UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 31,
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)
|
(Zip
Code)
|
949-481-9203
|
(Registrant's
Telephone Number, Including Area Code)
|
Securities
registered under Section 12(b) of the Act:
|
|
Title of each class
registered:
|
Name of each exchange on which
registered:
|
None
|
None
|
Securities
registered under Section 12(g) of the Act:
|
|
Common Stock, Par Value $.001
(Title
of Class)
|
Preferred Stock, Par Value
$.001
(Title
of
Class)
|
Indicate
by check mark if registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. o Yes xNo
Indicate
by check mark if registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. o Yes xNo
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 o No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
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 o (Do
not check if a smaller reporting company)
|
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
The
aggregate market value of the registrant's shares of common stock held by
non-affiliates of the registrant on June 30, 2008, based on $1.05 per
share, the average
bid and asked price of such common equity as of that date, was $800,712.
As of
March 30, 2009, there were 3,770,083 shares of the issuer's $.001 par value
common stock issued and outstanding.
Documents
incorporated by reference. There are no annual reports to security holders,
proxy information statements, or any prospectus filed pursuant to Rule 424 of
the Securities Act of 1933 incorporated herein by reference.
FORWARD-LOOKING
STATEMENTS
In
addition to historical information, this report contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. The forward-looking
statements are not historical facts but rather are based on current
expectations, estimates and projections about our business and industry, and our
beliefs and assumptions. Words such as “anticipate,” “believe,” “estimate,”
“expect,” “intend,” “plan,” “will” and variations of these words and similar
expressions identify forward-looking statements. These statements are not
guarantees of future performance and are subject to risks, uncertainties and
other factors, many of which are beyond our control, are difficult to predict
and could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements. These risks and uncertainties
include, but are not limited to, those described in Item 1 “Risk Factors”
and elsewhere in this report. Forward-looking statements that were believed to
be true at the time made may ultimately prove to be incorrect or false. We
undertake no obligation to revise or publicly release the results of any
revision to these forward-looking statements. Given these risks and
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements.
PART
I
Item 1.
Business.
Our Background. We were
incorporated in Nevada on March 21, 2001. We are qualified to do business in
California as Format Document Services, Inc. On November 14, 2006, we
filed a Registration Statement on Form 10-SB on a voluntary basis so that we
would become a reporting issuer pursuant to the Securities and Exchange Act of
1934, which is a requirement for our common stock to become eligible for
quotation on the OTC Bulletin Board. Our Registration Statement on Form 10-SB
became effective on January 13, 2007. Our shares of common stock are currently
eligible for quotation on the Over-the-Counter Bulletin Board under the
symbol “FRMT”.
During
the last three years, our business operations have been negatively impacted by
our inability to collect on certain accounts receivable balances, our inability
to offer HTML EDGARization filing services and our lack of a significant number
of customers. We have focused our business development on the
following:
-
In 2005
and 2006, we implemented HTML (Hypertext Markup Language) and unofficial PDF
(Portable Document Format) EDGARization filing services in order to update our
service offerings and improve our ability to compete with other providers of
EDGARization services.
-
In
2007, we have been actively marketing and promoting our services to increase
the number of clients that we service.
Our Business. 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.
Our EDGARization
Services. We are a full-service EDGARizing firm that files
EDGAR reports on behalf of public companies. The scope of work undertaken by a
full-service EDGARizing includes the following:
-
filing
for EDGAR access codes;
-
conversion
of document to EDGAR acceptable format;
-
client
approval of EDGARized document; and
-
electronic
filing of the document.
We offer
HTML (Hypertext Markup Language) and unofficial PDF (Portable Document Format)
filing service for those clients who prefer their documents to appear similar to
their original format. We use the most current EDGARization software, which
allows for filings to be transmitted via the Internet for no fee instead of the
older, slower, dial-up method. Documents still require much work to conform to
the requirements of the EDGAR system. We receive the documents to be EDGARized
via email in PDF, Microsoft Word or Excel format. In order to convert
that document to an HTML document, our edgarizer will do the following to
prepare a document for filing with the SEC:
1)
Identify the document type to be filed and print the document and open the
Edgarizer HTML Software on the desktop.
2) Open
the Contact Manager section of the software and Input the new client
information. This includes client name, CCC, CIK, password, pass phrase, I.R.S.
# and other pertinent information.
3) Create
a new submission information file for the particular filing and input the
correct and required information for the particular filing. For example, a
current report on Form-8K will have correlating item numbers which must be input
in advance of EDGARization, as well as a "date of event" field. Exhibits are
then added to the newly create submission information file. The file is then
saved.
4) From
this point, the document attachment is opened in its original format and proofed
for formatting errors before conversion. For example, in a word document for
example we would do the following:
-
accept
track changes;
-
turn
off track changes;
-
convert
auto numbers;
-
ensure
consistent formatting of the document, such as spacing, underlines, bold,
italics, paragraph justification, font size, and font type; and
-
copy
and paste into the newly created submission information file, the main body of
the document.
Additional
steps may be required depending on the quality and type of original documents
provided. PDF documents would require the extra conversion to Word using Omnipro
before it can be cut and paste into the submission information
file.
5) The
edgarized document is proofed for errors and necessary formatting corrections
are made within the Edgarizer HTML Software.
6)
Financial tables are then converted and adjusted using the" Convert to financial
table tool", within the Edgarizer HTML Software. Once completed, financial
tables require time to correct column width, row height, indents, spacing,
underlines, and centering. Financial tables can be significantly more complex
than text to convert.
7)
Exhibits are opened, proofed in the same manner as above, and pasted into their
allotted space within the submission information file. Exhibits are proofed
again for accuracy and corrected as necessary. An exhibit number and style
header is added to the top of each exhibit.
8) Page
breaks are added throughout the entire document and page numbers are
inserted.
9)
Adjustments are also made to the page numbers of the table of contents, as
needed and where applicable.
10)
Finally, the appropriate signature lines are added from within the Edgarizer
HTML software toolbar. The appropriate information is then cut and pasted in.
Dates are added and signatures conformed as required.
Our Commercial Printing Services.
We also provide commercial printing services, which consists of printing
annual reports, sales and marketing literature, newsletters, and custom-printed
products. We provide these services through third party contractors. We do not expect our
printing services to become a material part of our business for the foreseeable
future.
Our EDGARization Software. We
currently license Edgarizer HTML, our EDGARization software, from Edgarfilings,
Ltd. Edgarizer HTML is a widely used EDGARization software available for
compiling and submitting Securities and Exchange Commission EDGAR filings. The
program converts documents produced by word processing, spreadsheet, and desktop
publishing packages into the EDGAR HTML format, adding the required submission
information and EDGAR tags. Edgarizer HTML includes complete test filing
capabilities to ensure that filings are compliant, and full communications
features to facilitate filing directly to the SEC. We pay $1,200 per year to
Edgarfilings, Ltd. for our license, which is renewable on an annual
basis.
Our Industry. The Securities
and Exchange Commission has established a program for the electronic filing of
documents under the federal securities laws, entitled Electronic Data Gathering
Analysis and Retrieval. This program requires participants or their
agents to file disclosure information with the Securities and Exchange
Commission in an electronic format rather than by the traditional paper-filing
package. This electronic format includes additional submission information and
coding “tags” within the document for aid in the Securities and Exchange
Commission’s analysis of the document and retrieval by the public. EDGAR allows
registrants to file and the public to retrieve disclosure information
electronically.
