U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(MARK ONE)

Quarterly  Report Pursuant to Section 13 or 15(d) of Securities  Exchange Act of
1934

                For the quarterly period ended December 31, 1999

         Transition report under Section 13 or 15(d) of the Securities  Exchange
         Act of 1934 (No Fee Required)

                     For the transition period from _______ to _______.

                          Commission File No. 333-44393

                          EUROPEAN MICRO HOLDINGS, INC.
                (Name of Registrant as Specified in Its Charter)

NEVADA                                         65-0803752
(State or Other Jurisdiction of                (I.R.S. Employer Identification
Incorporation                                  No.)
or Organization)
6073 N.W. 167th Street, Unit C-25,             33015
-----------------------------------            -----
MIAMI, FLORIDA                                 (Zip Code)
(Address of Principal Executive
Offices)
                             (305) 825-2458
                             --------------
                (Issuer's Telephone Number, Including Area Code)

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,  and (2) has been
subject to such filing requirements for the past 90 days. Yes (X) No ( )

There  were  4,933,900  shares  of Common  Stock,  par  value  $0.01 per  share,
outstanding as of February 11, 2000.





<PAGE>


PART I


FINANCIAL INFORMATION


ITEM   FINANCIAL STATEMENTS.



                    INDEX TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


Consolidated  Condensed Balance Sheets as of December 31, 1999 and
June 30, 1999..................................................................3

Consolidated Condensed Statements of Operations for the three and
six months ended December 31, 1999 and 1998....................................4

Consolidated Statement of Shareholders' Equity for the six months
ended December 31, 1999....................................................... 5

Consolidated Condensed Statements of Cash Flows for the six months
ended December 31, 1999 and 1998...............................................6

Notes to the Consolidated Condensed Financial Statements.......................8






<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.

                      CONSOLIDATED CONDENSED BALANCE SHEETS
                        (In thousands, except share data)


                                                    (UNAUDITED)
                                               DECEMBER 31, 1999  JUNE 30, 1999
                                               -----------------  -------------

                     ASSETS
CURRENT ASSETS:
   Cash                                                  $1,819          $3,168
   Restricted Cash                                          393             379
   Trade receivables, net                                10,146          14,938
   Due from related parties                                  46           1,128
   Inventories, net                                       7,637           7,232
   Prepaid expenses                                         335             402
   Other current assets                                     470             562
                                                   ------------     -----------
      TOTAL CURRENT ASSETS                               20,846          27,809
   Property and equipment, net                            3,785             612
   Goodwill, net                                          2,791           1,675
   Investments in and advances to
      unconsolidated subsidiaries                           502             503
   Other assets                                             205               -
                                                   ------------     -----------
      TOTAL ASSETS                                      $28,129         $30,599
                                                   ============     ===========



      LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Short-term borrowings                                  $5,687         $8,614
   Current portion of long-term borrowings                 1,744              -
   Trade payables                                            925          3,484
   Accrued expenses and other current
      liabilities                                          2,225          2,851
   Due to related parties                                     11            633
   Income taxes payable                                      752            383
                                                   -------------    -----------
      TOTAL CURRENT LIABILITIES                           11,344         15,965
   Long-term borrowings                                    1,769             23
   Other liabilities                                           -            268
                                                   -------------    -----------
      TOTAL LIABILITIES                                  $13,113        $16,256
                                                   =============    ===========
SHAREHOLDERS' EQUITY:
   Preferred stock $0.01 par value shares:
      1,000,000 authorized,
      No shares issued and outstanding                         -              -
   Common stock $0.01 par value shares:
      20,000,000 authorized, 4,933,900 shares
      issued and outstanding                                  49             49
   Additional paid-in capital                              9,163          8,979
   Accumulated other comprehensive loss                     (41)          (312)
   Retained earnings                                       5,845          5,627
                                                   -------------    -----------
      TOTAL SHAREHOLDERS' EQUITY                          15,016         14,343
                                                   =============    ===========

   COMMITMENTS AND CONTINGENCIES

      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $28,129        $30,599
                                                   -------------    -----------

See accompanying notes to consolidated condensed financial statements.




                                       3
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

<TABLE>
<CAPTION>


                           CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                (In thousands, except per share data)
                                             (Unaudited)

                                                                     THREE MONTHS ENDED                     SIX MONTHS ENDED
                                                                        DECEMBER 31,                          DECEMBER 31,
                                                                 --------------------------------- ---------------------------------
                                                                         1999            1998              1999            1998
                                                                         ----            ----              ----            ----
<S>                                                                   <C>             <C>               <C>             <C>
SALES:
     Net sales                                                        $33,651         $27,939           $65,396         $55,720
     Net sales to related parties                                         895           1,072             1,914           2,588
                                                                      -------         -------           -------         -------
         Total net sales                                               34,546          29,011            67,310          58,308
                                                                      -------         -------           -------         -------

COST OF GOODS SOLD:
     Cost of goods sold                                              (29,969)        (25,685)          (58,045)        (50,539)
     Cost of goods sold to related parties                              (872)         (1,068)           (1,863)         (2,566)
                                                                      -------         -------           -------         -------

         Total cost of goods sold                                    (30,841)        (26,753)          (59,908)        (53,105)
                                                                      -------         -------           -------         -------

GROSS PROFIT                                                            3,705           2,258             7,402           5,203

OPERATING EXPENSES:
         Selling, general and administrative expenses                 (3,357)         (2,150)           (6,423)         (3,867)
                                                                      -------         -------           -------         -------

INCOME FROM OPERATIONS                                                    348             108               979           1,336

         Interest income                                                   20              33                59              69
         Interest expense                                               (309)            (60)             (528)           (142)
         Equity in net income (loss) of unconsolidated
         subsidiaries                                                       2            (19)                 0            (47)
                                                                      -------         -------           -------         -------

INCOME BEFORE INCOME TAXES                                                 61              62               510           1,216

     Income tax expense                                                  (50)            (38)             (292)           (470)
                                                                      -------         -------           -------         -------

NET INCOME                                                                $11             $24              $218            $746
                                                                      =======         =======           =======         =======

         Net income per share - basic                                   $0.00           $0.00             $0.04           $0.15
                                                                      =======         =======           =======         =======

         Net income per share - diluted                                 $0.00           $0.00             $0.04           $0.15
                                                                      =======         =======           =======         =======

See accompanying notes to consolidated condensed financial statements.
</TABLE>



                                                 4
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

<TABLE>
<CAPTION>

                           CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                  (In thousands, except share data)
                                             (Unaudited)

                                                                            ACCUMULATED
                                                            ADDITIONAL          OTHER                                 TOTAL
                                                             PAID-IN        COMPREHENSIVE         RETAINED        SHAREHOLDERS'
                                      COMMON STOCK           CAPITAL        INCOME (LOSS)         EARNINGS           EQUITY
                                --------------------------------------------------------------------------------------------------
                                    SHARES        AMOUNT
<S>                              <C>                 <C>        <C>                 <C>                <C>              <C>

Balance at June 30, 1999         4,933,900           $49        $8,979              $(312)             $5,627           $14,343

Comprehensive Income:
   Net income                            -             -             -                   -                218               218
Other comprehensive income,
   foreign currency
   translation adjustment                -             -             -                 271                  -               271
                                 ---------      ---------    ---------           ---------           ---------        ---------
   Total comprehensive income            -             -             -                 271                218               489

Adjustment to accrued offering
     costs                               -             -           156                   -                  -               156
Compensation charge in
     relation to share options
     issued to non-employees             -             -            28                   -                  -                28
                                 ---------      ---------    ---------           ---------           ---------        ---------
Balance at December 31, 1999     4,933,900           $49        $9,163               $(41)             $5,845           $15,016
                                 =========      =========    =========           =========           =========        =========
</TABLE>


See accompanying notes to consolidated condensed financial statements.



                                                 5
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

<TABLE>
<CAPTION>


                           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                           (In thousands)
                                             (Unaudited)
                                                                                   SIX MONTHS ENDED DECEMBER 31,
                                                                           ---------------------------------------------
                                                                                     1999                    1998
                                                                                     ----                    ----
<S>                                                                                  <C>                     <C>
OPERATING ACTIVITIES:
Net income                                                                           $218                    $746
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
     Depreciation and amortization                                                    287                     143
     Amortization of expense related to contingent
        earn-out provisions                                                            47                       -
     Deferred income taxes                                                           (15)                    (11)
     Equity in net loss of unconsolidated subsidiaries                                  -                      47
     Compensation charge for non-employee stock options                                28                      94
CHANGES IN ASSETS AND LIABILITIES, NET OF EFFECTS FROM ACQUISITIONS
     Trade receivables                                                              5,512                     884
     Due from related parties                                                       1,082                     341
     Inventories                                                                    1,512                 (3,525)
     Prepaid expenses and other current assets                                        225                   1,366
     Trade payables                                                               (3,705)                 (2,059)
     Accrued expenses and other current liabilities                               (1,185)                 (1,480)
     Due to related parties                                                         (622)                   (180)
     Income taxes payable                                                             369                     146
                                                                                ---------               ---------
NET CASH PROVIDED BY (USED IN ) OPERATING ACTIVITIES                                3,753                 (3,488)
                                                                                ---------               ---------
INVESTING ACTIVITIES:
     Purchase of fixed assets                                                     (2,993)                   (166)
     Sale of fixed assets                                                              27                       -
     Payment for acquisition, net of cash acquired                                (1,220)                   (648)
                                                                                ---------               ---------
NET CASH USED IN INVESTING ACTIVITIES                                             (4,186)                   (814)
                                                                                ---------               ---------
FINANCING ACTIVITIES:
     Short-term borrowings, net                                                   (4,175)                   4,606
     Proceeds from long-term borrowings                                             3,645                       -
     Repayment of long term borrowings                                              (527)                       -
     Issuance of common stock, net                                                      -                    (25)
     Repayment of capital leases                                                     (33)                    (30)
                                                                                ---------               ---------
NET CASH PROVIDED BY (USED IN)  FINANCING ACTIVITIES                              (1,090)                   4,551
                                                                                ---------               ---------
     Exchange rate changes                                                            174                      10
                                                                                ---------               ---------
NET  INCREASE (DECREASE) IN CASH:                                                 (1,349)                     259
     Cash at beginning of period                                                    3,168                   5,012
                                                                                ---------               ---------
CASH AT END OF PERIOD                                                              $1,819                  $5,271
                                                                                =========               =========



                                                 6
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.


Non-cash investing and financing activities:
Fair value of assets acquired                                                      $3,314                  $4,533
Goodwill                                                                            1,408                   1,534
Fair value of liabilities assumed                                                 (2,817)                 (4,322)
Notes issued for consideration                                                      (604)                   (964)
                                                                                ---------               ---------

Cash paid for acquisitions                                                         $1,301                    $781
Less cash acquired                                                                   (81)                   (133)
                                                                                ---------               ---------

Net cash paid for acquisitions                                                     $1,220                    $648
                                                                                =========               =========

Interest paid                                                                        $517                    $129
                                                                                =========               =========

Taxes paid                                                                            $29                    $391
                                                                                =========               =========

</TABLE>


See accompanying notes to consolidated condensed financial statements.




