Hammer Technology Holdings Corp 10-Q for FY2024 Q2
Hammer Technology Holdings Corp. (HMMR)
About this 10-Q
Hammer Technology Holdings Corp filed this 10-Q on March 27, 2024, covering the quarter ended January 31, 2024 (FY2024 Q2).
Headline figures
Quarter ended January 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $826.6K
- up 11.1% from $744.05K a year earlier
- Net income
- $12.66K
- compared with a net loss of $338.55K a year earlier
- Diluted EPS
- $0.00
- compared with -$0.01 a year earlier
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)
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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 (§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.
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[X] |
| Accelerated Filer | [ ] | Smaller Reporting Company |
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| 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 March 22, 2024, there were 62,680,947 shares of the registrant's $0.001 par value common stock issued and
HAMMER FIBER OPTICS HOLDINGS CORP.
TABLE OF CONTENTS
2
HAMMER FIBER OPTICS HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)
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.
Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," "HMMR," or Hammer Fiber Optics Holdings Corp refer to the Company.
3
EXPLANATORY NOTE
This quarterly report on Form 10Q for our quarter ended January 31, 2024 is unaudited and has not yet been reviewed by our Auditors as recommended under AS 4105 as approved by the US Securities and Exchange Commission. The Company anticipates filing an amendment to this Form 10Q when the review is complete.
4
HAMMER FIBER OPTICS HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| January 31, | July 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Security Deposits | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible and other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Loans payable | ||||||||
| Warrant liabilities | ||||||||
| Unissued Stock | ||||||||
| Deferred Revenue | ||||||||
| Current liabilities from discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Stockholders' Equity | ||||||||
| Common stock, $ |
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| $ | $ | |||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Stockholder's Equity | ||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
HAMMER FIBER OPTICS HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended |
For the Six Months Ended |
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| January 31, | January 31, | |||||||||||
| 2024 | 2023 (as restated) |
2024 | 2023 (as restated) |
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| Revenues | $ | $ | $ | $ | ||||||||
| Cost of sales | ||||||||||||
| Selling, general and administrative expenses | ||||||||||||
| Depreciation expense | ||||||||||||
| Total operating expenses | ||||||||||||
| Operating loss | ( |
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| Other income (expense) | ||||||||||||
| Other income | ||||||||||||
| Interest expense | ( |
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| Financing expenses | ( |
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| Warrant adjustment to fair value | ( |
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| Gain on extinguishment of convertible debt | ||||||||||||
| Other expenses | ( |
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| Total other income (expenses) | ( |
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| Net income (loss) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
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| Weighted average number of common shares outstanding - basic and diluted | ||||||||||||
| Gain/(Loss) per share- basic and diluted | ||||||||||||
| Basic | $ | $ | ( |
) | $ | ( |
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| Diluted | ( |
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| Total | $ | $ | ( |
) | $ | ( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
HAMMER FIBER OPTICS HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| For the Three | For the Six | |||||||||||
| Months Ended | Months Ended | |||||||||||
| January 31, | January 31, | |||||||||||
| 2024 | 2023 (as restated) |
2024 | 2023 (as restated) |
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| Net income (loss) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
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| Other comprehensive loss | ||||||||||||
| Foreign currency translation adjustments | ( |
) | ( |
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| Other comprehensive loss | ( |
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| Comprehensive income (loss) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
7
HAMMER FIBER OPTICS HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
| Additional | Accumulated | Total | ||||||||||||||||||||||
| Common Stock | Treasury Stock | Paid-in | Accumulated | Comprehensive | Stockholders' | |||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||
| Balance, July 31, 2022 (as restated) | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||
| Conversion shares issued | ||||||||||||||||||||||||
| Net loss for the quarter | - | - | ( |
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| Balance, October 31, 2022 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||
| Foreign currency translation adjustment | - | - | ( |
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| Net loss for the quarter | - | - | ( |
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| Balance, January 31, 2023 (as restated) | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| Balance, July 31, 2023 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||
| Commitment Shares Issued | ||||||||||||||||||||||||
| Net loss for the quarter | - | - | ( |
) | ( |
) | ||||||||||||||||||
| Balance, October 31, 2023 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||
| Net income for the quarter | - | - | ||||||||||||||||||||||
| Balance, January 31, 2024 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
HAMMER FIBER OPTICS HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENT CASH FLOWS
(Unaudited)
| For the Six Months Ended | ||||||||
| January 31, | ||||||||
| 2024 | 2023 | |||||||
| (as restated) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | $ | ( |
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| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation expense | ||||||||
| Warrant adjustment to fair value | ( |
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| Gain on extinguishment of convertible debt | ( |
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| Noncash interest expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( |
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| Prepaid expenses | ( |
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| Accounts Payable | ( |
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| Deferred revenue | ( |
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| Net cash used in operating activities | $ | ( |
) | $ | ( |
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| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | ( |
) | ( |
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| Net cash used investing activities | $ | ( |
) | $ | ( |
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| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment of loans | ( |
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| Proceeds from loans | ||||||||
| Net cash provided by financing activities | $ | $ | ||||||
| Effect of foreign currency on cash | ( |
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| Net increase (decrease) in cash | ( |
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| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Commitment shares issued | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 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'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.
