U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
Commission File Number: 001-16423
Old Commission File Number: 000-27373
--------------------------------------
ISA INTERNATIONALE INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1925647
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2560 Rice Street, St. Paul, MN 55113
(Mailing address of principal executive offices)
(651) 489-6941
(Issuer's telephone number)
----------------------------------------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (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 [ ]
On July 9, 2004, there were 1,211,055 of the Registrant's common stock, par
value $.0001 per share, outstanding excluding 240,100 of common shares not yet
issued due to non-receipt of required papers from certain shareholders and
5,000,000 shares of convertible preferred stock, par value $.0001 per share
issued and outstanding.
The preferred stock was convertible into common shares issued (pre-split) at
a conversion rate of 3.5 common shares for each preferred share being converted.
After giving effect to the reverse stock split that was effective January 22,
2004, the preferred stock is now convertible into shares at a convertible rate
of .025 common shares for every preferred share being converted, however, the
preferred shares also contain an anti-dilution provision clause that states
the preferred shares will convert into no less than 75% ownership of the
then common shares to be outstanding.
As of June 30, 2004 and computed on a post-split basis, the preferred shares
upon conversion would convert into no less than 5,751,981 additional common
shares. The timing of the conversion is at the discretion of the holder.
ISA INTERNATIONALE INC.
FORM 10-QSB
TABLE OF CONTENTS
Page
PART I. FINANCIAL STATEMENTS
Item 1. Financial statements
Balance Sheets as of June 30, 2004 (unaudited) and
December 31, 2003 (audited) 3
Statements of Operations for the three months and six months
ended June 30, 2004 and 2003 (unaudited) 4
Statements of Cash Flows for the six months ended
June 30, 2004 and 2003 (unaudited) 5
Notes to Condensed Financial Statements 6-10
Report of Independent Registered Public Accounting Firm 11
Item 2. Management's Discussions and Analysis of Financial Condition
And Results of Operations 12-16
Item 3. Controls and Procedures 16
PART II OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 17
Certifications 18-19
ISA INTERNATIONALE INC.
BALANCE SHEETS
June 30, December 31,
2004 2003
(UNAUDITED) (AUDITED)
ASSETS ---------- -----------
Current assets:
Cash and cash equivalents $ 403 $ 5,055
---------- ----------
Total Assets $ 403 $ 5,055
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Common stock payable $ 729,074 $ 754,792
Convertible debentures payable 150,000 150,000
Convertible notes payable 375,583 346,312
Accrued interest 202,822 170,937
Accounts payable - trade 15,770 5,776
Accounts payable - related party 140,000 100,000
Accounts payable - disposed business 44,000 44,000
Accrued liabilities 2,000 2,000
---------- ----------
Total current liabilities 1,659,249 1,573,817
---------- ----------
Long-term liabilities:
Convertible debenture payable 50,000 50,000
---------- ----------
Total Liabilities 1,709,249 1,623,817
Commitments and Contingencies (note 7)
Stockholders' Deficit:
Preferred stock, $.0001 par value
30,000,000 shares authorized,
5,000,000 shares issued and outstanding
at June 30, 2004 and December 31, 2003 500 500
Common stock, $.0001 par value,
300,000,000 shares authorized;
1,211,055 shares issued and outstanding
at June 30, 2004 and 372,880 shares at
December 31, 2003, respectively 121 37
Additional paid-in capital 5,573,070 4,986,437
----------- -----------
Accumulated deficit (6,721,538) (6,605,736)
Indemnification agreement-related party (561,000) --
----------- -----------
(7,282,538) (6,605,736)
----------- -----------
Total Stockholders' Deficit (1,708,846) (1,618,762)
----------- -----------
Total Liabilities and Stockholders' Deficit $ 403 $ 5,055
=========== ===========
See accompanying notes to financial statements and report of Independent
Registered Public Accounting Firm.
