HMMR 10-Q
Hammer Technology Holdings Corp. (HMMR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
[
For the quarterly period ended
For the transition period from:
Commission File Number
(Exact name of registrant as specified in its charter)
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| (State of incorporation) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Class | Trading Symbol | Name of Each Exchange |
| N/A | N/A | N/A |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | [ ] |
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[X] |
| Accelerated Filer | [ ] | Smaller Reporting Company | [ |
| Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ].
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [
As of May 16, 2025, the registrant had
1
HAMMER TECHNOLOGY HOLDINGS CORP.
TABLE OF CONTENTS
2
Hammer Fiber Optics Holdings Corp.
Condensed Consolidated Balance Sheets
| January 31, | July 31, | ||||||||
| 2025 | 2024 | ||||||||
| (unaudited) | |||||||||
| ASSETS | |||||||||
| Current Assets | |||||||||
| Cash and cash equivalents | $ | $ | |||||||
| Prepaid expenses | |||||||||
| Current assets from discontinued operations | |||||||||
| Total current assets | |||||||||
| Property and equipment, net | |||||||||
| Intangible assets, net | |||||||||
| Noncurrent assets from discontinued operations | |||||||||
| Total assets | $ | $ | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||||
| Current Liabilities | |||||||||
| Accounts payable and accrued expenses | $ | $ | |||||||
| Loans payable | |||||||||
| Convertible notes payable | |||||||||
| Convertible notes payable - related parties | |||||||||
| Warrant liabilities | |||||||||
| Current liabilities from discontinued operations | |||||||||
| Total current liabilities | |||||||||
| Total Liabilities | $ | $ | |||||||
| Commitments and contingencies (note 13) | |||||||||
| Stockholders' Equity (Deficit) | |||||||||
| Treasury stock ( |
$ | ( |
) | $ | |||||
| Common stock, $ |
|||||||||
| Additional paid-in capital | |||||||||
| Accumulated deficit | ( |
) | ( |
) | |||||
| Total Stockholders' Equity (Deficit) | ( |
) | ( |
) | |||||
| Total Liabilities and Stockholders' Equity (Deficit) | $ | $ | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Hammer Fiber Optics Holdings Corp
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended |
For the Six Months Ended |
|||||||||||
| January 31, | January 31, | |||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||
| (as restated) | (as restated) | |||||||||||
| Operating expenses | ||||||||||||
| Selling, general and administrative expenses | $ | $ | $ | $ | ||||||||
| Depreciation and amortization expense | ||||||||||||
| Total operating expenses | ||||||||||||
| Operating loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Other expenses | ||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | ||||||
| Change in fair value of warrant liability | ||||||||||||
| Total other (expenses) income | ( |
) | ||||||||||
| Net loss from continuing operations before income taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Provision for income taxes | ||||||||||||
| Net loss from continuing operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Net (loss) income from discontinued operations, after taxes | ||||||||||||
| Net income (loss) from discontinued operations | ( |
) | ||||||||||
| Gain on disposal of subsidiaries | ||||||||||||
| Total net (loss) income from discontinued operations, after taxes | ||||||||||||
| Net income (loss) | $ | $ | ( |
) | $ | $ | ( |
) | ||||
| Net loss from continuing operations per share, basic and diluted |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
| Net income from discontinued operations per share, basic | ||||||||||||
|
Net income from discontinued operations per share, diluted |
|
|||||||||||
| Total net income (loss) per share, basic | $ | $ | ( |
) | $ | $ | ( |
) | ||||
|
Total net income (loss) per share, diluted |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||
| Weighted average number of common shares outstanding, basic | ||||||||||||
|
Weighted average number of common shares outstanding, diluted |
||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Hammer Fiber Optics Holdings Corp
Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficit)
(Unaudited)
| Additional | Total | ||||||||||||||||||||
| Common Stock | Treasury Stock | Paid-in | Accumulated | Stockholders' | |||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity (Deficit) | |||||||||||||||
| Balance, July 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Commitment shares issued | |||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | |||||||||||||||
| Balance, October 31, 2023 | $ | $ | $ |
|
$ | ( |
) | $ | ( |
) | |||||||||||
| Net loss | ( |
) | ( |
) | |||||||||||||||||
| Balance, January 31, 2024 | $ | $ | $ |
|
$ | ( |
) | $ | ( |
) | |||||||||||
| Balance, July 31, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Net loss | - | - |
|
( |
) | ( |
) | ||||||||||||||
| Balance, October 31, 2024 | $ | $ | $ |
|
$ | ( |
) | $ | ( |
) | |||||||||||
| Treasury stock from Viper sale | ( |
) | ( |
) | |||||||||||||||||
| Net income | - | - |
|
||||||||||||||||||
| Balance, January 31, 2025 | $ | $ | ( |
) | $ |
|
$ | ( |
) | $ | ( |
) | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Hammer Fiber Optics Holdings Corp
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the six months ended January 31, | ||||||
| 2025 | 2024 | |||||
| (as restated) | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net income (loss) | $ | $ | ( |
) | ||
| Net income from discontinued operations | ||||||
| Net loss from continuing operations | ( |
) | ( |
) | ||
| Adjustments to Reconcile Net loss to Net Cash Used in Operating Activities: | ||||||
| Depreciation | ||||||
| Amortization | ||||||
| Warrant adjustment to fair value | ( |
) | ( |
) | ||
| Changes in assets and liabilities: | ||||||
| Prepaid expenses | ( |
) | ||||
| Accounts payable and accrued expenses | ( |
) | ||||
| Net cash provided by (used in) operating activities: | $ | $ | ( |
) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Software costs capitalized as intangible asset | ( |
) | ||||
| Net cash used in investing activities: | $ | $ | ( |
) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Proceeds from related party convertible notes | ||||||
| Repayment of convertible notes payable | ( |
) | ||||
| Net cash provided by financing activities: | $ | $ | ||||
| CASH FLOWS FROM DISCONTINUED OPERATIONS: | ||||||
| Cash provided by (used in) operations - discontinued operations | ( |
) | ||||
| Cash used in investing activities - discontinued operations | ( |
) | ( |
) | ||
| Cash provided by (used in) financing activities - discontinued operations | ( |
) | ||||
| Net cash used in discontinued operations: | $ | ( |
) | $ | ( |
) |
| NET (DECREASE) INCREASE IN CASH | ( |
) | ||||
| CASH FROM CONTINUING OPERATIONS - BEGINNING OF PERIOD | ||||||
| CASH FROM DISCONTINUED OPERATIONS - BEGINNING OF PERIOD | ||||||
| CASH AT BEGINNING OF PERIOD | $ | $ | ||||
| CASH FROM CONTINUING OPERATIONS - END OF PERIOD | ||||||
| CASH FROM DISCONTINUED OPERATIONS - END OF PERIOD | ||||||
| CASH AT END OF PERIOD | $ | $ | ||||
| Supplemental Disclosure of Cash Flow Information | ||||||
| Cash paid during the period: | ||||||
| Interest | $ | $ | ||||
| Income Tax | $ | $ | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||
| Commitment shares issued | $ | $ | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
| HAMMER FIBER OPTICS HOLDINGS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2025 and 2024 (Unaudited) |
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Hammer Fiber Optics Holdings Corp (OTCPK:HMMR) is a company focused on sustainable shareholder value investing in both financial services technology and wireless telecommunications infrastructure. Hammer Fiber Optics Holdings Corp (the “Company” or “Hammer”) is incorporated in the state of Nevada. As of the filing of the accompanying financial statements, the Company had one wholly-owned active subsidiary, Hammerpay USA Ltd. Additionally, the Company had two wholly-owned inactive subsidiaries: Hammer Fiber Optics Investment Ltd., and Hammer Wireless (SL) Limited.
