Attached files
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EX-5.1 - EXHIBIT 5.1 - Insight Management Corp | ex51.htm |
EX-21.1 - EXHIBIT 21.1 - Insight Management Corp | ex211.htm |
EX-10.8 - EXHIBIT 10.8 - Insight Management Corp | ex108.htm |
EX-10.9 - EXHIBIT 10.9 - Insight Management Corp | ex109.htm |
EX-23.1 - EXHIBIT 23.1 - Insight Management Corp | ex231.htm |
As
filed with the Securities and Exchange Commission on January 8,
2010
Registration
No. 333-148697
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
—————————
FORM
S-1
—————————
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
INSIGHT
MANAGEMENT CORPORATION
(Exact
name of registrant as specified in Charter)
Florida
|
333-148697
|
20-8715508
|
||
(State
or other jurisdiction of
incorporation
or organization)
|
(Commission
File No.)
|
(IRS
Employee Identification No.)
|
1130
E. Clark Ave. Ste 150-286
Orcutt,
CA 93455
(Address
of Principal Executive Offices)
_______________
(866)
787-3588
(Issuer
Telephone number)
_______________
Copies of
communications to:
Cident
Law Group
1425
Broadway Ave #454
Seattle,
Washington 98112
Telephone
No.: (206) 774-3697
Facsimile
No.: (206) 577-3894
Approximate
Date of Proposed Sale to the Public: As soon as practicable after the
effective date of the Registration Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act of 1933, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
Indicate
by check mark whether Registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer o Accelerated
Filer o
Non-accelerated
filer o Smaller
reporting company x
(Do not
check if a smaller reporting company)
Calculation of
Registration Fee
Title
Of Securities To be Registered
|
Amount
to
be
Registered
|
Proposed
Maximum
Offering
Price
Per
Share
|
Proposed
Maximum
Aggregate
Offering Price(4)
|
Amount
of
Registration
Fee(1)
|
||||||||||||
Common
Stock,(1)
|
75,000,000 | (2) | $ | 0.02 | (3) | $ | 1,500,000 | $ | 106.95 | |||||||
Per
share
|
||||||||||||||||
|
(1)
|
Estimated
pursuant to Rule 457(o) under the Securities Act of 1933 solely for the
purpose of computing the amount of the registration
fee.
|
(2)
|
Representing
shares of the Company to be offered through an equity financing
arrangement and shares to be sold by the
Underwriter.
|
(3)
|
Based
on Rule 457 under the Securities
Act.
|
(4)
|
This
amount represents the maximum aggregate value of common stock which may be
drawn from the Underwriter by the registrant pursuant to the terms and
conditions of an Drawdown Equity Financing Agreement between the
Underwriter and the
registrant.
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Preliminary
Prospectus Subject to Completion dated December 15, 2009
75,000,000
Shares
Common
Stock
This prospectus relates to the resale of up to 75,000,000 shares of the common stock of Insight Management Corporation, a Florida corporation, by Auctus Private Equity Fund, LLC, a Cayman Island exempted company (“Auctus” or “Underwriter”), a selling shareholder pursuant to Drawdown Notice under a Drawdown Equity Financing Agreement (the “Drawdown Equity Financing Agreement”), also referred to as an Equity Line of Credit, that we have entered into with Auctus. The Drawdown Equity Financing Agreement permits us to sell shares of our common stock to Auctus enabling us to drawdown $10.0 million from Auctus. We will not receive any proceeds from the sale of these shares of common stock offered by Auctus. However, we will receive proceeds from the sale of securities pursuant to each Drawdown Notice we send to Auctus. We will bear all costs associated with this registration.
Auctus is
an “underwriter” within the meaning of the Securities Act of 1933, as amended
(the “Securities
Act”) in connection with the resale of our common stock under the Equity
Line of Credit. Auctus will pay us 95% of the lowest closing “best bid” price
(the highest posted bid price) of the common stock during the five consecutive
trading days immediately following the date of our notice to Auctus of our
election to put shares pursuant to the Drawdown Equity Financing
Agreement.
Our
shares of common stock are traded on the Over-the-Counter Bulletin Board (the
“OTCBB”) under
the symbol "ISIM.OB." On January 4, 2010, the closing sale price of our common
stock was $0.02 per share.
This
investment involves a high degree of risk. You should purchase shares only if
you can afford a complete loss. See "Risk Factors" beginning on page
3.
The
information in this prospectus is not complete and may be changed. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. No one may sell these securities nor may
offers to buy be accepted until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer, solicitation or sale is not
permitted.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is December 15, 2009
TABLE
OF CONTENTS
SUMMARY
INFORMATION AND RISK FACTORS
|
1
|
|
RISK
FACTORS
|
3
|
|
Risk
Factors Related to Our Business
|
5
|
|
Risk
Factors Related to Our Securities, the Equity Line of Credit and This
Offering
|
5
|
|
USE
OF PROCEEDS
|
10
|
|
DETERMINATION
OF OFFERING PRICE
|
10
|
|
DILUTION
|
10
|
|
SELLING
SECURITY HOLDERS
|
11
|
|
PLAN
OF DISTRIBUTION
|
12
|
|
Drawdown
Equity Finance Agreement / Registration Rights
Agreement
|
12
|
|
INTEREST
OF NAMED EXPERTS AND COUNSEL
|
13
|
|
MARKET
FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
|
13
|
|
PENNY
STOCK RULES
|
14
|
|
TRANSFER
AGENT
|
14
|
|
EXPERTS
|
15
|
|
ABOUT
OUR COMPANY
|
16
|
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|
16
|
|
Forward-Looking
Information
|
16
|
|
General
|
16
|
|
Strategic
Plan
|
16
|
|
Rebel
Testing, Inc. (“RTI”), subsidiary
|
16
|
|
Results
of Operation
|
16
|
|
OFF-BALANCE
SHEET ARRANGEMENTS
|
18
|
|
INFLATION
|
18
|
|
GOVERNMENT
REGULATIONS
|
18
|
|
DESCRIPTION
OF PROPERTY
|
18
|
|
LEGAL
PROCEEDINGS
|
18
|
|
SUMMARY
FINANCIAL INFORMATION
|
18
|
|
DIVIDENDS
|
19
|
|
MANAGEMENT
|
19
|
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
21
|
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
21
|
|
DESCRIPTION
OF SECURITIES
|
22
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
23
|
|
SUMMARY
INFORMATION AND RISK FACTORS
|
This
summary highlights information described more fully elsewhere in this
prospectus. You should read the entire prospectus carefully. In this
prospectus, "Insight Management Corporation," the "Company," "ISIM," "we," "us"
and "our" refer to Insight Management Corporation, a Florida
corporation.
All
trademarks, service marks or trade names referred to in this prospectus are the
property of their respective owners.
The
Company
We were
organized under the laws of the State of Florida on March 10, 2006. Since our
inception, we have been engaged in organizational efforts and obtaining initial
financing. On June 29, 2009 Insight Management completed a reverse triangular
merger with Microresearch Corporation. Pursuant to the agreement,
Microresearch shareholders received 1.5 ISIM shares for each share they own in
Microresearch Corporation. Prior Insight Management shareholders did not
change their holdings in Insight Management. On June 30, 2009, the
company completed the acquisition of Rebel Testing, Inc. (“RTI”).
Our
principal executive offices are located at 1130 E. Clark Ave. Ste 150-286,
Orcutt, CA 93455, and our telephone number is (866) 797-3588. The address
of our website is www.insightmanagementcorp.com. Information on our
website is not part of this prospectus.
The
Offering
This
prospectus relates to the resale of up to 75,000,000 shares of our common stock
by Auctus. Auctus will obtain our common stock pursuant to a Drawdown
Equity Financing Agreement, effective December 7, 2009, entered into by Auctus
and us.
For the
purpose of determining the number of shares of common stock to be offered by
this prospectus, we have assumed that we will issue not more than 75,000,000
shares for the purpose of the Drawdown Equity Financing Agreement, although the
number of shares that we will actually issue pursuant to that drawdown may be
more or less than 100,000,000, depending on the trading price of our common
stock. We currently do not intend to exercise the drawdown in a manner
which would result in our issuance of more than 400,000,000 shares, but if we
were to exercise the drawdown in that manner, we would be required to file a
subsequent registration statement with the Securities and Exchange Commission
(“SEC”) and
that registration statement would have to be declared effective prior to the
issuance of any additional shares.
The
Drawdown Equity Financing Agreement with Auctus provides that following a
Drawdown Notice to Auctus, Auctus must purchase up to $10,000,000 in shares of
our common stock for a purchase price equal to 95% of the lowest closing “best
bid” price (the highest posted bid price) of the common stock during the five
consecutive trading days immediately following the date of our Drawdown Notice.
The dollar value that we will be permitted to draw per Drawdown Notice pursuant
to the Drawdown Equity Financing Agreement will be either: (A) 200% of the
average daily volume in the US market of the common stock for the twenty trading
days prior to our Drawdown Notice, or (B) $150,000, whichever is larger.
No single drawdown can exceed $150,000. Auctus has indicated that it
will resell those shares in the open market, resell our shares to other
investors through negotiated transactions, or hold our shares in its portfolio.
No Drawdown Notice shall be delivered to Auctus within five days of the
last Drawdown Notice.
Auctus
shall immediately cease selling any shares within the Drawdown Notice if the
price falls below a seventy-five percent (75%) of the average closing bid price
of the stock over the preceding ten (10) trading days prior to the Drawdown
Notice Date. This price “floor” can be waived at the discretion of the
Company.
This
prospectus covers the resale of our stock by Auctus either in the open market or
to other investors through negotiated transactions. Auctus'
obligations under the Drawdown Equity Financing Agreement are not transferrable
and this registration statement does not cover sales of our common stock by
transferees of Auctus.
Auctus
will only purchase shares when we meet the following conditions:
·
|
a
registration statement has been declared effective and remains effective
for the resale of the common stock subject to the Equity Line of
Credit;
|
·
|
our
common stock has not been suspended from trading for a period of five
consecutive trading days and we have not been notified of any pending or
threatened proceeding or other action to delist or suspend our common
stock;
|
·
|
we
have complied with our obligations under the Drawdown Equity Financing
Agreement and the Registration Rights
Agreement;
|
·
|
no
injunction has been issued and remains in force, and no action has been
commenced by a governmental authority which has not been stayed or
abandoned, prohibiting the purchase or the issuance of our common stock;
and
|
·
|
we
have not filed a petition in bankruptcy, either voluntarily or
involuntarily, and there shall not have been commenced any proceedings
under any bankruptcy or insolvency
laws.
|
1
The
Drawdown Equity Financing Agreement will terminate when any of the following
events occur:
·
|
Auctus
has purchased an aggregate of $10,000,000 of our common
stock;
|
·
|
we
file or otherwise enter an order for relief in bankruptcy;
or
|
·
|
our
common stock ceases to be registered under the Securities Exchange Act of
1934 (the “Exchange
Act”).
|
As we
draw down on the Equity Line of Credit, shares of our common stock will be sold
into the market by Auctus. The sale of these additional shares could cause
our stock price to decline. In turn, if the stock price declines and we
send more Drawdown Notices, more shares will come into the market, which could
cause a further drop in the stock price. You should be aware that there is
an inverse relationship between the market price of our common stock and the
number of shares to be issued under the Equity Line of Credit. If our
stock price declines, we will be required to issue a greater number of shares
under the Equity Line of Credit. We have no obligation to utilize the full
amount available under the Equity Line of Credit.
Common
stock offered:
|
Up
to 75,000,000 shares of common stock, no par value, to be offered for
resale by Auctus.
|
Common
stock to be outstanding after
this offering:
|
591,453,806
shares to be outstanding after this offering
|
Use
of proceeds:
|
We
will not receive any proceeds from the sale of the shares of common stock
offered by Auctus. However, we will receive proceeds from the Equity Line
of Credit. See “Use of Proceeds”.
|
Risk
factors:
|
An
investment in our common stock involves a high degree of risk. See “Risk
Factors” beginning on page 3 of this prospectus.
|
OTC
Bulletin Board symbol:
|
“ISIM.OB”
|
2
RISK
FACTORS
Investing
in our shares is very risky. Before making an investment decision, you
should carefully consider all of the risks described in this prospectus.
If any of the risks discussed in this prospectus actually occur, our
business, financial condition and results of operations could be materially and
adversely affected. If this were to happen, the price of our shares could
decline significantly and you might lose all or a part of your investment.
The risk factors described below are not the only ones that may affect us.
Our forward-looking statements in this prospectus are also subject to the
following risks and uncertainties. In deciding whether to purchase our
shares, you should carefully consider the following factors, among others, as
well as information contained in this prospectus, and our most recent Annual
Report on Form 10-K and Quarterly Report on Form 10-Qs:
Risk
Factors Related to Our Business
We
have a limited operating history that you can use to evaluate us, and the
likelihood of our success must be considered in light of the problems, expenses,
difficulties, complications and delays that we may encounter because we are a
small reporting company. As a result, we may not be profitable and we
may not be able to generate sufficient revenue to develop as we have
planned.
Although
Insight Management was incorporated in March 2006, it has had only limited
operations. In June 2009 the Company went through a management change after a
reverse triangular merger with Microresearch Corporation. The likelihood of our
success must be considered in light of the expenses and difficulties in growth
through acquisition and obtaining financing to meet the needs of our
plan of operations.
We
are a ”Going Concern” as determined by our auditors.
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate the continuation of the Company as a going concern. Until the
acquisition of Rebel Testing, Inc. on June 30, 2009, the Company operated as a
development stage enterprise and had not established an ongoing source of
revenues sufficient to cover its operating costs and to allow it to continue as
a going concern, relying on limited private placements of its stock through a
Regulation S offering to fund its development activities while incurring
significant losses and a working capital deficit. The Company has incurred
significant debt by the acquisition of Rebel Testing and must raise capital in
the near term to service this debt or risk termination of the
acquisition.
We
will require additional financing which may require the issuance of additional
shares that will dilute the ownership held by our stockholders.
We will
need to raise funds through either debt or sale of our shares in order to
achieve our business goals. Although there are no present plans, agreements,
commitments or undertakings with respect to the sale of additional shares or
securities convertible into any such shares by us, there are parties who have
discussed investment opportunities. If any sale should take place,
the shares issued would further dilute the percentage ownership held by the
stockholders.
We
will require significant financing to achieve our current business strategy and
our inability to obtain such financing could prohibit us from executing our
business plan and cause us to slow down our expansion of
operations.
We will
need to raise additional funds through public or private debt or sale of equity
to achieve our current plan of operations. Such financing may not be available
when needed. Even if such financing is available, it may be on terms that are
materially adverse to your interests with respect to dilution of book value,
dividend preferences, liquidation preferences, or other terms. Our capital
requirements to implement our business strategy will be significant. We will
need a minimum of $500,000 to continue operations over the next twelve
months.
3
Furthermore,
we will require additional funds of approximately $2,500,000 in order to avoid
losing our acquisition, Rebel Testing, Inc. or other acquisitions. These funds
may not be available or, if available, may not be on commercially reasonable
terms satisfactory to us. We may not be able to obtain financing if and when it
is needed on terms we deem acceptable. If we are unable to obtain
financing on reasonable terms, we could be forced to delay or scale back our
plans for expansion. In addition, such inability to obtain financing on
reasonable terms may delay the execution of our plan of operations increase our
member base.
Our future success is dependent, in
part, on the performance and creation of service of Jennifer Rapacki, our Chief Executive Officer. Without her
continued service, we may be forced to interrupt or eventually cease our
operations.
We are
presently dependent to a great extent upon the experience, abilities and
continued services of Jennifer Rapacki, our current Chief Executive Officer. The
loss of her services would delay our business operations
substantially.
Our
success depends upon our ability to attract and hire key
personnel. Our inability to hire qualified individuals will
negatively affect our business, and we will not be able to implement or expand
our business plan.
Our
business is greatly dependent on our ability to attract key personnel. We will
need to attract, develop, motivate and retain highly skilled technical
employees. Competition for qualified personnel is intense and we may not be able
to hire or retain qualified personnel. Our management has limited experience in
recruiting key personnel which may hurt our ability to recruit qualified
individuals. If we are unable to retain such employees, we will not be able to
implement or expand our business plan.
We
do not expect to pay dividends and investors should not buy our common stock
expecting to receive dividends. Therefore, you may not have any manner to
liquidate or to receive payment on your investment.
We have
not paid any dividends on our common stock in the past, and do not anticipate
that we will declare or pay any dividends in the foreseeable future.
Consequently, you will only realize an economic gain on your investment in our
common stock if the price appreciates. You should not purchase our common stock
expecting to receive cash dividends. Since we do not pay dividends, and if we
are not successful in having our shares listed or quoted on any exchange or
quotation system, then you may not have any manner to liquidate or receive any
payment on your investment. Therefore our failure to pay dividends may cause you
to not see any return on your investment even if we are successful in our
business operations. In addition, because we do not pay dividends we may have
trouble raising additional funds which could affect our ability to expand our
business operations.
We
may fail to establish and maintain strategic relationships.
We
believe that the establishment of strategic partnerships will greatly benefit
the growth of our business, and we intend to seek out and enter into strategic
alliances. We may not be able to enter into these strategic partnerships
on commercially reasonable terms, or at all. Even if we enter into
strategic alliances, our partners may not attract significant numbers of
customers or otherwise prove advantageous to our business. Our inability to
enter into new distribution relationships or strategic alliances could have a
material and adverse effect on our business.
We
may have difficulty in attracting and retaining management and outside
independent members to our Board of Directors as a result of their concerns
relating to their increased personal exposure to lawsuits and stockholder claims
by virtue of holding these positions in a publicly held company.
The
directors and management of publicly traded corporations are increasingly
concerned with the extent of their personal exposure to lawsuits and stockholder
claims, as well as governmental and creditor claims which may be made against
them, particularly in view of recent changes in securities laws imposing
additional duties, obligations and liabilities on management and directors.
Due to these perceived risks, directors and management are also becoming
increasingly concerned with the availability of directors and officers’
liability insurance to pay on a timely basis the costs incurred in defending
such claims. We currently do carry limited directors and officers’
liability insurance. Directors and officers’ liability insurance has
recently become much more expensive and difficult to obtain. If we are
unable to continue or provide directors and officers’ liability insurance at
affordable rates or at all, it may become increasingly more difficult to attract
and retain qualified outside directors to serve on our Board of
Directors.
We may
lose potential independent board members and management candidates to other
companies that have greater directors and officers’ liability insurance to
insure them from liability or to companies that have revenues or have received
greater funding to date which can offer more lucrative compensation packages.
The fees of directors are also rising in response to their increased
duties, obligations and liabilities as well as increased exposure to such risks.
As a company with a limited operating history and limited resources, we
will have a more difficult time attracting and retaining management and outside
independent directors than a more established company due to these enhanced
duties, obligations and liabilities.
Legislative
actions and potential new accounting pronouncements are likely to impact our
future financial position and results of operations.
There
have been regulatory changes, including the Sarbanes-Oxley Act of 2002, and
there may potentially be new accounting pronouncements or additional regulatory
rulings, which will have an impact on our future financial position and results
of operations. The Sarbanes-Oxley Act of 2002 and other rule changes as
well as proposed legislative initiatives have increased our general and
administrative costs as we have incurred increased legal and accounting fees to
comply with such rule changes. Further, proposed initiatives are expected
to result in changes in certain accounting rules, including legislative and
other proposals to account for employee stock options as a compensation expense.
These and other potential changes could materially increase the expenses
we report under accounting principles generally accepted in the United States,
and adversely affect our operating results.
4
Added
Costs Due to Being a Public Company
There is
a substantial increase of costs to the Company as a result of being
Public. These costs include, but are not limited to the cost of
conducting a yearly audit of the financial condition and quarterly reviews of
the Company, such cost can be in excess of $50,000 yearly. In
addition, there can be additional legal costs associated with preparing all
necessary filings with the Securities and Exchange Commission or other
regulatory body, if the Company is not subject to the reporting requirements of
section 13 or 15(d) of the Securities Act. There are also assorted
other additional costs to the Company for being Public. These
additional costs include, but are not limited to, the cost of internal auditing
controls in regard to financial reporting. This is made even more
difficult by the fact that we have only three officer/directors and that none of
the management has extensive experience with public companies. As a
result of all of these additional costs, the Company is likely to be less
profitable if it does not generate enough revenue to cover the additional
costs.
Risks of leverage and debt service
requirements may hamper our ability to operate and grow our
revenues.
The
Company’s debt to equity ratio may be high at the commencement of operations due
to the requirement of accruing expenses for operations. High leverage
creates risks, including the risk of default as well as operating and financing
constraints likely to be imposed by prospective lenders. The interest
expense associated with the Company's anticipated debt burden may be substantial
and may create a significant drain on the Company's future cash flow, especially
in the early years of operation. Any such operating or financing constraints
imposed by the Company's lenders as well as the interest expense created by the
Company's debt burden could place the Company at a disadvantage relative to
other better capitalized service providers and increase the impact of
competitive pressures within the Company's markets.
We may not be
able to compete successfully.
We are
entering a market that is presently addressed by large companies with extensive
financial resources. Additionally, there are smaller companies with active
research and development and we do not know the current status of their
development efforts. We have limited funds with which to develop products
and services, and most of the above competitors have significantly greater
financial resources, technical expertise and managerial capabilities than we
currently possess.
Risk
Factors Related to Our Securities, the Equity Line of Credit and This
Offering
We
are registering an aggregate of 75,000,000 shares of common stock to be issued
under the Equity Line of Credit. The sale of such shares could depress the
market price of our common stock.
We are
registering an aggregate of 75,000,000 shares of common stock under the
registration statement of which this prospectus forms a part for issuance
pursuant to the Equity Line of Credit. The sale of these shares into the public
market by Auctus could depress the market price of our common stock. As of December 15,
2009, there were 516,453,806 shares of our common stock issued and
outstanding.
We
May Not Have Access to the Full Amount under the Equity Line.
During
the nine months ended September 30, 2009, the average market price of our common
stock is $0.10. There is no assurance that the market price of our common stock
will increase substantially in the near future. The entire remaining commitment
under the Equity Line of Credit is $10,000,000. Presumably we will maintain the
market price of our common stock at $.02, we need to issue 500,000,000 shares of
common stock to Auctus in order to have access to the full remaining amount
under the Equity Line of Credit. We are authorized to issue 1,000,000,000 shares
of common stock and have 516,453,806 shares issued as of December 15, 2009. The
number of common shares that remains issuable is lower than the number of common
shares we need to issue in order to have access to the full amount under the
Equity Line of Credit. Therefore, we may not have access to the remaining
commitment under the equity line unless we amend our Articles of Incorporation
to increase the number of authorized common shares and/or the market price of
our common stock increase substantially.
Auctus
will pay less than the then-prevailing market price for our common
stock.
