EUROPEAN MICRO HOLDINGS, INC.

                     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 March 31, 1999

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

               For the transition period from _______ to _______.

                          Commission File No. 333-44393

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

Nevada                                                 65-0803752
------                                                 ----------
(State or Other Jurisdiction of Incorporation          (I.R.S. Employer
or Organization                                        Identification No.)

6073 N.W. 167th Street, Unit C-25, Miami, Florida      33015
-------------------------------------------------      -----
(Address of Principal Executive Offices)               (Zip Code)

                                 (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 |_|   No  |X|

     There were  4,933,900  shares of Common  Stock,  par value $0.01 per share,
outstanding as of May 14, 1999.




<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

PART I


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


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

                   Index to Consolidated Financial Statements

Consolidated Condensed Balance Sheets as of March 31, 1999 and
June 30, 1998                                                              3

Consolidated Condensed Statements of Earnings for the three
   and nine months ended March 31, 1999 and 1998                           4

Consolidated Statement of Changes in Shareholders' Equity
   for the nine months ended March 31, 1999                                5

Consolidated Condensed Statements of Cash Flows for the nine months
   ended March 31, 1999 and 1998                                           6

Notes to Consolidated Condensed Financial Statements                       8



                                     2
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

<TABLE>
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                ($ IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                                          (UNAUDITED)
<CAPTION>
                                                          MAR. 31, 1999    JUNE 30, 1998
                        ASSETS
<S>                                                      <C>              <C>
CURRENT ASSETS:
  Cash                                                         $2,380           $5,012
  Restricted cash                                                 387                -
  Trade receivables, net                                        6,212            7,985
  Discounted trade receivables                                  7,853
                                                                                     -
  Due from related parties                                      2,568              898
  Inventories, net                                              8,853            1,715
  Deferred tax asset                                               40               26
  Prepaid expenses                                                401              304
  Other current assets                                            635            2,459
                                                          -----------      -----------
      TOTAL CURRENT ASSETS                                     29,329           18,399
  Property and equipment, net                                     672              611
  Excess of cost over acquired net assets, net                  1,622                -
  Investments in and advances to unconsolidated                   499              194
    affiliate
                                                          -----------      -----------
      TOTAL ASSETS                                            $32,122          $19,204
                                                          ===========      ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Bank line of credit                                            $540               $-
  Discount creditor                                             6,675                -
  Trade payables                                                3,769            1,638
  Other current liabilities                                     2,048              987
  Due to related parties                                        1,942              238
  Income taxes payable                                          2,477            2,577
                                                          -----------      -----------
      TOTAL CURRENT LIABILITIES                                17,451            5,440
  Long-term borrowings under capital leases                        60               84
  Other liabilities                                               274                -
                                                          -----------      -----------
      TOTAL LIABILITIES                                        17,785            5,524
                                                          ===========      ===========
Commitments & contingencies                                         -                -
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,                     49               49
    4,933,900
  Additional paid in capital                                    8,933            8,802
  Retained earnings                                             5,541            4,773
  Accumulated other comprehensive income                        (186)               56
                                                          -----------      -----------
      TOTAL SHAREHOLDERS' EQUITY                               14,337           13,680
                                                          -----------      -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY               $     32,122      $    19,204
                                                         ============      ===========
</TABLE>

                                     3

<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

                  CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
                     ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                       (UNAUDITED)                  (UNAUDITED)
                                                    THREE MONTHS ENDED           NINE MONTHS ENDED
                                                        MARCH 31,                    MARCH 31,
                                                    1999           1998          1999          1998
<S>                                                <C>            <C>           <C>           <C>
SALES:
Net sales                                           $ 31,269       $27,422       $86,990       $59,571
Net sales to related parties                           7,196        11,708         9,783        25,667
                                                    --------       -------       -------       -------
      Total net sales                                 38,465        39,130        96,773        85,238
                                                    --------       -------       -------       -------
COST OF GOODS SOLD:
Cost of goods sold                                  (28,388)      (20,936)      (78,927)      (48,990)
Cost of goods sold to related parties                (7,148)      (11,613)       (9,714)      (25,287)
                                                    --------       -------       -------       -------
       Total cost of goods sold                     (35,536)      (32,549)      (88,641)      (74,277)
                                                    --------       -------       -------       -------
GROSS PROFIT                                           2,929         6,581         8,132        10,961

OPERATING EXPENSES:
Selling, general and administrative
  expenses                                           (2,831)       (2,842)       (6,698)       (5,248)
Expenses attributable to related parties                 (0)          (31)           (0)         (104)
                                                    --------       -------       -------       -------
      Total operating expenses                       (2,831)       (2,873)       (6,698)       (5,352)
                                                    --------       -------       -------       -------
OPERATING PROFIT                                          98         3,708         1,434         5,609

Interest expense, net                                   (77)         (117)         (150)         (328)
Equity in net income (loss)
  of unconsolidated affiliate                              2             2          (45)            23
                                                    --------       -------       -------       -------
INCOME BEFORE INCOME TAXES                                23         3,593         1,239         5,304

  Income taxes                                           (1)       (1,213)         (471)       (1,770)
                                                    --------       -------       -------       -------
NET INCOME                                               $22        $2,380          $768        $3,534
                                                    ========       =======       =======       =======
NET INCOME PER SHARE - BASIC                            $.00          $.60          $.15          $.88
                                                    ========       =======       =======       =======
NET INCOME PER SHARE - DILUTED                          $.00          $.60          $.15          $.88
                                                    ========       =======       =======       =======
</TABLE>


                                     4
<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

<TABLE>
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                ($ IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<CAPTION>
                                                                                             ACCUMULATED
                                                            ADDITIONAL                             OTHER             TOTAL
                                                               PAID IN      RETAINED       COMPREHENSIVE     SHAREHOLDERS'
                                        COMMON STOCK           CAPITAL      EARNINGS              INCOME            EQUITY
                                     SHARES      AMOUNT

<S>                                <C>           <C>        <C>             <C>             <C>              <C>
Balance at June 30, 1998           4,933,900        $49          8,802         4,773                  56           $13,680

Net income                                 -          -              -           768                   -               768

Other comprehensive
   income, net of tax, for
   foreign currency
   translation adjustment                  -          -              -             -               (242)             (242)

Total comprehensive income                 -          -              -             -                   -               526

Additional initial public
   offering expenses                       -          -           (25)             -                   -              (25)

Compensation charge in
   relation to share options
   issued to non-employees                 -          -            156             -                   -               156
                                   ---------     ------         ------        ------              ------           -------
Balance at March 31, 1999          4,933,900        $49          8,933         5,541               (186)           $14,863
                                   =========     ======         ======        ======              ======           =======
</TABLE>


                                     5
<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                ($ IN THOUSANDS)

                                                         (UNAUDITED)
                                                      NINE MONTHS ENDED
                                                          MARCH 31,
                                                       1999            1998
OPERATING ACTIVITIES:
Net income                                               $768           $3,534
ADJUSTMENTS TO RECONCILE NET INCOME
  TO NET CASH USED IN
  OPERATING ACTIVITIES
  Depreciation and amortization                           278              120
  Provision for deferred taxes                           (14)             (57)
  Equity in net loss (income) of
      unconsolidated affiliate                             45             (23)
  Compensation charge for non-employee
      stock options                                       156                -
CHANGES IN ASSETS AND LIABILITIES, NET
OF EFFECTS FROM ACQUISITIONS
     Restricted cash                                    (387)                -
  Trade and discounted receivables                    (1,886)          (6,034)
  Due from related parties                            (1,670)              510
  Inventory                                           (7,022)          (2,477)
  Prepaid expenses and other current                    1,727          (2,489)
    assets
  Trade payables                                      (1,013)          (1,362)
  Due to related parties                                1,704              770
  Taxes payable                                         (100)            1,644
Other current liabilities                               (800)            1,881
                                                      -------          -------
NET CASH USED IN OPERATING ACTIVITIES                 (8,214)          (3,983)
                                                      -------          -------
INVESTING ACTIVITIES:
  Purchase of fixed assets                              (213)            (451)
  Sale of fixed assets                                      -              121
  Payment for acquisitions, net of cash
     acquired                                           (819)                -
 Advances to unconsolidated affiliate                   (350)                -
                                                      -------          -------
NET CASH USED IN INVESTING ACTIVITIES                 (1,382)            (330)
                                                      -------          -------
FINANCING ACTIVITIES:
Dividends paid                                              -            (550)
Additional initial public offering
   expenses                                              (25)                -
Repayment of capital leases, net                         (24)               64
Change in bank line of credit                             540            3,245
Change in discount creditor                             6,675            1,784
                                                      -------          -------
NET CASH PROVIDED BY FINANCING ACTIVITIES               7,166            4,543
                                                      -------          -------
Exchange rate changes                                   (202)               95
                                                      -------          -------
NET INCREASE (DECREASE) IN CASH                       (2,632)              325
Cash at beginning of period                             5,012              288
                                                      -------          -------
CASH AT END OF PERIOD                                  $2,380             $613
                                                      -------          -------

                                     6
<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

Non-cash investing and financing activities:

Fair value of assets acquired                          $4,533               $-
Goodwill                                                1,705                -
Fair value of liabilities assumed                     (4,322)                -
Notes issued for consideration                          (964)                -
                                                      -------          -------
Cash paid for acquisitions                               $952                -
Less cash acquired                                      (133)                -
                                                      -------          -------
Net cash paid for acquisitions                           $819               $-

                                                      =======          =======
Interest paid                                            $239             $117
                                                      =======          =======
Taxes paid                                               $567             $261
                                                      =======          =======


                                     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  latest annual report on
Form 10-K.

