8-K/A 1 form8aklever.txt FORM 8-K/A UNITED STATES SECURITIES EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported)November 30, 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 Item 2. Acquisition or Disposition of Assets ACQUISITION OF KLEVER & CO., srl -------------------------------- On November 30, 2001, the Company, acquired a sixty (60%) percent interest in Klever & Co., srl, a company incorporated under the laws of Italy, having its registered office at Via S. Pio X, 50 S. Vendemiano, Treviso, Italy. In consideration for acquiring the sixty (60%) percent ownership interest in Klever & Co., I.A. Europe paid to the shareholders of Klever & Co., an amount of Fifty Thousand ($50,000.00) US Dollars and along with 50,000 newly issued shares of I.A. Europe, $.001 par value voting common stock. Klever & Co., is engaged in conducting advertising and new media 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. Prior to the acquisition, Klever & Co., was a strategic partner of I.A. Europe, which has worked closely with I.A. Europe in developing I.A. Europe's business and web based consulting and advertising platforms. I.A. Europe's management believes that the acquisition of Klever will form a stronger bond and working relationship between the two companies which shall allow both companies to further development in the same areas and compliment each other's skills. Klever shall operate as a majority owned subsidiary of I.A. Europe. ACQUISITION OF HOLDING NAFTA srl -------------------------------- On November 30, 2001, the Company, acquired a sixty (60%) percent interest in Holding Nafta srl, a company incorporated under the laws of Italy, having its registered office at via Gramsei 4, Susegana, Italy. In consideration for acquiring the sixty (60%) percent ownership interest in Holding Nafta srl, I.A. Europe paid to the shareholders of Holding Nafta srl, an amount of Fifty Thousand ($50,000.00) US Dollars and along with 1,250,000 newly issued shares of I.A. Europe, $.001 par value voting common stock. Holding Nafta produces sailing sportswear, sailing boat gears and accessories such as watches, sunglasses and footwear and primarily operates and targets consumers in Italy. Holding Nafta maintains approximately 500 stores which market and sell sunglasses to consumers throughout Italy and approximately 260 stores which market and sell sport watches to consumers throughout Italy as well. The company licenses the right for production and marketing of its goods to Croma srl, an Italian company, which sells these goods through store outlets and provides royalty payments to Holding Nafta. At the current time, Holding Nafta is seeking to further develop and market its line sportswear which are currently sold in 2 stores in Italy, one in Poltu Quatu, Sardinia and the other in Rome. Holding Nafta also maintains various web sites from which it markets its brands of sportswear, sunglasses and watches: * www.nafta.it * www.naftasportwear.it * www.naftasunglasses.it * www.naftawatch.it * www.naftastore.it Holding Nafta also has registered various trademark names in Italy to utilize in marketing and distributing its brand of items. Those names include: * NAFTA ECOLOGICA * NAFTA WATCH * NAFTA DANDY * RAFFINERIA NAFTA * NAFTA SHOES * NAFTA GLASSES * NAFTA ICE * NAFTA PERFUME * NAFTA SPORTWEAR Prior to I.A. Europe acquiring a 60% interest in Holding Nafta, the two companies had maintained a strategic partnership whereunder I.A. Europe provided advice and consulting to Holding Nafta related to the development of its web based design, e- commerce platform and marketing. I.A. Europe's management believes that the acquisition of a majority interest in Holding Nafta will allow it to further develop its business into other areas beyond web based consulting and design. Holding Nafta shall operate as a majority owned subsidiary of I.A. Europe. Item 7. Financial Statements and Exhibits I.A. EUROPE AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Historical Amounts ------------------------------------------------ HOLDING I.A. EUROPE, INC. KLEVER & CO SRL NAFTA SRL From Inception on Year Ended Year Ended October 20, 2000 September 30, September 30, to June 30, 2001 2001 2001 ----------------- -------------- ------------ Revenues $ 397,197 $ 133,590 Cost of Sales 227,980 89,125 ----------------- -------------- ------------ Gross Operating Margin 169,217 44,465 ----------------- -------------- ------------ Operating expenses: Organization and marketing expenses $ 633,325 Selling, general and administrative 