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


                                    FORM 10-Q

(MARK ONE)

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

              For the quarterly period ended September 30, 1999

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

              For the transition period from _______ to _______.

                        Commission File No. 333-44393

                        EUROPEAN MICRO HOLDINGS, INC.
                        ----------------------------
               (Name of Registrant as Specified in Its Charter)
<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 November 12, 1999.


<PAGE>


PART I


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

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

             INDEX TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


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

Consolidated Condensed Statements of Operations for the three
months ended September 30, 1999 and 1998.....................................4

Consolidated Statement of Changes in Shareholders' Equity
for the three months ended September 30, 1999................................5

Consolidated Condensed Statements of Cash Flows for the three months
ended September 30, 1999 and 1998............................................6

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



                                       2
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.


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



                                                    (UNAUDITED)
                                                  SEPTEMBER 30,   JUNE 30, 1999
                                                           1999
                                                --------------------------------
                     ASSETS
CURRENT ASSETS:
   Cash                                                  $5,675          $3,168
   Restricted Cash                                          397             379
   Trade receivables, net                                14,317          14,938
   Due from related parties                                   -           1,128
   Inventories, net                                       7,409           7,232
   Prepaid expenses                                         502             402
   Other current assets                                     569             562
                                                    -----------    ------------
      TOTAL CURRENT ASSETS                               28,869          27,809
   Property and equipment, net                            3,852             612
   Goodwill, net                                          2,423           1,675
   Investments in and advances to                           507             503
      unconsolidated subsidiaries                   -----------    ------------
      TOTAL ASSETS                                      $35,651         $30,599
                                                      ---------       ---------



      LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Short-term borrowings                                  $9,090         $8,614
   Trade payables                                          5,027          3,484
   Accrued expenses and other current
      liabilities                                          2,140          2,851
   Due to related parties                                    928            633
   Income taxes payable                                      677            383
                                                    ------------   ------------
      TOTAL CURRENT LIABILITIES                           17,862         15,965
   Long-term borrowings                                    2,434             23
   Other liabilities                                         280            268
                                                    ------------   ------------
      TOTAL LIABILITIES                                   20,576         16,256
                                                      ----------     ----------
SHAREHOLDERS' EQUITY:
   Preferred stock $0.01 par value shares:
      1,000,000 authorized,  no shares issued
      and outstanding                                          -              -
   Common stock $0.01 par value shares:
      20,000,000 authorized, Shares issued and
      outstanding 4,933,900                                   49             49
   Additional paid-in capital                              9,149          8,979
   Accumulated other comprehensive income (loss)              43          (312)
   Retained earnings                                       5,834          5,627
                                                    ------------   ------------
      TOTAL SHAREHOLDERS' EQUITY                          15,075         14,343
                                                     -----------    -----------

   COMMITMENTS, CONTINGENCIES AND SUBSEQUENT
      EVENTS                                                   -              -

   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY            $35,651        $30,599
                                                     ===========    ===========

See accompanying notes to consolidated condensed financial statements.



                                       3
<PAGE>


                         EUROPEAN MICRO HOLDINGS, INC.



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

                                                          (UNAUDITED)
                                                THREE MONTHS ENDED SEPTEMBER 30,
                                                 ------------------------------
                                                      1999              1998
                                                      ----              ----
SALES:
   Net sales                                       $31,745           $27,781
   Net sales to related parties                      1,019             1,516

                                                   -------            ------
      Total net sales                               32,764            29,297
                                                   -------            ------
COST OF GOODS SOLD:
   Cost of goods sold                             (28,076)          (24,854)
   Cost of goods sold to related parties             (991)           (1,498)

                                                   -------          --------
      Total cost of goods sold                    (29,067)          (26,352)

                                                   -------          --------
GROSS PROFIT                                         3,697             2,945

OPERATING EXPENSES:
      Selling, general and administrative
        expenses                                   (3,066)           (1,717)

                                                   -------          --------
      Total operating expenses                     (3,066)           (1,717)


                                                   -------          --------
INCOME FROM OPERATIONS                                 631             1,228

      Interest income                                   39                36
      Interest expense                               (219)              (82)
      Equity in net loss of unconsolidated
        subsidiaries                                   (2)              (28)

                                                   -------          --------
INCOME BEFORE INCOME TAXES                             449             1,154

      Income tax expense                             (242)             (432)

                                                   -------          --------
NET INCOME                                            $207              $722
                                                   =======          ========

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

See accompanying notes to consolidated condensed financial statements.



                                       4
<PAGE>


                         EUROPEAN MICRO HOLDINGS, INC.

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

<TABLE>
<CAPTION>
                         EUROPEAN MICRO HOLDINGS, INC.
<S>                           <C>          <C>               <C>            <C>                 <C>            <C>


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

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

Comprehensive Income:
   Net income                      -             -                  -                 -              207         207
   Other comprehensive
     income, foreign
     currency
     translation
     adjustment                    -             -                  -               355               -          355
                                                                                -------           -------    -------
   Total comprehensive
     income                        -             -                  -               355              207         562
Adjustment to accrued
   offering costs                  -             -                156                 -                -         156
Compensation charge in
   relation to share
   options issued to
   non-employees                   -             -                 14                 -                -          14
                              ------------------------------------------------------------------------------------------
Balance at September
   30, 1999                   4,933,900        $49             $9,149               $43           $5,834     $15,075
                              ==========================================================================================


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



                                       5
<PAGE>


<TABLE>
<CAPTION>

                         EUROPEAN MICRO HOLDINGS, INC.

