UNITED STATES 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 December 31, 2004
Commission File Number: 001-16423
-----------------------------------
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) (Zip Code)
(Issuer's telephone number) (651) 483-3114
Securities registered under Section 12(g) of the Exchange Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock OTC Bulletin Board
----------------------------------------------------------------------------
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 April 1, 2005, there were 2,573,758 of the Registrant's common stock, par
value $.0001 per share, outstanding excluding 100,002 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 0.025 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 December 31, 2004 the preferred shares upon conversion (post-split
basis) would convert into no less than 10,654,275 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 INFORMATION
Item 1. Financial statements
Balance Sheet as of December 31, 2004 (unaudited) 3
Statements of Operations for the three months
ended December 31, 2004 (unaudited) and 2003 (unaudited) 4
Statements of Cash Flows for the three months ended
December 31, 2004 (unaudited) and 2003 (unaudited) 5
Notes to Condensed Financial Statements 6-11
Item 2. Management's Discussion and Analysis of Plan of Operation 12-19
Item 3. Controls and Procedures 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20-21
Signatures 21
Certifications 22-23
ISA INTERNATIONALE INC.
BALANCE SHEET
December 31,
2004
(UNAUDITED)
ASSETS ---------- --
Current assets:
Cash and cash equivalents $ 11,314
Deposits 2,000
Costs incurred for pending acquisitions 71,926
----------
Total Assets $ 85,240
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Common stock payable $ 70,001
Accounts payable - trade and taxes 15,819
Convertible notes payable - related party 469,768
Accrued interest payable - related party 144,598
Accounts payable - related party 210,000
Convertible debentures, accrued interest,
Accounts payable - disposed business
Less Indemnification Agreement - related party 0
----------
Total current liabilities 910,186
----------
Long-term liabilities:
Convertible debenture payable
Less indemnification Agreement - related party 0
----------
Total Liabilities 910,186
Stockholders' Deficit:
Preferred stock, $.0001 par value
30,000,000 shares authorized,
5,000,000 shares issued and outstanding
at December 31, 2004 500
Common stock, $.0001 par value,
300,000,000 shares authorized;
2,573,758 shares issued and outstanding
at December 31 257
Additional paid-in capital 6,085,401
Accumulated deficit (6,911,104)
-----------
Total Stockholders' Deficit (824,946)
----------
Total Liabilities and Stockholders' Deficit $ 85,240
===========
The accompanying notes are an integral part of these condensed financial
statements.
ISA INTERNATIONALE INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Three Months Ended
December 31, 2004 December 31, 2003
------------------ -----------------
Operating revenue: 0 0
Operating expenses:
General & administrative $ 38,381 $ 284,438
Settlement expense 359,329
------------ -------------
Subtotal Operating expenses 38,381 643,767
------------ -------------
Operating loss (38,381) (643,767)
Other income (expense):
Interest expense (18,887) (15,579)
------------ ------------
Net loss from continuing operations (57,268) (659,346)
Extraordinary gain on
extinguishment of debt 77,351
------------ -----------
Net Income (Loss) (57,268) (581,995)
=========== ============
Basic and diluted (Loss) per share $ (0.02) $ (1.56)
============ ============
Average shares of common stock outstanding:
Basic and diluted 2,573,758 372,880
============ ============
Dividends per share of common stock none none
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
ISA INTERNATIONALE INC.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Three Months Ended December 31,
2004 2003
-----------------------------
Cash Flows From Operating Activities:
Loss from operations $ (57,268) $(659,346)
Gain from extraordinary item 77,351
Adjustments to reconcile net loss to net
cash provided by operating activities:
Deposits (2,000)
Costs incurred - pending acquisition (32,121)
Common stock payable - services 754,792
Accounts payable and accrued expenses 10,795 (6,071)
Accrued expenses - related party 35,000 (75,000)
Accrued interest payable - related party 13,594 10,287
Accrued interest payable - convertible debentures (45,558)
-----------------------------
Cash provided by (used for) operating activities (32,000) 56,455
Cash Flows From Financing Activities:
Expense from stock issuance for convertible debt (65,000)
Proceeds from issuance of convertible debt
to related party 40,659 12,515
-----------------------------
Cash provided by (used for) financing activities 40,659 (52,485)
Net increase (decrease) in cash and cash equivalents 8,659 3,970
Cash at beginning of period 2,655 1,085
-----------------------------
Cash and cash equivalents at end of period $ 11,314 $ 5,055
=============================
Non-cash investing in financing transactions:
Additional paid in capital for
Indemnification agreement 5,293 0
---------- ---------
Total non-cash transactions $ 5,293 0
========== =========
The accompanying notes are an integral part of these condensed financial
statements.
