POWER SOLUTIONS INTERNATIONAL, INC. - Quarter Report: 2009 September (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
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x
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QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934:
For
the quarterly period ended September 30,
2009
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934:
For
the transition period from to
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Commission
File Number: 000-52213
Format,
Inc.
(Exact
name of registrant as specified in its charter)
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Nevada
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33-0963637
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(State
or other jurisdiction
of
incorporation or organization)
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(I.R.S.
Employer
Identification
No.)
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3553 Camino Mira Costa, Suite E, San Clemente,
California 92672
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(Address
of principal executive
offices)
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949-481-9203
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(Issuer’s
Telephone Number)
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Indicate
by check mark whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
xYes oNo
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). oYes oNo
Indicate
by check mark whether the registrant is a large accelerated file, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer
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o
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Accelerated
filer
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o
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Non-accelerated
filer
(Do
not check if a smaller reporting company)
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o
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Smaller
reporting company
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x
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). oYes xNo
As of
November 16, 2009, there were 3,770,083 shares of the issuer's $.001 par value
common stock issued and outstanding.
1
PART
I - FINANCIAL INFORMATION
Item 1. Financial
Statements
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FORMAT,
INC.
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||||||||
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CONDENSED
BALANCE SHEETS
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||||||||
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September
30, 2009
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December
31, 2008
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|||||||
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(Unaudited)
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||||||||
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ASSETS
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||||||||
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CURRENT
ASSETS
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Cash
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$ | 37,867 | $ | 2,169 | ||||
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Accounts
receivable, net
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2,927 | 25,216 | ||||||
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Loan
receivable, net
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- | - | ||||||
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Prepaid
expenses
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449 | - | ||||||
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Security
deposit
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1,200 | 1,200 | ||||||
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Total
current assets
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42,443 | 28,585 | ||||||
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PROPERTY
AND EQUIPMENT, NET
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6,084 | 9,257 | ||||||
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TOTAL
ASSETS
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$ | 48,527 | $ | 37,842 | ||||
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LIABILITIES
AND STOCKHOLDERS' (DEFICIT)
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CURRENT
LIABILITIES
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Accounts
payable and accrued expenses
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$ | 76,715 | $ | 73,745 | ||||
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Accrued
officer compensation
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7,500 | - | ||||||
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Due
to related party
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167,977 | 149,928 | ||||||
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Total
current liabilities
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252,192 | 223,673 | ||||||
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TOTAL
LIABILITIES
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252,192 | 223,673 | ||||||
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STOCKHOLDERS' (DEFICIT)
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||||||||
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Preferred
stock, par value $0.001 per share, 5,000,000 shares
authorized
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||||||||
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and
0 shares issued and outstanding
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- | - | ||||||
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Common
stock, par value $0.001 per share, 50,000,000 shares
authorized
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and
3,770,083 shares issued and outstanding
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3,770 | 3,770 | ||||||
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Additional
paid-in capital
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37,809 | 37,809 | ||||||
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Accumulated
deficit
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(245,244 | ) | (227,410 | ) | ||||
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Total
stockholders' (deficit)
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(203,665 | ) | (185,831 | ) | ||||
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TOTAL
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
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$ | 48,527 | $ | 37,842 | ||||
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The
accompanying notes are an integral part of these unaudited condensed
financial statements.
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2
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FORMAT,
INC.