Hammer's financial technologies business is focused on providing digital stored value technology via its HammerPay mobile payments platform to enable digital commerce between consumers and branded merchants across the developing world, ensuring Swift, Safe and Secure encrypted remittances and banking transactions. Hammerpay USA Ltd. owns the intellectual property critical to the operations of the Company's financial technology business unit as well as certain key supplier, marketing and operating agreements.
Hammer Fiber Optics Investment Ltd ceased operations on October 31, 2018 when Verizon Communications, LLC terminated the spectrum lease agreement. During the year ended December 31, 2020, the Company’s board of directors approved the discontinuation of the operations of the Company’s subsidiary Open Data Centers LLC. The operations of Open Data Centers, LLC were discontinued and the Company shut down its operations in its Piscataway, NJ data center. Open Data Centers, LLC was dissolved on December 30, 2020. On July 31, 2023 the Company’s board of directors approved the discontinuation of the operations of Hammer Wireless (SL) Limited, the Company's data communications service in Sierra Leone. The operations were discontinued in March 2020 and all assets have been written down.
On August 7, 2024, the Company authorized and executed a Purchase Agreement with Viper Networks, Inc. ("Viper") with the intention to sell the Company's telecommunications assets to Viper. The assets include 1st Point Communications LCC, and all its subsidiaries, Endstream Communications LLC, American Networks Inc., and a
With the divestiture of the telecommunications assets, the Company has begun to concentrate its efforts on its fintech initiatives. HammerPay is a scalable, mobile-first financial services technology platform featuring an advanced digital wallet and neo-banking system, designed for global deployment in both developed and emerging markets.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and notes for complete financial statements. In the opinion of management, all adjustments (consistent of normal recurring accruals and adjustments) considered necessary for a fair presentation of the consolidated financial statements have been included. Results for the interim periods should not be considered indicative of results to be expected for a full year. Reference should be made to the consolidated financial statements and related notes thereto contained in our Form 10-K for the year ended July 31, 2024.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the valuation of intangible assets and the valuation of warrant liabilities.
Cash and cash equivalents
Cash equivalents include cash in banks, money market funds and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash. The Company maintains its cash balances with various banks. The balances are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
Property and equipment
Property and equipment is stated at cost. Depreciation is computed primarily using the over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in the condensed consolidated statement of operations or the period in which the disposal occurred. The Company computes depreciation utilizing estimated useful lives, as stated below:
| Property and Equipment, net Categories |
Estimated Useful Life |
||
| Computer and telecom equipment |
|
Management regularly reviews property and equipment for possible impairment. This review occurs annually or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Based on management's assessment, there were no indicators of impairment of the Company's property and equipment as of January 31, 2025 and July 31, 2024, respectively.
Impairment of long-lived assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted cash flows to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company has not recognized any related impairment losses during the six months ended January 31, 2025 and 2024.
Intangible assets
The Company's intangible assets with finite lives, including customer lists and internal-use software, are amortized over their estimated useful lives. The Company assess all amortizable intangible assets and other long-lived assets for impairment whenever circumstances or changes suggest the asset's carrying amount may not be recoverable. If impairment indicators are present, the Company evaluates recoverability by comparing the carrying amount of the asset group to its anticipated net undiscounted cash flows. Should these cash flows be less than the carrying amount, the Company proceeds to determine the asset's fair value and record any necessary impairment. Each year, the Company also re-evaluates the useful life of these intangible assets to decide if adjustments to their remaining useful lives are warranted based on current events and conditions.
The Company did not recognize any intangible asset impairment charges during the six months ended January 31, 2025 or 2024.
As of January 31, 2025, the Company had a total of $
As of July 31, 2024, the Company had a total of $
Leases
The Company accounts for its lease contracts in accordance with the guidance in ASC 842. The Company determines if an arrangement is a lease at inception. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. For leases that do not provide an implicit rate, the Company uses its incremental borrowing rate. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. All leases that have lease terms of one year or less are considered short-term leases, and therefore are not recorded through a ROU asset or liability. As of January 31, 2025, and July 31, 2024, the Company did not have any leases with terms greater than 12 months.
Revenue recognition
The Company accounts for revenues under Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers" (Topic 606), which we adopted on August 1, 2018, using the modified retrospective approach. This standard update, along with related subsequently issued updates, clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Amounts invoiced or collected in advance of product delivery or providing services are recorded as unearned revenue or customer deposits. The company accrues for sales returns, bad debts, and other allowances based on its historical experience.
Income taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, "Accounting for Income Taxes". The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. As of January 31, 2025, and July 31, 2024, the Company did not have any amounts recorded pertaining to uncertain tax positions.
