10-Q 1 form10q1201.txt FORM 10Q UNITED STATES SECURITIES EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ----------------------------------------------------------------- [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 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 -------------- 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 30, 2001, the following shares of the Registrant's common stock were issued and outstanding: ------------ shares of voting common stock I.A. EUROPE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 2001 (UNAUDITED) ASSETS 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 ===========

The attached notes are made a part hereof. I.A. EUROPE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) Period From Inception on Six Months October 20, Ended 2000 to December 31, December 31, 2001 2000 --------------------------- 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 $ -- =========== ===========

The attached notes are made a part hereof. I.A. EUROPE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED DECEMBER 31, 2001 (UNAUDITED) Additional Common Stock Paid-in Accumulated Shares Amount Capital Deficit ------------------------------------------- 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 -------------------------------------------- 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 5,81 $( 5,098)$(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) ===========================================

The attached notes are made a part hereof. I.A. EUROPE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Period From Three Inception on Months Six Months October 20, Ended Ended 2000 to December 31, December 31, December 31, 2001 2001 2000 -------------------------------------------- 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

The attached notes are made a part hereof. 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 - Subsequent Event Acquisition of InterCentro In January 2002, the Company acquired for $100,000 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 Costa Rica. 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 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. 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. 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, 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. 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. 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 has generated no revenues from planned business activities. Its operations to date have consisted of raising capital through the issuance of convertible debentures to foreign investors in a private placement and implementing its marketing plans in the United States and Europe. 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 conversation 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 a private placement of convertible debentures to foreign investors. These 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 very limited operating history upon which an evaluation of its business and prospects can be based. There can be no assurance of sustained profitability 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. Competition The market for internet consultancy and services is intensely competitive, rapidly evolving and subject to very rapid technological change. In addition, the areas of 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 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. 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 At this development stage, inflation has not had a material effect on the operations of I.A. Europe which are still in the development stage. Nonetheless, once I.A. Europe's operations are developed, inflation may affect its ability to generate profit as increased costs may be associated with development of its products and services. 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 purchaser of approximately 9,750,000 shares of common stock at $.40 which shall result in net 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: February 19, 2002 I.A. EUROPE, INC. /s/ Victor Minca ------------------------ By: Victor Minca Chief Executive Officer

I A EUROPE INC 10-Q