                                                 7
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.

                  NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1     INTERIM FINANCIAL STATEMENTS

The  accompanying  unaudited  interim  financial  statements  have been prepared
pursuant to the rules and regulations  for reporting on Form 10-Q.  Accordingly,
certain   information  and  notes  required  by  generally  accepted  accounting
principles  for  complete  financial  statements  are not included  herein.  The
interim  statements  should be read in conjunction with the Company's  financial
statements  and notes thereto  included in the  Company's  1999 Annual Report on
Form 10-K.

In the Company's opinion,  all adjustments  necessary for a fair presentation of
these  interim  statements  have been included and are of a normal and recurring
nature.

2     INVENTORY

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                   DECEMBER 31, 1999   JUNE 30, 1999
                                                   -----------------   -------------

<S>                                                       <C>               <C>
Finished goods and goods for resale                       $7,675            $7,348
Less: Allowance for inventory obsolescence                  (38)             (116)
                                                         -------           -------
                                                          $7,637            $7,232
                                                         =======           =======


A roll forward of allowance for obsolescence is as follows (in thousands):


                                                   DECEMBER 31, 1999   JUNE 30, 1999
                                                   -----------------   -------------

Balance at beginning of period                              $116                $9
Foreign currency translation adjustment                        2                 -
Provision for obsolescence                                   119               602
Amounts written off                                        (199)             (495)
                                                         -------           -------

Balance at end of period                                     $38              $116
                                                         =======           =======


3     PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

                                                   DECEMBER 31, 1999   JUNE 30, 1999
                                                   -----------------   -------------

Buildings and leasehold improvements                      $2,878                $-
Furniture, fixtures and equipment                          1,398               994
Vehicles and other                                           501               416
                                                         -------           -------

                                                           4,777             1,410
Less: accumulated depreciation                             (992)             (798)
                                                         -------           -------

                                                          $3,785              $612
                                                         =======           =======
</TABLE>


                                                 8
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

                  NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


3     PROPERTY AND EQUIPMENT  (CONTINUED)

On July 16, 1999,  European Micro Plc, a wholly-owned  subsidiary of the Company
("EUROPEAN MICRO UK"),  purchased the office building in which it had previously
leased space for a purchase price of 1,705,000  pounds  sterling  ($2,787,000 at
exchange rate on December 31, 1999).  The purchase price was financed in part by
a loan in the amount of 1,312,000  pounds sterling  ($2,144,000 at exchange rate
on December 31,  1999).  This loan calls for monthly  payments of principal  and
interest in the amount of 15,588 pounds sterling  ($25,478 at December 31, 1999)
and matures in July 2009.  The mortgage loan note bears interest at a fixed rate
of 7.598%.

Depreciation  expense was $207,000 and $48,000 for the  six-month  periods ended
December 31, 1999 and December 31, 1998, respectively.

4     GOODWILL

On October 26, 1998, European Micro UK acquired all of the outstanding shares of
capital stock of Sunbelt (UK) Limited  ("SUNBELT").  The Sunbelt  purchase price
(to be settled in pounds sterling) is comprised of a guaranteed  portion and two
contingent  earn-out  payments.  The guaranteed  portion of the purchase  price,
which was based upon  Sunbelt's  net book value at closing and a multiple of its
fiscal year 1998 pre-tax  earnings,  was 940,000 pounds sterling  (approximately
$1,536,000 at exchange rate on December 31, 1999).  Of this  guaranteed  amount,
approximately 360,000 pounds sterling  (approximately  $588,000 at exchange rate
on December  31,  1999) was paid in cash at closing.  The unpaid  balance of the
guaranteed  consideration  includes a note  payable  to the  former 40%  Sunbelt
shareholder in the amount of 240,163 pounds sterling  ($393,000 at exchange rate
on December 31, 1999) to be repaid in November 2005,  subject to early repayment
at the  option of the note  holder at any time  after  June 1,  1999.  Such note
payable is secured by a cash account of equal  amount at December 31, 1999.  The
note  payable  and  the  cash  balances  are   reflected  on  the   accompanying
consolidated  condensed  balance sheet at December 31, 1999, in accrued expenses
and other current liabilities and restricted cash, respectively. The Company has
the option of paying future  amounts due to the former Sunbelt  shareholders  in
common  stock of European  Micro  Holdings,  Inc.  The Company also entered into
employment  agreements  with the two former  shareholders  of  Sunbelt.  Sunbelt
continued  to  distribute  its Nova line of  products  in  accordance  with past
practice,  however, the Company discontinued the Nova line of products effective
January 31, 2000. With the closure of the Nova line of products,  the employment
agreement with one of the former shareholders also will be terminated.

During  November  1999,  purchase  accounting   adjustments  were  made  to  the
calculation of the guaranteed  portion and the two contingent  earn-out amounts.
These adjustments were derived from the recalculation of fiscal year 1998 pretax
earnings of Sunbelt  resulting  in a reduction  of  $272,000  to  goodwill.  The
portion of the guaranteed  consideration  due at the end of the first contingent
earn-out period which ran from November 1, 1998 to October 31, 1999, was paid in
November 1999 in the amount of 53,708 pounds sterling  ($87,786 at exchange rate
on  December  31,  1999).  Also,  the portion of the first  contingent  earn-out
payment  related to employee  retention and the volume of purchases from the Far
East,  was paid in  November  1999 in the  amount  of  190,820  pounds  sterling
($311,895 at exchange rate on December 31, 1999).

The unpaid balance of the guaranteed  purchase price of 152,656 pounds  sterling
($249,517 at exchange  rate on December 31, 1999) is reflected in goodwill,  net
and  accrued  expenses  and  other  current   liabilities  on  the  accompanying
consolidated condensed balance sheet at December 31, 1999. The second contingent
earn-out  payment  has not  been  recognized  in the  accompanying  consolidated
condensed  financial  statements  as the payment of such amounts are not, in the
opinion of management,  determinable  beyond a reasonable  doubt. The guaranteed
portion  of  the  purchase  price  of  940,000  pounds  sterling  (approximately
$1,536,000  at exchange  rate on December 31, 1999) and the portion of the first
contingent  earn-out  payment  related  to  employee  retention  and the  volume
purchases  from the Far East of 190,820  pounds  sterling  ($311,895 at exchange
rate on December 31, 1999) is being  amortized on a straight  line basis over 20
years.



                                       9
<PAGE>

4     GOODWILL  (CONTINUED)

On November  12,  1998,  European  Micro UK  acquired  the assets of H&B Trading
International  BV  ("H&B").  The  acquisition  of  H&B  was  accounted  for as a
purchase.  The base purchase  price,  subject to  adjustment,  of  approximately
125,000 Dutch guilders  ($57,000 at exchange rate on December 31, 1999) exceeded
the  estimated  value of net  assets  acquired  by  approximately  85,000  Dutch
guilders  ($39,000  at  exchange  rate on  December  31,  1999),  which is being
amortized  on  a  straight-line  basis  over  20  years.  If  certain  financial
performance criteria are met for the fiscal year ended June 30, 2000, additional
consideration of approximately  75,000 Dutch guilders  ($34,000 at exchange rate
on December 31, 1999) will be paid. The financial  criteria for the period ended
June 30,  1999 was not met,  therefore,  the  additional  consideration  was not
accrued or paid. The year 2000 contingent  consideration  has not been reflected
in  the  accompanying   consolidated   condensed  financial  statements  as  the
calculation  of such  amounts are not  determinable  at this point in time.  The
results of operations of H&B have been  included in the  accompanying  financial
statements from the date of acquisition.

The Company acquired  American  Surgical Supply Corp. of Florida d/b/a/ American
Micro Computer Center ("AMCC"), in a merger on July 1, 1999. The transaction was
structured  as a merger  of AMCC with and into the newly  formed,  wholly  owned
subsidiary of the Company.  Upon  consummation of the merger,  the  subsidiary's
name was changed to American Micro Computer Center, Inc. ("AMERICAN MICRO"). The
purchase price for AMCC was equal to $1,131,000, plus an earn-out amount payable
in cash or shares of the Company's  common stock (at the  Company's  discretion)
equal to two times the  after-tax  earnings of American  Micro in calendar  year
1999 and two times the  after-tax  earnings of American  Micro in calendar  year
2000.  The portion of the purchase  price paid at closing was funded through the
Company's  working  capital.  In addition,  the Company  assumed all outstanding
indebtedness of AMCC,  including a shareholder loan in the approximate amount of
$289,000.  This loan is owed to the father of John B.  Gallagher,  the Company's
Co-President,  Co-Chairman and significant shareholder.  This note was repaid in
full in November  1999. If the Company elects to pay any portion of the purchase
price in shares of the Company's  common stock,  then AMCC's  shareholders  have
fifteen  days to make  arrangements  to sell  such  shares  over the next  forty
trading  days.  If the sale of such shares  results in net proceeds of less than
the purchase  price,  then the Company will pay the difference in cash to AMCC's
shareholders.

The  acquisition  of AMCC was  accounted  for as a purchase.  The base  purchase
price, inclusive of transaction costs, of approximately  $1,301,000 exceeded the
estimated fair market value of net assets  acquired by  approximately  $804,000,
which constitutes goodwill and which is being amortized on a straight-line basis
over 20 years. The results of operations of American Micro,  since  acquisition,
have been included in the  accompanying  financial  statements.  The  contingent
earn-out  payment relating to two times the after tax earnings for calendar year
1999 of $605,000 (2 x $302,500)  has been  accrued and is reflected in goodwill,
net and accrued expenses and other current liabilities.  The contingent earn-out
payment  relating to two times the after tax earnings for calendar year 2000 has
not  been  recognized  in  the  accompanying  consolidated  condensed  financial
statements as the calculation of such amounts are not determinable at this point
in time.
Purchase accounting adjustments have not been finalized.

The following summarized  unaudited pro forma financial  information assumes the
acquisitions of Sunbelt and AMCC occurred on July 1, 1998 (in thousands,  except
share data):

                               SIX MONTHS ENDED
                               DECEMBER 31, 1998
                               -----------------

Total net sales                     $76,623
Net income                             $696
Earnings per share:
   Basic                              $0.14
   Diluted                            $0.14

The pro  forma  financial  information  is  based  on  certain  assumptions  and
estimates,  and do not  reflect  any  benefits  from  economies  which  might be
achieved from the combined operations.  The pro forma results do not necessarily
represent  results which would have occurred if the  acquisition had taken place
on the basis  assumed  above,  nor are they  indicative of the results of future
operations.



