UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2012
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 |
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| ----------------------------------------- |
Common Stock |
| OTC Bulletin Board |
----------------------------------------------------------------------------- | ||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [] No [X]
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [] 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]
1
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
On August 20, 2012, there were 48,874,912 shares of the Registrant's common stock, par value $.0001 per share.
Transitional Small Business Disclosure Format (check one). Yes [] No [X]
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ISA INTERNATIONALE INC.
FORM 10-Q
TABLE OF CONTENTS
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PART I. | FINANCIAL INFORMATION | 4 | |
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ITEM 1. | FINANCIAL STATEMENTS |
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| Consolidated Balance Sheets | 5 | |
| Consolidated Statements of Operations | 6 | |
| Consolidated Statements of Cash Flows | 7 | |
| Notes to Consolidated Financial Statements | 8-15 | |
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ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 16-23 | |
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ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 23 | |
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ITEM 4T. | Controls and Procedures | 24 | |
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PART II | OTHER INFORMATION |
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ITEM 1. | Legal Proceedings | 25 | |
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ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 25 | |
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ITEM 3. | Defaults upon Senior Securities | 25 | |
ITEM 4. | Submission of Matters to a Vote of Security Holders | 25 | |
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ITEM 5. | Other Information | 25 | |
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ITEM 6. | Exhibits and Reports on Form 8-K | 26 | |
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Signatures |
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PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
These consolidated financial statements have been prepared by ISA Internationale Inc. (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with such SEC rules and regulations. In the opinion of management, the accompanying statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2012 and its results of operations, stockholders' equity, and cash flows for the nine month period ended June 30, 2012. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto as a part of the Company's annual report on Form 10-K/A filed on February 21, 2012.
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ISA INTERNATIONALE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2012 September 30,2011
ASSETS -------------------------------
Current Assets:
Cash and cash equivalents $ 2,422 $ 1,841
Restricted cash 0 13,491
Trade Receivables 0 580
Prepaid expenses 0 0
------------ ---------
Total current assets 2,422 15,912
Fixed Assets
Fixed assets at cost less depreciation 12,589 24,460
------------ ---------
Total fixed assets 12,589 24,460
Other Assets:
Finance contract receivables, net of collections 8,002 75,879
Non Marketable Securities 2,000 0
Proceeds due from Sale of Assets 14,500 0
------------ ---------
Total other assets 24,500 75,879
------------ ---------
Total assets $ 39,513 $ 116,251
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade and taxes $ 137,768 $ 163,101
Credit lines payable 0 18,360
Notes payable other - current portion 3,694 3,462
Notes payable related party – includes accrued
interest – defaulted - current portion 94,459 87,011
Convertible notes payable, related party secured 43,878 0
Investment Payable 2,000 0
Convertible debentures payable - defaulted 0 50,000
Accrued interest payable debentures - defaulted 0 25,611
------------ ---------
Total current liabilities 281,799 347,546
Long Term Liabilities
Notes payable other - long term portion 6,246 9,127
------------ ---------
Total liabilities 288,045 356,674
------------ ------------
Stockholders' equity:
Preferred 12% cumulative convertible stock, par value $.0001
30,000,000 shares authorized, No shares issued and
outstanding at June 30, 2012 and 1,781,000 issues and
outstanding at September 30, 2011 0 178
Preferred ISA Acceptance Corporation, par value $25
50,000 shares authorized, No shares issued and outstanding
at June 30, 2012 and 22,400 issued and outstanding at
September 30, 2011 0 560,000
Common stock, $.0001 par value, 300,000,000 shares
authorized; 48,874,912
shares issued at June 30, 2012
and 23,999,612 issued at September 30, 2011 4,888 2,400
Additional paid-in capital 11,475,856 10 795,328
Accumulated deficit (11,191,776) (11,060,829)
Treasury stock (537,500) (537,500)
------------ -----------
Total stockholders' equity (Deficit) ( 248,532) (240,423)
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Total liabilities and stockholders' equity $ 39,513 $ 116,251
============ ===========
The accompanying notes are an integral part of these consolidated financial statements.
