format_10q-063008.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR
THE QUARTERLY PERIOD ENDED JUNE 30,
2008
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the transition period
from to
Commission
File Number: 000-52213
Format,
Inc.
(Exact
name of registrant as specified in its charter)
Nevada
|
33-0963637
|
(State
or other jurisdiction
of
incorporation or organization)
|
(I.R.S.
Employer
Identification
No.)
|
3553
Camino Mira Costa, Suite E, San Clemente, California
92672
|
(Address
of principal executive offices)
|
949-481-9203
|
(Issuer’s
Telephone Number)
|
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 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.
Large
accelerated filer
|
o |
Accelerated
filer
|
o |
Non-accelerated
filer (Do not check if a smaller reporting company)
|
o |
Smaller
reporting company
|
x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). xYes oNo
APPLICABLE
ONLY TO CORPORATE ISSUERS
State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practical date. As of August 13, 2008, there were
3,770,083 shares of the issuer's $.001 par value common stock issued and
outstanding.
PART
I - FINANCIAL INFORMATION
Item 1. Financial
Statements
FORMAT,
INC.
BALANCE
SHEETS
|
|
June 30,
2008(unaudited) |
|
|
December
31, 2007 |
|
|
|
|
|
|
|
|
ASSETS
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
|
|
$ |
11,706 |
|
|
$ |
5,583 |
|
Accounts
receivable, net
|
|
|
24,597 |
|
|
|
15,235 |
|
Loan
receivable, net
|
|
|
- |
|
|
|
- |
|
Security
deposit
|
|
|
1,200 |
|
|
|
1,200 |
|
Prepaid
expenses and other current assets
|
|
|
600 |
|
|
|
1,200 |
|
Total
current assets
|
|
|
38,103 |
|
|
|
23,218 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
12,002 |
|
|
|
15,069 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
50,105 |
|
|
$ |
38,287 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' (DEFICIT)
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
71,560 |
|
|
$ |
65,912 |
|
Income
taxes payable
|
|
|
800 |
|
|
|
800 |
|
Due
to related party
|
|
|
151,428 |
|
|
|
132,428 |
|
Total
current liabilities
|
|
|
223,788 |
|
|
|
199,140 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
223,788 |
|
|
|
199,140 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' (DEFICIT)
|
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.001 per share, 5,000,000 shares authorized
and
|
|
|
|
|
|
|
|
|
0
shares issued and outstanding
|
|
|
- |
|
|
|
- |
|
Common
stock, par value $0.001 per share, 50,000,000 shares authorized
and
|
|
|
|
|
|
|
|
|
3,770,083
shares issued and outstanding
|
|
|
3,770 |
|
|
|
3,770 |
|
Additional
paid-in capital
|
|
|
37,809 |
|
|
|
37,809 |
|
Accumulated
deficit
|
|
|
(215,262 |
) |
|
|
(202,432 |
) |
Total
stockholders' (deficit)
|
|
|
(173,683 |
) |
|
|
(160,853 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
|
|
$ |
50,105 |
|
|
$ |
38,287 |
|
The accompanying notes are
an integral part of these financial statements.
FORMAT,
INC.
STATEMENTS
OF OPERATIONS
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$ |
39,110 |
|
|
$ |
18,282 |
|
|
$ |
62,218 |
|
|
$ |
42,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wages
and wage related expenses
|
|
|
15,219 |
|
|
|
16,078 |
|
|
|
30,366 |
|
|
|
32,615 |
|
Professional
fees
|
|
|
6,325 |
|
|
|
5,292 |
|
|
|
18,942 |
|
|
|
27,905 |
|
Rent
expense
|
|
|
3,750 |
|
|
|
4,050 |
|
|
|
7,800 |
|
|
|
7,900 |
|
Depreciation
expense
|
|
|
1,521 |
|
|
|
1,490 |
|
|
|
3,067 |
|
|
|
2,948 |
|
Other
general and administrative expenses
|
|
|
10,191 |
|
|
|
14,190 |
|
|
|
14,073 |
|
|
|
23,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
37,006 |
|
|
|
41,100 |
|
|
|
74,248 |
|
|
|
94,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
2,104 |
|
|
|
(22,818 |
) |
|
|
(12,030 |
) |
|
|
(51,963 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on sale of automobile
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE PROVISION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
INCOME TAXES
|
|
|
2,104 |
|
|
|
(22,818 |
) |
|
|
(12,030 |
) |
|
|
(46,362 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
(800 |
) |
|
|
(800 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
$ |
2,104 |
|
|
$ |
(22,818 |
) |
|
$ |
(12,830 |
) |
|
$ |
(47,162 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) PER COMMON SHARE -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED
|
|
$ |
0.00 |
|
|
$ |
(0.01 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON
SHARES OUTSTANDING
|
|
|
3,770,083 |
|
|
|
3,770,083 |
|
|
|
3,770,083 |
|
|
|
3,770,083 |
|
The accompanying notes are
an integral part of these financial statements.