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CONDENSED
STATEMENTS OF OPERATIONS
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Three
Months Ended
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Nine
Months Ended
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September
30,
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September
30,
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|||||||||||||||
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2009
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2008
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2009
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2008
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|||||||||||||
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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|||||||||||||
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REVENUE
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$ | 27,186 | $ | 23,382 | $ | 69,952 | $ | 85,600 | ||||||||
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OPERATING
EXPENSES
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Wages
and wage related expenses
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7,621 | 12,668 | 33,427 | 43,034 | ||||||||||||
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Professional
fees
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5,356 | 4,977 | 23,746 | 23,919 | ||||||||||||
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Rent
expense
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4,696 | 3,600 | 10,744 | 11,400 | ||||||||||||
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Depreciation
expense
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916 | 1,372 | 3,172 | 4,439 | ||||||||||||
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Other
general and administrative expenses
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9,873 | 7,993 | 15,897 | 22,066 | ||||||||||||
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Total
operating expenses
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28,462 | 30,610 | 86,986 | 104,858 | ||||||||||||
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LOSS
FROM OPERATIONS
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(1,276 | ) | (7,228 | ) | (17,034 | ) | (19,258 | ) | ||||||||
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Provision
for income taxes
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- | - | (800 | ) | (800 | ) | ||||||||||
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NET
LOSS
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$ | (1,276 | ) | $ | (7,228 | ) | $ | (17,834 | ) | $ | (20,058 | ) | ||||
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NET
LOSS PER COMMON SHARE -
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BASIC
AND DILUTED
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$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | ||||
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WEIGHTED
AVERAGE NUMBER OF
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||||||||||||||||
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COMMON
SHARES OUTSTANDING
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3,770,083 | 3,770,083 | 3,770,083 | 3,770,083 | ||||||||||||
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The
accompanying notes are an integral part of these unaudited condensed
financial statements.
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3
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FORMAT,
INC.
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CONDENSED
STATEMENTS OF CASH FLOWS
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Nine
Months Ended
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September
30,
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2009
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2008
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(Unaudited)
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(Unaudited)
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CASH
FLOWS FROM OPERATING ACTIVITIES
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Net
loss
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$ | (17,834 | ) | $ | (20,058 | ) | ||
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Adjustments
to reconcile net loss to net cash provided by (used in)
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operating
activities:
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Depreciation
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3,173 | 4,439 | ||||||
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Bad
debt reserve
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9,641 | - | ||||||
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Net
changes in operating assets and liabilities:
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Accounts
receivable
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12,648 | (6,286 | ) | |||||
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Prepaid
expenses and other current assets
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(449 | ) | 900 | |||||
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Accounts
payable and accrued expenses
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2,970 | 1,369 | ||||||
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Accrued
officer compensation
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7,500 | - | ||||||
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Net
cash provided by (used in) operating activities
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17,649 | (19,636 | ) | |||||
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CASH
FLOWS FROM FINANCING ACTIVITIES
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Advances
from related party
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18,769 | 25,000 | ||||||
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Repayments
to related party
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(720 | ) | (7,500 | ) | ||||
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Net
cash provided by financing activities
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18,049 | 17,500 | ||||||
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NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
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35,698 | (2,136 | ) | |||||
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CASH
AND CASH EQUIVALENTS - BEGINNING OF PERIOD
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2,169 | 5,583 | ||||||
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CASH
AND CASH EQUIVALENTS - END OF PERIOD
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$ | 37,867 | $ | 3,447 | ||||
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SUPPLEMENTAL
DISCLOSURES OF CASH FLOW ACTIVITY
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Cash
paid during the year for income taxes
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$ | 800 | $ | 800 | ||||
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Cash
paid during the year for interest expense
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$ | - | $ | - | ||||
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The
accompanying notes are an integral part of these unaudited condensed
financial statements.
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4
FORMAT,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
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NOTE
1
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ORGANIZATION
AND BASIS OF PRESENTATION
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Format,
Inc. (the “Company”) was incorporated in the State of Nevada on March 21,
2001. The Company provides EDGARizing services to various commercial
and corporate entities. The Company provides services throughout the
United States, Canada and China.
The
Company has evaluated subsequent events through November 11, 2009, the date
these financial statements were issued. No material events that
require financial statement disclosure occurred between November 1, 2009 and
November 11, 2009.
Interim Financial
Statements
The
accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to such rules and
regulations.
In the
opinion of management, all adjustments, consisting of normal and recurring
adjustments, necessary for a fair presentation of the financial position and the
results of operations for the periods presented have been
included. The operating results of the Company on a quarterly basis
may not be indicative of operating results for the full year. For
further information, refer to the financial statements and notes included in
Format Inc.’s Form 10-K for the year ended December 31, 2008.
Going
Concern
As shown
in the accompanying financial statements the Company has an accumulated deficit
of $245,244 and a working capital deficit of $209,749 as of September 30, 2009.
