UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
- -----------------------------------------------------------------
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 2001
- -----------------------------------------------------------------
I.A. EUROPE, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-2327637
--------------- -------------------
State of Incorporation IRS Employer ID No.
14 Wall Street - 20th Floor
New York, New York 10005
- ------------------------------- --------------
Address of Principal Executive Offices Zip Code
Registrant's Telephone Number (212) 618-1801
--------------
Check here whether the issuer (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the
past 90 days.
Yes __X__ No_______
As of December 31, 2001, the following shares of the
Registrant's common stock were issued and outstanding:
21,718,671 shares of voting common stock
<page>
I.A. EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
(UNAUDITED)
<table>
ASSETS
<s> <c>
Current assets:
Cash $ 205,520
Accounts receivable 319,854
Loans to shareholder of subsidiary 73,337
Inventories - finished goods 172,682
Foreign taxes refundable 39,369
Other current assets 73,250
-----------
Total current assets 884,012
Fixed assets at cost, less $53,881 of
accumulated depreciation 213,890
Investment in real estate 1,391,232
Trademarks 223,960
Goodwill 678,559
Other assets 18,265
-----------
T O T A L $3,409,918
LIABILITIES
Current liabilities:
Bank overdrafts $ 8,384
Accounts payable and accrued expenses 394,512
Long-term debt - current portion 5,991
Foreign taxes payable 40,119
Advances from stockholder 11,159
Loans from potential investors in subsidiary 698,091
Loans payable - other 207,237
Other current liabilities 18,497
-----------
Total current liabilities 1,383,990
Long-term debt 5,700
Liability for employee termination indemnities in Italy 3,311
-----------
Total liabilities 1,393,001
Minority interest in Italian subsidiary 185
-----------
STOCKHOLDERS' EQUITY
Common stock - authorized 50,000,000 shares,
par value $.001 per share; issued and issuable
21,718,671 shares 21,719
Additional paid-in-capital 3,456,169
Accumulated deficit (1,456,280)
Accumulated other comprehensive income 222
-----------
2,021,830
Treasury stock (5,098)
-----------
Total stockholders' equity 2,016,732
-----------
T O T A L $ 3,409,918
===========
</table>
The attached notes are made a part hereof.
<page>
I.A. EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<table>
Period From
Inception on
Six Months October 20,
Ended 2000 to
December 31, December 31,
2001 2000
---------------------------
<s>
INCREASE (DECREASE) IN CASH
Cash flow from operating activities:
Net (loss) $ (524,911) $ (12,383)
Adjustment to reconcile net (loss) to cash
used in operating activities:
Depreciation and amortization 19,155
Charge for employee termination indemnities (101)
Minority interest 29,235
Changes in assets and liabilities:
Accounts receivable (25,111)
Inventories (23,155)
Foreign taxes refundable 6,398
Other assets (3,835)
Accounts payable and accrued expenses 31,918
Foreign taxes payable 38,168
Other liabilities 7,060
----------- -----------
Net cash used for operating activities (445,179) (12,383)
Cash flow used for investing activities:
Advances to stockholder for future
operating expenses (79,800)
Loans to strategic partners repaid, net 28,275
Purchase of fixed assets (46,151) (7,817)
Purchase of real estate (1,391,232)
Decrease in long-term debt (497)
Repayment of advances to officer 114,656
Advances for acquisition of InterCentro (10,675)
Cash balances of acquired companies,
net of cash paid at closing 230,589
----------- -----------
Net cash used for investing activities (1,075,035) (87,617)
Cash flow provided from financing activities:
Advance from stockholder 100,000
Increase in bank overdrafts 7,328
Proceeds of private placement of
common stock, net of expenses 1,709,838
Purchase of treasury stock (5,098)
----------- -----------
Net cash provided by financing activities 1,712,068 100,000
Net increase in cash 191,854 --
Cash at beginning of period 13,666
----------- -----------
CASH AT END OF PERIOD $ 205,520 $ --
=========== ===========
</table>
The attached notes are made a part hereof.
