M2
Law
Professional
Corporation
November
13, 2006
As
Filed On Edgar
Securities
and Exchange Commission
Division
of Corporate Finance
Washington,
DC 20549
Mail
Stop
4561
Attn:
Gregory Dundas
Re: Format,
Inc., a Nevada corporation
Registration
Statement on Form 10-SB
Filed
November 13, 2006
File
No.
0-52213
Dear
Mr.
Dundas:
On
behalf
of Format, Inc., a Nevada corporation (“Company”), please find enclosed two (2)
copies of the Company’s Registration Statement on Form 10-SB (“Form 10-SB”),
which was filed with the Securities and Exchange Commission on November
13,
2006. To facilitate your review, the copies are marked to show changes
from the
Company’s previous Amendment No. 1 to its Registration Statement on Form 10-SB,
which was withdrawn by the Company prior to its effectiveness. The
exhibits have not been attached to the enclosed marked
copies.
The
purpose of this letter is to respond, in writing, to the questions, comments
and
requests for information specified in your comment letter dated October 26,
2006, and to key those responses to the revisions and additions specified
in
Form 10-SB.
The
headings and provisions of this letter, which are numbered, are intended
to
correspond and respond to the headings and order of the paragraphs in your
letter.
Risk
Factors, page 6
|
1.
|
The
Company has revised its disclosure to quantify the number of customers
upon which the Company relies for the majority of its
revenues.
|
Securities
and Exchange Commission
Mr.
Gregory Dundas
Page
2
of
5
Liquidity
and Capital Resources, page 13
|
2.
|
The
Company has revised its disclosure to specify how providing funding
to
related companies has impacted the Company’s liquidity and capital
resources during the period presented. The Company also revised
its
disclosure to describe the impact on the timing and amount of cash
received by obtaining marketable securities contributed by the
Company’s
president as opposed to collecting on the related accounts receivable.
|
Our
Plan of Operations for the Next Twelve Months, page 13
|
3.
|
The
Company has revised its disclosure to disclose whether the Company’s
intends to attempt collection on the Company’s related loan receivable to
help improve the Company’s liquidity
position.
|
Recent
sales of Unregistered Securities, page 19
|
4.
|
The
Company has supplementally provided a reconciliation of the Company’s paid
in capital account including the date of changes to that account
from the
date of first capitalization. See attached
schedule.
|
Financial
Statements for the years ended December 31, 2005 and 2004
Report
of Independent Registered Public Accounting Firm, page F-17
|
5.
|
The
Company’s independent registered public accounting firm, Michael Pollack
CPA, has included in their opinion an explanatory paragraph regarding
the
correction of the error in 2004 that led to the reclassification
in the
statement of cash flows. This reclassification of the correction
of the
error in the cash flows has been removed from the 2004 opinion
from the
predecessor auditor in an explanatory
paragraph.
|
Statement
of Cash Flows, page F-20
|
6
|
The
Company has included a footnote disclosure detailing the reclassification
of the statement of cash flows and the correction of the error
leading to
this reclassification. There was no earnings impact with this
reclassification.
|
Note
2
- Summary of Significant Accounting Policies
Allowance
for Doubtful Accounts, page F-24
|
7.
|
The
Company is referring to SEC Form S-8, and has clarified that in
Note 2 to
both the audited financial statements and interim financial statements.
Additionally, the President of the Company was a consultant for
each
company as he performed the EDGARization services for each of the
companies for which shares were issued.
|
Securities
and Exchange Commission
Mr.
Gregory Dundas
Page 3
of
5
|
8.
|
Aside
from providing the Company’s typical EDGARization services for each of the
companies, the Company and its President have no relationship with
the
companies for which shares were issued as payment against outstanding
receivables. The Company clarified the relationship between its
President
and the companies in Note 2 of the financial
statements.
|
|
9.
|
The
following represents the information on the shares
issued:
|
|
·
|
Gross
amount of receivables outstanding at time of share issuance $5,564
(CA
Lit), $6,075 (IVI) and $11,030
(Cobalis)
|
|
·
|
Amount
of any allowance of doubtful accounts related to the receivables
$0
|
|
·
|
The
dates the shares were issued - 3-1-06 (CA Lit), and 5-15-06 (IVI
and
Cobalis)
|
|
·
|
The
number of shares issued to the President - CA Lit (14,642), IVI
(27,000)
and Cobalis (7,353)
|
|
·
|
Stock
price on date of issuance of shares - $0.38 (CA Lit), $0.225
(IVI) and
$1.50 (Cobalis)
|
|
·
|
Date
and stock price on which the shares sold in the open market
|
| o |
CA
Lit - 10,000 shares sold on 3/7/06 at $0.28 per share and 4,642
shares
sold on 3/7/06 at $0.30 per share
|
| o |
Cobalis
- 2,353
shares sold on 9/22/06 at $0.95 per share and 5,000 shares
sold on 10/3/06
at $0.95 per share
|
| o |
IVI
- See
chart below
|
|
Sale
date
|
#
of shares sold
|
Sale
price per share
|
|
2/21/06
|
5,000
|
$0.23
|
|
2/22/06
|
5,000
|
0.25
|
|
2/23/06
|
4,000
|
0.235
|
|
2/24/06
|
500
|
0.235
|
|
2/27/06
|
5,000
|
0.20
|
|
3/3/06
|
7,500 |
0.17
|
|
10.