Fair value measurements
The Company adopted the provisions of ASC Topic 820, "Fair Value Measurements and Disclosures", which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - quoted prices in active markets for identical assets or liabilities
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions) The Company has no assets or liabilities valued at fair value on a recurring basis.
Level 3 - Unobservable inputs reflecting management's assumptions about the inputs used in pricing the asset or liability. Financial assets and liabilities (including warrants) approximate fair value.
All financial assets and liabilities approximate their fair value. Warrants liabilities are valued at Level 3.
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
Fair Value Measurements
|
Fair Value Measurements at January 31, 2025 using: |
||||||||||||
|
January 31, 2025 |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||
| Liabilities | $ | |||||||||||
| Warrant Liabilities | $ | |||||||||||
|
Fair Value Measurements at July 31, 2024 using: |
||||||||||||
|
July 31, 2024 |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||
| Liabilities | $ | |||||||||||
| Warrant Liabilities | $ | |||||||||||
The warrant liabilities are measured at fair value using quoted market prices and estimated volatility factors based on historical prices for the Company's common stock and are classified within Level 3 of the valuation hierarchy.
The following table provides a summary of changes in fair value of the Company's Level 3 financial liabilities as of January 31, 2025 and July 31, 2024:
| January 31, 2025 | July 31, 2024 | |||||
| Beginning Balance | $ | $ | ||||
| Change in fair value of warrant liabilities | ( |
) | ( |
) | ||
| Ending Balance | $ | $ |
The table below shows the Black-Scholes option-pricing model inputs used by the Company to value the derivative liability at each measurement date:
| January 31, 2025 | July 31, 2024 | |||
| Stock Price | $ |
$ |
||
| Risk-free interest rates | ||||
| Expected life (in years) | ||||
| Expected volatility | ||||
| Dividend yield |
Principles of Consolidation
Hammer Fiber Optics Holdings Corp. is the parent company and sole shareholder of HammerPay [USA], Ltd. The financial statements for Hammer Fiber Optics Holdings Corp. and its wholly-owned subsidiary are reported on a consolidated basis. All significant intercompany accounts and transactions have been eliminated. Its subsidiaries Hammer Fiber Optics Investments, Ltd., Hammer Wireless - SL, Ltd and its former subsidiary Open Data Centers, LLC are discontinued and are considered discontinued operations. Open Data Centers, LLC was dissolved on December 30, 2020.
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued Accounting Standard Update ("ASU") 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker ("CODM"). ASU 2023-07 does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adopting this ASU on our disclosures.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. This guidance requires entities to disclose more detailed information about the types of expenses, including purchases of inventory, employee compensation, depreciation, amortization, and depletion in commonly presented expense captions such as cost of sales and selling, general and administrative expenses. Such guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, although early adoption is permitted. This guidance should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on our disclosures.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)". This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock, as well as amend the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. The Company adopted this ASU on a prospective basis as of August 1, 2023 and the adoption of this guidance had no material impact on the condensed consolidated financial statements.
NOTE 3 - GOING CONCERN
The accompanying condensed consolidated 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. For the six months ended January 31, 2025 the Company incurred a net loss from continuing operations of $
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company intends to continue to address this condition by seeking to raise additional funding through debt or equity financing until such time that ongoing revenues can sustain the business.
11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
NOTE 4 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Subsequent to the Company's filing of its Quarterly Report on Form 10-Q for the three and six months ended January 31, 2024, with the Securities and Exchange Commission on March 27, 2024, the Company performed an evaluation of its accounting in relation to intangible assets subject to amortization. Management determined that the Original and Amended Form 10-Q do not give effect to certain expenses identified. Accordingly, the Company restates its condensed consolidated financial statements in this Form 10-Q as outlined further below. Upon review of the Company's previously filed 10-Q, the following errors were discovered and recorded:
1. Amortization expense associated with two intangible assets, software and customer contracts, had not been amortized in accordance with ASC 350-30-35. The Condensed Statement of Operations and the Condensed Statement of Cash Flows for the six months ended January 31, 2024 have been updated to properly reflect the amortization expense of intangible assets. The Condensed Statement of Operations for the three months ended January 31, 2024 have been updated to properly reflect the amortization expense of intangible assets.
2. Software costs that had been capitalized as an intangible software asset in accordance with ASC 350-40, were not presented separately in the statement of cash flows. The Condensed Statement of Cash Flows for the six months ended January 31, 2024 has been updated to properly reflect the capitalization of software costs as an intangible asset.