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ISA INTERNATIONALE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
3 Months Ended 9 Months Ended
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
-----------------------------------------------
Operating expenses:
Portfolio collection costs 0 191 0 604
General and administrative 16,897 39,757 94,286 138,945
General and Administrative-related
Party 8,250 8,620 24,500 26,885
------- ------- ------- -------
Operating expenses 25,147 48,568 118,786 166,434
-------- -------- -------- --------
Operating loss (25,147) ( 48,568) (118,786) (166,434)
Other expenses
Interest expense (547) (3,135) (2,740) (4,044)
Interest expense-related party (1,168) (1,346) (7,746) (10,550)
Gain on liability extingishment 77,116 0 77,116 0
-------- ------- -------- --------
Net income (loss) before discontinued
Operations 50,254 (53,049) (52,156) (181,028)
Discontinued Operations
Loss from discontinued operations (53,542) (40,218) (78,790) (104,932)
-------- -------- -------- --------
Net (loss) (3,288) (93,267) (130,946) (285,960)
-------- -------- -------- --------
Dividends to preferred stockholders 0 0 0 (94,066)
--------- -------- -------- --------
Net loss attributable to common $ (3,288) ( 93,267) (130,946) (380,026)
stockholders ========= ======== ========= ========
Basic earnings (loss) per share
Continuing operations $ (0.002 $ (0.002) $ (0.002) $ ( 0.008)
Discontinued operations (0.002) (0.002) (0.003) ( 0.004
Basic & diluted gain (loss) per share 0.000 (0.004) (0.005) ( 0.012)
========= ======== ======== ========
Weighted average common
Shares outstanding: Basic 24,539,751 23,999,612 24,355,472 23,999,612
========== ========== ========== ==========
Dividends per share of common stock none none none none
Dividends per share of preferred $0.000 0.000 $0.000 0.005
stock
The accompanying notes are an integral part of these consolidated financial statements.
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ISA INTERNATIONALE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Nine Months
Ended Ended
June 30, 2012 June 30, 2011
---------------- ----------------
Cash flows from operating activities:
Net loss $ (130,946) $ (285,959)
Adjustments to reconcile net loss from operations
to cash flow used in operating activities:
Depreciation and amortization 4,027 6,832
Consulting fees 20,000
Reduction of debt receivable purchase price
due to gross collections received 8,044 67,674
Changes in operating assets and liabilities:
(Increase) decrease in Trade receivables 579 (1,768)
Decrease in deposits 2,500
(Increase) in prepaid expenses (505)
Increase in investment payable 2000
Increase in accounts payable and accrued expenses (25,333) (40,423)
Increase in notes payable – related party 7,448 6,775 Discontinued Operations:
Note proceeds receivable on disposal of business
Operations (14,500) 0
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Cash used in operating activities (128,681) (244,974)
Cash flows from investing activities:
Purchase of Investment Stock in Newsbeat Inc. (2,000) 0
Purchase of debt receivables 0 (12,699)
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Cash used by investing activities (2,000) (12,699)
Cash flows from financing activities:
Proceeds from bank lines of credit 0 4,785
Payments for bank lines of credit (18,360) (5,496)
Payments on issuance of convertible notes
payable - related party 0 (338)
Proceeds from notes payable – auto loan (2,650) (2,519)
Proceeds from issuance of convertible debt
related party – secured – net of consulting fee 23,878 0
Net proceeds from issuance of preferred stock 0 197,963
Proceeds from contributed capital-related party 98,758
45,160
Accounts payable and accrued liabilities of discontinued
Segment assumed by purchaser – related party –
Net of assets sold 16,145 0
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Cash provided by financing activities 117,771 239,555
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Increase (decrease) in cash and cash equivalents (12,910) (18,118)
Cash and cash equivalents at beginning of period 15,332 41,512
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Cash and cash equivalents at end of period $ 2,422 $ 23,394
========== ==========
Non-cash investing in financing transactions:
Additional paid – capital for indemnification agreement 0 2,104
Accrued preferred stock dividend expense 0 197,934
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Total non-cash transactions $ 0 $ 200,038
========= ==========
The accompanying notes are an integral part of these consolidated financial statements.