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

2  INVENTORY

Inventories comprise ($ in thousands):


                                                  MAR.31,     JUNE 30,
                                                     1999         1998

Finished goods and goods for resale                $8,900       $1,724

Less: Allowance for inventory obsolescence           (47)          (9)

                                                   ------       ------
                                                   $8,853       $1,715
                                                   ======       ======

The Company insures its inventory against theft and other damage up to a maximum
of the higher of $9,900,000 or the carrying value of the inventory.   On March
31, 1999, the carrying value was $8,853,000.

Obsolescence comprise ($ in thousands):

                            NINE MONTHS
                                  ENDED        YEAR ENDED
                                MAR. 31          JUNE 30,
                                   1999              1998

Beginning balance                    $9              $35
Provision for obsolescence          592              248
Amounts written off                (554)            (274)
                                   -----            -----
Ending balance                      $47               $9
                                   =====            =====




                                     8
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

      NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

3  OTHER CURRENT ASSETS

Other current assets comprise ($ in thousands):

                                             MAR. 31,       JUNE 30,
                                                 1999           1998
Amounts paid in advance for inventories            $-         $2,015
Advanced Corporation Tax recoverable              314            145
Value Added Tax receivable                        204              -
Other                                             117            299
                                              -------         ------
                                                 $635         $2,459
                                              =======         ======


4  EXCESS OF COST OVER ACQUIRED NET ASSETS

                                             NINE MONTHS
                                                   ENDED
                                                MAR. 31,
Beginning balance                                     $-
Additions to excess of cost over acquired
 net assets                                        1,657
Amortization                                        (35)
                                                  ------
Ending balance                                    $1,622
                                                  ======

5  BANK LINE OF CREDIT

European Micro UK has a line of credit with National Westminster Bank for
1,200,000 pounds sterling (approximately $1,933,000 at March 31, 1999). The
agreement bears interest at 1.25% over the base rate (5.5% at March 31, 1999).
Interest payments are due quarterly.

6  OTHER CURRENT LIABILITIES

     Other current liabilities comprise ($ in thousands):

                                                  MAR. 31,   JUNE 30,
                                                      1999       1998
Accrued expenses                                      $854       $710
Value Added Tax payable                                118         41
Accrued payroll taxes & national insurance             106         98
Current portion of capital leases                       38         70
Deferred payments on Sunbelt acquisition               903          -
Other                                                   29         68
                                                     -----      -----
                                                   $ 2,048       $987
                                                   =======      =====


                                       9
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

      NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

7  COMPREHENSIVE INCOME

An  adjustment   for  foreign   currency   translation   has  been  recorded  to
shareholders'  equity as other  comprehensive  income,  net of tax. The exchange
rate changes  recorded  for the nine months ended March 31, 1999 and 1998,  were
approximately $(242,000) and $40,000, respectively. Comprehensive income for the
nine months  ended  March 31, 1999 and 1998  totaled  $526,000  and  $3,574,000,
respectively.


8  EARNINGS PER SHARE

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

                                        THREE MONTHS ENDED    NINE MONTHS ENDED
                                             MARCH 31,            MARCH 31,
EARNINGS                                  1999       1998       1999       1998

Net income ($ in thousands)                $22     $2,380       $768     $3,534
                                       =======     ======     ======    =======
 
   WEIGHTED AVERAGE NUMBER OF SHARES

Outstanding common stock         
  during the period                  4,976,883  4,000,000  4,954,106  4,000,000
                                    ----------  ---------  ---------  ---------

Effect of dilutive stock options        43,670          -     24,206          -
                                    ----------  ---------  ---------  ---------

DILUTED WEIGHTED AVERAGE NUMBER      5,020,553  4,000,000  4,978,312  4,000,000
 OF SHARES                          ==========  =========  =========  =========

Basic earnings per share                 $0.00      $0.60      $0.15      $0.88
                                    ==========  =========  =========  =========

Diluted earnings per share               $0.00      $0.60      $0.15      $0.88
                                    ==========  =========  =========  =========

No stock options were issued during the three-month period ended March 31, 1999.
During the nine-month period ended March 31, 1999, the Company issued options to
purchase  35,000  shares of its common  stock at exercise  prices  ranging  from
$9.1875 to $11.00.  The above dilutive earnings per share  calculations  exclude
the effect of options to purchase  20,000  shares of common  stock at $11.00 per
share in the three-month and nine-month  period ended March 31, 1999, due to the
fact they were  anti-dilutive.  The  nine-month  period  ended  March 31,  1999,
reflects   only  a  pro-rata   impact  of  all  options  as  such  options  were
anti-dilutive  in the first quarter of fiscal 1999.  Also see Note 10 related to
contingently issuable shares related to an acquisition. The effect of contingent
shares related to the guaranteed  earn-out amount not paid at the closing of the
Sunbelt  acquisition  and the effect of  satisfactory  completion of part of the
first  contingent  earn-out  has been  included in the above basic  earnings per
share calculations.  The effect of part of the first contingent earn-out dealing
with employment of some key employees has been included in diluted  earnings per
share.  However,  the remainder of the first contingent  earn-out and all of the
second  contingent  earn-out are not included,  as the conditions  necessary for
such contingent  shares to be issued have not been met as of March 31, 1999. The
weighted average number of shares used in the 1998 periods reflect a retroactive
adjustment to assume the 4,000,000 shares issued in January 1998 in exchange for
the shares of European Micro Plc that were  outstanding for the complete periods
in 1998.


                                       10
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

      NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

9  RELATED PARTY TRANSACTIONS

European  Micro  Holdings,  Inc.  belongs  to a group of related companies  (the
"GROUP").  The  Group  is  comprised  of  Technology  Express,  Inc. located  in
Nashville,  Tennessee  ("TECHNOLOGY  EXPRESS"),  American Surgical  Supply Corp.
d/b/a American Micro Computer Center in Miami, Florida ("AMERICAN MICRO COMPUTER
CENTER")  and,  until August 1, 1997,  Ameritech  Exports Inc. located in Miami,
Florida  ("AMERITECH  EXPORTS") and Ameritech  Argentina  S.A. located in Buenos
Aires, Argentina  ("AMERITECH  ARGENTINA").  All members of the Group were owned
and  controlled  by either of the two  primary  shareholders  of  European Micro
Holdings, Inc., John B. Gallagher and/or Harry D. Shields and their families.

The  prices  charged  to  members  of the Group are lower  than they would be in
arms-length transactions.  The members of the Group maintain buying arrangements
which  enables a Group  member to purchase  large  job-lots at more  competitive
prices than would  otherwise be possible and then  immediately  sell part of the
purchase to the other Group members.  In practical  terms,  the sales to related
parties are to the  distributors  in a similar trade as European Micro Holdings,
Inc. and these parties would not buy at higher prices.

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

                                        THREE MONTHS ENDED  NINE MONTHS ENDED
                                             MARCH 31,            MARCH 31,
                                         1999        1998      1999      1998

     SALES TO:
     American Micro Computer Center    $4,107      ($590)    $4,508    $9,823
     Technology Express                 3,089      12,298     5,275    15,844
                                       ------      ------    ------    ------
                                       $7,196     $11,708    $9,783   $25,667
                                       ======     =======    ======   =======

     PURCHASES FROM:
     American Micro Computer Center      $790         $15      $920      $340
     Technology Express                 1,712         979    15,264     3,916
                                       ------      ------    ------    ------
                                       $2,502        $994   $16,184    $4,256
                                            =      ======   =======    ======


     OPERATING EXPENSES

     MANAGEMENT AND CONSULTANCY FEES PAID
     TO:
     American Micro Computer Center        $-         $15        $-       $45
     Technology Express                     -          16         -        59
                                       ------      ------   -------    ------
                                           $-         $31        $-      $104


                                       11
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

      NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

9  RELATED PARTY TRANSACTIONS (CONTINUED)

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


                                        MAR. 31,   JUNE 30,
                                            1999       1998

     American Micro Computer Center       $1,861        $54
     Technology Express                      707        844
                                        --------    --------
                                          $2,568       $898
                                        ========    ========

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


                                        MAR. 31,   JUNE 30,
                                            1999       1998

     American Micro Computer Center          $77        $12
     Technology Express                    1,865        226
                                        --------    -------
                                          $1,942       $238
                                        ========    =======

     There were no related  party  transactions  between,  or balances due to or
from, the Company and Ameritech Argentina or Ameritech Exports for the three and
nine-month periods ended March 31, 1999 and 1998.

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

AMERICAN MICRO COMPUTER CENTER

     American Micro Computer Center is a distributor of computer  hardware based
in Miami, Florida. John B. Gallagher who is Co-Chairman,  Co-President, Director
and  shareholder  (owning  39% of the  outstanding  shares)  of  European  Micro
Holdings,  Inc., is the president of American Micro Computer Center and owns 50%
of the  outstanding  shares of capital  stock in that  company.  See Note 11 for
further information.

