WORKSPORT, LTD
10-Ks and 10-Qs
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: September 30, 2013
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-27631
Franchise Holdings International, Inc.
(Exact Name of Small Business Issuer as specified in its charter)
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Nevada
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65-0782227
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification Number)
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5910 South University Boulevard, C-18, Unit 165
Littleton, Colorado 80121-2800
(Address of Principal Executive Offices, Including Zip Code)
Registrant’s Telephone Number, including area code:
(303) 220-5001
Securities to be Registered Pursuant to Section 12(b) of the Act:
None
Securities to be Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.0.001 per share par value
Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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No
þ
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Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes
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No
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Indicate by check mark whether the registrant (1) has filed all Reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes:
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No:
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files. Yes
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No
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Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is contained in this form and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K.
þ
Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
(Do not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes
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No
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State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: approximately $420,000.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. Common Stock, $0.001 par value – 2,840,864 shares, as of December 9, 2013.
DOCUMENTS INCORPORATED BY REFERENCE.
None.
Franchise Holdings International, Inc.
INDEX
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PART I
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Item 1.
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Business
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3
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Item 1A.
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Risk Factors
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5
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Item 1B.
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Unresolved Staff Comments
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5
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Item 2.
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Properties
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5
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Item 3.
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Legal Proceedings
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5
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Item 4.
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Mine Safety Disclosure
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5
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PART II
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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6
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Item 6.
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Selected Financial Data
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7
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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7
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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8
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Item 8.
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Financial Statements and Supplementary Data
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9
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Item 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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10
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Item 9A.
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Controls and Procedures
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10
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Item 9B.
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Other Information
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10
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PART III
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Item 10.
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Directors, Executive Officers, and Corporate Governance
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11
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Item 11.
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Executive Compensation
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12
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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12
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Item 13.
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Certain Relationships and Related Transactions, and Director
Independence
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13
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Item 14.
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Principal Accounting Fees and Services
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13
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PART IV
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Item 15.
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Exhibits, Financial Statement Schedules
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13
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Signatures
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14
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2
References in this document to “Franchise Holdings,” "us," "we," “our” or "Company" refer to Franchise Holdings International, Inc. unless the context indicates otherwise.
Cautionary Statements under the Private Securities Litigation Reform Act of 1995
Forward-Looking Statements
The following discussion contains forward-looking statements regarding us, our business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: our ability to successfully develop new products and services for new markets; the impact of competition on our revenues, changes in law or regulatory requirements that adversely affect or preclude clients from using us for certain applications; delays our introduction of new products or services; and our failure to keep pace with our competitors. When used in this discussion, words such as “believes”, “anticipates”, “expects”, “intends” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this report and other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business.
Narrative Description of the Business
Our History
We were originally incorporated as FSGI Corporation under the laws of the State of Florida in 1997 as a holding company for the purpose of acquiring Financial Standards Group, Inc. (FSG). That year FSGI Corporation acquired FSG, a Florida company organized in October 1989, to assist credit unions in performing financial services. FSG offered financial services to credit unions as a wholly-owned subsidiary until its sale in January 2000.
On December 21, 1998, FSGI Corporation, at the time a publicly traded company trading on the OTCBB as FSGI, acquired all of the outstanding common stock of The Martial Arts Network On-Line, Inc., a wholly owned subsidiary of The Martial Arts Network, Inc. The Martial Arts Network On-Line, Inc., a company organized under the laws of the State of Florida, was developed in 1996 by its parent company The Martial Arts Network, Inc. as an electronic forum dedicated to promoting education and awareness of martial arts through its web site. Upon issuance of shares, and options to purchase shares of FSGI Corporation's common stock to The Martial Arts Network, Inc., that company became the controlling stockholder of FSGI Corporation.
FSGI then changed its name to TMANglobal.com, Inc. ("TMAN") as the result of a merger between FSGI Corporation and The Martial Arts Network On-Line, Inc. on December 21, 1998.
3
Franchise Holdings was incorporated in the State of Nevada on April 2, 2003. Franchise Holdings International, Inc. completed a merger with TMAN Global.com Inc. on April 30, 2003. This merger was in the nature of a change in domicile of the Florida corporation to the State of Nevada, as well as the acquisition of a new business. Since the inception of our current business operations, we have been in the business of acquiring franchise, license and distribution rights in new and emerging growth companies.
Operations
General
We are engaged in the business of marketing franchises. We currently possess such rights in a tanning and beauty salon.