ISA INTERNATIONALE INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1.) NATURE OF BUSINESS AND SIGNIFICANT EVENTS
1.a) Nature of Business
ISA Internationale Inc. (the Company or ISAI) was incorporated on June 2,
1989, under the laws of the State of Delaware under a former name and became a
reporting publicly held corporation on November 15, 1999. On May 8, 1998,
Internationale Shopping Alliance Incorporated (Internationale), a Minnesota
corporation, was merged with the Company, a Delaware corporation, pursuant to
a merger agreement dated April 23, 1998. Upon consummation of the merger,
Internationale became a wholly owned subsidiary of the Company. During 2000,
the Company sold its International Strategic Assets, Inc. subsidiary and
discontinued the operations of its ShoptropolisTV.com subsidiary. Since then,
reorganization specialists, Doubletree Capital Partners LLC, has internally
reorganized the Company's financial affairs and changed its direction to focus
on the financial services industry.
1.b) Asset Acquisition and Purchase Agreement
On August 19, 2004, the Company signed an asset purchase agreement with five
related California Companies, wherein the Company (ISAI) would issue 5,250,000
shares of ISAI common stock and a combination of 4,000,000 bonus common shares
and 5,250,000 common stock warrants at varying prices to purchase additional
common shares over a three year period to be used to purchase the assets being
acquired. The companies from whom the assets are being purchased have not been
able to comply with certain terms of the agreement wherein two years of
certified audits are required as a part of the acquisition agreement.
Consequently, the agreement to purchase was amended on October 29, 2004 and
again on January 13, 2005, as previously reported in 8K filings by the Company
on August 23, 2004, November 3, 2004 and recently January 14, 2005.
Accordingly, the Company has not been able to complete the asset purchase
agreement. ISAI has contingently issued into an escrow account arrangement
9,250,000 shares of ISAI common stock in exchange for certain assets of the
acquired companies. Since the transaction has not closed, no recognition is
being given in this report for the acquisition of these assets. Advanced costs
in the form of travel, legal and accounting and consulting fees incurred to
assist the certified audit, are being recognized as a receivable from the
potential subsidiary whose assets are being acquired. If for any reason the
agreement is not executed, ISAI may be forced to charge off these specific
receivables, unless collection is obtained from the five companies to be
acquired. Subsequent to December 31, 2004 additional costs for similar
expenses have been incurred and these may also have to be accordingly charged
off as uncollectible should the acquisition fail to be finalized.
Pending receipt of the required seller's certified audits for the years 2003
and 2004, now scheduled to be finalized by April 30, 2005, and their
submission to the Securities and Exchange Commission, as required by the
agreement, the transaction will be considered completed and reported by the
Company at that time. ISAI has not taken effective control of the companies or
assets as described in the asset purchase agreement nor will ISAI take
effective control until the audits are completed and the agreement has closed.
1.c) Change in Fiscal Year
On November 4, 2004 the Company announced with an 8-K filing it was changing
its fiscal year from December 31 to September 30, therein making fiscal year
2004 a nine-month period that commenced on January 1, 2004 and accordingly
ended on September 30, 2004. Any references to the fiscal year 2004 will
therefore be for a nine-month period of time from January 1 to September 30,
2004.
NOTE 2) SIGNIFICANT ACCOUNTING POLICIES
2.a) Presentation
The interim 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 operations for three months ended December
31, 2004, 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 contained in the Company's Annual Report on Form 10-KSB for
the nine months ending September 30, 2004.
