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 December 31, 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
------------------- -----------------------------------------
Common Stock OTC Bulletin Board
----------------------------------------------------------------------------
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 [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]
1
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
On February 19, 2013, there were 49,224,912 shares of the Registrant's common stock, par value $.0001 per share.
On February 19, 2013, there were also convertible notes payable in the amount of $51,019 that are due and payable on demand and convertible at the option of the related party at a rate of $.0725 per share for 703,710 shares as of quarter ended December 31, 2012.
2
ISA INTERNATIONALE INC.
FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION 4
ITEM 1. FINANCIAL STATEMENTS
Con
densed
solidated
Balance Shee
Statement of Net Assets and Liabilities
ts
5
Schedule of Investments 6
Statements of Changes in Net Liabilities 7
Con
densed
solidated
Statements of Operations
8
6
Con
densed
solidated
Statements of Cash Flows
9
Statement of Financial Highlights 10
7
Notes to Con
densed
solidated
Financial Statements
11
8
-1
8
4
ITEM 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 1
9
5
-2
2
6
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 2
2
6
ITEM 4
T.
..
Controls and Procedures
2
3
7
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings 2
4
8
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 2
4
8
ITEM 3. Defaults upon Senior Securities 2
4
8
ITEM 4. Mine Safety Disclosures 2
4
8
ITEM 5. Other Information 2
4
8
ITEM 6. Exhibits and Reports on Form 8-K
28-29
25
Signatures
30
26
3
PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
These condensed 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 December 31, 2012, and its results of operations,
stockholders' equity
net liabilities
, and cash flows for the three month period ended December 31, 2012. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying condensed 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 filed on January 14, 2013.
4
ISA INTERNATIONALE INC.
CONDENSED
BALANCE SHEET
STATEMENT OF NET ASSETS AND LIABILTIIES
S
December 31,2012 September 30,2012
(Unaudited) (Audited)
ASSETS -------------------------------
Assets:
Cash $ 155 $ 5,232
------------ ---------
Total current assets 155 5,232
Investments:
Non-controlled, non-affiliated investments
at Fair Value
Investment in Newsbeat Stock 32,000 32,000
Investment in Reality Corp 13,000 -
------------ ---------
Total Investments 45,000
32,000
Fixed Assets
Fixed assets at cost less depreciation 0 11,247
Other Assets:
Note Receivable – Related party
0 22,782
------------ ---------
Total assets $ 45,155 $ 71,261
============ ============
LIABILITIES AND NET ASSETS
Current liabilities:
Obligations in excess of investment
basis
basis
$ 136,817 $
in controlled affiliate $ 136,817 $
Accounts payable - trade and taxes 14
3
2
,079 135,634
Common Stock Payable 1,000 -
Payable to related party – NewsBeat Social, Inc. 30,000 30,000
Notes payable other
0 3,741
Notes payable related party - current portion 0 97,480
Convertible notes payable - related party 51,019 83,949
------------ ---------
Total current liabilities 360,915 350,803
Long Term Liabilities
Notes payable other - long term portion 0
5,293
------------ ---------
Total liabilities 360,915 356,097
------------ ------------
Stockholders' equity
Net Liabilities
:
Common stock, $.0001 par value, 300,000,000 shares authorized;
49,224,912 shares issued and outstanding at
December 31, 2012; 48,874,912 shares issued and
outstanding at September 30, 2012 4,923 4,888
Additional paid-in capital 10,
322
339
,
735
177
10,325,770
Treasury stock; 1,250,000 shares (537,500) (537,500)
Accumulated deficit (10,
105
122
,
918
359
) (10,077,994)
------------ -----------
Total
stockholders' deficit
Net Liabilities
(315,760) (284,836)
------------ ---------
Total liabilities and stockholders' deficit $ 45,155 $ 71,261
============ ===========
The accompanying notes are an integral part of these condensed financial statements.
5
ISA INTERNATIONALE INC.
SCHEDULE OF INVESTMENTS
December 31, 2012
(Unaudited)
Equity Investments:
Description Percent Carrying Cost
Discounted
Company of Business Ownership Investment Fair Value Affiliation
Newsbeat, Inc. Social Facebook 2% $ 32,000 (1) $ 32,000 No
Reality Corp. Biomedical Company 10% 13,000 (2) 13,000 No
ISA Financial 100% 0 (3) 0 Yes
--------- ---------
Total Investments $ 45,000 $ 45,000
========= =========
(1) At December 31, 2012 there were 2,000,000 of Newsbeat shares held and reported on a fair value basis at the original purchase price of $0.001 with no
additional reduction
change
in Fair Market Value
applied
incurred
.. All common shares held have been recorded as a noncurrent securities asset. There has been a provision of $30,000 in projected future costs added to the carrying value of the investment based upon contractual commitments.
.
(2) At December 31, 2012 there were 10,000,000 of Re@lity shares held and reported on a fair value basis at the original purchase price of $0.0001 with no
additional reduction
change
in Fair Market Value
applied
incurred
.. All common shares held have been recorded as a noncurrent securities asset. The costs of $12,000 have been recorded as a development cost to
the date of this report.
(3) On October 1, 2012 the Company began reporting as a business development company (BDC). As such, we no longer consolidate our wholly owned subsidiary, ISAF, in accordance with Article 6.03 of Regulation S-X. Instead we show our 100% investment at the appropriate fair market value. Because obligations exceed the fair value of the investment in ISAF we record this as a liability of the Company ..
The accompanying notes are an integral part of the financial statements.
6
ISA INTERNATIONALE INC.