FORMAT,
INC.
STATEMENTS
OF CASH FLOW
|
|
Six
Months Ended
June
30,
|
|
|
|
2008 |
|
|
2007 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(12,830 |
) |
|
$ |
(47,162 |
) |
Adjustments
to reconcile net loss to net cash used in
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
3,067 |
|
|
|
2,948 |
|
Gain
on sale of automobile
|
|
|
- |
|
|
|
(5,601 |
) |
Net
changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(9,362 |
) |
|
|
(11,223 |
) |
Prepaid
expenses and other current assets
|
|
|
600 |
|
|
|
7,250 |
|
Accounts
payable and accrued expenses
|
|
|
5,648 |
|
|
|
6,653 |
|
Net
cash used in operating activities
|
|
|
(12,877 |
) |
|
|
(47,135 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds
from sale of automobile
|
|
|
- |
|
|
|
10,000 |
|
(Acquisition)
of fixed assets
|
|
|
- |
|
|
|
(6,900 |
) |
Net
cash provided by investing activities
|
|
|
- |
|
|
|
3,100 |
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Advances
from related party
|
|
|
19,000 |
|
|
|
39,656 |
|
Net
cash provided by financing activities
|
|
|
19,000 |
|
|
|
39,656 |
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
6,123 |
|
|
|
(4,379 |
) |
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
|
|
5,583 |
|
|
|
9,941 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - END OF PERIOD
|
|
$ |
11,706 |
|
|
$ |
5,562 |
|
The accompanying notes are
an integral part of these financial statements.
FORMAT,
INC.
STATEMENTS
OF CASH FLOW
(UNAUDITED)
|
|
Six
Months Ended
June
30,
|
|
|
|
2008 |
|
|
2007 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW ACTIVITY
|
|
|
|
|
|
|
Cash
paid during the year for income taxes
|
|
$ |
800 |
|
|
$ |
800 |
|
Cash
paid during the year for interest expense
|
|
$ |
- |
|
|
$ |
- |
|
The accompanying notes are
an integral part of these financial statements.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2008
(UNAUDITED)
NOTE
1
|
ORGANIZATION
AND BASIS OF PRESENTATION
|
Format,
Inc. (the “Company”) was incorporated in the State of Nevada on March 21,
2001. The Company provides transactional financial, corporate
reporting, commercial and digital printing for its customers. The Company
receives its clients’ information in a variety of formats and reprocesses it for
distribution typically in print, digital or internet formats. The Company
provides services throughout the United States, Canada and China.
Transactional financial
printing includes registration statements, prospectuses, debt
arrangements, special proxy statements, offering circulars, tender offer
materials and other documents related to corporate financings, mergers and
acquisitions.
Corporate reporting includes
interim reports, regular proxy materials prepared by corporations for
distribution to stockholders, and Securities and Exchange Commission reports on
Form 10-K and other forms.
Commercial and digital
printing consists of annual reports, sales and marketing literature,
newsletters and other custom-printed products.
The
accompanying unaudited 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-KSB for the year ended December 31, 2007.
Going
Concern
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. As shown
in the accompanying financial statements the Company has an accumulated deficit
of $215,262 and a working capital deficit of $185,685 as of June 30, 2008. 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. These conditions raise substantial doubt about the Company’s ability to
continue as a going concern for a reasonable period.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2008
(UNAUDITED)
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.
NOTE
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
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 and cash equivalent balances at one financial institution
that is insured by the Federal Deposit Insurance Corporation up to
$100,000.