The
Securities and Exchange Commission began the development of EDGAR with a pilot
program in 1984. Through a phase-in schedule, the Securities and Exchange
Commission assigned one of ten dates by which all public companies must start
filing disclosure documents through EDGAR operational system, which began April
26, 1993. All publicly held companies were expected to be required to file
disclosure documents through EDGAR by May 1996. In addition, in 1999,
the National Association of Securities Dealers, Inc. mandated that companies
that participate on the Over-The-Counter Bulletin Board, an electronic quotation
medium, file registration statements with the Securities and Exchange Commission
via EDGAR, and to begin filing periodic filings with the Securities and Exchange
Commission, which significantly increased the number of companies that need to
utilize EDGAR filer services.
In May
1999, the EDGAR system began accepting documents in HTML (Hypertext Markup
Language) and unofficial documents in PDF (Portable Document
Format). This modernization of the EDGAR system was intended to make
the system more user friendly, and give the documents submitted a look which was
closer to that of the original document. At some point in the future, the
Securities and Exchange Commission will no longer accept the traditional ASCII
documents, and HTML will become the new standard.
Our Target Markets and Marketing
Strategy. We believe that our primary target market will
consist of small and medium size corporate entities and law firms that desire
EDGARizing services for them or their clients. Our marketing strategy is to
promote our services and products and attract businesses to us. Our
marketing initiatives will include:
-
establish
relationships with industry professionals, such as attorneys and accountants,
who can refer customers to us;
-
utilizing
direct response print advertisements placed primarily in small business,
entrepreneurial, and financially-oriented magazines and special interest
magazines;
-
attend
industry tradeshows; and
-
initiate
direct contact with potential customers.
Growth Strategy. Our objective
is to become one of the dominant providers of EDGARizing services to small cap
and micro cap public companies and small to medium size law firms. Our strategy
is to provide clients with competitive pricing, exceptional personal service and
reliable quality. Key elements of our strategy include:
-
increase
our relationships with businesses, law firms and accountants;
-
continue
and expand our website;
-
provide
additional services for businesses and other filers; and
-
pursue
relationships with companies that will support our business
development.
Our Website
www.formatds.com. Our website provides a description of our
services along with our contact information including our address, telephone
number and e-mail address. Our website also provides prospective customers with
relevant information about our pricing and payment options, our filing
procedures, frequently asked questions and investor relations.
Our Competition. The
EDGARizing services industry in the United States is highly competitive. The
EDGARizing process reformats documents required to be filed with the SEC from
files that were originally generated using a variety of word processing and
spreadsheet software. We compete with a variety of companies, many of
which have greater financial and other resources than us, or are subsidiaries or
divisions of larger organizations. In particular, the industry is characterized
by a small number of large, dominant organizations that perform this service,
such as Bowne & Co., Inc., RR Donnelley & Sons Co. and Merrill
Corporation, along with corporate entities or law firms that have their own
in-house EDGARizing capability.
The major
competitive factors in our business are the timeliness and quality of customer
service, the quality of finished products and price. Our ability to compete
effectively in providing customer service and quality finished products depends
primarily on the level of training of our staff, the utilization of computer
software and equipment and the ability to perform the services with speed and
accuracy. We believe we compete effectively in all of these areas.
Many of
our competitors have substantially greater financial, technical, managerial,
marketing and other resources than we do and they may compete more effectively
than we can. If our competitors offer EDGARizing services at lower prices than
we do, we may have to lower the prices we charge, which will adversely affect
our results of operations. Furthermore, many of our competitors are
able to obtain more experienced employees than we can.
Government Regulation. We are
subject to federal, state and local laws and regulations applied to businesses
generally. We believe that we are in conformity with all applicable laws in all
relevant jurisdictions. We do not believe that we are subject to any
environmental laws and regulations of the United States and the states in which
we operate.
Our Research and Development.
We are not currently conducting any research and development
activities. We do not anticipate conducting such activities in the
near future.
Intellectual Property. We do
not presently own any copyrights, patents, trademarks, licenses, concessions or
royalties, and we may rely on certain proprietary technologies, trade secrets,
and know-how that are not patentable.
EDGARizer
is a registered trademark of EDGARfilings, Ltd. EDGAR is registered trademark of
the Securities and Exchange Commission. In the event that we use the
name or phrase EDGAR Ease in our materials, we may need to secure a trademark
license issued by EDGARfilings, Ltd. In the event that we use the name or phrase
EDGAR in our materials, we may need to secure a trademark license issued by the
Securities and Exchange Commission.
We own
the Internet domain name “www.formatds.com”. Under current domain name
registration practices, no one else can obtain an identical domain name, but
someone might obtain a similar name, or the identical name with a different
suffix, such as “.org”, or with a country designation. The regulation of domain
names in the United States and in foreign countries is subject to change, and we
could be unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of our domain names.
Employees. As of March 28,
2009, we have one full-time employee and one part-time employee. Mr. Neely, our
president, chief financial officer, secretary and one of our directors,
currently devotes approximately 90% of his business time to our operations. We
do not currently anticipate that we will hire any employees in the next six
months, unless we significantly increase our revenues. From time-to-time, we
anticipate that we will use the services of independent contractors and
consultants to support our expansion and business development.
Facilities. Our executive,
administrative and operating offices are located at 3553 Camino Mira Costa,
Suite E, San Clemente, CA 92672. Our office space is approximately 500 square
feet and consists of two offices with a reception area. The term of our lease is
month to month and we pay rent of $1,200 per month. We believe that our
facilities are adequate for our needs and that additional suitable space will be
available on acceptable terms as required.
Item 1A. Risk
Factors.
Investing
in our common stock involves a high degree of risk. Any potential investor
should carefully consider the risks and uncertainties described below before
purchasing any shares of our common stock. The risks described below are those
we currently believe may materially affect us.
Risks
Related to our Business:
We have had operating losses since
formation and expect to incur net losses for the foreseeable future. We
have reported a net loss of $24,978 for the year ended December 31, 2008, and a
net loss of $106,406 for the fiscal year ended December 31, 2007. We anticipate
that we will lose money in the foreseeable future and we may not be able to
achieve profitable operations. In order to achieve profitable operations, we
need to generate more significant revenues and expand our customer base. We
cannot be certain that our business will be successful or that we will generate
significant revenues and become profitable.
The nature of our EDGARizing business
is highly cyclical and affected by conditions in capital markets, such that our
operating results may fluctuate due to a number of factors, such as stock market
fluctuations and overall trends in the economy. The EDGARizing industry
is highly dependent on the volume of public financing and equity offerings and
corporate reporting requirements. The corporate reporting revenue is
seasonal as the greatest number of regulatory reports is required to be
processed during the fiscal quarter ending March 31 and the second quarter
ending June 30. Because of these cyclical and seasonal factors,
coupled with the general need to complete certain processing jobs quickly after
delivery of copy by customers, we may not be able to handle maximum work loads
as we only have only full-time employee and one-part time employee.
The EDGARizing industry has been
dominated by larger, more established service providers. We compete
directly with a number of other document processors having the same degree of
specialization. Some of these document processors, such as Bowne
& Co., Inc., RR Donnelley & Sons Co. and Merrill Corporation, enjoy
significant market share, operate at multiple locations and have greater
financial resources than we do. We face competition from other
EDGARizing services, as well as from corporate entities and law firms that
provide their own in-house EDGARizing services. We are newly entering
this market, therefore, we do not know if our services will generate widespread
market acceptance. Several factors may contribute to our products and services
not achieving broad market acceptance, which include:
-
failure
to build brand recognition of Format;
-
increased
competition among other EDGARizing providers;
-
failure
to acquire, maintain and use state-of-the-art designing and computer equipment
and document reformatting software;
-
failure
or stagnation of the e-commerce industry; and
-
failure
of clientele to use our EDGARizing services.