TECHNOLOGY EXPRESS

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

AMERITECH ARGENTINA

     Ameritech  Argentina  was an  authorized  distributor  of  Compaq,  Hewlett
Packard,  IBM and Acer Computers and accessories in Argentina.  Messrs.  Shields
and Gallagher were both  Directors of Ameritech  Argentina and each owned 50% of
the outstanding shares of common stock until its sale on August 1, 1997.


                                       12
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

      NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

9  RELATED PARTY TRANSACTIONS (CONTINUED)

AMERITECH EXPORTS

     Ameritech  Exports was an authorized  distributor  of Compaq  computers and
accessories  into  Caribbean  and certain  parts of central  and South  America.
Messrs.  Shields and Gallagher were both Directors of Ameritech Exports and each
owned 50% of the outstanding  shares of common stock until its sale on August 1,
1997.

10 ACQUISITION OF SUBSIDIARIES

On October 26, 1998,  European Micro Plc, a wholly-owned  subsidiary of European
Micro Holdings, Inc. ("European Micro"),  acquired all of the outstanding shares
of capital stock of Sunbelt (UK) Limited  ("Sunbelt"),  a company  registered in
England  and  Wales,  from the  shareholders  of Sunbelt  for the  consideration
described  below.  As a result of the  acquisition,  Sunbelt  is a  wholly-owned
subsidiary of European  Micro Plc. The Sunbelt  purchase price (to be settled in
pounds  sterling)  is  comprised  of a  guaranteed  portion  and two  contingent
earn-out payments. The guaranteed portion of the purchase price, which was based
upon  Sunbelt's net book value at closing and a multiple of its fiscal year 1998
pre-tax earnings,  was 940,000 pounds sterling  (approximately  $1.51 million at
exchange  rate on March 31,  1999).  Of this  guaranteed  amount,  approximately
360,000 pounds  sterling  (approximately  $580,000 at exchange rate on March 31,
1999) was paid in cash at closing.

The unpaid  balance of the guaranteed  consideration  includes a note payable to
the former 40% Sunbelt shareholder in the amount of approximately 240,163 pounds
sterling  ($387,000 at exchange rate on March 31, 1999) to be repaid in November
2005,  subject to early  repayment at the option of the  noteholder  at any time
after June 1,  1999.  Such note  payable  is secured by a cash  account of equal
amount at March 31, 1999.  The note payable and the cash  balances are reflected
on the accompanying  consolidated  condensed balance sheet at March 31, 1999, in
restricted cash and other current liabilities, respectively.

The remainder of the unpaid  guaranteed  consideration of approximately  339,614
pounds  sterling  ($547,000 at exchange  rate on March 31,  1999),  plus accrued
interest, is to be paid in equal installments within ninety (90) days of the end
of the first and second  contingent  earn-out  periods as discussed  below.  The
unpaid  balance of the  guaranteed  purchase price is reflected in other current
liabilities and other  liabilities on the  accompanying  consolidated  condensed
balance sheet at March 31, 1999.

The purchase agreement also contains contingent  purchase price provisions.  The
maximum  contingent  earn-out  payments  in the  aggregate  are  two  (2)  times
Sunbelt's  fiscal year 1998 pre-tax  earnings of  approximately  424,518  pounds
sterling  (approximately  $1.4 million at exchange rate on March 31, 1999).  The
first  contingent  payment  of  up  to  approximately  424,518  pounds  sterling
($684,000 at exchange rate on March 31, 1999) will be made if certain  financial
parameters are attained during the first  contingent  earn-out period which runs
from  November  1, 1998 to October  31,  1999,  and if  certain  of the  Sunbelt
executives  are still employed with the Company at the end of the first earn-out
period.  The second  contingent  payment of up to  approximately  424,518 pounds
sterling  ($684,000 at exchange  rate on March 31, 1999) will be made if certain
financial  parameters are attained during the second contingent  earn-out period
which runs from November 1, 1999 to October 31, 2000.  That portion of the first
contingent earn-out payment related to employee retention, approximately 106,130
pounds  sterling  ($171,000  at  exchange  rate on  March  31,  1999),  is being
recognized  by the  Company  over the  course of the first  contingent  earn-out
period as compensation  expense.  That portion of the first contingent  earn-out
payment  related to the volume of purchases from the Far East has been met. This
portion of approximately  106,130 pounds sterling  ($171,000 at exchange rate on
March 31, 1999),  has been  recognized  by the Company,  and is reflected in the
excess of cost over acquired net assets, net and other current liabilities.  The
remaining  portion of the first  contingent  earn-out  payment of  approximately
212,260  pounds  sterling  ($342,000 at exchange rate on March 31, 1999) and the
second contingent  earn-out payment have not been recognized in the accompanying
consolidated  condensed financial  statements as the payment of such amounts are
not, in the opinion of management, determinable beyond a reasonable doubt.


                                       13
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

      NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

10 ACQUISITION OF SUBSIDIARIES (CONTINUED)

Within  ninety  (90) days of the end of first  and  second  contingent  earn-out
periods,  the first and second purchase price installment payments will be made.
Such  installment  payments  will each  include  one-half of the  remaining  40%
guaranteed  purchase  price  amounts,  plus any  amounts due under the first and
second contingent earn-out payment provisions. The amounts due to the former 40%
shareholder  of Sunbelt will be satisfied by the issuance of a convertible  loan
note due six years after the date of issue,  and subject to early  prepayment at
the option of the  noteholder  on any date after  eight  months from the date of
issuance.  The  Company  has the option of paying all future  amounts due to the
former Sunbelt shareholders in common stock of European Micro Holdings, Inc. The
Company also entered into employment agreements with the two former shareholders
of Sunbelt.

The acquisition of Sunbelt was accounted for as a purchase.  The purchase price,
subject to adjustment as described above and inclusive of transaction  costs, of
approximately   1,001,000  pounds  sterling  plus  the  earned  portion  of  the
contingent  earn-out of  approximately  106,000  pounds  sterling for a total of
1,107,000  pounds  sterling  ($1,784,000  at  exchange  rate on March 31,  1999)
exceeded the estimated fair market value of net assets acquired by approximately
$1,657,000, which is being amortized on a straight-line basis over 20 years. The
results  of  operations  of  Sunbelt  have  been  included  in the  accompanying
financial statements from the date of acquisition.

Sunbelt,  formerly privately held, is a distributor of microcomputer products to
dealers,  value-added  resellers and mass merchants  throughout  Western Europe.
Sunbelt's  trading  operations  were  integrated with and into the operations of
European Micro Plc.  Sunbelt's  business of distributing its Nova brand products
operates as a separate  business entity  consistent with past practice.  Sunbelt
was established in 1992 and is based in Wimbledon,  England. For the fiscal year
ended June 30, 1998, Sunbelt had total sales of approximately  $16.5 million and
pre-tax earnings of approximately $742,500.

On November  12,  1998,  European  Micro Plc  acquired the assets of H&B Trading
International  BV  ("H&B").   Based  in  Holland,  H&B  was  a  privately  held,
independent,  focused  distributor  of  microcomputer  products  to the  BENELUX
countries - Belgium,  Holland and  Luxembourg.  H&B had 1997 annual  revenues of
approximately  $2  million.  The  acquisition  of  H&B  was  accounted  for as a
purchase.  The base purchase  price,  subject to  adjustment,  of  approximately
125,000 Dutch guilders ($74,000 at exchange rate on March 31, 1999) exceeded the
estimated  value of net assets acquired by  approximately  85,000 Dutch guilders
($54,000 at exchange  rate on March 31,  1999),  which is being  amortized  on a
straight-line basis over 20 years. If certain financial performance criteria are
met for the fiscal years ended June 30, 1999 and 2000, additional  consideration
of  approximately  50,000 Dutch guilders  ($24,000 at exchange rate on March 31,
1999) and 75,000 Dutch  guilders  ($37,000 at exchange  rate on March 31, 1999),
respectively, will be paid. Such contingent consideration has not been reflected
in the accompanying consolidated condensed financial statements.  The results of
operations of H&B have been included in the  accompanying  financial  statements
from the date of acquisition.

The following summarized  unaudited pro forma financial  information assumes the
acquisition  of Sunbelt  occurred  on July 1, 1997 ($ in  thousands,  except per
share data):

                                     NINE MONTHS ENDED

                         MARCH 31, 1999           MARCH 31, 1998
                         --------------           --------------

Total net sales                $102,571                  $97,117
                               ========                  =======

Net earnings                       $835                   $3,623
                                   ====                   ======
Earnings per share:
   Basic                          $0.17                    $0.91
                                  =====                    =====

   Diluted                        $0.17                    $0.91
                                  =====                    =====



                                       14
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

      NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

10 ACQUISITION OF SUBSIDIARIES (CONTINUED)

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

11 SUBSEQUENT EVENTS

On February 2, 1999, the Company's Board of Directors formed a special committee
(the  "Committee")  consisting  solely of independent  directors to evaluate and
determine  whether the Company should acquire American  Surgical Supply Corp. of
Florida d/b/a American Micro Computer Center ("AMCC") and, if so, on what terms.
The members of the Committee are Kyle R. Saxon and Barrett Sutton. The Committee
members  will be  compensated  at $150 per hour  each for their  service  on the
Committee. John B. Gallagher, who is a significant shareholder,  Co-Chairman and
Co-President  of the Company,  is the  President and a Director of AMCC and owns
fifty  percent  of  its  outstanding  capital  stock.  The  Committee's  charter
authorizes  it to take any action it deems  necessary  to properly  evaluate and
determine whether the Company should acquire AMCC,  including hiring independent
advisors and ensuring that any such  transaction is entirely fair to the Company
and its  shareholders.  The Committee has selected and hired  independent  legal
counsel  and is  currently  interviewing  investment  banking  firms  and  other
candidates  to  serve as  financial  advisor  to the  Committee.  The  Committee
anticipates that it will select and hire a financial advisor shortly.  Since its
formation,  the Committee  has  conducted a preliminary  review of the books and
records of AMCC and the Company has entered into a non-binding  letter of intent
to  acquire  AMCC  dated  May 5,  1999.  The  non-binding  letter  of  intent is
conditional  upon,  among  other  things,  the  satisfactory  completion  of the
Committee's due diligence  investigation  and obtaining a fairness  opinion from
the Committee's financial advisor.

