format_10q-093009.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 September 30, 2009
 
 
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 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.
 
 
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).  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
 
FORMAT, INC.
CONDENSED BALANCE SHEETS
             
             
   
September 30, 2009
   
December 31, 2008
 
   
(Unaudited)
       
             
ASSETS
             
CURRENT ASSETS
           
   Cash
  $ 37,867     $ 2,169  
   Accounts receivable, net
    2,927       25,216  
   Loan receivable, net
    -       -  
   Prepaid expenses
    449       -  
   Security deposit
    1,200       1,200  
Total current assets
    42,443       28,585  
                 
PROPERTY AND EQUIPMENT, NET
    6,084       9,257  
                 
TOTAL ASSETS
  $ 48,527     $ 37,842  
                 
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
                 
CURRENT LIABILITIES
               
   Accounts payable and accrued expenses
  $ 76,715     $ 73,745  
   Accrued officer compensation
    7,500       -  
   Due to related party
    167,977       149,928  
Total current liabilities
    252,192       223,673  
                 
TOTAL LIABILITIES
    252,192       223,673  
                 
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
    (245,244 )     (227,410 )
Total stockholders' (deficit)
    (203,665 )     (185,831 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS'  (DEFICIT)
  $ 48,527     $ 37,842  
                 
                 
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
 
2

 
FORMAT, INC.
CONDENSED STATEMENTS OF OPERATIONS
                         
                         
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2009
   
2008
   
2009
   
2008
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                         
REVENUE
  $ 27,186     $ 23,382     $ 69,952     $ 85,600  
                                 
OPERATING EXPENSES
                               
    Wages and wage related expenses
    7,621       12,668       33,427       43,034  
    Professional fees
    5,356       4,977       23,746       23,919  
    Rent expense
    4,696       3,600       10,744       11,400  
    Depreciation expense
    916       1,372       3,172       4,439  
    Other general and administrative expenses
    9,873       7,993       15,897       22,066  
                                 
Total operating expenses
    28,462       30,610       86,986       104,858  
                                 
LOSS FROM OPERATIONS
    (1,276 )     (7,228 )     (17,034 )     (19,258 )
                                 
   Provision for income taxes
    -       -       (800 )     (800 )
                                 
NET LOSS
  $ (1,276 )   $ (7,228 )   $ (17,834 )   $ (20,058 )
                                 
NET LOSS PER COMMON SHARE -
                         
    BASIC AND DILUTED
  $ (0.00 )   $ (0.00 )   $ (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 unaudited condensed financial statements.
 
 
3

 
FORMAT, INC.
 
CONDENSED STATEMENTS OF CASH FLOWS
 
             
             
   
Nine Months Ended
 
   
September 30,
 
   
2009
   
2008
 
   
(Unaudited)
   
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
     Net loss
  $ (17,834 )   $ (20,058 )
     Adjustments to reconcile net loss to net cash provided by (used in)
               
          operating activities:
               
          Depreciation
    3,173       4,439  
          Bad debt reserve
    9,641       -  
          Net changes in operating assets and liabilities:
               
               Accounts receivable
    12,648       (6,286 )
               Prepaid expenses and other current assets
    (449 )     900  
               Accounts payable and accrued expenses
    2,970       1,369  
               Accrued officer compensation
    7,500       -  
                   Net cash provided by (used in) operating activities
    17,649       (19,636 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
     Advances from related party
    18,769       25,000  
     Repayments to related party
    (720 )     (7,500 )
                   Net cash provided by financing activities
    18,049       17,500  
                 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    35,698       (2,136 )
                 
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
    2,169       5,583  
                 
CASH AND CASH EQUIVALENTS - END OF PERIOD
  $ 37,867     $ 3,447  
                 
                 
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 unaudited condensed financial statements.
 
 
4

 
FORMAT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009
(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 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)

 
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 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  
 
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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.

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 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)
 
                                                                         

 
ex31.htm


Exhibit 31
 
Certification of Principal Executive and Financial Officer,
pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934

I, Ryan Neely, certify that:
 
 
1.
I have reviewed this quarterly report on Form 10-Q of Format, Inc.;
 
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
 
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
 
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting , to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant‘s internal control over financial reporting.
 
Date: November 16, 2009   
         
/s/ Ryan Neely
       
Ryan Neely
       
Chief Executive Officer, Chief Financial Officer
       

ex32.htm


Exhibit 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

In connection with the Quarterly Report of Format, Inc. a Nevada corporation (the “Company”) on Form 10-Q for the period ending September 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Ryan Neely, Chief Executive Officer and Chief Financial Officer of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 
 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
 
A signed original of this written statement required by Section 906 has been provided to Format, Inc., and will be retained by Format, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
 
         
/s/ Ryan Neely
       
Ryan Neely
       
Chief Executive Officer, Chief Financial Officer
       
November 16, 2009