The
common stock to be issued to Auctus pursuant to the Drawdown Equity Financing
Agreement will be purchased at a five percent discount to the lowest closing
“best bid” price (the highest posted bid price) of the common stock during the
five consecutive trading days immediately following the date of our notice to
Auctus of our Drawdown Notice. Auctus has a financial incentive to
sell our common stock immediately upon receiving the shares to realize the
profit equal to the difference between the discounted price and the market
price. If Auctus sells the shares, the price of our common stock could decrease.
If our stock price decreases, Auctus may have a further incentive to sell the
shares of our common stock that it holds. These sales may have a further impact
on our stock price.
5
However,
Auctus shall immediately cease selling any shares if the stock price falls below
seventy-five (75%) of the average closing bid price of the stock over the
preceding ten (10) trading days prior to any Drawdown Notice.
There
may not be sufficient trading volume in our common stock to permit us to
generate adequate funds.
The
Drawdown Equity Financing Agreement provides that the dollar value that we will
be permitted to draw from Auctus will be either: (A) 200% of the average daily
volume in the US market of the common stock for the twenty trading days prior to
the Drawdown Notice, or (B) $150,000, whichever is greater, but at a limit of
$150,000. If the
average daily trading volume in our common stock is too low, it is possible that
we would only be permitted to draw $150,000, which may not provide adequate
funding for our planned operations.
Our
common stock is thinly traded, so you may be unable to sell at or near ask
prices or at all if you need to sell your shares to raise money or otherwise
desire to liquidate your shares.
Our
common stock has historically been sporadically or “thinly-traded” on the OTCBB,
meaning that the number of persons interested in purchasing our common stock at
or near ask prices at any given time may be relatively small or nonexistent.
This situation is attributable to a number of factors, including the fact that
we are a small company which is relatively unknown to stock analysts, stock
brokers, institutional investors and others in the investment community that
generate or influence sales volume, and that even if we came to the attention of
such persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we became more seasoned and viable.
As a
consequence, there may be periods of several days or more when trading activity
in our shares is minimal or non-existent, as compared to a mature issuer which
has a large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share price. It is possible
that a broader or more active public trading market for our common stock will
not develop or be sustained, or that current trading levels will
continue.
The
market price for our common stock is particularly volatile given our status as a
relatively unknown company with a small and thinly traded public float, limited
operating history and lack of net revenues which could lead to wide fluctuations
in our share price. The price at which you purchase our common stock may
not be indicative of the price that will prevail in the trading
market.
The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite
future.
In fact,
during the period from January 22, 2009 until September 30, 2009, the high and
low sale prices of a share of our common stock were $0.214 and $0.014,
respectively. The volatility in our share price is attributable to a number
of factors. First, as noted above, the shares of our common stock are
sporadically and/or thinly traded. As a consequence of this lack of
liquidity, the trading of relatively small quantities of shares by our
shareholders may disproportionately influence the price of those shares in
either direction. The price for our shares could, for example, decline
precipitously in the event that a large number of shares of our common stock are
sold on the market without commensurate demand, as compared to a seasoned issuer
which could better absorb those sales without adverse impact on its share
price.
Secondly,
we are a speculative or “risky” investment due to our limited operating history
and lack of profits to date, and uncertainty of future market acceptance for our
products and services. As a consequence of this enhanced risk, more
risk-adverse investors may, under the fear of losing all or most of their
investment in the event of negative news or lack of progress, be more inclined
to sell their shares on the market more quickly and at greater discounts than
would be the case with the stock of a seasoned issuer.
You
may be unable to sell your common stock at or above your purchase price, which
may result in substantial losses to you.
The
following factors may add to the volatility in the price of our common stock:
actual or anticipated variations in our quarterly or annual operating results;
government regulations, announcements of significant acquisitions, strategic
partnerships or joint ventures; our capital commitments; and additions or
departures of our key personnel.
Many of
these factors are beyond our control and may decrease the market price of our
common stock, regardless of our operating performance. We cannot make any
predictions or projections as to what the prevailing market price for our common
stock will be at any time, including as to whether our common stock will sustain
its current market price, or as to what effect that the sale of shares or the
availability of common stock for sale at any time will have on the prevailing
market price.
6
Volatility
in our common stock price may subject us to securities litigation.
The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than that of a seasoned issuer for the indefinite
future. In the past, plaintiffs have often initiated securities class
action litigation against a company following periods of volatility in the
market price of its securities. We may in the future be the target of
similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management’s attention and
resources.
Shares eligible
for future sale by our current shareholders may adversely affect our stock
price.
To date,
we have had a very limited trading volume in our common stock. As long as
this condition continues, the sale of a significant number of shares of common
stock at any particular time could be difficult to achieve at the market prices
prevailing immediately before such shares are offered. In addition, sales
of substantial amounts of common stock, including shares issued upon the
exercise of outstanding options and warrants, under Securities and Exchange
Commission Rule 144 or otherwise could adversely affect the prevailing market
price of our common stock and could impair our ability to raise capital at that
time through the sale of our securities. A number of our employees and
consultants have elected to convert a portion of their compensation to shares of
our common stock, and these shares have been registered for resale to the
public.
Our
issuance of additional common stock in exchange for services or to repay debt
would dilute your proportionate ownership and voting rights and could have a
negative impact on the market price of our common stock.
Our Board
of Directors may generally issue shares of common stock to pay for debt or
services, without further approval by our stockholders based upon such factors
as our Board may deem relevant at that time. We have issued shares of our
common stock in payment for services in the past. It is likely that we will
issue additional securities to pay for services and reduce debt in the future.
It is possible that we will issue additional shares of common stock under
circumstances we may deem appropriate at the time.
The
elimination of monetary liability against our directors, officers and employees
under our Articles of Incorporation and the existence of indemnification rights
for our directors, officers and employees may result in substantial expenditures
by the Company and may discourage lawsuits against our directors, officers and
employees.
Our
Articles of Incorporation contain provisions which eliminate the liability of
our directors for monetary damages to the Company and our shareholders.
Our Bylaws also require us to indemnify our officers and directors. We may
also have contractual indemnification obligations under our agreements with our
directors, officers and employees. The foregoing indemnification obligations
could cause us to incur substantial expenditures to cover the cost of settlement
or damage awards against directors, officers and employees, which we may be
unable to recoup. These provisions and resultant costs may also discourage
us from bringing a lawsuit against directors, officers and employees for
breaches of their fiduciary duties, and may similarly discourage the filing of
derivative litigation by our shareholders against our directors, officers and
employees even though such actions, if successful, might otherwise benefit us
and our shareholders.
Our
directors have the right to authorize the issuance of shares of additional
shares of our common stock.
Should we
issue additional shares of our common stock at a later time, each investor’s
ownership interest in our stock would be proportionally reduced. No
investor will have any preemptive right to acquire additional shares of our
common stock, or any of our other securities.
If
we fail to remain current on our reporting requirements, we could be removed
from the OTC Bulletin Board, which would limit the ability of broker-dealers to
sell our securities and the ability of shareholders to sell their securities in
the secondary market.
Companies
trading on the OTC Bulletin Board must be reporting issuers under Section 12 of
the Exchange Act, and must be current in their reports under Section 13 of the
Exchange Act, in order to maintain price quotation privileges on the OTC
Bulletin Board. If we fail to remain current on our reporting
requirements, we could be removed from the OTC Bulletin Board. As a
result, the market liquidity for our securities could be adversely affected by
limiting the ability of broker-dealers to sell our securities and the ability of
shareholders to sell their securities in the secondary market.
7
Our
common stock is subject to the “penny stock” rules of the Securities and
Exchange Commission, and the trading market in our common stock is limited,
which makes transactions in our stock cumbersome and may reduce the investment
value of our stock.
Our
shares of common stock are “penny stocks” because they are not registered on a
national securities exchange or listed on an automated quotation system
sponsored by a registered national securities association, pursuant to Rule
3a51-1(a) under the Exchange Act. For any transaction involving a penny
stock, unless exempt, the rules require:
·
|
That
a broker or dealer approve a person’s account for transactions in penny
stocks; and
|
·
|
That
the broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased.
|
·
|
The
broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Securities and Exchange
Commission relating to the penny stock market, which, in highlight
form:
|
·
|
Sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
·
|
That
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
Generally,
brokers may be less willing to execute transactions in securities subject to the
“penny stock” rules. This may make it more difficult for investors to
dispose of our common stock and cause a decline in the market value of our
stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
The
market for penny stocks has suffered in recent years from patterns of fraud and
abuse.
Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse.
Such patterns include:
·
|
Control
of the market for the security by one or a few broker-dealers that are
often related to the promoter or
issuer;
|
·
|
Manipulation
of prices through prearranged matching of purchases and sales and false
and misleading press releases;
|
·
|
Boiler
room practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced
salespersons;
|
·
|
Excessive
and undisclosed bid-ask differential and markups by selling
broker-dealers; and
|
·
|
The
wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, along with the
resulting inevitable collapse of those prices and with consequential
investor losses.
|
Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
The occurrence of these patterns or practices could increase the
volatility of our share price.
8
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus includes forward-looking statements. All statements, other than
statements of historical fact, contained in this prospectus constitute
forward-looking statements. In some cases, you can identify
forward-looking statements by terms such as “may,” “intend,” “might,” “will,”
“should,” “could,” “would,” “expect,” “believe,” “estimate,” “anticipate,”
“predict,” “project,” “potential,” or the negative of these terms and similar
expressions intended to identify forward-looking statements.
Forward-looking
statements are based on assumptions and estimates and are subject to risks and
uncertainties. We have identified in this prospectus some of the factors
that may cause actual results to differ materially from those expressed or
assumed in any of our forward-looking statements. There may be other
factors not so identified. You should not place undue reliance on our
forward-looking statements. As you read this prospectus, you should
understand that these statements are not guarantees of performance or results.
Further, any forward-looking statement speaks only as of the date on which
it is made and, except as required by law, we undertake no obligation to update
any forward-looking statement to reflect events or circumstances after the date
on which it is made or to reflect the occurrence of anticipated events or
circumstances. New factors emerge from time to time that may cause our
business not to develop as we expect and it is not possible for us to predict
all of them. Factors that may cause actual results to differ materially
from those expressed or implied by our forward-looking statements include, but
are not limited to, those described under the heading “Risk Factors” beginning
on page 3, as well as the following:
·
|
Our
limited operating history and business development associated with being a
growth stage company;
|
·
|
General
economic and capital market
conditions;
|
·
|
Our
history of operating losses, which we expect to
continue;
|
·
|
Our
exposure to unanticipated and uncontrollable business
interruptions;
|
·
|
Our
ability to generate enough positive cash flow to pay our creditors and
continue our operations;
|
·
|
Pricing
and product actions taken by our competitors in either our organ and
tissue preservation or alternative energy
markets;
|
·
|
Our
dependence on key personnel;
|
·
|
Financial
condition of our prospective
customers;
|
·
|
Our
need to attract and retain technical and managerial
personnel;
|
·
|
Customers’
perception of our financial condition relative to that of our
competitors;
|
·
|
Our
ability to execute our business
strategy;
|
·
|
Changes
in United States or foreign tax laws or
regulations;
|
·
|
Our
ability to protect our intellectual property and proprietary
technologies;
|
·
|
Unforeseen
liabilities resulting from
litigation;
|
·
|
Costs
associated with potential infringement claims asserted by a third
party;
|
·
|
Our
ability to successfully complete the integration of any future
acquisitions; and ability to protect, and build recognition of, our
trademarks and trade names;
|
·
|
Our
ability to project the markets for our products and services based upon
estimates and assumptions.
|
Reliance on
Management.
The
investors will have no rights to participate in the management decisions of the
Company; the shareholder will only have such rights as other
shareholders.
9
|
|
USE
OF PROCEEDS
We
propose to expend these proceeds as follows:
Proceeds
if 100%, or 75,000,000 shares sold
|
Proceeds
if 50% or 37,750,000 shares sold
|
|||||||
Gross
proceeds
|
1,500,000.00 | 750,000.00 | ||||||
Offering
expenses:
|
||||||||
Legal
fees
|
25,000.00 | 25,000.00 | ||||||
Printing
of prospectus
|
2,000.00 | 2,000.00 | ||||||
Accounting
and auditing fees
|
10,000.00 | 10,000.00 | ||||||
State
securities fees
|
0.00 | 0.00 | ||||||
Transfer
agent fees
|
1,500.00 | 1,500.00 | ||||||
Miscellaneous
expenses
|
100.00 | 100.00 | ||||||
Total
offering expenses
|
38,600.00 | 38,600.00 | ||||||
Net
proceeds
|
1,461,400 | 711,400 |
Working
capital needs include accounts payable, as well as accrued but unpaid salary of
our chief executive officer.
The
acquisition of Rebel Testing, Inc. on June 30, 2009 resulted in the Company
incurring significant debt and therefore must raise capital in the near term to
service this debt or risk termination of the acquisition. A portion
of this offering may go towards fulfilling this debt.
|
DETERMINATION
OF OFFERING PRICE
|
The
offering price, the market price, of the common stock bears no relationship to
any objective criterion of value. The price does not bear any relationship to
the Company’s assets, book value, historical earnings, or net worth. In
determining the offering price, management considered such factors as the
prospects, if any, for similar companies, anticipated results of operations,
present financial resources and the likelihood of acceptance of this
offering. Accordingly, the offering price should not be considered an
indication of the actual value of our securities.
|
DILUTION
|
Purchasers
of securities in this offering will experience immediate dilution and
substantial dilution in the net tangible book value of their common stock from
the initial public offering price. The historical net book tangible
value as of September 30, 2009 was $(3,872,487) or negative $0.00751 per
share. Historical net tangible book value per share of common stock
is equal to our total tangible assets less total liabilities, divided by the
number of shares of common stock outstanding as of September 30, 2009, that of
515,453,806, as adjusted to give effect to the receipt of net proceeds from the
sale of the 75,000,000 shares of common stock for $0.02. This
represents an immediate increase of $0.00349 per share to existing shareholders
and an immediate and substantial dilution of $0.02402 per share, or
approximately 120%, to new investors purchasing our securities in this
offering. Dilution in pro forma net tangible book value per share
represents the difference between the amount per share paid by purchasers of
shares of our common stock in this offering and the pro forma book value per
share of our common stock immediately following this offering.
10
Dilution
to New Investors
Offering
price per share of Common Stock
|
$ | 0.02 | ||||||
Net
pro forma tangible book value per share prior to the
Offering
|
$ | (0.00751 | ) | |||||
Increase
per share attributable to the Offering
|
$ | 0.00349 | ||||||
Pro
forma net tangible book value per share after the Offering
|
$ | (0.00402 | ) | |||||
Dilution
to New Investors
|
$ | 0.02402 |
|
SELLING
SECURITY HOLDERS
|
We agreed
to register for resale shares of common stock of the selling security holder.
The selling security holder may from time to time offer and sell any or all of
their shares that are registered under this prospectus. The selling security
holder and any participating broker-dealers are “underwriters” within the
meaning of the Securities Act of 1933, as amended. All expenses
incurred with respect to the registration of the common stock will be borne by
us, but we will not be obligated to pay any underwriting fees, discounts,
commissions or other expenses incurred by the selling security holder in
connection with the sale of such shares.
The following table sets forth information with respect to the maximum number of shares of common stock beneficially owned by the selling security holder named below and as adjusted to give effect to the sale of the shares offered hereby. The shares beneficially owned have been determined in accordance with rules promulgated by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. The information in the table below is current as of the date of this prospectus. All information contained in the table below is based upon information provided to us by the selling security holder and we have not independently verified this information. The selling security holder is not making any representation that any shares covered by the prospectus will be offered for sale. The selling security holder may from time to time offer and sell pursuant to this prospectus any or all of the common stock being registered.
Except as indicated below, the selling security holder has not held any position or office with us, nor are any of the selling security holder associates or affiliates of any of our officers or directors. Except as indicated below, the selling stock holder is not the beneficial owner of any additional shares of common stock or other equity securities issued by us or any securities convertible into, or exercisable or exchangeable for, our equity securities. The selling security holder is not a registered broker-dealer or an affiliate of a broker-dealer.
For purposes of this table, beneficial ownership is determined in accordance with SEC rules, and includes voting power and investment power with respect to shares and shares owned pursuant to warrants exercisable within 60 days. The "Number of Shares Beneficially Owned After the Offering” column assumes the sale of all shares offered.
As explained below under “Plan of Distribution,” we have agreed with the selling security holder to bear certain expenses (other than broker discounts and commissions, if any) in connection with the registration statement, which includes this prospectus.
11
Name
|
Number
of Shares
Beneficially
Owned Prior to Offering (1)
|
Number
of
Shares
Offered
|
Number
of Shares
Beneficially
Owned
after the Offering
|
|||||||||
Auctus
Private Equity Fund, LLC (2)
|
1,000,000 | (3) | 75,000,000 | 76,000,000 |
(1) The
actual number of shares of common stock offered in this prospectus, and included
in the registration statement of which this prospectus is a part, includes such
additional number of shares of common stock as may be issued or issuable upon
draw downs under the Auctus credit facility.
(2) Al
Sollami is a managing member of Auctus Private Equity Fund, LLC.
(3)
1,000,000 shares were issued to Auctus pursuant to the Drawdown Equity Finance
Agreement, see “Plan of Distribution”.
|
PLAN
OF DISTRIBUTION
|
Drawdown
Equity Finance Agreement / Registration Rights Agreement
On
December 15, 2009, we entered into Drawdown Equity Finance Agreement and A
Registration Rights Agreement with Auctus Private Equity Fund, LLC in order to
establish a possible source of funding for us. The equity line of credit
agreement establishes what is sometimes also referred to as an equity drawdown
facility.
Under the
equity line of credit agreement, Auctus has agreed to provide us with up to
$10,000,000 of funding over a thirty-six (36) month period from the effective
date of this prospectus; shares of our common stock covering $10,000,000 of the
agreement are being registered pursuant to this prospectus. During this period,
we may request a drawdown under the equity line of credit by selling shares of
our common stock to Auctus and Auctus will be obligated to purchase the shares.
We may request a drawdown once every five trading days, although we are under no
obligation to request any drawdowns under the equity line of credit. There must
be a minimum of five trading days between each drawdown request.
We may
request a drawdown by sending a drawdown notice to Auctus, stating the amount of
the draw down and the price per share, which shall be the lowest closing bid
price of our common stock during the preceding five trading days. During the
five trading days following a drawdown request, we will calculate the amount of
shares we will sell to Auctus and the purchase price per share. The number of
shares of Common Stock that Auctus shall purchase pursuant to each advance shall
be determined by dividing the amount of the advance by the purchase
price.
The
purchase price per share of common stock will be set at ninety-five percent
(95%) (a Five Percent (5%) discount) of the lowest closing bid of the common
stock during the pricing period. Further, Auctus shall immediately cease selling
any shares of our common stock within a drawdown notice if the price of the
Company’s common stock falls below 75% of the average closing bid price of the
common stock over the preceding ten (10) trading days prior to the drawdown
notice date; such floor can be waived only in the sole discretion of the
Company.
There is
no minimum amount we can draw down at any one time. The maximum amount we can
draw down at any one time is the larger of $150,000; or 200% of the average
daily volume based on the trailing ten days preceding the drawdown notice
date.
Upon
effectiveness of the Registration Statement, the Company shall deliver
Instructions to its transfer agent to issue shares of Common Stock to the
Investor free of restrictive legends on or before each advance
date.
Pursuant
to the Drawdown Agreement, Auctus shall not be issued shares of the Company’s
common stock that would result in its beneficial ownership equaling more than
4.99% of the outstanding common stock of the Company.
12
On
December 15, 2009 the Company signed a Registration Rights Agreement with Auctus
requiring, among other things, that the Company prepare and file with the SEC
Form S-1, or on such other form as is available no later than ninety (90)
calendar days after signing. In addition, the Company shall use all commercially
reasonable efforts to have the Registration Statement(s) declared effective by
the SEC within one hundred and twenty (120) calendar days from the date that the
Registration Statement is filed with the SEC.
As per
the Drawdown Agreement, none of Auctus’s obligation thereunder are transferrable
and may not be assigned to a third party.
We agreed
to pay a non-refundable origination fee of one million restricted common stock
shares.
|
INTEREST
OF NAMED EXPERTS AND COUNSEL
|
None of
the experts named herein was or is a promoter, underwriter, voting trustee,
director, officer or employee of Insight Management Corporation, except for
Matthew Maza, as described below, is currently a director. Cident Law Group
PLLC, and, specifically Matthew Maza are not holders of Company
stock. Furthermore, none of the experts was hired on a
contingent basis and none of the other experts named herein will receive a
direct or indirect interest in Insight Management Corporation.
|
MARKET
FOR COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
|
As of
December 15, 2009, the Company had a total of 160 shareholders of
record. The Common Stock of Insight Management Corporation currently
trades under the symbol ISIM.OB on the OTCBB.
Our
common stock has been traded on the OTCBB since January 22, 2009. Prior to
that date, our common stock was not actively traded in the public market.
Our common stock is listed on the OTCBB under the symbol "ISIM.OB". Since
June 2009, our common stock has also been traded on the Frankfurt Stock Exchange
under the symbol "746". The following table sets forth, for the periods
indicated, the high and low bid prices for our common stock on the OTCBB as
reported by various Bulletin Board market makers. The quotations do not reflect
adjustments for retail mark-ups, mark-downs, or commissions and may not
necessarily reflect actual transactions.
Price
|
||||||||
High
|
Low
|
|||||||
Third
Quarter 2009
|
$ | 0.086 | $ | 0.014 | ||||
Second
Quarter 2009
|
$ | 0.214 | $ | 0.086 | ||||
First
Quarter 2009
|
$ | 0.144 | $ | 0.136 |
On
December 4, 2009, the high and low bid prices of our common stock on the OTCBB
were $0.027 and $0.02 per share, respectively, and there were approximately 160
holders of record of our common stock.
To date,
we have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and therefore,
do not expect to pay any dividends in the foreseeable future. Payment of future
dividends, if any, will be at the discretion of our Board of Directors after
taking into account various factors, including our financial condition,
operating results, current and anticipated cash needs and plans for
expansion.
13
|
PENNY
STOCK RULES
|
The
Securities and Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system).
A
purchaser is purchasing penny stock, which limits the ability to sell the stock.
The shares offered by this prospectus constitute penny stock under the
Securities and Exchange Act. The shares will remain penny stocks for
the foreseeable future. The classification of penny stock makes it more
difficult for a broker-dealer to sell the stock into a secondary market, which
makes it more difficult for a purchaser to liquidate his/her
investment. Any broker-dealer engaged by the purchaser for the
purpose of selling his or her shares in us will be subject to Rules 15g-1
through 15g-10 of the Securities and Exchange Act. Rather than
creating a need to comply with those rules, some broker-dealers will refuse to
attempt to sell penny stock.