                                       10
<PAGE>

4     GOODWILL  (CONTINUED)

A roll forward of goodwill is as follows (in thousands):

                                     DECEMBER 31, 1999
                                     -----------------

Balance at beginning of period                $1,675
Foreign currency translation
  adjustment                                      60
Purchase accounting adjustments                (272)
Additions                                      1,408
Amortization                                    (80)
                                             -------
Balance at end of period                      $2,791
                                             =======

5     SHORT-TERM BORROWINGS

Short-term borrowings consists of the following (in thousands):

                                      DECEMBER 31, 1999     JUNE 30, 1999
                                      -----------------     -------------

Bank lines of credit:
    European Micro UK facility                $1,238            $1,581
    Nor'Easter Micro facility                    708                 -
    American Micro facility                      878                 -
                                            --------          --------
Total bank lines of credit                     2,824             1,581
Receivable financing                           2,181             7,033
Other short-term borrowings                      682                 -
                                            --------          --------

Total short-term borrowings                   $5,687            $8,614
                                            ========          ========


European Micro Plc has a bank line of credit (the "EUROPEAN  MICRO UK FACILITY")
which is secured by a mortgage  debenture on all the assets of European Micro UK
and is  subordinate  to the  receivable  financing and the capital  leases.  The
European  Micro UK  Facility is subject to review in July each year and has been
renewed to July 2000.  This  facility has total  availability  to the Company at
December 31, 1999 of $1.2 million pounds  sterling ($2.0 million at December 31,
1999).  Interest  is  charged  on the bank line of credit at 1.25% over the bank
borrowing rate of 5.50% at December 31, 1999 and 5% at June 30, 1999.

The Company also  obtained  two lines of credit on October 29, 1999,  to finance
operations  based in the  United  States.  American  Micro and  Nor'Easter  each
obtained a line of credit, secured by accounts receivable and inventory. Amounts
available  under each of the line of credit  agreements  are based upon eligible
accounts  receivable and  inventory,  up to a maximum  borrowing  amount of $1.5
million of each agreement.  Each of these lines of credit matures on October 28,
2000,  and each bears  interest at 0.5% over the bank  borrowing rate of 8.5% at
December 31, 1999. As partial  security for these loans,  Messrs.  Gallagher and
Shields  pledged to the lender a portion of their  shares of common stock of the
Company.  In the event the Company  defaults on one or more of these loans,  the
lender may  foreclose  on all or a portion of the  pledged  securities.  Such an
event may cause a change of control in the Company because Messrs. Gallagher and
Shields together own 71% of the Company's outstanding common stock. The lines of
credit  agreements  include certain  financial and  non-financial  covenants and
restrictions.  The  agreements  also contain a provision  whereby the lender can
declare a default based on  subjective  criteria.  As of December 31, 1999,  the
Company  was  not in  compliance  with  one of the  financial  covenants  in the
agreements.  The Company has obtained a waiver of these events of non-compliance
for the December 31, 1999  reporting  period.  Given the  Company's  current and
expected  operating  results,  it is  likely  that  the  Company  will be out of
compliance with such covenant requirements at the next quarterly reporting date.


                                       11
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

                  NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

5     SHORT-TERM BORROWINGS (CONTINUED)

As a  result,  the  Company  is in  discussion  with the  lender  to  amend  the
agreements  to adjust the  financial  covenant  requirements.  While  management
believes such discussions will result in amended covenant requirements which the
Company  will be able to achieve,  there can be no  assurances  that the Company
will be successful in these negotiations.

Receivable financing represents  borrowings secured by various trade receivables
totaling  $2.6  million at December  31, 1999 and $8.3 million at June 30, 1999.
Trade  receivables  can be  financed  up to the lower of 85% of the value of the
trade  receivables  balance or 6.2 million pounds  sterling at December 31, 1999
($10.1 million at December 31, 1999). The trade receivable  financing  increased
from a maximum of 5.5 million pounds  sterling at June 30, 1999 ($8.7 million at
June 30,  1999).  This  facility can be  terminated by either party giving three
months'  notice.  The finance  company which provides the  receivable  financing
facility has full recourse to European  Micro UK with respect to any doubtful or
unrecovered amounts.  Interest is charged on the receivable financing balance at
1.25% above the bank  borrowing  rate of 5.50% at December 31,  1999,  and 5% at
June 30, 1999.

European  Micro  UK also  had a  revolving  credit  agreement,  secured  against
inventory.  The facility  allowed  European Micro UK to borrow up to 3.5 million
pounds sterling ($5.7 million at December 31, 1999) to assist in the purchase of
inventory.  To date,  no  borrowings  have been drawn  down on this  line.  This
revolving  credit  agreement has expired and European Micro UK is negotiating to
renew.

Other short-term  borrowings  represent various notes payable of American Micro.
The  maturity  dates of the notes  range  from on demand to June 30,  2000.  The
interest rates range from 2.25% over the prime interest rate to 12%.

6     LONG-TERM BORROWINGS

Long-term borrowings consists of the following (in thousands):

                                      DECEMBER 31, 1999     JUNE 30, 1999
                                      -----------------     -------------

Mortgage loan note                            $2,043                $-
Term loan                                      1,375                 -
Other long-term borrowings                        95                23
                                            --------           -------
                                              $3,513               $23
Less current maturities of                   (1,744)                 -
long-term borrowings
                                            --------           -------

Total long-term borrowings                    $1,769               $23
                                            ========           =======



The  mortgage  loan note is  secured by a mortgage  on the  office  building  of
European Micro UK. The note calls for monthly payments of principal and interest
in the amount of 15,588  pounds  sterling  ($25,478  at December  31,  1999) and
matures in July 2009.  The mortgage loan note bears  interest at a fixed rate of
7.598%.

The term loan was obtained on October 29, 1999, in the amount of $1,500,000. The
term loan is to be repaid with quarterly  payments of $125,000 over three years.
The term loan bears  interest at the  one-month  LIBOR plus two and  one-quarter
percentage  points  (2.25%).  One-month LIBOR at December 31, 1999 was 5.8%. The
term loan is  secured by  substantially  all of the  assets of the  Company.  As
partial  security for this loan,  Messrs.  Gallagher and Shields  pledged to the
lender a portion of their shares of common  stock of the  Company.  In the event
the Company  defaults on this loan, the lender may foreclose on all or a portion
of the  pledged  securities.  Such an event may cause a change of control in the
Company because Messrs.  Gallagher and Shields together own 71% of the Company's
outstanding common stock. The term loan agreement includes certain financial and
non-financial  covenants  and  restrictions.   The  agreement  also  contains  a
provision whereby the lender can declare a default based on subjective criteria.


                                       12
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

                  NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

6     LONG-TERM BORROWINGS (CONTINUED)

The term loan  agreement  is with the same lender as the Nor'  Easter  Micro and
American Micro line of credit facilities  discussed in Note 5. Further, the term
loan credit agreement contains similar loan covenant requirements.  As such, the
Company's non-compliance with one of the financial covenants has been waived for
the December 31, 1999 reporting period.  The total amount  outstanding under the
term loan  agreement  is reflected  in current  maturities  of long term debt at
December 31, 1999,  because of the likelihood of covenant  violation at the next
quarterly reporting date absent an amendment to the term loan agreement.

In conjunction  with the purchase of AMCC, the Company assumed a note payable to
John  P.  Gallagher,  the  father  of John B.  Gallagher,  who is a  significant
shareholder, co-chairman, and co-president of the Company. This note was paid in
full during November 1999.

7     EARNINGS PER SHARE

The calculation of earnings per share are detailed in the table below:

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED             SIX MONTHS ENDED
                                                                         DECEMBER 31,                  DECEMBER 31,
                                                                 -----------------------------------------------------------
                                                                         1999           1998            1999          1998
                                                                         ----           ----            ----          ----
<S>                                                                       <C>            <C>            <C>           <C>
EARNINGS
Net income (in thousands)                                                 $11            $24            $218          $746
                                                                    ---------      ---------      ----------     ---------
WEIGHTED AVERAGE NUMBER OF SHARES
Outstanding common stock during the period                          4,933,900      4,933,900      4,933,900      4,933,900
Contingently issuable shares                                          114,011              -         99,559              -
                                                                    ---------      ---------      ----------     ---------

BASIC WEIGHTED AVERAGE NUMBER OF SHARES                             5,047,911      4,933,900      5,033,459      4,933,900
Effect of dilutive stock options and other contingent shares                -         17,926            497          8,963
                                                                    ---------      ---------      ----------     ---------

DILUTED WEIGHTED AVERAGE NUMBER OF SHARES                           5,047,911      4,951,826      5,033,956      4,942,863
                                                                    =========      =========      =========      =========

Basic earnings per share                                                $0.00          $0.00          $0.04          $0.15
                                                                    =========      =========      =========      =========

Diluted earning per share                                               $0.00          $0.00          $0.04          $0.15
                                                                    =========      =========      =========      =========
</TABLE>



During the  three-month  period  ended  December 31,  1999,  the Company  issued
options to purchase up to 2,500 shares of Common  Stock at an exercise  price of
$8.00 per share.  The above  dilutive  earnings per share  calculations  for the
three-month and six-month periods ended December 31, 1999, exclude the effect of
options to purchase 349,000 and 341,500 shares of common stock, respectively, at
exercise  prices  ranging  from $7.50 to $12.00 per share,  due to the fact they
were anti-dilutive (i.e., the exercise price was greater than the average market
price  for the  respective  periods).  The  above  dilutive  earnings  per share
calculations for the three-month and six-month  periods ended December 31, 1998,
exclude  the effect of options to  purchase  20,000 and 20,000  shares of common
stock, respectively,  at exercise prices ranging from $9.19 to $11.00 per share,
due to the fact they were  anti-dilutive.  Also see  "Note 4  (Goodwill)  to the
Consolidated  Condensed Financial  Statements" related to contingently  issuable
shares related to acquisitions. However, the effect of contingent shares related
to the payment  due after the first  contingent  earn-out  period of the Sunbelt
acquisition  has not been included in the three month period ended  December 31,
1999 as such payment was paid in cash in November  1999.  Also the effect of the
contingent  shares  related to the second  contingent  earn-out  of the  Sunbelt
acquisition  are not included,  as the conditions  necessary for such contingent
shares to be issued  have not been met as of December  31,  1999.  However,  the
effect of contingent  shares related to the guaranteed  earn-out  amount payable
after  the  second  contingent  earn-out  period  is  included.  The  effect  of
contingent shares related to the first earn-out of American Micro is included in
the three-month  period ended December 31, 1999. The effect of contingent shares


                                       13
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

                  NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

7     EARNINGS PER SHARE (CONTINUED)

related to second earn-out of American Micro is not included,  as  determination
of the amount of such contingent shares to be issued are not determinable.