At the present time, we have no plans to raise any additional funds within the next twelve months. Any working capital will be expected to be generated from internal operations. However, we reserve the right to examine possible additional sources of funds, including, but not limited to, equity or debt offerings, borrowings, or joint ventures. Limited market surveys have never been conducted to determine demand for our products and services. Therefore, there can be no assurance that any of its objectives will be achieved.
Nature of Products and Services
Our principal activities are to acquire franchise, license and distribution rights in new and emerging growth companies.
We currently have such rights to a tanning and beauty salon and are pursuing other franchise and business opportunities.
We currently have franchise, license and distribution rights to Endless Summer Tan- founded in 1999, is a tanning, hair, and beauty salon.
Markets
We plan to continue to market ourselves through the internet and using traditional methods such as print and other media. Currently, we have a marketing strategy, which uses the media, along with our web site, to market our products nationwide. We plan to add new accounts through direct solicitation, mass e-mail marketing, and participation in franchise industry trade shows.
Raw Materials
The use of raw materials is not now a material factor in our operations.
Customers and Competition
The franchise business is a highly competitive and fragmented industry, with no one single company or group of companies having a large market share. Our operational activities focus primarily on the franchise sales business, in which there is a great deal of competition. We anticipate that competition will come from a number of sources, many of which will have greater resources than we do. All franchisors in the United States are potential competitors. There can be no guarantee that we will be able to compete successfully over the short term or long term.
4
Employees
Currently, we employ one full-time person, our President. We may hire additional employees in the future to facilitate anticipated growth projections. We reimburse our employee for all necessary and customary business related expenses.
We have no plans or agreements which provide health care, insurance or compensation on the event of termination of employment or change in our control.
Proprietary Information
We own no proprietary information.
Government Regulation
We believe that governmental regulation will not be significant to us now or in the future.
Research and Development
We have never spent any amount in research and development activities.
Environmental Compliance
We believe that we are not subject to any material costs for compliance with any environmental laws.
How to Obtain our SEC Filings
We file annual, quarterly, and special reports, proxy statements, and other information with the Securities Exchange Commission (SEC). Reports, proxy statements and other information filed with the SEC can be inspected and copied at the public reference facilities of the SEC at 100 F Street N.E., Washington, DC 20549. Such material may also be accessed electronically by means of the SEC’s website at
www.sec.gov
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Our investor relations department can be contacted at our principal executive office at 5910 South University Boulevard, C-18, Unit 165, Littleton, Colorado 80121-2800. Our phone number is (303) 220-5001. Our website is
www.fnhi.net
.
Smaller reporting companies are not required to provide this information.
Smaller reporting companies are not required to provide this information.
We currently occupy office space on a rent-free basis from our President, Mr. A. J. Boisdrenghien. We have no equipment.
We are not a party to any material legal proceedings, nor is our property the subject of any material legal proceeding.
None
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Market Information
Our shares of common stock are quoted on the Pink Sheets under the trading symbol FNHI. The shares became trading in 1999 but there is no extensive history of trading. The bid and asked prices have ranged between $0.65 and $0.66 during the last two fiscal years, but the trading has been minimal. The quotations reflect interdealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Holders
As of December 17, 2013, there were 93 record holders of our common stock and there were 2,840,864 shares of our common stock outstanding.
Stock Transfer Agent
The stock transfer agent for our securities is Corporate Stock Transfer of Denver, Colorado. Their address is 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209. Their phone number is (303) 282-4800.
Dividend Policy
We have not previously declared or paid any dividends on our common stock and do not anticipate declaring any dividends in the foreseeable future. The payment of dividends on our common stock is within the discretion of our board of directors.
Equity Compensation Plan Information
We have no outstanding stock options or other equity compensation plans.
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities during the year ended September 30, 2013.
6
Issuer Purchases of Equity Securities
There were no repurchases of shares of the Company’s common stock during the three months ended September 30, 2013.
As a “smaller reporting company,” we are not required to provide the information in this Item.
Certain statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations that are not historical facts are forward-looking statements such as statements relating to future operating results, existing and expected competition, financing and refinancing sources and availability and plans for future development or expansion activities and capital expenditures. Such forward-looking statements involve a number of risks and uncertainties that may significantly affect our liquidity and results in the future and, accordingly, actual results may differ materially from those expressed in any forward-looking statements. Such risks and uncertainties include, but are not limited to, those related to effects of competition, leverage and debt service financing and refinancing efforts, general economic conditions, and changes in applicable laws or regulations. The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in this report.
Results of Operations
We had no revenue for the fiscal years ended September 31, 2013 or 2012.
Operating expenses during the year ended September 30, 2013 totaled $19,098, consisting of professional fees and other miscellaneous costs. Operating expenses during the year ended September 30, 2012 totaled $22,554, consisting of professional fees and other miscellaneous costs.