The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from those rules, to deliver a standardized risk disclosure
document, which:
-
|
Contains
a description of the nature and level of risk in the market for penny
stock in both Public offerings and secondary
trading;
|
-
|
Contains
a description of the broker’s or dealer’s duties to the customer and of
the rights and remedies available to the customer with respect to a
violation of such duties or other requirements of the Securities Act of
1934, as amended;
|
-
|
Contains
a brief, clear, narrative description of a dealer market, including “bid”
and “ask” price for the penny stock and the significance of the spread
between the bid and ask price;
|
-
|
Contains
a toll-free number for inquiries on disciplinary
actions;
|
-
|
Defines
significant terms in the disclosure document or in the conduct of trading
penny stocks; and
|
-
|
Contains
such other information and is in such form (including language, type, size
and format) as the Securities and Exchange Commission shall require by
rule or regulation.
|
The
broker-dealer also must provide, prior to effecting any transaction in a penny
stock, to the customer:
-
|
The
bid and offer quotations for the penny
stock;
|
-
|
The
compensation of the broker-dealer and its salesperson in the
transaction;
|
-
|
The
number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the market
for such stock; and
|
-
|
Monthly
account statements showing the market value of each penny stock held in
the customer’s account.
|
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling their securities.
|
TRANSFER
AGENT
|
The
Transfer Agent and Registrar for the common stock is OTC Stock Transfer, 231
East 2100 South, Salt Lake City, Utah.
14
|
EXPERTS
|
Our
financial statements as of December 31, 2008 and for the periods then ended,
have been included in this prospectus and in the registration statement filed
with the Securities and Exchange Commission in reliance upon the report of our
independent registered public accounting firm, dated March 31, 2009 upon
authority as experts in accounting and auditing. M & K CPAS
report on the financial statements can be found at the end of this prospectus
and in the registration statement.
|
ABOUT
OUR COMPANY
|
We were
organized under the laws of the State of Florida on March 10, 2006. Since our
inception, we have been engaged in organizational efforts and obtaining initial
financing. On June 29, 2009 Insight Management completed a reverse triangular
merger with Microresearch Corporation. Pursuant to the agreement,
Microresearch shareholders received 1.5 ISIM shares for each share they own in
Microresearch Corporation. Prior Insight Management shareholders did not
change their holdings in Insight Management. On June 30, 2009, the
company completed the acquisition of Rebel Testing, Inc. (“RTI”).
Where
you can find us
Our
principal executive offices are located at 1130 E. Clark Ave. Ste 150-286,
Orcutt, CA 93455, and our telephone number is (866) 797-3588. The address
of our website is www.insightmanagementcorp.com. Information on our website is
not part of this prospectus.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
|
Forward-Looking
Information
Certain
statements in this document are forward-looking in nature and relate to trends
and events that may affect the Company’s future financial position and operating
results. The words “expect” “anticipate” and similar words or expressions are to
identify forward-looking statements. These statements speak only as of the date
of the document; those statements are based on current expectations, are
inherently uncertain and should be viewed with caution. Actual results may
differ materially from the forward-looking statements as a result of many
factors, including changes in economic conditions and other unanticipated events
and conditions. It is not possible to foresee or to identify all such factors.
The Company makes no commitment to update any forward-looking statement or to
disclose any facts, events or circumstances after the date of this document that
may affect the accuracy of any forward-looking statement.
General
Insight
Management Corporation, formerly known as Skreem Records Corporation was an
entertainment development, marketing and production company formed in May 2006.
Originally the recording and artist management division for an international
entertainment media company with multiple hit releases, Skreem Records was
formed to continue these operations globally.
As a
result of the reverse triangular merger with Microresearch Corporation on June
29, 2009 and its acquisition of Rebel Testing, Inc. on June 30, 2009, Insight
Management’s core business focus is changing to the oil and gas industry. The
Company has a strategic plan for growth through acquisition and functions from
the perspective of an engineering firm. This is the nucleolus that directs what
acquisitions are made and creates strategic alliances, develops proprietary
technology and patents that bring the expertise and ultimately creates the real
value for Insight Management. The Company expects to retain the strong
management teams in each business unit, capitalizing on their local knowledge of
competitors and operating climate, along with their loyal customer
relationships.
Strategic
Plan
Insight
Management has a three step approach to value creation:
|
1.
|
Find and negotiate the
acquisition of small to midsize oil and gas companies that have strong
financial track records and experienced management. Insight
Management has a method of identifying and securing acquisitions that meet
the following criteria:
|
|
•
|
Solid
growth history
|
|
•
|
Profitable
|
|
•
|
Opportunity
to increase profits
|
|
•
|
Strong
management team willing to stay on board for a minimum of three
years
|
|
•
|
Little
or no debt on the books
|
These
companies are primarily successful family owned businesses that are looking for
a way to increase market presence and provide financial security for the owners
while at the same time leading further growth and technological advancement.
Insight Management offers all of that by taking the Company to the public
marketplace, providing valuable business management experience to identify
operating efficiencies, linking companies together to exploit synergies, and
providing technical expertise and technology to their already successful
businesses.
15
|
2.
|
Apply the technology
and gain efficiencies from synergies provided by the multiple
acquisitions. Insight Management will use its technology to improve
the operations of the companies acquired and possibly license the
technology for increase revenue at little to no additional cost. Insight
Management will also exploit the opportunity to gain efficiencies from the
consolidation of its acquisitions. The company managers will have the
opportunity to share best practices and work together to gain market share
and drive growth to the bottom
line.
|
|
3.
|
Continuously work
towards increasing market awareness and move the stock to larger public
markets. Insight Management has experienced personnel to improve
market awareness and gradually increase institutional holding of the
stock. Value will come from continued growth through acquisition and
deployment of developed technologies. The current strategy allows for
rapid expansion of revenues and
profit.
|
Insight
Management is conducting due diligence on a second potential acquisition after
recently signing a non-disclosure agreement in November of 2009. The company is
an established drilling company currently operating eight oil wells in
Texas. The company has been in business for five years and management
has more than twenty years of experience. Insight Management is reviewing
financials and evaluating the company’s potential for expansion.
Rebel
Testing, Inc. (“RTI”), subsidiary
On March
6, 2009, the Company entered into a Stock Purchase Acquisition Agreement (the
“Agreement”) with RTI, for the acquisition of all of the issued and outstanding
common stock of RTI for a purchase price of $5,000,000 paid over a 36-month
period based upon the earnings of RTI over this three year period. The Company
closing of the acquisition occurred on June 30, 2009.
Rebel
Testing, Inc. of Gillette, Wyoming, has been in business for over eighteen years
and is a leading Rocky Mountain regional oil and gas field services provider.
The company maintains a fleet of pump hoist trucks servicing the greater Powder
River Basin. RTI also has operations based in Colorado servicing and pressure
testing blow out preventers, and provides these services in the greater
Colorado, Wyoming and Utah areas. Customers include, among others, two Fortune
500 oil and gas corporations.
Market
Conditions and Outlook
Natural
gas is a largely overlooked energy source. Not long ago the consensus
was the US was running out of natural gas. But due to technology
advances in the last few years, natural gas can be extracted out of shale rock.
There is now an abundance of natural gas available in the US.
Natural
gas is a much cleaner energy source. Since it emits ½ the carbon as coal when
burned, natural gas is a logical choice to replace coal in power plants and help
decrease green house emissions. Natural gas is also seen as a transition energy
source as renewable energy replacements of fossil fuels are still in the distant
future.
With a
solid foothold in the natural gas field services industry now established, the
Company expects meaningful growth through the acquisition of other oil and gas
enterprises that are both complimentary and offer greater diversity in revenue
streams.
Quarter
Ended September 30, 2009 -
The
average price per MMBtu for natural gas reversed its decline during the third
quarter of 2009 and has reached a 9-month high. Demand for RTI
field services remains strong and RTI’s EBIDTA more than doubled during the
third quarter to $214,505, an increase of 131% compared to the second quarter of
2009.
Indications
of higher leasing activity in Colorado and with strong margins, the company is
in a good position to continue to add significantly to bottom line during the
remainder of 2009 and 2010.
Outlook
for 2010 -
Following
the economic downturn, a cyclical boom in drilling activity is typical. The
Company is anticipating an improved environment for natural gas and oil field
service companies that should result in significantly better this
year.
We are an
insignificant player among the firms, which engage in business combinations.
There are many established venture capital and financial concerns which have
significantly greater financial and personnel resources and technical expertise
than we will. In view of our combined limited financial resources and limited
management availability, we will continue to be at a significant competitive
disadvantage compared to our competitors. Also, we will be competing with a
number of other small, blank check public and shell companies.
16
Results of
Operation
Three
months and nine months ended September 30, 2009 and September 30,
2008
Revenues
–
The
Company recorded revenue of $588,903 and $0 for the three months ended September
30, 2009 and 2008, respectively. Revenue for the nine months ended
September 30, 2009 and 2008 was $588,903 and $0, respectively.
Operating
Expenses –
Operating
expenses were $641,052 for the three months ended September 30, 2009 compared to
$162,301 for the three months ended September 30, 2008, an increase of
$478,751 or 295%. Operating expenses for the nine months ended
September 30, 2009 and 2008 were $949,232 and $209,137, respectively, an
increase of $740,095 or 354%. Expenses were primarily attributable to
professional and consulting fees relating to business development activities,
which increased substantially during the first half of FY09 as the Company
positioned itself to commence significant operations such as the reverse merger
with Microresearch Corporation on June 29, 2009 and acquisition of Rebel
Testing, Inc. on June 30, 2009.
Interest
Expense –
For the
three months ended September 30, 2009 and 2008, the Company recorded interest
expense in the amount of $111,355 and $0, respectively. Interest expense for the
nine months ended September 30, 2009 and 2008 was $112,373 and $0,
respectively. The interest expense relates to a note payable to a minority
shareholder.
Liquidity
and Capital Resources
As of
September 30, 2009, the Company had cash of $331,712 and a deficit in
working capital of $1,964,029. This compares with cash of $16,759 and a deficit
in working capital of $219,937 as of December 31, 2008. Cash used by
operations was $122,567 for the nine months ended September 30, 2009 versus
cash used by operations of $199,808 for the nine months ended September 30,
2008.
To raise
funds for debt and working capital, the Company plans to submit a registration
statement with the SEC. The Company anticipates the stock registration will
result in raising capital and facilitate further sales. However, this plan is
dependent upon approval of the registration statement by the SEC and there is no
guarantee this registration will result in raising sufficient capital to meet
the Company’s needs, if any at all. In addition, the Company is exploring other
private equity and debt financing opportunities.
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate the continuation of the Company as a going concern. Until the
acquisition of Rebel Testing, Inc. on June 30, 2009, the Company operated
as a development stage enterprise and had not established an ongoing source of
revenues sufficient to cover its operating costs and to allow it to continue as
a going concern, relying on limited private placements of its stock through a
Regulation S offering to fund its development activities while incurring
significant losses and a working capital deficit. The Company has incurred
significant debt by the acquisition of Rebel Testing and must raise capital in
the near term to service this debt or risk termination of the
acquisition.
The
Company's ability to continue in existence is dependent upon developing
additional sources of capital to service its acquisition debt and continue
expansion of its business in oil & gas field services. Management's plan is
to raise capital through additional private offerings and financing initiatives,
in addition to registering shares to raise equity capital in U.S. and foreign
markets. The accompanying financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amount and classifications or liabilities or other adjustments that might be
necessary should the Company be unable to continue as a going
concern.
17
|
OFF-BALANCE
SHEET ARRANGEMENTS
|
We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
|
INFLATION
|
The
amounts presented in the financial statements do not provide for the effect of
inflation on the Company’s operations or its financial position. Amounts shown
for machinery, equipment and leasehold improvements and for costs and expenses
reflect historical cost and do not necessarily represent replacement cost. The
net operating losses shown would be greater than reported if the effects of
inflation were reflected either by charging operations with amounts that
represent replacement costs or by using other inflation
adjustments.
|
GOVERNMENT
REGULATIONS
|
We
estimate that there is no material cost to comply with any environmental laws of
the Federal, State or Local governments and believe that any cost and/or
compliance is the responsibility of the end user.
|
DESCRIPTION
OF PROPERTY
|
With the
acquisition of Rebel Testing, Inc. (RTI), Insight Management acquired the
existing equipment of RTI in 2009.
|
LEGAL
PROCEEDINGS
|
None.
|
SUMMARY
FINANCIAL INFORMATION
|
The
summary financial information set forth below is derived from the detailed
financial statements appearing elsewhere in this prospectus. This
information should be read in conjunction with those financial statements and
related notes, and the “use of Proceeds” and “Plan of Operation” sections
included in the prospectus.
Balance Sheet Data:
|
September 30,
2009
|
|||
Cash
and cash equivalents
|
$ | 331,712 | ||
Property
and equipment net of depreciation
|
535,875 | |||
Total
assets
|
4,803,226 | |||
Total
liabilities
|
5,060,005 | |||
Stockholders’
Equity
|
( 256,779 | ) |
18
Statement
of Operations Data:
Three months ended September
30, 2009
|
Nine months
ended
September 30,
2009
|
|||||||
Revenues
|
$ | 588,903 | 588,903 | |||||
Total
cost and expenses
|
641,052 | 949,232 | ||||||
Other
Income (Expense)
|
( 111,355 | ) | ( 112,373 | ) | ||||
Net
loss
|
( 163,504 | ) | ( 472,702 | ) | ||||
Net
loss per share – basic and diluted
|
( 0.00 | ) | ( 0.00 | ) |
|
DIVIDENDS
|
We have
never paid a cash dividend on our common stock. It is our present
policy to retain earnings, if any, to finance the development and growth of our
business. Accordingly, we do not anticipate that cash dividends will be paid
until our earnings and financial condition justify such dividends, and there can
be no assurance that we can achieve such earnings.
|
MANAGEMENT
|
The
directors and officers of the Company are listed below with information about
their respective backgrounds. Each Director is elected to serve a one
year term, until the next annual meeting of the shareholders or until their
successor is elected (or appointed) and qualified. Our officers are
appointed by our board of directors and hold office until removed by the
board.
NAME
|
AGE
|
POSITION
|
|||
Jennifer
Rapacki
|
52 |
CEO/President/Treasurer/Director
|
|||
Matthew
Maza
|
33 |
Secretary/Director
|
Set forth
below is a brief description of the background and business experience of our
executive officers and directors for the past five years.
Jennifer Rapacki, 52,
President/CEO/Director. Ms. Rapacki has both a technical engineering
background with a degree in Mechanical Engineering from Purdue University, as
well as profound business knowledge due to a MBA degree from the University of
Phoenix. Consequentially, she understands the operational business side, is able
to support with precise trouble shooting, to resolve technical problems and to
complement the long-term R&D processes to maintain and expand competitive
edges. Additionally, the business background enables great optimization
potential by enhancing capital structures, mediating potential cooperation
partners to create synergies and implement her involvement and commitment to the
company. With her remarkable experience of over 20 years in the corporate world
working for Fortune 500 companies, she combines many critical aspects for
creating sustainable business success.
Matthew Maza, 33,
Secretary/Director. Mr. Maza is an attorney admitted to practice law in
the State of Washington. He has extensive experience in the securities in
regards to drafting private offering disclosures, acquisition/merger agreements,
and stock subscription agreements. In addition he has extensive securities
research background in the areas of NASD/SEC rule violations pertaining to
fraud, unsuitability and other issues. He has researched globalization issues in
various fields of study with a focus on trade related intellectual property. He
has performed a Compliance Research Internship with the National Association of
Securities Dealers Regulation (NASD). Mr. Maza graduated with a B.S. degree in
Molecular Biology from University of Washington; has a B.S. degree in Economics
from University of Washington; an M.B.A. degree from Seattle University Albers
School of Business & Economics; a J.D. degree from Seattle University School
of Law; and a LL.M. in Taxation from the University of Washington.
Term
of Office
Our
directors are appointed for a one-year term to hold office until the next annual
general meeting of our stockholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board.
19
Current
Issues and Future Management Expectations
No board
audit committee has been formed as of the date of this Memorandum.
The
Company expects to develop and maintain management in two ways: 1) find a Chief
Operating Officer (COO) to oversee the operations of the Company’s acquisitions
and then 2) retain existing management of the acquired business units who are
able to identify acquisition targets that will fit our goals, using their
knowledge of local competitors and operating climate, along with their loyal
customer relationships. The targets will most likely be existing
suppliers, competitors or distributors. Once a target has been identified, a
proper valuation of the business is formed internally. The Company
then values the experience of the employees of the operations it plans to
acquire and considers whether their expertise will create a strong competitive
advantage for the Company.
EXECUTIVE
COMPENSATION
The table
below summarizes all compensation awarded to, earned by, or paid to our
executive officers in their positions.
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock Awards ($)
|
Option Awards ($) |
Totals ($)
|
||||||||||||||||||||||||||
Jennifer
Rapacki, CEO/President/Treasurer/Director
|
FY
2009
|
$ | 90,000 | (1 | ) | 30,000 | (2) | N/A | N/A | $ | 120,000 | |||||||||||||||||||||
Matthew
Maza, Secretary/Director
|
FY
2009
|
$ | 0 | (3 | ) | N/A | N/A | N/A | $ | 0 |
(1) As
of November 30, 2009, Ms. Rapacki has been paid $27,500, and accrued $52,500 of
salary
(2) As
of November 30, 2009, Ms. Rapacki’s bonus of $30,000 is accrued
(3)
Matthew Maza is paid as the company counsel; as of November 30, 2009, Mr. Maza’s
fees of $69,030 have been accrued.
EMPLOYEES
The
company has three employee, two part-time individuals and one full-time
individual. The Company believes it has good relations with all of
the employees.
EMPLOYMENT
AGREEMENTS
President/CEO
Employment Agreement
Effective
June 29, 2009, Insight Management Corporation entered into an employment
agreement with Ms. Rapacki with an annual base salary of
$130,000. Executive shall also be entitled to a bonus determined at
the sole discretion of the Board of Directors, 15 days vacation per year and
participation in the Company’s Stock Option Plan.
The
agreement provides that upon termination of the executive’s employment by the
company for any reason other than for cause, or if the executive terminated her
employment for good reason, the executive would be entitled to a lump sum
payment equal to 1 year of base salary.
Issuance
of Bonus
On July
15, 2009, the Board of Directors of the Company’s subsidiary, Microreseach
Corporation, approved a $30,000 performance bonus for Microresearch President,
Jennifer Rapacki, in consideration for the excellent performance of negotiating
and closing the Rebel Testing, Inc. acquisition and closing the merger with
Insight Management. The performance bonus completes all monetary compensation
due to Ms. Rapacki, as President of Microresearch Corporation.
20
|
CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS
|
There
were no transactions that, outside of fees paid for hours worked, occurred with
our officers or directors with the company. Furthermore, there were no
transactions between our officers or directors with the Company where 1) there
were no competitive bidding; 2) rates or charges was not fixed by law or
governmental authority; 3) the transaction did not involve services as a bank
depositary of funds, transfer agent, registrar, trustee under a trust indenture,
or similar services; 4) the amount involved exceeded $60,000; or 5) the interest
of the person rose beyond the ownership of securities of the Company and the
person received extra or special benefit that was not shared equally (pro rata)
by all holders of securities of the class.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
We have
no parents. We have one class of equity securities, our Common Stock. The
following table provides the names and addresses of each person known to us to
own more than 5% of our outstanding common stock as of December 15, 2009, and by
the officers and directors, individually and as a group. Except as otherwise
indicated, all shares are owned directly.
Title
of Class
|
Name
and Address of
Beneficial
Owner
|
Amount and Nature of Beneficial Owner (1)
|
Percent
of Class
|
Percent
of Class assuming 75,000,000 shares sold in this offering
|
|||||||||
Common
Stock
|
Jennifer
Rapacki
1130
East Clark Ave. #150-286
Orcutt,
CA 93455
|
- 0 - | -- | % | -- | % | |||||||
Common
Stock
|
Matthew
Maza
1130
East Clark Ave. #150-286
Orcutt,
CA 93455
|
- 0 - | -- | % | -- | % | |||||||
Common
Stock
|
Cede
& Co
Depository
Trust Company
PO
Box 222
Bowling
Green Station
New
York, NY 10274
|
54,044,375 | 10.5 | % | 9.1 | % | |||||||
Common
Stock
|
Kytin
Holdings, LLC
1425
Broadway Ave East #454
Seattle,
WA 98122
|
168,051,405 | 32.5 | % | 28.4 | % | |||||||
Common
Stock
|
Tech
Development LLC
1425
Broadway Ave East #454
Seattle,
WA 98122
|
147,044,772 | 28.5 | % | 24.9 | % |
The percent of class is based on
516,453,806 shares of
common stock and outstanding on December 15, 2009.
All
Officers and Directors as a group (2 Persons)
(1)
|
Pursuant
to the rules and regulations of the Securities and Exchange Commission,
shares of Common Stock that an individual or entity has a right to acquire
within 60 days pursuant to the exercise of options or warrants are deemed
to be outstanding for the purposes of computing the percentage ownership
of such individual or entity, but are not deemed to be outstanding for the
purposes of computing the percentage ownership of any other person or
entity shown in the table.
|
21
|
DESCRIPTION
OF SECURITIES
|
General
Our
authorized capital stock consists of 1,000,000,000 shares of common stock at a
par value of $0.00014 per share and 10,000,000 shares of preferred shares at a
par value of $0.01. The common stock par value was
updated subsequent to our most recent filing and will be incorporated in the
balance sheet of the December 31, 2009 10K filing. There are no
provisions in our charter or by-laws that would delay, defer or prevent a change
in our control.
Common
Stock
As of
December 15, 2009, 516,453,806 shares of
common stock are issued and outstanding and held by 160 stockholders. Holders of
our common stock are entitled to one vote for each share on all matters
submitted to a stockholder vote.
Holders
of common stock do not have cumulative voting rights. Therefore, holders of
a majority of the shares of common stock voting for the election of directors
can elect all of the directors. Holders of our common stock representing a
majority of the voting power of our capital stock issued and outstanding and
entitled to vote, represented in person or by proxy, are necessary to constitute
a quorum at any meeting of our stockholders. A vote by the holders of a majority
of our outstanding shares is required to effectuate certain fundamental
corporate changes such as liquidation, merger or an amendment to our Articles of
Incorporation.
Holders
of common stock are entitled to share in all dividends that the board of
directors, in its discretion, declares from legally available funds. In the
event of liquidation, dissolution or winding up, each outstanding share entitles
its holder to participate pro rata in all assets that remain after payment of
liabilities and after providing for each class of stock, if any, having
preference over the common stock. Holders of our common stock have no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to our common stock.