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                                             (UNAUDITED)
                                                  THREE MONTHS ENDED SEPTEMBER 30,
                                                 ------------------------------------
<S>                                                      <C>                  <C>

                                                         1999                 1998
                                                         ----                 ----
OPERATING ACTIVITIES:
Net income                                               $207                 $722
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES
   Depreciation and amortization                          134                   65
   Amortization of expense related to
     contingent earn-out provisions                        47                    -
   Deferred income taxes                                  (7)                  (6)
   Equity in net loss of unconsolidated
     subsidiaries                                           2                   28
   Compensation charge for non-employee stock
     options                                               14                   41
CHANGES IN ASSETS AND LIABILITIES, NET OF
EFFECTS FROM ACQUISITIONS
   Trade receivables                                    1,341              (1,706)
   Due from related parties                             1,128                (442)
   Inventories                                          1,740              (3,732)
   Prepaid expenses and other current assets              157                2,134
   Trade payables                                         397                  899
   Due to related parties                                 295                (229)
   Income taxes payable                                   294                 (59)
   Accrued expenses and other current
     liabilities                                         (622)                341
                                                        ------              ------

NET CASH PROVIDED BY (USED IN) OPERATING                5,127              (1,944)
ACTIVITIES                                            -------              -------

INVESTING ACTIVITIES:
   Purchase of fixed assets                           (2,998)                 (54)
   Sale of fixed assets                                    21                    -
   Payment for acquisition, net of cash acquired      (1,220)                    -
                                                      -------              -------

NET CASH USED IN INVESTING ACTIVITIES                 (4,197)                 (54)
                                                      -------              -------

FINANCING ACTIVITIES:
   Short-term borrowings, net                         (1,073)                  468
   Proceeds from long-term borrowings                   2,429                    -
   Issuance of common stock, net                            -                 (25)
   Repayment of capital leases, net                      (20)                 (18)

                                                      -------              -------
NET CASH PROVIDED BY FINANCING ACTIVITIES               1,336                  425

                                                      -------              -------
   Exchange rate changes                                  241                  140

                                                      -------              -------
NET  INCREASE (DECREASE) IN CASH:                       2,507              (1,433)
   Cash at beginning of period                          3,168                5,012

                                                      -------              -------
CASH AT END OF PERIOD                                  $5,675               $3,579
                                                       ======               ======

</TABLE>

                                       6
<PAGE>


                          EUROPEAN MICROHOLDINGS, INC.

<TABLE>
<CAPTION>

<S>                                                    <C>                      <C>

Non-cash investing and financing activities:
Fair value of assets acquired                           3,314                    -
Goodwill                                                  804                    -
Fair value of liabilities assumed                     (2,817)                    -

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

                                                      --------              ------
Net cash paid for acquisitions                         $1,220                    -

                                                      ========              ======
Interest paid                                            $219                  $65

                                                      ========              ======
Taxes paid                                                 $5                 $391

                                                      ========              ======

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



                                       7
<PAGE>



                          EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



1     INTERIM FINANCIAL STATEMENTS

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

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

2     INVENTORY

Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>

                                                  SEPTEMBER 30, 1999     JUNE 30, 1999
                                                  ------------------     -------------

<S>                                                       <C>               <C>

Finished goods and goods for resale                       $7,470            $7,348
Less: Allowance for inventory obsolescence                  (61)             (116)
                                                         -------           -------

                                                          $7,409            $7,232

                                                         =======            ======

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

                                                  SEPTEMBER 30, 1999     JUNE 30, 1999
                                                  ------------------     -------------

Balance at beginning of period                              $116                $9
Foreign currency translation adjustment                        3                 -
Provision for obsolescence                                    53               602
Amounts written off                                        (111)             (495)

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

Balance at end of period                                     $61              $116

                                                          =======          =======
3     PROPERTY AND EQUIPMENT

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

                                                  SEPTEMBER 30, 1999     JUNE 30, 1999
                                                  ------------------     -------------

Buildings and leasehold improvements                      $2,899                $-
Furniture, fixtures and equipment                          1,455               994
Vehicles and other                                           430               416

                                                         -------             --------
                                                           4,784             1,410
Less: accumulated depreciation                             (932)             (798)

                                                         -------             --------
                                                          $3,852              $612

                                                         =======             ========
</TABLE>

                                       8
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO BE 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  ($2,815,000 at
September  30, 1999).  The purchase  price was financed in part by a loan in the
amount of 1,312,000  pounds  sterling  ($2,166,000  at September 30, 1999) at an
annual  interest  rate equal to the  one-month  London  Interbank  Offering Rate
("LIBOR") plus one  percentage  point (1.0%),  payable over ten years.  LIBOR at
September 30, 1999 was 5.4%.

Depreciation and  amortization  expense was $101,000 and $65,000 for the periods
ended September 30, 1999 and September 30, 1998, respectively.

4     GOODWILL

On October 26, 1998, European Micro UK acquired all of the outstanding shares of
capital stock of Sunbelt (UK) Limited  ("SUNBELT").  The Sunbelt  purchase price
(to be settled in pounds sterling) is comprised of a guaranteed  portion and two
contingent  earn-out  payments.  The guaranteed  portion of the purchase  price,
which was based upon  Sunbelt's  net book value at closing and a multiple of its
fiscal year 1998 pre-tax  earnings,  was 940,000 pounds sterling  (approximately
$1,550,000 at exchange rate on September 30, 1999). Of this  guaranteed  amount,
approximately 360,000 pounds sterling  (approximately  $594,000 at exchange rate
on September  30, 1999) was paid in cash at closing.  The unpaid  balance of the
guaranteed  consideration  includes a note  payable  to the  former 40%  Sunbelt
shareholder in the amount of 240,163 pounds sterling  ($397,000 at exchange rate
on September 30, 1999) to be repaid in November 2005, subject to early repayment
at the  option of the note  holder at any time  after  June 1,  1999.  Such note
payable is secured by a cash account of equal amount at September 30, 1999.  The
note  payable  and  the  cash  balances  are   reflected  on  the   accompanying
consolidated  condensed balance sheet at September 30, 1999, in accrued expenses
and other current liabilities and restricted cash, respectively. The Company has
the option of paying all future amounts due to the former  Sunbelt  shareholders
in common stock of European Micro  Holdings,  Inc. The Company also entered into
employment agreements with the two former shareholders of Sunbelt.