The following table sets forth the effects of the adjustments on affected items within the Company's previously reported condensed consolidated statement of operations for the six months ended January 31, 2024:
| January 31, | January 31, | |||||||||
| 2024 | Adjustments | 2024 | ||||||||
| (As Filed) | (As Restated) | |||||||||
| Revenues | $ | $ | $ | |||||||
| Cost of sales | ||||||||||
| Gross margin | ||||||||||
| Selling, general and administrative expenses | ||||||||||
| Amortization expense | (1) | |||||||||
| Total operating expenses | ||||||||||
| Operating loss | ( |
) | ( |
) | ( |
) | ||||
| Other income (expense) | ||||||||||
| Interest expense | ( |
) | ( |
) | ||||||
| Warrant adjustment to fair value | ||||||||||
| Total other expenses | ||||||||||
| Net loss from continuing operations before income taxes | $ | ( |
) | $ | ( |
) | $ | ( |
) | |
| Provision for income taxes | ||||||||||
| Net loss from continuing operations | ( |
) | ( |
) | ( |
) | ||||
| Net income from discontinued operations, after tax | ||||||||||
| Net income (loss) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |
| Weighted average number of common shares outstanding - basic and diluted | ||||||||||
| Net loss from continuing operations per share, basic and diluted | $ | ( |
) | $ | $ | ( |
) | |||
| Net income from discontinued operations per share, basic and diluted | $ | $ | ||||||||
| Net loss per share, basic and diluted | $ | ( |
) | $ | ( |
) |
The following table sets forth the effects of the adjustments on affected items within the Company's previously reported condensed consolidated statement of operations for the three months ended January 31, 2024:
| January 31, | January 31, | |||||||||
| 2024 | Adjustments | 2024 | ||||||||
| (As Filed) | (As Restated) | |||||||||
| Revenues | $ | $ | $ | |||||||
| Cost of sales | ||||||||||
| Gross margin | ||||||||||
| Selling, general and administrative expenses | ||||||||||
| Amortization expense | (1) | |||||||||
| Total operating expenses | ||||||||||
| Operating loss | ( |
) | ( |
) | ( |
) | ||||
| Other income (expense) | ||||||||||
| Interest expense | ( |
) | ( |
) | ||||||
| Warrant adjustment to fair value | ||||||||||
| Total other expenses | ( |
) | ( |
) | ||||||
| Net loss from continuing operations before income taxes | ( |
) | ( |
) | ( |
) | ||||
| Provision for income taxes | ||||||||||
| Net loss from continuing operations, after tax | ( |
) | ( |
) | ( |
) | ||||
| Net income from discontinued operations, after tax | ||||||||||
| Net income (loss) | $ | $ | ( |
) | $ | ( |
) | |||
| Weighted average number of common shares outstanding - basic and diluted | $ | $ | ||||||||
| Net loss from continuing operations per share, basic and diluted | $ | ( |
) | $ | ( |
) | ||||
| Net income from discontinued operations, after tax | $ | $ | ||||||||
| Net income (loss) per share, basic and diluted | $ | $ | ( |
) |
12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
The following table sets forth the effects of the adjustments on affected items within the Company's previously reported condensed consolidated statements of cash flows for six months ended January 31, 2024:
| January 31, | January 31, | |||||||||
| 2024 | Adjustments | 2024 | ||||||||
| (As Filed) | (As Restated) | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
| Net (loss) income from discontinued operations | $ | $ | $ | |||||||
| Net loss from continuing operations | ( |
) | ( |
) | ( |
) | ||||
| Net loss | ( |
) | ( |
) | ( |
) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
| Amortization expense | (1) | |||||||||
| Warrant adjustment to fair value | ( |
) | ( |
) | ||||||
| Changes in operating assets and liabilities: | ||||||||||
| Prepaid expenses | ( |
) | ||||||||
| Accounts payable | ||||||||||
| Net cash provided by (used in) operating activities | ( |
) | ( |
) | ||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||
|
Software costs capitalized as intangible asset |
( |
) | (2) | ( |
) | |||||
|
Net cash used in investing activities |
( |
) | ( |
) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
| Proceeds from related party convertible notes | ||||||||||
| Net cash provided by (used in) financing activities | ||||||||||
| Net increase (decrease) in cash from continuing operations | ||||||||||
| Net increase (decrease) in cash from discontinued operations | ( |
) | ( |
) | ||||||
| Net increase (decrease) in cash | ||||||||||
| Cash, beginning of period | ||||||||||
| Cash, end of period | $ | $ | $ | |||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES: | ||||||||||
| Cash paid for interest | $ | $ | ( |
) | $ | |||||
| Cash paid for taxes | $ | $ | $ | |||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||||
| Commitment shares issued | $ | $ | $ | |||||||
The specific explanations for the items noted above in the condensed consolidated restated financial statements are as follows:
1. After reexamining the useful lives of the Company's intangible assets, it has been determined that a portion of such assets are subject to amortization and should be segregated and amortized.
2. The cash flow effect of software costs capitalized as intangible assets in accordance with ASC 350-40 has been segregated and presented separately as an investing cash flow activity.
13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
NOTE 5 - DISCONTINUED OPERATIONS
Hammer Fiber Optics Investment Ltd ceased operations on October 31, 2018 when Verizon Communications, LLC terminated the spectrum lease agreement. Open Data Centers, LLC ceased operations at its sole location in Piscataway, NJ on May 1, 2020. Open Data Centers, LLC was dissolved on December 30, 2020. The divestiture of Hammer Fiber Optics Investments Ltd and Open Data Centers, LLC qualified for held-for-sale accounting and represent a strategic shift with a major effect on the Company's operations and financial results. Following the divestitures, the Company does not have any significant continuing involvement in the operations of Open Data Centers, LLC or Hammer Fiber Optics Investment Ltd. As a result, the divestitures met the criteria for reporting as a discontinued operation.
On August 7, 2024, the Company authorized and executed a Purchase Agreement with Viper to sell the Company's telecommunications assets to Viper (the "Viper Sale"). The assets include 1st Point Communications LCC, and all its subsidiaries, Endstream Communications LLC, American Networks Inc., and a
The following table represents the assets and liabilities of discontinued operations as of January 31, 2025 and July 31, 2024:
|
January 31, |
July 31, |
|||||
| 2025 | 2024 | |||||
| Current assets | ||||||
| Cash and cash equivalents | $ | $ | ||||
| Accounts receivable | ||||||
| Note receivable | ||||||
| Security deposits | ||||||
| Prepaid expenses | ||||||
| Total current assets | ||||||
| Noncurrent assets | ||||||
| Property and equipment, net | ||||||
| Total noncurrent assets | ||||||
| Total assets - discontinued operations | $ | $ | ||||
| Current liabilities | ||||||
| Accounts payable and accrued expenses | $ | $ | ||||
| Loans payable | ||||||
| Convertible notes payable - related parties | ||||||
| Deferred revenue | ||||||
| Total current liabilities | ||||||
| Total liabilities - discontinued operations | $ | $ |
14
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
The following table represents the major components of the financial results of discontinued operations for the three and six months ended January 31, 2025 and 2024:
| For the Three Months Ended, | For the Six Months Ended, | |||||||||||
| January 31, | January 31, | |||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||
| Revenues | $ | $ | $ | $ | ||||||||
| Cost of sales | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses | ||||||||||||
| Selling, general and administrative expenses | ||||||||||||
| Depreciation and amortization expense | ||||||||||||
| Total operating expenses | ||||||||||||
| OPERATING INCOME (LOSS) | ( |
) | ||||||||||
| Other income (expense) | ||||||||||||
| Other income | ||||||||||||
| Financing expense | ( |
) | ( |
) | ||||||||
| Other expenses | ( |
) | ( |
) | ||||||||
| Gain on disposal of subsidiaries | ||||||||||||
| Total other income (expense) | ||||||||||||
| Net income from discontinued operations before taxes | ||||||||||||
| Provision for income taxes | ||||||||||||
| Net income from discontinued operations, after taxes | $ | $ | $ | $ | ||||||||
The following table presents the components of the gain on disposal of subsidiaries resulting from the disposal of the telecommunication assets sold to Viper on November 1, 2024:
| November 1, | |||
| 2024 | |||
| Net assets and liabilities | |||
| Cash and cash equivalents | $ | ( |
) |
| Accounts receivable | ( |
) | |
| Note receivable | ( |
) | |
| Security deposits | ( |
) | |
| Prepaid expenses | ( |
) | |
| Property and equipment, net | ( |
) | |
| Accounts payable and accrued expenses | |||
| Loans payable | |||
| Convertible notes payable - related parties | |||
| Deferred revenue | |||
| Net gain from disposal of assets and liabilities | |||
| Consideration received in exchange for disposal of assets | |||
| Gain on disposal of subsidiaries | $ |
Loans payable from discontinued operations
On August 7, 2024, the Company authorized and executed a Purchase Agreement with Viper to sell the Company's telecommunications assets to Viper (the "Viper Sale"). The assets include 1st Point Communications LCC, and all its subsidiaries, Endstream Communications LLC, American Networks Inc., and a 10% ownership interest in Wikibuli Inc. The Viper Sale closed on November 1, 2024. The telecommunication assets met the criteria for reporting as a discontinued operation and all assets and liabilities held within the telecommunication assets, including loans payable, were disposed of (Note 5 - Discontinued Operations).