Dividends
Since
inception we have not paid any dividends on our common stock. We currently do
not anticipate paying any cash dividends in the foreseeable future on our common
stock, when issued pursuant to this offering. Although we intend to retain our
earnings, if any, to finance the exploration and growth of our business, our
Board of Directors will have the discretion to declare and pay dividends in the
future. Payment of dividends in the future will depend upon our earnings,
capital requirements, and other factors, which our Board of Directors may deem
relevant.
Warrants
There are
no outstanding warrants to purchase our securities.
Options
There are
no options to purchase our securities outstanding. We may in the future
establish an incentive stock option plan for our directors, employees and
consultants.
Preferred
Stock
As of
December 15, 2009, zero shares of preferred stock are issued and
outstanding. There are 10,000,000 shares authorized. The
Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to create and provide
for the issuance of shares of the Preferred Stock in series, and by filing
amendments to the Articles of Incorporation pursuant to the applicable section
of the Florida Business Corporation Act, to establish from time to time the
number of shares to be included in each such series, and to fix the
designations, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof. The
authority of the Board of Directors with respect to each series is stated in the
Articles of Incorporation.
22
CERTAIN
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS REGARDING
INDEMIFICATION OF DIRECTORS AND OFFICERS REGARDING INDEMNIFICATION
The
Certificate of Incorporation of the Company provides indemnification to the
fullest extent permitted by Florida law for any person whom the Company may
indemnify thereunder, including directors, officers, employees and agents of the
Company. In addition, the Certificate of Incorporation, as permitted
under the Florida General Corporation Law, eliminates the personal liability of
the directors to the Company or any of its stockholders for damages for breaches
of their fiduciary duty as directors. As a result of the inclusion of
such provision, stockholders may be unable to recover damages against directors
for actions taken by directors which constitute negligence or gross negligence
or that are in violation of their fiduciary duties. The inclusion of this
provision in the Company's Certificate of Incorporation may reduce the
likelihood of derivative litigation against directors and other types of
stockholder litigation, even though such action, if successful, might otherwise
benefit the Company and its stockholders.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the
“Act”) may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. The Company's
Certificate of Incorporation provides that no director of the Company shall be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director except as limited by Florida
law. The Company's Bylaws provide that the Company shall indemnify to
the full extent authorized by law each of its directors and officers against
expenses incurred in connection with any proceeding arising by reason of the
fact that such person is or was an agent of the corporation.
Insofar
as indemnification for liabilities may be invoked to disclaim liability for
damages arising under the Securities Act of 1933, as amended, or the Securities
Act of 1934, (collectively, the “Acts”) as amended, it is the position of the
Securities and Exchange Commission that such indemnification is against public
policy as expressed in the Acts and are therefore, unenforceable.
FLORIDA
ANTI-TAKEOVER LAW AND OUR CERTIFICATE OF INCORPORATION AND BY-LAW
PROVISIONS
Provisions
of Florida law and our Certificate of Incorporation and By-Laws could make more
difficult our acquisition by a third party and the removal of our incumbent
officers and directors. These provisions, summarized below, are
expected to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of the Company to first
negotiate with us. We believe that the benefits of increased
protection of our ability to negotiate with proponent of an unfriendly or
unsolicited acquisition proposal outweigh the disadvantages of discouraging such
proposals because, among other things, negotiation could result in an
improvement of their terms.
We are
subject to the Florida General Corporation Law, which regulates corporate
acquisitions. In general, Section 607.0901 prohibits a publicly held
Florida corporation from engaging in a “business combination” with an
“interested stockholder” for a period of five years following the date the
person became an interested stockholder, unless:
|
(i)
|
The
Board of Directors approved the transaction in which such stockholder
became an interested stockholder prior to the date the interested
stockholder attained such status;
|
|
(ii)
|
Upon
consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 80% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
|
|
(iii)
|
On
subsequent to such date the business combination is approved by the Board
of Directors and authorized at an annual or special meeting of
stockholders.
|
A
“business combination” generally includes a merger, asset or stock sale, or
other transaction resulting in a financial benefit to the interested
stockholder. In general, an “interested stockholder” is a person who,
together with affiliates and associates, owns, or within three years prior to
the determination of interested stockholder status, did own, 10% or more of the
corporation's voting stock.
WHERE
YOU CAN FIND MORE INFORMATION
We have filed with the Securities
and Exchange Commission a registration statement on Form S-1, Quarterly Report
on 10-Qs and Annual Report on 10-Ks. This prospectus, which is a part
of the registration statement, does not contain all of the information included
in the registration statement. Some information is omitted, and you should refer
to the registration statement and its exhibits. With respect to references made
in this prospectus to any contract, agreement or other document of ours, such
references are not necessarily complete and you should refer to the exhibits
attached to the registration statement for copies of the actual contract,
agreement or other document. You may review a copy of the registration
statement, including exhibits, at the Securities and Exchange Commission's
public reference room at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 or Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
23
We will
also file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information on file at the public
reference rooms. You can also request copies of these documents, for
a copying fee, by writing to the Securities and Exchange
Commission.
Our
Securities and Exchange Commission filings and the registration statement can
also be reviewed by accessing the Securities and Exchange Commission's Internet
site at http://www.sec.gov, which contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Securities and Exchange Commission.
You
should rely only on the information provided in this prospectus or any
prospectus supplement. We have not authorized anyone else to provide you with
different information. We are not making an offer to sell, nor
soliciting an offer to buy, these securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this
prospectus nor any sales made hereunder after the date of this prospectus shall
create an implication that the information contained herein or our affairs have
not changed since the date hereof.
24
INSIGHT
MANAGEMENT CORPORATION
FINANCIAL
STATEMENTS
TABLE OF
CONTENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
27
|
Balance Sheets as
of December 31, 2008 and December 31, 2007
|
28
|
Statements of Operations For the
Years Ended December 31, 2008 and 2007 and the Period From May 10, 2006
(Inception) Through December 31, 2008
|
30
|
Statement of Cash Flows For the
Years Ended December 31, 2008 and 2007 and the Period From May 10, 2006
(Inception) Through December 31, 2008
|
31
|
Statement of Stockholder’s Equity
From May 10, 2006 (Inception) to December 31, 2008
|
33
|
Notes
to Audited Financial Statements
|
35
|
Consolidated Balance Sheets as of
September 30, 2009 and December 31, 2008
|
42
|
Consolidated Statements of
Operations for the three and nine month periods ending September 30, 2009
and 2008
|
43
|
Consolidated Statement of Changes
in Stockholders’ Deficit for the nine months ended September 30, 2009
|
44
|
Consolidated Statements of Cash
Flows for the nine month period ending September 30, 2009 and
2008
|
45
|
Notes
to Unaudited Consolidated Financial Statements
|
47
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
56
|
Rebel
Testing, Inc. Balance Sheets as of December 31, 2008 and
2007
|
57
|
Rebel
Testing, Inc. Statement of Operations for the year ended December 31, 2008
and 2007
|
58
|
Rebel
Testing, Inc. Statement of Changes in Stockholders’ Equity from December
31, 2006 through December 31, 2008
|
59
|
Rebel
Testing, Inc. Statements of Cash Flows for the year ended December 31,
2008 and 2007
|
60
|
Rebel
Testing, Inc. Notes to Audited Financial Statements
|
61
|
Basis
of Presentation of the Unaudited Pro Forma Combined Statements of
Operations for the Year Ended December 31, 2008 and Six Months Ended
June 30, 2009
|
66
|
Unaudited
Pro-forma Combined Statements of Operations for the year ended December
31, 2008
|
67
|
Unaudited
Pro-forma Combined Statements of Operations for the six months ended June
30, 2009
|
68
|
Notes
to Unaudited Pro Forma Combined Statements of Operations
|
69
|
25
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
Insight
Management, Inc.
We have
audited the accompanying balance sheet of Insight Management, Inc. (a
development stage company) as of December 31, 2008 and 2007, and the related
statements of operations, changes in stockholders’ equity (deficit), and cash
flows for the years then ended and for the period from May 10, 2006 (inception)
through December 31, 2008. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Insight Management, Inc. as of
December 31, 2008 and 2007, and the results of its operations, changes in
stockholders’ equity (deficit) and cash flows for the period then ended and for
the period from May 10, 2006 (inception) through December 31, 2008 in conformity
with accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has insufficient working capital, which raises
substantial doubt about its ability to continue as a going concern. Management’s
plans regarding those matters also are described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ M&K CPAS,
PLLC
www.mkacpas.com
Houston,
Texas
March 31,
2009
26
Insight
Management Corporation
Balance
Sheets
As
of December 31, 2008 and December 31, 2007
From
ANNUAL REPORT ON FORM 10-K For Fiscal Year Ended December 31, 2008
December
31,
2008
|
December
31,
2007
|
|||||||
ASSETS:
|
||||||||
Current
assets:
|
||||||||
Cash
|
$
|
59
|
$
|
24,232
|
||||
Capitalized
production costs net of amortization of $0 and $3,362 at December 31, 2008
and 2007, respectively
|
—
|
24,701
|
||||||
Advances
to related party
|
525
|
1,000
|
||||||
Prepaid
expense
|
—
|
4,440
|
||||||
Total
current assets
|
584
|
54,373
|
||||||
Assets
of discontinued operations, net
|
—
|
361,195
|
||||||
TOTAL
ASSETS
|
$
|
584
|
$
|
415,568
|
||||
LIABILITIES AND STOCKHOLDERS’
DEFICIT:
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued liabilities
|
$
|
79,991
|
$
|
92,909
|
||||
Accrued
interest
|
6,484
|
238
|
||||||
Notes
payable – related party
|
141,025
|
99,696
|
||||||
Total
Current Liabilities
|
227,500
|
192,843
|
||||||
Liabilities
of discontinued operations, net
|
—
|
269,440
|
||||||
Stockholders’
Deficit:
|
||||||||
Common
Stock, $.001 par value; 50,000,000 shares authorized, 3,051,870 and
2,934,050 shares issued and outstanding at December 31, 2008 and 2007,
respectively
|
3,052
|
2,934
|
||||||
Stock
subscription receivable
|
(3,100
|
)
|
—
|
|||||
Additional
paid in capital
|
360,264
|
225,938
|
||||||
Deficit
accumulated during the development stage
|
(587,132
|
)
|
(275,587
|
)
|
||||
Total
Stockholders’ Equity Deficit
|
(226,916
|
)
|
(46,715
|
)
|
||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$
|
584
|
$
|
415,568
|
The
accompanying notes are an integral part of these financial
statements.
27
Insight
Management Corporation
Statements
of Operations
For
the Years Ended December 31, 2008 and 2007
and
the Period From May 10, 2006 (Inception) Through December 31, 2008
From
ANNUAL REPORT ON FORM 10-K For Fiscal Year Ended December 31, 2008
Year
Ended
December
31,
|
May
10, 2006
(Inception)
Through
December
31,
|
|||||||||||
2008
|
2007
|
2008
|
||||||||||
Expenses:
|
||||||||||||
General
and administrative expenses
|
$
|
187,788
|
$
|
205,404
|
$
|
393,192
|
||||||
Rent
|
12,415
|
1,190
|
13,605
|
|||||||||
Amortization
of capitalized production costs
|
—
|
3,362
|
3,362
|
|||||||||
Interest
expense
|
8,289
|
2,307
|
10,596
|
|||||||||
Total
Operating Expenses
|
208,492
|
212,263
|
421,755
|
|||||||||
Other
income
|
80
|
—
|
80
|
|||||||||
Net
Loss from continuing operations
|
$
|
(208,412
|
)
|
$
|
(212,263
|
)
|
$
|
(420,675
|
)
|
|||
Discontinued
operations
|
||||||||||||
Loss
from discontinued operations
|
(103,133
|
)
|
(63,324
|
)
|
(166,457
|
)
|
||||||
Net
Loss
|
$
|
(311,545
|
)
|
$
|
(275,587
|
)
|
$
|
(587,132
|
)
|
|||
Net
Loss per Common Share - Basic and Diluted
|
$
|
(0.10
|
)
|
$
|
(0.12
|
)
|
||||||
Per
Share Information:
|
||||||||||||
Weighted
Average Number of Common Stock
|
||||||||||||
Shares
Outstanding - Basic and Diluted
|
3,037,888
|
2,376,116
|
The
accompanying notes are an integral part of these financial
statements.
28
Insight
Management Corporation
Statement
of Cash Flows
For
the Years Ended December 31, 2008 and 2007 and
the
Period From May 10, 2006 (Inception) Through December 31, 2008
From
ANNUAL REPORT ON FORM 10-K For Fiscal Year Ended December 31, 2008
Year
Ended
December
31,
|
May
10, 2006
(inception)
to
December
31,
|
|||||||||||
2008
|
2007
|
2008
|
||||||||||
Cash
Flows from Operating Activities:
|
||||||||||||
Net
Loss from continuing operations
|
$
|
(208,412
|
)
|
$
|
(212,263
|
)
|
$
|
(420,675
|
)
|
|||
Net
Loss from discontinued operations
|
(103,133
|
)
|
(63,324
|
)
|
(166,457
|
)
|
||||||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||||||
Impairment
of capitalized production costs
|
31,159
|
—
|
31,159
|
|||||||||
Amortization
of capitalized production costs
|
—
|
3,362
|
3,362
|
|||||||||
Bad
debt
|
—
|
—
|
—
|
|||||||||
Rent
contributed from shareholder
Changes
in:
|
12,415
|
—
|
12,415
|
|||||||||
Accounts
receivable
|
475
|
—
|
475
|
|||||||||
Capitalized
production costs
|
—
|
(28,063
|
)
|
(28,063
|
)
|
|||||||
Prepaid
expenses & Other Assets
|
(2,018
|
)
|
(5,440
|
)
|
(7,458
|
)
|
||||||
Accrued
expenses
|
6,246
|
6,246
|
||||||||||
Accounts
payable
|
(12,919
|
)
|
93,147
|
80,228
|
||||||||
Net
Cash Flows Used in Operations
|
(276,187
|
)
|
(212,581
|
)
|
(488,768
|
)
|
||||||
Cash
Flows from Financing Activities:
|
||||||||||||
Net
borrowings on demand notes-related party
|
134,698
|
99,696
|
234,394
|
|||||||||
Payment
of debt-related party
|
(48,868
|
)
|
—
|
(48,868
|
)
|
|||||||
Proceeds
from sale of stock- net of subscription receivable
|
75,900
|
114,050
|
189,950
|
|||||||||
Net
Cash Flows Provided by Financing activities
|
161,730
|
213,746
|
375,476
|
|||||||||
Cash
Flows from Discontinued Operations:
|
||||||||||||
Cash
used in operating activities
|
(14,505
|
)
|
14,505
|
—
|
||||||||
Cash
used from investing activities
|
353,460
|
(145,457
|
)
|
208,003
|
||||||||
Cash
used in financing activities
|
(248,671
|
)
|
154,019
|
(94,652
|
)
|
|||||||
Net
Cash Flows used in Discontinued Operations
|
90,284
|
23,067
|
113,351
|
|||||||||
Net
Increase (Decrease) in Cash
|
(24,173
|
)
|
24,232
|
59
|
||||||||
Cash
and cash equivalents - Beginning of period
|
24,232
|
—
|
—
|
|||||||||
Cash
and cash equivalents - End of period
|
$
|
59
|
24,232
|
$
|
59
|
|||||||
SUPPLEMENTARY
INFORMATION
|
||||||||||||
Interest
Paid
|
$
|
2,042
|
$
|
—
|
$
|
4,111
|
||||||
Taxes
Paid
|
$
|
—
|
$
|
—
|
$
|
—
|
The
accompanying notes are an integral part of these financial
statements.
29
Insight
Management Corporation
Statement
of Stockholder’s Equity
From
May 10, 2006 (inception) to December 31, 2008
From
ANNUAL REPORT ON FORM 10-K For Fiscal Year Ended December 31, 2008
Stock
Subscription
Receivable
|
Additional
Paid
In
Capital
|
Deficit
Accumulated
During
the
Development
Stage
|
Total
Stockholders’
Equity
(Deficit)
|
|||||||||||||||||||||
Common
Stock
|
||||||||||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||||||
Inception
- May 10, 2006
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||||||||||
Issuance
of founders shares
|
1,820,000
|
1,820
|
(18,200
|
)
|
16,380
|
—
|
—
|
|||||||||||||||||
Net
loss for the period
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Balances
- December 31, 2006
|
1,820,000
|
1,820
|
(18,200
|
)
|
16,380
|
—
|
—
|
|||||||||||||||||
Shares
issued to acquire Skreem Studios
|
1,000,000
|
1,000
|
—
|
999,000
|
—
|
1,000,000
|
||||||||||||||||||
Payment
of subscription receivable
|
—
|
—
|
18,200
|
—
|
—
|
18,200
|
||||||||||||||||||
Proceeds
from sale of stock
|
114,050
|
114
|
—
|
113,936
|
—
|
114,050
|
||||||||||||||||||
Purchase
price allocation
|
—
|
—
|
—
|
(903,378
|
)
|
—
|
(903,378
|
)
|
||||||||||||||||
Net
loss for the year
|
—
|
—
|
—
|
—
|
(275,587
|
)
|
(275,587
|
)
|
||||||||||||||||
Balances
- December 31, 2007
|
2,934,050
|
2,934
|
—
|
225,938
|
(275,587
|
)
|
(46,715
|
)
|
||||||||||||||||
Shares
issued for notes
|
50,000
|
50
|
—
|
249,950
|
—
|
250,000
|
||||||||||||||||||
Shares
issued for services
|
5,620
|
6
|
—
|
(6
|
)
|
—
|
—
|
|||||||||||||||||
Proceeds
from sale of stock
|
62,200
|
62
|
—
|
78,375
|
—
|
79,000
|
||||||||||||||||||
—
|
—
|
|||||||||||||||||||||||
Subscription
Receivable
|
(3,100
|
)
|
—
|
(3,100
|
)
|
|||||||||||||||||||
—
|
—
|
|||||||||||||||||||||||
Contribution
from shareholder
|
—
|
—
|
—
|
12,415
|
—
|
12,415
|
||||||||||||||||||
Investment
in discontinued operations
|
—
|
—
|
—
|
(206,971
|
)
|
—
|
(206,971
|
)
|
||||||||||||||||
Net
loss from discontinued operations
|
—
|
—
|
—
|
—
|
(103,133
|
)
|
(103,133
|
)
|
||||||||||||||||
Net
loss from continuing operations
|
—
|
—
|
—
|
—
|
(208,412
|
)
|
(208,412
|
)
|
||||||||||||||||
Balances
– December 31, 2008
|
3,051,870
|
3,052
|
(3,100
|
)
|
360,264
|
(587,132
|
)
|
(226,916
|
)
|
The
accompanying notes are an integral part of these financial
statements.
30
Notes
to Financial Statements
(A
Development Stage Company)
From
ANNUAL REPORT ON FORM 10-K For Fiscal Year Ended December 31, 2008
1. Nature of
Operations
Insight
Management Corporation (the Company) (formerly known as Skreem Records
Corporation) was formed on March 10, 2006, but was dormant and did not commence
operations until April 1, 2007 when it acquired a 100% interest in Skreem
Studios, Inc. (the Subsidiary) (formerly known as Skreem Studios LLC). Skreem
Studios, Inc. was formed on October 7, 2005 as a limited liability company with
the beneficial interest held by two of the Company’s shareholders, Jeffrey
Martin and Tony Harrison. The Subsidiary initiated pre-commencement activity in
May 2006, renting a studio facility, acquiring equipment, building out two
studios and incurring other pre-operational expenses. On April 1, 2007 the
Company acquired the Subsidiary under the purchase method and commenced business
operations. On June 9, 2008, the majority of stockholders authorized a name
change from Skreem Records Corporation to Insight Management Corporation,
authorized a ten for 1 reverse split of common stock and declared a stock
dividend of its subsidiary, Skreem Studios, Inc. On July 1, 2008, Insight
Management Corporation commenced a reverse spin-off Skreem Studios, Inc., where
the shareholders of record receive one share of Skreem Studios, Inc. per share
owned in Insight Management. The Company’s business is to search for recording
talent, sign the talent to contracts, and to promote and fund the talent. The
Company may incur costs to develop unrecognized talent such as vocal coaching,
choreography, fitness training, clothing, hair design, transportation and living
expenses. Additionally, the company may incur these costs as well as
promotional, tour costs and recording costs for established talent as well as
its developed talent. Revenue is generated through sales of recordings,
performance fees, management fees, merchandising and publishing royalties. Via
these revenue sources the Company recovers the cost it has invested in the
talent and then shares in a percentage of the excess proceeds according to the
terms of individual contracts.
2.Summary of Significant
Accounting Policies
Basis of
Presentation
The
financial statements of the Company have been prepared utilizing the accrual
basis of accounting in conformity with accounting principles generally accepted
in the United States of America. Under this method, revenues are recognized when
earned and expenses are recorded when liabilities are incurred. In the opinion
of management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the result of
operations for the interim periods presented have been reflected
herein.
Revenue
Recognition
Revenue
is recognized when it is realized or realizable and earned. The Company
considers revenue realized or realizable and earned when persuasive evidence of
an arrangement exists, services have been provided, and collectability is
reasonably assured. Revenue that is billed in advance such as recurring weekly
or monthly services are initially deferred and recognized as revenue over the
period the services are provided. As of December 31, 2008, no significant
revenue has been recorded.
Use of
estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Cash
and cash equivalents
For the
purposes of the statement of cash flows, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents. As of December 31, 2008 and 2007, there were no cash
equivalents.
Capitalized
production costs
Capitalized
production costs consist of capitalized master production costs and finished
product purchased for resale and is valued at the lower of cost or market, on
the first-in, first-out method. Capitalized master production costs include
capitalizable direct negative costs, production overhead, interest, development
costs, and acquired production costs, and are stated at the lower of cost, less
accumulated amortization, or fair value. Capitalized master production costs are
expensed based on the ratio of the current period’s gross revenues to estimated
remaining total gross revenues from all sources on an individual production
basis. Development costs for projects
that have been determined will not go into production or have not been set for
production within one year are written off. Estimates of total gross revenues
can change significantly due to a variety of factors, including advertising
rates and the level of market acceptance of the production. Accordingly, revenue
estimates are reviewed periodically and amortization is adjusted, if necessary.
Such adjustments could have a material effect on results of operations in future
periods. As of December 31, 2008, management expensed $31,159 of capitalized
production costs due to uncertainty of future economic benefit. See Note
9.
31
Prepaid expenses
Prepaid
expenses are advance payments for products or services that will be used in
operations during the next 12 months.
Development
Stage Company
The
Company complies with Statement of Financial Accounting Standard (“SFAS”) No. 7
and the Securities and Exchange Commission Exchange Act 7 for its
characterization of the Company as development stage.
