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 March 31, 2007 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 [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date. On May 15, 2007 there were 23,989,912 of the Registrant's common stock, par value $.0001 per share outstanding. Transitional Small Business Disclosure Format (check one). Yes [ ] No [X] ISA INTERNATIONALE INC. FORM 10-QSB TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheet as of March 31, 2007 (unaudited) 3 Condensed Consolidated Statements of Operations for the three months and six months ended March 31, 2007 (unaudited) and 2006 (unaudited) 4 Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2007 (unaudited) and 2006 (unaudited) 5 Notes to Condensed Consolidated Financial Statements 6-14 Item 2. Management's Discussion and Analysis or Plan of Operation 15-21 Item 3. Controls and Procedures 22 PART II OTHER INFORMATION Item 1. Legal Proceedings 23 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23 Item 3. Defaults Upon Senior Securities 23 Item 4. Submission of Matters to a Vote of Security Holders 23 Item 5. Other Information 23 Item 6. Exhibits and Reports on Form 8-K 23 Signatures 24 PART I FINANCIAL INFORMATION Item 1. Financial Statements ISA INTERNATIONALE INC. CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) March 31, 2007 ASSETS --------------- Current Assets: Cash and cash equivalents $ 3,659 Trade receivables 10,852 ------------ Total Current Assets: 14,511 Fixed assets, less accumulated depreciation of $917 4,583 Other Assets: Finance contract receivables - net of collections 277,894 Notes receivable - non current portion 7,600 Organization costs - net of amortization 228 ------------ Total Other Assets 285,722 ------------ Total Assets $ 304,816 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable - trade and taxes 47,597 Convertible notes payable - related party 143,343 Accrued interest payable - related party 4,746 Indemnification agreement - related party -- ------------ Total Current Liabilities 195,686 Long-Term Liabilities: -- ------------ Total Liabilities 195,686 ------------ Stockholders' Equity: Common stock, $.0001 par value, 300,000,000 shares authorized; 23,989,912 issued and outstanding 2,399 (No change since quarter one FY 2007) Additional paid-in capital 8,842,079 Accumulated (deficit) (8,735,348) ------------ Total Stockholders' Equity 109,130 ------------ Total Liabilities and Stockholders' Equity $ 304,816 ============ The accompanying notes are an integral part of these financial statements. ISA INTERNATIONALE INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Three Months Six Months Six Months Ended Ended Ended Ended March 31, 2007 March 31 2006 March 31 2007 March 31 2006 --------------- ------------- ------------- ------------ Operating revenue: Portfolio collections $ 0 $ 0 $ 0 $ 0 Operating expenses: Portfolio collection costs 15,329 30,446 33,789 58,646 General & administrative 91,863 76,480 209,803 154,991 Impairment charge on portfolio 0 219,934 0 219,934 --------- --------- -------- -------- Operating expenses 107,192 326,860 243,592 433,571 --------- --------- -------- -------- Operating loss (107,192) (326,860) (243,592) (433,571) Other income (expense): Interest expense (8,292) (23,451) (15,217) (47,225) --------- ---------- --------- ---------- Net (loss) from operations (115,484) (350,311) (258,809) (480,796) --------- ---------- ---------- --------- Net (Loss) (115,484) (350,311) (258,809) (480,796) ========= ========= ========== ========= Basic and diluted (loss) per share (0.005) (0.02) (0.01) (0.12) ========== ========= ========== ========= Weighted average common Shares outstanding: Basic & Assuming Diluted 23,989,912 3,956,880 23,989,912 3,956,880 ========== ========== =========== ========== Dividends per share of common stock none none none none ========== ========== =========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements. ISA INTERNATIONALE INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended Six Months Ended March 31, 2007 March 31, 2006 ------------------ ------------------ Cash flows from operating activities: (Loss) from continuing operations $ (258,809) $ (480,796) Adjustments to reconcile net (loss) from operations to cash flow used in operating activities: Deprecation, a non cash charge 550 -- Amortization of incorporation costs, a non-cash charge 39 39 Reduction of debt receivable purchase price due to gross collections received 95,135 159,240 Impairment charge on debt receivable purchase price carrying charge 219,934 Charge-off costs incurred for unsuccessful acquisition 9,305 Interest charge for indemnification agreement 10,471 10,471 Changes in operating assets and liabilities: Trade account receivables (2,616) (7,238) Note receivable for incurred acquisition 10,000 (17,600) Accounts payable and accrued expenses 16,053 18,546 Accrued interest payable, related party 4,746 36,754 Accrued expenses, related party 41,000 ----------- ---------- Cash provided by (used in) operating activities (124,431) (10,345) ----------- ---------- Cash flows from financing activities: Proceeds from issuance of convertible debt to related party 102,529 13,069 ----------- ---------- Cash provided by financing activities 102,529 13,069 ----------- ---------- Increase (decrease) in cash and cash equivalents (21,902) 2,724 Cash at beginning of period 25,561 18,963 ----------- ---------- Cash and cash equivalents at end of period $ 3,659 $ 21,687 =========== ========== Non-cash investing in financing transactions: Stock issued to related party for capital contribution for Indemnification Agreement 10,471 10,471 ---------- ---------- Total non-cash