PSIX

Business Context and Reporting Period

Company: Format, Inc. (trading as Power Solutions International, Inc. in metadata, but identified as Format, Inc. in the filing text; ticker: FRMT).
Reporting Period: Fiscal year ended December 31, 2010.
Business Model: The Company provides EDGARizing services (reformatting corporate documents for SEC filing) and limited commercial printing services. It operates as a smaller reporting company with a single full-time employee and one part-time employee.
Key Contract: In July 2009, the Company entered a Services Agreement with Research Data Group, Inc. (RDG) to provide bulk EDGARizing services. In 2010, 100% of revenue was derived from this single customer.

Key Financial Metrics

Debt and Liquidity: The Company has no long-term debt. Current liabilities are dominated by related party advances of $116,656 (owed to the President) and accrued officer compensation of $42,500. Cash flow from operations was positive at $43,367 in 2010, primarily due to increases in accounts payable and accrued compensation rather than operational profitability.

Material Changes vs. Prior Period

• Revenue Decline: Revenue decreased by approximately 21% ($20,824) from 2009 to 2010. Management attributes this to the shift in service volume provided to RDG under their agreement.
• Profitability Reversal: The Company swung from a net income of $18,273 in 2009 to a net loss of $25,914 in 2010. The 2009 income was significantly bolstered by a one-time $25,000 "gain on relief of indebtedness" (statute of limitations expired on a consulting debt), which did not recur in 2010.
• Liability Structure: While total liabilities increased, the related party advances decreased by $51,321 due to net repayments made by the Company to the President during 2010. Conversely, accrued officer compensation increased by $27,500.
• Asset Base: Total assets decreased by $12,531, driven primarily by a reduction in cash and the write-off of accounts receivable.

Outlook, Risks, and Management Commentary

Going Concern: The Company's auditors have issued a "going concern" opinion. The Company has an accumulated deficit of $235,051 and a working capital deficit of $196,805. Management states that current cash ($47,988) is insufficient to fund operations for the next twelve months.

Capital Needs: Management estimates a need to raise approximately $50,000 to fund marketing activities and achieve profitability. Without additional capital, the Company relies on continued interest-free loans from the President, Ryan Neely, though there is no guarantee he will continue to provide them.

Key Risks:

• Customer Concentration: 100% of 2010 revenue came from a single customer (RDG). Loss of this contract would be catastrophic.
• Key Person Risk: The Company relies entirely on Ryan Neely (President, CFO, Secretary, and sole Director). He has no employment agreement, and the Company has no life insurance on him.
• Market Liquidity: The stock trades on the Pink Sheets with extremely limited volume, making it difficult for investors to sell shares. It is subject to "penny stock" regulations.
• Internal Controls: Management disclosed that internal controls over financial reporting are not effective due to a lack of segregation of duties caused by the very limited staff.

Investor Verification Checklist

• Customer Dependency: Verify the status of the contract with Research Data Group, Inc. (RDG) and whether it has been renewed or modified for 2011.
• Capital Sufficiency: Confirm if the required $50,000 in additional capital has been raised or if the President has committed to further advances.
• Related Party Obligations: Review the terms of the $116,656 owed to the President and the $42,500 in accrued compensation to understand potential cash outflow requirements.
• Going Concern Status: Assess the likelihood of the Company ceasing operations if the single customer relationship is disrupted or if funding is not secured.
• Stock Liquidity: Verify current trading volume and bid/ask spreads on the Pink Sheets, as the filing notes trading is extremely limited.