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

                                    FORM 10-Q

(MARK ONE)

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

                For the quarterly period ended March 31, 2000

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

              For the transition period from _______ to _______.

                          Commission File No. 333-44393

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

<TABLE>
<CAPTION>
NEVADA                                                               65-0803752
------                                                               ----------
<S>                                                                  <C>
(State or Other Jurisdiction of Incorporation                        (I.R.S. Employer Identification No.)
or Organization)

6073 N.W. 167th Street, UNIT C-25, Miami, Florida                    33015
-------------------------------------------------                    -----
(Address of Principal Executive Offices)                             (Zip Code)
</TABLE>

                             (305) 825-2458
                             --------------
                (Issuer's Telephone Number, Including Area Code)

Check  whether  the  issuer:  (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act  during the past 12 months,  and (2)
has been  subject  to such  filing  requirements  for the  past 90  days.
Yes  (X)    No ( )

There  were  4,933,900  shares  of Common  Stock,  par  value  $0.01 per  share,
outstanding as of May 15, 2000.


<PAGE>


PART I

FINANCIAL INFORMATION

ITEM   FINANCIAL STATEMENTS.

             INDEX TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Consolidated Condensed Balance Sheets as of March 31, 2000 and June 30, 1999...3

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

Consolidated Statement of Shareholders' Equity for the nine months ended
March 31, 2000.................................................................5

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

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






                                       2
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.

<TABLE>
<CAPTION>
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                        (In thousands, except share data)

                                                                                  (UNAUDITED)
                                                                               MARCH 31, 2000          JUNE 30, 1999
                                                                       -----------------------------------------------------
<S>                                                                                     <C>                   <C>
                                ASSETS
CURRENT ASSETS:

     Cash                                                                               $2,726                $3,168
     Restricted Cash                                                                       381                   379
     Trade receivables, net                                                              9,934                14,938
     Due from related parties                                                               47                 1,128
     Inventories, net                                                                    7,820                 7,232
     Prepaid expenses                                                                      316                   402
     Other current assets                                                                  590                   562
                                                                                 -------------           -----------
         TOTAL CURRENT ASSETS                                                           21,814                27,809
     Property and equipment, net                                                         3,719                   612
     Goodwill, net                                                                       2,714                 1,675
     Investments in and advances to unconsolidated subsidiaries                            643                   753
     Other assets                                                                           34                     -
                                                                                 -------------           -----------
         TOTAL ASSETS                                                                  $28,924               $30,849
                                                                                 =============           ===========

                 LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:

     Short-term borrowings                                                              $7,294                $8,614
     Current portion of long-term borrowings                                             1,591                     -
     Trade payables                                                                      2,614                 3,734
     Accrued expenses and other current liabilities                                      1,996                 2,851
     Due to related parties                                                                  4                   633
     Income taxes payable                                                                  234                   383
                                                                                 -------------           -----------
         TOTAL CURRENT LIABILITIES                                                      13,733                16,215
     Long-term borrowings                                                                1,735                    23
     Other liabilities                                                                       -                   268
                                                                                 -------------           -----------
         TOTAL LIABILITIES                                                             $15,468               $16,506
                                                                                 -------------           -----------
SHAREHOLDERS' EQUITY:

     Preferred stock $0.01 par value shares:  1,000,000 authorized,
        No shares issued and outstanding                                                     -                     -
     Common stock $0.01 par value shares:  20,000,000 authorized,
        4,933,900 shares issued and outstanding                                             49                    49
     Additional paid-in capital                                                          9,177                 8,979
     Accumulated other comprehensive loss                                                 (307)                 (312)
     Retained earnings                                                                   4,537                 5,627
                                                                                 -------------           -----------
         TOTAL SHAREHOLDERS' EQUITY                                                     13,456                14,343
                                                                                 -------------           -----------
     COMMITMENTS AND CONTINGENCIES

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                    $28,924               $30,849
                                                                                 =============           ===========
</TABLE>

See accompanying notes to consolidated condensed financial statements.



                                       3
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

<TABLE>
<CAPTION>
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (Unaudited)

                                                                        THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                            MARCH 31,                         MARCH 31,
                                                                 --------------------------------- ---------------------------------
                                                                         2000            1999              2000            1999
                                                                         ----            ----              ----            ----
<S>                                                                   <C>             <C>               <C>             <C>
SALES:

     Net sales                                                        $23,917         $31,269           $89,313         $86,990
     Net sales to related parties                                         437           7,196             2,350           9,783
                                                                       ------          ------            ------           -----
         Total net sales                                               24,354          38,465            91,663          96,773
                                                                       ------          ------            ------           -----
COST OF GOODS SOLD:
     Cost of goods sold                                               (22,050)        (28,388)          (80,095)        (78,927)
     Cost of goods sold to related parties                               (449)         (7,148)           (2,311)         (9,714)
                                                                       ------          ------            ------           -----
         Total cost of goods sold                                     (22,499)        (35,536)          (82,406)        (88,641)
                                                                       ------          ------            ------           -----
GROSS PROFIT                                                            1,855           2,929             9,257           8,132

OPERATING EXPENSES:

         Selling, general and administrative expenses                  (3,323)         (2,831)           (9,747)         (6,698)
                                                                       ------          ------            ------           -----
INCOME (LOSS) FROM OPERATIONS                                          (1,468)              98             (490)          1,434

         Interest income                                                   10              18                70              65
         Interest expense                                                (148)            (95)             (676)           (215)
         Equity in net income (loss) of unconsolidated
            subsidiaries                                                   (3)              2                (3)            (45)
                                                                       ------          ------            ------           -----
INCOME (LOSS) BEFORE INCOME TAXES                                      (1,609)             23            (1,099)          1,239

     Income tax expense (benefit)                                        (301)              1                (9)            471
                                                                       ------          ------            ------           -----
NET INCOME (LOSS)                                                     $(1,308)            $22           $(1,090)           $768
                                                                       ======          ======            =======          -----
         Net income (loss) per share - basic                           $(0.26)          $0.00            $(0.22)          $0.15
                                                                       ======          ======            =======          -----
         Net income (loss) per share - diluted                         $(0.26)          $0.00            $(0.22)          $0.15
                                                                       ======          ======            =======          -----
</TABLE>

See accompanying notes to consolidated condensed financial statements.



                                       4
<PAGE>

                                 EUROPEAN MICRO HOLDINGS, INC.

<TABLE>
<CAPTION>
                           CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                  (In thousands, except share data)
                                             (Unaudited)

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

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

Comprehensive loss:
   Net loss                               -            -             -                   -             (1,090)           (1,090)
Other comprehensive income,
   foreign currency
   translation adjustment                 -            -             -                   5                  -                 5
                                  ---------         ----        ------              ------            -------           -------
   Total comprehensive
       loss                               -            -             -                   5             (1,090)           (1,085)
Adjustment to accrued offering
     costs                                -            -           156                   -                  -               156
Compensation charge in relation
     to share options issued to
     non-employees                        -            -            42                   -                  -                42
                                  ---------         ----        ------              ------            -------           -------
Balance at March 31, 2000         4,933,900          $49        $9,177               $(307)            $4,537           $13,456
                                  =========         ====        ======              ======            =======           =======
</TABLE>

See accompanying notes to consolidated condensed financial statements.



                                                 5
<PAGE>

                                    EUROPEAN MICRO HOLDINGS, INC.