The remainder of the unpaid  guaranteed  consideration of approximately  339,614
pounds sterling  ($560,000 at exchange rate on September 30, 1999), plus accrued
interest,  is to be paid in equal installments  within nineteen (19) days of the
end of the first and second contingent  earn-out periods as discussed below. The
unpaid balance of the guaranteed purchase price is reflected in accrued expenses
and  other  current  liabilities  and  other  liabilities  on  the  accompanying
consolidated condensed balance sheet at September 30, 1999.

The  maximum  contingent  earn-out  payments  in the  aggregate  are  two  times
Sunbelt's   fiscal  year  1998  pre-tax  earnings  of  849,036  pounds  sterling
($1,400,000  at exchange  rate on  September  30,  1999).  The first  contingent
payment of up to 424,518 pounds sterling ($701,000 at exchange rate on September
30, 1999) will be made if certain  financial  parameters are attained during the
first contingent earn-out period which runs from November 1, 1998 to October 31,
1999,  and if certain of the  Sunbelt  executives  are still  employed  with the
Company at the end of the first earn-out period.  The second contingent  payment
of up to 424,518  pounds  sterling  ($701,000 at exchange  rate on September 30,
1999) will be made if  certain  financial  parameters  are  attained  during the
second  contingent  earn-out  period which runs from November 1, 1999 to October
31,  2000.  That portion of the first  contingent  earn-out  payment  related to
employee retention,  approximately 106,130 pounds sterling ($175,000 at exchange
rate on September 30, 1999), is being  recognized by the Company over the course
of the first contingent earn-out period as compensation expense. That portion of
the first  contingent  earn-out  payment related to the volume of purchases from
the Far East has been met. This portion of approximately 106,130 pounds sterling
($175,000 at exchange rate on September 30,  1999),  has been  recognized by the
Company,  and is  reflected  in  goodwill,  net and accrued  expenses  and other
current  liabilities.  The remaining criteria for the first contingent  earn-out
was not met, therefore,  the additional  consideration of approximately  212,260
pounds  sterling  ($350,000  at exchange  rate on  September  30,  1999) was not
accrued or paid. The second contingent earn-out payment have not been recognized
in the accompanying  consolidated  condensed financial statements as the payment
of such  amounts are not, in the opinion of  management,  determinable  beyond a
reasonable doubt.


                                       9
<PAGE>


                         EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO BE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

4     GOODWILL  (CONTINUED)

The acquisition of Sunbelt was accounted for as a purchase.  The purchase price,
subject to adjustment as described above and inclusive of transaction  costs, of
approximately   1,011,000  pounds  sterling  plus  the  earned  portion  of  the
contingent  earn-out of  approximately  106,000  pounds  sterling for a total of
1,117,000  pounds  sterling  ($1,844,000 at exchange rate on September 30, 1999)
exceeded the estimated fair market value of net assets acquired by approximately
$1,716,000, which is being amortized on a straight-line basis over 20 years. The
results  of  operations  of  Sunbelt  have  been  included  in the  accompanying
financial statements.  Purchase accounting adjustments are preliminary as actual
1998 pre-tax earnings have not been finalized.

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 ($61,000 at exchange rate on September 30, 1999) exceeded
the  estimated  value of net  assets  acquired  by  approximately  85,000  Dutch
guilders  ($41,000 at  exchange  rate on  September  30,  1999),  which is being
amortized  on  a  straight-line  basis  over  20  years.  If  certain  financial
performance  criteria are met for the fiscal years ended June 30, 1999 and 2000,
additional  consideration  of  approximately  50,000 Dutch guilders  ($24,000 at
exchange  rate on  September  30, 1999) and 75,000  Dutch  guilders  ($35,000 at
exchange rate on September 30, 1999), respectively,  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. Also, the year 2000 contingent
consideration has not been reflected in the accompanying  consolidated condensed
financial statements either. The results of operations of H&B have been included
in the accompanying financial statements from the date of acquisition.

On February 2, 1999, the Company's Board of Directors formed a special committee
consisting solely of independent directors to evaluate and determine whether the
Company should acquire American  Surgical Supply Corp. of Florida d/b/a American
Micro Computer Center ("AMCC") and, if so, on what terms. John B. Gallagher, who
is a significant  shareholder,  Co-Chairman and Co-President of the Company, was
the President and a Director of AMCC and owned fifty percent of its  outstanding
capital stock. Frank Cruz, who is Chief Operating Officer of the Company, was an
employee of AMCC since 1994.  He is currently  an employee of the  newly-formed,
wholly-owned  subsidiary of the Company formed to acquire AMCC. The  committee's
charter  authorized  it to take any  action  it  deemed  necessary  to  properly
evaluate and determine whether the Company should acquire AMCC, including hiring
independent advisors and ensuring that any such transaction was entirely fair to
the Company and its shareholders.  The committee hired independent legal counsel
and an independent  financial  advisor.  Prior to consummating this transaction,
the Company received an opinion from the independent  financial advisor that the
consideration  paid in connection with the transaction was fair from a financial
point of view to the  Company's  shareholders.  The Company  acquired  AMCC in a
merger on July 1, 1999.

The  transaction  was  structured  as  a  merger  of  AMCC  with  and  into  the
newly-formed,  wholly-owned  subsidiary of the Company. Upon consummation of the
merger,  the  subsidiary's  name was changed to American Micro Computer  Center,
Inc.  ("AMERICAN  MICRO").  The purchase price for AMCC was equal to $1,131,000,
plus an earn-out amount payable in cash or shares of the Company's  common stock
(at the  Company's  discretion)  equal to two times the  after-tax  earnings  of
American  Micro in calendar  year 1999 and two times the  after-tax  earnings of
American  Micro in calendar year 2000. The portion of the purchase price paid at
closing was funded  through the  Company's  working  capital.  In addition,  the
Company  assumed all outstanding  indebtedness of AMCC,  including a shareholder
loan in the approximate  amount of $289,000.  This loan is owed to the father of
John B.  Gallagher.  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 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 have been included in
the accompanying financial statements. The contingent earn-out payments have not
been recognized in the accompanying  consolidated condensed financial statements
as the  payment  of such  amounts  are not  determinable  at this point in time.
Purchase accounting adjustments have not been finalized.