Hammer's "Everything Wireless" go to market strategy for its telecommunications business includes the development of high speed fixed wireless service for residential, small business and enterprise clients using its wireless fiber platform, Hammer Wireless AIR®, mobility networks including 4G/LTE, Over-the-Top services such as voice, SMS and collaboration services and hosting services.
NOTE 2 - CORPORATE HISTORY AND BACKGROUND ON MERGER
The Company was originally incorporated in the State of Nevada on September 23, 2010, under the name Recursos Montana S.A. The Company's principal activity was an exploration stage company engaged in the acquisition of mineral properties then owned by the Company.
On February 2, 2015, the Company entered into a Share Exchange Agreement with Tanaris Power Holdings, Inc., whereby the Company acquired
On April 25, 2016, Tanaris Power Holdings, Inc., a Nevada corporation entered into s Share Exchange Agreement (the "Share Exchange Agreement") with Hammer Fiber Optics Investments, Ltd., a Delaware corporation ("HFOI"), and the controlling stockholders of HFOI (the "HFOI Shareholders"). Pursuant to the Share Exchange Agreement, the Company acquired
On April 13, 2016, the Board of Directors (BOD) approved a Plan of Merger (the "Plan of Merger") under Nevada Revised Statuses (NRS) Section 92A.180 to merge (the "Merger") with our wholly-owned subsidiary HFO Holdings, a Nevada corporation, to effect a name change from Tanaris Power Holdings Inc. to Hammer Fiber Optics Holdings Corp. The Plan of Merger also provides for a
On May 3, 2016, the FINRA approved the merger with the wholly-owned subsidiary, HMMR Fiber Optics Holdings Corp. ("HFO Holdings"). Accordingly, thereafter, the Company's name was changed and the shares of common stock began trading under new ticker symbol "HMMR" as of May 27, 2016. The merger was effective on July 19, 2016.
In 2016 Hammer Fiber Optics Investments Ltd deployed its first beta network in Atlantic County, New Jersey. The network used a spectrum license agreement from Straightpath Communications, LLC. On January 17, 2018 Verizon Communications, LLC purchased Straightpath Communications, LLC and on July14 2018, Verizon terminated the spectrum license agreement effective October 31, 2018 despite communications that it would continue to honor the agreement. On October 31, 2018 the Company ceased operations of the network in Atlantic County and subsequently classified the subsidiary as a discontinued operation.
On November 1, 2018, the Company acquired Open Data Centers, LLC, 1stPoint Communications, LLC and its subsidiaries. 1stPoint and its subsidiaries possess CLEC licenses in Florida, New York State, and a nationwide CMRS (Commercial Mobile Radio Services) license. The companies operate data center facilities in Piscataway, New Jersey and Homewood, Alabama. On December 17, 2018, the Company closed the acquisition of Endstream Communications, LLC, a wholesale voice operator in the United States.
10
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 2 - CORPORATE HISTORY AND BACKGROUND ON MERGER (CONTINUED)
On January 29, 2019 our board of directors approved a stock purchase agreement with American Network, Inc to acquire all of its equity. The acquisition of American Network, Inc closed on September 1, 2019.
As of December 30, 2020 our board of directors approved the discontinuation of the operations of Open Data Centers LLC. The operations of Open Data Centers, LLC were discontinued effective December 30, 2020 and the Company shut down its operations in its Piscataway, NJ data center.