During the year 2003 the Company executed certain stock based transactions.
As of December 31, 2004 and December 31, 2003, these transactions had not been
processed through its transfer agent. Consequently, these transactions were
recorded as "common stock payable". As of December 31, 2004, 100,002 common
stock shares remain to be issued regarding transactions executed by the
Company in 2003 valued at $0.70 per share or $70,001. Required papers
requested from the debt holders have not been received.
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.
In 2004, significant estimates of the fair value of the Company's common stock
were computed under FASB Statement No. 123, Accounting for Stock-Based
Compensation, and used to value the 6,000,000 shares stock option for $60,000
to DCP (a related party) and the 1,200,000 shares to DLC (a related party) for
an indemnification agreement to the Company in the amount of $329,714. The
valuations were based upon the Company's estimates of the goods or services or
transactional related value of consideration received by the Company. Since no
established market exists for the Company's common shares, the Company used
alternative valuations of estimates for consummated agreements through
September 30, 2004.
2.c) Loss Per Share
Basic loss per share excludes dilution and is computed by dividing the net
loss by the weighted average number of common shares outstanding during the
period. Diluted loss per share includes assumed conversion shares consisting
of dilutive stock options and warrants determined by the treasury stock method
and dilutive convertible securities. In 2004 and 2003 all shares potentially
issuable have been excluded from the calculation of loss per share, as their
effect is anti-dilutive. The weighted average calculation includes the common
stock payable transactions as enumerated in note 5b. For the periods ended
December 31, 2004 and September 30, 2004 respectively there were 10,654,275
and 10,421,516 anti-dilution common shares potentially issuable.
NOTE 3) LIQUIDITY AND GOING CONCERN MATTERS
The Company has no operations and has incurred losses since its inception and,
as a result, has an accumulated deficit of $6,911,104 at December 31, 2004.
The net loss for the three month period ended December 31, 2004 was $57,268.
The Company had convertible debenture debt in default in the amount of $
150,000, plus related accrued interest payable of $94,574. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's ability to continue as a going concern depends upon successfully
restructuring its debt, obtaining sufficient financing to maintain adequate
liquidity and provide for capital expansion until such time as operations
produce positive cash flow. The Company is in reorganization at the present
time except for the acquisition activities and remains in default on certain
debenture obligations amounting to $150,000.
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's current plans are to complete its
pending asset acquisition agreement and bring to a conclusion its
reorganization efforts and resume operations. There can be no assurance that
these actions will be successful.
NOTE 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 1,078,277 (post-split) shares of common stock
for services and debt restructuring costs. Of this amount, 1,000,878 shares
have been issued and 100,002 shares remained to be issued to a convertible
debenture holder as of September 30, 2004. Required paperwork to facilitate
the transaction with the Company's Transfer Agent had not been received.
Consequently, these transactions were recorded as "common stock payable" as of
December 31, 2004 and September 30, 2004 respectively. The Company anticipates
these shares will be issued by March 31, 2005.
Included in the approved common shares referred to above, were 513,328 (post-
split) common stock shares for issuance to all previously converted debenture
holders for the express purpose of equalizing their respective share
conversion price received for debenture principal and interest due on
debenture investments. All of the debenture holders received common shares at
the negotiated price of $0.70 per share (post-split) as of September 30, 2003,
their final date of conversion. This transaction resulted in settlement
expense charge to the income statement of the Company of $359,329 for the year
ended December 31, 2003 and an additional $14,523 during the nine months ended
September 30, 2004. All of these shares were issued by September 30, 2004,
except the 100,002 common shares referred to above.
Note 5.) CONVERTIBLE DEBT
5.a) Convertible Debentures Payable
As of December 31, 2004 and September 30, 2004, the Company was in default on
the terms of payment of quarterly interest on these debentures amounting to
$94,574 and $88,473, respectively. Accordingly, two remaining convertible
debentures have been classified as a current liability amounting to $150,000.
Reference should be made to note 6.2 to financial statements as this amount
has been offset by a contra-indemnification receivable.