STATEMENTS OF CHANGES IN NET
ASSETS
LIABILITIES
Three Months Ended Three Months Ended
December 31, 2012 December 31, 2011
(Unaudited) (Unaudited)
--------------- ---------------
OPERATIONS:
Net loss from operations $ (
26,073
27,365
) $ (
54
49
,
197
912
)
Interest expense
Realized loss on Investment
(1
7
,
559
292
)
(4,285)
------------ ----------
Net decrease in assets resulting
from operations (
27,365
44,924
) (54,197)
SHAREHOLDER ACTIVITY:
Declared dividend
Issuance of Common Stock
14,000
--
31,742
--
NET
INCREASE(
DECREASE
)
IN NET
LIABILITIES
ASSETS
(
27,365
30,924
) (
54,197
22,455
)
NET ASSETS:
Beginning of period (284,836) (240,423)
End of period (315,760) (262,878)
Average net assets (300,298) (251,651)
========= =========
Ratios to average net assets:
Net operating expenses
(
9.1
15.0)
%
(
21.5
)
%
Net investment gain(loss) - % - %
Per share ratio expenses
0.0
-
%
-
0.0
%
Per share ratio net investment gain(loss) - % - %
The accompanying notes are an integral part of the financial statements.
7
ISA INTERNATIONALE INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
December 31, December 31,
2012 2011
---------------------------
Investment Income: - -
Operating expenses:
General and administrative 17,823 37,606
General and administrative-related party 8,250 8,750
-------- --------
Operating expenses 26,073 46,356
-------- ---------
Operating loss (26,073) (46,356)
Other expenses
Interest expense 0 (1,871)
Interest expense-related party (1,292) (2,414)
Other
--------- --------
(1,292) (4,285)
Net Investments
Net realized loss on investments (17,559) -
-------- --------
(17,559) -
Net loss (27,365) (50,641)
Discontinued operations
Loss from discontinued operations - (3,556)
--------- --------
Net
decrease
loss att
in net
ributa
assets
ble to com
from operations
mon stockholders
$(
27,365
44,924
) $(54,197)
========= =========
Basic loss per share
Continuing Operations $ (0.00
09
06
) $ (0.0021)
Discontinued Operations $ (0.0000) $ (0.0001)
========= =========
Basic and diluted loss per share $ (0.00
06
09
) $ (0.0022)
========= =========
Weighted average common
Shares outstanding: Basic 48,923,282 23,999,612
========== ==========
Dividends per share of common stock none none
Dividends per share of preferred stock $0.000 $0.000
The accompanying notes are an integral part of these condensed financial statements.
8
ISA INTERNATIONALE INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Three Months
Ended Ended
December 31, 2012 December 31, 2011
---------------- ----------------
Cash flows from operating activities:
Net (Income) loss from Continuing Operations $ (
44,924
27,365
) $ (54,197)
Adjustments to reconcile net loss from operations
to cash flow used in operating activities:
Depreciation and amortization 0 3,345
Consulting Fees, related party 7,500 5,000
Consulting Fees, other 2,000 -
Loss in Investments 17,559 -
Reduction of debt receivable purchase price
due to gross collections received - 4,477
Changes in operating assets and liabilities:
Decrease in Trade account receivables - (413)
Increase in obligations in excess of investment basis 136,817
Increase in accounts payable and accrued expenses 6,
182
446
3,309
Increase in investment payable (1,000) -
---------- ----------
Cash used in operating activities
126,398
11,683
(38,479)
Cash flows from investing activities:
Investment in Reality Corp
(13,000
-
)
Disposal of equipment 11,247
Decrease in note receivable from related party 22,782
-
---------- ---------
Cash used by investing activities
-
21,029
-
Cash flows from financing activities:
Proceeds from bank lines of credit, net or repayments
(9,035)
-
(857)
Payments on notes payable related party (97,480)
Proceeds from contributed capital-related party - 26,742
Increase in interest accrued on notes payable –
Related party
-
0
757
Paid in capital adjustment (net of consulting fees) (5,594)
Proceeds from issuance of convertible debt –
related party
(40,430
6,606
)
1,542
Issuance of common stock 35
---------- ----------
Cash provided by financing activities
(152,504
6,606
)
28,184
---------- ----------
Decrease in cash (5,077) (10,295)
Cash and cash equivalents at beginning of period 5,232 15,332
---------- ----------
Cash at end of period $ 155 $ 5,037
========= ========
Interest paid 4,285
Non-cash investing and financing transactions:
Amount Due for Investment Purchase (1,000)
Equity issued for cost of obtaining investment
in Re@lity (12,000)
Issuance of common stock for pre-paid consulting 10,000 -
Effect of de-consolidating subsidiary and reporting
Related net assets and liabilities as a BDC (119,107)
---------- ----------
Total non-cash transactions $
(132,107
10,
)
000
$ -
========== ==========
The accompanying notes are an integral part of these condensed financial statements.
9
ISA INTERNATIONALE INC.
STATEMENTS OF FINANCIAL HIGHLIGHTS
Three Months Ended Three Months Ended
December 31, 2012 December 31, 2011
(Unaudited) (Unaudited)
---------------- -------------
Per Share Unit Operating Performance
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss from operations $ (0.00) $ (0.00)
Gain on recovery of legal fees .00 .00
Net realized gain on portfolio securities 0.00 0.00
Net change in unrealized (depreciation)
appreciation of portfolio companies
(
17,559
0.00
) 0.00
Net change in unrealized (deprecation)
appreciation of stock option investment (0.00) 0.00
Net income tax expense (0.00)
--------- ---------
Total from investment operations
(
17,559
0.00
)
0.00
SHAREHOLDER ACTIVITY
Declared dividend -- --
========= =======
NET
IN
IN
CREASE IN NET
ASSETS
LIABILITIES
(
17,559
0.000
) 0.000
========= =======
NET
ASSETS
LIABILITIES
Beginning of period
284,836
0.000
0.000
240,423
End of period
315,760
.000
262,878
0.000
========= =========
TOTAL NET ASSET VALUE RETURN (
0.
