32, Chairman of the Board,  Chief Executive Officer
and  President  of  Eastbrokers  since  December  1998,  and  Vice  Chairman  of
Eastbrokers  since March 1997; a Director of Eastbrokers  since its inception in
1993. Mr. Sumichrast is a founder of the Company and was formerly  Secretary and
Executive Vice President and Chief  Financial  Officer.  Mr.  Sumichrast is also
Chairman of Eastbrokers  North America,  Inc., a subsidiary of the Company.  Mr.
Sumichrast  is  also a  Director  of EBI  Securities  Corporation,  Chairman  of
EBonline.com,  Inc. and  Eastbrokers  North America,  Inc., two  subsidiaries of
Eastbrokers.

      KEVIN D. MCNEIL, 39, Executive Vice President and Secretary since December
1998; and 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 acquired by
the  Company in 1996.  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 Internal  Auditors  Division of
the Securities Industry Association.

      WOLFGANG KOSSNER, 31, Vice Chairman of the Board since December 1998 and a
Director of  Eastbrokers  since  August 1996.  Mr.  Kossner was  Executive  Vice
President of Eastbrokers 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 Bank AG ("WMP")  (formerly named
WMP  Borsenmakler  AG), a subsidiary  acquired by Eastbrokers in 1996.  Prior to
that,  Mr.  Kossner  was the manager of  securities  trading at WMP from 1991 to
1993. Mr. Kossner  presently  serves on the  Supervisory  Boards of Eastbrokers'
subsidiaries in Vienna,  Ljubljana and Zagreb. Mr. Kossner is also principal and
founder of General Partners Beteiligungs AG, Eastbrokers' largest stockholder.

                                      -70-
<PAGE>


      DR. LAWRENCE  CHIMERINE,  59, Director of the Company since February 1999,
is a Managing Director and Chief Economist at the Economic Strategy Institute, a
position he has held since 1993.  Since 1991, he also has served as President of
Radnor  International  Consulting,  Inc., an international  consulting firm. Dr.
Chimerine  is also a director of Bank United Corp.  and Bank  United,  Outsource
International, Inc. and Sanchez Computer Associates, Inc.

      MICHAEL  SUMICHRAST,  Ph.D.,  78, Director of Eastbrokers  since 1993, was
Chairman of the Board of  Eastbrokers  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.

      JAY R. SCHIFFERLI, 39, Director of Eastbrokers since January 1, 1999, is a
Partner at the law firm of Kelley Drye & Warren LLP, an  international  law firm
with offices in the United States, Europe and Asia. Mr. Schifferli joined Kelley
Drye & Warren LLP in 1986,  and  concentrates  his  practice in  securities  and
corporate law. Kelley Drye & Warren LLP is counsel to the Eastbrokers Group.

   COMPENSATION OF DIRECTORS

      DIRECTOR  COMPENSATION.  In April 1999, the Board adopted a company policy
that  eliminated  all cash payments for services on the Board and  attendance at
Board  meetings.  Instead,  each  non-officer  director of  Eastbrokers  will be
awarded 7,500 shares of restricted  stock at the time they join the Board and an
annual award of 5,000 options  pursuant to Eastbrokers'  1996 Stock Option Plan,
as  amended.  Provisions  of the Plan are  described  under  "Executive  Officer
Compensation--1996  Stock Option  Plan." The  restricted  stock and options were
granted to each of Dr. Chimerine,  Dr. Sumichrast and Mr. Schifferli at the time
the policy was adopted in April 1999.

      During  the fiscal  year  ended  March 31,  1999,  no fees were paid.  All
current directors waived such fees for the fiscal year ended March 31, 1999.