transactions $ 10,471 $10,471 ========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements. ISA INTERNATIONALE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1.) NATURE OF BUSINESS AND SIGNIFICANT EVENTS 1.a) Description 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. These condensed consolidated financial statements included the parent Company, ISA Internationale, Inc., its wholly owned subsidiary, ISA Financial Services, Inc. (formerly ISA Acquisition Corporation), and its wholly owned subsidiary, ISA Acceptance Corporation. As a result of a distressed consumer debt asset purchase that commenced on May 18, 2005 and completed in September 2005, the Companies currently operate as debt collection companies. On August 19, 2004, the Company signed an asset purchase agreement with five California Companies, wherein common shares of the Company would be used to purchase the assets being acquired. The terms of the agreement, as previously reported in 8K filings by the Company on August 23, 2004, November 3, 2004, January 14, 2005 and recently April 30, 2005, were not complied with by the seller of the assets enumerated in the agreement and, accordingly, the Company was not able to complete the asset purchase agreement. Certified audits of the seller companies were required by the agreement and the seller companies were not able to deliver these required certified audits for the years 2003 and 2004. However, on May 18, 2005, the Company purchased of a portion of the Company's consumer receivable portfolios for stock valued at $1,094,900. The Company accounts for its debt receivables under the guidance of Statement of Position ("SOP") 03-3, "Accounting for Loans or Certain Debt Securities Acquired in a Transfer." This SOP limits the yield that may be accreted (accretable yield) to the excess of the Company's estimate of undiscounted expected principal, interest and other cash flows (cash flows expected at the acquisition to be collected) over the Company's initial investment in the debt receivables. Subsequent increases in cash flows expected to be collected are recognized prospectively through adjustment of the debt receivables yield over its remaining life. Decreases in cash flows expected to be collected are recognized as impairment to the debt receivable portfolios. The Company's proprietary collections model is designed to track and adjust the yield and carrying value of the debt receivables based on the actual cash flows received in relation to the expected cash flows. This method is commonly referred to as the "cost recovery method" for revenue recognition under which no revenue is recognized until the investment amount of $1,094,900 has been recovered. In the event cash collections are inadequate to amortize the carrying balance and the resulting estimated remaining fair market value of the remaining portfolio debt receivables were to be less than the carrying value, an impairment charge would need to be taken with a corresponding write off of the "impaired" or deficient receivable carrying value with a corresponding charge to profit and loss of the Company at that time. The Company believes the remaining portfolio debt receivables of $277,894 will be recovered by the Company from future gross collections to be received in the next 48 months commencing from March 31, 2007 and forward. The agreements to purchase the aforementioned receivables include general representations and warranties from the sellers covering account holder death or bankruptcy, and accounts settled or disputed prior to sale. The representation and warranty period permitting the return of these accounts from the Company to the seller is typically 90 to 180 days. Any funds received from the seller of debt receivables as a return of purchase price are referred to as buybacks. Buyback funds are simply applied against the debt receivable balance received. They are not included in the Company's cash collections from operations nor are they included in the Company's cash collections applied to principal amount. Gains on sale of debt receivables, representing the difference between sales price and the unamortized value of the debt receivables, are recognized when debt receivables are sold. There was no revenue recognized on debt receivables for the six months ended March 31, 2007. The Company has not had additional portfolio debt impairment write downs for the current six month period ended March 31, 2007. Last year's operating expenses for the six month period ended March 31, 2006 included an impairment write down charge against the asset value of the debt receivables in the amount of $219,934. Changes in debt receivables for the quarter ended March 31, 2007 were as follows: Balance at beginning of period, December 31, 2006 $ 321,059 Acquisition of debt receivables 0 Cash collections applied to principal (43,165) Impairment write down to carrying cost 0 -------------- Balance at the end of the period, March 31, 2007 $ 277,894 ============== Estimated Remaining Collections ("ERC")(Unaudited) * $ 311,853 ============== Estimated Remaining Collections refers to the sum of all future projected cash collections from acquired portfolios less estimated direct costs of collection including fees charged by third party collection firms by the Company. ERC is not a balance sheet item, however, it is provided for informational purposes. Under SOP-03-3 debt security impairment is recognized only if the fair market value of the debt has declined below its amortizable costs. Currently no additional amortizable costs are below fair market value. 