5.b) Convertible Notes Payable - Related Party
The Company issued convertible notes payable during the three month period
ended December 31, 2004, to a related entity owned by two stockholders of the
Company totaling $40,659. This increased the Convertible Notes Payable -
Related Party account to $469,768 from $429,109 on September 30, 2004. These
demand notes bear interest at 12%, are secured by the assets of the Company,
and are convertible at the option of the holder into common stock at $0.70 per
share. These notes were previously convertible at the rate of $2.80 per share,
but in July 2004 the Board of Directors changed the conversion rate to $.70
per share. The change did not result in any beneficial intrinsic value to
their holders and no change to the Company's financial statements was required
as the fair value of the Company's common stock was less than the $0.70 per
share. The issuance of these notes did not include a beneficial conversion
feature with intrinsic value resulting from the market value for common stock
being less than the conversion price.
Interest expense on these notes was $13,594 and $10,285 during the three month
periods ended December 31, 2004 and December 31, 2003, respectively. Accrued
interest on these notes was $144,598 at December 31, 2004.
NOTE 6) RELATED PARTY TRANSACTIONS
6.1) Related Party Compensation
The Company incurred expenditures with its President and major stockholder for
consulting services amounting to $35,000 of which $15,000 was for additional
consulting services directly related to the acquisition efforts of the Company
accrued as Costs Advanced- Acquisitions Pending for the three months ended
December 31, 2004. This compares to $25,000 expensed in the three months
ending December 31, 2003. These amounts have not been paid but recorded as
Accounts Payable - Related Party
In December 2003, the Company's Board of Directors approved the issuance of
357,143 common shares as partial payment for services rendered to date. These
unpaid consulting services remain as accrued expenses at December 31, 2004. As
a Director, the President received an additional 35,715 common shares
authorized to him during the year ended December 31, 2003 for his services as
a director of the Company and these shares were issued in 2004. Three other
directors received a total of 107,145 shares issued in 2004 for their
services.
6.2) Indemnification Agreement - Related Party
On July 1, 2004, the Company approved the issuance of 1,200,000 common shares
to an affiliated company, Doubletree Liquidation Corporation (DLC). DLC is 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, DLC, has issued an indemnification guarantee to
the Company wherein it will process, review, and guarantee payment for certain
prior Company liabilities (both actual and contingent) that may arise during
the next four years from June 30, 2004. The Company has deemed the value of
the transaction to be $329,714 based upon the consideration given to the
Company in the indemnification agreement.
During the four years of the agreement, DLC will endeavor to finalize and
bring to a conclusion, the payment of prior operation's liabilities. The
remaining unpaid liabilities can be summarized as (1) one defaulted
convertible debenture in the amount of $150,000 and one converted debenture
loan payable in the amount of $50,000. Both of these notes are included on the
books of the Company along with related accrued interest payable in the amount
of $94,574, (2) One account payable - disposed business in the amount of
$24,000 which is also covered by this indemnification agreement. At December
31, 2004, the debt indemnification accounts are summarized below:
Description of debt indemnification: Current Long-term
Defaulted convertible debenture payable $ 150,000 $ 0
Defaulted accrued interest payable 94,574
Account payable-disposed business 24,000
Convertible debenture payable 50,000
Less, contra-indemnification receivable (268,574) (50,000)
--------- ---------
Net Balances at December 31, 2004: $ 0 $ 0
The Company believes that beyond the $329,714 referred to above plus accrued
interest that may occur after the date of the issuance of the Indemnification
Agreement until all debts are settled and paid, there will be no additional
charge or exposure for past liabilities, contingent or otherwise to the
Company and if any do occur, they will be the responsibility of DLC in
accordance with their guarantee to the Company as enumerated in the
Indemnification Agreement.
