SEC Filing Summary: POWER SOLUTIONS INTERNATIONAL, INC. (Format, Inc.)
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended December 31, 2008. The registrant, operating as Format, Inc. (trading symbol "FRMT"), is a Nevada corporation incorporated in 2001. The company provides EDGARization services (reformatting corporate documents for SEC filing) and limited commercial printing services. The company is classified as a smaller reporting company and a shell company is not applicable. As of March 30, 2009, there were 3,770,083 shares of common stock outstanding.
Key Financial Metrics
| Metric | 2008 | 2007 |
|---|---|---|
| Revenue | $114,386 | $84,927 |
| Net Loss | $(24,978) | $(106,406) |
| Operating Expenses | $138,564 | $196,134 |
| Cash and Cash Equivalents | $2,169 | $5,583 |
| Total Assets | $37,842 | $38,287 |
| Total Liabilities | $223,673 | $199,140 |
| Working Capital | $(195,088) | $(175,922) |
| Accumulated Deficit | $(227,410) | $(202,432) |
| Related Party Debt (Due to Officer) | $149,928 | $132,428 |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased by approximately 35% ($29,459) due to engaging additional clients and performing more work.
- Expense Reduction: Total operating expenses decreased by $57,570 (29%), primarily driven by a reduction in general and administrative expenses ($36,766 decrease) and professional fees ($11,725 decrease) due to lower legal costs for reporting.
- Loss Improvement: Net loss narrowed significantly from $106,406 in 2007 to $24,978 in 2008.
- Liquidity Deterioration: Cash on hand decreased by $3,414. Accounts receivable increased to $25,216 (from $15,235) due to difficulties in collecting payments.
- Debt Increase: Current liabilities increased by $24,533, almost entirely due to an additional $17,500 in interest-free advances from the company's President, Ryan Neely.
Outlook, Risks, and Management Commentary
Going Concern: The company's auditors have issued a report expressing substantial doubt about the company's ability to continue as a going concern. This is due to negative working capital, significant operating losses, and an accumulated deficit of $227,410.
Capital Needs: Management estimates that current cash ($2,169) is insufficient to fund operations for the next twelve months. The company anticipates needing to raise approximately $50,000 to fund marketing activities and achieve profitability. There is no guarantee that additional financing will be available.
Key Risks:
- Customer Concentration: Four customers accounted for a significant portion of revenues in 2008 (42% from six customers).
- Key Person Risk: The company relies heavily on President Ryan Neely, who devotes 90% of his time to the company and provides interest-free loans. He has no employment agreement.
- Market Liquidity: The stock trades on the Pink Sheets with extremely limited volume; the last quoted price was $2.00 in July 2007.
- Competition: The industry is dominated by larger firms (e.g., Bowne & Co., RR Donnelley) with greater resources.
Investor Verification Checklist
- Capital Sufficiency: Verify if the company has secured the estimated $50,000 needed for operations or if it is relying solely on further advances from the President.
- Accounts Receivable Quality: Assess the collectability of the $25,216 in accounts receivable, given the history of collection difficulties and the allowance for doubtful accounts.
- Related Party Dependence: Confirm the terms and willingness of the President to continue providing interest-free loans to cover the working capital deficit.
- Stock Liquidity: Investigate current trading activity on the Pink Sheets, as the filing notes only one trade occurred as of March 2009.
- Customer Retention: Evaluate the stability of the top four customers who drive the majority of revenue.