|
The
actual journal entries recorded by the Company for the receipt
of the
shares issued to the Company’s President for the outstanding receivable,
and subsequent advance by the President back to the Company is
as
follows:
|
|
Dr.
Shareholder Advance
|
0
|
|
|
Dr.
Wage Expense
|
22,669
|
|
|
Cr.
Accounts Receivable
|
|
22,669
|
Entry
to
record issuance of shares to President from customer. Wages are recorded
when
the shareholder advance account is fully absorbed.
|
Dr.
Cash/Marketable Securities
|
22,669
|
|
|
Cr.
Shareholder Advance
|
22,669
|
Entry
to
record cash infusion by President for working capital purposes
|
Cr.
Marketable Securities
|
|
14,948
|
|
Dr.
Unrealized Losses
|
3,309
|
|
|
Dr
Cash
|
9,808
|
|
|
Dr.
Realized Losses
|
1,831
|
Entry
to
record gain or loss on sale of securities
|
11.
|
The
substance of the transaction was that the issuance of the shares
to the
Company’s president was due to the regulations under Form S-8, that the
Company could not directly receive payment in the form of shares.
The
Company’s receivable was the only reason the transaction was done. Without
a valid receivable, no shares would have been issued. The receivable
should not be written off as it was paid to the Company’s president on
behalf of the Company. In effect, the second entry provided by
us in
comment 10, shows the security coming back into the Company, just
not in
the form of a contribution of equity, but as a liability, because
the
Company’s president is due the advances that he put into the Company prior
to the stock issuance back.
|
Securities
and Exchange Commission
Mr.
Gregory Dundas
Page 4
of
5
The
amount recognized in the statement of operations is merely just the recognition
of the difference between the value of the liability outstanding to the
President and the value of the stock the President received. This is not
a write
off of the receivable and is not a reflection of the change in value of the
stock.
|
12.
|
As
noted in earlier responses, the Company believes they received
full value
for the outstanding receivables through the shares issued to the
Company’s
president and given to the Company. The number of shares was determined
based on the fair value of the receivable at the time of the issuance.
The
charge to wage expense was due to the fact that the value of the
shares
received by the Company’s president was greater than the liability
recognized at the time the Company’s president received the shares. It had
nothing to do with the value of the receivable. Therefore, no loss
is to
be recognized. The Company believes no revision is required to
the
disclosures.
|
|
13.
|
The
Company has amended their disclosure to reconcile these amounts
correctly
reflecting the bad debt expense as well as recoveries of bad debt.
|
Note
4
- Loans Receivable, page F-30
|
14.
|
The
Company has revised its disclosure to reflect the relationship
of the
related parties in accordance with SFAS 57, paragraph
2.
|
Securities
and Exchange Commission
Mr.
Gregory Dundas
Page 5
of
5
|
15.
|
The
Company at the time both the loans receivable and loans payable
were
entered into, had preliminary discussions with local banks. The
interest
rate of 4% was a few points below prime, however, when you combine
interest expense for the loans payable and the interest income
earned on
the loans receivable, the Company can have 8% or 12% interest as
well,
without materiality playing a factor. The Company has replaced
the 4% for
8% which is above prime for these periods, however, this will not
impact
the adjustments. It is important to note that the Company’s loans would
have been personally guaranteed by the Company’s president, and the
principals that borrowed the amounts from the Company, also would
have
provided guarantees on debt, so using 8% is reasonable. They are
still
calculated below materiality as noted
below.
|
Combining
the loans together in 2005, you would have a net loan receivable of
approximately $3,500 resulting in $140 in interest income at 4%, $280 at
8% and
$420 at 12%. Materiality for 2005 was $4,800 for planning materiality, $3,600
for tolerable misstatement and $1,200 for individual significant items.
Combining
the loans together in 2004, you would have a net loan receivable of
approximately $15,500 which is higher due to the loan receivable of $27,000
that
was paid by the Company during 2004, resulting in approximately $500 in interest
income at 4%, $1,000 at 8% and $1,500 at 12%. Materiality in 2004 was comparable
to the amounts in 2005.
Should
you have any questions or comments concerning the enclosed materials, please
contact me at 949-706-1470.
Sincerely,
M2
Law
Professional Corporation
| /s/ Michael Muellerleile | |||
|
Michael
Muellerleile
|