ISA INTERNATIONALE INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003
------------ ------------- ------------- -------------
Operating expenses
General & administrative $ 45,615 $ 21,113 $ 83,916 $ 52,612
------------ ------------- ------------- ------------
Subtotal Operating expenses 45,615 21,113 83,916 52,612
------------ ------------- ------------- ------------
Operating loss (45,615) (21,113) (83,916) (52,612)
Other income (expense):
Interest expense (16,176) (17,480) (31,885) (34,462)
------------ ------------- ------------- ------------
Net loss from continuing operations (61,791) (38,593) (115,802) (87,075)
------------ ------------- ------------- ------------
Income (Loss) before extraordinary items (61,791) (9,538) (115,802) (87,075)
Extraordinary item gain on
Extinguishment of debt -- -- -- 9,538
------------ ------------- ------------- ------------
Net Income (Loss) (61,791) (29,055) (432,802) (77,536)
========================================================
Basic earnings (Loss) per share
Continuing operations (0.04) (0.08) (0.08) (0.23)
Extraordinary gain -- -- -- 0.02
------------ ------------ ------------- ------------
Total Net Gain (loss) per share $ (0.04) $ (0.08) $ (0.08) $ (0.21)
============ ============ ============= ============
Average shares of common stock outstanding:
(re-stated for reverse stock split)
Basic & Diluted 1,451,155 372,880 1,451,155 372,880
============ ============ ============= ============
Dividends per share of common stock none none none none
============ ============ ============= ============
See accompanying notes to financial statements and report of Independent Registered Public
Accounting Firm.
ISA INTERNATIONALE INC.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Six Months Ended June 30,
2004 2003
-----------------------------
Cash Flows From Operating Activities:
Loss from operations $ (115,802) $ (87,075)
Adjustments to reconcile net loss
from continuing operations to cash flow
from operating activities:
Accounts payable and accrued expenses 49,995 32,101
Accrued interest 31,884 34,463
-----------------------------
Cash used by operations (33,923) (20,511)
-----------------------------
Cash used by operating activities (33,923) (20,511)
Cash Flows From Financing Activities:
Proceeds from issuance of convertible debt 29,271 20,663
-----------------------------
Net (decrease) in cash and cash equivalents (4,652) 152
Cash and cash equivalents at beginning
of period 5,055 1,542
-----------------------------
Cash and cash equivalents at end of period $ 403 $ 1,694
=============================
See accompanying notes to financial statements and report of Independent
Registered Public Accounting Firm.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions for Form 10-QSB and
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. All adjustments that, in the opinion
of management, are necessary for a fair presentation of the results of
operation for the interim periods have been made and are of a recurring
nature unless otherwise disclosed herein. The results of operation for six
months ended June 30, 2003, are not necessary indicative of the results that
will be realized for a full year. For further information, refer to the
financial statements and notes thereto contain in the Company's Annual
Report on Form 10-KSB for the year ending December 31, 2002,
On January 12, 2004, the Company's Board of Directors approved a reverse
stock split of 1 to 140, effective on common shares outstanding as of
January 22, 2004. The accompanying financial statements and notes reflect
all transactions on a post-split basis.
During the year 2003 the company executed certain stock based transactions.
As of June 30, 2004 and December 31, 2003, these transactions had not been
processed through its transfer agent. Consequently, these transactions are
recorded as "common stock payable". As of June 30, 2004, 240,100 common stock
shares remain to be issued regarding transactions executed by the Company in
2003. Required papers requested from the debt holders have not been received.
On July 1, 2004, The Company approved the issuance of 1,200,000 common shares
to an affiliated Company, Doubletree Liquidation Corporation (DTL), a
corporation owned 50% by the Company's President and 50% by an affiliated
stockholder, whose ownership exceeds, beneficially, 5% of the Company's common
stock. The affiliated Company has issued an "indemnification guarantee" to the
Company wherein it will process, review, and guarantee payment, if deemed
appropriate and able, for any prior Company liabilities (both actual and
contingent) that may arise during the next three years from June 30, 2004.
See Note 5 "Indemnification Agreement".
The Company has deemed the value of the transaction to be $561,000 and has
recorded this transaction during the quarter ended June 30, 2004. DTL will be
issued the common shares in July, 2004. The transaction value is presented in
common stock payable in the amount of $561,000 along with other common stock to
be issued and also as an addition to the accumulated deficit section of the
Company's balance sheet.
(2) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(2.a) NATURE OF BUSINESS
ISA Internationale Inc. (ISA) was incorporated on June 2, 1989, under the
laws of the state of Delaware under a former name, and was inactive
operationally for some time prior to its May 1998 recapitalization through
a merger with Internationale Shopping Alliance Incorporated (Internationale).
