Hammer Technology Holdings Corp 10-Q for FY2024 Q3
Hammer Technology Holdings Corp. (HMMR)
About this 10-Q
Hammer Technology Holdings Corp filed this 10-Q on August 26, 2024, covering the quarter ended April 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended April 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $770.41K
- up 0.4% from $767.53K a year earlier
- Net loss
- $504.47K
- compared with a net loss of $205.71K a year earlier
- Diluted EPS
- -$0.01
- compared with $0.00 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)
| (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 |
| None | None | None |
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).
| Large Accelerated Filer | [ ] | [X] | |
| Accelerated Filer | [ ] | Smaller Reporting Company | [ |
| Emerging Growth Company |
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 August 26, 2024, there were 63,155,947 shares of the registrant’s $0.001 par value common stock issued and
F-2
HAMMER FIBER OPTICS HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| April 30, | 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 assets | |||||||
| Total assets | $ | $ | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current Liabilities | |||||||
| Accounts payable and accrued expenses | $ | $ | |||||
| Notes payable | |||||||
| Convertible notes payable | |||||||
| Convertible notes payable - related parties | |||||||
| Warrant liabilities | |||||||
| Unissued Stock | |||||||
| Deferred Revenue | |||||||
| Current liabilities from discontinued operations | |||||||
| Total current liabilities | |||||||
| Total Liabilities | $ | $ | |||||
|
Commitments and contingencies |
|||||||
| Stockholders' Equity | |||||||
| Common stock, $ |
|||||||
| $ | $ | ||||||
| Additional paid-in capital | |||||||
| Accumulated deficit | ( |
) | ( |
) | |||
| Total Stockholder's Equity | |||||||
| Total Liabilities and Stockholders' Equity | $ | $ | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
HAMMER FIBER OPTICS HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended |
For the Nine Months Ended |
|||||||||||
| April 30, | April 30, | |||||||||||
| 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 | ||||||||||||
|
Loss from operation |
( |
) | ( |
) | ( |
) | ( |
) | ||||
| Other income (expense) | ||||||||||||
| Other income | ||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Financing expenses | ( |
) | ( |
) | ( |
) | ( |
) | ||||
|
Change in fair value of warrant liabilities |
( |
) | ( |
) | ||||||||
| Gain on extinguishment of convertible debt | ||||||||||||
| Other expenses | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Total other expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Net loss | $ | ( |
) | $ | ( |
) | $ | ( |
) |
$ |
( |
) |
| Weighted average number of common shares outstanding - basic and diluted | ||||||||||||
| Basic and diluted loss per share | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
HAMMER FIBER OPTICS HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| For the Three | For the Nine | ||||||||||||||
| Months Ended | Months Ended | ||||||||||||||
| April 30, | April 30, | ||||||||||||||
| 2024 | 2023 (as restated) |
2024 | 2023 (as restated) |
||||||||||||
| Net loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Foreign currency translation adjustments | ( |
) | |||||||||||||
| Comprehensive loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-6
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, 2023 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||
| Commitment Shares Issued | ||||||||||||||||||||||||||
| Net loss for the quarter | - | - | ( |
) | ( |
) | ||||||||||||||||||||
| Balance, October 31, 2023 | ( |
) | ||||||||||||||||||||||||
| Net income for the quarter | - | - | ||||||||||||||||||||||||
| Balance, January 31, 2024 | ( |
) | ||||||||||||||||||||||||
| Commitment Shares Issued | ||||||||||||||||||||||||||
| Net loss for the quarter | - | - | ( |
) | ( |
) | ||||||||||||||||||||
| Balance, April 30, 2024 | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||
| Balance, July 31, 2022 (as restated) | $ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||
| Conversion shares issued | ||||||||||||||||||||||||||
| Net loss for the quarter | - | - | ( |
) | ( |
) | ||||||||||||||||||||
| Balance, October 31, 2022 | ( |
) | ||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( |
) | ( |
) | ||||||||||||||||||||
| Net loss for the quarter | - | - | ( |
) | ( |
) | ||||||||||||||||||||
| Balance, January 31, 2023 (as restated) | ( |
) | ( |
) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||
| Conversion shares issued | ||||||||||||||||||||||||||
| Net loss for the quarter | - | - | ( |
) | ( |
) | ||||||||||||||||||||