We had a net loss of $19,098 for the fiscal year ended September 30, 2013, compared to a net loss of $22,554 for the fiscal year ended September 30, 2012.
We believe that overhead cost in current operations should remain fairly constant.
Liquidity and Capital Resources
At September 30, 2013, we had $982 of cash in the bank.
Net cash used in operating activities was $(19,656) for the fiscal year ended September 30, 2013, compared to cash used by operating activities of $(21,026) for the fiscal year ended September 30, 2012.
Cash flows used or provided by investing activities was $-0- for the fiscal year ended September 30, 2013, compared to $-0- for the fiscal year ended September 30, 2012.
7
Cash flows provided by financing activities was $20,320 for the fiscal year ended September 30, 2013, compared to $21,344 for the fiscal year ended September 30, 2012. The amounts for each year represented contributions from our President and two shareholders.
Due to the uncertainty of our ability to meet our operational expenses, in their report on our audited financial statements as of and for the years ended September 30, 2013 and 2012, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our independent auditors. There is substantial doubt about our ability to continue as a going concern as we have losses for the years ended September 30, 2013 and 2012 totaling ($19,098) and ($22,554) respectively, as well as an accumulated deficit since inception amounting to ($7,904).
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements with any party.
Critical Accounting Policies
Our discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible accounts receivable, inventories, valuation of intangible assets and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The accounting policies that we follow are set forth in Note 2 to our financial statements as included in this prospectus. These accounting policies conform to accounting principles generally accepted in the United States, and have been consistently applied in the preparation of the financial statements.
A smaller reporting company is not required to provide the information in this Item.
8
FRANCHISE HOLDINGS INTERNATIONAL, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
September 30, 2012 and 2013,
And For the Period from March 12, 2001
(Inception of Development Stage)
Through September 30, 2013
9
FRANCHISE HOLDINGS INTERNATIONAL, INC.
(A Development Stage Company)
Financial Statements
TABLE OF CONTENTS
| Page | ||
| Reports of Independent Registered Public Accounting Firm | F-2 | |
| Balance Sheets at September 30, 2013 and 2012 | F-4 | |
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Statements of Operations for the years ended September 30, 2013 and 2012, and
for the period from March 12, 2001 (inception) through September 30, 2013
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F-5 | |
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Statement of Changes in Shareholders' Deficit for the period from March 12, 2001
(inception) through September 30, 2013
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F-6 | |
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Statements of Cash Flows for the years ended September 30, 2013 and 2012, and
for the period from March 12, 2001 (inception) through September 30, 2013
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F-7 | |
| Notes to Financial Statements | F-8 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Franchise Holdings International, Inc.:
We have audited the accompanying balance sheet of Franchise Holdings International, Inc., a development stage company (“the Company”) as of September 30, 2013 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended, and for the period from March 12, 2001 (inception) through September 30, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Franchise Holdings International, Inc., as of September 30, 2013, and the results of its operations and its cash flows for the years then ended, and for the period from March 12, 2001 (inception) through September 30, 2013 in conformity with generally accepted accounting principles in the United States of America.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company's internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ B F Borgers CPA PC
B F Borgers CPA PC
Denver, CO
December 6, 2013
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Franchise Holdings International, Inc.:
We have audited the accompanying balance sheet of Franchise Holdings International, Inc., a development stage company (“the Company”) as of September 30, 2012 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended, and for the period from March 12, 2001 (inception) through September 30, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Franchise Holdings International, Inc., as of September 30, 2012, and the results of its operations and its cash flows for the years then ended, and for the period from March 12, 2001 (inception) through September 30, 2012 in conformity with generally accepted accounting principles in the United States of America.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company's internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Borgers & Culter CPA’s PLLC
Borgers & Cutler CPA’s PLLC
Denver, CO
December 6, 2013
F-3
Franchise Holdings International, Inc.
(A Development Stage Company)
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September 30,
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2013
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2012
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Assets
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Cash
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$ | 982 | $ | 318 | ||||
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Total Assets
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$ | 982 | $ | 318 | ||||
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Liabilities and Shareholders’ Deficit
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Liabilities:
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Accounts payable
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$ | 972 | $ | 1,530 | ||||
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Total Liabilities
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972 | 1,530 | ||||||
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Commitments and Contingencies (Note 5)
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Shareholders’ Equity/(Deficit) (Notes 2 and 3):
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Common stock, $0.0001 par value; 20,000,000 shares authorized,
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2,840,864 and 2,840,864 shares issued and outstanding,
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respectively
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284 | 284 | ||||||
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Additional paid-in capital
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3,917,995 | 3,897,675 | ||||||
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Accumulated deficit prior to development stage
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(3,910,365 | ) | (3,910,365 | ) | ||||
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(Deficit)/equity accumulated during development stage
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(7,904 | ) | 11,194 | |||||
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Total Shareholders’ Equity/(Deficit)
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10 | (1,212 | ) | |||||
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Total Liabilities and Shareholders’ Equity/(Deficit)
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$ | 982 | $ | 318 | ||||
See accompanying notes to financial statements.