The Company has experienced cash shortages that have been funded by the
Company’s President. There is no guarantee that the Company will be able to
sustain operations to alleviate the working capital deficit or continued
operating losses, or that the Company’s President will continue to fund
operations. These conditions raise substantial doubt about the Company’s ability
to continue as a going concern for a reasonable period.
Management’s
plans to mitigate the effects that give rise to the conditions involve more
aggressive marketing strategies towards small publicly reporting
companies. This marketing will include working closely with lawyers,
associations and investment advisors.
The
accompanying financial statements do not include any adjustments related to the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
Reclassification
Certain
reclassifications have been made to conform the prior period financial statement
amounts to the current period presentation for comparative
purposes.
5
FORMAT,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
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NOTE
2
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SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
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Cash and Cash
Equivalents
The
Company considers all highly liquid debt instruments and other short-term
investments with a maturity of three months or less, when purchased, to be cash
equivalents.
The
Company maintains cash balances at one financial institution that is insured by
the Federal Deposit Insurance Corporation up to $250,000.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
Accounts
Receivable
Accounts
receivable are reported at the customer’s outstanding balances less any
allowance for doubtful accounts. Interest is not accrued on overdue
accounts receivable.
Allowance for Doubtful
Accounts
An
allowance for doubtful accounts on accounts receivable is charged to operations
in amounts sufficient to maintain the allowance for uncollectible accounts at a
level management believes is adequate to cover any probable
losses. Management determines the adequacy of the allowance based on
historical write-off percentages and information collected from individual
customers. Accounts receivable are charged off against the allowance
when collectibility is determined to be permanently
impaired. Management has determined that as of September 30, 2009 an
allowance of $26,341 is required.
Property and
Equipment
Property
and equipment are stated at cost. Depreciation and amortization are
computed using the straight-line method on the estimated useful lives of the
assets, generally ranging from three to seven years. Expenditures of
major renewals and improvements that extended the useful lives of property and
equipment are capitalized. Expenditures for repairs and maintenance
are charged to expense as incurred. Leasehold improvements are
amortized using the straight-line method over the shorter or the estimated
useful life of the asset or the lease term. Gains or losses from retirements or
sales are credited or charged to income.
Long-Lived
Assets
The
Company accounts for its long-lived assets in accordance with SFAS No. 144,
“Accounting for the Impairment
or Disposal of Long-Lived Assets.” SFAS No. 144 requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the historical cost carrying value of an asset may
no longer be appropriate. The Company assesses recoverability of the
carrying value of an asset by estimating the future net cash flows expected to
result from the asset, including eventual disposition. If the future
net cash flows are less than the carrying value of the asset, an impairment loss
is recorded equal to the difference between the asset’s carrying value and fair
value or disposable value. As of September 30, 2009, the Company does not
believe there has been any impairment of its long-lived assets.
6
FORMAT,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
Fair Value of Financial
Instruments
Pursuant
to ASC No. 820, “Fair Value Measurements and Disclosures”, the Company is
required to estimate the fair value of all financial instruments included on its
balance sheet as of September 30, 2009. The Company’s financial instruments
consist of cash, accounts receivables, payables, and other
obligations. The Company considers the carrying value of such amounts
in the financial statements to approximate their fair value.
Revenue
Recognition
The
Company generates revenue from professional services rendered to customers
either at time of delivery or completion, when the earning process is complete
and collectibility is probable.
Concentrations
The
Company derived 99% and 39% of its operating revenue during the three months and
nine ended September 30, 2009, respectively, from a single
customer. The revenue from this customer was earned pursuant to a
service contract entered into on July 8, 2009.
Loss Per Share of Common
Stock
The
Company follows Statement of Financial Accounting Standards No. 128, “Earnings
Per Share” (SFAS No. 128) that requires the reporting of both basic and diluted
earnings (loss) per share. Basic earnings (loss) per share is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the
period. The calculation of diluted earnings (loss) per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. In accordance
with SFAS No. 128, any anti-dilutive effects on net earnings (loss) per share
are excluded. For the nine months ended September 30, 2009 and 2008,
there were no common stock equivalents.
There
were no options or warrants to purchase shares of common stock at September 30,
2009 and 2008.