15.0
00
)% 0.00%
RATIOS AND SUPPLEMENTAL DATA:
Ratios to average net assets:
Net expenses 0.00% 0.00%
Net investment gain(loss) 0.00% 0.00%
The accompanying notes are an integral part of the financial statements.
10
ISA INTERNATIONALE INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Note 1) NATURE OF BUSINESS AND SIGNIFICANT EVENTS
1.a) NATURE OF BUSINESS
ISA Internationale, Inc ("ISAI") was a financial services company specializing in debt collections for third party clients and our own portfolios of distressed debt receivables. The Company and its Board of Directors decided to become a Business Development Co
mpany
rporation
on June 29, 2012
, and determined that it will operate as a business development company effective October 1, 2012
and
has
accordingly filed Form N54-A with the Securities and Exchange Commission. See note
7
6
for an explanation of the Company’s future plans and direction following a revised and new business plan of operations.
1.b) PRESENTATION
On June 28, 2012, the Company filed Form N-54A with the United States Securities Exchange Commission to become a Business Development Company (“BDC”). 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. The Company commenced significant investment activities in fiscal 2013 and as such began reporting and accounting methodologies consistent with BDC requirements during the first quarter of fiscal 2013.
In
Fiscal 2013
2012
, the Company has began reporting as a BDC and the attached financial statements for the quarter ended
December 31, 2012
December 31, 2012
have been formatted in conformity with those of other BDC financial statements, including the BDC supplemental schedules, as required for comparative purposes. Although the nature of the Company's operations and its reported financial position, results of operations, and its cash flows are dissimilar for the periods prior to and subsequent to its becoming an investment company, its financial position for the quarter ended
December 31, 2012
December 31, 2012
and 2011
and its operating results, cash flows and changes in net assets for each of the quarters ended December 31, 2012
and 2011
are presented in the accompanying financial statements pursuant to Article 6 of Regulation S−X.
The results of September 30, 2012 and the three months ended December 31, 2011 are representative of the company as an operational company, prior to becoming an investment entity.
In addition, the accompanying footnotes, although different in nature as to the required disclosures and information reported therein, is also presented as they relate to each of the above referenced periods.
In the opinion of management, the condensed financial statements include all normal recurring adjustments necessary for a fair presentation of the balance sheet of the Company at December 31, 2012 and September 30, 2012 the results of its operations and cash flows for the three months ended December 31, 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.
1.c) USE OF ESTIMATES
The preparation of the financial statements is in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, such as the fair value of investment
s and the useful lives of fixed assets
income and loss
, at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
1.d)RECENT ACCOUNTING PRONOUNCEMENTS
The Company’s management has evaluated all recently issued accounting pronouncements through the filing date of these condensed financial statements and has determined that these pronouncements will have no material impact on the condensed financial statements of ISA Internationale, Inc.
1.e) FINANCIAL INSTRUMENTS
The Company has categorized it financial assets and liabilities based upon the Fair Value Measurement and Disclosures (ASC 820). This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures.
11
This standard does not require any new fair value measurement, but discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the disclosure requirements around fair value establishes a fair value hierarchy for valuation inputs which is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which
is
are
determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are described as:
Level 1:
Quoted Market prices in Active Markets
Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2:
Significant Observable Inputs
Inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3:
Significant Unobservable Inputs
Inputs are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The carrying value of the Company's
non-investment
financial assets and liabilities which consist of cash, accounts payable and accrued liabilities, and notes payable
are valued using level 1 inputs. The Company believes that the recorded values
approximate their fair value due to the short maturity of such instruments. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.
12
1.f) FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value measurements of our financial instrument assets are presented in the following table:
Fair Value Measurements as of December 31, 2012:
Level 1 Level 2 Level 3 Total
Assets
Investment – NewsBeat Social, Inc. - - $32,000 $ 32,000
Investment – Re@lity Corp - -
$13,000
$ 13,000
Investment –
Reality Corp
ISA Financial
$ 0 $ 0
13,000 13,000
Total Assets - -
$
45,000
$
45,000
Rollforward of level 3 financial instruments:
Financial Instruments as of September 30, 2012 $32,000
Investments in equity of Re@lity Corp $12,000
Total Assets as of December 31, 2012 $45,000
The fair value of the Company 's investments as of December 31, 2012 approximate cost due to the short time period from the time of purchase and the lack of any market related transactions since our purchase. These companies are currently in the development stage.
Note 2) LIQUIDITY AND GOING CONCERN MATTERS
The Company has incurred losses since its inception and, as a result, has an accumulated deficit of $10,1
22,
0
918
5,359
at December 31, 2012. The Company incurred a net loss from operating activities of $
27,365
44,924
for the three month period ended December 31, 2012 compared to a net loss of $54,197 for the same period last year.
The Company received loans and cash advances totaling $7,328 from a related party during the quarter ended December 31, 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 $51,019.
As of December 31, 2012, the Company also had obligations due on investments made to ISA Financial Services, Inc. an unconsolidated related party affiliate in the amount of $136,817. These obligations will require payment by the Company in the near future as the BDC activities further commence.