As of April 30, 2020 our board of directors approved the discontinuation of the operations of Open Data Centers LLC. The operations of Open Data Centers, LLC were discontinued effective April 30, 2020 and the Company shut down its operations in its Piscataway, NJ data center.
On October 19, 2021 our board of directors approved a name change from Hammer Fiber Optics Holdings Corp to Hammer Technology Holdings Corp.
On October 25, 2021 our board of directors approved a share exchange agreement with Telecom Financial Services Limited ("TFS") for the acquisition one hundred percent (
On July 31, 2023 our 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.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The interim financial statements for the six months ending January 31, 2024 are unaudited. These financial statements are prepared in accordance with requirements for unaudited interim periods and consequently do not include all disclosures required to be in conformity with accounting principles generally accepted in the United States of America. The results of operations for the interim periods are not necessarily indicative of the results for the full year. In management's opinion, all adjustments necessary for a fair presentation of the Company's financial statements are reflected in the interim periods included and are of a normal recurring nature. These interim financial statements should be read in conjunction with the financial statements included in our Form 10-K, for the year ended July 31, 2023, as filed with the Securities and Exchange Commission ("the SEC") at www.sec.gov.
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.
Cash and cash equivalents
Cash and 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 and which, in the opinion of management, are subject to an insignificant risk of loss in value.
Property and equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is recorded on a over the useful lives of the assets. For furniture and fixtures, the useful life is
11
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Indefinite lived intangible assets
The Company reviews property, plant and equipment, inventory component prepayments and certain identifiable intangibles, excluding goodwill, for impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property, plant and equipment, inventory component prepayments and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. The Company has not recorded any related impairment losses. The Company does not amortize goodwill and intangible assets with indefinite useful lives, rather such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company has not recorded any related impairment losses.
Revenue recognition
We adopted ASC 606 on August 1, 2018. Revenue is measured based on a consideration specified in a contract or agreement with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Incidental items that are immaterial in the context of the contract are recognized as expense. Unearned revenues are recorded when cash payments are received or due in advance of the performance of the services. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
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 July 31, 2023, 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.
12
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
| Fair Value Measurements at January 31, 2024 using: |
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| January 31, 2024 |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
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| Liabilities | $ | |||||||||||
| Warrant Liabilities | $ | |||||||||||
| Fair Value Measurements at July 31, 2023 using: | ||||||||||||
| July 31, 2023 |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
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| 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, 2024 and 2023:
| Three Months Ended | Six Months Ended | |||||||||||
| January 31, 2024 | January 31, 2023 | January 31, 2024 | January 31, 2023 | |||||||||
| Beginning Balance | $ | $ | $ | $ | ||||||||
| Change in fair value of derivative liabilities | ( |
) | ( |
) | ( |
) | ||||||
| Balance as of January, 31 | $ | $ | $ | $ | ||||||||
The below table shows the Black-Scholes option-pricing model inputs used by the Company to value the derivative liability at each measurement date:
| January 31, 2024 | January 31, 2023 | ||
| Exercise Price | $ |
$ |
|
| Risk-free interest rates | |||
| Expected life (in years) | |||
| Expected volatility | |||
| Dividend yield |
Consolidation of financial statements
Hammer Fiber Optics Holdings Corp. is the parent company and sole shareholder of Hammer Wireless Corporation and its subsidiaries, 1stPoint Communications, LLC and its subsidiaries (which includes Shelcomm, Inc), Endstream Communications, LLC, American Network Inc. and HammerPay [USA], Ltd. The financial statements for Hammer Fiber Optics Holdings Corp. and its wholly-owned subsidiaries 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.
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HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign currency translation and other comprehensive loss
We transact business in various foreign currencies including the Euro and the Leone. In general, The functional currency of Hammer Wireless - SL, Ltd., the Company's Sierra Leone subsidiary, is the Sierra Leonean Leone. Consequently, revenues and expenses of operations outside the United States are translated into USD Dollars using the weighted-average exchange rates on the period end date and assets and liabilities of operations outside the United States are translated into US Dollars using the change rate on the balance sheet dates. The effects of foreign currency translation adjustments amounted to approximately $
Basic and Diluted Earnings (Loss) Per Share
The basic earnings (loss) per share are calculated by dividing the Company's net income available to common shareholders by the weighted average number of common shares during the year. The diluted earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company.
