UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009
Commission File Number: 001-16423
-----------------------------------
ISA INTERNATIONALE INC.
(Name of small business registrant in its charter)
Delaware 41-1925647
(State of incorporation) (I.R.S. Employer Identification No.)
2564 Rice Street, St. Paul, MN 55113
(Mailing address of principal executive offices) (Zip Code)
(Issuer's telephone number) (651) 484-9850
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 []
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [] Accelerated filer []
Non-accelerated filer [] Smaller Reporting Company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes [] No [X]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
On August 6, 2009 there were 23,999,612 shares of the Registrant's common
stock, par value $.0001 per share and 610,000 shares of Convertible Preferred
Stock, par value $.0001 per share outstanding. The Convertible Preferred Stock
would upon conversion at the option of the holder, require the issuance of an
additional 3,050,000 shares of common stock.
Transitional Small Business Disclosure Format (check one). Yes [] No [X]
ISA INTERNATIONALE INC.
FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations (Unaudited) 4
Condensed Consolidated Statements of Cash Flows (Unaudited) 5
Notes to Condensed Consolidated Financial Statements 6-14
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 15-21
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 22
ITEM 4. 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 and Other Notes Payable 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 SHEETS
June 30, September 30,
2009 2008
(Unaudited) (Audited)
ASSETS --------------- -------------
Current assets:
Cash and cash equivalents $ 13,873 $ 26,311
Trade receivables 1,251 2,010
------------- -----------
Total current assets: 15,124 28,321
Office equipment, net 2,108 2,933
Other assets:
Finance contract receivables, net of collections 361,088 487,972
Notes receivable 7,600 7,600
Other assets 52 110
------------ ------------
Total Assets $ 385,972 $ 526,936
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable - trade and taxes $ 106,831 $ 96,805
Notes payable - related party 471,847 401,560
Convertible note payable - related party 217,550 915
Accrued interest payable - related party 28,073 10,548
------------ ---------
Total current liabilities 824,301 509,828
------------ ---------
Total Liabilities 824,301 509,828
------------ ------------
Stockholders' Equity (deficit):
Preferred 12% cumulative convertible stock, par value $.0001
30,000,000 shares authorized, 610,000 shares
issued and outstanding at June 30, 2009
and at September 30, 2008 61 61
Common stock, $.0001 par value,
300,000,000 shares authorized; 23,999,612 shares
issued and outstanding at June 30, 2009
and at September 30, 2008 2,400 2,400
Additional paid-in capital 9,503,482 9,487,775
Treasury stock (537,500) (537,500)
Accumulated deficit (9,406,772) (8,935,628)
------------ -----------
Total stockholders' equity (deficit) (438,329) 17,108
------------ ---------
Total liabilities and stockholders' equity (deficit) $ 385,972 $ 526,936
============ ===========
The accompanying notes are an integral part of these financial statements.
ISA INTERNATIONALE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
June 30, 2009 June 30, 2008 June 30, 2009 June 30, 2008
--------------- -------------- --------------- --------------
Operating revenue:
Portfolio collections $ -- $ -- $ -- $ --
Operating expenses:
General & administrative 81,810 83,291 272,564 284,448
Portfolio collection costs 19,177 4,142 78,202 18,526
--------- --------- ---------- ----------
Operating expenses 100,987 87,434 350,766 302,974
--------- --------- ---------- ----------
Operating loss (100,987) (87,434) (350,766) (302,974)
Other income (expense):
Interest income -- -- 6 --
Interest expense (24,742) (6,077) (65,635) (19,902)
--------- --------- ---------- ----------
Net loss from operations (125,729) (93,511) (416,395) (322,876)
--------- --------- ---------- ----------
Net loss (125,729) (93,511) (416,395) (322,876)
Dividend to preferred
shareholders (18,250) (13,613) (54,750) (33,898)
========= ========= =========== ==========
Net loss attributable to
common shareholders (143,979) (107,124) (471,145) (356,773)
Basic loss per share $ (0.005) $ (0.004) $ (0.017) $ (0.013)
Basic loss per share
attributable to
common shareholders $ (0.006) $ (0.004) $ (0.020) $ (0.015)
========== ========= =========== ==========
Weighted average common
Shares outstanding:
Basic 23,999,612 23,999,612 23,999,612 23,999,612
========== ========== ========== ==========
Dividends per share of
common stock none none none none
Dividends per share of
preferred stock $0.030 $0.034 $0.090 $0.030
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
ISA INTERNATIONALE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended Nine Months Ended
June 30, 2009 June 30, 2008
------------------ -----------------
Cash flows from operating activities:
Net loss $ (416,395) $ (322,876)