<TABLE>
<CAPTION>
                           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                           (In thousands)
                                             (Unaudited)

                                                                                    NINE MONTHS ENDED MARCH 31,
                                                                        ----------------------------------------------------
                                                                                     2000                           1999
                                                                                     ----                           ----
<S>                                                                              <C>                                <C>
OPERATING ACTIVITIES:
Net income (loss)                                                                 $(1,090)                          $768
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
     Depreciation and amortization                                                    435                            278
     Amortization of expense related to contingent
        earn-out provisions                                                            47                              -
     Deferred income taxes                                                            (13)                           (14)
     Equity in net loss of unconsolidated subsidiaries                                  3                             45
     Compensation charge for non-employee stock options                                42                            156
CHANGES IN ASSETS AND LIABILITIES, NET OF EFFECTS FROM ACQUISITIONS
     Restricted cash                                                                    -                           (387)
     Trade receivables                                                              5,724                         (1,886)
     Due from related parties                                                       1,081                         (1,670)
     Inventories                                                                    1,329                         (7,022)
     Prepaid expenses and other current assets                                        294                          1,727
     Trade payables                                                                (2,266)                        (1,013)
     Accrued expenses and other current liabilities                                  (809)                          (800)
     Due to related parties                                                          (629)                         1,704
     Income taxes payable                                                            (149)                          (100)
                                                                                    -----                          -----
NET CASH PROVIDED BY (USED IN ) OPERATING ACTIVITIES                                3,999                         (8,214)
                                                                                    -----                          -----

INVESTING ACTIVITIES:

     Purchase of fixed assets                                                      (3,069)                          (213)
     Sale of fixed assets                                                              42                              -
     Payment for acquisition, net of cash acquired                                 (1,834)                          (819)
     Repayment (advances) to unconsolidated affiliate                                 100                           (350)
                                                                                    -----                          -----
NET CASH USED IN INVESTING ACTIVITIES                                              (4,761)                        (1,382)
                                                                                    -----                          -----
FINANCING ACTIVITIES:
     Short-term borrowings, net                                                    (2,568)                         7,215
     Proceeds from long-term borrowings                                             3,585                              -
     Repayment of long term borrowings                                               (628)
     Issuance of common stock, net                                                      -                            (25)
     Repayment of capital leases                                                      (58)                           (24)
                                                                                    -----                          -----
NET CASH PROVIDED BY FINANCING ACTIVITIES                                             331                          7,166
                                                                                    -----                          -----
     Exchange rate changes                                                            (11)                          (202)
                                                                                    -----                          -----
NET  DECREASE IN CASH:                                                               (442)                        (2,632)
     Cash at beginning of period                                                    3,168                          5,012
                                                                                    -----                          -----
CASH AT END OF PERIOD                                                              $2,726                         $2,380
                                                                                    =====                          =====




                                                 6
<PAGE>


NON-CASH INVESTING AND FINANCING ACTIVITIES:
Fair value of assets acquired                                                      $3,314                         $4,533
Goodwill                                                                            1,418                          1,705
Fair value of liabilities assumed                                                  (2,817)                        (4,322)
Notes issued for consideration                                                          0                          (964)
                                                                                    -----                          -----
Cash paid for acquisitions                                                         $1,915                           $952
Less cash acquired                                                                    (81)                          (133)
                                                                                    -----                          -----
Net cash paid for acquisitions                                                     $1,834                           $819
                                                                                    =====                          =====
Interest paid                                                                        $667                           $239
                                                                                    =====                          =====
Taxes paid                                                                           $182                           $567
                                                                                    =====                          =====
</TABLE>

See accompanying notes to consolidated condensed financial statements.













                                                 7
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

           NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


1     INTERIM FINANCIAL STATEMENTS

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

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

Certain  fiscal 1999  amounts have been  reclassified  to conform to the current
year presentation.

2     INVENTORY

Inventories consist of the following (in thousands):

                                               March 31, 2000     June 30, 1999
                                               --------------     -------------

Finished goods and goods for resale                    $7,904            $7,348
Less: Allowance for inventory obsolescence                (84)             (116)
                                                        -----             -----
                                                       $7,820            $7,232
                                                       ======            ======


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

                                               March 31, 2000     June 30, 1999
                                               --------------     -------------

Balance at beginning of period                           $116                $9
Foreign currency translation adjustment                     2                 -
Provision for obsolescence                                234               602
Amounts written off                                      (268)             (495)
                                                         ----              ----
Balance at end of period                                  $84              $116
                                                          ===              ====


3     PROPERTY AND EQUIPMENT

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

                                               March 31, 2000     June 30, 1999
                                               --------------     -------------

Buildings and leasehold improvements                   $2,797                $-
Furniture, fixtures and equipment                       1,521               994
Vehicles and other                                        453               416
                                                        -----             -----
                                                        4,771             1,410
Less: accumulated depreciation                         (1,052)             (798)
                                                        -----             -----
                                                       $3,719              $612
                                                       ======             =====


                                       8
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


3     PROPERTY AND EQUIPMENT  (CONTINUED)

On July 16, 1999,  European Micro Plc, a wholly-owned  subsidiary of the Company
("EUROPEAN MICRO UK"),  purchased the office building in which it had previously
leased space for a purchase price of 1,705,000  pounds  sterling  ($2,709,000 at
exchange rate on March 31, 2000).  The purchase  price was financed in part by a
loan in the amount of 1,312,000 pounds sterling  ($2,085,000 at exchange rate on
March 31, 2000).  This loan calls for monthly payments of principal and interest
in the amount of 15,588 pounds sterling  ($24,768 at March 31, 2000) and matures
in July 2009. The mortgage loan note bears interest at a fixed rate of 7.598%.

Depreciation  expense was $315,000 and $243,000 for the periods  ended March 31,
2000 and March 31, 1999, respectively.

4     GOODWILL

On October 26, 1998, European Micro UK acquired all of the outstanding shares of
capital stock of Sunbelt (UK) Limited  ("SUNBELT").  The Sunbelt  purchase price
(to be settled in pounds sterling) is comprised of a guaranteed  portion and two
contingent  earn-out  payments.  The guaranteed  portion of the purchase  price,
which was based upon  Sunbelt's  net book value at closing and a multiple of its
fiscal year 1998 pre-tax  earnings,  was 940,000 pounds sterling  (approximately
$1,493,000  at exchange  rate on March 31,  2000).  Of this  guaranteed  amount,
approximately  360,000 pounds  sterling was paid in cash at closing.  The unpaid
balance of the  guaranteed  consideration  includes a note payable to the former
40% Sunbelt  shareholder in the amount of 240,163 pounds  sterling  ($381,000 at
exchange rate on March 31, 2000) to be repaid in November 2005, subject to early
repayment at the option of the note holder at any time after June 1, 1999.  Such
note payable is secured by a cash account of equal amount at March 31, 2000. The
note  payable  and  the  cash  balances  are   reflected  on  the   accompanying
consolidated  condensed balance sheet at March 31, 2000, in accrued expenses and
other current liabilities and restricted cash, respectively. The Company has the
option of paying future amounts due to the former Sunbelt shareholders in common
stock of European Micro Holdings,  Inc. If the Company elects to pay any portion
of the purchase  price in shares of the Company's  common stock,  then Sunbelt'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 Sunbelt's  shareholders.  The Company also entered into employment agreements
with the two former shareholders of Sunbelt. The Company discontinued  Sunbelt's
Nova line of products  effective  January 31, 2000. With the closure of the Nova
line of products,  the employment  agreement with one of the former shareholders
was terminated.

During  November  1999,  purchase  accounting   adjustments  were  made  to  the
calculation of the guaranteed  portion and the two contingent  earn-out amounts.
These adjustments were derived from the recalculation of fiscal year 1998 pretax
earnings  of  Sunbelt  resulting  in a  reduction  of  166,000  pounds  sterling
($264,000 at exchange  rate on March 31,  2000) to goodwill.  The portion of the
guaranteed  consideration due at the end of the first contingent earn-out period
which ran from  November 1, 1998 to October 31, 1999,  was paid in November 1999
in the amount of 53,708 pounds  sterling  ($85,336 at exchange rate on March 31,
2000).  Also, the portion of the first  contingent  earn-out  payment related to
employee  retention and the volume of purchases  from the Far East,  was paid in
November  1999 in the amount of 190,820  pounds  sterling  ($303,194 at exchange
rate on March 31, 2000).

The unpaid balance of the guaranteed  purchase price of 152,656 pounds  sterling
($242,555 at exchange rate on March 31, 2000) is reflected in goodwill,  net and
accrued expenses and other current liabilities on the accompanying  consolidated
condensed  balance  sheet at March 31,  2000.  The  second  contingent  earn-out
payment  has not been  recognized  in the  accompanying  consolidated  condensed
financial  statements  as the payment of such amounts are not, in the opinion of
management, determinable beyond a reasonable doubt.