The software and equipment we use in
our EDGARizing business are subject to rapid technological change and could
cause us to make significant capital investment in new equipment. Newer
technologies, techniques or products for the delivery of EDGARizing services we
offer could be developed with better performance than the computer equipment and
software that we use. The availability of new and better technologies could
require us to make significant investments in computer equipment and software,
render our current computer equipment or software obsolete and have a
significant negative impact on our business and results of
operations. Furthermore, technological changes, such as improvements
or advancements in computer equipment or software could require a significant
investment on our part to train our designers how to use these new
applications.
Significant decreases in EDGARizing
prices could harm our business by decreasing the demand for our services,
lowering the barriers to market entry and increasing market competitiveness.
A significant reduction in the price of document reformatting computer
equipment or software could reduce the demand for our services by making it
economically more attractive for small reporting companies and law firms that
are our primary target market to buy their own document reformatting computer
equipment and software begin to compete with us. Furthermore, decreases in
prices of document reformatting software and computer equipment could result in
smaller business ceasing to use our services to perform basic EDGARizing
projects. In addition, price decreases could force us to reduce our fees in
response to this reduction in demand or as a means to remain
competitive.
We anticipate that we may need to
raise additional capital to market our services. Our failure to raise additional
capital will significantly affect our ability to fund our proposed activities.
To actively market our services, we may be required to raise additional
funds of approximately $50,000. We do not know if we will be able to acquire
additional financing. We anticipate that we will spend significant funds on the
marketing and promotion of our services. Our failure to obtain additional funds
would significantly limit or eliminate our ability to fund our sales and
marketing activities. If we are not able to fund our sales and marketing
activities, our ability to increase our revenues will be significantly
hindered.
We have
been relying, and expect to continue to rely, on Mr. Neely to provide interest
free loans to pay for many of our expenses. We owe Mr. Neely a total of $149,928
as of December 31, 2008. We cannot guaranty that Mr. Neely will continue to
provide interest free loans to us.
Our officer and directors are engaged
in other activities and could have conflicts of interest with
us. Mr. Neely, our president, chief financial officer,
secretary and one of our directors, and Robert Summers, one of our directors,
engage in other activities unrelated to our operations. Our officer and
directors may have conflicts of interest in allocating time, services, and
functions between the other business ventures in which those persons may be or
become involved. Our officer and directors may not have sufficient staff,
consultants, employees, agents, contractors, and managers to adequately conduct
our business.
As a service-oriented company,
we depend on the efforts
and abilities of Ryan Neely to manage our operations and perform our
EDGARization services. Our sole officer has not entered
into an employment agreement with us. We currently do not maintain
any life insurance for our sole officer or any of our directors. Our
ability to provide services will depend on the continued services of Ryan Neely,
our sole officer and one of our directors. Any loss of services
provided by Ryan Neely would be particularly detrimental to us because, among
other things, the loss would slow our growth, sever the relationships and
contacts we maintain through Mr. Neely within the EDGARizing industry and
deprive us of his experience.
Our auditors have questioned our
ability to continue operations as a “going concern.” Investors may lose all of
their investment if we are unable to continue operations. We
hope to generate increased revenues and operate profitably. In the absence of
generating significantly more revenues, we will seek to raise additional funds
to meet our working capital needs principally through the additional sales of
our securities. However, we cannot guaranty that we will be able to
obtain sufficient additional funds when needed, or that such funds, if
available, will be obtainable on terms satisfactory to us. As a result, our
auditors believe that substantial doubt exists about our ability to continue
operations.
Risks Related to Owning Our
Common Stock
We lack a public market for shares of
our common stock, which may make it difficult for investors to sell their
shares. No public market currently exists for our common stock, which is
eligible for quotation on the Pink Sheets. We cannot guaranty that an active
public market will develop or be sustained. Therefore, investors may not be able
to find purchasers for their shares of our common stock. Purchasers of shares of
our common stock may not realize any return on their purchase of our shares.
Purchasers may lose their investments in us completely.
Our officer, directors and principal
security holders own approximately 80% of our outstanding shares of common
stock, allowing these shareholders to exert significant influence in matters
requiring approval of our shareholders. Our directors, officer
and principal security holders, taken as a group, together with their
affiliates, beneficially own, in the aggregate, approximately 80% of our
outstanding shares of common stock. Our principal security
holders may be able to exert significant influence, or even control, matters
requiring approval by our security holders, including the election of
directors. Such concentrated control may also make it difficult for
our shareholders to receive a premium for their shares of our common stock in
the event we merge with a third party or enter into a different transaction
which requires shareholder approval. In addition, certain provisions
of Nevada law could have the effect of making it more difficult or more
expensive for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of us.
Our common stock may be subject to
penny stock regulations which may make it difficult for investors to sell their
stock. The Securities and Exchange Commission has adopted
rules that regulate broker-dealer practices in connection with transactions in
“penny stocks”. Penny stocks generally are equity securities with a
price of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system, provided that current price
and volume information with respect to transactions in such securities is
provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, deliver a standardized risk disclosure document prepared by the
Commission, which specifies information about penny stocks and the nature and
significance of risks of the penny stock market. The broker-dealer
also must provide the customer with bid and offer quotations for the penny
stock, the compensation of the broker-dealer and salesperson in the transaction,
and monthly account statements indicating the market value of each penny stock
held in the customer's account. In addition, the penny stock rules
require that, prior to a transaction in a penny stock not otherwise exempt from
those rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure
requirements may have the effect of reducing the trading activity in the
secondary market for a stock that becomes subject to the penny stock
rules. If our common stock becomes subject to the penny stock rules,
holders of our shares may have difficulty selling those shares.
Item 1B. Unresolved Staff
Comments.
None.
Item 2.
Properties.
Property held by us. As of the
December 31, 2008 and 2007, we held no real property. We do not presently own
any interests in real estate.
Our Facilities. Our
executive, administrative and operating offices are located at 3553 Camino Mira
Costa, Suite E, San Clemente, CA 92672. Our office space is approximately 500
square feet and consists of two offices with a reception area. The term of our
lease is month to month and we pay rent of $1,200 per month. We believe that our
facilities are adequate for our needs and that additional suitable space will be
available on acceptable terms as required.
Item 3. Legal
Proceedings.
There are
no legal actions pending against us nor are any legal actions contemplated by us
at this time.
Item 4. Submission of
Matters to Vote of Security Holders.
Not
applicable.
PART
II
Item 5. Market for Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Reports to Security
Holders. We became a reporting company pursuant to the
Securities and Exchange Act of 1934 on January 13, 2007, which was 60 days after
the filing of our Registration Statement on Form 10-SB. Since that
time, we have been required to provide an annual report to our security holders,
which will include audited financial statements, and quarterly reports, which
will contain unaudited financial statements. The public may read and copy any
materials filed with the Securities and Exchange Commission at the Securities
and Exchange Commission’s Public Reference Room at 450 Fifth Street NW,
Washington, D.C. 20549. The public may also obtain information on the operation
of the Public Reference Room by calling the Securities and Exchange Commission
at 1-800-SEC-0330. The Securities and Exchange Commission maintains an Internet
site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the Securities and
Exchange Commission. The address of that site is
http://www.sec.gov.
There are
no outstanding options or warrants to purchase, or securities convertible into,
shares of our common stock. There are no outstanding shares of our common stock
that we have agreed to register under the Securities Act for sale by security
holders.
There
have been no cash dividends declared on our common stock. Dividends
are declared at the sole discretion of our Board of Directors.
As of
March 28, 2009, there were approximately 57 record holders of our common
stock.
Dividend Policy. We have never
declared or paid a cash dividend on our capital stock. We do not expect to pay
cash dividends on our common stock in the foreseeable future. We currently
intend to retain our earnings, if any, for use in our business. Any dividends
declared in the future will be at the discretion of our board of directors and
subject to any restrictions that may be imposed by our lenders.
No Equity Compensation Plan.