Recent Accounting
Pronouncements
The
Company adopted Statement of Financial Accounting Standards (SFAS) No. 157,
Fair Value Measurement,
effective in this period ending September 30, 2009. SFAS No. 157
defines fair value as the price that would be received to sell an asset, or paid
to transfer a liability, in an orderly transaction between market participants
at the measurement date and establishes a framework for measuring fair value. It
establishes a three-level hierarchy for fair value measurements based upon the
transparency of inputs to the valuation of an asset or liability as of the
measurement date and expands the disclosures about instruments measured at fair
value. SFAS No. 157 requires consideration of a company's own
creditworthiness when valuing liabilities. The Company does not have any assets
that it currently carries at fair value.
7
FORMAT,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
The
Company also adopted SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities, effective in this period ending
September 30, 2009. SFAS No. 159 provides an option to elect
fair value as an alternative measurement basis for selected financial assets and
financial liabilities. As a result of adopting SFAS No. 159, the Company
did not elect fair value accounting for any other assets and liabilities not
previously carried at fair value.
In May
2009, the FASB issued SFAS No. 165, Subsequent Events, which
requires entities to disclose the date through which they have evaluated
subsequent events and whether the date corresponds with the release of its
financial statements. The statement established general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be
issued. SFAS No. 165 is effective for interim or annual financial
periods ending after June 15, 2009, and shall be applied
prospectively. The adoption of SFAS No. 165 did not have a material
impact on the Company’s financial statements.
In June
2009, the FASB issued SFAS No. 166, Accounting for Transfers of
Financial Assets (“SFAS 166”). Statement 166 is a revision to FASB
Statement No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, and will require more information about transfers of
financial assets, including securitization transactions, and where entities have
continuing exposure to the risks related to transferred financial assets. It
eliminates the concept of a “qualifying special-purpose entity,” changes the
requirements for derecognizing financial assets, and requires additional
disclosures. SFAS 166 enhances information reported to users of financial
statements by providing greater transparency about transfers of financial assets
and an entity’s continuing involvement in transferred financial
assets.
SFAS 166
will be effective at the start of a reporting entity’s first fiscal year
beginning after November 15, 2009. Early application is not permitted. The
Company does not anticipate the adoption of SFAS 166 will have an impact on its
consolidated results of operations or consolidated financial
position.
In June
2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation
No. 46(R) (“SFAS 167”). Statement 167 is a revision to FASB
Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest
Entities, and changes how a reporting entity determines when an entity
that is insufficiently capitalized or is not controlled through voting (or
similar rights) should be consolidated. The determination of whether a reporting
entity is required to consolidate another entity is based on, among other
things, the other entity’s purpose and design and the reporting entity’s ability
to direct the activities of the other entity that most significantly impact the
other entity’s economic performance. SFAS 167 will require a reporting
entity to provide additional disclosures about its involvement with variable
interest entities and any significant changes in risk exposure due to that
involvement. A reporting entity will be required to disclose how its involvement
with a variable interest entity affects the reporting entity’s financial
statements. SFAS 167 will be effective at the start of a reporting entity’s
first fiscal year beginning after November 15, 2009. Early application is not
permitted. The Company is currently evaluating the impact, if any, of
adoption of SFAS 167 on its financial statements.
8
FORMAT,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
In June
2009, the FASB issued Statement No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles (“SFAS 168”). SFAS 168 is the single source of