15
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
On August 27, 2024, Endstream Communications entered into a financing agreement with a financial institution in the amount of $
On April 1, 2024, 1stPoint Communications entered into a financing agreement with a financial institution in the amount of $
On August 8, 2024, a lender lent 1stPoint Communications $
On March 20, 2023, 1stPoint Communications entered into a financing agreement with a financial institution in the amount of $
During the fiscal year 2022, the Company entered into a non-interest bearing loan with a financial institution in the amount of $
On February 26, 2021, Endstream Communications entered into a financing agreement with a financial institution in the amount of $
As of November 1, 2024 and July 31, 2024, notes payable from discontinued operations consisted of the following:
| November 1, 2025 | July 31, 2024 | |||||
| Notes payable | $ | $ | ||||
| Less: current portion, net | ( |
) | ( |
) | ||
| Long-term notes payable, net | $ | $ |
Related party convertible notes from discontinued operations
On August 7, 2024, the Company authorized and executed a Purchase Agreement with Viper to sell the Company's telecommunications assets to Viper (the “Viper Sale”). The assets include 1st Point Communications LCC, and all its subsidiaries, Endstream Communications LLC, American Networks Inc., and a 10% ownership interest in Wikibuli Inc. The Viper Sale closed on November 1, 2024. The telecommunication assets met the criteria for reporting as a discontinued operation and all assets and liabilities held within the telecommunication assets, including related party convertible notes, were disposed of (Note 5 – Discontinued Operations).
On March 24, 2020, the Company entered into a convertible note with a former Chief Financial Officer of the Company in the amount of $
On September 1, 2020, the Company entered into a convertible note for the sum of $
As of November 1, 2024 and July 31, 2024, related parties convertible debt from discontinued operations consisted of the following:
| November 1, 2024 | July 31, 2024 | |||||
| Convertible notes payable – related parties from discontinued operations | $ | $ | ||||
| Less: current portion, net | ( |
) | ( |
) | ||
| Long-term convertible notes payable – related parties, net | $ | $ | ||||
16
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
NOTE 6 - PROPERTY AND EQUIPMENT
As of January 31, 2025 and July 31, 2024, property and equipment of continuing operations consisted of the following:
| January 31, | July 31, | ||||||||
| 2025 | 2024 | Life | |||||||
| Computer, telecom equipment and software | $ | $ |
|
||||||
| Less: Accumulated depreciation | ( |
) | |||||||
| Total | $ | $ |
The Company incurred depreciation expense of $
NOTE 7 - INTANGIBLE ASSETS, NET
The following table displays the composition of intangible assets, net as well as the respective amortization period:
| January 31, 2025 | July 31, 2024 | ||||||||||||||||||
| Useful Life |
Gross Amount |
Accumulated Amortization |
Net Amount | Gross Amount |
Accumulated Amortization |
Net Amount | |||||||||||||
| Customer contracts |
|
$ | $ | $ | $ | $ | $ | ||||||||||||
| Software |
|
||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||
The Company incurred amortization expense of $
Estimated annual amortization expense for intangible assets is as follows:
| For the years ended July 31, | |||
| 2025 (remainder) | $ | ||
| 2026 | |||
| 2027 | |||
| 2028 | |||
| 2029 | |||
| Thereafter | |||
| Total | $ |
NOTE 8 - LOANS PAYABLE
Loans payable from continued operations
On January 5, 2022, the Company entered into an unsecured promissory note (the "January 2022 Note") in the amount of $
As of January 31, 2025 and July 31, 2024, loans payable consisted of the following:
|
January 31, 2025 |
July 31, 2024 |
|||||
| Notes payable | $ | $ | ||||
| Less: current portion, net | ( |
) | ( |
) | ||
| Long-term notes payable, net | $ | $ |
17
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
NOTE 9 - RELATED PARTY CONVERTIBLE DEBT
Related party convertible notes from continued operations
On August 22, 2019, the Company entered into a convertible note with a related party in the amount of $
On August 24, 2019, the Company entered into two convertible notes with two related parties (who were former partners in 1stPoint Communications, LLC) in the amounts of $
On April 20, 2020, the Company entered into a convertible note with a former Chief Financial Officer of the Company in the amount of $
18
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
On February 26, 2021, the Company entered into a convertible note (the "February 2021 Note") with a related party in the amount of $
As of January 31, 2025 and July 31, 2024, all of the related party payables are reported as current liabilities in the Consolidated Balance Sheet and all interest and maturity dates have been waived by the holders of all convertible notes from all related parties.