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 July, 1, 2012, the Company has changed its business plan and
has ceased
wound down
being a debt collection Company, sold its existing debt collection business that had been operated within a wholly owned subsidiary and has formulated plans to begin operations as a Business Development Corporation, effective
June 29
October 1
, 2012. However, there can be no assurance these new actions will be successful.
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. 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.
Note 3) STOCKHOLDER’S EQUITY:
Common Stock
During the quarter ended December 31, 2012, 300,000 shares of the Company’s common stock were issued to a consultant who has been instrumental in assisting in the negotiations and purchase of the Company’s purchase of its interest in Reality Corp as well as an additional 50,000 shares of common stock for additional services rendered as a consultant to the Company on behalf of its Business Development activities.
As a result of these new issues of common shares, there are 49,224,912 in common stock shares outstanding at December 31, 2012.
In the fourth quarter of 2007, the Company re-acquired 1,250,000 previously issued common stock shares from the U.S. Bankruptcy Court in accordance with a settlement agreement with the court. The re-acquired shares were valued at $.43 cents per share based upon then current average market prices prevailing during the fourth quarter of 2007. It is the intention of the Company in the near future or before September 30, 2013, to cancel these restricted shares and remove them from being issued and outstanding common shares.
Note 4) 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 $22,782, 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
$22,782 due to the seller within 3 years. The promissory note bears interest at the rate of 6%, with principal and interest due 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 June 29, 2012 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.
On December 31, 2012, the note receivable of $22,782 and the equipment and fixtures net asset value of $11,247, both assets of ISAF, an unconsolidated affiliate of the Company, have been presented as a reduction of the “Obligations in excess of investment basis
” in controlled affiliate
”
, in the total amount of $170,846, resulting in the presented Current Liability at December 31, 2012 in the net amount of $136,817.
As of December 31, 2012, no further operations in the debt collection business are being conducted by the Company. No further losses in this activity are anticipated by the Company.
NOTE 5) CONVERTIBLE or SECURED NOTES PAYABLE - RELATED PARTY
The principal parties of Doubletree Capital Partners, Inc. (DCP) have lending arrangements with ISAT, as promulgated by and between DCP and the past board of directors and officers of the company who had subsequently resigned their positions throughout the years 2000 and 2001. The financial company is owned by two individuals, one of which is ISAT's current President, CEO and Chairman of the Board of Directors. The two principals advance funds as deemed necessary from other entities they control and the balance is listed as a Loan Payable to Related Parties. If surplus funds are available the Loan is reduced.
During the quarter ended December 31, 2012, provided the financing necessary to maintain operations by advancing loans and advances to the Company. These monies included cash advances, net of repayments of $7,328. None of these advances were repaid except a consulting fee was added to the amount in the amount of $7,500 and a note payable at December 31, 2012 to DCP was in the amount of $51,019. The remaining amount of advances net of repayments in the amount of $98,758 have been recorded as contributed capital as of September 30, 2012. These loans outstanding of $51,019 bear interest at the rate of 12% per annum and are also convertible at the option of the holder into 703,710 common shares of the Company at the conversion price of $.0725 per common share.
Note
6
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 $2,000,000 shares of common stock shares of NewsBeat Social,Inc. was consummated on June 29, 2012. A copy of that agreement is attached to this Form 10Q filing as an exhibit. The total purchase price was approximately $32,000 and is not considered significant.
In December 2012, the Company entered into its second agreement with RE@LITY Corp, Inc, a Delaware Corporation. RE@LITY focuses on eClinical validation services using its proprietary automation platform, ClinTest. To further its business plans and raise needed capital, RE@LITY is seeking to sell its common shares in a private placement and to accelerate the registration of its shares for public trading through an S-1 registration filing with the SEC (“Registration”). It is the intention of the parties that ISAT shall either directly or through its assigns, or investors facilitated by ISAT, acquire equity interests in RE@LITY for $1,000 in cash, payable at closing or shortly thereafter and ISAT will then distribute a pre-agreed portion of its equity interests to its shareholders as a dividend.
On February 6, 2013, ISAT received 10,000,000 non registered common shares in Reality Corp for the agreed purchase price of $1,000. As of the date of this report, ISAT considers the transaction completed and will proceed to assist Reality Corp. to achieve its intended business plan objective.
Note
7
8
) RELATED PARTY TRANSACTIONS
(
7
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 December 31, 2012 is $34,560.
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 December 31, 2012 is $65,590.
All of the above loans are presented on the balance sheet as current liabilities for a total amount of $101,150 and are included in the “Obligations in excess of investment basis” in controlled affiliate ..
(
7
8
..b) CONVERTIBLE NOTES PAYABLE - RELATED PARTY
During the quarter ended December 31, 2012, the Company received $7,328 in cash loans and advances from a related party. These advances and loans and a $7,500 management fee payable to Doubletree Capital Partners, Inc., recorded as notes payable – related party and are included in the loan payable of $51,019, 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 703,710 common shares at the rate of $.0725 per share as of December 31, 2012.
13
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
On June 29, 2012, the Company
to begin in the process of
bec
oming
ame
a Business Development Company by fil
ed
ing
Form N54-A with the Securities and Exchange Commission. Further, The Company sold its in-house debt collection business to a related company owned by the Company’s President and another investor who is also an investor shareholder in the Company’s Management Company.
With the Company’s filing of Form N-54A with the United States Securities Exchange Commission to become a Business Development Company, 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.
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
.
As a result, the Company considers itself to be operational
as
but
a Business Development Company
for the period from
as of October 1, 2012
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.