On May 8, 1998, Internationale Shopping Alliance Incorporated (Internationale),
a Minnesota corporation incorporated on October 7, 1997, was merged with the
Company (ISA) pursuant to a reverse merger agreement dated April 23, 1998.
Upon consummation of the merger of Internationale with ISA, Internationale
became a wholly owned subsidiary of ISA. Subsequent to this reverse merger the
name of Internationale Shopping Alliance Incorporated was changed to
ShoptropolisTV.com, Inc (Shoptropolis). The Company became a reporting publicly
held corporation on November 15, 1999. The primary business strategy of
ShoptropolisTV.com, Inc. was to develop a multimedia home shopping network
offering in-home shoppers a convenient electronic shopping experience
broadcast, cable, and satellite television or the Internet. During 2000 and
2001, the Company discontinued the operations of its only two business segments
and is currently reorganizing its financial affairs.
(2.b) USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America (GAAP) requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from
those estimates.
(3) LIQUIDITY AND GOING CONCERN MATTERS
The Company has incurred losses since its inception resulting in an accumulated
deficit of $7,282,538 at June 30, 2004. The Company's ability to continue as a
going concern depends upon successfully obtaining sufficient financing to
maintain adequate liquidity and provide for capital expansion until such time
as operations produce positive cash flow. The accompanying financial statements
have been prepared on a going concern basis, which assumes continuity of
operations and realization of assets and liabilities in the ordinary course of
business. The financial statements do not include any adjustments that might
result if the Company was forced to discontinue its operations.
The Company is still in default under the terms of its obligation to make
quarterly interest payments of certain defaulted convertible 12% debentures
issued between September 1999 and June 2000. The debentures in default total
$150,000 in principal and $81,764 in related interest as of June 30, 2003.
No interest payments were ever made by the Company on the debentures. These
debentures were classified as current liabilities as of the end of the 2nd
quarter of 2000. The Company converted $940,000 of principal and accrued
interest in the amount of $169,435 into 15,794,917 (pre-split) common shares
of the Company at the rate of $.07 per share during the year ended December
31, 2001. The Company also converted during the year ended December 31, 2002
$386,640 in principal and $112,247 in related interest into 9,977,750 shares
of common stock at the rate of $.05 per share.
During the year ended December 31, 2003, $65,000 in debentures payable were
converted into common shares plus additional accrued interest due on extended
debentures payable of $50,000 in the amount of $21,633 was also converted into
common shares. Accordingly, 41,376 (post-split) common shares were issued to
these debenture holders. The Company is presently attempting to convert the
remaining debenture holder to common shares for principal and accrued interest
as of December 31, 2003.
During the year ended December 31, 2003, the Company authorized 513,328
(post-split)common stock shares for issuance to all previously converted
debenture holders and certain stockholders for the express purpose of
equalizing their respective share conversion price for debenture principal
and interest due the issued price of $.70 per share post split (see note 4)
common stock payable. The Company continues to reorganize its financial affairs
by negotiating with creditors to restructure and convert debt to equity and
actively seeks new business opportunities and merger or acquisition candidates.
There can be no assurance these actions will be successful.
(4) STOCK ISSUANCE:
(4.a) COMMON STOCK PAYABLE
During the year ended December 31, 2003, the Company and its board of directors
approved for issuance 1,078,276 (post-split) shares of common stock for
services and debt restructuring costs. These new shares were issued June
30, 2004, except for 240,100 common stock shares hat have not been completely
processed by the company to the related debt holders. Common Stock Payable also
includes the recording value $561,000 of the common shares to be issued
regarding the indemnification agreement. See Note 5.
(4.b)PREFERRED STOCK PAYABLE
The preferred shares contain an anti-dilution provision clause that states the
preferred shares will convert into no less than 75% ownership of the common
shares to be outstanding as of June 30, 2004 and computed on a post-split
basis, the preferred shares upon conversion would convert into no less than
5,751,981 additional common shares. The timing of the conversion is at the
discretion of the holder.
