Business Context and Reporting Period
Company: Format, Inc. (d/b/a Power Solutions International, Inc.)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2010
Business Description: The Company provides EDGARizing services (preparing and filing documents with the SEC) to commercial and corporate entities throughout the United States. The Company is a smaller reporting company incorporated in Nevada.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2010 | Six Months Ended June 30, 2009 | Three Months Ended June 30, 2010 | Three Months Ended June 30, 2009 |
|---|---|---|---|---|
| Revenue | $47,828 | $42,766 | $37,652 | $25,884 |
| Net Income (Loss) | $(12,907) | $(16,558) | $3,767 | $3,674 |
| Operating Expenses | $59,935 | $58,524 | $33,885 | $22,210 |
| Cash and Equivalents (End of Period) | $78,689 (as of June 30, 2010) | |||
| Net Cash Provided by Operating Activities | $26,204 | $(11,479) | N/A | |
| Total Assets | $86,188 (as of June 30, 2010) | |||
| Total Liabilities | $266,653 (as of June 30, 2010) | |||
| Working Capital | $(184,322) Deficit | |||
| Accumulated Deficit | $(222,044) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased by approximately 12% for the six months ended June 30, 2010, compared to the prior year period. This was driven primarily by additional bulk EDGARizing services provided to a single customer, Research Data Group, Inc. (RDG).
- Customer Concentration: During the six months ended June 30, 2010, 100% of operating revenue was derived from one customer (RDG), compared to 20% from one customer in the same period in 2009.
- Expense Increases: Operating expenses rose slightly year-over-year for the six-month period, primarily due to a significant increase in professional fees (from $18,390 to $32,205). This was partially offset by decreases in wages and general administrative expenses.
- Profitability: While the Company reported a net loss for the six-month period, the loss narrowed compared to the prior year ($12,907 vs. $16,558). The Company returned to profitability in the second quarter alone, reporting net income of $3,767.
- Liquidity: Cash balances increased from $56,763 at year-end 2009 to $78,689 at June 30, 2010, driven by positive cash flow from operations ($26,204) despite the net loss.
Outlook, Risks, and Contingencies
- Going Concern: The filing explicitly states that the Company has an accumulated deficit of $222,044 and a working capital deficit of $184,322. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Operations have historically been funded by advances from the President.
- Liquidity Risk: Management estimates that current cash of $78,689 is insufficient to fund operations for the next twelve months. The Company anticipates increased legal and accounting costs associated with public reporting requirements.
- Capital Needs: The Company intends to pursue capital through public or private financing, borrowings, or further advances from officers and directors. There is no guarantee that additional funding will be available on favorable terms.
- Related Party Dependence: The Company owes $163,699 to its President (Ryan Neely) in unsecured, non-interest-bearing advances due on demand. Additionally, $27,500 in officer compensation is accrued and unpaid.
- Management Plan: To mitigate risks, management plans to implement more aggressive marketing strategies targeting small publicly reporting companies and to work closely with lawyers and investment advisors.
Investor Verification Checklist
- Customer Concentration: Verify the stability of the relationship with Research Data Group, Inc., which accounted for 100% of revenue in the current period.
- Related Party Debt: Confirm the terms and repayment status of the $163,699 owed to the President, as this represents a significant portion of total liabilities.
- Going Concern Status: Assess the likelihood of securing additional financing given the explicit statement that current cash is insufficient for the next 12 months.
- Revenue Quality: Investigate the nature of the "bulk EDGARizing services" to ensure they are recurring and not a one-time event.
- Accrued Liabilities: Monitor the payment of accrued officer compensation ($27,500) and accounts payable ($73,854) to gauge operational cash flow health.