European Micro Holdings Announces Third Quarter Results

Business Wire, May 21, 2001

Business Editors

MIAMI--(BUSINESS WIRE)--May 21, 2001

European Micro Holdings, Inc. (OTCBB: EMCC) ("EMCC") today announced financial results for its fiscal 2001 third quarter ended March 31, 2000 (see attached tables).

Total net sales for the fiscal 2001 third quarter decreased to $20,115,000 from $24,354,000 for the same period last year. For the first nine months of fiscal 2001, total net sales were $75,933,000 as compared to $91,663,000 in the same period of fiscal 2000. Lower total net sales for the fiscal 2001 third quarter were primarily attributable to a general softening of the global IT market, which impacted each of the Company's subsidiaries.

The net loss for the fiscal third quarter was $2,517,000, or $.50 per share, versus a net loss of $1,308,000, or $.26 per share, for the same period last year. For the nine months ended March 31, 2001, the net loss was $2,739,000, or $.55 per share, versus a net loss of $1,090,000, or $.22 per share, for comparable period of the prior year.

In addition to the impact of lower sales, several factors contributed to lower operating results for the third quarter of fiscal 2001, including ongoing legal costs related to Big Blue Europe, costs associated with the Company's B2B electronic commerce strategy (the development of which EMCC has internalized and is re-evaluating), higher overhead costs, inventory write-downs and increased interest expense. Management has initiated certain actions intended to improve operating results including, among other things: subordination of payment of contingent earn-out amounts relating to calendar year 2000 under the American Micro purchase agreement; adjusting staffing levels; implementing steps to attempt to increase sales volume and lower inventory levels; and the consolidation of redundant functions at some of its subsidiaries.

European Micro Holdings, Inc. is an independent, focused distributor of microcomputer products. The Company monitors and capitalizes on worldwide market-price disparities to purchase a select group of in-demand products from other distributors in 28 countries in 13 currencies. Utilizing its multi-lingual sales staff, European Micro then quickly and efficiently sources these products to its customer base, which includes value-added resellers, corporate resellers, retailers, direct marketers and distributors throughout the world. The vast majority of the products sold by European Micro are manufactured by well-recognized companies such as IBM, Compaq, Hewlett-Packard and 3Com.

Statements contained in this news release regarding expected financial results of the Company are forward-looking statements, subject to uncertainties and risks, many of which are beyond the Company's control, including, but not limited to, pricing strategies of the manufacturers, gross margins, reliance on key markets, suppliers, and products, availability of product from resellers, purchasing strategies, currency fluctuations, dependence on key personnel and trade restrictions, each of which may be impacted, among other things, by economic, competitive or regulatory conditions. These and other applicable risks are summarized under the caption "Risk Factors" in the Company's prospectus dated April 6, 1998 and in the Company's Annual Report on Form 10-K for the year ended June 30, 2000 as filed with the Securities and Exchange Commission. Forward-looking statements by their nature involve substantial risks and uncertainties. As a result, actual results may differ materially depending on many factors, including those described above. The Company cautions that historical results are not necessarily indicative of the Company's future performance.

            CONSOLIDATED CONSENSED STATEMENT OF OPERATIONS
                 (in thousands, except per share data)
                              (Unaudited)

                       Three Months ended         Nine Months ended
                            March 31,                  March 31,
                        2001        2000          2001          2000

Sales:
 Net sales             $20,064    $23,917        $75,735      $89,313
 Net sales to
  related parties           51        437            198        2,350

  Total net sales       20,115     24,354         75,933       91,663

Cost of goods sold:
 Cost of goods sold    (19,236)   (22,050)       (68,994)     (80,095)
 Cost of goods sold
  to related parties       (46)      (449)          (189)      (2,311)

  Total cost of
   goods sold          (19,282)   (22,499)       (69,183)     (82,406)

Gross profit               833      1,855          6,750        9,257

Operating expenses:
 Selling, general and
  administrative
  expenses              (2,712)    (3,323)        (8,191)      (9,747)

Loss from operations    (1,879)    (1,468)        (1,441)        (490)

 Interest income             6         10             23           70
 Interest expense         (285)      (148)          (858)        (676)
 Equity in net income
  of unconsolidated
  subsidiaries              --         (3)            --           (3)

Loss before income
 taxes                  (2,158)    (1,609)        (2,276)      (1,099)

 Income tax benefit
 (expense)                (359)       301           (463)           9

Net loss               $(2,517)   $(1,308)       $(2,739)     $(1,090)

Net loss per
 share - basic          $(0.50)    $(0.26)        $(0.55)      ($0.22)

Net loss per
 share - diluted        $(0.50)    $(0.26)        $(0.55)      ($0.22)

Weighted average
 shares
 outstanding -
 basic & diluted     5,003,639  4,958,292      4,959,882    5,008,404