8     RELATED PARTY TRANSACTIONS

European  Micro  Holdings,  Inc.  belongs to a group of related  companies  (the
"GROUP").  The  Group is  comprised  of  Technology  Express,  Inc.  located  in
Nashville, Tennessee ("TECHNOLOGY EXPRESS"), and, until July 1, 1999, AMCC which
was  purchased by European  Micro  Holdings,  Inc. See "Note 4 (Goodwill) to the
Consolidated  Condensed Financial  Statements."  Technology Express is owned and
controlled by Harry D.  Shields,  who is  Co-President  and  Co-Chairman  of the
Company. Until July 1, 1999, AMCC was controlled by John B. Gallagher,  who is a
Co-President  and Co-Chairman of the Company.  The Company acquired AMCC on July
1,1999.

The rates  charged  on  related  party  sales are  lower  than they  would be in
arms-length  transactions.  The Company has a bulk buying  arrangement  with the
remaining related party, Technology Express, which gives the Company the benefit
of buying large job-lots at more  competitive  prices than it would otherwise be
possible  to do and then  immediately  sell part of the  purchase to the related
party.

Related party transactions are summarized as follows (in thousands):

                                    THREE MONTHS ENDED       SIX MONTHS ENDED
                                       DECEMBER 31,            DECEMBER 31,
                                 -----------------------------------------------
                                      1999         1998        1999        1998
                                      ----         ----        ----        ----
 SALES TO:
 AMCC                                  N/A         $389         N/A        $402
 Technology Express                   $895          683      $1,914       2,186
                                    ------       ------      ------      ------
                                      $895       $1,072      $1,914      $2,588
                                    ======       ======      ======      ======

 PURCHASES FROM:
 AMCC                                  N/A         $130         N/A        $130
 Technology Express                    $44        1,113      $1,724      13,552
                                    ------       ------      ------      ------

                                       $44       $1,243      $1,724     $13,682
                                    ======       ======      ======      ======


Due from related parties was comprised of the following balances (in thousands):

                                  DECEMBER 31, 1999      JUNE 30, 1999
                                  -----------------      -------------

 AMCC                                       N/A              $974
 Technology Express                         $46               154
                                          -----            ------
                                            $46            $1,128
                                          =====            ======



                                       14
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

                  NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


8     RELATED PARTY TRANSACTIONS (CONTINUED)

Due to related parties was comprised of the following balances (in thousands):

                                  DECEMBER 31, 1999      JUNE 30, 1999
                                  -----------------      -------------

 AMCC                                       N/A                $3
 Technology Express                         $11               630
                                          -----            ------

                                            $11              $633
                                          =====            ======


The entities listed above are related to the Company in the following manner:

AMCC

AMCC is a distributor  of computer  hardware  based in Miami,  Florida.  John B.
Gallagher who is Co-Chairman,  Co-President,  a Director and shareholder (owning
39% of the outstanding shares) of European Micro Holdings,  Inc., was until July
1,  1999,  the  president  of AMCC and  owned 50% of the  outstanding  shares of
capital  stock in that  company.  See  "Note 4  (Goodwill)  to the  Consolidated
Condensed Financial  Statements"  regarding the acquisition of AMCC. Frank Cruz,
who is Chief  Operating  Officer of European Micro  Holdings,  Inc., has been an
employee of AMCC since 1994.

TECHNOLOGY EXPRESS

Until  1996,  Technology  Express  was a full  service  authorized  reseller  of
computers and related products based in Nashville,  Tennessee, selling primarily
to  end-users.  Technology  Express  was  sold  to  Inacom  Computers  in  1996.
Concurrently  with the sale, Mr. Shields founded a new computer company with the
name Technology Express.  This company is a distributor of computer products and
does not sell to end-users. Harry D. Shields, who is Co-Chairman,  Co-President,
a Director and shareholder  (owning 32% of the  outstanding  shares) of European
Micro  Holdings,  Inc., is president of Technology  Express and owns 100% of the
outstanding  shares of capital  stock of that  company.  Jay Nash,  who is Chief
Financial Officer, Treasurer and Secretary of European Micro Holdings, Inc., has
been an employee of Technology Express since 1992.

9     CONTINGENCIES

European  Micro UK and the  Company  have each  demanded  payment  from Big Blue
Europe for loans made in the amounts of $150,000 and $350,000, respectively. Big
Blue Europe is currently under a court order prohibiting payment of these loans.
The 50% shareholders of Big Blue Europe, its principals, Jeff and Marie Alnwick,
and Big Blue  Europe,  derivatively,  have filed a lawsuit  against the Company,
European Micro UK, John B. Gallagher and Harry D. Shields alleging fraud, aiding
and abetting fraud, misappropriation of trade secrets, breach of fiduciary duty,
aiding and abetting  breach of fiduciary  duty,  breach of contract and tortious
interference  with contract.  The complaint  states that the plaintiffs seek $10
million or more in  damages.  The suit was filed in the United  States  District
Court of the Eastern  District of New York, Case # 99 CV 7380 (E.D.N.Y.)  (ADS).
The factual  allegations  underlying  the lawsuit stem from European  Micro UK's
joint venture  interest in Big Blue Europe.  The Company has a pending motion to
dismiss the  complaint and has requested the New York court to refer the case to
the courts of Holland  upon the  doctrine of FORUM NON  CONVENIENS.  The Company
believes that the  allegations  specified in the complaint are without merit and
intends  to  vigorously  defend  the  suit.  As a  consequence  of  some  of the
allegations  in such  complaint,  Messrs.  Gallagher  and Shields  have filed an
action in the United Kingdom for defamation against the Alnwicks and others.





                                       15
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

ITEM MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

INTRODUCTORY STATEMENTS

FORWARD-LOOKING  STATEMENTS AND ASSOCIATED RISKS. THIS QUARTERLY REPORT CONTAINS
FORWARD-LOOKING STATEMENTS,  INCLUDING STATEMENTS REGARDING, AMONG OTHER THINGS,
(A)  EUROPEAN  MICRO  HOLDINGS,  INC.'S  ("EUROPEAN  MICRO"  OR  THE  "COMPANY")
PROJECTED SALES AND  PROFITABILITY,  (B) THE COMPANY'S  GROWTH  STRATEGIES,  (C)
ANTICIPATED TRENDS IN THE COMPANY'S INDUSTRY, (D) THE COMPANY'S FUTURE FINANCING
PLANS, AND (E) THE COMPANY'S ANTICIPATED NEEDS FOR WORKING CAPITAL. IN ADDITION,
WHEN  USED  IN THIS  QUARTERLY  REPORT,  THE  WORDS  "BELIEVES,"  "ANTICIPATES,"
"INTENDS," "IN  ANTICIPATION  OF,"  "EXPECTS," AND SIMILAR WORDS ARE INTENDED TO
IDENTIFY CERTAIN FORWARD-LOOKING  STATEMENTS.  THESE FORWARD-LOOKING  STATEMENTS
ARE BASED LARGELY ON THE COMPANY'S  EXPECTATIONS  AND ARE SUBJECT TO A NUMBER OF
RISKS AND UNCERTAINTIES,  MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACTUAL
RESULTS  COULD DIFFER  MATERIALLY  FROM THESE  FORWARD-LOOKING  STATEMENTS  AS A
RESULT  OF  CHANGES  IN  TRENDS  IN THE  ECONOMY  AND  THE  COMPANY'S  INDUSTRY,
REDUCTIONS  IN THE  AVAILABILITY  OF  FINANCING  AND  AVAILABILITY  OF  COMPUTER
PRODUCTS ON TERMS AS FAVORABLE AS  EXPERIENCED  BY THE COMPANY IN PRIOR  PERIODS
AND OTHER FACTORS.  IN LIGHT OF THESE RISKS AND  UNCERTAINTIES,  THERE CAN BE NO
ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY REPORT
WILL IN FACT OCCUR.  THE COMPANY DOES NOT UNDERTAKE  ANY  OBLIGATION TO PUBLICLY
RELEASE THE RESULTS OF ANY  REVISIONS  TO THESE  FORWARD-LOOKING  STATEMENTS  TO
REFLECT ANY FUTURE EVENTS OR CIRCUMSTANCES.

UNLESS  THE  CONTEXT  OTHERWISE  REQUIRES  AND  EXCEPT AS  OTHERWISE  SPECIFIED,
REFERENCES  HEREIN TO "EUROPEAN  MICRO" OR THE "COMPANY"  INCLUDE EUROPEAN MICRO
HOLDINGS,  INC. AND ITS FOUR  WHOLLY-OWNED  SUBSIDIARIES,  EUROPEAN MICRO PLC, A
COMPANY  ORGANIZED UNDER THE LAWS OF THE UNITED KINGDOM  ("EUROPEAN  MICRO UK"),
NOR'EASTER  MICRO,  INC.,  A  NEVADA  CORPORATION   ("NOR'EASTER"),   COLCHESTER
ENTERPRISE  PTE.  LTD.,  A  COMPANY   ORGANIZED  UNDER  THE  LAWS  OF  SINGAPORE
("COLCHESTER"),  AND AMERICAN MICRO COMPUTER CENTER, INC., A FLORIDA CORPORATION
("AMERICAN  MICRO")  (COLLECTIVELY,   THE  FOUR  WHOLLY-OWNED  SUBSIDIARIES  ARE
REFERRED TO AS THE "SUBSIDIARIES").

OVERVIEW

The Company is an independent distributor of microcomputer  products,  including
personal  computers,  memory modules,  disc drives and networking  products,  to
customers  mainly in Western  Europe and to customers  and to a related party in
the United States. The Company's  customers consist of more than 670 value-added
resellers,  corporate resellers,  retailers,  direct marketers and distributors.
The Company does not sell to end-users.  Substantially  all of the products sold
by the Company are manufactured by  well-recognized  manufacturers  such as IBM,
Compaq and  Hewlett-Packard,  although the Company generally does not obtain its
inventory directly from such manufacturers.  The Company monitors the geographic
pricing strategies related to such products,  currency  fluctuations and product
availability  in order to  obtain  inventory  at  favorable  prices  from  other
distributors, resellers and wholesalers.

The  Company  considers  itself to be a focused  distributor,  as  opposed  to a
broadline distributor,  dealing with a limited and select group of products from
a limited and select group of leading  manufacturers.  The Company believes that
being a focused  distributor  enables it to  respond  more  quickly to  customer
requests and gives it greater  availability of products,  access to products and
improved pricing. The Company believes that as a focused distributor it has been
able to develop  greater  expertise in the products which it sells.  The Company
places significant emphasis on market awareness and planning and actively shares
this knowledge with its customers in order to further enhance trading relations.
The Company  strives to monitor and react  quickly to market  trends in order to
enable its  multilingual  sales team to maintain the highest  levels of customer
service.

European  Micro  Holdings,  Inc.  was  organized  under the laws of the State of
Nevada in  December  1997 and is the parent of  European  Micro UK,  Nor'Easter,
Colchester and American Micro. European Micro UK was organized under the laws of
the  United  Kingdom  in  1991  to  serve  as  an  independent   distributor  of
microcomputer  products  to  customers  mainly in Western  Europe and to related
parties in the United  States.  Nor'Easter  was organized  under the laws of the
State of Nevada on December 26, 1997 to serve as an  independent  distributor of
microcomputer products in the United States.  Colchester was organized under the
laws of Singapore in November  1998 to serve as an  independent  distributor  of
microcomputer  products in Asia.  American  Micro was formed on June 24, 1999 to
acquire AMCC and now serves as an independent distributor in the United States.