The following table sets forth the number of potential shares of common stock that have been excluded from basic net loss per share because their effect was anti-dilutive:
| January 31, 2024 |
January 31, 2023 |
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| Warrants | ||||||
| Convertible Promissory Notes | ||||||
| Total |
Recent 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 4 - 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. The Company has consistently sustained losses since its inception. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The Company's continuation as a going concern is dependent upon, among other things, its ability to increase revenues, adequately control operating expenses and receive debt and/or equity capital from third parties. No assurance can be given that the Company will be successful in these efforts.
The 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 capital through the issuance of debt and/or the sale of equity until such time that ongoing revenues can sustain the business, at which time capitalization may be considered through other means.
14
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 5 - 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, 2023, with the Securities and Exchange Commission on March 22, 2023, the Company performed an evaluation of its accounting in relation with warrants issued in conjunction with the February 11, 2022 Mast Hill Fund, L.P. and February 17, 2022 Talos Victory Fund, L.P. convertible notes. Management determined that the Original Form 10-Q does not give effect to certain expenses identified. Accordingly, the Company restates its 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. | Certain intellectual property (platform software) for the HammerPay subsidiary has been reclassified as an intangible asset. | |
| 2. | Financing expense associated with the two convertible notes has been accrued and amortized instead of expensed in accordance with ASC 470-20-25. | |
| 3. | The change in value of the warrants issued in conjunction with two convertible notes have been valued in accordance with ASC 820-10 as clarified by ASU 2022-03. | |
| 4. | The Statement of Operations and Statement of Cash Flows have been adjusted to reflect the change in warrant financing expenses, expenses associated with the convertible notes, and income associated with conversion of the convertible notes. Adjustments to the fair value of the warrants have also been reflected as other income. |
15
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 5 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| January 31, | January 31, | January 31, | January 31, | |||||||||||||||||||||
| 2023 | Adjustments | 2023 | 2023 | Adjustments | 2023 | |||||||||||||||||||
| (As Filed) | (As Restated) | (As Filed) | (As Restated) | |||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | ( |
) | (4) | $ | |||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||
| Selling, general and administrative expenses | (1,4) | (1,4) | ||||||||||||||||||||||
| Depreciation expense | ||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||
| Operating loss | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Other income (expense) | ||||||||||||||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | (1) | ( |
) | |||||||||||||||
| Financing expenses | ( |
) | (1) | ( |
) | ( |
) | (1) | ( |
) | ||||||||||||||
| Warrant adjustment to fair value | ( |
) | (1) | ( |
) | (1) | ||||||||||||||||||
| Gain on extinguishment of convertible debt | (2) | |||||||||||||||||||||||
| Other expenses | ( |
) | (4) | ( |
) | ( |
) | (4) | ( |
) | ||||||||||||||
| Total other expenses | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| Net income (loss) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||||||||||||||||||
| Loss per share- basic and diluted | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||
The following table sets forth the effects of the adjustments on affected items within the Company's condensed consolidated statement of comprehensive income for the three and six months ended January 31, 2023:
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| January 31, | January 31, | January 31, | January 31, | |||||||||||||||||||
| 2023 | Adjustments | 2023 | 2023 | Adjustments | 2023 | |||||||||||||||||
| (As Filed) | (As Restated) | (As Filed) | (As Restated) | |||||||||||||||||||
| Net loss | $ | ( |
) | $ | ( |
) | (1,2) | $ | ( |
) | $ | ( |
) | $ | ( |
) | (1,2) | $ | ( |
) | ||
| Foreign currency translation adjustments | ( |
) | (3) | ( |
) | ( |
) | (3) | ( |
) | ||||||||||||
| Other comprehensive loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
| Comprehensive loss | $ | ( |
) | ( |
) | $ | ( |
) | $ | ( |
) | ( |
) | $ | ( |
) | ||||||
16
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 5 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the effects of the adjustments on affected items within the Company's previously reported consolidated statements of cash flows for six months ended January 31, 2023:
| January 31, | January 31, | |||||||||||
| 2023 | Adjustments | 2023 | ||||||||||
| (As Filed) | (As Restated) | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net Loss | $ | ( |
) | $ | ( |
) | (1,2,3) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