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ISA INTERNATIONALE INC.
NOTES TO CONDENSED INTERIM 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 consolidated financial statements include the parent Company, ISA Internationale, Inc., its wholly owned subsidiary, ISA Financial Services, Inc. (formerly ISA Acquisition Corporation).
On June 29, 2012, the Company’s Board of Directors approved the discontinuance of the operations of a wholly owned subsidiary that was in the debt collection business and sold the subsidiary, ISA Acceptance Corporation, to a related party for a note receivable of $14,500 and future potential proceeds on the sale or disposition of a portion of the proceeds of 3,000,000 common stock shares of ISA Internationale, Inc., owned by the subsidiary that were received by the purchaser as consideration of total transaction of the Stock Purchase Agreement. See note 5 for complete explanation of the Stock Purchase Agreement transaction.
The Company and its Board of Directors has decided to become a Business Development Corporation as of June 29, 2012 and has accordingly filed Form N54-A with the Securities and Exchange Commission therein effecting the start of the Company’s operations as a Business Development Corporation See note 7 for an explanation of the Company’s future plans and direction following a revised and new business plan of operations.
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, 2012 and the results of its operations and cash flows for the nine months ended June 30, 2012 and 2011 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-K.
Critical Accounting Policies
Basis of Presentation:
These financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America.
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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 affect 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 may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Recent Accounting Pronouncements:
The Company’s management has evaluated all recently issued accounting pronouncements through the filing date of these financial statements and has determined that these pronouncements will have no material impact on the financial statements of ISA Internationale, Inc.
Fair value of financial instruments
The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures" for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
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| Level 1: Quoted prices in active markets for identical assets or liabilities. |
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| Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. |
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| Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The carrying amounts of the Company’s financial instruments as of June 30, 2012 reflect
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| Cash: Level One measurement based on bank reporting. |
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| Loans from Officers and related parties: Level 2 based on observable inputs. |
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation.
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Note 2 LIQUIDITY AND GOING CONCERN MATTERS
The Company has incurred losses since its inception and, as a result, has an accumulated deficit of $11,191,776 at June 30, 2012. The Company incurred a net loss from operating activities of $3,288 for the three month period ended June 30, 2012 and compared to a net loss of $93,267 for the same period last year, adjusted for losses from discontinued operations in the amounts of $53,542 and $40,218 for the same three month periods of 2012 and 2011, respectively.
The Company received loans and cash advances totaling $23,878 from a related party during the quarter ended ended June 30, 2012. These loans and cash advances have been recorded as a convertible note payable to the related party and not treated as additional contributed capital to the Company’s paid in capital as had been done through March 31, 2012 in the amount of $98,758.
As of June 30, 2012, the Company also had a principal balance due of $94,459 in Notes payable to finance portfolio purchases to related parties and $9,940 in a bank note payable related to an automobile purchase in January 2010.
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 had been in reorganization and was attempting to establish itself in the debt collection business within the financial services industry.
As of June 30, 2012, the Company has changed its business plan and has ceased being a debt collection Company, sold its existing debt collection business that had been operated within a wholly owned subsidiary and is formulated plans to begin operations as a Business Development Corporation, effective June 29, 2012. However, there can be no assurance these new 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. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the company cannot continue in existence.
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Note 3 STOCKHOLDER’S EQUITY:
Preferred Stock
As of June 29, 2012, all of the Company’s previously issued 1,781,000 of Preferred shares have been converted into 17,810,000 as authorized by the Company’s Board of Directors. The shares were previously convertible into 17,810,000 common shares as the Company’s Board of Directors authorized the conversion price previously upon date of original issuance.
