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EX-31 - Insulcrete, Inc.ins1q09exh311.htm
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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

[X]

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

 

OR

 

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from       N/A         to                .

 

Commission file number:  033-27508-LA

 

Insulcrete, Inc.
(Exact Name of Small Business Issuer in Its Charter)

 

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

33-0338441
(I.R.S. Employer Identification No.)

 

706 Orchid Drive, Unit D, Bakersfield, California 93308
(Address of principal executive office)

 

(661) 392-7982
Issuer's telephone number, including area code

 

1400 Norris Road, Bakersfield, California 93308
(Former Name, Former Address, and Former Fiscal Year, If Changed Since Last Report)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [  ]   No [X]   

 

The number of shares outstanding of the Registrant's Common Stock as of March 31, 2009 was 26,515,200 shares. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [  ]   No [X]   

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

[  ]

 

Accelerated filer

[  ]

Non-accelerated filer
(Do not check if a smaller reporting company)

[  ]

 

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 [X]   No [  ]   

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

On March 31, 2009, 26,515,200 shares of the issuer's common stock were outstanding.

 
 

 

Insulcrete, Inc.

TABLE OF CONTENTS

       
       
     

Page
Number

     

PART I -

FINANCIAL INFORMATION

 
 

Item 1.

Financial Statements

 
   

Consolidated Balance Sheets
March 31, 2009 (unaudited) and December 31, 2008

F-1

   

Consolidated Statements of Operations (unaudited)
Three Months Ended March 31, 2009 (unaudited)
and Three Months Ended March 31, 2008 (unaudited)

F-2

   

Consolidated Statements of Cash Flows (unaudited)
Three Months Ended March 31, 2009 and March 31, 2008

F-3

   

Notes to Consolidated Financial Statements (unaudited)

F-4

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

10

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

13

 

Item 4.

Controls and Procedures

14

       

PART II -

OTHER INFORMATION

 
 

Item 1.

Legal Proceedings

15

 

Item 1A.

Risk Factors

15

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

16

 

Item 3.

Defaults Upon Senior Securities

16

 

Item 4.

[Removed and Reserved]

16

 

Item 5.

Other Information

16

 

Item 6.

Exhibits and Reports on Form 8-K

16

 

PART I - FINANCIAL INFORMATION

Available Information

Information about our Company is available from the Company at the address shown on the first page of this Report. We are obligated to file reports with the Securities and Exchange Commission, or SEC. These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports, each of which is provided on our website after we electronically file such materials with or furnish them to the SEC. You can also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1.800.SEC.0330. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

MATTER OF FORWARD-LOOKING STATEMENTS

THIS FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS" THAT CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS "BELIEVES," "EXPECTS," "MAY," "WILL," "SHOULD," OR "ANTICIPATES," OR THE NEGATIVE OF THESE WORDS OR OTHER VARIATIONS OF THESE WORDS OR COMPARABLE WORDS, OR BY DISCUSSIONS OF PLANS OR STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. MANAGEMENT WISHES TO CAUTION THE READER THAT THESE FORWARD-LOOKING STATEMENTS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS REGARDING THE COMPANY'S MARKETING PLANS, GOALS, COMPETITIVE AND TECHNOLOGY TRENDS AND OTHER MATTERS THAT ARE NOT HISTORICAL FACTS ARE ONLY PREDICTIONS. NO ASSURANCES CAN BE GIVEN THAT SUCH PREDICTIONS WILL PROVE CORRECT OR THAT THE ANTICIPATED FUTURE RESULTS WILL BE ACHIEVED. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY EITHER BECAUSE ONE OR MORE PREDICTIONS PROVE TO BE ERRONEOUS OR AS A RESULT OF OTHER RISKS FACING THE COMPANY. FORWARD-LOOKING STATEMENTS SHOULD BE READ IN LIGHT OF THE CAUTIONARY STATEMENTS AND IMPORTANT FACTORS DESCRIBED IN THIS FORM 10-QSB FOR INSULCRETE, INC., INCLUDING, BUT NOT LIMITED TO "THE FACTORS THAT MAY AFFECT FUTURE RESULTS" SHOWN AS ITEM 1A AND IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS ASSOCIATED WITH AN EARLY-STAGE COMPANY THAT HAS ONLY A LIMITED HISTORY OF OPERATIONS, THE COMPARATIVELY LIMITED FINANCIAL RESOURCES OF THE COMPANY, THE INTENSE COMPETITION THE COMPANY FACES FROM OTHER ESTABLISHED COMPETITORS, TECHNOLOGICAL CHANGES THAT MAY LIMIT THE ABILITY OF THE COMPANY TO MARKET AND SELL ITS PRODUCTS AND SERVICES OR ADVERSELY IMPACT THE PRICING OF THESE PRODUCTS AND SERVICES, AND MANAGEMENT THAT HAS ONLY LIMITED EXPERIENCE IN DEVELOPING SYSTEMS AND MANAGEMENT PRACTICES. ANY ONE OR MORE OF THESE OR OTHER RISKS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FUTURE RESULTS INDICATED, EXPRESSED, OR IMPLIED IN SUCH FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT TO REFLECT EVENTS, CIRCUMSTANCES, OR NEW INFORMATION AFTER THE DATE OF THIS FORM 10-Q OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED OR OTHER SUBSEQUENT EVENTS.