| Depreciation expense | (4) | |||||||||||
| Warrant adjustment to fair value | ( |
) | (1) | ( |
) | |||||||
| Gain on extinguishment of convertible debt | ( |
) | (2) | ( |
) | |||||||
| Noncash interest expense | (1) | |||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | ( |
) | ( |
) | ||||||||
| Prepaid expenses | ||||||||||||
| Accounts payable | (4) | |||||||||||
| Deferred revenue | ||||||||||||
| Net cash provided by (used in) operating activities | ( |
) | ( |
) | ( |
) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Purchase of property and equipment | ( |
) | ( |
) | ||||||||
| Net cash provided by (used in) investing activities | ( |
) | ( |
) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Repayment of loans | ( |
) | (4) | |||||||||
| Proceeds from loans | (4) | |||||||||||
| Net cash provided by (used in) financing activities | ||||||||||||
| Effect of foreign currency on cash | ( |
) | ( |
) | (4) | ( |
) | |||||
| 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 | $ | $ | $ | |||||||||
| Shares issued for debt conversion | $ | $ | $ | |||||||||
The specific explanations for the items noted above in the restated financial statements are as follows:
(1) During February 2022, the Company entered into two convertible notes that included warrants exercisable for
(2) On October 4, 2022 Talos Fund exercised its right to convert the principal and accrued interest from its promissory note in the amount of $
(3) During the three and six months ended January 31, 2023, the business transactions of the Company's West African subsidiary, Hammer Wireless - SL, Ltd., whose functional currency is the Sierra Leonean Leone, incurred $
(4) Other corrections with immaterial impact on the condensed consolidated statement of operations and statement of cash flow.
17
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 6 - DISCONTINUED OPERATIONS
Hammer Fiber Optics Investment Ltd ceased operations in the Atlantic County geographical market on October 31, 2018 when Verizon Communications, LLC terminated the spectrum lease agreement. The operations of Hammer Fiber Optics Investments, Ltd were classified as a discontinued operation. Reporting of the discontinued operation is in accordance with Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.
Open Data Centers, LLC ceased operations at its sole location in Piscataway, NJ on May 1, 2020. The operations of Open Data Centers, LLC were classified as a discontinued operation. Reporting of the discontinued operation is in accordance with Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.
The following summarizes the assets and liabilities of the discontinued operations:
|
|
|
January 31, |
|
|
July 31, |
|
|
Assets |
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
Cash |
$ |
|
|
$ |
|
|
|
Accounts receivable |
|
|
|
|
|
|
|
Other current assets |
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
Other Assets |
|
|
|
|
|
|
|
Property and equipment- net |
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
|
Total other assets |
|
|
|
|
|
|
|
Total Assets |
$ |
|
|
$ |
|
|
|
Liabilities and Net Assets |
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
Accounts payable |
$ |
|
|
$ |
|
|
|
Notes payable- related parties |
|
|
|
|
|
|
|
Current portion of long-term notes payable - related parties |
|
|
|
|
|
|
|
Accrued interest |
|
|
|
|
|
|
|
Rent Concessions |
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
Net assets (liabilities) |
$ |
( |
) |
$ |
( |
) |
See Note 3 for details regarding comprehensive losses incurred as a result of discontinued operations.
NOTE 7 - PROPERTY AND EQUIPMENT
As of January 31, 2024 and July 31, 2023, property and equipment consisted of the following:
| January 31, | July 31, | ||||||||
| 2024 | 2023 | Life | |||||||
| Computer, Telecom equipment & Software | $ | $ |
|
||||||
| Less: Accumulated depreciation | ( |
) | ( |
) | |||||
| Total | $ | $ |
NOTE 8 - INDEFINITE LIVED INTANGIBLE ASSETS
The Company has $
18
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 9 - RELATED PARTY TRANSACTIONS
During the fiscal year ending on July 31, 2020, the Company entered into convertible notes with the Chief Executive Officer and a relation of the Chief Executive Officer on April 20th and May 5th 2020 in the amounts of $
On February 26, 2021, March 9, 2021 and March 15, 2021 the Company entered into promissory notes for the sums of $
On January 15, 2022 the Company entered into a promissory note for the sum of $
On February 28, 2022 and March 7, 2022 the Company entered into a promissory note totaling $
From August 1, 2023 through January 31, 2024 the Company entered into promissory notes with a non-executive director. The dates of the notes were August 8, 2023, August 11, 2023, August 31, 2023, September 22, 2023, October 17, 2023, October 24, 2023, November 3, 2023, November 6, 2023, December 1, 2023, December 4, 2023, December 13, 2023 and December 28 2023 and January 29, 2024. The notes on August 8, August 31, September 22, October 17, October 24, November 3, November 6, December 1 and December 28 2023 have a principal of $
As of January 31, 2024, all of the related party payables are reported as current liabilities in the Condensed Consolidated Balance Sheet and all interest has been forgiven by the holders of all promissory notes from all related parties.