(4.c) LOSS PER SHARE
All potentially issuable shares have been excluded from the loss per share, as
their effect is anti-dilutive. The weighted average calculation includes the
common stock payable transaction as enumerated in (Note 4.a)
(5) INDEMNIFICATION AGREEMENT - RELATED PARTY
The Company's Board of Directors approved on July 1, 2004, an indemnification
agreement between DTL and the Company wherein the affiliate will issue to ISA
an indemnification guarantee wherein DTL will process, review and guarantee
payment, if able and deemed appropriate, any prior company liabilities (both
accrual and contingent) existing prior to June 30, 2004, for a period of three
(3) years. Per the indemnification agreement, the actual and contingent
liabilities excluding related legal and accounting expenses, aggregate to
approximately $868,500 as of June 30, 2004. The company has determined the
transaction value to be $561,000 and will issue 1,200,000 shares of common
stock to the affiliated entity in July, 2004.
The carrying value of the transaction is $561,000 and this amount has been
added to common stock payable along with the additional remaining common shares
to be issued to other prior convertible debenture holders. The transaction has
also been reflected as an addition to shareholders deficit as of June 30, 2004.
When the shares are issued, the liability called common stock payable will
be reduced accordingly.
(6) CONVERTIBLE NOTES PAYABLE
During the three months ending June 30, 2004, the Company issued an additional
$21,722 of convertible debt to an entity controlled by two of the Company's
stockholders, one of which is the Company's president. The convertible note
holder, Doubletree Capital Partners, Inc. an entity controlled by the same
parties listed as controlling (DTL), (See Note 1), continues to hold a secured
collateral interest in any assets the Company owns as of June 30, 2004 and any
assets the Company may acquire in the future until the convertible notes are
either paid in full or converted into common shares of stock at the option of
the convertible note holder.
(7) CONTINGENT LIABILITIES
The Company is not a party to any pending legal or administrative proceeding,
and is not aware of any threatened litigation or administrative proceeding
being considered against the Company. However, the current reorganization
efforts of the Company may not be to the satisfaction of any or all of its
creditors and lawsuits could occur in the future. Consequently, the
indemnification agreement includes $476,500 in potential liabilities incurred
by the company's former subsidiary. In addition, there is no material
proceeding to which a director, officer, or affiliate of the issuer, any owner
of record or beneficial holder of more than 5% of any class of voting
securities of the Company, or security holder is a party adverse to the
Company or has a material interest adverse to the Company.
(8) RELATED PARTY TRANSACTIONS
The Company incurred expenditures with its President, who is also a stockholder,
for consulting services amounting to $75,000 in the year ended December 31,
2003 and $40,000 for the six month period ended June 30, 2004. These amounts
have not been paid but are recorded as accounts payable related party.
The Company has accrued interest payable on the entity set forth in Note 6
above, "Convertible Notes Payable". Interest at the rate of 12% per annum is
due on all loans made by the entity to the Company. As of June 30, 2004 and
December 31, 2003, $118,806 and $92,963 were due respectively for accrued
interest on loans from the related party. Total principal on loans from the
related party amount to $375,583 and $346,312 on June 30, 2004 and December
31, 2003, respectively. In addition, see Notes 4b "Preferred Stock", Note 5
"Indemnification Agreement - Related Party", and Note 9, "Subsequent Events"
(9) SUBSEQUENT EVENTS
On July 22, 2004, the Company's Board of Directors issued to Doubletree Capital
Partners, Inc., the company currently directing all reorganization efforts, a
stock option for 6,000,000 common shares exercisable at $.60 per share
anytime during the next five years to June 30, 2009. All other previously
granted stock options and warrants issued since the company's inception and
still currently outstanding were also re-priced to $3.00 from their prior
approved price of approximately $140.00 per share, which was the exercise
price computed after giving effect to the reverse stock split of 1 to 140 that
occurred on January 12, 2004.
The Board of Directors also on July 22, 2004, approved a change in the
conversion of the Doubletree Capital Partners, Inc. convertible notes and
related accrued interest from $2.80 to $.70 conversion price into common stock
shares. Conversion remains at the option of Doubletree Capital Partners, Inc.
See Note 6 "Convertible Notes Payable".
George Brenner, CPA
A Professional Corporation
10680 W. Pico Boulevard, Suite 260
Los Angeles, California 90064
(310) 202-6445 Fax (310) 202-6494
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
ISA Internationale, Inc.
I have reviewed the accompanying balance sheet of ISA Internationale, Inc.
as of June 30, 2004 and the related statements of operations for the three and
six month periods ended June 30, 2004 and 2003 and the statement of cash
flows for the six month period ended June 30, 2004 and 2003. These financial
statements are the responsibility of the Company's management.