European  Micro  UK is the  parent  of  European  Micro  GmbH  ("EUROPEAN  MICRO
GERMANY"),  Sunbelt and European Micro B.V. ("EUROPEAN MICRO HOLLAND") and has a
50% joint  venture  interest  in Big Blue  Europe,  B.V.  ("BIG  BLUE  EUROPE").


                                       16
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

European  Micro  Germany  was  organized  under the laws of  Germany in 1993 and
operates as a sales office in Dusseldorf, Germany. All products sold by European
Micro Germany are procured and shipped from the facilities of European Micro UK.
Sunbelt is a company  registered in England and Wales,  which was established in
1992 and is based in Wimbledon,  England.  Sunbelt  operates as a distributor of
microcomputer  products to dealers,  value-added  resellers  and mass  merchants
throughout  Western  Europe.  Except  for the  distribution  of its  Nova  brand
products,  Sunbelt's  distribution  operations were integrated with and into the
operations  of European  Micro UK.  Sunbelt  discontinued  the Nova product line
effective  January  31,  2000.  European  Micro  Holland  was formed in 1995 and
acquired the assets of H&B.  European Micro UK acquired these assets on November
12,  1998.  Big Blue Europe was  organized  under the laws of Holland in January
1997 and is a computer parts  distributor  with offices  located near Amsterdam,
Holland. Big Blue Europe has no affiliation with International Business Machines
Corporation.

European  Micro  Holding's  headquarters  are located at 6073 N.W. 167th Street,
Unit C-25, Miami, Florida 33015, and its telephone number is (305) 825-2458.

RESULTS OF OPERATIONS

The following table sets forth, for the periods presented, the percentage of net
sales  represented  by certain  items in the  Company's  Consolidated  Condensed
Statements of Operations:

<TABLE>
<CAPTION>
                                              PERCENTAGE OF NET SALES

                                                         THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                            DECEMBER 31,                       DECEMBER 31,
                                                        1999            1998               1999            1998
                                                        ----            ----               ----            ----
<S>                                                    <C>             <C>                <C>               <C>

Net sales to third parties                             97.4%           96.3%              97.2%             95.6%
Net sales to related parties                            2.6%            3.7%               2.8%              4.4%
                                                  ----------      ----------         ----------        ----------
Total net sales                                       100.0%          100.0%             100.0%            100.0%
                                                  ----------      ----------         ----------        ----------

Cost of goods sold to third parties                  (86.8%)         (88.5%)            (86.2%)           (86.7%)
Cost of goods sold to related parties                 (2.5%)          (3.7%)             (2.8%)            (4.4%)
                                                  ----------      ----------         ----------        ----------

Total cost of goods sold                             (89.3%)           92.2%            (89.0%)           (91.8%)
                                                  ----------      ----------         ----------        ----------

Total gross profit                                     10.7%            7.8%              11.0%              8.9%

Total operating expenses                              (9.7%)          (7.4%)             (9.6%)            (6.6%)
                                                  ----------      ----------         ----------        ----------

Operating profit                                        1.0%           0.04%               1.4%              2.3%

Interest income                                         0.1%            0.5%               0.1%              0.4%
Interest expense                                      (0.9%)          (0.6%)             (0.8%)            (0.5%)
Equity in net income (loss) of unconsolidated
subsidiary                                              0.0%          (0.1%)               0.0%            (0.1%)
                                                  ----------      ----------         ----------        ----------

Income before income taxes                              0.2%            0.2%               0.7%              2.1%
Income taxes                                          (0.1%)          (0.1%)             (0.4%)            (0.8%)
                                                  ----------      ----------         ----------        ----------

Net income                                              0.1%            0.1%               0.3%              1.3%
                                                  ==========      ==========         ==========        ==========
</TABLE>


                                       17
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 AND 1998

TOTAL NET SALES.  Total net sales increased $5.5 million,  or 19.1%,  from $29.0
million in the  three-month  period ended  December 31, 1998 to $34.5 million in
the comparable period in 1999. Excluding net sales to related parties, net sales
increased $5.8 million,  or 20.4%, from $27.9 million in the three-month  period
ended December 31, 1998 to $33.7 million in the comparable  period in 1999. This
increase was attributable to the addition of Sunbelt's trading sales (accounting
for approximately $3.2 million),  the addition of Colchester's sales (accounting
for  approximately  $2.8  million)  and the addition of American  Micro's  sales
(accounting for approximately $4.5 million).  This increase was partially offset
by a reduction  of $1.4  million in the Premier  Dealers  Club,  a reduction  of
$50,000 from Sunbelt's  Nova line of products,  a reduction of $2.4 million from
European  Micro UK's trading sales  (excluding  Sunbelt's  trading  sales) and a
reduction of $870,000 in Nor'Easter's sales.

Net sales to related parties  decreased  $177,000,  or 16.5%, in the three-month
period ended December 31, 1999 from the comparable period in 1998. This decrease
is  primarily  attributable  to the  acquisition  of AMCC on July 1,  1999,  and
therefore,  net sales to American  Micro are excluded  from net sales to related
party.  Until July 1, 1999, the related parties consisted of a group of entities
in  which  an  ownership  interest  was  held  by  either  of  the  two  primary
shareholders of the Company,  John B. Gallagher or Harry D. Shields. See "Note 8
(Related  party   transactions)   to  the   Consolidated   Condensed   Financial
Statements."  Since the  acquisition  of AMCC,  the sole  member of the group is
Technology Express, Inc. In order to facilitate fast and efficient international
transactions,  the  Company  expects to  continue  to act as a supplier  for and
purchaser from Technology Express.  Inter-group prices are expected to remain at
one percent over cost but  exceptions  may be made in times of short supply,  to
cover  assembly  costs  and to  reward  one  another  for  exceptional  low cost
purchases.  The Company believes that its reliance on the group will continue to
decline,  although the  Company's  sales will be lower in future  periods if the
Company is unable to sell product to Technology  Express as it has  historically
done. Likewise, the Company's profitability may be lower in future periods if it
is unable to purchase  products from Technology  Express because the Company may
not be able to obtain such product  from other  sources or if  available,  on as
favorable terms.

There can be no assurance that the Company will be able to maintain the level of
sales or sales  growth  achieved  in this  period  or past  periods  because  of
seasonal  variations in the demand for the products and services  offered by the
Company, the introduction of new hardware and software technologies and products
offering improved features and  functionality,  the introduction of new products
and services by the Company and its competitors,  the loss or consolidation of a
significant  supplier or customer,  changes in the level of operating  expenses,
inventory  adjustments,  product supply constraints and competitive  conditions,
including  pricing,  interest  rate  fluctuations,  the impact of  acquisitions,
currency fluctuations and general economic conditions.

GROSS PROFIT.  Gross profit increased $1.4 million,  or 64.1%, from $2.3 million
in the  three-month  period  ended  December  31,  1998 to $3.7  million  in the
comparable  period in 1999.  Gross profit excluding  related party  transactions
increased $1.4 million,  or 63.3%,  from $2.3 million in the three-month  period
ended  December 31, 1998 to $3.7  million the  comparable  period in 1999.  This
increase is primarily due to the addition of  Colchester  with $224,000 in gross
profit,  the  addition of American  Micro with  $480,000 in gross  profit and an
increase at  European  Micro UK of $375,000  and an  increase at  Nor'Easter  of
$360,000.

Gross profit  attributable to related party sales was $24,000 in the three-month
period ended December 31, 1999. This represents a gross margin of  approximately
(2.7%). As discussed above, the mark-up on sales to related parties is typically
one percent over cost. Therefore,  the gross profit on sales to third parties is
typically higher than the gross profit earned on sales to related parties.

Gross margins increased by 290 basis points from 7.8% in the three-month  period
ended  December 31, 1998 to 10.7% in the  comparable  period in 1999.  Excluding
related party transactions,  gross margin increased from 8.1% in the three-month
period ended December 31, 1998 to 10.9% in the comparable  period in 1999.  This
change is related  to the  shortage  of memory  products  in the  fiscal  second
quarter resulting in higher selling prices and margin.

Foreign exchange gains and losses,  net, increased from a loss of $52,000 in the
three-month  period  ended  December  31,  1998  to a gain  of  $160,000  in the
comparable  period in 1999.  This  favorable  movement was  attributable  to the
weakening of the U.K. pound sterling  relative to the Euro and the strengthening
of the U.K. pound sterling against the U.S. dollar.



                                       18
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

OPERATING  EXPENSES.  Operating  expenses  as a  percentage  of total  net sales
increased from 7.4% in the three-month period ended December 31, 1998 to 9.7% in
the comparable period in 1999. This increase in operating expenses was primarily
caused by higher  commissions  and bonus payments to employees which are tied to
the Company's gross profit and gross margin.  Also contributing to this increase
were legal  expenses  incurred  by the Company in  connection  with the Big Blue
lawsuit.  Moreover,  American Micro's operating expenses, which were included in
the Company's  consolidated financial statements for period ended December 1999,
had a higher  level of  operating  expenses  relative  to sales than that of the
Company.

INTEREST  EXPENSE.  Interest  expense  increased  by  $249,000  from  $60,000 in
three-month  period ended December 31, 1998 to $309,000 in the comparable period
in 1999. This was attributable to increased borrowings during the period because
of increased average accounts receivable and inventory balances, the purchase of
the office building and the acquisitions of Sunbelt and AMCC.

INCOME  TAXES.  Income  taxes as a  percentage  of income  before  income  taxes
increased from 61% in the  three-month  period ended December 31, 1998 to 82% in
the  comparable  period in 1999.  For the period ended  December  31, 1998,  the
Company had accrued a tax benefit  based on the estimate  that the Company would
have consolidated U.S. taxable income.  However,  for the fiscal year ended June
30, 1999, the Company had a U.S.  consolidated loss. The Company has not accrued
a tax benefit for the U.S.  operating  losses in the  three-month  period  ended
December 31, 1999,  and has  continued to accrue tax expense for European  Micro
UK.  The net  effect of accrued  tax  expenses  was to  increase  the  effective
consolidated income tax rate for the Company.

INTEREST IN JOINT  VENTURE.  The Company's  share of income (loss) from Big Blue
increased  from a loss of $19,000 in the  three-month  period ended December 31,
1998 to a gain of $2,000 in the comparable period in 1999.