B.    COMPLIANCE WITH SECTION 16(A)

      Section  16(a) of the  Exchange  Act  requires  Eastbrokers'  officers and
directors,  and  persons who own more than 10 percent of a  registered  class of
Eastbrokers'  equity  securities,   to  file  reports  of  ownership  of  equity
securities of Eastbrokers with the SEC. Officers, directors and greater-than-ten
percent  shareholders are required by SEC regulation to furnish Eastbrokers 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  Eastbrokers,  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,  Eastbrokers  believes that, during
the fiscal year ended March 31, 1999,  its directors and officers and holders of
more than 10 percent of the  outstanding  shares of Common  stock have  complied
with all reporting  requirements  under Section 16(a),  except General  Partners
Beteiligungs AG, which did not file on a timely basis.

                                      -71-


<PAGE>



                             EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE


<PAGE>

<TABLE>
<CAPTION>

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

             (a)               (b)       (c)     (d)         (e)              (f)            (g)            (h)          (i)
                                                                                          SECURITIES
                                                         OTHER ANNUAL  RESTRICTED STOCK   UNDERLYING       LTIP      ALL OTHER
NAME AND PRINCIPAL POSITION   YEAR     SALARY    BONUS   C0MPENSATION       AWARDS($)    OPTIONS/SARS(#)  PAYOUTS  COMPENSATION
---------------------------   ----     ------    -----   ------------  ----------------  ---------------  -------  ------------

<S>                           <C>     <C>       <C>            <C>              <C>          <C>             <C>         <C>
 Martin A. Sumichrast(1)      1999    $175,000  $    --        --               --           75,000          --          --
  Chairman, President         1998    $120,000  $20,000        --               --               --          --          --
  and Chief Executive         1997    $120,000  $11,000        --               --               --          --          --
  Officer

 Kevin D. McNeil(2)           1999    $ 75,000  $25,000        --               --           50,000          --          --
  Chief Financial Officer,    1998    $ 57,500  $17,250        --               --               --          --          --
  Executive Vice President    1997          --       --        --               --               --          --          --
  President of Finance,
  Treasurer, and
  Secretary

 Peter Schmid(3)              1999          --       --        --               --               --          --          --
   Former Chairman,           1998    $138,305  $30,000        --               --               --          --          --
   President and Chief        1997    $129,988       --        --               --               --          --          --
   Executive Officer


</TABLE>


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

(1)   Martin A.  Sumichrast  became  Chairman of the Board,  President and Chief
      Executive  Officer of  Eastbrokers in December 1998, and was Vice Chairman
      of the Board  since  March  1997.  Prior to that,  he was  Executive  Vice
      President and Chief Financial Officer.

(2)   Kevin  D.  McNeil  became   Executive  Vice  President  and  Secretary  of
      Eastbrokers  in  December  1998.  Prior to that,  he was  Chief  Financial
      Officer and Treasurer.

(3)   Mr. Schmid was the Chairman of the Board and Chief Executive  Officer from
      March 1997 through  December 15, 1998 and  President of  Eastbrokers  from
      August 1996 through December 1998.

   EMPLOYMENT AGREEMENTS

      Effective January 1995,  Eastbrokers entered into an employment  agreement
with Mr. Martin A. Sumichrast. Effective as of December 31, 1998, Mr. Sumichrast
entered into a new Employment  Agreement which will expire in December 2004, and
will renew for a period of five years  following  the  expiration  date,  unless
contrary  notice is given by either  party.  Eastbrokers  also  entered  into an
Employment  Agreement,  effective  as of December 31, 1998 with Kevin D. McNeil,
which agreement will expire in December 2002, unless contrary notice is given by
either party.  The annual  salaries for Martin A. Sumichrast and Mr. McNeil have
been  initially  fixed  at  $240,000  and  $120,000,   respectively,  with  such
subsequent  increases  in salary  during  the term of the  agreements  as may be
determined by the Board of Directors.  Messrs.  Martin A.  Sumichrast and McNeil
are each  eligible to receive a quarterly  performance  bonus of up to 1 percent
and 1/4 percent of 1 percent,  respectively,  of total revenue of Eastbrokers in
excess of $6,000,000  per quarter.  Mr.  Sumichrast and Mr. McNeil have forgiven
any  bonuses  owed to them  through  the period  ending  March 31,  1999.  As an
inducement for entering into each of their  respective  agreements,  Eastbrokers
has agreed to sell 200,000 shares and 50,000 shares at $3.50 and $3.00 per share
of Common Stock,  respectively,  to Mr. Martin A. Sumichrast and Mr. McNeil,  in
exchange for each of Messrs.  Sumichrast  and McNeil  issuing to  Eastbrokers  a
promissory note in the amount of $700,000 and $150,000, respectively. On January
1, 1999,  Martin A. Sumichrast and Kevin D. McNeil  purchased  70,000  Placement

