Filing summary
Entity and period: The supplied filing is a Form 10-K for Franchise Holdings International, Inc., not Worksport Ltd. It covers the fiscal year ended September 30, 2011, with comparative FY2010 figures; it does not provide standalone fourth-quarter results. The company describes itself as a development-stage business and checked the box indicating it was a shell company.
Business context and financial results
The company marketed franchise rights and reported rights to Endless Summer Tan, a tanning, hair, and beauty salon. It had one full-time employee, no equipment, and used office space rent-free from its president. It reported no revenue in FY2011 or FY2010.
| Metric | FY2011 | FY2010 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $11,908 | $13,555 |
| Net loss | $11,908 | $13,555 |
| Net cash used in operations | $13,462 | $12,074 |
| Cash from financing | $12,792 | $12,744 |
| Cash at year-end | $0 | $670 |
| Total assets | $0 | $670 |
| Total liabilities | $2 | $1,556 |
Margins are not meaningful because there was no revenue. The $12,792 of FY2011 financing cash flow consisted of capital contributions from the president and two shareholders. The balance sheet reported a $2 bank overdraft and no accounts payable at September 30, 2011; it reported no cash or debt balance beyond the overdraft. No investing cash flows occurred in either year.
Changes, outlook, and risks
- Year-over-year net loss narrowed by $1,647, or about 12%; operating expenses decreased by the same amount. Operating cash use increased by $1,388.
- Management expected overhead to remain fairly constant and said it had no current plan to raise funds in the next 12 months, while reserving the option to seek equity, debt, borrowings, or joint ventures. No quantified revenue or earnings guidance was provided.
- The independent auditor highlighted substantial doubt about the company’s ability to continue as a going concern, citing operating losses and dependence on continued contributions from the president and certain shareholders. The filing states there is no assurance this funding will continue or that the company can raise needed capital.
- Management cited competition, general economic conditions, financing availability, regulatory changes, and delays or failure in developing products or services as risks. It said limited market surveys had not been conducted and provided no assurance its objectives would be achieved.
- The company reported no material legal proceedings and no off-balance-sheet arrangements. A historic Kentucky tax notice for $10,118 was believed by management to be closed with no amount due. The company reported a fully reserved $349,534 deferred tax asset related to approximately $887,000 of loss carryforwards.
Important facts to verify
- Confirm the issuer: this filing names Franchise Holdings International, Inc., whereas the request identifies Worksport Ltd.
- Confirm the intended reporting period: the filing is for the full fiscal year ended September 30, 2011, not a standalone 2011 fourth quarter.
- Verify the company’s ability to fund operations, given zero cash at year-end and reliance on related-party contributions.
- Review the going-concern disclosure, audited financial statements, and any subsequent filings for changes in financing, business activity, or corporate identity.
- Check the stated franchise rights and the company’s ability to generate revenue; FY2011 and FY2010 revenue were both zero.