authoritative nongovernmental U.S. generally accepted accounting principles
(“GAAP”), superseding existing FASB, American Institute of Certified Public
Accounts (“AICPA”), Emerging Issues Task Force (“EITF”), and related accounting
literature. SFAS 168 reorganized the thousands of GAAP pronouncements
into roughly 90 accounting topics and displays them using a consistent
structure. Also included is relevant Securities and Exchange
Commission guidance organized using the same topical structure in separate
sections. SFAS 168 will be effective for financial statements issued
for reporting periods that end after September 15, 2009. The Company
adopted the Codification during the current period ending September 30,
2009. There was no impact upon adoption.
FAS 157-4
- In April 2009, the Financial Accounting Standards Board (FASB) issued
FASB Staff Position (FSP) Financial Accounting Standard (FAS) 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not
Orderly. Based on the guidance, if an entity determines that
the level of activity for an asset or liability has significantly decreased and
that a transaction is not orderly, further analysis of transactions or quoted
prices is needed, and a significant adjustment to the transaction or quoted
prices may be necessary to estimate fair value in accordance with Statement of
Financial Accounting Standards (SFAS) No. 157 Fair Value Measurements. This
FSP is to be applied prospectively and is effective for interim and annual
periods ending after June 15, 2009 with early adoption permitted for
periods ending after March 15, 2009. The company adopted this FSP for its
quarter ending June 30, 2009. There was no impact upon
adoption.
FSP FAS
115-2 and FAS 124-2 - In April 2009, the FASB issued FSP FAS 115-2 and FAS
124-2, Recognition and
Presentation of Other-Than-Temporary Impairments. The guidance applies to
investments in debt securities for which other-than-temporary impairments may be
recorded. If an entity’s management asserts that it does not have the intent to
sell a debt security and it is more likely than not that it will not have to
sell the security before recovery of its cost basis, then an entity may separate
other-than-temporary impairments into two components: 1) the amount related to
credit losses (recorded in earnings), and 2) all other amounts (recorded in
other comprehensive income). This FSP is to be applied prospectively and is
effective for interim and annual periods ending after June 15, 2009 with
early adoption permitted for periods ending after March 15, 2009. The
company adopted this FSP for its quarter ending June 30, 2009. There was no
impact upon adoption.
FSP FAS
107-1 and APB 28-1 - In April 2009, the FASB issued FSP FAS 107-1 and
Accounting Principles Board (APB) 28-1, Interim Disclosures about Fair Value
of Financial Instruments. The FSP amends SFAS No. 107 Disclosures about Fair Value of
Financial Instruments to require an entity to provide disclosures about
fair value of financial instruments in interim financial information. This FSP
is to be applied prospectively and is effective for interim and annual periods
ending after June 15, 2009 with early adoption permitted for periods ending
after March 15, 2009. The company included the required disclosures in its
quarter ending June 30, 2009.
9
FORMAT,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
|
NOTE
3
|
FAIR VALUE
ACCOUNTING
|
Fair Value
Measurements
On
January 1, 2008, the Company adopted SFAS No. 157 (SFAS 157), Fair Value
Measurements. SFAS 157 relates to financial assets and
financial liabilities. In February 2008, the FASB issued FASB Staff Position
(FSP) No. FAS 157-2, Effective
Date of FASB Statement No. 157, which delayed the effective date of
SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial statements on at
least an annual basis, until January 1, 2009 for calendar year-end
entities.
SFAS 157
defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (GAAP),
and expands disclosures about fair value measurements. The provisions of this
standard apply to other accounting pronouncements that require or permit fair
value measurements and are to be applied prospectively with limited
exceptions.
SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. This standard is now the single source in GAAP for the
definition of fair value, except for the fair value of leased property as
defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on
market data obtained from independent sources (observable inputs) and
(2) an entity’s own assumptions, about market participant assumptions, that
are developed based on the best information available in the circumstances
(unobservable inputs). The fair value hierarchy consists of three broad levels,
which gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy
under SFAS 157 are described below:
|
•
|
Level
1 - Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or
liabilities.
|
|
•
|
Level
2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly,
including quoted prices for similar assets or liabilities in active
markets; quoted prices for identical or similar assets or liabilities in
markets that are not active; inputs other than quoted prices that are
observable for the asset or liability (e.g., interest rates); and inputs
that are derived principally from or corroborated by observable market
data by correlation or other means.
|
|
•
|
Level
3 - Inputs that are both significant to the fair value measurement and
unobservable. These inputs rely on management's own assumptions about the
assumptions that market participants would use in pricing the asset or
liability. (The unobservable inputs are developed based on the best
information available in the circumstances and may include the Company's
own data.)