(6.3) Restatement of June 30, 2004 Financial Statements and 10-QSB
The value of the indemnification agreement transaction had been recorded
during the quarter ended June 30, 2004 in the previously determined amount of
$561,000. The $561,000 was based upon a more encompassing list of unpaid
liabilities from all prior operations of the Company, both parent and
subsidiary included, The Company now deems their potential debt payment
exposure to be limited to only the liabilities included on the Company's
financial statements in the amount of $329,714 at the date of the issuance of
the Indemnification Agreement by DLC, plus accrued interest that may occur
until all debts are settled and paid. The valuation change herein discussed
will require a change to the Company's previously filed Form 10-QSB financial
statement report with the Securities and Exchange Commission. Also the Company
will record an additional $14,523 in expense to issue an additional 20,747
shares of common stock for additional interest due to the conversion of a
convertible debenture. The Company will make this amended report to the SEC
within the next thirty days from the date of this report. The following table
summarizes the changes to the financial statements as of June 30, 2004 before
and after the revisions:
As Reported Revised
Total Assets $ 403 403
Total Liabilities 1,709,249 1,162,772
Stockholders Equity (1,593,045) (1,032,045)
Loss on extinquishment of debt 14,523
General and Administrative expense 83,916 83,916
Interest expense 31,886 31,885
Net (loss) (115,802) (130,324)
6.4) Convertible Notes Payable - Related Party
During the three months ending December 31, 2004, the Company issued an
additional $40,659 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), holds a
secured collateral interest in any assets the Company currently owns 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. See note 5.b for more information.
NOTE 7) SUBSEQUENT EVENTS
On January 14, 2005, the Company announced by filing form 8-K it amended again
its agreement originally dated August 19, 2004 and amended on November 2, 2004
to complete the acquisition of the assets of a privately held group of
financial service companies. See Note 3 LIQUIDITY AND GOING CONCERN MATTERS
and the Company's 8-K announcement for more details.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
Forward Looking Statements
The information herein contains certain "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995, 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," "could," "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
reorganization efforts. Additional reorganization efforts include negotiation
with creditors to restructure and convert debt to equity and actively seeking
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 in 2005 and resume operations.
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 acquisition with ShoptropolisTV.com, Inc. (f/k/a Internationale
Shopping Alliance Inc.), which was a wholly owned subsidiary of ISAI. This
subsidiary was acquired when 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.
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. In January 1999, the Company redeemed and cancelled
1,650,000 shares held by three of the founding shareholders. No consideration
was paid to the founding shareholders for the redemption.
ISAI incorporated its precious metals subsidiary, International Strategic
Assets, Inc., as a Minnesota corporation in March 1999. Its business was
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.
Since December 2000, the Company has been operationally dormant. The Company
believes its shareholder base is its major asset. For the last four years,
from January 2001 to present, the Company has been actively reorganizing its
financial affairs and actively seeking merger or acquisition candidates
offering growth and profit potential for its shareholders.
Results of Operations for the Three months ended December 31, 2004 and 2003.
Sales and Gross Profit
No sales were recorded for the three months ended December 31, 2004 and 2003
as operations were suspended. The Company plans to resume operations in 2005.
Operating Expenses
Operating expenses included general and administrative expenses and interest
expenses related to convertible debenture and convertible notes payable.
General and administrative expenses were $38,381 for the three months ended
December 31, 2004 and $284,438 for the three months ended December 31, 2003.
The expenses in 2004 were principally for audit, consulting, office, salaries,
and interest costs. At this time, the Company has no anticipation as to its
operating expenses in future periods as it continues reorganization efforts.
However, new current expenses are being incurred for interest, office,
telephone, consulting, and legal and professional expenses relating to the
potential acquisitions and the Company efforts in obtaining new business
operations. No advertising expense was incurred in 2004 or 2003.
Liquidity and Capital Resources
ISAI obtained its original capitalization through the sale of 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 of
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 $4,100 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 three months ended December 31, 2004 the Company received $40,659 from
convertible demand notes payable from a related investor in connection with
the continuing reorganization efforts. The convertible note holder, since
November 2000, has held a secured collateral interest in any assets the
Company owns or 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.
As of December 31, 2004 the Company had Total Current Assets of $85,240
consisting of $11,314 in cash, $2,000 in Deposits, and $71,926 in Costs
Advanced to a Related Party and $910,186 in Current Liabilities consisting of
$225,819 in accounts payable, $70,001 in common stock payable, convertible
notes payable- related party of $469,768 and related interest accruals of
$144,598. Accordingly, the Company had a working capital deficit position of
$824,946.