14
Results of Operations for the three months ended December 31, 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 $3,556 for the three months ended December 31, 2011. There are no additional losses to record for discontinued operations for the quarter ended December 31, 2012.
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 $26,073 for the three months ended December 31, 2012 compared to $46,356 for three months ended December 31, 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 December 31, 2012 totaled $1,292 compared to $4,285 for the three month period ended December 31, 2011.
15
Liquidity and Capital Resources
As of December 31, 2012, the Company had total assets of $45,155 consisting of $155 in cash, $32,000 in a stock investment for NewsBeat Social, Inc., $1
3
2
,000 invested in Realty Corp.
The Company also had $360,915 in current liabilities consisting of $136,817 in obligations in excess of investment basis
in controlled affiliate
, $14
3
2
,
079
344
in accounts payable and accrued expense
s
s, $ 1,000 in common stock payable
, $51,019 in 12% convertible notes payable – secured – related party, and a stock investment payable of $30,000. Total liabilities as of December 21, 2012 were $360,915 compared to $356,097 at September 30, 2012.
Certain assets and liabilities related to ISA Financial are no longer consolidated with the Company as of October 1, 2012. Instead, they are presented net as the approximate fair value of the Company’s 100% interest in ISA Financial as of December 31, 2012. The net assets represented obligations in excess of our investment basis of $136,817.
As of September 30, 2012, the Company had total assets of $71,261 consisting of $5,232 in cash, $11,247 in office equipment, furniture, and vehicles net of depreciation, $32,000 stock investment, and $22,782 receivable from a related party. It had $350,803 in current liabilities consisting of $135,634 in accounts payable and accrued expenses, $30,000 for an investment payable to a related party, $3,741 in notes payable other-current portion, $97,480 in notes payable to a related party current portion, and $83,949 convertible notes payable to a related party. Total liabilities as of September 30, 2012 were $356,097 and included notes payable long term of $5,293.
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.
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, 2012, 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 2013 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
investments
..
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 venture
investment
s and if successful in finding sufficient capital, that it can successfully grow and manage the business or new business venture into a profitable and successful operation. No assurance can be given on any of these developments. The Company will continue to complete its financial reorganization,
and
attempt to
develop a successful business in the debt collection business and endeavor to find suitable candidates for merger or acquisition
operate as a business development company
..
History of Losses and Anticipated Further Losses
The Company has generated only limited revenues to date and has an accumulated deficit as of December 31, 2012 of $
10,105,359
10,122,918
.. Further, the Company expects to continue to incur
investment
losses until it generates
revenues at appropriate margins to achieve profitability
investment income
.. There can be no assurance the Company will ever generate
revenues
investment income
or that it will achieve profitability or that its future
operations
investment activity
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 Company will continue to use 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 and investment 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, 2012, includes an explanatory paragraph concerning the Company's ability to continue as a going concern. Additionally, Footnote 2 of our financial statement of this form 10Q discusses current liquidity and going concern matters.
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
Three principal shareholders, Doubletree Capital Partners, Inc. (DCP), Doubletree Liquidation Corporation and Bernard L. Brodkorb, beneficially own approximately 94.04%, respectively of the Company's outstanding common stock at December 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.
Liquidity and Going Concern Matters
The Company has incurred losses since its inception and, as a result, has an accumulated deficit of $
10,105,359
10,122,918
at December 31, 2012. The net loss for the three month period ended December 31, 2012 was $
27,365
44,924
..
The Company currently owes $136,817 in obligations in excess of investment basis, $142,079 in accounts payable and accrued expenses, $1,000in common stock payable, $51,019 in 12% convertible notes payable – secured – related party, $30,000 in a stock investment payable for a total liabilities of $360,915 at December 31, 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
business development company activities
.. 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.
16
ITEM 4
T
. 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 have concluded that as of December 31, 2012, the Company's disclosure controls and procedures were not 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).
Our management has concluded that, as of December 31, 2012, our internal control over financial reporting is not effective.
17
4(b) Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We reported on form 10K as of September 30, 2012 that our internal control over financial reporting was not effective.
18
Part II. OTHER INFORMATION
ITEM 1. Legal Proceedings
During the quarter ended December 31, 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 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 December 31, 2012.
ITEM 3. Defaults Upon Senior Securities
The defaults previously present on the Convertible Debentures as of March 31, 2012 continue as of December 31, 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. Mine Safety Disclosures
None during the quarter ended December 31, 2012.
ITEM 5. Other Information
None during the quarter ended December 31, 2012.
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 Rule 13(a) – 14(a) of the Securities Exchange Act, as amended.
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.
Exhibit: Purchase Agreement between ISA Internationale, Inc. and Reality Corp, dated December 21, 2012.
(b) Form 8-K reports filed during quarter:
Section 4.1 Changes in Registrant’s Certifying Accountant.
On November 16, 2012, ISA Internationale, Inc. (the “Company”) decided to change its independent registered public accountants, and accordingly dismissed Seale and Beers, CPAs. Seale and Beers’ reports on the Company’s financial statements during the past year did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.
The decision to change independent registered public accountants was proposed by management to the Audit Committee and the Audit Committee subsequently recommended to the Board of Directors. By direction of the Board of Directors, the Audit Committee analyzed and approved the change.
There were no disagreements with Seale and Beers, CPAs on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which if not resolved to Seale and Beers’ satisfaction would have caused it to make reference to the subject matter of the disagreement in connection with its report.
The Company has provided Seale and Beers, CPAs with the contents of this current report on Form 8-K and has requested that Seale and Beers, CPAs furnish a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statements made by the Company in this report, and if not, stating the respects in which it does not agree. A copy of the letter from Seale and Beers, CPAs to the Securities and Exchange Commission is filed as Exhibit 16.1 hereto.