F-4
Franchise Holdings International, Inc.
(A Development Stage Company)
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March 12, 2001
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(Inception)
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For The Year Ended
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Through
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September 30,
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September 30,
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2013
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2012
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2013
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Revenue
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$ | — | $ | — | $ | — | ||||||
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Operating expenses:
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General and administrative
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19,098 | 22,554 | 160,773 | |||||||||
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Operating loss
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(19,098 | ) | (22,554 | ) | (160,773 | ) | ||||||
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Other income (expense):
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Gain on debt relief
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— | — | 388,095 | |||||||||
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Interest expense
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— | — | (235,226 | ) | ||||||||
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Total other income (expense)
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— | — | 152,869 | |||||||||
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Loss before income tax
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(19,098 | ) | (22,554 | ) | (7,904 | ) | ||||||
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Provision for income tax (Note 4)
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— | — | — | |||||||||
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Net loss
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$ | (19,098 | ) | $ | (22,554 | ) | $ | (7,904 | ) | |||
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Basic and diluted income (loss) per share
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$ | (0.01 | ) | $ | (0.01 | ) | ||||||
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Weighted average number of common
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shares outstanding
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2,840,864 | 2,840,864 | ||||||||||
See accompanying notes to financial statements.
F-5
Franchise Holdings International, Inc.
(A Development Stage Company)
Statement of Changes in Shareholders’ Deficit
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Accumulated
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Equity
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Deficit
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Accumulated
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Additional
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Stock
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Prior to
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During
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Common Stock
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Paid-In
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Subscription
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Development
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Development
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Shares
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Par Value
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Capital
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Receivable
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Stage
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Stage
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Total
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Balance, March 12, 2001 (inception of
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development stage)
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90,861 | $ | 9 | $ | 3,562,331 | $ | (15,000 | ) | $ | (3,910,365 | ) | $ | — | $ | (363,025 | ) | ||||||||||||
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Net loss for period ended September 30, 2001
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— | — | — | — | — | (27,487 | ) | (27,487 | ) | |||||||||||||||||||
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Balance, September 30, 2001
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90,861 | 9 | 3,562,331 | (15,000 | ) | (3,910,365 | ) | (27,487 | ) | (390,512 | ) | |||||||||||||||||
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Net loss for year ended September 30, 2002