                                       10
<PAGE>


                          EUROPEAN MICRO HOLDINGS,INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

4     GOODWILL  (CONTINUED)

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):

                             PERIOD ENDED SEPTEMBER 30,
                             --------------------------
                                   1999       1998
Total net sales                 $32,764    $43,222
Net income                         $207       $732
Earnings per share:
   Basic                          $0.04      $0.15
   Diluted                        $0.04      $0.15

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.

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

                                      SEPTEMBER 30, 1999   JUNE 30, 1999
                                      ------------------   -------------

Balance at beginning of period                $1,675                  $-
Foreign currency translation                      78                   -
  adjustment
Purchase accounting adjustments                (101)                   -
Additions                                        804               1,731
Amortization                                    (33)                (56)

                                             -------             -------
Balance at end of period                      $2,423              $1,675

                                             =======             =======

5     SHORT-TERM BORROWINGS

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

                                      SEPTEMBER 30, 1999   JUNE 30, 1999

Bank line of credit                               $-              $1,581
Receivable financing                           8,003               7,033
Other short-term borrowings                    1,087                   -
                                             -------             -------

Total short-term borrowings                   $9,090              $8,614
                                             =======             =======

The bank line of credit 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 bank line of credit is  subject  to review in July each  year.  The
facility  available to the Company at September 30, 1999 was 1.2 million  pounds
sterling ($1.98 million at September 30, 1999). The facility has been renewed to
July 2000. Interest is charged on the bank line of credit at 1.25% over the bank
borrowing rate of 5.25% at September 30, 1999 and 5% at June 30, 1999.

European  Micro  UK also  had a  revolving  credit  agreement,  secured  against
inventory.  The facility  allowed  European Micro UK to borrow up to 3.5 million
pounds  sterling  ($5.8 million at September 30, 1999) to assist in the purchase
of inventory.  To date, no  borrowings  have been drawn down on this line.  This
revolving  credit  agreement  has expired  and  European  Micro UK is  currently
negotiating a renewal and modification of this revolving credit agreement.


                                       11
<PAGE>


                         EUROPEAN MICRO HOLDINGS, INC.


            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


5     SHORT-TERM BORROWINGS (CONTINUED)

Receivable financing represents the amount borrowed, which is secured by various
trade  receivables  totaling $9.4 million at September 30, 1999 and $8.3 million
at June 30, 1999.  Trade  receivables  can be financed up to the lower of 85% of
the value of the trade  receivables  balance or 6.2 million  pounds  sterling at
September 30, 1999 ($10.2 million at September 30, 1999). This trade receivables
financing  increased from a maximum of $5.5 million pounds  sterling at June 30,
1999 ($8.7  million at June 30,  1999).  The  facility is  reviewed  annually in
November of each year.  This  facility can be  terminated by either party giving
three  months'  notice.  The  finance  company  which  provides  the  receivable
financing  facility has full  recourse to European  Micro UK with respect to any
doubtful or unrecovered amounts. Interest is charged on the receivable financing
balance at 1.25% above the bank  borrowing  rate of 5.25% at September 30, 1999,
and 5% at June 30, 1999.

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 1.0% over the prime interest rate to 15%. See "Note 9
(Subsequent Events) to the Consolidated Condensed Financial Statements."

6     LONG-TERM BORROWINGS

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

                                      SEPTEMBER 30, 1999   JUNE 30, 1999
                                      ------------------   -------------

Mortgage loan note                            $2,149                  $-
Note payable                                     273                   -
Other long-term borrowings                        12                  23

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

Total long-term borrowings                    $2,434                 $23

                                             =======              ======

The  mortgage  loan note is  secured by a mortgage  on the  office  building  of
European  Micro UK. The note  calls for  quarterly  payments  of  principal  and
interest in the amount of 46,763 pounds sterling ($77,207 at September 30, 1999)
and matures in July 2009. The mortgage loan note bears interest at the one-month
LIBOR plus one percentage point (1.0%). LIBOR at September 30, 1999 was 5.4%.

The note  payable  is  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  assumed  in the  purchase  of  AMCC.  The note
matures in August  2003 and bears  interest  at 10%.  See "Note 9  (Subsequent
Events) to the Consolidated Condensed Financial Statements."


                                       12
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

7     EARNINGS PER SHARE

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

                                                   THREE MONTHS ENDED
                                                      SEPTEMBER 30,
                                                 ------------------------
                                                      1999        1998
EARNINGS
Net income (in thousands)                             $207        $722

                                                   -------     -------
WEIGHTED AVERAGE NUMBER OF SHARES
Outstanding common stock during the period       4,933,900   4,933,900
Contingently issuable shares                        85,107           -

                                                   -------     -------
BASIC WEIGHTED AVERAGE NUMBER OF SHARES          5,019,007   4,933,900
Effect of dilutive stock options and other
contingent shares                                      995           -
                                                   -------     -------
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES        5,020,002   4,933,900

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

                                                 =========   =========
Diluted earning per share                            $0.04       $0.15

                                                 =========   =========

During the  three-month  period ended  September  30, 1999,  the Company  issued
options to purchase  7,500  shares of its common  stock at an exercise  price of
$7.50.  The above dilutive  earnings per share  calculations for the three-month
period  ended  September  30,  1999 and 1998,  exclude  the effect of options to
purchase 339,000 and 294,000,  respectively,  shares of common stock at exercise
prices  ranging  from  $9.1875 to $12.00  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. The effect of contingent shares related to the guaranteed earn-out
amount not paid at the  closing  of the  Sunbelt  acquisition  and the effect of
satisfactory  completion  of part of the  first  contingent  earn-out  has  been
included  in the above  basic  earnings  per share  calculations.  However,  the
remainder  of the first  contingent  earn-out  and all of the second  contingent
earn-out are not  included,  as the  conditions  necessary  for such  contingent
shares to be issued have not been met as of September  30,  1999.  The effect of
contingent  shares  related  to the first and  second  earnouts  of AMCC are not
included,  as determination of the amount of such contingent shares to be issued
are not determinable.