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 collectability is determined to be permanently
impaired. Management has determined that as of June 30, 2008 an
allowance of $16,100 is required.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2008
(UNAUDITED)
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 June 30, 2008, the Company does not believe
there has been any impairment of its long-lived assets.
Fair Value of Financial
Instruments
Pursuant
to SFAS No. 107, “Disclosures About Fair Value of Financial Instruments”, the
Company is required to estimate the fair value of all financial instruments
included on its balance sheet as of June 30, 2008. 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, where collectibility is probable. The
Company’s fees are fixed.
Stock-Based
Compensation
The
Company adopted SFAS No. 123 (Revised 2004), Share Based Payment (“SFAS
No. 123R”), under the modified-prospective transition method on
January 1, 2006. SFAS No. 123R requires companies to measure and
recognize the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value. Share-based compensation
recognized under the modified-prospective transition method of SFAS
No. 123R includes share-based compensation based on the grant-date fair
value determined in accordance with the original provisions of SFAS
No. 123, Accounting for Stock-Based Compensation, for all share-based
payments granted prior to and not yet vested as of January 1, 2006 and
share-based compensation based on the grant-date fair-value determined in
accordance with SFAS No. 123R for all share-based payments granted after
January 1, 2006. SFAS No. 123R eliminates the ability to account for
the award of these instruments under the intrinsic value method prescribed by
Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock
Issued to Employees, and allowed under the original provisions of SFAS
No. 123. Prior to the adoption of SFAS No. 123R, the Company accounted
for our stock option plans using the intrinsic value method in accordance with
the provisions of APB Opinion No. 25 and related
interpretations.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2008
(UNAUDITED)
As of
June 30, 2008, the Company had no options outstanding.
Concentrations
The
Company has derived 42% of its operating revenue from four customers, for the
six months ended June 30, 2008 and 2007, respectively.
The
Company’s cash balance in financial institutions at times may exceed federally
insured limits of $100,000.
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 six months ended June 30, 2008 and 2007, there
were no common stock equivalents.
There
were no options or warrants to purchase shares of common stock at June 30, 2008
and 2007.
Recent Accounting
Pronouncements
In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) requires
the acquiring entity in a business combination to recognize all assets acquired
and liabilities assumed in the transaction, establishes the acquisition-date
fair value as the measurement objective for all assets acquired and liabilities
assumed, and requires the acquirer to disclose the nature and financial effect
of the business combination. SFAS 141(R) is effective for fiscal years beginning
on or after December 15, 2008. If and when the Company acquires one or more
entities in the future, it will apply SFAS 141(R) for the purposes of accounting
for such acquisitions.
In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160,"Noncontrolling Interests in Consolidated Financial Statements”
(“SFAS 160”). SFAS 160 amends Accounting Research Bulletin No. 51,
“Consolidated Financial Statements,” to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years
beginning on or after December 15, 2008. the Company presently has no such
noncontrolling interests. If and at such time as such an interest exists, it
will apply SFAS 160.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2008
(UNAUDITED)
In
March 2008, the FASB issued Statement of Financial Accounting Standards
No. 161, “Disclosures about Derivative Instruments and Hedging Activities”
(“SFAS 161”). SFAS 161 amends and expands the disclosure requirements of SFAS
133, “Accounting for Derivative Instruments and Hedging.” SFAS 161 is effective
for fiscal years beginning after November 15, 2008. The Company will adopt
SFAS 161 in the first quarter of 2009 and currently expect such adoption to have
no impact on its results of operations, financial position, or cash
flows.
In
April 2008, the FASB issued Staff Position No. 142-3, “Determination
of the Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement of Financial Accounting Standards No. 142, “Goodwill and Other
Intangible Assets”. FSP 142-3 is effective for Format, Inc. in the first quarter
of 2009. The Company presently has no such intangible assets. If and at such
time as such assets are acquired, the Company will apply SFAS 160.
In
May 2008, the FASB issued Statement of Financial Accounting Standards
No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS
162”). SFAS 162 identifies the sources of accounting principles and the
framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles in the United States.
SFAS 162 will become effective 60 days following Securities and Exchange
Commission (“SEC”) approval of the Public Company Accounting Oversight Board
(PCAOB) amendments to AU Section 411, “The Meaning of Present Fairly
in Conformity With Generally Accepted Accounting Principles.” The Company does
not anticipate the adoption of SFAS 162 to have a material impact on our results
of operations, financial position, or cash flows.