Property,
equipment, and improvements
Property
and equipment are stated at cost. Major additions and improvements are
capitalized, and routine expenditures for repairs and maintenance are charged to
expense as incurred. Fully depreciated assets are carried on the books until the
date of disposal. Property sold or retired, and the related gain or loss, if
any, is taken into income currently. Property that costs less than $500 is
expensed as incurred.
Depreciation
is calculated on the straight-line method over the estimated useful lives of the
respective assets, which range from three to seven years for equipment and
furnishings and over the life of the lease for leasehold
improvements.
Impairment of Long Lived
Assets
Long-lived
assets are reviewed for impairment in accordance with SFAS No. 144, “Accounting
for the Impairment or Disposal of Long- lived Assets”. Under SFAS No. 144,
long-lived assets are tested for recoverability whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. An
impairment charge is recognized for the amount, if any, which the carrying value
of the asset exceeds the fair value.
Fair
Value of Financial Instruments
Financial
instruments, including cash, receivables, accounts payable, and notes payable
are carried at amounts which reasonably approximate their fair value due to the
short-term nature of these amounts or due o variable rates of interest which are
consistent with market rates. No adjustments have been made in the current
period.
Income taxes
The
Company accounts for income taxes under the Financial Accounting Standards Board
of Financial Accounting Standard No. 109, “Accounting for Income Taxes”
(“Statement 109”). Under Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Current income tax provisions are made based on
taxable income reported to federal and state taxing authorities. Deferred tax
assets, including tax loss and credit carryforwards, and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date. As of December 31, 2008, the Company has a deferred tax benefit
approximating $231,700 which consists entirely of federal and state net
operating losses generated by the current period tax losses. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion or all of the deferred tax assets will
not be realized. The Company has provided a valuation allowance for the full
amount of the deferred tax benefit because the Company does not have a history
of taxable earnings and is a development stage enterprise. Additionally, the
reconciliation of the Company’s current tax benefit from 34% for federal tax
rate to 0% for book purposes consists entirely of the change in the valuation
allowance.
For
income tax reporting purposes, the Company uses accounting methods that
recognize depreciation sooner than for financial statement reporting. As a
result, the basis of property and equipment for financial reporting exceeds its
tax basis by the cumulative amount that accelerated depreciation exceeds
straight-line depreciation. Deferred income taxes have been recorded for the
excess, which will be taxable in future periods through reduced depreciation
deductions for tax purposes.
Cash paid
for income taxes for the twelve month period ended December 31, 2008 was
$0.
32
Basic
and Diluted Net Income Per Common Share
Basic and
diluted net loss per share calculations are calculated on the basis of the
weighted average number of common shares outstanding during the year. The per
share amounts include the dilutive effect of common stock equivalents in years
with net income. Basic and diluted loss per share is the same due to the anti
dilutive nature of potential common stock equivalents.
Stock
Based Compensation
The
Company accounts for stock-based employee compensation arrangements using the
fair value method in accordance with the provisions of Statement of Financial
Accounting Standards no.123(R) or SFAS No. 123(R), Share-Based Payments, and
Staff Accounting Bulletin No. 107, or SAB 107, Share-Based Payments. The company
accounts for the stock options issued to non-employees in accordance with the
provisions of Statement of Financial Accounting Standards No. 123, or SFAS No.
123, Accounting for Stock-Based Compensation, and Emerging Issues Task Force No.
96-18, Accounting for Equity Instruments with Variable Terms That Are Issued for
Consideration other Than Employee Services under FASB Statement no.
123.
The
Company did not grant any stock options during the period ended December 31,
2008 or 2007.
Advertising
Advertising
costs are generally expensed as incurred. Total advertising cost from for the
twelve month period ended December 31, 2008 and the period from inception on
March 10, 2006 through December 31, 2008 were $0 and $3,306,
respectively.
Recent Accounting
Pronouncements
The
Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on its results of operations,
financial position or cash flow.
3. Going
Concern
The
Company’s financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and settlement of liabilities and
commitments in the normal course of business for the foreseeable future. Since
inception, the Company has accumulated losses aggregating to $587,132 and has a
working capital deficit of $226,916 at December 31, 2008. These conditions raise
substantial doubt as to the Company’s ability to continue as a going concern.
Management intends to finance these deficits through the sale of stock. The
financial statements do not include any adjustment that might be necessary if
the Company is unable to continue as a going concern.
4.Development
Stage Operations
The
Company was formed March 10, 2006 and the Subsidiary was formed October 7, 2005.
Initial funding for the Subsidiary was provided by the Company’s principal
stockholder via equity capital, direct debt capital and indirect/related party
debt capital. The Company’s business operations commenced on April 1, 2007 and
the Subsidiary’s business operations commenced on January 2, 2008. Operations
from inception have been devoted primarily to raising capital, obtaining
financing, acquiring equipment, constructing improvements to the rented studio
facilities, and administrative functions. Start-up and organization costs are
expensed as incurred. Transactions with shareholders and other related parties
are described in other notes to these financial statements.
5. Notes
Payable- Related Party
33
Short-term
debt as of December 31, 2008 consisted of the following demand
notes:
Various
unsecured demand notes to the principal shareholder with no stated
interest rate; interest is being accrued at 8.00%.
|
$
|
98,165
|
||
Various
unsecured demand notes to a business owned and controlled by the principal
shareholder with a stated interest rate of 8.00%.
|
19,760
|
|||
Various
unsecured demand notes to a business controlled by the principal
shareholder with a state interest rate of 8.00%
|
7,100
|
|||
Various
unsecured demands note to a corporation controlled by the principal
shareholder with a stated interest rate of 8.00%.
|
16,000
|
|||
$
|
141,025
|
During
the twelve month period ended December 31, 2008, the Company issued various
unsecured demand notes to the business owned and controlled by a shareholder
totaling $10,000 with a stated interest rate of 8%. During the twelve month
period ended December 31, 2008, the Company issued various unsecured demands
notes to a shareholder totaling $78,750 with a stated interest rate of 8%. The
company owed $98,165 as of December 31, 2008. This amount is included in Note
Payable-related party of $141,025.
During
the twelve month period ended December 31, 2008, the Company issued unsecured
demand notes to business controlled by a shareholder totaling $16,000 with a
stated interest rate of 8%. During the twelve month period ended December 31,
2008 the Company issued various unsecured demand notes to the business owned and
controlled by a shareholder totaling $22,600. During the twelve month period
ended December 31, 2008, the Company issued various unsecured demand notes to
the business controlled by a shareholder totaling $7,100 with a stated interest
rate of 8%. The company owed $19,760 as of December 31, 2008. This amount is
included in Note Payable-related party of $141,025.
On
February 26, 2008, the Company issued 500,000 common shares with a value of
$250,000 at the current trading rate of $0.50 in settlement of a $250,000 note
to the majority shareholder. The difference in the value of the shares and the
balance of the debt is included as an addition to additional paid in capital to
the common control nature of this transaction. The company owed $7,100 as of
December 31, 2008. This amount is included in Note Payable-related party of
$141,025.
At
December 31, 2008, interest in the amount of $6,484 is accrued on these notes.
Interest expense for the twelve months ended December 31, 2008, and the period
from inception on March 10, 2006 through December 31, 2008 was $8,289 and
$10,596, respectively. The company owed $16,000 as of December 31, 2008. This
amount is included in Note Payable-related party of $141,025.
6. Capital
Stock
The
Company has 50,000,000 shares of $0.001 par value stock authorized. At December
31, 2008 there were 3,051,870 shares outstanding.
In May
2006, the Company authorized the issuance of 1,820,000 shares of common stock to
the Company’s founders.
As of
December 31, 2006, the funding of the founders’ shares was recognized as
subscription receivable and in the months of April through June 2007, the
payment for founders’ shares subscriptions receivable was received in
2007.
On April
1, 2007, 1,000,000 shares of common stock were issued in exchange for 100%
interest in Skreem Studios, LLC (Subsidiary). The value of the shares issued
using the PPM price of $1.00 per share was $1,000,000. Due to the common control
of the entities involved, the excess consideration provided of $903,378 has been
recorded as a decrease of additional paid in capital. The net assets of the
Subsidiary on the date of purchase was $189,803.
In the
period from January 1, 2008 through December 31, 2008, 62,200 shares were sold
and issued in exchange for cash received in the amount of $75,900, net of
subscription receivable of $3,100, and 50,000 shares were issued in exchange for
cancellation of $250,000 of debt owed to the majority shareholder.
34
Shares
owned by the principal shareholder, Jeffrey Martin, include personal shares and
shares owned by a business owned and controlled by him.
The
difference in the value of the shares and the balance of the debt is included as
an addition to additional paid in capital due to the common control nature of
this transaction.
On
February 20, 2008, 5,620 shares valued $56 at the current trading rate of $0.01
per share was issued in exchange for underwriting services
provided.
On June
9, 2008, the Company authorized a ten for 1 reverse split of common stock
effective July 1, 2008.
On July
1, 2008, Insight Management Corporation commenced a reverse spin-off Skreem
Studios, Inc., where the shareholders of record receive one share of Skreem
Studios, Inc. per share owned in Insight Management.
7. Related
Party Transactions
The
Company utilizes an office facility at 11637 Orpington Street, Orlando, FL. This
facility contains 2,000 square feet of office space and it is owned and
controlled by a corporation owned solely by the Company’s majority shareholder.
The shareholder has waived rent expense in exchange for an increase in
additional paid in capital. At December 31, 2008, the rent expense in exchange
of additional paid in capital was $12,415.
All of
the debt financing and related interest expense for the Company and its
Subsidiary have been provided by and paid or accrued to the principal
shareholder or entities controlled by him. See the note regarding short-term
debt for details.
On
February 21, 2008 the principal shareholder exchanged $250,000 of debt financing
for 500,000 shares of common stock. The shares of stock were issued to
individuals and entities with related-party interest to the principal
shareholder.
At
December 31, 2008, $35,000 of the $79,991 balance of accounts payable was to a
minority shareholder holding less than 1% interest in the Company.
8. Supplemental
Cash Flow Information
Non-Cash
Financing Activities. On February 26, 2008, the Company issued 500,000 common
shares with a stated value of $500,000 in settlement of a $250,000 note to the
majority shareholder. Only $45,500 of the $250,000 note payable is deemed a
non-cash transaction at September 30, 2008 due to the spinoff of Skreem Studios,
Inc.
9. Capitalized
Production Costs
The
capitalized production costs balance at December 31, 2008 and 2007 was $0 and
$31,159, net of accumulated amortization of $0 and $3,362, respectively. These
costs consist entirely of capitalized master production costs for one video and
one audio product to be produced and sold. Management does not expect to sell
video and audio products in the foreseeable future; therefore, the balance has
been expensed.
10. Business
Combination
On April
1, 2007, the Company purchased Skreem Studios, Inc. (the Subsidiary) for
10,000,000 shares of the Company’s common stock valued at $1,000,000 based upon
a PPM price of $0.10 and an increase in notes payable of $93,181. The subsidiary
was controlled by the founding shareholder and due to the entities being under
common control the excess purchase price over the net asset value has been
recorded as a decrease in additional paid in capital and retained
deficit.
The
shareholders of the Company maintained control of the subsidiary before and
after the purchase and as a result of considering this and other relevant
criteria in FASB statement number 141 the Company has been determined to be the
accounting acquirer.
35
Due to
the primarily dormant nature of the subsidiary prior to April 1, 2007, the
results for the period ended December 31, 2007 would not have materially
differed and as a result pro-forma information is not presented in these
financial statements.
PP&E
|
$
|
189,803
|
||
Additional
paid in capital
|
903,378
|
|||
Increase
in demand note
|
(93,181
|
)
|
||
Total
|
$
|
1,000,000
|
11.Discontinued
Operations
On July
1, 2008, Skreem Studios, a subsidiary of Insight Management, Inc, amended its
Articles of Incorporation to change the name of Skreem Studios, LLC to Skreem
Studios, Inc. upon conclusion of a stock dividend payable at a rate of one share
in Skreem Studios, Inc for every share owned in Insight Management, Inc. The
Board of Directors has determined that the operations that made up the Company
would be better off in a separate company, with its own goals, while the
Subsidiary concentrates its efforts on other media related business. On July 1,
2008, the Company spun-off its wholly owned subsidiary, Skreem Studios
LLC.
In
connection with the spin-off, all of the assets and liabilities were transferred
and the due to affiliate was forgiven and treated as additional paid in capital.
The following schedule shows the assets and liabilities of the wholly owned
subsidiary at July 1, 2008:
At
July 1,
2008
|
At
December 31,
2007
|
|||||||
Assets
of discontinued operations
|
||||||||
Cash
|
$
|
569
|
$
|
389
|
||||
Accounts
receivable
|
—
|
543
|
||||||
Advances
|
—
|
215
|
||||||
Prepaid
expenses
|
717
|
588
|
||||||
Property
and equipment, net
|
327,248
|
353,460
|
||||||
Deposit
|
6,000
|
6,000
|
||||||
TOTAL
ASSETS
|
$
|
334,534
|
$
|
361,195
|
||||
Liabilities
of discontinued operations
|
||||||||
Accounts
payable
|
$
|
2,073
|
$
|
3,502
|
||||
Accrued
interest
|
24,540
|
18,738
|
||||||
Notes
payable-related parties
|
100,950
|
247,200
|
||||||
TOTAL
LIABILITIES
|
$
|
127,563
|
$
|
269,440
|
36
Skreem
Studios’ loss from operations, reported in discontinued operations, for the
twelve months ended December 31, 2008 and 2007 are $103,133 and $63,324,
respectively. The loss from operations for Skreem Studios for the period of May
10, 2006 (inception) to December 31, 2008 is $166,547. Prior year financial
statements have been restated to present the operations of Skreem Studios as a
discontinued operation.
12. Interest
Expense
Interest
expense for the twelve months ended December 31, 2008, and the period from
inception on March 10, 2006 through December 31, 2008 was $8,289 and $10,596,
respectively. At December 31, 2008 the Company had accrued interest of $6,484.
For the twelve month period ended and from inception through December 31, 2008,
the Company paid interest of $2,043 and $4,111, respectively.
37
INSIGHT
MANAGEMENT CORPORATION
CONSOLIDATED
BALANCE SHEETS
(unaudited)
From
Form 10-Q - For the quarterly period ended September 30, 2009
September
30, 2009
|
December
31, 2008
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 331,712 | $ | 16,759 | ||||
Trade
accounts receivable, net of allowance for doubtful
accounts
|
311,370 | 4,988 | ||||||
Other
current assets
|
8,561 | — | ||||||
Total
current assets
|
651,643 | 21,747 | ||||||
EQUIPMENT,
net of accumulated depreciation
|
535,875 | 7,115 | ||||||
OTHER
ASSETS:
|
||||||||
Identified
intangible assets, net of accumulated amortization
|
2,888,537 | — | ||||||
Goodwill
|
727,171 | — | ||||||
TOTAL
ASSETS
|
$ | 4,803,226 | $ | 28,862 | ||||
L IABILITIES AND STOCKHOLDERS’
DEFICIT
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 316,169 | $ | 26,684 | ||||
Short-term
note payable
|
34,000 | — | ||||||
Unsecured
loan payable
|
— | 215,000 | ||||||
Long-term
debt - current portion
|
2,265,503 | — | ||||||
Total
current liabilities
|
2,615,672 | 241,684 | ||||||
CONDITIONAL
NOTE PAYABLE, net of discount
|
2,444,333 | — | ||||||
STOCKHOLDERS’
DEFICIT
|
||||||||
Common
stock, $.001 par value; 1,000,000,000 shares authorized, 515,453,806 and
504,453,831 shares issued and outstanding, respectively
|
515,454 | 504,454 | ||||||
Stock
subscriptions receivable
|
(24,340 | ) | (201,496 | ) | ||||
Additional
paid-in capital
|
367,192 | 126,603 | ||||||
Accumulated
deficit
|
(1,115,085 | ) | (642,383 | ) | ||||
Total
stockholders’ deficit
|
(256,779 | ) | (212,822 | ) | ||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$ | 4,803,226 | $ | 28,862 |
The
accompanying notes are an integral part of these financial
statements
38
INSIGHT
MANAGEMENT CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited)
From
Form 10-Q - For the quarterly period ended September 30, 2009
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
SERVICE
REVENUES
|
$ | 588,903 | $ | — | $ | 588,903 | $ | — | ||||||||
Total
revenues
|
588,903 | — | 588,903 | — | ||||||||||||
COSTS
AND EXPENSES:
|
||||||||||||||||
Consulting
fees
|
— | 31,300 | 102,550 | 64,300 | ||||||||||||
Consulting
fees - related party
|
— | 114,250 | 10,000 | 123,250 | ||||||||||||
Compensation
|
333,949 | — | 392,891 | — | ||||||||||||
Contracted
labor
|
12,500 | 7,075 | 56,700 | 7,075 | ||||||||||||
Professional
fees
|
65,690 | — | 136,323 | 7,200 | ||||||||||||
Other
operating expenses
|
39,873 | 9,676 | 59,576 | 10,872 | ||||||||||||
Rent
|
12,000 | — | 12,000 | — | ||||||||||||
Supplies
|
46,663 | — | 46,663 | — | ||||||||||||
Insurance
|
25,149 | — | 25,149 | — | ||||||||||||
Repairs
and maintenance
|
16,108 | — | 16,108 | — | ||||||||||||
(Gain)
Loss on disposal of equipment
|
(344 | ) | — | 1,109 | (3,560 | ) | ||||||||||
Depreciation
and amortization
|
89,464 | — | 90,163 | — | ||||||||||||
Total
cost and expenses
|
641,052 | 162,301 | 949,232 | 209,137 | ||||||||||||
OTHER
INCOME (EXPENSE):
|
||||||||||||||||
Interest
expense
|
(111,355 | ) | — | (112,373 | ) | — | ||||||||||
NET
(LOSS)
|
$ | (163,504 | ) | $ | (162,301 | ) | $ | (472,702 | ) | $ | (209,137 | ) | ||||
BASIC
AND DILUTED NET (LOSS) PER COMMON SHARE
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
510,451,780 | 504,453,824 | 507,208,205 | 504,453,824 |
The
accompanying notes are an integral part of these financial
statements
39
INSIGHT
MANAGEMENT CORPORATION
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
NINE
MONTHS ENDED SEPTEMBER 30, 2009
(unaudited)
From
Form 10-Q - For the quarterly period ended September 30, 2009
Common
Stock
|
Stock
Subscriptions
|
Additional
Paid-In
|
Accumulated
|
|||||||||||||||||||||
Shares
|
Amount
|
Receivable
|
Capital
|
Deficit
|
Total
|
|||||||||||||||||||
Balances,
December 31, 2008
|
504,453,831 | $ | 504,454 | $ | (201,496 | ) | 126,603 | (642,383 | ) | $ | (212,822 | ) | ||||||||||||
Shares
issued for cash
|
2,109,975 | 2,110 | 213,396 | 29,816 | — | 245,322 | ||||||||||||||||||
Debt
acquired as part of reverse merger
|
— | — | — | (97,168 | ) | — | (97,168 | ) | ||||||||||||||||
Shares
issued for subscription receivable and conversion of debt -related party,
at fair value
|
7,000,000 | 7,000 | (39,340 | ) | 49,232 | — | 16,892 | |||||||||||||||||
Shares
issued for interest expense, and conversion of debt - at fair
value
|
7,000,000 | 7,000 | — | 243,000 | — | 250,000 | ||||||||||||||||||
Shares
issued for services
|
140,000 | 140 | — | 10,459 | — | 10,599 | ||||||||||||||||||
Share
cancellation
|
(5,250,000 | ) | (5,250 | ) | — | 5,250 | — | — | ||||||||||||||||
Impairment
of subscription receivable
|
— | — | 3,100 | — | — | 3,100 | ||||||||||||||||||
Net
loss
|
— | — | — | — | (472,702 | ) | (472,702 | ) | ||||||||||||||||
Balances,
September 30, 2009
|
515,453,806 | $ | 515,454 | $ | (24,340 | ) | $ | 367,192 | $ | (1,115,085 | ) | $ | (256,779 | ) |
The
accompanying notes are an integral part of these financial
statements
40
INSIGHT
MANAGEMENT CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
From
Form 10-Q - For the quarterly period ended September 30, 2009
Nine
Months Ended
September
30,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (472,702 | ) | $ | (209,137 | ) | ||
Adjustments
to reconcile net loss to net cash provided (used) by operating
activities:
|
||||||||
Impairment
of subscription receivable
|
3,100 | — | ||||||
Loss/(Gain)
on disposal of equipment
|
1,109 | (3,560 | ) | |||||
Depreciation
and amortization
|
90,163 | — | ||||||
Shares
issued for services
|
10,599 | — | ||||||
Accrued
interest expense
|
33,725 | — | ||||||
Accretion
of interest on acquisition notes
|
42,614 | — | ||||||
Interest
settled by share issuance
|
35,000 | — | ||||||
Change
in operating assets and liabilities, net of business
acquisitions:
|
— | — | ||||||
Accounts
receivable
|
(56,582 | ) | 14,336 | |||||
Other
current assets
|
(900 | ) | (5,547 | ) | ||||
Other
non-current assets
|
— | 4,100 | ||||||
Accounts
payable and accrued expenses
|
191,307 | — | ||||||
NET
CASH USED BY OPERATING ACTIVITIES
|
(122,567 | ) | (199,808 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Net
cash acquired from acquisitions
|
160,232 | — | ||||||
Purchase
of equipment
|
— | (6,980 | ) | |||||
Proceeds
from disposal of equipment
|
699 | 3,560 | ||||||
NET
CASH PROVIDED (USED) BY INVESTING ACTIVITIES
|
160,931 | (3,420 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net
borrowing on short-term unsecured financing
|
— | 39,136 | ||||||
Proceeds
from short-term note payable
|
34,000 | — | ||||||
Proceeds
from common stock issuances and subscriptions
|
245,322 | 191,574 | ||||||
Payment
of vehicle loans and unsecured short term financing
|
(2,733 | ) | (7,560 | ) | ||||
NET
CASH PROVIDED BY INVESTING ACTIVITIES
|
276,589 | 223,150 | ||||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
314,953 | 19,922 | ||||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
16,759 | 200 | ||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 331,712 | $ | 20,122 | ||||
SUPPLEMENTAL
DISCLOSURES OF NON-CASH FINANCING TRANSACTIONS:
|
||||||||
Accounts
payable acquired in reverse merger
|
$ | 97,168 | $ | — | ||||
Non-cash
assets acquired/debt assumed from acquisition:
|
||||||||
Accounts
receivable
|
249,800 | — | ||||||
Other
current assets
|
7,661 | — | ||||||
Equipment
|
559,268 | — | ||||||
Identifiable
intangible assets
|
2,950,000 | — | ||||||
Goodwill
|
727,171 | — | ||||||
Accounts
payable
|
17,809 | — | ||||||
Long-term
debt - current portion
|
2,234,537 | — | ||||||
Conditional
note payable
|
2,401,692 | — | ||||||
Stock
issued for debt settlement/ stock subscription receivable:
|
||||||||
Stock
subscription receivable
|
39,340 | — | ||||||
Accounts
payable
|
(16,892 | ) | — | |||||
Unsecured
loan payable
|
(250,000 | ) | ||||||
Unsecured
loan payable issued for intangible asset
|
— | 215,000 | ||||||
SUPPLEMENTAL
DISCLOSURES:
|
||||||||
Cash
paid for interest
|
$ | — | $ | — | ||||
Cash
paid for taxes
|
$ | — | $ | — |
The
accompanying notes are an integral part of these financial
statements
41
INSIGHT
MANAGEMENT CORPORATION
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
From
Form 10-Q - For the quarterly period ended September 30, 2009
1. Basis of Financial Statement
Presentation
Interim
Financial Information
The
accompanying unaudited consolidated financial statements of Insight Management
Corporation (the “Company”) have been prepared in accordance with principles
generally accepted in the United States of America for interim financial
information and applicable rules of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. The interim financial statements and notes should be read in
conjunction with the financial statements and notes thereto included in the
Company’s Form 10-K for the year ended December 31, 2008. Operating results for
the three months and nine months ended September 30, 2009 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2009.