 

Item 1.  Financial Statements

          See F-1

<Table of Contents>

2

 

 

INSULCRETE, INC.
(A Development Stage Company)
Balance Sheets

As of
March 31,
2009
(Unaudited)

As of
December 31,
2008

ASSETS

Current Assets

Cash

$

3,095

$

277

Total Current Assets

3,095

277

TOTAL ASSETS

$

3,095

$

277

LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities

Accounts Payable

$

5,000

$

-   

Accrued Interest Payable

1,485

-   

Total Current Liabilities

6,485

-   

Long-Term Liabilities

Note payable - related party

203,814

200,064

Total Long-Term Liabilities

203,814

200,064

TOTAL LIABILITIES

210,299

200,064

Stockholders' Equity (Deficit)

Preferred stock,

3,340

3,340

($.01 par value, 5,000,000 shares authorized;
334,000 issued and outstanding as of March 31, 2009 and December 31, 2008, respectively)

Common stock

265,152

265,152

($.01 par value, 30,000,000 shares authorized;
26,515,200 shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively)

Additional paid-in capital

(65,378)

(65,378)

Deficit accumulated during development stage

(410,318)

(402,901)

Total Stockholders' Equity (Deficit)

(207,204)

(199,787)

 

TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY (DEFICIT)

$

3,095

 

$

277

See Notes to Financial Statements.

F - 1

<Table of Contents>

3

 

 

INSULCRETE, INC.
(A Development Stage Company)
Statements of Operations (Unaudited)

   



Three Months Ended

 

May 3, 1988
(inception)
through
March 31,
2009

   

March 31,
2009

 

March 31,
2008

Revenues

Revenues

$

-   

$

-   

$

-   

Total Revenues

-   

-   

-   

Operating Costs

Administrative Expenses

5,932

3,648

379,564

Total Operating Costs

5,932

3,648

379,564

Other Income & (Expenses)

Other income (expense)

-   

-   

15,450

Interest (expense)

(1,485)

(1,371)

(46,204)

Total Other Income & (Expenses)

(1,485)

(1,371)

(30,754)

Net Loss

$

(7,417)

$

(5,019)

$

(410,318)

Basic loss per share

$

(0.00)

$

(0.00)

Weighted average number of common shares outstanding

26,515,200

26,515,200

See Notes to Financial Statements.