8     RELATED PARTY TRANSACTIONS

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

The rates  charged  on  related  party  sales are  lower  than they  would be in
arms-length  transactions.  The Company has a bulk buying  arrangements 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.  In  practical  terms,  the  sales  to  the  related  party  are  to  the
distributors  in a similar  trade to the Company and this party would not buy at
higher prices.

                                       13
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

8     RELATED PARTY TRANSACTIONS (CONTINUED)

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

                                                    THREE MONTHS ENDED
                                                       SEPTEMBER 30,
                                                  ------------------------
                                                     1999          1998
                                                     ----          ----
 SALES TO:
 AMCC                                                 N/A           $13
 Technology Express                                $1,019         1,503
                                                  -------       -------

                                                   $1,019        $1,516
                                                  =======       =======

 PURCHASES FROM:
 AMCC                                                 N/A            $-
 Technology Express                                $1,768        12,439

                                                   -------      -------
                                                   $1,768       $12,439

                                                   =======      =======

Due from related parties comprised the following balances (in thousands):
<TABLE>
<CAPTION>

                                                   SEPTEMBER 30, 1999     JUNE 30, 1999
                                                   ------------------     -------------

<S>                                                           <C>         <C>

 AMCC                                                         N/A              $974
 Technology Express                                            $-               154

                                                          -------           -------
                                                               $-            $1,128

                                                          =======           =======

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

                                                   SEPTEMBER 30,1999      JUNE 30, 1999
                                                   -----------------      -------------

 AMCC                                                         N/A                $3
 Technology Express                                          $928               630

                                                          -------              ----
                                                             $928              $633

                                                          =======              ====
The entities listed above are related to the Company in the following manner:
</TABLE>

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.


                                       14
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.

            NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

8     RELATED PARTY TRANSACTIONS (CONTINUED)

TECHNOLOGY EXPRESS

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

9     SUBSEQUENT EVENT

On October 29, 1999, the Company obtained  financing for its operations based in
the United States. American Micro and Nor'Easter each obtained a $1,500,000 line
of credit, secured by accounts receivable and inventory.  Each of these lines of
credit  matures on October 29, 2000,  and each bears interest at a rate equal to
the lender's base rate plus one-half  percentage  point (1/2%).  Also on October
29, 1999, the Company obtained a term loan 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%).  The term loan is secured by substantially all of the
assets of the Company.

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.

European  Micro UK and the Company have each  notified Big Blue Europe that they
intend to make a demand for  payment  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.  According  to a press  release  issued on
November 12, 1999, the 50% shareholders of Big Blue Europe, its principles, 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
for 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 press release was issued
by the law firm  representing the plaintiffs.  The press release states that the
plaintiffs are seeking $10 million or more in damages. The suit was filed in the
United States  District Court for the Eastern  District of New York. The factual
allegations  underlying  the lawsuit stem from European Micro UK's joint venture
interest  in Big  Blue  Europe.  The  Company  has  not  received  a copy of the
complaint.  The Company,  in connection  with its legal counsel,  will carefully
review the  allegations in the complaint when a copy is received.  However,  the
Company believes that the allegations  specified in the law firm's press release
are without merit and intends to vigorously defend the suit.



                                       15
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.



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

INTRODUCTORY STATEMENTS

FORWARD-LOOKING  STATEMENTS AND ASSOCIATED RISKS. THIS QUARTERLY REPORT CONTAINS
FORWARD-LOOKING STATEMENTS,  INCLUDING STATEMENTS REGARDING, AMONG OTHER THINGS,
(A)  EUROPEAN  MICRO  HOLDINGS,  INC.'S  ("EUROPEAN  MICRO"  OR  THE  "COMPANY")
PROJECTED SALES AND  PROFITABILITY,  (B) THE COMPANY'S  GROWTH  STRATEGIES,  (C)
ANTICIPATED TRENDS IN THE COMPANY'S INDUSTRY, (D) THE COMPANY'S FUTURE FINANCING
PLANS, AND (E) THE COMPANY'S ANTICIPATED NEEDS FOR WORKING CAPITAL. 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. ("AMERICAN MICRO"), A
FLORIDA  CORPORATION  (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 480 value-added
resellers,  corporate resellers,  retailers,  direct marketers and distributors.
The Company does not sell to end-users.  Substantially  all of the products sold
by the Company are manufactured by  well-recognized  manufacturers  such as IBM,
Compaq and  Hewlett-Packard,  although the Company generally does not obtain its
inventory directly from such manufacturers.  The Company monitors the geographic
pricing strategies related to such products,  currency  fluctuations and product
availability  in order to  obtain  inventory  at  favorable  prices  from  other
distributors, resellers and wholesalers.

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

European  Micro  Holdings,  Inc.  was  organized  under the laws of the State of
Nevada in December 1997 and is the parent of European  Micro UK,  Nor'Easter and
Colchester.  European Micro Holdings,  Inc. is also the parent of American Micro
which  was  formed  on June 24,  1999 to  acquire  AMCC.  This  transaction  was
structured as a merger of American Surgical Supply Co. of Florida d/b/a American
Micro Computer  Center  ("AMCC") with and into American  Micro, a  newly-formed,
wholly-owned subsidiary of the Company. This transaction was consummated on July
1, 1999. American Micro is an independent  distributor of microcomputer products
in the  United  States.  A detailed  discussion  of the  acquisition  of AMCC is
contained in the section entitled "Related Party  Transactions."  European Micro


                                       16
<PAGE>

                         EUROPEAN MICRO HOLDINGS, INC.



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.

