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

                                    FORM 10-Q

(MARK ONE)


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

                For the quarterly period ended December 31, 2000

    |_|  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)
<TABLE>
<CAPTION>

NEVADA                                                  65-0803752
------                                                  ----------
<S>                                                     <C>

(State or Other Jurisdiction of Incorporation           (I.R.S. Employer Identification No.)
or Organization)
6073 N.W. 167TH STREET, UNIT C-25, MIAMI, FLORIDA       33015
-------------------------------------------------       -----
(Address of Principal Executive Offices)                (Zip Code)
</TABLE>

                                 (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  4,996,674  shares  of Common  Stock,  par  value  $0.01 per  share,
outstanding as of January 31, 2001.

<PAGE>

PART I

FINANCIAL INFORMATION
---------------------

ITEM 1.  FINANCIAL STATEMENTS.
         --------------------

              INDEX TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Consolidated Condensed Balance Sheets as of December 31, 2000 and
June 30, 2000..................................................................3

Consolidated Condensed Statements of Operations for the three and six
months ended December 31, 2000 and 1999........................................4

Consolidated Statement of Changes in Shareholders' Equity
for the six months ended December 31, 2000.....................................5

Consolidated Condensed Statements of Cash Flows for the six months
ended December 31, 2000 and 1999...............................................6

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

                                       2
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.
<TABLE>
<CAPTION>
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                        (In thousands, except share data)
                                   (Unaudited)

                                                               DECEMBER 31, 2000        JUNE 30, 2000
                                                          -------------------------------------------
                     ASSETS
<S>                                                                     <C>                  <C>
CURRENT ASSETS:
   Cash                                                                     $575               $1,222
   Restricted cash                                                           359                  364
   Trade receivables, net                                                  9,956               13,160
   Due from related parties                                                   49                   --
   Inventories, net                                                        7,564                6,194
   Prepaid expenses                                                          492                  322
   Income taxes receivable                                                   847                  909
   Other current assets                                                      482                  765
                                                                      ----------           ----------
      TOTAL CURRENT ASSETS                                                20,324               22,936
   Property and equipment, net                                             3,718                3,927
   Goodwill, net                                                           4,360                2,808
   Investments in and advances to unconsolidated subsidiaries                 85                  252
   Other assets                                                              348                  290
                                                                      ----------           ----------
      TOTAL ASSETS                                                       $28,835              $30,213
                                                                      ----------           ----------



      LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Short-term borrowings                                                 $11,167              $11,903
   Current portion of long-term borrowings                                   702                  678
   Trade payables                                                            877                2,256
   Accrued expenses and other current liabilities                          3,040                1,882
   Due to related parties                                                      -                   11
                                                                      ----------           ----------
      TOTAL CURRENT LIABILITIES                                           15,786               16,730
   Long-term borrowings                                                    2,104                2,373
                                                                      ----------                -----
      TOTAL LIABILITIES                                                  $17,890              $19,103
                                                                      ----------           ----------
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, Shares issued and
      outstanding 4,996,674 at December 31,                                   50                   49
      2000 and 4,933,900 at June 30, 2000
   Additional paid-in capital                                              9,325                9,191
   Accumulated other comprehensive loss                                    (628)                (550)
   Retained earnings                                                       2,198                2,420
                                                                      ----------           ----------
      TOTAL SHAREHOLDERS' EQUITY                                          10,945               11,110
                                                                      ----------           ----------

   COMMITMENTS, CONTINGENCIES AND SUBSEQUENT                                   -                    -
      EVENTS

   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                            $28,835              $30,213
                                                                     ===========          ===========
</TABLE>

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)                       (UNAUDITED)
                                THREE MONTHS ENDED DECEMBER 31,   SIX MONTHS ENDED DECEMBER 31,
                            -------------------------------------------------------------------
                                       2000          1999             2000            1999
                                       ----          ----             ----            ----
<S>                                <C>           C>              <C>             <C>
SALES:

   Net sales                        $26,657       $33,651          $55,671         $65,396
   Net sales to related parties          93           895              147           1,914

                                   --------      --------         --------        --------
      Total net sales                26,750        34,546           55,818          67,310

COST OF GOODS SOLD:

   Cost of goods sold              (23,900)      (29,969)         (49,758)        (58,045)
   Cost of goods sold to related       (89)         (872)            (143)         (1,863)
   parties

                                   --------      --------         --------        --------
      Total cost of goods sold     (23,989)      (30,841)         (49,901)        (59,908)
                                   --------      --------         --------        --------

GROSS PROFIT                          2,761         3,705            5,917           7,402

OPERATING EXPENSES:

      Selling, general and          (2,596)       (3,357)          (5,479)         (6,423)
administrative expenses
                                   --------      --------         --------        --------
INCOME FROM OPERATIONS                  165           348              438             979

      Interest income                     2            20               17              59
      Interest expense                (262)         (309)            (573)           (528)
      Equity in net income
of unconsolidated subsidiaries           --             2               --              --

                                   --------      --------         --------        --------
INCOME (LOSS) BEFORE INCOME TAXES      (95)            61            (118)             510

   Income tax expense                  (59)          (50)            (104)           (292)

                                   --------      --------         --------        --------
NET INCOME (LOSS)                    $(154)           $11           $(222)            $218
                                   ========      ========         ========        ========
      Net income (loss) per share   $(0.03)         $0.00          $(0.04)           $0.04
- basic
                                   ========      ========         ========        ========
      Net income (loss) per share   $(0.03)         $0.00          $(0.04)           $0.04
- diluted
                                   ========      ========         ========        ========
</TABLE>

See accompanying notes to consolidated condensed financial statements.

                                                    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, 2000        4,933,900    $49     $9,191               $(550)         $2,420       $11,110

Comprehensive Income (loss):
   Net loss                            -       -          -                   -           (222)          (222)
   Other comprehensive
   income, foreign currency
   translation adjustment              -       -          -                 (78)             -            (78)
                                                               ---------------------------------------------------
   Total comprehensive loss            -       -          -                 (78)          (222)          (300)
Issuance of common stock, net of
   $184 in offering costs           62,774       1       16                                                17
Compensation charge in
   relation to share options
   issued to non-employees             -                118                   -              -             118
                         -----------------------------------------------------------------------------------------
Balance at December 31,        4,996,674     $50     $9,325               $(628)         $2,198        $10,945
                         =========================================================================================
</TABLE>


See accompanying notes to consolidated condensed financial statements.

                                                         5
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                         (UNAUDITED)
                                                                SIX MONTHS ENDED DECEMBER 31,

                                                           ---------------------------------------
                                                                     2000              1999
                                                                     ----              ----
<S>                                                                <C>                <C>
OPERATING ACTIVITIES:
Net income (loss)                                                  $(222)              $218
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED
BY (USED IN) OPERATING ACTIVITIES
   Depreciation and amortization                                      333               287
   Amortization of expense related to contingent earn-out              --                47
   provisions
   Deferred income taxes                                               40              (15)
   Provision for note receivable impairment                           252                --
   Compensation charge for non-employee stock options                 118                28
CHANGES IN ASSETS AND LIABILITIES
   Trade receivables                                                3,204             5,512
   Due from related parties                                          (49)             1,082
   Inventories                                                    (1,370)             1,512
   Prepaid expenses and other current assets                            9               225
   Income tax receivable                                               62                --
   Trade payables                                                 (1,379)           (3,705)
   Due to related parties                                            (11)             (622)
   Income taxes payable                                                --               369
   Accrued expenses and other current liabilities                   (489)           (1,185)
                                                                ---------         ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                             498             3,753
                                                                ---------         ---------

INVESTING ACTIVITIES:

   Purchase of fixed assets                                         (279)           (2,993)
   Sale of fixed assets                                               190                27
   Payment for acquisition, net of cash acquired                       --           (1,220)
   Investments                                                       (85)                --
                                                                ---------         ---------
NET CASH USED IN INVESTING ACTIVITIES                               (174)           (4,186)
                                                                ---------         ---------
FINANCING ACTIVITIES:

   Short-term borrowings, net                                       (736)           (4,175)
   Proceeds (repayments) of long-term borrowings                    (321)             3,118
   Issuance of common stock, net                                       17                --
   Repayment of capital leases, net                                   102              (33)
                                                                ---------         ---------
NET CASH USED IN FINANCING ACTIVITIES                               (938)           (1,090)
                                                                ---------         ---------
   Exchange rate changes                                             (33)               174
                                                                ---------         ---------
NET DECREASE IN CASH:                                               (647)           (1,349)
   Cash at beginning of period                                      1,222             3,168
                                                                ---------         ---------
CASH AT END OF PERIOD                                                $575            $1,819
                                                                =========         =========

                                               6
<PAGE>

Non-cash investing and financing activities:
Fair value of assets acquired                                        $ --            $3,314
Goodwill                                                            1,647             1,408
Fair value of liabilities assumed                                      --           (2,817)
Notes issued for consideration                                    (1,647)             (604)
                                                                ---------         ---------

Cash paid for acquisitions                                             --             1,301
Less cash acquired                                                     --              (81)
                                                                ---------         ---------
Net cash paid for acquisitions                                       $ --            $1,220
                                                                =========         =========
Interest paid                                                        $573              $517
                                                                =========         =========
Taxes paid                                                            $18               $29
                                                                =========         =========
</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  2000 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     LIQUIDITY

The Company  suffered  operating losses during fiscal year 2000 and in the first
and second quarters of 2001.  Ongoing legal costs associated with the litigation
related to Big Blue Europe,  the costs associated with the Company's  electronic
commerce  strategy,  increases in general overhead costs, and increased interest
expense due primarily to increased  borrowings,  coupled with  decreasing  sales
volumes and gross profit margins,  have negatively  impacted  operating results.
These factors may continue to impact the Company's operations.