19
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 10 - CONVERTIBLE DEBT
As of January 31, 2024, the Company has convertible notes with related parties in the amounts of $
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 agreed to sell to Mast and Mast agreed to purchase from the Company, a promissory note in the aggregate principal amount of $
Pursuant to the terms of the Mast SPA, the Company also agreed to issue (i) a common stock purchase warrant to purchase
The Mast Note bears interest at a rate of
The foregoing description of the Mast SPA, the Mast Note and the Mast Warrants does not purport to be complete and is qualified in its entirety by reference to the Mast SPA, the Mast Note, the First Mast Warrant and the Second Mast Warrant, copies of which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4 to Form 8-K filed on February 23, 2022.
On February 17, 2022, the Company entered into a Securities Purchase Agreement (the "Talos SPA") by and between the Company and Talos Victory Fund, LLC ("Talos"). Pursuant to the terms of the Talos SPA, the Company agreed to sell to Talos, and Talos agreed to purchase from the Company, a promissory note in the aggregate principal amount of $
NOTE 11 - INCOME TAXES
The Company's provision for income taxes was not material and the effective tax rate was
20
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2024
(Unaudited)
NOTE 12 - STOCKHOLDERS' EQUITY
Common Stock
On March 6, 2023, Mast Hill amended the terms of its promissory note, which included the issuance of
On October 4, 2022, Talos converted the promissory convertible note into
Treasury Stock
The balance of Company Treasury Stock was unchanged during the period.
Unissued Stock
On March 6, 2023, Mast Hill amended the terms of its promissory note. The terms included the issuance of
NOTE 13 - COMMITMENTS AND LEASES
Hammer does not currently have any material long-term lease obligations.
NOTE 14 - CLAIMS
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. | $ | ||
| Cross River Fiber v. Related Party | $ | ||
| Cross River Fiber v. Hammer Fiber Optics Inv, Ltd. | $ |
Cross River Fiber has advanced its claim against Hammer Fiber Optics Investments, Ltd. Cross River Fiber has expanded its claim to include Hammer Fiber Optics Holdings Corp, 1stPoint Communications, LLC, Endstream Communications, LLC, Open Data Centers, LLC, Manhattan Carrier Company, LLC, Erik Levitt personally, Local Telecommunications Services – FL, LLC, Local Telecommunications Services – NY, LLC, American Network Inc and Hammer Wireless Corporation. There never was, nor has there ever been, a contract between any of these entities or Mr. Levitt personally and Cross River Fiber, nor is there any security under the agreement between Cross River Fiber and Hammer Fiber Optics Investments, Ltd. After discovery in the claim against Hammer Fiber Optics Holdings Corp and its subsidiaries, A trial occurred on February 5th and 6th of 2024 and a ruling was issued at the end of the trial in favor of Hammer Fiber Optics Holdings Corp and its subsidiaries. An award was given to Cross River against one of the related parties to the claim of $
NOTE 15 - SUBSEQUENT EVENTS
The Company has completed an evaluation of all subsequent events through March 25, 2024, the date the financial statements were issued. Except as described below, the Company has concluded that no subsequent event has occurred that requires disclosure.
On February 20, 2024 and March 11, 2024 the Company entered into promissory notes with a non-executive director in the amount of $
Management has reviewed the subsequent events and there is no material impact on the current financial statements or the valuation of the business.
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis should be read in conjunction with Hammer Fiber Optics Holdings Corp., financial statements and the related notes thereto. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect," and the like, and/or future-tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report on Form 10-Q. The Company's actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report on Form 10-Q.
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to our condensed consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended July 31, 2023, filed with the SEC on February 16, 2024.