<page>
I.A. EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2001
(UNAUDITED)
<table>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
-------------------------------------------
<s> <c> <c> <c> <c>
Balance - July 1, 2001 16,509,956 $ 16,510 $1,231,540 $ (931,369)
Issuance of common stock for
acquisition of Klever & Co. S.R.L.
and Holding Nafta S.R.L. 1,300,000 1,300 518,700
Issuance of common stock in
private placements 3,908,715 3,909 1,705,929
Treasury stock acquired, at cost
Accumulated other comprehensive
income
Net (loss) (524,911)
-------------------------------------------
Balance - December 31, 2001 21,718,671 $21,719$3,456,169$(1,456,280)
Accumulated
Other Com- Total
Prehensive Treasury Stock Stockholders'
Income Shares Amount Equity
--------------------------------------------
<s> <c> <c> <c> <c>
Balance - July 1, 2001 $ 316,681
Issuance of common stock for
acquisition of Klever & Co. S.R.L.
and Holding Nafta S.R.L. 520,000
Issuance of common stock in
private placements 5,182 $(5,098) (5,098)
Treasury stock acquired, at cost
Accumulated other comprehensive $ 222 222
income
Net (loss) (524,911)
-------------------------------------------
Balance - December 31, 2001 $ 222 5,182 $(5,098)$(2,016,732)
Total comprehensive income (loss) representing the sum of net
earnings or (loss) and other comprehensive income (loss) is as
follows:
October 20, Three Months Six Months
2000 to Ended Ended
December 31, December 31, December 31,
2000 2001 2001
-------------------------------------------
Net loss $(12,283) $(320,149) $(524,911)
Other comprehensive
income (loss) 222 222
-------------------------------------------
Total comprehensive (loss) $(12,283) $(319,927) $(524,689)
===========================================
</table>
The attached notes are made a part hereof.
<page>
I.A. EUROPE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<table>
Period From
Three Inception on
Months Six Months October 20,
Ended Ended 2000 to
December 31, December 31, December 31,
2001 2001 2000
--------------------------------------------
<s> <c> <c> <c>
Revenue $ 143,996 $ 143,996
Cost of sales 30,745 30,745
--------------------------------------------
Gross operating margin 113,251 113,251
Operating expenses:
Selling, general and administrative 369,378 570,336 $ 12,283
Depreciation and amortization 13,158 19,155
--------------------------------------------
Total operating expenses 382,536 589,491 12,283
Operating (loss) (269,285) (476,240) (12,283)
--------------------------------------------
Interest income (expense):
Interest income 3,472 5,665
Interest expense (724) (724)
--------------------------------------------
Total other income (expense) 2,748 4,941
(Loss) before foreign income taxes and
minority interest (266,537) (471,299) (12,283)
Foreign income taxes (24,377) (24,377)
--------------------------------------------
(Loss) before minority interest (290,914) (495,676) (12,283)
Minority interest in earnings of foreign
subsidiaries (29,235) (29,235)
--------------------------------------------
Net (loss) $ (320,149) $ (524,911) $ (12,283)
============================================
Net (loss) per share $ (0.02) $ (0.03) $ (0.00)
============================================
Weighted average number of common
shares used to compute net loss
per share 17,613,802 17,061,879 13,434,398
</table>
The attached notes are made a part hereof.
<page>
I.A. EUROPE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 2001
NOTE A - Basis of Presentation
The attached financial statements include the accounts of
Klever & Co. S.R.L. and Holding Nafta S.R.L., 60% of whose stock
was acquired effective November 30, 2001 (see Note B). The
operations of these Company's are included for the period
from December 1, 2001 to December 31, 2001. Also, in December
2001 the Company acquired certain real estate for development in
Costa Rica and rental property in Sardinia, Italy. As a result
of these transactions, the Company no longer considers itself in
the development stage.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and the instructions to Form 10-QSB and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the periods ended
December 31, 2001 are not necessarily, indicative of the results
that may be expected for the full fiscal year ending June 30,
2002. For further information, refer to the financial statements
and footnotes thereto included in the Company's annual report on
Form 10-KSB for the period ended June 30, 2001.