Previous to June 28, 2012, the Company’s subsidiary, ISA Acceptance Corporation had issued to a related party 22,400 shares of $25 par value 12% dividend non-convertible preferred shares, payable when declared. On June 28, 2012, the Company and its subsidiary converted the Preferred Stock of 22,400 shares into a 6% Note Payable on the books of the subsidiary in the amount of $560,000. This note has been included in the Stock Purchase Agreement that was completed on June 29, 2012 and is included in the assumption of liabilities by
the purchaser. This note and an additional $149,680 in various liabilities were assumed by the purchaser – related party - as a part of the Stock Purchase Agreement. See note 5 - discontinued operations for a complete explanation of the Stock Purchase Agreement an a complete itemization of the assets sold and liabilities assumed within the transaction.
Common Stock
As of June 30, 2012, an additional 7,065,300 of common shares were issued as a part of the Stock Purchase Agreement to the wholly owned subsidiary, ISA Acceptance Corporation, consummated with the purchaser – related party as consideration for the payment of Intercompany loans and advances totaling $512,234 due to the subsidiary by the Parent Company at June 28, 2012.
There was an additional 17,810,000 of common shares issued to a related party management Company due for the conversion of previously issued Preferred Stock shares of 1,781,000 prior to September 30, 2011. See reference to note 3 above for a further explanation of the issuance.
As a result of these new issues of common shares, there are 48,874,912 in common stock shares outstanding at June 30, 2012.
Note 4 CONVERTIBLE DEBENTURES
The Company had reported a $50,000 convertible debenture and the related interest due thereon in the amount of $27,116 as of March 31, 2012. The Company has removed the liability of $77,116 at June 30, 2012 due to the expiration of the Statute of Limitations under Minnesota Law for the payment of the debt as well as the expiration of an Indemnification Agreement between the Company and the Company’s Management Party. As a result, the Company recorded an extraordinary item of income at June 30, 2012 in the amount of $77,116. This gain of $77,116 has been recorded as an extraordinary item of income due to the extinguishment of the debt on the books of the Company at June 30, 2012.
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Note 5 DISCONTINUED OPERATIONS
During the recent quarters of operations beginning with the fiscal year ended September 30, 2009, the Company had experienced a history of losses from operations. Due to the Company's financial condition and inability to continue ongoing operations with current cash flows, along with debt obligations, towards the beginning of fiscal 2012, on October 1, 2011, the Company's Board of Directors and management determined that it would be in the best interest of the Company's stockholders to sell all of the operating assets and liabilities associated with the Company’s wholly-owned subsidiary that was in the debt collection business on June 28, 2012.
On June 28, 2012, the Board of Directors approved the sale of all the assets and liabilities of a wholly owned subsidiary operating completely within the debt collection business to related parties that had been directing and operating all of the efforts of the Company to establish itself within that industry. The related parties have a Company that has been in the debt liquidation business and through an agreement the parties have decided to sell the assets and related inherent liabilities to that entity 100% owned by the related parties under a Stock Purchase Agreement dated June 29, 2012. Accordingly, on June 29, 2012 we completed the sale of substantially all of the subsidiary assets and liabilities of the subsidiary ISA Acceptance Corporation to Doubletree Liquidation Corporation, a Minnesota corporation
formed in 2005 by the related parties, for consideration valued at approximately $1,042,000, which consisted of the following:
The transaction as herein described.
(i) 7,065,300 of the seller Company’s, ISA Internationale, Inc. common stock shares which were to be delivered to the Purchaser at Closing.
