Filing summary
Issuer and period: The supplied 10-Q is for Franchise Holdings International, Inc., not Worksport Ltd. It covers the three months ended December 31, 2013 (the company’s fiscal first quarter of 2014); the financial statements are unaudited.
Business context and financial position
The company described itself as a development-stage business evaluating franchise opportunities and seeking franchise, license, and distribution rights. It also checked the shell-company box.
- Revenue: $0 for the quarter, unchanged from the prior-year quarter.
- Expenses and earnings: General and administrative expenses were $6,904 versus $6,779, up $125 (about 1.8%). Net loss was $6,904 versus $6,779. Basic and diluted loss per share was reported as $0.00.
- Cash flow: Operating cash use was $972 versus $10 in the prior-year quarter. Investing cash flow was $0. Financing provided $500, compared with $765, from related-party contributions. Cash declined $472 during the quarter, ending at $510.
- Liquidity and equity: At December 31, cash was $510, accounts payable and total liabilities were $6,904, and shareholders’ deficit was $6,394. The balance sheet shows no other assets or liabilities.
- Debt: No current notes payable balance is shown. The notes describe historical debt settlements, including a gain on debt relief recorded in earlier periods.
- Margins: Not meaningful because the company reported no revenue.
Changes versus the prior comparable period
Revenue remained at zero and the quarterly net loss increased by $125. Operating cash use rose from $10 to $972; related-party financing contributions fell from $765 to $500. Compared with September 30, 2013, cash declined from $982 to $510, accounts payable rose from $972 to $6,904, and equity moved from a $10 surplus to a $6,394 deficit. Common shares outstanding remained 2,840,864.
Outlook, risks, and other disclosures
- Management expected overhead to remain fairly constant, said it did not anticipate raising additional capital during the next 12 months, and believed short-term capital was sufficient for current operations. It tied profitability to developing clients and generating sales, but provided no quantitative forecast or sales guidance.
- The filing warns that continued operations depend on meeting obligations and ultimately achieving profitability. The company had a limited operating history and losses, relied on officer and shareholder contributions, and had no funding commitment from its officer and director; continued support or successful fundraising was not assured.
- Management said expenses could be controlled by foregoing additional hiring, but acknowledged that additional financing might be needed if expenses could not be adjusted. The filing also notes that business activity is linked to the Denver and U.S. economies.
- No material legal proceedings or off-balance-sheet arrangements were reported. Management said disclosure controls were effective and there were no material quarterly changes in internal control over financial reporting.
Important facts for investors to verify
- Confirm issuer identity: this document names Franchise Holdings International, Inc., not Worksport Ltd.
- Check the reported period and filing history; the document’s contents page contains a reference to financial statements for the period ended December 31, 2012, while the statements and report cover December 31, 2013.
- Verify the MD&A liquidity comparison: it refers to “September 30, 2012,” although the balance sheet comparison is September 30, 2013.
- Assess the company’s ability to fund operations given $510 of cash, $6,904 of accounts payable, no revenue, and no committed related-party financing.