                                       9
<PAGE>

4     GOODWILL  (CONTINUED)

On November  12,  1998,  European  Micro UK  acquired  the assets of H&B Trading
International  BV  ("H&B").  The  acquisition  of  H&B  was  accounted  for as a
purchase.  The base purchase  price,  subject to  adjustment,  of  approximately
125,000 Dutch guilders ($54,000 at exchange rate on March 31, 2000) exceeded the
estimated  value of net assets acquired by  approximately  85,000 Dutch guilders
($37,000 at exchange  rate on March 31,  2000),  which is being  amortized  on a
straight-line basis over 20 years. If certain financial performance criteria are
met for the  fiscal  year  ended  June 30,  2000,  additional  consideration  of
approximately 75,000 Dutch guilders ($32,000 at exchange rate on March 31, 2000)
will be paid. The financial  criteria for the period ended June 30, 1999 was not
met, therefore,  the additional  consideration was not accrued or paid. The year
2000  contingent  consideration  has  not  been  reflected  in the  accompanying
consolidated  condensed financial  statements as the calculation of such amounts
are not  determinable  at this point in time.  The results of  operations of H&B
have been included in the  accompanying  financial  statements  from the date of
acquisition.

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

The  acquisition  of AMCC was  accounted  for as a purchase.  The base  purchase
price, inclusive of transaction costs, of approximately  $1,301,000 exceeded the
estimated fair market value of net assets  acquired by  approximately  $804,000,
which constitutes goodwill and which is being amortized on a straight-line basis
over 20 years. The results of operations of American Micro,  since  acquisition,
have been included in the accompanying  consolidated  financial statements.  The
contingent  earn-out  payment  relating to two times the after tax  earnings for
calendar  year 1999 of  $601,044  (2 x  $300,522)  was paid in March 2000 and is
reflected in goodwill,  net. The  contingent  earn-out  payment  relating to two
times the after tax earnings for calendar  year 2000 has not been  recognized in
the accompanying  consolidated condensed financial statements as the calculation
of such amounts are not determinable at this point in time.  Purchase accounting
adjustments have not been finalized.

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

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

Total net sales                    $122,515
Net income                             $813
Earnings per share:
   Basic                              $0.16
   Diluted                            $0.16

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



                                       10
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

           NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


4     GOODWILL  (CONTINUED)

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

                                             March 31, 2000
                                             --------------

Balance at beginning of period (7/1/99)              $1,675
Foreign currency translation                              5
Purchase accounting adjustments                        (264)
Additions                                             1,418
Amortization                                           (120)
                                                      -----
Balance at end of period (3/31/00)                   $2,714
                                                     ======


5     SHORT-TERM BORROWINGS

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

                                      March 31, 2000     June 30, 1999
                                      --------------     -------------

Bank lines of credit:
    European Micro UK facility                $    -            $1,581
    Nor'Easter Micro facility                    600                 -
    American Micro facility                    1,249                 -
                                               -----             -----
Total bank lines of credit                     1,849             1,581
Receivable financing                           4,768             7,033
Other short-term borrowings                      677                 -
                                               -----             -----
Total short-term borrowings                   $7,294            $8,614
                                              ======            ======


European Micro UK has a bank line of credit (the  "EUROPEAN  MICRO UK Facility")
which is secured by a mortgage  debenture on all the assets of European Micro UK
and is  subordinate  to the  receivable  financing and the capital  leases.  The
European  Micro UK  Facility is subject to review in July each year and has been
renewed to July 2000.  This  facility has total  availability  to the Company at
March 31, 2000 of 1.2 million pounds  sterling ($1.9 million at March 31, 2000).
Interest is charged on the bank line of credit at 1.25% over the bank  borrowing
rate of 6% at March 31, 2000 and 5% at June 30, 1999.

The Company also  obtained  two lines of credit on October 28, 1999,  to finance
operations  based in the  United  States.  American  Micro and  Nor'Easter  each
obtained a line of credit, secured by accounts receivable and inventory. Amounts
available  under each of the line of credit  agreements  are based upon eligible
accounts  receivable and  inventory,  up to a maximum  borrowing  amount of $1.5
million for each agreement. Each of these lines of credit matures on October 28,
2000,  and each bears  interest at 0.5% over the bank  borrowing rate of 9.0% at
March 31,  2000.  As partial  security for these loans,  Messrs.  Gallagher  and
Shields  pledged to the lender a portion of their  shares of common stock of the
Company.  In the event the Company  defaults on one or more of these loans,  the
lender may  foreclose  on all or a portion of the  pledged  securities.  Such an
event may cause a change of control in the Company because Messrs. Gallagher and
Shields together own 71% of the Company's outstanding common stock. The lines of
credit  agreements  include certain  financial and  non-financial  covenants and
restrictions.  The  agreements  also contain a provision  whereby the lender can
declare a default  based on  subjective  criteria.  As of March  31,  2000,  the
Company was not in  compliance  with certain of the  financial  covenants in the
agreements.  Given the Company's current and expected operating  results,  it is
likely that the Company will remain out of



                                       11
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.

           NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


5     SHORT-TERM BORROWINGS (CONTINUED)

compliance  with such  covenant  requirements.  As a result,  the  Company is in
discussion  with the lender to amend the  agreements and to adjust the financial
covenant  requirements.  There can be no  assurances  that the  Company  will be
successful in these negotiations.

Receivable  financing  represents  borrowings  of  European  Micro UK secured by
various  trade  receivables  totaling  $5.6  million at March 31,  2000 and $8.3
million at June 30, 1999.  Trade  receivables can be financed up to the lower of
85% of the value of the trade receivables balance or 6.2 million pounds sterling
at March 31,  2000  ($9.9  million  at March  31,  2000).  The trade  receivable
financing  increased from a maximum of 5.5 million  pounds  sterling at June 30,
1999 ($8.7 million at June 30, 1999).  This facility can be terminated by either
party  giving three  months'  notice.  The finance  company  which  provides the
receivable  financing  facility  has full  recourse  to  European  Micro UK with
respect to any  doubtful  or  unrecovered  amounts.  Interest  is charged on the
receivable  financing  balance at 1.25% above the bank  borrowing  rate of 6% at
March 31, 2000, and 5% at June 30, 1999.

European  Micro  UK also  had a  revolving  credit  agreement,  secured  against
inventory.  The facility  allowed  European Micro UK to borrow up to 3.5 million
pounds  sterling  ($5.6  million at March 31, 2000) to assist in the purchase of
inventory.  To date,  no  borrowings  have been drawn  down on this  line.  This
revolving  credit  agreement has expired and European Micro UK is negotiating to
renew the facility.

Other short-term  borrowings  represent various notes payable of American Micro.
The  maturity  dates of the notes  range  from on demand to June 30,  2000.  The
interest rates range from 10.5% to 12%.

6     LONG-TERM BORROWINGS

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

                                      March 31, 2000     June 30, 1999
                                      --------------     -------------

Mortgage loan note                            $2,007                $-
Term loan                                      1,250                 -
Other long-term borrowings                        69                23
                                              ------               ---
                                              $3,326               $23
Less current maturities of long-term
borrowings                                    (1,591)                -
                                              ------               ---
Total long-term borrowings                    $1,735               $23
                                              ======               ===



The  mortgage  loan note is  secured by a mortgage  on the  office  building  of
European Micro UK. The note calls for monthly payments of principal and interest
in the amount of 15,588 pounds sterling  ($24,768 at March 31, 2000) and matures
in July 2009.  The mortgage loan note bears  interest at a fixed rate of 7.598%.
The mortgage loan note includes certain  financial and  non-financial  covenants
and restrictions. The agreement also contains a provision whereby the lender can
declare a default based on  subjective  criteria.  The  financial  covenants are
measured using the financial results of European Micro UK as of each fiscal year
end.  Given European Micro UK's current and expected  operating  results,  it is
likely that European Micro UK will be out of compliance with one of the covenant
requirements at June 30, 2000. The Company is evaluating options to address this
expected instance of non-compliance.  See "Note 11 to the Consolidated Condensed
Financial Statements."



                                       12
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.

           NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


6     LONG-TERM BORROWINGS (CONTINUED)

The term loan was obtained on October 28, 1999, in the amount of $1,500,000. The
term loan is to be repaid with quarterly  payments of $125,000 over three years.
The term loan bears  interest at the  one-month  LIBOR plus two and  one-quarter
percentage  points (2.25%).  One-month LIBOR at March 31, 2000 was 6.1288%.  The
term loan is  secured by  substantially  all of the  assets of the  Company.  As
partial  security for this loan,  Messrs.  Gallagher and Shields  pledged to the
lender a portion of their shares of common  stock of the  Company.  In the event
the Company  defaults on this loan, the lender may foreclose on all or a portion
of the  pledged  securities.  Such an event may cause a change of control in the
Company because Messrs.  Gallagher and Shields together own 71% of the Company's
outstanding common stock.