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.
On October 26, 1998,  European Micro UK completed its  acquisition of all of the
outstanding shares of capital stock of Sunbelt.  Sunbelt is a company registered
in England and Wales which was  established  in 1992 and is based in  Wimbledon,
England. Sunbelt operates as a distributor of microcomputer products to dealers,
value-added  resellers and mass merchants throughout Western Europe.  Except for
the distribution of its Nova brand products,  Sunbelt's distribution  operations
were  integrated  with and into the  operations  of European  Micro UK.  Sunbelt
continues  to  distribute  its Nova line of  products  in  accordance  with past
practice.  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.


                                       17
<PAGE>

                          EUROPEAN MICRO HOLDINGS, INC.


RESULTS OF OPERATIONS

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

                             PERCENTAGE OF NET SALES


                                             THREE MONTHS ENDED
                                                SEPTEMBER 30,
                                           ------------------------
                                                1999       1998
                                                ----       ----

             Net sales to third parties        96.9%      94.8%
             Net sales to related parties       3.1%       5.2%
                                             -------    -------
             Total net sales                  100.0%     100.0%
                                             -------    -------
             Cost of goods sold to third
               parties                        (85.7%)    (84.8%)
             Cost of goods sold to
               related parties                 (3.0%)     (5.1%)
                                             -------    -------
             Total cost of goods sold         (88.7%)    (89.9%)
                                             -------    -------
             Total gross profit                11.3%      10.1%

             Total operating expenses          (9.4%)     (5.9%)
                                             -------    -------
             Operating profit                   1.9%       4.2%

             Interest income                    0.1%       0.3%
             Interest expense                  (0.7%)     (0.5%)
             Equity in loss of
               unconsolidated affiliate            -      (0.1%)
                                              -------   -------
             Income before income taxes         1.3%       3.9%
             Income taxes                      (0.7%)     (1.5%)
                                             -------    -------
             Net income                         0.6%       2.5%
                                             =======    =======

THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND 1998

TOTAL NET SALES.  Total net sales increased $3.5 million,  or 11.9%,  from $29.3
million in the  three-month  period ended September 30, 1998 to $32.8 million in
the comparable period in 1999. Excluding net sales to related parties, net sales
increased $3.9 million,  or 14.4%, from $27.8 million in the three-month  period
ended September 30, 1998 to $31.7 million in the comparable period in 1999. This
increase was attributable to the addition of Sunbelt's trading sales (accounting
for approximately  $2.3 million),  the additional sales from Sunbelt's Nova line
of products (accounting for approximately  $700,000),  the growth of the Premier
Dealers Club (accounting for approximately $1.0 million),  the increase in sales
by  Colchester  (accounting  for  approximately  $600,000),  and the addition of
American  Micro's  sales  (accounting  for  approximately  $4.9  million).  This
increase  was  offset by a  reduction  of $4.2  million in  European  Micro UK's
trading  sales  (excluding  Sunbelt's  trading  sales) and a  reduction  of $1.3
million in Nor'Easter's sales.

Net sales to related  parties  decreased  $497,000,  or 32.8% in the three-month
period  ended  September  30,  1999 from the  comparable  period  in 1998.  This
decrease is primarily  attributable  to the acquisition of AMCC on July 1, 1999,
and  therefore,  net  sales to  American  Micro are  excluded  from net sales to
related party.  Until July 1, 1999, the related parties  consisted of a group of
entities in which an  ownership  interest  was held by either of the two primary


                                       18
<PAGE>


                         EUROPEAN MICRO HOLDINGS, INC.


shareholders of the Company,  John B. Gallagher or Harry D. Shields. See "Note 8
(Related  party   transactions)   to  the   Consolidated   Condensed   Financial
Statements."   In  order  to  facilitate   fast  and   efficient   international
transactions,  each  member  of the  group  has  acted as a  supplier  for,  and
purchaser from, the other members of the group. The group has attempted to price
inter-group sales at one percent above the selling group member's cost, although
the  group  has made  numerous  exceptions  in times of short  supply,  to cover
assembly  costs and to reward  certain  group members for  exceptional  low-cost
purchases.  None of the members of the group are under any legal  obligation  to
continue to act as a supplier for, or purchaser  from,  the other members of the
group.  If the  Company is unable to sell  product  to the other  members of the
group, the Company's  revenues will be  significantly  reduced and its business,
financial  condition  and results of  operations  will be  materially  adversely
effected,  as the Company would not be able to handle large volume  purchases at
favorable  prices,  if they  could not rely on  related  parties  to  purchase a
portion of the product and sell through their distribution  channels.  Likewise,
the Company's  business and results of operations  will be materially  adversely
effected if the Company is unable to purchase  product from the other members of
the group when such  product  could be  purchased  from these  group  members at
prices lower than available from other sources.

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

GROSS PROFIT.  Gross profit increased  $752,000,  or 25.5%, from $2.9 million in
the  three-month  period  ended  September  30,  1998  to  $3.7  million  in the
comparable  period in 1999.  Gross profit excluding  related party  transactions
increased $742,000,  or 25.4%, from $2.9 million in the three-month period ended
September 30, 1998 to $3.7 million the comparable  period in 1999. This increase
is primarily due to the addition of American Micro with $500,000 in gross profit
and an increase at European Micro UK of $450,000.  This increase in gross profit
was partially offset by a reduction in gross profit at Nor'Easter of $200,000.

Gross profit  attributable to related party sales was $28,000 in the three-month
period ended  September  30, 1999. As discussed  above,  the mark-up on sales to
related parties is typically one percent over cost. Therefore,  the gross profit
on sales to third  parties is typically  higher than the gross profit  earned on
sales to related parties. This represents a gross margin of approximately 1.2%.

Gross margins increased by 120 basis points from 10.1% in the three-month period
ended  September 30, 1998 to 11.3% in the comparable  period in 1999.  Excluding
related party transactions, gross margin increased from 10.5% in the three-month
period ended September 30, 1998 to 11.6% in the comparable  period in 1999. This
change is related to the normal  fluctuations  in purchasing  opportunities  and
sales demand from quarter to quarter.