The  Company  was  not in  compliance  with  certain  loan  agreement  financial
covenants  during fiscal year 2000.  While the Company has obtained waivers from
these  covenant  violations  existing at June 30, 2000,  in most  instances  the
waivers only address the  covenant-reporting  period ending thereon.  Compliance
with  these  financial  covenants  during  fiscal  2001  will  require  improved
operating  results  compared to fiscal 2000.  Management  has initiated  certain
actions to  increase  the  likelihood  of  attaining  these  improved  operating
results.  Such actions include,  among other things,  (i) modifying the terms of
certain financial  covenants (ii) entering into the Equity Credit Line (See Note
7  to  the  Consolidated  Condensed  Financial  Statements),  (iii)  temporarily
suspending activities related to its electronic commerce strategy until specific
funding  can be obtained  (see Note 8 to the  Consolidated  Condensed  Financial
Statements),   (iv)  obtaining   extensions  and  subordination  of  payment  of
contingent  earn-out  amounts  relating to calendar year 2000 under the American
Micro purchase  agreement,  (v) adjusting staffing levels, and (vi) implementing
steps to  attempt  to  increase  sales  volume and lower  inventory  levels.  No
assurances can be given that  management's  initiatives will be successful,  and
that loan agreement defaults will not occur in the future.

Another factor that could negatively impact the Company's liquidity is the terms
of the borrowing  arrangements of European Micro UK. As disclosed in Notes 4 and
5 to the Consolidated Condensed Financial Statements,  certain of European Micro
UK's  borrowing  capacity  is subject to  termination  by the  borrower  at such
lender's sole  discretion.  Further,  the American Micro and Nor-Easter lines of
credit and the  European  Micro  Holdings,  Inc.  term loan  contain  subjective
acceleration clauses. These factors increase the liquidity risk to the Company.

                                       8
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


3     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) was comprised of a guaranteed portion and two
contingent  earn-out  payments.  The unpaid balance of the  guaranteed  purchase
price of 152,656  pounds  sterling  ($228,000  at exchange  rate on December 31,
2000), and the portion of the second contingent  earn-out payment related to the
volume  purchases  from the  Far-East of 129,758  pounds  sterling  ($194,000 at
exchange  rate on  December  31,  2000) was paid in cash the  amount of  112,966
pounds  sterling  ($169,000 at exchange rate on December 31, 2000) to the former
40% Sunbelt on November 20, 2000 and was paid with the issuance of 37,754 shares
of the Company's common stock to the former 60% Sunbelt  shareholder on December
12, 2000.  At December 31, 2000,  all  contingent  consideration  related to the
Sunbelt  acquisition  has been paid.  Goodwill  from this  transaction  is being
amortized on a straight-line basis over 20 years.

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 was 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 former  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  $1,315,000 exceeded the
estimated fair market value of net assets  acquired by  approximately  $817,000,
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   consolidated  condensed  financial
statements.  The contingent earn-out payment relating to two times the after tax
earnings for calendar year 1999 of approximately $600,000 was paid in March 2000
and is reflected in goodwill,  net. The contingent  earn-out payment relating to
two times  the  after  tax  earnings  for  calendar  year 2000 of  approximately
$1,647,000 is reflected in goodwill,  net and accrued expenses and other current
liabilities in the accompanying consolidated condensed financial statements. The
second earn-out  payment will be due in monthly  principal  payments of $50,000,
plus  interest  at 8%  commencing  on April 1, 2001 ,  subject  to the rights of
SouthTrust  Bank. This loan will be due and payable thirty days after no amounts
are due to SouthTrust  Bank. This amount is secured by a pledge of the shares of
common  stock of  American  Micro held by the  Company.  This  security  hs been
subordinated to SouthTrust Bank.

The  results of  operations  of the above  entities  have been  included  in the
accompanying  consolidated  condensed  financial  statements  from the  dates of
acquisition.

                                       9
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


4     SHORT-TERM BORROWINGS

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

                                         DECEMBER 31, 2000     JUNE 30, 2000
                                         -----------------     -------------

Bank line of credit
  European Micro UK Working Capital facility (a)    $3,217            $1,959
  Nor'Easter Micro facility (b)                      1,150               975
  American Micro facility (b)                          750               992
                                                   -------           -------
Total bank lines of credit                           5,117             3,926

Receivable financing (c)                             5,381             7,303
Other short-term borrowings (d)                        669               674
                                                   -------           -------
Total short-term borrowings                        $11,167           $11,903


(a)   European  Micro  UK has a bank  line of  credit  (the  "EUROPEAN  MICRO UK
      WORKING CAPITAL FACILITY") which is collateralized by a mortgage debenture
      on  all  the  assets  of  European  Micro  UK and  is  subordinate  to the
      receivable  financing  and the  capital  leases.  The  facility,  which is
      subject to review in July each year,  has been extended to September  2001
      and is due on demand.  Maximum  borrowing  capacity under this facility is
      2.0 million pounds sterling ($3.0 million at exchange rate on December 31,
      2000).  Interest is charged at 1.25% over the bank-borrowing rate of 6% at
      December 31, 2000 and 6% at June 30, 2000.

      Until  December 31, 2000,  European  Micro UK also had a revolving  credit
      agreement  (the  "EUROPEAN  MICRO UK INVENTORY  FACILITY")  collateralized
      against general  corporate assets.  The facility was terminated  effective
      December 31, 2000.

(b)   The Company  also  obtained  two lines of credit on October 28,  1999,  to
      finance  operations  based  in  the  United  States.  American  Micro  and
      Nor'Easter  each  obtained  a line of  credit,  collaterized  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  for each
      agreement.  Each of these  lines of credit  was to mature on  October  28,
      2000. 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.

      On  October  5,  2000,  the  Company  received  a waiver  of the  covenant
      violations  existing at the June 30, 2000  reporting date for the American
      Micro and Nor'Easter lines of credit.  The Company and the bank terminated
      the existing lines of credit and entered into a new borrowing  arrangement
      whereby each of American Micro and Nor'Easter  have a working capital line
      of credit  equal to the lesser of (i) $1.5  million or (ii) the sum of 85%
      of  eligible  accounts  receivable,  plus the  lesser  of 50% of  eligible
      inventory or $750,000. Interest will be paid monthly at a floating rate of
      0.5% over the bank's base rate of 9.5% at December 31,  2000.  The term of
      the new  arrangements  is for one year  from  the  closing  date.  The new
      facilities also require the companies to maintain  depository  accounts at
      the  bank,  whose  daily  receipts  will be  applied  against  outstanding
      borrowings  under the  lines of  credit.  The new  facilities  also  place
      certain  restrictions  on the  companies'  ability to pay dividends and to
      make  capital  expenditures,  among  other  things,  and  also  include  a
      provision  whereby  the lender can declare a default  based on  subjective
      criteria.  Collateral  under the new credit line facilities  consists of a
      first priority lien on all assets

                                       10
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

      of American Micro and Nor'Easter. Messrs. Gallagher and Shields guaranteed
      the obligations under these arrangements. Mr. Shields has pledged personal
      assets as additional collateral and has further agreed to maintain certain
      personal  financial  statement  liquidity  levels.  These  borrowings  are
      cross-collateralized  and  cross-defaulted  with borrowings under the $1.5
      million term loan to European Micro Holdings,  Inc. discussed in Note 5 to
      the Consolidated Condensed Financial Statements.

(c)   Receivable  financing  represents  borrowings  secured  by  various  trade
      receivables  of European  Micro UK totaling  $6.3  million at December 31,
      2000 and $8.6 million at June 30, 2000. The accounts receivable  financing
      provides for a borrowing base of 85% of accounts receivable,  with a limit
      of 6.2 million pounds  sterling ($9.3 million at exchange rate on December
      31,  2000).  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 6% at December
      31, 2000, and 6% at June 30, 2000.

(d)   Other short-term  borrowings  represent various unsecured notes payable of
      American  Micro.  The maturity  dates of the notes range from on demand to
      June 30, 2001. The interest rates range from 11% to 12%.

5     LONG-TERM BORROWINGS

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

                                             DECEMBER 31, 2000     JUNE 30, 2000
                                             -----------------     -------------

Mortgage loan note (a)                                  $1,780            $1,877
Note payable (b)                                           875             1,125
Other long-term borrowings                                 151                49

                                                      --------          --------
                                                        $2,806            $3,051
Less current maturities of long-term borrowings          (702)             (678)
                                                      --------          --------
Total long-term borrowings                              $2,104            $2,373
                                                      ========          ========


(a)   European Micro UK purchased the office building in which it had previously
      leased space for a purchase price of 1,705,000 pounds sterling ($2,547,000
      at exchange rate on December 31, 2000). The purchase price was financed in
      part by a mortgage  loan note in the amount of 1,312,000  pounds  sterling
      ($1,960,000  at exchange  rate on December 31,  2000).  This mortgage loan
      note bears  interest  at a fixed rate of 7.6%,  with  monthly  payments of
      principal and interest of 15,588 pounds sterling ($23,000 at exchange rate
      on December 31,  2000),  and matures in July 2009.  The mortgage loan note
      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 financial covenants are measured
      using the  financial  results of European  Micro UK as of each fiscal year
      end.  Based upon European  Micro UK's fiscal year end  operating  results,
      European  Micro UK was out of  compliance  with  certain  of the  covenant
      requirements  at June 30, 2000.  The Company has obtained a waiver of this
      non-compliance through July 1, 2001.

(b)   European Micro Holdings, Inc. obtained a term loan on October 28, 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, 2000 was 6.6%. 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.  Messrs.  Gallagher  and
      Shields  guaranteed the obligations under the term loan. In addition,  Mr.
      Shield  has  pledged  personal  assets as  additional  collateral  and has
      further agreed to maintain certain personal financial  statement liquidity
      levels.  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.