(ii) An unsecured promissory note in the aggregate principal amount of
$14,500 due the seller within 3 years. The promissory note bears interest at the rate of 6%, with principal and interest due on upon the disposition of the liquidation of the various assets sold on June 29, 2012. Additional proceeds are due as follows in a separate provision in the purchase agreement as of June 30, 2012. The Purchaser DLC also has the obligation to pay to the seller ISAF, additional certain specific excess proceeds received by DLC on the sale of the first 3,000,000 shares of ISA Internationale, Inc. in excess of $.25 per share of stock sold and further after all of the trade debts that are owed by ISAC as of 6.29.12 are paid in full. This provision is not a part of the promissory note obligation on the payment of the $14,500 plus interest due thereon until paid in full, but is a part of the Purchase Agreement signed by ISAF to Doubletree Liquidation Corporation
The following tables summarize the consideration received and the net
liabilities divested:
Consideration Received
Promissory Note in the amount of $14,500 with interest at the rate of 6% per annum until paid in full.
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Proceeds received by DLC, the seller, on shares sold by them exceeding a sale price of $.25 per share on the first 3,000,000 common shares sold by the purchaser, as explained above. No value to this provision has been calculated as of June 30, 2012 because the Company can’t predict what proceeds, if any, would accrue to the Company on the sale of common shares tendered to ISAC in full payment for the intercompany loans paid in full with the issuance of 7,065,300 common stock shares to ISAC or if the holder of the shares will even be able to sell any of the shares of common stock received..
Total fair value of consideration received ................... $ 14,500
===========
Assets Divested
Cash ......................................................... $ 2,760
Accounts receivable .......................................... 280
Property and Equipment, net .................................. 2,037
Debt Collection Receivables .................................. 58,390
ISAT Common stock shares (7,065,300) valued at $ .0725
per share 512,234
Total assets divested ........................................$ 575,701
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Liabilities Divested
Accounts payable .................................... $ 23,875
Loans Payable – related party .................... 125,805
Loan Payable - related party ................... 560,000
Total liabilities divested .......................... 709,680
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Fair value of the consideration received
plus the net liabilities divested .................... $ 724,180
===========
Included in Discontinued Operations for the nine ended June 30, 2012 was revenue of $ 50,476. For the nine months ended June 30, 2012, net loss included in discontinued operations was $ 78,790.
No gain or loss was recorded in relation to the 2012 Asset Sale as the
transaction was between entities under common control, except for the $14,500 Promissory note received by ISAF within . Accordingly, the excess
of the fair value of the consideration received over the net assets disposed of was treated as a capital contribution.
NOTE 6 - STOCKHOLDERS' EQUITY
STOCK OPTIONS:
As of June 30, 2012, there are no stock options currently outstanding.
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Note 7 - BUSINESS DEVELOPMENT CORPORATION
As of June 30, 2012, the Company filed Form N-54A with the United States Securities Exchange Commission to become a Business Development Company. As a result, it will soon become a closed-end company (mutual fund) organized and operated for the purpose of making investments in securities described in Section 55 (a)(1) through (3) of the Investment Company Act of 1940; and that it will make available significant managerial assistance to American companies with respect to issuers of such securities to the extent required by the act.
1)
The Company has commenced the development of new management consulting services to assist American client companies in complying with the reporting requirements to the government and in communicating with shareholders, customers and the public and the accessing of needed growth capital. The Company will be receiving shares from its various new client for financial consulting work completed in the succeeding quarters going forward from July 1, 2012.
2)
In June, 2012, the Company entered into its first agreement with NewsBeat Social, Inc, an Oregon corporation, a Company organized to provide social news content via the internet, such as Facebook, Inc. A commitment to purchase $2,000 of common stock shares (2,000,000) of NewsBeat, Inc. was consummated on June 29, 2012. A copy of that agreement is attached to this Form 10Q filing as an exhibit.
Note 8 RELATED PARTY TRANSACTIONS
(8.A) NOTES PAYABLE - RELATED PARTY
Bernard L. Brodkorb, President of ISAT, has a Loan Agreement with ISAF issued on January 25, 2010 in the amount of $25,008 used to finance a portfolio purchase. The loan accrues interest at the rate of 11% per annum. No interest or principal payments have been paid toward the loan and the balance outstanding at June 30, 2012 is $32,584.