NOTE B - Acquisitions
On November 30, 2001, the Company acquired 60% ownership
interests in Holding Nafta S.R.L. and Klever & Co. S.R.L., the
Company's strategic partners in Italy for an assignment to the
sellers of $111,613 of previous cash advances to these companies
and the issuance of 1,300,000 shares of common stock, valued at
$.40 a share. Holding Nafta S.R.L. ("Nafta") is primarily in the
business of wholesale and retail sales of sailing sportswear and
accessories such as eyewear, watches and footwear, while Klever &
Co. S.R.L. ("Klever) is primarily in the business of advertising
and new media, including web design, web development and web
hosting. Results of operations include the operations of Nafta
and Klever for the one month ended December 31, 2001.
Pro forma consolidated revenues, net income (loss) and net
income (loss) per share, as if these acquisitions had occurred at
the beginning of each fiscal period are as follows:
Six Months Ended Six Months Ended
December 31, December 31,
2001 2000
Revenues $305,489 $ 238,513
Net income (loss) $ 35,389 $(621,007)
Net income (loss) per share 0.00 $ 0.00
Based on a preliminary allocation of the purchase price, the
excess of the purchase price for each of these companies over the
Company's 60% portion of their net assets acquired has been
recorded as "goodwill," which, pursuant to Statement of
Financial Accounting Standards No. 142, is not being amortized
but will be periodically evaluated for impairment in the future.
In December 2001, the Company acquired real property in the
town of Escazu, province of San Jose, in Costa Rica for $730,000
plus closing costs. The property is approximately 281 acres and
currently is compounded with three residential homes, one
warehouse and one sugar cane processing plant.
Also in December 2001, the Company acquired two condominium
apartment units located in the Mediterranean resort town of Poltu
Quatu, on the island of Sardinia, in Italy for $630,000 plus
closing costs. The units are one bedroom and two bedroom
duplex apartments that the Company anticipates renting on a
seasonal basis.
NOTE C - Common Stock Private Placements
In July 2001, the Company commenced a private placement of
up to 500,000 shares of common stock at $1.00 a share. The
transaction was closed in November 2001 upon the placement of
430,100 shares.
In November 2001, the Company commenced another private
placement of up to 10,000,000 shares of common stock at $.40 per
share. Through December 31, 2001, the Company has received
subscriptions and payments for 3,478,615 shares. From January 1,
2002 to February 15, 2002, the Company received subscriptions
and payments for approximately an additional 6,400,000 shares.
NOTE D - Financing
At December 31, 2001, the Italian subsidiaries have lines of
credit with four banks which provide for loans up to ITL 255
million (approximately $116,000). Borrowings are based on
outstanding receivables and bear interest at approximately 13.5%
a year. No borrowings were outstanding at December 31, 2001.
NOTE E - Employment Agreement
On December 1, 2001, the Company entered into an employment
agreement with its Chairman and Chief Executive Officer, Victor
Minca. Under the terms of the Agreement, Mr. Minca will render
his services and work for the Company for a period of five
(5) years. The employment agreement also contains a provision
whereunder, in the event the agreement is terminated, Mr. Minca
shall be provided with severance compensation which shall be in
the form of Five Million (5,000,000) shares of common stock of
the Company.