| Balance, April 30, 2023 (as restated) | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-7
HAMMER FIBER OPTICS HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENT CASH FLOWS
(Unaudited)
| For the Nine Months Ended | ||||||
| April 30, | ||||||
| 2024 | 2023 | |||||
| (as restated) | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net loss | $ | ( |
) | $ | ( |
) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||
| Depreciation expense | ||||||
| Change in fair value of warrant liabilities | ( |
) | ( |
) | ||
| Gain on extinguishment of convertible debt | ( |
) | ||||
| Noncash interest and financing expense | ||||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | ( |
) | ( |
) | ||
| Prepaid expenses | ( |
) | ||||
| Accounts payable | ( |
) | ( |
) | ||
| Deferred revenue | ( |
) | ||||
| Net cash used in operating activities | $ | ( |
) | $ | ( |
) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Purchase of property and equipment | ( |
) | ( |
) | ||
| Capitalized intangible assets | ( |
) | ||||
| Net cash used investing activities | $ | ( |
) | $ | ( |
) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Repayment of notes payable | ( |
) | ( |
) | ||
| Proceeds from notes payable | ||||||
| Proceeds from convertible notes - related parties | ||||||
| Net cash provided by financing activities | $ | $ | ||||
| Effect of foreign currency on cash | ( |
) | ||||
| Net increase (decrease) in cash | ( |
) | ||||
| Cash and cash equivalent, beginning of period | ||||||
| Cash and cash equivalent, 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 unaudited condensed consolidated financial statements.
F-8
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 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.
F-9
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 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 nine months ending April 30, 2024 are unaudited. These interim condensed 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 consolidated financial statements are reflected in the interim periods included and are of a normal recurring nature. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated 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
F-10
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 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.
Intangible Assets
The Company has intangible assets with indefinite useful lives obtained as a result of assets acquisitions. The Company does not amortize its intangible assets with indefinite useful lives, rather such assets are tested for impairment are tested for impairment annually, or more frequently if events or changes in circumstances indicate the asset may be impaired in accordance with ASC 350 Intangibles-Goodwill and Other. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.
As of April 30, 2024, the Company had a total of $
As of July 31, 2023, the Company had a total of $
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.
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. The Company’s revenues are derived from its subsidiaries, 1stPoint Communications, LLC, Endstream Communications, LLC and Shelcomm, Inc. 1stPoint’s and Shelcomm’s revenues are derived from retail web and voice hosting services as well as carrier hosting services. These are contracted agreements which are billed monthly, and revenues are recognized in the period in which the services are rendered. In some cases customers sign longer term agreements (up to two years) and prepay for those services. Revenues are recognized in the period the services are delivered. Endstream’s revenue is derived from post-paid and pre-paid wholesale voice services and billed on a usage basis. Revenues are recognized in the period in which the services are delivered.
Accounts Receivable
On August 1, 2023, the Company adopted ASC 326, "Financial Instruments - Credit Losses". In accordance with ASC 326, an allowance is maintained for estimated forward-looking losses resulting from the possible inability of customers to make the required payments (current expected losses). The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding specific customers.
Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. Any required allowance is based on specific analysis of past due accounts and also considers historical trends of write-offs.
Management performed its assessment of Company’s accounts receivable as of April 30, 2024 and July 31, 2023 and determined that no allowance for estimated uncollectible amounts was necessary.
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:
F-11
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2024
(Unaudited)
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.