                                       11
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The term loan agreement is with SouthTrust  Bank as is the Nor'Easter  Micro and
American Micro line of credit facilities discussed in Note 4 to the Consolidated
Condensed Financial Statements.  The agreement also contains a provision whereby
the lender can declare a default based on subjective criteria. Further, the term
loan  credit  agreement  contains  similar  loan  covenant  requirements  and is
cross-collateralized and cross-defaulted with the line of credit facilities.  As
such, the Company was not in compliance for the June 30, 2000 reporting  period.
On October 5, 2000, the Company received a waiver of the non-compliance with the
financial  covenants as of June 30, 2000,  and also entered into an amendment to
the term loan agreement that, among other things,  established revised financial
covenants.

6     EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED        SIX MONTHS ENDED
                                                   DECEMBER 31,             DECEMBER 31,
                                            ---------------------------------------------------
                                                2000          1999          2000         1999
                                                ----          ----          ----         ----
<S>                                        <C>           <C>           <C>          <C>
EARNINGS
Net income (loss) (in thousands)              $(154)           $11        $(222)         $218
                                           ---------     ---------     ---------    ---------

WEIGHTED AVERAGE NUMBER OF SHARES
Outstanding common stock during            4,943,057     4,933,900     4,938,478    4,933,900
the period
Contingently issuable shares                      --       114,011            --       99,559
                                           ---------     ---------     ---------    ---------

BASIC WEIGHTED AVERAGE NUMBER OF SHARES    4,943,057     5,047,911     4,938,478    5,033,459
Effect of dilutive stock options and              --            --            --          497
other contingent shares
                                           ---------     ---------     ---------    ---------

DILUTED WEIGHTED AVERAGE NUMBER OF         4,943,057     5,047,911     4,938,478    5,033,956
SHARES
                                           =========     =========     =========    =========
Basic earnings per share                     $(0.03)         $0.00       $(0.04)        $0.04
                                           =========     =========     =========    =========

Diluted earning per share                    $(0.03)         $0.00       $(0.04)        $0.04
                                           =========     =========     =========    =========
</TABLE>

During the three-month period-ended December 31, 2000, the Company issued 62,774
shares of common stock,  which reflected 9,157 and 4,579 weighted average shares
for the three-month and six-month period ended December 31, 2000,  respectively.
During the  three-month  period-ended  December  31,  2000,  the Company  issued
warrants  and  options  to  purchase  50,000  shares of its  common  stock at an
exercise  price of $4.00.  The above  dilutive  earnings per share  calculations
exclude the effect of warrants and options to purchase  1,480,500  and 1,480,500
shares of common stock for the three-month and six-month  periods ended December
31,  2000  respectively,  at  exercise  prices  ranging  from  $4.00  to  $12.00
respectively,  because they were anti-dilutive.  The above dilutive earnings per
share  calculations  exclude  the effect of  warrants  and  options to  purchase
349,000 and 341,500  shares of common stock for the  three-month  and  six-month
periods ended December 31, 1999  respectively,  at exercise  prices ranging from
$7.50 to $12.00 respectively,  because they were anti-dilutive. Also, see Note 3
to the  Consolidated  Condensed  Financial  Statements  related to  contingently
issuable  shares  related to an  acquisition.  The effect of  contingent  shares
related to the first earn-out of American Micro is not included, as such payment
was paid in cash in March  2000.  The  effect of  contingent  shares  related to
second earn-out of American Micro is not included.

                                       12
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


7     EQUITY LINE OF CREDIT

On August 24, 2000, European Micro Holdings, Inc. entered into an Equity Line of
Credit (the  "EQUITY  CREDIT  LINE").  Pursuant to the Equity  Credit  Line,  an
institutional  investor  agreed to  acquire up to $20  million of the  Company's
common stock at a purchase price equal to 88% of the market price of such stock,
as defined in the agreement. The timing of each sale and the number of shares to
be sold is at the  discretion  of the  Company,  subject to various  conditions,
including  an  effective  registration  of the shares.  Dollar  amounts that the
Company can request under any individual  sale is subject to the average trading
volume of the Company's  common stock for the preceding  25-day trading  period.
The  maximum  term of the Equity  Credit  Line is 30 months from the date of the
agreement.  The  agreement  contains  various  representations,  warranties  and
covenants by the Company, including limitations on the Company's ability to sell
common stock or common stock equivalents, sell assets, merge, etc. In connection
with  entering  into the Equity  Credit  Line,  the Company  also entered into a
Placement Agent Agreement.  Under the Placement Agent Agreement,  the agent will
receive a commission  equal to 7% of the gross  proceeds from each advance under
the Equity Credit Line.

The Company has issued to the  placement  agent two warrants to purchase a total
of 1,000,000  shares of the Company's  common stock.  The Class A Warrant allows
the holder to purchase  500,000  shares of common stock at an exercise  price of
$7.00 (subject to certain anti-dilution  adjustments)  commencing with the first
advance under the Equity  Credit Line. If the warrant  shares are not covered by
an effective  registration  statement for the resale of the warrant shares,  the
holder can elect a cash-less exercise. The warrant shares expire five years from
the issuance date. The Company can force conversion of the warrant shares if the
closing  price of its  common  stock is  $10.00 or  higher  for ten  consecutive
trading days. The Class B Warrant  allows the holder to purchase  500,000 shares
of common stock at an exercise price of $10.00 (subject to similar anti-dilution
adjustments).  The other terms of the Class B Warrant are similar to the Class A
Warrant, except that the Class B Warrant is exercisable pro-rata to the ratio of
the advances drawn under the Equity Credit Line, and except that the Company can
force  conversion of the warrant shares if the closing price of its common stock
is $15.00 or higher for ten consecutive trading days.

The Company  granted the Equity  Credit Line  investor and the  placement  agent
certain registration rights. Pursuant to the registration rights agreements, the
Company was obligated to, among other things, register the sale of the investors
shares sold to such investor under the Equity Credit Line and the sale of shares
of common stock underlying the warrant shares.  On October 27, 2000, the Company
filed a registration  statement  with the Securities and Exchange  Commission to
register all such shares. The Securities and Exchange Commission issued approval
and the registration statement became effective on December 1, 2000.

On August 8, 2000,  in  connection  with the Equity  Credit  Line,  the  Company
entered  into a  consulting  arrangement  with a third party  whereby such party
would provide certain financing and capital market  consultation.  In connection
with  the  arrangement,  the  Company  paid to the  consultant  $10,000  in cash
compensation.  The  Company  also issued to the  consultant  options to purchase
100,000 shares of its common stock at an exercise price of $4.55. Management has
attributed  $208,000 of the value of these options as incremental costs directly
attributable  to the signing of the Equity Credit Line,  and as such, has offset
such amounts against additional paid in capital in the accompanying Consolidated
Condensed  Balance  Sheet at December 31, 2000.  The remaining  $105,000  option
value  attributed  to general  consulting  services  was expensed in the quarter
ended  September 30, 2000. In addition,  the Company will pay to the  consultant
cash payments and warrants to purchase  common shares of the Company.  Each cash
and warrant  payment will equal 1% of the dollar  amount  drawn  by  the Company
under the Equity Credit Line.

On December 4, 2000,  in  connection  with the Equity  Credit Line,  the Company
requested an advance from the investor in the amount of $50,000.  In  accordance
with the advance request, on December 26, 2000, the Company issued 25,020 shares
of its common stock to the  investor and received  cash in the amount of $45,750
($50,000 less fees of $4,250),  accordingly  the Company has  reclassed  $45,750
from prepaid  offering costs to additional paid in capital.  As a result of this
initial advance all 500,000 of the Class A warrant shares and a pro-rata portion
of the Class B warrant shares became exercisable. These amounts have been netted
against additional paid-in capital.

                                       13
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


8     BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE STRATEGY

The Company has initiated a  business-to-business  electronic commerce strategy,
which is  focused  on  creating a global,  value-added,  information  technology
equipment and service  trading  community.  The Company has hired Cap Gemini,  a
leading  European  management  consultancy and information  technology  services
firm, to assist in the implementation of this plan. The Company has incurred the
sum of 755,000  pounds  sterling  ($1,128,000  at exchange  rate on December 31,
2000)  related to the  feasibility  studies and business  process  design.  This
amount was  reflected  in selling,  general and  administrative  expenses on the
accompanying  consolidated  statements of operations for the year ended June 30,
2000. The Company has capitalized  the sum of 229,000 pounds sterling  ($338,000
at  exchange  rate  on  December  31,  2000)  related  to  the  actual  software
development.  This amount is  reflected in property  and  equipment,  net on the
accompanying consolidated condensed balance sheets at December 31, 2000 and June
30,  2000.  During  May  2000,  the  Company   temporarily  halted  the  ongoing
development  being performed by Cap Gemini until specific funding is obtained to
complete the project.  No further  expenses have been incurred in the six months
ended  December 31, 2000.  There can be no  assurances  that the Company will be
successful  in  obtaining  funding for this  project.  Since the project was not
continued  by November  30,  2000,  the Company  incurred a fee to Cap Gemini of
150,000 pounds sterling  ($224,000 at exchange rate on December 31, 2000).  This
fee will be credited against future invoices of Cap Gemini upon the continuation
of the project. The Company is re-evaluating and re-defining the current project
based on changes in the market.  This  planning  includes  detailing the project
based on the Company's ability to fund the project from current working capital,
if other funding is still not available.

9     COMMITMENTS AND CONTINGENCIES

On November 12, 1999,  Jeffrey and Marie Alnwick (the "ALNWICKS") and a New York
corporation,   Big  Blue  Products,   commenced  an  action   individually   and
derivatively for the Dutch company, Big Blue Europe, against our company and our
founders and officers,  John B.  Gallagher  and Harry D. Shields,  in the United
States District Court,  Eastern District of New York,  Jeffrey Alnwick and Marie
Alnwick v. European Micro Holdings,  Inc.,  Eastern District of New York, Docket
No. 99 CV 7380 (the "ALNWICK LITIGATION").