NOTE F - Segment Data
As a result of the acquisitions described in Note B, the
Company considers itself to be operating in three business
segments; 1) Advertising/new media, comprised of marketing design
and advertising consulting, public relations, media planning and
organizing of events and new media operations including web
design, web hosting, web consulting and providing e-commerce
solutions, 2) Apparel, comprised of sailing sportswear, sailing
boat gear skiwear and accessories such as watches, eyewear and
footwear including the licensing of its design of eyeglasses and
3) Real estate, comprised of the investment in property in Costa
Rica for development and renting of the condominiums acquired in
Sardinia Italy:
Segment operating data for the three and six month periods
ended December 31, 2001 (which includes the acquired operations
from December 1, 2001) is as follows:
Three months ended December 31, 2001
------------------------------------
Advertising/ Real Unallocated
New media Apparel Estate Corporate Total
------------ ------- ------- --------- ------
Net sales to
external
customers $ 96,050 $ 47,896 - - $ 143,996
========= ======== ========
Net earnings
(loss) $ 38,911 $ 4,941 - $(364,001)$(320,149)
========= ======== ====================
Six months ended December 31, 2001
----------------------------------
Advertising/ Real Unallocated
New media Apparel Estate Corporate Total
------------ ------- ------- --------- ------
Net sales to
external
customers $ 96,050 $ 47,896 - - $143,996
========= ======== ==================
Net earnings
(loss) $ 38,911 $ 4,941 - $(568,763)$(524,911)
========= ======== ==================
NOTE G - Subsequent Event
Acquisition of InterCentro
In January 2002, the Company acquired for $100,000, plus
closing costs, a seventy (70%) percent ownership interest in
Internet de CentroAmerica Sociedad Anonima (InterCentro), a Costa
Rican entity, which operates an Internet consulting, hosting and
commerce solutions company. Additionally, the Company agreed to
employ InterCentro's principal officer for a five year period, at
an annual salary of $34,000 and agreed to invest up to,
$250,000.00 in InterCentro for working capital purposes.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
FORWARD-LOOKING STATEMENTS
The information set forth in this Report on Form 10-Q including,
without limitation, that contained in this Item 2, Management's
Discussion and Analysis and Plan of Operation, contains forward
looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results may
differ materially from those projected in the forward-looking
statements as a result of certain risks and uncertainties set
forth in this report. Although management believes that the
assumptions made and expectations reflected in the
forward-looking statements are reasonable, there is no assurance
that the underlying assumptions will, in fact, prove to be
correct or that actual future results will not be different from
the expectations expressed in this report.
Except for the historical information contained herein, certain
matters discussed in this report may be considered
"forward-looking statements" within the meaning of The Securities
Act of 1933 and The Securities Exchange Act of 1934, as amended
by The Private Securities Litigation Reform Act of 1995. Those
statements include statements regarding the intent, belief or
current expectations of the Company and members of its management
as well as the assumptions on which such statements are based.
Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve
risks and uncertainties and that actual results may differ
materially from those contemplated by such forward-looking
statements. Important factors currently known to management that
could cause actual results to differ materially from those in
forward-looking statements include "if the Company cannot
integrate acquired companies in its business, its profitability
may be adversely effected", and "the Company may not be able to
compete successfully against other companies." These and
additional important factors to be considered are set forth in
the Safe Harbor compliance Statement for forward-looking
statements. The Company undertakes no obligation to update or
revise forward-looking statements to reflect changed assumptions,
the occurrence of unanticipated events or changes to future
operating results.
The following discussion should be read in conjunction with the
information contained in the financial statements of the Company
and the notes thereto appearing elsewhere herein.
OVERVIEW OF I.A. EUROPE
I.A. Europe Inc. is an integrated holding company maintaining
offices in New York, London and Coral Gables, Florida. Its
subsidiaries operate and provide services in the following
segment areas: new media advertising and marketing consulting
services; developing B2B and B2C hosting and commerce solutions,
including internet consulting services; marketing and
distributing sportswear apparel and related accessories; real
estate investment. The Company conducts its operations through
subsidiaries devoted to each segment.
Its subsidiaries are Klever & Co, srl, an Italian entity, which
operates new media advertising and marketing consulting services;
Holding Nafta srl, an Italian entity, which markets and
distributes sportswear apparel and related accessories under the
name "NAFTA"; I.A. Europe, Inc., a New York entity, which holds
title to the Company's real estate investments; Internet de
CentroAmerica Sociedad Anonima, a Costa Rican entity, which
operates an internet consulting, hosting and commerce solutions
company known as InterCentro. For accounting purposes, the
operations of each entity are consolidated and reported in the
financial statements of I.A. Europe.
The Company maintains its internet web site at www.iaeurope.com.
Its offices are located at 14 Wall Street, 20th Floor, New York,
New York, 34 South Molton Street, London, England and 901 Ponce
de Leon Boulevard, Coral Gables, Florida 33134.
