Worksport Ltd annual report, FY2012

Business context and reporting period

Issuer mismatch: The supplied filing is for Franchise Holdings International, Inc., not Worksport Ltd. It is a Form 10-K for the fiscal year ended September 30, 2012—not a standalone 2012 fourth-quarter report. The company describes itself as a development-stage business marketing franchises, with rights to the Endless Summer Tan tanning and beauty salon and plans to pursue other opportunities. It reported one full-time employee, its president.

Financial results and liquidity

At September 30, 2012, cash was $318, total assets were $318, accounts payable and total liabilities were $1,530, and shareholders’ deficit was $1,212. The filing reports no revenue, so a meaningful operating margin is not available. No interest expense or income-tax provision was reported for either year. The balance sheet shows no notes payable at year-end; the filing does not provide a debt balance beyond the listed liabilities.

Material changes versus prior period

Operating expenses and net loss increased by $10,646, or about 89%, from FY2011. Cash used in operations increased by $7,564. Financing contributions from the president and two shareholders rose to $21,344 from $12,792 and funded the year’s operating cash shortfall, leaving $318 in cash. Shares outstanding remained 2,840,864.

Outlook, risks, and unusual items

• The company said it expected overhead to remain fairly constant and had no plans to raise additional funds during the next 12 months, while reserving the right to seek financing or other sources if needed. It provided no revenue or earnings guidance.
• The auditor stated that significant operating losses raise substantial doubt about the company’s ability to continue as a going concern. Management said it relied on its president and certain shareholders for capital and that continued support or successful fundraising was not assured.
• Management reported that no limited market surveys had been conducted to assess demand and that the company faced substantial competition. Forward-looking risks also included financing availability, competition, economic conditions, regulation, and delays in new products or services.
• The company occupied office space rent-free from its president. The filing reported no material legal proceedings and no off-balance-sheet arrangements. A historical Kentucky tax notice for $10,118 was believed by management to be closed with no amount due.
• The company identified itself as a shell company. Its annual-report cover also indicates it had not filed all required reports during the preceding 12 months, which warrants review.

Most important facts for investors to verify

• Confirm that this is the intended issuer and filing: the document names Franchise Holdings International, Inc., not Worksport Ltd.
• Review the going-concern warning, minimal cash balance, recurring losses, and dependence on related-party contributions.
• Assess whether the franchise rights generate revenue or have measurable demand; the filing reports no revenue and no market survey.
• Verify the reporting-status disclosure and the company’s shell-company designation.
• Reconcile the controls disclosure: disclosure controls are described as effective as of September 30, 2011, while internal controls are described as effective as of September 30, 2012.