56,825 150,572 138,196 Recapitalization expenses 38,538 Depreciation 11,660 15,156 35,111 ----------------- -------------- ------------ Total operating expenses 740,348 165,728 173,307 ----------------- -------------- ------------ Operating income (loss) (740,348) 3,489 (128,842) ----------------- -------------- ------------ Interest and amortization of debt Issue costs ( 45,095) (21,352) (3,627) ----------------- -------------- ------------ Interest income 3,033 4,315 ----------------- -------------- ------------ Interest and other income (expense) ( 42,062) (21,352) 688 ----------------- -------------- ------------ (Loss) before income taxes and extraordinary item (782,410) (17,863) (128,154) Income tax provision 6,206 (1,281) ----------------- -------------- ------------ (Loss) before extraordinary item (782,410) (24,069) (126,873) Extraordinary item (133,929) ----------------- -------------- ------------ NET LOSS $ (916,339) $ (24,069) $(126,873) ================= ============== ============ Pro forma Adjusted Adjustments Pro Forma -------------- ------------ Revenues $ (68,640) $ 462,147 Cost of Sales (39,399) 277,706 -------------- ------------ Gross Operating Margin (29,241) 184,441 -------------- ------------ Operating expenses: Organization and marketing expenses 633,325 Selling, general and administrative 345,593 Recapitalization expenses 38,538 Depreciation 61,927 -------------- ------------ Total operating expenses - 1,079,383 -------------- ------------ Operating income (loss) (29,241) (894,942) -------------- ------------ Interest and amortization of debt Issue costs (70,074) -------------- ------------ Interest income 7,348 -------------- ------------ Interest and other income (expense) - (62,726) -------------- ------------ (Loss) before income taxes and extraordinary item (29,241) (957,668) Income tax provision 4,925 -------------- ------------ (Loss) before extraordinary item (29,241) (962,593) Extraordinary item (133,929) -------------- ------------ NET LOSS $ (29,241) $(1,096,522) ============== ============

* represents elimination of intercompany sales I.A. EUROPE AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) Historical Amounts ------------------------------------------------ HOLDING I.A. EUROPE, INC. KLEVER & CO SRL NAFTA SRL AND SUBSIDARIES ----------------- -------------- ------------ Current Assets: Unrestricted cash $ 18,615 $ 126,716 $ 1,303,681 Accounts receivable 60,834 195,481 Inventory 196,646 Loans receivable from strategic Partners 69,032 Accrued interest receivable 5,226 Advances to employee 24,093 Due from member 71,937 Taxes refundable 23,489 Other current assets 6,597 31,766 ----------------- -------------- ------------ Total current assets 116,966 265,544 1,751,063 Due from member 82,428 Depreciable assets 56,311 70,757 12,561 Trademarks 231,137 Goodwill Security deposits 7,947 ----------------- -------------- ------------ TOTAL $ 181,224 $ 336,301 $2,077,189 ----------------- -------------- ------------ Current Liabilities: Bank overdrafts $ 37,203 Current portion of long term debt 6,152 Accounts payable and accrued expenses 37,533 24,211 188,512 Taxes payable 29,439 8,662 Accrued expenses and other current liabilities 287,466 41,402 Advances from stockholders 31,772 Liability for Value Added Tax 11,744 Loan Payable 1,671,588 ----------------- -------------- ------------ Total current liabilities 69,305 384,471 1,921,908 Long term debt 7,384 Reserve for employee termination indemnities 3,957 390 ----------------- -------------- ------------ Total liabilities 69,305 395,812 1,922,298 ----------------- -------------- ------------ Minority interest STOCKHOLDERS' EQUITY Members' equity (59,511) 154,891 Common stock 16,510 Additional paid in capital 1,231,540 Accumulated deficit (1,136,131) ----------------- -------------- ------------ Total stockholders' equity 111,919 (59,511) 154,891 ----------------- -------------- ------------ TOTAL $ 181,224 $ 336,301 $ 2,077,189 ================= =============== ============ Pro Forma Adjusted Adjustments Pro Forma -------------- ------------ Current Assets: Unrestricted cash $ 1,448,472 Accounts receivable (38,638) 217,677 Inventory 196,646 Loans receivable from strategic Partners (69,032) - Accrued interest receivable 5,226 Advances to employee 24,093 Due from member 71,937 Taxes refundable 23,489 Other current assets 38,363 -------------- ------------ Total current assets ( 107,670) 2,025,093 Due from member 82,428 Depreciable assets 139,629 Trademarks 231,137 Goodwill 574,087 574,087 Security deposits 