On October 15, 2001, I.A. Europe elected to change its fiscal
year from December 31 to June 30. Pursuant to the rules and
regulations of the Securities and Exchange Commission, the change
in fiscal year required the filing of a Form 10-K by I.A. Europe
for the period ending on June 30, 2001. The Form 10-K was filed
by the Company on January 14, 2002. The disclosure and
financial statements provided by I.A. Europe in the Form 10-K
relates to the period through June 30, 2001 and also discusses
significant events subsequent to this date which affect the
company's liquidity and operations.
On November 30, 2001, the Company, acquired a sixty (60%) percent
interest in Klever & Co., srl, ("Klever") a company incorporated
under the laws of Italy, having its registered office at Via S.
Pio X, 50 S. Vendemiano, Treviso, Italy. Klever & Co., an
advertising and new media marketing company with operations in
Italy. Its advertising operations include marketing design and
advertising consulting, public relations, media planning and
organizing of events. Its new media operations include web
design, web hosting, web consulting and providing e-commerce
solutions. Klever's operates a web site located at
www.klever.it.
Also on November 30, 2001, the Company, acquired a sixty (60%)
percent interest in Holding Nafta srl, ("Nafta") a company
incorporated under the laws of Italy, having its registered
office at via Gramsei 4, Susegana, Italy. Holding Nafta
wholesales and retails sailing sportswear, sailing boat gear and
accessories such as watches, eyewear and footwear and primarily
operates and targets consumers in Italy. Holding Nafta designs
eyeglasses and licenses the right for production and marketing to
Croma srl., which sells these eyeglasses to approximately 500
stores. Holding Nafta receives royalties from Croma srl. Holding
Nafta manufactures, distributes and sells watches to
approximately 260 stores which market and sell these watches
to consumers throughout Italy. At the current time, Holding
Nafta is seeking to further develop and market its line of
sportswear which is currently sold in 2 stores in Italy, one in
Poltu Quatu, Sardinia and the other in Rome. Holding Nafta
operates several web sites located at www.nafta.it and related
sites.
As a result of the acquisitions by I.A. Europe of Klever & Co.,
and Holding Nafta, I.A. Europe was no longer considered a
development stage company.
In December 2001, I.A. Europe acquired real property in the
town of Escazu, province of San Jose, in Costa Rica. The
property is approximately 281 acres and currently is compounded
with three residential homes, one warehouse and one sugar cane
processing plant. The total purchase price of the property,
pursuant to a Purchase Contract executed between I.A. Europe and
the Seller, is Seven Hundred Thirty Thousand ($730,000.00) United
States Dollars, plus closing costs. Title to the property is
held in the name of the Company's subsidiary, I.A. Europe, Inc.,
the New York entity, which holds title to the company's
investment properties.
Also in December 2001, I.A. Europe acquired two condominium
apartment units located in the Mediterranean resort town of
Poltu Quatu, on the island of Sardinia, in Italy. The units are
one bedroom and two bedroom duplex apartments which the company
anticipates renting on a seasonal basis. The total purchase
price of the two units is approximately Six Hundred Thirty
Thousand ($630,000.00) United States Dollars, plus closing costs.
Title to these properties is held in the name of the Company's
subsidiary, I.A. Europe, Inc., the New York entity, which holds
title to the company's investment properties. The properties
have no operating results and the acquisition of these entities
by the company are for investment purposes only.
On January 28, 2002, the company acquired a seventy (70%)
percent interest in the company known as Internet de
CentroAmerica S.A., a Costa Rican entity, having its registered
office at Edifico 7, Piso 8, Oficentro Ejecutivo, La Sabana,
Sabana Sur, San Jose, Costa Rica, which operates an
internet consulting, hosting and commerce solutions company known
as InterCentro. In consideration of such acquisition, the
company paid the shareholders of InterCentro, transferring the
seventy (70%) percent interest in that entity, the sum of One
Hundred Thousand ($100,000.00) United States Dollars, plus
closing costs. Additionally, I.A. Europe agreed to employ
InterCentro's principal officer for a five year period,
extendable for another five years if so agreed by the parties, at
an annual salary of USD$34,000.00 per year. Additionally, I.A.
Europe pledged to invest the total sum of USD$250,000.00 in
InterCentro to be utilized for the development of InterCentro.