We do not have any securities authorized for issuance under any equity
compensation plan. We also do not have an equity compensation plan
and do not plan to implement such a plan.
Recent Sales of Unregistered
Securities. There have been no sales of unregistered securities within
the last three (3) years which would be required to be disclosed pursuant to
Item 701 of Regulation S-B.
Use of Proceeds of
Registered Securities. There were no sales or proceeds during
the calendar year ended December 31, 2008, for the sale of registered
securities.
Penny Stock
Regulation. Trading of our securities will be in the
over-the-counter markets which are commonly referred to as the “pink sheets” or
on the OTC Bulletin Board. As a result, an investor may find it more difficult
to dispose of, or to obtain accurate quotations as to the price of the
securities offered.
Shares of
our common stock will probably be subject to rules adopted the Securities and
Exchange Commission that regulate broker-dealer practices in connection with
transactions in “penny stocks”. Penny stocks are generally equity
securities with a price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on the NASDAQ system, provided
that current price and volume information with respect to transactions in those
securities is provided by the exchange or system). The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from those rules, deliver a standardized risk disclosure
document prepared by the Securities and Exchange Commission, which contains the
following:
-
a
description of the nature and level of risk in the market for penny stocks in
both public offerings and secondary trading;
-
a
description of the broker’s or dealer’s duties to the customer and of the
rights and remedies available to the customer with respect to violation to
such duties or other requirements of securities’ laws;
-
a
brief, clear, narrative description of a dealer market, including "bid" and
"ask” prices for penny stocks and the significance of the spread between the
"bid" and "ask" price;
-
a
toll-free telephone number for inquiries on disciplinary actions;
-
definitions
of significant terms in the disclosure document or in the conduct
of trading in penny stocks; and
-
such
other information and is in such form (including language, type, size and
format), as the Securities and Exchange Commission shall require by rule or
regulation.
Prior to
effecting any transaction in penny stock, the broker-dealer also must provide
the customer the following:
-
the bid
and offer quotations for the penny stock;
-
the
compensation of the broker-dealer and its salesperson in the
transaction;
-
the
number of shares to which such bid and ask prices apply, or other comparable
information relating to the depth and liquidity of the market for such stock;
and
- monthly
account statements showing the market value of each penny stock held in the
customer’s account.
In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser’s written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably
statement. These disclosure requirements may have the effect of
reducing the trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. Holders of shares of our common
stock may have difficulty selling those shares because our common stock will
probably be subject to the penny stock rules.
Purchases of Equity Securities.
None during the period covered by this report.
Item 6. Management’s
Discussion and Analysis of Financial Condition or 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 Annual Report on Form 10-K for
the year ended December 31, 2008.
The
following discussion of our financial condition and results of operations should
be read in conjunction with our audited financial statements for the years ended
December 31, 2008 and 2007, together with notes thereto included in this Form
10-K.
For the year ended December
31, 2008 as compared to the same period ended December 31,
2007.
Results
of Operations.
Revenues. We generated
revenues of $114,386 for the year ended December 31, 2008, as compared to
$84,927 for the year ended December 31, 2007. The increase in
revenues from 2007 to 2008 was primarily due to the fact that we were able to
engage additional clients and perform more work than the year
before. We hope to continue to engage more clients and increase our
revenues.
Operating Expenses. For the
year ended December 31, 2008, our total operating expenses were $138,564, as
compared to total operating expenses of $196,134 for the year ended December 31,
2007. The decrease in total operating expenses is primarily due to a decrease in
general and administrative expenses from $68,712 for the year ended December 31,
2007 to $31,946, for the year ended December 31, 2008. We also had a decrease in
professional fees, which totaled $27,470 for the year ended December 31, 2008,
as compared to $39,195 for the year ended December 31, 2007. The
decrease was due to the fact that we were able to reduce legal expenses incurred
in preparing our quarterly and annual reports.
Other Income. For
the year ended December 31, 2008, we had no other income, as compared to other
income of $5,601 for the year ended December 31, 2007. For the year ended
December 31, 2007, we had $5,601 gain on the sale of an automobile.
Net Income or
Loss. For the year ended December 31, 2008, our net loss from
operations before provision for income taxes of $800 was $24,178, making our net
loss $24,978. This is in comparison to the year ended December 31,
2007, where our net loss from operations before provision for income taxes of
$800 was $105,606, making our net loss $106,406. The decrease in our
net loss for the year ended December 31, 2008 as compared to the year ended
December 31, 2007, was primarily due to our ability to generate additional
revenues while lowering our costs of operations.
Liquidity and Capital
Resources. We had cash of $2,169 as of December 31, 2008,
compared to cash of $5,583 as of December 31, 2007. We had less cash as of
December 31, 2008, due to the difficulty of collecting on our accounts
receivable. Our accounts receivable increased to $25,216 as of December 31,
2008, as compared to $15,235 as of December 31, 2007, due to our inability to
collect certain receivables in a timelier manner. Our total current assets
increased to $28,585 as of December 31, 2008, from total current assets of
$15,235 as of December 31, 2007, which was primarily due to the increase in
accounts receivable. As of December 31, 2007, the total of our
property and equipment, less accumulated depreciation, was a net value of
$15,069, compared to the net value of $9,257 for our property and equipment,
less accumulated depreciation, as of December 31, 2008.
Our total
assets as of December 31, 2008 were $37,842, as compared to total assets of
$38,287 as of December 31, 2007. Our total assets remained nearly
even between the comparable periods as the increase in accounts receivable was
offset by the decrease in property and equipment.
As of
December 31, 2008, our current liabilities were $223,673, of which $73,745 was
represented by accounts payable and accrued expenses, as compared to December
31, 2007, where we had current liabilities were $199,140, of which $66,712 was
represented by accounts payable and accrued expenses. However, the increase in
current liabilities is due primarily to the increase in related party advance
from $132,428 as of December 31, 2007, to $149,928 as of December 31,
2008. The related party advance is payable to Mr. Neely, our officer,
principal shareholder and one of our directors compared. 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 potential 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.
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 believe that our ability to file all documents in
HTML has significantly improved our ability to compete with other providers of
EDGARization 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 $2,169 as of December 31, 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. For the year ended December 31, 2008, we were
advanced $17,500, making our total amount due to Mr. Neely $149,928, as compared
to $39,657 advanced during the year ended December 31, 2007, with a total amount
due as of that date of only $132,428. All of those loans are interest free
and due on demand. 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. However, our officer and directors
are not committed to contribute funds to pay for our expenses.
Our
belief that our officer and directors will pay our expenses is based on the fact
that our officer and directors collectively own 3,007,500 shares of our common
stock, which equals approximately 80% of our outstanding common stock. We
believe that our officer and directors will continue to pay our expenses as long
as they maintain their ownership of our common stock. However, our officer and
directors are not committed to contribute additional capital.
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 7A. Quantitative and
Qualitative Disclosures about Market Risk.
Not
applicable.
Item 8. Financial
Statements and Supplementary Data.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
Format,
Inc.
We have
audited the accompanying balance sheets of Format, Inc. as of December 31, 2008
and 2007 and the related statements of operations, changes in stockholders’
(deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Format, Inc. as of December 31,
2008 and 2007, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the financial statements, the
Company has negative working capital, incurred significant losses, and has an
accumulated deficit of $227,410 as of December 31, 2008. As discussed in Note 1,
these conditions raise substantial doubt about the Company’s ability to continue
as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
|
|
|
|
|
/s/
Jonathon Reuben, C.P.A.
|
|
|
|
|
Jonathon
Reuben, C.P.A.