SIX-MONTH PERIOD ENDED DECEMBER 31, 1999 AND 1998

TOTAL NET SALES.  Total net sales increased $9.0 million,  or 15.4%,  from $58.3
million in the six-month  period ended December 31, 1998 to $67.3 million in the
comparable  period in 1999.  Excluding net sales to related  parties,  net sales
increased  $9.7 million,  or 17.4%,  from $55.7 million in the six-month  period
ended December 31, 1998 to $65.4 million in the comparable  period in 1999. This
increase was attributable to the addition of Sunbelt's trading sales (accounting
for approximately  $5.5 million),  the additional sales from Sunbelt's Nova line
of  products   (accounting  for   approximately   $650,000),   the  addition  of
Colchester's  sales (accounting for approximately $3.4 million) and the addition
of American  Micro's sales  (accounting for  approximately  $9.4 million).  This
increase was partially  offset by a reduction of $6.6 million in European  Micro
UK's  trading  sales  (excluding  Sunbelt's  trading  sales),  a decrease in the
Premier Dealers Club (accounting for approximately  $400,000) and a reduction of
$2.2 million in Nor'Easter's sales.

Net sales to related  parties  decreased  $675,000,  or 26.1%,  in the six-month
period ended December 31, 1999 from the comparable period in 1998. This decrease
is  primarily  attributable  to the  acquisition  of AMCC on July 1,  1999,  and
therefore,  net sales to American  Micro are excluded  from net sales to related
party.  Until July 1, 1999, the related parties consisted of a group of entities
in  which  an  ownership  interest  was  held  by  either  of  the  two  primary
shareholders of the Company,  John B. Gallagher or Harry D. Shields. See "Note 8
(Related  party   transactions)   to  the   Consolidated   Condensed   Financial
Statements."

There can be no assurance that the Company will be able to maintain the level of
sales or sales  growth  achieved  in this  period  or past  periods  because  of
seasonal  variations in the demand for the products and services  offered by the
Company, the introduction of new hardware and software technologies and products
offering improved features and  functionality,  the introduction of new products
and services by the Company and its competitors,  the loss or consolidation of a
significant  supplier or customer,  changes in the level of operating  expenses,
inventory  adjustments,  product supply constraints and competitive  conditions,
including  pricing,  interest  rate  fluctuations,  the impact of  acquisitions,
currency fluctuations and general economic conditions.

GROSS PROFIT.  Gross profit increased $2.2 million,  or 42.3%, from $5.2 million
in the  six-month  period  ended  December  31,  1998  to  $7.4  million  in the
comparable  period in 1999.  Gross profit excluding  related party  transactions
increased  $2.2 million,  or 41.9%,  from $5.2 million in the  six-month  period
ended  December 31, 1998 to $7.4  million the  comparable  period in 1999.  This
increase is primarily due to the addition of  Colchester  with $224,000 in gross
profit,  the  addition  of American  Micro with  $994,000  in gross  profit,  an


                                       19
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

increase at  European  Micro UK of $818,000  and an  increase at  Nor'Easter  of
$179,000.

Gross profit  attributable  to related  party sales was $51,000 in the six-month
period ended December 31, 1999. This represents a gross margin of  approximately
2.7%. As discussed  above,  the mark-up on sales to related parties is typically
one percent over cost. Therefore,  the gross profit on sales to third parties is
typically higher than the gross profit earned on sales to related parties.

Gross margins  increased by 210 basis points from 8.9% in the  six-month  period
ended  December 31, 1998 to 11.0% in the  comparable  period in 1999.  Excluding
related party  transactions,  gross margin  increased from 9.3% in the six-month
period ended December 31, 1998 to 11.2% in the comparable  period in 1999.  This
change is  related to the  shortage  of memory  products  in the  quarter  ended
December 31, 1999, resulting in higher selling prices and gross margin.

Foreign exchange gains and losses, net, increased from a loss of $184,000 in the
six-month  period ended December 31, 1998 to a loss of $82,000 in the comparable
period in 1999. This favorable movement was attributable to the weakening of the
U.K. pound sterling relative to the Euro and the strengthening of the U.K. pound
sterling against the U.S. dollar.

OPERATING  EXPENSES.  Operating  expenses  as a  percentage  of total  net sales
increased  from 6.6% in the six-month  period ended December 31, 1998 to 9.6% in
the comparable  period in 1999.  This increase in operating  expenses was caused
primarily by higher  commissions  and bonus payments to employees which are tied
to the  Company's  gross  profit and gross  margin.  Also  contributing  to this
increase were legal expenses  incurred by the Company in connection with the Big
Blue lawsuit. Moreover, American Micro's operating expenses, which were included
in the Company's  consolidated  financial  statements  for period ended December
1999 had a higher level of operating expenses relative to sales than that of the
Company.

INTEREST  EXPENSE.  Interest  expense  increased  by $386,000  from  $142,000 in
six-month period ended December 31, 1998 to $528,000 in the comparable period in
1999. This was attributable to increased borrowings during the period because of
increased average accounts  receivable and inventory  balances,  the purchase of
the office building and the acquisitions of Sunbelt and AMCC.

INCOME  TAXES.  Income  taxes as a  percentage  of income  before  income  taxes
increased from 39% in the six-month period ended December 31, 1998 to 57% in the
comparable  period in 1999.  For the period ended December 31, 1998, the Company
had  accrued a tax benefit  based on the  estimate  that the Company  would have
consolidated  U.S. taxable income.  However,  for the fiscal year ended June 30,
1999,  the Company had a U.S.  consolidated  loss. The Company has not accrued a
tax benefit for the U.S. operating losses in the six-month period ended December
31, 1999, and has continued to accrue tax expense for European Micro UK. The net
effect of accrued tax expense was to increase the effective  consolidated income
tax rate for the Company.

INTEREST  IN JOINT  VENTURE.  The  Company's  share of  gain/loss  from Big Blue
increased from a loss of $47,000 in the six-month period ended December 31, 1998
to breaking even in the comparable period in 1999.

SEASONALITY

The Company  typically  experiences  variability  in its total net sales and net
income on a quarterly basis as a result of many factors.  These include, but are
not limited to,  seasonal  variations  in demand for the  products  and services
offered  by  the  Company,   the  introduction  of  new  hardware  and  software
technologies and products  offering  improved  features and  functionality,  the
introduction  of new products  and services by the Company and its  competitors,
the loss or consolidation of a significant supplier or customer,  changes in the
level of operating expenses,  inventory adjustments,  product supply constraints
and competitive conditions,  including pricing, interest rate fluctuations,  the
impact of acquisitions,  currency  fluctuations and general economic conditions.
Historical  operating  results  have  reflected a reduction  in demand in Europe
during the summer months.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  primary cash  requirements  are for operating  expenses,  funding
accounts receivable, the purchase of inventory to support growth, taking greater
advantage  of available  cash  discounts offered   by certain of  the  Company's


                                       20
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

suppliers  for early  payment    and making   acquisitions.    The  Company  has
historically  funded these cash  requirements  through a  combination  of loans,
internally  generated  cash  flow and the net  proceeds  of its  initial  public
offering.

Short-term  working  capital  requirements  of European Micro UK are funded by a
combination  of line of credit  facilities  together  with  accounts  receivable
financing.  In both  cases,  the  amounts  drawn  down  accrue  the same rate of
interest based on a markup over the bank  borrowing rate in the United  Kingdom.
The bank line of credit was 1.2  million  pounds  sterling  ($1.96  million)  at
December 31, 1999. The accounts  receivable  financing  provides for a borrowing
base of 85% of accounts receivable,  with a limit of 6.2 million pounds sterling
($10.1 million on December 31, 1999). The limit on trade  receivables  financing
increased from a maximum of 5.5 million  pounds  sterling at June 30, 1999 ($8.7
million  at June  30,  1999).  European  Micro UK also  had a  revolving  credit
agreement,  secured against inventory. The facility allowed European Micro UK to
borrow up to 3.5 million pounds  sterling ($5.7 million at December 31, 1999) to
assist in the purchase of inventory. To date, no borrowings have been drawn down
on this line. This revolving  credit agreement has expired and European Micro UK
is negotiating to renew.

Short-term  working capital  requirements of the Company are funded by two lines
of credit on October 29, 1999, to finance operations based in the United States.
American  Micro and  Nor'Easter  each  obtained  a line of  credit,  secured  by
accounts  receivable and inventory.  Amounts available under each of the line of
credit agreements are based upon eligible accounts receivable and inventory,  up
to a maximum  borrowing amount of $1.5 million of each agreement.  Each of these
lines of credit  matures on October 28,  2000,  and each bears  interest at 0.5%
over the bank borrowing  rate of 8.5% at December 31, 1999. As partial  security
for these loans,  Messrs.  Gallagher and Shields pledged to the lender a portion
of their  shares  of common  stock of the  Company.  In the  event  the  Company
defaults on one or more of these  loans,  the lender may  foreclose  on all or a
portion of the pledged  securities.  Such an event may cause a change of control
in the Company  because  Messrs.  Gallagher and Shields  together own 71% of the
Company's  outstanding  common  stock.  The lines of credit  agreements  include
certain financial and non-financial  covenants and restrictions.  The agreements
also  contain a  provision  whereby  the lender can  declare a default  based on
subjective criteria.  As of December 31, 1999, the Company was not in compliance
with one of the financial covenants in the agreements.  The Company has obtained
a waiver of these events of  non-compliance  for the December 31, 1999 reporting
period. Given the Company's current and expected operating results, it is likely
that the Company will be out of compliance  with such covenant  requirements  at
the next  quarterly  reporting  date. As a result,  the Company is in discussion
with the  lender  to amend  the  agreements  to adjust  the  financial  covenant
requirements.  While management believes such discussions will result in amended
covenant requirements which the Company will be able to achieve, there can be no
assurances that the Company will be successful in these negotiations.

In addition,  in June 1998, the Company  received $9.3 million in gross proceeds
from its initial public offering of 933,900 shares of common stock.  The Company
incurred  total  expenses in connection  with the offering of $2.0 million.  The
Company has used the proceeds to fund  operations and provide working capital to
European Micro UK, Nor'Easter and Colchester.

Long-term  funding is  supplied  to the  Company  in the form of  capital  lease
agreements and term loans. The lease agreements are secured by vehicles owned by
the Company.  The agreements are usually for 36 months from the date of purchase
and are typically for 80% of the purchase  value of the vehicle.  All but two of
the agreements  are subject to variable rate interest.  As of December 31, 1999,
the borrowings were $95,000, of which $32,000 was due after more than one year.