The  complaint  alleges  thirty-three  causes of action.  Plaintiffs  claim,  in
substance,  that defendants breached oral and written agreements relating to the
management,  operation and funding of Big Blue Europe. Specifically,  plaintiffs
alleged that defendants  breached the joint venture  agreement by which Big Blue
Europe was formed, a licensing  agreement for use of the "Big Blue" service mark
in Europe, a non-competition agreement allegedly preventing Big Blue Europe from
operating  in the United  States and several  capital  contribution  agreements.
Plaintiffs also claimed that defendants  breached their fiduciary  duties to the
Alnwicks,  engaged in fraudulent  acts,  aided and abetted breaches of fiduciary
duties  by  others,  misappropriated  trade  secrets  and  interfered  with  the
employment contract of Big Blue Europe's managing director.  The complaint seeks
unspecified  compensatory  and punitive  damages,  as well as injunctive  relief
restraining defendants from acting in violation of the alleged agreements.

Defendants have moved to dismiss the complaint principally on the basis of forum
non-conveniens in favor of existing proceedings in the Netherlands (commenced by
European Micro UK).  Defendants  argue that any dispute between the stockholders
and directors of Big Blue Europe,  which operates  pursuant to Dutch law, should
be resolved by a Dutch court.

Defendants intend to contest the claims in the Alnwicks  Litigation  vigorously,
whether  asserted in the United  States or in the  Netherlands  courts.  For the
three-month  and  six-month  period ended  December  31,  2000,  the Company has
incurred  approximately  $236,000 and $355,000 in costs related to such lawsuit.
Management  does not believe that the ultimate  outcome of this  litigation will
result in a material liability to the Company.

Due to the continued  uncertainty of the outcome of the pending  lawsuit and the
difficulties of managing  operations of Big Blue Europe during the dispute,  the
Company  recorded  during the  three-month  period ended  September  30, 2000 an
additional  $252,000  provision  for  doubtful  accounts  related  to the  notes
receivable owed to the Company. During the three-month period ended December 31,
2000, the Company and the Alnwicks entered into a liquidation agreement in which
Big Blue Europe would cease operations and liquidate all assets and liabilities.
As of December 31, 2000 all operations have ceased and the remaining liquidation
is being handled by a court appointed liquidator. As part of the liquidation the
Company and the Alnwicks have both  advanced  $85,000 to the  liquidator.  As of
December 31, 2000 the Company  believes  the $85,000  that was advanced  will be
recovered and therefore,  no valuation  allowance has been  established  for the
$85,000.

                                       14
<PAGE>

10    SUBSEQUENT EVENTS

On January 2, 2001, the Company issued options to purchase 144,000 shares of its
common stock at an exercise price of $2.00 to various key employees.


On January 19, 2001, the Company received a letter from The Nasdaq Stock Market,
Inc.  stating  that the  Company  failed to maintain a minimum  market  value of
public  float of $5.0  million  over a 30 day trading  period.  According to the
letter, the Company has until April 19, 2001 to regain the minimum public float.
If the Company is unable to  demonstrate  that the minimum public float has been
met,  then the  Company's  common stock will be  delisted.  In such an event the
Company  intends  to apply for  listing  on The  Nasdaq  Small Cap  Market if it
satisfies the requirements for continued  listing on that market.  Any delisting
of the Company's  common stock may negatively  impact the price of the Company's
common stock and impair the  development  of a trading  market in the  Company's
common stock.

11    OTHER ACCOUNTING MATTERS

Effective July 1, 2000, the Company  adopted  Statement of Financial  Accounting
Standards ("SFAS") No. 133, Accounting for Derivative and Hedging Activities, as
amended  by  SFAS  No.  138.  The  Statement  requires  the  recognition  of all
derivatives on the balance sheet at fair value.  The Company's  derivatives  are
primarily  forward foreign  exchange  contracts.  The Company's  forward foreign
exchange  contracts have been designated as economic hedges of anticipated sales
and purchase  transactions.  In addition,  the Company enters  utilizes  forward
foreign exchange  contracts as an economic hedge against foreign currency market
exposures of underlying assets, liabilities and other obligations.  Effective in
the first quarter of fiscal 2001, changes in the fair value of these derivtives,
have been recorded through  earnings.  At December 31, 2000, the Company did not
have any open forward foreign  exchange  contracts.  Foreign  currency gains and
losses,  net were a $20,000  loss and a $160,000  gain for the six months  ended
December 31, 2000 and 1999, respectively.  The effect of the adoption of the new
Statements was immaterial.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101, "Revenue Recognition in Financial  Statements." The effective date
has been deferred  with respect to the Company to the fourth  fiscal  quarter of
2001  pending  additionsl  interpretive  guidance.  The  Company  is not able to
quantify  the  impact of SAB 101 at this  time.  However,  there is at least one
issue that could have a material impact on the Company's  consolidated condensed
financial  statements.  For  European  Micro  UK  the  standard  practice  is to
recognize  revenue on shipment.  However,  title to the goods is retained  until
full payment is received from the customer to perfect the Company's  interest in
the goods. Under possible  interpretations,  European Micro UK would not be able
to recognize  revenue until full payment is received.  In the transisiton  year,
revenues  would be lower as all sales on the net terms not collected by year-end
would not be recognized.

                                       15
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

ITEM 2.  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 AND ITS
ABILITY TO COMPLY WITH THE FINANCIAL COVENANTS IN THE COMPANY'S LOAN AGREEMENTS.
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 FIVE  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"),  AMERICAN  MICRO  COMPUTER  CENTER,  INC. A FLORIDA  CORPORATION
("AMERICAN MICRO"),  AND ENGENIS.COM LTD., A COMPANY ORGANIZED UNDER THE LAWS OF
THE  UNITED   KINGDOM   ("ENGENIS"),   (COLLECTIVELY,   THE  FIVE   WHOLLY-OWNED
SUBSIDIARIES ARE REFERRED TO AS THE "SUBSIDIARIES").

OVERVIEW

We are an independent distributor of microcomputer products,  including personal
computers,  memory modules,  disc drives and networking  products,  to customers
mainly in Western  Europe and the United States.  Our customers  consist of more
than 770 value-added resellers, corporate resellers, retailers, direct marketers
and  distributors.  We generally do not sell to end-users.  Substantially all of
the products sold by us are manufactured by well-recognized manufacturers,  such
as IBM,  Compaq and  Hewlett-Packard,  although we  generally  do not obtain our
inventory  directly from such  manufacturers.  We monitor the geographic pricing
strategies  related  to  such  products,   currency   fluctuations  and  product
availability  in an attempt to obtain  inventory at favorable  prices from other
distributors, resellers and wholesalers.

We consider  ourselves  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.  We  believe  that being a focused
distributor enables us to respond more quickly to customer requests and gives us
greater  availability of products,  access to products and improved pricing.  We
believe  that as a focused  distributor  we have been  able to  develop  greater
expertise in the products that we sell. Our company places significant  emphasis
on market awareness and planning and shares this knowledge with our customers to
enhance  business  relations.  We strive to monitor and react  quickly to market
trends in order to enable our  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,  American Micro and Engenis.  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 organized under the laws of
the State of  Florida  on June 24,  1999 to  acquire  AMCC and now  serves as an
independent  distributor of microcomputer products in the United States. Premier
Pages,  Ltd.  was  formed on  January  28,  2000 and later  changed  its name to
Engenis.com,  Ltd. on June 23,  2000.  Engenis was formed  under the laws of the
United Kingdom to serve as a  business-to-business  electronic  commerce trading
company.

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 until
August 2000 operated as a sales office in Dusseldorf,  Germany.  In August 2000,
we closed the office and  consolidated  the sales  operations of European  Micro
Germany.  Customers of European Micro Germany are being handled through European
Micro UK. All products sold by European  Micro Germany were 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 operated as a distributor of microcomputer products to dealers,
value-added  resellers and mass merchants throughout Western Europe.  Except for
the  distribution of our Nova brand products (which was  discontinued in January
2000),  Sunbelt's  distribution  operations  were  integrated  with and into the
operations of European Micro UK.  European Micro Holland was organized under the
laws of Holland in 1995, and operates as a sales office near Amsterdam, Holland.
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, selling
primarily to computer maintenance companies.  We are currently in the process of
liquidating Big Blue Europe.