InterCentro is one of Costa Rica's premier internet hosting and
web design companies, offering web design services including
domain registration and e-mail service, network diagnostics and
configuration, e-security, telephone and networking hardware.
I.A. Europe intends to integrate InterCentro with the Company's
existing new media and internet consulting platforms for the
purpose of further developing InterCentro to other markets in
Latin America. Intercentro operates on its web site which is
www.intercentro.com.
The Company on January 15, 2002 filed a Form S-8 Registration
Statement for the purpose of registering a plan to compensate
various employees and consultants with shares of the company's
common stock for services rendered. The shares to be issued to
any employees and consultants, upon the complete rendering of any
services, shall be subject to the re-sale restrictions as
provided for by Rule 144 of the Securities Exchange Act of 1934.
The total sum of shares registered was 812,0000 shares.
On December 1, 2001, the Company entered into an employment
agreement with its Chairman and Chief Executive Officer, Victor
Minca. Under the terms of the Agreement, Mr. Minca will render
his services and work for the Company for a period of five (5)
years. The employment agreement also contains a provision
whereunder, in the event the agreement is terminated, Mr. Minca
shall be provided with severance compensation which shall be in
the form of Five Million (5,000,000) shares of common stock of
the Company.
RESULTS OF OPERATIONS FOR THE PERIOD FROM OCTOBER 2000
(INCEPTION) TO DECEMBER 31, 2000 AND THE SIX MONTHS ENDED
DECEMBER 31, 2001
Since the Company commenced operations in the fourth quarter
of 2000, there were no results of operations to report for the
three and six month periods ended June 30, 2000.
As indicated in Note A to the condensed financial
statements, the Company was a development stage company and as
such had generated no revenues from planned business activities.
Its operations through November 30, 2001 have consisted of
raising capital through the issuance of convertible debentures
and common stock to foreign investors in private placements and
implementing its marketing plans in the United States and Europe.
As a result of acquisitions effective November 30, 2001 the
Company no longer considers itself a development stage company.
The costs incurred for the period from October 20, 2000
(inception) to November 30, 2001 consist primarily of consulting
fees for promotion of the Company, developing strategic
alliances, foreign travel and office and occupancy expenses. The
Company also incurred an extraordinary loss equal to the
unamortized balance of deferred finance costs in connection with
the conversion of its outstanding debentures into common stock
in June 2001. Effective November 30, 2001, the Company acquired
a majority ownership interest in its strategic partners, Klever &
Co. S.R.L. and Holding Nafta S.R.L., and thus became an operating
company.
Loss per common share was computed based on the weighted
average outstanding shares during the periods. Average shares
outstanding for the entire period include all of the common stock
issued in connection with the In Memoriam recapitalization as
well as the 2.5-for-1 stock split in February 2001. The
financial statements for the three and six months ended December
31, 2001 include the operations of Klever & Co. S.R.L. and
Holding Nafta S.R.L. for the one month of December 2001.
Liquidity and Capital Resources
To date, the Company has raised capital through private
placements of convertible debentures and common stock. The
debentures were converted to common shares in June 2001.
The Company intends to raise additional capital from public
or private placements to investors of common stock and/or
convertible debentures. However, there can be no assurances that
the Company will be able to obtain capital from these sources or
whether the funds required by the Company to implement its
business plan will otherwise be obtainable.
During the period July 1, 2001 to December 31, 2001, the
Company used cash of $445,179 in its operating activities,
primarily for marketing and consulting fees in promotion of the
Company and establishing strategic alliances.
Cash flow used for investing activities was $1,075,035,
primarily for the purchase of real estate and fixed assets,
reduced by net cash acquired upon the acquisition of Klever & Co.
S.R.L. and Holding Nafta S.R.L. and repayment of advances to
officer.
Cash flow provided from financing activities was $1,712,068,
primarily from the net proceeds of private placements of common
stock.
At December 31, 2001, the Company had cash of $205,520.
Through February 15, 2002 the Company raised an additional amount
of approximately $2,200,000, net of expenses, in connection with
its private placement which commenced in November 2001. The sum
of the proceeds of the private placement of common stock,
together with cash in bank of $205,520 at December 31, 2001
provides the Company with approximately $2,400,000 of liquidity
to fund its operations in the following period.