F - 2

<Table of Contents>

4

 

INSULCRETE, INC.
(A Development Stage Company)
Statements of Cash Flows (unaudited)

   

Three Months Ended

 

May 3, 1988
(inception)
through
March 31,
2009

March 31,
2009

March 31,
2008

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$

(7,417)

$

(5,019)

$

(410,318)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Changes in operating assets and liabilities:

Increase (decrease) in accounts payable

5,000

-   

5,000

Increase (decrease) in interest payable

1,485

-   

1,485

Net cash provided by (used in) operating activities

(932)

(5,019)

(403,833)

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash provided by (used in) investing activities

-   

-   

-   

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of common stock

-   

-   

265,152

Proceeds from issuance of preferred stock

-   

-   

3,340

Proceeds from issuance of paid-in capital

-   

-   

(65,378)

Note payable - related party

3,750

(3,629)

203,814

Net cash provided by (used in) financing activities

3,750

(3,629)

406,928

Net increase (decrease) in cash

2,818

(8,648)

3,095

Cash at beginning of period

277

10,717

-   

Cash at end of period

$

3,095

$

2,069

$

3,095

See Notes to Financial Statements.

F - 3

<Table of Contents>

5

 

INSULCRETE, INC.
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
As of March 31, 2009

NOTE 1.  ORGANIZATION AND DESCRIPTION OF BUSINESS

Insulcrete, Inc (the Company) was incorporated under the laws of the State of Delaware on May 3, 1988. The Company has limited operations and in accordance with SFAS #7, the Company is considered a development stage company.

 

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.  Basis of Accounting

The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a December 31, year-end.

b.  Basic Earnings per Share

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. SFAS No. 128 supersedes the provisions of APB No. 15, and requires the presentation of basic earnings (loss) per share and diluted earnings (loss) per share. The Company has adopted the provisions of SFAS No. 128 effective May 3, 1988 (inception).

Basic earnings (loss) per share amounts are computed by dividing the net income (loss) by the weighted average number of common shares outstanding. Diluted gain (loss) per common share has been calculated based on the weighted average number of shares of common and preferred stock outstanding during the period.

c.  Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

d.  Income Taxes

Income taxes are provided in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be not realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

e.  New Accounting Pronouncements:

In December 2007, the Financial FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141R"). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

F - 4

<Table of Contents>

6

 

 

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements-an amendment of Accounting Research Bulletin No. 51" ("SFAS 160"). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent's ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133.  This standard requires companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not yet adopted the provisions of SFAS No. 161, but does not expect it to have a material impact on its consolidated financial position, results of operations or cash flows.

In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB's amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company's financial position, statements of operations, or cash flows at this time.

In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company's financial position, statements of operations, or cash flows at this time.

 

NOTE 3.  WARRANTS AND OPTIONS

There are no warrants or options outstanding to acquire any additional shares of common.

 

NOTE 4.  GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company generated net losses of $410,318 during the period from May 3, 1988 (inception) to March 31, 2009. This condition raises substantial doubt about the Company's ability to continue as a going concern. The Company's continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management plans to raise additional funds through debt or equity offerings. There is no guarantee that the Company will be able to raise any capital through any type of offerings.

F - 5

<Table of Contents>

7

 

 

NOTE 5.  RELATED PARTY TRANSACTION

The Company neither owns nor leases any real or personal property. A director provides office services without charge. Such costs are immaterial to the financial statements and accordingly, have not been reflected therein. The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities as they become available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.

As of March 31, 2009 the Company has a note payable due to International Credit Bureau, Inc. (a related party) in the amount of $203,814. This is an unsecured loan with an interest rate of 3%. Total interest recorded for the three months ended March 31, 2009 was $1,485.

 

NOTE 6.  INCOME TAXES

 

As of
March 31, 2009

Deferred tax assets:

 

Net operating tax carryforwards

$   139,508

Other

      -0-  

Gross deferred tax assets

    139,508

Valuation allowance

    (139,508)

   

Net deferred tax assets

$     -0-  

Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance.