According to the  non-binding  letter of intent,  the purchase price for AMCC is
equal to $811,500,  plus an amount equal to AMCC's book value as of the last day
of the month  immediately  prior to closing,  payable in cash,  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 AMCC in calendar year
1999 and two times the  after-tax  earnings  of AMCC in calendar  year 2000.  In
addition,  the Company will repay a shareholder loan of approximately  $289,000,
plus accrued interest.  If the Company elects to pay any portion of the purchase
price in shares of the Company's  Common Stock,  then AMCC's  shareholders  have
fifteen  days to make  arrangements  to sell  such  shares  over the next  forty
trading  days.  If the sale of such shares  results in net proceeds of less than
the purchase  price,  then the Company will pay the difference in cash to AMCC's
shareholders.  A copy of the  non-binding  letter of intent is  attached to this
Quarterly  Report  on Form 10-Q as  Exhibit  99.01.  The  terms of the  proposed
acquisition  of AMCC are  subject  to the  Committee  and AMCC  negotiating  and
entering into a definitive  agreement.  Until such time,  no  assurances  can be
given that the  acquisition  will be consummated on the terms set forth above or
at all.


                                       15
<PAGE>

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, (E) THE COMPANY'S  ANTICIPATED NEEDS FOR WORKING CAPITAL AND (F) BENEFITS
RELATED TO THE POSSIBLE ACQUISITION OF AMERICAN SURGICAL SUPPLY CORP. OF FLORIDA
D/B/A AMERICAN MICRO COMPUTER CENTER  ("AMCC").  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 THAT MAY BE MADE 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 THREE 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")  AND  COLCHESTER
ENTERPRISE   PTE  LTD,  A  COMPANY   ORGANIZED   UNDER  THE  LAWS  OF  SINGAPORE
("COLCHESTER")  (COLLECTIVELY,  THE THREE WHOLLY-OWNED SUBSIDIARIES ARE REFERRED
TO AS THE "SUBSIDIARIES").

OVERVIEW

     The  Company  is an  independent  distributor  of  microcomputer  products,
including  personal  computers,  memory  modules,  disc  drives  and  networking
products,  to customers  mainly in Western  Europe and to customers  and related
parties in the United States.  The Company's  customers consist of more than 375
value-added  resellers,  corporate  resellers,  retailers,  direct marketers and
distributors.  The Company does not sell to end-users.  Substantially all of the
products sold by the Company are manufactured by  well-recognized  manufacturers
such as IBM, Compaq and Hewlett-Packard, although the Company generally does not
obtain its inventory directly from such manufacturers.  The Company monitors the
geographic pricing strategies  related to such products,  currency  fluctuations
and product  availability in order to obtain  inventory at favorable prices from
other distributors, resellers and wholesalers.

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

     European Micro Holdings,  Inc. was organized under the laws of the State of
Nevada  and is the  parent of  European  Micro UK,  Colchester  and  Nor'easter.
Colchester  was organized  under the laws of Singapore in November 1998 to serve
as an independent distributor of microcomputer products in Singapore. 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.  European Micro UK was organized under the laws of the United Kingdom in
1991 to serve as an  independent  distributor  to  customers  mainly in  Western
Europe  and to  related  parties in the United  States.  On  January  31,  1998,
European Micro Holdings,  Inc. acquired one hundred percent (100%) of the issued


                                       16
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

and outstanding  shares of ordinary stock of European Micro UK in  consideration
for the issuance of 4,000,000  newly issued  shares of common  stock,  par value
$0.01 per share (the  "Common  Stock"),  of European  Micro  Holdings,  Inc. The
4,000,000 shares of Common Stock of European Micro Holdings, Inc. were issued to
the  shareholders  of European  Micro UK on a pro rata basis in accordance  with
such  shareholders'  respective  ownership  interest in European  Micro UK. As a
result of the exchange,  the shareholders of European Micro UK together received
all of the issued  and  outstanding  shares of Common  Stock of  European  Micro
Holdings,  Inc. prior to the consummation of its initial public offering.  These
shareholders  were John B. Gallagher,  Harry D. Shields,  Thomas H. Minkoff,  as
trustee of the  Gallagher  Family  Trust,  and Stuart S.  Southard and Robert H.
True,  as  Trustees of the 1997 Henry  Daniel  Shields  Irrevocable  Educational
Trust.  In  addition,  European  Micro UK became a  wholly-owned  subsidiary  of
European Micro Holdings, Inc.

     European Micro UK is the parent of European  Micro GmbH (formerly  known as
European Micro Computer Center GmbH) ("European  Micro  Germany"),  Sunbelt (UK)
Limited ("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").
European  Micro  Germany  was  organized  under the laws of  Germany in 1993 and
operates as a sales office in Dusseldorf, Germany. All products sold by European
Micro Germany are procured and shipped from the facilities of European Micro UK.
On October 26, 1998,  European Micro UK completed its  acquisition of all of the
outstanding shares of capital stock of Sunbelt.  Sunbelt is a company registered
in England and Wales which was  established  in 1992 and is based in  Wimbledon,
England. Sunbelt operates as a distributor of microcomputer products to dealers,
value-added  resellers and mass merchants throughout Western Europe.  Except for
the distribution of its Nova brand products,  Sunbelt's distribution  operations
were  integrated  with and into the  operations of European  Micro UK, since the
date of acquisition.  Sunbelt  continues to distribute its Nova line of products
in accordance with past practice.  European Micro Holland was formed in 1995 and
recently  acquired  the assets of H&B Trading  International  B.V.  ("H&B") from
European Micro UK. European Micro UK acquired these assets on November 12, 1998.
Big Blue Europe was organized under the laws of Holland in January 1997 and is a
computer parts distributor with offices located near Amsterdam, Holland. Selling
primarily to computer  maintenance  companies,  Big Blue Europe has  experienced
growth in sales and the Company  believes  that Big Blue Europe is positioned to
participate in the relatively high margin parts after-market  industry. Big Blue
Europe has no affiliation with International Business Machines Corporation.

     European  Micro  Holdings,  Inc. was formed in December  1997 to serve as a
holding company of the  Subsidiaries. Its  headquarters are located at 6073 N.W.
167th Street, Unit C-25, Miami, Florida 33015, and its telephone number is (305)
825-2458.




                                       17
<PAGE>


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 Earnings:


                             PERCENTAGE OF NET SALES

                                   THREE MONTHS ENDED         NINE MONTHS ENDED
                                        MARCH 31,                MARCH 31,
                                        ---------                ---------

                                        1999     1998            1999      1998
                                        ----     ----            ----      ----

Net sales to third parties             81.3%    70.1%           89.9%     69.9%

Net sales to related parties           18.7%    29.9%           10.1%     30.1%
                                    --------  -------         -------   -------
Total net sales                       100.0%   100.0%          100.0%    100.0%
                                    --------  -------         -------   -------
Cost of goods sold to third
 parties                             (73.8%)  (53.5%)         (81.6%)   (57.4%)
Cost of goods sold to related
 parties                             (18.6%)  (29.7%)         (10.0%)   (29.7%)
                                    --------  -------         -------   -------
Total cost of goods sold
                                     (92.4%)  (83.2%)         (91.6%)   (87.1%)
                                    --------  -------         -------   -------
Total gross profit                      7.6%    16.8%            8.4%     12.9%

Total operating expenses              (7.3%)   (7.3%)          (6.9%)    (6.3%)
                                    --------  -------         -------   -------
Operating profit                        0.3%     9.5%            1.5%      6.6%

Interest expense, net                 (0.2%)   (0.3%)          (0.2%)    (0.4%)
Equity in income (loss) of
 unconsolidated affiliate             (0.0%)   (0.0%)          (0.0%)    (0.0%)
                                    --------  -------         -------   -------

Income before income taxes              0.1%     9.2%            1.3%      6.2%
Income taxes                          (0.0%)   (3.1%)          (0.5%)    (2.1%)

                                    --------  -------         -------   -------
Net income                              0.1%     6.1%            0.8%      4.1%
                                    ========  =======         =======   =======