2. Nature of
Operations
The
company provides servicing and maintenance of natural gas pipelines and wells
pumps for customers located in the greater Rocky Mountain region and pressure
testing blow out prevention services in the Colorado.
Effective
June 29, 2009, the Company acquired through a wholly-owned subsidiary all
outstanding common stock of Microresearch Corporation, a Nevada corporation in a
reverse triangular merger (see Note 7). The acquisition has been treated as a
recapitalization of Insight Management Corporation. Under U.S. generally
accepted accounting principles, in this reverse merger Microresearch Corporation
is considered the acquirer for accounting purposes and not Insight Management
Corporation, which was the legal acquirer. Accordingly, all historic information
presented in the accompanying financial statements is that of Microresearch
Corporation.
Upon
review of Microresearch’s financials for the prior two fiscal years, the Company
concluded that Microresearch did not meet the definition of a business under
current FASB guidance and as a result, audited financial statements for
Microresearch are not provided. At the date of the merger and for the
prior two fiscal years, management concluded that Microresearch did not consist
of a self-sustaining group of activities and was not managed for the purpose or
providing a return to investors. Additionally, Microresearch did not
have significant assets or the ability to obtain the necessary assets in order
to sustain operations.
On June
30, 2009, the Company acquired Rebel Testing, Inc. (“RTI”) in a purchase
transaction (Note 7). RTI is a Wyoming-based company providing servicing and
maintenance of natural gas wells for customers located in the greater Rocky
Mountain region since 1991. Audited financial statements for RTI are
provided as part of this filing.
3. Significant Accounting
Policies
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of Insight
Management Corporation and its subsidiary. All material intercompany accounts
and transactions have been eliminated in consolidation. Revenues and expenses of
acquired companies are included as of the effective the date of
acquisition.
Development
Stage Operations
Prior to
the acquisition of RTI, the Company had presented its financial statements as a
development stage enterprise as it had not realized significant revenues.
Although the Company did not realized any revenues in the periods ended June 30,
2009, the Company considers itself to have exited its development stage as of
this date with the acquisition of RTI, which has significant and long
established business operations and revenues.
42
Revenue
Recognition
Revenue
is comprised principally of service revenue from work performed for customers
under master service arrangements. Revenue is recognized at the time a work
order is completed and approved by the customer, in the same manner as they are
contractually earned as such policy complies with the following criteria: (i)
persuasive evidence of an arrangement exists; (ii) the services have been
provided; (iii) the fee is fixed and determinable, (iv) collectability is
reasonably assured. Once work is approved, the Company has no further service
obligations to the customer, at which time the work order is billed and is
payable in full by the customer. The Company’s policy is not to grant refunds or
other credits against billed amounts for completed and approved work
orders.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents. There are no cash equivalents at
September 30, 2009 or December 31, 2008.
Accounts
Receivable
The
Company provides credit in the normal course of business to its customers. The
Company performs ongoing credit evaluations of its customers and maintains
allowances for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends, and other information. An allowance is
established with a charge to bad debt expense at the time management determines
a customer balance has become doubtful. Based on its evaluation, management
believes all receivables are collectible as of September 30, 2009, and therefore
no allowance for doubtful accounts has been established. Substantially all of
the Company’s customers are engaged in the oil and gas industry in the western
United States. This concentration of customers may impact overall exposure to
credit risk, either positively or negatively, in that customers may be similarly
affected by changes in general economic and/or specific industry
conditions.
Property
and Equipment
Property
and equipment are recorded at cost. Depreciation is computed using straight-line
method based on the estimated useful lives of the related assets, generally
ranging from three to seven years.
Goodwill/Intangible
Asset Valuation
Goodwill
represents the excess of acquisition cost over the assigned fair value of the
assets acquired, less liabilities assumed. Goodwill is tested for impairment
annually at the same date every year and when an event occurs or circumstances
change such that it is reasonably possible that impairment may exist, in
accordance with procedures outlined in the Financial Accounting Standards
Board’s ASC Topic 350, “Intangibles - Goodwill and Other”.
The Company’s annual testing date is December 31.
Finite-lived
acquired intangible assets are amortized on a straight-line method over the
estimated lives of the assets. The intangible assets consist of customer
relationships being amortized over a 15 year period, trade name being amortized
over a 20 year period and non-compete agreements being amortized over a 5 year
periods. Management evaluates potential impairment of finite-lived acquired
intangible assets when appropriate. The value of the asset is reduced with a
charge to impairment loss to the extent it is determined that the carrying value
is no longer recoverable based upon the undiscounted cash flows of the
asset.
As
goodwill and intangible amortizable assets presented in the accompanying 2009
balance sheet were acquired on June 30, 2009, the recorded fair values of which
were based upon an independent valuation, management believes no impairment of
these assets exist as of this date. However, the Company is exposed to the
possibility that changes in market conditions could result in significant
impairment charges in the future.
Fair
Value Measurements
The
Company adopted FASB ASC Topic 820, “Fair Value Measurement and
Disclosure”, at inception. ASC Topic 820 defines fair value, establishes
a framework for measuring fair value, and expands disclosure of fair value
measurements. FASB ASC Topic 820 applies under other accounting pronouncements
that require or permit fair value measurements and accordingly, does not require
any new fair value measurements. SFAS No. 157 clarifies that fair value is an
exit price, representing the amount that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that should be
determined based on assumptions that market participants would use in pricing an
asset or liability. As a basis for considering such assumptions, FASB ASC Topic
820 established a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value as follows.
|
•
|
Level
1. Observable inputs such as quoted market prices in active
markets.
|
|
•
|
Level
2. Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly,
and
|
|
•
|
Level
3. Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own
assumptions.
|
43
The
FASB’s ASC Topic 825, “Financial Instruments”,
became effective for the Company on January 1, 2008. FASB ASC Topic 825
establishes a fair value option that permits entities to choose to measure
eligible financial instruments and certain other items at fair value at
specified election dates. A business entity shall report unrealized gains and
losses on items for which the fair value options have been elected in earnings
at each subsequent reporting date. For the period ended September 30, 2009,
there were no applicable items on which the fair value option was
elected.
Acquisition
Accounting
In
December 2007, the FASB issued guidance now codified as FASB ASC Topic 805,
“Business Combination”.
The statement retains the purchase method of accounting for acquisitions, but
requires a number of changes, including changes in the way assets and
liabilities are recognized in the purchase accounting. It also changes the
recognition of assets acquired and liabilities assumed arising from
contingencies and requires expensing of acquisition-related costs as incurred.
FASB ASC Topic 805 was effective for us beginning January 1, 2009 and applies
prospectively to business combinations completed on or after that
date.
4. Recently Issued Accounting
Standards
In June
2009, the FASB issued guidance now codified as FASB ASC Topic 105, “Generally Accepted Accounting
Principles,” as the single source of authoritative nongovernmental U.S.
GAAP. FASB ASC Topic 105 does not change current U.S. GAAP, but is intended to
simplify user access to all authoritative U.S. GAAP by providing all
authoritative literature related to a particular topic in one place. All
existing accounting standard documents will be superseded and all other
accounting literature not included in the FASB Codification will be considered
non-authoritative. These provisions of FASB ASC Topic 105 are effective for
interim and annual periods ending after September 15, 2009 and, accordingly, are
effective for the Company for the current fiscal reporting period. The adoption
of this pronouncement did not have an impact on the Company’s financial
condition or results of operations, but will impact our financial reporting
process by eliminating all references to pre-codification standards. On the
effective date of this Statement, the Codification superseded all then-existing
non-SEC accounting and reporting standards, and all other non-grandfathered
non-SEC accounting literature not included in the Codification became
non-authoritative.
In
September 2006, the FASB issued guidance now codified as FASB ASC Topic 820,
“Fair Value Measurements and
Disclosures,” which defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. The
pronouncement is effective for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. In February 2008, the FASB
released additional guidance now codified under FASB ASC Topic 820, which
provides for delayed application of certain guidance related to non-financial
assets and non-financial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually), until fiscal years beginning after November 15, 2008, and
interim periods within those years. The Company adopted certain provisions of
FASB ASC Topic 820 that were unaffected by the delay in 2008. The implementation
of this pronouncement did not have a material impact on our consolidated
financial position, results of operations or cash flows. See Note 5, Fair Value of Financial
Instruments, for these additional disclosures.
In April
2009, the FASB issued guidance now codified as FASB ASC Topic 825, “Financial Instruments,” which
amends previous Topic 825 guidance to require disclosures about fair value of
financial instruments in interim as well as annual financial statements. This
pronouncement is effective for periods ending after June 15, 2009. Accordingly,
the Company adopted these provisions of FASB ASC Topic 825 on April 1, 2009. The
adoption of this pronouncement did not have a material impact on our
consolidated financial position, results of operations or cash flows. However,
these provisions of FASB ASC Topic 825 resulted in additional disclosures with
respect to the fair value of the Company’s financial instruments. See Note 5,
Fair Value of Financial
Instruments, for these additional disclosures.
In May
2009, the FASB issued guidance now codified as FASB ASC Topic 855, “Subsequent Events,” which
establishes general standards of accounting for, and disclosures of, events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. This pronouncement is effective for interim or
fiscal periods ending after June 15, 2009. Accordingly, the Company adopted
these provisions of FASB ASC Topic 855. The adoption of this pronouncement did
not have a material impact on our consolidated financial position, results of
operations or cash flows. However, the provisions of FASB ASC Topic 855 resulted
in additional disclosures with respect to subsequent events. See Note 12,
Subsequent Events, for this additional disclosure.
5. Fair Value
Measurements
The
Company adopted certain provisions of FASB ASC Topic 820, “Fair Value Measurements and
Disclosures,” as of April 1, 2009, to evaluate the fair value of certain
of its financial assets required to be measured on a recurring basis. Under FASB
ASC Topic 820, based on the observability of the inputs used in the valuation
techniques, the Company is required to provide the following information
according to the fair value hierarchy. The fair value hierarchy ranks the
quality and reliability of the information used to determine fair values.
Financial assets and liabilities carried at fair value will be classified and
disclosed in one of the following three categories:
Various
inputs are considered when determining the value of the Company’s investments
and long-term debt. The inputs or methodologies used for valuing securities are
not necessarily an indication of the risk associated with investing in these
securities. These inputs are summarized in the three broad levels listed
below.
44
|
•
|
Level
1. Observable inputs such as quoted market prices in active
markets.
|
|
•
|
Level
2. Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly,
and
|
|
•
|
Level
3. Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own
assumptions.
|
The
Company had no assets or liabilities that were measured and recognized at fair
value on a non-recurring basis as of September 30, 2009 or 2008, and as such,
had no assets or liabilities that fell into the tiers described
above.
The
following table presents assets and liabilities that are measured and recognized
at fair value as of June 30, 2009 on a non-recurring basis, as a result of the
acquisition on June 30, 2009. Refer to Note 7 for further details:
Description
|
Level
1
|
Level
2
|
Level
3
|
Total
Gains
(Losses)
|
||||||||||||
Intangible
assets
|
$ | — | $ | — | $ | 2,950,000 | $ | — | ||||||||
Goodwill
|
$ | — | $ | — | $ | 645,000 | $ | — | ||||||||
Conditonal
note payable
|
$ | — | $ | — | $ | 4,631,692 | $ | — |
The
Company adopted the provisions of FASB ASC Topic 825, “Financial Instruments,” on
April 1, 2009, which require disclosures about the fair value of financial
instruments in interim as well as annual financial statements.
The
Company’s cash and cash equivalents, trade accounts receivable, accounts
payable, accrued liabilities and short term note payable fair values
approximates their carrying amounts due to their current maturities as of
September 30, 2009.
The
Company’s long-term debt with aggregate book value of $4,709,836 had aggregated
fair value of approximately $4,847,975 as of September 30, 2009. These changes
in fair value from their carrying amounts are primarily due to the difference
between accounting for the October 6, 2009, debt modification using the
effective interest rate method and fair value method. See note 9 for more
details. The Company determined the estimated fair value amounts by using
commonly accepted valuation methodologies and unobservable inputs in which there
is little or no market data, and the reporting entity’s own assumptions. (Level
3) However, considerable judgment is required in interpreting market data to
develop estimates of fair value. Accordingly, the fair value estimates presented
herein are not necessarily indicative of the amount that the Company could
realize in a current market exchange. The use of different assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value.
6. Going
Concern
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate the continuation of the Company as a going concern. Until the
acquisition of Rebel Testing, Inc. on June 30, 2009, the Company operated as a
development stage enterprise and had not established an ongoing source of
revenues sufficient to cover its operating costs and to allow it to continue as
a going concern, relying on limited private placements of its stock through a
Regulation S offering to fund its development activities while incurring
significant losses and a working capital deficit. The Company has incurred
significant debt by the acquisition of Rebel Testing and must raise capital in
the near term to service this debt or risk termination of the
acquisition.
The
Company’s ability to continue in existence is dependent upon developing
additional sources of capital to service its acquisition debt and continue
expansion of its business in oil & gas field services. Management’s plan is
to raise capital through additional private offerings and financing initiatives,
in addition to registering shares to raise equity capital in U.S. and foreign
markets. The accompanying financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amount and classifications or liabilities or other adjustments that might be
necessary should the Company be unable to continue as a going
concern.
7. Acquisitions
Reverse
Merger - Microresearch
On June
29, 2009, the Company acquired through a wholly-owned subsidiary all outstanding
common stock of Microresearch Corporation in a reverse triangular merger. Under
the merger agreement, Microresearch shareholders were issued 1½ shares of
Company common stock in exchange for each outstanding share of Microresearch,
resulting in 66,305,792 common shares issued by the Company to effect the
acquisition. For accounting purposes, the acquisition has been treated as a
recapitalization of Microresearch, with Microresearch as the acquirer. This
determination is due to the fact that the previously established public company
did not meet the definition of a business. The historical consolidated financial
statements prior to June 29, 2009 are those of Microresearch, with capital
retroactively adjusted by the common stock exchange ratio established in the
merger agreement. We determined this transaction to be a reverse merger because
the shareholders of Microresearch own a majority of the shares and voting rights
post merger in addition to a majority of the Company’s new management and board
of directors positions. The Company elected to change our name and keep the
former public company name of Insight Management Corporation.
45
Purchase
Acquisition – Rebel Testing, Inc.
Effective June 30, 2009, the Company
acquired all outstanding common stock of Rebel Testing, Inc. (“RTI”). As initial
consideration, the RTI shareholders (“Sellers”) received $20,000 in cash at
closing. The Company also executed a Conditional Promissory Note (“Conditional
Note”) to the Sellers with a face value of $4,980,000. Under the terms of the
Stock Purchase Acquisition Agreement (“Purchase Agreement”) and the Conditional
Note, $2,230,000 in cash is unconditionally due by the Company within 60 days
after effective registration of shares with the Securities and Exchange
Commission, which shall not exceed 90 days from the closing date. This portion
of the Conditional Note bears interest at a 6% annual rate until paid. The
remaining $2,750,000 face value of the Conditional Note of $2,401,692, the
discounted fair value at the acquisition date is contingent upon RTI achieving a
performance target as defined in the Purchase Agreement over three twelve-month
periods following the closing, and represents the maximum additional
consideration which may be paid to the Sellers. Upon achieving the defined
performance target, the maximum payment and due date for each period is as
follows:
Original
due dates
|
Payments
|
|||
July
31, 2010
|
$
|
1,000,000
|
||
July
31, 2011
|
$
|
1,000,000
|
||
July
31, 2012
|
$
|
750,000
|
Should
any of the above amounts become due, the Company may elect to pay the balance
over four equal quarterly installments following the due date, the unpaid
principal of which will bear interest at a 10% annual rate until fully paid. The
entire balance due, or conditionally due, under the Conditional Note is secured
by the RTI shares.
The total cost of the acquisition was
$4.7 million, with $1.1 million in net assets acquired at fair value, resulting
in an excess of consideration over value received of $3.6 million. The Company
engaged an independent consultant to assess the fair value of the net assets
acquired, and to assess the excess consideration for potential amortizable
intangible assets and determine a value for such assets that may be identified.
The valuation also determined the discounted value for the Conditional Note, as
portions of this obligation contained no interest terms over their periodic
maturity dates. The identified intangible assets and assigned values were as
follows:
Existing
customer relationships
|
$
|
2,211,000
|
||
Trade
name
|
329,000
|
|||
Non-compete
agreements
|
410,000
|
|||
Total
identified intangible assets
|
$
|
2,950,000
|
The above
total value was recorded in the acquisition accounting, on June 30, 2009 as
identified intangible assets, with the remaining unidentified excess
consideration of $645,764 recorded as goodwill as of the acquisition date. The
Company recorded an additional $81,407 of Goodwill during the third quarter of
2009, due to new information obtained about facts and circumstances that existed
as of the acquisition date, regarding the fair
values of the fixed assets acquired in Rebel Testing, Inc acquisition on June
30, 2009. Refer to Note 8 for the change in carrying value of goodwill and for
the useful lives of the identified intangible assets and the amortization for
the three month period ending September 30, 2009.
The
following summary presents the estimated fair values of the assets acquired and
liabilities assumed for RTI as of the effective date of acquisition, prior to
the adjustment to the property and equipment fair values during the third
quarter of 2009. Refer to Note 8 for further details.
Current
assets
|
$
|
437,599
|
||
Property
and equipment
|
640,675
|
|||
Total
assets acquired
|
1,078,274
|
|||
Current
liabilities (other than debt obligations)
|
17,809
|
|||
Debt
obligations - current portion
|
4,537
|
|||
Total
liabilities assumed
|
22,346
|
|||
Net
assets acquired
|
$
|
1,055,928
|
||
Purchase
price:
|
||||
Cash
at closing
|
$
|
20,000
|
||
Seller-financed
debt
|
4,631,692
|
|||
Total
purchase price
|
4,651,692
|
|||
Excess
of purchase price over net assets acquired
|
3,595,764
|
|||
Less:
Excess purchase price allocated to identified intangible
assets
|
2,950,000
|
|||
Goodwill
|
$
|
645,764
|
46
Pro
Forma Information
Unaudited
pro forma information for the Company is presented below as if the acquisition
of RTI had taken place as of January 1 for each of the fiscal years presented.
This pro forma information does not purport to be indicative of the results of
operations which would have resulted had the acquisition been consummated at the
dates assumed.
Nine
Months Ended Sep 30,
|
||||||||
2009
|
2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Revenues
|
$ | 1,681,073 | $ | 2,534,673 | ||||
Net
income (loss)
|
$ | (310,625 | ) | $ | 464,099 | |||
Basic
and diluted per share income (loss)
|
$ | (0.00 | ) | $ | 0.00 |
8. Goodwill and other
Intangible Assets
The
Company recorded an additional $81,407 of Goodwill due to new information
obtained about facts and circumstances that existed as of the acquisition date, regarding the fair
values of the fixed assets acquired in Rebel Testing, Inc acquisition on June
30, 2009.
The
change in the carrying value of goodwill is as follows:
June
30, 2009 Balance
|
$
|
645,764
|
||
Adjustment
to fair value of property and equipment
|
81,407
|
|||
September
30, 2009 Balance
|
$
|
727,171
|
||
Intangible
assets were recognized in conjunction with the Rebel Testing, Inc acquisition on
June 30, 2009. There were no intangible assets prior to this
acquisition.
September
30, 2009
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Estimated
useful
Life
(Years)
|
Gross
carrying
Amount
|
Accumulated
Amortization
|
Net
|
|||||||||||||
Intangible
assets
|
||||||||||||||||
Existing
customer relationships
|
15 | $ | 2,211,000 | $ | 36,850.00 | $ | 2,174,150 | |||||||||
Trade
name
|
20 | 329,000 | $ | 4,113 | 324,887 | |||||||||||
None-compete
agreements
|
5 | 410,000 | $ | 20,500.00 | 389,500 | |||||||||||
$ | 2,950,000 | $ | 61,463.00 | $ | 2,888,537 |
Amortization
expense on intangible assets for the three months and nine months ended
September 30, 2009 was $61,463. Amortization expense on intangible assets for
the three months and nine months ended September 30, 2008 was nil. At September
30, 2009 estimated amortization expense for the remainder of fiscal 2009 and
years thereafter are as follows:
47
Estimated
Amortization
Expense
|
||||
2009
(remainder)
|
$
|
61,463
|
||
2010
|
245,852
|
|||
2011
|
245,852
|
|||
2012
|
245,852
|
|||
2013
|
245,852
|
|||
2014
|
204,852
|
|||
Thereafter
|
1,638,814
|
|||
Total
|
$
|
2,888,537
|
9. Debt
Short-Term
Note Payable
The
Company has an unsecured loan with an unrelated company in the amount of
$34,000, the principal and accrued interest (6% annual rate) of which was due
September 30, 2009. A late charge of 5% interest per annum will be incurred
after September 30, 2009, in terms of the loan agreement.
Long-Term
Debt
As more
fully described in Note 7, the Company incurred conditional and unconditional
obligations (the “Conditional Note” and “Unconditional Note”) with a total face
value of $4,980,000 in the acquisition of RTI. $2,230,000 of this amount is
unconditional current debt and $2,750,000 is conditionally due 30 days after the
close of three 12-month periods beginning June 30, 2009 should RTI achieve a
performance target for each period as defined in the Purchase Agreement
(“Maturity Intervals”).
Due to
the requirements of fair value for contingent consideration pursuant to FASB ASC
Topic 805, “Business
Combination”, an independent valuation of the conditional portion of the
Conditional Note determined its fair value at $2,401,692 at the acquisition
date. This valuation resulted in a discount applied to each of the conditional
amounts due at the Maturity Intervals, as there were no interest terms stated in
the Conditional Note for this portion of the debt. The total discount of
$348,308 will be amortized to interest expense over the lives of each of the
three maturity periods of this debt. $42,641 has been amortized during the nine
months ended September 30, 2009.