C. J. Newman, Vice President of Doubletree Capital Partners, Inc., has two loan agreements with ISAF issued on June 25, 2010 and August 3, 2010. Both loans are for $25,000 for a total of $50,000. The loans accrue interest at the rate of 11% per annum. No interest or principal payments have been paid toward the loan. The balance outstanding at June 30, 2012 is $61,875.
All of the above loans are distributed on the balance sheet as current liabilities for a total amount of $94,459.
(8.B) CONVERTIBLE NOTES PAYABLE - RELATED PARTY
During the quarter ended June 30, 2012, the Company received $23,878 in cash loans and advances from a related party. These advances and loans and a $20,000 management fee payable to Doubletree Capital Partners, Inc., recorded as notes payable – related party for a total of $43,878, are secured by a blanket collateral pledge of all of the Company’s assets and bear interest at the rate of 12% per annum commencing June 30, 2012 and forward until paid in full. The convertible notes payable are due and payable on demand and convertible at the option of the related party into 585,040 common shares at the rate of $.075 per share as of June 30, 2012.
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(8.C) ADDITIONAL PAID IN CAPITAL - RELATED PARTY
During the nine months ended June 30, 2012, the Company received $98,758 in cash and services through the date March 31, 2012, rendered from a related party that have been treated as contributions made to capital. Doubletree Capital Partners contributed $86,258 in cash while Doubletree Capital Partners, Inc. provided management services valued at $12,500 for which payment was forgiven to provide for the capital contribution. For the period from April 1, 2012 through June 30, 2012, the Company received $43,878 in additional monies and expense provisions that have, as of June 30, 2012, been recorded as due to related party – note payable, secured and convertible.
Note 9 OTHER LIABILITIES
The Company had a total outstanding balance of $18,035 in Credit Lines Payable for its available bank credit lines of $20,000 as of March 31, 2012. The loans were paid in full during the quarter ended June 30, 2012.
The Company has a loan outstanding in the amount of $9,940 as of June 30, 2012 ($3,694 current and $6,246 Long Term). The interest rate is 5.11%. The note is personally guaranteed by an officer of the Corporation and the Company’s automobile is pledged as collateral to the loan.
Note 10 SUBSEQUENT EVENTS
The management of the Company has evaluated all other subsequent events through the date of this report and has determined there are no other matters that need reporting within this 10Q as of June 30, 2012.
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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.
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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 Financial Services, Inc. (formerly named 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 $15,183,922 bringing the total consumer debt receivable purchase to $51,281,000 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 collectability and 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 2009 and 2010, the Company, through its subsidiary companies, further developed its in-house capabilities to collect debt portfolios in addition to using a network of Attorneys and third party collection agents. Our staff includes a Corporate Officer who supervises our collections operations, a Staff Accountant, an Office Administrative Assistant and six collectors in collection operations.
On June 29, 2012, the Company became a Business Development Company by filing Form N54-A with the Securities and Exchange Commission. Further, The Company sold its in-house debt collection business ro a related company owned by the Company’s President and another investor who is also a investor shareholder in the Company’s Management Company.
As a result, the Company considers itself to be operational but a Business Development Company for the period from June 30, 2012 and forward. After successful completion of its reorganization efforts and the set–up of operations as a Business Development Company, ISAT plans to pursue strategic alternatives that may include the purchase of a business or acquisition by another entity, as well as the associated activities required of a Company involved in activities as a Business Development Corporation..
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Results of Operations for the three months ended June 30, 2012 and 2011.
Sales and Gross Profit
The Company has sold its debt collection business as of June 30, 2012. Accordingly, losses from discontinued operations have been recorded in the amount of $53,542 for the three months ended June 30, 2012. For the period ended June 30, 2011, $40,218 are reflected as losses from discontinued operations.