                                      -72-

<PAGE>

Agent Common Stock  Warrants and 32,583  Placement  Agent Common Stock  Warrants
from Eastbrokers N.A.,  respectively,  in each case for an amount equal to $0.25
per warrant.  Each warrant will entitle Mr. Sumichrast and Mr. McNeil,  each, to
purchase  one (1)  share of  Eastbrokers'  common  stock at a price of $7.00 per
share.  Payment for the  warrants  will be in the form of  unsecured  promissory
notes,  with one-year terms and interest  accruing at 8 percent.  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
Eastbrokers.  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 Eastbrokers
with cause or by the  executive  with or without  good  reason.  Termination  by
Eastbrokers  without cause,  or by the executive for good reason,  would subject
Eastbrokers  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, Eastbrokers is obligated to purchase insurance policies on
the lives of Messrs.  Martin A. Sumichrast and McNeil.  Eastbrokers 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. Eastbrokers
has a one million dollar key man life insurance  policy on Martin A.  Sumichrast
and a $500,000 key man life insurance  policy on Mr.  McNeil,  in each case with
the Company as the beneficiary.

      Effective January 1, 1999,  Wolfgang Kossner,  Vice Chairman of the Board,
entered into a one-year Consulting Agreement with Eastbrokers.  Mr. Kossner will
receive  compensation for his services as a consultant to the Company of 200,000
Class C Warrants,  payable in equal  installments  on March 31,  1999,  June 30,
1999,  September  30,  1999 and  December  31,  1999.  The  value of the Class C
Warrants will be determined  for  compensation  purposes  using the Black Schole
method at the time of grant. As additional compensation under the agreement, Mr.
Kossner will receive project success fees to be determined. The agreement may be
terminated by Eastbrokers for cause and in the event that Eastbrokers terminates
the  agreement  for any reason  other than "for  cause,"  Mr.  Kossner  shall be
entitled to the remaining  payments that would have  otherwise  been payable had
his  services  not  been  terminated.  The  agreement  also  provides  for  full
compensation and reimbursement of expenses in the event of disability.

   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.  On December  23,  1998,  the Board of  Directors of
Eastbrokers granted stock options to Martin A. Sumichrast,  Wolfgang Kossner and
Kevin D. McNeil.  Pursuant to these grants,  Martin A.  Sumichrast  and Wolfgang
Kossner are each entitled for 10 years to purchase 75,000 shares of Eastbrokers'
Common  Stock at $4.00 per share and Kevin D. McNeil is entitled  for 7 years to
purchase 50,000 shares of Eastbrokers' Common Stock at $4.00 per share.

   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.

                                      -73-
<PAGE>


   FISCAL YEAR-END OPTION/SAR VALUES

     AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
                                OPTION/SAR VALUES


                                               Number of
                                               Securities        Value of
                                               Underlying       Unexercised
                                              Unexercised      In-The-Money
                                            Options/SARs at   Options/SARs at
                       Shares     Value        FY-End (#)        FY-End($)
                    Acquired on  Realized     Exercisable/     Exercisable/
       Name         Exercise (#)    ($)      Unexercisable     Unexercisable
        (a)             (b)         (c)           (d)               (e)
------------------------------------------------------------------------------

 Martin A. Sumichrast    0           -           0/75,000             -
 Kevin D. McNeil         0           -           0/50,000             -

   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 was 400,000. In October 1997, the Plan was
initially  amended  to  provide  an  additional  200,000  shares  available  for
distribution.  In 1999,  the Plan was amended to provide an  additional  250,000
shares for distribution.  Currently,  the total number of shares of Common Stock
available under the Plan is 850,000.