Torrance,
California
March
27, 2009
|
|
|
|
|
FORMAT,
INC.
|
|
BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
2008
|
|
|
|
2,007
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$ |
2,169 |
|
|
$ |
5,583 |
|
Accounts
receivable, net
|
|
|
25,216 |
|
|
|
15,235 |
|
Loan
receivable, net
|
|
|
- |
|
|
|
- |
|
Security
deposit
|
|
|
- |
|
|
|
1,200 |
|
Prepaid
expenses and other current assets
|
|
|
1,200 |
|
|
|
1,200 |
|
Total
current assets
|
|
|
28,585 |
|
|
|
23,218 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
9,257 |
|
|
|
15,069 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
37,842 |
|
|
$ |
38,287 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
73,745 |
|
|
$ |
66,712 |
|
Due
to related party
|
|
|
149,928 |
|
|
|
132,428 |
|
Total
current liabilities
|
|
|
223,673 |
|
|
|
199,140 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
223,673 |
|
|
|
199,140 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' (DEFICIT)
|
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.001 per share, 5,000,000 shares authorized
and
|
|
|
|
|
|
0
shares issued and outstanding at December 31, 2008 and
2007
|
|
|
- |
|
|
|
- |
|
Common
stock, par value $0.001 per share, 50,000,000 shares authorized
and
|
|
|
|
|
|
3,770,083
shares issued and outstanding at December 31, 2008 and
2007
|
|
|
3,770 |
|
|
|
3,770 |
|
Additional
paid-in capital
|
|
|
37,809 |
|
|
|
37,809 |
|
Accumulated
deficit
|
|
|
(227,410 |
) |
|
|
(202,432 |
) |
Total
stockholders' (deficit)
|
|
(185,831 |
) |
|
|
(160,853 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
|
|
$ |
37,842 |
|
|
$ |
38,287 |
|
The
accompanying notes are an integral part of these financial
statements.
FORMAT,
INC.
|
|
STATEMENTS
OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended
|
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
REVENUE
|
|
$ |
114,386 |
|
|
$ |
84,927 |
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Wages
and wage related expenses
|
|
|
58,336 |
|
|
|
67,496 |
|
Professional
fees
|
|
|
27,470 |
|
|
|
39,195 |
|
Rent
expense
|
|
|
15,000 |
|
|
|
14,440 |
|
Depreciation
expense
|
|
|
5,812 |
|
|
|
6,291 |
|
Other
general and administrative expenses
|
|
|
31,946 |
|
|
|
68,712 |
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
138,564 |
|
|
|
196,134 |
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
(24,178 |
) |
|
|
(111,207 |
) |
|
|
|
|
|
|
|
|
|
OTHER
INCOME
|
|
|
|
|
|
|
|
|
Gain
on sale of automobile
|
|
|
- |
|
|
|
5,601 |
|
|
|
|
|
|
|
|
|
|
Total
other income
|
|
|
- |
|
|
|
5,601 |
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE PROVISION
|
|
|
|
|
|
|
|
|
FOR
INCOME TAXES
|
|
|
(24,178 |
) |
|
|
(105,606 |
) |
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
(800 |
) |
|
|
(800 |
) |
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
$ |
(24,978 |
) |
|
$ |
(106,406 |
) |
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) PER COMMON SHARE -
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED
|
|
$ |
(0.01 |
) |
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF
|
|
|
|
|
|
|
|
|
COMMON
SHARES OUTSTANDING
|
|
|
3,770,083 |
|
|
|
3,770,083 |
|
The
accompanying notes are an integral part of these financial
statements.
FORMAT,
INC.
|
|
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Earnings
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
(Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Total
|
|
Balance
- January 1, 2007
|
|
|
3,770,083 |
|
|
$ |
3,770 |
|
|
$ |
37,809 |
|
|
$ |
(96,026 |
) |
|
$ |
(54,447 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(106,406 |
) |
|
|
(106,406 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2007
|
|
|
3,770,083 |
|
|
|
3,770 |
|
|
|
37,809 |
|
|
|
(202,432 |
) |
|
|
(160,853 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(24,978 |
) |
|
|
(24,978 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2008
|
|
|
3,770,083 |
|
|
$ |
3,770 |
|
|
$ |
37,809 |
|
|
$ |
(227,410 |
) |
|
$ |
(185,831 |
) |
The
accompanying notes are an integral part of these financial
statements.
FORMAT,
INC.
|
|
STATEMENTS
OF CASH FLOW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended
|
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(24,978 |
) |
|
$ |
(106,406 |
) |
Adjustments
to reconcile net loss to net cash used in
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
5,812 |
|
|
|
6,291 |
|
Bad
debt reserve
|
|
|
(11,481 |
) |
|
|
36,049 |
|
Gain
on sale of automobile
|
|
|
- |
|
|
|
(5,601 |
) |
Net
changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
1,500 |
|
|
|
(1,178 |
) |
Prepaid
expenses and other current assets
|
|
|
1,200 |
|
|
|
6,650 |
|
Accounts
payable and accrued expenses
|
|
|
7,033 |
|
|
|
17,081 |
|
Net
cash used in operating activities
|
|
|
(20,914 |
) |
|
|
(47,114 |
) |
|
|
|
|
|
|
|
|
|
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
|
|
|
17,500 |
|
|
|
39,656 |
|
Net
cash provided by financing activities
|
|
|
17,500 |
|
|
|
39,656 |
|
|
|
|
|
|
|
|
|
|
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(3,414 |
) |
|
|
(4,358 |
) |
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
|
|
5,583 |
|
|
|
9,941 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - END OF PERIOD
|
|
$ |
2,169 |
|
|
$ |
5,583 |
|
The accompanying notes are
an integral part of these financial statements.
FORMAT,
INC.
|
|
STATEMENTS
OF CASH FLOW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended
|
|
|
Year
ended
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW ACTIVITY
|
|
|
|
|
|
|
Cash
paid during the year for income taxes
|
|
$ |
800 |
|
|
$ |
800 |
|
Cash
paid during the year for interest expense
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATION ON NONCASH ACTIVITY
|
|
|
|
|
|
|
|
|
Accounts
receivable paid off with marketable securities.
|
|
$ |
- |
|
|
$ |
18,447 |
|
The accompanying notes are
an integral part of these financial statements.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
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.
Going
Concern
As shown
in the accompanying financial statements the Company has incurred an net loss of
$24,978 and $106,406 for the years ended December 31, 2008 and 2007,
respectively. The Company has an accumulated deficit of
$227,410 and a working capital deficit of $195,088 for the year ended
December 31, 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.
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.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
The
Company maintains cash and cash equivalent 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 and the Company does not require any collateral to support its
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 December 31, 2008 and
2007 an allowance of $16,700 and
$15,200, respectively, 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 December 31, 2008, the Company does not believe
there has been any impairment of its long-lived assets.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
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 December 31, 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.
As of
December 31, 2008 and 2007, the Company had no options outstanding.
Concentrations
The
Company derived 42% of its operating revenue from six customers during the year
ended December 31, 2008. For the year ended December 31, 2007, the
Company derived 35% of its operating revenue from two customers. As of December
31, 2008, four customers each had balances due the Company that exceeded
10% of total accounts receivable.
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 years ended December 31, 2008 and 2007, there
were no common stock equivalents.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
Recent Accounting
Pronouncements
SFAS No. 141(R) - In
December 2007, the FASB issued Statement No. 141(R), Business
Combinations. This Statement replaces FASB Statement No. 141,
Business Combinations. This Statement retains the fundamental requirements in
Statement 141 that the acquisition method of accounting (which Statement 141
called the purchase method) be used for all business combinations and for an
acquirer to be identified for each business combination. This Statement defines
the acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. Statement 141 did not define the acquirer, although
it included guidance on identifying the acquirer, as does this Statement. This
Statement's scope is broader than that of Statement 141, which applied only to
business combinations in which control was obtained by transferring
consideration. By applying the same method of accounting - the acquisition
method - to all transactions and other events in which one entity obtains
control over one or more other businesses, this Statement improves the
comparability of the information about business combinations provided in
financial reports.