|
10
FORMAT,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
The
following table presents the Company's fair value hierarchy for those assets and
liabilities measured at fair value on a recurring basis as of June 30, 2009 and
December 31, 2008:
|
September 30,
2009
|
December 31,
2008
|
||||||||||||||
|
Level
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
|||||||||||
|
Assets
|
|||||||||||||||
|
Cash
|
1
|
$
|
37,867
|
$
|
37,867
|
$
|
2,169
|
$
|
2,169
|
||||||
|
Accounts
receivable
|
2
|
2,927
|
2,927
|
25,216
|
25,216
|
||||||||||
|
Liabilities
|
|||||||||||||||
|
Accounts
payable and accrued expenses
|
2
|
76,715
|
76,715
|
73,745
|
73,745
|
||||||||||
|
Accrued
officer compensation
|
2
|
7,500
|
7,500
|
-
|
-
|
||||||||||
|
Due
to related party
|
3
|
167,977
|
167,977
|
149,928
|
149,928
|
||||||||||
Due to
related party increased during the nine-months ended September 30, 2009 by a
$18,769 advances from the Company’s President, and decreased by repayments to
the President of $720 (see Note 6 – Related Party Transactions).
NOTE
4 LOAN
RECEIVABLE
As of
September 30, 2009 and 2008, the Company has a loan receivable from an outside
party in the amount of $20,500. The loan is interest free and due on
demand. At September 30, 2009 collectibility is uncertain and an
allowance has been setup for the full amount due of $20,500.
|
NOTE
5
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consisted of the following as of September 30, 2009 and December
31, 2008.
Depreciation expense for the three
months ended September 30, 2009 and 2008 amounted to $916 and $1,372,
respectively. Depreciation expense for the nine months ended September 30, 2009
and 2008 amounted to $3,173 and $4,439, respectively.
11
FORMAT,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(UNAUDITED)
|
NOTE
6
|
RELATED
PARTY TRANSACTIONS
|
|
|
The
Company’s President, who is also a stockholder, has made advances to the
Company which are unsecured, non-interest bearing, and due on
demand. For the nine months ended September 30, 2009 and 2008,
the Company was advanced $18,049 and $17,500, respectively, net of
repayments. The total amount due at September 30, 2009 was
$167,977.
|
|
|
Effective
July 1, 2009, the Company agreed to compensate its President $2,500 per
month for services rendered, and to pay such compensation at a later date
when sufficient funds are available. The accrued compensation
due to the President totaled $7,500 at September 30,
2009.
|
NOTE
7 INCOME
TAXES
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS 109). This statement mandates the liability
method of accounting for deferred income taxes and permits the recognition of
deferred tax assets subject to an ongoing assessment of
realizability.
As of
September 30, 2009, the Company had estimated federal net operating loss
carryforwards totaling approximately $194,000 which can be used to offset future
federal income tax. The federal net operating loss carryforwards
expire at various dates through 2029. Deferred tax assets resulting
from the net operating losses are reduced by a valuation allowance, when, in the
opinion of management, utilization is not reasonably assured. At
September 30, 2009, the Company’s gross deferred tax asset totaled $46,800. This
amount was reduced 100% by a valuation allowance, making the net deferred tax
asset $0.
The
components of the Company’s income tax provision for the nine months ended
September 30, 2009 and 2008 consisted of:
|
September
30,
|
September
30,
|
|||||||
|
2009
|
2008
|
|||||||
|
Current
income tax expense
|
$ | 800 | $ | 800 | ||||
|
Deferred
income tax benefit
|
(3,840 | ) | (4,320 | ) | ||||
|
Change
in valuation allowance
|
3,840 | 4,320 | ||||||
| $ | 800 | $ | 800 | |||||
12
Item 2. Plan of
Operation
This
following information specifies certain forward-looking statements of management
of the company. Forward-looking statements are statements that estimate the
happening of future events are not based on historical fact. Forward-looking
statements may be identified by the use of forward-looking terminology, such as
“may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”,
“probable”, “possible”, “should”, “continue”, or similar terms, variations of
those terms or the negative of those terms. The forward-looking statements
specified in the following information have been compiled by our management on
the basis of assumptions made by management and considered by management to be
reasonable. Our future operating results, however, are impossible to predict and
no representation, guaranty, or warranty is to be inferred from those
forward-looking statements.