Adjustments to reconcile net loss from operations
to cash flow used in operating activities:
Depreciation and amortization 884 884
Reduction of debt receivable purchase price
due to gross collections received 126,884 51,251
Interest contributed to capital 15,707 15,764
Changes in operating assets and liabilities:
Trade account receivables 759 1,727
Accounts payable and accrued liabilities 10,027 62,739
Accrued expenses - related party -- (368)
Accrued interest payable-related party 17,524 (17,277)
---------- --------
Cash used in operating activities (244,610) (208,156)
Cash flows from investing activities:
Debt receivables purchased -- (141,696)
---------- ---------
Cash used in investing activities -- (141,696)
Cash flows from financing activities:
Proceeds from notes payable - related party 70,287 160,696
Proceeds from issuance of convertible debt
- related party 216,635 196,294
Preferred stock dividend (54,750) --
---------- ----------
Cash provided (used) by financing activities 232,172 356,990
---------- ----------
Decrease in cash and cash equivalents (12,439) 7,138
Cash at beginning of period 26,311 14,742
---------- ----------
Cash and cash equivalents at end of period $ 13,873 $ 21,880
========== ==========
Non-cash investing in financing transactions:
Additional paid in capital to related party
for indemnification agreement $ 15,707 $ 15,764
Accrued preferred stock dividend expense $(54,750) $ (33,897)
Payment of convertible and secured loans and accrued
interest with preferred stock to related party $ -- $ 236,103
========== ==========
Total non-cash transactions $ (39,043) $ 285,764
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
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.
These condensed consolidated financial statements include 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. The companies resumed operations in September 2005
as a result of a distressed consumer debt purchase agreement which commenced
on May 18, 2005, and currently operate as debt collection companies.
In the opinion of management, the condensed consolidated financial statements
include all normal recurring adjustments necessary for a fair presentation of
the balance sheet of the Company at June 30, 2009 and the results of its
operations and cash flows for the nine months ended June 30, 2009 and 2008.
Results of operations reported for interim periods are not necessarily
indicative of results for the entire year and should be read in conjunction
with the prior year 10-KSB.
The Company accounts for its debt receivables under the guidance of Statement
of Position ("SOP 03-3"), "Accounting for Certain Loans or 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. Alternatively, The
Company's have chosen to use the "cost recovery method" for revenue
recognition under which no revenue is recognized until the original investment
cost of the portfolio less write-offs has been recovered. The Company has
plans to convert to a revenue amortization model where the carrying value of
the debt receivables based on the actual cash flows received in relation to
the expected cash flows when it has gathered sufficient data and experience to
make those projections.
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 receivable carrying costs of
$361,088 will be recovered by the Company from future gross collections to be
received in the next 60 months commencing from July 1, 2008 and forward. The
Company cannot guarantee all of the remaining receivable costs can be
recovered due to the aging and future write-offs of the receivables.
On June 30, 2008, the Company purchased $141,696 of distressed debt portfolio
receivables. On July 28, 2008, the Company purchased an additional $230,864
distressed debt receivables and both are included in finance contract
receivables on our balance sheet at June 30, 2009.
The agreements to purchase the aforementioned receivables include general
representations and warranties from the sellers covering account holder death
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 inventory
balance. They are not included in the Company's cash collections from
operations nor are they included in the Company's cash collections applied to
revenue.
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.
Changes in debt receivables for the quarter ended June 30, 2009:
Balance at beginning of period, March 31, 2009 $ 405,573
Acquisition of debt receivables --
Cash collections applied to principal (44,485)
Buybacks and returns --
Impairment write down to carrying cost --
-----------------
Balance at the end of the period, June 30, 2009 $ 361,088
=================
Estimated Remaining Collections ("ERC")(Unaudited) * $ 1,081,300
=================
* The Estimated Remaining Collection refers to the sum of all future projected
cash collections from acquired portfolios. ERC is not a balance sheet item,
however, it is provided for informational purposes. There was no revenue
recognized on debt receivables for the nine months ended June 30, 2009.
Under SOP 03-3 guidance, 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.