As of January 31, 2025 and July 31, 2024, related parties convertible debt consisted of the following:
| January 31, 2025 | July 31, 2024 | |||||
| Convertible notes payable - related parties | $ | $ | ||||
| Less: current portion, net | ( |
) | ( |
) | ||
| Long-term convertible notes payable - related parties, net | $ | $ |
NOTE 10 - CONVERTIBLE DEBT
On February 11, 2022, the Company entered into a Securities Purchase Agreement (the "Mast SPA") by and between the Company and Mast Hill Fund, L.P. ("Mast"). Pursuant to the terms of the Mast SPA, the Company issued Mast a promissory note in the aggregate principal amount of $
19
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
The Company entered into the First Amendment to the Mast Note as of March 6, 2023, through which both parties agreed to increase the principal balance of the note by $
Pursuant to the terms of the Mast SPA, the Company also agreed to issue (i) a common stock purchase warrant to purchase
On April 4, 2024, the Company entered into the Second Amendment to the Mast Note, effectively increasing the principal balance of the note by $
The Mast Note bears interest at a rate of
As of January 31, 2025 and July 31, 2024, convertible debt consisted of the following:
| January 31, 2025 | July 31, 2024 | |||||
| Convertible debt | $ | $ | ||||
| Original issue discount | $ | $ | ||||
| Less: current portion, net | ( |
) | ||||
| Long-term convertible debt, net | $ | $ |
20
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
NOTE 11 - INCOME TAXES
The Company recorded no provision or benefit for income tax expense for the six months ended January 31, 2025 and 2024, respectively.
For all periods presented, the pretax losses incurred by the Company received no corresponding tax benefit because the Company concluded that it is more likely than not that the Company will be unable to realize the value of any resulting deferred tax assets. The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance in the future.
The Company has no open tax audits with any taxing authority as of January 31, 2025. The company's taxes are subject to examination by taxation authorities for a period of three years.
NOTE 12 - STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock
On March 6, 2023, Mast Hill amended the terms of its promissory note, which included the issuance of
Treasury Stock
On November 1, 2024, the Viper Sale closed. As a result the Company sold its telecommunications assets to Viper, including 1st Point Communications LCC, and all its subsidiaries, Endstream Communications LLC, American Networks Inc., and a
NOTE 13 - COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments. The following parties have filed claims against Hammer Fiber Optics Investments Ltd and are not secured:
| Calvi Electric v. Hammer Fiber Optics Inv, Ltd. | $ | ||
| Horizon Blue Cross v. Hammer Fiber Optics Inv, Ltd. | $ |
In the matter of Cross River Fiber vs. Hammer Fiber Optics Investments, Ltd., the related party has paid its obligations and the matter is now considered closed. The claims by Calvi Electric and Horizon Blue Cross have not advanced.
NOTE 14 - WARRANTS
On February 11, 2022, the Company issued a purchase warrant (the "Mast First Warrant") to Mast Hill Fund, L.P. for
On February 11, 2022, the Company issued a purchase warrant (the "Mast Second Warrant") to Mast Hill Fund, L.P. for
21
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2025 and 2024
(Unaudited)
On February 17, 2022, the Company issued a purchase warrant to Talos Victory Fund, LLC for
On February 17, 2022, the Company issued a purchase warrant to Talos Victory Fund, LLC for
The following schedule summarizes the changes in the Company's common stock warrants during the six months ended January 31, 2025 and 2024:
| Weighted | |||||||||
| Weighted | Average | ||||||||
| Average | Contractual | ||||||||
| Number of | Exercise | Term | |||||||
| Warrants | Price | (Years) | |||||||
| Balance outstanding at July 31, 2023 |
|
||||||||
| Granted | $ | ||||||||
| Exercised | - | ||||||||
| Expired/Canceled | - | ||||||||
| Balance outstanding at January 31, 2024 | $ |
|
|||||||
| Exercisable at January 31, 2024 |
|
||||||||
| Balance outstanding at July 31, 2024 |
|
||||||||
| Granted | - | ||||||||
| Exercised | - | ||||||||
| Expired/Canceled | ( |
) | - | ||||||
| Balance outstanding at January 31, 2025 | $ |
|
|||||||
| Exercisable at January 31, 2025 | $ |
|
The Black Scholes model was used to determine the fair value of the warrants, including the use of the share price, exercise price, term, volatility, risk free interest rate and the dividend rate. The warrants were priced in each quarter and the carrying cost of the warrant adjusted in accordance with the model. The fair values of the outstanding warrants recorded as warrants liability as of January 31, 2025 and July 31, 2024 was estimated using the Black-Scholes option-pricing model with the following assumptions:
| January 31, | July 31, | |||
| 2025 | 2024 | |||
| Stock Price | $ |
$ |
||
| Risk-free interest rates | ||||
| Expected life (in years) |
|
|
||
| Expected volatility | ||||
| Dividend yield |
NOTE 15 – EARNINGS PER SHARE
Basic income (loss) per common share is calculated by dividing net income (loss) available to common shareholders by the number of weighted average common shares issued and outstanding. Diluted income (loss) per common share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares issued and outstanding for the period, plus amounts representing the dilutive effect from the conversion of the convertible notes, as applicable. The Company calculates dilutive potential common shares for convertible securities using the as-if-converted method, which assumes the convertible securities will be converted as of the beginning of the period or the issuance date if later. The Company also calculates dilutive potential common shares using the treasury stock method for options and warrants.
A reconciliation of the Company’s basic and diluted income (loss) per common share is as follows:
| For the Three Months Ended, | For the Six Months Ended, | |||||||||||
| January 31, | January 31, | |||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||
| Numerator: | ||||||||||||
| Net loss from continuing operations | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Net income from discontinued operations | $ | $ | $ | $ | ||||||||
| Net income (loss) | $ | $ | ( |
) | $ | $ | ( |
) | ||||
| Denominator: | ||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||
| Effect of potentially dilutive convertible notes | ||||||||||||
| Dilutive weighted average common shares outstanding | ||||||||||||
| Net loss from continuing operations per common share: | ||||||||||||
| Basic | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Diluted | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Net income from discontinued operations per common share: | ||||||||||||
| Basic | $ | $ | $ | $ | ||||||||
| Diluted | $ | $ | $ | $ | ||||||||
| Net income (loss) per common share: | ||||||||||||
| Basic | $ | $ | ( |
) | $ | $ | ( |
) | ||||
| Diluted | $ | $ | ( |
) | $ | $ | ( |
) | ||||
The following potentially dilutive securities have been excluded from computations of dilutive weighted average shares outstanding as they would be antidilutive:
| January 31, 2025 | January 31, 2024 | |||||
| Warrants | ||||||
| Convertible Notes | ||||||
| Total |
NOTE 16 - SUBSEQUENT EVENTS
In February of 2025, the Company agreed to amend the February 2021 Convertible Note. As a result, the principal balance of the February 2021 Note increased by $
22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Hammer Fiber Optics Holdings Corp. (the "Company"), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," or "project" or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
Overview
Hammer Fiber Optics Holdings Corp. is a company focused on sustainable shareholder value investing in financial services technology.