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 April 30, 2024 using: |
||||||||||||
| April 30, 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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| 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) |
|||||||||
| 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 April 30, 2024 and 2023:
| Three Months Ended | Nine Months Ended | ||||||||||||
| April 30, 2024 | April 30, 2023 | April 30, 2024 | April 30, 2023 | ||||||||||
| Beginning Balance | $ | $ | $ | $ | |||||||||
| Change in fair value of warrant liabilities | ( |
) | |||||||||||
| Balance as of April 30, | $ | $ | $ | $ | |||||||||
The below table shows the Black-Scholes option-pricing model inputs used by the Company to value the derivative liability at each measurement date:
| April 30, 2024 | April 30, 2023 | ||
| Stock Price | $ |
$ |
|
| Risk-free interest rates | |||
| Expected life (in years) | |||
| Expected volatility | |||
| Dividend yield |
F-12
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2024
(Unaudited)
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.
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 $
Prior period reclassifications
We have reclassified certain amounts in prior periods to conform with current presentation. Notes payable, convertible notes payable, and convertible notes payable – related parties which were reported within loans payable at July 31, 2023 have been reclassified into their own lines within the condensed consolidated balance sheet.
Basic and diluted 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.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 for the three and nine months ended:
| April 30, 2024 | April 30, 2023 | |||||
| Warrants | ||||||
| Convertible Promissory Notes | ||||||
| Convertible Promissory Notes – Related Parties | ||||||
| Total |
Recent accounting pronouncements
In the period from August 1, 2023 through June 2024 the FASB has not issued any additional accounting standards updates that have a significant impact on the Company.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets, including accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December 15, 2022, for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. On August 1, 2023, the Company adopted ASC 326, "Financial Instruments - Credit Losses". the adoption did not have a material impact on Company’s consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, “Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”). The purpose of ASU 2020-06 is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles (“GAAP”) for certain financial instruments with characteristics of liabilities and equity. The amendments in ASU 2020-06 are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020. The Company adopted ASU 2020-06 on August 1, 2023, and the impact was considered immaterial on Company’s consolidated financial statements.
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.
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.
F-13
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2024
(Unaudited)
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.
F-14
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 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 nine months ended April 30, 2023, with the Securities and Exchange Commission on June 21, 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. Financing expense associated with the two convertible notes has been accrued and amortized instead of expensed in accordance with ASC 470-20-25.
2. 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.
3. 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.
F-15
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2024
(Unaudited)
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 and nine months ended April 30, 2023:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| April 30, | April 30, | April 30, | April 30, | |||||||||||||||||
| 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) income | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
| Other income (expense) | ||||||||||||||||||||
| Other income | (1) | (1) | ||||||||||||||||||
| Interest expense | ( |
) | ( |
) (1) | ( |
) | ( |
) (1) | ( |
) | ||||||||||
| Financing expenses | ( |
) | ( |
) (1) | ( |
) | ( |
) | ( |
) (1) | ( |
) | ||||||||
| Warrant adjustment to fair value | ( |
(1) | ( |
) | (1) | |||||||||||||||
| Gain on extinguishment of convertible debt | (2) | |||||||||||||||||||
| Other expenses | ( |
) | ( |
) | ( |
) | (4) | ( |
) | |||||||||||
| Total other expenses | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net 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 nine months ended April 30, 2023:
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| April 30, | April 30, | April 30, | April 30, | |||||||||||||||
| 2023 | Adjustments | 2023 | 2023 | Adjustments | 2023 | |||||||||||||
| (As Filed) | (As Restated) | (As Filed) | (As Restated) | |||||||||||||||
| Net loss | $ | ( |
) | $ | ( |
)(1,4) | $ | ( |
) | $ | ( |
) | $ | ( |
)(1,2) | $ | ( |
|
| Foreign currency translation adjustments | ( |
) | (3) | ( |
) | ( |
||||||||||||
| Comprehensive loss | $ | ( |
) | ( |
) | $ | ( |
) | $ | ( |
) | ( |
) | $ | ( |
|||
F-16
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2024
(Unaudited)
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 the nine months ended April 30, 2023:
| April 30, | April 30, | |||||||||
| 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 notes payable | ( |
) | ( |
) (4) | ( |
) | ||||
| Proceeds from notes payable | (4) | |||||||||
| Proceeds from convertible notes payable – related parties | (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 nine months ended April 30, 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.