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 reorganization of all of its financial affairs and
obligations.
The Company is not currently seeking any additional sources of debt or equity
financing beyond which is already in place with the financing agreement
consummated in November 2000 with Doubletree Capital Partners, Inc. Until the
reorganization 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 creditors 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 fiscal nine months
ended September 30, 2004 and year ended December 31, 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 December 31, 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.
New Business Ventures
With respect to the business strategy of developing and launching a multimedia
home shopping network, ISAI had only a very limited operating history on which
to base an evaluation of its business and prospects. The Board of Directors
decided in December 2000 to begin disposal efforts of the Shoptropolis
subsidiary and cease development of the home shopping network. All efforts of
the Company at the present time have been directed to a complete
reorganization of all of its affairs. Therefore, the Company's prospects for
new business ventures must be considered in light of the many risks, expenses
and difficulties encountered frequently by companies in reorganization. Such
major risks include, but are not limited to, an evolving business model and
the overall effective management of future growth. To address the many startup
risks and difficulties the Company has encountered, it must in the future have
the ability to successfully execute any of its operational and marketing
strategies that it may develop in any new business venture. There would be no
assurance the Company would be successful in addressing the many risks and
difficulties it could encounter and the failure to do so would continue to
have a material adverse effect on the Company's business, prospects, financial
condition and results of any operations it pursues or tries to develop,
pending successful reorganization of its financial affairs. There can be no
assurance that ISAI can find and attract new capital for any new business
ventures and if successful in finding sufficient capital, that it can
successfully grow and manage the business or new business venture into a
profitable and successful operation. No assurance can be given on any of these
developments. The Company will continue to complete its financial
reorganization and endeavor to find suitable candidates for merger or
acquisition.
History of Losses and Anticipated Further Losses
ISAI has generated only limited revenues to date and has an accumulated
deficit as of December 31, 2004 of $6,911,104. Further, the Company expects to
continue to incur losses until it establishes a means of generating revenues
at appropriate margins to achieve profitability. There can be no assurance the
Company will ever generate revenues or that it will achieve profitability, or
that its future operations will prove commercially successful, or that it will
establish any means of generating revenues at appropriate margins to achieve
profitability.
Need for Additional Financing
The Company's current capital resources are not sufficient to support the
Company's anticipated day-to-day operations. As such, the Company must obtain
significant additional capital in order to the support the Company's
anticipated day-to-day operations and settle the debt incurred by ISAI during
its past operations until it establishes a means of generating revenues at
appropriate margins to achieve profitability. The Company currently has an
agreement with Doubletree Capital Partners, Inc. (hereinafter referred to as
the financial company or DCP) to loan the Company at the financial company's
sole discretion, funds to meet its day-to-day operational expense and settle
certain debt incurred by ISAI. The financial company is owned by two
individuals, one of which is ISAI's current President, CEO and Chairman of the
Board of Directors.
The financial company has commenced its best efforts to help the Company
resolve, consolidate, and reorganize the Company's present debt structure and
contractual liabilities. There is no assurance that the financial company will
provide the Company any additional capital. Additional financing is
contemplated by the Company, but such financing is not guaranteed and is
contingent upon pending successful settlement of the Company's problems with
various creditors. There is no assurance that the Company will be able to
obtain any additional capital. There can be no assurance that the necessary
additional financing will be available when needed by the Company, or that
such capital will be available on terms acceptable to the Company. If the
Company is unable to obtain financing sufficient to meet its operating and
development needs, the Company will be unable to develop and implement a new
business strategy or continue its operations. As a result of the Company's
history of operating losses and its need for significant additional capital,
the reports of the Company's consolidated financial statements for the year
ended December 31, 2003, and the nine month period ended September 30, 2004
include an explanatory paragraph concerning the Company's ability to continue
as a going concern.
Reliance on Key Personnel
The Company's future success will be dependent upon the ability to attract and
retain executive officer(s) and certain other key persons. The inability to
attract such individuals or the loss of services of one or more of such
persons would have a material adverse effect on ISAI's ability to implement
its current plans or continue its operations. There can be no assurance the
Company will be able to attract and retain qualified personnel as needed for
its business.
