Filing summary
Entity and period: The supplied filing is Franchise Holdings International, Inc.’s Form 10-K for the fiscal year ended September 30, 2013—not a filing identified as Worksport Ltd. or a quarterly report for 2013 Q4. The filing describes the company as a development-stage business marketing franchise rights, including rights to Endless Summer Tan, a tanning, hair and beauty salon.
Financial results and liquidity
- Revenue: $0 in fiscal 2013 and fiscal 2012. With no reported revenue, margins are not meaningful.
- Expenses and earnings: Operating expenses and net loss were $19,098 in 2013, versus $22,554 in 2012. Reported loss per share was $0.01 in each year.
- Cash flow: Operating cash use was $19,656 in 2013, compared with $21,026 in 2012. Investing cash flow was $0 in both years. Financing cash flow was $20,320 in 2013 and $21,344 in 2012, provided by the president and two shareholders as capital contributions.
- Balance sheet: Cash and total assets were $982 at September 30, 2013, versus $318 a year earlier. Accounts payable and total liabilities were $972, versus $1,530. The balance sheet reports no outstanding notes payable at year-end; it does not provide a separate liquidity ratio.
- Equity: Total shareholders’ equity was $10 at September 30, 2013, versus a deficit of $1,212 in 2012. The filing reports a $7,904 development-stage accumulated deficit and a separate $3,910,365 deficit accumulated before the development stage.
Changes, outlook and risks
- Net loss narrowed by $3,456 year over year, while operating cash use also decreased. The company remained without revenue and relied on insider and shareholder contributions to fund operations.
- Management said it had no plans to raise additional funds in the next 12 months and expected working capital to come from internal operations, but reserved the right to seek equity, debt, borrowings or joint ventures. This expectation is qualified by the company’s lack of revenue and limited cash.
- The auditor included a going-concern explanatory paragraph, citing substantial doubt about the company’s ability to continue operating. The financial statements include no adjustments that might be required if the company cannot continue as a going concern.
- The filing identifies competition, difficulty developing or introducing new offerings, regulatory changes and financing availability as risks. The company reported one full-time employee, no proprietary information, rent-free office space provided by its president, and no material legal proceedings.
- The company reported no dividends, stock repurchases, unregistered share sales or material off-balance-sheet arrangements during the periods described. Its common stock traded on the Pink Sheets with minimal trading activity.
Important facts to verify
- Confirm the issuer and filing match the requested company: this document names Franchise Holdings International, Inc., not Worksport Ltd.
- Review the underlying audited statements and notes for the going-concern disclosure, related-party capital contributions and the composition of liabilities.
- Verify the status and economic value of the Endless Summer Tan franchise rights, since the filing reports no revenue and provides no clear evidence of operating franchise sales.
- Check filing accuracy: the MD&A refers once to a year ended “September 31, 2013,” and the controls discussion cites dates in 2011 and 2012 despite the report covering 2013.
- Consider the thinly traded market, very low cash balance and dependence on shareholder support when assessing liquidity and the reliability of quoted share prices.