I conducted my review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquires of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, I do not express such an
opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements for them to be in conformity with
accounting principles generally accepted in the United States.
As discussed in Note 3, certain conditions raise substantial doubt that the
company may be able to continue as a going concern. The accompanying financial
statements do not include any adjustments to the financial statements that
might be necessary should the company be unable to continue as a going
concern.
George Brenner, CPA
Los Angeles, California
July 23, 2004
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements
The information herein contains certain forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities and Exchange Act of 1934, as amended, which are intended
to be covered by the safe harbors created thereby. Investors are cautioned that
all forward looking statements involve risks and uncertainties, including,
without limitation, the ability of the Company to continue its present business
strategy which will require it to obtain significant additional working
capital, changes in costs of doing business, identifying and establishing a
means of generating revenues at appropriate margins to achieve profitability,
changes in governmental regulations and labor and employee benefits and
costs, and general economic and market conditions. Such risks and
uncertainties may cause the Company's actual results, levels of activity,
performance or achievement to be materially different from those future
results, levels of activity, performance or achievements expressed or implied
by such forward-looking statements.
Although the Company believes that the assumptions and expectations reflected
in these forward looking statements are reasonable, any of the assumptions and
expectations could prove inaccurate or not be achieved, and accordingly there
can be no assurance the forward looking statements included in this Form 10-QSB
will prove to be accurate. In view of the significant uncertainties inherent in
these forward-looking statements, their inclusion herein should not be regarded
as any representation by the Company or any other person that the objectives,
plans, and projected business results of the Company will be achieved.
Generally, such forward looking statements can be identified by terminology
such as "may," "anticipate," "expect," "will," "believes," "intends,"
"estimates," "plans," or other comparable terminology.
Overview
The Company (ISAI), through its two former wholly-owned subsidiaries Minnesota
corporations, ShoptropolisTV.com, Inc. (f/k/a Internationale Shopping Alliance,
Inc.) and International Strategic Assets, Inc., was engaged in two distinct
businesses: (1.) the development of a multimedia home shopping network
primarily for the purpose of generating direct retail sales of varied products
from T.V. viewers and internet shoppers, and (2) direct sales via
outbound telemarketing of precious metals consisting mainly of gold
and silver coins and bars.
ISAI is presently attempting to financially restructure itself. ISAI disposed
of International Strategic Assets, Inc. on May 19, 2000, and ISAI disposed
of the ShoptropolisTV.Com, Inc. on March 29, 2001 as a part of its
re-organization efforts. Additional re-organization efforts include negotiation
with creditors to restructure and convert debt to equity and actively seek
new business opportunities. After successful completion of its reorganization
efforts, ISAI plans to pursue strategic alternatives that may include the
purchase of a business or acquisition by another entity. With the
consummation of the indemnification agreement, ISAI believes it can now
effect an acquisition and or a merger.
ISAI was incorporated in Delaware in 1989 under a former name, and was inactive
operationally for some time prior to its May 1998 recapitalization through a
merger with ShoptropolisTV.com, Inc. (f/k/a Internationale Shopping Alliance
Inc.), which was a wholly owned subsidiary of ISAI. ISAI acquired its home
shopping network business through such merger, after which the former
shareholders of this subsidiary acquired 89% of the outstanding common stock of
ISAI through a stock exchange. ISAI issued 11,772,600 shares of its common
stock in exchange for all of the outstanding common stock of ShoptropolisTV.com
Inc. This merger was effected as a reverse merger for financial statement
and operational purposes, and accordingly, ISA regards its inception as
being the incorporation of ShoptropolisTV.com, Inc. on October 7, 1997.
ISAI sold ShoptropolisTV.com, Inc. on March 29, 2001.
ISAI incorporated its precious metals subsidiary, International Strategic
Assets, Inc., as a Minnesota corporation in March 1999. Its business is direct
sales via outbound telemarketing of precious metals consisting mainly of gold
and silver coins and bars. ISAI sold International Strategic Assets, Inc.
on May 19, 2000 to an individual who was an officer and director of ISAI.
Results of Operations for the Three months and Six months ended June 30, 2004
and 2003.
Sales and Gross Profit.
No sales were recorded for the six months ended June 30, 2004 and 2003 as
operations have been suspended.
Operating Expenses.