The term loan  agreement  is with the same  lender as the  Nor'Easter  Micro and
American Micro line of credit facilities  discussed in Note 5. Further, the term
loan credit agreement contains similar loan covenant requirements.  As such, the
Company  was not in  compliance  with such  covenants  for the  March  31,  2000
reporting  period.  The Company has not received a waiver of the  non-compliance
with the financial  covenants,  therefore the total amount outstanding under the
term loan  agreement  is reflected  in current  maturities  of long term debt at
March 31, 2000. The agreement  also contains a provision  whereby the lender can
declare a default  based on  subjective  criteria.  The Company is in discussion
with the  lender to amend the  agreements  and  adjust  the  financial  covenant
requirements.  There can be no assurances that the Company will be successful in
these negotiations.

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

7     EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                           MARCH 31,                    MARCH 31,
                                                                 -----------------------------------------------------------
                                                                         2000           1999            2000          1999
                                                                         ----           ----            ----          ----
<S>                                                                 <C>            <C>            <C>            <C>
EARNINGS (LOSS)
Net income (in thousands)                                             $(1,308)            $22        $(1,090)          $768
                                                                    ---------      ---------      ---------      ---------
WEIGHTED AVERAGE NUMBER OF SHARES
Outstanding common stock during the period                          4,933,900      4,933,900      4,933,900      4,933,900
Contingently issuable shares                                           24,392         42,983         74,504         20,206
                                                                    ---------      ---------      ---------      ---------
BASIC WEIGHTED AVERAGE NUMBER OF SHARES                             4,958,292      4,976,883      5,008,404      4,954,106
Effect of dilutive stock options and other contingent shares                -         43,670              -         24,206
                                                                    ---------      ---------      ---------      ---------
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES                           4,958,292      5,020,553      5,008,404      4,978,312
                                                                    =========      =========      =========      =========

Basic earnings (loss) per share                                       $(0.26)          $0.00        $(0.22)          $0.15
                                                                    =========      =========      =========      =========
Diluted earnings (loss) per share                                     $(0.26)          $0.00        $(0.22)          $0.15
                                                                    =========      =========      =========      =========
</TABLE>






                                       13
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.

           NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


7     EARNINGS PER SHARE (CONTINUED)

During the  three-month  period ended March 31, 2000, the Company issued options
to purchase up to 10,000 shares of Common Stock at exercise  prices ranging from
$9.00 to $9.25 per share. The above dilutive earnings per share calculations for
the three-month and nine-month  periods ended March 31, 2000, exclude the effect
of options to purchase 329,000 shares of common stock at exercise prices ranging
from $10.00 to $12.00 per share, due to the fact they were anti-dilutive  (i.e.,
the exercise  price was greater than the average market price for the respective
periods). The above dilutive earnings per share calculations for the three-month
and  nine-month  periods ended March 31, 1999,  exclude the effect of options to
purchase 20,000 shares of common stock at an exercise price of $11.00 per share,
due to the fact they were  anti-dilutive.  Also see  "Note 4  (Goodwill)  to the
Consolidated  Condensed Financial  Statements" related to contingently  issuable
shares related to acquisitions. However, the effect of contingent shares related
to the payment  due after the first  contingent  earn-out  period of the Sunbelt
acquisition  has not been  included  in the three month  period  ended March 31,
2000, as such payment was paid in cash in November 1999.  Also the effect of the
contingent  shares  related to the second  contingent  earn-out  of the  Sunbelt
acquisition  are not included,  as the conditions  necessary for such contingent
shares to be issued have not been met as of March 31, 2000. However,  the effect
of contingent shares related to the guaranteed earn-out amount payable after the
second contingent  earn-out period is included.  The effect of contingent shares
related  to  the  first  earn-out  of  American  Micro  is not  included  in the
three-month  period  ended March 31,  2000,  as such payment was paid in cash in
March 2000. The effect of contingent  shares  related to the second  earn-out of
American Micro is not included.  The second  earn-out of American Micro is based
on two times the after-tax earnings of American Micro for calendar year 2000. As
such, the  calculation of the amount of such  contingent  shares to be issued is
not determinable.

8     RELATED PARTY TRANSACTIONS

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

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

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

                                    THREE MONTHS ENDED       NINE MONTHS ENDED
                                        MARCH 31,                MARCH 31,
                               -------------------------------------------------
                                      2000         1999        2000        1999
                                      ----         ----        ----        ----
 SALES TO:
 AMCC                                  N/A       $4,107         N/A      $4,508
 Technology Express                   $437        3,089      $2,350       5,275
                                    ------        -----      ------      ------
                                      $437       $7,196      $2,350      $9,783
                                    ======        =====      ======      ======
 PURCHASES FROM:
 AMCC                                  N/A         $790         N/A        $920
 Technology Express                 $1,407        1,712      $3,131      15,264
                                    ------        -----      ------      ------
                                    $1,407       $2,502      $3,131     $16,184
                                    ======        =====      ======      ======




                                       14
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

           NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


8     RELATED PARTY TRANSACTIONS (CONTINUED)

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

                                 MARCH 31, 2000     JUNE 30, 1999
                                 --------------     -------------

 AMCC                                       N/A              $974
 Technology Express                         $47               154
                                            ---               ---
                                            $47            $1,128
                                            ===            ======

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

                                 MARCH 31, 2000     JUNE 30, 1999
                                 --------------     -------------

 AMCC                                       N/A                $3
 Technology Express                          $4               630
                                             --               ---
                                             $4              $633
                                             ==              ====


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

AMCC

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

TECHNOLOGY EXPRESS

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



                                       15
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

           NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


9     BUSINESS TO BUSINESS ELECTRONIC COMMERCE STRATEGY

The Company has initiated a business to business  electronic  commerce strategy,
which is  focused  on  creating a global,  value-added,  information  technology
equipment and service  trading  community.  The company has hired Cap Gemini,  a
leading  European  management  consultancy and information  technology  services
firm, to assist it in the  implementation of this plan. The Company has incurred
the sum of 229,212  pounds  sterling  ($364,195  at  exchange  rate on March 31,
2000),  related to the feasibility  studies and business  process  design.  This
amount is  reflected  in  selling,  general and  administrative  expenses on the
accompanying  consolidated  condensed  Statement of Operations for the three and
nine months ended March 31, 2000 and 1999. The Company has  capitalized  the sum
of 48,809 pounds sterling ($77,553 at exchange rate on March 31, 2000),  related
to the actual  software  development.  This amount is  reflected in property and
equipment, net on the accompanying consolidated condensed balance sheet at March
31,  2000.  During  May  2000,  the  Company   temporarily  halted  the  ongoing
development  being performed by Cap Gemini until specific funding is obtained to
complete the project.

10    CONTINGENCIES

European  Micro UK and the  Company  have each  demanded  payment  from Big Blue
Europe, a 50% owned joint venture in which the Company has a capital  investment
at March 31, 2000 of  $143,000,  for their loans made in the amounts of $150,000
and  $350,000,  respectively.  Big Blue Europe is currently  under a court order
prohibiting  payment of these amounts.  The 50% shareholders of Big Blue Europe,
its principals, Jeff and Marie Alnwick, and Big Blue Europe, derivatively,  have
filed a lawsuit  against the Company,  European  Micro UK, John B. Gallagher and
Harry D. Shields alleging fraud, aiding and abetting fraud,  misappropriation of
trade secrets, breach of fiduciary duty, aiding and abetting breach of fiduciary
duty, breach of contract and tortious interference with contract.  The complaint
states that the  plaintiffs  seek $10  million or more in damages.  The suit was
filed in the United States  District Court of the Eastern  District of New York,
Case # 99 CV 7380  (E.D.N.Y.)  (ADS).  The factual  allegations  underlying  the
lawsuit stem from European Micro UK's joint venture interest in Big Blue Europe.
The Company has a pending  motion to dismiss the complaint and has requested the
New York court to refer the case to the courts of Holland  upon the  doctrine of
FORUM NON CONVENIENS. The Company believes that the allegations specified in the
complaint  are without  merit and intends to  vigorously  defend the suit.  As a
consequence of some of the allegations in such complaint,  Messrs. Gallagher and
Shields  and  European  Micro UK have filed an action in the United  Kingdom for
defamation  against the Alnwicks and others. For the three and nine months ended
March 31,  2000,  the  Company  has  incurred  $331,000  and  $537,000  of legal
expenses, respectively, related to such lawsuit.