On November 16, 2012, the audit committee approved the engagement of Boulay, Heutmaker, Zibell and Co. P.L.L.P. (“Boulay”) as the Company’s independent registered public accounting firm for the year ending September 30, 2012 subject to Boulay’s completion of its client acceptance process.
During the years ended September 30, 2011 and September 30, 2012 and through November 16, 2012, neither the Company nor anyone on its behalf has consulted Boulay with respect to either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that Boulay concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
19
20
SIGNATURES
Pursuant to the requirements 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: February 19, 2013
Exhibits: Purchase Agreement between ISA Internationale, Inc. and Reality Corp, dated December 21, 2012.
21
22
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: February 19, 2013
By: /s/ Bernard L. Brodkorb
Bernard L. Brodkorb
President, Chief Executive Officer, and Chief Financial Officer
Chairman of the Board
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 December 31, 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: February 19, 2013
REGISTRATION AND
SHARE PURCHASE AGREEMENT
This Registration and Share Purchase Agreement (the “Agreement”), effective December 21, 2012 (the "Closing Date"), is between ISA Internationale, Inc., (“ISAT”), a Delaware corporation located at 2564 No Rice St., St. Paul, MN 55113, and Re@lityCorp (“RE@LITY”), a Delaware corporation located at 240 North James Street, Suite 103, Newport, DE 19804 (ISAT and RE@LITY, collectively, the “Parties”).
RECITALS:
RE@LITY focuses on eClinical validation services using its proprietary automation platform, ClinTest; and
ISAT is a Business Development Company (“BDC”) as defined by the Securities & Exchange Commission (“SEC”), Investment Company Act of 1940. ISAT is focused on recruiting, mentoring, coaching and enhancing the investment opportunity for healthcare and technology based companies in the process of becoming public entities. ISAT provides its experience, world class advisors, additional intellectual properties, management expertise, etc. to enhance the value and profile of the companies it represents; and
To further its business plans and raise needed capital, RE@LITY is seeking to sell its common shares in a private placement and to accelerate the registration of its shares for public trading through an S-1 registration filing with the SEC (“Registration”), and
It is the intention of the parties hereto that ISAT shall either directly or through its assigns, or investors facilitated by ISAT, acquire equity interests in RE@LITY for a minimum of $1,000 in cash, payable at closing and,
ISAT will then distribute a pre-agreed portion of its equity interests to its shareholders as a dividend.
The boards of directors of ISAT and RE@LITY deem it to be in the best interest of ISAT and RE@LITY to proceed with these actions.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the parties hereto agree as follows:
SECTION 1. PURCHASE OF SHARES AND OTHER CONSIDERATIONS
1. Purchase of Shares
1.1
Initial Investment. On or before January 15, 2012, or at a later date as soon as Section 2.3 is satisfied, ISAT shall purchase 10,000,000 shares of RE@LITY common stock at a price of $0.0001 per share for a total aggregated purchase of $1,000 and other valuable consideration including services to be performed;
1.2
Consideration. In addition to the payment of the share purchase consideration, ISAT will facilitate Registration and subsequent dividending (including certificate printing, as necessary) of a minimum of 5,000,000 of the acquired shares to ISAT shareholders as a share distribution. ISAT shall also, on a best efforts basis, assist RE@LITY with securing a pre – Registration private placement of approximately $500,000.00 into RE@LITY and with securing a post Registration investment of $1,000,000.00 into RE@LITY at a mutually agreeable time.
ISAT may, as needed, attract the services of a fully licensed broker/dealer – investment banking firm to assist with securing the capital sought by RE@LITY as outlined in this Section 1.2, provided that any agreement with such broker/dealer – investment banking firm shall be entered into directly by RE@LITY and any fees or commissions due such broker/dealer – investment banking firm per such agreement shall be the sole responsibility of RE@LITY.
1.3
Restricted Securities. The Common Stock issued by RE@LITY has not been Registered under the Securities Act of 1933, as amended (the “Securities Act"), and may not be re-sold unless the resale thereof is registered under the Securities Act or an exemption from such registration is available. Each certificate representing the Common Stock will have a legend thereon in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT''), OR ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD TRANSFERRED OR PLEDGED UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE LAW OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
1.4
Board of Directors. ISAT shall have the right to appoint one director for the board of directors of RE@LITY, with such director being Boris Epshteyn.
1.5
Employment Contracts. RE@LITY will make reasonable efforts to enter into employment contracts with key executives (e.g., CEO) of RE@LITY, spanning a minimum of two years, on a basis acceptable to both parties prior to the initial filing of the Registration statement.
1.6
Expenses. RE@LITY shall provide payment to ISAT for expenses, including, without limitation, legal, accounting, diligence and structural to be incurred as part of ISAT’s performance pursuant to this Agreement. Such expenses payable by RE@LITY pursuant to this Section 1.6 shall be paid from proceeds from a transaction completed by RE@LITY as contemplated by this Agreement and specifically Section 1.2. Any expenses payable pursuant to this Section 1.6 exceeding $50,000.00 will require pre – approval by RE@LITY.
1.7 Termination. If and only if this Agreement is terminated by ISAT without cause or by RE@LITY with cause prior to Registration, ISAT shall sell to RE@LITY 5,000,000 shares of RE@LITY common stock at a price of $0.0001 per share unless otherwise agreed to by the Parties hereto in writing.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF RE@LITY AND ISAT
RE@LITY hereby represents and warrants on or before the Closing date as follows:
2.1
Organization and Good Standing.
a.