F-17
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 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:
|
|
|
April 30, |
|
|
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) |
$ |
( |
) |
$ |
( |
) |
NOTE 7 - PROPERTY AND EQUIPMENT
As of April 30, 2024 and July 31, 2023, property and equipment consisted of the following:
| April 30, | July 31, | ||||||||
| 2024 | 2023 | Life | |||||||
| Computer, Telecom equipment & Software | $ | $ | |||||||
| Less: Accumulated depreciation | ( |
) | ( |
) | |||||
| Total | $ | $ |
NOTE 8 - INDEFINITE LIVED INTANGIBLE ASSETS
F-18
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2024
(Unaudited)
NOTE 9 - NOTES PAYABLE
On April 1, 2024, 1stPoint Communications entered into a financing agreement with a financial institution in the amount of $
On March 20, 2023, 1stPoint Communications entered into a financing agreement with a financial institution in the amount of $
On January 5, 2022, the Company entered into a convertible note with a related party 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 April 30, 2024 and July 31, 2023, notes payable consisted of the following:
| April 30, 2024 | July 31, 2023 | ||||||
| Notes payable | $ | $ | |||||
| Less: current portion, net | ( |
) | ( |
) | |||
| Long-term notes payable, net | $ | $ |
NOTE 10 - RELATED PARTY CONVERTIBLE DEBT
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 a convertible note with two related parties (who were former partners in 1stPoint Communications, LLC) in the amounts of $
On March 24, 2020, the Company entered into a convertible note with the Chief Financial Officer in the amount of $
On April 20, 2020, the Company entered into a convertible note with the Chief Financial Officer in the amount of $
On September 1, 2020, the Company entered into a promissory note for the sum of $
On February 26, 2021, the Company entered into a convertible note with a related party in the amount of $
F-19
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2024
(Unaudited)
As of April 30, 2024 and July 31, 2023 all of the related party payables are reported as current liabilities in the Condensed Consolidated Balance Sheet and all interest and maturity dates have been waived by the holders of all promissory notes from all related parties.
All related party convertible notes, with the exception of the August 22, 2019, September 1, 2020, January 5, 2022 notes, have conversion terms of a 20% discount to market on the date of the proposed conversion, at the option of the Company or lender.
The August 22, 2019, September 1, 2020, and January 5, 2022 notes have no conversion price explicitly stated.
As of April 30, 2024 and July 31, 2023, related parties convertible debt consisted of the following:
| April 30, 2024 | July 31, 2023 | ||||||
| Convertible notes payable – related parties | $ | $ | |||||
| Less: current portion, net | ( |
) | ( |
) | |||
| Long-term convertible notes payable – related parties, net | $ | $ | |||||
NOTE 11 - CONVERTIBLE DEBT
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
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 $
F-20
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2024
(Unaudited)
As of April 30, 2024 and July 31, 2023, convertible debt consisted of the following:
| April 30, 2024 | July 31, 2023 | ||||||
| Convertible debt | $ | $ | |||||
| Original issue discount | $ | $ | |||||
| Less: current portion, net | ( |
) | ( |
) | |||
| Long-term convertible debt, net | $ | $ |
NOTE 12 - INCOME TAXES
The Company's provision for income taxes was not material and the effective tax rate was
NOTE 13 - STOCKHOLDERS' EQUITY
Common Stock
On April 4, 2024, the Company entered into the Second Amendment to the Mast Note, which included the issuance of
On March 6, 2023, Mast Hill amended the terms of its promissory note, which included the issuance of
On March 23, 2023, Mast Hill converted the promissory convertible note into
On October 4, 2022, Talos converted the promissory convertible note into
Treasury Stock
The balance of Company Treasury Stock was unchanged during the period.