THREE-MONTH PERIOD ENDED MARCH 31, 1999 AND 1998

     TOTAL NET SALES.  Total net sales decreased $0.6 million,  or (1.7%),  from
$39.1 million in the three-month period ended March 31, 1998 to $38.5 million in
the comparable period in 1999. Excluding net sales to related parties, net sales
increased $3.9 million,  or 14.0%, from $27.4 million in the three-month  period
ended March 31, 1998 to $31.3  million in the  comparable  period in 1999.  This
increase was attributable to the addition of Sunbelt's trading sales (accounting
for approximately  $4.9 million),  the additional sales from Sunbelt's Nova line
of products  (accounting  for  approximately  $350,000),  the start-up growth of
Nor'easter  which  started its  operations  in  February  1998  (accounting  for
approximately  $4.7  million)  and  the  growth  of  the  Premier  Dealers  Club
(accounting  for  approximately  $3.3  million).  This  increase was offset by a
reduction  of $9.4  million in  European  Micro  UK's  trading  sales  which was
primarily  due to the  exceptional  quarter  ended March 31, 1998 when  European
Micro UK made a one-time  purchase of computer  peripherals at favorable  prices
and were later sold.  Helping to offset the  decrease  from the prior period was
the purchase of  approximately  $2.3 million in product  during the  three-month
period  ended March 31,  1999 from the office  opened in  Singapore  in November
1998.  There can be no  assurance  that the Company will be able to maintain the
level of sales or sales growth  achieved in this period or past periods  because
of seasonal  variations  in the demand for the products and services  offered by
the Company,  the  introduction  of new hardware and software  technologies  and


                                       18
<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

products offering improved features and  functionality,  the introduction of new
products  and  services  by  the  Company  and  its  competitors,  the  loss  or
consolidation  of a  significant  supplier or customer,  changes in the level of
operating  expenses,  inventory  adjustments,  product  supply  constraints  and
competitive  conditions,  including  pricing,  interest rate  fluctuations,  the
impact of acquisitions, currency fluctuations and general economic conditions.

     Net sales to related  parties  decreased  $4.5  million,  or 38.5%,  in the
three-month period ended March 31, 1999 from the comparable period in 1998. This
decrease is primarily  attributable to large  purchases of computer  peripherals
made on behalf of related parties in the three-month period ended March 31, 1998
compared to the same period in 1999. In addition,  the Company's  purchases from
related parties increased by $1.5 million in the three-month  period ended March
31, 1999 from the comparable  period in 1998. The related  parties  consist of a
group of  entities in which an  ownership  interest is held by either of the two
primary shareholders of the Company,  John B. Gallagher or Harry D. Shields. See
"Note  9 to the  Consolidated  Condensed  Financial  Statements."  In  order  to
facilitate  fast and efficient  international  transactions,  each member of the
group has acted as a supplier for, and purchaser  from, the other members of the
group. The group has attempted to price  inter-group  sales at one percent above
the selling group member's cost, although the group has made numerous exceptions
in times of short supply,  to cover  assembly  costs and to reward certain group
members for exceptional low-cost purchases. None of the members of the group are
under any legal  obligation  to continue to act as a supplier  for, or purchaser
from,  the other members of the group.  If the Company is unable to sell product
to the other members of the group, the Company's  revenues will be significantly
reduced and its business,  financial condition and results of operations will be
materially  adversely  affected,  the Company  would not be able to handle large
volume purchases at favorable  prices, if they could not rely on related parties
to  purchase  a portion  of the  product  and sell  through  their  distribution
channels.  Likewise,  the Company's  business and results of operations  will be
materially  adversely affected.  Moreover,  if the Company is unable to purchase
product from the other members of the group (including  Technology Express) when
such product  could be purchased  from these group  members at prices lower than
available from other sources.

     GROSS PROFIT.  Gross profit  decreased  $3.7 million,  or 55.5%,  from $6.6
million in the  three-month  period  ended March 31, 1998 to $2.9 million in the
comparable  period in 1999.  Gross profit excluding  related party  transactions
decreased $3.6 million,  or 55.5%,  from $6.5 million in the three-month  period
ended  March 31,  1998 to $2.9  million  the  comparable  period  in 1999.  This
decrease is primarily due to a large volume purchase of computer  peripherals in
the prior year period which were purchased by the Company on  exceptional  terms
and later sold at a significant mark-up. In addition, this decrease is partially
the result of a shift in market conditions,  resulting in a downward pressure on
margins  due to  currency  fluctuations,  product  availability  and  changes in
geographic  pricing  strategies of manufacturers  and suppliers of the Company's
products.

     Gross  profit  attributable  to  related  party  sales was  $48,000  in the
three-month  period ended March 31, 1999.  As  discussed  above,  the mark-up on
sales to related  parties is  typically  one percent over cost.  Therefore,  the
gross profit on sales to third parties is typically higher than the gross profit
earned  on  sales  to  related  parties.  This  represents  a  gross  margin  of
approximately 0.7%. This is lower than the normal one percent mark-up due to the
currency changes between the U.K. pound sterling and the U.S. dollar.

     Gross margin decreased from 16.8% in the three-month period ended March 31,
1998  to  7.6%  in the  comparable  period  in  1999.  Excluding  related  party
transactions,  gross margin decreased from 23.7% in the three-month period ended
March 31,  1998 to 9.2% in the  comparable  period  in 1999.  This  decrease  is
primarily due to a large volume purchase of computer  peripherals on exceptional
terms in the  three-month  period  ended  March  31,  1998 and  later  sold at a
significant  mark-up.  The  addition of Sunbelt's  Nova line of products  helped
offset the decrease in gross margin for the Company's other products. During the
period, the Nova line produced a gross margin of 23.0%.

     Foreign  exchange  gains and losses  moved from a loss of  $138,000  in the
three-month  period ended March 31, 1998 to a loss of $354,000 in the comparable
period in 1999. This adverse movement was  attributable to the  strengthening of
the U.S.  Dollar  against the U.K.  pound sterling and the weakening of the Euro
relative  to  other  European  currencies,  devaluing  sales  made  in  European
currencies.

     OPERATING  EXPENSES.  Operating expenses as a percentage of total net sales
remained  constant at 7.3% in the  three-month  period  ended March 31, 1998 and
1999,  respectively.  Commissions  and bonus payments to employees  decreased as
these  payments are tied to the Company's  gross profit and gross  margin.  This
decrease   was  offset  by   increased   operating   expenses   related  to  the


                                       19
<PAGE>

administrative  expenses  incurred by European  Micro which began  operations in
January 1998, but did not start to incur substantial expenses until April 1998.

     INTEREST EXPENSE. Interest expense, net, decreased by $40,000 from $117,000
in three-month  period ended March 31, 1998 to $77,000 in the comparable  period
in 1999. This was attributable to decreased  borrowing during the period because
of the  availability  of the net  proceeds  from the  Company's  initial  public
offering.

     INCOME  TAXES.  Income taxes as a percentage  of income before income taxes
decreased from 33.7% in the  three-month  period ended March 31, 1998 to 4.3% in
the comparable period in 1999. During the current period,  European Micro UK and
Nor'easter  earned  taxable income and accrued income taxes at an effective rate
of 38%.  European  Micro  Holdings,  Inc.  had a taxable loss during the current
period,  resulting in a tax benefit.  On a consolidated basis, the effect of the
taxes accrued by European Micro UK and  Nor'easter and the tax benefit  recorded
by European  Micro  resulted in an decrease in income taxes as a  percentage  of
earnings  before  income  taxes.  The  Company's  effective  income tax rate may
increase or decrease in the future as a result of the Company's  product mix and
variations in the countries to which the Company sells its products.

     INTEREST  IN JOINT  VENTURE.  The  Company's  share of income from Big Blue
Europe  remained  constant at $2,000 in the  three-month  period ended March 31,
1998 and the  comparable  period in 1999.  During the  three-month  period ended
March 31, 1999,  the Company made an advance to Big Blue Europe in the amount of
$350,000,  in the form of an unsecured note  receivable, the terms of which are
principal due on demand with interest at a rate of 9.25% payable quarterly.

NINE-MONTH PERIOD ENDED MARCH 31, 1999 AND 1998

     TOTAL NET SALES.  Total net sales increased $11.5 million,  or 13.5%,  from
$85.2 million in the nine-month  period ended March 31, 1998 to $96.7 million in
the comparable period in 1999. Excluding net sales to related parties, net sales
increased $27.4 million,  or 46.0%,  from $59.6 million in the nine-month period
ended March 31, 1998 to $87.0  million in the  comparable  period in 1999.  This
increase  was  attributable  to the  addition  of  Sunbelt's  trading  sales  of
(accounting for approximately $6.2 million), the additional sales from Sunbelt's
Nova line of products (accounting for approximately $1.0 million),  the start-up
growth of Nor'easter  which started its operations in February 1998  (accounting
for  approximately  $14.6  million)  and the growth of the Premier  Dealers Club
(accounting  for  approximately  $6.4  million).  This  increase was offset by a
reduction in European  Micro UK's trading sales of $800,000  which was primarily
due to the  exceptional  quarter  ended March 31,  1998 when the Company  made a
one-time  purchase of computer  peripherals at favorable prices which were later
sold.  Helping to offset the decrease  from the prior period was the purchase of
approximately  $2.3 million in product during the three-month period ended March
31, 1999, from the office opened in Singapore in November 1998.  There can be no
assurance  that the Company will be able to maintain the level of sales or sales
growth achieved in this period or prior periods  because of seasonal  variations
in the  demand  for the  products  and  services  offered  by the  Company,  the
introduction  of new hardware and software  technologies  and products  offering
improved  features  and  functionality,  the  introduction  of new  products and
services by the  Company and its  competitors,  the loss or  consolidation  of a
significant  supplier or customer,  changes in the level of operating  expenses,
inventory  adjustments,  product supply constraints and competitive  conditions,
including  pricing,  interest  rate  fluctuations,  the impact of  acquisitions,
currency fluctuations and general economic conditions.