European  Micro  Holding's  headquarters  are located at 6073 N.W. 167th Street,
Unit C-25, Miami, Florida 33015, and our 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:

                            PERCENTAGE OF NET SALES

                               THREE MONTHS ENDED         SIX MONTHS ENDED
                                  DECEMBER 31,              DECEMBER 31,

                            ----------------------------------------------------
                                  2000         1999         2000        1999
                                  ----         ----         ----        ----

Net sales to third parties       99.7%        97.4%        99.7%        97.2%
Net sales to related parties      0.3%         2.6%         0.3%         2.8%
                               -------      -------      -------      -------
Total net sales                 100.0%       100.0%       100.0%       100.0%

Cost of goods sold to third
parties                        (89.4%)      (86.8%)      (89.1%)      (86.2%)
                               -------      -------      -------      -------
Cost of goods sold to related
parties                         (0.3%)       (2.5%)       (0.3%)       (2.8%)
                               -------      -------      -------      -------
Total cost of goods sold       (89.7%)      (89.3%)      (89.4%)      (89.0%)
                               -------      -------      -------      -------
Total gross profit               10.3%        10.7%        10.6%        11.0%
                               -------      -------      -------      -------
Total operating expenses        (9.7%)       (9.7%)       (9.8%)       (9.6%)
                               -------      -------      -------      -------
Operating profit                  0.6%         1.0%         0.8%         1.4%

Interest income                   0.0%         0.1%         0.0%         0.1%
Interest expense                (1.0%)       (0.9%)       (1.0%)       (0.8%)
Equity in income of
unconsolidated affiliate          0.0%         0.0%         0.0%         0.0%
                               -------      -------      -------      -------
Income (loss) before income     (0.4%)         0.2%       (0.2%)         0.7%
taxes
Income taxes                    (0.2%)       (0.1%)       (0.2%)       (0.4%)
                               -------      -------      -------      -------
Net income (loss)               (0.6%)         0.1%       (0.4%)         0.3%
                               =======      =======      =======      =======

                                       17
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


THREE-MONTH PERIOD ENDED DECEMBER 31, 2000 AND 1999

TOTAL NET SALES.  Total net sales decreased $7.8 million,  or 22.6%,  from $34.5
million in the  three-month  period ended  December 31, 1999 to $26.7 million in
the comparable period in 2000. Excluding net sales to related parties, net sales
decreased $7.0 million,  or 20.8%, from $33.7 million in the three-month  period
ended December 31, 1999 to $26.7 million in the comparable  period in 2000. This
decrease  was  attributable  to a decrease in sales of $7.6  million at European
Micro UK due to the  comparison  to the sales  run up  caused  by the  impending
millennium and a significant  decrease in the exchange rate from pounds sterling
to US dollars,  and a decrease  in sales of $1.5  million at  Colchester  due to
shifting sales from third parties to  intercompany  sales.  This decrease of net
sales was partially offset by an increase in sales of $706,000 at American Micro
due to a shift  from  selling  server  options  and  other  computer  parts  and
concentrating on configuring and selling complete systems,  an increase in sales
of $1.4 million at Nor'Easter due to the increased  availability of product from
Colchester.

Net sales to related parties  decreased  $803,000 or 89.7%, from $895,000 in the
three-month  period ended December 31, 1999, to $92,000 in the comparable period
in 2000.  Sales to  Technology  Express have  decreased as product  availability
decreased.

GROSS PROFIT.  Gross profit decreased  $945,000,  or 25.5%, from $3.7 million in
the  three-month  period  ended  December  31,  1999,  to  $2.8  million  in the
comparable  period in 2000.  Gross profit excluding  related party  transactions
decreased $924,000,  or 25.1%, from $3.7 million in the three-month period ended
December 31, 1999 to $2.8 million the comparable  period in 2000.  This decrease
was  attributable to a decrease of $1.34 million at European Micro UK due to the
decrease  in sales in  addition  to a decrease  in gross  margin  from 11.63% to
8.82%.  This decrease in gross margin mainly resulted from the excellent margins
gained from the sale of memory  modules  during  October  1999 due to the Taiwan
earthquake.  This  decrease  was also  attributable  to a decrease of $11,000 at
Nor'Easter,  and a  decrease  of  $110,000  at  Colchester.  This  decrease  was
partially  offset,  by an increase of $543,000 at American  Micro.  Nor'Easter's
gross profit  decreased even with a higher sales volume because of a decrease in
gross margin from 8.28% to 5.81%.  Colchester's  gross profit  decreased  with a
decrease in sales volume.  American Micro's gross profit increased due to higher
sales  volume and an increase in gross  margin from 10.26% to 19.82% by changing
the product mix from low margin components to higher margin complete systems.

Gross profit  attributable to related party sales decreased  $21,000,  or 85.6%,
from $24,000 in the three-month period ended December 31, 1999, to $3,000 in the
comparable  period in 2000. As discussed above, this decrease is attributable to
decreased sales due to a lack of product availability.

Gross  margins  decreased  by 0.4% from 10.7% in the  three-month  period  ended
December 31, 1999 to 10.3% in the comparable  period in 2000.  Excluding related
party transactions,  gross margin decreased from 10.9% in the three-month period
ended December 31, 1999 to 10.3% in the comparable  period in 2000.  This change
is related to the net of a decrease at European  Micro UK  and Nor'Easter and an
increase at American Micro.

Foreign  exchange gains and losses,  net, changed from a gain of $160,000 in the
three-month  period  ended  December  31,  1999,  to a loss  of  $20,000  in the
comparable  period  in 2000.  This  adverse  movement  was  attributable  to the
weakening  of the  Euro  relative  to the  British  pound  sterling,  causing  a
devaluation of sales made in European  currencies,  and the strengthening of the
U.S.  dollar  relative  to the  Euro  and the  British  pound  sterling,  making
purchases denominated in U.S. dollars more expensive.

OPERATING  EXPENSES.  Operating  expenses  as a  percentage  of total  net sales
decreased  from 9.72% during the  three-month  period ended December 31, 1999 to
9.70% in the  comparable  period in 2000.  This decrease was  attributable  to a
decrease in operating  expenses as a percentage of total net sales from 8.57% to
7.36% at European Micro UK, which is due to a decrease in operating  expenses of
approximately  $882,000  from  $2.0  million  in the  three-month  period  ended
December  31,  1999 to $1.1  million  in the  comparable  period  in 2000.  This
decrease in expenses at European  Micro UK is due to the  reduction in personnel
and the decrease in gross profit reduced commission and bonus expense, which are
a function of gross profit. This decrease was partially offset by an increase in
operating  expenses  as a  percentage  of total net sales from 4.13% to 4.93% at
Nor'Easter,  which is due to an increase in operating  expenses of approximately
$103,000  from  $162,000 in the  three-month  period ended  December 31, 1999 to
$265,000 in the comparable  period in 2000.  This increase in expenses is due to
moving their  operations  to a new building,  which has higher  monthly rent, an
increase  in  depreciation  expense  related  to  new  equipment  and  leasehold
improvements and an increase in gross profit therefore increasing commission and

                                       18
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                          EUROPEAN MICRO HOLDINGS, INC.


bonus expense, which are a function of gross profit. This decrease was partially
offset also by an increase in operating  expenses as a  percentage  of total net
sales from 4.38% to 7.62% at  Colchester,  which is due to a large  decrease  in
sales, while operating expenses only decreased slightly.  This decrease was also
partially  offset by an increase in operating  expenses as a percentage of total
net sales from 8.94% to 10.31% at American Micro, which is due to an increase in
operating expenses attributable to selling efforts related a new product mix.

INTEREST  EXPENSE.  Interest  expense  decreased  by $48,000  from  $309,000  in
three-month  period ended December 31, 1999 to $261,000 in the comparable period
in 2000. This was attributable to a decreased reliance on short-term  borrowings
to finance accounts receivable and inventory balances.

INTEREST IN JOINT  VENTURE.  Due to the continued  uncertainty of the outcome of
the pending  lawsuit and the  difficulties  of managing  operations  of Big Blue
Europe during the dispute,  the Company  recorded during the three-month  period
ended September 30, 2000 an additional  $252,000 provision for doubtful accounts
related to the notes  receivable  owed to the  Company.  During the  three-month
period  ended  December 31,  2000,  the Company and the Alnwicks  entered into a
liquidation  agreement  in which Big Blue  Europe  would  cease  operations  and
liquidate  all assets and  liabilities.  As of December 31, 2000 all  operations
have ceased and the remaining  liquidation is being handled by a court appointed
liquidator.  As part of the  liquidation  the Company and the Alnwicks have both
advanced $85,000 to the liquidator. As of December 31, 2000 the Company believes
the $85,000 that was  advanced  will be recovered  and  therefore,  no valuation
allowance has been established for the $85,000.

INCOME TAXES. Income tax expense results from taxes on income earned by European
Micro UK. The  Company  has not  accrued a tax  expense or benefit  for the U.S.
operations.

SIX-MONTH PERIOD ENDED DECEMBER 31, 2000 AND 1999

TOTAL NET SALES.  Total net sales decreased $11.5 million,  or 17.1%, from $67.3
million in the six-month  period ended December 31, 1999 to $55.8 million in the
comparable  period in 2000.  Excluding net sales to related  parties,  net sales
decreased  $9.7 million,  or 14.9%,  from $65.4 million in the six-month  period
ended December 31, 1999 to $55.7 million in the comparable  period in 2000. This
decrease was  attributable  to a decrease in sales of $13.0  million at European
Micro UK due to the  comparison  to the sales  run up  caused  by the  impending
millennium, and a significant decrease in the exchange rate from pounds sterling
to US dollars, and a decrease of $74,000 at American Micro. This decrease of net
sales  was  partially  offset  by an  increase  in  sales  of  $2.1  million  at
Nor'Easter,  and an increase of $1.3  million at  Colchester.  This  increase at
Colchester is due to Colchester  selling  within the Asian region as compared to
being mainly a supplier for other  Subsidiaries in 1999,  especially  during the
three month period of July through September 2000.

Net sales to related parties decreased $1.8 million, or 92.3%, from $1.9 million
in the six-month  period ended  December 31, 1999, to $147,000 in the comparable
period  in  2000.  Sales  to  Technology   Express  have  decreased  as  product
availability decreased.

GROSS PROFIT.  Gross profit decreased $1.5 million,  or 20.1%, from $7.4 million
in the  six-month  period  ended  December  31,  1999,  to $5.9  million  in the
comparable  period in 2000.  Gross profit excluding  related party  transactions
decreased  $1.4 million,  or 19.6%,  from $7.4 million in the  six-month  period
ended December 31, 1999 to $5.9 million in the comparable  period in 2000.  This
decrease was  attributable  to a decrease of $2.6 million at European  Micro UK.
This decrease in gross margin mainly resulted from the excellent  margins gained
from  the  sale  of  memory  modules  during  October  1999  due to  the  Taiwan
earthquake.  This  decrease was  partially  offset by an increase of $149,000 at
Nor'Easter,  and an increase of $931,000 at American  Micro,  and an increase of
$104,000 at Colchester.  Nor'Easter's gross profit increased due to higher sales
volume and an increase in gross  margin  from 6.6% to 6.7%.  Colchester's  gross
profit increased due to higher sales volume and an increase in gross margin from
5.9% to 6.5%.  American  Micro's  gross profit  increased  even with lower sales
volume by  increasing  the gross  margin  from  10.2% to 20.6% by  changing  the
product mix from low margin components to higher margin complete systems.