NOTE 14 - COMMITMENTS AND LEASES
Hammer does not currently have any material long-term lease obligations.
NOTE 15 - 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. | $ |
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.
F-21
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2024
(Unaudited)
NOTE 16 - SUBSEQUENT EVENTS
The Company has completed an evaluation of all subsequent events through August 26, 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.
Management has reviewed the subsequent events and there is no material impact on the current financial statements or the valuation of the business.
On July 23, 2024, the Company received notification from Fruci & Associates II, PLLC, our independent accountant, that the original audit opinions issued by Fruci with the July 31, 2023 and July 31, 2022 Form 10-K filings by the Company were not supported with sufficient audit procedures and therefore should no longer be relied upon.
On August 7, 2024, the Company authorized and executed a Purchase Agreement with Viper Networks Inc. with the intention to sell the Company's telecommunication assets to Viper. The assets include 1st Point Communications LLC., and all its subsidiaries, Endstream Communications LLC, American Networks Inc., and
F-22
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 April 30, 2024 Compared to the Three Months Ended April 30, 2023
Net revenues for the three months ended April 30, 2024, and April 30, 2023 were $770,412 and $767,527 respectively, an increase of approximately $2,885 or 0.4%. 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 April 30, 2024, the Company incurred total operating expenses of $1,059,174 compared with $788,698 during the comparable period April 30, 2023. This increase of approximately $270,476 or 35% is due to an increase in selling, general and administrative expenses of $262,008 in the quarter.
The Company recorded depreciation and amortization expense of $13,471 and $14,608 during the three months ended April 30, 2024, and April 30, 2023, respectively. During the three months ended April 30, 2024, and April 30, 2023 interest expense was $21,756 and $6,379 respectively.
During the three months ended April 30, 2024, the Company incurred total other expense of $215,705 primarily consisting of interest expense, financing expense, and loss on fair value of warrant liability, of $21,756, $173,520 and, $29,250, respectively. These expenses are partially offset by other income in the quarter of $9,621, which represents income from previously written-down customer accounts receivable. During the three months ended April 30, 2023 the Company incurred total other expense of $184,540 consisting of interest expense, financing expense, and loss on fair value of warrant liability of $6,379, $175,960, and $13,500. These expenses are partially offset by other income of $11,467.
During the three months ended April 30, 2024 the Company recorded a net loss of $504,467, compared to a loss of $205,711 in the same three-month period ended April 30, 2023. The increase in loss is due to a large increase in the Company’s total other expenses and selling, general, and administrative expenses quarter over quarter.
Nine Months Ended April 30, 2024 Compared to the Nine Months Ended April 30, 2023
Net revenues for the nine months ended April 30, 2024 and April 30, 2023 were $2,506,966 and $2,311,038 respectively, an increase of approximately $195,928 or 8.5%. 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 nine months ended April 30, 2024, the Company incurred total operating expenses of $3,050,369 compared with $2,768,264, an increase of approximately $282,105 or 10.2%, for the comparable period ended April 30, 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 $43,441 and $45,416 during the nine months ended April 30, 2024 and April 30, 2023 respectively. During the nine months ended April 30, 2024 and April 30, 2023 interest expense was $62,061 and $7,628 respectively.
F-23
During the nine months ended April 30, 2024, the Company incurred total other expense of $38,261 primarily consisting of interest expense, financing expense, and other expenses of $62,061, $187,955, and $13,915, respectively. These expenses are partially offset by other income in the nine months ended April 30, 2023 of $178,420, which represents income from previously written-down customer accounts receivable. During the nine months ended April 30, 2023 the Company incurred total other expenses of $171,710 consisting of interest expense and financing expense of $7,628 and $316,897. These expenses are partially offset by other income, gain on fair value of warrant liability, and gain extinguishment of convertible debt of $11,467, $27,392, and $115,357.