There were no operating revenues through June 30, 2009. Revenue will be
recognized based on AICPA Statement of Position 03-3, if management is
reasonably comfortable with expected cash flows. In the event expected cash
flows cannot be reasonably estimated, the Company will continue to use the
"Recovery Method" under which revenues are only recognized after the initial
investment has been recovered.
Note 2 LIQUIDITY AND GOING CONCERN MATTERS
The Company has incurred losses since its inception and, as a result, has an
accumulated deficit of $9,406,772 at June 30, 2009. The net loss for the nine
month period ended June 30, 2009 from operating activities was $416,395. The
Company has incurred $471,847 in Notes payable to finance portfolio purchases
and $217,550 in Convertible notes payable to a related party as of June 30,
2009. Also there is $106,833 in Trade Accounts Payable. 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 continuing to establish itself in the debt collection business
within the financial services industry. However, there can be no assurance
these actions will be successful.
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.
Note 3 BASIS OF PRESENTATION
The accompanying audited and unaudited financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States of America.
Cash and Cash Equivalents: For purposes of the Statements of Cash Flows, the
Company considers liquid investments with an original maturity of three months
or less to be cash equivalents.
Management's Use of Estimates: The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that effect
the reported amounts of assets and liabilities, disclosures 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.
Fair Value of Financial Instruments: The carrying amounts of financial
instruments including other current assets, accounts payable and other current
liabilities including accounts payable and notes payable approximated fair
value because of the immediate short-term maturity of these instruments.
Income Taxes: Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of deferred taxes related
primarily to differences between the basis of certain assets and liabilities
for financial and tax reporting and net operating loss carry-forwards.
Deferred taxes represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
The income tax benefit consists of taxes currently refundable due to net
operating loss carry back provisions less the effects of accelerated
depreciation for the federal government. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or the entire deferred tax asset will not be realized.
Deferred tax assets and liabilities are adjusted for the effect of changes in
tax laws and rates on the date of enactment. 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.
Earnings (Loss) Per Share: The Company reports earnings (loss) per share in
accordance with Statement of Financial Accounting Standard (SFAS) No. 128.
This statement requires dual presentation of basic and diluted earnings (loss)
per share with a reconciliation of the numerator and denominator of the loss
per share computations. Basic earnings per share amounts are based on the
weighted average shares of common shares outstanding. If applicable, diluted
earnings per share assumes the conversion, exercise or issuance of all common
stock instruments such as options, warrants and convertible securities,
determined by the treasury stock method, unless the effect is to reduce a loss
or increase earnings per share. Accordingly, this presentation has been
adopted for the period presented. There were no adjustments required for the
period presented in the computation of diluted earnings per share.
Fixed Assets: Fixed assets are recorded at cost and include expenditures that
substantially increase the productive lives of the existing assets.
Maintenance and repair costs are expensed as incurred. Depreciation is
provided using the straight-line method over management prescribed recovery
periods. When a fixed asset is disposed of, its cost and related accumulated
depreciation are removed from the accounts. The difference between un-
depreciated cost and proceeds from disposition is recorded as a gain or loss.
Advertising Costs: Advertising costs are expensed as incurred. There have been
no advertising costs incurred during the periods covered by these notes.
Long-Lived Assets: In accordance with FASB Statement of Financial Accounting
Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", the carrying value of long-lived assets is reviewed by management on
a regular basis for the existence of facts or circumstances, both internally
and externally, that may suggest impairment. Should there be impairment in the
future; the Company will recognize the impairment loss as the difference
between the carrying amount and fair value of the asset based on discounted
expected consolidated future cash flows from the impaired assets.
Contra Account presentation: Reference should be made to note 6 in these notes
to financial statements for additional information as to consolidated
financial statement presentation for certain defaulted convertible debenture
notes payable and related accrued interest.
Stock Based Compensation: No shares of the Company's common stock were issued
for consulting services and settlement expenses during the quarter ended June
30, 2009. No additional shares of Convertible Preferred Stock were issued
during the quarter to reduce the loans payable, accrued interest and dividends
payable to the related party financing company.
Note 4 RECENT ACCOUNTING PRONOUNCEMENTS
In May of 2008, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 163, "ACCOUNTING FOR
FINANCIAL GUARANTEE INSURANCE - AN INTERPRETATION OF FASB STATEMENT NO. 60,
ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES". This statement requires
that an insurance enterprise recognize a claim liability prior to an event of
default (insured event) when there is evidence that credit deterioration has
occurred in an insured financial obligation. This statement also clarifies how
Statement 60 applies to financial guarantee insurance contracts. This
statement is effective for fiscal years beginning after December 15, 2008.