Operating Expenses
Operating expenses include general and administrative expenses. Other expenses include interest expenses related to short term financing notes, convertible debenture notes and convertible notes payable. General and administrative expenses were $25,147 for the three months ended June 30, 2012 compared to $48,377 for three months ended June 30, 2011. The decrease is primarily due to decreased staffing costs and the disposition of other costs and expenses related to the discontinued operations as of June 30, 2012 compared to the same period in 2011.
Interest expense for the three months ended June 30, 2012 totaled $1,715 compared to $4,481 for the three month period ended June 30, 2011.
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Liquidity and Capital Resources
As of June 30, 2012, the Company had total assets of $39,513 consisting of $2,422 in cash, $12,589 in office equipment, furniture, and vehicles net of depreciation, $8,002 in finance contracts receivables net of collections, $2,000 in an stock investment and $14,500 in sale proceeds due in the future related to the Company’s sales of its subsidiary at June 30, 2012. The fixed assets were written down for an impairment in the amount of $16,825 during the year ended September 30, 2011. An impairment write-down of $135,000 was also recorded against the carrying value of the finance debt receivables during the year ended September 30, 2011.
The Company also had $281,799 in current liabilities consisting of $137,768 in accounts payable and accrued expenses, $3,694 in notes payable other-current portion, $94,459 in notes payable to related party - current portion, $43,878 in 12% convertible notes payable – secured – related party, and a stock investment payable of $2,000. There is an additional $6,246 in long-term liabilities for Notes payable other – long term portion. Total liabilities as of June 30, 2012 were $288,045 compared to $243,744 at June 30, 2012
As of June 30, 2011, the Company had total assets of $288,045 consisting of $23,394 in cash, $2,300 in trade receivables, $5,005 in prepaid deposits, $43,329 in office equipment, furniture, and vehicles net of depreciation, $213,414 in finance contracts receivables net of collections, and $2,500 in long-term deposits. It had $178,300 in current liabilities consisting of $127,898 in accounts payable and accrued expenses, bank credit lines payable totaled $17,736, $3,462 in notes payable other-current portion, $29,204 in notes payable to a related party current portion. Total liabilities as of June 30, 2011 were $243,744 and included notes payable long term of $65,445.
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 support its expanded operational in-house collection agency activities and future debt receivable purchases.
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.
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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-K submission for the year ended September
30, 2011, 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 2012 due to a recessionary economy that is slowly recovering but still has relatively high unemployment in the work force making it difficult for millions to meet their credit obligations.
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.
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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, 2012 of $10,027,190. 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-K reports of the Company and notes to consolidated financial statements for the fiscal year ended September 30, 2011, 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.
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Control By Existing Management
Three principal shareholders, Doubletree Capital Partners, Inc. (DCP), Doubletree Liquidation Corporation and Bernard L. Brodkorb, beneficially own approximately 94.39%, respectively of the Company's outstanding common stock at June 30, 2012. 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.
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Liquidity and Going Concern Matters
The Company has incurred losses since its inception and, as a result, has an accumulated deficit of $10,041,690 at June 30, 2012. The net loss for the nine month period ended June 30, 2012 was $130,946.
The Company currently owes $137,768 in accounts payable and accrued expenses, $3,694 in notes payable other-current portion, $94,459 in notes payable to a related party current portion, $43,878 in 12% convertible notes payable – secured – related party, $2,000 in an stock investment payable and $6,246 in long term liabilities for total liabilities of $288,045 at June 30, 2012.
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 reorganization efforts and expand its direct collection operations. There can be no assurance these actions will be successful.
ITEM 3. QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK
This item is not required for smaller reporting companies.
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ITEM 4T. CONTROLS AND PROCEDURES
4.1 Evaluation of Controls and Procedures
The management of ISA International Inc., under the direction, supervision, and participation of, our Chief Executive Officer and Chief Financial Officer and effected by management and other personnel, has conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the design and operation of disclosure controls and procedures (as defined as defined in Rules 240.13a-15(e) and 240.15d-15(e) of the Securities Exchange Act of 1934).
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that as of June 30, 2012, the Company's disclosure controls and procedures were effective.