The only operating expenses were general and administrative expenses and
interest expenses related to convertible debenture and convertible notes
payable. General and administrative expenses were $83,917 for the six months
ended June 30, 2004 and $52,612 for the six months ended June 30, 2003. The
expenses were principally for audit, consulting, office and stock transfer
fees costs. At this time the Company has no anticipation as to its operating
expenses in future periods as it is continues its re-organization efforts.
No current expenses are being incurred except minimal office, telephone, legal,
professional and consulting expenses relating to the re-organization efforts and
ultimate disposition of the Company.
Liquidity and Capital Resources
ISAI has obtained its capitalization primarily through the sale of its equity
securities to a limited group of private investors known to management of ISAI.
From the inception of ISAI in 1997 through December 31, 1997, ISAI raised
$400,000 in cash through the sale of its common stock with accompanying
warrants. In calendar year 1998, ISA raised an additional $833,376 in cash
through sales of common stock and common stock with accompanying warrants.
During a period from January through February 1999, ISAI raised a total of
$1,171,040 through the exercise of outstanding warrants by existing
shareholders, of which $528,702 was in cash and $642,838 was in gold bullion
and coins transferred to ISAI. Such gold bullion and coins were immediately
liquid to ISA, and were converted to cash. From September 1999 through February
2000, the Company raised $1,336,640 through the sale of unsecured convertible
debentures.
From March 2000 through May 2000, the Company raised $255,000 from the sale
unsecured convertible debentures. In May 2000 the Company sold its wholly owned
subsidiary, International Strategic Assets, Inc. (ISA), for a cash sum of
$175,000. The $175,000 purchase price consisted of $75,000 for the purchase
of approximately 43% of the outstanding common stock of ISA and $100,000 paid
in connection with the subsequent redemption of the remaining 57% of the
outstanding common stock of ISA. During the quarter ended June 30, 2000,
the Company had one option exercised for 5,000 common shares for $6,850.
From July 2000 through October 2000, the Company sold a total of 902,857 shares
of its Common Stock: 200,000 shares at a purchase price of $0.10 per share,
299,999 shares at a purchase price of $0.15 per share, and 385,000 shares at
a purchase price of $0.20 per share, and 17,858 shares at a purchase price of
$.28 per share for a total amount of $146,100. In November 2000 the Company sold
5,000,000 shares of its Preferred Stock at a purchase price of $0.0002 per share
for total consideration of $1,000, and, 2,999,999 shares of its Common Stock
at a purchase price of $0.0097 per share for total consideration of $29,000.
Also in November and December 2000 the Company obtained loans totaling
$88,527 to settle unsecured debts using the Company's television broadcast
and production equipment and office equipment and furniture as collateral.
In March 2001 the collateral was disposed of in the sale of the discontinued
operations of the Company.
In 2001 the Board of Directors of the Company issued additional shares to
these stockholders to reflect a uniform purchase price for those shares
purchased from July 2000 through October 2000 at a price of $0.06 per share.
This resulted in an additional 1,547,142 shares being issued.
In the years end December 31, 2003 and 2002 the Company raised $78,756 and
$138,027 from convertible demand notes payable from a related investor. In the
by convertible notes payable in connection with the continuing reorganization
efforts. Convertible Notes Payable outstanding at June 30, 2004 total $375,583.
The convertible note holder continues since November 2000 to hold a secured
collateral interest in any assets the Company owns as of June 30, 2004. Any
assets the Company may acquire in the future are also secured and pledged as
collateral until the convertible notes are either paid in full or converted
into common shares of stock at the option of the convertible note holder.
As of June 30, 2004, the Company had current assets of $403 in cash and
$1,659,249 in current liabilities consisting of $199,770 in accounts payable,
$729,074 in common stock payable, $2,000 in accrued liabilities, convertible
debentures payable in default totaling $150,000, convertible notes payable of
$375,583 and related interest accruals of $202,822. Accordingly, the Company
had a working capital deficit position of $1,658,846.
The Company's current capital resources are not sufficient to supports its
development and operations. Additional capital will be necessary to support
future general and administrative and interest expenditures as well as interest
expense currently due. The Company cannot continue its existence without a full
and complete re-organization of all of its financial affairs and obligations.