A term loan was obtained on October 29, 1999, in the amount of  $1,500,000.  The
term loan is to be repaid with quarterly  payments of $125,000 over three years.
The term loan bears  interest at the  one-month  LIBOR plus two and  one-quarter
percentage  points  (2.25%).  One-month LIBOR at December 31, 1999 was 5.8%. The
first  payment on the term loan was made on  November  30,  1999,  bringing  the
balance down to $1,375,000. The term loan is secured by substantially all of the
assets of the Company. As partial security for this loan, Messrs.  Gallagher and
Shields  pledged to the lender a portion of their  shares of common stock of the
Company.  In the event  the  Company  defaults  on this  loan,  the  lender  may
foreclose on all or a portion of the pledged securities. Such an event may cause
a change of  control  in the  Company  because  Messrs.  Gallagher  and  Shields
together  own 71% of the  Company's  outstanding  common  stock.  The term  loan
agreement   includes   certain   financial  and   non-financial   covenants  and
restrictions.  The agreement  also  contains a provision  whereby the lender can
declare a default based on subjective criteria.  The term loan agreement is with
the same  lender as the  Nor'easter  Micro  and  American  Micro  line of credit
facilities  discussed above.  Further,  the term loan credit agreement  contains
similar loan covenant  requirements.  As such, the Company has obtained a waiver
of these events of  non-compliance  for the December 31, 1999 reporting  period.
The total  amount  outstanding  under the term loan  agreement  is  reflected in
current  maturities  of  long-term  debt at December  31,  1999,  because of the
likelihood of covenant violation at the next quarterly  reporting date absent an
amendment to the term loan agreement.

On July 1, 1999,  the Company  acquired  AMCC for a purchase  price of $1,131,00
plus an earn-out.  See "Related Party Transactions." The portion of the purchase
price paid at closing was funded  through the  Company's  working  capital.  The
earn-out  portion of the  purchase  price is expected  to be funded  through the
Company's working capital,  additional borrowings,  or the issuance of shares of
common stock.



                                       21
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

On July 16, 1999,  European  Micro UK purchased the office  building in which it
had previously been leasing space for 1,705,000  pounds sterling  ($2,787,000 at
December 31,  1999).  The  purchase  price was financed in part by a loan in the
amount of 1,312,000 pounds sterling ($2,144,000 at December 31, 1999). This loan
calls for monthly  payments of  principal  and  interest in the amount of 15,588
pounds  sterling  ($25,478 at December 31,  1999) and matures in July 2009.  The
mortgage loan note bears interest at a fixed rate of 7.598%.

Net cash  provided  by  operating  activities  during  the  six-month  period to
December 31, 1999 amounted to $3.8 million.  Significant  factors providing cash
were a decrease in trade receivables, net of effects from acquisitions,  of $5.5
million,  a decrease in  inventory,  net of effects from  acquisitions,  of $1.5
million  and a  decrease  in due  from  related  parties,  net of  effects  from
acquisitions,  of $1.1  million.  The amount of cash  provided by the  Company's
operations was partially offset by a reduction in trade payables, net of effects
from acquisition,  of $3.7 million and a reduction in accrued expenses and other
current liabilities, net of the effects from acquisitions, of $1.2 million.

Cash used in  investing  activities  amounted to $4.2  million.  This  primarily
consisted of expenditures on fixed assets of $3.0 million,  largely the purchase
of European  Micro UK's office  building  and the  acquisition  of AMCC for $1.2
million.

Cash used by  financing  activities  amounted to $1.1  million.  This  primarily
consisted  of $4.2  million  used to pay down  short-term  borrowings,  net. The
Company  also used  $300,000 to pay down long term  borrowings  assumed from the
acquisition of AMCC, $125,000 to pay down the term loan and $100,000 to pay down
the mortgage loan on the building.  This was offset by $2.1 million  provided by
proceeds from the mortgage loan secured by European  Micro UK's office  building
and $1.5 million provided by a term loan.

Overall,  the Company experienced a net decrease in cash of $1.3 million for the
six-month period ended December 31, 1999.

ASSET MANAGEMENT

INVENTORY.  European  Micro's  goal is to achieve  high  inventory  turns and to
maintain a low level of  inventory  on hand and  thereby  reduce  the  Company's
working capital requirements.  The Company's strategy to achieve this goal is to
both  effectively  manage its  inventory  and  achieve  high  order fill  rates.
Inventory levels may vary from period to period, due to many factors,  including
increases  or  decreases  in sales  levels,  the  Company's  practice  of making
large-volume  purchases  when it deems  such  purchases  to be  attractive,  new
products and changes in the Company's product mix.

ACCOUNTS  RECEIVABLE.  The Company sells its products and services to a customer
base of more than 670 value-added resellers,  corporate resellers, retailers and
direct  marketers.  The Company offers credit terms to qualifying  customers and
also  sells on a pre-pay  and  cash-on-delivery  basis.  With  respect to credit
sales,  the  Company  attempts to control  its bad debt  exposure by  monitoring
customers'  creditworthiness  and, where practicable,  through  participation in
credit  associations that provide customer credit rating information for certain
accounts.  Also,  substantially all of European Micro UK's accounts  receivables
are insured.  Nor'Easter,  Colchester and American Micro generally do not insure
their accounts receivable.

CURRENCY RISK MANAGEMENT

REPORTING CURRENCY. European Micro Holding's,  Nor'Easter's and American Micro's
reporting  and  functional  currency,  as  defined  by  Statement  of  Financial
Accounting  Standards No. 52, is the U.S.  dollar.  The  functional  currency of
European  Micro UK is the U.K.  pound  sterling and  Colchester is the Singapore
dollar.  European Micro UK and Colchester  translate into the reporting currency
by measuring  assets and  liabilities  using the exchange rates in effect at the
balance sheet date and results of operations  using the average  exchange  rates
prevailing during the period.

HEDGING AND CURRENCY MANAGEMENT  ACTIVITIES.  The Company occasionally hedges to
guard against currency fluctuations between the U.K. pound sterling and the U.S.
dollar.  Because  the  functional  currency  of  the  Company's  main  operating
subsidiary, European Micro UK, is the U.K. pound sterling, currency fluctuations
of the pound sterling  relative to the U.S.  dollar may have a material  adverse
affect on the Company's business, financial condition and results of operations.
The  Company  may  engage in  hedging  activities  in the  future,  although  no
assurances can be given that it will engage in such activities and if it does so
that such activities will be successful.

Generally,  the Company's policy is not to hedge specifically against individual
daily transactions.  Instead, the exposure to a currency is determined every two
to three days.  This is done by comparing the bank account  balances and account


                                       22
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

receivables  with  accounts  payable,  all in the  same  currency  to  create  a
"natural" hedge.  Thereafter,  to the extent that a bank balance and the account
receivable are not totally offset by the accounts payable, there would be a need
to cover the residual  credit  balance  with a forward  currency  contract.  The
Company tends to concentrate its currency  management into six currencies:  U.K.
pound sterling,  U.S. dollar, Dutch guilder,  Canadian dollar,  Singapore dollar
and German  Mark.  It  normally  deems the  exposure in other  currencies  to be
minimal.  However,  when the  Company  buys  products in other  currencies,  the
Company may, in conjunction with current market advice,  book a forward contract
to cover current and some anticipated future purchases.

ECONOMIC AND MONETARY  UNION.  On January 1, 1999,  eleven of the fifteen member
countries of the European Union established fixed conversion rates between their
existing  sovereign  currencies  and a new  currency  called the  "Euro."  These
countries adopted the Euro as their common legal currency on that date. The Euro
is trading on currency  exchanges  and is available  for non-cash  transactions.
Until  January 1, 2002,  the  existing  sovereign  currencies  will remain legal
tender in these countries.  On January 1, 2002, the Euro is scheduled to replace
the sovereign  legal  currencies of these  countries.  Through the operations of
European Micro UK, the Company has  significant  operations  within the European
Union,  including  many of the  countries  which  adopted the Euro.  The Company
continues  to  evaluate  the  impact  that the Euro is having on its  continuing
business operations and no assurances can be given that the Euro will not have a
material  adverse  affect on the  Company's  business,  financial  condition and
results of operations.  However,  the Company does not expect the Euro to have a
material  affect on its competitive  position as a result of price  transparency
within  the  European  Union  because  the  Company  does not  rely on  currency
imbalances in purchasing inventory from within the European Union. On an ongoing
basis,  the Company cannot  accurately  predict the impact the Euro will have on
currency  exchange  rates or the  Company's  currency  exchange  rate risk.  The
Internal  Revenue Service  ("IRS") has requested  comments on various tax issues
raised by the Euro conversion. The IRS is expected to publish guidelines on this
issue soon and,  until such time,  the Company  cannot  predict  whether the IRS
guidelines will have any tax consequences on the Company.

RELATED PARTY TRANSACTIONS

In order to achieve attractive prices from suppliers, the Company must commit to
purchasing  large  quantities of product.  To accomplish this, the Company polls
all the  Subsidiaries  and Technology  Express for informal  commitments to help
distribute that product.  Thereafter,  the purchasing  entity,  would obtain the
product, examine the product for damage and authenticity, and then supervise the
shipping to the other Subsidiaries and the related party. In such capacity,  the
purchasing  entity acts as a "purchasing  agent" for the other  Subsidiaries and
the related party.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company  utilizes  derivative  financial  instruments in the form of forward
exchange  contracts for the purpose of economic  hedges of anticipated  sale and
purchase transactions.  In addition, the Company enters into economic hedges for
the purpose of hedging foreign currency market  exposures of underlying  assets,
liabilities and other  obligations  which exist as part of its ongoing  business
operations. See "Currency Risk Management."

Where the foreign  currency  exposure is covered by a forward  foreign  exchange
contract, the asset, liability or other obligation is recorded at the contracted
rate each  month end and the  resultant  mark-to-market  gains  and  losses  are
recognized as cost of sales in the current period, generally consistent with the
period in which the gain or loss of the  underlying  transaction  is recognized.
Cash  flows  associated  with  derivative  transactions  are  classified  in the
statement of cash flows in a manner  consistent with those of the exposure being
hedged.

EXCHANGE RATE SENSITIVITY

On  December  31,  1999,  the  Company  did not have any open  forward  exchange
contracts. Gains and losses in respect of the foreign exchange transactions were
as follows (in thousands):

                              THREE MONTHS ENDED           SIX MONTHS ENDED
                                 DECEMBER 31,                DECEMBER 31,
                               1999         1998            1999        1998
                          ------------------------------------------------------
Gain (Loss) on foreign
exchange transactions          $160         $(52)         $(82)        $(184)
                               ====         ====          ====         =====


                                       23
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.

PART II

ITEM 1.     LEGAL PROCEEDINGS.

European  Micro UK and the  Company  have each  demanded  payment  from Big Blue
Europe for loans made in the amounts of $150,000 and $350,000, respectively. Big
Blue Europe is currently under a court order prohibiting payment of these loans.
The 50% shareholders of Big Blue Europe, its principals, Jeff and Marie Alnwick,
and Big Blue  Europe,  derivatively,  have filed a lawsuit  against the Company,
European Micro UK, John B. Gallagher and Harry D. Shields alleging fraud, aiding
and abetting fraud, misappropriation of trade secrets, breach of fiduciary duty,
aiding and abetting  breach of fiduciary  duty,  breach of contract and tortious
interference  with contract.  The complaint  states that the plaintiffs seek $10
million or more in  damages.  The suit was filed in the United  States  District
Court of the Eastern  District of New York, Case # 99 CV 7380 (E.D.N.Y.)  (ADS).
The factual  allegations  underlying  the lawsuit stem from European  Micro UK's
joint venture  interest in Big Blue Europe.  The Company has a pending motion to
dismiss the  complaint and has requested the New York court to refer the case to
the courts of Holland  upon the  doctrine of FORUM NON  CONVENIENS.  The Company
believes that the  allegations  specified in the complaint are without merit and
intends  to  vigorously  defend  the  suit.  As a  consequence  of  some  of the
allegations  in such  complaint,  Messrs.  Gallagher  and Shields  have filed an
action in the United Kingdom for defamation against the Alnwicks and others.