Hammer's financial technologies business is focused on providing digital stored value technology via its HammerPay mobile payments platform to enable digital commerce between consumers and branded merchants across the developing world, ensuring Swift, Safe and Secure encrypted remittances and banking transactions.
Recent Business Developments
On August 7, 2024, we authorized and executed a Purchase Agreement with Viper Networks, Inc. (“Viper”” to sell the Company's telecommunications assets to Viper (the “Viper Sale”). The assets include 1st Point Communications LCC, and all its subsidiaries, Endstream Communications LLC, American Networks Inc., and a 10% ownership interest in Wikibuli Inc. Viper is acquiring these assets in exchange for 2,500,000 (2.5 Million) shares of the Company's common stock. The Viper Sale closed on November 1, 2024.
As a result, these subsidiaries’ results, including the gain on disposal of subsidaries, are presented as a line item, “net income from discontinued operations,” net of tax in the condensed consolidated statements of operations and excluded from continuing operations for all periods presented. Accordingly, any discussion of historical information in Management’s Discussion and Analysis below reflects the discontinued subsidiaries’ results as a discontinued operation, and amounts, including key metrics, and disclosures below pertain to our continuing operations for all periods presented unless overwise noted. (See “Note 5-Discontinued Operations” to the condensed consolidated financial statements of this Quarterly Report on Form 10-Q for further details of the transaction.)
Results of Operations
For the Three Months Ended January 31, 2025 Compared to the Three Months Ended January 31, 2024
| January 31, 2025 | January 31, 2024 | $ Change | % Change | |||||||||
| Revenues | $ | - | $ | - | $ | - | 0.0% | |||||
| Cost of sales | - | - | - | 0.0% | ||||||||
| Selling, general and administrative expenses | 176,928 | 158,600 | 18,328 | 11.6% | ||||||||
| Depreciation and amortization expense | 170,647 | 168,298 | 2,349 | 1.4% | ||||||||
| Total operating expenses | $ | 347,575 | $ | 326,898 | $ | 19,057 | 6.3% |
We did not generate any revenues from continuing operations for the three months ended January 31, 2025 nor the three months ended January 31, 2024.
23
During the three months ended January 31, 2025, we incurred total operating expenses of $347,575 compared with $326,898, an increase of approximately $20,677 or 6.3%, for the comparable period ended January 31, 2024. The increase in expenses is due to the launch of our HammerPay software.
We recorded depreciation and amortization expense of $170,647 and $168,298 during the three months ended January 31, 2025 and 2024, respectively.
| For the three months ended January 31, |
||||||||||||
| 2025 | 2024 | $ Change | % Change | |||||||||
| Other income (expense) | ||||||||||||
| Interest expense | - | (20,448 | ) | 20,448 | (100.00)% | |||||||
| Warrant adjustment to fair value | 67,737 | 4,500 | 63,237 | 1,405.3% | ||||||||
| Total other income (expense) | $ | 67,737 | $ | (15,948 | ) | $ | 83,685 | (524.7)% | ||||
During the three months ended January 31, 2025, we incurred total other income of $67,737 consisting of warrant adjustment to fair value of $67,737. We did not incur any interest expense during the three months ended January 31, 2025. During the three months ended January 31, 2024 we incurred total other expense of $15,948 consisting primarily of interest expense of $20,448. This expense is partially offset by warrant adjustment to fair value of $4,500.
For the Six Months Ended January 31, 2025 Compared to the Six Months Ended January 31, 2024
| January 31, 2025 | January 31, 2024 | $ Change | % Change | |||||||||
| Revenues | $ | - | $ | - | $ | - | 0.0% | |||||
| Cost of sales | - | - | - | 0.0% | ||||||||
| Selling, general and administrative expenses | 363,487 | 322,590 | 40,897 | 12.7% | ||||||||
| Depreciation and amortization expense | 339,674 | 336,596 | 3,078 | 0.9% | ||||||||
| Total operating expenses | $ | 703,161 | $ | 659,186 | $ | 43,975 | 6.7% |
We did not generate any revenues from continuing operations for the six months ended January 31, 2025 nor the six months ended January 31, 2024.
During the six months ended January 31, 2025, we incurred total operating expenses of $703,161 compared with $659,186, an increase of approximately $43,975 or 6.7%, for the comparable period ended January 31, 2024. The increase in expenses is due to the launch of our HammerPay software.
We recorded depreciation and amortization expense of $339,674 and $336,596 during the six months ended January 31, 2025 and 2024, respectively.
| For the six months ended January 31, |
||||||||||||
| 2025 | 2024 | $ Change | % Change | |||||||||
| Other income (expense) | ||||||||||||
| Interest expense | (152 | ) | (40,305 | ) | 40,153 | 99.6% | ||||||
| Change in fair value of warrant liability | 10,800 | 76,500 | (65,700 | ) | (85.9)% | |||||||
| Total other income (expense) | $ | 10,648 | $ | 36,195 | $ | (25,547 | ) | (70.6)% | ||||
During the six months ended January 31, 2025, we incurred total other income of $10,648 primarily consisting of adjustments to the fair value of the warrant liability of $10,800. This income is partially offset by interest expense of $152. During the six months ended January 31, 2025 we incurred total other income of $36,195 consisting primarily of adjustments to the fair value of warrant liabilities of $76,500. This expense is partially offset by interest expense of $40,305.
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of January 31, 2025, we had $29,552 in cash compared to $0 at July 31, 2024, an increase of $29,552.