Foreign exchange gains and losses, net, increased from a loss of $132,000 in the
three-month  period  ended  September  30,  1998  to a loss of  $242,000  in the
comparable  period  in 1999.  This  adverse  movement  was  attributable  to the
weakening of the Euro relative to the British pound  sterling,  devaluing  sales
made in European currencies.

OPERATING  EXPENSES.  Operating  expenses  as a  percentage  of total  net sales
increased from 5.9% in the  three-month  period ended September 30, 1998 to 9.4%
in the comparable period in 1999. This increase in operating expenses was caused
by higher  commissions  and bonus  payments to  employees  which are tied to the
Company's  gross profit and gross  margin.  This increase was also the result of
start-up  expenses  incurred by Colchester in connection with its operations and
which  has  been so far  responsible  for  purchasing  inventory  for the  other
Subsidiaries.  Moreover,  AMCC's operating expenses,  which were included in the
Company's  consolidated  financial statements for the first time in this period,
had a higher  level of  operating  expenses  relative  to sales than that of the
Company.

INTEREST  EXPENSE.  Interest  expense  increased  by  $137,000  from  $82,000 in
three-month period ended September 30, 1998 to $219,000 in the comparable period
in 1999. This was attributable to increased borrowings during the period because
of  increased  average  accounts  receivable  and  inventory  balances,  for the
purchase of the office building and for the acquisitions of Sunbelt and AMCC.

INCOME  TAXES.  Income  taxes as a  percentage  of income  before  income  taxes
increased from 37.4% in the three-month period ended September 30, 1998 to 53.9%
in the comparable  period in 1999. For the period ended  September 30, 1998, the


                                       19
<PAGE>


                         EUROPEAN MICRO HOLDINGS, INC.


Company had accrued a tax benefit  based on the estimate  that the Company would
have consolidated U.S. taxable income.  However,  for the fiscal year ended June
30, 1999, the Company had a U.S.  consolidated loss. The Company has not accrued
a U.S. tax benefit for the  three-month  period ended  September 30, 1999,  thus
increasing the effective income tax rate for the Company.

INTEREST IN JOINT VENTURE.  The Company's  share of loss from Big Blue decreased
from a loss of $28,000 in the  three-month  period ended September 30, 1998 to a
loss of $2,000 in the comparable period in 1999.

SEASONALITY

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

LIQUIDITY AND CAPITAL RESOURCES

The Company's  primary cash  requirements  are for operating  expenses,  funding
accounts receivable and for the purchase of inventory to support growth, to take
greater  advantage  of  available  cash  discounts  offered  by  certain  of the
Company's suppliers for early payment and to make 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.  Both of these  facilities  are set and  reviewed  annually.  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 ($1.98 million) at September 30, 1999. The accounts
receivable   financing  provides  for  a  borrowing  base  of  85%  of  accounts
receivable,  with a limit of 6.2  million  pounds  sterling  ($10.2  million  on
September 30, 1999). The limit on trade receivables  financing  increased from a
maximum of $5.5 million  pounds  sterling at June 30, 1999 ($8.7 million at June
30, 1999).  European  Micro UK also had a revolving  credit  agreement,  secured
against  inventory.  The facility  allowed European Micro UK to borrow up to 3.5
million  pounds  sterling  ($5.8 million at September 30, 1999) to assist in the
purchase of inventory. To date, no borrowings have been drawn down on this line.
This revolving  credit  agreement has expired and European Micro UK is currently
negotiating an extension of this revolving credit agreement.

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

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 September 30, 1999,
the borrowings were $68,000, of which $12,000 was due after more than one year.

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

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  ($2,815,000 at
September  30, 1999).  The purchase  price was financed in part by a loan in the
amount of 1,312,000  pounds  sterling  ($2,166,000 at September 30, 1999).  This
note bears interest at the one-month LIBOR rate plus one percentage  point (1%).
LIBOR at September 30, 1999 was 5.4%.


                                       20
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.


Net cash  provided by  operating  activities  during the  three-month  period to
September 30, 1999 amounted to $5.1 million.  Significant factors providing cash
were net income in the period of $207,000, a decrease in trade receivables,  net
of effects from  acquisitions of $1.3 million,  a decrease in inventory,  net of
effects  from  acquisitions,  of $1.7 million and a decrease in due from related
parties,  net of effects from acquisitions,  of $1.1 million. The amount of cash
provided by the  Company's  operations  was  partially  offset by a reduction in
accrued  expenses  and  other  current  liabilities,  net  of the  effects  from
acquisitions, of $622,000.

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

Cash provided by financing  activities amounted to $1.3 million.  This primarily
consisted of $2.4 million provided by proceeds from the mortgage loan secured by
European  Micro UK's office  building  reduced by $1.1  million used to pay down
short-term borrowings.

Overall,  the Company experienced a net increase in cash of $2.5 million for the
three-month period ended September 30, 1999.

ASSET MANAGEMENT

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

ACCOUNTS  RECEIVABLE.  The Company sells its products and services to a customer
base of more than 480 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.


                                       21
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.


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

YEAR 2000 ISSUES

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

The  Company has  evaluated  the impact the Year 2000  problem  will have on its
suppliers,  customers,  financial  institutions,  freight  carriers  and general
economic  infrastructure.  The Company is not highly  dependent  upon any single
supplier (except  Technology  Express) or customer and therefore does not expect
the failure of the  Company's  suppliers  and customers to correct the Year 2000
problem to have a material adverse effect on the Company's  business,  financial
condition  and results of  operations.  The  Company  believes  that  Technology
Express  is Year  2000  complaint.  The  Company  is  dependent  upon  financial
institutions,  freight carriers and general economic infrastructure. The Company
has received  varying  information  from these outside  parties  regarding their
state of  readiness  for the Year  2000  problem.  The  Company  has  formulated
contingency  plans to implement  in the event these  parties fail to address the
Year 2000 problem.

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

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


                                       22
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.