7,947 -------------- ------------ TOTAL $ 466,417 $3,061,131 ============== ============ Current Liabilities: Bank overdrafts $ $ 37,203 Current portion of long term debt 6,152 Accounts payable and accrued expenses (38,638) 211,618 Taxes payable 38,101 Accrued expenses and other current liabilities 42,283 371,151 Advances from stockholders 31,772 Liability for Value Added Tax 11,744 Loan Payable 1,671,588 -------------- ------------ Total current liabilities 3,645 2,379,329 Long term debt 7,384 Reserve for employee termination indemnities 4,347 -------------- ------------ Total liabilities 3,645 2,391,060 -------------- ------------ Minority interest 38,152 38,152 STOCKHOLDERS' EQUITY Members' equity (95,380) - Common stock 1,300 17,810 Additional paid in capital 518,700 1,750,240 Accumulated deficit (1,136,131) -------------- ------------ Total stockholders' equity 424,620 631,919 -------------- ------------ TOTAL $ 466,417 $ 3,061,131 ============== ============

I.A. EUROPE AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Historical Amounts ------------------------------------------------ For the Three Months Ended September 30, 2001 ------------------------------------------------ HOLDING I.A. EUROPE, INC. KLEVER & CO SRL NAFTA SRL ----------------- -------------- ------------ Revenues $ 144,327 $ 50,486 Cost of Sales 63,789 26,294 -------------- ------------ Gross Operating Margin 80,538 24,192 -------------- ------------ Operating expenses: Organization and marketing expenses $ 128,664 Selling, general and administrative 72,294 44,298 77,146 Depreciation 5,997 2,636 9,743 ----------------- -------------- ------------ Total operating expenses 206,955 46,934 86,889 ----------------- -------------- ------------ Operating income (loss) (206,955) 33,604 ( 62,697) ----------------- -------------- ------------ Interest and amortization of debt Issue costs ( 9,231) (3,627) Interest income 2,193 6,009 ----------------- -------------- ------------ Interest and other income (expense) 2,193 ( 9,231) 2,382 ----------------- -------------- ------------ (Loss) before income taxes and extraordinary item (204,762) 24,373 ( 60,315) Income tax provision 6,206 ----------------- -------------- ------------ NET LOSS $ (204,762) $ 18,167 $( 60,315) ================= ============== ============ Adjusted Pro Forma ------------ Revenues $ 194,813 Cost of Sales 90,083 ------------ Gross Operating Margin 104,730 ------------ Operating expenses: Organization and marketing expenses 128,664 Selling, general and administrative 193,738 Depreciation 18,376 ------------ Total operating expenses 340,778 ------------ Operating income (loss) (236,048) ------------ Interest and amortization of debt Issue costs (12,858) ------------ Interest income 8,202 ------------ Interest and other income (expense) ( 4,656) ------------ (Loss) before income taxes and extraordinary item (240,704) Income tax provision 6,206 ------------ NET LOSS $ (246,910) ============

* represents elimination of intercompany sales I.A. EUROPE INC. AND SUBSIDIARIES NOTES TO PRO FORMA FINANCIAL STATEMENTS Effective November 30, 2001, the Company acquired 60% ownership interests in Holding Nafta S.R.L. and Klever & Co. S.R.L. for an aggregate consideration of 1,300,000 shares of common stock (valued at $.40 each) and assignment of $111,315 of previous cash advances to these companies to the sellers of the ownership interests. The attached pro forma financial statements combine the historical financial information of the Company as at September 30, 2001 and for the year and three month periods ended June 30, 2001 and September 30, 2001, respectively, with those of the acquired companies. However, for purposes of this presentation, the full-year historical results of operations of the acquired companies have been presented based on a year ended September 30, 2001. The pro forma adjustments to the historical balance sheet are comprised of the following: 1. The recognition of the excess of the aggregate purchase price over the proportionate share of the net assets of the acquired companies as "goodwill." 2. The reduction of advances receivable from strategic partners at September 30, 2001 representing the assignment of the receivables, with the balance reflected as an accrued expense at September 30, 2001. 3. An increase in stockholders' equity representing the fair value of the stock issued. 