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— | — | — | — | — | (60,100 | ) | (60,100 | ) | |||||||||||||||||||
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Balance, September 30, 2002
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90,861 | 9 | 3,562,331 | (15,000 | ) | (3,910,365 | ) | (87,587 | ) | (450,612 | ) | |||||||||||||||||
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Fractional shares - reverse stock split
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3 | — | — | — | — | — | — | |||||||||||||||||||||
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Debt relief - repurchase obligation
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— | — | 15,000 | 15,000 | — | — | 30,000 | |||||||||||||||||||||
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Compensatory stock issuances
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2,750,000 | 275 | 2,475 | — | — | — | 2,750 | |||||||||||||||||||||
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Net loss for year ended September 30, 2003
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— | — | — | — | — | (41,245 | ) | (41,245 | ) | |||||||||||||||||||
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Balance, September 30, 2003
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2,840,864 | 284 | 3,579,806 | — | (3,910,365 | ) | (128,832 | ) | (459,107 | ) | ||||||||||||||||||
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Net loss for year ended September 30, 2004
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— | — | — | — | — | (31,996 | ) | (31,996 | ) | |||||||||||||||||||
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Balance, September 30, 2004
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2,840,864 | 284 | 3,579,806 | — | (3,910,365 | ) | (160,828 | ) | (491,103 | ) | ||||||||||||||||||
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Net loss for year ended September 30, 2005
|
— | — | — | — | — | (32,146 | ) | (32,146 | ) | |||||||||||||||||||
|
Balance, September 30, 2005
|
2,840,864 | 284 | 3,579,806 | — | (3,910,365 | ) | (192,974 | ) | (523,249 | ) | ||||||||||||||||||
|
Net loss for year ended September 30, 2006
|
— | — | — | — | — | (32,146 | ) | (32,146 | ) | |||||||||||||||||||
|
Balance, September 30, 2006
|
2,840,864 | 284 | 3,579,806 | — | (3,910,365 | ) | (225,120 | ) | (555,395 | ) | ||||||||||||||||||
|
Net loss for year ended September 30, 2007
|
— | — | — | — | — | (32,146 | ) | (32,146 | ) | |||||||||||||||||||
|
Balance, September 30, 2007
|
2,840,864 | 284 | 3,579,806 | — | (3,910,365 | ) | (257,266 | ) | (587,541 | ) | ||||||||||||||||||
|
Net loss for year ended September 30, 2008
|
— | — | — | — | — | (43,841 | ) | (43,841 | ) | |||||||||||||||||||
|
Balance, September 30, 2008
|
2,840,864 | 284 | 3,579,806 | — | (3,910,365 | ) | (301,107 | ) | (631,382 | ) | ||||||||||||||||||
|
Capital contributions by officer (Note 2)
|
— | — | 270,989 | — | — | — | 270,989 | |||||||||||||||||||||
|
Net loss for year ended September 30, 2009
|
— | — | — | — | — | 360,318 | 360,318 | |||||||||||||||||||||
|
Balance, September 30, 2009
|
2,840,864 | 284 | 3,850,795 | — | (3,910,365 | ) | 59,211 | (75 | ) | |||||||||||||||||||
|
Capital contributions by an officer
|
||||||||||||||||||||||||||||
|
and shareholders (Note 2)
|
— | — | 12,744 | — | — | — | 12,744 | |||||||||||||||||||||
|
Net loss for year ended September 30, 2010
|
— | — | — | — | — | (13,555 | ) | (13,555 | ) | |||||||||||||||||||
|
Balance, September 30, 2010
|
2,840,864 | 284 | 3,863,539 | — | (3,910,365 | ) | 45,656 | (886 | ) | |||||||||||||||||||
|
Capital contributions by an officer
|
||||||||||||||||||||||||||||
|
and shareholders (Note 2)
|
— | — | 12,792 | — | — | — | 12,792 | |||||||||||||||||||||
|
Net loss for year ended September 30, 2011
|
— | — | — | — | — | (11,908 | ) | (11,908 | ) | |||||||||||||||||||
|
Balance, September 30, 2011
|
2,840,864 | 284 | 3,876,331 | — | (3,910,365 | ) | 33,748 | (2 | ) | |||||||||||||||||||
|
Capital contributions by an officer
|
||||||||||||||||||||||||||||
|
and shareholders (Note 2)
|
— | — | 21,344 | — | — | — | 21,344 | |||||||||||||||||||||
|
Net loss for year ended September 30, 2012
|
— | — | — | — | — | (22,554 | ) | (22,554 | ) | |||||||||||||||||||
|
Balance, September 30, 2012
|
2,840,864 | $ | 284 | $ | 3,897,675 | $ | — | $ | (3,910,365 | ) | $ | 11,194 | $ | (1,212 | ) | |||||||||||||
|
Capital contributions by an officer
|
||||||||||||||||||||||||||||
|
and shareholders (Note 2)
|
— | — | 20,320 | — | — | — | 20,320 | |||||||||||||||||||||
|
Net loss for year ended September 30, 2013
|
— | — | — | — | — | (19,098 | ) | (19,098 | ) | |||||||||||||||||||
|
Balance, September 30, 2013
|
2,840,864 | $ | 284 | $ | 3,917,995 | $ | — | $ | (3,910,365 | ) | $ | (7,904 | ) | $ | 10 | |||||||||||||
See accompanying notes to financial statements.
F-6
Franchise Holdings International, Inc.