This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. The adoption of SFAS No 141(R) should not have a significant
impact on our consolidated financial statements.
SFAS No. 160 - In
December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements - an Amendment of ARB No. 51. This
Statement amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this Statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This Statement improves
comparability by eliminating that diversity.
This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. Earlier adoption is prohibited.
The effective date of this Statement is the same as that of the related
Statement 141(R). This Statement shall be applied prospectively as of the
beginning of the fiscal year in which this Statement is initially applied,
except for the presentation and disclosure requirements. The presentation and
disclosure requirements shall be applied retrospectively for all periods
presented. The adoption of SFAS No 160 should not have a significant
impact on our consolidated financial statements.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
SFAS No. 161 - In
March 2008, the FASB issued Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No. 133. This
Statement changes the disclosure requirements for derivative instruments and
hedging activities. Entities are required to provide enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under Statement 133 and
its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows.
This
Statement is intended to enhance the current disclosure framework in Statement
133. The Statement requires that objectives for using derivative instruments be
disclosed in terms of underlying risk and accounting designation. This
disclosure better conveys the purpose of derivative use in terms of the risks
that the entity is intending to manage. Disclosing the fair values of derivative
instruments and their gains and losses in a tabular format should provide a more
complete picture of the location in an entity’s financial statements of both the
derivative positions existing at period end and the effect of using derivatives
during the reporting period. Disclosing information about credit-risk-related
contingent features should provide information on the potential effect on an
entity’s liquidity from using derivatives. Finally, this Statement requires
cross-referencing within the footnotes, which should help users of financial
statements locate important information about derivative
instruments.
This
Statement is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. This Statement encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. The
adoption of SFAS No 160 should not have a significant impact on our consolidated
financial statements.
FASB issued Staff Position
No. 142-3 - 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 the Company in the first quarter of 2009. The adoption of “FSP
142-3 should not have a significant impact on our consolidated financial
statements.
SFAS No. 162 - 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.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
FASB issued Staff Position
No. EITF 03-6-1 - 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 the Company 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.
SFAS No. 157 - The
Company plans to adopt in the first quarter of fiscal 2009, the Statement of
Financial Accounting Standards No. 157, Fair Value Measurements, (“SFAS
No. 157”) for all financial assets and financial liabilities and for all
non-financial assets and non-financial liabilities recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually).
SFAS No. 157 defines fair value, establishes a framework for measuring fair
value, and enhances fair value measurement disclosure. The adoption
of SFAS No. 157 should not have a significant impact on our
consolidated financial statements, and the resulting fair values calculated
under SFAS No. 157 after adoption were not significantly different than the
fair values that would have been calculated under previous
guidance.
In
October 2008, the Financial Accounting Standards Board (“FASB”) issued
Financial Staff Position 157-3, Determining the Fair Value of a Financial Asset
When the Market for That Asset Is Not Active, (“FSP 157-3”). FSP 157-3 clarifies
the application of SFAS No. 157 in a market that is not active, and
addresses application issues such as the use of internal assumptions when
relevant observable data does not exist, the use of observable market
information when the market is not active, and the use of market quotes when
assessing the relevance of observable and unobservable data. FSP 157-3 is
effective for all periods presented in accordance with SFAS No. 157. The
adoption of FSP 157-3 did not have a significant impact on our consolidated
financial statements or the fair values of our financial assets and
liabilities.
In
December 2008, the FASB issued Financial Staff Position (“FSP”) Financial
Accounting Standard No. 140-4 and FASB Interpretation 46(R)-8, Disclosures
by Public Entities (Enterprises) about Transfers of Financial Assets and
Interests in Variable Interest Entities (“FSP FAS 140-4” and “FIN
46(R)-8”). The document increases disclosure requirements for public companies
and is effective for reporting periods (interim and annual) that end after
December 15, 2008. FSP FAS 140-4 and FIN 46(R)-8 became effective
for us on December 31, 2008. The adoption of FSP FAS 140-4 and
FIN 46(R)-8 did not have a significant impact on our consolidated financial
statements.
As of
December 31, 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 December 31, 2008 collectability is uncertain and an
allowance has been setup for the full amount due of $20,500.
FORMAT,
INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
NOTE
4
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consisted of the following as of December 31, 2008 and
2007.
|
|
2008
|
|
|
2007
|
|
Office
machinery and equipment
|
|
$ |
33,080 |
|
|
$ |
34,895 |
|
Furniture and
fixtures
|
|
|
2,011 |
|
|
|
2,011 |
|
|
|
|
35,091 |
|
|
|
36,906 |
|
Less:
Accumulated depreciation
|
|
|
(25,834 |
) |
|
|
(21,837 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
9,257 |
|
|
$ |
15,069 |
|
Depreciation
expense for the years ended December 31, 2008 and 2007 amounted to $5,812 and
$6,291, respectively.
In
January 2007, the Company sold an automobile for $10,000. The basis of the
automobile at the time of the sale was $4,399, resulting in a gain on the sale
of $5,601.
In August 2008, the Company disposed of
a computer. The basis of the computer at the time of the disposal was
$0, resulting in neither a gain or a loss.
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 years ended December 31, 2008 and 2007,
the Company was advanced $17,500 and $39,657, respectively. The total
amount due at December 31, 2008 and 2007 amounted to $149,928 and
$132,428.
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.
The
components of the Company’s income tax provision for the years ended December
31, 2008 and 2007 consist
of:
|
|
2008
|
|
|
2007
|
|
Current
income tax expense
|
|
$ |
800 |
|
|
$ |
800 |
|
Expected
income tax benefit
|
|
|
42,720 |
|
|
|
37,440 |
|
Change
in valuation allowance
|
|
|
(42,720 |
) |
|
|
(37,440 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
800 |
|
|
$ |
800 |
|
Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure.
There
have been no changes in or disagreements with our accountants since our
formation required to be disclosed pursuant to Item 304 of Regulation S-B,
except for the following:
On
January 7, 2008, we were notified that effective January 1, 2008, Michael
Pollack CPA, LLC (“Pollack”) had merged into the accounting firm of KBL, LLP,
and that Pollack resigned as independent registered public accounting firm for
us. A copy of Pollack’s letter to the Securities and Exchange Commission
regarding the resignation is included as Exhibit 16.2 to Form 8-K, which was
filed on January 15, 2008.
The
reports of Pollack on our financial statements for each of the years ended
December 31, 2006 and 2005, contained an explanatory paragraph relating to our
ability to continue as a going concern. Other than this report modification, the
reports of Pollack on our financial statements as of and for each of the past
two fiscal years did not contain any adverse opinion or disclaimer of opinion,
and were not modified as to uncertainty, audit scope, or accounting
principles.
We
engaged Jonathon P. Reuben, CPA, an Accountancy Corporation, as its new
independent auditors, effective as of January 11, 2008, to audit our financial
statements for the year ended December 31, 2007, and to perform procedures
related to the financial statements included in our current reports on Form 8-K
and quarterly reports on Form 10-QSB.
The
decision to engage Jonathon P. Reuben, CPA, an Accountancy Corporation, was
approved by our Board of Directors on January 11, 2008.
During
our two most recent fiscal years and the subsequent interim period through
January 7, 2007, the date of resignation, there were no disagreements with
Pollack on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of Pollack, would have caused it to make reference to the subject
matter of the disagreement(s) in connection with its reports. There were no
“reportable events” as that term is described in Item 304(a)(1)(v) of
Regulation S-B during our two most recent fiscal years and the subsequent
interim period through January 7, 2007, the date of resignation.