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS.

(a), (b), (c) and (d).  None.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES.

None.

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

(a) The Company  held its 1999 Annual  Meeting of  Stockholders  on November 15,
1999.

(b) At the annual meeting,  the  stockholders  re-elected the Class II directors
named  in the  following  table  by the  vote  set  forth  in such  table  for a
three-year  term to expire in 2002.  The names of the  directors  whose terms of
office as directors  continued after the meeting were:  John B. Gallagher,  Jr.,
Harry D. Shields, Bernadette Spofforth and Laurence Gilbert.

       NAME:                   FOR:         AGAINST:      WITHHELD:
       -----                   ----         --------      ---------

       Barrett Sutton          4,876,571    0             11,100
       Kyle Saxon              4,876,571    0             11,100


(c) The only matter  voted upon at the Annual  Meeting of  Stockholders  was the
election of the  directors  mentioned in the above  table.  Such table also sets
forth the number of votes for, against or withheld for such directors.

(d)   None.

The foregoing  matters are described in detail in the Company's  Proxy Statement
dated October 29, 1999 for the 1999 Annual Meeting of Stockholders.

ITEM 5.     OTHER INFORMATION.

None.



                                       24
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K.

(a)   Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NO.            DESCRIPTION                                         LOCATION
---            -----------                                         --------
<S>            <C>                                                 <C>

     2.01      Agreement for the  Acquisition of Sunbelt (UK)      Incorporated  by reference to Exhibit 2.01
               Limited by European  Micro Plc dated October 26,    to  Registrant's  Form 10-Q for the quarter
               1998                                                ended September 30, 1998.

     2.02      Merger Agreement re: AMCC dated June 29, 1999       Incorporated by reference to Exhibit 2.02
                                                                   to Registrant's From 10-K for the year
                                                                   ended June 30, 1999.

     2.03      Plan of 1999 Merger re: AMCC dated June 29, 1999    Incorporated by reference to Exhibit 2.03
                                                                   to Registrant's From 10-K for the year
                                                                   ended June 30, 1999.

     2.04      Articles of Merger re: AMCC dated June 29, 1999     Incorporated by reference to Exhibit 2.04
                                                                   to Registrant's Form 10-K for the year
                                                                   ended June 30, 1999.

     3.01      Articles of Incorporation                           Incorporated by reference to Exhibit No.
                                                                   3.01 to Registrant's Registration
                                                                   Statement (the "Registration Statement")
                                                                   on Form S-1 (Registration Number
                                                                   333-44393).

     3.02      Certificate of Amendment of Articles of             Incorporated by reference to Exhibit 3.02
               Incorporation                                       to Registrant's Form 10-Q for the quarter
                                                                   ended March 31, 1998.

     3.03      Bylaws                                              Incorporated by reference to Exhibit No.
                                                                   3.02 to the Registration Statement.

     4.01      Form of Stock Certificate                           Incorporated by reference to Exhibit No.
                                                                   4.01 to the Registration Statement.

     4.02      1998 Stock Incentive Plan                           Incorporated by reference to Exhibit No.
                                                                   4.02 to the Registration Statement.

     4.03      1998 Stock Employee Stock Purchase Plan             Incorporated by reference to Exhibit No.
                                                                   4.03 to the Registration Statement.

     4.04      Form of Lock-up Agreement                           Incorporated by reference to Exhibit No.
                                                                   4.04 to the Registration Statement.

    10.01      Form of Advice of Borrowing Terms with National     Incorporated by reference to Exhibit No.
               Westminster Bank Plc                                10.01 to the Registration Statement.

    10.02      Invoice Discounting Agreement with Lombard NatWest  Incorporated by reference to Exhibit No.
               Discounting Limited, dated November 21, 1996        10.02 to the Registration Statement.

    10.03      Commercial Credit Insurance, policy number 60322,   Incorporated  by reference to Exhibit No.
               with  Hermes  Kreditversicherungs-AG  dated         10.03  to  the Registration Statement.
               August  1, 1995

    10.04      Commercial Credit Insurance, policy number 82692,   Incorporated  by reference to
               with Hermes Kreditversicherungs-AG                  Exhibit No. 10.04 to the Registration Statement.
               dated  August  1, 1995



                                       25
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.
EXHIBIT
NO.            DESCRIPTION                                         LOCATION
---            -----------                                         --------

    10.05      Consignment Agreement with European Micro Computer  Incorporated by reference to Exhibit No.
               B.V., dated January 1996                            10.05 to the Registration Statement.

    10.06      Shareholders' Cross-Purchase Agreement by and       Incorporated by reference to Exhibit No.
               between Jeffrey Gerard Alnwick, Marie Alnwick,      10.07 to the Registration Statement.
               European Micro Plc and Big Blue Europe, B.V. dated
               August 21, 1997

    10.07      Trusteed Shareholders Cross-Purchase Agreement by   Incorporated by reference to Exhibit No.
               and between John B. Gallagher, Harry D. Shields,    10.08 to the Registration Statement.
               Thomas H. Minkoff, Trustee of the Gallagher Family
               Trust, Robert H. True and Stuart S. Southard,
               Trustees of the Henry Daniel Shields 1997
               Irrevocable Educational Trust, European Micro
               Holdings, Inc. and SunTrust Bank, Nashville, N.A.,
               as Trustee dated January 31, 1998

    10.08      Executive Employment Agreement between John B.      Incorporated by reference to Exhibit No.
               Gallagher and European Micro Holdings, Inc.         10.09 to the Registration Statement.
               effective as of January 1, 1998

    10.09      Executive Employment Agreement between Harry D.     Incorporated by reference to Exhibit No.
               Shields and European Micro Holdings, Inc.           10.10 to the Registration Statement.
               effective as of January 1, 1998

    10.10      Contract of Employment Agreement between Laurence   Incorporated  by  reference to
               Gilbert and European Micro UK dated                 Exhibit No. 10.11 to the Registration Statement.
               March  14,  1998

    10.11      Contract of Employment  between  Bernadette         Incorporated by reference to Exhibit No.
               Spofforth and European Micro UK dated April 30, 10.12 to the Registration Statement.
               1996

    10.12      Subscription Agreement by and between John B.       Incorporated by reference to Exhibit No.
               Gallagher, Harry D. Shields, Thomas H. Minkoff,     10.13 to the Registration Statement.
               Trustee of the Gallagher Family Trust, Robert H.
               True and Stuart S. Southard, Trustees of the Henry
               Daniel Shields 1997 Irrevocable Educational Trust,
               European Micro Holdings, Inc. effective as of
               January 31, 1998

    10.13      Administrative Services Contract by and between     Incorporated by reference to Exhibit No.
               European Micro Holdings, Inc. and European Micro    10.14 to the Registration Statement.
               Plc effective as of January 1, 1998

    10.14      Escrow Agreement between European Micro Holdings,   Incorporated by reference to Exhibit No.
               Inc., Tarpon Scurry Investments, Inc. and The       10.15 to the Registration Statement.
               Chase Manhattan dated as of March 24, 1998

    10.15      Form of Indemnification Agreements with officers    Incorporated by reference to Exhibit No.
               and directors                                       10.16 to the Registration Statement.

    10.16      Form of Transfer Agent Agreement with Chase Mellon  Incorporated by reference to Exhibit No.
               Shareholder Services, L.L.C.                        10.17 to the Registration Statement.



                                       26
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.
EXHIBIT
NO.            DESCRIPTION                                         LOCATION
---            -----------                                         --------

    10.17      Form of Credit Agreement by and between European    Incorporated by reference to Exhibit No.
               Micro UK and National Westminster Bank Plc          10.17 to the Annual Report on Form 10-K
                                                                   for the  fiscal  year  ended June
                                                                   30,    1998    filed   with   the
                                                                   Commission on September 28, 1998.

    10.18      Consulting Contract dated September 10, 1998 by     Incorporated by reference to Exhibit 10.19
               and between European Micro Holdings, Inc. and The   to Registrant's Form 10-Q for the quarter
               Equity Group                                        ended September 30, 1998.

    10.19      Service  Agreement dated October 28, 1998 by and    Incorporated by reference to Exhibit 10.20
               between European Micro Holdings, Inc. and Michael   to Registrant's Form 10-Q for the quarter
               Gesner                                              ended September 30, 1998.

    10.20      Service  Agreement dated October 28, 1998 by and    Incorporated by reference to Exhibit 10.21
               between  European Micro Plc and Gerard O'Rourke to  Registrant's  Form 10-Q for the quarter
                                                                   ended September 30, 1998.

    10.21      Employment Agreement dated July 1, 1999 between     Incorporated by reference to Exhibit 10.21
               John B. Gallagher and American Micro                to Registrant's Form 10-K for the year
                                                                   ended June 30, 1999.

    10.22      Loan and Security Agreement dated October 29, 1999  Incorporated by reference to Exhibit 10.22
               among American Micro, the Company, Nor'Easter and   to Registrant's Form 10-Q for the quarter
               SouthTrust Bank, N.A. re: Line of Credit to         ended September 30, 1999.
               American Micro

    10.23      Loan Agreement dated October 29, 1999 among the     Incorporated by reference to Exhibit 10.23
               Company, American Micro, Nor'Easter and SouthTrust  to Registrant's  Form 10-Q for the quarter
               Bank, N.A. re: Term Loan to the Company             ended September 30, 1999.

    10.24      Loan Agreement dated October 29, 1999 among         Incorporated by reference to Exhibit 10.24
               Nor'Easter, the Company, American Micro and         to Registrant's Form 10-Q for the quarter
               SouthTrust Bank, N.A. re: Line of Credit to         ended September 30, 1999.
               Nor'Easter

    11.01      Statement re: Computation of Earnings               Provided herewith.

    15.01      Letter re: Unaudited Financial Information          Provided herewith.

    18.01      Letter re Change in Accounting Principles           Not applicable.

    19.01      Report Furnished to Security Holders                Not applicable.

    22.01      Published Report Regarding Matters Submitted to     Not applicable.
               Vote of Security Holders

    23.01      Consents of experts and counsel                     Not applicable.

    24.01      Power of Attorney                                   Not applicable.

    27.01      Financial Data Schedule                             Provided herewith.
</TABLE>

(b) Reports on Form 8-K.

None.

                                       27
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.


                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

Dated:      February 14, 2000              EUROPEAN MICRO HOLDINGS, INC.

                                           By:   /s/ John B. Gallagher
                                                 --------------------------
                                                 John B. Gallagher, Co-President





                                       28