(A Development Stage Company)
|
March 12, 2001
|
||||||||||||
|
(Inception)
|
||||||||||||
|
For The Year Ended
|
Through
|
|||||||||||
|
September 30,
|
September 30,
|
|||||||||||
|
2013
|
2012
|
2013
|
||||||||||
|
Cash flows (used in) operating activities:
|
||||||||||||
|
Net income (loss)
|
$ | (19,098 | ) | $ | (22,554 | ) | $ | (7,904 | ) | |||
|
Adjustments to reconcile net income/(loss) to net
|
||||||||||||
|
cash used in operating activities:
|
||||||||||||
|
Amortization and depreciation
|
— | — | 475 | |||||||||
|
Stock-based compensation
|
— | — | 2,750 | |||||||||
|
Loss on fixed asset disposal
|
— | — | 1,408 | |||||||||
|
Gain on debt relief
|
— | — | (388,095 | ) | ||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Bank overdraft
|
— | (2 | ) | — | ||||||||
|
Accounts payable
|
(558 | ) | 1,530 | 19,848 | ||||||||
|
Accrued expenses
|
— | — | 233,519 | |||||||||
|
Related party payables
|
— | — | 87,431 | |||||||||
|
Net cash provided by (used in)
|
||||||||||||
|
operating activities
|
(19,656 | ) | (21,026 | ) | (50,568 | ) | ||||||
|
Net cash provided by (used in)
|
||||||||||||
|
investing activities
|
— | — | — | |||||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Capital contributed by related parties
|
20,320 | 21,344 | 67,200 | |||||||||
|
Notes payable - borrowings
|
— | — | 10,000 | |||||||||
|
Notes payable - payments
|
— | — | (25,650 | ) | ||||||||
|
Net cash provided by (used in)
|
||||||||||||
|
financing activities
|
20,320 | 21,344 | 51,550 | |||||||||
|
Net change in cash
|
664 | 318 | 982 | |||||||||
|
Cash, beginning of period
|
318 | — | — | |||||||||
|
Cash, end of period
|
$ | 982 | $ | 318 | $ | 982 | ||||||
|
Supplemental disclosure of cash flow information:
|
||||||||||||
|
Cash paid during the period for:
|
||||||||||||
|
Income taxes
|
$ | — | $ | — | $ | — | ||||||
|
Interest
|
$ | — | $ | — | $ | — | ||||||
See accompanying notes to financial statements.
F-7
Franchise Holdings International, Inc.
(A Development Stage Company)
Notes to Financial Statements
(1) Nature of Organization and Summary of Significant Accounting Policies
Nature of Organization
Franchise Holdings International, Inc. (referenced as “we”, “us”, “our” in the accompanying notes) was incorporated in the State of Nevada on April 2, 2003. FSGI Corporation was incorporated in the State of Florida on May 15, 1997, and in a reorganization on December 21, 1998 with another corporation named The Martial Arts Network On-Line, Inc. (originally incorporated in Florida on May 23, 1996) changed its name to TMAN Global.Com, Inc. Franchise Holdings International, Inc. and TMAN Global.Com, Inc. consummated a merger on April 30, 2003 whereby Franchise Holdings International, Inc. exchanged 1 common share for all the 90,861 outstanding common shares of TMAN Global.Com, Inc. The purpose of the transaction was a change of domicile. Pursuant to the merger terms, Franchise Holdings International, Inc. was the surviving corporation and TMAN Global.Com, Inc. ceased to exist. The accompanying financial statements include the activities of Franchise Holdings International, Inc. and its predecessor corporations. Currently we are engaged in evaluating franchise opportunities, and are considered to be in the development stage.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has a limited operating history and has suffered operating losses since Inception (March 12, 2001). These factors, among others, may indicate that the Company may be unable to continue as a going concern.
In recent years, we have relied upon our president and certain shareholders to contribute capital to maintain our limited operations (see Notes 2 and 3). There is no assurance that these loans will continue, or that we will be successful in raising the capital required to continue our operations.
The financial statements do not include any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to meet our obligations on a timely basis, and, ultimately to attaining profitability.
Development Stage Company
We are in the development stage in accordance with the Accounting and Reporting by Development Stage Enterprises Topic of the Financial Accounting Standards Board’s Accounting Standards Codification (FASB ASC) 915.
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles permits management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
F-8
Franchise Holdings International, Inc.
(A Development Stage Company)
Notes to Financial Statements
Cash and Cash Equivalents
We consider all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. We had no financial instruments that qualified as cash equivalents at September 30, 2013 and 2012.
Fair Value of Financial Instruments
The carrying amounts of cash and current liabilities approximate fair value because of the short-term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments.
The FASB ASC clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities.
|
|
Level 2:
|
Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.
|
|
Level 3:
|
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Earnings (Loss) per Common Share
We report earnings (loss) per share using a dual presentation of basic and diluted earnings (loss) per share. Basic earnings (loss) per share excludes the impact of common stock equivalents. Diluted earnings (loss) per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents. At September 30, 2013 and 2012, there were no variances between the basic and diluted loss per share as there were no potentially dilutive securities outstanding.
Income Taxes
We account for income taxes as required by the Income Tax Topic of the FASB ASC, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
F-9
Franchise Holdings International, Inc.
(A Development Stage Company)
Notes to Financial Statements
We have analyzed filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal tax return and its state tax return in Colorado as “major” tax jurisdictions, as defined. We are not currently under examination by the Internal Revenue Service or any other jurisdiction. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded.