11    LIQUIDITY

The Company has suffered  losses in the current quarter and is out of compliance
with loan  covenants of certain of its debt  agreements.  In  addition,  certain
other loan agreements contain  contractual  provisions which allow the lender to
accelerate  the maturity of such  borrowings.  These matters  raise  substantial
doubt  about the ability of the  Company to  continue  as a going  concern.  The
Company is in discussion  with the lender to amend the  agreements and to adjust
the financial  covenant  requirements  of the loan  agreements.  The Company has
delayed the business to business  electronic  commerce strategy (as discussed in
Note  9 to the  Consolidated  Condensed  Financial  Statements)  until  specific
funding is available.  Currently,  the Company is pursuing  specific funding for
the  business  to  business  electronic  commerce  strategy  through the venture
capital  markets in the United  States and  United  Kingdom.  Additionally,  the
Company is taking steps to reduce the average level of inventory,  thus reducing
its dependence on debt financing.



                                       16
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.


ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

INTRODUCTORY STATEMENTS

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

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

OVERVIEW

The Company is an independent distributor of microcomputer  products,  including
personal  computers,  memory modules,  disc drives and networking  products,  to
customers  mainly in Western  Europe and to customers  and to a related party in
the United States. The Company's  customers consist of more than 680 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.

The Company has initiated a business to business  electronic  commerce strategy,
which is  focused  on  creating a global,  value-added,  information  technology
equipment and service  trading  community.  The Company has hired Cap Gemini,  a
leading  European  management  consultancy and information  technology  services
firm, to assist it in the  implementation  of this plan. The Company has accrued
the sum of 229,212  pounds  sterling  ($364,195  at  exchange  rate on March 31,
2000),  related to the feasibility  studies and business  process  design.  This
amount is  reflected  in  selling,  general and  administrative  expenses on the
accompanying  consolidated  condensed  Statement of Operations for the three and
nine months ended March 31, 2000 and 1999. The Company has  capitalized  the sum
of 48,809 pounds sterling ($77,553 at exchange rate on March 31, 20000,  related
to the actual  software  development.  This amount is  reflected in property and
equipment, net on the accompanying consolidated condensed balance sheet at March
31, 2000. During May 2000, the Company  suspended the ongoing  development being
performed  by Cap Gemini  until  specific  funding is obtained  to complete  the
project.



                                       17
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

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

European  Micro  UK is the  parent  of  European  Micro  GmbH  ("EUROPEAN  MICRO
GERMANY"),  Sunbelt and European Micro B.V. ("EUROPEAN MICRO HOLLAND") and has a
50% joint  venture  interest  in Big Blue  Europe,  B.V.  ("BIG  BLUE  EUROPE").
European  Micro  Germany  was  organized  under the laws of  Germany in 1993 and
operates as a sales office in Dusseldorf, Germany. All products sold by European
Micro Germany are procured and shipped from the facilities of European Micro UK.
Sunbelt is a company  registered in England and Wales,  which was established in
1992 and is based in Wimbledon,  England.  Sunbelt  operated as a distributor of
microcomputer  products to dealers,  value-added  resellers  and mass  merchants
throughout  Western  Europe.  Except  for the  distribution  of its  Nova  brand
products,  Sunbelt's  distribution  operations were integrated with and into the
operations  of European  Micro UK.  Sunbelt  discontinued  the Nova product line
effective  January  31,  2000.  European  Micro  Holland  was formed in 1995 and
acquired the assets of H&B.  European Micro UK acquired these assets on November
12,  1998.  Big Blue Europe was  organized  under the laws of Holland in January
1997 and is a computer parts  distributor  with offices  located near Amsterdam,
Holland. Big Blue Europe has no affiliation with International Business Machines
Corporation.

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

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                              PERCENTAGE OF NET SALES

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

                                                        2000            1999               2000            1999
                                                        ----            ----               ----            ----
<S>                                                    <C>             <C>                <C>               <C>

Net sales to third parties                             98.2%           81.3%              97.4%             89.9%
Net sales to related parties                            1.8%           18.7%               2.6%             10.1%
                                                      -----           -----              -----             -----
Total net sales                                       100.0%          100.0%             100.0%            100.0%
                                                      -----           -----              -----             -----
Cost of goods sold to third parties                   (90.6%)         (73.8%)            (87.4%)           (81.6%)
Cost of goods sold to related parties                  (1.8%)         (18.6%)             (2.5%)           (10.0%)
                                                      -----           -----              -----             -----
Total cost of goods sold                              (92.4%)         (92.4%)            (89.9%)           (91.6%)
                                                      -----           -----              -----             -----
Gross profit                                            7.6%            7.6%              10.1%              8.4%
Total operating expenses                              (13.6%)          (7.3%)            (10.6%)            (6.9%)
                                                      -----           -----              -----             -----
Income (loss) from operations                          (6.0%)           0.3%              (0.5%)             1.5%

                                       18
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


Interest income                                         0.0%            0.1%               0.1%              0.1%
Interest expense                                       (0.6%)          (0.3%)             (0.8%)            (0.2%)
Equity in net income (loss) of unconsolidated
subsidiary                                             (0.0%)           0.0%               0.0%             (0.1%)
                                                      -----           -----              -----             -----
Income (loss) before income taxes                      (6.6%)           0.1%              (1.2%)             1.3%
Income tax expense (benefit)                           (1.2%)           0.0%              (0.0%)             0.5%
                                                      -----           -----              -----             -----
Net income (loss)                                      (5.4%)           0.1%              (1.2%)             0.8%
                                                      =====           =====              =====             =====
</TABLE>


THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999

TOTAL NET SALES.  Total net sales decreased $14.1 million,  or 36.7%, from $38.5
million in the  three-month  period ended March 31, 1999 to $24.4 million in the
comparable  period in 2000.  Excluding net sales to related  parties,  net sales
decreased $7.4 million,  or 23.5%, from $31.3 million in the three-month  period
ended March 31, 1999 to $23.9  million in the  comparable  period in 2000.  This
decrease was  attributable to a reduction of $5.3 million in the Premier Dealers
Club, a reduction of $300,000 from Sunbelt's Nova line of products,  a reduction
of $9.6 million from  European  Micro UK's trading  sales  (excluding  Sunbelt's
trading  sales) and a reduction  of $2.1  million in  Nor'Easter's  sales.  This
decrease  was  partially  offset by the  addition  of  Sunbelt's  trading  sales
(accounting for approximately $2.2 million),  the addition of Colchester's sales
(accounting for approximately $2.7 million) and the addition of American Micro's
sales (accounting for approximately $5.0 million)

Net  sales  to  related  parties  decreased  $6.8  million,  or  93.9%,  in  the
three-month period ended March 31, 2000 from the comparable period in 1999. This
decrease  is  attributable  to the  acquisition  of AMCC on  July 1,  1999,  and
therefore,  net sales to American  Micro are excluded  from net sales to related
party. Also, sales to Technology Express have decreased as product  availability
decreased.  Until July 1, 1999,  the  related  parties  consisted  of a group of
entities in which an  ownership  interest  was held by either of the two primary
shareholders of the Company,  John B. Gallagher or Harry D. Shields. See "Note 8
(Related  party   transactions)   to  the   Consolidated   Condensed   Financial
Statements." Since the acquisition of AMCC, the sole related party is Technology
Express,   Inc.  In  order  to  facilitate  fast  and  efficient   international
transactions,  the  Company  expects to  continue  to act as a supplier  for and
purchaser  from  Technology  Express.  Prices  for  purchases  from and sales to
Technology  Express  are  expected  to  remain  at one  percent  over  cost  but
exceptions may be made in times of short supply,  to cover assembly costs and to
reward one another for exceptional low cost purchases. The Company believes that
its  reliance on related  party  purchases  and sales will  continue to decline,
although the Company's  sales will be lower in future  periods if the Company is
unable to sell  product  to  Technology  Express  as it has  historically  done.
Likewise,  the Company's  profitability  may be lower in future periods if it is
unable to purchase products from Technology  Express because the Company may not
be able to obtain  such  product  from  other  sources  or if  available,  on as
favorable terms.