(b) Management's Report on Internal Control Over Financial Reporting
The management of ISA Internationale Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the direction, supervision, and participation of, our Chief Executive Officer and Chief Financial Officer and effected by management and other personnel, our management and certifying officers conducted an evaluation as of the end of the period covered by this report, of the effectiveness of internal control over financial reporting based on the framework in Internal-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO-Framework).
Based on the results of this evaluation, our Chief Executive Officer and CFO concluded that as of June 30, 2012, our controls were effective.
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Part II. OTHER INFORMATION
ITEM 1. Legal Proceedings
During the quarter ended June 30, 2012, the Company was not a party to any lawsuit and legal proceeding. The Company considers small lawsuits regarding collection matters to be part of the normal course of business. The Company engages outside attorneys to represent the Company in court actions to recover funds due to the Company and obtain judgments. Occasionally one of its subsidiaries is named as a plaintiff in a civil action regarding violation of the Fair Debt Collection Practices Act ("FDCPA"). The Company has reviewed pending litigation and determined that none would have a material impact on the financial condition of the Company and the results reported. The Company has strict policies and procedures in place designed to prevent any unlawful or unethical collection practices by its employees.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None during the quarter ended June 30, 2012.
ITEM 3. Defaults Upon Senior Securities
The defaults previously present on the Convertible Debentures as of March 31, 2012 continue as of June 30, 2012. 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 $50,000. The accrued interest liability due on these notes combined amounting to $27,116 as of March 31, 2012 is no longer recorded as a current liability by the Company at June 30, 2012. (See note 7 in the notes to financial statements).
ITEM 4. Submission of Matters to a Vote of Security Holders
None during the quarter ended June 30, 2012.
ITEM 5. Other Information
None during the quarter ended June 30, 2012.
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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:
On June 29, 2012, the Company filed the following 8-K report with the Securities and Exchange Commission:
Section 5 Business and Operations
Item 5.01 Entry into New Business Operations:
The Company announced that it has filed Form 54(a), Notification of Election of Company To Be Subject To Sections 55 Through 65 Of The Investment Company Act of 1940 Filed Pursuant to Section 54(a) Of The Act. From this date forward, The Company will be a Business Development Company and file accordingly with the SEC, as required.
The Company also announced that it’s wholly owned subsidiary, ISA Financial Services, Inc., has sold off to a related company, the 100% owned subsidiary of ISA Financial Services, Inc., ISA Acceptance Corporation, a Nevada Corporation, an operating debt collection Company licensed in various states in the United States. Exhibit of the Stock Purchase agreement is attached hereto to this 8-K filing.
The Company also announced the signing of its first new agreement as a Business Development Company with Newsbeat Social, Inc., an Oregon Corporation. Exhibit of this agreement is attached hereto to this 8-K filing.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated, thereunto duly authorized.
ISA INTERNATIONALE INC.
/s/ Bernard L. Brodkorb
By: Bernard L. Brodkorb
President, Chief Executive Officer, and Chief Financial Officer
Date: August 20, 2012
Exhibits : Purchase Agreement between ISA Financial Services, Inc. and Doubletree Liquidation Corporation, dated June 29, 2012.
Promissory Note between Doubletree Liquidation Corporation and
ISA Financial Services, Inc., dated June 29, 2012.
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Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ISA Internationale Inc. (the "Company") on Form 10-Q for the period ending June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
(1.) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2.) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operation of the Company.
By: /s/ Bernard L. Brodkorb
Bernard L. Brodkorb, President, Chief Executive Officer, and
Chief Financial Officer, Chairman of the Board
Dated: August 20, 2012
Exhibit 31.1 Rule 13a-14(a) Certification
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
I, Bernard L. Brodkorb, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of ISA
Internationale Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls to be designed under our supervision, to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation;
d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's Auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 20, 2012
By: /s/ Bernard L. Brodkorb
Bernard L. Brodkorb
President, Chief Executive Officer, and Chief Financial Officer
Chairman of the Board