Stock-Based Compensation
Stock-based compensation is accounted for under ASC 718 "Share-Based Payment", using the modified prospective method. ASC 718 requires the recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the award. ASC 718 also requires the stock option compensation expense to be recognized over the period during which an employee is required to provide service in exchange for the award (generally the vesting period).
Fiscal Year-end
The Company operates on a September 30 year-end.
(2) Related Party Transactions
During the year ended September 30, 2013, our president and two shareholders contributed $20,320 to us for working capital to support our development stage operations. These contributions are included in the accompanying financial statements as Additional paid-in capital.
During the year ended September 30, 2012, our president and two shareholders contributed $21,344 to us for working capital to support our development stage operations. These contributions are included in the accompanying financial statements as Additional paid-in capital.
During the year ended September 30, 2011, our president and two shareholders contributed $12,792 to us for working capital to support our development stage operations. These contributions are included in the accompanying financial statements as Additional paid-in capital.
During the year ended September 30, 2010, our president and two shareholders contributed $12,744 to us for working capital to support our development stage operations. These contributions are included in the accompanying financial statements as Additional paid-in capital.
During the year ended September 30, 2009, an officer contributed $82,260 to us for working capital to support our development stage operations. In addition, the officer gave 26,000 shares of his own stock in Franchise Holdings International, Inc. to other debtors in settlement of $18,000 in stock subscriptions payable and $170,729 in notes payable, which the officer then contributed to capital. Total contributions of $270,989 are included in the accompanying financial statements as Additional paid-in capital.
F-10
Franchise Holdings International, Inc.
(A Development Stage Company)
Notes to Financial Statements
(3) Notes Payable
At September 30, 2008, we had $271,759 in notes payable outstanding to non-related parties, currently due, bearing interest at rates from 10 to 12 percent per annum, and convertible into common stock at $1 to $3 per share. Accrued interest payable under the notes at September 30, 2008 was $238,580. During 2009, the noteholders agreed to cancel the conversion feature and settle their notes upon payment of cumulative settlement amounts totaling $25,650 in cash and 20,000 common shares. The note settlements were finalized in the first quarter of fiscal year September 30, 2009. An officer provided (out of his personal shares in Franchise Holdings International, Inc.) the 20,000 shares for the note settlement. Pursuant to the note settlement, the noteholders, who were owed a total of $510,339, were given 20,000 of the Company’s common shares (by an officer out of his personal holdings) in settlement of $170,729 and $25,650 in cash as full settlement, resulting in a gain on debt relief for the Company totaling $313,960.
In 2003, an $18,000 note with an automatic conversion feature was recorded as a stock subscription payable for 6,000 common shares upon conversion. During the year ended September 30, 2009, an officer provided (out of his personal shares in Franchise Holdings International, Inc.) the 6,000 shares to settle the stock subscription payable.
(4) Income Taxes
The Company has incurred net operating losses since inception resulting in a deferred tax asset, which has been fully allowed for; therefore, the net benefit and expense resulted in no income tax provision.
(5) Subsequent Events
We have evaluated the effects of all subsequent events from October 1, 2013 through December 6, 2013, the date the accompanying financial statements were available for use. There have been no subsequent events after September 30, 2013 for which disclosure is required.
F-11
We did not have any disagreements on accounting and financial disclosures in connection with our change in auditors during the most recent fiscal year.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Accordingly, we concluded that our disclosure controls and procedures were effective as of September 30, 2011.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U. S. generally accepted accounting principles.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in
Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, management has concluded, as of September 30, 2012, we did maintain effective control over the financial reporting process.
Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting since we are a smaller reporting company.
Changes in Internal Control Over Financial Reporting
We have made no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Nothing to report.
10
Our Director and Executive Officer, his age and position held with us is as follows:
|
Name
|
Age
|
Position Held
|
||
|
A. J. Boisdrenghien
|
64
|
President, Secretary and Director
|
The person named above is expected to hold said offices/positions until the next annual meeting of our stockholders. He cannot be considered to be an independent director.
Mr. Boisdrenghien is our sole Officer and Director. He has been our sole officer and director since May, 2003. He has been the President of Equity Capital Holding, a consulting company, since 1999. He was formerly President of NABCO, Inc, a bagel franchising company which was sold in 1999. In 1999, NABCO merged with EUniverse, which later changed its name to Intermix. Intermix held several properties, including My Space, which was sold to News Corp in 2008. Mr. Boisdrenghien graduated from Pittsburgh State, in Pittsburgh, Kansas in 1969, with a degree in finance.