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

GROSS PROFIT.  Gross profit decreased $1.1 million,  or 36.7%, from $2.9 million
in the three-month period ended March 31, 1999 to $1.8 million in the comparable
period in 2000. Gross profit excluding related party transactions decreased $1.0
million,  or 35.2%, from $2.9 million in the three-month  period ended March 31,
1999 to $1.9 million the comparable  period in 2000.  This decrease is primarily
due to a  decrease  at  European  Micro UK of $1.6  million  and a  decrease  at
Nor'Easter of $200,000.  This  decrease was partially  offset by the addition of
Colchester with $220,000 in gross profit and the addition of American Micro with
$575,000 in gross profit.

Gross  profit   attributable  to  related  party  sales  was  $(12,000)  in  the
three-month  period  ended March 31,  2000.  This  represents  a gross margin of
approximately  (2.7%).  Gross profit  included a sale to  Technology  Express of
product at a price  below  cost.  As  discussed  above,  the mark-up on sales to
related parties is typically


                                       19
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

one percent over cost. Therefore,  the gross profit on sales to third parties is
typically higher than the gross profit earned on sales to related parties.

Gross margins  remained  constant at 7.6% in the three-month  period ended March
31,  1999  and in  the  comparable  period  in  2000.  Excluding  related  party
transactions,  gross margin decreased from 9.2% in the three-month  period ended
March 31,  1999 to 7.7% in the  comparable  period  in 2000.  This  decrease  is
related to a reduction in demand and price competition related to the slowdown.

Foreign  exchange  gains and losses,  net,  changed from a loss of $354,000 in
the  three-month  period  ended  March 31,  1999 to a loss of  $144,000 in the
comparable  period in 2000.  This favorable  movement was  attributable to the
weakening  of  the  U.K.  pound   sterling   relative  to  the  Euro  and  the
strengthening of the U.K. pound sterling against the U.S. dollar.

OPERATING  EXPENSES.  Operating  expenses  as a  percentage  of total  net sales
increased from 7.4% in the  three-month  period ended March 31, 1999 to 13.6% in
the  comparable  period in 2000.  This  increased  percentage  was the result of
increases in operating expenses,  primarily caused by $331,000 of legal expenses
incurred by the Company in connection  with the Big Blue lawsuit and $364,000 of
expenses  incurred with the feasibility  studies and business process design for
the  Company's  business to business  electronic  commerce  project.  Helping to
offset the increase in  operating  expenses  was a decrease in  commissions  and
bonus  payments to employees,  which are tied to the Company's  gross profit and
gross margin.

INTEREST  EXPENSE.  Interest  expense  increased  by  $53,000  from  $95,000  in
three-month  period ended March 31, 1999 to $148,000 in the comparable period in
2000. This was attributable to increased borrowings during the period because of
increased average accounts  receivable and inventory  balances,  the purchase of
the office building and the acquisitions of Sunbelt and AMCC.

INCOME TAXES.  Income taxes as a percentage of income (loss) before income taxes
decreased from 4.3% in the three-month  period ended March 31, 1999 to an income
tax benefit of 22% in the comparable  period in 2000. For the period ended March
31, 1999,  the Company had accrued a tax benefit  based on the estimate that the
Company would have  consolidated  U.S. taxable income for fiscal 1999.  However,
for the fiscal year ended June 30,  1999,  the  Company had a U.S.  consolidated
loss. The Company has not accrued a tax benefit for the U.S. operating losses in
the three-month  period ended March 31, 2000. For the  three-month  period ended
March 31, 2000,  European Micro UK incurred a loss from operations and therefore
accrued a tax benefit in the  three-month  period  based on  previous  operating
profits.

INTEREST IN JOINT  VENTURE.  The Company's  share of income (loss) from Big Blue
decreased from income of $2,000 in the  three-month  period ended March 31, 1999
to a loss of $(3,000) in the comparable period in 2000.

NINE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999

TOTAL NET SALES.  Total net sales  decreased $5.1 million,  or 5.3%,  from $96.8
million in the  nine-month  period ended March 31, 1999 to $91.7  million in the
comparable  period in 2000.  Excluding net sales to related  parties,  net sales
increased $2.3 million, or 2.7%, from $87 million in the nine-month period ended
March 31, 1999 to $89.3 million in the comparable  period in 2000. This increase
was  attributable  to the addition of Sunbelt's  trading sales  (accounting  for
approximately $5.4 million),  the addition of Colchester's sales (accounting for
approximately   $6.1  million)  and  the  addition  of  American  Micro's  sales
(accounting for approximately $14.4 million). This increase was partially offset
by a reduction of $18.6 million in European Micro UK's trading sales  (excluding
Sunbelt's trading sales), a decrease in the Premier Dealers Club (accounting for
approximately  $5.4  million) and a reduction  of $4.2  million in  Nor'Easter's
sales.

Net sales to related parties decreased $7.4 million, or 76.0%, in the nine-month
period ended March 31, 1999 from the comparable period in 1999. This decrease is
attributable  to the  acquisition of AMCC on July 1, 1999,  and  therefore,  net
sales to American  Micro are  excluded  from net sales to related  party.  Also,
sales to  Technology  Express have decrease as product  availability  decreased.
Until July 1, 1999,  the  related  parties  consisted  of a group of entities in
which an ownership  interest was held by either of the two primary  shareholders
of the  Company,  John B.  Gallagher or Harry D.  Shields.  See "Note 8 (Related
party transactions) to the Consolidated Condensed Financial Statements."

There can be no assurance that the Company will be able to maintain the level of
sales achieved in this period or past periods because of seasonal  variations in
the  demand  for  the  products  and  services  offered  by  the  Company,   the
introduction  of new hardware and software  technologies  and products  offering
improved  features  and  functionality,  the  introduction  of new  products and


                                       20
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

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

GROSS PROFIT.  Gross profit increased $1.1 million,  or 13.8%, from $8.1 million
in the nine-month  period ended March 31, 1999 to $9.2 million in the comparable
period in 2000. Gross profit excluding related party transactions increased $1.1
million,  or 14.3%,  from $8.1 million in the nine-month  period ended March 31,
1999 to $9.2 million the comparable  period in 2000.  This increase is primarily
due to the addition of Colchester with $400,000 in gross profit, the addition of
American  Micro with $1.6  million in gross  profit and a decrease  at  European
Micro UK of $900,000.

Gross profit  attributable  to related party sales was $38,000 in the nine-month
period ended March 31,  2000.  This  represents a gross margin of  approximately
1.6%. As discussed  above,  the mark-up on sales to related parties is typically
one percent over cost. Therefore,  the gross profit on sales to third parties is
typically higher than the gross profit earned on sales to related parties.

Gross margins  increased by 170 basis points from 8.4% in the nine-month  period
ended  March  31,  1999 to 10.1% in the  comparable  period  in 2000.  Excluding
related party  transactions,  gross margin increased from 9.3% in the nine-month
period  ended March 31,  1999 to 10.3% in the  comparable  period in 2000.  This
change is  related to the  shortage  of memory  products  in the  quarter  ended
December 31, 1999, resulting in higher selling prices and gross margin. However,
the increase was partially  offset by lower  selling  prices and gross margin on
most products in the quarter ended March 31, 2000.

Foreign  exchange  gains and losses,  net,  changed from a loss of $538,000 in
the  nine-month  period  ended  March 31,  1999 to a loss of  $226,000  in the
comparable  period in 2000.  This favorable  movement was  attributable to the
weakening  of  the  U.K.  pound   sterling   relative  to  the  Euro  and  the
strengthening of the U.K. pound sterling against the U.S. dollar.

OPERATING  EXPENSES.  Operating  expenses  as a  percentage  of total  net sales
increased  from 6.9% in the  nine-month  period ended March 31, 1999 to 10.6% in
the  comparable  period in 2000.  This  increased  percentage  was the result of
increases in operating expenses,  primarily caused by $537,000 of legal expenses
incurred by the Company in connection  with the Big Blue lawsuit and $364,000 of
expenses  incurred with the feasibility  studies and business process design for
the  Company's  business  to business  electronic  commerce  project.  Moreover,
American  Micro's  operating  expenses,  which were  included  in the  Company's
consolidated financial statements for period ended March 2000 had a higher level
of operating expenses relative to sales than that of the Company.

INTEREST  EXPENSE.  Interest  expense  increased  by $461,000  from  $215,000 in
nine-month  period ended March 31, 1999 to $676,000 in the comparable  period in
2000. This was attributable to increased borrowings during the period because of
increased average accounts  receivable and inventory  balances,  the purchase of
the office building and the acquisitions of Sunbelt and AMCC.