On June 30, 2009, the inception date,
of the $2,750,000 Conditional Note, notwithstanding the discount applied, the
due dates and future payments was:
Original
due dates
|
Payments
|
|||
July
31, 2010
|
$
|
1,000,000
|
||
July
31, 2011
|
$
|
1,000,000
|
||
July
31, 2012
|
$
|
750,000
|
By
agreement dated October 6, 2009, the Company and Rebel Testing, Inc shareholders
(“Sellers”) entered into a Modification to Acquisition Agreement (“Modified
Purchase Agreement”). Pursuant to the Modified Purchase Agreement, the parties
agreed to waive and release one another from certain closing conditions, modify
the note payment terms and certain note amounts under the Stock Purchase
Agreement of June 29, 2009 between the Company and the Sellers, by which the
Company acquired Rebel Testing, Inc from the Sellers.
Under the
terms of the Modified Purchase Agreement, the Sellers and the Company agreed to
extend the deadline of $2,230,000, originally due on or before September 27,
2009, until December 31, 2009 and waive the 6% interest rate per annum from June
29, 2009 to September 27, 2009, and the Sellers and the Company agreed to
increase the amount due by $214,505 with interest of 6% per annum from September
30, 2009, payable on the same day as the $2,230,000. The additional amount of
$214,505 will be accreted using the effective interest method as additional
financing expense. The accretion begins September 27, 2009 and will be completed
in full by December 31, 2009, the due date. The company deemed the accretion
expense as of September 30, 2009 to be immaterial, and thus will begin accretion
on October 1, 2009.
48
In
accordance with the guidance in FASB ASC 470-50, “Debt-modifications and
Extinguishments”, the amended Unconditional Note amount is not
substantially different to the original Unconditional Note amount, due to the
present value of the change in cash flows being less than 10% and there is no
change in the creditor. The Company accounts for the modification of terms
prospectively using the new effective interest rates of the various
notes.
The
carrying value as September 30, 2009 is $2,263,725 and the new effective
interest rate on the amended note is 38%. During the three and nine months ended
September 30, 2009, the Company recorded interest expense of $33,725 on the
note.
The
Sellers and the Company also agreed to modify the due dates on the remaining
$2,750,000 Conditional Notes, presented at a discounted fair value amount of
$2,401,692 in the June 30, 2009 balance sheet by extending the due dates by
three months for each payment amount. The payment amounts remain contingent upon
Rebel Testing, Inc achieving a the same performance target as defined in the
Purchase Agreement over three twelve-month periods, and remains the maximum
additional consideration which may be paid to the Sellers. The start of the
three twelve-month periods was changed from the date of closing to September 30,
2009.
In
accordance with the guidance in FASB ASC 470-50, “Debt-modifications and
Extinguishments”, the amended Conditional Note amount is not
substantially different to the original Conditional Note amount, due to the
present value of the change in cash flows being less than 10% and there is no
change in the creditor. The Company accounts for the modification of terms
prospectively using the new effective interest rates of the various
notes.
The
amended Conditional Notes carrying value at September 30, 2009 is $2,444,333 and
the new effective interest rate, the modified due dates and maximum future
payments is summarized in the following table:
Due
dates
|
Payments
|
Effective
interest
rates
|
||||||
October
30, 2010
|
$ | 1,000,000 | 4.90 | % | ||||
October
30, 2011
|
$ | 1,000,000 | 6.20 | % | ||||
October
30, 2012
|
$ | 750,000 | 7.50 | % |
During
the three and nine months ended September 30, 2009, the Company recorded
interest expense of $42,641 on the note.
Also a
result of the RTI acquisition, the Company assumed loans owed to two financing
institutions totaling $4,537, which mature in July and December 2009 and are
secured by a vehicle and equipment. The amount outstanding as at September 30,
2009 is $1,788
10. Stockholders’
Deficit
Shares
Issued for Cash/Debt Cancellation
During
the nine months ended September 30, 2009, the Company sold 2,109,975 common
shares under a Regulation S Stock Purchase Agreement with a foreign placement
company dated August 4, 2008. The Company received a total of $245,322 in cash
during the nine months ended September 30, 2009 for these shares and shares
which had been subscribed and issued during the year ended December 31,
2008.
On June
30, 2009, an existing stockholder was issued 7,000,000 common shares in exchange
for cancellation of $16,892 in debt and a subscription receivable of $39,340.
The total market price of the 7,000,000 shares was $550,000, resulting in a
$533,108 loss. The Company recorded this loss as a reduction of additional
paid-in capital due to the related party nature of the transaction. The
subscription receivable has no payment terms. Subsequent to June 30, 2009, the
Company received a total of $15,000 in cash for the subscription
receivable.
On July
1, 2009, the Company cancelled 5,250,000 common shares surrendered by former
shareholders of Microresearch, for no consideration.
On July
23, 2009, the Company issued 140,000 common shares to the former shareholders of
Microresearch as compensation for the assignment of a company with no assets or
liabilities. The total market price of the 140,000 shares was
$10,599.
49
On
September 04, 2009, a creditor was issued 7,000,000 common shares in exchange
for cancellation of $250,000 in debt including finance costs of $35,000. The
total market price of the 7,000,000 shares was $250,000.
During
the nine months ended September 30, 2009, the Company wrote off a $3,100
subscription receivable it determined to be uncollectible.
On
October 20, 2009, the Company’s Board of Directors approved the increase of
authorized shares from 150,000,000 to 1,000,000,000 and a seven-for-one stock
split of the Company’s common stock, with no fractional shares, to the
shareholders of record as of November 6, 2009, with a distribution date of
November 9, 2009. This stock split resulted in the issuance of 441,817
additional shares of common stock and has been accounted for
retroactively.
Shares
Issued for Acquisition
As
disclosed in Note 7, on June 29, 2009 the Company issued 464,140,551 common
shares in exchange for all outstanding common shares of Microresearch
Corporation in a reverse merger transaction. Historic outstanding shares in the
accompanying financial statements have been retroactively adjusted by the common
stock exchange ratio established in the merger agreement. As a result of the
reverse merger, the Company assumed $97,168 of debt. Insight Management Company
had no assets at the time of the reverse merger.
11. Related Party
Transactions
The
Company paid $10,000 and $123,250 during the nine months ended September 30,
2009 and 2008, respectively, to shareholders performing development related
services. At September 30, 2009, $35,000 of accounts payable was due to a
minority shareholder holding less than 1% interest in the Company. The Company
leases an office facility from a company owned by the management of RTI under a
month-to-month arrangement with no terms. $12,000 was paid for rent during the
three months ended September 30, 2009, which covered the period since the RTI
acquisition occurred on June 30, 2009. The former shareholders of Microresearch
were issued 20,000 shares, with a market price $10,599, as compensation for the
assignment of a company with no assets or liabilities.
12. Subsequent
Events
On
October 6, 2009, the Company and Rebel Testing, Inc shareholders (“Sellers”)
entered into a Modification to Acquisition Agreement (“Modified Purchase
Agreement”). See note 8 for more details.
We
evaluated subsequent events through the date and time the Consolidated Financial
Statements were issued on November 23, 2009.
50
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Stockholders
Rebel
Testing, Inc.
We have
audited the accompanying balance sheets of Rebel Testing, Inc. as of December
31, 2008 and 2007 and the related statements of operations, changes in
stockholders' equity, and cash flows for the periods then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Rebel Testing, Inc. as of December
31, 2008 and 2007, and the results of its operations, changes in stockholders'
equity and cash flows for the period then ended in conformity with accounting
principles generally accepted in the United States of America.
/s/
M&K CPAS, PLLC
|
www.mkacpas.com
|
September
28, 2009
|
51
REBEL
TESTING, INC.
BALANCE
SHEETS
From
Form 8-K/A Amendment No. 1, Date of Report July 7, 2009
December 31,
|
||||||||
2008
|
2007
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 139,511 | $ | 301,538 | ||||
Accounts
receivable, net
|
607,170 | 640,656 | ||||||
Other
current assets
|
850 | — | ||||||
TOTAL
CURRENT ASSETS
|
747,531 | 942,194 | ||||||
PROPERTY
AND EQUIPMENT, net
|
583,290 | 338,093 | ||||||
OTHER
NON-CURRENT ASSETS
|
— | 917 | ||||||
TOTAL
ASSETS
|
$ | 1,330,821 | $ | 1,281,204 | ||||
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
|
$ | 18,343 | $ | 24,484 | ||||
Accrued
expenses
|
533 | 1,322 | ||||||
Current
maturities of long-term debt
|
14,177 | 15,692 | ||||||
TOTAL
CURRENT LIABILITIES
|
33,053 | 41,498 | ||||||
LONG
TERM DEBT, net of current maturities
|
— | 7,267 | ||||||
TOTAL
LIABILITIES
|
33,053 | 48,765 | ||||||
STOCKHOLDERS’
EQUITY:
|
||||||||
Common
stock, no par value; 30,000 shares authorized; 30,000 shares issued;
20,000 shares outstanding
|
30,000 | 30,000 | ||||||
Retained
earnings
|
1,280,268 | 1,214,939 | ||||||
1,310,268 | 1,244,939 | |||||||
Less:
Treasury stock, at cost (Shares held: 2008-10,000,
2007-10,000)
|
(12,500 | ) | (12,500 | ) | ||||
TOTAL
STOCKHOLDERS’ EQUITY
|
1,297,768 | 1,232,439 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 1,330,821 | $ | 1,281,204 |
SEE
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52
REBEL
TESTING, INC.
STATEMENTS
OF OPERATIONS
From
Form 8-K/A Amendment No. 1, Date of Report July 7, 2009
Year
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
SERVICE
REVENUES
|
$ | 3,315,492 | $ | 2,865,651 | ||||
COSTS
AND EXPENSES:
|
||||||||
Salary
and wages
|
1,267,385 | 1,179,140 | ||||||
Rent
|
90,223 | 52,312 | ||||||
Supplies
|
397,521 | 313,942 | ||||||
Insurance
|
156,574 | 180,012 | ||||||
Repairs
and maintenance
|
117,244 | 86,153 | ||||||
Professional
fees
|
5,290 | 2,415 | ||||||
Other
operating expenses
|
112,153 | 102,712 | ||||||
Depreciation
and amortization
|
140,163 | 126,601 | ||||||
Total
cost and expenses
|
2,286,553 | 2,043,287 | ||||||
OTHER
INCOME:
|
||||||||
Gain
on sale of property and equipment
|
— | 75,000 | ||||||
Interest
income, net
|
1,990 | 7,080 | ||||||
Total
other income
|
1,990 | 82,080 | ||||||
NET
INCOME
|
$ | 1,030,929 | $ | 904,444 | ||||
BASIC
AND DILUTED EARNINGS PER COMMON SHARE
|
$ | 51.55 | $ | 45.22 | ||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
20,000 | 20,000 |
SEE
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
REBEL
TESTING, INC.
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY
From
Form 8-K/A Amendment No. 1, Date of Report July 7, 2009
Common
Stock
|
Retained
|
Treasury
|
||||||||||||||||||
Shares
|
Amount
|
Earnings
|
Stock
|
Total
|
||||||||||||||||
Balances,
December 31, 2006
|
30,000 | $ | 30,000 | $ | 1,030,495 | $ | (12,500 | ) | $ | 1,047,995 | ||||||||||
Net
income
|
904,444 | 904,444 | ||||||||||||||||||
Shareholder
distributions
|
(720,000 | ) | (720,000 | ) | ||||||||||||||||
Balances,
December 31, 2007
|
30,000 | 30,000 | 1,214,939 | (12,500 | ) | 1,232,439 | ||||||||||||||
Net
income
|
1,030,929 | 1,030,929 | ||||||||||||||||||
Shareholder
distributions
|
(965,600 | ) | (965,600 | ) | ||||||||||||||||
Balances,
December 31, 2008
|
30,000 | $ | 30,000 | $ | 1,280,268 | $ | (12,500 | ) | $ | 1,297,768 |
SEE
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
REBEL
TESTING, INC.
STATEMENTS
OF CASH FLOWS
From
Form 8-K/A Amendment No. 1, Date of Report July 7, 2009
Year
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
income
|
$ | 1,030,929 | $ | 904,444 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
140,163 | 126,601 | ||||||
Gain
on sale of property and equipment
|
— | (75,000 | ) | |||||
Change
in:
|
||||||||
Accounts
receivable
|
33,486 | (24,479 | ) | |||||
Other
current assets
|
(850 | ) | 400 | |||||
Other
non-current assets
|
917 | 500 | ||||||
Accounts
payable
|
(789 | ) | 1,059 | |||||
Accrued
expenses
|
(6,141 | ) | (4,084 | ) | ||||
NET
CASH PROVIDED BY OPERATING ACTIVITIES
|
1,197,715 | 929,441 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Property
and equipment purchases
|
(371,532 | ) | (98,798 | ) | ||||
Proceeds
from sale of property and equipment
|
— | 75,000 | ||||||
NET
CASH USED IN INVESTING ACTIVITIES
|
(371,532 | ) | (23,798 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Shareholder
distributions
|
(965,600 | ) | (720,000 | ) | ||||
Repayments
on long-term debt
|
(22,610 | ) | (27,870 | ) | ||||
NET
CASH USED IN FINANCING ACTIVITIES
|
(988,210 | ) | (747,870 | ) | ||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
(162,027 | ) | 157,773 | |||||
CASH
AND CASH EQUIVALENTS, beginning of year
|
301,538 | 143,765 | ||||||
CASH
AND CASH EQUIVALENTS, end of year
|
$ | 139,511 | $ | 301,538 | ||||
SUPPLEMENTAL
DISCLOSURE OF NON-CASH FINANCING INFORMATION:
|
||||||||
Vehicle
acquired by seller financing
|
$ | 13,828 | $ | — | ||||
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
||||||||
Cash
paid for interest
|
$ | 336 | $ | — |
SEE
ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
REBEL
TESTING, INC.
NOTES
TO FINANCIAL STATEMENTS
From
Form 8-K/A Amendment No. 1, Date of Report July 7, 2009
1.
|
Nature of
Operations
|
Rebel
Testing, Inc. (the “Company”) is a Wyoming-based company providing servicing and
maintenance of natural gas wells for customers located in the greater Rocky
Mountain region since its incorporation in 1991. On June 30, 2009, 100% of
the outstanding common stock of the Company was acquired by Insight Management
Corporation, a publicly-traded holding company. Upon its acquisition, the
Company became a wholly-owned subsidiary of Insight Management Corporation.
Insight Management Corporation is based in California and engaged in providing
supporting technology and operational services to the oil & gas industry in
the western United States.
2. Significant Accounting
Policies
Basis
of Financial Statement Presentation
The
accompanying financial statements of Rebel Testing, Inc. have been prepared in
accordance with principles generally accepted in the United States of
America.
Revenue
Recognition
Revenue
is comprised principally of service revenue from work performed for customers
under master service arrangements. Revenue is recognized at the time a work
order is completed and approved by the customer, in the same manner as they are
contractually earned as such policy complies with the following criteria: (i)
persuasive evidence of an arrangement exists; (ii) the services have been
provided; (iii) the fee is fixed and determinable, (iv) collectability is
reasonably assured. Once work is approved, the Company has no further service
obligations to the customer, at which time the work order is billed and is
payable in full by the customer. The Company’s policy is not to grant refunds or
other credits against billed amounts for completed and approved work
orders.
Cash
and Cash Equivalents
The
Company considers all unrestricted highly liquid investments purchased with a
maturity of three months or less at the time of purchase to be cash equivalents.
There were no cash equivalents at December 31, 2008 or 2007.
Fair
Value of Financial Instruments
Accounting
principles generally accepted in the United States require disclosing the fair
value of financial instruments to the extent practicable for financial
instruments, which are recognized or unrecognized in the balance sheet. In
assessing the fair value of its financial instruments, the Company uses a
variety of methods and assumptions, which are based on estimates of market
conditions and risks existing at that time. For certain instruments, including
cash and cash equivalents, accounts receivable, accounts payable, and long-term
notes payable, the Company estimated the carrying amount approximated fair value
for the majority of these instruments because of their short maturity. The fair
value of the Company’s property and equipment is estimated to approximate their
net book values.
Accounts
Receivables and Allowance for Doubtful Accounts
The Company provides credit
in the normal course of business to its customers. The Company performs ongoing
credit evaluations of its customers and maintains allowances for doubtful
accounts based on factors surrounding the credit risk of specific customers,
historical trends, and other information.
An allowance is established with a charge to bad debt expense at the time
management determines a customer balance has become doubtful, , in accordance
with the direct write off method. During the years ended December 31, 2008
and 2007, the Company wrote off accounts totaling $3,097 and zero, respectively,
to bad debt expense. All accounts remaining were deemed to be fully collectible
by management, and as such, no allowance was necessary at December 31, 2008
or 2007.
Property
and Equipment
Property
and equipment are recorded at cost. Depreciation is computed using straight-line
method based on the estimated useful lives of the related assets, generally
ranging from three to seven years. Expenditures for repairs and maintenance are
charged to expense when incurred. Expenditures for major renewals and
betterments, which extend the useful lives of existing equipment, are
capitalized and depreciated over the remaining useful life of the equipment.
Upon retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts, and any resulting gain
or loss is recognized in the statement of operations.
Impairment
of Long-Lived Assets
In
accordance with Statement of Financial Accounting Standards (“SFAS”)
No. 144, “Accounting for
the Impairment or Disposal of Long-Lived Assets”, the Company evaluates
the recoverability of property and equipment and other long-lived assets, if
facts and circumstances indicate that any of those assets might be impaired. If
an evaluation is required, the estimated future undiscounted cash flows
associated with the asset are compared to the asset’s carrying amount to
determine if an impairment of such property is necessary. The effect of any
impairment would be to expense the difference between the fair value of such
property and its carrying value. Based on the Company’s review, no such
impairment indicators exist for the periods presented.
Advertising
Advertising
costs are expensed as incurred. Advertising expense for the years ended
December 31, 2008 and 2007 was $2,982 and $1,388.
56
Income
Taxes
The
shareholders have
elected treatment of the Company as an S-Corporation for taxation purposes under
the provisions of the Internal Revenue Code. Under these provisions, taxation
effects from income or losses of the Company pass directly to the shareholders.
Accordingly, no provision for income tax effects is presented in the
accompanying financial statements. As of its acquisition by Insight Management
Corporation on June 30, 2009, the S-Corporation election automatically
terminated, whereby the Company became a C-Corporation for income tax purposes.
From that date forward, income taxation effects will occur at the company
level.
Earnings
Per Common Share
Basic
earnings per common share is calculated based upon the weighted average number
of common shares outstanding during the periods presented. In determining the
weighted average number of common shares outstanding, all shares issued at
nominal value, net of subsequent share cancellations, are considered as
outstanding as of the inception date. The Company had no potentially dilutive
equity-based instruments outstanding at December 31, 2008 and
2007.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3.
|
Recently Issued
Accounting Standards
|
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157 (SFAS 157), “Fair Value Measurements,” which defines fair value,
establishes guidelines for measuring fair value and expands disclosures
regarding fair value measurements. SFAS 157 does not require any new fair value
measurements but rather eliminates inconsistencies in guidance found in various
prior accounting pronouncements. SFAS 157 is effective for fiscal years
beginning after November 15, 2007. In February 2008, the FASB issued
FASB Staff Position (FSP) 157-2, “Effective Date of FASB Statement
No. 157,” which defers the effective date of Statement 157 for nonfinancial
assets and nonfinancial liabilities, except for items that are recognized or
disclosed at fair value in an entity’s financial statements on a recurring basis
(at least annually), to fiscal years beginning after November 15, 2008, and
interim periods within those fiscal years. Earlier adoption is permitted,
provided the company has not yet issued financial statements, including for
interim periods, for that fiscal year.
The
company adopted those provisions of SFAS 157 that were unaffected by the delay
in 2008. Such adoption has not had a material effect on our consolidated
statement of financial position, results of operations or cash
flows.
SFAS
No. 157 clarifies that fair value is an exit price, representing the amount
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that
market participants would use in pricing an asset or liability. As a basis for
considering such assumptions, SFAS No. 157 established a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as
follows.
|
·
|
Level
1. Observable inputs such as quoted market prices in active
markets.
|
|
·
|
Level
2. Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly:,
and
|
|
·
|
Level
3. Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own
assumptions.
|
The
Company had no assets or liabilities that were measured and recognized at fair
value on a non-recurring basis as of December 31, 2008 or 2007, and as
such, had no assets or liabilities that fell into the tiers described
above.
In
February 2007, the FASB issued Statement No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities, including an Amendment of
SFAS No. 115”. SFAS 159 permits entities an option to choose to measure
many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. The objective of this Statement
is to reduce both complexity in accounting for financial instruments and the
volatility in earnings caused by measuring related assets and liabilities using
different measurement techniques. The fair value measurement provisions are
elective and can be applied to individual financial instruments. A business
entity shall report unrealized gains and losses on items for which the fair
value options have been elected in earnings at each subsequent reporting date.
This Statement is effective for the Company as of January 1, 2008. For the
period ended December 31, 2008 and 2007, there were no applicable items on
which the fair value option was elected.
57
In
March 2008, the FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities—an amendment of FASB Statement
No. 133”. SFAS 161 changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required 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. The Statement is effective for financial
statements issued for fiscal years and interim periods beginning after
November 15, 2008, which begins January 1, 2009 for the Company. The
adoption of SFAS 161 is not expected to have a material impact on the Company’s
results from operations or financial position.
In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles” (SFAS 162). This statement identifies the
sources of accounting principles and the framework for selecting the principles
used in the preparation of financial statements of nongovernmental entities that
are presented in accordance with GAAP. With the issuance of this statement, the
FASB concluded that the GAAP hierarchy should be directed toward the entity and
not its auditor, and reside in the accounting literature established by the FASB
as opposed to the American Institute of Certified Public Accountants (AICPA)
Statement on Auditing Standards No. 69, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.” The effective date of
this statement is November 15, 2008. The adoption of SFAS 162 is not
expected to have a material impact on the Company’s results from operations or
financial position.
In
May 2008, the FASB issued SFAS No. 163, “Accounting for Financial
Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60.”
Diversity exists in practice in accounting for financial guarantee insurance
contracts by insurance enterprises under FASB Statement No. 60, Accounting
and Reporting by Insurance Enterprises. This results in inconsistencies in the
recognition and measurement of claim liabilities. This Statement requires that
an insurance enterprise recognize a claim liability prior to an event of default
(insured event) when there is evidence that credit deterioration has occurred in
an insured financial obligation. This Statement requires expanded disclosures
about financial guarantee insurance contracts. The accounting and disclosure
requirements of effective for financial statements issued for fiscal years and
interim periods beginning after December 15, 2008, the Statement will
improve the quality of information provided to users of financial statements.