RE@LITY is an entity, duly organized, validly existing and in good standing under the laws of the state of Delaware. The company has the corporate power and authority to carry on its business as presently conducted, and is qualified to do business in all jurisdictions where the failure to be so qualified would have a material adverse effect on its business.
b.
ISAT is an entity, duly organized, validly existing and in good standing under the laws of the state of Delaware. The company has the corporate power and authority to carry on its business as presently conducted, and is qualified to do business in all jurisdictions where the failure to be so qualified would have a material adverse effect on its business.
2.2
Corporate Authority.
a.
RE@LITY has the power to operate as a corporation and to perform any corporate obligations hereunder. RE@LITY, and the consummation of the transactions contemplated hereby, do not violate any State, Governmental or corporate restrictions governing these transactions, The execution and performance of this Agreement, will not constitute a breach of any agreement, indenture, mortgage, license or other instrument or document to which RE@LITY is a party and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable to RE@LITY or its properties. The execution and performance of this Agreement will not violate or conflict with any provision of the laws of the State of Delaware.
b.
ISAT has the power to operate as a corporation and to perform any corporate obligations hereunder. ISAT, and the consummation of the transactions contemplated hereby, do not violate any State, Governmental or corporate restrictions governing these transactions, The execution and performance of this Agreement, will not constitute a breach of any agreement, indenture, mortgage, license or other instrument or document to which ISAT is a party and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable to ISAT or its properties. The execution and performance of this Agreement will not violate or conflict with any provision of the laws of the State of Delaware.
2.3
Capitalization and the RE@LITY Shares. The total authorized capital of RE@LITY shall consist of 100,000,000 shares of authorized common stock, no preferred shares are issued, outstanding or contemplated. There are no options, warrants, or other rights to equity interests outstanding other than those disclosed in the accompanying option table. RE@LITY reserves the right to implement stock compensation plans and traditional ESOP programs for new additions to its Board of Directors, Advisory Board members, and key executive hires.
2.4
Receipt of Corporate Information, Independent investigation, Access. ISAT information is available to RE@LITY via the EDGAR website. RE@LITY acknowledges that it, in making the decision to go forward as set forth in this Agreement, has relied upon independent investigations made by its representatives, and they have been given access to and the opportunity to examine all material contracts and documents relating to this Agreement and an opportunity to ask questions of, and to receive information from, ISAT or any person acting on its behalf concerning the terms and conditions of this Agreement. RE@LITY and its advisors, if any, have received complete and satisfactory answers to any such inquiries.
2.5
Financial Statements: Books and Records. RE@LITY will provide audited financial statements of the Company, including subsidiaries and affiliates, for the calendar year ending 2011 , and unaudited for the period through October 31, 2012 (the “RE@LITY Financial Statements") for purposes of the registration statement. These audited RE@LITY Financial Statements currently in existence, dated December 31, 2011 , will be attached as Schedule 2.5 and shall fairly represent the financial position of RE@LITY at those dates and the results of their operations for the periods then ended. The RE@LITY Financial Statements have been and will continue to be prepared in accordance with generally accepted GAAP accounting standards.
2.6
Approvals. No approval, authorization, consent, order or other action of, or filing with, any person, firm or corporation or any court, administrative agency or other governmental authority is. required in connection with the execution and delivery of this Agreement by RE@LITY.
2.7
No Material Adverse Changes. Since December 31 2011, there has not been:
(i)
any material adverse change in the financial position of RE@LITY except changes arising in the ordinary course of business, which changes will in no event materially and adversely affect the financial position of RE@LITY;
(ii)
any damage, destruction or loss materially affecting the assets, prospective business, operations or condition (financial or otherwise) of RE@LITY whether or not covered by insurance;
(iii)
any declaration, setting aside or payment of any dividend or distribution with respect to any redemption or repurchase of RE@LITY capital interests;
(iv)
any sale of an asset (other than in the ordinary course of business) or any mortgage or pledge by RE@LITY of arty properties or assets; or
(v)
adoption of any pension, profit sharing, retirement, stock bonus, stock option or similar plan, or arrangement, except those listed in the Schedule attached to this Agreement
2.8
No Breach. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not:
(i)
violate any provision of the Articles of Incorporation or the Bylaws of RE@LITY or ISAT;
(ii)
violate, conflict with or result in the breach of any of the terms of, result in a material modification of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time, or both constitute) a default under any contract or other agreement to which RE@LITY or ISAT is a party or by or to which it or any of its assets or properties may be bound or subject;
(iii)
violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, RE@LITY or ISAT or upon the properties or business of RE@LITY or ISAT; or
(iv)
violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein which could have a material, adverse effect on the business or operations of RE@LITY or ISAT.
2.9
Actions and Proceedings.
a.
RE@LITY is not a party to any material pending litigation or, to the knowledge of the shareholders, after reasonable inquiry, any governmental investigation or proceeding not reflected in the RE@LITY Financial Statements and, to their best knowledge, no material litigation, claims, assessments or non-governmental proceedings are threatened against RE@LITY.
b.
ISAT is not a party to any material pending litigation or, to the knowledge of the shareholders, after reasonable inquiry, any governmental investigation or proceeding not reflected in the information provided pursuant to Section 2.4 and, to their best knowledge, no material litigation, claims, assessments or non-governmental proceedings are threatened against ISAT.
2.10
Brokers or Finders. No broker's or any other fee will be payable by RE@LITY to ISAT in connection with this Agreement or the transactions contemplated by this Agreement, or any action or omission related to this agreement, nor will any such fee be incurred as a result of any actions by RE@LITY or any of its shareholders.