      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.

      During the year ended March 31, 1999,  220,000  options to purchase shares
of Common Stock were granted under this plan.

               SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth the number of shares of Eastbrokers' Common
Stock owned as of June 25,  1999 by (i) each person who is known by  Eastbrokers
to own beneficially  more than five percent of Eastbrokers'  Common Stock;  (ii)
each of  Eastbrokers'  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 Eastbrokers and have sole voting and
investment power with respect to all shares as beneficially owned by them.


                                      -74-

<PAGE>

                                                                    Percentage
                               Position with          Number of         of
  Name and Address (1)          Eastbrokers             Shares        Shares
 ------------------------ ------------------------- --------------- -----------

 Martin A. Sumichrast(2)  Chairman of the Board,        390,000          7.31
                          President, Chief
                          Executive Officer and
                          Director
 Kevin D. McNeil (3)      Executive Vice                110,078          2.10
                          President, Secretary,
                          Treasurer and Chief
                          Financial Officer

 Wolfgang Kossner (4)     Vice Chairman               2,420,420         40.23
 Dr. Lawrence Chimerine   Director                       12,500           *
   (5)
 Jay R. Schifferli (5)    Director                       12,500           *
 Michael Sumichrast,      Director                       12,500           *
   Ph.D. (5)
 Peter Schmid (former
 Chairman of the Board,
 President and Chief
 Executive Officer)                                      27,775           *
 General Partners AG (6)                              2,187,920         37.83
 All Officers and
   Directors as a Group
   (6 persons)                                        2,957,998         47.24
----------------------
*     Less than 1 percent

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

                                       75
<PAGE>

(2)  190,000  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  150,000
     shares issuable upon exercise of Placement Agent Warrants to acquire Common
     Stock at $7.00 per share.

(3)  Includes  57,583 shares  issuable upon exercise of Placement Agent Warrants
     to acquire Common Stock at $7.00 per share.

(4)  1,587,920 shares are owned indirectly through General Partners Beteiligungs
     AG, formerly KHS Beteiligungs AG ("General Partners" or "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
     200,000 shares issuable upon 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. The
     400,000  shares  issuable  upon the  exercise  of  warrants  held by GP and
     400,000 of the shares of Common Stock owned indirectly through GP.

(5)  Includes  7,500  shares of  restricted  Common  Stock and 5,000  options to
     acquire shares of Common Stock at $5.00 per share.

(6)  Includes 200,000 shares issuable upon exercise of options to acquire Common
     Stock at $10.00 per share, and 400,000 shares issuable upon the exercise of
     warrants to acquire Common Stock at $7.00 per share.  GP is including under
     this registration  statement all such 400,000 Class C Purchase Warrants and
     400,000 of its shares of Common Stock.


                       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      In connection with Mr. Randall F. Greene's  resignation  from the Board of
Directors  of  Eastbrokers,  Eastbrokers  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  Eastbrokers'  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 Eastbrokers'
Common Stock in full  satisfaction for consulting  services  rendered during the
period August 1, 1996 through March 31, 1997.  Also pursuant to this  agreement,
Eastbrokers  agreed to indemnify Mr. Greene  against  certain  liabilities,  the
parties  exchanged  mutual  releases and Mr. Greene agreed to sell his shares of
Eastbrokers'  Common Stock to the  Company's  primary  market  maker  subject to
certain conditions.