 

NOTE 7.  SCHEDULE OF NET OPERATING LOSSES

1993 Through 1995 Net Operating Loss

$

(52,645)

1996 Net Operating Loss

 

(165,212)

1997 Net Operating Loss

 

(7,670)

1998 Net Operating Loss

 

(4,444)

1999 Net Operating Loss

 

(7,577)

2000 Net Operating Loss

 

(4,911)

2001 Net Operating Loss

 

(36,369)

2002 Net Operating Loss

 

(9,682)

2003 Net Operating Loss

 

(9,414)

2004 Net Operating Loss

 

(17,466)

2005 Net Operating Loss

 

(26,042)

2006 Net Operating Loss

 

(17,201)

2007 Net Operating Loss

 

(17,106)

2008 Net Operating Loss

 

(27,162)

2009 Three Months Net Operating Loss

 

(7,417)

Net Operating Loss

$

(410,318)

As of March 31, 2009, the Company has a net operating loss carryforwards of approximately $410,318. Net operating loss carryforward expires twenty years from the date the loss was incurred.

F - 6

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8

 

 

NOTE 8.  STOCK TRANSACTIONS

Transactions, other than employees' stock issuance, are in accordance with paragraph 8 of SFAS 123. Thus issuances shall be accounted for based on the fair value of the consideration received. Transactions with employees' stock issuance are in accordance with paragraphs (16-44) of SFAS 123. These issuances shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, or whichever is more readily determinable.

As of March 31, 2009 the Company had 26,515,200 shares of common stock issued and outstanding.

 

NOTE 9.  STOCKHOLDERS' EQUITY

The stockholders' equity section of the Company contains the following classes of capital stock as of March 31, 2009:

     ·   Preferred stock, $ 0.01 par value: 5,000,000 shares authorized; 334,000 shares issued and outstanding.

     ·   Common stock, $ 0.01 par value: 30,000,000 shares authorized; 26,515,200 shares issued and outstanding.

F - 7

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9

 

 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

As used herein, the term "we," "us," "our," and the "Company" refers to Insulcrete, Inc., a Delaware corporation unless otherwise noted.

We are a "shell company" (as that term is defined in Rule 144(i) of the Securities Act of 1933).

As a "shell company" our stockholders are not able to claim or use the exemption provided by Rule 144. As a result, unless or until we file the required "Form 10-type information" with the Commission (in this case, on Form 8-K) and, at the same time, have and maintain non-cash assets (or operations) that are not nominal and thereafter for a period of at least one year after the filing of the "Form 10 type information", we will not we said to have "cured" our shell company status.

Further to "cure" the shell company status, we will also need to prepare and file with the Commission all of our Form 10-Qs and our Form 10-Ks and maintain non-cash assets (or operations) that are not nominal at all times thereafter.

For as long as the Company remains a "shell company," all stockholders of the Company cannot use or claim the exemption provided by Rule 144. In effect, that means that stockholders will not have an effective ability to undertake any public re-sale of any of the Company's common stock.

Company Background

We were originally named Sun Harbor Financial Resources, Inc., a Delaware Corporation ("the Company") and we were incorporated in the State of Delaware on May 3, 1988. On August 25, 1988, we effectuated a tax free reorganization ("the Acquisition") under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. As a result of the Acquisition, we acquired Sun Harbor Mortgage, Inc., a California Corporation ("SHMI"), incorporated in the State of California on January 26, 1981, which became our wholly-owned subsidiary.

SHMI was a financial intermediary and operates a mortgage banking firm with activities in San Diego , California. In addition, at that time our second wholly-owned subsidiary, Peninsula Funding Corporation ("PFC"), was a trustee corporation that SHMI specified in it's Deeds of Trust to represent the beneficiary, supervise foreclosure proceedings, and issue re-conveyances. At that time the Company derived re-conveyance and trustee fee revenues through PFC operations. On September 11, 1989 a third wholly-owned subsidiary, Pacific Empire Escrow, Inc. ("PEEI") was incorporated as a California corporation. Pacific Empire Escrow, Inc. was intended to be an independent Escrow company operating in the state of California. However, Pacific Empire Escrow never became operational, and SHMI formed an Escrow Department to provide Escrow Services for loans that directly involve SHMI. On July 27, 1993, Pacific Empire Escrow, Inc. formally amended its Articles of Incorporation to change its name to Sun Harbor Insurance Services, Inc. ("SHISI"). SHISI offered insurance agency services within San Diego county during the final two quarters of 1993 and for a portion of the first quarter of 1994. However, as a result of a management decision, SHISI's operations were terminated in March 1994.