This statement is not expected to effect the Company's financial reporting.
In May of 2008, the FASB issued Statement No. 162, "THE HIERARCHY OF GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES." This statement identifies literature
established by the FASB as the source for accounting principles to be applied
by entities which prepare financial statements presented in conformity with
generally accepted accounting principles (GAAP) in the United States. This
statement is effective 60 days following approval by the SEC of the Public
Company Accounting Oversight Board amendments to AU Section 411, "The Meaning
of Present Fairly in Conformity With Generally Accepted Accounting
Principles." This statement will require no changes in the Company's financial
reporting practices.
In March 2008, the FASB issued SFAS No.161, "DISCLOSURES ABOUT DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES" ("SFAS 161"). SFAS 161 is intended to
improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity's financial position, financial
performance, and cash flows. SFAS 161 achieves these improvements by
requiring disclosure of the fair values of derivative instruments and their
gains and losses in a tabular format. It also provides more information about
an entity's liquidity by requiring disclosure of derivative features that are
credit risk-related. Finally, it requires cross-referencing within footnotes
to enable financial statement users to locate important information about
derivative instruments. SFAS 161 will be effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008
and will be adopted by the Company beginning in the first quarter of fiscal
2010. The Company does not expect there to be any impact of adopting SFAS 161
on its financial position, cash flows and results of operations as the Company
does not currently have any derivative instruments or hedging activity and
does not anticipate any in the near future.
In December 2007, the FASB issued SFAS No. 160, "NONCONTROLLING INTEREST IN
CONSOLIDATED FINANCIAL STATEMENTS, AN AMENDMENT OF ARB NO. 51" ("SFAS No.
160"), which will change the accounting and reporting for minority interests,
and will be recharacterized as non-controlling interests and classified as a
component of equity within the consolidated balance sheets. SFAS No. 160 is
effective as of the beginning of an entity's first fiscal year beginning on or
after December 15, 2008. Earlier adoption is prohibited. Management does not
expect there to be any impact of adopting SFAS 160 on its financial position.
In December 2007, the FASB issued SFAS No. 141 (R), "Business Combinations
(revised 2007)" ("SFAS 141 (R)"). SFAS 141 (R) applies the acquisition method
of accounting for business combinations established in SFAS 141 to all
acquisitions where the acquirer gains a controlling interest, regardless of
whether consideration was exchanged. Consistent with SFAS 141, SFAS 141 (R)
requires the acquirer to fair value the assets and liabilities of the acquiree
and record goodwill on bargain purchases, with the main difference being the
application to all acquisitions where control is achieved. SFAS 141 (R) is
effective for financial statements issued for fiscal years beginning after
December 15, 2008 and will be adopted by the Company in the first quarter of
fiscal year 2010. We do not expect that the adoption of SFAS 141(R) will have
a material impact on our financial condition or results of operation.
In February 2007, the FASB issued Statement No. 159, "THE FAIR VALUE OPTION
FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES, INCLUDING AN AMENDMENT OF FASB
STATEMENT NO. 115" (FAS 159). FAS 159 permits companies to choose to measure
many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value and establishes presentation
and disclosure requirements designed to facilitate comparisons between
companies that choose different measurement attributes for similar types of
assets and liabilities. The provisions of FAS 159 became effective as of the
beginning of our 2009 fiscal year. The adoption of this statement did not have
a material impact on the Company's financial position or results of
operations.
In September 2006, the FASB issued SFAS No. 157, "FAIR VALUE MEASUREMENTS".
SFAS No. 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosure about
fair values. The provisions of FAS 157 became effective as of the beginning of
our 2009 fiscal year. The adoption of SFAS No. 157 did not have a material
impact on the consolidated financial results of the Company.
In June 2009, the FASB issued Statement of Financial Accounting Standards No.