In
June 2008, the FASB issued Staff Position No. EITF 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities” (“EITF 03-6-1”). EITF 03-6-1 addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore, need to be included in the earnings
allocation in calculating earnings per share under the two-class method
described in FASB Statement of Financial Accounting Standards No. 128,
“Earnings per Share.” EITF 03-6-1 requires companies to treat unvested
share-based payment awards that have non-forfeitable rights to dividend or
dividend equivalents as a separate class of securities in calculating earnings
per share. EITF 03-6-1 is effective for fiscal years beginning after
December 15, 2008. EITF 03-6-1 is effective for Format, Inc. in the first
quarter of 2009. We are currently assessing the impact of EITF 03-6-1, but do
not expect that such adoption will have a material effect on our results of
operations, financial position, or cash flows.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2008
(UNAUDITED)
As of
June 30, 2008 and 2007, 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 June 30, 2008 collectability is uncertain and an allowance
has been setup for the full amount due of $20,500.
NOTE
4
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consisted of the following as of June 30, 2008:
Office
machinery and equipment
|
|
$ |
34,895 |
|
Furniture
and fixtures
|
|
|
2,011 |
|
|
|
|
36,906 |
|
Less:
Accumulated depreciation
|
|
|
(24,904 |
) |
|
|
|
|
|
|
|
$ |
12,002 |
|
Depreciation
expense for the three months ended June 30, 2008 and 2007 amounted to $1,521 and
$1,490, respectively. Depreciation expense for the six months ended June 30,
2008 and 2007 amounted to $3,067 and $2,948, respectively.
In
January 2007, the Company sold an automobile for $10,000. The carrying value of
the automobile at the time of the sale was $4,399, resulting in a gain on the
sale of $5,601.
NOTE
5
|
RELATED
PARTY TRANSACTION
|
A
stockholder of the Company has made advances to the Company which are unsecured
and due on demand. For the six months ended June 30, 2008 the
Stockholder advanced $25,000 to the Company and was repaid
$6,000. For the six months ended June 30, 2007 the stockholder
advanced $39,656 to the Company. The total amount due at June 30,
2008 was $151,428.
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS 1019). 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.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2008
(UNAUDITED)
The
components of the Company’s income tax provision for the six months ended June
30, 2008 and 2007 consist of:
|
|
2008
|
|
|
2007
|
|
Current
income tax expense
|
|
$ |
800 |
|
|
$ |
800 |
|
Expected
income tax benefit
|
|
|
40,560 |
|
|
|
44,600 |
|
Change
in valuation allowance
|
|
|
(40,560 |
) |
|
|
(44,600 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
800 |
|
|
$ |
800 |
|
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 June 30,
2008.
We
provide EDGARizing services to various commercial and corporate entities. Our
primary service is the EDGARization of corporate documents that require filing
on EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system
maintained by the Securities and Exchange Commission. EDGAR performs automated
collection, validation, indexing, acceptance, and forwarding of submissions by
companies and others who are required by law to file forms with the Securities
and Exchange Commission. These documents include registration statements,
prospectuses, annual reports, quarterly reports, periodic reports, debt
agreements, special proxy statements, offering circulars, tender offer materials
and other documents related to corporate financings, acquisitions and mergers.
We receive our clients’ information in a variety of media, and reformat it for
distribution, either in print, digital or Internet form. We also provide limited
commercial printing services, which consist of annual reports, sales and
marketing literature, newsletters, and custom-printed products.
Liquidity and Capital
Resources. We had cash of $11,706 as of June 30, 2008.
Our accounts receivable were $24,597 as of June 30, 2008. We also had
$1,200 represented by a security deposit and $600 represented by prepaid
expenses and other current assets. Therefore our total current assets
as of June 30, 2008 were $38,103. We also had $12,002 represented by
fixed assets, net of depreciation, as of June 30, 2008.
Our total
assets as of June 30, 2008 were $50,105. As of June 30, 2008,
our current liabilities were $223,788, of which $71,560 was represented by
accounts payable and accrued expenses, $800 was represented by income taxes
payable, and $151,428 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.
Other
than the proposed increases in marketing expenses and the increases in legal and
accounting costs we experienced due to the reporting requirements of becoming 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
June 30, 2008 and June 30, 2007.