1.b) Presentation The condensed consolidated balance sheet at March 31, 2007 contains contra account statement presentation for certain convertible debenture notes payable, related accrued interest payable and accounts payable-disposed business in the amount of $365,752. Reference should be made to note 4.d in these notes to financial statements for additional information as to consolidated financial statement presentation at March 31, 2007. 1.c) Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets 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. 1.d) Revenue Recognition There were no operating revenues through March 31, 2007. Revenue will be recognized based on AICPA Statement of Position 03-3, if management is reasonably comfortable with expected cash flows. In the event management believes expected cash flows cannot be reasonably estimated, the Company will use the "Cost Recovery Method" under which revenues are only recognized after the initial investment cost has been recovered. The Company has been using the "Cost Recovery Method" of revenue recognition. 1.e) Earnings per Common Share Basic loss per common 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 2007 and 2006, all potentially issueable shares 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 and those that may have been issueable at the end dates of the financial statements included in this 10-QSB report. 1.f) Stock Based Compensation No shares of the Company's common stock were issued for consulting services and settlement expenses during the quarter ended March 31, 2007. 1.g) Fair Value of Financial Instruments The Company uses the following methods and assumptions to estimate the fair value of each class of financial instruments for which it is practicable to estimate such value: Cash and short-term investments: The carrying amount approximates fair value because of the short maturity of those instruments. Accounts payable: The carrying value of accounts payable approximates fair value due to the short-term nature of the obligations. Convertible debentures and notes payable: The carrying value of the Company's convertible debentures and notes payable, which are in default, approximates fair value due to the short-term nature of the obligations. 1.h) Recently Issued Accounting Standards In February 2007 the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") 159, "The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement 115", that provides companies with an option to report certain financial assets and liabilities in their entirety at fair value. This statement is effective for fiscal years beginning after November 15, 2007. The fair value option may be applied instrument by instrument, and may be applied only to entire instruments. A business entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. We are evaluating SFAS 159 and have not yet determined the impact the adoption will have on the consolidated financial statements. In September 2006, the FASB issued SFAS 157, "Fair Value Measurements". This statement defines fair value, establishes a framework for measuring fair value for both assets and liabilities through a fair value hierarchy, and expands disclosure requirements. SFAS 157 is effective for financial statements issued or fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We are evaluating SFAS 157 and have not yet determined the impact the adoption will have on the consolidated financial statements. In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" (SAB 108), which addresses how to quantify the effect of financial statement errors. The provisions of SAB 108 become effective as of the end of our 2007 fiscal year. We do not expect the adoption of SAB 108 to have a significant impact on our financial statements. In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," an interpretation of FASB Statement No. 109, "Accounting for Income Taxes." FIN 48 prescribes a minimum recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition for tax related positions. FIN 48 becomes effective for the Company on January 1, 2007. The Company is currently in the process of determining the effect, if any, the adoption of FIN 48 will have on the consolidated financial statements. 2.) LIQUIDITY AND GOING CONCERN MATTERS The Company has had limited operations and only recently entered into new operations in the debt collection business. The Company has incurred losses since its inception and, as a result, has an accumulated deficit of $8,735,348 at March 31, 2007. The net loss for the six month period ended March 31, 2007 was $258,809. The Company had convertible debenture debt in default in the amount of $200,000, plus related accrued interest payable of $141,752. 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 has been in reorganization and at the present time is entering into the debt collection business within the financial services industry and remains in default on certain debenture obligations amounting to $341,752. The accompanying consolidated 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 consolidated 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 continue to insert itself into the debt collection industry as a result of its recent consumer debt asset acquisition agreement. The Company has resumed operations after an approximate five year reorganization period. However, there can be no assurance that these actions will be successful. NOTE 3) INCOME TAXES The Company has incurred significant net operating losses since its inception but has not reflected any benefit of such net operating loss carry-forwards in the accompanying financial statements. NOTE 4) STOCK ISSUANCE: (4.a) Preferred Stock As of March 31, 2007 there are no shares of Preferred Stock issued and outstanding. (4.b) Common Stock As of March 31, 2007, 23,989,912 shares of common stock were issued and outstanding, No additional shares were issued during the quarter ended December 31, 2006. (4.c) Stock Options There were no options issued during the quarter ended March 31, 2007. (4.d) 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. As the remaining liabilities are paid or resolved, The Company will receive such notification of the resolution and may be allowed to reduce the carrying value of the indemnification receivable. 