4. Recording a minority interest, representing the 40% interests in the acquired companies retained by the selling members, and 5. The elimination of certain intercompany receivables and payables. For purposes of this presentation, the calculations of goodwill and minority interests are based on the financial statements of the acquired companies as at September 30, 2001. The amounts to be reflected in the historical financial statements of the Company will be based on the acquired companies' financial statements as at November 30, 2001 and will be subject to a final allocation of the purchase price. No representation is made that the pro forma presentation necessarily presents the results of operations which will be achieved subsequent to November 30, 2001. Independent Auditors' Report To the Members Klever & Co. S.R.L. We have audited the accompanying balance sheet of KLEVER & CO. S.R.L. as of December 31, 2000 and the related statements of operations and changes in members' capital and cash flows for the period from June 22, 1999 (inception) to December 31, 1999 and for the year ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Klever & Co. S.R.L as of December 31, 2000, and its results of operations and cash flows for the periods referred to the above, in conformity with generally accepted accounting principles in the United States of America. Cornick, Garber & Sandler, LLP CERTIFIED PUBLIC ACCOUNTANTS New York, New York November 16, 2001 KLEVER & CO. S.R.L. BALANCE SHEETS (IN U.S. $) (Unaudited) As at As at December 31, September 30, 2000 2001 ---------------------------- ASSETS Current assets: Cash $34,152 $126,176 Accounts receivable - trade 51,329 60,834 Due from members 73,449 71,937 Inventories 2,531 Other current assets 5,562 6,597 Total current assets 167,023 265,544 Fixed assets, net of accumulated depreciation 22,075 70,757 Other assets 584 T O T A L $189,682 $336,301 LIABILITIES AND MEMBERS' CAPITAL Current liabilities: Bank overdraft $ 46,211 $ 37,203 Current portion of long-term debt 8,431 6,152 Trade accounts payable 62,224 24,211 Taxes payable 47,861 29,439 Accrued expenses and other current liabilities 27,423 79,313 Loan payable 208,153 Total current liabilities 192,150 384,471 Long-term debt 12,433 7,384 Reserve for employee termination indemnities 2,303 3,957 Total liabilities 206,886 395,812 Members' capital (17,204) (59,511) T O T A L $189,682 $336,301

The notes to financial statements are made a part hereof. KLEVER & CO. S.R.L. STATEMENTS OF OPERATIONS AND CHANGES IN MEMBERS' CAPITAL (IN U.S. $) (Unaudited) June 22, 1999 Year Ended Nine Months Ended to December 31, December 31, September 30, 1999 2000 2000 2001 ----------------------------------------------------- Revenues $125,325 $428,929 $284,602 $252,870 Cost of sales 47,674 288,348 224,559 164,191 Gross operating margin 77,651 140,581 60,043 88,679 Operating expenses: Depreciation 1,776 3,230 594 12,520 Selling, general and administrative 70,916 142,110 97,812 106,273 ---------- ---------- ---------- ---------- Total operating expenses 72,692 145,340 98,406 118,793 Operating income (loss) 4,959 (4,759) (38,363) (30,114) Interest expense (3,945) (17,112) (7,881) (12,121) Income (loss) before income tax 1,014 (21,871) (46,244) (42,235) Income tax provision 2,613 6,206 ---------- ---------- ---------- ---------- NET LOSS (1,599) (28,077) (46,244) (42,235) Members' capital - beginning of period -- 8,871 8,871 (17,204) Capital contributions 10,379 658 Foreign currency translation gain (loss) 91 2,002 (579) (730) ---------- ---------- ---------- ---------- MEMBERS' CAPITAL - END OF PERIOD $ 8,871 $ (17,204) $ (37,952) $ (59,511) ========== ========== ========== ===========

The notes to financial statements are made a part hereof. KLEVER & CO. S.R.L. STATEMENTS OF CASH FLOWS (IN U.S. $) (Unaudited) June 22, 1999 Year Ended Nine Months Ended to December 31, December 31, September 30, 1999 2000 2000 2001 ----------------------------------------------------- INCREASE (DECREASE) IN CASH Net loss $ (1,599) $ (28,077) $(46,244) $ (42,235) Adjustment to reconcile results of operations to net cash used in operating activities: Depreciation 1,776 3,230 536 12,520 Reserve for employee terminations 905 1,454 1,734 Changes in assets and liabilities: Accounts receivable (61,487) 6,322 18,682 (11,278) Inventories (5,672) 2,787 5,301 2,444 Other assets (4,602) 2,879 (4,630) (664) Accounts payable 39,448 25,236 30,893 (35,874) Accrued expenses 11,616 16,533 (1,598) 52,234 Taxes payable 6,549 41,721 (16,775) ---------- ---------- ---------- ---------- Net cash provided by (used for) operating activities (13,066) 72,085 2,940 (37,894) Cash flows from investing activities: Acquisition of