     Net sales to related  parties  decreased  $15.9  million in the  nine-month
period ended March 31, 1999 from the comparable period in 1998. This decrease is
primarily attributable to large purchases of computer peripherals made on behalf
of related parties in the nine-month period ended March 31, 1998 compared to the
same period in 1999. In addition,  the Company's  purchases from related parties
increased by $11.9  million in the  nine-month  period ended March 31, 1999 from
the  comparable  period  in 1998.  The  related  parties  consist  of a group of
entities  in which an  ownership  interest  is held by either of the two primary
shareholders of the Company,  John B. Gallagher or Harry D. Shields. See "Note 9
to the Consolidated Condensed Financial Statements." In order to facilitate fast
and efficient international transactions,  each member of the group has acted as
a supplier for, and purchaser  from,  the other members of the group.  The group
has attempted to price  inter-group sales at one percent above the selling group
member's cost, although the group has made numerous exceptions in times of short
supply,  to cover  assembly  costs  and to  reward  certain  group  members  for
exceptional  low-cost purchases.  None of the members of the group are under any
legal  obligation to continue to act as a supplier for, or purchaser  from,  the
other  members of the  group.  If the  Company is unable to sell  product to the
other members of the group, the Company's revenues will be significantly reduced


                                       20
<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

and  its  business,  financial  condition  and  results  of  operations  will be
materially adversely affected. Moreover, the Company would not be able to handle
large volume  purchases at favorable  prices,  if they could not rely on related
parties to purchase a portion of the product and sell through their distribution
channels.  Likewise,  the Company's  business and results of operations  will be
materially  adversely affected if the Company is unable to purchase product from
the other members of the group (including  Technology Express) when such product
could be purchased  from these group members at prices lower than available from
other sources.

     GROSS PROFIT.  Gross profit  decreased $2.8 million,  or 25.8%,  from $10.6
million in the  nine-month  period  ended March 31, 1998 to $8.1  million in the
comparable  period in 1999.  Gross profit excluding  related party  transactions
decreased $2.5 million,  or 23.8%,  from $10.6 million in the nine-month  period
ended  March 31,  1998 to $8.1  million  the  comparable  period  in 1999.  This
decrease is primarily due to a large volume purchase of computer  peripherals in
the prior year period which were purchased by the Company on  exceptional  terms
and later sold at a significant mark-up.

     Gross  profit  attributable  to  related  party  sales was  $69,000  in the
nine-month period ended March 31, 1999. As discussed above, the mark-up on sales
to related  parties is  typically  one percent over cost.  Therefore,  the gross
profit on sales to third  parties  is  typically  higher  than the gross  profit
earned on sales to related  parties.  This represents a margin of  approximately
0.7%.  This is lower than the normal one  percent  due to the  currency  changes
between the U.K. pound sterling and the U.S. dollar.

     Gross margin decreased from 12.9% in the nine-month  period ended March 31,
1998  to  8.4%  in the  comparable  period  in  1999.  Excluding  related  party
transactions,  gross margin decreased from 17.8% in the nine-month  period ended
March 31,  1998 to 9.3% in the  comparable  period  in 1999.  This  decrease  is
primarily due to a large volume  purchase of computer  peripherals  in the prior
year period which were purchased by the Company on  exceptional  terms and later
sold at a significant mark-up.

     Foreign  exchange  gains and losses  moved from a loss of  $370,000  in the
nine-month  period ended March 31, 1998 to a loss of $538,000 in the  comparable
period in 1999. This adverse movement was attributable to a strengthening of the
U.S.  dollar  relative to the U.K.  pound  sterling  and a weakening of the Euro
relative to other  European  currencies.  These  movements  created  unfavorable
purchasing and selling conditions respectively.

     OPERATING  EXPENSES.  Operating expenses as a percentage of total net sales
increased from 6.3% in the nine-month period ended March 31, 1998 to 6.9% in the
comparable  period  in  1999.  This  decrease  is  primarily  attributable  to a
reduction in commission and bonus payments to employees. These payments are tied
to the  Company's  gross profit and gross  margins.  This decrease was offset by
increased operating expenses related to the administrative  expenses incurred by
European  Micro which began  operations  in January  1998,  but did not start to
incur substantial expenses until April 1998.

     INTEREST  EXPENSE.  Interest  expense,  net,  decreased  by  $178,000  from
$328,000 in nine-month period ended March 31, 1998 to $150,000 in the comparable
period in 1999. This was  attributable to decreased  borrowing during the period
because of the  availability  of the net  proceeds  from the  Company's  initial
public offering.

     INCOME TAXES.  Income taxes as a percentage of earnings before income taxes
increased from 33.4% in the  nine-month  period ended March 31, 1998 to 38.0% in
the  comparable  period in 1999.  The  Company's  effective  income tax rate may
increase or decrease in the future as a result of the Company's  product mix and
variations in the countries to which the Company sells its products.

     INTEREST IN JOINT VENTURE.  The Company's  share of income or loss from Big
Blue Europe  decreased  from income of $23,000 in the  nine-month  period  ended
March 31,  1998 to a loss of  $45,000  in the  comparable  period in 1999.  This
reduction in earnings is  attributed  to an increased  provision  for  inventory
obsolescence.  During the  three-month  period ended March 31, 1999, the Company
made an advance to Big Blue Europe in the amount of $350,000,  in the form of an
unsecured note  receivable,  the terms of which are principal due on demand with
interest at a rate of 9.25% payable quarterly.


                                       21
<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

SEASONALITY

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

LIQUIDITY AND CAPITAL RESOURCES

     Short-term  working  capital  requirements  are funded by a combination  of
short-term  revolving lines of credit provided by National  Westminster Bank Plc
together  with  accounts  receivable  financing  provided  by  Lombard  NatWest.
Short-term  obligations  must be repaid within one year.  One line of credit and
the accounts receivable  facilities are set and reviewed annually.  The interest
rate on these  facilities is based on a mark-up over the bank  borrowing rate in
the United Kingdom. This line of credit facility was $830,000 in fiscal 1997 and
was  increased  to $2.0 million  during  fiscal  1998.  The accounts  receivable
financing provides  financing for up to 85% of trade receivables.  In June 1998,
the Company obtained a second  short-term line of credit which is secured by the
Company's  inventory.  This  facility  allows  the  Company to borrow up to $5.8
million to assist in the purchase of inventory.

     European  Micro's  principal need for additional  working capital in fiscal
1999 is  expected  to be for the  purchase of  additional  inventory  to support
growth,  to take  advantage  of cash  discounts  offered by certain of  European
Micro's  suppliers for early payment and the possible  acquisition  of AMCC. See
"Related  Party  Transactions."  Working  capital  may also be needed  for other
acquisitions.  European Micro expects to obtain cash for these purposes  through
its internal cash flow and its existing  bank credit lines,  but there can be no
assurance  that  financing  will be  available on terms  acceptable  to European
Micro. The unavailability of such financing could adversely affect the Company's
business, financial condition and results of operations.

     Net cash used in operating activities during the nine-month period to March
31, 1999 amounted to $8.2 million. Significant factors in the use of cash were a
decrease in trade payables,  net of effects from acquisitions,  of $1.0 million,
an increase in inventory,  net of effects from  acquisitions of $7.0 million and
an  increase  in  trade  and  discounted   receivables,   net  of  effects  from
acquisitions, of $1.9 million. The decrease in payables was largely attributable
to paying  down the large  payables  balance  that was  acquired  in the Sunbelt
acquisition.  The  increase  in  inventory  was  largely  attributable  to large
quantity  purchases of computer products at prices which the Company  considered
to be favorable  and a relatively  low level of inventory at June 30, 1998.  The
increase in trade and  discounted  receivables  is largely  attributable  to the
increase  in  third  party  sales.  The  amount  of cash  used in the  Company's
operations  was partially  offset by net income in the period of $768,000,  cash
generated  from a reduction in other current  assets,  primarily  related to the
prepayment of inventory at June 30, 1998 of $1.7 million.

     Cash used in investing activities amounted to $1.4 million.  This consisted
of expenditures on fixed assets of $213,000,  the acquisitions of Sunbelt and of
H&B and a $350,000 advance to Big Blue Europe.  See "Note 10 to the Consolidated
Condensed Financial Statements."

     Cash  provided by  financing  activities  was $7.2  million,  of which $6.7
million was provided by an increase in the Lombard NatWest  accounts  receivable
financing  facility and $540,000 was provided by an increase in the bank line of
credit.

     Overall, the Company experienced a net decrease in cash of $2.6 million for
the nine-month period ended March 31, 1999.