The
assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to
uncertainty as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. No assurance can be given
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
Critical Accounting Policy and
Estimates. Our Management's Discussion and Analysis of Financial
Condition and Results of Operations section discusses our financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an on-going basis, management evaluates its estimates and
judgments, including those related to revenue recognition, accrued expenses,
financing operations, and contingencies and litigation. Management bases its
estimates and judgments on historical experience and on various other factors
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. The most
significant accounting estimates inherent in the preparation of our financial
statements include estimates as to the appropriate carrying value of certain
assets and liabilities which are not readily apparent from other
sources. These accounting policies are described at relevant sections
in this discussion and analysis and in the notes to the financial statements
included in our Quarterly Report on Form 10-Q for the period ended September 30,
2009.
Liquidity and Capital
Resources. We had cash of $37,867 as of September 30,
2009. Our accounts receivable were $2,927 as of September 30,
2009. We also had $1,200 represented by a security deposit and $449
of prepaid expenses. Therefore, our total current assets as of
September 30, 2009 were $42,443. We also had $6,084 represented by
fixed assets, net of depreciation, as of September 30, 2009.
Our total
assets as of September 30, 2009 were $48,527. As of September 30,
2009, our current liabilities were $252,192, of which $76,715 was represented by
accounts payable and accrued expenses, $7,500 was accrued officer compensation
and $167,977 was represented by a related party advance. The related
party advance is payable to Mr. Neely, our officer, principal shareholder and
one of our directors. Mr. Neely had advanced those funds to us for working
capital. We had no other long term liabilities, commitments or
contingencies.
13
Other
than the proposed increases in marketing expenses and the increases in legal and
accounting costs we experienced due to the reporting requirements of being a
reporting company, we are not aware of any other known trends, events or
uncertainties, which may affect our future liquidity.
For the three months ended
September 30, 2009, as compared to the three months ended September 30,
2008.
Results
of Operations.
Revenues. We
generated revenues of $27,186 for the three months ended September 30, 2009, as
compared to $23,382 for the three months ended September 30, 2008. The increase
in revenues was primarily due to the fact that we entered in the Services
Agreement with Research Data Group, Inc. (“RDG”) as discussed
below.
Operating Expenses. For the
three months ended September 30, 2009, our total operating expenses were
$28,462, as compared to total operating expenses of $30,610 for the three months
ended September 30, 2008. The decrease in total operating expenses is due
primarily to a decrease in compensation between the two periods. We
had a decrease in compensation, which totaled $7,621 for the three months ended
September 30, 2009, as compared to $12,668 for the three months ended September
30, 2008. Therefore, we had net loss of $1,276 for the three months ended
September 30, 2009, as compared to net loss of $7,228 for the three months ended
September 30, 2008.
For the nine months ended
September 30, 2009, as compared to the nine
months ended September 30,
2008.
Results
of Operations.
Revenues. We
generated revenues of $69,952 for the nine months ended September 30, 2009, as
compared to $85,600 for the nine months ended September 30, 2008. The decrease
in revenues was primarily due to the fact that we performed less work during the
nine months ended September 30, 2009 as compared to 2008.
Operating Expenses. For the
nine months ended September 30, 2008, our total operating expenses were $86,986,
as compared to total operating expenses of $104,858 for the nine months ended
September 30, 2008. The decrease in total operating expenses is due to decreases
in certain of our operating expenses. We had a decrease in professional fees,
which totaled $33,427 for the nine months ended September 30, 2009, as compared
to $43,034 for the nine months ended September 30, 2008. We also had a decrease
in general and administrative expenses, which totaled $15,897 for the nine
months ended September 30, 2009, as compared to $22,066 for the nine months
ended September 30, 2008. Our professional fees and general and administrative
expenses were higher for the comparable period in 2008 due to the costs
associated with becoming a public company. Therefore, we had a net
loss of $17,834 for the nine months ended September 30, 2009, as compared to a
net loss of $19,258 for the nine months ended September 30, 2008.