Other
than in connection with the engagement of Jonathon P. Reuben, CPA, an
Accountancy Corporation, by us, during our two most recent fiscal years
ended December 31, 2006 and 2005, and through January 7, 2007, we did not
consult Jonathon P. Reuben, CPA, an Accountancy Corporation, regarding either:
(i) the application of accounting principles to a specified transaction,
completed or proposed, or the type of audit opinion that might be rendered on
our financial statements, or (ii) any matter that was either the subject of
a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-B or the
related instructions thereto or a “reportable event” as described in
Item 304(a)(1)(v) of Regulation S-B.
We made
the contents of this disclosure available to Pollack and requested it to furnish
a letter to the Securities and Exchange Commission as to whether Pollack agrees
or disagrees with, or wishes to clarify our expression of its views. A copy
of Pollack’s letter to the Securities and Exchange Commission is included as
Exhibit 16.2 to this Form 8-K, which was filed on January 15, 2008
Item 9A. 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 (i) recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange
Commission and (ii) accumulated and communicated to our principal executive and
principal financial officers to allow timely decisions regarding required
disclosure. Based upon their evaluation of those controls and procedures
performed as of December 31, 2008, the date of this report, our chief executive
officer and the chief financial officer concluded that our disclosure controls
and procedures were effective.
Management's annual report
on internal control over financial reporting.
Our Chief
Executive Officer and our Chief Financial Officer are responsible for
establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rule 13a-15(f) and
15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process
designed by, or under the supervision of, our principal executive and principal
financial officers and effected by our board of directors, management and other
personnel, 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 and
includes those policies and procedures that:
-
pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets;
-
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of management and our directors;
and
-
provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material
effect on the financial statements.
Because
of its inherent limitations, our internal control over financial reporting may
not prevent or detect misstatements. Therefore, even those systems determined to
be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Our Chief
Executive Officer and our Chief Financial Officer assessed the effectiveness of
our internal control over financial reporting as of December 31, 2008. In
making this assessment, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control — Integrated Framework.
Based on
our assessment, our Chief Executive Officer and our Chief Financial Officer
believe that, as of December 31, 2008, our internal control over financial
reporting is not effective based on those criteria, due to the
following:
-
lack of proper segregation of functions, duties and responsibilities
with respect to our cash and control over the disbursements related thereto
due to our very limited staff, including our accounting
personnel.
In light
of this conclusion and as part of the preparation of this report, we have
applied compensating procedures and processes as necessary to ensure the
reliability of our financial reporting. Accordingly, management believes, based
on its knowledge, that (1) this report does not contain any untrue statement of
a material fact or omit to state a material face necessary to make the
statements made not misleading with respect to the period covered by this
report, and (2) the financial statements, and other financial information
included in this report, fairly present in all material respects our financial
condition, results of operations and cash flows for the years and periods then
ended.
This
report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management’s report in this
report.
Changes in Internal Control
Over Financial Reporting
There
have been no changes in our internal control over financial reporting (as
defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our
most recently completed quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
Item 9B. Other
Information.
None.
PART
III
Item 10. Directors,
Executive Officers and Corporate Governance.
Executive Officers and
Directors. Each of our directors is elected by the stockholders for a
term of one year and serves until his or her successor is elected and qualified.
Each of our officers is elected by the board of directors for a term of one year
and serves until his or her successor is duly elected and qualified, or until he
or she is removed from office. The board of directors has no nominating, audit
or compensation committee.
The
following table sets forth information regarding our executive officer and
directors.
Name
|
Age
|
Position
|
Ryan
A. Neely
|
37
|
president,
secretary, chief financial officer, director
|
Robert
D. Summers
|
38
|
director
|
Ryan A. Neely. Mr.
Neely has been our president, secretary and director since April 2001, and our
chief financial officer since April 2004. Mr. Neely manages all aspects of our
operations, including marketing and sales of our services. Mr. Neely also served
as our chief financial officer from April 2001 to February 2003. From
2000 to 2001, Mr. Neely was the chief executive officer of JPAL, Inc., a Nevada
corporation and an Internet based provider of vacation rental properties and
services. From May 1999 to September 1999, Mr. Neely worked as a
sales account manager for Unified Research Laboratories, Inc., which was
acquired by Symantec Corporation. Unified Research Laboratories, Inc. was a
developer of Internet content-control software and web filtering technologies.
From 1996 to August 1998, Mr. Neely worked as a regional sales manager where he
was responsible for all enterprise sales for Log-On Data Corp., Inc., a
California corporation, which has since changed its name to 8e6 Technologies,
Inc. Mr. Neely is not currently a director of any other reporting
company.
Robert D.
Summers. Mr. Summers has been one of our directors since
February 2003. Since 1996 to the present, Mr. Summers has been
employed as a staff accountant with Frankel & Summers, CPAs, which is an
accounting firm in Laguna Hills, California. Mr. Summers earned
his Bachelor of Science degree in Business in 1996 from California State
University at Fullerton. Mr. Summers is not an officer or director of
any reporting company.
There is
no family relationship between any of our officers or
directors. There are no orders, judgments, or decrees of any
governmental agency or administrator, or of any court of competent jurisdiction,
revoking or suspending for cause any license, permit or other authority to
engage in the securities business or in the sale of a particular security or
temporarily or permanently restraining any of our officers or directors from
engaging in or continuing any conduct, practice or employment in connection with
the purchase or sale of securities, or convicting such person of any felony or
misdemeanor involving a security, or any aspect of the securities business or of
theft or of any felony, nor are any of the officers or directors of any
corporation or entity affiliated with us so enjoined.
Nominating
Committee. Our entire board of directors participates in
consideration of director nominees. The board of directors will consider
candidates who have experience as a board member or senior officer of a company
or who are generally recognized in a relevant field as a well-regarded
practitioner, faculty member or senior government officer. The board
of directors will also evaluate whether the candidates' skills and experience
are complementary to the existing Board's skills and experience as well as the
board of directors' need for operational, management, financial, international,
technological or other expertise. The board of directors will interview
candidates that meet the criteria and then select nominees that board of
directors believes best suit our needs.
The board
of directors will consider qualified candidates suggested by stockholders for
director nominations. Stockholders can suggest qualified candidates for director
nominations by writing to our Corporate Secretary, at 3553 Camino Mira Costa,
Suite E, San Clemente, CA 92672. Submissions that are received that meet the
criteria described above will be forwarded to the board of directors for further
review and consideration. The board of directors will not evaluate candidates
proposed by stockholders any differently than other candidates.
Compensation Committee. The board of
directors has no compensation committee.
Audit Committee and Audit Committee
Financial Expert. We do not have a standing audit committee. The
functions of the Audit Committee are currently assumed by our board of
directors. Robert Summers, a member on our board of directors, is responsible
for the duties of an audit committee “financial expert.” It is unlikely that we
would be able to attract an independent financial expert to serve on our board
of directors at this stage of our development. In order to entice such a
director to join our board of directors, we would probably need to acquire
directors' errors and omission liability insurance and provide some form of
meaningful compensation to such a director; both of which we are unable to
afford at this time.
Item 10. Executive
Compensation
Name
and Principal
Position
|
Year
Ended
|
Salary
$
|
Bonus
$
|
Stock
Awards
$
|
Option
Awards
$
|
Non-Equity
Incentive Plan Compensation
$
|
Nonqualified
Deferred Compensation Earnings $
|
All
Other Compensation
$
|
Total
$
|
Ryan
Neely
President
CFO, Secretary
|
2008
|
$0
|
0
|
0
|
0
|
0
|
0
|
$0
|
$0
|
|
2007
|
$32,500
|
0
|
0
|
0
|
0
|
0
|
$0
|
$32,500
|
Employment Contracts and Termination
of Employment. We do not anticipate that we will enter into any
employment contracts with any of our employees. We have no plans or arrangements
in respect of remuneration received or that may be received by our executive
officers to compensate such officers in the event of termination of employment
(as a result of resignation or retirement).