Committees of the Board of Directors
Currently, we do not have any committees of the Board of Directors.
Director and Executive Compensation
No compensation has been paid and no stock options granted to any of our officers or directors in the last three fiscal years.
Employment Agreements
We have no written employment agreements with any of our executive officer or key employee.
Equity Incentive Plan
We have not adopted an equity incentive plan, and no stock options or similar instruments have been granted to any of our officers or directors.
Indemnification and Limitation on Liability of Directors
Our Articles of Incorporation limit the liability of our directors to the fullest extent permitted by Nevada law. Nothing contained in the provisions will be construed to deprive any director of his right to all defenses ordinarily available to the director nor will anything herein be construed to deprive any director of any right he may have for contribution from any other director or other person.
11
At present, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification will be required or permitted. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
No compensation has been paid and no stock options granted to our officer and director in the last three fiscal years.
The following sets forth the number of shares of our $0.0001 par value common stock beneficially owned by (i) each person who, as of September 30, 2013, was known by us to own beneficially more than five percent (5%) of its common stock; (ii) our individual Director and (iii) our Officer and Director as a group. A total of 2,840,864 common shares were issued and outstanding as of September 30, 2013.
|
Name and Address of Beneficial Owner(1)
|
Number of
Shares Owned
|
Percentage
of Ownership
|
||||||
|
A.J. Boisdrenghien
5910 South University Boulevard, C-18, Unit 165
Littleton, Colorado 80121-2800
|
995,800 | 35.05 | % | |||||
|
Robert Lazzeri
2560 West Main Street
Littleton, Colorado 80120 (2)
|
600,000 | 21.11 | % | |||||
|
Earnest Mathis
2560 West Main Street
Littleton, Colorado 80120 (3)
|
600,000 | 21.11 | % | |||||
|
All Officers and Directors as a Group
(one person)
|
995,800 | 35.05 | % | |||||
_____________
|
(1)
|
A total of 974,000 shares are owned in the name of Franchise Concepts, Inc. A total of 21,800 shares owned by Equity Capital Holding Corporation. Both companies are affiliates of our President.
|
|
|
(2)
|
Includes 300,000 shares owned in the name of Lazzeri Equity Partners 401(K) Plan and 300,000 shares owned in the name of Lazzeri Family Trust.
|
|
|
(3)
|
Includes 300,000 shares owned in the name of Mathis Family Partners, Ltd. and 300,000 shares owned in the name of Earnco MPPP.
|
12
We currently occupy office space on a rent-free basis from our President, Mr. A. J. Boisdrenghien. Mr. Boisdrenghien is our only director and he is not an independent director.
Our independent auditor, B F Borgers CPA PC, and our previous auditor Borgers and Cutler CPAs, PLLC, Certified Public Accountants, billed an aggregate of $6,200 and $6,200 for the fiscal years ended September 30, 2013 and September 30, 2012, respectively, for professional services rendered for the audit of our annual financial statements and review of the financial statements included in our quarterly reports.
We do not have an audit committee and as a result our entire board of directors performs the duties of an audit committee. Our board of directors evaluates the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services.
The following financial information is filed as part of this report:
|
(1)
|
FINANCIAL STATEMENTS
|
||
|
(2)
|
SCHEDULES
|
||
|
(3)
|
EXHIBITS. The following exhibits required by Item 601 to be filed herewith are incorporated by reference to previously filed documents:
|
|
Exhibit
Number
|
Description
|
||
|
3.1*
|
Articles of Incorporation
|
||
|
3.2 *
|
Bylaws
|
||
|
3.3 *
|
Articles of Merger of TMAN Global.com, Inc. and FRANCHISE HOLDINGS INTERNATIONAL, INC.
|
||
|
31.1
|
Certification of CEO/CFO pursuant to Sec. 302
|
||
|
32.1
|
Certification of CEO/CFO pursuant to Sec. 906
|
||
|
101.1
|
Interactive Data File
|
_____________
* Previously filed
Reports on Form 8-K.
We filed no reports on Form 8-K during the fourth quarter of the fiscal year ended September 30, 2013.
13
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on December 9, 2013.
|
FRANCHISE HOLDINGS INTERNATIONAL, INC.
|
||
|
By:
|
|
|
|
A. J. Boisdrenghien
|
||
|
Chief Executive Officer and President
(principal executive officer and principal financial and accounting officer)
|
||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacity and on the date indicated.
|
Date: December 9, 2013
|
By:
|
|
|
A. J. Boisdrenghien
|
||
|
Director
|
||
14
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management's Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers, and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits, Financial Statement Schedules