Control By Existing Management
One principal shareholder Doubletree Capital Partners, Inc. beneficially owns
approximately 95.10% of ISAI's outstanding common stock, which includes common
stock that can be converted from preferred stock owned by the one principal
shareholder as well as similar conversion of convertible loans and related
interest due, and accordingly has complete control of the business and
development, including the ability to manage all operations, establish all
corporate policies, appoint future executive officers, determine management
salaries and other compensation, and elect all members of the Board of
Directors of ISAI.
Effects of Trading in the Over-the-Counter Market
The Company's common stock is traded in the over-the-counter market on the OTC
Electronic Bulletin Board. The Company's stock symbol is ISAT. Consequently,
the liquidity of the Company's common stock may be impaired, not only in the
number of shares that may be bought and sold, but also through delays in the
timing of transactions, and coverage by security analysts and the news media
may also be reduced. As a result, prices for shares of the Company's common
stock may be lower than might otherwise prevail if the Company's common stock
were traded on a national securities exchange or listed on the NASDAQ Stock
Market. Further, the recent adoption of new eligibility standards and rules
for broker dealers who make a market in shares listed on the OTC Election
Bulletin Board may limit the number of brokers willing to make a market in the
Company's common stock.
Limited Market For Securities
There is a limited trading market for the Company's common stock, which is not
listed on any national stock exchange or the NASDAQ stock market. The
Company's securities are subject to the "penny stock rules" adopted pursuant
to Section 15(g) of the Securities Exchange Act of 1934, which applies to non-
NASDAQ companies whose common stock trades at less than $5 per share or has
tangible net worth of less than $2,000,000. These "penny stock rules"
require, among other things, that brokers who sell covered "penny stock" to
persons other than "established customers" complete certain documentation,
make suitability inquiries of investors and provide investors with certain
information concerning trading in the security, including a risk disclosure
document and quote information under certain circumstances.
Many brokers have decided not to trade "penny stock" because of the
requirements of the "penny stock rules" and, as a result, the number of
broker-dealers willing to act as market makers in such securities are limited.
There can be no assurance that an established trading market will develop, the
current market will be maintained or a liquid market for the Company's common
stock will be available in the future.
Liquidity And Going Concern Matters
The Company has no operations and incurred losses since its inception and, as
a result, has an accumulated deficit of $6,911,104 at December 31, 2004. The
net loss for the three month period ended December 31, 2004 was $57,268. The
Company had convertible debenture debt in default in the amount of $150,000,
plus related accrued interest payable of $94,574. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's ability to continue as a going concern depends upon successfully
restructuring its debt, obtaining sufficient financing to maintain adequate
liquidity and provide for capital expansion until such time as operations
produce positive cash flow. The Company is in reorganization at the present
time except for the acquisition activities and remains in default on certain
debenture obligations amounting to $150,000 plus related interest of $89,338.
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's current plans are to complete its
pending asset acquisition agreement and bring to a conclusion its
reorganization efforts and resume operations. There can be no assurance that
these actions will be successful.
Recent acquisition agreements announced in the Company's August 23, 2004 8-K
filing, subsequently amended on November 2, 2004 and again on January 13,
2005, if executed, will give the Company an operating business subsidiary in
the financial services industry in 2005. However, due to the inability of the
Company to receive certified audits of the assets of the acquired companies,
as required in the asset acquisition agreement, none of the acquired companies
assets, liabilities, or revenues and expenses are included at December 31,
2004.
ISAI is providing bookkeeping assistance to assist in the completion of the
agreement which requires the completion of the certified audit for the years
2003 and 2004 of the acquired companies. The Company has incurred cumulative
costs of $71,926 related to this acquisition activity recorded as "costs
incurred for pending acquisitions" in the financial statements for the period
ending December 31, 2004. ISAI has not taken effective control of the
companies or assets as described in the asset purchase agreement nor will ISAI
take effective control until the audits are completed and the agreement has
closed.