165, "Subsequent Events," ("SFAS No. 165"). SFAS 165 establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. SFAS 165 applies to both interim financial statements and annual
financial statements. SFAS 165 is effective for interim or annual financial
periods ending after June 15, 2009. SFAS 165 does not have a material impact
on our financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards
No.166, "Accounting for Transfers of Financial Assets, an amendment to SFAS
No. 140," ("SFAS 166"). SFAS 166 eliminates the concept of a "qualifying
special-purpose entity," changes the requirements for derecognizing financial
assets, and requires additional disclosures in order to enhance information
reported to users of financial statements by providing greater transparency
about transfers of financial assets, including securitization transactions,
and an entity's continuing involvement in and exposure to the risks related to
transferred financial assets. SFAS 166 is effective for fiscal years beginning
after November 15, 2009. The Company will adopt SFAS 166 in fiscal 2010. The
Company does not expect that the adoption of SFAS 166 will have a material
impact on the consolidated financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No.
167, "Amendments to FASB Interpretation No. 46(R)," ("SFAS 167"). The
amendments include: (1) the elimination of the exemption for qualifying
special purpose entities, (2) a new approach for determining who should
consolidate a variable-interest entity, and (3) changes to when it is
necessary to reassess who should consolidate a variable-interest entity. SFAS
167 is effective for the first annual reporting period beginning after
November 15, 2009 and for interim periods within that first annual reporting
period. The Company will adopt SFAS 167 in fiscal 2010. The Company does not
expect that the adoption of SFAS 167 will have a material impact on the
consolidated financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards
No. 168, "The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles," ("SFAS 168"). SFAS 168 replaces
FASB Statement No. 162, "The Hierarchy of Generally Accepted Accounting
Principles", and establishes the FASB Accounting Standards Codification
("Codification") as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP"). SFAS 168 is effective for interim and annual
periods ending after September 15, 2009. The Company will begin to use the new
Codification when referring to GAAP in its annual report on Form 10-K for the
fiscal year ending September 30, 2010. This will not have an impact on the
consolidated results of the Company.
NOTE 5 STOCK ISSUANCE:
Preferred Stock
As of June 30, 2009, 610,000 shares of Convertible Preferred Stock were issued
and outstanding; 275,000 preferred shares were issued to the Company's
financing company during the fiscal year ended September 30, 2007 and 335,000
shares were issued during the fiscal year ended September 30, 2008 for
repayment of convertible/secured debt to a related party. The preferred shares
are convertible at the rate of one preferred to five common shares at the
option of the holder. The accumulated deficit for the quarter ended June 30,
2009 was adjusted for a dividend distribution of $18,250 on 12% Convertible
Preferred Stock.
Common Stock
As of June 30, 2009, 23,999,612 shares of common stock were issued and
outstanding. No additional shares were issued during the quarter ended June
30, 2009.
Stock Options
There were no stock options issued or exercised during the quarter ended June
30, 2009.
Note 6 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 four years from June 30, 2004. The Company has deemed the value of the
transaction to be $368,045 based upon the consideration given to the Company
in the indemnification agreement.
During the four years of the agreement, DLC endeavored 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 three defaulted convertible debentures totaling $200,000. These
notes are included on the books of the Company along with the related accrued
interest payable in the amount of $189,044. The following is a summary of the
presentation of these liabilities in the Balance Sheet at June 30, 2009:
Description of debt indemnification: Current Long-term
Defaulted convertible debentures payable $ 200,000 $ --
Defaulted accrued interest payable 189,044 --
Less, contra-indemnification receivable (389,044) --
--------- ---------
Balances per Balance Sheet, at
June 30, 2009: $ -- $ --
========= =========
The Company believes that beyond the $389,044 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 7 CREDIT LINES PAYABLE
During the quarter ended June 30, 2009, the Company paid back $13,015 on its
available bank credit lines of $20,000. The current balance is zero. The
interest rate is 12.0% per annum and the lines are payable on demand and
unsecured. The lines are personally guaranteed by the Company's President.
Note 8 CONVERTIBLE DEBT
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 matured 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.
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 lowered to 6% per annum for this note. 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.
As of June 30, 2009, the Company was in default on the terms of payment of
quarterly interest on these debentures amounting to $189,044 and the three
remaining convertible debentures have been classified as a current liability
amounting to $200,000. Reference should be made to note 6 in these notes to
financial statements as this amount has been offset by a contra-
indemnification receivable.
Note 9 RELATED PARTY TRANSACTIONS
Convertible or Secured Notes Payable
During the three months ended June 30, 2009, an additional net amount of
$66,182 was loaned to the Company by an entity owned by two of the Company's
stockholders.
The Company also incurred expenditures with its President who is also a
stockholder for consulting services amounting to $25,000 for the three months
ended June 30, 2009. This amount was accrued as an expense with the liability
transferred to the note payable-related party account.