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10

 

 

1995 Actions RE: Divestiture

On October 31, 1995, our Board of Directors approved the proposed sale of our three wholly-owned subsidiaries, Sun Harbor Mortgage, Inc., Sun Harbor Leasing, Inc., and Peninsula Funding Corporation (collectively, the "Subsidiaries"). The proposed sale of the Subsidiaries was and remains subject to the approval of the Company's shareholders for which the Company plans to file a proxy statement with the U.S. Securities and Exchange Commission.

The sale was undertaken pursuant to a Board of Director's resolution previously adopted in May 1995 and after the Board of Directors reviewed the cumulative history of losses incurred by the Company over the past five years and the limited profitable business opportunities that the Board of Directors identified in the Company's mortgage banking business. On this basis, the Board of Director retained the services of an independent valuation expert retained to establish the fair market value of the three subsidiaries as of June 29, 1995.

After review of the valuation opinion received, the Board of Directors voted to sell the three subsidiaries to David W. Langill, at a selling price of fifteen thousand dollars in accordance with the terms of the "Stock Purchase Agreement Between Sun Harbor Financial Resources, Inc. and David W. Langill" (the "Agreement"). Mr. Langill was, at the time, a co-founder of the Subsidiaries and a co-founder, officer, and director of the Company.

Under the terms of the Agreement, Mr. Langill agreed to assume all liabilities, known or unknown, whether asserted or unasserted, whether liquidated or unliquidated, and whether due or to become due, including and liability for taxes, office equipment, and other leases, rents, and other obligations of the Subsidiaries except for certain limited obligations. The Note carried an interest rate of 8%, with a principal amount of fifteen thousand dollars and required a monthly payment of five hundred dollars beginning January 15, 1996. All unpaid principal and interest was due the Company in full no later than June 29, 1998. The Company attempted to collect these monies from Mr. Langill but, as stated below, the Company was not successful in collecting any monies on the Note.

In February 2004, Mr. Langill died with the result that the Company believes it will likely be unable to collect any monies from his estate. For these reasons, the Company does not anticipate that it will collect any monies on the Note it received from Mr. Langill in connection with the divestiture of the subsidiaries.

Amendments to Articles of Incorporation

On August 13, 2000 and by an action of a majority of the Company's shareholders by written consent and without a meeting, a majority of the Company's shareholders approved an amendment to the Company's Certificate of Incorporation to change the Company's name to Block Tech Corporation.

Subsequently on May 7, 2001and by an action of a majority of the Company's shareholders by written consent and without a meeting, a majority of the Company's shareholders approved an amendment to the Company's Certificate of Incorporation to change the Company's name to Insulcrete, Inc.

The change in the Company's name to Insulcrete, Inc. was undertaken in anticipation that the Company may undertake efforts to become active in the residential housing industry. The Company did not, during the fiscal year ending December 31, 2004 or earlier undertake further efforts to enter the residential housing industry but the Company continues to explore possible opportunities in this area.

The "Company", as used herein, refers to the consolidated entity unless otherwise noted.

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11

 

 

Three Month Periods Ended March 31, 2009 and March 31, 2008

During the first three months ending March 31, 2009, ("First Quarter 2009"), we recorded no sales revenues. During this period we had no business, assets, or operations. Similarly, during the first three months ending March 31, 2008 ("First Quarter 2008"), we recorded no sales revenues and again during First Quarter 2008, we had no business, assets, or operations.

During the First Quarter 2008, we did record $614 as administrative expense - these were expenses related to the maintenance of the Company's corporate charter, accounting, administrative, preparation of filings with the U.S. Securities and Exchange Commission, and related expenses. By comparison, during the First Quarter 2009, we incurred $4,672 as administrative expenses. The higher level of general and administrative expenses during the First Quarter 2009 was primarily due to efforts that we took to attend to our files, books, records, and the preparation and filing of our periodic reports for the current quarter as well as for prior calendar years and quarters together various filing fees.