RISK FACTORS
There are inherent risk factors associated with investment in
I.A. Europe and management wishes to alert investors to these
risks.
Limited Operating History
I.A. Europe has a limited operating history upon which an
evaluation of its business and prospects can be based. There can
be no assurance of that an investment in I.A. Europe shall
be profitable or that, I.A. Europe will realize revenue growth or
be profitable on a quarterly or annual basis. In addition, I.A.
Europe plans to increase its operating expenses to expand its
sales and marketing operations and increase its administration
resources. A relatively high percentage of I.A. Europe's
expenses will be typically fixed in the short term as I.A.
Europe's expense levels are based, in part, on its expectations
of future revenue. To the extent that such expenses precede or
are not subsequently followed by increased revenue, I.A. Europe's
business, financial condition, operating results and cash flows
would be materially adversely affected. I.A. Europe believes
that period-to-period comparisons of financial results are not
necessarily meaningful at this development stage and should not
be relied upon as an indication of future performance.
Investors are alerted that although I.A. Europe may realize
profitability in one segment, such profitability may be adversely
affected by losses in the other segment.
Competition
I.A. Europe and its subsidiaries face competition in the internet
consultancy and services segment and in the retail sportswear
apparel segment, as operated through I.A. Europe's respective
subsidiaries.
The market for internet consultancy and services is intensely
competitive, rapidly evolving and subject to very rapid
technological change. In addition, the areas of new media
marketing and advertising are also intensely competitive
requiring constant new and innovative ideas as well as a
demanding effort to outperform competitors and introduce new
channels of communicating ideas to the public. I.A. Europe and
its subsidiaries must develop and introduce, in an expeditious
and cost-effective manner, new products, product features, ideas
and services that outperform offerings and products by
competitors. A failure by I.A. Europe or its subsidiaries to
meet any one of these demands may have an adverse affect on the
Company's ability to compete with other entities in this area.
Additionally, the market for retail sportswear apparel is also
highly competitive and constantly re-inventing itself to respond
to consumer tastes, demands and fashion. I.A. Europe and
Holding Nafta must continuously adapt on a seasonal basis to the
consumer and create a product which will be well accepted by the
consumer. Competitors of Holding Nafta are also constantly
seeking to market items to the public which will be well received
and which will result in sales to competitors and not Holding
Nafta. This makes competition in the retail market extremely
intense. Any failure by Holding Nafta to respond to the
consumer's needs and tastes will have an adverse affect on the
company's ability to generate revenues and reaching
profitability.
Reliance on Subsidiaries
I.A. Europe's financial statements and operations are based on
the consolidated financial statements of its subsidiaries. As a
result, I.A. Europe relies on its subsidiaries and management of
these subsidiaries to generate revenue. I.A. Europe is able to
appoint management for each subsidiary through its majority
control and ownership of each subsidiary in an effort to insure
that each subsidiary is well managed and operated. However,
there is no guarantee that a subsidiary will generate revenue and
reach profitability. As a result, investors are alerted that a
negative impact on the operations or financial statements of any
subsidiary will result in a negative impact on the operations and
financial statements of I.A. Europe.
Loss of Key Personnel
I.A. Europe has a small team of personnel who manage and operate
its business. I.A. Europe's success and operating results are
substantially dependent on the continued service and performance
of its management and sales personnel. I.A. Europe intends to
hire a significant number of additional technical and sales
personnel in the next year. Competition for such personnel is
intense, and there can be no assurance that I.A. Europe will be
able to attract or retain highly-qualified technical and
managerial personnel in the future. The loss of the services of
any of I.A. Europe's management or other key employees or the
inability to attract and retain the necessary technical, sales
and managerial personnel could have a material adverse effect
upon I.A. Europe's business, financial condition, operating
results and cash flows. The ability to succeed is wholly
dependent on the contributions and efforts of its personnel.
Change in Technology
Because of the rapid technological change in the internet and
technology fields, I.A. Europe's success will depend upon its
ability to address the increasingly sophisticated needs of its
customers by designing, developing, testing, marketing and
selling enhancements to its products and services on a timely
basis that keeps pace with technological developments, and
customer requirements.