      Eastbrokers  entered into a one year consulting  agreement dated March 31,
1997 with Dr.  Sumichrast,  a Director  of  Eastbrokers,  pursuant  to which Dr.
Sumichrast  was  granted  20,000  shares of  Eastbrokers'  Common  Stock to vest
ratably over the term of the  agreement.  Dr.  Sumichrast  provided  services to
Eastbrokers  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 December 1996, Eastbrokers  Vienna loaned Dr. Muller-Tyl  approximately
$72,000 USD. Interest on the outstanding  balance of this obligation is computed

                                       76
<PAGE>

at 8  percent  per  annum  until  paid in full.  Dr.  Muller-Tyl  was the  Chief
Operating  Officer of Eastbrokers  until his resignation in January 1998.

      Eastbrokers   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, 1998 and 1999.
The terms of this  lease were  negotiated  such that  Eastbrokers  is subject to
occupancy expenses no greater than the current market rates. GPI is a subsidiary
of General  Partners,  an Austrian  holding company and the beneficial  owner of
2,187,920 shares of Common Stock. Mr. Kossner,  a Director of Eastbrokers and an
officer  of  Eastbrokers   from  August,   1996  until   November,   1996,  owns
approximately 30 percent of the outstanding shares of General Partners.  He is a
member of General Partners'  Supervisory  Board,  WMP's  Supervisory  Board, the
Eastbrokers AG Supervisory Board, and is a Director of Eastbrokers.

      At December 31,1998,  Eastbrokers  has a receivable  related to securities
transactions  from Mr.  Kossner in the amount of 1,132,776  Austrian  Schillings
(approximately $97,000 USD).

      At December  31,  1998,  Eastbrokers  has a  receivable  related  to share
transactions  from  Z.E.  Beteiligungs  AG ("ZE")  in the  amount  of  7,745,600
Austrian Schillings  (approximately $661,000 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 Eastbrokers  through its Directors
or  Shareholders.  For the year  ended  March 31,  1999,  Eastbrokers  generated
profits of  approximately  $1,190,000  USD  related to the  trading of shares of
these companies.

      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).  Eastbrokers  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, 1998,  ZE, a 26.27 percent owned  subsidiary of General
Partners,  owned  approximately 25 percent of UCP Beteiligungs AG ("UCP AG"), an
Austrian  holding  company.  UCP AG,  in turn,  owns 27.7  percent  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.

                                       77
<PAGE>

      Upon acquiring Eastbrokers  Beteiligungs AG on August 1, 1996, Eastbrokers
assumed a receivable in the amount of 7,387,697 ATS (approximately $704,000 USD,
at the then current  exchange  rates) from Mr. Schmid.  As of December 31, 1997,
the  receivable  increased due to cash advances to 8,046,177 ATS  (approximately
$635,000 USD, 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 percent per annum and matures May 31,
2000. It was  collateralized by 150,000 shares of Eastbrokers'  Common Stock. On
October 8, 1998, Mr. Schmid repaid  6,748,111  Austrian  Schillings of the total
amount due. As of March 31, 1999,  Mr. Schmid did not owe any remaining  balance
under these arrangements.

      Periodically,  Eastbrokers  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  Eastbrokers  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
December  31,  1998,  Eastbrokers  had a  receivable  from URBI in the amount of
2,780,030 Austrian Schillings or approximately  $236,000 related to transactions
occurring subsequent to December 31, 1997. In addition, Eastbrokers 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  Eastbrokers  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  percent  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).

      Eastbrokers  conducts various business  transactions with General Partners
throughout  the year. As of December 31, 1998,  the Company was owed  $3,787,339
relating to these transactions.

      As of December 31, 1997, Eastbrokers 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 percent per annum and is due  September 15, 1999.
This note was paid in full, with accrued interest in February 1999.