Our Plan of Operation for the Next
Twelve Months. To effectuate our business plan during the next twelve
months, we must continue to increase the number of clients we service and
actively market and promote our services. We have been actively meeting with our
referral sources, such as accountants and attorneys, to understand how we can
better service their clients’ needs and how we can obtain EDGARization work from
clients of theirs that currently use another provider. We believe that referrals
will continue to comprise a majority of our business, and we hope to nurture and
care for the relationships we have so that we can attract more
clients.
In July
2009, we entered into a Services Agreement with Research Data Group, Inc.
(“RDG”), a large provider of edgarization services, pursuant to which we will
provide bulk edgarizing services to RDG in exchange for three monthly payments
of $8,194.44 during the first three months of the agreement. Subsequent to the
initial ninety days of the agreement, RDG will pay us a monthly fee of $3,750.
After the initial one hundred twenty days of the agreement, either party may
terminate the agreement at any time by giving thirty days written notice to the
other party. We believe that we will be able to decrease our general and
administrative expenses by providing edgarizing services to RDG pursuant to this
agreement as we will only be responsible for invoicing RDG for our services.
This brief description of the Services Agreement is not intended to be complete
and is qualified in its entirety by reference to the full text of the agreement,
which was filed as Exhibit 10.1 to our Quarterly Report for the period ended
June 30, 2009.
14
We had
cash of $37,867 of September 30, 2009, which we estimate will not be sufficient
to fund our operations for the next twelve months. Our forecast for the period
for which our financial resources will be adequate to support our
operations involves risks and uncertainties and actual results could fail as a
result of a number of factors. Ryan Neely, our president, secretary, chief financial officer and
one of our directors, has made advances to us which are unsecured and due on
demand. As of September 30, 2009, the total amount due was
$167,977. We expect that the increased legal and accounting costs due to
the reporting requirements of being a reporting company will continue to impact
our liquidity as we will need to obtain funds to pay those expenses.
Other than proposed increases in
marketing expenses and the anticipated increases in legal and accounting costs
of being a public company, we are not aware of any other known trends, events or
uncertainties, which may affect our future liquidity.
In the
event that we experience a shortfall in our capital, we intend to pursue capital
through public or private financing as well as borrowings and other sources,
such as our officer and directors. We cannot guaranty that additional funding
will be available on favorable terms, if at all. If adequate funds are not
available, then our ability to expand our operations may be significantly
hindered. If adequate funds are not available, we believe that our officer and
directors will contribute funds to pay for our expenses to achieve our
objectives over the next twelve months.
We are
not currently conducting any research and development activities. We do not
anticipate conducting such activities in the near future. We do not anticipate
that we will purchase or sell any significant equipment. In the event that we
expand our customer base, then we may need to hire additional employees or
independent contractors as well as purchase or lease additional
equipment.
Off-Balance Sheet Arrangements.
We have no off-balance sheet arrangements.
Not
applicable.
Item 4. Controls and
Procedures
Evaluation of disclosure controls and
procedures. We maintain controls and procedures designed to ensure that
information required to be disclosed in the reports that we file or submit under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed as of September 30, 2009, the date of this
report, our chief executive officer and the principal financial officer
concluded that our disclosure controls and procedures were
effective.
Item 4(T). Controls and
Procedures.
Changes in internal controls.
There were no changes in our internal control over financial reporting
that occurred during the fiscal quarter covered by this report that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART
II — OTHER INFORMATION
Item 1. Legal
Proceedings.
None.
Item 1A. Risk
Factors.
Not
applicable.
Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds.
None.
15
Item 3. Defaults
Upon Senior Securities
None.
Item
4. Submission of Matters to Vote of Security
Holders
None.
Item 5. Other
Information
None.
Item
6. Exhibits
|
31
|
Certification
of Principal Executive and Financial Officer, pursuant to Rule 13a-14
and 15d-14 of the Securities Exchange Act of 1934
|
|
32
|
Certification
of Principal Executive and Financial Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002
|
16
SIGNATURES
In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
Format,
Inc.,
a
Nevada corporation
|
|||
|
Date:
November 16, 2009
|
By:
|
/s/ Ryan
Neely
|
|
|
Ryan
Neely
Chief
Executive Officer, Chief Financial Officer,
President
and a Director
(Principal, Executive, Financial
and Accounting Officer)
|
|||