Foreign Currency Exchange Fluctuation
Because I.A. Europe's reporting currency is the United States
dollar, its operations outside the United States face additional
risks, including fluctuating currency values and exchange rates,
hard currency shortages and controls on currency exchange. I.A.
Europe has operations outside the United States and is hedged, to
some extent, from foreign exchange risks because of its ability
to purchase, develop and sell in the local currency of those
jurisdictions. There can be no assurance, however, that the
attempted matching of foreign currency receipts with
disbursements or hedging activities will adequately moderate the
risk of currency or exchange rate fluctuations which could have a
material adverse effect on I.A. Europe's business, financial
condition, operating results and cash flows. In addition, to the
extent I.A. Europe has operations outside the United States, I.A.
Europe is subject to the impact of foreign currency fluctuations
and exchange rate charges on I.A. Europe's reporting in its
financial statements of the results from such operations outside
the United States.
Inflation
Through to the Company's development stage, inflation has not had
a material effect on the operations of I.A. Europe. Since the
Company is no longer considered a development stage entity,
inflation may affect its ability to generate profit as increased
costs may be associated with development of its products and
services.
In the opinion of management, inflation at this time has not and
will not have a material effect on the operations of the Company
and its subsidiaries. Management focuses on the long term growth
of the Company and therefore any increase in inflation or jump in
costs will not result in an immediate increase in prices to the
consumer. Management believes that an increase in its prices may
lead to a loss of customers and therefore hinder the Company's
long term growth. At any course however, management will evaluate
the possible effects of inflation on the Company as it relates to
its business and operations and proceed accordingly.
Ability to Raise Capital
I.A. Europe's ability to further develop its business and
operations is dependent on its ability to raise capital. The
company will seek to raise capital through equity funding and
private placement of securities as well as securing lines of
credit with credit institutions. There is no guarantee that I.A.
Europe will be able to raise capital to further develop its
business and operations. Additionally, the company may encounter
significant costs or unfavorable terms in its efforts to raise
capital. Investors are further alerted that any efforts to raise
capital through a private placement of equity securities will
result in dilution to shareholders of the company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are currently no pending legal proceedings against the
company.
Item 2. Changes in Securities
(A) During the quarter ended December 30, 2001, the Company
offered to sell, pursuant to a private offering of its shares
under Rule 506 of Regulation D of the Exchange Act of 1934, a
total of 10,000,000 shares of common stock at the price of $.40
per share. As of the date of this filing, the Company has
received subscriptions for the purchase of approximately
9,750,000 shares of common stock at $.40 which shall result in
proceeds to the Company of approximately $3,900,000. The
transaction is irrevocable, not subject to any conditions and
each subscription is deemed firm. The Company has closed this
transaction and the funds are available to the Company.
The issuance of securities in these transactions is exempt from
registration under the Securities Act in reliance on Section 4(2)
of the Securities Act as transactions by an issuer not involving
a public offering, where the purchasers were sophisticated
investors who represented their intention to acquire securities
for investment only and not with a view to distribution.
Item 3. Defaults upon Senior Securities
There has been no default in the payment of principal, interest,
sinking or purchase fund installment.
Item 4. Submission of Matters to a Vote of Security Holders
There have been no matters submitted to a vote of security
holders.
Item 5. Other information
(A)Change of Year End
On October 15, 2001, the Registrant changed its year end from
December 31 to June 30, effective with the period ended June 30,
2001.
The Company on October 31, 2001 filed a form 8-K disclosing the
change of its year end which is incorporated by reference herein.
Item 6. Exhibits and Reports on Form 8-K
(A) Incorporated by reference is the Form 8-K filed by the
company on October 31, 2001.
(B) Incorporated by reference is the Form 8-K filed by the
company on December 14, 2001.
(C) Incorporated by reference is the Form 8-K filed by the
company on December 27, 2001.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: March 20, 2002
I.A. EUROPE, INC.
/s/ Victor Minca
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By: Victor Minca
Chief Executive Officer