Gross profit  attributable to related party sales decreased  $47,000,  or 92.2%,
from $51,000 in the six-month  period ended  December 31, 1999, to $4,000 in the
comparable  period in 2000. As discussed above, this decrease is attributable to
decreased sales due to a lack of product availability.

Gross  margins  decreased  by 0.4%  from  11.0% in the  six-month  period  ended
December 31, 1999 to 10.6% in the comparable  period in 2000.  Excluding related
party  transactions,  gross margin  decreased from 11.2% in the six-month period
ended December 31, 1999 to 10.6% in the comparable  period in 2000.  This change
is related to the net of a decrease  at  European  Micro (UK) and an increase at
American Micro, Colchester and Nor'Easter.

                                       19
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                          EUROPEAN MICRO HOLDINGS, INC.


Foreign  exchange gains and losses,  net,  changed from a loss of $82,000 in the
six-month  period  ended  December  31,  1999,  to a  loss  of  $170,000  in the
comparable  period  in 2000.  This  adverse  movement  was  attributable  to the
weakening  of the  Euro  relative  to the  British  pound  sterling,  causing  a
devaluation of sales made in European  currencies,  and the strengthening of the
U.S.  dollar  relative  to the  Euro  and the  British  pound  sterling,  making
purchases denominated in U.S. dollars more expensive.

OPERATING  EXPENSES.  Operating  expenses  as a  percentage  of total  net sales
increased from 9.54% in the six-month period ended December 31, 1999 to 9.82% in
the  comparable  period in 2000.  This  increase was partially  attributable  to
expensing  $105,000 related to the value of stock options  attributed to general
consulting  services.  This  increase  was also  attributable  to an increase in
operating  expenses  as a  percentage  of total net sales  from 8.8% to 10.5% at
American Micro, which is due to a decrease in sales as operating expenses remain
constant.  Operating  expenses as a percentage of total net sales increased from
3.6% to 5.0% at Nor'Easter, which is due to an increase in operating expenses of
approximately  $216,000 from $286,000 in the six-month period ended December 31,
1999 to $502,000 in the comparable  period in 2000. This increase in expenses is
due to moving their operations to a new building, which has higher monthly rent,
an increase in  depreciation  expense  related to new  equipment  and  leasehold
improvements and an increase in gross profit therefore increasing commission and
bonus expense, which are a function of gross profit. This increase was partially
offset by a decrease in operating  expenses as a  percentage  of total net sales
from 8.6% to 7.6% at European  Micro UK, which is due to a decrease in operating
expenses of approximately $1.5 million from $3.9 million in the six-month period
ended December 31, 1999 to $2.4 million in the comparable  period in 2000.  This
decrease in expenses is due to the  reduction in  personnel  and the decrease in
gross profit reduced commission and bonus expense, which are a function of gross
profit. Also, this decrease was attributable to a decrease in operating expenses
as a percentage of total net sales from 7.5% to 5.2% at Colchester, which is due
to a large increase in sales, as operating expenses increased slightly.

INTEREST  EXPENSE.  Interest  expense  increased  by $45,000  from  $528,000  in
six-month period ended December 31, 1999 to $573,000 in the comparable period in
2000.  This was  attributable  to having the lines of credit at  Nor'Easter  and
American Micro and the term loan for six months,  July through December,  during
2000, while only three months, October through December, during 1999.

INTEREST IN JOINT  VENTURE.  Due to the continued  uncertainty of the outcome of
the pending  lawsuit and the  difficulties  of managing  operations  of Big Blue
Europe during the dispute,  the Company  recorded during the three-month  period
ended September 30, 2000 an additional  $252,000 provision for doubtful accounts
related to the notes  receivable  owed to the  Company.  During the  three-month
period  ended  December 31,  2000,  the Company and the Alnwicks  entered into a
liquidation  agreement  in which Big Blue  Europe  would  cease  operations  and
liquidate  all assets and  liabilities.  As of December 31, 2000 all  operations
have ceased and the remaining  liquidation is being handled by a court appointed
liquidator.  As part of the  liquidation  the Company and the Alnwicks have both
advanced $85,000 to the liquidator. As of December 31, 2000 the Company believes
the $85,000 that was  advanced  will be recovered  and  therefore,  no valuation
allowance has been established for the $85,000.

INCOME TAXES. Income tax expense results from taxes on income earned by European
Micro UK. The  Company  has not  accrued a tax  expense or benefit  for the U.S.
operations.

SEASONALITY

We typically  experience  variations  in our total net sales and net income on a
quarterly basis as a result of many factors.  These include seasonal  variations
in demand for our products and services,  the  introduction  of new hardware and
software technologies and products offering improved features and functionality,
the  introduction  of new products and services by us and our  competitors,  the
loss or  consolidation  of a  significant  supplier or customer,  changes in the
level of operating expenses, inventory adjustments,  product supply constraints,
pricing,  interest  rate  fluctuations,  the  impact of  acquisitions,  currency
fluctuations and general economic conditions.  Historical operating results have
included a reduction in demand in Europe during the summer months.

LIQUIDITY AND CAPITAL RESOURCES

GENERAL. Our company suffered an operating loss in fiscal 2000 and the first and
second  quarters of fiscal  2001.  Our  operating  results  have been  adversely
impacted by ongoing legal costs related to Big Blue Europe, the costs associated
with our electronic  commerce strategy,  increases in general overhead costs and
interest  expense and a decrease in sales.  These factors may continue to impact
our operations in fiscal 2001.

                                       20
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                          EUROPEAN MICRO HOLDINGS, INC.


We were not in compliance with certain financial covenants contained in our loan
documents  during fiscal 2000. The lenders waived any  noncompliance  with these
financial covenants that existed on June 30, 2000. In most cases, however, these
waivers do not  relate to any future  reporting  period.  Compliance  with these
financial  covenants during Fiscal 2001 will require improved  operating results
compared to Fiscal 2000.  Management has initiated  certain  actions to increase
the  likelihood of attaining  these  improved  operating  results.  Such actions
include,  among  other  things,  (i)  modifying  the terms of certain  financial
covenants,  (ii)  entering  into the equity  line of credit,  (iii)  temporarily
suspending activities related to our electronic commerce strategy until specific
funding can be obtained,  (iv) obtaining  extensions of the due date for payment
of contingent earn-out amounts relating to calendar year 2000 under the American
Micro purchase  agreement,  (v) adjusting staffing levels, and (vi) implementing
steps to attempt to increase sales and lower inventory levels. No assurances can
be given that management's initiatives will be successful or that loan agreement
defaults will not occur in the future.

Another  factor that could  negatively  impact on our liquidity  position is the
terms of the borrowing  arrangements  of European  Micro UK. Certain of European
Micro UK's  borrowing  capacity are subject to  termination by the lender at its
sole  discretion.  Further,  the American  Micro and  Nor-Easter  line of credit
facilities and the European Micro  Holdings,  Inc. term loan contain  subjective
acceleration clauses. These factors increase the liquidity risk to our company.

CASH  REQUIREMENTS.  Our primary cash  requirements are for operating  expenses,
funding  accounts  receivable,   purchasing  inventory,  acquisitions  and  debt
service.  We  have  historically  funded  these  cash  requirements   through  a
combination of loans, internally generated cash flow and the net proceeds of our
initial public offering.

WORKING CAPITAL. 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 2.0  million  pounds  sterling  ($3.0  million)  at
December 31, 2000. The accounts  receivable  financing  provides for a borrowing
base of 85% of accounts receivable,  with a limit of 6.2 million pounds sterling
($9.2 million on December 31,  2000).  This facility can be terminated by either
party  giving  three  months'  notice.  The finance  company  that  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 6% at
December 31, 2000.

Working capital  requirements of our U.S.  operations are funded by two lines of
credit. On October 28, 1999,  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  were  based  upon  eligible  accounts
receivable and inventory,  up to a maximum  borrowing amount of $1.5 million for
each agreement. Each of these lines of credit was to mature on October 28, 2000.
Interest  accrued at 0.5% over the  bank-borrowing  rate of 9.5% at December 31,
2000. As partial security for these loans, Messrs. Gallagher and Shields pledged
to the lender a portion of their shares of common  stock of our company.  In the
event that we  defaulted  on one or more of these  loans,  the lender could have
foreclosed  on all or a portion of the pledged  securities.  Such an event could
have caused a change of control in our company  because  Messrs.  Gallagher  and
Shields  together own 71% of our outstanding  common stock.  The lines of credit

                                       21
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


agreements   included  certain   financial  and   non-financial   covenants  and
restrictions. The agreements also contained a provision whereby the lender could
have declared a default based on  subjective  criteria.  As of June 30, 2000, we
were  not  in  compliance  with  certain  of  the  financial  covenants  in  the
agreements.