ASSET MANAGEMENT

     INVENTORY.  European Micro's goal is to achieve high inventory turns and to
maintain a low level of inventory on hand and thereby  reduce  European  Micro's
working capital requirements.  European Micro's strategy to achieve this goal is
to both  effectively  manage its  inventory  and achieve  high order fill rates.
Inventory levels may vary from period to period, due to many factors,  including
increases or  decreases in sales  levels,  European  Micro's  practice of making


                                       22
<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

large-volume  purchases  when it deems  such  purchases  to be  attractive,  new
products and changes in European Micro's product mix.

     ACCOUNTS  RECEIVABLE.  European  Micro sells its products and services to a
customer  base of more  than 375  value-added  resellers,  corporate  resellers,
retailers and direct marketers. European Micro offers credit terms to qualifying
customers and also sells on a pre-pay and  cash-on-delivery  basis. With respect
to credit  sales,  European  Micro  attempts to control its bad debt exposure by
monitoring   customers'   creditworthiness   and,  where  practicable,   through
participation  in  credit  associations  that  provide  customer  credit  rating
information for certain  accounts.  Substantially all of European Micro UK's and
Sunbelt UK's accounts  receivables  are insured and its positive  credit results
have allowed  European  Micro UK to enjoy what it believes to be one of the most
competitive  insurance  rates in the  industry.  Nor'easter's  and  Colchester's
accounts receivable are not insured.

CURRENCY RISK MANAGEMENT

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

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

     European   Micro  UK  recognizes   that  it  has  currency   exposure  when
transactions  are  consummated  in currency other than the pound  sterling.  For
example,  for the quarter  ended  March 31,  1999,  purchases  of  inventory  by
European Micro UK were in the U.K. pound sterling (25%),  German Mark (6%), U.S.
dollar (58%),  Canadian dollar (0.5%),  Swedish Krona (10%) and other (.5%). The
most  significant  currencies  in which  sales were  made,  other than the pound
sterling  (46%),  were the U.S.  dollar (20%),  German Mark (9%),  Dutch guilder
(4%),  French franc (7%),  Canadian  dollar (5%) and others (9%).  Additionally,
receivables  are also  significantly  spread  out over  several  currencies.  In
addition,  European Micro UK has exposure to currency fluctuations to the extent
it maintains bank deposits in foreign currencies.

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

ECONOMIC AND MONETARY UNION

     On January 1, 1999,  eleven of the fifteen member countries of the European
Union  established  fixed  conversion  rates  between their  existing  sovereign
currencies  and a new currency  called the "Euro." These  countries  adopted the
Euro as their  common  legal  currency  on that  date.  The Euro is  trading  on
currency exchanges and is available for non-cash transactions.  Until January 1,
2002,  the  existing  sovereign  currencies  will remain  legal  tender in these
countries.  On January 1, 2002,  the Euro is scheduled to replace the  sovereign
legal  currencies of these  countries.  Through the operations of European Micro
UK, the Company has significant  operations within the European Union, including
many of the countries which adopted the Euro. The Company  continues to evaluate
the impact that the Euro is having on its continuing  business operations and no
assurances can be given that the Euro will not have a material adverse affect on


                                       23
<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

the Company's business, financial condition and results of operations.  However,
the  Company  does  not  expect  the  Euro  to  have a  material  affect  on its
competitive position as a result of price transparency within the European Union
because the Company does not rely on currency imbalances in purchasing inventory
from  within the  European  Union.  In the first  quarter  of  trading  the Euro
devalued  against  sterling by 6%,  adversely  affecting  the value of its trade
receivables  in Euro,  and on an ongoing  basis the  Company  cannot  accurately
predict  the  impact  the  Euro  will  have on  currency  exchange  rates or the
Company's  currency exchange rate risk. The Internal Revenue Service ("IRS") has
requested comments on various tax issues raised by the Euro conversion.  The IRS
is expected to publish  guidelines on this issue soon and,  until such time, the
Company cannot predict whether the IRS guidelines will have any tax consequences
on the Company.

YEAR 2000 ISSUES

     Many existing  computer  programs use only two digits to identify a year in
the date field.  These programs were designed and developed without  considering
the impact of the  upcoming  change in the Year 2000.  If not  corrected  in the
computer  applications  of the  Company or its  suppliers  and  customers,  this
problem may cause computer  applications to fail or to create erroneous  results
by or at the Year 2000.  In 1998,  the  Company  initiated  a plan  ("Plan")  to
identify,  assess and remediate Year 2000 issues within each of its  significant
computer  programs and certain  equipment  which contain  micro-processors.  The
Company  has  divided the Plan into five major  phases -  assessment,  planning,
conversion,  implementation  and testing.  After  completing  the assessment and
planning  phases in the prior year, the Company is currently in the  conversion,
implementation   and  testing   phases.   The  Plan  addresses  each  subsidiary
differently.   All  computer  equipment,   software  and  other  non-information
technology equipment owned by Nor'easter and Colchester were Year 2000 compliant
when  purchased  and  therefore  the costs of  conversion  and  remediation  are
expected  to be  minimal.  European  Micro UK and  Sunbelt are in the process of
obtaining  assurances  from  manufacturers  of all of  its  computer  equipment,
software and other  non-information  technology equipment as to whether they are
Year 2000 compliant.  Any non-compliant software or hardware will be upgraded or
replaced.  The Company  expects to complete the conversion,  implementation  and
testing  phases by  September  1999.  The Company has  budgeted an  aggregate of
$60,000 to cover these  costs.  The Company  does not  generally  sell  software
products and  therefore  the Company does not expect its products to be affected
by the Year 2000 problem.

     The Company is evaluating the impact the Year 2000 problem will have on its
suppliers,  customers,  financial  institutions,  freight  carriers  and general
economic  infrastructure.  The Company is not highly  dependent  upon any single
supplier or customer and therefore  does not expect the failure of the Company's
suppliers  and  customers  to correct  the Year 2000  problem to have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.  The  Company is  dependent  upon  financial  institutions,  freight
carriers and general economic  infrastructure.  The Company has received varying
information  from these outside  parties  regarding their state of readiness for
the Year 2000 problem. The Company is formulating contingency plans to implement
in the event these  parties fail to address the Year 2000  problem.  The Company
expects such plans to be completed in September 1999.

     The Company's  failure to correct a material Year 2000 problem could result
in an interruption  in, or a failure of, certain normal  business  activities or
operations.  Such failures could  materially and adversely  affect the Company's
operations, liquidity and financial condition. The Company's ability to insulate
itself from the Year 2000 problem is limited due to the  Company's  inability to
accurately   gauge  the  readiness  of  its  suppliers,   customers,   financial
institutions, freight carriers and general economic infrastructure. Accordingly,
the Company cannot accurately anticipate or quantify the impact of the Year 2000
problem or  determine  whether the failure to correct the Year 2000 problem will
have a  material  adverse  affect  on the  Company's  operations,  liquidity  or
financial condition.

RELATED PARTY SALES

     In order to achieve attractive prices from suppliers, a large quantity of a
product must be firmly  committed to.  European Micro polls the other members of
the group for informal commitments to help distribute that product.  Thereafter,
the purchasing member of the group would obtain the product, examine the product
for damage and authenticity,  and then supervise the shipping to the other group
members.  In  such  capacity,  the  purchasing  member  of the  group  acts as a
"purchasing agent" for the other group members.


                                       24
<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

     In the three- and nine-month  periods ended March 31, 1999,  European Micro
benefited  from low  mark-up  purchases  from the  other  members  of the  group
totaling $2.5 million and $16.2 million, respectively. European Micro's sales to
the related parties during the three-month period ended March 31, 1999 decreased
$4.5 million from $11.7  million to $7.2 million and for the  nine-month  period
ended March 31, 1999 decreased $15.9 million from $25.7 million to $9.8 million.
These  decreases  are  primarily  attributable  to large  purchases  of computer
peripherals  made on behalf of related  parties in the  nine-month  period ended
March 31, 1998 compared to the same period in 1999.  While the average margin on
these sales was  approximately 1% in the three- and nine-month  periods compared
to an average margin of approximately 9.2% and 9.3%,  respectively,  on sales to
unrelated  third parties  during the same period,  such margin was sufficient to
cover the costs incurred by the Company in purchasing such products on behalf of
the group. Significantly, European Micro was able to enjoy the marginal benefits
from the lower cost of the remaining  product for its sales.  See "Note 9 to the
Consolidated Condensed Financial Statements."

     On February 2, 1999,  the  Company's  Board of Directors  formed an special
committee  (the  "Committee")  consisting  solely of  independent  directors  to
evaluate and determine  whether the Company  should  acquire AMCC and, if so, on
what terms.  The members of the Committee are Kyle R. Saxon and Barrett  Sutton.
The  Committee  members  will be  compensated  at $150 per hour  each for  their
service on the Committee.  John B. Gallagher,  who is a significant shareholder,
Co-Chairman and Co-President of the Company,  is the President and a Director of
AMCC and owns fifty percent of its  outstanding  capital stock.  The Committee's
charter authorizes it to take any action it deems necessary to properly evaluate
and  determine  whether  the  Company  should  acquire  AMCC,  including  hiring
independent  advisors and ensuring that any such transaction is entirely fair to
the  Company  and  its  shareholders.  The  Committee  has  selected  and  hired
independent legal counsel and is currently interviewing investment banking firms
and  other  candidates  to serve as  financial  advisor  to the  Committee.  The
Committee  anticipates that it will select and hire a financial advisor shortly.
Since its  formation,  the Committee  has conducted a preliminary  review of the
books and records of AMCC and the Company has entered into a non-binding  letter
of intent to acquire AMCC dated May 5, 1999. The non-binding letter of intent is
conditional  upon,  among  other  things,  the  satisfactory  completion  of the
Committee's due diligence  investigation  and obtaining a fairness  opinion from
the Committee's financial advisor.