2.11
Operations of RE@LITY. Other than as disclosed in the RE@LITY Financial Statements, RE@LITY has not and will not without notifying ISAT in advance, outside of the ordinary course of business, have:
(i) declared or paid any dividend or declared or made any distribution of any kind to any shareholder, or made any direct or indirect redemption, retirement, purchase or other acquisition of any interests in its capital structure;
(ii)
made any loan or advance to any shareholder, officer, director, employee, consultant, agent or other representative or made any other loan or advance;
(iii)
disposed of any assets of RE@LITY;
(iv)
materially increased the annual level of compensation of any executive employee of RE@LITY;
(v)
increased, terminated, amended or otherwise modified any plan for the benefit of employees of RE@LITY;
SECTION 3. COVENANTS
3.1
Corporate Examinations and Investigations. Prior to the Closing Date, the parties acknowledge that they have been entitled, through their employees and representatives, to make such investigation of the assets, properties, business and operations, books, records and financial condition of the other as they each may reasonably require. No investigations, by a party hereto shall, however, diminish or waive any of the representations, warranties, covenants or agreements of the party under this Agreement.
3.2
Further Assurances. The parties shall execute such documents and other papers and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby. Each such party shall use its best efforts to fulfill or obtain the fulfillment of the conditions to the Closing, including, without limitation, the execution and delivery of any documents or other papers, the execution and delivery of which are necessary or appropriate to the Closing.
3.3
Confidentiality. In the event the transactions contemplated by this Agreement are not consummated, ISAT and RE@LITY agree to keep confidential any information disclosed to each other in connection with this transaction for a period of one (1) year from the date hereof; provided. However, such obligation shall not apply to information which:
(i)
at the time of the disclosure was public knowledge;
(ii)
after the time of disclosure becomes public knowledge (except due to the action of the receiving party); or
(iii)
the receiving party had within its possession at the time of disclosure: or
(iv)
is ordered disclosed by a Court of proper jurisdiction.
SECTION 4. SURVIVAL OF REPRESENTATIONS AND WARRANTEES
Notwithstanding any right of either party to investigate the affairs of the other party and its Shareholders, each party has the right to rely fully upon representations, warranties, covenants and agreements of the other party and its Shareholders contained in this Agreement or in any document delivered to one by the other or any of their representatives, in connection with the transactions contemplated by this Agreement. All such representations, warranties. covenants and agreements shall survive the execution and delivery hereof and the closing hereunder for one year following the Closing Date, unless the Agreement is terminated pursuant to the provision of Section 1.7 Termination.
SECTION 5. MISCELLANEOUS
5.1
Waivers. The waiver of a breach of this Agreement or the failure of any party hereto to exercise any right under this Agreement shall in no way constitute waiver as to future breach whether similar or dissimilar in nature or as to the exercise of any further right under this Agreement.
5.2
Amendment. This Agreement may be amended or modified only by an instrument of equal formality signed by the parties or the duly authorized representatives of the respective parties.
5.3
Assignment This Agreement is not assignable except by operation of law.
5.4
Notice. Until otherwise specified in writing, the mailing addresses and fax numbers of the parties of this Agreement shall be as follows;
TO:
ISA INTERNATIONALE, INC.:
Bernard Brodkorb, President
2564 No Rice St.
St. Paul, MN 55113
RE@LITYCORP
Carlton Schowe, CEO
and President
240 North James Street, Suite 103,
Newport, DE, 19804
Any notice or statement given under this Agreement shall be deemed to have been given if sent by registered mail addressed to the other party at the address indicated above or at such other address which shall have been furnished in writing to the addressor.
5.5
Governing Law. This Agreement shall be construed, and the legal relations between the parties determined, in accordance with the laws of the State of Delaware , thereby precluding any choice of law rules which may direct the application of the laws of any other jurisdiction.
5.6
Publicity. No publicity release or announcement concerning this Agreement or the transactions contemplated hereby shall be issued by either party hereto at any time from the signing hereof without advance approval in writing of the form and substance by the other party.
5.7
Entire Agreement. This Agreement and the collateral agreements executed in connection with the consummation of the transactions contemplated herein contain the entire agreement among the parties with respect to the purchase and issuance of the shares and options and related transactions, and supersede all prior agreements, written or oral, with respect thereto.
5.8
Headings. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
5.9
Severability of Provisions. The invalidity or unenforceability of any term, phrase, clause, paragraph, restriction, covenant, agreement or provision of this Agreement shall in no way affect the validity or enforcement of any other provision or any part thereof.
5.10
Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed, shall constitute an original copy hereof, but all of which together shall consider but one and the same document.
5.11
Binding Effect. This Agreement shall be binding upon the parties hereto and inure to the benefit of the parties, their respective heirs, administrators, executors, successors ad assigns.
5.12
Tax Treatment. Each party acknowledges that they each have been represented by their own tax advisors in connection with this transaction; that none of them has made a representation or warranty to any of the other parties with respect to the tax treatment accorded this transaction, or the effect individually or corporately on any party under the applicable tax laws, regulations, or interpretations; and that no opinion of counsel or private revenue ruling has been obtained with respect to the effects of this transaction under the Code.
5.13
Press Releases. The parties will mutually agree as to the wording and timing of any informational releases concerning this transaction prior to and through Closing.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written:
ISA INTERNATIONALE, INC.
RE@LITYCORP
By: /s/ Bernard Brodkorb
By: /s/ Carlton Schowe
Bernard Brodkorb
Carlton Schowe
President
CEO and President