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 the related accrued interest payable in the amount of $141,752, (2) One account payable-disposed business in the amount of $24,000 is also covered by this indemnification agreement. The following is summary of the presentation of the liabilities in the Balance Sheet at March 31, 2007: Description of debt indemnification: Current Long-term Defaulted convertible debenture payable $ 150,000 $ 0 Defaulted accrued interest payable 141,752 0 Account payable-disposed business 24,000 0 Convertible debenture payable 50,000 0 Less, contra-indemnification receivable (365,752) 0 --------- --------- Balances per Balance Sheet, at March 31, 2007: $ 0 $ 0 ========= ========= The Company believes that beyond the $365,752 referred to above, 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. Note 5) CONVERTIBLE DEBT (5.a) Convertible Debentures The Company issued convertible debentures in a private placement between November 1999 and May 2000. These debentures were convertible at the option of the holder into common stock at $1.50 per share and bear interest, which is payable quarterly beginning June 30, 2000 at 12%. The debentures had a term of three years and mature between November 2002 and May 2003. The issuance of these debentures included a beneficial conversion feature with intrinsic value resulting from the market price for common stock being greater than the option price. The beneficial conversion feature amounted to $422,920, which was greater than the proceeds of the related debentures by $25,000. The amount of the beneficial conversion feature not exceeding the proceeds from the debentures is immediately recognized as interest expense because the right to convert to common stock is vested upon issuance of the debentures. Accordingly, interest expense for the year ended December 31, 2000 included $397,920 related to the beneficial conversion feature. As of March 31, 2007, the Company was in default on the terms of payment of quarterly interest on these debentures amounting to $141,752. Accordingly, two remaining convertible debentures have been classified as a current liability amounting to $200,000. Reference should be made to note 4.d in these notes to financial statements as this amount has been offset by a contra- indemnification receivable. The principal and interest due on these debenture notes continue to remain unpaid. During 2003, the Company extended one previously defaulted $50,000 convertible debenture to a future due date of March 31, 2006 with interest payable at that date. The interest rate was also lowered to 6% par annum. The debenture is also convertible into common shares of the Company at the rate of $3.00 per share at the option of the holder. It is classified as a current liability and has been offset by a contra-indemnification receivable. (5.b) Convertible or Secured Notes Payable - Related Party During the three months ended March 31, 2007, additional monies in the amount of $76,219 were loaned to the Company by an entity owned by two of the Company's stockholders. As of March 31, 2007, the loans total $143,343 and are payable on demand to the financial company, bear interest at the rate of 12% per annum, and are secured by the Company's assets for collateral purposes, but are not convertible into common stock of the Company. Interest expense on these notes for the three months ended March 31, 2007 amounted to $3,114. (6.) RELATED PARTY TRANSACTIONS Convertible Notes Payable - See note 5 b. The Company incurred expenditures with its President who is also a stockholder for consulting services amounting to $14,500 in the three months ended March 31, 2007 and salary expenses in the amount of $10,500. NOTE 7) SUBSEQUENT EVENTS There were no reportable events subsequent to March 31, 2007 to the date of this report, May 21, 2007. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Forward Looking Statements This report 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 10QSB 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. The Company undertakes no obligation to update the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, conditions, or circumstances. 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 businesses: (1) the development of a multimedia home shopping network generating direct retail sales of varied products from TV. viewers and internet shoppers, and (2) direct sales via outbound telemarketing of precious metals consisting mainly of gold and silver coins and bars. ISAI has been attempting to financially restructure itself. ISAI disposed of International Strategic Assets, Inc. on May 19, 2000, and ShoptropolisTV.Com, Inc. on March 29, 2001. 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. 