ISA INTERNATIONALE INC.
CONDENSED STATEMENT OF NET ASSETS AND LIABILTIIES
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
in controlled affiliate $ 136,817 $
Accounts payable - trade and taxes 143,079 135,634
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
------------ ------------
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 10,339,735 10,325,770
Treasury stock; 1,250,000 shares (537,500) (537,500)
Accumulated deficit (10,122,918) (10,077,994)
------------ -----------
Total 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.
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) $ (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 accounts payable and accrued expenses 6,182 3,309
---------- ----------
Cash used in operating activities 11,683 (38,479)
Cash flows from investing activities
:
Investment in Reality Corp -
---------- ---------
Cash used by investing activities - -
Cash flows from financing activities:
Proceeds from bank lines of credit, net or repayments - (857)
Proceeds from contributed capital-related party - 26,742
Increase in interest accrued on notes payable
Related party - 757
Proceeds from issuance of convertible debt
related party 6,606 1,542
---------- ----------
Cash provided by financing activities 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)
Effect of de-consolidating subsidiary and reporting
Related net assets and liabilities as a BDC (119,107)
---------- ----------
Total non-cash transactions $ (132,107) $ -
========== ==========
The accompanying notes are an integral part of these condensed financial statements.
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 ISA Financial $ 0 $ 0
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 $10,122,918 at December 31, 2012. The Company incurred a net loss from operating activities of $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 Companys 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 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 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) STOCKHOLDERS EQUITY:
Common Stock
During the quarter ended December 31, 2012, 300,000 shares of the Companys common stock were issued to a consultant who has been instrumental in assisting in the negotiations and purchase of the Companys 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 Companys 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 Companys, 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) - 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.
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) RELATED PARTY TRANSACTIONS
(7.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.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 Companys 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.
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 began the process of becoming a Business Development Company as it filed 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 Companys President and another investor who is also an investor shareholder in the Companys Management Company.
With the Companys 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.
As a result, the Company considers itself to be operational as a Business Development Company as of October 1, 2012 and forward. After successful completion of its reorganization efforts and the setup 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.
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.
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., $13,000 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, $143,079 in accounts payable and accrued expenses, $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
Companys
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 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 investments 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 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 $10,122,918. Further, the Company expects to continue to incur investment losses until it generates investment income. There can be no assurance the Company will ever generate investment income or that it will achieve profitability or that its future investment activity will prove commercially successful.
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 $10,122,918 at December 31, 2012. The net loss for the three month period ended December 31, 2012 was $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 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.
ITEM 4. CONTROLS AND PROCEDURES
4(a) 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.
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.