Outstanding Equity Awards at Fiscal
Year-end. As of the year ended December 31, 2008, the following named
executive officer had the following unexercised options, stock that has not
vested, and equity incentive plan awards:
Option Awards
|
Stock
Awards
|
Name
|
Number
of Securities Underlying Unexercised Options
#
Exercisable
|
#
Un-exercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Options
|
Option
Exercise Price
|
Option
Expiration Date
|
Number
of
Shares
or
Units
of
Stock
Not
Vested
|
Market
Value
of
Shares
or
Units Not Vested
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
Not
Nested
|
Value
of Unearned
Shares,
Units
or
Other
Rights
Not Vested
|
Ryan
Neely
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
No Equity Compensation Plan.
We do not have any securities authorized for issuance under any equity
compensation plan. We also do not have an equity compensation plan
and do not plan to implement such a plan.
Stock Options/SAR Grants. No
grants of stock options or stock appreciation rights were made since our date of
incorporation on March 21, 2001.
Long-Term Incentive Plans. There are no
arrangements or plans in which we provide pension, retirement or similar
benefits for directors or executive officer. We do not have any material bonus
or profit sharing plans pursuant to which cash or non-cash compensation is or
may be paid to our directors or executive officer.
Director Compensation. Our
directors received the following compensation for their service as directors
during the fiscal year ended December 31, 2008:
Name
|
Fees
Earned or Paid in Cash
|
Stock
Awards
$
|
Option
Awards
$
|
Non-Equity
Incentive Plan Compensation
$
|
Non-Qualified
Deferred Compensation Earnings
$
|
All
Other Compensation
$
|
Total
$
|
Ryan
Neely
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Robert
Summers
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Item 12. Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The
following table sets forth certain information as of March 28, 2009,
regarding the beneficial ownership of our common stock by (i) each stockholder
known by us to be the beneficial owner of more than 5% of our common stock, (ii)
by each of our directors and executive officers and (iii) by all of our
executive officers and directors as a group. Each of the persons named in the
table has sole voting and investment power with respect to common stock
beneficially owned.
Name
and Address
of
Beneficial Owner
|
Amount
and Nature
of
Beneficial Owner
|
Percent
of
Class
|
Ryan
Neely
336
Plaza Estival
San
Clemente, CA 92672
|
3,000,000
shares (1)
president,
secretary, chief financial officer
and
a director
|
79.5%
|
Michelle
Neely
336
Plaza Estival
San
Clemente, CA 92672
|
3,000,000
shares (1)
|
79.5%
|
Robert
Summers
77
Pasto Rico
Rancho
Santa Margarita, CA 92688
|
7,500
shares
director
|
0.2%
|
All
directors and named executive officers as a group
|
3,007,500
shares
|
79.7%
|
(1) Ryan A. Neely, our officer and sole director, who owns
2,000,000 shares, is married to Michelle Neely, our former officer and
sole director, who owns 1,000,000 shares. Therefore, each beneficially
owns 3,000,000 shares of common stock, which equals approximately 79.5% of
our issued and outstanding common
stock.
|
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where
applicable, the persons or entities named in the table above have sole voting
and investment power with respect to all shares of our common stock indicated as
beneficially owned by them.
Changes in
Control. We are not aware of any arrangements which may result
in “changes in control” as that term is defined by the provisions of Item 403 of
Regulation S-B.
Equity Compensation Plan Information.
There are no securities authorized for issuance under any equity
compensation plans, and no securities issued or outstanding under any such
plans.
Item 13. Certain
Relationships and Related Transactions, and Director
Independence.
Related Party Transactions.
From time to time, Ryan Neely, our president, chief financial officer, secretary
and one of our directors advances money to us for working capital with no
interest, due on demand. As of December 31, 2008 and 2007, we have $149,928 and
$132,428 respectively, due to Mr. Neely as a current liability.
In 2005
and 2004, we loaned $21,500 and $7,500, respectively, to a company that is
principally owned by one of our shareholders that owns less than one percent of
our issued and outstanding shares. The loan is interest free and is due on
demand. The loan was made to this company based on the business the company was
conducting, and the fact that they were planning on going public and utilizing
our services.
Additionally
in 2004, we loaned $27,000 to one of our shareholders that owns less than one
percent of our issued and outstanding shares. That loan was repaid in
2005.
There
have been no other related party transactions, or any other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation
S-B.
With
regard to any future related party transaction, we plan to fully disclose any
and all related party transactions, including, but not limited to, the
following:
-
disclosing
such transactions in prospectuses where required;
-
disclosing
in any and all filings with the Securities and Exchange Commission, where
required;
-
obtaining
disinterested directors consent; and
-
obtaining
shareholder consent where required.
Director
Independence. Members of our Board of Directors are not
independent as that term is defined by defined in Rule 4200(a)(15) of the
Nasdaq Marketplace Rules.
Item
14. Principal Accountant Fees and Services.
Audit
Fees. The aggregate fees billed in each of the fiscal years ended
December 31, 2008 and 2007 for professional services rendered by the principal
accountant for the audit of our annual financial statements and quarterly review
of the financial statements included in our Form 10-K or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements for those fiscal years were $14,536 and $18,000,
respectively.
Audit-Related
Fees. For the fiscal year ended December 31, 2008, there were fees billed
for services reasonably related to the performance of the audit or review of the
financial statements outside of those fees disclosed above under “Audit Fees.”
For the fiscal year ended December 31, 2008, we were billed a total of $3,219 by
a separate accountant for consulting services in preparation for the annual
audit and quarterly reviews of the financial statements. For the fiscal year
ended December 31, 2007, we were billed a total of $7,675 by a separate
accountant for consulting services in preparation for the annual audit and
quarterly reviews of the financial statements.
Tax
Fees. For the fiscal years ended December 31, 2008 and December 31, 2007,
our accountants rendered services for tax compliance, tax advice, and tax
planning work for which we paid $750 and $875 respectively.
All Other Fees.
None.
Pre-Approval Policies and Procedures.
Prior to engaging our accountants to perform a particular service, our
board of directors obtains an estimate for the service to be performed. All of
the services described above were approved by the board of directors in
accordance with its procedures.
Item 15.
Exhibits,
Financial Statement Schedules.
(a)
|
Financial
Statements.
|
Included
in Item 8
(b)
|
Exhibits
required by Item 601.
|
Exhibit
No. |
Description |
3.1 |
Articles
of Incorporation* |
3.2 |
Bylaws* |
4. |
Specimen
Stock Certificate* |
14. |
Code
of Ethics* |
31
|
Certification
of Principal Executive Officer and Principal Financial Officer, pursuant
to Rule 13a-14 and 15d-14 of the Securities Exchange Act of
1934
|
32
|
Certification
of Principal Executive Officer and Principal Financial Officer, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of
2002
|
*
|
Included
in Registration Statement on Form 10-SB filed on November 14,
2006.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
Format,
Inc.,
a
Nevada corporation
|
|
|
|
|
|
March
30, 2009
|
By:
|
/s/ Ryan
A. Neely |
|
|
|
Ryan
A. Neely
President, Secretary, Treasurer and a Director
(Principal Executive Officer and Principal Financial
and Accounting Officer)
|
|
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
/s/ Ryan
Neely
|
|
|
|
|
Ryan Neely
President,
Secretary, Treasurer and a Director
(Principal Executive
Officer and Accounting Officer)
|
|
|
|
|
|
|
|
|
|
/s/
Robert Summers
|
|
|
|
|
Robert
Summers
Director
|
|
|
|
|