One 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. These debentures in default are classified as current
liabilities and totaled $150,000 in principal and $94,574 in accrued interest
as of December 31, 2004. No interest payments were ever made by the Company on
the debentures. One convertible debenture holder with a principal amount due
of $50,000 has agreed to extend the terms and conditions of his debenture so
that debenture has been reclassified as long-term and is not in default. The
indemnification agreement has been designed to cover these liabilities. The
Company is attempting to convert the remaining convertible debenture debt to
common shares.
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 its disclosure controls and procedures
pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended
("Exchange Act"). This evaluation was done under the supervision and with the
participation of the Registrant's President. Based on that evaluation, the
President has concluded that the Company's disclosure controls and procedures
are effective in gathering, analyzing, and disclosing information required to
be disclosed by the Company under the Exchange Act.
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.
As a non-accelerated filer with a fiscal year end of September 30, the Company
must first begin to comply with the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 ("Section 404") for the fiscal year ending
September 30, 2006. During fiscal 2005, management will review and evaluate
the effectiveness, and where necessary, enhance the Company's internal
controls over financial reporting. The Company anticipates it may need to
engage a third party to assist it with the design of such internal controls
over financial reporting. As of the date of this report, the Company has not
yet engaged any such third party. This review and any enhancements, if
necessary, will likely involve significant time and expense by the Company and
its independent auditors. Accordingly, there can be no assurances that the
Company will be in compliance with the requirements of Section 404 by
September 30, 2006.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
During the quarter ending December 31, 2004, the Company was not sued in any
new legal matters.
Item 2. Changes in Securities and Use of Proceeds
During the quarter ended December 31, 2004, there were no common stock shares
issued 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 December 31, 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 short-term convertible debt principal amounting to
$150,000 and long-term convertible debt in the amount of $50,000 with accrued
interest thereon of $94,574 as of December 31, 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:
On November 3, 2004, the Company announced it had amended its acquisition
agreement, originally dated August 19, 2004, to complete and finalize the
acquisition of the privately-held network of financial services companies
composed of Harrison Asset Management Inc. (HAMI), Money Asset Management,
Inc. (MAMI), Cash Asset Management Inc. (CAMI), E-commerce Bank, First
American Financial Family Services (FAFFS), and United Recovery Inc.(URI) - a
wholly-owned subsidiary of MAMI to November 1, 2004. On August 19, 2004, ISAI
completed the agreement to exchange common shares and common share warrants of
ISAI for certain assets of the group of companies above. Paragraph 2.5 of the
Asset Purchase Agreement, previously filed with the SEC in an 8-K dated 8-23-
04, stated ISA Internationale Inc. would be provided audited financial
statements within 70 days of closing and such audited statements would be used
to apportion the 5,000,000 shares of common stock of ISAI among the three
companies in accordance with the asset values being transferred from each of
the companies to ISAI.
Subsequent to the amended agreement of October 29, 2004, the parties have
again determined that audited financial statements for the periods covered by
the revised agreement can not be provided as required by the agreement.
On November 4, 2004, the Company announced it changed its fiscal year end to
September 30. Formerly it was December 31, 2004. Fiscal year 2004 will have
only three quarters of activity from January 1, 2004 to September 30, 2004.
ISAI reported its year-end results in Form 10-KSB. The Board of Directors of
the Company approved the resolution to change its fiscal year as authorized
under Article IX of its corporation bylaws on November 2, 2004.
On January 14, 2005, the Company announced it amended again its agreement to
complete and finalize the acquisition of the assets of a privately held
network of financial services companies composed of Harrison Asset Management
Inc. (HAMI), Money Asset Management, Inc. (MAMI), Cash Asset Management Inc.
(CAMI), E-commerce Bank, First American Financial Family Services (FAFFS), and
United Recovery Inc. (URI) - a wholly-owned subsidiary of MAMI to April 30,
2005. A related Stock Acquisition Agreement was also amended.
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, Chief Executive Officer, and Chief Financial Officer
Date: April 6, 2005
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
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, Chief Executive Officer, and Chief Financial Officer
Date: April 6, 2005
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, Chief Executive Officer, and Chief Financial Officer
Dated: April 6, 2005
23