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.  In the three month  period  ended  September  30, 1999 and
September 30, 1998, the Company  benefited  from low mark-up  purchases from the
other  members  of  the  group   totaling   $1.8  million  and  $12.4   million,
respectively.  During  the same  periods,  the  Company's  sales to the  related
parties were $1.0 million,  and $1.5 million.  These  fluctuations are primarily
due to currency  fluctuations,  product  availability  and changes in geographic
pricing strategies of manufacturers and suppliers of the Company's products.

On February 2, 1999, the Company's Board of Directors formed a special committee
consisting solely of independent directors to evaluate and determine whether the
Company  should  acquire  AMCC and,  if so, on what  terms.  The  members of the
committee were Kyle R. Saxon and Barrett  Sutton.  John B.  Gallagher,  who is a
significant  shareholder,  Co-Chairman and Co-President of the Company,  was the
President  and a Director  of AMCC and owned  fifty  percent of its  outstanding
capital stock. Frank Cruz, who is Chief Operating Officer of the Company, was an
employee of AMCC since 1994.  He is currently  an employee of the  newly-formed,
wholly-owned  subsidiary of the Company formed to acquire AMCC. The  committee's
charter  authorized  it to take any  action  it  deemed  necessary  to  properly
evaluate and determine whether the Company should acquire AMCC, including hiring
independent advisors and ensuring that any such transaction was entirely fair to
the Company and its shareholders.  The committee hired independent legal counsel
and an independent  financial  advisor.  Prior to consummating this transaction,
the Company received an opinion from the independent  financial advisor that the
consideration  paid in connection with the transaction was fair from a financial
point of view to the Company's  shareholders.  The Company acquired AMCC 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.  The earn-out portion
of the purchase  price is expected to be funded  through the  Company's  working
capital,  additional  borrowings or the issuance of shares of common  stock.  In
addition, the Company assumed all outstanding  indebtedness of AMCC, including a
shareholder loan in the approximate amount of $289,000. This loan is owed to the
father of John B.  Gallagher.  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.

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.


                                       23
<PAGE>


                          EUROPEAN MICRO HOLDINGS, INC.


EXCHANGE RATE SENSITIVITY

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

                                                EXPECTED
                                               MATURITY OR
                                            TRANSACTION DATE        FAIR VALUE
                                            ----------------        ------------
 FOREIGN CURRENCY  EXCHANGE CONTRACTS


    SEPTEMBER 30, 1999

    (Receive $US/Pay (pound))                October 12, 1999
    Contract amount                              $2,405,000         $2,472,080

    Average contractual exchange rate
                                            $1.6062/(pound)1


    (Receive $US/Pay (pound))               October 12, 1999
    Contract amount                                $612,000           $620,830
    Average contractual exchange rate
                                            $1.6222/(pound)1



Foreign currency  losses,  net were $242,000 at September 30, 1999, and $132,000
for the comparable period in 1998. See  "Management's  Discussion and Analysis -
Quarter Ended September 30, 1999 and 1998" for discussion on the changes.





                                       24
<PAGE>
                          EUROPEAN MICRO HOLDINGS, INC.

PART II

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

According to a press release issued on November 12, 1999,  the 50%  shareholders
of Big Blue Europe, its principles, 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  for  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  press  release  was  issued  by the law  firm  representing  the
plaintiffs. The press release states that the plaintiffs are seeking $10 million
or more in damages.  The suit was filed in the United States  District Court for
the Eastern District of New York. The factual allegations underlying the lawsuit
stem from  European  Micro UK's joint venture  interest in Big Blue Europe.  The
Company has not received a copy of the  complaint.  The Company,  in  connection
with its legal counsel,  will carefully  review the allegations in the complaint
when a copy is received.  However,  the Company  believes  that the  allegations
specified  in the law firm's  press  release  are  without  merit and intends to
vigorously defend the suit.

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS.
            -----------------------------------------

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

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES.
            -------------------------------

None.

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

None.

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

On October 29, 1999, the Company obtained  financing for its operations based in
the United States. American Micro and Nor'Easter each obtained a $1,500,000 line
of credit,  secured by accounts  receivable and inventory.  The maturity date on
the loans is October 29,  2000.  The loans bear  interest at a rate equal to the
lender's base rate plus one-half  percentage  point (1/2%).  Also on October 29,
1999,  the Company  obtained a term loan in the amount of  $1,500,000.  The term
loan is to be repaid with  quarterly  payment of $125,000 over three years.  The
term loan bears interest at the one-month London Interbank Offering Rate (LIBOR)
plus two and one-quarter percentage points (2.25%).

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.

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

(a)   Exhibits.

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

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

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

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

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

                                       25
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       26
<PAGE>


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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       27
<PAGE>


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

  10.22   Loan and Security Agreement dated   Provided herewith.
          October 29, 1999 among American
          Micro, the Company, Nor'Easter and
          SouthTrust Bank, N.A. re: Line of
          Credit to American Micro

  10.23   Loan Agreement dated October 29,    Provided herewith.
          1999 among the Company, American
          Micro, Nor'Easter and SouthTrust
          Bank, N.A. re: Term Loan to the
          Company

  10.24   Loan Agreement dated October 29,    Provided herewith
          1999 among Nor'Easter, the
          Company, American Micro and
          SouthTrust Bank, N.A. re: Line of
          Credit to Nor'Easter

  11.01   Statement re: Computation of        Provided herewith.
          Earnings

  15.01   Letter re: Unaudited Financial      Not applicable.
          Information

  18.01   Letter re Change in Accounting      Not applicable.
          Principles

  19.01   Report Furnished to Security        Not applicable.
          Holders

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

  23.01   Consents of experts and counsel     Not applicable.

  24.01   Power of Attorney                   Not applicable.

  27.01   Financial Data Schedule             Provided herewith.

(b) Reports on Form 8-K.

None.





                                       28
<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:      November 12, 1999              EUROPEAN MICRO HOLDINGS, INC.

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








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