The Statement is which begins January 1, 2009 for the Company. The adoption of FASB 163
will not have a material impact on the Company’s results from operations or
financial position.
In
June 2008, the FASB issued FASB Staff Position (FSP) Emerging Issues Task
Force (EITF) No. 03-6-1, “Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities.” Under the FSP,
unvested share-based payment awards that contain rights to receive
non-forfeitable dividends (whether paid or unpaid) are participating securities,
and should be included in the two-class method of computing EPS. The FSP is
effective for fiscal years beginning after December 15, 2008, and interim
periods within those years, and is not expected to have a material impact on the
Company’s results from operations or financial position.
In
December 2008, the Financial Accounting Standards Board (“FASB”) issued
FASB Staff Position (“FSP”) FASB Interpretation (“FIN”) 48-3, Effective Date of FASB
Interpretation No. 48 for Certain Nonpublic Enterprises. FSP FIN
48-3 permits an entity within its scope to defer the effective date of FIN 48,
Accounting for Uncertainty in
Income Taxes, to its annual financial statements for fiscal years
beginning after December 15, 2008. The Company has elected to defer the
application of FIN 48 for the year ended December 31, 2008. The Company
evaluates its uncertain tax positions using the provisions of SFAS No. 5,
Accounting for
Contingencies. Accordingly, a loss contingency is recognized when it is
probable that a liability has been incurred as of the date of the financial
statements and the amount of the loss can be reasonably estimated. The amount
recognized is subject to estimate and management judgment with respect to the
likely outcome of each uncertain tax position. The amount that is ultimately
sustained for an individual uncertain tax position or for all uncertain tax
positions in the aggregate could differ from the amount recognized.
4.
|
Concentrations of
Risk
|
Credit
Risk
Financial
instruments exposed to potential credit risk are cash and accounts receivable.
The Company maintains depository cash accounts at two banks, where balances are
insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per
depositor. The cash in excess of the FDIC insured limit at December 31,
2008 and 2007 was zero and $14,102, respectively.
Substantially
all of the Company’s customers are engaged in the oil & gas industry in the
western United States. This concentration of customers may impact overall
exposure to credit risk, either positively or negatively, in that customers may
be similarly affected by changes in general economic and/or specific industry
conditions. The Company extends unsecured credit based on management’s
assessment of the customer’s financial condition, receivable aging, customer
disputes, and general business and economic conditions.
Three
customers amounted to of accounts receivable as of December 31, 2008,
respectively. No other customers amounted to more than 10% of 50%, 13% and 10%
of accounts receivable as of December 31, 2007, and two customers amounted
to 62% and 11% accounts receivable as of December 31, 2007 and 2008. Based
on its assessment of accounts receivable, management determined no allowance for
doubtful accounts was required at December 31, 2008 and 2007.
58
Major
Customers
Sales to
three customers in the year ended December 31, 2007 amounted to a total of
45%, 16% and 12% of revenue, respectively. Sales to three customers in the year
ended December 31, 2008 amounted to a total of 49%, 17% and 11% of
revenues, respectively. No other single customer accounted for more than 10% of
revenues in 2007 or 2008.
5.
|
Property and
Equipment
|
During
the year ended December 31, 2007, the company disposed of equipment with
zero net book value and recorded a gain of $75,000.
The
following is a summary of assets included under property and equipment in the
accompanying balance sheets:
December 31,
|
||||||||
2008
|
2007
|
|||||||
Equipment
|
$ | 704,139 | $ | 480,458 | ||||
Vehicles
|
867,125 | 705,446 | ||||||
1,571,264 | 1,185,904 | |||||||
Less:
accumulated depreciation and amortization
|
987,974 | 847,811 | ||||||
Property
and equipment, net
|
$ | 583,290 | $ | 338,093 |
The
property and equipment estimated average useful lives were five years for the
years ended December 31, 2008 and 2007.
6. Long-Term
Debt
December 31,
|
||||||||
2008
|
2007
|
|||||||
Note
payable to financing company; 0% interest; $1,030 monthly installments;
due July 2009; secured by vehicle
|
$ | 7,263 | $ | 19,627 | ||||
Note
payable to financing company; 0% interest; $576 monthly installments; due
December 2009; secured by equipment
|
6,914 | — | ||||||
Note
payable to financing company; 0% interest; $1,210 monthly installments;
due March 2008; secured by equipment
|
— | 3,332 | ||||||
Total
long-term debt
|
14,177 | 22,959 | ||||||
Less:
current maturities
|
14,177 | 15,692 | ||||||
$ | — | $ | 7,267 |
7. Commitments/Related Party
Transactions
The
Company rents office space and equipment under various short-term, cancellable
operating leases. Total rent expense was $90,223 and $52,312 for the years ended
December 31, 2008 and 2007.
Included
in the above is a lease for an office facility from a company owned by Rebel
Testing, Inc. shareholders under a month-to-month arrangement with no terms.
Rent expense for this related party lease was $47,000 and $36,000 for the years
ended December 31, 2008 and 2007.
8. Retirement Benefit
Plan
The
Company sponsors a retirement benefit plan which covers all employees meeting
the participation requirements and who elect to participate. The plan provides
for elective contributions by employees up to a maximum limit allowed by tax
regulations. The Company can elect to make matching contributions equal to 3% of
the compensation of participating employees. Total benefit plan expense for
Company contributions was $8,483 and $8,000 for the years ended
December 31, 2008 and 2007.
9. Subsequent
Event
Effective
June 30, 2009, all of the Company’s outstanding common shares were acquired
by Insight Management Corporation, a publicly-traded holding company. Under the
terms of Stock Purchase Agreement, the Company shareholders received $20,000 in
cash at closing and a promissory note with a total face value of $4,980,000,
secured by the Company’s common stock. At that time, the Company became a
wholly-owned subsidiary of Insight Management Corporation and a C-Corporation
for income taxation purposes.
59
Insight
Management Corporation
Unaudited
Pro Forma Combined Statements of Operations
for
the Year Ended December 31, 2008 and Six Months Ended June 30,
2009
From
Form 8-K/A Amendment No. 1, Date of Report July 7, 2009
Basis of
Presentation
Insight
Management Corporation/Microresearch Corporation Reverse Merger
Effective
June 29, 2009, Insight Management Corporation (the “Company”) acquired
through a wholly-owned subsidiary all outstanding common stock of Microresearch
Corporation in a reverse triangular merger. The acquisition was treated as a
recapitalization of Insight Management Corporation. Under U.S. generally
accepted accounting principles, in this reverse merger Microresearch Corporation
is considered the acquirer for accounting purposes and not Insight Management
Corporation, which was the legal acquirer. Accordingly, all historic information
presented in the accompanying pro forma combined statements of operations is
that of Microresearch Corporation. A more detailed description of the reverse
merger may be found in the Current Report on Form 8-K filed by the Company
on July 7, 2009 and in the 2009 Interim Report on Form 10-Q filed on
September 17, 2009. Upon review of Microresearch’s financials
for the prior two fiscal years, the Company concluded that Microresearch did not
meet the definition of a business under SFAS 141(R) “Business Combinations” and
as a result, audited financial statements for Microresearch are not provided in
this filing. At the date of the merger and for the prior two fiscal
years, management concluded that Microresearch did not consist of a
self-sustaining group of activities and was not managed for the purpose or
providing a return to investors. Additionally, Microresearch did not
have significant assets or the ability to obtain the necessary assets in order
to sustain operations.
Rebel
Testing, Inc. Purchase Acquisition
Effective
June 30, 2009, the Company acquired all outstanding common stock of Rebel
Testing, Inc. (“RTI”). As a result of this stock purchase, the Company received
approximately $1.1 million in tangible net assets, $3 million in
identifiable intangible assets and $646,000 in goodwill in exchange for $20,000
in cash and $4.98 million in Seller-financed debt. The basis of
presentation in accompanying pro forma information includes the effects of the
purchase accounting resulting from this acquisition as if the acquisition had
occurred January 1, 2008. A more detailed description of the RTI
acquisition and related accounting matters may be found in the Current Report on
Form 8-K filed by the Company on July 7, 2009 and in the 2009 Interim
Report on Form 10-Q filed on September 17, 2009.
The pro
forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or the financial position that
would have occurred if the acquisition had been consummated as of the assumed
date, nor is it necessarily indicative of the future operating results or the
financial position of the combined companies. No pro forma balance sheet is
presented as the acquisition was effective June 30, 2009, which resulted in
the acquisition being reflected in the 2009 Interim Report on Form 10-Q
filed on September 17, 2009. The pro forma adjustments are based upon
available information and certain assumptions that management believes are
reasonable.
The
unaudited combined pro forma statement of operations for the year ended
December 31, 2008 and the six months ended June 30, 2009 is based on
the Company’s unaudited results of operations for the year ended
December 31, 2008 and the audited results of operations for the year ended
December 31, 2008 of RTI, and the Company’s unaudited results of operations
for the six months ended June 30, 2009 and the unaudited results of
operations for the six months ended June 30, 2009 of RTI, as if the RTI
acquisition occurred on January 1, 2008. These pro forma unaudited combined
financial statements should be read in conjunction with the Company’s 2009
Interim Report on Form 10-Q filed on September 17, 2009, and the
historic financial statements and notes thereto of RTI included elsewhere in
this report.
60
INSIGHT
MANAGEMENT CORPORATION
PRO-FORMA
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
From
Form 8-K/A Amendment No. 1, Date of Report July 7, 2009
Historic
|
||||||||||||||||
Insight
Management
Corporation
Twelve
Months
Ended
December 31,
2008
|
Rebel
Testing, Inc.
Twelve
Months
Ended
December 31,
2008
|
|||||||||||||||
Pro
Forma
|
||||||||||||||||
Adjustments
|
Combined
|
|||||||||||||||
REVENUES
|
$ | — | $ | 3,315,492 | $ | 3,315,492 | ||||||||||
COSTS
AND EXPENSES:
|
||||||||||||||||
Consulting
fees
|
304,300 | — | 304,300 | |||||||||||||
Consulting
fees - related party
|
29,250 | — | 29,250 | |||||||||||||
Contracted
labor
|
17,075 | — | 17,075 | |||||||||||||
Professional
fees
|
32,190 | 5,290 | 37,480 | |||||||||||||
Salary
and wages
|
32,292 | 1,267,385 | 1,299,677 | |||||||||||||
Rent
|
— | 90,223 | 90,223 | |||||||||||||
Supplies
|
— | 397,521 | 397,521 | |||||||||||||
Insurance
|
— | 156,574 | 156,574 | |||||||||||||
Repairs
and maintenance
|
— | 117,244 | 117,244 | |||||||||||||
Other
operating expenses
|
25,254 | 112,153 | 137,407 | |||||||||||||
Impairment
of goodwill
|
215,000 | 215,000 | ||||||||||||||
Depreciation
and amortization
|
644 | 140,163 | $ | 366,884 | (a) | 507,691 | ||||||||||
Total
cost and expenses
|
656,005 | 2,286,553 | 366,884 | 3,309,442 | ||||||||||||
OTHER
INCOME:
|
||||||||||||||||
Income
on disposal of equipment
|
3,560 | — | 3,560 | |||||||||||||
Interest
income (expense), net
|
— | 1,990 | (173,718 | (b) | (171,728 | ) | ||||||||||
Total
other income (expense), net
|
3,560 | 1,990 | (173,718 | (168,168 | ) | |||||||||||
Net
income (loss), before income taxes
|
(652,445 | ) | 1,030,929 | (540,602 | (162,118 | ) | ||||||||||
Income
tax (expense) benefit
|
— | — | — | (c) | — | |||||||||||
NET
INCOME (LOSS)
|
$ | (652,445 | ) | $ | 1,030,929 | $ | (366,884 | $ | (162,118 | ) | ||||||
BASIC
AND DILUTED LOSS
PER
COMMON SHARE
|
$ | (0.01 | ) | $ | (0.00 | ) | ||||||||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
72,064,832 | 72,064,832 |
SEE
ACCOMPANYING NOTES TO UNAUDITED PRO-FORMA COMBINED STATEMENTS OF
OPERATIONS.
61
INSIGHT
MANAGEMENT CORPORATION
PRO-FORMA
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
From
Form 8-K/A Amendment No. 1, Date of Report July 7, 2009
Historic
|
||||||||||||||||
Insight
Management
Corporation
Six
Months
Ended
June 30,
2009
|
Rebel
Testing, Inc.
Six
Months
Ended
June 30,
2009
|
|||||||||||||||
Pro
Forma
|
||||||||||||||||
Adjustments
|
Combined
|
|||||||||||||||
REVENUES
|
$ | — | $ | 1,092,170 | $ | 1,092,170 | ||||||||||
COSTS
AND EXPENSES:
|
||||||||||||||||
Consulting
fees
|
102,550 | — | 102,550 | |||||||||||||
Consulting
fees - related party
|
10,000 | — | 10,000 | |||||||||||||
Contracted
labor
|
44,200 | — | 44,200 | |||||||||||||
Professional
fees
|
70,633 | 10,911 | 81,544 | |||||||||||||
Salary
and wages
|
58,942 | 505,556 | 564,498 | |||||||||||||
Rent
|
— | 31,000 | 31,000 | |||||||||||||
Supplies
|
— | 101,408 | 101,408 | |||||||||||||
Insurance
|
— | 75,993 | 75,993 | |||||||||||||
Repairs
and maintenance
|
— | 36,170 | 36,170 | |||||||||||||
Other
operating expenses
|
19,703 | 45,627 | 65,330 | |||||||||||||
Loss
on disposal of equipment
|
1,453 | — | 1,453 | |||||||||||||
Depreciation
and amortization
|
699 | 70,082 | $ | 183,442 | (a) | 254,223 | ||||||||||
Total
cost and expenses
|
308,180 | 876,747 | 183,442 | 1,368,369 | ||||||||||||
OTHER
INCOME:
|
||||||||||||||||
Income
on disposal of equipment
|
||||||||||||||||
Interest
income (expense), net
|
(1,018 | ) | 1,986 | (59,670 | (b) | (58,702 | ) | |||||||||
Total
other income (expense), net
|
(1,018 | ) | 1,986 | (59,670 | (58,702 | ) | ||||||||||
Net
income (loss), before income taxes
|
(309,198 | ) | 217,409 | (243,112 | (334,901 | ) | ||||||||||
Income
tax (expense) benefit
|
— | — | — | (c) | — | |||||||||||
NET
INCOME (LOSS)
|
$ | (309,198 | ) | $ | 217,409 | $ | (89,864 | $ | (181,653 | ) | ||||||
BASIC
AND DILUTED NET LOSS PER COMMON SHARE
|
$ | (0.00 | ) | $ | (0.00 | ) | ||||||||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
72,222,791 | 72,222,791 |
SEE
ACCOMPANYING NOTES TO UNAUDITED PRO-FORMA COMBINED STATEMENTS OF
OPERATIONS.
62
Insight
Management Corporation
Notes
to Unaudited Pro Forma Combined Statements of Operations
From
Form 8-K/A Amendment No. 1, Date of Report July 7, 2009
1. Pro
Forma Adjustments:
(a) Represents
depreciation and amortization adjustments relating to the fair value assessment
of vehicles, equipment and identifiable intangible assets as a result of the
purchase accounting for the acquisition of Rebel Trading, Inc., as follows (see
the 2009 Interim Report on Form 10-Q filed on September 17, 2009 for
further details):
Twelve
Months
Ended
December 31,
2008
|
Six
Months
Ended
June 30,
2009
|
|||||||
Depreciation
|
$ | 121,034 | $ | 60,517 | ||||
Amortization
of identified intangible assets
|
$ | 245,850 | $ | 122,925 |
(b) Represents
interest expense attributable to $4.98 million in RTI Seller-financed
acquisition debt.
(c) RTI
was an S-corporation for taxation purposes until the effective date of its
acquisition by the Company on June 30, 2009, at which time its
S-Corporation status terminated. Thus, for the purpose of the pro forma
statement of operations for the year ended December 31, 2008 and the six
months ended June 30, 2009, RTI is depicted as a taxable C-corporation. The
pro forma presentations assume a consolidated income tax return filing by the
Company with that of RTI, in which case any taxable income of RTI would be
entirely offset by available net operating loss carry forwards of Insight
Management Corporation and result in no current income tax provision for the
Company as a whole. Effects of deferred tax benefits are not included as pro
forma adjustments, as management is uncertain to the extent, if any, such
deferred benefits will be realized in subsequent periods.
2. Per
Share Information:
Basic and
diluted net earnings or loss per share for the year ended December 31, 2008
were computed using the historic weighted average shares of the Company’s
outstanding common stock, in addition to 66,012,962 common shares issued to the
former Microresearch shareholders as the result of the reverse merger between
Insight Management Corporation and Microreserach.
63
___________________________________________________
INSIGHT MANAGEMENT CORPORATION
INSIGHT MANAGEMENT CORPORATION
75,000,000
Shares
Common
Stock
PROSPECTUS
You
should rely only on the information contained in this document or that we have
referred you to. We have not authorized anyone to provide you with information
that is different. This prospectus is not an offer to sell common stock and is
not soliciting an offer to buy common stock in any state where the offer or sale
is not permitted.
Until
June 15, 2010 all dealers that effect transactions in these securities, whether
or not participating in the offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
December
15, 2009
___________________________________________________
64
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of
Directors, Officers, Employees and Agents.
The
Registrant's certificate of incorporation limits the liability of the
Registrant's directors to the maximum extent permitted by Florida
law. Florida law provides that a director of a corporation will not
be personally liable for monetary damages for breach of that individual's
fiduciary duties as a director except for liability for (1) a breach of the
director's duty of loyalty to the corporation or its stockholders, (2) any act
or omission not in good faith or that involves intentional misconduct or a
knowing violation of the law, (3) unlawful payments of dividends or unlawful
stock repurchases or redemptions, or (4) any transaction from which the director
derived an improper personal benefit.
This
limitation of liability does not apply to liabilities arising under federal
securities laws and does not affect the availability of equitable remedies such
as injunctive relief or rescission.
The
Florida General Corporation Law provides that a corporation may indemnify
directors and officers, as well as other employees and individuals, against
attorneys' fees and other expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
any threatened, pending or completed actions, suits or proceedings in which such
person was or is a party or is threatened to be made a party by reason of such
person being or having been a director, officer, employee or agent of
the corporation. The Florida General Corporation Law
provides that this is not exclusive of other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise.
The
Registrant's certificate of incorporation and bylaws provide that the Registrant
is required to indemnify its directors and officers to the maximum extent
permitted by law. The Registrant's bylaws also require the Registrant
to advance expenses incurred by an officer or director in connection with the
defense of any action or proceeding arising out of that party's status or
service as a director or officer of the Registrant or as a director, officer,
employee benefit plan or other enterprise, if serving as such at the
Registrant's request. The Registrant's by-laws also permit the
Registrant to secure insurance on behalf of any director or officer for any
liability arising out of his or her actions in a representative
capacity. The Registrant intends to enter into indemnification
agreements with its directors and some of its officers containing provisions
that (1) indemnify, to the maximum extent permitted by Florida law, those
directors and officers against liabilities that may arise by reason of their
status or service as directors or officers except liabilities arising from
willful misconduct of a culpable nature, (2) to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified, and (3) to obtain directors' and officers' liability insurance if
maintained for other directors or officers.
The
following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered hereby. All such expenses will
be borne by the registrant.
Securities
and Exchange Commission registration fee
|
$ | 58.95 | ||
Legal
fees and expenses (1)
|
$ | 25,000.00 | ||
Accounting
fees and
expenses
|
$ | 10,000.00 | ||
Miscellaneous
(1)
|
$ | 100.00 | ||
Total
(1)
|
$ | 20,158.95 | ||
(1)
Estimated.
|
None
65
(a) Exhibits:
The
following exhibits are filed or referenced as part of this registration
statement:
Exhibit Description of
Exhibit
|
3.1 Certificate
of Incorporation of Insight Management Corporation, filed on Form 8-K,
2009-12-22
3.2
By-laws of Insight Management Corporation, filed on Form 8-K,
2009-12-22
5.1
Opinion of Counsel
10.8 Drawdown
Equity Financing Agreement
10.9 Registration
Rights Agreement
20.1 Resolution of
Board of Directors Re: Drawdown Equity Financing Agreement
21.1 Subsidiaries
of the Registrant
23.1 Consent of Independent Registered
Certified Public Accountants
Item 28.
Undertakings.
The
undersigned registrant hereby undertakes to:
a. The
undersigned registrant hereby undertakes:
1. To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i. To include
any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
ii. To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
iii. To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
Provided
however, That:
A.
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Paragraphs
(a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration
statement is on Form S-8, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or
section
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement;
and
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B.
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Paragraphs
(a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the
registration statement is on Form S-3 or
Form F-3
and the information required to be included in a post-effective amendment
by those paragraphs is contained in reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement, or is contained in a form of prospectus filed
pursuant to Rule
424(b) that is part of the registration
statement.
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2. That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3.To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
4. If the
registrant is a foreign private issuer, to file a post-effective amendment to
the registration statement to include any financial statements required by Item
8.A. of Form
20-F at the start of any delayed offering or throughout a continuous
offering. Financial statements and information otherwise required by Section 10(a)(3) of
the Act need not be furnished, provided that the registrant
includes in the prospectus, by means of a post-effective amendment, financial
statements required pursuant to this paragraph (a)(4) and other information
necessary to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3, a
post-effective amendment need not be filed to include financial statements and
information required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter
if such financial statements and information are contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the Form
F-3.
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5. That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
i.
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If
the registrant is relying on Rule 430B (?230.430B of this
chapter):
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a.
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Each
prospectus filed by the registrant pursuant to Rule
424(b)(3)shall be deemed to be part of the registration statement
as of the date the filed prospectus was deemed part of and included in the
registration statement; and
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b.
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Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x)
for the purpose of providing the information required by section 10(a) of
the Securities Act of 1933 shall be deemed to be part of and included in
the registration statement as of the earlier of the date such form of
prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement relating
to the securities in the registration statement to which that prospectus
relates, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such effective date;
or
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ii.
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f
the registrant is subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of
and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
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6. That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
i.
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Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
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ii.
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Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
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iii.
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The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
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iv.
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Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
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b. The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
c.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned; thereunto duly authorized, in the Town of Orcutt, State of
California, on January 8, 2010.
INSIGHT MANAGEMENT CORPORATION | |||
January
8, 2010
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By:
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/s/ Jennifer Rapacki | |
Jennifer Rapacki | |||
President and Principal Executive Officer, Treasurer and Director | |||
January
8, 2010
|
By:
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/s/ Matthew Maza | |
Matthew Maza | |||
Secretary, Director | |||
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