intangible assets (2,361) (1,411) (1,407) (4,101) Acquisition of fixed assets, net of disposals (1,202) (22,185) (558) (55,276) Acquisition of marketable securities (4,710) Loans to member (110,983) (1,021) Repayment of loans from members 30,610 ---------- ---------- ---------- ---------- Net cash provided by (used for)investing activities (114,546) 2,304 (1,965) (60,398) Cash flows from financing activities: Proceeds of loan payable 208,153 Proceeds (repayment) of long-term debt 20,864 8,517 (6,610) Increase (decrease) in bank overdraft 117,469 (63,930) (7,415) Capital contributions from members 10,379 658 ---------- ---------- ---------- ---------- Net cash provided by (used for)financing activities 127,848 (43,066) 8,517 194,786 Effect of foreign exchange rate changes on cash (10) 2,603 - (4,470) ---------- ---------- ---------- ---------- NET INCREASE IN CASH 226 33,926 9,492 92,024 Cash balance - beginning of period 226 211 34,152 ---------- ---------- ---------- ---------- CASH BALANCE - END OF PERIOD $ 226 $ 34,152 $ 9,703 $126,176 ========== ========== ========== ========== Amounts paid for interest $ 3,945 $ 17,112 $ 7,881 $ 12,121 ========== ========== ========== ==========

The notes to financial statements are made a part hereof. KLEVER & CO. S.R.L. NOTES TO FINANCIAL STATEMENTS (INFORMATION AS AT SEPTEMBER 30, 2001 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 IS UNAUDITED) NOTE 1 - Organization The Company was organized in Italy on June 22, 1999 as Diaport, S.R.L. and, effective September 2000, changed its name to Klever & Co. S.R.L. The Company is engaged in the "development of the image of its customers" through the use of graphic arts, advertising strategy and the creation of web sites. The Company also organizes sports meetings and other events and produces and purchases promotional materials, including guidebooks, t-shirts and other handmade objects for direct sale. The Company is organized as an S.R.L. in Italy, which has ownership characteristics similar to those of a limited liability company in the United States. NOTE 2 - Summary of Significant Accounting Policies Revenue Recognition The Company recognizes revenue from the sales of its guidebooks, t-shirts and other handmade objects when title passes to its customers. Revenues with respect to the services rendered by the Company for advertising campaigns, development of graphic arts and web sites is recognized in the period those services are performed. Inventory Inventories are stated at the lower of cost (specific identification method) or market value. Advertising and Marketing Costs Advertising and marketing costs are charged to operations as incurred. Advertising and marketing costs were $1,654, $159,712, $159,712 and $21,205 for the period ended December 31, 1999, the year ended December 31, 2000 and the nine months ended September 30, 2000 and 2001, respectively. Depreciation The cost of fixed assets is depreciated over their estimated useful life of 5 years on the straight-line method. Translation of Financial Statements and Comprehensive Income The assets and liabilities of the Company are translated into United States dollars at the rates of exchange at each balance sheet date. Operating accounts are translated at average rates of exchange during each period. Gains and losses on translation are reflected as a separate component (accumulated other comprehensive income) of members' capital on the balance sheets. Total comprehensive income (loss) representing the sum of net earnings or (loss) and other comprehensive income (loss) is as follows: June 22, 1999 to Year Ended Nine Months Ended December 31, December 31, September 30, 1999 2000 2000 2001 -------------------------------------------------- Net loss $(1,599) $(28,077) $(46,244) $(42,235) Other comprehensive income (loss) 91 2,002 (579) (730) -------------------------------------------------- Total comprehensive (loss) $(1,508) $(26,075) $(46,823) $(42,965) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, operating results and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 3 - Due from Members The amounts loaned to members are due on demand without interest and have no specific due date. NOTE 4 - Inventory Inventory consists of finished goods, primarily guidebooks. NOTE 5 - Depreciable Assets Depreciable assets are comprised of: December 31, September 30, 2000 2001 Computer equipment $21,170 $ 36,270 Furniture and equipment 33,686 Other 5,310 14,293 ---------- ----------- 26,480 84,249 Less accumulated depreciation (4,405) (13,491) ---------- ----------- Balance $22,075 $ 70,758 NOTE 6 - Income Taxes The provision for income taxes is comprised of local income taxes pursuant to which a portion of the Company's operating expenses is not deductible. For Italian national income tax purposes, the Company has net operating loss carry forwards for 1999, 2000 and September 30, 2001, which can be carried forward for five years. The Company has recorded a reserve equal to the deferred tax benefit applicable to these loss carry forwards. NOTE 7 - Long-Term Debt Long-term debt consists of a capitalized lease for computer equipment expiring in December 2003, which bears interest at approximately 7%. The lease payments for each of the three years approximates $6,200. NOTE 8 - Revenues and Customer Concentration The Company's revenues to date have been derived approximately 90% from graphic arts and media services and 10% from the sale of "Magnar Ben" guides. For the year ended December 31, 2000, approximately 60% of revenues were from Holding Nafta S.R.L., which has certain members in common with the Company. NOTE 9 - Lease Commitments The Company occupies common office space with Holding Nafta S.R.L. There is no formal lease agreement between the Company and Holding Nafta S.R.L. The current annual lease payment is approximately $21,000. Rent expense was as follows: June 22, 1999 to Year Ended Nine Months Ended December 31, December 31, September 30, 1999 2000 2000 2001 -------------------------------------------------------- $12,380 $12,535 $10,746 $8,163 Independent Auditors' Report To the Members Holding Nafta S.R.L. We have audited the accompanying balance sheet of HOLDING NAFTA S.R.L. as of December 31, 2000 and the related statements of operations and changes in members' capital and cash flows for the period from March 2, 1999 (inception) to December 31, 1999 and for the year ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Holding Nafta S.R.L. as of December 31, 2000 and its results of operations and cash flows for the periods referred to above, in conformity with generally accepted accounting principles in the United States of America. Cornick, Garber & Sandler, LLP CERTIFIED PUBLIC ACCOUNTANTS New York, New York November 16, 2001 HOLDING NAFTA S.R.L. BALANCE SHEETS (IN U.S. $) (Unaudited) As at As at ASSETS December 31, September 30, 2000 2001 ----------------------------- Current assets: Cash $ 95 $1,303,681 Accounts receivable - trade 23,583 195,481 Inventories 8,956 196,646 Taxes refundable 33,550 23,489 Due from member 44,764 Other current assets 647 31,766 --------- ---------- Total current assets 111,595 1,751,063 Due from member 82,428 82,428 Fixed assets (at cost, less accumulated depreciation) 13,270 12,561 Trademarks (at cost, less accumulated amortization) 244,942 231,137 --------- ---------- T O T A L $452,235 $ 2,077,189 LIABILITIES AND MEMBERS' CAPITAL Current liabilities: Bank overdraft $ 13,094 Trade accounts payable 51,779 $ 188,512 Taxes payable 1,306 41,402 Accrued expenses and other current liabilities 25,637 8,662 Due to potential investors 1,671,588 Liability for value added tax 48,655 11,744 Due to member 45,724 --------- ---------- Total current liabilities 186,195 1,921,908 Reserve for employee termination indemnities 390 --------- ---------- Total liabilities 186,195 1,922,298 Commitments and contingencies Members' capital 266,040 154,891 --------- ---------- T O T A L $452,235 $2,077,189 ========= ==========

The notes to financial statements are made a part hereof. HOLDING NAFTA S.R.L. STATEMENTS OF OPERATIONS AND CHANGES IN MEMBERS' CAPITAL (IN U.S. $) (Unaudited) March 2, 1999 Year Nine Months to Ended Ended December 31, December 31, September 30, 1999 2000 2000 2001 --------------------------------------------- Revenues $ 39,340 $260,667 $238,664 $111,588 Cost of sales 24,221 175,650 147,200 60,676 Gross operating margin 15,119 85,017 91,464 50,912 Operating expenses: Depreciation and amortization 34,941 31,603 46,543 50,051 Selling, general and administrative 7,987 72,394 75,254 141,055 --------------------------------------------- Total operating expenses 42,928 103,997 121,797 191,106 --------------------------------------------- Operating (loss) (27,809) (18,980) (30,333)(140,194) Interest and other income (expense): Interest (expense) (194) (3,155) (2,511) (3,627) Interest income 4,959 --------------------------------------------- Total interest income (expense) (194) (3,155) (2,511) 1,332 Loss before income tax (28,003) (22,135) (32,844)(138,862) --------------------------------------------- Income tax (1,281) --------------------------------------------- NET LOSS (28,003) (23,416) (32,844)(138,862) Members' capital - beginning of period 176,869 176,869 266,040 Capital contributions 203,258 124,071 72,752 13,841 Foreign currency translation gain (loss) 1,614 (11,484) (11,503) 13,872 --------------------------------------------- MEMBERS' CAPITAL - END OF PERIOD $176,869 $266,040 $205,274 $154,891 =============================================