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. Between December 2000 and through May 2005, the Company was operationally dormant and was actively reorganizing its financial affairs and actively seeking merger or acquisition candidates offering growth and profit potential for its shareholders. On May 11, 2005, the Company, through its wholly owned subsidiary, ISA Acquisition Corporation, purchased $36,097,726 of portfolio debt receivables and commenced operations in the troubled debt collection business. Upon a detailed examination of the individual debts and accounts purchased, the Company determined that it should receive replacement debt receivables from the Seller companies due to substitutions and replacement debt considered to be non-collectible, as determined by the Company prior to September 30, 2005. Accordingly, the Company was given and did receive additional consumer debt receivables considered to be replacement debt in the additional net amount of $7,635,274 bringing the total consumer debt receivable purchase to $43,733,000 as of September 30, 2005. The substituted debts, as revised, amount to a larger face value of debt purchased but have the same computed fair market value due to different categories of debts received as well as different ages of the debts. For the most part, the new and revised group of debts received in accordance with the original purchase agreement is now considered to be older in age and of slightly less individual value. The Company, through its third party collection agent, is evaluating this overall debt purchase for its current fair market value, future collectibility and net estimated net realizable value in comparison to the purchase price paid in the amount of $1,094,900 with the issuance of 1,250,000 shares of the Company's restricted common stock. Currently, the Company considers itself to be out of the reorganization period and now an operating company. At March 31, and June 30, 2006, respectively, the Company determined that portions of the purchased debt receivables in the final group as finally received had diminished, reduced or no value due to debt worthlessness and losses or further the existence of newly discovered prior sales of portions of the debt receivables. The Company recorded a fair market value impairment write down in the amount of $378,287 for the fiscal year ended September 30, 2006 to reduce the carrying value of the purchased debt receivables. At March 31, 2007, the current carrying value of the Company's purchased debt receivables, net after gross collections from date of original purchase and impairment write downs, is $277,894. The Company believes this carrying value on its Balance Sheet is a fair carrying value and the amount as stated will be realized from the gross collections received after required third party collection fees in the minimum amount of 35% of the gross collections received. Results of Operations for the six months ended March 31, 2007 and 2006. Sales and Gross Profit No net revenue was recorded for the six months ended March 31, 2007 for collection of debt receivables using the cost recovery method of revenue recognition. The Company has engaged the services of third party collection companies to assist in the collection efforts on the purchased debt receivables. Collection receipts from the debt portfolios in the amount of $95,135 were collected in the six months ended March 31, 2006. This amount has been recorded as a reduction of the purchase price carrying value of the purchased debt receivables. The Company believes the net cash flows received from the debt receivables collected will not be anywhere close to the amount of cash flows estimated to be required to sustain Company operations in the future. Therefore, additional efforts are being expended to bring to the Company additional debt portfolio receivables for the operational source of future additional revenues. 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 $209,802 for the six months ended March 31, 2007 compared to $154,991 for six months ended March 31 2006. The remaining expenses in 2007 and 2006 were principally for audit, legal, other recurring consulting, office, wages and salaries. Legal costs for the six month period represented $65,848 or 31% of the total general and administrative costs due to high legal fees associated with our defense in a legal proceeding (see Part II, Item 1 - Legal Proceedings). Last fiscal year Legal Costs amounted to $1,155 for the six months ended March 31, 2006. For the six months ended March 31, 2007, the Company incurred $33,789 in direct debt collection costs including third party agency collection costs. Debt collection costs incurred by the Company in the six months ended March 31, 2006 were $58,646. Additionally, new current expenses are being incurred for interest, office, telephone, consulting, and legal and professional expenses relating to potential acquisitions and the Company's efforts in obtaining new business operations. No advertising expense was incurred in 2007 or 2006. Liquidity and Capital Resources As of March 31, 2007, the Company had Total Assets of $304,816 consisting of $3,659 in cash, $10,852 in Trade Receivables, $4,583 in Office Equipment less depreciation, $277,894 in Purchased Receivables - net, $7,600 in Notes receivables and $228 in other assets for organization costs. It had $195,686 in Current Liabilities consisting of $47,596 in accounts payable and accrued expenses, $4,746 in Accrued interest payable - related party, and $143,343 in convertible notes payable-related party. The Company's current capital resources are not sufficient to supports its development and operations. Additional capital will be necessary to support future growth of the Company as well as general and administrative and interest expenditures. The Company cannot continue its existence without a full and complete reorganization of all of its financial affairs and obligations as well as the capital requirements to support its operational activities required now as a result of the troubled debt receivable purchase on May 11, 2005 and the related expenditures that will be required. 