As of June 30, 2009 and December 31, 2008, the secured loans totaled $217,550
and $915, respectively 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
debt receivable assets for collateral purposes, but are not convertible into
common stock of the Company. Interest expense on these notes for the three
months ended June 30, 2009 and nine months ended June 30, 2009 amounted to
$24,742 and $65,635, respectively. The Company issued a 12% short-term secured
promissory note for $126,368 with the Company's debt receivable assets pledged
as collateral.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS 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-Q
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.
Company History and Overview
ISA Internationale, Inc ("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 an acquisition with ShoptropolisTV.com, Inc.
(f/k/a Internationale Shopping Alliance Inc.), which was a wholly owned
subsidiary of ISAI. Shoptropolis was engaged in the development of a
multimedia home shopping network generating direct retail sales of varied
products from TV viewers and internet shoppers. 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, has evaluated this overall debt purchase for its current
fair market value, future collectibility and net estimated net realizable
value in comparison to the original purchase price paid in the amount of
$1,094,900 with the issuance of 1,250,000 of the Company's restricted common
shares of stock.
In 2008, the Company, through its subsidiary companies, established in-house
capabilities to collect debt portfolios in addition to using third party
agents. Staff includes Donald Kampmann, President of ISA Acceptance
Corporation, as a full time consultant, three collectors in collection
operations, and a full-time licensed Attorney specializing in collections.
Currently, the Company considers itself to be operational but still in a
period of financial and structural reorganization. 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.
At March 31, 2009, the current carrying value of the Company's original
purchased debt receivables, net after gross collections from date of original
purchase and impairment write downs, is $361,088. The Company believes this
carrying value on its Balance Sheet is a fair carrying value and the amount
will be realized from the gross collections received after incurring direct
collection costs and third party collection fees.
Results of Operations for the nine months ended June 30, 2009 and 2008.
Sales and Gross Profit
No net revenue was recorded for the nine months ended June 30, 2009 and 2008
for collection of debt receivables using the cost recovery method of revenue
recognition. The Company, in addition to its in-house staff, uses third party
collection companies and outside legal firms to assist in the collection
efforts on the purchased debt receivables. Collection receipts in the amount
of $44,485 were collected from the debt portfolios in the three months ended
June 30, 2009. 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 collections on the current inventory of debt
receivables will not be sufficient to sustain Company operations in the
future. Efforts are being expended to purchase additional debt portfolio
receivables for future additional revenues.
Operating Expenses
Operating expenses included collection costs, general and administrative
expenses. Other expenses include interest expenses related to short term
financing notes, convertible debenture notes and convertible notes payable.
Direct collection costs incurred during the nine months ended June 30, 2009
were $78,202 compared to $18,526 for the nine months ended June 30, 2008.
General and administrative expenses were $272,564 for the nine months ended
June 30, 2009 compared to $284,448 for nine months ended June 30, 2008.
Interest expense for the nine months ended June 30, 2009 totaled $65,635
compared to $19,902 for the nine month period ended June 30, 2008 due to loans
financing the additional receivables purchase.
Additional expenses are being incurred for interest, office, telephone,
consulting, and legal and professional expenses relating to the Company's
efforts in establishing its direct collection business operations.
Liquidity and Capital Resources
As of June 30, 2009, the Company had total assets of $385,972 consisting of
$13,873 in cash, $1,251 in trade receivables, $2,108 in office equipment less
depreciation, $361,088 in finance contract receivables - net, $7,600 in notes
receivables, and $52 in other assets for organization costs. It had $824,302
in current liabilities consisting of $106,833 in accounts payable and accrued
expenses, $217,550 in convertible notes payable-related party, $471,847 in
notes payable-related party with $28,073 in accrued interest payable.
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 will continue its complete reorganization
of financial affairs and obligations as well as the capital requirements to
support its operational activities required now as a result of additional debt
receivable purchases in 2008 and the related expenditures that will be
required.
The Company is currently seeking additional sources of debt or equity
financing to replace the financing agreement consummated in November 2000 with
Doubletree Capital Partners, Inc. Until the reorganization process is fully
completed and sources of capital needs 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 Form 10-KSB submission for the year ended September
30, 2008, 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. This benefit has not been
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. The Company forecasts a more challenging economic
environment for its operations in 2009 due to a recessionary economy.