On October 5, 2000, we received a waiver of the covenant  violations existing at
the June 30, 2000 reporting date for the American Micro and Nor'Easter  lines of
credit.  Our company and the bank  terminated  the existing  lines of credit and
entered into a new  borrowing  arrangement  whereby  each of American  Micro and
Nor'Easter have a working capital line of credit equal to the lesser of (i) $1.5
million or (ii) the sum of 85% of eligible accounts receivable,  plus the lesser
of 50% of eligible  inventory  or $750,000.  Interest  will be paid monthly at a
floating rate of .5% over the bank's base rate. The term of the new arrangements
is for one year from the  closing  date.  The new  facilities  also  require the
companies to maintain depository accounts at the bank, whose daily receipts will
be applied against  outstanding  borrowings  under the lines of credit.  The new
facilities  also place certain  restrictions on our ability to pay dividends and
to make  capital  expenditures,  among other  things,  and  includes a provision
whereby  the  lender  can  declare  a  default  based  on  subjective  criteria.
Collateral  under the new credit line  facilities  consists of a first  priority
lien on all assets of  American  Micro and  Nor'Easter.  Messrs.  Gallagher  and
Shields  guaranteed the  borrowings  under these  arrangements.  Mr. Shields has
pledged  personal  assets as  additional  collateral  and has further  agreed to
maintain certain personal financial statement liquidity levels. These borrowings
are  cross-collateralized  and  cross-defaulted  with borrowings  under the $1.5
million term loan to European Micro Holdings, Inc.

LONG-TERM  CAPITAL.  Our long-term capital needs have historically been met from
the sales of securities and long-term borrowings. In June 1998, we received $9.3
million in gross proceeds from our initial public  offering of 933,900 shares of
common  stock.  Our  company  incurred  total  expenses in  connection  with the
offering of $2.2 million.  These proceeds have been used to acquire  Sunbelt and
American Micro and to fund operations.

On October  28,  1999,  we  obtained  a $1.5  million  term loan.  The term loan
agreement is with the lender the  Nor'easter  Micro and  American  Micro line of
credit facilities discussed above.  Further, the term loan contains similar loan
covenants.  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
2.25%.  One-month LIBOR at December 31, 2000 was 6.6%. At December 31, 2000, the
outstanding  balance on the term loan was $875,000.  The term loan is secured by
substantially  all of the assets of our  company.  As partial  security for this
loan,  Messrs.  Gallagher  and Shields  pledged to the lender a portion of their
shares of common stock of our  company.  In  addition,  Mr.  Shields has pledged
personal  assets as  additional  collateral  and has further  agreed to maintain
certain personal financial  statement  liquidity levels. In the event we default
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 our company  because
Messrs.  Gallagher and Shields together own 71% of our 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.  As described above, we were not
in compliance  with the loan  covenants on June 30, 2000. The lender waived this
non-compliance  in October 2000 and amended the term loan  agreement,  including
revising the financial covenants.

On July 1, 1999, we acquired  American Micro for a purchase price of $1,131,000,
plus an earn-out.  The portion of the purchase  price paid at closing was funded
through our working  capital.  The contingent  earn-out  payment relating to two
times the after tax earnings for calendar  year 1999 of  approximately  $600,000
was paid in March 2000.  The remaining  earn-out  portion of the purchase  price
relating to two times the after tax earnings  for calendar  year 2000 was funded
through a note payable to the former stockholders of American Micro. Pursuant to
the original merger agreement,  the remaining  earn-out portion was to be due no
later than May 1, 2001.  The former  stockholders  of American Micro have agreed
that,  for so long as the  repayment  of the  earn-out  is  limited  by the loan
covenants with SouthTrust Bank, we will pay the stockholders  $50,000 per month,
plus 8% interest,  commencing April 1, 2001, subject to the rights of SouthTrust
Bank.  The loan will be due and payable  thirty days after no amounts are due to
SouthTrust  Bank.  This  amount is  secured  by a pledge of the shares of common
stock of American Micro held by the Company. This security has been subordinated
to SouthTrust Bank.

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  ($2,547,000 at
December 31,  2000).  The  purchase  price was financed in part by a loan in the
amount of 1,312,000 pounds sterling ($1,960,000 at December 31, 2000). This loan
calls for monthly  payments of  principal  and  interest in the amount of 15,588
pounds  sterling  ($23,284 at December 31,  2000) and matures in July 2009.  The
mortgage loan bears interest at a fixed rate of 7.6%. The mortgage loan 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 financial  covenants are measured using the financial

                                       22
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


results of European  Micro UK as of each fiscal  year end.  Based upon  European
Micro UK's  fiscal  year end  operating  results,  European  Micro UK was out of
compliance  with certain of the  covenant  requirements  at June 30,  2000.  The
lender waived this non-compliance through July 1, 2001.

On August 24, 2000, European Micro Holdings, Inc. entered into an equity line of
credit with  Spinneret  Financial  System,  Ltd.  Pursuant to the equity line of
credit,  Spinneret  Financial  agreed to acquire up to $20 million of our common
stock at a purchase  price equal to 88% of the market  price of such stock.  The
timing  of each sale and the  number of shares to be sold is at our  discretion,
subject  to various  conditions,  including  an  effective  registration  of the
shares. The dollar amount that our company can request under any individual sale
is subject to the average  trading  volume of our common stock for the preceding
25-day  trading  period.  The  maximum  term of the equity  line of credit is 30
months  from  the  date  of  the  agreement.   The  agreement  contains  various
representations,  warranties and covenants by us,  including  limitations on our
ability to sell common stock or common stock equivalents, sell assets, merge, or
enter into certain other transactions.

On December 4, 2000,  in  connection  with the Equity  Credit Line,  the Company
requested an advance from the investor in the amount of $50,000.  In  accordance
with the advance request, on December 26, 2000, the Company issued 25,020 shares
of its common stock to the  investor and received  cash in the amount of $45,750
($50,000 less fees of $4,250),  accordingly  the Company has  reclassed  $45,750
from prepaid  offering costs to additional paid in capital.  As a result of this
initial advance all 500,000 of the Class A warrant shares and a pro-rata portion
of the Class B warrant  shares became  exercisable.

Net cash  provided by operating  activities  during the  six-month  period ended
December 31, 2000 amounted to $498,000.  Significant factors providing cash were
a decrease in trade receivables of $3.2 million and a net income before non-cash
expenses in the period of $441,000. The amount of cash provided by the Company's
operations was partially  offset by an increase in inventory of $1.4 million,  a
decrease in trade payables of $1.4 million.

Cash used in investing activities amounted to $174,000. This primarily consisted
of purchases of fixed assets.

Cash used by financing activities amounted to $938,000. This primarily consisted
of $736,000 paid down on short-term borrowings and payments on long-term debt of
$321,000.  The amount of cash used by financing  activities was partially offset
by $17,000 in issuance of common stock, net.

Overall,  the Company  experienced  a net  decrease in cash of $647,000  for the
six-month period ended December 31, 2000.

ASSET MANAGEMENT

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

ACCOUNTS  RECEIVABLE.  We sell  products and services to a customer base of more
than 770  value-added  resellers,  corporate  resellers,  retailers  and  direct
marketers.  We offer credit  terms to  qualifying  customers  and also sell on a
pre-pay and cash-on-delivery  basis. With respect to credit sales, we attempt to
control our 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

                                       23
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


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.  We  occasionally  hedge to guard
against  currency  fluctuations  between the U.K.  pound  sterling  and the U.S.
dollar.  Because  the  functional  currency  of  our  company's  main  operating
subsidiary, European Micro UK, is the U.K. pound sterling, currency fluctuations
of the U.K.  pound  sterling  relative  to the U.S.  dollar  may have a material
adverse effect on our business,  financial  condition and results of operations.
We may engage in hedging activities in the future, although no assurances can be
given  that  it  will  engage  in  such  activities  and if we do so  that  such
activities will be successful.

Generally,  our 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
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.  We tend
to concentrate our currency  management into seven currencies:  Euro, U.K. pound
sterling,  U.S. dollar,  Dutch guilder,  Canadian  dollar,  Singapore dollar and
German Mark.  We normally  deem the exposure in other  currencies to be minimal.
However,  when we buy products in other currencies,  we 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, we have  significant  operations  within the European  Union,
including  many of the countries  that adopted the Euro. We continue to evaluate
the impact that the Euro will have on our continuing  business operations and no
assurances can be given that the Euro will not have a material adverse effect on
our business, financial condition and results of operations.  However, we do not
expect  the Euro to have a  material  effect on our  competitive  position  as a
result of price transparency within the European Union because we do not rely on
currency  imbalances in purchasing  inventory from within the European Union. In
the first eight  quarters  of trading,  the Euro  devalued  against  sterling by
12.4%,  adversely  affecting the value of our trade  receivables  denominated in
Euros. Going forward, we cannot accurately predict the impact the Euro will have
on currency  exchange  rates or our 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
and, until such time, we cannot predict whether the IRS guidelines will have any
tax consequences on us.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
         -----------------------------------------------------------

We utilize  derivative  financial  instruments  in the form of  forward  foreign
exchange  contracts for the purpose of economic  hedges of anticipated  sale and
purchase  transactions.  In  addition,  we enter  into  economic  hedges for the
purposes of hedging  foreign  currency  market  exposures of underlying  assets,
liabilities  and other  obligations  that exist as part of its ongoing  business
operations.

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, 2000, the Company did not have any open forward foreign exchange
contracts.  Foreign  currency gains and losses,  net were a $20,000 loss for the
three-months  ended  December 31, 2000,  and a $160,000 gain for the  comparable
period in 1999.  Foreign currency gains and losses, net were a $170,000 loss for
the  six-months  ended December 31, 2000, and an $82,000 loss for the comparable
period in 1999.

                                       24
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


PART II

ITEM 1. LEGAL PROCEEDINGS.
        -----------------

On November 12, 1999,  Jeffrey and Marie Alnwick (the "ALNWICKS") and a New York
corporation,   Big  Blue  Products,   commenced  an  action   individually   and
derivatively for the Dutch company, Big Blue Europe, against our company and our
founders  and  officers,  John B.  Gallagher  and Harry D. Shields in the United
States District Court,  Eastern District of New York,  Jeffrey Alnwick and Marie
Alnwick v. European Micro Holdings,  Inc.,  Eastern District of New York, Docket
No. 99 CV 7380 (the "ALNWICK LITIGATION").