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 fully completed and capital needs required to be made as a result of the entry by the Company into the troubled debt collection as of May 11, 2005 are determined and defined, 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 year ended September 30, 2006, should be read including 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 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. Prior 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 sell 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, attempt to develop a successful business in the debt collection business 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 March 31, 2007 of $8,735,348. Further, the Company expects to continue to incur losses until it generates 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 new capital to support the Company's anticipated day- to-day operations and fully 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 September 30, 2006, includes 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. (DCP), beneficially owns approximately 89.22% of the Company's outstanding common stock at March 31, 2007 compared to 95.06% on March 31, 2006. DCP's beneficial ownership 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 all options issued. DCP accordingly has complete control of the business and future 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 and its 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 numbers 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 incurred losses since its inception and, as a result, has an accumulated deficit of $8,735,346 at March 31, 2007. The net loss for the six month period ended March 31, 2007 was $258,809. The Company currently owes $143,343 in Loans Payable to a related third party investment company. 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 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, resume operations, and bring to a conclusion its reorganization efforts. There can be no assurance these actions will be successful. One remaining officer is currently managing the Company. 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 $200,000 in principal and $141,752 in accrued interest as of March 31, 2007 No interest payments were ever made by the Company on the debentures. One convertible debenture holder with a principal amount due of $50,000 agreed to extend the terms and conditions of his debenture so that debenture has been reclassified as long-term debt and is currently in default. These debenture liabilities have been offset by an indemnification agreement designed to cover these liabilities and offset them on the Balance Sheet.. 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 ended September 30, 2007. During fiscal 2006, management reviewed and evaluated the effectiveness, and where necessary, enhanced the Company's internal controls over financial reporting. The Company anticipates it may need to engage a third party to assist it with the improvement 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 the Company will be in compliance with the requirements of Section 404 by September 30, 2007. Part II. OTHER INFORMATION Item 1. Legal Proceedings During the six months ending March 31, 2007, the Company was not sued in any new legal matters. However, on July 18, 2006, The Company was served a summons and complaint in the commencement of an adversary proceeding in the U.S. Bankruptcy Court Case(s) of Harrison Asset Management, Inc., Cash Asset Management, Inc. and Money Asset Management, Inc. in the Central District of California, San Fernando Valley Division. The U.S. Bankruptcy Court Trustee, on behalf of the debtor collection companies, files the summons and complaint against the Company seeking avoidance and recovery of fraudulent transfers; civil conspiracy for fraudulent transfer; avoidance of unperfected sale; determination of the validity, priority and extent of lien (as filed by the Company); turnover (of debt receivables purchased) and objection to the claims filed by the Company, ISA Internationale, Inc., subsequent in January 2006. The Company believes the Trustee's summons and complaint positions are without merit and will vigorously defend its actions in the debt receivable purchase and seek recovery of all damages incurred, expenses advanced and related losses thereto since August 19, 2004, the date the relationship with the debtor companies commenced through and including the date of May 18, 2005, the date of the debt receivable purchases by the Company, through the date of suit commencement and termination. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None during the quarter ended March 31, 2007. Item 3. Defaults Upon Senior Securities The defaults previously present on the Convertible Debentures as of December 31, 2003 continue as of March 31, 2007, 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 defaults consist of short-term convertible debt principal amounting to $150,000 and one additional short-term convertible debt in the amount of $50,000. The accrued interest liability due on these notes combined amounts to $141,752 as of March 31, 2007 has been assumed by an indemnification agreement with a related investment party (see note 4(d). 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: EX-31.1 Certification per Sarbanes-Oxley Act (Section 302) EX-32.1 Certification per Sarbanes-Oxley Act (Section 906) (b) Form 8-K reports filed during quarter: None The total outstanding common shares of the Company as of March 31, 2007 after all issuances total 23,989,912. 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: May 21, 2007