INCOME TAXES.  Income taxes as a percentage of income (loss) before income taxes
decreased  from 38% in the  nine-month  period ended March 31, 1999 to an income
tax  benefit of less than 1% in the  comparable  period in 2000.  For the period
ended  March 31,  1999,  the  Company  had  accrued a tax  benefit  based on the
estimate that the Company would have consolidated U.S. taxable income for fiscal
1999.  However,  for the fiscal year ended June 30, 1999, the Company had a U.S.
consolidated  loss.  The  Company  has not  accrued a tax  benefit  for the U.S.
operating  losses  in the  nine-month  period  ended  March  31,  2000.  For the
nine-month  period ended March 31, 2000 European  Micro UK has had income before
income taxes of  approximately  $730,000.  The management  chargebacks  from the
European Micro Holdings,  Inc. for the nine months ended March 31, 2000 are more
than the $730,000 in income.  Therefore,  for the nine-month  period ended March
31, 2000, European Micro UK has accrued a tax benefit of approximately $9,000.

INTEREST IN JOINT  VENTURE.  The Company's  share of income (loss) from Big Blue
decreased from a loss of $(45,000) in the nine-month period ended March 31, 1999
to a loss of $(3,000) in the comparable period in 2000.

SEASONALITY

The Company  typically  experiences  variability  in its total net sales and net
income on a quarterly basis as a result of many factors.  These include, but are
not limited to,  seasonal  variations  in demand for the  products  and services
offered  by  the  Company,   the  introduction  of  new  hardware  and  software
technologies and products  offering  improved  features and  functionality,  the


                                       21
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

introduction  of new products  and services by the Company and its  competitors,
the loss or consolidation of a significant supplier or customer,  changes in the
level of operating expenses,  inventory adjustments,  product supply constraints
and competitive conditions,  including pricing, interest rate fluctuations,  the
impact of acquisitions,  currency  fluctuations and general economic conditions.
Historical  operating  results  have  reflected a reduction  in demand in Europe
during the summer months.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  primary cash  requirements  are for operating  expenses,  funding
accounts receivable, the purchase of inventory to support growth, taking greater
advantage  of  available  cash  discounts  offered by  certain of the  Company's
suppliers   for  early  payment  and  making   acquisitions.   The  Company  has
historically  funded these cash  requirements  through a  combination  of loans,
internally  generated  cash  flow and the net  proceeds  of its  initial  public
offering.

Short-term  working  capital  requirements  of European Micro UK are funded by a
combination  of line of credit  facilities  together  with  accounts  receivable
financing.  In both  cases,  the  amounts  drawn  down  accrue  the same rate of
interest based on a markup over the bank  borrowing rate in the United  Kingdom.
The bank line of credit was 1.2 million pounds  sterling ($1.9 million) at March
31, 2000. The accounts receivable financing provides for a borrowing base of 85%
of  accounts  receivable,  with a limit of 6.2  million  pounds  sterling  ($9.9
million on March 31, 2000). The limit on trade receivables  financing  increased
from a maximum of 5.5 million pounds  sterling at June 30, 1999 ($8.7 million at
June 30, 1999). European Micro UK also had a revolving credit agreement, secured
against  inventory.  The facility  allowed European Micro UK to borrow up to 3.5
million  pounds  sterling  ($5.6  million  at March  31,  2000) to assist in the
purchase of inventory. To date, no borrowings have been drawn down on this line.
This revolving credit agreement has expired and European Micro UK is negotiating
to renew.

Short-term working capital requirements of the Company's operations based in the
United States are funded by two lines of credit.  On October 29, 1999,  American
Micro and  Nor'Easter  each  obtained  a line of  credit,  secured  by  accounts
receivable and  inventory.  Amounts  available  under each of the line of credit
agreements are based upon eligible  accounts  receivable and inventory,  up to a
maximum borrowing amount of $1.5 million for each agreement. Each of these lines
of credit  matures on October 28, 2000, and each bears interest at 0.5% over the
bank  borrowing  rate of 9.0% at March 31, 2000.  As partial  security for these
loans,  Messrs.  Gallagher and Shields  pledged to the lender a portion of their
shares of common stock of the Company.  In the event the Company defaults on one
or more of these  loans,  the  lender may  foreclose  on all or a portion of the
pledged  securities.  Such an event may cause a change of control in the Company
because  Messrs.  Gallagher  and  Shields  together  own  71% of  the  Company's
outstanding  common  stock.  The  lines of  credit  agreements  include  certain
financial and  non-financial  covenants and  restrictions.  The agreements  also
contain a provision whereby the lender can declare a default based on subjective
criteria.  As of March 31, 2000, the Company was not in compliance  with certain
of the financial covenants in the agreements. The Company is in discussions with
the  lender  to  amend  the  agreements   and  adjust  the  financial   covenant
requirements.  There can be no assurance  that the Company will be successful in
these negotiations.

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

Certain  long-term  funding is  supplied  to the  Company in the form of capital
lease  agreements and term loans.  The lease  agreements are secured by vehicles
owned by the Company.  The agreements are usually for 36 months from the date of
purchase and are typically for 80% of the purchase value of the vehicle. All but
two of the  agreements  are subject to variable rate  interest.  As of March 31,
2000, the borrowings were $68,000,  of which $25,000 was due after more than one
year.

A term loan was obtained on October 28, 1999, in the amount of  $1,500,000.  The
term loan is to be repaid with quarterly  payments of $125,000 over three years.
The term loan bears  interest at the  one-month  LIBOR plus two and  one-quarter
percentage  points (2.25%).  One-month LIBOR at March 31, 2000 was 6.1325%.  Two
payments  have been made,  bringing the balance down to  $1,250,000 at March 31,
2000.  The term  loan is  secured  by  substantially  all of the  assets  of the
Company.  As partial  security  for this loan,  Messrs.  Gallagher  and  Shields
pledged to the lender a portion of their  shares of common stock of the Company.
Messrs.  Gallagher and Shields have also personally guaranteed a portion of this
term  loan.  In the event the  Company  defaults  on this  loan,  the lender may
foreclose on all or a portion of the pledged securities. Such an event may cause
a change of  control  in the  Company  because  Messrs.  Gallagher  and  Shields
together  own 71% of the  Company's  outstanding  common  stock.  The term  loan


                                       22
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

agreement   includes   certain   financial  and   non-financial   covenants  and
restrictions.  The agreement  also  contains a provision  whereby the lender can
declare a default based on subjective criteria.  The term loan agreement is with
the same  lender as the  Nor'easter  Micro  and  American  Micro  line of credit
facilities  discussed above.  Further,  the term loan credit agreement  contains
similar loan covenant  requirements.  As such, the Company was not in compliance
for the March  31,  2000  reporting  period,  and  therefore  the  total  amount
outstanding under the term loan agreement is reflected in current  maturities of
long-term debt at March 31, 2000.  The Company is in discussion  with the lender
to amend the agreements and adjust the financial  covenant  requirements.  There
can be no assurances that the Company will be successful in these negotiations.

On July 1, 1999,  the Company  acquired AMCC for a purchase  price of $1,131,000
plus an earn-out.  See "Related Party Transactions." The portion of the purchase
price paid at closing was funded  through the  Company's  working  capital.  The
contingent  earn-out  payment  relating to two times the after tax  earnings for
calendar year 1999 of 601,044 was paid in March. The remaining  earn-out portion
of the purchase  price is expected to be funded  through the  Company's  working
capital or additional borrowings.

On July 16, 1999,  European  Micro UK purchased the office  building in which it
had previously been leasing space for 1,705,000  pounds sterling  ($2,709,000 at
March 31, 2000). The purchase price was financed in part by a loan in the amount
of 1,312,000 pounds sterling ($2,085,000 at March 31, 2000). This loan calls for
monthly  payments  of  principal  and  interest  in the amount of 15,588  pounds
sterling ($24,768 at March 31, 2000) and matures in July 2009. The mortgage loan
note bears  interest at a fixed rate of 7.598%.  The mortgage loan note includes
certain  financial and non-financial  covenants and restrictions.  The agreement
also  contains a provision  whereby  the lender can  declare a default  based on
subjective  criteria.  The financial  covenants are measured using the financial
results of European  Micro UK as of each fiscal year end.  Given  European Micro
UK's current and expected operating results, it is likely that European Micro UK
will be out of  compliance  with one of the  covenant  requirements  at June 30,
2000.  The Company is evaluating  options to address this  expected  instance of
non-compliance.   See  "Note  11  to  the   Consolidated   Condensed   Financial
Statements."