     According to the non-binding  letter of intent, the purchase price for AMCC
is equal to  $811,500,  plus an amount equal to AMCC's book value as of the last
day of the month immediately prior to closing, payable in cash, 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 AMCC in calendar year
1999 and two times the  after-tax  earnings  of AMCC in calendar  year 2000.  In
addition,  the Company will repay a shareholder loan of approximately  $289,000,
plus accrued interest.  If the Company elects to pay any portion of the purchase
price in shares of the Company's  Common Stock,  then AMCC's  shareholders  have
fifteen  days to make  arrangements  to sell  such  shares  over the next  forty
trading  days.  If the sale of such shares  results in net proceeds of less than
the purchase  price,  then the Company will pay the difference in cash to AMCC's
shareholders.  A copy of the  non-binding  letter of intent is  attached to this
Quarterly  Report  on Form 10-Q as  Exhibit  99.01.  The  terms of the  proposed
acquisition  of AMCC are  subject  to the  Committee  and AMCC  negotiating  and
entering into a definitive  agreement.  Until such time,  no  assurances  can be
given that the  acquisition  will be consummated on the terms set forth above or
at all.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

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

     The  Company  places all foreign  exchange  forward  contracts  with Global
Financial  Markets,  a division of the National  Westminster Bank Plc, a leading
European bank.


                                       25
<PAGE>
                         EUROPEAN MICRO HOLDINGS, INC.

EXCHANGE RATE SENSITIVITY

     The table below summarizes information on foreign currency forward exchange
agreements  as of March 31, 1999.  The table  presents the notional  amounts and
weighted  average exchange rates by expected  (contractual)  maturity dates. The
fair value has been  determined  by applying the  mid-price of the spread on the
buy or sell rates,  as  appropriate,  of the  relevant  foreign  currency at the
balance sheet date. The mid-price used is that quoted by the Financial Times.

                                        Expected
                                       maturity or
                                     transaction date       Fair value
                                    ------------------     ------------

     FORWARD EXCHANGE
       AGREEMENTS

     (Receive $US/Pay (pound))         April 23, 1999
     Contract amount                       $1,000,000         $990,411
     Average contractual
      exchange rate                   $1.6269/(pound)1

     (Receive $US/Pay (pound))         April 15, 1999
     Contract amount                       $1,927,400       $1,902,370
     Average contractual
      exchange rate                   $1.6325/(pound)1






     Losses in respect of the foreign exchange  transactions  were as follows ($
in thousands).  See "Management's  Discussion and Analysis -- Three Month Period
Ending  March 31, 1999 and 1998" and " -- Nine Month Period Ended March 31, 1999
and 1998" for discussion on the changes:

                                        THREE MONTHS        NINE MONTHS
                                       ENDED MARCH 31,     ENDED MARCH 31,
                                        1999      1998      1999      1998
                                    ------------------------------------------

Loss on foreign exchange               ($354)    ($138)    ($538)    ($370)
transactions
                                    =========   =======   =======  ========



                                       26
<PAGE>


PART II

ITEM 1.   LEGAL PROCEEDINGS.

          None.

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.

          None.

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

     On February 2, 1999,  the  Company's  Board of Directors  formed an special
committee  (the  "COMMITTEE")  consisting  solely of  independent  directors  to
evaluate and determine  whether the Company  should  acquire  American  Surgical
Supply Corp. of Florida d/b/a American Micro  Computer  Center  ("AMCC") and, if
so, on what terms.  The members of the  Committee  are Kyle R. Saxon and Barrett
Sutton.  The  Committee  members will be  compensated  at $150 per hour each for
their  service  on the  Committee.  John  B.  Gallagher,  who  is a  significant
shareholder, Co-Chairman and Co-President of the Company, is the President and a
Director of AMCC and owns fifty percent of its  outstanding  capital stock.  The
Committee's  charter  authorizes  it to take any  action it deems  necessary  to
properly  evaluate  and  determine  whether the  Company  should  acquire  AMCC,
including hiring independent  advisors and ensuring that any such transaction is
entirely  fair to the Company and its  shareholders.  The Committee has selected
and hired  independent  legal counsel and is currently  interviewing  investment
banking  firms  and  other  candidates  to serve  as  financial  advisor  to the
Committee.  The Committee  anticipates  that it will select and hire a financial
advisor shortly. Since its formation,  the Committee has conducted a preliminary
review of the books and records of AMCC,  and the  Company  has  entered  into a
non-binding  letter of intent to acquire AMCC dated May 5, 1999. The non-binding
letter of intent is  conditional  upon,  among other  things,  the  satisfactory
completion  of the  Committee's  due  diligence  investigation  and  obtaining a
fairness opinion from the Committee's financial advisor.

     According to the non-binding  letter of intent, the purchase price for AMCC
is equal to  $811,500,  plus an amount equal to AMCC's book value as of the last
day of the month immediately prior to closing, payable in cash, 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 AMCC in calendar year
1999 and two times the  after-tax  earnings  of AMCC in calendar  year 2000.  In
addition,  the Company will repay a shareholder loan of approximately  $289,000,
plus accrued interest.  If the Company elects to pay any portion of the purchase
price in shares of the Company's  Common Stock,  then AMCC's  shareholders  have
fifteen  days to make  arrangements  to sell  such  shares  over the next  forty
trading  days.  If the sale of such shares  results in net proceeds of less than
the purchase  price,  then the Company will pay the difference in cash to AMCC's
shareholders.  A copy of the  non-binding  letter of intent is  attached to this
Quarterly  Report  on Form 10-Q as  Exhibit  99.01.  The  terms of the  proposed
acquisition  of AMCC are  subject  to the  Committee  and AMCC  negotiating  and
entering into a definitive  agreement.  Until such time,  no  assurances  can be
given that the  acquisition  will be consummated on the terms set forth above or
at all.


                                       27
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.

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


(A)  EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NO.           DESCRIPTION                                       LOCATION
<S>           <C>                                               <C>  
    2.01      Agreement for the  Acquisition  of Sunbelt (UK)   Incorporated  by reference to Exhibit 2.01 
              Limited by European Micro Plc dated October 26,   to Registrant's Form 10-Q for the quarter 
              1998                                              ended September 30, 1998.

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

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

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

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

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

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

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

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

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

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

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

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

   10.06      Distributor  Agreement  with  WatchGuard          Incorporated  by  reference  to Exhibit No.
              Technologies, Inc., dated November 5, 1997        10.06 to the Registration Statement.

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

   10.08      Trusteed Shareholders Cross-Purchase Agreement    Incorporated by reference to Exhibit No.
              by and between John B. Gallagher, Harry D.        10.08 to the Registration Statement.


                                                            28
<PAGE>

              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

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

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

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

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

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

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

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

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

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

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

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

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


                                                            29

<PAGE>

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

   11.01      Statement re: Computation of Earnings             Provided herewith.

   15.01      Letter re: Unaudited Financial Information        Not applicable.

   18.01      Letter re Change in Accounting Principles         Not applicable.

   19.01      Report Furnished to Security Holders              Not applicable.

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

   23.01      Consents of experts and counsel                   Not applicable.

   24.01      Power of Attorney                                 Not applicable.

   27.01      Financial Data Schedule                           Provided herewith.

   99.01      Non-binding Letter of Intent to Acquire AMCC      Provided herewith.
</TABLE>

(B) REPORTS ON FORM 8-K.

     On November 10, 1998,  the Company filed its original Form 8-K ("Form 8-K")
with the Securities and Exchange  Commission  with respect to the acquisition of
Sunbelt.  In the Form 8-K,  the  Company  stated its  intention  to provide  the
financial  information of Sunbelt required by Item 7 of Form 8-K in an amendment
to be filed within sixty days. On January 8, 1999,  the Company filed an amended
Form 8-K  ("Amendment  No. 1") with the Securities and Exchange  Commission.  In
Amendment No. 1, the Company stated that the financial  information  required by
Item 7 of Form 8-K would not be  required  and such  financial  information  was
excluded.  On March  12,  1999,  the  Company  filed a second  amended  Form 8-K
("Amendment  No. 2") with the Securities and Exchange  Commission.  In Amendment
No. 2, the Company stated that the financial  information  required by Item 7 of
Form 8-K would be required  because it had  incorrectly  excluded  approximately
$1.2 million in advances made to Sunbelt in order to pay dividends to its former
shareholders.   When  such  advances  are  taken  into  account,  Sunbelt  is  a
"significant"  business under Rule 11-01(b) of Regulation  S-X.  Amendment No. 2
contained Sunbelt's  financial  statements and the Company's pro forma financial
statements which reflected the Sunbelt acquisition.


                                       30


<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.

Date:  May 17, 1999               EUROPEAN MICRO HOLDINGS, INC.


                                  By: /s/ Harry D. Shields
                                      -------------------------------
                                      Harry D. Shields, Co-President









                                       31