During the nine months ended April 30, 2024 the Company recorded a net loss of $581,664, compared to a loss of $628,936 in the same nine month period ended April 30, 2023. The increase in loss is due to a large increase in the Company's total other expenses and selling, general, and administrative expenses year over year.
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 nine months ended April 30, 2024 the Company’s total cash increased by $23,516, compared to a decrease in cash of $369,703 in the period ended April 30, 2023. Cash flow used in operating activities was $614,568, compared to $467,530 in the period ended April 30, 2023. The increase was partially due to an increase in net loss in the period as well as increases in accounts receivables, decreases in accounts payables, and decreases in deferred revenues, partially offset by a decrease in non-cash interest expense and depreciation expense.
Cash Flow from Investing Activities
During the nine months ended April 30, 2024, the Company’s investing activities used $48,349, compared to $14,138 used in investing activities during the nine months ended April 30, 2023. The increase was primarily due to an increase in the purchases of property and equipment as well as an increase in capitalized intangible assets during the period ended April 30, 2024.
Cash Flow from Financing Activities
During the nine months ended April 30, 2024, cash flow provided by financing activities was $686,433 compared with $139,334 provided during the nine months ended April 30, 2023. The increase is primarily attributable to greater borrowings of notes payable and convertible notes payable – related parties during the period. During the nine months ended April 30, 2024, the Company received approximately $77,279 more in proceeds from notes payable and approximately $452,574 more in proceeds from convertible notes payable – related parties as compared to the nine months ended April 30, 2023.
Going Concern
As of April 30, 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.
F-24
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. For the nine-month period ended April 30, 2024, there were no significant changes to our critical accounting policies as identified in our Annual Report on Form 10-K for the year ended July 31, 2023.
Recently Issued Accounting Pronouncements
In the period from July 2023 through April 2024, the FASB has not issued any additional accounting standards updates that have a significant impact on the Company. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related 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.
F-25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
F-26
ITEM 4. 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 necessarily 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 April 30, 2024, the disclosure controls and procedures of our Company were not effective.
Material Weakness
Our management assessed the effectiveness of our internal control over financial reporting as of April 30, 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).
A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified a material weakness in our internal control over financial reporting. Specifically, this is due to an inherent staffing limitation to properly segregate duties and provide adequate monitoring during the process leading to and including the preparation of the condensed consolidated financial statements.
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 fiscal year 2024, we engaged an outsourced firm with a panel of CPA consultants to assist in building internal controls and preparing financial reports, and to establish best practices and help us document and implement all the checks and balances needed for all financial areas.
Except as listed above, there were no other 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.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
On April 4, 2024, the Company entered into the Second Amendment to the Mast Note, which included the issuance of 475,000 shares of the Company’s common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
There is no other information required to be disclosed under this item which has not been previously disclosed.
F-27
ITEM 6. EXHIBITS
*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.
F-28
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: August 26, 2024 | /s/ Michael Cothill |
| Michael P. Cothill | |
| Principal Executive Officer | |
| Date: August 26, 2024 | /s/ Mark Stogdill |
| Mark Stogdill | |
| Principal Financial Officer |
F-29
EXHIBIT 31.01
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 April 30, 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: August 26, 2024
Hammer Fiber Optics Holdings Corp.
By: /s/ Michael P. Cothill
Name: Michael P. Cothill
Title: Principal Executive Officer
EXHIBIT 31.02
CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Mark Stogdill, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of the Registrant for the period ended April 30, 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: August 26, 2024
Hammer Fiber Optics Holdings Corp.
By: /s/ Mark Stogdill
Name: Mark Stogdill
Title: Principal Financial 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, 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 April 30, 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: August 26, 2024
Hammer Fiber Optics Holdings Corp.
By: /s/ Michael P. Cothill
Name: Michael P. Cothill
Title: Principal Executive OfficerA 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 32.02
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark Stogdill, the Principal 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 April 30, 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: August 26, 2024
Hammer Fiber Optics Holdings Corp.
By: /s/ Mark Stogdill
Name: Mark Stogdill
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.