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
The Company has generated only limited revenues to date and has an accumulated
deficit as of June 30, 2009 of $9,406,772. 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 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 the Company will be able to obtain
additional capital and the necessary additional financing will be available
when needed by the Company 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 need for significant additional capital, the Form 10-KSB
reports of the Company and notes to consolidated financial statements for the
fiscal year ended September 30, 2008, 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 officers, board members, 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
Two principal shareholders, Doubletree Capital Partners, Inc. (DCP) and
Bernard L. Brodkorb, beneficially own approximately 89.85% and 85.48%,
respectively of the Company's outstanding common stock at June 30, 2009 and
December 31, 2008. DCP's and Mr. Brodkorb'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. Brodkorb is a 50% owner of DCP and his beneficial shares
represented 100% of DCP's interest. DCP and Brodkorb accordingly have 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 Electronic
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 has incurred losses since its inception and, as a result, has an
accumulated deficit of $9,406,772 at June 30, 2009. The net loss for the nine
month period ended June 30, 2009 was $416,395. The Company currently owes
$217,550 for a convertible note payable to a related third party investment
company and $471,847 in short-term notes payable to a related party for the
purchase of distressed debt portfolios and working capital. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. The Company's financial plan 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
reorganization efforts and expand its direct collection operations. There can
be no assurance these actions will be successful.
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 now in default classified as current
liabilities totaled $200,000 in principal and $189,044 in accrued interest as
of June 30, 2009. No interest or principal payments were ever made by the
Company on the remaining debentures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to the registrant.
ITEM 4. CONTROLS AND PROCEDURES
4.1 Evaluation of Controls and Procedures
The Company's management, under the supervision and with the participation of
the Registrant's President, has evaluated the effectiveness of the design and
operation of its disclosure controls and procedures pursuant to Rule 13(a)-
15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act").
This evaluation was done as of the end of the period covered by this quarterly
report. Based on that evaluation, the President, CEO, and CFO has concluded
that our current disclosure controls and procedures are effective in
gathering, analyzing, and disclosing information required to be disclosed by
the Company under the Exchange Act as of the end of the period covered by this
quarterly report.
4.2 Changes in Internal Controls
There have been no significant changes in the Company's internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the
Securities Exchange Act of 1934) that have occurred during the nine months
ended June 30, 2009 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
As a smaller reporting company 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, 2010. During fiscal years 2006, 2007, and 2008, management reviewed and
evaluated the effectiveness, and where necessary, enhanced the Company's
internal controls over financial reporting. The Company may engage a third
party consultant to assist it with the improvement of such internal controls
over financial reporting. This review and any enhancements, if necessary, will
likely involve significant time and expense by the Company and its independent
auditors. The Company believes the Company's risk of control failure is low
due to the financial expertise of its President and the small size of
operations. The Company will begin work with independent consultants to comply
with the requirement of auditor attestation of our internal controls due with
our fiscal year 2010 annual report.
Part II. OTHER INFORMATION
ITEM 1. Legal Proceedings
During the nine months ending June 30, 2009, the Company was not sued in or a
plaintiff in any new legal matters except in the ordinary course of its
business to collect purchased debt receivables.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None during the quarter ended June 30, 2009.
ITEM 3. Defaults Upon Senior Securities and Other Notes Payable
The defaults previously present on the Convertible Debentures as of December
31, 2003 continue as of June 30, 2009, 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 $189,044 as of June
30, 2009 has been assumed by an indemnification agreement with a related
investment party (see note 6 and 8 in the notes to consolidated financial
statements).
The Company was granted an extension of the due date of June 29, 2009 for an
accumulated interest payment on a note payable due to a related party was
extended by mutual agreement to December 29, 2009. This does not affect the
results of the consolidated financial statements presented in this report. On
June 30, 2009 the Company had not paid the accrued interest due on a note
payable in the amount of $9,749. The Company also has three other notes
payable with interest payable on July 24, 2009 in the amount of $19,825. On
August 5, 2009 the Company received an extension until December 29, 2009 to
pay the accrued interest on these notes. The Company is endeavoring to re-
structure the terms and conditions of all promissory notes payable to the
related party in the principal amount of $471,847 and accrued interest of
$28,073 as of June 30, 2009.
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 of the Chief Executive Officer and Chief
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
EX-32.1 Certification of the Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Form 8-K reports filed during quarter:
None
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: August 6, 2009
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