Filing summary
Entity and period: The supplied filing is for Franchise Holdings International, Inc., not Worksport Ltd. It is a Form 10-Q for the quarter ended December 31, 2011, filed February 7, 2012. The filing identifies the company as a development-stage business evaluating franchise opportunities. Its reported fiscal year-end is September 30.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2011 | Comparable 2010 period |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expenses | $11,731 | $5,575 |
| Operating loss and net loss | ($11,731) | ($5,575) |
| Operating cash flow | ($5,142) | ($1,748) |
| Financing cash flow | $6,766 | $1,233 |
| Cash at period end | $1,624 | $155 |
- At December 31, 2011, total assets were $1,624, accounts payable and total liabilities were $6,591, and shareholders’ deficit was $4,967. Working capital deficit was also reported as $4,967.
- The balance sheet showed no bank overdraft at quarter-end. The filing reports no current-period interest expense or cash interest paid; it describes prior notes payable as settled in 2009.
- Gross margin and other operating margins are not meaningful because the company reported no revenue. No capital expenditures or investing cash flows were reported for the quarter.
Changes and management commentary
- Expenses and net loss increased from the comparable quarter: general and administrative expenses and net loss were each $6,156 higher.
- Operating cash use increased by $3,394 year over year. The quarter’s $6,766 financing inflow came from contributions by the president and two shareholders, compared with $1,233 in the prior-year quarter.
- Management said overhead should remain fairly constant, stated it did not anticipate raising additional capital in the next 12 months, and described short-term capital as sufficient for the company’s current level of operations. It also acknowledged there was no assurance that officer or shareholder funding would continue, and that additional financing might be needed if expenses could not be adjusted.
Risks, contingencies, and other items
- The company disclosed a limited operating history, ongoing losses since inception, minimal cash, and reliance on officer and shareholder contributions. It cautioned that these conditions could affect its ability to continue as a going concern; the financial statements contain no adjustments for a possible failure to continue.
- The company had no revenue and said profitability depended on developing clients and generating sales, which it could not guarantee. Management also noted that business activity was tied to the Denver and U.S. economies.
- Management reported no material legal proceedings, no off-balance-sheet arrangements, and no material changes in internal controls. It concluded disclosure controls were effective. The company checked the “shell company” box on the cover page.
Important facts for investors to verify
- Confirm the filing belongs to the intended issuer: the supplied document names Franchise Holdings International, Inc., not Worksport Ltd.
- Confirm the intended reporting period. The filing covers the quarter ended December 31, 2011; it does not identify itself as “2012 Q1.”
- Check the liquidity comparison in MD&A: it refers to September 30, 2010, while the balance sheet comparison is September 30, 2011.
- Review the company’s subsequent filings and funding history for evidence of sales, ongoing shareholder support, and ability to meet obligations.