Results of Operations
Three Months Ended January 31, 2024 Compared to the Three Months Ended January 31, 2023
Net revenues for the three months ended January 31, 2024 and January 31, 2023 were $826,602 and $744,051 respectively, an increase of approximately $83,000 or 11%. The increase was primarily due to the expansion of the Company's Over-the-Top ("OTT") business segment which includes its SMS messaging and hosting business units.
During the three months ended January 31, 2024, the Company incurred total operating expenses of $963,764 compared with $999,212 during the comparable period January 31, 2023. This decrease of approximately $35,000 or 4% is due to increased efficiency in operations.
The Company recorded depreciation and amortization expense of $15,043 and $14,884 during the three months ended January 31, 2024 and January 31, 2023 respectively. During the three months ended January 31, 2024 and January 31, 2023 interest expense was $20,448 and $731 respectively.
Other income for the three and six months ended January 31, 2024 represents income from previously written-down customer accounts receivables amounting to $165,784, no such income for the same periods in prior year ended January 31, 2023.
During the three months ended January 31, 2024 the Company recorded a net gain of $12,661, compared to a loss of $(338,553) in the same three month period ended January 31, 2023. The decrease in loss is due to a large increase in the Company's other income from previously written-down customer accounts receivables amounting to $165,784, offset by the Company's diversification into the financial technologies sector and the development of the Company's HammerPay technology.
Six Months Ended January 31, 2024 Compared to the Six Months Ended January 31, 2023
Net revenues for the six months ended January 31, 2024 and January 31, 2023 were $1,736,554 and $1,543,511 respectively, an increase of approximately $193,000 or 13%. The increase was primarily due to the expansion of the Company's Over-the-Top ("OTT") business segment which includes its SMS messaging and hosting business units.
During the six months ended January 31, 2024, the Company incurred total operating expenses of $1,991,195 compared with $1,979,566, an increase of approximately $12,000 or 1%, for the comparable period ended January 31, 2023. The increase in expenses is due to the expenses associated with the Company's diversification into the financial services markets and increased expenses associated with the expansion of the telecommunications business segment.
The Company recorded depreciation and amortization expense of $29,970 and $30,808 during the six months ended January 31, 2024 and January 31, 2023 respectively. During the six months ended January 31, 2024 and January 31, 2023 interest expense was $40,305 and $1,249 respectively.
During the six months ended January 31, 2024 the Company recorded a net loss of $77,197, compared to a loss of $423,225 in the same six month period ended January 31, 2023. The decrease in loss is due to the Company's diversification into the financial technologies sector and the development of the Company's HammerPay technology.
22
Liquidity and Capital Resources
The Company is at risk of remaining a going concern. Its ability to remain a going concern is dependent upon whether the company can raise debt and/or equity capital from third-party sources for both working capital and business development needs until such time as the Company may be substantially sustained as a going concern through cash flow from operations or the Company increases its cash flow from operations through sale of services in the ongoing business units, Endstream Communications, 1stPoint Communications and HammerPay.
Cash Flow from Operating Activities
During the six months ended January 31, 2024 the Company's total cash increased by $28,523, compared to a decrease in cash of $375,221 in the period ended January 31, 2023. Cash flow from Operating Activities decreased by $316,159, compared to a decrease of $390,568 in the period ended January 31, 2023. The decrease was primarily due to improvements in operations.
Cash Flow from Investing Activities
During the six months ended January 31, 2024, the Company's investing activities used $13,506, compared to $50,152 used in investing activities during the six months ended January 31, 2023. The increase was primarily due to the expansion of the operations of the company's telecommunications business unit, and particularly the Company's investments in its HammerPay platform.
Cash Flow from Financing Activities
During the six months ended January 31, 2024, the Company used $358,188 in cash from financing activities compared with $101,266 used during the six months ended January 31, 2023.
Going Concern
As of January 31, 2024, doubt existed as to the Company's ability to continue as a going concern as the Company 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.
Off-Balance Sheet Arrangements
We have no significant 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 that are material to stockholders.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States, applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
Recently Issued Accounting Pronouncements
The Company has implemented new accounting pronouncements that are relevant to the company and are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
23
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.
24
ITEM 4. CONTROLS AND PROCEDURES
Management's Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer to allow for timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibilities, estimates, and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of January 31, 2024. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework (2013). Our management has concluded that, as of January 31, 2024, our internal control over financial reporting was not effective. This is due to an inherent staffing limitation and the Principal Financial Officer and the President are the same individual. That individual does not maintain day-to-day banking responsibilities to provide some limitation in such risks.