As of January 31, 2025, we had total current assets of $34,912 and total current liabilities of $3,123,746, or negative working capital of $3,088,834, compared to total current assets of $206,266 and total current liabilities of $3,998,146, or negative working capital of $3,791,880 as of July 31, 2024. This is an increase in working capital of $703,46 driven primarily by the Viper Sale and the resulting decrease in current liabilities from discontinued operations.
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We have financed our operations since inception primarily through debt from related parties. There can be no assurance that we will be able to raise additional capital, when needed, to continue operations in their current form. Our ability to remain a going concern is dependent upon whether we can raise debt and/or equity capital from third party sources for both working capital and business development needs until such time as we are substantially sustained as a going concern through cash flow from operations.
See the analysis below of the cash flow statement for further details pertaining to liquidity.
| For the six months ended January 31, |
|||||||||
| 2025 | 2024 | $ Change | |||||||
| Net cash provided by (used in) operating activities - continuing operations | $ | 1,135,181 | $ | (110,496 | ) | $ | 1,275,249 | ||
| Net cash provided by investing activities - continuing operations | - | (29,572 | ) | 29,572 | |||||
| Net cash provided by financing activities - continuing operations | 493,806 | 406,035 | 87,771 | ||||||
| Net cash provided by (used in) operations - discontinued operations | 4,310 | (176,100 | ) | 180,410 | |||||
| Net cash used in investing activities - discontinued operations | (1,691,958 | ) | (13,497 | ) | (1,678,461 | ) | |||
| Net cash provided by (used in) financing activities - discontinued operations | 14,080 | (47,847 | ) | 61,927 | |||||
| Net increase (decrease) in cash and cash equivalents | $ | (44,581 | ) | $ | 28,523 | $ | (73,104 | ) | |
Changes in Cash Flows from Continuing Operating Activities
During the six months ended January 31, 2025 the cash provided by operating activities was $1,135,181. The cash provided by operating activities was primarily the result of the net income from discontinued operations of $1,632,517, and amortization expense of $337,784; offset primarily by the net income from continuing operations of $940,004 and a decrease in accounts payable and accrued expenses of $128,697. During the six months ended January 31, 2024 the cash used in operating activities consisted primarily of amortization expense of $336,596 and the net loss from continuing operations of $209,201; offset primarily by the net loss from continuing operations of $413,790 and the warrant adjustment to fair value of $76,500.
Changes in Cash Flows from Continuing Investing Activities
There were no investing activities during the six months ended January 31, 2025. During the six months ended January 31, 2024 the cash used by investing activities was composed entirely of $29,572 of software costs capitalized as intangible assets.
Changes in Cash Flows from Continuing Financing Activities
During the six months ended January 31, 2025, cash flow provided by financing activities was $493,806. The cash provided by financing activities was primarily the result of proceeds from related part6y convertible notes payable of $1,175,806 offset by the repayment of convertible notes payable of $682,000. During the six months ended January 31, 2024 the cash provided by financing activities was $406,035. The cash provided by financing activities was composed entirely of the proceeds from related party convertible notes.
Going Concern
As of January 31, 2025, substantial doubt existed as to the Company's ability to continue as a going concern as the Company has earned only minimal revenue, has no certainty of earning additional revenues in the future, has a working capital deficit and an overall accumulated deficit since inception. The Company will require additional financing to continue operations either from management, existing shareholders, or new shareholders through equity financing and/or sources of debt financing. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. The financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Future Financings
We will continue to rely on equity sales of our common shares in order to continue to fund business operations. Issuances of additional shares may result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of equity securities or arrange for debt or other financing in amounts sufficient to fund our operations and other development activities.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of financial statements in accordance with GAAP requires application of management's subjective judgments, often requiring estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our actual results may differ substantially from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in "Note 2 - Summary of Significant Accounting Policies," to our condensed consolidated unaudited financial statements included in Item 1, "Financial Statements," of this Quarterly Report on Form 10-Q, we believe that the following accounting policies require the application of significant judgments and estimates.
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Warrant Liability Fair Value
Our warrant liability fair value estimates are based on the Black Scholes model using quoted market prices and estimated volatility factors based on historical prices of the Company's common stock.
Intangible Assets
Our intangible assets, composed of software and customer contracts, were obtained through the Company's January 2022 acquisition of Telecom Financial Services, Ltd. ("TFS"), as well as capitalized internal software development costs. A valuation specialist was contracted to determine a purchase price allocation for the $4,230,000 paid for TFS. Ultimately, it was determined that the software is valued at approximately $387,843 and the customer contract at approximately $3,862,657. The Company also capitalized internal software costs of $230,961. These assets have useful lives of between 5 and 7 years and are amortized on a straight-line basis. Periodically, the Company assesses its intangible assets for impairment.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued Accounting Standard Update ("ASU") 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker ("CODM"). ASU 2023-07 does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adopting this ASU on our disclosures.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. This guidance requires entities to disclose more detailed information about the types of expenses, including purchases of inventory, employee compensation, depreciation, amortization, and depletion in commonly presented expense captions such as cost of sales and selling, general and administrative expenses. Such guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, although early adoption is permitted. This guidance should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on our disclosures.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
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ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that are designed to reasonably ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
At the end of the period covered by this Quarterly Report, we conducted an evaluation under the supervision and with the participation of our Principal Officer and Principal Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon the foregoing, our Principal Executive Officer and Principal Financial Officer concluded that, as of January 31, 2025, the disclosure controls and procedures of our Company were not effective.
Limitations on Effectiveness of Controls and Procedures
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
During the quarter ended January 31, 2025, management continued to commit resources to the remediation of the material weaknesses reported in the Company’s Form 10-K for the fiscal year ended July 31, 2024. Furthermore, management continued to augment its resources for remediating the identified deficiencies and in other internal controls over financial reporting.
Except as described above, there were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, or proceeding by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or our subsidiary, threatened against or affecting our Company, our common stock, our subsidiary or of our companies or our subsidiary's officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
* Filed herewith
** In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are furnished and not filed
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.
| HAMMER TECHNOLOGY HOLDINGS CORP | |
| Date: May 16, 2025 | /s/ Michael Cothill |
| Michael P. Cothill | |
| Principal Executive Officer | |
| Date: May 16, 2025 | /s/ Mark Stogdill |
| Mark Stogdill | |
| Principal Financial Officer |
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