The Company has suffered  losses in the current quarter and is out of compliance
with loan  covenants of certain of its debt  agreements.  In  addition,  certain
other loan agreements contain  contractual  provisions which allow the lender to
accelerate  the maturity of such  borrowings.  These matters  raise  substantial
doubt  about the ability of the  Company to  continue  as a going  concern.  The
Company is in discussion  with the lender to amend the  agreements and to adjust
the financial  covenant  requirements  of the loan  agreements.  The Company has
delayed the business to business  electronic  commerce  strategy  until specific
funding is available. Currently the Company is pursuing specific funding for the
business to business  electronic  commerce  strategy through the venture capital
markets in the United States and United  Kingdom.  Additionally,  the Company is
taking  steps to reduce  the  average  level of  inventory,  thus  reducing  its
dependence on debt financing.

Net cash provided by operating  activities during the nine-month period to March
31, 2000 amounted to $4.0 million.  Significant  factors  providing  cash were a
decrease  in  trade  receivables,  net of  effects  from  acquisitions,  of $5.7
million,  a decrease in  inventory,  net of effects from  acquisitions,  of $1.3
million  and a  decrease  in due  from  related  parties,  net of  effects  from
acquisitions,  of $1.1  million.  The amount of cash  provided by the  Company's
operations  was partially  offset by a net loss of $1.1 million,  a reduction in
trade payables, net of effects from acquisition, of $2.3 million and a reduction
in accrued  expenses  and other  current  liabilities,  net of the effects  from
acquisitions, of $800,000.

Cash used in  investing  activities  amounted to $4.8  million.  This  primarily
consisted of expenditures on fixed assets of $3.1 million,  largely the purchase
of European  Micro UK's office  building  and the  acquisition  of AMCC for $1.8
million.

Cash  provided by  financing  activities  amounted to $331,000.  This  primarily
consisted  of $2.6  million  used to pay down  short-term  borrowings,  net. The
Company  also used  $300,000 to pay down long term  borrowings  assumed from the
acquisition of AMCC,  $250,000 to pay down the term loan and $77,000 to pay down
the mortgage loan on the building.  This was offset by $2.1 million  provided by
proceeds from the mortgage loan secured by European  Micro UK's office  building
and $1.5 million provided by a term loan.

Overall,  the Company  experienced  a net  decrease in cash of $442,000  for the
nine-month period ended March 31, 2000.



                                       23
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

ASSET MANAGEMENT

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

ACCOUNTS  RECEIVABLE.  The Company sells its products and services to a customer
base of more than 680 value-added resellers,  corporate resellers, retailers and
direct  marketers.  The Company offers credit terms to qualifying  customers and
also  sells on a pre-pay  and  cash-on-delivery  basis.  With  respect to credit
sales,  the  Company  attempts to control  its bad debt  exposure by  monitoring
customers'  creditworthiness  and, where practicable,  through  participation in
credit  associations that provide customer credit rating information for certain
accounts.  Also,  substantially all of European Micro UK's accounts  receivables
are insured.  Nor'Easter,  Colchester and American Micro generally do not insure
their accounts receivable.

CURRENCY RISK MANAGEMENT

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

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

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

DERIVATIVE  INSTRUMENTS.  SFAS No. 133, "Accounting for Derivate Instruments and
Hedging Activities",  was issued in June 1998 and as amended by SFAS No. 137, is
effective  for  fiscal  years  beginning  after  June  15,  2000.  The  standard
establishes  accounting and reporting  standards for derivative  instruments and
hedging  activities.  The Company is currently  reviewing  the likely  financial
statement impact and the level of disclosure currently provided in its financial
statements.

ECONOMIC AND MONETARY  UNION.  On January 1, 1999,  eleven of the fifteen member
countries of the European Union established fixed conversion rates between their
existing  sovereign  currencies  and a new  currency  called the  "Euro."  These
countries adopted the Euro as their common legal currency on that date. The Euro
is trading on currency  exchanges  and is available  for non-cash  transactions.
Until  January 1, 2002,  the  existing  sovereign  currencies  will remain legal
tender in these countries.  On January 1, 2002, the Euro is scheduled to replace
the sovereign  legal  currencies of these  countries.  Through the operations of
European Micro UK, the Company has  significant  operations  within the European
Union,  including  many of the  countries  which  adopted the Euro.  The Company
continues  to  evaluate  the  impact  that the Euro is having on its  continuing
business operations and no assurances can be given that the Euro will not have a
material  adverse  affect on the  Company's  business,  financial  condition and
results of operations.  However,  the Company does not expect the Euro to have a
material  affect on its competitive  position as a result of price  transparency
within  the  European  Union  because  the  Company  does not  rely on  currency
imbalances in purchasing inventory from within the European Union. On an ongoing


                                       24
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

basis,  the Company cannot  accurately  predict the impact the Euro will have on
currency  exchange  rates or the  Company's  currency  exchange  rate risk.  The
Internal  Revenue Service  ("IRS") has requested  comments on various tax issues
raised by the Euro conversion. The IRS is expected to publish guidelines on this
issue soon and,  until such time,  the Company  cannot  predict  whether the IRS
guidelines will have any tax consequences on the Company.

RELATED PARTY TRANSACTIONS

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

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

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

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

EXCHANGE RATE SENSITIVITY

On March 31, 2000, the Company did not have any open forward exchange contracts.
Gains and losses in respect of the foreign exchange transactions were as follows
(in thousands):

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED MARCH 31,              NINE MONTHS ENDED MARCH 31,
                                              2000               1999                  2000               1999
                                      ----------------------------------------------------------------------------------
<S>                                          <C>                <C>                  <C>                 <C>
Loss on foreign exchange
transactions                                 $(144)             $(354)               $(226)              $(538)
                                             =====              =====                =====               =====
</TABLE>





                                       25
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


PART II

ITEM 1.     LEGAL PROCEEDINGS.

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

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS.

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

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES.

The Company  obtained a term loan and two lines of credit on October  28,  1999.
The term loan is in the amount of $1.5  million and is to be repaid in quarterly
installments  of  $125,000  each over three  years.  The term loan is secured by
substantially all of the assets of the Company. The two lines of credit are used
to finance  the  operations  American  Micro and  Nor'Easter  and are secured by
accounts receivable and inventory.  As partial security for these loans, Messrs.
Gallagher and Shields  pledged to the lender a portion of their shares of common
stock of the Company. For a detailed description of the term loan see "Note 6 to
the Consolidated  Condensed Financial Statements - Long-term  borrowings." For a
detailed  description of the two lines of credit see "Note 5 to the Consolidated
Condensed Financial Statements - Short-term borrowings."

Each of the term loan and the two lines of credit include certain  financial and
non-financial  covenants  and  restrictions.   The  agreements  also  contain  a
provision whereby the lender can declare a default based on subjective criteria.
As of March 31, 2000,  the Company was not in  compliance  with the "Minimum Net
Equity" and "Interest Coverage Ratio" Covenants. Given the Company's current and
expected  operating  results,  it is likely that the Company  will remain out of
compliance with such covenants at fiscal year end.

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

None

ITEM 5.     OTHER INFORMATION.

None.



                                       26
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

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

(a)   Exhibits.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



                                                 27
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

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

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

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

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

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

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

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

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

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

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

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

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



                                                 28
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

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

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

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

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

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

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

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

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

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

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

    10.25      Specific Agreement for the Provision of             Provided herewith.
               Professional Services dated as of March 17, 2000
               between the Company and Cap Gemini UK plc

    11.01      Statement re: Computation of Earnings               Provided herewith.

    15.01      Letter re: Unaudited Financial Information          Provided herewith.

    18.01      Letter re Change in Accounting Principles           Not applicable.

    19.01      Report Furnished to Security Holders                Not applicable.

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

    23.01      Consents of experts and counsel                     Not applicable.

    24.01      Power of Attorney                                   Not applicable.

    27.01      Financial Data Schedule                             Provided herewith.
</TABLE>

(b)   Reports on Form 8-K.



                                       29
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

None.







                                       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.

Dated:      May 15, 2000                   EUROPEAN MICRO HOLDINGS, INC.

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






















                                       31