      On December 23, 1998, the Board of Directors of the Company  granted stock
options to Martin A. Sumichrast,  Wolfgang Kossner and Kevin D. McNeil. Pursuant

                                       78
<PAGE>

to these grants, Martin A. Sumichrast and Wolfgang Kossner are each entitled for
10 years to purchase  75,000  shares of  Eastbrokers'  Common Stock at $4.00 per
share and Kevin D. McNeil is entitled for 7 years to purchase  50,000  shares of
Eastbrokers' Common Stock at $4.00 per share.

      Effective as of December 31, 1998, Mr. Martin A. Sumichrast entered into a
new Employment  Agreement which will expire in December 2004, and will renew for
a period of five years following the expiration date,  unless contrary notice is
given by either party.  Eastbrokers  also entered into an Employment  Agreement,
effective as of December 31, 1998,  with Kevin D. McNeil,  which  agreement will
expire in December 2002,  unless contrary  notice is given by either party.  The
annual  salaries for Martin A.  Sumichrast  and Mr.  McNeil have been  initially
fixed at $240,000 and $120,000,  respectively, with such subsequent increases in
salary  during the term of the  agreements  as may be determined by the Board of
Directors.  Messrs. Martin A. Sumichrast and McNeil are each eligible to receive
a quarterly performance bonus of up to 1 percent and 1/4 percent of 1 percent of
total revenue of the Company in excess of $6,000,000 per quarter,  respectively.
Mr. Sumichrast and Mr. McNeil have forgiven any bonuses owed to them through the
period ending March 31, 1999.  See "Executive  Officer  Compensation--Employment
Agreements."

      On January 1, 1999,  Martin A.  Sumichrast  and Kevin D. McNeil  purchased
70,000  Class C Warrants  and 32,583  Class C Warrants  from  Eastbrokers  N.A.,
respectively,  in each  case for an  amount  equal to $0.25  per  warrant.  Each
warrant will entitle Mr.  Sumichrast and Mr.  McNeil,  each, to purchase one (1)
share of the Company's  common stock at a price of $7.00 per share.  Payment for
the warrants will be in the form of unsecured  promissory  notes,  with one-year
terms and interest  accruing at 8 percent.  Eastbrokers  sold 200,000  shares at
$3.50  per  share and  50,000  shares at $3.00 per share of common  stock to Mr.
Martin A.  Sumichrast  and Mr.  McNeil,  respectively,  in exchange  for each of
Messrs.  Sumichrast and McNeil  issuing to the Company a promissory  note in the
amount of $700,000 and $150,000, respectively.

      Effective January 1, 1999,  Wolfgang Kossner,  Vice Chairman of the Board,
entered into a one-year Consulting Agreement with Eastbrokers.  Mr. Kossner will
receive  compensation for his services as a consultant to Eastbrokers of 200,000
Class C Warrants,  payable in equal  installments  on March 31,  1999,  June 30,
1999,  September  30,  1999 and  December  31,  1999.  The  value of the Class C
Warrants will be determined  for  compensation  purposes  using the Black Schole
method at the time of grant. As additional compensation under the agreement, Mr.
Kossner  will receive  project  success fees to be  determined.  See  "Executive
Officer Compensation--Consulting Agreements."

      Effective  January 1, 1999, Jay R. Schifferli,  a Partner at Kelley Drye &
Warren LLP, became a director of Eastbrokers.  Kelley Drye & Warren LLP received
from Eastbrokers legal fees in the amount of $345,311.64  during the fiscal year
ended March 31, 1999.  As of the date of this  Prospectus,  Mr.  Schifferli  has
received  7,500 shares of  restricted  Common Stock and 5,000 options to acquire
shares of Common Stock at $5.00 per share as non-employee director compensation.