The notes to financial statements are made a part hereof. HOLDING NAFTA S.R.L. STATEMENTS OF CASH FLOWS MEMBERS' CAPITAL (IN U.S. $) (Unaudited) March 2, 1999 Year Nine Months to Ended Ended December 31, December 31, September 30, 1999 2000 2000 2001 --------------------------------------------- INCREASE (DECREASE) IN CASH Cash flows from operating activities Net (loss) $ (28,003) $(23,416) $(32,844)$(138,862) Adjustments to reconcile results of operations to net cash used in operating activities: Depreciation 1,270 769 Amortization 32,928 30,600 45,774 50,051 Changes in assets and liabilities: Accounts receivable (66,876) 39,121 (167,281)(172,711) Inventories (30,442) 19,587 28,452 (187,999) Taxes refundable (33,549) (24,257) 8,903 Other assets (104) (550) (31,141) Accounts payable 247,590 (180,365) (16,854) 138,519 Accrued expenses 21 25,617 18,485 16,648 Taxes payable 1,306 7,401 Liability for value added tax 48,655 48,501 (35,233) Reserve for employee terminations 390 --------------------------------------------- Net cash provided by (used for) operating activities 155,114 (71,724) (99,255) (344,034) Cash flows from investing activities: Acquisition of intangible assets (326,802) (18,425) Acquisition of fixed assets, net of disposals (14,540) (15,810) 252 Loans to member (127,192) Repayments from member 44,764 --------------------------------------------- Net cash provided by (used for) investing activities (326,802) (141,732) (15,810) 26,591 Cash flows from financing activities: Proceeds of loans from members 45,724 21,197 Proceeds from potential investors 1,671,588 Repayment of loans from members (44,147) Proceeds of capital contributions 203,258 124,071 72,752 13,841 Increase (decrease) in bank overdraft 22 13,073 (12,642) --------------------------------------------- Net cash provided by financing activities 203,280 182,868 93,949 1,628,640 Effect of foreign exchange rate changes on cash 1,614 (2,523) (2,794) (7,611) --------------------------------------------- NET INCREASE (DECREASE) IN CASH 33,206 (33,111) (23,910)1,303,586 Cash balance - beginning of period 33,206 33,206 95 --------------------------------------------- CASH BALANCE - END OF PERIOD $ 33,206 $ 95 $ 9,296$1,303,681 ============================================= Supplemental disclosure of cash paid for interest $ 194 $ 3,155 $ 2,511 $ 3,626

The notes to financial statements are made a part hereof. HOLDING NAFTA S.R.L. NOTES TO FINANCIAL STATEMENTS (INFORMATION AS AT SEPTEMBER 30, 2001 AND FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 2001 IS UNAUDITED) NOTE 1 - Organization The Company was organized in Italy on March 2, 1999. The Company is engaged in the manufacture, licensing, wholesale and retail sale of sportswear, eyewear, watches and related accessories to the sailing and skiing enthusiast. The Company owns and licenses trademarks for its use in the advertising and sale of its products in Italy and other foreign countries. Its principal trademark is "NAFTA," which is owned by the Company. The Company organizes sporting and public events to promote its products utilizing the NAFTA trademark and also engages well known sports personalities. The Company's products are sold through approximately 500 sales outlets. The Company is organized as an S.R.L. in Italy, which has ownership characteristics similar to a limited liability company in the United States. NOTE 2 - Summary of Significant Accounting Policies Revenue Recognition The Company's wholesale revenues are recognized when merchandise is shipped to its customers. Retail revenues are recognized at point of sale. Revenue from the licensing of trademarks is recognized when it is earned based on sales reports submitted by the licensee. Inventory Inventories are stated at the lower of cost (specific identification method) or market value method. Advertising and Marketing Costs Advertising and marketing costs are charged to operations as incurred. Advertising and marketing costs were $0, $6,277, $15,089 and $42,171 for the period ended December 31, 1999, for the year ended December 31, 2000 and the nine