The  complaint  alleges  thirty-three  causes of action.  Plaintiffs  claim,  in
substance,  that defendants breached oral and written agreements relating to the
management,  operation and funding of Big Blue Europe. Specifically,  plaintiffs
alleged that defendants  breached the joint venture  agreement by which Big Blue
Europe was formed, a licensing  agreement for use of the "Big Blue" service mark
in Europe, a non-competition agreement allegedly preventing Big Blue Europe from
operating  in the United  States and several  capital  contribution  agreements.
Plaintiffs also claimed that defendants  breached their fiduciary  duties to the
Alnwicks,  engaged in fraudulent  acts,  aided and abetted breaches of fiduciary
duties  by  others,  misappropriated  trade  secrets  and  interfered  with  the
employment contract of Big Blue Europe's managing director.  The complaint seeks
unspecified  compensatory  and punitive  damages,  as well as injunctive  relief
restraining defendants from acting in violation of the alleged agreements.

Defendants have moved to dismiss the complaint principally on the basis of forum
non-conveniens in favor of existing proceedings in the Netherlands (commenced by
European Micro UK), where a Dutch court has appointed an independent director to
oversee the operations of the company. Defendants argue that any dispute between
the  stockholders  and directors of the Dutch  company,  Big Blue Europe,  which
operates pursuant to Dutch law, should be resolved by a Dutch court.

Our company and our  affiliated  defendants  intend to contest the claims in the
Alnwick Litigation  vigorously,  whether asserted in the United States or in the
Netherlands courts.

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

(c) On December 12, 2000,  the Company  issued  37,754 shares of common stock in
connection with the purchase of the shares of common stock of Sunbelt.  See Note
3 to the Consolidated  Condensed Financial Statements.  The closing price of the
Company's  common  stock  on  December  12,  2000  was  $3.00  per  share.  This
transaction  was  exempt  from  registration  pursuant  to  section  4(2) of the
Securities  Act  of  1933  as the  recipient  of the  shares  was an  accredited
investor.

ITEM 5. OTHER INFORMATION.
        -----------------

None.

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

(a)     Exhibits.

                                       25
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


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

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

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

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

  2.05    Amendment to Merger Agreement re:   Incorporated by reference to
          AMCC dated October 2, 2000          Exhibit 2.05 to Registrant's
                                              Registration Statement on Form
                                              S-1 filed on October 27, 2000.

  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         Incorporated by reference to
          Articles                            of Incorporation Exhibit 3.02 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  Incorporated by reference to
          Plan                                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   Incorporated by reference to
          with National Westminster Bank Plc  Exhibit No. 10.01 to the
                                              Registration Statement.

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

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

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

                                       26
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

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

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

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

  10.07   Trusteed Stockholders               Incorporated by reference to
          Cross-Purchase Agreement by and     Exhibit No. 10.08 to the
          between John B. Gallagher, Harry    Registration Statement.
          D. Shields, 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      Incorporated by reference to
          between John B. Gallagher and       Exhibit No. 10.09 to the
          European Micro Holdings, Inc.       Registration Statement.
          effective as of January 1, 1998

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

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

  10.11   Subscription Agreement by and       Incorporated by reference to
          between John B. Gallagher, Harry    Exhibit No. 10.13 to the
          D. Shields, Thomas H. Minkoff,      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

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

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

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

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

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

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

                                       27
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

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

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

  10.19   Revolving Loan Agreement dated      Incorporated by reference to
          October 5, 2000 between  American   Exhibit 10.19 to Registrant's Form
          Micro and SouthTrust Bank re: Line  10-K for  the year ended June 30,
          of Credit to American Micro         2000.

  10.20   First Amendment to Loan Agreement   Incorporated by reference to
          dated October 5, 2000 among the     Exhibit 10.20 to Registrant's
          Company, American Micro,            Form 10-K for the year ended
          Nor'Easter and SouthTrust Bank,     June 30, 2000.
          N.A. re: Term Loan to the Company

  10.21   Revolving Loan Agreement dated      Incorporated by reference to
          October 5, 2000 between Nor'Easter  Exhibit 10.21 to Registrant's Form
          and SouthTrust Bank re: Line of     10-K for  the year ended June
          Credit to Nor'Easter                30, 2000.

  10.22   Loan Agreement dated October 28,    Incorporated  by reference to
          1999 among the Company, American    Exhibit 10.23 to Registrant's Form
          Micro, Nor'Easter and SouthTrust    10-Q for the quarter ended
          Bank, N.A. re: Term Loan to the     September 30, 1999.
          Company

  10.23   Security Agreement dated October    Incorporated by reference to
          5, 2000 between Nor'Easter and      Exhibit 10.23 to Registrant's Form
          SouthTrust Bank                     10-K for the year ended June 30,
                                              2000.

  10.24   Security Agreement dated October    Incorporated by reference to
          5, 2000 between American Micro and  Exhibit  10.24  to Registrant's
          SouthTrust Bank                     Form 10-K for the year ended
                                              June 30, 2000.

  10.25   Line of Credit Note given by        Incorporated by reference to
          Nor'Easter to SouthTrust Bank       Exhibit 10.25 to Registrant's
                                              Form 10-K for the year ended
                                              June 30, 2000.

  10.26   Line of Credit Note given by        Incorporated by reference to
          American Micro to SouthTrust Bank   Exhibit 10.26 to Registrant's
                                              Form  10-K  for  the year ended
                                              June 30, 2000.

  10.27   Unconditional Guaranty given by     Incorporated by reference to
          Harry Shields to SouthTrust Bank    Exhibit 10.27 to Registrant's
          Re: American Micro                  Form 10-K for the year ended
                                              June 30, 2000.

  10.28   Unconditional Guaranty given by     Incorporated by reference to
          John Gallagher to SouthTrust Bank   Exhibit 10.28 to Registrant's
          Re: American Micro                  Form 10-K for the year ended
                                              June 30, 2000.

  10.29   Amended and Restated  Unlimited     Incorporated by reference to
          Guaranty Agreement dated October    Exhibit 10.29 to Registrant's Form
          5, 2000 between Harry Shields and   10-K for the year ended June 30,
          SouthTrust Bank                     2000.

  10.30   Amended and Restated Unlimited      Incorporated by reference to
          Guaranty Agreement dated October    Exhibit 10.30 to Registrant's
          5, 2000 between John Gallagher and  Form 10-K for the year ended
          SouthTrust  Bank                    June 30, 2000.

  10.31   Unconditional Guaranty given by     Incorporated by reference to
          John Gallagher to SouthTrust Bank   Exhibit 10.31 to Registrant's
          Re: Nor'Easter                      Form 10-K for the year ended
                                              June 30, 2000.

  10.32   Unconditional Guaranty given by     Incorporated by reference to
          Harry Shields to SouthTrust Bank    Exhibit 10.32 to Registrant's
          Re: Nor'Easter                      Form 10-K for the year ended
                                              June 30, 2000.

                                       28
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

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

10.33     Specific Agreement for the          Incorporated by reference to
          Provision of Professional Services  Exhibit 10.25 to Registrant's
          dated as of March 17, 2000 between  Form 10-Q for the the quarter
          the Company and Cap Gemini UK Plc   ended March 31, 2000.

10.34     Equity Line of Credit Agreement     Incorporated by reference to
          dated as of August 24, 2000,        Exhibit 10.34 to Registrant's Form
          between the Company and Spinneret   10-K for the year ended June
          Financial System, Ltd.              30, 2000.

10.35     Registration Rights Agreement       Incorporated by reference to
          dated as of August 24, 2000,        Exhibit 10.35 to Registrant's
          between the Company and Spinneret   Form 10-K for the year ended
          Financial System, Ltd.              June 30, 2000.

10.36     Warrant to Purchase Common Stock    Incorporated by reference to
          dated as of August 24, 2000, given  Exhibit 10.36 to Registrant's
          by the Company to Spinneret         Form 10-K for the year ended June
          Financial System, Ltd.              30, 2000.

10.37     Warrant to Purchase Common Stock    Incorporated by reference to
          dated as of August 24, 2000, given  Exhibit 10.37 to Registrant's
          by the Company to the May Davis     Form 10-K for the year ended
          Group, Inc.                         June 30, 2000.

10.38     Registration Rights Agreement       Incorporated by reference to
          dated as of August 24, 2000,        Exhibit 10.38 to Registrant's
          between the Company and the May     Form 10-K for the year ended
          Davis Group, Inc.                   June 30, 2000.

10.39     Placement Agent Agreement dated as  Incorporated by reference to
          of August 24, 2000, between the     Exhibit 10.39 to Registrant's
          Company and the May Davis Group,    Form 10-K for the year ended
          Inc.                                June 30, 2000.

10.40     Secured Promissory Note dated as    Provided herewith.
          of February 19, 2001 given by the
          Company to John B. Gallagher

10.41     Secured Promissory Note dated as    Provided herewith.
          of February 19, 2001 given by
          the Company to John P. Gallagher.

10.42     Pledge and Security Agreement       Provided herewith.
          dated as of February 19, 2001
          among the Company, John B.
          Gallagher and John P. Gallagher.

11.01     Statement re: Computation of        Provided herewith.
          Earnings

15.01     Letter re: Unaudited Financial      Not applicable.
          Information

18.01     Letter re Change in Accounting      Not applicable.
          Principles

19.01     Report Furnished to Security        Not applicable.
          Holders

21.01     Subsidiaries of the Registrant      Not applicable.

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

23.01     Consent of Experts                  Not applicable.

24.01     Power of Attorney                   Not applicable.

(b)   Reports on Form 8-K.

On January 5, 2001,  the  Company  filed a Form 8-K,  which  disclosed  that the
Company  dismissed  KPMG  LLP as its  independent  certified  public  accountant
effective December 28, 2000.


                                       29
<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 20, 2001              EUROPEAN MICRO HOLDINGS, INC.

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