EXHIBITS AND REPORTS ON FORM 8-K

A.    EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-B

          1. See Index to Exhibits on pages 81-82.



B.    REPORTS ON FORM 8-K

      1. Current  Report on Form 8-K filed on February  22, 1999,  as amended on
         March 9, 1999.

      2. Current Report on Form 8-K filed on March 16, 1999.


                                       79

<PAGE>



                                   SIGNATURES

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


EASTBROKERS INTERNATIONAL INCORPORATED
                  (Registrant)


By          /s/ Martin A. Sumichrast                     July 2, 1999
 ----------------------------------------------      ---------------------
              Martin A. Sumichrast                           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/ Martin A. Sumichrast                     July 2, 1999
 ----------------------------------------------      ---------------------
              Martin A. Sumichrast                           Date
      Chairman, President, Chief Executive
              Officer, and Director



               /s/ Kevin D. McNeil                       July 2, 1999
 ----------------------------------------------      ---------------------
                 Kevin D. McNeil                             Date
      Executive Vice President, Treasurer,
      Chief Financial Officer and Secretary
  (Principal Financial and Accounting Officer)



            /s/ Michael Sumichrast                       July 2, 1999
 ----------------------------------------------      ---------------------
             Michael Sumichrast, PhD                         Date
                    Director



              /s/ Wolfgang Kossner                       July 2, 1999
 ----------------------------------------------      ---------------------
                Wolfgang Kossner                             Date
                    Director




 ----------------------------------------------      ---------------------
             Lawrence Chimerine, PhD                         Date
                    Director



             /s/  Jay R. Schifferli                      July 2, 1999
 ----------------------------------------------      ---------------------
                Jay R. Schifferli                            Date
                    Director

                                       80
<PAGE>



                                INDEX TO EXHIBITS



                                                                            PAGE
                                                                            ----

EXHIBIT NO.      DESCRIPTION
-----------      -----------

(2.1)            Agreement  and Plan of Merger  dated May 14,  1998 by and among
                 Eastbrokers, 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).

(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 Eastbrokers' Form 10-QSB for the nine months ended
                 December 31, 1996).

(3.2)            Amendments  to  the  Bylaws   (incorporated   by  reference  to
                 Eastbrokers'  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  (Each are  incorporated  by reference to
                 Eastbrokers'  Registration  Statement on Form S-1 as filed with
                 the Securities and Exchange Commission (No. 33-89544).

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

(10.1)           Employment   Agreement   between   Eastbrokers  and  Martin  A.
                 Sumichrast  effective as of December 31, 1998  (incorporated by
                 reference to Eastbrokers'  Registration  Statement on Form SB-2
                 (File No. 333-72359)).

(10.2)           Employment  Agreement  between  Eastbrokers  and  Kevin  McNeil
                 effective as of December 31, 1998 (incorporated by reference to
                 Eastbrokers'  Registration  Statement  on Form  SB-2  (File No.
                 333-72359)).

(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 Eastbrokers' Form 10-QSB for
                 the three  months  ended June 30,  1996).

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

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

                                       81
<PAGE>

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

(10.7)           Stock  Option  Agreement  between  Eastbrokers  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  Eastbrokers   (the  "Plan")
                 (incorporated by reference to Eastbrokers'  Quarterly Report on
                 Form 10-QSB for the nine months ended December 31, 1996).

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

(10.10)          Subscription  Agreement dated December 11, 1998 for the Private
                 Placement of Eastbrokers' shares (incorporated by reference to
                 Eastbrokers'  Registration  Statement  on Form  SB-2  (File No.
                 333-72359))

(10.11)          Consulting  Agreement  between Wolfgang Kossner and Eastbrokers
                 effective  December  31, 1998  [incorporated  by  reference to]
                 Eastbrokers'  Registration  Statement  on Form  SB-2  (File No.
                 333-72359)).

(16.1)           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)).

                 Letter on  Change in  Certifying  Accountant  (incorporated  by
                 reference to the Current  Report on Form 8-K dated  January 22,
                 1998 (File No. 0-26202)).

(21.1)           Subsidiaries of Eastbrokers.*

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



   ----------------
   *Filed herewith.
                                       82