months ended September 30, 2000 and 2001, respectively. Depreciation and Amortization The cost of sailboat accessories, sails and equipment is depreciated over their estimated useful lives of 5 to 11 years on the straight-line method. The "Nafta" trademarks are being amortized over 10 years. Translation of Financial Statements The assets and liabilities of the Company are translated into United States dollars at the rates of exchange at the balance sheet date. Operating accounts are translated at average rates of exchange during each period. Gains and losses on translation are reflected as a separate component (accumulated other comprehensive income) of members' capital on the balance sheet. Total comprehensive income (loss) represents the sum of net earnings or (loss) and other comprehensive income (loss) is as follows: March 2, 1999 to Year Ended Nine Months Ended December 31, December 31, September 30, 1999 2000 2000 2001 --------------------------------------------- Net loss $(28,003) $(23,416) $(32,844) $(138,862) Other comprehensive income (loss) 1,614 (11,484) (11,503) 13,872 Total comprehensive (loss) $(26,389) $(34,900) $(44,347) $(124,990) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, operating results and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 3 - Due from Member The amount is non-interest bearing and has no specific due date. NOTE 4 - Inventory Inventory consists of finished goods, primarily watches and t-shirts. NOTE 5 - Depreciable Assets Depreciable assets are comprised of: December 31, September 30, 2000 2001 Store furniture and equipment $17,357 Sailboat accessories $ 5,296 Sales 7,688 Equipment 1,555 ---------- ---------- Total 14,539 17,357 Less accumulated depreciation (1,269) (4,796) Net $13,270 $12,561 NOTE 6 - Trademarks December 31, September 30, 2000 2001 "Nafta" trademarks $306,757 $314,365 Less accumulated amortization (61,815) (84,260) ---------- ---------- $244,942 $230,105 NOTE 7 - Due to Potential Investors During the nine month period ended September 30, 2001, the Company received funds in connection with a then pending financing and capital transaction which was sub-sequently cancelled. The $954,738 related to the pending capital transaction was returned by the Company by November 30, 2001. NOTE 8 - Liability for Value Added Tax The liability represents the estimated payment due for late charges and penalties and the value added tax payable in connection with the purchase of the "Nafta" trademarks in 1999. The actual tax payable, estimated at $24,000, will be recoverable from future operations of the Company. NOTE 9 - Revenue Information Revenues are comprised of the following: March 2, 1999 to Year Ended Nine Months Ended December 31, December 31, September 30, 1999 2000 2000 2001 --------------------------------------------- Advertising -- % 61% 79% -- % Retail sales 100 31 18 96 Royalties 8 3 4 100% 100% 100% 100% NOTE 10 - Income Taxes The provision for income taxes is comprised of local income taxes pursuant to which a portion of the Company's operating expenses is not deductible. For Italian national income tax purposes, the Company has net operating loss carry forwards for 1999, 2000 and September 30, 2001, which can be carried forward for five years. The Company has recorded a reserve equal to the deferred tax benefit applicable to the loss carry forwards. NOTE 11 - Related Parties Due to Members The loan representing the initial financing by members in connection with the start-up of the Company was non-interest bearing and was repaid by September 30, 2001. Lease The Company occupies office space with an affiliated company, Klever & Co. S.R.L., which has certain members in common with the Company. There is no formal lease agreement between the Company and Klever & Co. S.R.L. The current annual lease payment is approximately $7,300. Revenue and Customer Concentration In 2000, 70% of revenues were derived from advertising provided to Klever & Co. S.R.L. on a sailing vessel leased by the Company on an month-to-month basis. The rental cost incurred by the Company was approximately $24,000 for the year ended December 31, 2000 and for the nine months ended September 30, 2000. There was no comparable advertising revenues during the year ended December 31, 1999 or the nine months ended September 30, 2001. In the nine months ended September 31, 2001, 80% of revenues were derived from 4 customers. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 14, 2002 I.A. EUROPE, INC. (Registrant) /s/ Victor Minca Chairman

I A EUROPE INC 8-K/A