The Company is not currently seeking any additional sources of debt or equity
financing beyond that which is already in place with the financing agreement
consummated in November 2000 with Doubletree Capital Partners, Inc. Until the
re-organization process is completed, the Company cannot provide assurances as
to its future viability or its ability to prevent the possibility of a
bankruptcy-filing petition either voluntary or involuntary by any creditor of
the Company.
As a result of the Company's history of operating losses and its need for
significant additional capital, the reports of the Company's independent
auditors' on the Company's financial statements for the years ended December
31, 2004 and 2003, include explanatory paragraphs concerning the Company's
ability to continue as a going concern.
Income Tax Benefit
The Company has an income tax benefit from net operating losses, which is
available to offset any future operating profits. None of this benefit was
recorded in the accompanying financial statements as of June 30, 2004
because of the uncertainty of future profits. The ability to utilize the net
operating losses may be limited due to ownership changes.
Impact of Inflation
The Company believes that inflation has not had any material effect on its
development or operations since its inception in 1997. Furthermore, the
Company has no way of knowing if inflation will have any material effect
for the foreseeable future.
Other Going Concern matters
One (1) remaining officer is currently managing the Company. The Company
has suspended its operations pending the resolution of its financial matters.
The Company is in default under the terms of its obligation to make quarterly
interest payments on convertible 12% debentures issued between September 1999
and June 2000. The debentures in default totaled $150,000 in principal and
$81,764 in accrued interest. No interest payments were ever made by the Company
on the debentures. As such, these debentures have been classified as current
liabilities as of June 30, 2004.
The Company converted $940,000 of principal
and $169,435 in accrued interest into 15,794,917 common shares of the Company
at the rate of $.07 per share during the year ended December 31, 2001. During
the year ended December 31, 2002 the Company converted $386,640 in principal
plus $112,247 in accrued interest into 9,977,750 shares of common stock at the
rate of $.05 per share.
The Company is attempting to convert the remaining debenture holder's debt to
common shares at $.70 per share (post-split) for the total of principal and
accrued interest owed up to the conversion date. At June 30, 2004, $231,764 of
convertible debentures and related accrued interest in default remained on the
Company's balance sheet.
Item 3. Controls and Procedures
Within the 90-day period prior to the filing of this report, an evaluation was
carried out as to the effectiveness of our disclosure controls and procedures.
Based on that evaluation, the President has concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the time periods specified in Securities and Exchange
Commission rules and forms.
Subsequent to the date of their evaluation, there were no significant changes
in the Company's internal controls or in other factors that could
significantly affect the disclosure controls, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Part II. Other Information
Item 1. Legal Proceedings
During the quarter ending June 30, 2004, the Company was not sued in any new
legal matters.
Item 2. Changes in Securities and Use of Proceeds
During the quarter ended June 30, 2004. The Company issued 838,175 common
stock shares in payment and settlement of services and interest expense and
debt retirements.
Item 3. Defaults Upon Senior Securities
The defaults previously present on the Convertible Debentures as of December
31, 2003, continue as of June 30, 2004, after partial conversions into common
stock of the Company. These defaults arose because the Company has missed
payment of quarterly interest payments since June 2000. The remaining default
consists of convertible debt principal amounting to $150,000 and accrued
interest thereon of $81,764 as of June 30, 2004.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: none
(b) Form 8-K:
There was no 8-K forms filed for the three months ended June 30, 2004
through July 23, 2004.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ISA INTERNATIONALE INC.
/s/ Bernard L. Brodkorb
By: Bernard L. Brodkorb
President, and Chief Financial Officer
Date: July 23, 2004
CERTIFICATIONS
I, Bernard L. Brodkorb, certify that:
1. I have reviewed the Quarterly Report on Form 10-QSB of ISA Internationale,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statements
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this report (the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls, which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls.
6. I have indicated in this report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
/s/ Bernard L. Brodkorb
By: Bernard L. Brodkorb
President, and Chief Financial Officer
Date: July 23, 2004
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ISA Internationale, Inc.,
(the "Company") of Form 10-QSB for the period ending June 30, 2004,
as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Bernard L. Brodkorb, President, Chief Executive Officer,
and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act
of 2002, that to the best of my knowledge and belief:
(1.) the report fully complies with the requirements of Section 13(a)
or 15 (d) of the Securities Exchange Act of 1934; and
(2.) the information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ Bernard L. Brodkorb
By: Bernard L. Brodkorb
President, and Chief Financial Officer
Dated: July 23, 2004