Filing summary
Entity and period: The supplied filing is for Franchise Holdings International, Inc., not Worksport Ltd. It is an unaudited Form 10-Q for the three months ended December 31, 2012 (the company’s fiscal first quarter), filed February 12, 2013. The filing describes the company as a development-stage business evaluating franchise opportunities.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2012 | Comparable 2011 period |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $6,779 | $11,731 |
| Operating loss and net loss | $6,779 | $11,731 |
| Net cash used in operating activities | $10 | $5,142 |
| Cash provided by financing activities | $765 | $6,766 |
- At December 31, 2012, cash was $1,073, accounts payable were $8,299, total assets were $1,073, and shareholders’ deficit was $7,226. The company reported a $7,226 working-capital deficit.
- No debt balance or interest expense was reported for the quarter. The filing discusses older notes that were settled in 2009.
- Gross margin and operating margin are not meaningful with no revenue. Basic and diluted loss per share was reported as $(0.00).
Changes, outlook, and risks
- Compared with the prior-year quarter, G&A expense and net loss declined by $4,952. Operating cash use also decreased. Revenue remained zero.
- Related parties—the president and two shareholders—contributed $765 for working capital; there is no assurance they will continue funding the company.
- Management expected overhead to remain fairly constant, said it did not anticipate raising capital in the next 12 months, and believed short-term resources were sufficient for current operations. It also acknowledged that additional financing could be needed if expenses cannot be adjusted and that profitability depends on generating sufficient sales.
- The filing warns that operating losses and dependence on uncertain funding may affect the company’s ability to continue as a going concern. It provides no quantified revenue or earnings guidance.
- The company reported no material legal proceedings, off-balance-sheet arrangements, or required subsequent-event disclosures. Management concluded disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.
Investor facts to verify
- Confirm the filing’s registrant: the supplied document names Franchise Holdings International, Inc., whereas the request identifies Worksport Ltd.
- Reconcile the MD&A statement that September 30, 2012 working capital was a deficit of $2 with the balance sheet, which shows cash of $318 and accounts payable of $1,530—a $1,212 deficit.
- Assess the company’s going-concern exposure, its reliance on related-party contributions, and whether it can generate revenue; it reported no revenue in either comparative quarter.
- Note that the financial statements are unaudited and the filing identifies the company as a development-stage entity.