Inherent Limitations on Effectiveness of Controls
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. The President and Principal Financial Officer are the same individual. 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
Effective November 1, 2018 the management and accounting resources of the 1stPoint subsidiary assumed responsibility of our internal controls. The Company views this migration to have a positive material impact on our ability to maintain internal controls over financial reporting as 1stPoint has a separation in banking, day-to-day accounting and financial reporting responsibilities, however, the President and Principal Financial Officer are the same individual.
25
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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. | $ | 9,210 | |
| Horizon Blue Cross v. Hammer Fiber Optics Inv, Ltd. | $ | 17,309 | |
| Cross River Fiber v. Hammer Fiber Optics Inv, Ltd. | $ | 25,000 |
Cross River Fiber has advanced its claim against Hammer Fiber Optics Investments, Ltd. Cross River Fiber has expanded its claim to include Hammer Fiber Optics Holdings Corp, 1stPoint Communications, LLC, Endstream Communications, LLC, Open Data Centers, LLC, Manhattan Carrier Company, LLC, Erik Levitt personally, Local Telecommunications Services - FL, LLC, Local Telecommunications Services - NY, LLC, American Network Inc and Hammer Wireless Corporation. There never was, nor has there ever been, a contract between any of these entities or Mr. Levitt personally and Cross River Fiber, nor is there any security under the agreement between Cross River Fiber and Hammer Fiber Optics Investments, Ltd. After discovery in the claim against Hammer Fiber Optics Holdings Corp and its subsidiaries, A trial occurred on February 5th and 6th of 2024 and a ruling was issued at the end of the trial in favor of Hammer Fiber Optics Holdings Corp and its subsidiaries. An award was given to Cross River against one of the related parties to the claim of $25,000.
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. OTHER INFORMATION
Please refer to our Current Reports on Form 8-K filed since August 19, 2016, which are incorporated by reference herein.
26
ITEM 5. EXHIBITS
| Exhibit | ||
| Number | Description of Exhibit | |
| 31.01 | Certification of Principal Financial Officer Pursuant to Rule 13a-14 | Filed herewith. |
| 32.01 | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. |
| 101.INS* | Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document | Filed herewith. |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | Filed herewith. |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith. |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed herewith. |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith. |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith. |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 | Filed herewith. |
*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
27
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HAMMER FIBER OPTICS HOLDINGS CORP | |
| Date: March 25, 2024 | /s/ Michael Cothill |
| Michael P. Cothill | |
| Principal Executive Officer | |
| Date: March 25, 2024 | /s/ Erik B. Levitt |
| Erik B. Levitt | |
| Principal Financial Officer |
28
EXHIBIT 31.01
CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Erik B. Levitt, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of the Registrant for the period ended January 31, 2024.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. As the Registrant's certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5. As the Registrant's certifying officer, I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant auditors and the audit committee of the Registrant's Board of Directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
Date: March 24, 2024
Hammer Fiber Optics Holdings Corp.
By: /s/ Erik B. Levitt
Name: Erik B. Levitt
Title: Principal Financial Officer
EXHIBIT 31.02
CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Cothill, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of the Registrant for the period ended January 31, 2024.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. As the Registrant's certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5. As the Registrant's certifying officer, I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant auditors and the audit committee of the Registrant's Board of Directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
Date: March 24, 2024
Hammer Fiber Optics Holdings Corp.
By: /s/ Michael P. Cothill
Name: Michael P. Cothill
Title: Principal Executive Officer
EXHIBIT 32.01
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Erik B. Levitt, the Chief Accounting and Financial Officer of Hammer Fiber Optics Holdings Corp, certify, under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of the Registrant for the period ended January 31, 2024, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: March 24, 2024
Hammer Fiber Optics Holdings Corp.
By: /s/ Erik B. Levitt
Name: Erik B. Levitt
Title: Principal Financial Officer
A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.01
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael P. Cothill, the Principal Executive Officer of Hammer Fiber Optics Holdings Corp, certify, under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of the Registrant for the period ended January 31, 2024, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: March 24, 2024
Hammer Fiber Optics Holdings Corp.
By: /s/ Michael P. Cothill
Name: Michael P. Cothill
Title: Principal Executive Officer
A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.