Results
of Operations.
Revenues. We
generated revenues of $39,110 for the three months ended June 30, 2008, as
compared to $18,282 for the three months ended June 30, 2007. The increase in
revenues was primarily due to the fact that we had more clients and performed
more work during the three months ended June 30, 2008 as compared to
2007.
Operating Expenses. For the
three months ended June 30, 2008, our total operating expenses were $37,006, as
compared to total operating expenses of $41,100 for the three months ended June
30, 2007. The decrease in total operating expenses is due primarily to a
decrease in general and administrative expenses for the three months ended June
30, 2008, to $10,191 as compared to $14,190 for the three months ended June 30,
2007. Therefore, our net income before provision for income taxes was
$2,104 for the three months ended June 30, 2008, as compared to a net loss
before provision for income taxes, was $22,818 for the three months ended June
30, 2007.
For the six months ended
June 31, 2008 and June 31, 2007.
Results
of Operations.
Revenues. We
generated revenues of $62,218 for the six months ended June 31, 2008, as
compared to $42,818 for the six months ended June 31, 2007. The increase in
revenues was primarily due to the fact that we had more clients and performed
more work during the six months ended June 30, 2008 as compared to
2007.
Operating Expenses. For the
six months ended June 31, 2008, our total operating expenses were $74,248, as
compared to total operating expenses of $94,781 for the six months ended June
31, 2007. 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 $18,942 for the six months ended June 31, 2008 as compared
to $27,905 for the six months ended June 31, 2007. The decrease was due to lower
legal and accounting expenses incurred in 2008. We also had a decrease in
general and administrative expenses, which totaled $14,073 for the six months
ended June 31, 2008 as compared to $23,413 for the six months ended June 31,
2007. Our professional fees and general and administrative expenses were higher
in 2007 due to the costs associated with becoming a public
company. Therefore, our net loss from operations before other income
or expenses and provision for income taxes was $12,030 for the six months ended
June 31, 2008, as compared to $51,963 for the six months ended June 31,
2007.
Other Income. For the
six months ended June 31, 2008, we had no other income, as compared to the six
months ended June 31, 2007, where our other income was comprised of $5,601 which
was gain from the sale of an automobile.
Net Income or Loss. For the
six months ended June 31, 2008, our net loss from operations before provision
for income taxes of $800 was $12,030 making our net loss $12,830. This is in
comparison to the six months ended June 31, 2007, where our net loss was
$46,362, and after provision for income tax of $800, was $47,162. The decrease
in our net loss for the six months ended June 31, 2008, was due a decrease in
operating expenses between the two periods, and the increase in revenue, as
discussed above.
Our Plan of Operation for the Next
Twelve Months. To effectuate our business plan during the next twelve
months, we must 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.
We have
also initiated a direct marketing campaign to newly public and small public
companies. We believe that many smaller public companies are particularly
sensitive to pricing. Therefore, we have targeted those companies as potential
customers. We plan to mail information with pricing specials as well as make
direct marketing calls to those companies in an effort to attract their
business.
We had
cash of $11,706 of June 30, 2008, 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 June 30, 20, he total amount due was
$151,428. We used those funds to pay our auditors for the audit
of our financial statements. 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.
Besides
generating revenue from our current operations, we will need to raise
approximately $50,000 to continue operating at our current rate. At our current
level of operation, we are not able to operate profitably. In order to conduct
further marketing activities and expand our operations to the point at which we
are able to operate profitably, we believe we would need to raise $50,000, which
would be used for conducting marketing activities. Other than proposed increases
in marketing expenses and the anticipated increases in legal and accounting
costs of becoming 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.
Because
we have limited operations and assets, we may be considered a shell company as
defined in Rule 12b-2 of the Securities Exchange Act of 1934. Accordingly, we
have checked the box on the cover page of this report that specifies we are a
shell company.
Off-Balance Sheet Arrangements.
We have no off-balance sheet arrangements.
Item 3. Quantitative and
Qualitative Disclosures about Market Risk
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 June 30, 2008, 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.
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
32.
Section 1350 Certifications.
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
|
|
|
|
|
|
August
14, 2008
|
By:
|
/s/ Ryan
Neely |
|
|
Its:
|
Ryan
Neely
Principal
Executive Officer,
Chief
Financial Officer,
President
and a Director
|
|