During the First Quarter 2009, we had other expenses of $12,000 and interest expense of $1,485. By comparison, during the First Quarter 2008, we had interest expense of $1,243. The interest expense incurred in the First Quarter 2009 was incurred as a result of a promissory note issued to International Credit Bureau, Inc. This note bears interest at 3%.

As a result, we had a Net Loss of $18,157 during the First Quarter 2009 compared to a Net Loss of $1,857 during the First Quarter 2008.

On a per share basis, the Net Loss during the First Quarter 2009 was $0 compared to First Quarter 2008 when the Net Loss Per Common Share was $0.

Liquidity and Capital Resources

We have no real liquidity and no apparent source of financing apart from the arrangement that we have established with ICBI. We currently owe ICBI an aggregate of $203,814 as of March 31, 2009. On a going-forward basis, the Company anticipates that it will need between $8,000 to $20,000annually merely to maintain the Company's existence and to pay the expenses and costs that it incurs to ensure that the Company can remain a corporate enterprise with all of the attendant responsibilities, filings, and associated documentation. For these and other reasons, our management recognizes the adverse difficulties and continuing challenges we face. Apart from the limited assurances that we have received from ICBI, there can be no assurance that we will receive any financing or funding from any source or if any financing should be obtained, that existing shareholders will not incur substantial, immediate, and permanent dilution of their existing investment.

Further, there can be no assurance that we will be successful in obtaining any additional financing, or if we receive any additional financing, that any such financing can be obtained on terms that may be deemed reasonable given our current dire financial condition.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The Company's status as a "shell company" and its securities are subject to a number of substantial risks, including those described below. If any of these or other risks actually occur, the Company's business, financial condition and operating results, as well as the value of our common stock could be materially adversely affected. No attempt has been made to rank these risks in the order of their likelihood or potential harm. In addition to those general risks enumerated elsewhere in the document, any purchaser of the Company's common stock should also consider the following risk factors:

Further and in the context of the uncertainties facing the Company's business organization and existing debt and obligations on its balance sheet all involve elements of substantial risk. In many instances, these risks arise from factors over which the Company will have little or no control. Some adverse events may be more likely than others and the consequence of some adverse events may be greater than others.

1. Continued Operating Losses. We incurred additional losses and negative cash flow during the twelve months ending December 31, 2008. There is no assurance that our operations (if any are ever established) will be successful or that we will be profitable or achieve positive cash flow in the future

2. Absence of Assets, Business, Operations & Extraordinary Uncertainties. We have no meaningful assets, business or operations and there can be no assurance that we will regain or acquire any new assets in the future. While we may later search for other ventures, our ability to undertake any such future venture will likely be severely limited and there can be no assurance that we will ever acquire any other business venture or if such a venture is acquired, that any such venture can be acquired on any reasonable terms in light of our current financial circumstances.

3. Lack of Business, No Equity, No Working Capital & Severe Need for Additional Financing. The Company has no business, no equity, and no operations. If the Company is to develop or acquire any new business, the Company will need to obtain significant additional equity or debt financing on reasonable terms. There can be no guarantee that the Company will be successful in obtaining any such financing or if it is obtained, that stockholders will not lose all of their investment. If we do obtain any new capital, we anticipate that our stockholders will likely incur significant and immediate dilution.

4. Auditor's Opinion: Going Concern. Except for the explanatory paragraph included in the firm's report on the financial statements for the year ended December 31, 2008, relating to the substantial doubt existing about the Company's ability to continue as a going concern, the audit report did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.

5. Subordinate to Existing and Future Debt & Newly-Issued Outstanding Preferred Stock. All of the Common Stock is subordinate to the claims of the Company's existing and future creditors and any future holders of the Company's preferred stock. The Company is authorized to issue shares of the Company's preferred stock and 300,000 shares of our Preferred Stock were issued in March 2008 in an exchange transaction. In this transaction, three holders of our Common Stock exchanged shares of our Common Stock (aggregating 3,000,000 shares) for an aggregate of 300,000 shares of our Series B Preferred Stock. All of the 300,000 shares of our Series B Preferred Stock are immune to any stock split and may be converted into shares of our Common Stock upon the election of each of the holders. We did not receive any cash or other proceeds in connection with the exchange transaction and the transaction was completed without any third party. The exchange transaction was completed solely between each of the holders and the Company's sole officer, Lisa Norman.

6. Other Factors Cited in Form 10-K As Previously Filed. The Company faces many risks and uncertainties. These also include those risks and uncertainties recited in the Company's most recent Form 10-K. Any investor who purchases the Company's Common Stock should be prepared to lose their entire investment.

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Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of March 31, 2007, that our disclosure controls and procedures are effective to a reasonable assurance level of achieving such objectives. However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed 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.  The internal controls for the Company are provided by executive management's review and approval of all transactions.  Our internal control over financial reporting also includes those policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management's assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls.

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Based on this assessment, management has concluded that as of December 31, 2006, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our fiscal quarter ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

None.

 

Item 1A.  Risk Factors

Status as a "Shell Company" and Uncertain Future Prospects

We are a "shell company" within the meaning of Rule 12b-2 of the Securities Exchange Act of 1934 and within the meaning of Rule 144(i) of the 1933 Act. As a result, we and our stockholders are burdened by several disabilities imposed on companies that do not currently possess an operating business. While we continue to look at potential business and investment opportunities, we can not assure you that we will be successful in identifying any suitable business opportunities or, if we identify them, that we can successfully negotiate a transaction that will be beneficial to our stockholder

Absence of Trading Market for Our Common Stock

Our Common Stock does not trade in any market and there is no certain prospect that our Common Stock will ever achieve tradability on any stock market at any time in the near future. Although our Common Stock is a security that is registered under Section 12(g) of the Securities Exchange Act of 1934 and we are obligated to fulfill certain obligations thereby, we remain a "shell company" and, as result, we will not likely have the ability to gain tradability for our common stock until we acquire or develop a business with assets and operations that will allow us to no longer meet the definition of a "shell company."

Limited Management and Limited Management Time

We have only one officer and director who spends only a limited amount of time attending to our business and financial affairs. This lack of management and lack of management time has and will likely continue to limit our ability to acquire or develop any new business. As a result, there can be no assurance that we will acquire or develop a suitable business or if we are able to do so, that any such acquisition can be undertaken successfully.

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Likely Future Dilution & Recapitalization

In the event that we acquire or develop a new business, we anticipate that we may have to undertake a reverse stock split, amend our Certificate of Incorporation (as filed with the Secretary of State of the State of Delaware) to increase our authorized Common Stock and otherwise take other actions necessary in connection with one or more transactions in acquiring or developing a new business. Further, we may have to pay finders' fees, brokers' fees, commissions, and other fees that may require that we issue shares of our Common Stock to one or more persons for the services we receive from them in connection with these transactions. As a result, our existing stockholders will likely incur significant and immediate dilution.

General Uncertainties of Regulatory Environment

Since the passage of the Penny Stock Reform Act of 1990, securities laws, on both a federal and state level, have continued to impose greater burdens and costs on securities that are deemed to be "penny stocks" and on "shell companies" as well. As a result, the ability of a company that is a "shell company" to regain the rights and privileges that would allow its common stock to achieve tradability in any securities market is limited and even if such tradability is later achieved, the stockholders of such companies face new and more stringent burdens in trading their shares. We anticipate that these costs and burdens will likely increase in the future and we cannot assure persons who acquire our Common Stock that their investment will have the marketability or liquidity that they have had in the past.

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

 

Item 3.  Defaults Upon Senior Securities

Not applicable.

 

Item 4.  Submission of Matters to a Vote of Security Holders

None.

 

Item 5.  Other Information

None.

Not applicable.

 

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

31.1  Certification
31.2  Certification

32.1  Certification
32.2  Certification

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the three months ended March 31, 2009.

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SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant:
Insulcrete, Inc.

Date:  October 11, 2011

/s/ Lisa Norman
Lisa Norman
President, Chief Executive Officer
Chief Financial Officer

 

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